-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WxSOVOKCzib1a28a9lf6zZ1IDxAl3bB+AnzEVPNzqISsdTChXICJa3/FeRRdWYo/ 6eR96sZuuhc76CFibvRmxA== 0001145549-08-001011.txt : 20080605 0001145549-08-001011.hdr.sgml : 20080605 20080605135041 ACCESSION NUMBER: 0001145549-08-001011 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 45 CONFORMED PERIOD OF REPORT: 20071231 FILED AS OF DATE: 20080605 DATE AS OF CHANGE: 20080605 FILER: COMPANY DATA: COMPANY CONFORMED NAME: China Finance Online Co. LTD CENTRAL INDEX KEY: 0001297830 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 000000000 STATE OF INCORPORATION: K3 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 20-F SEC ACT: 1934 Act SEC FILE NUMBER: 000-50975 FILM NUMBER: 08882591 BUSINESS ADDRESS: STREET 1: 9TH FLOOR OF TOWER C, CORPORATE SQUARE, STREET 2: NO. 35 FINANCIAL STREET, XICHENG DISTRIC CITY: BEIJING STATE: F4 ZIP: 100032 BUSINESS PHONE: (86-10) 58325288 MAIL ADDRESS: STREET 1: 9TH FLOOR OF TOWER C, CORPORATE SQUARE, STREET 2: NO. 35 FINANCIAL STREET, XICHENG DISTRIC CITY: BEIJING STATE: F4 ZIP: 100032 20-F 1 h02185e20vf.htm CHINA FINANCE ONLINE CO. LIMITED CHINA FINANCE ONLINE CO. LIMITED
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
     
o   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
     
þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
     
o   SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report _______________
For the transition period from ___________ to __________.
Commission file number: 000-50975
CHINA FINANCE ONLINE CO. LIMITED
 
(Exact name of Registrant as specified in its charter)
Not Applicable
 
(Translation of Registrant’s name into English)
Hong Kong
 
(Jurisdiction of incorporation or organization)
9th Floor of Tower C, Corporate Square
NO.35 Financial Street, Xicheng District
Beijing 100032, China
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
     
Title of each class   Name of each exchange on which registered
None
  None
Securities registered or to be registered pursuant to Section 12(g) of the Act.
American Depositary Shares, each representing 5 ordinary shares,
par value HK$0.001 per share *
 
(Title of Class)
 
*   Not for trading, but only in connection with the listing on the Nasdaq Global Market of American Depository Shares each representing 5 ordinary shares pursuant to the requirements of the Securities and Exchange Commission
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 109,754,433 ordinary shares, par value HK$0.001 per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
oYes           þ No          
If this report is an annual or transaction report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
oYes           þ No          
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
þ Yes           o No          
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
Large accelerated filer o          Accelerated filer þ          Non-accelerated filer o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
oYes           þ No          
Indicate by check mark which financial statement item the registrant has elected to follow:
     o Item 17          þ Item 18
 
 

 

CHINA FINANCE ONLINE CO. LIMITED
TABLE OF CONTENTS
                 
INTRODUCTION        
 
PART I        
ITEM 1       5  
ITEM 2       5  
ITEM 3       5  
ITEM 4       33  
ITEM 5       55  
ITEM 6       73  
ITEM 7       82  
ITEM 8       89  
ITEM 9       90  
ITEM 10       91  
ITEM 11       98  
ITEM 12       98  
 
 
PART II        
ITEM 13       98  
ITEM 14       99  
ITEM 15       99  
ITEM 16A       101  
ITEM 16B       101  
ITEM 16C       101  
ITEM 16D       102  
ITEM 16E       102  
 
PART III        
ITEM 17       102  
ITEM 18       102  
ITEM 19       102  
 EX-4.15 FRAMEWORK AGREEMENT
 EX-4.16 LOAN AGREEMENT
 EX-4.17 SHARE TRANSFER CONTRACT
 EX-4.18 SHARE PLEDGE AGREEMENT
 EX-4.19 PURCHASE OPTION AND COOPERATION AGREEMENT
 EX-4.20 PURCHASE OPTION AND COOPERATION AGREEMENT
 EX-4.21 CAPITAL INCREASE AGREEMENT
 EX-4.22 LOAN AGREEMENT
 EX-4.23 SHARE PLEDGE AGREEMENT
 EX-4.24 LOAN AGREEMENT
 EX-4.25 OPERATION AGREEMENT
 EX-4.26 TECHNICAL SUPPORT AGREEMENT
 EX-4.27 STRATEGIC CONSULTING AND SERVICE AGREEMENT
 EX-4.28 PURCHASE OPTION AGREEMENT
 EX-4.29 FRAMEWORK AGREEMENT
 EX-4.30 LOAN AGREEMENT
 EX-4.31 SHARE TRANSFER CONTRACT
 EX-4.32 OPERATION AGREEMENT
 EX-4.33 TECHNICAL SUPPORT AGREEMENT
 EX-4.34 STRATEGIC CONSULTING AND SERVICE AGREEMENT
 EX-4.35 PURCHASE OPTION AGREEMENT
 EX-4.37 LICENSE AGREEMENT
 EX-4.46 LEASE CONTRACT
 EX-4.47 LEASE CONTRACT
 EX-4.48 LEASE CONTRACT
 EX-4.49 LEASE CONTRACT
 EX-4.50 LEASE CONTRACT
 EX-4.51 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES
 EX-4.52 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES
 EX-4.53 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES
 EX-4.54 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES
 EX-4.55 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES
 EX-4.56 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES
 EX-4.57 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES
 EX-4.58 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES
 EX-4.67 ENGAGEMENT LETTER
 EX-8.1 LIST OF SUBSIDIARIES
 EX-10.1 CONSENT OF DELOITTE TOUCHE TOHMATSU CPA LTD.
 EX-12.1 CEO CERTIFICATION PURSUANT TO RULE 13A-14(A)
 EX-12.2 CFO CERTIFICATION PURSUANT TO RULE 13A-14(A)
 EX-13.1 CEO CERTIFICATION PURSUANT TO SECTION 906
 EX-13.2 CFO CERTIFICATION PURSUANT TO SECTION 906

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INTRODUCTION
Except where the context otherwise requires and for purposes of this annual report only:
  •   “we,” “us,” “our company” and “our” refer to China Finance Online Co. Limited, or CFO Hong Kong, its principle subsidiaries, China Finance Online (Beijing) Co., Ltd., or CFO Beijing, Fortune Software (Beijing) Co., Ltd., or CFO Software, Stockstar Information Technology (Shanghai) Co., Ltd., or CFO Stockstar, Shenzhen Genius Information Technology Co., Ltd., or CFO Genius, Jujin Software (Shenzhen) Co., Ltd. or CFO Jujin, Zhengning Information Technology (Shanghai) Co., Ltd., or CFO Zhengning, Fortune (Beijing) Wisdom Technology Co., Ltd. or CFO Wisdom, Fortune (Beijing) Success Technology Co., Ltd. or CFO Success, Daily Growth Securities Limited, or Daily Growth Securities, which we acquired in November 2007 and subsequently renamed from Daily Growth Investment Company Limited to Daily Growth Securities, and, in the context of describing our operations, also include our PRC-incorporated affiliates, Fuhua Innovation Technology Development Co., Ltd., or CFO Fuhua, Shanghai Meining Computer Software Co., Ltd., or CFO Meining, CFO Fuhua’s wholly owned subsidiary, Beijing CFO Glory Co., Ltd., or CFO Glory, and Beijing CFO Premium Technology Co., Ltd., or CFO Premium.
 
  •   “shares” and “ordinary shares” refer to our ordinary shares, “preferred shares” refers to our preferred shares, all of which were converted into our ordinary shares upon the completion of our initial public offering on October 20, 2004, “ADSs” refers to our American depositary shares, each of which represents five ordinary shares, and “ADRs” refers to the American depositary receipts which evidence our ADSs;
 
  •   “China” or “PRC” refers to the People’s Republic of China, excluding Taiwan, Hong Kong and Macau;
 
  •   “Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China; and
 
  •   all references to “Renminbi,” “RMB” or “yuan” are to the legal currency of China, all references to “U.S. dollars,” “dollars,” “$” or “US$” are to the legal currency of the United States and all references to “Hong Kong dollars” or “HK$” are to the legal currency of Hong Kong. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.
We and certain selling shareholders of our company completed the initial public offering of 6,200,000 American Depositary Shares, each representing five of our ordinary shares, par value HK$0.001 per share on October 20, 2004. On October 15, 2004, we listed our ADSs on the Nasdaq Global Market (known as the Nasdaq National Market prior to July 1, 2006), or Nasdaq, under the symbol “JRJC.”
FORWARD-LOOKING INFORMATION
This annual report on Form 20-F contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about us and our industry. All statements other than statements of historical fact in this annual report are forward-looking statements. These forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “estimate,” “plan,” “believe,” “is /are likely to” or other and similar expressions. The forward-looking statements included in this annual report relate to, among others:
  •   our goals and strategies, including how we effect our goals and strategies;

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  •   our future business developments, business prospects, financial condition and results of operations;
 
  •   our future pricing strategies or policies;
 
  •   our plans to expand our service offerings;
 
  •   our plans to use acquisitions and strategic investments as part of our corporate strategy;
 
  •   competition in the PRC financial data and information services industry;
 
  •   performance of China’s securities markets;
 
  •   performance of Hong Kong’s securities markets;
 
  •   growth in our subscriber base;
 
  •   PRC governmental policies relating to taxes and how they will impact our business;
 
  •   PRC governmental policies relating to the Internet and Internet content providers;
 
  •   PRC governmental policies relating to the distribution of content, especially the distribution of financial content over the Internet; and
 
  •   PRC governmental policies relating to mobile value-added services.
These forward-looking statements involve various risks, assumptions and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, we cannot assure you that our expectations will turn out to be correct. Our actual results could be materially different from and worse than our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in Item 3.D of this annual report, “Key information — Risk Factors” and elsewhere in this annual report.
This annual report on Form 20-F also contains data related to the online financial data and information services market and the Internet. This market data includes projections that are based on a number of assumptions. The online financial data and information services market may not grow at the rates projected by market data, or at all. The failure of these markets to grow at the projected rates may have a material adverse effect on our business and the market price of our ADSs. In addition, the relatively new and rapidly changing nature of the online financial data and information services industry subjects any projections or estimates relating to the growth prospects or future condition of our markets to significant uncertainties. Furthermore, if any one or more of the assumptions underlying the market data turns out to be incorrect, actual results may differ from the projections based on these assumptions.
The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. You should not place undue reliance on these forward-looking statements and you should read these statements in conjunction with the risk factors disclosed in Item 3.D of this annual report, “Key Information — Risk Factors.” We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.

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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not Applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable.
ITEM 3. KEY INFORMATION
A. Selected financial data.
The selected consolidated financial data presented below have been derived from our consolidated financial statement. This data may not be indicative of our future condition or results of operations and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes.
                                         
    For the year ended December 31,
(in thousands of U.S. dollars, except per share or per ADS data)(1)   2003   2004   2005   2006 (4)   2007
Consolidated statement of operations and comprehensive income (loss) data:
                                        
Net revenues
     2,271       6,016       7,482       7,128       25,903  
Cost of revenues
     (298 )     (393 )     (482 )     (1,468 )     (4,427 )
     
Gross profit
     1,973       5,623       7,000       5,660       21,476  
Operating expenses:
                                        
General and administrative
     (400 )     (730 )     (1,740 )     (2,956 )     (7,784 )
Product development
     (149 )     (172 )     (236 )     (742 )     (2,269 )
Sales and marketing
     (284 )     (800 )     (1,795 )     (2,666 )     (6,924 )
     
Total operating expenses
     (833 )     (1,702 )     (3,771 )     (6,364 )     (16,977 )
Subsidy income
     —       —       —       —       136  
     
Income (loss) from operations
     1,140       3,921       3,229       (704 )     4,635  
Interest income
     51       294       1,486       1,003       1,105  
Other income (expense)
     (1 )     (2 )     —       115       9  
Exchange gain (net)
     —       —       366       267       424  
Loss from impairment of cost method investment
                             (1,322 )     (11,127 )
Income (loss) before income taxes
     1,190       4,213       5,081       (641 )     (4,954 )
Income tax benefit (provision)
     —       384       (457 )     41       809  
 
                                        
Minority interests in net income of consolidated subsidiary
     —       —       —       —       15  
Net income (loss)
   $ 1,190     $ 4,597     $ 4,624     $ (600 )   $ (4,130 )
Dividends on preference shares
     (352 )     —       —       —          
Income (loss) attributable to ordinary shareholders
   $ 838     $ 4,597     $ 4,624     $ (600 )   $ (4,130 )
 
                                        
Income (loss) per share-basic
   $ 0.04     $ 0.12     $ 0.05     $ (0.01 )   $ (0.04 )
Income (loss) per share-diluted
   $ 0.01     $ 0.05     $ 0.04     $ (0.01 )   $ (0.04 )
Income per ADS equivalent-basic(2)
   $ 0.21     $ 0.59     $ 0.25     $ (0.03 )   $ (0.22 )
Income per ADS equivalent-diluted(2)
   $ 0.06     $ 0.26     $ 0.22     $ (0.03 )   $ (0.22 )
Dividends declared per ordinary share or preference shares
   $ 0.01       —       —       —       —  

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    For the year ended December 31,
(in thousands of U.S. dollars)(1)   2003   2004   2005   2006   2007
Consolidated balance sheet data:
                                        
Cash and cash equivalents
   $ 5,806     $ 70,596     $ 46,168     $ 44,956     $ 74,729  
Current working capital(3)
     4,306       67,590       45,227       38,011       53,811  
Total assets
     6,606       71,861       63,113       71,119       103,885  
Deferred revenue, current
     1,278       3,487       1,859       6,419       20,457  
Total current liabilities
     1,875       3,773       2,282       8,521       31,009  
Deferred revenue, non-current
     —       —       —       —       4,665  
Total shareholders’ equity
   $ 4,731     $ 68,088     $ 60,831     $ 62,453     $ 67,362  
 
(1)   For the results of operations for a specified period, all translations from Renminbi to U.S. dollars were calculated by using the average of the exchange rates on each day during the period. All translations from Renminbi to U.S. dollars were calculated for the periods listed below at the corresponding rates
         
For the years ended December 31,   RMB per US$1.00
 
        
2003
     8.2770  
2004
     8.2780  
2005
     8.1472  
2006
     7.9693  
2007
     7.6072  
     For consolidated balance sheet data, all translations from Renminbi to U.S. dollars were calculated at the exchange rate at the end of that year. The exchange rates were as set forth below as of the corresponding dates:
         
As at December 31,   RMB per US$1.00
 
        
2003
     8.2769  
2004
     8.2765  
2005
     8.0702  
2006
     7.8087  
2007
     7.2946  
     
(2)   Each ADS represents five ordinary shares.
 
(3)   Current working capital is the difference between total current assets and total current liabilities.
 
(4)   In 2006, the Company changed its method of accounting for stock-based compensation to conform to Statement of Financial Accounting Standard No. 123 (revised 2004), “Share-Based Payment”, effective on January 1, 2006. In 2007, the Company adopted the recognition and measurement methods under Financial Accounting Standards Board Interpretation No. 48 “Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No. 109.”

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Exchange Rate Information
We have published our financial statements in U.S. dollars. Our business is primarily conducted in China and denominated in Renminbi. Periodic reports will be made to shareholders and will be expressed in U.S. dollars using the then-current exchange rates. The conversion of Renminbi into U.S. dollars in this annual report is based on the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from Renminbi to U.S. dollars in this annual report were made at $1.00 to RMB7.2946, which was the prevailing rate on December 31, 2007. The prevailing rate on March 31, 2008 was $1.00 to RMB7.0120. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes controls over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade.
The People’s Bank of China sets and publishes daily a base exchange rate. Until July 21, 2005, the People’s Bank of China set this rate with reference primarily to the supply and demand of Renminbi against the U.S. dollar in the market during the prior day. Beginning on July 21, 2005, the People’s Bank of China has set this rate with reference primarily to the supply and demand of Renminbi against a basket of currencies in the market during the prior day. The People’s Bank of China also takes into account other factors such as the general conditions existing in the international foreign exchange markets. Although governmental policies were introduced in the PRC in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or security, requires the approval of the State Administration for Foreign Exchange and other relevant authorities.
The following table sets forth various information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this annual report or will use in the preparation of our periodic reports or any other information to be provided to you. The source of these rates is the Federal Reserve Bank of New York.
                                 
    Average(1)   High   Low   Period-end
    (RMB per U.S.$1.00)
 
                                
2003
     8.2770       8.2800       8.2765       8.2769  
2004
     8.2768       8.2774       8.2764       8.2765  
2005
     8.1472       8.2765       8.0702       8.0702  
2006
     7.9693       8.0705       7.8051       7.8087  
2007
     7.5806       7.8127       7.2946       7.2946  
2008 (through May 15, 2008)
    7.0731       7.2946       6.9815       6.9943  
 
(1)   Averages are calculated from month-end rates.
B. Capitalization and indebtedness.
Not Applicable.
C. Reasons for the offer and use of proceeds.
Not Applicable.

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D. Risk factors.
Risks relating to our business
Negative changes in China’s securities markets, economic conditions, inflation, regulatory policies, interests rates and other factors that could affect investors’ interests in investing in China’s securities markets could have an adverse effect on our business.
We believe that the level of public interest in investing in China’s securities market could significantly influence the demand for market intelligence on China’s securities markets and our products. Such demand could be affected by the level of trading activity in China’s securities markets. During the past several years, China’s securities markets have experienced significant volatility. The benchmark Shanghai Stock Exchange A-Share Index declined 44.80%, from January, 2001 to December, 2005 and surged 124.33% between the start of 2006 and the market peak in October, 2007, despite of the severe corrections on February 27, 2007 and May 30, 2007, when China stock market declined approximately 9% and 7% on a single trading day, respectively. Then the Shanghai Stock Exchange A-Share Index declined 43% from late October, 2007 till the end of March, 2008. Any factors that lead to prolonged weakness or intensified volatility in China’s securities markets in the future may diminish investors’ interest in China’s securities markets, and our business could be adversely affected accordingly.
China’s securities market is further limited by a lack of hedging instruments that would assist investors in hedging against market volatility. For example, investors are not permitted to sell short in China’s securities markets. Because our business is dependent on investors’ interest in China’s securities markets, our business could be materially and adversely affected if market volatility and the lack of hedging instruments continue to affect China’s securities markets and dampen investors’ interest in China’s securities markets.
In response to the increased inflation rate during 2004, the Chinese government announced measures to restrict lending and investment in China in order to reduce inflationary pressure on China’s economy. In 2006 and 2007, the People’s Bank of China announced a series of basic interest rate increases and other measures to reduce inflationary pressure. If China experiences increased inflation in future, the Chinese government may introduce further measures intended to reduce the inflation rate in China. Any such measures adopted by the Chinese central bank may have an adverse effect on China’s securities markets, which could adversely impact our business.
Downturns, disruptions and volatility in Hong Kong securities markets and negative developments in the business, economic, and market conditions that could affect investors’ interests in investing in Hong Kong securities markets could have adverse impact on our business in the future.
Following the acquisition of Daily Growth Securities, we expect to provide a diversified portfolio of brokerage and informational service to our clients in connection with their investment in Hong Kong securities market. Lower trading volumes and price levels of securities transactions in Hong Kong securities market may affect investors’ interests in investing in Hong Kong securities markets and have adverse impact on our business in the future. Historically, securities trading volume in Hong Kong has fluctuated considerably. These fluctuations may result from regional and global economic, political and market conditions, broad trends in business and finance that are out of our control.
Our securities brokerage business in Hong Kong operates in a highly regulated industry and compliance failures could adversely affect our business.
With the acquisition of Daily Growth Securities, a licensed securities brokerage firm incorporated in Hong Kong, we provide a diversified portfolio brokerage and other related services to our

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customers who invest in stocks listed on Hong Kong Stock Exchange. The securities brokerage business and operations in Hong Kong are subject to extensive regulations by Hong Kong Securities and Futures Commission and Hong Kong Stock Exchange, which may increase our cost of doing business and may be a limiting factor on the operations and development of our securities brokerage business. The regulation on securities broker-dealer business is also an ever-changing area of law and is subject to modification by government, regulatory and judicial actions. As our business grows with the acquisition of Daily Growth Securities, we may devote more time to regulatory matters. Failure to comply with any of the laws, rules or regulations applicable to our securities brokerage business could lead to adverse consequences including, without limitation, investigations, fines, law suits and other penalties from regulatory agencies. Any of these consequences could adversely affect our securities broker-dealer business.
Our business could be materially and adversely affected if new features and new research tools are not accepted by users.
We currently offer to our subscribers a limited number of service packages with different features and functionalities. If we introduce a new feature or a new research tool that is not favorably received, our current subscribers may not continue to use our service as frequently as before. New subscribers could also choose a competitive or different service offering over ours. We may also experience difficulties that could delay or prevent us from introducing new research tools or features. Furthermore, these research tools or features may contain errors that are discovered after the services are introduced. We may need to significantly modify the design of these research tools or features to correct these errors. Our business could be materially and adversely affected if we experience difficulties or delays in introducing new features and research tools or if these new features and research tools are not accepted by users.
We have a limited operating history, which may make it difficult for you to evaluate our business.
Our service offerings have only been commercially available since April 2001. Our senior management and employees have worked together at our company for only a relatively short period of time. Furthermore, the acquisition of CFO Genius, a financial information database provider mainly serving Chinese domestic institutional customers, in September 2006, our October 2006 acquisition of CFO Stockstar, a finance and securities website in China and November 2007 acquisition of Daily Growth Securities, a licensed securities brokerage firm incorporated in Hong Kong have altered the overall composition of company. Accordingly, we have a limited operating history upon which you can evaluate our business and prospects.
We may not be able to successfully implement our growth strategies, which could materially and adversely affect our business, financial condition and results of operations.
We are pursuing a number of growth strategies, which will require us to expand our data and information content and service offerings through internal development efforts and through partnerships, joint ventures and acquisitions. Some of these strategies relate to new service offerings for which there are no established markets in China, or relate to service offerings in which we lack experience and expertise. We cannot assure you that we will be able to deliver new service offerings on a commercially viable basis or in a timely manner, or at all.
In addition, online advertising business strategies may be developed in addition to our subscription-based service offerings. However, since we regard subscription-based services as our current core business and allocate a significant portion of the advertising inventories of our websites, namely, www.jrj.com and www.stockstar.com, to promote our subscription-based service offerings, to date, our current online advertising business has been limited. We cannot assure you that we will be able to efficiently or effectively implement and grow our online advertising business, or that online advertising on our websites will not detract from our users’

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experience and thereby adversely affect our brand name or our subscription-based service offerings.
If we are unable to successfully implement our growth strategies, our revenue and profitability will not grow as we expect, if at all, and our competitiveness may be materially and adversely affected.
We face significant competition which could adversely affect our business, financial condition and results of operations.
The online financial data and information services market in China is relatively new, has few substantial barriers to entry and is competitive and rapidly changing. More broadly, the number of financial news and information sources competing for consumers’ attention and spending has increased since we commenced operations and we expect that competition will continue to intensify. We currently compete, directly and indirectly, for paying subscribers and viewers with companies in the business of providing financial data and information services, including publishers and distributors of traditional media, Internet portals providing information on business, finance and investing, dedicated financial information websites, personal stock research software vendors and stock brokerage companies, especially stock brokerage companies with online trading capabilities. Some of the sponsors with whom we currently maintain sponsorship arrangements could also become our competitors in the future.
Many of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. This may allow them to adopt our business model and devote greater resources than we can to the development and promotion of service offerings similar to or more advanced than our own. These competitors may also engage in more extensive research and development, undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies and offer products and services that achieve greater market acceptance than ours. They may also undercut us by making more attractive offers to our existing and potential employees, content providers and sponsors. New and increased competition could result in price reductions for our research tools, reduced margin or loss of market share, any of which could materially and adversely affect our business, results of operations and financial condition.
In addition to us, many companies in China offer stock quotes, economic and company-specific news, historical stock performance statistics, online chatting regarding individual securities and other features for free over the Internet. If users determine that the information available for free over the Internet is sufficient for their investing needs, they would be unlikely to pay for subscription to our services, thus reducing our revenues and net income and forcing us to develop a new business model. Furthermore, the amount and quality of information available for free over the Internet may expand in the future, reducing the attractiveness of our services and forcing us to spend additional money to develop more sophisticated services in order to compete. There can be no assurance that we would be successful in developing a new business model or more advanced services in response to either of the above challenges. Failure to do so would lead to significant declines in our number of subscribers, revenues and net income.
Our business could be materially and adversely affected if the stock exchanges from which we receive data and information fail to deliver us reliable data and price quotes or other trading related information, or if we cannot maintain our current business relationships with our historical data providers on commercially reasonable terms.
We depend on two securities data providers associated with the Shanghai and Shenzhen Stock Exchanges to provide us with real-time stock, bond and mutual fund quotes and other trading related information. We primarily rely on contractual arrangements with Shanghai Stock

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Exchange Information Network Co., Ltd., which is associated with the Shanghai Stock Exchange, and with Shenzhen Securities Information Co., Ltd., which is associated with the Shenzhen Stock Exchange, pursuant to which we pay fixed service fees in exchange for receiving real-time price quotes and other trading related information through satellite communication. In June 2006, we are certified by Shanghai Stock Exchange Information Network Co., Ltd. to develop service packages based on Level II quotes (which provide insight into stock price movements and provide faster and more comprehensive trading data), and upgrade the features and functions of our current products. The definitive agreement is contemplated to continue through July 31, 2009. In January 2008, we entered into a license agreement with Shanghai Stock Exchange Information Network Co., Ltd. to distribute TopView (which reveals valuable statistics, such as trading volume and prices of various types of trading accounts). The agreement authorizes us to use TopView to enhance features and functionalities of our existing products and develop new product offerings. The definitive agreement is contemplated to continue through December 12, 2008. Our contract with Shenzhen Securities Information Co., Ltd. is in the process of being renewed. Any disruption in our ability to secure data, price quotes or other trading related information on timely basis either through technical issues or through our inability to maintain and renew our contracts with the Shanghai and Shenzhen Stock Exchanges will have a material adverse effect on our business.
We have also transitioned the primary source of historical data and information on listed companies, bonds and mutual funds to Shenzhen Genius Information Technology Co. Ltd., or CFO Genius, which we acquired in September 2006. Starting from May 2007, CFO Genius has become our primary provider of historical data and information, thereby mitigating our reliance on third-party backup providers of such historical data and information. Though we maintain raw data provision contracts with Financial China Information & Technology Co., Ltd. and Shanghai Gildata Service Co., Ltd. as alternative sources of historical data and information, any problems arising in or any disruption to CFO Genius as the primary provider of historical data and information will have a material adverse effect on our business.
We cannot assure you that we will be able to enter into business arrangements with either of the two securities data providers associated with the Shanghai and Shenzhen Stock Exchanges on commercially reasonable terms, or at all, after our current contracts expire. We cannot assure you that the two securities data providers will not charge us service fees substantially higher than the service fees we are currently paying. Our business, financial condition and results of operations could be materially and adversely affected if either of our two securities data providers imposes on us service fees substantially higher than the service fees we are currently paying. Even if we are able to maintain our current business arrangements for data on commercially reasonable terms, either of the two securities data providers may fail to deliver us reliable price quotes or other trading related information. In either case, it would be difficult for us to receive reliable real-time price quotes and other trading related information from a different source, which could materially and adversely affect our business.
Additionally, we cannot assure you that we will be able to enter into or maintain our business arrangements with our current data providers on commercially reasonable terms or at all. In this case, it could take time for us to locate alternative providers of comprehensive historical data and information on commercially reasonable terms, which could cause disruptions to our operations and adversely affect our business. Even if we are able to find alternative data providers, they may fail to deliver to us reliable and comprehensive data and information in accordance with our specifications and requirements, which could materially and adversely affect our business.
Our business would be adversely affected if we do not continue to expand and maintain an effective telemarketing and customer support force.
We market our service offerings through our websites, as well as through our telemarketing and customer service centers in Beijing and Shanghai. In addition to sales and marketing functions,

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we depend on our customer support force to explain our service offerings to our existing and potential subscribers and resolve our subscribers’ technical problems. Many of our telemarketing and customer support personnel have only worked for us for a short period of time, and some of them may not have received sufficient training or gained sufficient experience to effectively serve our customers. In addition, we will need to further increase the size of our customer support force as our business continues to grow. We may not be able to hire, retain, integrate or motivate additional customer support personnel without any short-term disruptions of our operations. As a result, our business could be adversely affected if we do not continue to expand and maintain an effective customer support force.
Acquisitions present many risks, and we may not realize the financial and strategic goals that were contemplated at the time of any transaction.
An active acquisition program is an important element of our corporate strategy. For example, we acquired CFO Genius, a financial information database provider mainly serving Chinese domestic institutional customers, in September 2006. In October 2006, we acquired CFO Stockstar, a leading finance and securities website in China. In November 2007, we acquired Daily Growth Securities, a licensed securities brokerage firm incorporated in Hong Kong. We may not be able to achieve all of the benefits of the business combination or to successfully integrate CFO Stockstar’s, CFO Genius’s and Daily Growth Securities’ operations into ours. While CFO Stockstar, CFO Genius and Daily Growth Securities contributed positive operating cash flows on a collective basis in 2007, we cannot assure you that they will continue to do so. Moreover, we expect to continue to acquire companies, products, services and technologies. Risks we may encounter in acquisitions include:
  •   the acquisition may not further our business strategy, or we may pay more than it is worth;
 
  •   we may not realize the anticipated increase in our revenues if we are unable to sell the acquired company’s products to our customer base, or the acquired contract models of acquired contract models companies;
 
  •   we may have difficulty identifying suitable acquisition opportunities and integrating acquired companies with our existing operations or their products and services with our existing products and services;
 
  •   we may have higher than anticipated costs in continuing support and development of acquired products;
 
  •   we may have multiple and overlapping product lines that are offered, priced and supported differently, which could cause customer confusion and delays;
 
  •   our due diligence process may fail to identify problems, such as issues with unlicensed use of intellectual property;
 
  •   we may have legal and tax exposures or lose anticipated tax benefits as a result of unforeseen difficulties in our legal entity integration activities;
 
  •   we may face contingencies related to intellectual property, financial disclosures and accounting practices or internal controls;
 
  •   our ongoing business may be disrupted and our management’s attention may be diverted by transition or integration issues; and

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  •   to the extent that we issue a significant amount of equity securities in connection with future acquisitions, existing ADS holders and shareholders may be diluted and earnings per share may decrease.
These factors could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the case of a larger acquisition or multiple concurrent acquisitions.
Our plan to make strategic investments may negatively affect our business due to the poor financial condition and operating performance of those companies we invest in and other risks.
As part of our business strategy, we may also make strategic investments intended to facilitate the introduction of new service offerings as well as to add capabilities that we do not currently have. For example, we invested in Moloon International, Inc., or Moloon, a Chinese wireless technology and service provider, in December 2005. However, the financial condition and operating results of companies we invest in such as Moloon could negatively affect our business and financial condition. Government regulations may adversely affect the business of companies we invest in, which could have a material and adverse impact on our business. For example, following an independent valuation of our cost method investment in Moloon, it was determined that a decline in value had occurred and we recorded a non-cash investment impairment of $11.13 million in 2007, reducing the carrying balance of such investment from $12.61 million to $1.48 million, 88% off the book value. In the future, we may also consider further strategic investments and partnerships with companies that specialize in non-exchange traded financial products in order to acquire their expertise in that area which we believe are difficult to obtain otherwise.
Our ability to successfully make strategic investments will depend on the availability of suitable candidates at an acceptable cost, our ability to compete effectively to attract and reach agreement with strategic partners on commercially reasonable terms, the availability of financing to complete larger acquisitions or joint ventures, as well as our ability to obtain any required governmental approvals. In addition, the benefits of a partnership or joint venture transaction may take considerable time to develop, and we cannot assure you that any particular partnership or joint venture will produce the intended benefits. For example, we may experience difficulties in integrating acquisitions with our existing operations and personnel. The identification and completion of these transactions may require significant management time and resources. Moreover, the partnership and joint venture strategies we pursue could also cause earnings or ownership dilution to our shareholders’ interests, which could result in losses to investors.
Our business could be materially and adversely affected if increased usage strains our server systems or if we suffer from other system malfunctions.
In the past, our websites have experienced significant increases in traffic when there are significant business developments, financial news and activities, or stock market trading activities. In addition, the number of our users has continued to increase over time and we are seeking to further increase our user base. Therefore, our website must accommodate a high volume of traffic to meet peak user demand and deliver frequently updated information. Our websites have in the past experienced and may in the future experience slower response time or login delays for a variety of reasons. It is essential to our success that our websites are able to accommodate our users in an efficient manner so that our users’ experience with us is viewed favorably and without frequent delays.
We also depend on other Internet content providers, such as other financial information websites, to provide data and information to our website on a timely basis. Our websites could experience disruptions or interruptions in service due to the failure or delay in the transmission or receipt of this information. In addition, our users depend on Internet service providers, online service

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providers and other website operators for access to our website. Each of them has experienced significant outages in the past, and could experience outages, delays and other difficulties due to system failures unrelated to our systems. These types of occurrences could cause users to perceive our website as not functioning properly and therefore cause them to use other methods to obtain the financial data and information services they need.
If we are not able to respond successfully to technological or industry developments, our business may be materially and adversely affected.
The online financial data and information services market is characterized by rapid advancements in technology, evolving industry standards and changes in customer needs. New services or technologies may render our existing services or technologies less competitive or obsolete. Responding and adapting to technological developments and standard changes in our industry, the integration of new technologies or industry standards or the upgrading of our networks may require substantial time, effort and capital investment. In the event that we are unable to respond successfully to technological industry developments, this may materially and adversely affect our business, results of operations and competitiveness.
We may be subject to, and may expend significant resources in defending against claims based on the content and services we provide through our website and our research tools.
Due to the manner in which we obtain, collect, categorize and integrate content for our website, and because our services, including our online bulletin boards and discussion forums, may be used for the distribution of information and expression of opinions, claims may be filed against us for defamation, subversion, negligence, copyright or trademark infringement or other violations due to the nature and content of such information. For example, our bulletin boards and online forums reflect the statements and views of persons we do not control and we cannot be assured that such information is true and correct and is not misleading. These persons may also have conflicts of interest in relation to their statements or views regarding securities or other financial matters. Liability insurance for these types of claims is not currently available in the PRC. While we do not take responsibility for statements or views presented on our website, we may incur significant costs investigating and defending these types of claims even if they do not result in liability. Any such claim may also damage our reputation if our users and subscribers do not view this content as reliable or accurate, which could adversely affect our business.
We may be subject to intellectual property infringement claims, which may force us to incur substantial legal expenses and, if determined adversely against us, may materially disrupt our business.
We cannot be certain that our website content, online services and our research tools do not or will not infringe upon patents, valid copyrights or other intellectual property rights held by third parties. We may become subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives. In addition, we may incur substantial expenses in defending against these third party infringement claims, regardless of their merit. Successful infringement or licensing claims against us may result in substantial monetary liabilities, which may materially and adversely affect our business.
Unauthorized use of our intellectual property by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business.
We regard our copyrights, trademarks, trade secret and other intellectual property as critical to our success. Unauthorized use of the intellectual property used in our business may adversely affect our business and reputation. We rely on trademark and copyright law, trade secret protection and

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confidentiality agreements with our employees, customers, business partners and others to protect our intellectual property rights. Despite our precautions, it may be possible for third parties to obtain and use our intellectual property without authorization. The validity, enforceability and scope of protection of intellectual property in Internet-related industries are uncertain and still evolving. In particular, the laws and enforcement procedures in the PRC do not protect intellectual property rights to the same extent as do the laws and enforcement procedures in the United States. Moreover, litigation may be necessary in the future to enforce our intellectual property rights. Future litigation could result in substantial costs and diversion of our resources, and could disrupt our business, as well as have a material adverse effect on our financial condition and results of operations.
We depend on our key personnel and our business and growth prospects may be severely disrupted if we lose their services.
Our future success is dependent upon the continued service of our key executives and employees. We rely on their expertise in our business operations. If one or more of our key executives were unable or unwilling to continue in their present positions, or if they joined a competitor or formed a competing company in violation of their employment agreements, we may not be able to replace them easily. As a result, our business may be significantly disrupted and our financial condition and results of operations may be materially and adversely affected.
Furthermore, since our industry is characterized by high demand and intense competition for talent, we may need to offer higher compensation and other benefits in order to attract and retain key personnel in the future. Prior to January 1, 2008, our employees were required to enter into one-year employment agreements with us. Starting from January 1, 2008, our employees are required to enter into at a minimum two-year employment agreements with us to be in compliance with the PRC Labor Contract Law becoming effective January 1, 2008. We seek to enter into employment and non-competition agreements with our senior executives for longer terms. We cannot assure you that we will be able to attract or retain the key personnel that we will need to achieve our business objectives. We do not maintain key-man life insurance for any of our key personnel.
Recent changes in the PRC’s labor law restrict our ability to reduce our workforce in the PRC in the event of an economic downturn and may increase our labor costs.
In June 2007, the National People’s Congress of the PRC enacted new labor law legislation called the Labor Contract Law, which became effective on January 1, 2008. It formalizes workers’ rights concerning overtime hours, pensions, layoffs, employment contracts and the role of trade unions. Considered one of the strictest labor laws in the world, among other things, this new law provides for specific standards and procedures for the termination of an employment contract and places the burden of proof on the employer. In addition, the law requires the payment of a statutory severance pay upon the termination of an employment contract in most cases, including the case of the expiration of a fixed-term employment contract. Further, the law requires an employer to conclude an “employment contract without a fixed-term” with any employee who either has worked for the same employer for 10 consecutive years or more or has had two consecutive fixed term contracts with the same employer. An “employment contract without a fixed term” can no longer be terminated on the ground of the expiration of the contract, although it can still be terminated pursuant to the standards and procedures set forth under the new law. Because of the lack of implementing rules for the new law and the precedents for the enforcement of such a law, the standards and procedures set forth under the law in relation to the termination of an employment contract have raised concerns among foreign investment enterprises in the PRC that such “employment contract without a fixed term” might in fact become a “lifetime, permanent employment contract.” Finally, under the new law, downsizing of either more than 20 people or more than 10% of the workforce may occur only under specified circumstances, such as a restructuring undertaken pursuant to the PRC’s Enterprise Bankruptcy Law, or where a company

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suffers serious difficulties in business operations, or where there has been a material change in the objective economic circumstances relied upon by the parties at the time of the conclusion of the employment contract, thereby making the performance of such employment contract not possible. Again, there has been very little guidance and precedents as to how such specified circumstances for downsizing will be interpreted and enforced by the relevant PRC authorities. All of our employees working for us exclusively within the PRC are covered by the new law and thus, our ability to adjust the size of our operations when necessary in periods of recession or less severe economic downturns may be curtailed. Accordingly, if we face future periods of decline in business activity generally or adverse economic periods specific to our business, this new law can be expected to exacerbate the adverse effect of the economic environment on our results of operations and financial condition.
Undetected programming errors or defects in our research tools could materially and adversely affect our business, financial condition and results of operations.
Our research tools may contain programming errors or other defects that our internal testing did not detect, which are commonly referred to as programming bugs. The occurrence of undetected errors or defects in our research tools could disrupt our operations, damage our reputation and detract from the experience of our users. As a result, such errors and defects could materially and adversely affect our business, financial condition and results of operations.
If tax benefits currently available to us in PRC were no longer available under the new Enterprise Income Taxes (“EIT”) law which became effective on January 1, 2008, our effective income tax rates for our PRC operations could increase.
Our operating subsidiaries incorporated in the PRC are governed by the PRC income tax law, which included until December 31, 2007, the Income Tax Law of the People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises and the Provisional Regulations of the People’s Republic of China on Enterprises Income Tax, and, prior to January 1, 2008, were generally subject to the PRC enterprise income tax rate of 33%. Some of our operating subsidiaries incorporated in the PRC enjoy preferential tax treatments, including reduced tax rates, tax holidays or tax refunds, provided by either the PRC government or its local agencies or bureaus. For example, as a foreign invested “ Software Enterprise”, CFO Beijing was granted by the Beijing branch of the PRC tax bureau two tax incentives that have the effect of:
  •   Exempting the company from state income tax for 2003 and 2004; and
 
  •   Providing the company a preferential state income tax rate of 12% from 2005 to 2007, the rate currently applicable to wholly foreign-owned enterprises based in Beijing and not subject to other tax holidays.
Similarly, in December 2004, we established our subsidiary CFO Software in Beijing that was classified by the Beijing local government as a foreign invested high-technology company. With the classification of a foreign invested high-technology company, CFO Software expects to receive tax incentives provided to such companies from the Beijing branch of the PRC tax bureau that have the effect of:
  •   Exempting the company from enterprise income tax from 2005 to 2007; and
 
  •   Providing the company a preferential enterprise income tax rate of 7.5% from 2008 to 2010, and 15% for taxable years thereafter, the rate currently applicable to companies classified as high-technology companies based in Beijing and not subject to other tax holidays, provided that the company continues to be qualified as a “high and new technology enterprise” under the newly enacted PRC Enterprise Income Tax Law taking effect as of January 1, 2008.

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Furthermore, prior to January 1, 2008 CFO Stockstar, CFO Zhengning CFO Genius , and CFO Jujin , each enjoys a preferential enterprise income tax rate of 15% rather than the enterprise income tax rate of 33% applicable to domestic PRC companies generally and is not subject to other tax holidays.
In the absence of these incentives, our operating subsidiaries incorporated in the PRC would be subject to the enterprise income tax rate of 33% applicable to domestic PRC companies generally prior to January 1, 2008. If our PRC incorporated subsidiaries had not received these preferential tax treatments and were required to pay enterprise income tax at the same rate as domestic PRC companies, our business would be adversely affected.
The newly enacted PRC Enterprise Income Tax Law, or the EIT Law, and the implementation regulations to the EIT Law issued by the PRC State Council, became effective as of January 1, 2008. Under the EIT Law, China adopted a uniform tax rate of 25% for all enterprises (including domestically-owned enterprises and foreign-invested enterprises) and revoked the previous tax exemption, reduction and preferential treatments applicable to foreign-invested enterprises. However, there is a transitional period for certain enterprises, whether foreign-invested or domestic, during which they are allowed to continue to enjoy their existing preferential tax treatments provided by the then applicable tax laws and administrative regulations. Enterprises that were subject to an enterprise income tax rate lower than 25% prior to January 1, 2008 may continue to enjoy the lower rate and gradually transition to the new tax rate within five years after the effective date of the EIT Law. Enterprises that were entitled to exemptions or reductions from the standard income tax rate for a fixed term prior to January 1, 2008 may continue to enjoy such treatment until the fixed term expires. Preferential tax treatments may continue to be granted to industries and projects that are strongly supported and encouraged by the state, and enterprises otherwise classified as “new and high technology enterprises strongly supported by the state” are entitled to a 15% enterprise income tax rate. Most of our operating subsidiaries incorporated in the PRC are classified as “Software Enterprise” and their qualifications to continue to be entitled to the tax incentives granted to Software Enterprise prior to January 1, 2008 are being reviewed by relevant tax authorities .
The status of certain of our PRC subsidiaries as a “high and new technology enterprise” will be subject to review on regular basis. Certain of our other PRC subsidiaries qualified as a “high and new technology enterprise” under the definition promulgated by the prior enterprise income tax law in effect before January 1, 2008. Under the EIT Law, the qualifications for “high and new technology enterprise” status have not yet been defined. We cannot assure you that certain of our other PRC subsidiaries will continue to qualify as a “high and new technology enterprise” in future periods. If any of our PRC subsidiaries fails to qualify as a “high and new technology enterprise,” our income tax expenses would increase, which would have a material and adverse effect on our net income and results of operations.
In addition, with respect to revenue generated from the sale of certain online subscription , including our service packages, CFO Beijing, CFO Software, CFO Zhengning, CFO Meining, CFO Genius and CFO Jujin all obtain value-added-tax, or VAT, refunds that reduce their effective VAT rates from 17% to 3%. We cannot assure you that we will continue to enjoy any of these preferential tax treatments in the future. The discontinuation of any of these preferential tax treatments could materially and adversely affect our financial condition.
Any significant increase in our income tax expenses may have a material adverse effect on our profit for the year. Reduction or elimination of the financial subsidies or preferential tax treatments we enjoyed prior to January 1, 2008 or imposition of additional taxes on us or our combined entities in China may significantly increase our income tax expenses and materially reduce our net income, which could have a material adverse effect on our business, prospects, results of operations and financial condition.

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Dividends we receive from our operating subsidiaries located in the PRC may be subject to PRC withholding tax.
The newly enacted PRC Enterprise Income Tax Law, or the EIT Law, and the implementation regulations for the EIT Law issued by the PRC State Council, became effective as of January 1, 2008. The EIT Law provides that a maximum income tax rate of 20% may be applicable to dividends payable to non-PRC investors that are “non-resident enterprises,” to the extent such dividends are derived from sources within the PRC, and the State Council has reduced such rate to 10% through the implementation regulations unless any such non-PRC investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. We are a Hong Kong incorporated company and substantially all of our income may be derived from dividends we receive from our operating subsidiaries located in the PRC. According to Mainland and Hong Kong Special Administrative Region Arrangement on Avoiding Double Taxation or Evasion of Taxation on Income agreed between the Mainland and Hong Kong Special Administrative Region in August 2006, dividends payable by subsidiary located in the PRC to the company in Hong Kong who directly holds at least 25% of the equity interests in the subsidiary will be subject to a no more than 5% withholding tax. Since the preferential withholding tax is subject to the approval from competent taxation authorities in PRC, it remains uncertain whether our company in Hong Kong actually would be able to enjoy preferential withholding taxes for dividends distributed by our subsidiaries in China. Thus, dividends paid to us by our subsidiaries in China may be subject to the 5% income tax if we are considered as a “non-resident enterprise” under the EIT Law. If we are required under the EIT Law to pay income tax for any dividends we receive from our subsidiaries, it will materially and adversely affect the amount of dividends, if any, we may pay to our shareholders and ADS holders.
We may be deemed a PRC resident enterprise under the EIT Law and be subject to the PRC taxation on our worldwide income.
The EIT Law also provides that enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises” and are generally subject to the uniform 25% enterprise income tax rate as to their worldwide income. Under the implementation regulations for the EIT Law issued by the PRC State Council, “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and treasury, and acquisition and disposition of properties and other assets of an enterprise. Although substantially all of our operational management is currently based in the PRC, it is unclear whether PRC tax authorities would require (or permit) us to be treated as a PRC resident enterprise. If we are treated as a resident enterprise for PRC tax purposes, we will be subject to PRC tax on our worldwide income at the 25% uniform tax rate, which could have an impact on our effective tax rate and an adverse effect on our net income and results of operations, although dividends distributed from our PRC subsidiaries to us could be exempt from Chinese dividend withholding tax, since such income is exempted under the new EIT Law to a PRC resident recipient.
Dividends payable by us to our foreign investors and gain on the sale of our ADSs or ordinary shares may become subject to taxes under PRC tax laws.
Under the EIT Law and implementation regulations issued by the State Council, PRC income tax at the rate of 10% is applicable to dividends on post 2007 earnings payable to investors that are “non-resident enterprises,” which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of ADSs or shares by such investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC. If we are considered a PRC “resident enterprise,” it is unclear whether

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dividends we pay with respect to our ordinary shares or ADSs, or the gain you may realize from the transfer of our ordinary shares or ADSs, would be treated as income derived from sources within the PRC and be subject to PRC tax. If we are required under the EIT Law to withhold PRC income tax on dividends payable to our non-PRC investors that are “non-resident enterprises,” or if you are required to pay PRC income tax on the transfer of our ordinary shares or ADSs, the value of your investment in our ordinary shares or ADSs may be materially and adversely affected.
We may become a passive foreign investment company, or PFIC, which could result in adverse U.S. tax consequences to U.S. investors.
Depending upon the value of our shares and ADSs and the nature of our assets and income over time, we could be classified as a passive foreign investment company, or PFIC, by the United States Internal Revenue Service, or IRS, for U.S. federal income tax purposes. If we are classified as a “PFIC” in any taxable year in which you hold our ADSs and you are a U.S. investor, you would generally be taxed at higher ordinary income, rather than lower capital gain rates, if you dispose of ADSs at a gain in a later year, even if we are not a PFIC in that year. In addition, a portion of the tax imposed on your gain would be increased by an interest charge. Moreover, if we were classified as a PFIC in any taxable year, you would not be able to benefit from any preferential tax rate with respect to any dividend distribution that you may receive from us in that year or in the following year. Finally, you would also be subject to special U.S. tax reporting requirements.
We believe that we were not a PFIC for the taxable year 2007. However, there can be no assurance that we will not be a PFIC for the taxable year 2008 and/or later taxable years, as PFIC status is re-tested each year and depends on the facts in such year. For example, we would be a PFIC for the taxable year 2008 if the sum of our average market capitalization, which is our share price multiplied by the total amount of our outstanding shares, and our liabilities over that taxable year is not more than twice the value of our cash, cash equivalents, and other assets that are readily converted into cash. We could also be a PFIC for any taxable year if the gross income that we and our subsidiaries earn from investing the portion of the cash raised in our initial public offering in 2004 that exceeds the immediate capital needs of our active business is substantial in comparison with the gross income from our business operations.
While we will continue to examine our results under the PFIC tests, we cannot assure you that we will not be a PFIC for any future taxable year. For more information on the U.S. tax consequences to you that would result from our classification as a PFIC please see “Taxation — United States federal income taxation — U.S. Holders — Passive Foreign Investment Company.”
Because there is limited business insurance coverage in China, any business disruption or litigation we experience might result in our incurring substantial costs and the diversion of resources.
The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products and do not, to our knowledge, offer business liability insurance. While business disruption insurance is available to a limited extent in China, we have determined that the risks of disruption, cost of such insurance and the difficulties associated with acquiring such insurance make having such insurance impractical for us.
Risks relating to our industry
The Internet infrastructure in China, which is not as well developed as in the United States or other more developed countries, may limit our growth.

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The Internet infrastructure in China is not as well developed as in the United States or other more developed countries. In particular, we depend significantly on the PRC government and fixed line telecommunications operators in China to establish and maintain a reliable Internet infrastructure to reach a growing base of Internet users in China. We cannot assure you that the Internet infrastructure in China will support the demands associated with the continued growth of the Internet industry in China. If the necessary infrastructure standards or protocols, or complementary products, services or facilities are not developed in China on a timely basis or at all by these enterprises, our business, financial condition and results of operations could be materially adversely affected.
The limited use of personal computers in China and the relatively high cost of Internet access with respect to per capita gross domestic product may limit the development of the Internet in China and impede our growth.
Although the use of personal computers in China has increased in recent years, the penetration rate for personal computers in China is much lower than in the United States. In addition, despite a decrease in the cost of Internet access in China due to a decrease in the cost of personal computers and the introduction and expansion of broadband access, the cost of Internet access remains relatively high in comparison to the average per capita income in China. The limited use of personal computers in China and the relatively high cost of Internet access may limit the growth of our business. Furthermore, any Internet access or telecommunications fee increase could reduce the number of users that use our online services. Any fee or tariff increase could further decrease our user traffic and our ability to derive revenues from transactions over the Internet, which could have a material adverse effect on our business, financial condition and results of operations.
We depend largely on the infrastructure of the telecommunications operators in China, and any interruption of their network infrastructure may result in severe disruptions to our business.
Although private Internet service providers exist in China, substantially all access to the Internet in China is maintained through the telecommunications operators, under the administrative control and regulatory supervision of the Ministry of Industry and Information, or MII. In addition, local networks connect to the Internet through a government-owned international gateway. We rely on this infrastructure and to a lesser extent, certain other Internet data centers in China to provide data communications capacity primarily through local telecommunications lines. In the event of a large-scale infrastructure disruption or failure, we may not have access to alternative networks and services, on a timely basis or at all.
We may not be able to lease additional bandwidth from the telecommunications operators in China on acceptable terms, on a timely basis or at all. In addition, we may not have means of getting access to alternative networks and services on a timely basis or at all in the event of any disruption or failure of the network.
Unexpected network interruptions, security breaches or computer virus attacks could have a material adverse effect on our business, financial condition and results of operations.
We have limited backup systems and have previously experienced system failures, which have disrupted our operations. Any failure to maintain the satisfactory performance, reliability, security and availability of our network infrastructure may cause significant harm to our reputation and our ability to attract and maintain users. Major risks involved in such network infrastructure include:
  •   Any break-downs or system failures resulting in a sustained shutdown of all or a material portion of our servers, including failures which may be attributable to sustained power

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      shutdowns, or efforts to gain unauthorized access to our systems causing loss or corruption of data or malfunctions of software or hardware; and
  •   Any disruption or failure in the national backbone network, which would prevent our users from logging on to our website or accessing our services.
Our network systems are also vulnerable to damage from fire, flood, power loss, telecommunications failures, computer virus, hackings and similar events. Any network interruption or inadequacy that causes interruptions in the availability of our services or deterioration in the quality of access to our services could reduce our user satisfaction and competitiveness. In addition, any security breach caused by hackings, which involve efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses could cause our users to question the safety or reliability of our website and our services and could have a material adverse effect on our business, financial condition and results of operations. In addition, unauthorized access by third parties to our network could result in theft of personal user information, which could have an adverse effect on our reputation.
Concerns about the security and confidentiality of information on the Internet may increase our costs, reduce the use of our website and impede our growth.
A significant barrier to confidential communications over the Internet has been the need for security. To date, there have been several well-publicized compromises of security as a result of global virus outbreaks. We may incur significant costs to protect against the threat of security breaches or to alleviate problems caused by these breaches. If unauthorized persons are able to penetrate our network security, they could misappropriate proprietary information, including personal information regarding our subscribers, or cause interruptions in our services. As a result, we may be required to incur substantial costs and divert our other resources to protect against or to alleviate these problems. Security breaches could have a material adverse effect on our reputation, business, financial condition and results of operations.
Risks relating to regulation of our business and to our structure
We rely on contractual arrangements with CFO Fuhua, CFO Glory and CFO Premium, our PRC-incorporated affiliates, and their shareholders for our China operations, which may not be as effective in providing operational control as direct ownership. If the affiliates fail to perform its obligations under these contractual arrangements or PRC laws impair the enforceability of these contracts, our business, financial condition and results of operations may be materially and adversely affected.
Because PRC regulations restrict our ability to provide Internet content directly in China, we rely on contractual arrangements with CFO Fuhua, our PRC-incorporated affiliate over which we have no direct ownership, and its shareholders for operating our website and conducting our advertising business. These contractual arrangements may not be as effective in providing us with control over CFO Fuhua as direct ownership.
If we had direct ownership of CFO Fuhua, we would be able to exercise our rights as shareholders to effect changes in the board of directors, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, under the current contractual arrangements, as a legal matter, if CFO Fuhua fails to perform its obligations under these contractual arrangements, we may have to (i) incur substantial costs and resources to enforce such arrangements, and (ii) rely on legal remedies under PRC law, which we cannot be sure would be effective. In addition, we cannot be certain that the individual equity owners of CFO Fuhua will always act in the best interests of China Finance Online, especially if they leave the company.

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In 2007, we entered into contractual arrangements with CFO Glory and CFO Premium, our PRC-incorporated affiliates over which we have no direct ownership, with the intention of using these two companies as vehicles to acquire PRC domestic companies to operate business, which we are restricted from conducting directly by PRC regulations. Under the contractual arrangements, CFO Glory and CFO Premium will pay us service fees in return for our strategic consulting and technology support services. Currently CFO Glory and CFO Premium have no substantive business operation. These contractual arrangements may not be as effective in providing us with control over CFO Glory and CFO Premium as direct ownership.
These contractual arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. If CFO Fuhua, CFO Glory or CFO Premium fails to perform its obligations under these contractual arrangements, we may have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot be sure would be effective. In addition, the legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event that we are unable to enforce these contractual arrangements, our business, financial condition and results of operations could be materially and adversely affected.
If the PRC government finds that the financial data and information services we provide do not comply with Chinese laws and regulations relating to the provision of securities investment advisory services, we may suffer severe disruption to our business operations and lose substantially all of our revenue.
PRC laws require entities providing securities investment advisory services to the public to obtain a securities advisory business permit from the China Securities Regulatory Commission, or the CSRC. On May 30, 2002, we received a notice from the CSRC requesting that we stop promotional activities of our service offerings involving investment advisory content and alter the relevant content of our website and offerings so that we are no longer deemed to be providing investment advisory related offerings. Promptly after receipt of such notice, we entered into a business cooperation agreement with a securities advisory company licensed to provide securities advisory services, pursuant to which we receive modeling advice and data processing advice for the development of all of our research tools. We subsequently filed a written report with the CSRC on July 18, 2002, explaining our business arrangements with the securities advisory company. Since that time, we have entered into similar business cooperation agreements with five other licensed securities advisory companies. We have not received any further notices from the CSRC since the filing and have been providing financial data and information services under this business framework since that time. We cannot assure you that the CSRC will not revisit this issue and take a position contrary to our interests.
If we are found to be in violation of Chinese laws and regulations relating to the provision of securities investment advisory services, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including imposing monetary penalties on us, ordering us to shut down our websites or forcing us to pursue alternative business objectives other than offering financial data and information services. We may alternatively seek to apply for a securities advisory permit, but we cannot assure that we will be able to secure one. As a result of the possible penalties imposed on us, if the CSRC were to conclude that we provide securities investment advisory services, we could suffer severe disruption to our business operations and lose substantially all of our revenue.
If the PRC government finds that the agreements that establish the structure for operating our China business do not comply with PRC government restrictions on foreign investment in the online financial data and information service industry, we could be subject to severe penalties.

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PRC regulations currently limit foreign ownership of companies that provide Internet content services, which include operating financial data and information services through the Internet, to be no more than 50%. Accordingly, foreign and wholly foreign-owned enterprises are currently not able to apply for the required licenses for operating such services in China. We are a Hong Kong company. We conducted our operations in China solely through CFO Beijing, our wholly owned subsidiary from April 2000 to December 2004. In late 2006, we acquired CFO Stockstar and CFO Genius, and currently conduct our operations in China primarily through CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom and CFO Success.
We are a foreign enterprise and each of our subsidiaries, CFO Beijing, CFO Software, CFO Stockstar CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom and CFO Success is a wholly foreign-owned enterprise under PRC law, and accordingly, neither we, CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom and CFO Success is eligible to apply for licenses to operate our website. In order to comply with foreign ownership restrictions, we operate our website in China through CFO Fuhua and its wholly owned subsidiary CFO Meining, both of which hold the licenses required to be an Internet information content provider under the relevant PRC laws. Zhiwei Zhao, our chief executive officer, and Jun Wang, our chief financial officer, hold 45% and 55% of the equity interests in CFO Fuhua, respectively. We have been and are expected to continue to be dependent on CFO Fuhua and its wholly owned subsidiary CFO Meining to host our websites, www.jrj.com and www.stockstar.com. We have entered into contractual arrangements with CFO Fuhua, pursuant to which we provide operational support to CFO Fuhua. In addition, we have entered into agreements with CFO Fuhua and Zhiwei Zhao and Jun Wang, the shareholders of CFO Fuhua, which provide us with the substantial ability to control CFO Fuhua. Wu Chen, a financial manager at International Data Group China Ltd., a PRC company affiliated with IDG Technology Venture Investment, Inc. and IDG Technology Venture Investments, LP, two of our principal shareholders, transferred his holdings in CFO Fuhua to Jun Wang, our current chief financial officer, in October 2007. As a result, Jun Wang replaced Wu Chen as a party to all of the agreements we entered into with Wu Chen in connection with his holdings in CFO Fuhua and the operation of CFO Fuhua.
There are, however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly, we cannot assure you that the PRC regulatory authorities will not ultimately take a view that our arrangements with CFO Fuhua comply with PRC law.
If we, CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom, CFO Success, CFO Fuhua, and CFO Meining are found to be in violation of any existing or future PRC laws or regulations or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including:
  •   Revoking business and operating licenses of CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom, CFO Success, CFO Fuhua or CFO Meining;
 
  •   Discontinuing or restricting our operations or those of CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom, CFO Success, CFO Fuhua or CFO Meining;
 
  •   Imposing conditions or requirements with which we, CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom, CFO Success, CFO Fuhua or CFO Meining;

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  •   Requiring us, CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom, CFO Success, CFO Fuhua or CFO Meining to restructure the relevant ownership structure or operations;
 
  •   Restricting or prohibiting our use of the proceeds of our initial public offering in 2004 to finance our business and operations in China; or
 
  •   Taking other regulatory or enforcement actions, including levying fines that could be harmful to our business.
Any of these actions could cause our business, financial condition and results of operations to suffer and the price of our ADSs to decline.
Our contractual arrangements with CFO Fuhua may be subject to scrutiny by the PRC tax authorities and create a potential double layer of taxation for our revenue-generating services conducted by CFO Fuhua.
We could face material and adverse tax consequences if the PRC tax authorities determine that the contracts between CFO Beijing and CFO Fuhua were not entered into based on arm’s-length negotiations. Although we based these contractual arrangements on those of similar businesses, if the PRC tax authorities determine that these contracts were not entered into on an arm’s-length basis, they may adjust our income and expenses for PRC tax purposes in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by CFO Beijing or CFO Stockstar, which could adversely affect us by increasing the tax liabilities of CFO Beijing or CFO Stockstar without reducing the tax liabilities of CFO Fuhua, because CFO Fuhua currently does not operate profitably. These increased tax liabilities could further result in late payment fees and other penalties to CFO Beijing and CFO Fuhua for under-paid taxes.
We rely principally on dividends and other distributions on equity paid by our wholly owned operating subsidiaries to fund any cash and financing requirements we may have.
We are a holding company, and we rely principally on dividends and other distributions on equity paid by CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom and CFO Success for our cash requirements, including the funds necessary to service any debt we may incur. If any of CFO Beijing, CFO Software, CFO Stockstar , CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom or CFO Success incurs debt on its own behalf in the future, the instruments governing the debt may restrict such entity’s ability to pay dividends or make other distributions to us. In addition, PRC tax authorities may require us to amend the contractual arrangements CFO Beijing currently has in place with CFO Fuhua in a manner that would materially and adversely affect CFO Beijing’s ability to pay dividends and other distributions to us. Furthermore, PRC legal restrictions permit payments of dividends by CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom or CFO Success only out of their net income, if any, determined in accordance with PRC accounting standards and regulations. Under PRC law, CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom and CFO Success are also required to set aside a portion of their net income each year to fund specified reserve funds. These reserves are not distributable as cash dividends. Any limitation on the ability of CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom and CFO Success to make dividends to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends, or otherwise fund and conduct our business.
The PRC government may prevent us from distributing, and we may be subject to liability for, content that it believes is inappropriate.

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China has enacted laws and regulations governing Internet access and the distribution of news, information or other content, as well as products and services, through the Internet. In the past, the PRC government has stopped the distribution of information through the Internet that it believes violates PRC law. The Ministry of Industry and Information, or MII, the General Administration of Press and Publication and the Ministry of Culture has promulgated regulations which prohibit information from being distributed through the Internet if it contains content that is found to, among other things, propagate obscenity, gambling or violence, instigate crimes, undermine public morality or the cultural traditions of the PRC, or compromise State security or secrets.
In addition, the MII has published regulations that subject website operators to potential liability for content included on their websites and the actions of users and others using their systems, including liability for violations of PRC laws prohibiting the distribution of content deemed to be socially destabilizing. The PRC’s Ministry of Public Security has the authority to order any local Internet service provider, or ISP, to block any Internet website maintained outside China at its sole discretion. Periodically, the Ministry of Public Security has stopped the distribution over the Internet of information which it believes to be socially destabilizing. The PRC’s State Secrecy Bureau, which is directly responsible for the protection of State secrets of the PRC government, is authorized to block any website it deems to be leaking State secrets or failing to meet the relevant regulations relating to the protection of State secrets in the distribution of online information.
Under applicable PRC regulation, we may be held liable for any content we offer or will offer through our website, including information posted on bulletin boards and online forums which we host and maintain on our website. Furthermore, we are required to delete any content we transmit through our website if such content clearly violates PRC laws and regulations. Where any content is considered suspicious, we are required to report such content to PRC governmental authorities.
It may be difficult to determine the type of content that may result in liability for us. If any financial data and information services we offer or will offer through our website were deemed to have violated any of such content restrictions, we would not be able to continue such offerings and could be subject to penalties, including confiscation of income, fines, suspension of business and revocation of licenses for operating online financial data and information services, which would materially and adversely affect our business, financial condition and results of operations. Moreover, if any information posted on our bulletin boards or online forums were deemed to have violated any of the content restrictions, we could be subject to similar penalties that materially and adversely affect our business, financial condition and results of operations.
Risks relating to the People’s Republic of China
Substantially all of our assets are located in China and substantially all of our revenues are derived from our operations in China. Accordingly, our business, financial condition, results of operations and prospects are subject, to a significant extent, to economic, political and legal developments in China.
The PRC’s economic, political and social conditions, as well as government policies, could affect the financial markets in China and our business.
The PRC economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past twenty years, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.

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The PRC economy has been transitioning from a planned economy to a more market-oriented economy. Although the PRC government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. These actions, as well as future actions and policies of the PRC government, could materially affect the financial markets in China and our business and operations.
The PRC legal system embodies uncertainties which could limit the legal protections available to you and us.
The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past 28 years has significantly enhanced the protections afforded to various forms of foreign investment in China. Our PRC operating subsidiaries, CFO Beijing, CFO Software, CFO Stockstar , CFO Genius, CFO Jujing, CFO Zhengning, CFO Wisdom and CFO Success, respectively, are wholly foreign-owned enterprises, which are enterprises incorporated in China and wholly owned by foreign investors. Our wholly foreign-owned enterprises are subject to laws and regulations applicable to foreign investment in China in general and laws and regulations applicable to wholly foreign-owned enterprises in particular. However, these laws, regulations and legal requirements are constantly changing, and their interpretation and enforcement involve uncertainties. These uncertainties could limit the legal protections available to us and other foreign investors, including you. In addition, we cannot predict the effect of future developments in the PRC legal system, particularly with regard to the Internet, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws.
Restrictions on currency exchange may limit our ability to utilize our revenues effectively.
Substantially all of our revenues and operating expenses are denominated in Renminbi. Renminbi is currently convertible under the “current account,” which includes dividends, trade and service related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans. Currently, CFO Beijing, CFO Software, CFO Stockstar and , CFO Genius, CFO Jujing, CFO Zhengning, CFO Wisdom and CFO Success, may purchase foreign exchange for settlement of “current account transactions,” including payment of dividends to us and payment of license fees and service fees to foreign licensors and service providers, without the approval of the State Administration for Foreign Exchange. CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujing, CFO Zhengning, CFO Wisdom and CFO Success may also retain foreign exchange in their current accounts to satisfy foreign exchange liabilities or to pay dividends. However, we cannot assure you that the relevant PRC governmental authorities will not limit or eliminate our ability to purchase and retain foreign currencies in the future. Since a significant amount of our future revenues will be in the form of Renminbi, the existing and any future restrictions on currency exchange may limit our ability to utilize revenues generated in Renminbi to fund our business activities outside China, if any, or expenditures denominated in foreign currencies.
Fluctuations in exchange rates could result in foreign currency exchange losses.

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Because our earnings and cash from operations are denominated in Renminbi, fluctuations in exchange rates between U.S. dollars and Renminbi will affect our balance sheet and earnings per share in U.S. dollars. In addition, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. The People’s Bank of China sets and publishes daily a base exchange rate. Until July 21, 2005, the People’s Bank of China allowed this rate to fluctuate within a narrow and managed band with reference primarily to the supply and demand of Renminbi against the U.S. dollar in the market during the prior day; beginning on July 21, 2005, the People’s Bank of China has allowed this rate to fluctuate within a narrow and managed band with reference primarily to the supply and demand of Renminbi against a basket of currencies in the market during the prior day, and the People’s Bank of China also takes into account other factors such as the general conditions existing in the international foreign exchange markets. As a result of this policy change, Renminbi appreciated approximately 3.2% and 6.4 % against the U.S. dollar in 2006 and 2007, respectively. It is possible that the Chinese government could adopt a more flexible currency policy, which could result in more significant fluctuation of Chinese Renminbi against the U.S. dollar. We can offer no assurance that Renminbi will be stable against the U.S. dollar or any other foreign currency.
Our statements of operations of our international operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenues, operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in increased revenues, operating expenses and net income for our international operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our operations into U.S. dollars. Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to successfully hedge our exposure at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency.
Risks relating to our shares and ADSs
Stock prices of Internet-related companies, particularly companies with business operations primarily in China, have fluctuated widely in recent years, and the trading prices of our ADSs are likely to be volatile, which could result in substantial losses to investors.
The trading prices of our ADSs have been volatile and could fluctuate widely in response to factors beyond our control. Since the completion of our initial public offering in October 2004, the trading prices of our ADSs have ranged between a high of $47.68 per ADS to a low of $3.95 per ADS. During the twelve-month period ended December 31, 2007, the price of our ADSs on the NASDAQ Global Market has ranged from a low of $4.53 to a high of $47.68 per ADS. The market prices of the securities of Internet-related companies have generally been especially volatile.
In particular, the performance and fluctuation of the market prices of other technology companies with business operations mainly in China that have listed their securities in the U.S. may affect the volatility in the price of and trading volumes for our ADSs. Recently, a number of PRC companies have listed their securities, or are in the process of preparing for listing their securities, on U.S. stock markets. Some of these companies have experienced significant volatility, including significant price declines in connection with their initial public offerings. The trading performances of these Chinese companies’ securities at the time of or after their offerings may

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affect the overall investor sentiment towards PRC companies listed in the U.S. and consequently may impact the trading performance of our ADSs. Changes in the US stock market generally or as it concerns the Company’s industry, as well as geopolitical, economic, and business factors unrelated to the Company, may also affect the market price and volatility of our ADSs, regardless of our actual operating performance.
In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for business specific reasons. Factors such as variations in our revenue, earnings and cash flow, announcements of new investments, cooperation arrangements or acquisitions, and fluctuations in market prices for our services could cause the market price for our ADSs to change substantially. Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade. We cannot give any assurance that these factors will not occur in the future.
If we grant employee share options and other share-based compensation in the future, our net income could be materially and adversely affected.
We adopted the 2004 Stock Incentive Plan, or the Plan, in January 2004, and amended the Plan in September 2004 and August 2006. As of December 31, 2007, we had granted options under the Plan with the right to purchase a total of 15,239,488 ordinary shares, of which 1,560,640 unvested options had been returned to the pool of our ungranted options as a result of resignation from employment by a few former employees. We had also granted share options to purchase up to 6,829,500 ordinary shares in January 2004, under option agreements that were independent of the Plan, to other consultants and business advisors of the company. In July, 2007, we granted restricted stock awards covering 10,558,493 ordinary shares of the Company under our 2007 Equity Incentive Plan to our employees who are eligible for the 2007 Equity Incentive Plan. Until December 31, 2005 we accounted for options granted to our directors and employees and restricted stock granted to our employees in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” or APB 25, and its related interpretations, which require us to recognize compensation expenses for share options we grant where the exercise price is less than the deemed fair value of our ordinary shares on the date of the grant. However, the Financial Accounting Standards Board, or the FASB, has issued Statement No. 123 (Revised 2004), “Share-Based Payments,” or SFAS 123(R), which requires all companies to recognize, as an expense, the fair value of share options and other share-based compensation to employees at the beginning of the first annual or interim period after June 15, 2005. As a result, beginning on January 1, 2006, we account for compensation costs for all share options including share options granted to our directors and employees and restricted shares granted to our employees using a fair-value based method and recognize expenses in our consolidated statement of operations in accordance with the relevant rules under U.S. GAAP, which may have a material and adverse effect on our reported earnings. Moreover, the additional expenses associated with share-based compensation may reduce the attractiveness of such incentive plan to us. However, if we reduce the scope of the 2004 Stock Incentive Plan and 2007 Equity Incentive Plan, we may not be able to attract and retain key personnel, as share options and restricted shares are an important employee recruitment and retention tool. If we grant employee share options or other share-based compensation in the future, our net income could be adversely affected.
The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.
Sales of substantial amounts of our ADSs in the public market in the future, or the perception that these sales could occur, could adversely affect the market price of our ADSs and could materially impair our future ability to raise capital through offerings of our ADSs.

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There were 109,754,433 of our ordinary shares including 15,656,231 ADSs (representing 78,281,155 of those ordinary shares) outstanding as of March 31, 2008. In addition, there are outstanding options to purchase an additional 8,985,708 ordinary shares, including options to purchase 1,405,000 ordinary shares that are vested and immediately exercisable. Their ordinary shares, once issued, are exchangeable for our ADSs for trading in the public market. The 82,837,921 ordinary shares that were outstanding prior to our initial public offering are “restricted securities” as defined in Rule 144 and may not be sold in the absence of registration other than in accordance with Rule 144 under the Securities Act or another exemption from registration. These “restricted securities” are available for sale subject to volume and other restrictions as applicable under Rule 144 of the Securities Act. To the extent ordinary shares are sold to the market, the market price of our ADSs could decline.
A significant percentage of our outstanding ordinary shares are held by a small number of our shareholders, and these shareholders may have significantly greater influence on us and our corporate actions by nature of the size of their shareholdings relative to our public shareholders.
As of March 31, 2008, six of our existing shareholders, including IDG Technology Venture Investments, LP, IDG Technology Venture Investment, Inc., Vertex Technology Fund (III) Ltd., C&F International Holdings Limited, Ling Zhang and Jianping Lu, beneficially owned, collectively, approximately 59.55% of our outstanding ordinary shares. As of March 31, 2008, IDG Technology Venture Investments, LP and IDG Technology Venture Investment, Inc. together have one board representative on our five-director board, and beneficially own, collectively, approximately 24.88% of our outstanding ordinary shares. Accordingly, these shareholders have had, and may continue to have, significant influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. In addition, without the consent of these shareholders, we could be prevented from entering into transactions that could be beneficial to us.
Provisions in our charter documents and Hong Kong law, and change in control agreements we have entered into with each of our each of our executive officers, may discourage our acquisition by a third party, which could limit your opportunity to sell your shares at a premium.
Our constituent documents and Hong Kong law include provisions that could limit the ability of others to acquire control of us, modify our structure or cause us to engage in change in control transactions, including, among other things, the following:
  •   Our articles of association provide for a staggered board, which means that our directors, excluding our chief executive officer, are divided into two classes, with half of our board, excluding our chief executive officer, standing for election every two years. Our chief executive officer will at all times serve as a director, and will not retire as a director, so long as he remains our chief executive officer. This means that, with our staggered board, at least two annual shareholders’ meetings, instead of one, are generally required in order to effect a change in a majority of our directors. Our staggered board can discourage proxy contests for the election of our directors and purchases of substantial blocks of our shares by making it more difficult for a potential acquirer to take control of our board in a relatively short period of time.
 
  •   Hong Kong law permits shareholders of a company to remove directors by a shareholders’ resolution. Our articles of association require any shareholder who wishes to remove a director in this way to give us at least 120 days’ notice of the resolution, making it more difficult and time consuming for a potential acquirer who has

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      accumulated a substantial voting position to obtain control of our board by removing opposing directors.
  •   Our articles of association provide that our board can have no less than five and no more than nine directors. Our board currently has five directors. Any increase in the maximum number of directors on our board beyond nine directors can only be accomplished by amending our articles of association, which under Hong Kong law requires a shareholders’ supermajority vote of 75% and at least 21 days’ notice. These restrictions can make it more difficult for a potential acquirer who has accumulated a majority of our shares to take control of us by promptly increasing the size of our board and appointing new directors that are its nominees.
 
  •   Hong Kong does not have merger laws that permit Hong Kong companies to merge in the same way as U.S. companies could in the U.S. However, the Hong Kong Companies Ordinance has provisions that facilitate arrangements for the reconstruction and amalgamation of companies. The arrangement must be approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, representing three-fourths in value of each such class of shareholders or creditors that are present and voting either in person or by proxy at meetings convened by the High Court of Hong Kong. The arrangements must be sanctioned by the High Court of Hong Kong after shareholders or creditors approve it at the court-convened meeting.
 
  •   Our shareholders have authorized our board of directors, without any further action by shareholders, to issue additional shares. Under Hong Kong law, the authority granted by our shareholders will remain valid until the conclusion of our next annual general meeting, or the time when our next annual general meeting is required to be held. For as long as this approval remains effective, or is renewed, our board of directors will have the power to issue additional ordinary shares (including ordinary shares represented by ADSs) and preference shares without any further action by shareholders.
We are a Hong Kong company and because the legal and procedural protections afforded minority shareholders under Hong Kong law differ from those under U.S. law, you may have difficulty protecting your interests as our shareholder relative to shareholders of corporations organized in the U.S.
We are a Hong Kong company and are subject to the laws of Hong Kong. The fiduciary responsibilities of our directors, and the ability of minority shareholders to take successful legal action in Hong Kong against us or our directors, are governed by the laws and court procedures of Hong Kong. Shareholders of a Hong Kong company would not be able to bring class action lawsuits against that company or its directors in a Hong Kong court in the same way that shareholders of a U.S. corporation might be able to bring such lawsuits in a U.S. court. In addition, professional conduct rules applicable to Hong Kong lawyers generally prohibit Hong Kong lawyers from accepting contingency fee arrangements, where a lawyer representing the plaintiffs is paid a fee only if the lawsuit is successful. Without contingency fee arrangements or the ability to bring class action lawsuits, our shareholders may find it more costly and difficult to take legal action against us or our directors in the Hong Kong courts. The Hong Kong courts are also unlikely:
  •   to recognize or enforce against us judgments of courts of the United States based on the civil liability provisions of U.S. securities laws; or
 
  •   to allow original actions brought in Hong Kong, based on the civil liability provisions of U.S. securities laws that are penal in nature.

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In addition, there is no automatic statutory recognition in Hong Kong of judgments obtained in the United States. Moreover, Hong Kong companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
As a result of all of the above, minority public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, directors or controlling shareholders than they would as minority public shareholders of a U.S. corporation. Moreover, substantially all of our assets are located outside of the United States and all of our current operations are conducted in the PRC. In addition, most of our directors and officers are nationals and residents of countries other than the United States. All or a substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons.
The voting rights of holders of ADSs must be exercised in accordance with the terms of the deposit agreement, the American depositary receipts, and the procedures established by the depositary. The process of voting through the depositary may involve delays that limit the time available to you to consider proposed shareholders’ actions and also may restrict your ability to subsequently revise your voting instructions.
A holder of ADSs may exercise its voting rights with respect to the underlying ordinary shares only in accordance with the provisions of the deposit agreement and the American depositary shares. We do not recognize holders of ADSs representing our ordinary shares as our shareholders, and instead we recognize the ADS depositary as our shareholder.
When the depositary receives from us notice of any shareholders meeting, it will distribute the information in the meeting notice and any proxy solicitation materials to you. The depositary will determine the record date for distributing these materials, and only ADS holders registered with the depositary on that record data will, subject to applicable laws, be entitled to instruct the depositary to vote the underlying ordinary shares. The depositary will also determine and inform you of the manner for you to give your voting instructions, including instructions to give discretionary proxies to a person designated by us. Upon receipt of voting instructions of a holder of ADSs, the depositary will endeavor to vote the underlying ordinary shares in accordance with these instructions. Although Hong Kong law requires us to call annual shareholders’ meetings by not less than 21 days’ notice in writing, and all other shareholders’ meeting by not less than 14 days’ notice in writing, these minimum notice requirements can be shortened or completely waived by the consent of all holders of our ordinary shares entitled to attend and vote (in the case of annual shareholders’ meetings) or a majority in number of the holders of our ordinary shares representing at least 95% in nominal value of the shares giving the right to attend and vote (in the case of all other shareholders’ meetings). If the minimum notice periods are shortened or waived, you may not receive sufficient notice of a shareholders’ meeting for you to withdraw your ordinary shares and cast your vote with respect to any proposed resolution, as a holder of our ordinary shares. In addition, the depositary and its agents may not be able to send materials relating to the meeting and voting instruction forms to you, or to carry out your voting instructions, in a timely manner. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. The additional time required for the depositary to receive from us and distribute to you meeting notices and materials, and for you to give voting instructions to the depositary with respect to the underlying ordinary shares, will result in your having less time to consider meeting notices and materials than holders of ordinary shares who receive such notices and materials directly from us and who vote their ordinary shares directly. If you have given your voting instructions to the depositary and subsequently decide to change those instructions, you may not be able to do so in time for the depositary to vote in accordance with your revised instructions.
Furthermore, the depositary has deemed any holders who do not send in voting instructions at all or in time as having instructed the depository to give a discretionary voting proxy to the person(s)

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designated by us to receive voting proxies, with full power to exercise such holder’s (or holders’) voting rights under the ADSs’ underlying ordinary shares in the manner as the proxy holder deems fit. Accordingly, matters that favor the incumbent board of directors and management will have a higher likelihood of passing than would otherwise be the case.
The depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote.
You may not receive distributions on our ordinary shares or any value for them if such distribution is illegal or if any required government approval cannot be obtained in order to make such distribution available to you.
The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions (which may include securities or rights distributions) it or the custodian for our ADSs receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of our ordinary shares your ADSs represent. However, the depositary is not responsible to make a distribution available to any holders of ADSs if it decides that it is unlawful to make such distribution. For example, it would be unlawful to make a distribution to holder of ADSs if it consisted of securities that required registration under the Securities Act but that were not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or registration required for such distribution cannot be obtained after reasonable efforts made by the depositary. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our ADSs. This means that you may not receive the distributions we make on our ordinary shares or any value for them if it is unlawful or unreasonable from a regulatory perspective for us to make them available to you. These restrictions may have a material adverse effect on the value of your ADSs.
You may be subject to limitations on transfer of your ADSs.
Your ADSs represented by American Depositary Shares are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
Your right as a holder of ADSs to participate in any future rights offerings may be limited, which may cause dilution to your holdings.
We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to our ADS holders in the United States unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. In addition, the deposit agreement provides that the depositary bank will not make rights available to you unless the distribution to ADS holders of both the rights and any related securities are either registered under the Securities Act or exempted from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be

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able to establish an exemption from registration under the Securities Act. Accordingly, ADS holders may be unable to participate in our rights offerings and may experience dilution in their holdings.
In addition, if the depositary is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which case you will receive no value for these rights.
ITEM 4. INFORMATION ON THE COMPANY
A. History and development of the company.
China Finance Online Co., Ltd. was incorporated in Hong Kong in November 1998. Prior to April 2000, we did not conduct any business operations. In April 2000, we purchased all of the equity interests of Fortune Software (Beijing) Limited and renamed it China Finance Online (Beijing) Co., Ltd., or CFO Beijing, whereby we acquired our website, www.jrj.com.cn, and commenced our online financial and listed company data and information operations. In October 2004, we purchased another domain name, www.jrj.com, and commenced operating our business under this domain name in March 2005. We maintain the same content under both domain names.
Since we commercially launched our service offerings in April 2001, we have conducted substantially all of our operations in China through our wholly owned subsidiary, CFO Beijing until December 2004. In December 2004, we incorporated a new wholly foreign-owned enterprise, Fortune Software (Beijing) Co., Ltd., or CFO Software. As wholly foreign-owned enterprises, CFO Beijing and CFO Software are not permitted under PRC law to provide Internet information content, which requires special licenses from the Ministry of Industry and Information or its local branches. In order to comply with foreign ownership restrictions, we operate our website in China through Beijing Fuhua Innovation Technology Development Co., Ltd., or CFO Fuhua, which holds the licenses required to be an Internet information content provider under the relevant PRC laws. Zhiwei Zhao, our chief executive officer, and Jun Wang, our chief financial officer, hold 45% and 55% of the equity interests in CFO Fuhua, respectively.
In October 2004, we completed the initial public offering of our ADSs, each of which represents five of our ordinary shares, and listed our ADSs on Nasdaq.
On September 21, 2006 China Finance Online entered into an agreement to acquire all the equity interest in CFO Genius, CFO Genius engages in the business of constructing and maintaining financial information databases and providing networked information solution. It was the first company of its kind in China to build databases and to provide electronic information networks for domestic securities and investment firms at the time of its establishment in 1994. The acquisition is expected to strengthen the Company’s position in the industry and provide future opportunities to develop database products. CFO Genius is a financial information database provider primarily serving domestic securities and investment firms, for a total cash consideration of $1,040,081, including $40,081 in transaction costs.
In October 2006, we closed the acquisition of CFO Stockstar and CFO Meining, a related company of CFO Stockstar that operates www.stockstar.com. Under the definitive agreements, we and one of our affiliates paid US$6.5 million and RMB12 million, respectively, for an aggregate consideration of approximately US$8 million, in exchange for 100% of the equity of CFO Stockstar and 100% of the equity of CFO Meining. Established in 1996, www.stockstar.com is one of the leading finance and securities websites in China.
In October 2007, we formed a strategic alliance with China Center for Financial Research (“CCFR”) of Tsinghua University, one of the most reputable universities in China, primarily in the area of financial database development. We receive exclusive technical advice and support

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from CCFR on the development of financial database and analytics. We also cooperate with CCFR on other areas including training, product development, investor education, etc. This collaboration enables us to further solidify our leading position in providing financial information, data and analytics in China.
In November 2007, we successfully completed the acquisition of Daily Growth Securities (formerly known as Daily Growth Investment Company Limited), a licensed securities brokerage firm incorporated in Hong Kong with a history of over 35 years. Under the definitive agreement, China Finance Online acquired 85% equity interest of Daily Growth Securities for approximately $3.6 million. In March 2008, we raised the authorized and issued share capital of Daily Growth Securities; consequently, the total percentage of beneficial ownership by CFO Hong Kong increased from 85% to 98.5%. By acquiring and fully integrating Daily Growth Securities with our existing resources, particularly the vast investor base of our premium websites jrj.com and stockstar.com, our goal in the long run is to provide a diversified portfolio of brokerage and informational services to our users and improve the monetization rate of our website user base by capitalizing our users’ growing interest in investing in Hong Kong-listed securities.
In January 2008, we entered into an alliance agreement with China Telecom, the largest wireline telecommunications and broadband services provider in China, with a purpose to deliver a variety of financial information services to China Telecom’s more than 40 millions of broadband users. Under the alliance agreement, the two parties will establish and maintain a co-branded financial channel on China Telecom’s broadband portal Vnet.cn, a website owned by China Telecom that also serves as the payment platform for its broadband subscribers for various internet value-added services. China Telecom will distribute our products through the Vnet portal as well as its business halls in China, and the two parties will split the revenues according to the agreed-upon scheme under the alliance agreement. We believe that this strategic move will further solidify our leading position in providing financial information, data and analytics in China and also bring us a unique opportunity to further enhance our brand awareness among internet users.
Our principal executive offices are currently located at 9th Floor of Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing 100032, People’s Republic of China and our telephone number is (8610) 5832-5288.
B. Business overview.
We are one of the leading companies that specialize in providing online financial and listed company data and information in China. We offer subscription-based services on a single information platform that integrates data and information from multiple sources with features and functions such as data and information search, retrieval, delivery, storage and analysis. We deliver these features and functions using software tools that we have developed, which we refer to as research tools. Our research tools combine:
  •   financial analysis tools that permit users to calculate and analyze quantitatively financial data;
 
  •   current and historical financial data and information for China’s listed company stocks, bonds and mutual funds;
 
  •   categorized news and research reports; and
 
  •   online forums and bulletin boards.
With our screen layout and menu options, we display our research tools in a manner designed for ease of use. The content and technology comprising our integrated information platform is also designed to be adaptable so that as we develop new research tools and adopt new content and

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features, these new research tools, content and features can be easily integrated with our existing platform.
Our service offerings permit users to subscribe to several of the service packages that we offer. These offerings are broadly divided into three categories: Securities Market Information, Technical Analysis, and Fundamental Analysis. Each service package contains one or more research tools. Our research tools include a number of features and functions that, we believe, are innovative and are not widely available in the Chinese financial markets. Our service offerings can be accessed using our research tools and through our websites at www.jrj.com or www.stockstar.com. “JRJ” is the abbreviation of “Jin Rong Jie”, which means financial industry in Chinese. As of December 31, 2007, we had a total of approximately 9.0 million registered user accounts, and approximately 56,200 active paying individual subscribers. Our registered users are Internet users who maintain a registered account with either www.jrj.com or www.stockstar.com. Active paying individual subscribers refer to registered user who subscribe to a fee to one of our subscription-based services offered by either www.jrj.com or www.stockstar.com by download or through mobile devices.
Our service offerings to users are used by and targeted at a broad range of investors in China, including individual investors managing their own money, professional investors such as institutional investors managing large sums of money on behalf of their clients and high net worth individuals, other financial professionals such as investment bankers, stock analysts and financial reporters, and middle class individuals. Most, if not all, all of our research tools are designed for and tailored toward investors in China, allowing them to make informed investment decisions with respect to all of China’s listed company stocks, bonds and mutual funds according to specifications and analyses determined by the investors.
Our website users are not charged for visiting our websites and obtaining basic financial information such as real-time quotes and historical financial information for all of China’s listed company stocks, bonds and mutual funds, and financial news. Our integrated information platform, which allows users to select from a range of downloadable and web-based research tools, is available only through subscription. We categorize, process and, through our subscription-based research tools and our website content, present data and research results to our subscribers, allowing them to make informed investment decisions. Our service offerings are designed to enhance our users’ and subscribers’ experience due to the following characteristics:
Comprehensive.
We offer a broad range of data and information regarding China’s listed company stocks, bonds and mutual funds. We offer more than basic financial data such as price and trading information and provide our subscribers with breaking economic and financial news, detailed historical data and information, financial analysis tools, market coverage and listed company analysis and online forums that facilitate our subscribers’ own investment analysis efforts. We believe we have built a comprehensive database of historical financial data and information on China’s listed companies, bonds and mutual funds with data and information dating back to December 1990, when the Shanghai and Shenzhen Stock Exchanges first opened for trading.
Integrated.
Our information platform integrates data and information from multiple sources with features and functions such as data and information search, retrieval, delivery, storage and analysis. Our platform integrates all of the research tools, data and other information we have developed or gathered and, together with our screen layout and menu options, displays them in a manner designed for ease of use. The content and technology comprising our integrated information platform is also designed to be adaptable so that as we develop new research tools, content and features, these new research tools, content and features can be easily integrated with our existing

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platform. Depending on the service package chosen by the subscriber, a subscriber can have different levels of access privileges to financial analysis tools, real-time and historical data, news, research reports and online forums.
Interactive.
We have established online bulletin boards and discussion forums where users can share with each other views on stocks and trends in the financial markets in China. In addition, we have introduced stock alert services that send messages to our users’ mobile phones alerting them of changes in stock prices and other trading related information of their interest, according to their pre-set query parameters, allowing them to extend their experience with our services beyond the Internet.
Timely.
We provide our subscribers and users access to real-time stock quotes, breaking news and updated research reports to allow them to stay current with the latest market developments. We receive real-time stock, bond and mutual fund quotes and other trading related information directly from the Shanghai and Shenzhen Stock Exchanges. During an average trading day, we update our research tools within three seconds of receipt of new data and information from the stock exchanges. We also receive current news headlines from financial news websites and publishers and distributors of traditional media. We also have provided our subscribers and users with up-to-date personal finance news and wealth management products that we received from banks, trust companies, insurance companies and other financial institutions.
Unbiased.
Our website presents third-party content, analysis and commentary, and computer generated quantitative analysis to provide our subscribers and users with a broad view of the financial markets in China. We do not formulate or publish views on this content, analysis or commentary. Because we are not motivated to convince them to buy or sell any securities or to invest in any specific investments, we believe our subscribers and users view us as an unbiased provider of financial information.
Easy to use.
Our research tools and our website are designed with a screen layout, menu options and displays that we believe any user familiar with a computer will find easy to use. From our basic web page, our users can choose a variety of financial data and information topics that interest them. Through our research tools, our subscribers have access to a large pool of historical financial data and information, which they can categorize and analyze as they determine. We have a product development team directed at working closely with our customer support personnel to update and develop information and presentation formats that our subscribers view as enhancing ease of use and increasing the informative power of our research tools and our website. Our website is also designed to accommodate low bandwidth access to the Internet.
To assist us in the delivery of comprehensive, timely and easy to use service offerings, we have developed a technology platform that utilizes the capabilities of the Internet. Our technology platform allows us to retrieve real-time stock quotes from both the Shanghai and Shenzhen Stock Exchanges, historical financial data and information on listed companies, bonds and mutual funds from data providers, research reports from securities advisory companies, futures companies and securities brokerage companies licensed to provide securities advisory services, commentaries from licensed individual securities advisors and news feeds from news publishers and media companies.

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A substantial portion of our revenue is derived from annual subscription fees for our service offerings. For subscription services provided to individual investors, our current core business, we receive subscription fees at the beginning of the subscribers’ subscription periods. Revenues from the subscription fees are deferred and recognized ratably over the service period.
Growth Strategy
We are combing our own capability of organic growth with strategic acquisition and partnership.
Our own organic growth is achieved from:
  •   increase our sales force scale and improve efficiency by recruiting more telemarketing sales personnel and training them with better sales skills;
 
  •   increase our subscriber base by expanding distribution channels such as banks, mutual funds and brokerage firms;
 
  •   build our customer database by better understanding and in depth mining registered users;
 
  •   upgrade our existing service offerings and expand our present service offerings to include data and information relating to other financial instruments such as mutual funds, currencies, futures and commodities; and
 
  •   continue to encourage our subscribers to migrate to newer, more comprehensive and higher priced service offerings.
On the other hand, strategic acquisition and partnership is achieved by:
  •   acquire strategic resources and capabilities in order to strength entry barriers, expand business scale, diverse revenue resources and monetize registered user base; and
 
  •   get access to complementary resources and capabilities through strategic partnership that enables to penetrate into a bigger market in order to solidify our leading position and enhance our brand awareness.
Our Subscription Services
We collect, process and, through our research tools and our website content, provide to our subscribers financial analysis tools, real-time and historical data, news, research reports and online forums in one integrated information platform, allowing them to make informed investment decisions with respect to all of China’s listed company stocks, bonds and mutual funds according to specifications and analyses determined by them.
Our features
Through our integrated information platform, our subscribers have access to and can make use of each of our main content features: financial analysis tools, real-time and historical data, news, research reports and online forums.
Financial analysis tools.
Our financial analysis tools are research tools that provide subscribers with the ability to quantitatively calculate and analyze financial data, which include:

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  •   Fundamental analysis tools, which are designed to enable investors to analyze data based on company fundamentals; and
 
  •   Technical analysis tools, which are designed to enable investors to analyze data based on trends formulated by historical trading data.
These tools allow our subscribers to perform fundamental and technical analysis on companies, bonds and mutual funds listed on the Shanghai and Shenzhen Stock Exchanges, based on current and historical financial data and information, trading volumes and other user specifications.
Real-time and historical data.
Our integrated information platform offers subscribers interactive charts, quotes, reports and indicators on over 2,000 securities, including company stocks, bonds, warrants and mutual funds, listed on China’s Shanghai and Shenzhen Stock Exchanges. Users can search by company name or ticker symbol for real-time stock quotes of these securities. Trading data is provided to us on a real-time basis by each of the Shanghai and Shenzhen Stock Exchanges. We collect, categorize, organize and index trading data provided to us to allow searches, sorting and analysis by user specification and allow our subscribers to access and analyze the data, using our financial analysis tools and other research tools.
We also offer our subscribers detailed historical data and information on listed companies, mutual funds and bonds. This information is available for our subscribers to download from our website and is available on compact diskettes but are not accessible to general viewers. We collect historical data and information, process this information and, through our research tools, allow our subscribers to retrieve critical data and information they select.
News.
Our news feature allows users to search and view breaking economic and financial news and information from China and around the world. We do not report news ourselves. We have a team of editorial staff who compile on daily basis economic and financial news and information reported by other public sources that are relevant to China’s financial markets. Our editorial staff further indexes them according to topics and categories for the convenience of our users. Through our research tools and website content, our subscribers can access timely and customized financial information and reports, categorized and integrated into topics and sub-topics that they select, based on their investment and analysis needs. The financial data and information presented on our website or through our research tools is gathered from other financial information content providers and intermediaries with whom we have contractual arrangements.
Research reports.
Through our integrated information platform, our users can view financial news letters and analytical reports from a number of China’s prominent securities professionals. We draw market research reports and commentaries from securities advisory companies, futures companies and securities brokerage companies licensed to provide securities advisory services, commentaries from licensed individual securities advisors. For our subscribers, we categorize these reports and commentaries based on topics, industry sector and other customary categorizations.
Online forums.
We host several online bulletin boards on our websites by which Chinese licensed securities advisors offer their views on a variety of topics ranging from macroeconomic conditions to performance of individual stocks, bonds and mutual funds. We do not support, comment on or advocate any views presented by any such securities advisors. We also maintain several online

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forums on our website, enabling our users to participate in the discussions on specific financial topics we believe will be of interest to them. The online forums are moderated by third party moderators approved by us. We believe the online bulletin boards and discussion forums enhance our users’ experience and, through our active monitoring, allow us to better understand our users’ behavior and needs.
Our websites
Our website content and our research tools are the key components of our information platform. Our websites have four primary functions:
  •   to attract visitors and market our subscription based service offerings;
 
  •   to store content and serve as an integral part of our information platform;
 
  •   to serve as download platforms for our service offerings; and
 
  •   to display online advertisements.
In order to attract visitors to our websites, we offer a significant portion of our website content free of charge. This free content includes real-time stock quotes, trading volumes, pricing indicators for listed companies in China and market news from the Shanghai and Shenzhen Stock Exchanges. Through our websites, users can also participate in online forum discussions and bulletin boards. Our websites also have an important marketing function for our subscription based service offerings. We provide examples to our visitors on our websites of the various premium content and features they can access and receive by becoming a subscriber to our service offerings.
Our premium content and features are accessible through our research tools, some of which are web-based and others are computer-based. Subscribers to our web-based research tools are required to register and maintain personal accounts with our websites. These subscribers can store important information they viewed and analytical results they obtained in their personal accounts maintained at our websites, and later review that information and results using the same screen layouts and menu options our websites provide.
Subscribers to computer-based research tools can download from our website the packages they selected to their computers.
We believe our websites are designed for ease of use and accommodate low bandwidth access to the Internet. In addition, we have also historically derived some revenue from online advertising.
Our research tools
Through our research tools we have developed, our subscribers can access and analyze our content, including our real-time and historical data, news and research reports, in one integrated platform, allowing our subscribers to make informed investment decisions with respect to all of China’s listed company stocks, bonds and mutual funds according to specifications and analyses determined by them. Some of our research tools are web-based and others require download from our website and are computer-based. Our subscribers pay us a subscription fee for the use of our subscription services over a specified period of time, typically 12 months. .
We offer subscribers a variety of research tools designed to provide information and analysis, including financial analysis, as well as the ability to search and sort out data and information, based on subscribers’ needs and preferences. For example, we make available services that permit subscribers to analyze our content using some or all of the following research tools:

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  •   Categorized macro information. This feature allows subscribers to search and sort up-to-date and comprehensive news and information relating to the broader financial markets or a specific financial topic or industry sector. We have a dedicated team of professional editors who collect, organize, categorize and index macro-economic and financial market information on a daily basis, according to user feedback and classification methods that we believe are accepted practice in securities markets in China.
 
  •   Industry sector analysis. Many investors in China seek to distinguish between listed companies with investment potential and those prone to financial trouble by analyzing listed companies’ financial data published in their financial statements and comparing such data among companies within the same industry sector. We collect and process listed company financial data and information according to classification methods set by relevant PRC regulatory authorities, and allow subscribers to view the relative standings of listed companies in the same industry sector or geographical locations based on market accepted performance parameters such as price-to-earnings ratios and profit margins.
 
  •   Fundamental analysis. Historical and real-time financial information are important to investors because they provide insight into company fundamentals. This research tool integrates the historical and real-time trading information we maintain in our database, as well as fundamental financial information such as earnings-per-share, shareholdings and other related data and information. Our subscribers can receive fundamental financial and trading information organized by their specifications and display these results on a graphical interface that we designed to be easy to visualize and navigate.
 
  •   Mutual fund analysis. Our mutual fund research tool focuses on categorizing information relating to the portfolio holdings of mutual funds. This feature allows subscribers to study the collective effect of large market players on individual stocks. This feature also offers information relating to the performance of individual mutual funds, allowing subscribers to assess the risks and rewards of investing in mutual funds.
 
  •   Technical analysis. This feature allows investors interested in trends formulated by historical trading data to perform technical analysis on listed companies. With over 60 markets accepted technical indicators and a complete database of historical data and information on all of China’s listed company stocks, our subscribers can perform extensive chart analysis and pattern recognition on any stock listed on China’s stock exchanges.
We currently offer different service packages incorporating some or all of our research tools to our users. Our service packages provide research tools focused around three main areas: securities market data, technical analysis, and fundamental analysis. We expect that as we introduce data and information on commodities, we would include a separate research tool for that purpose. We view the migration of existing subscribers and the attraction of new subscribers to our service offerings with more comprehensive research tools as one of our most important growth strategies.
Our securities service packages. Our service packages focus on the following three main areas:
  •   Securities Market Data. Our Securities Market Data service packages are developed on the basis of Level II quotes and TopView data licensed from Shanghai Stock Exchange. On June 15, 2006, we entered into an agreement with Shanghai Stock Exchange Information Network Co., Ltd., (“SSEINC”) which is associated with the Shanghai Stock Exchange, or SSE. Under the definitive agreement, we are certified by SSE to develop service packages based on Level II quotes, and upgrade the features and functions of our current products. The definitive agreement is contemplated to continue through April 30, 2009.

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Level II quotes give investors unique insight into a stock’s price movement, which, we believe, is of great value to Chinese investors. In addition, Level II quotes provide faster and more comprehensive trading data and statistical information on market transactions.
In January 2008, once again we are certified by SSEINC to distribute TopView, a series of trading data and statistics for stocks listed on SSE. Among other things, TopView reveals valuable statistics, such as trading volume and price patterns of various types of trading accounts, which give investors unique insight to identify and analyze major market participants’ trading activities in specific stocks and thereby help investors make informed decisions. In addition, we are also authorized to use TopView data to enhance and upgrade features and functionalities of our existing products and develop new products.
  •   Technical Analysis. Technical Analysis involves researching historical price and volume data, patterns and trends to predict the performance of a given stock. This type of analysis focuses on chart formations and formulas to identify major and minor trends to recognize buying opportunities and exit points.
 
  •   Fundamental Analysis. Fundamental Analysis involves examining the company’s financials and operations, especially sales, earnings, growth potential, assets, debt, management, products, and competition. Fundamental Analysis takes into consideration only those variables that are directly related to the company itself, rather than the overall state of the market or technical analysis data.
Pricing policy
We price our service packages based on the research tools included and their level of comprehensiveness, as well as on market demand. Each of the securities service packages has multiple versions ranging from low end to high end with different levels of comprehensiveness in terms of features and functionality which target various levels of customer demand for fundamental analysis. Therefore, we focus on enhancing and upgrading the available features and functions of our research tools and continue to introduce updated versions of our service packages. We encourage all of our users to upgrade to newer versions of our service packages or more comprehensive service packages.
We may, from time to time, offer discounts or promotions, depending on our perceived need in accordance with our pricing policy. Any of such discounts or promotions could apply to new or repeat subscribers as we may determine.
Our brokerage services
With the acquisition of Daily Growth Securities in November 2007, a licensed securities brokerage firm with a history of 36 years, we provide a diversified portfolio of brokerage and other related services to our customers who invest in stocks listed on Hong Kong Stock Exchange. Daily Growth Securities is regulated by Hong Kong Securities and Futures Commission and Hong Kong Stock Exchange. In 2007, brokerage and related services provided by Daily Growth Securities represented less than 1% of our total net revenues, and such services were not part of our core business in 2007.
Our online advertisement services
Our websites www.jrj.com and www.stockstar.com are among the most popular financial information websites in China. Although we believe our internet community is an attractive demographic target for advertisers because it represents an affluent, educated and technically sophisticated market, in 2007, we continued to allocate most of our advertising inventory to promote our subscription-based software offerings. In 2007, revenues from advertising-related

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services represented approximately 6% of our total net revenues, and online advertising was not part of our core business in 2007.
Customer support
Our customer support center provides our subscribers real-time and personal support. Our customer support center currently operates from 8:00 a.m. to 10:00 p.m. on weekdays and 9:30 a.m. to 8:30 p.m. on weekends and holidays. Our customer support personnel, in addition to their sales and marketing functions, help our existing and prospective subscribers to resolve any technical problems they may have. We have an in-house training program for our customer support personnel, which include training courses on China’s securities markets, our service features and functionalities, technical problem solving skills in respect of our research tools and general customer service guidelines.
Our content providers
We draw content from the Shanghai and Shenzhen Stock Exchanges, which provide us with real-time stock, bond and mutual fund pricing and other information, and our data providers, which provide us with historical financial data and information on listed companies, bonds and mutual funds, according to our parameters, specifications and requirements. We also draw content from securities advisory companies, futures companies and securities brokerage companies licensed to provide securities advisory services, licensed individual securities advisors, and news publishers and media companies, as well as financial institutions, such as banks, trust companies and insurance companies.
Shanghai and Shenzhen Stock Exchanges
We receive real-time stock, bond and mutual fund quotes and other trading related information directly from the Shanghai and Shenzhen Stock Exchanges. We have entered into an information service agreement with each of the stock exchanges pursuant to which we pay the stock exchanges fixed service fees in exchange for receiving real-time price quotes and other trading related information through satellite communication. We also have cable links to both exchanges to serve as back-ups to satellite communication data feeds. During an average trading day, we update our web pages within five seconds of receipt of new data and information from the stock exchanges.
Our agreement with Shanghai Stock Exchange Information Network Co., Ltd., which is associated with the Shanghai Stock Exchange, allows us to develop service packages based on Level II quotes and upgrade the features and functions of our current products. Level II quotes give investors unique insight into a stock price’s movement and provide faster and more comprehensive trading data. We also have an agreement with Shanghai Stock Exchange Information Network Co., Ltd. to distribute TopView. Among other things, TopView reveals valuable statistics, such as trading volume and prices of various types of trading accounts, which give investors unique insight to identify and analyze major market participants’ trading activities in specific stocks and help investors make more informed investment decisions. In addition, we are also authorized to use TopView to enhance and upgrade features and functionalities of our existing products and develop new products.
Our agreement with Shenzhen Securities Information Co., Ltd., associated with the Shenzhen Stock Exchange, is in the process of being renewed. Under these agreements, we may distribute the financial data and information we receive to our users, but not to other vendors or distributors. Each of these two data providers can terminate its respective agreement with us if we breach the terms of the relevant agreement, such as fail to pay or delay our payment of fees to these providers.

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Data providers
We acquired CFO Genius in September 2006. Starting from May 2007, CFO Genius has become our primary provider of historical data and information on listed companies, bonds and mutual funds for input into our information platform. We are able to obtain information in accordance with designated parameters, specifications and requirements. This information includes historical financial information for listed companies, significant corporate events such as mergers and acquisitions and significant changes in the shareholdings of listed companies, information concerning major shareholders of listed companies, biographical information for directors and management of listed companies, as well as financial news and other data and information. The updates provided by CFO Genius range from several times a day to once a month depending on the type of information. In addition, we have raw data provision contracts with Financial China Information & Technology Co., Ltd. and Shanghai Gildata Service Co., Ltd as alternative sources of historical data and information.
Financial Institutions, securities advisors and stock brokerages
We have entered into cooperation contracts with various financial institutions, including banks, insurance and trust companies. According to these contracts, they will provide the personal finance information and product updates directly to us. We have also entered into cooperation arrangements with securities advisory companies, futures companies and securities brokerage companies, each licensed to provide securities advisory services. Under these arrangements, we have the right to extract market commentary and research notes taken from their websites, and to store, reproduce, market and deliver such information to our customers by means of our information platforms. We upload financial content from these websites on a regular basis. In addition, we have entered into cooperation arrangements with licensed individual securities advisors to receive through email and other means their published articles and commentaries covering a range of topics from macroeconomic conditions to performance of individual stocks, bonds and mutual funds. Many of these individual securities advisors have dedicated columns or bulletin boards maintained on our website for which they are responsible for maintenance.
News and media conglomerates
We also draw content in the form of breaking headlines and other news information from publishers and distributors of traditional media.
Chinese news publishers and media companies
We are permitted under these arrangements to extract financial news, reports and information taken from their print publication channels, and to store, reproduce, market and deliver such information to our users through our website. We rely on our editorial staff to compile, for publication on our website, publicly available financial news, reports and information received from these sources that are relevant to China’s financial markets.
Sales and marketing
We market our service offerings through our websites, as well as through customer support personnel at our telemarketing and customer service centers. Our websites provide detailed descriptions of our service offerings while our customer support personnel are available to explain to callers the various features of our offerings and to resolve our subscribers’ technical problems. We also market our service offerings through banks, mutual funds and stock brokerage firms.
We charge our subscribers a subscription fee for the use of our service packages over an agree-upon service period, typically one year. Our subscribers either pay us by cash, by money

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order via post, by online bank transfer or by direct wiring of cash. Upon receipt of payment, we promptly activate our subscribers’ accounts with us. Since we accept cash as the only payment method, we do not take any credit risk of our subscribers. We have a refund policy, and refunds in 2007 represented approximately 1% of cash revenues received from individual subscribers.
Product development
We place significant emphasis on refining and upgrading our information platform, and on creating new and innovative features to meet the changing needs of our customers and utilizing the latest in technology and innovation. We believe that we are one of the few online financial information service providers in China that have solid in-house software development capabilities. Our ability to develop software internally allows us to broaden our service offerings and enhance our competitiveness, while keeping development costs at a minimum.
Our product development team works as an integral part of our overall service offering efforts. For example, we require our product development team to conduct frequent meetings with our sales and marketing team to discuss the feasibility of new service offerings and the progress of existing product development efforts. Our product development team also works closely with our customer support team to develop features and content that is based on feedback we received from our subscribers and users.
We expect product development to remain an important part of our business as the online financial data and information services industry in China becomes increasingly sophisticated. In order to remain competitive, we expect to continue to expand our product development efforts:
  •   to increase the breadth of our service offerings through the addition of new features and functions to our service packages;
 
  •   to enhance our subscribers’ experience by improving the quality of our research tools and website;
 
  •   to develop additional research tools, features and content specifically targeting the high-end subscribers; and
 
  •   to design and build new financial instrument service products that fit our strategies.
Technology and infrastructure
Our internally developed technology infrastructure is designed to maximize the number of concurrent users we can serve, while minimizing information retrieval time for our users. We deliver electronically real-time and historical financial data and analysis tools to our users through our internally developed technology platform, which is designed specifically for our web-based and computer-based software services. Our technology platform, which consists of web server technology, database technology and a data aggregation engine, enables us to enhance performance, reliability and scalability in handling bursts of high-volume data requests during peak time, allowing users to quickly retrieve the information that they search for even during periods of high concurrent use. We own all of our servers. Our servers are capable of accommodating three times the number of peak-hour concurrent users and four times our required bandwidth as measured during peak hours for the twelve months ended December 31, 2007
Web server technology.
Our web server technology enables us to quickly develop and deploy information services dynamically. Our web server technology includes features that are designed to optimize the performance of our online services. For example, we developed a special feature that maximizes

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the time during which client-server connections are kept open, based on current server load, thereby increasing user navigation and website access speed.
Database technology.
We have developed database technology to address the specific requirements of our information services. Our database design and search techniques allow for efficient data retrieval within the unique operating parameters of the Internet. For example, our dynamic index traversal technology utilizes users’ inputted search parameters to determine the appropriate database index (from among multiple indices) in parallel, thereby efficiently locating the data requested. Further, we use an index compression mechanism to achieve an efficient balance between disk space and compression/decompression for various database activities.
Remote data aggregation engine.
Our remote data aggregation engine allows us to retrieve, process and present data as a single virtual database result from a variety of sources, either in real-time or at predetermined intervals. We developed a template-driven profiling system that catalogs the data on each source site. We also store data results internally in order to reduce network traffic and deliver the results to our users as quickly as possible.
Competition
The online financial data and information service market in China is relatively new, has few substantial barriers to entry and is competitive and rapidly changing. The number of online financial news and information sources competing for users’ attention and spending has increased since we commenced operations and we expect that competition will continue to intensify. More broadly, we also compete, directly and indirectly, for users and subscribers with companies in the business of providing financial data and information services, including:
  •   publishers and distributors of traditional media, including print, radio and television, such as China Securities News, Shanghai Securities News, International Financial Times, 21st Century Economic Reports, as well as radio and television programs and news focused on financial news and information;
 
  •   internet portals providing information on business, finance and investing, such as sina.com.cn and sohu.com;
 
  •   financial information web pages offered by websites such as hexun.com;
 
  •   personal stock research software vendors, such as Shanghai Qian Long High Tech Corporation, that develop and market stock research software through stock brokerage companies; and
 
  •   stock brokerage companies, especially stock brokerage companies with online trading capabilities, such as Haitong Securities.
Our ability to compete depends on many factors, including the comprehensiveness, timeliness and trustworthiness of our content, the market acceptance, pricing and sophistication of our analytical tools, the ease of use of our information platform and the effectiveness of our sales and marketing efforts.
Many of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. This may allow them to adopt our

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business model and devote greater resources than we can to the development and promotion of products and services similar to or better than our own. These competitors may also engage in more extensive research and development, undertake more far-reaching marketing campaigns, and adopt more aggressive pricing policies and offer products and services that achieve greater market acceptance than ours. They may also undercut us by making more attractive offers to our existing and potential employees, content providers and sponsors. New and increased competition could result in price reductions for our service packages, reduced margin or loss of market share, any of which could materially adversely affect our business, results of operations and financial condition.
Intellectual property
Our intellectual property is an essential element of our business operations. We rely on copyright, trademark, trade secret and other intellectual property law, as well as non-competition, confidentiality and license agreements with our employees, suppliers, business partners and others to protect our intellectual property rights. Our employees are generally required to sign agreements to acknowledge that all inventions, trade secrets, works of authorship, developments and other processes generated by them on our behalf are our property, and to assign to us any ownership rights that they may claim in those works. Despite our precautions, it may be possible for third parties to obtain and use intellectual property that we own or license without consent.
Our PRC subsidiaries, CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Wisdom, CFO Success, CFO Jujin, CFO Zhengning and CFO Meining, are the registered owners of 47 software copyrights, each of which has been registered with the National Copyright Administration of the PRC.
We have registered two key domain names relating to our websites, www.jrj.com and www.stockstar.com, with the Internet Corporation for Assigned Names and Numbers, or ICANN, an internationally organized, non-profit corporation. We have also registered one domain name relating to our website, www.jrj.com.cn, with the China Internet Network Information Center, a domain name registration service in the PRC. We currently have 11 trademarks registered with the China Trademark Office, owned by CFO Meining and CFO Genius. Our applications for trademark registration of “Financial Street Fuhua” in Chinese and three other Chinese variations of “Financial Street Fuhua” with the Trademark Bureau of the State Administration for Industry and Commerce of China are still in the approval process.
Regulation
We operate our business primarily in the People’s Republic of China under a legal regime that consists of the State Council, which is the highest authority of the executive branch of the PRC central government, and several ministries and agencies under its leadership, including:
  •   Ministry of Industry and Information;
 
  •   the China Securities Regulatory Commission;
 
  •   the Ministry of Culture;
 
  •   the General Administration of Press and Publication (National Copyright Administration);
 
  •   the State Administration of Industry and Commerce;
 
  •   the Ministry of Public Security; and

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  •   the Ministry of Commerce.
The State Council and these ministries and agencies have issued a series of rules that regulate a number of different substantive areas of our business, which are discussed below.
Foreign ownership restriction on Internet content provision businesses
PRC regulations currently limit foreign ownership of companies that provide Internet content services, including our business of providing financial information and data to Internet users, to 50%. In order to comply with this foreign ownership restriction, we operate our website in China through CFO Fuhua, which is wholly owned by Zhiwei Zhao, our chief executive officer, and Jun Wang, our chief financial officer, who are both PRC citizens. Under PRC law, we cannot hold the licenses and approvals necessary to operate our website because those licenses and approvals can not be held by foreign entities or majority foreign-owned entities. We, as a company incorporated in Hong Kong, SAR, are a foreign entity for this purpose.
There are, however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly, we cannot assure you that the PRC regulatory authorities will not ultimately take a view that is contrary to the opinion of our PRC legal counsel. If the PRC government finds that the agreements that establish the structure of our operations in China do not comply with PRC government restrictions on foreign investment in our industry, we could be subject to severe penalties.
Licenses and permits
There are a number of aspects of our business which require us to obtain licenses from a variety of PRC regulatory authorities.
In order to host our website, CFO Fuhua and CFO Meining are required to hold an Internet content provider, or ICP, license issued by the Ministry of Industry and Information or its local offices. CFO Fuhua currently holds an ICP license issued respectively by Beijing Communications Administration and Shanghai Communications Administration, local offices of the Ministry of Industry and Information.
Each ICP license holder that engages in supply of analysis and research information relating to stocks and other securities must obtain a securities advisory permit from China Securities Regulatory Commission, or the CSRC. We currently do not hold a securities advisory permit. We receive securities analysis and research information from licensed securities advisors that hold securities advisory permits, and we have clearly stated on our websites and in our software the source of such information as required by the CSRC.
A recent regulation issued by the Ministry of Industry and Information requires short message, or SMS, content providers to obtain an SMS license from the Ministry of Industry and Information or its local offices. We have obtained the required SMS license for the delivery of our financial short message content.
Furthermore, the Ministry of Industry and Information has promulgated rules requiring ICP license holders that provide online bulletin board services to register with, or obtain an approval from, the relevant telecommunications authorities. CFO Fuhua and CFO Meining have obtained such approval from Beijing Communications Administration and Shanghai Communications Administration, respectively, the government agency in charge of this matter.
Regulation of Internet content

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The PRC government has promulgated measures relating to Internet content through a number of ministries and agencies, including the Ministry of Industry and Information, the Ministry of Culture and the General Administration of Press and Publication. These measures specifically prohibit Internet activities, which include provision of financial information through the Internet, that result in the publication of any content which is found to, among other things, propagate obscenity, gambling or violence, instigate crimes, undermine public morality or the cultural traditions of the PRC, or compromise State security or secrets. If an ICP license holder violates these measures, the PRC government may revoke its ICP license and shut down its websites.
CFO Fuhua and CFO Meining’s ICP licenses expressly state that, in relation to their Internet content provision and among other things, they are not allowed to publish general news on politics, society or culture, or establish a “news column,” of provide such information under express heading of “news”. Specifically, the Press Office of Beijing People’s Government, the government authority regulating news publication, confirmed with us that so long as we do not provide general news, we are not required to obtain a license to publish financial or economic related news content. However, on September 25, 2005, the Press Office of the State Council and the Ministry of Industry and Information jointly promulgated the Provisions for the Administration of Internet News Information Services, in which the authorities provided an applicable definition of internet news information services and require that internet content providers that provide internet news information services within such definition must apply for a license. CFO Fuhua and CFO Meining are planning to procure such a license.
Regulation of information security
Internet content in China is also regulated and restricted by the PRC government to protect State security. The National People’s Congress, China’s national legislative body, has enacted a law that may subject to criminal punishment in China any effort to: (1) gain improper entry into a computer or system of strategic importance; (2) disseminate politically disruptive information; (3) leak State secrets; (4) spread false commercial information; or (5) infringe intellectual property rights.
The Ministry of Public Security has promulgated measures that prohibit use of the Internet in ways which, among other things, result in a leakage of State secrets or a spread of socially destabilizing content. The Ministry of Public Security has supervision and inspection rights in this regard, and we may be subject to the jurisdiction of the local security bureaus. If an ICP license holder violates these measures, the PRC government may revoke its ICP license and shut down its websites.
Intellectual property rights
The State Council and the National Copyright Administration have promulgated various regulations and rules relating to protection of software in China. Under these regulations and rules, software owners, licensees and transferees should register their rights in software with the National Copyright Administration or its local offices and obtain software copyright registration certificates. Although such registration is not mandatory under PRC law, software owners, licensees and transferees are encouraged to go through the registration process and registered software rights may receive better protections. We have registered all of our self-developed software with the National Copyright Administration.
PRC law requires owners of Internet domain names to register their domain names with qualified domain name registration agencies approved by the Ministry of Industry and Information and obtain a registration certificate from such registration agencies. A registered domain name owner has an exclusive use right over its domain name.

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Unregistered domain names may not receive proper legal protections and may be misappropriated by unauthorized third parties. We have registered our domain names, www.jrj.com and www.stockstar.com, with the Internet Corporation for Assigned Names and Numbers, or ICANN, and obtained a certificate for this domain name. ICANN is an internationally organized, non-profit corporation that has responsibility for Internet Protocol (IP) address space allocation, protocol identifier assignment, generic (gTLD) and country code (ccTLD) Top-Level Domain name system management, and root server system management functions.
Website name
A PRC law published in September 2000 requires entities and individuals operating commercial websites to register their website names with the Beijing Municipal Administration of Industry and Commerce, or Beijing AIC, which is authorized by the State Administration of Industry and Commerce, or the SAIC, as the only official registration authority in China during trial period. If any entity or individual operates a commercial website without obtaining such certificate, it may be charged a fine or imposed other penalties by the Beijing AIC. We have registered our website name, “JRJ Investment and Finance Network” and “Stockstar” with, and received commercial website name registration certificates from Beijing AIC.
Privacy protection
PRC law does not prohibit Internet content providers from collecting and analyzing personal information from their users. We require our users to accept a user agreement whereby they agree to provide certain personal information to us. PRC law prohibits Internet content providers from disclosing to any third parties any information transmitted by users through their networks unless otherwise permitted by law. If an Internet content provider violates these regulations, the Ministry of Industry and Information or its local offices may impose penalties and the Internet content provider may be liable for damages caused to its users.
Advertising regulation
PRC law requires entities conducting advertising activities to obtain an advertising permit from the SAIC’s local offices. Entities conducting advertising activities without such permit may be charged a fine or imposed other penalties by the SAIC’s local offices. We hold our advertising permits through CFO Fuhua, a PRC domestic company wholly owned by Zhiwei Zhao and Jun Wang, and CFO Meining, a subsidiary wholly owned by CFO Fuhua.
Brokerage regulations in Hong Kong
Daily Growth Securities, which operates in Hong Kong, is regulated by the Securities and Futures Commission (“SFC”) of Hong Kong, SAR and Hong Kong Stock Exchange.
C. Organizational structure.
We conduct substantially our business through our wholly owned subsidiaries in China, which are CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Wisdom and CFO Success. We are dependent on CFO Fuhua and CFO Meining, a wholly owned subsidiary of CFO Fuhua, to host our websites. In 2007, we acquired Daily Growth Securities (formerly known as Daily Growth Investment Company Limited) to provide securities brokerage services for stocks listed on Hong Kong Stock Exchange. In March 2008, we raised the authorized and issued share capital of Daily Growth Securities so the total percentage of beneficial ownership by CFO Hong Kong increases from 85% to 98.5%. In addition, in August and September 2007, we established CFO Glory and CFO Premium in anticipation of using these two companies to acquire PRC domestic companies whose business are those which we are restricted from conducting directly by PRC regulations.

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The following table sets forth the details of our principle subsidiaries and PRC-incorporated affiliates:
                 
            Percentage of
    Jurisdiction   Beneficial
    of   Ownership
Name   Incorporation   Interest
Fortune Software (Beijing) Co., Ltd
   PRC     100  
China Finance Online (Beijing) Co., Ltd.
   PRC     100  
Beijing Fuhua Innovation Technology Development Co., Ltd. *
   PRC     100  
Stockstar Information Technology (Shanghai) Co., Ltd
   PRC     100  
Shanghai Meining Computer Software Co., Ltd.*
   PRC     100  
Zhengning Information & Technology (Shanghai) Co., Ltd.
   PRC     100  
Shenzhen Genius Information Technology Co., Ltd.
   PRC     100  
Jujin Software (Shenzhen) Co., Ltd.
   PRC     100  
Fortune (Beijing) Wisdom Technology Co., Ltd.
   PRC     100  
Fortune (Beijing) Success Technology Co., Ltd.
   PRC     100  
Beijing CFO Glory Co., Ltd*
   PRC     100  
Beijing CFO Premium Technology Co., Ltd*
   PRC     100  
Daily Growth Securities Limited
   Hong Kong     98.5  
 
*   Denotes variable interest entity

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The following diagram illustrates our material entities involved in the operation of those businesses and excludes dormant entities and entities, which aside from holding existing contracts or conducting any operations as of March 31, 2008:
(FLOWCHART)

(GRAPHIC)

(1)   Zhiwei Zhao is our chief executive officer and director.
 
(2)   Jun Wang is our chief financial officer.
 
(3)   Zhenfei Fan is our financial manager.
 
(4)   Wei Xiong is our director of Human Resource and Administrative Department.


PRC regulations currently limit foreign ownership of companies that provide Internet content provider services, or ICP services, which include our business of providing financial information and data to Internet users, to 50%. We are a Hong Kong company and we conduct our operations

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solely in China through our wholly owned subsidiaries. We are a foreign enterprise and the wholly owned subsidiaries are all foreign invested enterprises under PRC law and accordingly, neither we, or wholly owned subsidiaries is eligible for a license to operate ICP services or provide online advertising services. In order to comply with foreign ownership restrictions, in December 2000, we formed our affiliated Chinese entity, CFO Fuhua, with Wu Chen and Xinzheng Wang, who later transferred his holdings in CFO Fuhua to Jun Ning, our former chairman and chief executive officer. Both Wu Chen and Jun Ning are PRC citizens and own 55% and 45% of the equity interest in CFO Fuhua, respectively. Jun Ning resigned from his positions with us and transferred his holdings in CFO Fuhua to Zhiwei Zhao, our current chief executive officer and a member of our board of directors in November 2006. Wu Chen transferred his holdings in CFO Fuhua to Jun Wang, our current chief financial officer in October 2007. CFO Fuhua holds the licenses and approvals that are required to operate our website, as well as our domain names www.jrj.com.cn and www.jrj.com. CFO Fuhua also holds the licenses and approvals required to operate our online advertising business. We and CFO Beijing have entered into a series of contractual arrangements with CFO Fuhua and its shareholders. Zhiwei Zhao replaced Jun Ning as a party to these contractual arrangements when he received Jun Ning’s holdings in CFO Fuhua in November 2006. Jun Wang replaced Wu Chen as a party to these contractual arrangements in October 2007. As a result of these contractual arrangements, we are considered the primary beneficiary of CFO Fuhua and accordingly, we consolidate CFO Fuhua’s results of operations in our financial statements.
Pursuant to our contractual arrangements with CFO Fuhua, we provide equipment, services and domain name licenses to CFO Fuhua in exchange for fees. The principal equipment lease, services and domain name license agreements that we have entered into with CFO Fuhua include:
  •   an equipment leasing agreement, pursuant to which CFO Fuhua leases a substantial majority of its operating assets from CFO Beijing;
 
  •   a technical support agreement, pursuant to which CFO Beijing provides technical support for CFO Fuhua’s operations;
 
  •   an amended and restated strategic consulting agreement, pursuant to which CFO Beijing provides strategic consulting services to CFO Fuhua, including consulting services in relation to CFO Fuhua’s online advertising business;
We made a loan to each of the shareholders of CFO Fuhua, Wu Chen and Jun Ning, solely for the purposes of capitalizing CFO Fuhua. Pursuant to the loan agreements, Wu Chen and Jun Ning can only repay the loans by transferring all of their interest in CFO Fuhua to us or a third party designated by us. Zhiwei Zhao replaced Jun Ning as a party to the loan agreements when he received Jun Ning’s holdings in CFO Fuhua in November 2006. Jun Wang replaced Wu Chen as a party to the loan agreements when he received Wu Chen’s holdings in CFO Fuhua in October 2007. While Hong Kong law limits the maximum interest payment chargeable under a loan to 60% of the total principal amount per annum, we do not believe this limitation will have a material adverse effect on our business and operations, or will result in a material amount being paid to the shareholders of CFO Fuhua if and when they are permitted to transfer their interest in CFO Fuhua to us. In addition, we have entered into agreements with CFO Fuhua and its shareholders that provide us with the substantial ability to control CFO Fuhua. Pursuant to these contractual arrangements:
  •   the shareholders of CFO Fuhua have granted us or individuals designated by us an irrevocable proxy to exercise all their voting rights as shareholders of CFO Fuhua, including the right to appoint directors, the general manager and other senior management of CFO Fuhua;

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  •   CFO Fuhua will not enter into any transaction that may materially affect its assets, liabilities, equity or operations without our prior written consent;
 
  •   CFO Fuhua will not distribute any dividends;
 
  •   we may purchase the entire equity interest in, or all the assets of, CFO Fuhua when and if such purchase is permitted by PRC law or the current shareholders of CFO Fuhua cease to be directors or employees of CFO Fuhua;
 
  •   the shareholders of CFO Fuhua have pledged their equity interest in CFO Fuhua to CFO Beijing to secure the payment obligations of CFO Fuhua under the equipment leasing agreement, the technical support agreement and the amended and restated strategic consulting agreement between CFO Beijing and CFO Fuhua; and
 
  •   the shareholders of CFO Fuhua will not transfer, sell, pledge, dispose of or create any encumbrance on their equity interest in CFO Fuhua without the prior written consent of CFO Beijing.
On March 3, 2008, Jun Wang, Zhiwei Zhao and CFO Fuhua entered into a capital increase agreement, under which Jun Wang and Zhiwei Zhao will increase their capital contribution in CFO Fuhua by $449,000 and $549,000 respectively. As a result, the registered capital of CFO Fuhua will be increased from $428,000 to approximately $1,426,000 . In connection with the capital increase agreement, we entered into a loan agreement with Zhiwei Zhao and Jun Wang to extend each of Zhiwei Zhao and Jun Wang a loan with the amount of 449,000 and $549,000, respectively, for the sole purpose of financing their increase of capital contribution in CFO Fuhua. Under the loan agreement, as conditions precedent to the extension of loans, Zhiwei Zhao and Jun Wang shall have entered into a share pledge agreement, purchase option and cooperation agreement with CFO (Beijing).
On March 3, 2008, Zhiwei Zhao, Jun Wang and CFO (Being) entered into a share pledge agreement, under which Jun Wang and Zhiwei Zhao have pledged all of their equity interest in Fuhua to CFO Beijing to secure the payment obligations of Fuhua under the equipment leasing agreement, the technical support agreement and the amended and restated strategic consulting agreement between CFO Beijing and CFO Fuhua. Under the share pledge agreement, Zhiwei Zhao and Jun Wang have agreed not to transfer, assign, pledge or in any other manner dispose of their interest in Fuhua or create any other encumbrance on their interest in Fuhua which may have a material effect on CFO Beijing’s interest without the written consent of CFO Beijing, except the transfer of their interest in CFO Fuhua to us or the third party assignee designated by us according to the purchase option.
On March 3, 2008, CFO Beijing, Zhiwei Zhao, Jun Wang, CFO Fuhua and CFO entered into a purchase option and cooperation agreement, or the purchase option agreement, pursuant to which, Zhiwei Zhao and Jun Wang jointly granted us an exclusive option to purchase all or any portion of their equity interest in CFO Fuhua, and CFO Fuhua granted us an exclusive option to purchase all of its assets if and when (1) such purchase is permitted under applicable PRC law, and (2) to the extent permitted by law, when Zhiwei Zhao and/or Jun Wang ceases to be a director or employee of CFO Fuhua, or either Zhiwei Zhao or Jun Wang desires to transfer his equity interest in CFO Fuhua to a party other than the existing shareholders of CFO Fuhua. We may purchase such interest or assets ourselves or designate another party to purchase such interest or assets. The exercise price of the option will equal the total principal amount of the loan lent by us to Zhiwei Zhao and Jun Wang under their loan agreements to purchase their respective equity interest in CFO Fuhua, or the price required by relevant PRC law or government approval authority if such required price is higher than the total principal amount of the loans lent by us to Zhiwei Zhao and Jun Wang. We may choose to pay the purchase price payable to Zhiwei Zhao and Jun Wang by canceling our loans to Zhiwei Zhao and Jun Wang.

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Following any exercise of the option, the parties will enter into a definitive share or asset purchase agreement and other related transfer documents within 30 days after written notice of exercise is delivered by us. Pursuant to the purchase option agreement, at all times before we or any party designated by us acquire 100% of CFO Fuhua’s shares or assets, CFO Fuhua may not (1) sell, transfer, assign, dispose of in any manner or create any encumbrance in any form on any of its assets unless such sale, transfer, assignment, disposal or encumbrance is related to the daily operation of CFO Fuhua or has been disclosed to and consented to in writing by us; (2) enter into any transaction which may have a material effect on CFO Fuhua’s assets, liabilities, operations, equity or other legal interest unless such transaction relates to the daily operation of CFO Fuhua or has been disclosed to and consented to in writing by us; or (3) distribute any dividends to its shareholders in any manner, and Zhiwei Zhao and Jun Wang may not cause CFO Fuhua to amend its articles of association to the extent such amendment may have a material effect on CFO Fuhua’s assets, liabilities, operations, equity or other legal interest except for pro rata increases of registered capital required by law.
Each of the contractual arrangement with CFO Fuhua and its shareholders can only be amended with the approval of our audit committee or another independent body of our board of directors. The shareholders of CFO Fuhua are not deriving any material personal benefits from these arrangements and are not expected to receive any consideration, other than cancellation of the existing loans, upon future transfer of their entire equity interest in, or all of the assets of, CFO Fuhua to us.
In 2007, we formed our affiliated Chinese entities, CFO Premium and CFO Glory, in anticipation of using these two companies as the vehicles to acquire PRC companies to operate business which we are restricted from conducting directly by PRC regulations. We formed CFO Premium with Wei Xiong, our director of the department of human resource and administration and Zhifei Fan, our financial manager in August 2007. Both Wei Xiong and Zhifei Fan are PRC citizens and own 55% and 45% of equity interest in CFO Premium respectively. We have entered into a series of contractual arrangements with CFO Premium and its shareholders including contracts relating to provision of strategic consulting, technical and operational support services and certain shareholders rights. As a result of these contractual arrangements, we are considered the primary beneficiary of CFO Premium and accordingly, we could consolidate CFO Premium’s results of operations in our financial statements.
We entered into a loan agreement with Wei Xiong, and Zhenfei Fan,to extend them a loan with the amount of $77,000 and $63,000 , respectively, for the sole purpose of financing their investments in CFO Premium as CFO Premium’s registered capital. The initial term of these loans in each case is 10 years which may be extended upon the parties’ agreement. Wei Xiong and Zhifei Fan can only repay the loans by transferring all of their interest in CFO Premium to us or a third party designated by us. When Wei Xiong or Zhifei Fan transfer their interest in CFO Premium to us or our designee, if the actual transfer price is higher than the principal amount of the loans, the amount exceeding the principal amount of the loans will be deemed as interest accrued on such loans and repaid by Wei Xiong and Zhifei Fan to us. In addition, we have entered into with CFO Premium and its shareholders agreements that provide us with substantial ability to control CFO Premium. Pursuant to these contractual arrangements:
  •   the shareholders of CFO Premium have granted us or individuals designated by us an irrevocable proxy to exercise all their voting rights as shareholders of CFO Premium, including the right to appoint directors, the general manager and other senior management of CFO Premium;
 
  •   CFO Premium will not enter into any transaction that may materially affect its assets, liabilities, equity or operations without our prior written consent;
 
  •   CFO Premium will not distribute any dividends;

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  •   we may purchase the entire equity interest in, or all the assets of, CFO Premium when and if such purchase is permitted by PRC law or the current shareholders of CFO Premium cease to be employees of CFO Premium;
 
  •   the shareholders of CFO Premium will not transfer, sell, pledge, dispose of or create any encumbrance on their equity interest in CFO Premium without our prior written consent.
We formed CFO Glory with Wu Chen and Zhiwei Zhao in September, 2007. Wei Chen and Zhiwie Zhao own 55% and 45% of equity interest in CFO Glory respectively. Wei Chen transferred his holdings in CFO Glory to Jun Wang on September 1, 2007. W have entered into a series of contractual arrangements with CFO Glory and its shareholders including contracts relating to provision of strategic consulting, technical and operational support services and certain shareholders rights. As a result of these contractual arrangements, we are considered the primary beneficiary of CFO Glory and accordingly, we could consolidate CFO Glory’s results of operations in our financial statements.
On September 1, 2007, we entered into a loan agreement with Wu Chen and Zhiwei Zhao, the shareholders of CFO Glory to extend each of Wu Chen and Zhiwei Zhao a loan with the amount of $77,000 and $63,000, respectively, for the sole purpose of financing their investments in CFO Glory as CFO Glory’s registered capital. The initial term of these loans in each case is 10 years which may be extended upon the parties’ agreement. Wu Chen and Zhiwei Zhao can only repay the loans by transferring all of their interest in CFO Glory to us or a third party designated by us. When Wu Chen or Zhiwei Zhao transfer their interest in CFO Glory to us or our designee, if the actual transfer price is higher than the principal amount of the loans, the amount exceeding the principal amount of the loans will be deemed as interest accrued on such loans and repaid by Wu Chen and Zhiwei Zhao to us. On September 10, 2007, we entered into a loan agreement with Jun Wang to extend Jun Wang a loan in the amount of $77,000 on the same term as described above, for the sole purpose of financing Jun Wang to acquire from Wu Chen the whole of Wu Chen’s holdings in CFO Glory. Upon transferring all his holdings in CFO Glory to Jun Wang, Wu Chen has repaid his loans in full. In addition, we have entered into with CFO Glory and its shareholders same agreements as those we entered into with CFO Premium and its shareholders described above that provide us with substantial ability to control CFO Glory.
D. Property and equipment.
Our principal executive offices as well as our subsidiaries, CFO Beijing and CFO Software, CFO Fuhua, CFO Wisdom, CFO Success, CFO Glory and CFO Premium are currently located in Beijing, leasing approximately 3,200 square meters. CFO Stockstar, CFO Meining and CFO Zhengning are located in Shanghai, leasing approximately 3,300 square meters. CFO Genius and Jujin both are located in Shenzhen, leasing approximately 900 square meters. Daily Growth Securities, located in Hong Kong, leases approximately 500 square meters. We intend to seek additional office space as required for our operations as needed on commercially reasonable terms. We believe that we will be able to obtain adequate facilities, principally through the leasing of appropriate properties, to accommodate our future expansion plans.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this annual report on Form 20-F. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect”, “anticipate”, “intend”, “believe”, or similar language. All forward-looking statements included in this annual report are based on information available to us on the date hereof, and we assume no obligation

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to update any such forward — looking statements. Actual results could differ materially from those projected in the forward — looking statements. In evaluating our business, you should carefully consider the information provided under the caption “Risk Factors” in this annual report on Form 20-F. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.
A. Operating Results
We are one of the leading companies that specialize in providing online financial and listed company data and information in China. We offer subscription-based services based on a single integrated information platform that combines financial analysis tools, real-time and historical data, news, research reports and online forums. Our service offerings can be accessed using our research tools and through our websites www.jrj.com and stockstar.com. Our service offerings are used by and targeted at a broad range of investors in China, including individual investors managing their own money, professional investors such as institutional investors managing large sums of money on behalf of their clients and high net worth individuals, other financial professionals such as investment bankers, stock analysts and financial reporters, and middle class individuals.
Our net revenues increased by 263% to $25.9 million in 2007 from $7.1 million in 2006. Our net loss was $4.1 million in 2007. For subscription services provided to individual investors, we receive subscription fees at the beginning of the subscribers’ subscription periods. Revenues from the subscription fees are deferred and recognized ratably over the twelve month period. Our deferred revenues were $25.1 million as of December 31, 2007, compared to $6.4 million as of December 31, 2006.
Our principal capital expenditures for 2005, 2006 and 2007 consisted of primarily purchases of servers, workstations, computers, computer software, and other items related to our network infrastructure for a total of approximately $235,000, $1.0 million and $3.8 million, respectively.
Key factors affecting our operating results and financial condition
Some of the key factors affecting our operating results and financial condition include the following:
  •   performance of China’s securities markets, and user demand for market intelligence on China’s securities markets, as well as the overall performance of China’s economy;
 
  •   contribution of alternative revenue resources such as revenues from online advertising;
 
  •   seasonality associated with the level of activity of our users and subscribers and the trading activities of China’s securities markets;
 
  •   tax refund from the PRC tax authorities for value-added-taxes we are required to pay on the sale of subscriptions to our service packages;
 
  •   other tax incentives we receive from PRC tax authorities resulting from CFO Beijing being a foreign invested software development company and CFO Software being a foreign invested high-technology company;
 
  •   our cost structure, including, in particular, our cost for raw data;
 
  •   the desirability of our service packages relative to other products and offerings available in the market;

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  •   our ability to benefit from the acquisition of CFO Stockstar, CFO Genius, and Daily Growth Securities; and
 
  •   PRC telecommunication and regulatory policies.
We derive revenues primarily from annual subscription fees from subscribers to our financial data and information services. The level of public interests in investing in China’s securities market could significantly influence the demand for market intelligence on China’s securities markets and our products. Such demand could be affected by the level of trading activity in China’s securities markets. During the past several years, China’s securities markets have experienced sizable volatility.
To a lesser extent, we also derive revenues through advertisement sales on our website, which contributed $1.6 million in 2007, representing a 17% increase from the $1.3 million contributed in 2006. Revenues from advertising accounted for 6.0% of our net revenues in 2007. We allocated most of our advertising inventories to promote our subscription-based software offerings, and hence online advertising was not considered a core service line of our business in 2007.
Our gross revenues also include the benefit of a refund from the PRC tax authorities for value-added-taxes, or VAT, we are required to pay on the sale of subscriptions to our service packages. We receive these refunds from the PRC tax authorities as part of the PRC government’s policy of encouraging software development in the PRC. There is generally a one-month lapse between the time we complete a sale and pay the VAT on that sale and the time we receive the refund. We recognized approximately $2.2million in revenue for VAT refunds in 2007.
Gross revenues
We generate subscription fee revenues mostly from the sales of the service packages we currently offer, which are comprised of downloadable and web-based research tools. In general, a subscription permits the subscriber to use the selected service package for a one-year period.
The most significant factors that affect our subscription revenues are:
  •   the number of registered user accounts on our websites;
 
  •   the number of active paying individual subscribers; and
 
  •   the service packages selected by our subscribers.
Although users of our website are not charged for visiting our website and obtaining basic financial information, such as real-time stock quotes and historical financial information for all of China’s listed company stocks, bonds and mutual funds, financial news and research reports, these users are our primary source of existing and potential subscribers. As users frequent our website and rely on our offerings, we expect that a number of them will opt to purchase our subscription services. A substantial portion of our revenues are currently derived from our subscription services. Registered user accounts refer to user accounts registered by individuals with either www.jrj.com or www.stockstar.com. Active paying individual subscribers refer to registered users who subscribe for a fee to one of our subscription-based services offered by either www.jrj.com or www.stockstar.com by download or through the mobile devices. We view increase in the number of active paying individual subscribers as a measure of market acceptance and customer loyalty to our service offerings.
We generally encourage our subscribers to migrate to newer, more comprehensive and higher priced service offerings. We price our service packages based on the research tools included and their level of comprehensiveness, as well as on market demand. From time to time, we may offer

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discounts to and promotional rates for our service packages, which may be offered to new subscribers or repeat subscribers.
Net revenues
Our net revenues reflect a deduction from our gross revenues for business taxes and related surcharges incurred in connection with our China operations. Because CFO Beijing, CFO Software, CFO Fuhua, CFO Wisdom, CFO Success, CFO Glory, CFO Premium, CFO Stockstar, CFO Meining, CFO Genius and CFO Jujin operate in China, their gross revenues from sales that are not subject to VAT are subject to a business tax at a rate ranging from 3% to 5%. We expect to pay business tax in the PRC on revenues from advertising-related business and from mobile value added services we expect to generate in the future.
We derives revenue from external customers for each of the following services during the years presented:
                         
    Years ended December 31,  
    2005     2006     2007  
 
                        
Subscription fees
  $ 5,811,395     $ 5,075,830     $ 22,712,043  
Advertising revenue
    996,311       1,337,630       1,560,194  
SMS revenue
    —       298,232       1,339,321  
Brokerage service revenue
    —       —       80,896  
Others
    674,460       416,386       210,620  
 
                  
 
   $ 7,482,166     $ 7,128,078     $ 25,903,074  
 
                  
Revenue recognition
We charge our subscribers a subscription fee for the right to use our service packages for, in general, a one-year period. For subscription services provided to individual investors, our subscription fee is paid in full prior to the delivery of our service packages. Therefore, we do not take any credit risk with respect to our individual subscribers. Upon receipt of payment in full, we activate our subscriber’s account, marking the start of the subscription period, and promptly provide the subscriber with an account access code. We begin to recognize subscription fees as revenue upon activation of the subscriber’s account and then ratably over the service period. Subscription fees that have been paid but not yet recognized are accounted for as deferred revenue on our balance sheets. Deferred revenue is reduced proportionately as revenue is recognized ratably over the service period.
We derive advertising fees from advertising sales on our website principally for fixed periods of time, which are generally less than one year. We recognize advertising fees ratably over the periods during which the advertisements are displayed on our website.
We also derive commission from brokerage services provided by the newly acquired subsidiary, Daily Growth Securities, which buys or sells securities on their customers’ behalf. The commission income is recognized on a trade date basis as securities transactions occur.
Cost of revenues
Our cost of revenues consists of expenses directly related to the offering of our software subscription services. Our cost of revenues primarily consists of cost of raw data, cost of bandwidth, salary and compensation, depreciation and rent. Cost of revenues accounted for 21% and 17% of our net revenues in 2006 and 2007 respectively, although the absolute amount of cost

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of revenue experienced a sizable increase in 2007 compared with that of 2006. The decrease in the ratio of cost of revenues to net revenues in 2007 is primarily due to the increase in net revenues greater than the increase in cost of revenues. We believe the absolute increase will partly be attributable to contribution from increase in website maintenance and development expenses of $2.9 million in 2007, compared to $943,000 from 2006, which consists of rent, cost of raw data, salary and compensation, server depreciation expenses, bandwidth costs, and content expenses for our jrj.com and stockstar.com websites. We expect our cost of revenues will increase in absolute amount of our net revenues in 2008.
Rent. Rent attributable to cost of revenues reflects that portion of our rent expense that we believe is directly used in the provision of our web content and database services. We allocate rent to cost of revenues to the extent the space is occupied by our web content and database personnel. Our rent is the largest component of our cost of revenues, constituting 26% of our cost of revenues in 2007.
Cost of raw data. Our cost of raw data consists of bandwidth fees, which we pay to Internet Data Center (IDC) and fees we pay to the stock exchanges and our other data providers pursuant to our commercial agreements with those parties. These contracts are typically for a fixed rate, without regard to the level of use, for a term, typically between one and three years, depending on the provider. Our cost of raw data is likely to be our most variable element of cost of revenues. Our cost of raw data is expected to increase:
  •   if we enter into additional commercial agreements for purchasing data from new sources or if we obtain different or additional data from existing sources or
 
  •   due to rate increases we may experience in the future upon renewal of our existing agreements.
Salary and compensation. Salary and compensation expenses include wages, bonuses and other benefits, including welfare benefits. Salary and compensation included in our cost of revenues relate to our web content and database personnel. We expect that our salary and compensation expenses will increase in the future as we intend to increase our customer service performance as our business further grows and expands.
Depreciation. Depreciation consists of depreciation of property and equipment, primarily our network and servers. We include depreciation within cost of revenues when the relevant assets are directly related to the provision of our web content and database services.
Operating expenses
Our operating expenses consist of general and administrative expenses, product development expenses, and sales and marketing expenses. Stock-based compensation expenses are reported within each of the cost of revenue and operating expense financial statement line items, as appropriate. The decrease in the ratio of operating expenses to net revenues in 2007 is primarily due to the increase in net revenues greater than the increase in operating expenses. The increase in absolute amount of operating expenses is primarily due to the expansion of our business scale and the increase in the salary and compensation for our personnel, stock-based compensation, cost of professional services and other related costs associated with our being publicly listed in the U.S. The most significant factors affecting our operating expenses are:
  •   salary and compensation for our employees, particularly our sales and marketing personnel and our management team;
 
  •   stock- based compensation expenses for the grant of the performance-based restricted stock and for new grants issued in 2007;

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  •   professional services and other related costs associated with being publicly listed in the U.S; and
 
  •   expansion in operating scale associated with the acquisition of CFO Stockstar, CFO Genius and Daily Growth Securities.
We expect our operating expenses will continue to increase for the foreseeable future, but the rate of such increase will depend primarily on our personnel needs, our advertising needs and our computer, network and server capacity, including efforts we may undertake to expand our online advertising business.
General and administrative expenses. General and administrative expenses primarily consist of salary and compensation for our general management, finance and administrative personnel, stock-based compensation expenses, rent, professional expenses and other expenses, including travel and other general business expenses, office supplies and depreciation for general office furniture and equipment. We expect our general and administrative expenses to increase in 2008 and for the foreseeable future.
Product development expenses. Our product development expenses primarily consist of salary and compensation expenses of personnel engaged in the research, development and implementation of our new service offerings, rent and depreciation of equipment attributable to our product development efforts. We expect that our product development expenditures will increase for the next twelve months.
Sales and marketing expenses. Our sales and marketing expenses primarily consist of salary and compensation for our sales and marketing personnel, as well as the marketing promotion fees. The increase is largely due to compensation expenses as a result of increased sales force. We expect to continue to increase our sales and marketing efforts in the foreseeable future.
Stock option plan and option agreements
We adopted the 2004 Stock Incentive Plan, or the Plan, in January 2004. The Plan is intended to promote our success and to increase shareholder value by providing an additional means to attract, motivate, retain and reward selected directors, officers, employees and other eligible persons. An aggregate of 5,688,488 ordinary shares were reserved for issuance under the Plan in January 2004. We amended the Plan in September 2004 to increase the total number of ordinary shares issuable under the Plan by 5,000,000. We granted options under the Plan with the right to purchase up to 5,688,488 ordinary shares (including 90,000 options to eligible individual consultants and advisors) in 2004, of which 623,000 unvested options had been returned to the pool of our ungranted options as a result of resignation from employment by a few former employees as of March 31,2008. In 2005, we granted to selected directors, officers, employees, individual consultants and advisors under the Plan options with the right to purchase up to 5,003,000 ordinary shares, of which 899,640 unvested options had been returned to the pool of our ungranted options as a result of resignation from employment by a few former employees. In July 2006, we granted options to purchase up to 700,000 ordinary shares to selected officers under the Plan. We amended the Plan again in December 2006 to increase the total number of ordinary shares reserved for issuance under the Plan to 15,688,488. In 2007, we granted to selected directors, officers, employees, individual consultants and advisors under the Plan options with the right to purchase up to 3,848,000 ordinary shares, of which 40,560 unvested options had been returned to the pool of our ungranted options as a result of resignation from employment by a few former employees. As of March 31, 2008 we may grant options to purchase up to an additional 2,012,200 ordinary shares under the Plan.
The options we granted in January and February of 2004 have an exercise price of $0.16 per share and will expire on March 5, 2009. The options we granted in June 2004 have an exercise price of

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$1.04 per share and will expire on March 5, 2009. The options we granted in February 2005 have an exercise price of $1.31 per share and will expire on February 18, 2015. The exercise price for the 400,000 and 200,000 options we granted in November 2005 were $1.12 and $1.16 per share respectively. The 700,000 options we granted in July 2006 have an exercise prices of $1.07 per share and will expire on July 4, 2016.The 3,272,000 options we granted in January 2007 under the Plan have an exercise price of $0.96 per share and will expire on January 17, 2017. The 100,000 and 150,000 options we granted in April and May, 2007 have exercise prices of $1.25 and $1.318 per share respectively, and will expire on April 4, 2017 and May 9, 2017 respectively. The 323,000 and 3,000 options we granted in August and September 2007 have exercise prices of $2.03 and 2.188 per share, respectively, and will expire on August 26, 2017 and September 3, 2017 respectively.
Options granted under the Plan generally do not vest unless the grantee remains under our employment or in service with us on the given vesting date. However, in circumstances where there is a death or disability of the grantee, or a change in the control of our company, the vesting of options will be accelerated to permit immediate exercise of all options granted to a grantee. Generally, to the extent an outstanding option granted under the Plan has not vested by the date the grantee’s employment or service with us terminates, the option will terminate and become unexercisable. Our board of directors may amend, alter, suspend, or terminate the Plan at any time, provided, however, that our board of directors must first seek the approval of our shareholders and, if such amendment, alteration, suspension or termination would adversely affect the rights of an optionee under any option granted prior to that date, the approval of such optionee. Under the Plan, as of March 31, 2008, we have a total number of 7,294,388 options that are currently vested and exercisable for ordinary shares.
We also granted share options to purchase up to 6,829,500 ordinary shares in January 2004, under option agreements that were independent of the Plan, to other consultants and business advisors of the company, 5,424,500 ordinary shares have been exercised as of March 31, 2008.
On July 2, 2007, we granted restricted stock awards covering 10,558,493 ordinary shares of the company under our 2007 Equity Incentive Plan to our employees who are eligible for the 2007 Equity Incentive Plan. The vesting of the restrictive stock are subject to us achieving certain financial performance targets stated in the 2007 Equity Incentive Plan. In order to bind the employees together in achieving the common goal, the ordinary shares are held by C&F International Holdings Limited for the benefit whole group of eligible employees. Pursuant to the 2007 Equity Incentive Plan and the restricted stock issuance and allocation agreement effective as of July, 2, 2007, we issued 10,558,493 ordinary shares to C&F International Holdings Limited, a company incorporated in British Virgin Islands, which holds the ordinary shares on behalf of and exclusively for the benefit of the group of employees eligible for the 2007 Equity Incentive Plan. C&F International Holdings Limited is 100% owned by C&F Global Limited, a British Virgin Islands Company, which is in turn owned by the grantees. As of December 31, 2007, 10,558,493 ordinary shares have been issued and allotted to selected employees pursuant to the 2007 Equity Incentive Plan.
Critical accounting policies
We prepare our financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We consider the policies discussed

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below to be critical to an understanding of our financial statements as their application places the most significant demands on our management’s judgment.
Income taxes. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
Stock-based compensation. Effective January 1, 2006, we adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), using the modified prospective transition method. Under this method, stock-based compensation expense recognized beginning January 1, 2006 includes: (a) compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of January 1, 2006 based on the fair market value as of the grant date, measured in accordance with SFAS 123, and (b) compensation expense for all stock-based compensation awards granted on or subsequent to January 1, 2006, based on grant-date fair vale estimated in accordance with the provisions of SFAS 123(R). We recognize stock-based compensation costs on a graded-vesting attribution method over the requisite service period which is generally the vesting period.
For options vested prior to January 1, 2006, we accounted for share-based compensation plans in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”, as amended (“APB 25”). Accordingly, we recognized compensation expense only when options were granted with a discounted exercise price. The compensation expense was recognized ratably over the requisite service period, which was generally the vesting period of the options.
Cost method investment. In December 2005, we purchased 9,800,000 Series B preferred shares in a private company, Moloon International Inc., (“Moloon”) for $15,000,000, which represents a 25% interest in Moloon on an if-converted basis. The investment in these preferred shares is not in-substance common stock, and accordingly, the investment has been recorded as a cost method investment. As Moloon does not have readily determinable fair value, we carry the investment at cost and only adjusted for other-than-temporary declines in fair value and distributions of earnings. The management regularly evaluates the impairment of the cost method investment based on performance and the financial position of the investee as well as other evidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash position, recent financings, projected and historical financial performance, cash flow forecasts and financing needs. An impairment loss is recognized in earnings equal to the difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value of the investment would then become the new cost basis of the investment. We recorded an other-than-temporary impairment charge totaling $1,322,000 during the year ended December 31, 2006, and $11,127,000 during the year ended December 31, 2007. No impairment charges were recorded during the year ended December 31, 2005.
Goodwill. The excess of the purchase price over the fair value of net assets acquired is recorded on the consolidated balance sheet as goodwill.
We test goodwill annually following a two-step process in accordance with SFAS No. 142. The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a

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reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill.
We perform goodwill impairment tests annually on December 31 by comparing the book value to the fair value of each reporting unit. Based on the our assessment, there was no impairment of goodwill for the years ended December 31, 2005, 2006 and 2007.
Impairment of long-lived assets. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, we measure impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and our eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, we would recognize an impairment loss based on the fair value of the assets. There were no impairment losses in the years ended December 31, 2005, 2006 and 2007.
Results of operations
The following table sets forth certain information relating to our results of operations, and our consolidated statements of operations as a percentage of net revenues, for the periods indicated:
                                                 
    For the year ended December 31,
(in thousands of U.S. dollars, except as % of net revenues)(1)   2005   2006   2007
Consolidated statement of operations and comprehensive income (loss) data:
                                                
Gross revenues(2)
   $ 7,627       101.9 %   $ 7,337       102.9 %   $ 26,570       102.6 %
Business tax
     (145 )     (1.9 )     (209 )     (2.9 )     (667 )     (2.6 )
     
Net revenues
     7,482       100 %     7,128       100 %     25,903       100 %
Cost of revenues
    (482 )     (6.4 )     (1,468 )     (20.6 )     (4,427 )     (17.1 )
     
Gross profit
    7,000       93.6       5,660       79.4       21,476       82.9  
Operating expenses:
                                               
General and administrative
    (1,740 )     (23.3 )     (2,956 )     (41.5 )     (7,784 )     (30.1 )
Product development
    (236 )     (3.2 )     (742 )     (10.4 )     (2,269 )     (8.8 )
Sales and marketing
    (1,795 )     (24.0 )     (2,666 )     (37.4 )     (6,924 )     (26.7 )
     
Total operating expenses
     (3,771 )     (50.5 )     (6,364 )     (89.3 )     (16,977 )     (65.5 )
Subsidy income
     —       —       —       —       136       0.5  
Income from operations
     3,229       43.2       (704 )     (9.9 )     4,635       17.9  
Interest income
    1,486       19.9       1,003       14.1       1,105       4.3  
Exchange gain (net)
    366       4.9       267       3.7       424       1.6  
Other expense, net
     —       —       115       1.6       9       0.03  
Loss from impairment of cost method investment
     —       —       (1,322 )     (18.5 )     (11,127 )     (43.0 )
Income before income taxes benefit (provision)
     5,081       67.9       (641 )     (9.0 )     (4,954 )     (19.1 )
Minority interests in net income of consolidated subsidiary
     —       —       —       —       15       0.06  
Income tax benefit (provision)
     (457 )     (6.1       41       (0.58 )     809       3.1  
     
Net income (loss)
   $ 4,624       61.8 %   $ (600 )     (8.4 %)   $ (4,130 )     (15.9 %)
 
(1)   For the results of operations for a specified period, all translations from Renminbi to U.S. dollars were calculated at the average exchange rate for that period. For the years ended

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    December 31, 2005, 2006 and 2007, all translations from Renminbi to U.S. dollars were calculated at RMB8.1472, RMB7.9693 and RMB7.6072 per US$1.00, respectively.
 
(2)   For subscriptions provided to individual investors, we receive subscription fees at the beginning of the subscribers’ subscription periods. Revenues from the subscription fees are deferred and recognized ratably over the subscription period, typically twelve months.
Year ended December 31, 2007 compared to year ended December 31, 2006
Revenues
Our gross revenues increased by 264% from $7.3 million in 2006 to $26.6 million in 2007. For our subscription business, individual customers pay the entire subscription fee upfront in cash for services to be received over a specified period of time, typically 12 months. Such subscription fees are recognized as net revenues ratably over the service period, and those that have not been rendered at the end of a reporting period are recorded as deferred revenue in the balance sheet. Deferred revenue at the end of 2007 is $25.1 million, compared to $6.4 million at the end of 2006, The significant increase in deferred revenue as of December 31, 2007 is [due to our strong performance in the subscription business and such increase in deferred revenue will be recorded as net revenues over the next several quarters.]
Our revenues derived from online advertising sales, which were not a sizable business of the Company in 2007, increased to $1.6 million in 2007 from $1.3 million in 2006.
Our revenues derived from brokerage income were $81,000 in 2007, representing 0.3% of total revenues for the year.
Our business taxes attributable to our gross revenues increased from $209,000 in 2006 to $667,000 in 2007, primarily due to increase in business taxes associated with our increase in subscription and advertising businesses. After taking into account business taxes attributable to our gross revenues, our net revenues increased by 265% to $25.9 million in 2007 from $7.1 million in 2006.
Cost of revenues
Our cost of revenues in 2007 increased by 193% to $4.4 million from $1.5 million in 2006 primarily because [our website maintenance and development expenses increased to $2.9 million in 2007 from $943,000 in 2006, which consists of bandwidth costs, salary and compensation, server depreciation expenses, rent, cost of raw data and content expenses for our jrj.com and stockstar.com websites.]
Gross profit
As a result of the foregoing, our gross profit increased by 277% to $21.5 million in 2007 from $5.7 million in 2006.
Operating expenses
Our operating expenses increased by 166% to $17.0 million in 2007 from $6.4 million in 2006. The increase in our operating expenses was primarily due to expansion in operating scale, including headcount, operation locations, associated with the acquisitions of CFO Stockstar and CFO Genius and Daily Growth Securities, as well as increase in commission and bonus expenses in line with strong core business results, stock-based compensation expenses and the increase in professional service fees as a result of being a U.S. listed public company. Operating expenses as

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a percentage of net revenues decreased to 65.5% in 2007 from 89.3% in 2005 because our net revenues grew at a faster rate than the rate of increase in our operating expenses.
General and administrative. Our general and administrative expenses increased by 160% to $7.8 million in 2007 from $3.0 million in 2006 due primarily to an increase in our employee headcount, an increase in stock-based compensation of $1.8 million primary due to the performance-based restricted stock awards granted in the third quarter of 2007, the increase in compensation expenses of $1.0 million, and the increase in professional service fees with the amount of $717,000. Our general and administrative expenses as a percentage of net revenues decreased to 30.1% in 2007 from 41.5% in 2006.
Product development. Our product development expenses increased by 210% to $2.3 million in 2007 from $743,000 in 2006 due primarily to increase in headcount, particularly through the acquisition of CFO Genius. Our product development expenses decreased as a percentage of net revenues to 8.8% in 2007 from 10.4% in 2006.
Sales and marketing. Our sales and marketing expenses increased by 156% to $6.9 million in 2007 from $2.7 million in 2006. This primarily due to an increase in compensation expenses, particularly commissions and bonus, to our sales and marketing personal by 336% to $4.9 million in 2007 from $1.1 million in 2006. Our sales and marketing expenses as a percentage of net revenues decreased to 26.7% in 2007 from 37.4% in 2006.
Income/(Loss) from operations
Our income from operations was $4.6 million compared to operating loss of $704,000 in 2006, and our operating margin improved to 17.9% in 2007 from -9.9% in 2006.
Interest income
Our interest income increased by 10% to $1.1 million in 2007 from $1.0 million in 2006 due to an increase in our cash balances derived primarily from the increase in our subscription fees in 2007.
Loss from impairment of cost method investment
In December 2005, we purchased 9,800,000 Series B preferred shares in Moloon International Inc. (“Moloon”) for $15,000,000, which represents a 25% interest in Moloon on an if-converted basis. We do not exert significant influence over the operating and financial activities of Moloon, and accordingly, the investment has been recorded as a cost method investment.
Moloon is a Chinese wireless technology and service provider. During the second half of 2006, China Mobile Communication Corporation announced policy changes which, among others, required mobile value added service, or MVAS, providers to extend free trial periods for customers prior to subscriptions and to send reminders to customers confirming new and existing subscriptions. These policy changes had a substantial negative impact on Moloon’s MVAS business. Consequently, following an independent valuation, we determined that its investment in Moloon was impaired and recorded an impairment loss of $1,322,000 in the accompanying consolidated statements of operations for 2006.
Since late 2006 Moloon has taken measures to become a leading provider of mobile gaming services in China. However, despite the new strategies Moloon’s financial conditions deteriorated and, following an independent valuation of the our cost method investment in Moloon, it was determined that we should record a non-cash investment impairment of $11,127,000 in the accompanying consolidated statements of operations for 2007, reducing the carrying balance of such investment from $12.61 million to $1.48 million, 88% off the book value.

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The Company does not expect the impairment charge against its investment in Moloon, or disposal of this investment in the future if possible, to have any adverse impact on its core business.
Income tax benefit
Our wholly owned subsidiary, CFO Beijing, enjoys preferential tax treatments in China, including exemption from enterprise income tax for 2003 and 2004 and a preferential enterprise income tax rate of 12% from 2005 to 2007. CFO Software enjoys preferential tax treatments in China, including exemption from enterprise income tax from 2005 to 2007. CFO Meining, CFO Stockstar and CFO Zhengning, which are wholly foreign owned enterprise registered in Shanghai enjoy preferential tax treatment, preferential enterprise income tax rate of 15%. CFO Genius and CFO Jujin, which are wholly foreign owned enterprise registered in Shenzhen enjoy preferential tax treatment and a preferential enterprise income tax rate of 15%. [In addition, deferred tax assets and liabilities are recognized for expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and tax credit carryforwards. ] Accordingly we recognized an income tax benefit of $809,000 for 2007.
Net income/(loss)
As a result of the $12.61 million non-cash impairment in Moloon, our net loss was $4.1 million in 2007 compared to net loss $600,000 in 2006, and our net margin decreased to -15.9% in 2007 from-8.4% in 2006.
Year ended December 31, 2006 compared to year ended December 31, 2005
Revenues
Our gross revenues decreased by 3.9% from $7.6 million in 2005 to $7.3 million in 2006. The slight decrease is because more revenue was deferred in 2006 than that in 2005, which results in slightly less revenue recognized in 2006 than that of 2005. A large part of net operating cash will be realized as revenue in 2007. For our subscription business, individual customers pay the entire subscription fee upfront in cash for services to be received over a specified period of time, typically 12 months. Such subscription fees are recognized as net revenues ratably over the service period, and those that have not been rendered at the end of a reporting period are recorded as deferred revenue in the balance sheet. Deferred revenue at the end of 2006 is $6.4 million, an increase of 245% compared $1.9 million of 2005, The significant increase in deferred revenue as of 31 December 2006 is due to our strong performance in the subscription business and such increase in deferred revenue will be recorded as net revenues over the next several quarters.
Our revenues derived from online advertising sales increased to $1.3 million in 2006 from $1.0 million in 2005. This increase primarily resulted from the fact that online advertising was no longer a core service line in 2006 nor will it be in the foreseeable future. In 2006 we allocated most of our advertising space on our websites to promote our own subscription-based online service offerings.
Our business taxes attributable to our gross revenues increased from $145,000 in 2005 to $209,000 in 2006, primarily due to increase in business taxes associated with our increase in advertising and related businesses. After taking into account business taxes attributable to our gross revenues, our net revenues decreased by 5% to $7.1 million in 2006 from $7.5 million in 2005.
Cost of revenues

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Our cost of revenues in 2006 increased by 204.6% to $1.5 million from $482,000 in 2005 primarily because our cost of raw data increased by 177% to $694,000 in 2006 from $251,000 in 2005, as we increased the number of our content and data providers to increase the amount of data and information available to our subscribers and users.
Gross profit
As a result of the foregoing, our gross profit decreased by 19% to $5.7 million in 2006 from $7.0 million in 2005.
Operating expenses
Our operating expenses increased by 68.4% to $6.4 million in 2006 from $3.8 million in 2005. The increase in our operating expenses was primarily the result of expansion in operating scale associated with the acquisitions of CFO Stockstar and CFO Genius, as well as increase in compensation expenses as a result of increased sales force and product development headcounts in the fourth quarter of 2006. Operating expenses as a percentage of net revenues increased to 89.3% in 2006 from 50.4% in 2005 because our operating expenses grew at a faster rate than the rate of increase in our net revenues.
General and administrative. Our general and administrative expenses increased by 74.1% to $3.0 million in 2006 from $1.7 million in 2005 due primarily to an increase in our employee headcount, which resulted in an increase in salary and compensation expenses of $242,000, professional service with the amount of $351,000, an increase in stock-based compensation of $461,000 as the result of adopting SFAS 123(R), as well as an increase in bank charges for online payments made by some of our subscribers in the amount of $49,000, other office expenses decreased $59,000, partially offset by reductions in other general office expenses. Our general and administrative expenses as a percentage of net revenues increased to 41.5% in 2006 from 23.3% in 2005.
Product development. Our product development expenses increased by 214.8% to $743,000 in 2006 from $236,000 in 2005 due primarily to increase in employee salaries. Our product development expenses increased as a percentage of net revenues to 10.4% in 2006 from 3.2% in 2005.
Sales and marketing. Our sales and marketing expenses increased by 50% to $2.7 million in 2006 from $1.8 million in 2005. This increase is largely attributable to an increase in our advertising expenditures and an increase in our customer service and sales personnel to address increased subscription demand. Our marketing fee increased substantially to $101,000 in 2006 from Nil in 2005, primarily reflecting increases in our sponsorship arrangements with portals, search engines and other websites and, to a lesser extent, an increase in the advertising fee we pay to one of our sponsors. Salary and compensation expenses attributable to our sales and marketing personnel increased by 375% to $1.1 million in 2006 from $240,000 in 2005 reflecting an increase in headcount. Our sales and marketing expenses as a percentage of net revenues increased to 37.4% in 2006 from 24.0% in 2005. This increased cost is primarily due to higher sales and marketing expenses associated with our expanded advertising efforts, the increase of customer support headcount, and decreases in the number of new subscribers from 2005 to 2006.
Income/(Loss) from operations
As a result of the foregoing, we suffered losses from operations of $704,000 in 2006, a decrease by 122% compared to income from operations of $3.2 million in 2005, and our operating margin decreased to -9.9% in 2006 from 43.2% in 2005.
Interest income

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Our interest income decreased by 33.3% to $1.0 million in 2006 from $1.5 million in 2005 due to a significant decrease in our cash balances derived primarily from the acquisition of CFO Stockstar and CFO Genius in 2006.
Loss from impairment of cost method investment
In December 2005, we purchased 9,800,000 Series B preferred shares in Moloon International Inc. (“Moloon”) for $15,000,000, which represents a 25% interest in Moloon on an if-converted basis. We do not exert significant influence over the operating and financial activities of Moloon, and accordingly, the investment has been recorded as a cost method investment.
Moloon is a Chinese wireless technology and service provider. During the second half of 2006, China Mobile Communication Corporation announced policy changes which, among others, required mobile value added service, or MVAS, providers to extend free trial periods for customers prior to subscriptions and to send reminders to customers confirming new and existing subscriptions. These policy changes had a substantial negative impact on Moloon’s MVAS business. Consequently, following an independent valuation, we determined that its investment in Moloon was impaired and recorded an impairment loss of $1,322,000 in the accompanying consolidated statements of operations for 2006.
Income tax benefit
Our wholly owned subsidiary, CFO Beijing, enjoys preferential tax treatments in China, including exemption from enterprise income tax for 2003 and 2004 and a preferential enterprise income tax rate of 12% from 2005 to 2007. CFO Software, enjoys preferential tax treatments in China, including exemption from enterprise income tax from 2005 to 2007 and a preferential enterprise income tax rate of 7.5% from 2008 to 2010. CFO Meining and CFO Stockstar enjoy preferential tax treatment, preferential enterprise income tax rate of 15%. CFO Genius enjoys preferential tax treatment and a preferential enterprise income tax rate of 15%. Accordingly we recognized an income tax benefit of $41,000 for 2006.
Net income/(loss)
As a result of the foregoing, our net income decreased by 113% to $600,000 in net loss in 2006 from $4.6 million in 2005. Our net margin decreased to -8.4% in 2006 from 61.8% in 2005.
B. Liquidity and capital resources.
Cash flows and working capital
As of December 31, 2007, we had approximately $74.7 million in cash and cash equivalents. As of the same date, we did not have any outstanding debt. Our cash and cash equivalents primarily consist of cash on hand and liquid investments with remaining maturities of three months or less when purchased that are deposited with banks and other financial institutions. We generally deposit our excess cash in interest bearing bank accounts.
The following table shows our cash flows with respect to operating activities, investing activities and financing activities in 2005, 2006 and 2007:
                         
    For the year ended December 31
(in thousands of U.S. dollars)   2005   2006   2007
Net cash provided by operating activities
   $ 3,059     $ 5,892     $ 28,426  
Net cash used in investing activities
     (15,235 )     (8,202 )     (4,830 )

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    For the year ended December 31
(in thousands of U.S. dollars)   2005   2006   2007
Net cash provided by (used in) financing activities
     (12,923 )     (76 )     3,226  
Net increase (decrease) in cash and cash equivalents
     (24,428 )     (1,213 )     29,773  
Cash and cash equivalents at beginning of year
     70,596       46,168       44,956  
Cash and cash equivalents at end of year
   $ 46,168     $ 44,956     $ 74,729  
Net cash provided by operating activities was $28.4 million in 2007 compared to $5.9 million in 2006. This increase was primarily due to significant increase in cash revenues generated from our subscription service fees from individual customers. Net cash provided by operating activities was $5.9 million in 2006 compared to $3.1 million for 2005.
Net cash used in investing activities and the acquisition of Daily Growth Securities, was $4.8 million in 2007, compared to net cash used in investing activities of $8.2 million in 2006.
Net cash provided in financing activities was $3.2 million, mainly due to the proceeds from exercise of stock options by our employees and consultants. Net cash used by financing activities in 2006 was $76,000. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends on our ordinary shares, or indirectly on our ADSs, for the foreseeable future.
Capital resources
Our principal capital expenditures for 2005, 2006 and 2007 consisted of primarily purchases of servers, workstations, computers, computer software, and other items related to our network infrastructure for a total of approximately $235,000, $1.0 million and $3.8 million, respectively.
Capital expenditures in 2006 and 2007 have been, and our 2008 capital expenditures are expected to continue to be, funded through operating cash flows and through our existing capital resources. We believe that our current cash and cash equivalents, and cash flow from operations will be sufficient to meet our anticipated cash needs, including for our working capital and capital expenditure needs, for the foreseeable future. We may, however, require additional cash resources due to changes in business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell debt securities or additional equity securities or obtain a credit facility. The sale of convertible debt securities or additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financial covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
From time to time, we also evaluate possible investments, acquisitions or divestments and may, if a suitable opportunity arises, make an investment or acquisition or conduct a divestment.
Restricted net assets
Relevant PRC laws and regulations permit payments of dividends by our PRC subsidiary and affiliate only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, the statutory general reserve fund, which requires annual appropriations of 10% of net after-tax income should be set aside prior to payment of any dividends. As a result of these and other restrictions under PRC laws and regulations, our PRC subsidiary and affiliate are restricted in their ability to transfer a portion of their net assets to us either in the form of dividends, loans or advances, restricted portion amounted to approximately $46 million, or 67.9%, of our total consolidated net assets as of December 31, 2007.

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Even though we currently do not require any such dividends, loans or advances from our PRC subsidiary and affiliate, we may in the future require additional cash resources from our PRC subsidiary and affiliate due to changes in business conditions, to fund future acquisitions or developments, or merely to declare and pay dividends or distributions to our shareholders, although we currently have no intention to do so.
C. Research and development.
Our research and development efforts consist of continuing to:
  •   increase the breadth of our service offerings through the addition of new features and functions to our service packages;
 
  •   enhance our subscribers’ experience by improving the quality of our research tools and website; and
 
  •   develop additional research tools, features and content specifically targeting the high-end subscribers.
D. Trend information.
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2007 to December 31, 2007 that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E. Off-balance sheet arrangements.
We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts. We do not engage in trading activities involving non-exchange traded contracts.
F. Tabular disclosure of contractual obligations.
We have entered into arrangements relating to office premises leasing and data purchase agreement. The following sets forth our known contractual obligations as of December 31, 2007 and as of the types that are specified below:
                         
    Office Premises   Data Purchase   Total
    (in U.S. dollars)
Less than 1 year
     1,521,127       486,673       2,007,800  
1 — 3 years
     2,845,844       21,934       2,867,778  
3 — 5 years
     22,128       —       22,128  
Apart from such premises, as of December 31, 2007, we did not have any long-term debt obligations, capital (finance) lease obligations, purchase obligations or any other long-term liabilities reflected on our balance sheets with durations to maturity as are set forth in the chart directly above.
G. Quantitative and qualitative disclosures about market risk.

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Interest rate risk
Our exposure to market rate risk for changes in interest rates relates primarily to the interest income generated by excess cash invested in short term money market accounts and certificates of deposit. We have not used derivative financial instruments in our investment portfolio. Interest earning instruments carry a degree of interest rate risk. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates. However, our future interest income may fall short of expectations due to changes in interest rates.
Foreign currency risk
Substantially all our revenues and expenses are denominated in Renminbi and a substantial portion of our cash is kept in Renminbi, but as noted above, a portion of our cash is also kept in U.S. dollars. Although we believe that, in general, our exposure to foreign exchange risks should be limited, the value of our American Depositary Shares, or ADSs, will be affected by the foreign exchange rate between U.S. dollars and Renminbi. For example, to the extent that we need to convert U.S. dollars into Renminbi for our operational needs and the Renminbi appreciates against the U.S. dollar at that time, our financial position and the price of our ADSs may be adversely affected. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of declaring dividends on our ADSs or otherwise and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of our earnings from our subsidiaries and controlled entities in China would be reduced.
We have recorded foreign exchange gains of $424,000 in net income in year 2007, due to the recent revaluation of RMB against the U.S. dollar by Chinese government. On July 21, 2005, the Chinese government changed its policy of pegging the value of the Renminbi to that of U.S. dollar. Under the new policy, the Renminbi has fluctuated within a narrow and managed band against a basket of certain foreign currencies. As a result, the Renminbi appreciated approximately 3.4% and 6.6% against the U.S. dollar in 2006 and 2007, respectively, and may appreciate or depreciate significantly in value against the US dollar or other foreign currencies in the long term. Since we have not engaged in any hedging activities, we may experience economic loss as a result of any foreign currency exchange rate fluctuations.
H. Recent accounting standards.
In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets — an amendment of APB Opinion No. 29,” which amends Accounting Principles Board Opinion No. 29, “Accounting for Nonmonetary Transactions,” to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The Company adopted SFAS No. 153 on January 1, 2006 and the adoption of SFAS No. 153 did not have a material effect on its consolidated financial position or results of operations.
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”, which replaces Accounting Principles Board Opinions No. 20 “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28.” SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. The Company adopted SFAS No. 154 on January 1, 2006 and the adoption of SFAS No. 154 did not have a material effect on its consolidated financial position or results of operations.
In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the

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accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes”, and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is in the process of implementing FIN 48 and has not yet determined the effect, if any, on its consolidated financial statements as a result of adopting FIN 48.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” which provides enhanced guidance for using fair value to measure assets and liabilities. SFAS No. 157 also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. SFAS No. 157 does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 (fiscal years beginning after November 15, 2008 for all nonrecurring fair value measurements of nonfinancial assets and nonfinancial liabilities)and interim periods within those fiscal years. The Group is currently evaluating whether the adoption of SFAS No. 157 will have a material effect on its consolidated financial position, results of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, Including an amendment of FASB Statement No. 115”. SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value. SFAS No. 159 requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the Group’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which a Group has chosen to use fair value on the face of the balance sheet. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. The Group is currently evaluating whether the adoption of SFAS No. 159 will have a significant effect on its consolidated results of operations and financial position.
In December 2007, the FASB issued SFAS No. 141R, “Business Combination”, to improve reporting creating greater consistency in the accounting and financial reporting of business combinations. The standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The Group is currently evaluating whether the adoption of SFAS No. 141R will have a significant effect on its consolidated financial position, results of operations or cash flows.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” to improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same way as required in the consolidated financial statements. Moreover, SFAS No. 160 eliminates the diversify that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transaction. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The Group is

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currently evaluating whether the adoption of SFAS No. 160 will have a significant effect on its consolidated financial position, results of operations or cash flows.
In March 2008, The FASB issued FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Group has not yet begun the process of assessing the potential impact of the adoption of FASB No. 161 may have on its consolidated financial position or results of operations.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and senior management.
The following table sets forth the name, age and position of each director and executive officer of our company as of March 31, 2008.
             
Name   Age   Position
Zhiwei Zhao
    45     Chief Executive Officer and a member of the Board of Directors
Hugo Shong
    52     Chairman of the Board of Directors
Kheng Nam Lee(1)
    60     Director
Ling Wang(1)(2)(3)
    45     Director
Fansheng Guo(1)(2)(3)
    52     Director
Jun (Jeff) Wang
    37     Chief Financial Officer
Caogang Li
    42     Chief Operating Officer
 
(1)   Member, audit committee
 
(2)   Member, compensation committee
 
(3)   Member, nominations committee
The address of each of our executive officers and directors is 9th Floor of Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, China 100032.
Dr. Caogang Li, who used to be the Company’s Vice President of Sales and Marketing since August 2005, was named Chief Operating Officer with effect from March 3, 2008.
Biographical Information
Hugo Shong has served as our director since May 2004. He was elected as the Chairman of our Board of Directors as of July 25, 2005 and has been in that position since then. Mr. Shong has been an executive vice president of International Data Group, Inc., or IDG, since 2001, the president of IDG Asia since 1995, a director of IDG Technology Venture Investment, Inc., or IDGVC Partners, since 1994, and a member of IDG Technology Venture Investments, LLC, the general partner of IDG Technology Venture Investments, LP, since 2000. Mr. Shong has headed a number of operations for IDG including in information technology, publishing, market research and tradeshows in the Asia Pacific region. Mr. Shong graduated from Hunan University with a Bachelor of Arts degree in English, followed by a Master of Science degree from the Boston University College of Communications.
Zhiwei Zhao has served as our Chief Executive Officer since June 21, 2005 and our director since July 25, 2005. Mr. Zhao was the Chairman of the Board of Directors of Abitcool Inc before joining us. Abitcool is a company that provides broadband internet services in China. It boasts the largest private Internet Data Center in China. From 1998 to 2005, he served as the General

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Manager of Huatong International Development Limited in Hong Kong. Mr. Zhao graduated with a Bachelor of Science degree from Huazhong University of Science and Technology.
Kheng Nam Lee has served as our director since May 2004. Mr. Lee was the president of Vertex Management (II) Pte Ltd, a management company for a venture capital fund, from March 1995 to February 2004 and was also a director of Vertex Venture Holdings Ltd., both of which are affiliates of Vertex Technology Fund (III) Ltd. Mr. Lee is a director of Creative Technology Ltd and has served as a director of ActivCard Corp, Centillium Communications Inc., Creative Lab Inc., GRIC Communications Inc., Gemplus International SA and Semiconductor Manufacturing International Corporation. Mr. Lee holds a Bachelor of Science degree in mechanical engineering, with first class honors, from Queen’s University, Canada and a Master of Science degree in operations research and systems analysis from the U.S. Naval Postgraduate School.
Ling Wang has served as our director since May 2004. Mr. Wang is the chairman and chief executive officer of GCTech Company Limited, a company that provides systems integration and software development services to the telecommunications industry, which he founded in 1994. Since 2003, he has been a director of Tiantian Online Co., Ltd., a provider of broadband Internet audio-visual programs (or Internet TV) in the PRC. Mr. Wang graduated with a Bachelor of Science degree in Mathematics from the University of Science and Technology of China, and also has a Master of Science degree in automation control from the Beijing Institute of Information Control.
Fansheng Guo has served as our director since May 2004. Mr. Guo is the chairman, chief executive officer and president of HC International, Inc., a Hong Kong listed company that provides business information services in the PRC, which he founded in 1990. Mr. Guo obtained a Bachelor of Arts degree in Industrial Economics from Renmin University of China.
Jun (Jeff) Wang has served as our Chief Financial Officer since August 15, 2006, and joined our company as Vice President of Finance in May 2006. Mr. Wang was a Senior Manager in the Tax and Business Advisory Services at Deloitte Beijing Office before joining us. From 2002 to 2005 Jun Wang was founder and president of Miracle Professional Services Inc., a company that provided training and consulting services to finance professionals. Prior to that Mr. Wang worked in Deloitte’s Beijing, London and New York offices, providing tax and business advisory and management consulting services. Mr. Wang obtained his Master of Business Administration from New York University’s Leonard N. Stern School of Business, his Master of Economics in accounting from Beijing Technology and Business University and his B.A. degree from Shandong University. Mr. Wang is a CFA charterholder, and a Certified Management Accountant.
Dr. Caogang Li has served as the company’s Chief Operating Officer since March 3, 2008, and joined our company as Vice President of Sales and Marketing in August 2005. Before joining us, Dr. Li was the corporate vice president of China Asset Management Co., Ltd., the largest mutual fund management firm in China in terms of asset under management. Prior to that, Dr. Li was in charge of the brokerage business at China Securities Ltd., which, now merged with CITIC Securities, was one of the leading securities firms in China. Dr. Li holds an MBA from University of Missouri, a Ph. D. in Management and a Master’s degree in Economics from Nanjing University.
B. Compensation of directors and executive officers.
In 2007, we paid aggregate cash compensation of approximately $401,410 to our directors and executive officers as a group. In 2007, we granted to selected directors and officers to acquire 2,200,000 and 10,558,493 ordinary shares under the 2004 Stock Incentive Plan and the performance based 2007 Equity Incentive Plan, respectively. We have no service contracts with any of our directors or executive officers that provide benefits to them upon termination, except for change in control agreements we entered into with each of our executive officers. The change in control agreements provide that if after a change-of-control of our company has occurred, the executive is terminated

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without cause or resigns for good reason, we are obligated to provide severance benefits to that executive.
All of our current directors and executive officers have entered into indemnification agreements in which we agree to indemnify, to the fullest extent allowed by Hong Kong law, our charter documents or other applicable law, our directors and executive officers from any liability or expenses, unless the liability or expense arises from the director or executive officer’s own willful negligence, intentional malfeasance, bad faith act, or other transactions from which the director or executive officer may not be relieved of liability under applicable law. The indemnification agreements also specify the procedures to be followed with respect to indemnification.
Directors’ and officers’ liability insurance
We have renewed directors’ and officers’ liability insurance on behalf of our directors and officers that will expire in January 2009.
Employee’s stock option plan
We adopted the 2004 Stock Incentive Plan, or the Plan, in January 2004. The Plan is intended to promote our success and to increase shareholder value by providing an additional means to attract, motivate, retain and reward selected directors, officers, employees and other eligible persons. An aggregate of 5,688,488 ordinary shares were reserved for issuance under the Plan in January 2004. We amended the Plan in September 2004 to increase the total number of ordinary shares issuable under the Plan by 5,000,000. We granted options under the Plan with the right to purchase up to 5,688,488 ordinary shares (including 90,000 options to eligible individual consultants and advisors) in 2004, of which 623,000 unvested options had been returned to the pool of our ungranted options as a result of resignation from employment by a few former employees as of March 31,2008. In 2005, we granted to selected directors, officers, employees, individual consultants and advisors under the Plan options with the right to purchase up to 5,003,000 ordinary shares, of which 899,640 unvested options had been returned to the pool of our ungranted options as a result of resignation from employment by a few former employees. In July 2006, we granted options to purchase up to 7,000,000 ordinary shares to selected officers under the Plan. We amended the Plan again in September 2006 to increase the total number of ordinary shares reserved for issuance under the Plan to 15,688,488. In 2007, we granted to selected directors, officers, employees, individual consultants and advisors under the Plan options with the right to purchase up to 3,848,000 ordinary shares, of which 40,560 unvested options had been returned to the pool of our ungranted options as a result of resignation from employment by a few former employees. As of March 31, 2008 we may grant options to purchase up to an additional 2,012,200 ordinary shares under the Plan.
The options we granted in January and February of 2004 have an exercise price of $0.16 per share and will expire on March 5, 2009. The options we granted in June 2004 have an exercise price of $1.04 per share and will expire on March 5, 2009. The options we granted in February 2005 have an exercise price of $1.31 per share and will expire on February 18, 2015. The exercise price for the 400,000 and 200,000 options we granted in November 2005 were $1.12 and $1.16 per share respectively. The 700,000 options we granted in July 2006 have an exercise prices of $1.07 per share and will expire on July 4, 2016.The 3,272,000 options we granted in January 2007 under the Plan have an exercise price of $0.96 per share and will expire on January 17, 2017. The 100,000 and 150,000 options we granted in April and May, 2007 have exercise prices of $1.25 and $1.318 per share respectively, and will expire on April 4, 2017 and May 9, 2017 respectively. The 323,000 and 3,000 options we granted in August and September 2007 have exercise prices of $2.03 and 2.188 per share, respectively, and will expire on August 26, 2017 and September 3, 2017 respectively.

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Options granted under the Plan generally do not vest unless the grantee remains under our employment or in service with us on the given vesting date. However, in circumstances where there is a death or disability of the grantee, or a change in the control of our company, the vesting of options will be accelerated to permit immediate exercise of all options granted to a grantee. Generally, to the extent an outstanding option granted under the Plan has not vested by the date the grantee’s employment or service with us terminates, the option will terminate and become unexercisable. Our board of directors may amend, alter, suspend, or terminate the Plan at any time, provided, however, that our board of directors must first seek the approval of our shareholders and, if such amendment, alteration, suspension or termination would adversely affect the rights of an optionee under any option granted prior to that date, the approval of such optionee. Under the Plan, as of March 31, 2008, we have a total number of 7,294,388 options that are currently vested and exercisable for ordinary shares.
The table below sets forth the option grants made to our directors and executive officers pursuant to the Plan:
                                 
    Number of            
    ordinary Shares to            
    be issued upon   Exercise price per        
    exercise of options   ordinary share   Date of grant   Date of expiration
Zhiwei Zhao
     400,000     $ 1.120     November 15, 2005   November 15, 2015
 
     400,000     $ 1.070     July 5, 2006   July 5, 2016
 
     800,000     $ 0.960     January 18, 2007   January 17, 2017
Hugo Shong
     *     $ 0.160     January 5, 2004   March 5, 2009
 
     *     $ 1.040     June 15, 2004   March 5, 2009
 
     *     $ 1.314     February 18, 2005   February 18, 2015
 
     *     $ 0.960     January 18, 2007   January 17, 2017
Kheng Nam Lee
     *     $ 0.160     February 18, 2004   March 5, 2009
 
     *     $ 1.040     June 15, 2004   March 5, 2009
 
     *     $ 1.314     February 18, 2005   February 18, 2015
 
     *     $ 0.960     January 18, 2007   January 17, 2017
Fansheng Guo
     *     $ 0.160     January 5, 2004   March 5, 2009
 
     *     $ 1.040     June 15, 2004   March 5, 2009
 
     *     $ 1.314     February 18, 2005   February 18, 2015
 
     *     $ 0.960     January 18, 2007   January 17, 2017
Ling Wang
     *     $ 0.160     January 5, 2004   March 5, 2009
 
     *     $ 1.040     June 15, 2004   March 5, 2009
 
     *     $ 1.314     February 18, 2005   February 18, 2015
 
     *     $ 0.960     January 18, 2007   January 17, 2017
Jun (Jeff) Wang
     *     $ 1.070     July 5, 2006   July 5, 2016
 
     *     $ 0.960     January 18, 2007   January 17, 2017
Caogang Li
     *     $ 1.158     November 30, 2005   November 30, 2015
 
     *     $ 0.96     January 18, 2007   January 17, 2017
 
*   Upon exercise of all options granted, would beneficially own less than 1% of our outstanding ordinary shares.
Equity Incentive Plan
On July 2, 2007, we granted restricted stock awards covering 10,558,493 ordinary shares of the company under our 2007 Equity Incentive Plan to our employees who are eligible for the 2007 Equity Incentive Plan. The vesting of the restrictive stock are subject to us achieving certain financial performance targets stated in the 2007 Equity Incentive Plan. In order to bind the employees together in achieving the common goal, the ordinary shares are held by C&F International Holdings Limited for the benefit whole group of eligible employees. Pursuant to the 2007 Equity Incentive Plan and the restricted stock issuance and allocation agreement effective as of July, 2, 2007, we issued 10,558,493 ordinary shares to C&F International Holdings Limited, a

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company incorporated in British Virgin Islands, which holds the ordinary shares on behalf of and exclusively for the benefit of the group of employees eligible for the 2007 Equity Incentive Plan. C&F International Holdings Limited is 100% owned by C&F Global Limited, a British Virgin Islands Company, which is in turn owned by the grantees. As of December 31, 2007, 10,558,493 ordinary shares have been issued and allotted to selected employees pursuant to the 2007 Equity Incentive Plan.
The table below sets forth the restricted shares issued and allotted to selected employees pursuant to the Plan:
                 
Name   Number   Percent
Selected Employees
                
Zhiwei Zhao
     8,958,493       8.16 %
Jun (Jeff) Wang
     *       *  
Caogang Li
     *       *  
All executive officers as a group (3 persons)
     10,558,493       9.62 %
C. Board practices.
In 2007, our directors met in person or passed resolutions by unanimous written consent eight times. No director attended fewer than 75% of all the meetings of our board and its committees on which he served after becoming a member of our board. No director is entitled to any severance benefits upon termination of his directorship with us. Our board of directors has also concluded that Mr. Kheng Nam Lee meets the criteria for an “audit committee financial expert” as established by the SEC.
Board committees
Our board of directors has established an audit committee, a compensation committee and a nominations committee.
Audit committee. Our audit committee currently consists of Kheng Nam Lee, Ling Wang and Fansheng Guo. Our board of directors has determined that all of our audit committee members are “independent directors” within the meaning of Nasdaq Marketplace Rule 4200(a)(15) and meet the criteria for independence set forth in Section 10A(m)(3) of the U.S. Securities Exchange Act of 1934, or the Exchange Act. Our audit committee is responsible for, among other things:
  •   recommending to our shareholders, if appropriate, the annual re-appointment of our independent registered public accounting firm and pre-approving all auditing and non-auditing service fees permitted to be performed by the independent registered public accounting firm;
 
  •   annually reviewing an independent registered public accounting firm’s report describing the independent registered public accounting firm’s internal quality-control procedures, any material issues raised by the most recent internal quality control review, or peer review, of the independent registered public accounting firm and all relationships between the independent registered public accounting firm and our company;
 
  •   setting clear hiring policies for employees or former employees of the independent registered public accounting firm;
 
  •   reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response;

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  •   reviewing and approving all proposed related-party transactions, as defined in Item 404 of Regulation S-K under the U.S. securities laws;
 
  •   discussing the annual audited financial statements with management and the independent registered public accounting firm;
 
  •   discussing with management and the independent registered public accounting firm major issues regarding accounting principles and financial statement presentations; reviewing reports prepared by management or the independent auditors relating to significant financial reporting issues and judgments;
 
  •   reviewing reports prepared by management or the independent registered public accounting firm relating to significant financial reporting issues and judgments;
 
  •   discussing earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies;
 
  •   reviewing with management and the independent registered public accounting firm the effect of regulatory and accounting initiatives, as well as off-balance sheet structures on our financial statements;
 
  •   discussing policies with respect to risk assessment and risk management;
 
  •   reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies;
 
  •   timely reviewing annual reports from the independent registered public accounting firm regarding all critical accounting policies and practices to be adopted by our company, all alternative treatments of financial information within U.S. GAAP that have been discussed with management and all other material written communications between the independent registered public accounting firm and management;
 
  •   establishing procedures for the receipt, retention and treatment of complaints received from our employees regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;
 
  •   annually reviewing and reassessing the adequacy of our audit committee charter;
 
  •   such other matters that are specifically delegated to our audit committee by our board of directors from time to time;
 
  •   meeting separately, periodically, with management and the independent registered public accounting firm; and
 
  •   reporting regularly to the full board of directors.
Compensation committee. Our current compensation committee consists of Ling Wang and Fansheng Guo. Our board of directors has determined that all of our compensation committee members are “independent directors” within the meaning of Nasdaq Marketplace Rule 4200(a)(15). Our compensation committee is responsible for:
  •   determining and recommending the compensation of our senior management;

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  •   reviewing and making recommendations to our board of directors regarding our compensation policies and forms of compensation provided to our directors and officers;
 
  •   reviewing and determining bonuses for our officers and other employees;
 
  •   reviewing and determining stock-based compensation for our directors, officers, employees and consultants;
 
  •   administering our equity incentive plans in accordance with the terms thereof; and
 
  •   such other matters that are specifically delegated to the compensation committee by our board of directors from time to time.
Nominations committee. Our current nominations committee consists of Ling Wang and Fansheng Guo. Our board of directors has determined that all of our nominations committee members are “independent directors” within the meaning of Nasdaq Marketplace Rule 4200(a)(15). Our nominations committee is responsible for, among other things, selecting and recommending the appointment of new directors to our board of directors.
Corporate governance
Our board of directors has adopted a code of ethics, which is applicable to our senior executive and financial officers. In addition, our board of directors has adopted a code of conduct, which is applicable to all of our directors, officers and employees. Our code of ethics and our code of conduct are publicly available on our website.
In addition, our board of directors has adopted a set of corporate governance guidelines. The guidelines reflect certain guiding principles with respect to our board’s structure, procedures and committees. The guidelines are not intended to change or interpret any law, or our memorandum and articles of association.
Duties of directors
Under Hong Kong law, our directors have a duty of loyalty to act honestly in good faith with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonable person with that director’s qualifications and experience would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association.
The functions and powers of our board of directors include, among others:
  •   convening shareholders’ meetings and reporting its work to shareholders at such meetings;
 
  •   implementing shareholders’ resolutions;
 
  •   determining our business plans and investment proposals;
 
  •   formulating our profit distribution plans and loss recovery plans;
 
  •   determining our debt and finance policies and recommending proposals for the increase or decrease in our share capital and the issuance of debentures;
 
  •   formulating our major acquisition and disposition plans, and plans for consolidation, division or dissolution;

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  •   proposing amendments to our articles of association; and
 
  •   exercising any other powers conferred at shareholders’ meetings or under our memorandum and articles of association.
Terms of directors and executive officers
We have a staggered board, which means our directors, excluding our chief executive officer, are divided into two classes, with half of our board, excluding our chief executive officer, standing for election every two years. Our chief executive officer will at all times be a director, and will not retire as a director, so long as he remains as the chief executive officer. Accordingly, our directors, excluding our chief executive officer, hold office until the second annual meeting of shareholders following their election, or until their successors have been duly elected and qualified. Our board has adopted a policy providing that no director may be nominated for re-election or re-appointment to our board after reaching 70 years of age, unless our board concludes that such person’s continued service as our director is in our best interest. Officers are elected by and serve at the discretion of the board of directors.
D. Employees. Most of our full-time employees are located in Beijing, Shanghai, Shenzhen and Hong Kong with the remainder in miscellaneous locations.
We believe we maintain a good working relationship with our employees.
China enacted a new Labor Contract Law, which became effective on January 1, 2008. The Company has updated its employment contracts and employee handbook and is in compliance with the new law. The Company will work with the employees to insure that the employees obtain the full benefit of the new Labor Contract Law. The Company does not anticipate that changes in the law will materially impact the Company balance sheet or cash flow.
E. Share ownership.
As of March 31, 2008, 109,754,433 of our ordinary shares were outstanding, excluding shares issuable upon exercise of outstanding options. On that date, a total of 15,656,231 of our ADSs were outstanding.
The following table sets forth information with respect to the beneficial ownership, within the meaning of Section 13(d)(3) of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, of our ordinary shares by:
  •   each person known to us to own beneficially more than 5% of our ordinary shares; and
 
  •   each of our directors and executive officers who beneficially own any of our ordinary shares.
Beneficial ownership includes voting or investment power with respect to the securities. Except as indicated below, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all ordinary shares shown as beneficially owned by them. Percentage of beneficial ownership is based on 109,754,433 ordinary shares outstanding.
Number of Shares Beneficially Owned
                 
Name   Number   Percent
5% Shareholder
                
IDG Technology Venture Investment, Inc.(1)
     20,580,652       18.75 %
IDG Technology Venture Investments, LP (2)
     6,723,115       6.13 %

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Name   Number   Percent
Vertex Technology Fund (III) Ltd. (3)
     11,595,569       10.57 %
Jianping Lu (4)
     7,156,121       6.52 %
Ling Zhang (5)
     8,746,370       7.97 %
C&F International Holdings Limited (6)
     10,558,493       9.62 %
Directors and executive officers
                
Hugo Shong
     *       *  
Kheng Nam Lee
     *       *  
Ling Wang
     *       *  
Fansheng Guo
     *       *  
Zhiwei Zhao
     *       *  
Jun (Jeff) Wang
     *       *  
Caogang Li
     *       *  
All current directors and executive officers as a group (7 persons)
     2,815,200       2.56 %
 
*   Upon exercise of all options currently exercisable or vesting within 60 days of the date of this annual report, would beneficially own less than 1% of our ordinary shares.
 
(1)   Includes 20,580,652 ordinary shares held by IDG Technology Venture Investment, Inc. IDG Technology Venture Investment, Inc. is the limited partner of IDG Technology Venture Investments, LP and does not control IDG Technology Venture Investments, LP. IDG Technology Venture Investment, Inc., a Massachusetts corporation, is wholly owned by International Data Group Inc., a Massachusetts corporation, which is controlled by Patrick McGovern, the majority shareholder, founder and chairman of International Data Group Inc. IDG Technology Venture Investment, Inc. disclaims beneficial ownership of all of the ordinary shares owned by IDG Technology Venture Investments, LP. The registered address of IDG Technology Venture Investment, Inc. is 5 Speen Street, Framingham, MA 01701, U.S.A.
 
(2)   Includes 6,723,115 ordinary shares held by IDG Technology Venture Investments, LP. The general partner of IDG Technology Venture Investments, LP is IDG Technology Venture Investments, LLC. Messrs. Patrick McGovern and Quan Zhou are managing members of IDG Technology Venture Investments, LLC, both of whom disclaim beneficial ownership of our shares held by IDG Technology Venture Investments, LLC. IDG Technology Venture Investment, Inc. is a limited partner of IDG Technology Venture Investments, LP, and does not control IDG Technology Venture Investments, LP. IDG Technology Venture Investments, LP disclaims beneficial ownership of all of the ordinary shares owned by IDG Technology Venture Investment, Inc. The registered address of IDG Technology Venture Investments, LP is Corporation Service Company, 1013 Centre Road, Wilmington, County of New Castle, Delaware 19805-1297, U.S.A.
 
(3)   Includes 11,595,569 ordinary shares held by Vertex Technology Fund (III) Ltd as of 31 March 2008 in the form of 2,319,113 ADS and 4 ordinary shares. Vertex Management (II) Pte Ltd is the fund manager of Vertex Technology Fund (III) Ltd, and may be deemed to have power to vote and dispose of the shares held of record by Vertex Technology Fund (III) Ltd. Vertex Venture Holdings Ltd, as the sole shareholder of Vertex Technology Fund (III) Ltd, and as the sole shareholder of Vickers Capital Limited, which is the sole shareholder of Vertex Management (II) Pte Ltd, may also be deemed to have the power to vote and dispose of these shares. The address of Vertex Technology Fund (III) Ltd is 51 Cuppage Road, #10-03 Starhub Centre, Singapore 229469.
 
(4)   Includes (i) 4,028,156 ordinary shares held by Cast Technology, Inc.; and (ii) 3,127,965 ordinary shares held by Fanasia Capital Limited. Both Cast Technology, Inc. and Fanasia Capital Limited are held 45% and 55% by Jianping Lu and Ling Zhang, respectively.
 
(5)   Includes (i)4,923,302 ordinary shares held by Cast Technology, Inc.; and (ii) 3,823,068 ordinary shares held by Fanasia

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    Capital Limited. Both Cast Technology, Inc. and Fanasia Capital Limited are held 45% and 55% by Jianping Lu and Ling Zhang, respectively.
 
(6)   Includes 10,558,493 ordinary shares held by C&F International Holdings Limited, a company incorporated in British Virgin Islands. C&F International Holdings Limited holds the ordinary shares on behalf of and exclusively for the benefit of the group of employees eligible for the 2007 Equity Incentive Plan. C&F International Holdings Limited is 100% owned by C&F Global Limited, a British Virgin Islands Company, which is in turn owned by the selected employees.
None of our existing shareholders has voting rights that differ from the voting rights of other shareholders. We are not aware of any arrangement that may, at a subsequent date, result in a change in control of our company.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major shareholders.
Please refer to Item 6. “Directors, Senior Management and Employees — Share Ownership”
B. Related party transactions.
CFO Beijing/CFO Fuhua arrangements
In order to comply with PRC regulations, we operate our online business in China through CFO Fuhua, a company initially wholly owned by Wu Chen, a financial manager at International Data Group China, Ltd., a PRC company affiliated with IDG Technology Venture Investment Inc., and IDG Technology Venture Investments, LP, two of our principal shareholders, and Jun Ning, our former chairman and Chief Executive Officer, who are both PRC citizens. Jun Ning transferred his holdings in CFO Fuhua to Zhiwei Zhao, a PRC citizen and our current Chief Executive Officer and a member of our board of directors, on November 30, 2006. Wu Chen transferred his holdings in CFO Fuhua to Jun Wang, a PRC citizen and our Chief Financial Officer on October 18, 2007. We have entered into a series of contractual arrangements with CFO Fuhua and its shareholders, including contracts relating to the leasing of equipment, the licensing of our domain name, the provision of services and certain shareholder rights and corporate governance matters. Upon their receipt of Jun Ning’s and Wu Chen’s holdings in CFO Fuhua, Zhiwei Zhao and Jun Wang replaced Jun Ning and Wu Chen respectively as a party to each of the contractual arrangements we have entered into with Jun Ning and Wu Chen with respect to their holdings in CFO Fuhua and the operation of CFO Fuhua.
Each of our contractual arrangements with CFO Fuhua and its shareholders may only be amended with the approval of our audit committee or another independent body of our board of directors. The following is a summary of the material provisions of these agreements.
Leasing of equipment
Equipment Leasing Agreement, dated May 27, 2004, between CFO Beijing and CFO Fuhua.
CFO Beijing leases to CFO Fuhua equipment necessary for CFO Fuhua’s operation and requested by CFO Fuhua from time to time for a monthly lease payment calculated based on the actual value of the leased equipment. Without CFO Beijing’s written consent, CFO Fuhua may not lease any equipment from any other parties. The term of the lease is ten years, which will be automatically renewed for another one year term upon the expiration of each term unless CFO Beijing notifies CFO Fuhua of its intention not to renew 30 days before the relevant term expires.
Provision of services

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Technical Support Agreement, dated May 27, 2004, between CFO Beijing and CFO Fuhua.
CFO Beijing provides CFO Fuhua with exclusive technical support services for the maintenance of CFO Fuhua’s servers, networks and other equipment, software and systems. CFO Fuhua pays a quarterly service fee to CFO Beijing which is based on the actual labor cost of CFO Beijing during the relevant period. In addition, CFO Fuhua reimburses CFO Beijing for out of pocket costs CFO Beijing incurs in connection with providing the services under this agreement. The term of this agreement is ten years, which will be automatically renewed for another one year term upon the expiration of each term unless CFO Beijing notifies CFO Fuhua of its intention not to renew 30 days before the relevant term expires.
Amended and Restated Strategic Consulting Service Agreement, dated May 27, 2004, between CFO Beijing and CFO Fuhua.
CFO Beijing provides CFO Fuhua with strategic consulting and related services for CFO Fuhua’s business, including (1) valuation of new products; (2) industry investigation and survey; (3) marketing and promotion strategies; and (4) other services relating to CFO Fuhua’s business, including its online advertising business. The fee for these services will be calculated quarterly based on the actual time of services provided by CFO Beijing. The term of this agreement is 20 years, which will be automatically renewed for another one year term upon the expiration of each term unless CFO Beijing notifies CFO Fuhua of its intention not to renew 30 days before the relevant term expires.
CFO Software/CFO Glory and CFO Software/CFO Premium arrangements
We have entered into a series of contractual arrangements with CFO Premium and CFO Glory and their shareholders, including contracts relating to provision of strategic consulting, technical and operational support services and certain shareholders rights.
Each of our contractual arrangements with CFO Glory or CFO Premium and its shareholders may only be amended with the approval of our audit committee or another independent body of our board of directors. The following is a summary of the material provisions of these agreements.
Strategic Consulting Service Agreement, dated August 21, 2007, between CFO Software and CFO Premium.
CFO Software provides CFO Premium exclusive strategic consulting and related services for CFO Premium’s business, including (1) valuation of new products/services; (2) industry investigation and survey; (3) marketing and promotion strategies; (4) staff training; and (5) other services relating to CFO Premium’s business. The term of this agreement is 20 years. As consideration for the foregoing services provided by CFO Software, CFO Premium pays CFO Software annual service fees in the amount equivalent to 30% of CFO Premium’s profit for the respective year, which will be determined by CFO Software and CFO Premium on quarterly basis in writing and paid by CFO Premium within three months after the accounting date.
Technical Support Agreement, dated August 21, 2007, between CFO Software and CFO Premium.
CFO Software provides CFO Premium with exclusive technical support services for the maintenance of CFO Premium’s servers, networks and other equipment, software and systems. As consideration for the foregoing services provided by CFO Software, CFO Premium pays CFO Software annual service fees in the amount equivalent to 30% of CFO Premium’s profit for the respective year, which will be determined by CFO Software and CFO Premium on quarterly basis in writing and paid by CFO Premium within three months after the accounting date.

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Operation Agreement, dated August 21, 2007, between CFO Software and CFO Premium.
CFO Software will, according to operational needs of CFO Premium provide support for the business operation of CFO Premium, including (1) acting as the guarantor to guarantee CFO Premium’s performance of its obligations under the contracts, agreements or transactions entered into between CFO Premium and third parties in relation to the business operation of CFO Premium; (2) making recommendations to CFO Premium individuals to be appointed as directors or senior management personnel of CFO Premium; and (3) provision of guidance and recommendations on the policy daily operation, financial management and human resource. Without obtaining the written consent of CFO Software in advance, CFO Premium shall not engage in any activities that could seriously affect the assets, rights, obligations or operations of CFO Premium, including without limitation (i) borrowing loans from a third party or undertake any debt liability; (ii) selling to or receiving from a third party any assets or rights; and (iii)pledging its own assets to provide guarantees for a third party. As consideration for the foregoing operation support provided by CFO Software, CFO Premium will pay CFO Software annual service fees in the amount equivalent to 40% of CFO Premium’s profit for the respective year, which will be determined by CFO Software and CFO Premium on quarterly basis in writing and paid by CFO Premium within three months after the accounting date. CFO Premium shall not, without the written consent of CFO Software, transfer its rights and obligations under the agreement to a third party, whereas, CFO Software, if necessary, may transfer its rights and obligations under the agreement to a third party without the consent of CFO Premium. The terms of the agreement is 10 years.
On September 10, 2007, CFO Software entered into a technical support agreement, strategic consulting service agreement and operation agreement with CFO Glory on the same terms as described above.
Loans to Zhiwei Zhao, Wu Chen and Jun Wang
We entered into a loan agreement with each of Jun Ning and Wu Chen, the shareholders of CFO Fuhua, on May 27, 2004 to extend each of Jun Ning and Wu Chen a loan with the amount of $163,000 and $199,000, respectively, for the sole purpose of investing in CFO Fuhua as CFO Fuhua’s registered capital. The initial term of these loans in each case is 10 years which may be extended upon the parties’ agreement. Jun Ning and Wu Chen can only repay the loans by transferring all of their interest in CFO Fuhua to us or a third party designated by us. When Jun Ning and Wu Chen transfer their interest in CFO Fuhua to us or our designee, if the actual transfer price is higher than the principal amount of the loans, the amount exceeding the principal amount of the loans will be deemed as interest accrued on such loans and repaid by Jun Ning and Wu Chen to us. While Hong Kong law limits the maximum interest payment chargeable under a loan to 60% of the outstanding principal amount per annum, this limitation would only be relevant if, at the time of a future transfer to us of the interest in CFO Fuhua held by Jun Ning and Wu Chen, the actual value of CFO Fuhua were to have increased at an average annual rate greater than 60%. CFO Fuhua’s assets currently consist primarily of registered capital and licenses to provide Internet content and advertising related services, and its operations are primarily limited to operating our free website and providing advertising related services on behalf of CFO Beijing. In addition, we do not expect CFO Fuhua to continue to provide advertising related services once CFO Beijing obtains necessary permits to do so. Accordingly, we do not believe this limitation will have a material effect on our business and operations, or will result in a material amount being paid to the shareholders of CFO Fuhua if and when they are permitted to transfer their interest in CFO Fuhua to us.
As Zhiwei Zhao was appointed to replace Jun Ning as a shareholder of CFO Fuhua, in November 2006, accordingly the loans to Jun Ning as described above were transferred to Zhiwei Zhao by contractual arrangements on the same term. On October 18, 2007, we entered into a loan agreement with Jun Wang to extend Jun Wang a loan in the amount of $199,000 on the same term

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as described above, for the sole purpose of financing Jun Wang to acquire from Wu Chen the whole of his holdings in CFO Fuhua. Upon transferring all his holdings in CFO Fuhua to Jun Wang, Wu Chen has repaid his loans in full.
In May 2004, we repaid $60,000 to Jun Ning and Wu Chen for funds advanced by Jun Ning and Wu Chen, on our behalf, to capitalize CFO Fuhua when CFO Fuhua was initially incorporated in December 2000.
On September 1, 2007, we entered into a loan agreement with Wu Chen and Zhiwei Zhao, the shareholders of CFO Glory to extend each of Wu Chen and Zhiwei Zhao a loan with the amount of $77,000 and $63,000 , respectively, for the sole purpose of financing their investments in CFO Glory as CFO Glory’s registered capital. The initial term of these loans in each case is 10 years which may be extended upon the parties’ agreement. Wu Chen and Zhiwei Zhao can only repay the loans by transferring all of their interest in CFO Glory to us or a third party designated by us. When Wu Chen or Zhiwei Zhao transfer their interest in CFO Glory to us or our designee, if the actual transfer price is higher than the principal amount of the loans, the amount exceeding the principal amount of the loans will be deemed as interest accrued on such loans and repaid by Wu Chen and Zhiwei Zhao to us. On September 10, 2007, we entered into a loan agreement with Jun Wang to extend Jun Wang a loan in the amount of $77,000 on the same term as described above, for the sole purpose of financing Jun Wang to acquire from Wu Chen the whole of Wu Chen’s holdings in CFO Glory. Upon transferring all his holdings in CFO Glory to Jun Wang, Wu Chen has repaid his loans in full.
On March 3, 2008, Jun Wang, Zhiwei Zhao and CFO Fuhua entered into a capital increase agreement, under which Zhiwei Zhao and Jun Wang will increase their capital contribution in CFO Fuhua by $449,000 and $549,000 respectively. As a result, the registered capital of CFO Fuhua is increased from $428,000 to $1,426,000. In connection with the capital increase agreement, we entered into a loan agreement with Zhiwei Zhao and Jun Wang to extend each of Zhiwei Zhao and Jun Wang a loan with the amount of $549,000 and $449,000, respectively, for the sole purpose of financing their increase of capital contribution in CFO Fuhua. The initial term of these loans in each case is 10 years which may be extended upon the parties’ agreement. Zhiwei Zhao and Jun Wang can only repay the loans by transferring all of their interest in CFO Fuhua to us or a third party designated by us. When Zhiwei Zhao and Jun Wang transfer their interest in CFO Fuhua to us or our designee, if the actual transfer price is higher than the principal amount of the loans, the amount exceeding the principal amount of the loans will be deemed as interest accrued on such loans and repaid by Zhiwei Zhao and Jun Wang to us. While Hong Kong law limits the maximum interest payment chargeable under a loan to 60% of the outstanding principal amount per annum, for the reasons discussed above, we do not believe this limitation will have a material effect on our business and operations, or will result in a material amount being paid to the shareholders of CFO Fuhua if and when they are permitted to transfer their interest in CFO Fuhua to us.
To satisfy the conditions precedent to the extension of loans, Zhiwei Zhao and Jun Wang have entered into a share pledge agreement and purchase option and cooperation agreement with CFO (Beijing) n March 3, 2008.
Loans to Wei Xiong and Zhenfei Fan
On August 21, 2007, we entered into a loan agreement with Wei Xiong, our director of the department of human resource and administration and Zhenfei Fan, our financial manager, to extend each of Wei Xiong and Zhifei Fan a loan with the amount of $77,000 and $63,000, respectively, for the sole purpose of financing their investments in CFO Premium as CFO Premium’s registered capital. The initial term of these loans in each case is 10 years which may be extended upon the parties’ agreement. Wei Xiong and Zhifei Fan can only repay the loans by transferring all of their interest in CFO Premium to us or a third party designated by us. When Wei

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Xiong or Zhifei Fan transfer their interest in CFO Premium to us or our designee, if the actual transfer price is higher than the principal amount of the loans, the amount exceeding the principal amount of the loans will be deemed as interest accrued on such loans and repaid by Wei Xiong and Zhifei Fan to us.
Loans to CFO Beijing and CFO Software
In March 2005, we have made additional capital contributions of $9 million and $11.5 million to CFO Beijing and CFO Software, respectively. In April 2005, we further made shareholder loans of $16.8 million and $18.0 million to CFO Beijing and CFO Software, respectively. We made these additional capital contributions and shareholder loans solely for purposes of capitalizing CFO Beijing and CFO Software. Funding for these additional capital contributions and shareholder loans came from net proceeds of our initial public offering in October 2004. In August, October and December 2005, CFO Software repaid $5.0 million, $5.0 million, $5.0 million respectively. In July 2006, CFO Software paid off the remaining $3.0 million. In July 2006, CFO Beijing re-paid $7.0 million.
Shareholder rights and corporate governance
Transfer of ownership when permitted by law
Pursuant to a purchase option and cooperation agreement, or the purchase option agreement, entered into among us, CFO Beijing, Jun Ning, Wu Chen and CFO Fuhua on May 27, 2004, its subsequent amendments on November 20, 2006 upon the transfer of shares by Jun Ning to Zhiwei Zhao, and a purchase option and cooperation agreement entered into among us, CFO Beijing, Zhiwei Zhao, Jun Wang and CFO Fuhua on October 18, 2007 upon the transfer of shares by Wu Chen to Jun Wang, Zhiwei Zhao and Jun Wang jointly granted us an exclusive option to purchase all or any portion of their equity interest in CFO Fuhua, and CFO Fuhua granted us an exclusive option to purchase all of its assets if and when (1) such purchase is permitted under applicable PRC law, and (2) to the extent permitted by law, when Zhiwei Zhao and/or Jun Wang ceases to be a director or employee of CFO Fuhua, or either Zhiwei Zhao or Jun Wang desires to transfer his equity interest in CFO Fuhua to a party other than the existing shareholders of CFO Fuhua. We may purchase such interest or assets ourselves or designate another party to purchase such interest or assets.
The exercise price of the option will equal the total principal amount of the loan lent by us to Zhiwei Zhao and Jun Wang under their loan agreements to purchase their respective equity interest in CFO Fuhua, or the price required by relevant PRC law or government approval authority if such required price is higher than the total principal amount of the loans lent by us to Zhiwei Zhao and Jun Wang. We may choose to pay the purchase price payable to Zhiwei Zhao and Jun Wang by canceling our loans to Zhiwei Zhao and Jun Wang.
Following any exercise of the option, the parties will enter into a definitive share or asset purchase agreement and other related transfer documents within 30 days after written notice of exercise is delivered by us. Pursuant to the purchase option agreement, at all times before we or any party designated by us acquire 100% of CFO Fuhua’s shares or assets, CFO Fuhua may not (1) sell, transfer, assign, dispose of in any manner or create any encumbrance in any form on any of its assets unless such sale, transfer, assignment, disposal or encumbrance is related to the daily operation of CFO Fuhua or has been disclosed to and consented to in writing by us; (2) enter into any transaction which may have a material effect on CFO Fuhua’s assets, liabilities, operations, equity or other legal interest unless such transaction relates to the daily operation of CFO Fuhua or has been disclosed to and consented to in writing by us; or (3) distribute any dividends to its shareholders in any manner, and Zhiwei Zhao and Jun Wang may not cause CFO Fuhua to amend its articles of association to the extent such amendment may have a material effect on CFO

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Fuhua’s assets, liabilities, operations, equity or other legal interest except for pro rata increases of registered capital required by law.
We entered into a purchase option agreements with Wei Xiong, Zhifei Fan and CFO Premium and with Jun Wang, Zhiwei Zhao and CFO Glory on the same terms as described above on August 21, 2007 and September 10, 2007 respectively.
On March 3, 2008, CFO (Beijing), Zhiwei Zhao, Jun Wang, CFO Fuhua and CFO entered into a purchase option and cooperation agreement on the same terms as described above.
Voting arrangement
Pursuant to two proxies executed and delivered by Jun Ning and Wu Chen to Ling Hai Ma and Jian Feng, respectively, each an employee of CFO Beijing, on May 27, 2004, Jun Ning and Wu Chen have granted Ling Hai Ma and Jian Feng the power to exercise all their voting rights as shareholders of CFO Fuhua, including the right to appoint directors, the general manager and other senior managers of CFO Fuhua. The term of the proxies is 20 years which will be automatically renewed for another one year term upon the expiration of each term unless we notify Jun Ning and Wu Chen of our intention not to renew 30 days before the relevant term expires. Under the purchase option agreement, Jun Ning and Wu Chen have agreed that (1) they will only revoke the proxies granted to Ling Hai Ma and Jian Feng when either Ling Hai Ma or Jian Feng ceases to be an employee of CFO Beijing or we deliver a written notice to Jun Ning and Wu Chen requesting such revocation, and (2) they, or either of them, as the case may be, will execute and deliver another proxy in the same format as the one dated May 27, 2004 to any other individuals as instructed by us. Upon Zhiwei Zhao’s receipt of Jun Ning’s holdings in CFO Fuhua on November 20, 2006, and Jun Wang’s receipt of Wu Chen’s holdings in CFO Fuhua on October 18, 2007, each of Zhiwei Zhao and Jun Wang executed and delivered a proxy substantially identical to the proxy executed by Jun Ning and Wu Chen respectively, with respect to his voting rights as a shareholders of CFO Fuhua.
Pursuant to two proxies executed and delivered by Wei Xiong and Zhifei Fan to CFO Software on August 21, 2007, Wei Xiong and Zhifei Fan have granted CFO Software the power to exercise all their voting rights as shareholders of CFO Premium, including the right to appoint directors, the general manager and other senior managers of CFO Premium. The term of the proxies is 20 years which will be automatically renewed for another one year term upon the expiration of each term unless we notify Wei Xiong and Zhifei Fan of our intention not to renew 30 days before the relevant term expires. Under the purchase option agreement, Wei Xiong and Zhifei Fan have agreed that they will only revoke the proxies granted to CFO Software when CFO Software deliver a written notice to Wei Xiong and Zhifei Fan requesting such revocation.
Pursuant to two proxies executed and delivered by Zhiwei Zhao and Jun Wang to CFO Software on September 10, 2007, Zhiwei Zhao and Jun Wang have granted CFO Software the power to exercise all their voting rights as shareholders of CFO Glory, including the right to appoint directors, the general manager and other senior managers of CFO Glory. The term of the proxies is 20 years which will be automatically renewed for another one year term upon the expiration of each term unless we notify Zhiwei Zhao and Jun Wang of our intention not to renew 30 days before the relevant term expires. Under the purchase option agreement, Zhiwei Zhao and Jun Wang have agreed that they will only revoke the proxies granted to CFO Software when CFO Software deliver a written notice to Zhiwei Zhao and Jun Wang requesting such revocation.
Share Pledge Agreement
Pursuant to a share pledge agreement, dated May 27, 2004, Jun Ning and Wu Chen have pledged all of their equity interest in CFO Fuhua to CFO Beijing to secure the payment obligations of CFO Fuhua under the equipment leasing agreement, the technical support agreement and the amended

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and restated strategic consulting agreement between CFO Beijing and CFO Fuhua. Upon Zhiwei Zhao’s receipt of Jun Ning’s holdings in CFO Fuhua on November 20, 2006, and Jun Wang’s receipt of Wu Chen’s holdings in CFO Fuhua on October 18, 2007, Zhiwei Zhao and Jun Wang replaced Jun Ning and Wu Chen respectively as a party to the share pledge agreement. Under this agreement entered into by and among Zhiwei Zhao, Jun Wang and CFO Beijing, Zhiwei Zhao and Jun Wang have agreed not to transfer, assign, pledge or in any other manner dispose of their interest in CFO Fuhua or create any other encumbrance on their interest in CFO Fuhua which may have a material effect on CFO Beijing’s interest without the written consent of CFO Beijing, except the transfer of their interest in CFO Fuhua to us or the third party assignee designated by us according to the purchase option agreement.
Pursuant to a share pledge agreement, dated March 3, 2008, Zhiwei Zhao and Jun Wang have pledged all of their equity interest in CFO Fuhua to CFO Beijing on the same terms as described above.
Financing support
Pursuant to the purchase option agreement, we have agreed to provide or designate one of our affiliates to provide financing to CFO Fuhua in a way permitted by relevant laws in case CFO Fuhua needs such financing. If CFO Fuhua is unable to repay the financing due to its losses, we agree to waive or cause other relevant parties to waive all recourse against CFO Fuhua with respect to the financing.
Indemnifications
Pursuant to the purchase option agreement, CFO Beijing has agreed to provide necessary support to and to indemnify Zhiwei Zhao and Jun Wang to the extent that they are subject to any legal or economic liabilities as a result of performing their obligations pursuant to their agreements with us or CFO Beijing.
2007 Equity Incentive Plan
On July 2, 2007, we granted restricted stock awards covering 10,558,493 ordinary shares of the Company under our 2007 Equity Incentive Plan to our employees who are eligible for the 2007 Equity Incentive Plan. The vesting of the restrictive stock are subject to us achieving certain financial performance targets stated in the 2007 Equity Incentive Plan. In order to bind the employees together in achieving the common goal, the ordinary shares are held by C&F International Holdings Limited for the benefit whole group of selected employees. Pursuant to the 2007 Equity Incentive Plan and the restricted stock issuance and allocation agreement effective as of July 2, 2007, we issued 10,558,493 ordinary shares to C&F International Holdings Limited, a company incorporated in British Virgin Islands, which holds the ordinary shares on behalf of and exclusively for the benefit of the group of employees eligible for the 2007 Equity Incentive Plan. C&F International Holdings Limited is 100% owned by C&F Global Limited, a British Virgin Islands Company, which is in turn owned by the selected employees. As of December 31, 2007, 10,558,493 ordinary shares have been issued and allotted to selected employees pursuant to the 2007 Equity Incentive Plan.
Other related party transactions
Shareholders Agreement
Our investors under the shareholders agreement are IDG Technology Venture Investment, Inc. and Vertex Technology Fund (III) Ltd. Investors to the shareholders agreement or their permitted assignees that hold at least 15% of our registrable securities may require us to effect a registration statement on Form F-3 (or any successor form or any comparable form for a registration in a

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jurisdiction other than the United States) for a public offering of registrable securities so long as the reasonably anticipated aggregate price to the public (net of selling expenses) would be at least $1 million and we are entitled to use Form F-3 (or a comparable form) for such offering.
Holders of registrable securities may demand a registration on Form F-3 on unlimited occasions, although we are not obligated to affect more than two such registration in any twelve month period. Holders of registrable securities are also entitled to “piggyback” registration rights, which may require us to register all or any part of the registrable securities then held by such holders when we register any of our ordinary shares.
Registrable securities are ordinary shares not previously sold to the public and issued or issuable to IDG Technology Venture Investment, Inc. and Vertex Technology Fund (III) Ltd., who are holders of our preference shares, including (1) ordinary shares issued upon conversion of our preferred shares, (2) ordinary shares issued or issuable upon exercise of their options or warrants to purchase ordinary shares, and (3) ordinary shares issued pursuant to stock splits, stock dividends and similar distributions to holders of our preference shares. Under certain circumstances, such demand registration may also include ordinary shares other than registrable securities.
If any of the offerings involves an underwriting, the managing underwriter of any such offering has certain rights to limit the number of shares included in such registration. However, the number of registrable securities included in an underwritten public offering subsequent to our initial public offering pursuant to “piggyback” registration rights may not be reduced to less than 10% of the aggregate securities included in such offering without the consent of a majority of the holders of registrable securities who have requested their shares to be included in the registration and underwriting. We are generally required to bear all of the registration expenses incurred in connection with one demand registration on a form other than Form F-3, and unlimited Form F-3 and piggyback registrations. The foregoing demand, Form F-3 and piggyback registration rights will terminate, with respect to any holder of registrable securities, on the earliest of:
  •   the fifth anniversary of the consummation of our initial public offering;
 
  •   upon such holder holding less than 1% of our outstanding ordinary shares after our initial public offering; and
 
  •   upon such holder becoming eligible to sell all of such holder’s registrable securities pursuant to Rule 144 under the Securities Act within any three-month period without volume limitations, under Rule 144(k), or under any comparable securities law of a jurisdiction other than the United States for sale of registrable securities in such jurisdiction.
C. Interests of experts and counsel.
Not applicable
ITEM 8. FINANCIAL INFORMATION
A. Consolidated financial statements and other financial information.
We have appended consolidated financial statements filed as part of this annual report.
Legal Proceedings
On December 10, 2007, Mr. Fei Ruan, our employee, filed a complaint against CFO Meijing at the Shanghai No.1 Intermediate People’s Court alleging copyright violation. The plaintiff sought

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indictment and compensation of approximately $141,000). We filed the answer to the complaint on March, 2008 . The case is currently pending in the court. Although we cannot predict with certainty the result of this litigation, we believe that the final outcome will not have a material adverse effect on our business and results of operations.
Dividend Policy
We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends on our ordinary shares, or indirectly on our ADSs, for the foreseeable future. Investors seeking cash dividends should not purchase our ADSs. Future cash dividends, if any, will be at the discretion of our board of directors and will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors as our board of directors may deem relevant. In addition, we can pay dividends only out of our profit or other distributable reserves. Any dividend we declare will be paid to the holders of ADSs, subject to the terms of the deposit agreement, to the same extent as holders of our ordinary shares, less the fees and expenses payable under the deposit agreement. Other distributions, if any, will be paid by the depositary to holders of our ADSs in any means it deems legal, fair and practical. Any dividend will be distributed by the depositary, in the form of cash or additional ADSs, to the holders of our ADSs. Cash dividends on our ADSs, if any, will be paid in U.S. dollars.
B. Significant changes since December 31, 2007.
None.
ITEM 9. THE OFFER AND LISTING
A. Offering and listing details.
Our ADSs, each representing five of our ordinary shares, have been listed on the Nasdaq Global Market (known as the Nasdaq National Market prior to July 1, 2006) since October 15, 2004. Our ADSs trade under the symbol “JRJC.”
The following table provides the high and low trading prices for our ADSs on Nasdaq for (1) the years 2004, 2005, 2006 and 2007 (2) each of the quarters since the first quarter in 2006 and (3) each of the months since November 2007.
                 
    Sales Price
    High   Low
Yearly highs and lows
                
Year 2004 (from October 15, 2004)
     15.99       8.30  
Year 2005
     11.14       5.22  
Year 2006
     9.68       3.95  
Year 2007
     47.68       4.53  
 
                
Quarterly highs and lows
                
First Quarter 2006
     9.68       5.66  
Second Quarter 2006
     7.37       4.74  
Third Quarter 2006
     6.60       4.95  
Fourth Quarter 2006
     5.60       3.95  
First Quarter 2007
     7.27       4.53  
Second Quarter 2007
     10.18       6.04  

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    Sales Price
    High   Low
Third Quarter 2007
     44.48       8.17  
Fourth Quarter 2007
     47.68       16.55  
First Quarter 2008
     22.43       10.02  
 
                
Monthly highs and lows
                
November 2007
     39.99       16.55  
December 2007
     27.74       19.3  
January 2008
     22.43       10.02  
February 2008
     21.85       14.6  
March 2008
    21.35       12.8  
B. Plan of distribution.
Not applicable
C. Markets.
See Item 9.A. above.
D. Selling shareholders.
Not applicable
E. Dilution.
Not applicable
F. Expenses of the issue.
Not applicable
ITEM 10. ADDITIONAL INFORMATION
A. Share capital.
Not applicable.
B. Memorandum and articles of association.
We incorporate by reference into this Annual Report the description of our amended and restated memorandum of association contained in our registration statement on Form F-1 (File No. 333-119166) filed with the Commission on October 14, 2004. Our shareholders adopted our amended and restated memorandum and articles of association at an extraordinary shareholder meeting on October 14, 2004.
C. Material contracts.
We have not entered into any material contracts other than in the ordinary course of business and other than those described in Item 4, “Information on the Company” or elsewhere in this annual report on Form 20-F.
D. Exchange controls.

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China’s government imposes control over the convertibility of RMB into foreign currencies. Under the current unified floating exchange rate system, the People’s Bank of China publishes a daily exchange rate for RMB, or the PBOC Exchange Rate, based on the previous day’s dealings in the inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency may enter into foreign exchange transactions at exchange rates within an authorized range above or below the PBOC Exchange Rate according to market conditions.
Pursuant to the Foreign Exchange Control Regulations issued by the State Council on January 29, 1996 and effective as of April 1, 1996 (and amended on January 14, 1997) and the Administration of Settlement, Sale and Payment of Foreign Exchange Regulations which came into effect on July 1, 1996 regarding foreign exchange control, or the Regulations, conversion of Renminbi into foreign exchange by foreign investment enterprises for current account items, including the distribution of dividends and profits to foreign investors of joint ventures, is permissible upon the proper production of qualified commercial vouchers or legal documents as required by the Regulations. Foreign investment enterprises are permitted to remit foreign exchange from their foreign exchange bank account in China upon the proper production of, inter alia, the board resolutions declaring the distribution of the dividend and payment of profits. Conversion of RMB into foreign currencies and remittance of foreign currencies for capital account items, including direct investment, loans, security investment, is still subject to the approval of the State Administration of Foreign Exchange, or SAFE, in each such transaction. On January 14, 1997, the State Council amended the Foreign Exchange Control Regulations and added, among other things, an important provision, as Article 5 provides that the State shall not impose restrictions on recurring international payments and transfers under current accounts.
Under the Regulations, foreign investment enterprises are required to open and maintain separate foreign exchange accounts for capital account items (but not for other items). In addition, foreign investment enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business upon the production of valid commercial documents and, in the case of capital account item transactions, document approval from SAFE.
Currently, foreign investment enterprises are required to apply to SAFE for “foreign exchange registration certificates for foreign investment enterprises.” With such foreign exchange registration certificates (which are granted to foreign investment enterprises, upon fulfilling specified conditions and which are subject to review and renewal by SAFE on an annual basis) or with the foreign exchange sales notices from the SAFE (which are obtained on a transaction-by-transaction basis), foreign-invested enterprises may open foreign exchange bank accounts and enter into foreign exchange transactions at banks authorized to conduct foreign exchange business to obtain foreign exchange for their needs.
E. Taxation.
Hong Kong taxation
Profits tax. No tax is imposed in Hong Kong in respect of capital gains from the sale of property, such as the ordinary shares underlying our ADSs. However, trading gains from the sale of property by persons carrying on a trade, profession or business in Hong Kong where such gains are derived from or arise in Hong Kong from such trade, profession or business will be chargeable to Hong Kong profit tax. Liability for Hong Kong profits tax would therefore arise in respect of trading gains from the sale of ADSs or the underlying ordinary shares realized by persons in the course of carrying on a business of trading or dealing in securities in Hong Kong. For the current year of assessment 2006/2007, the charging rate for profits tax is 17.5% for corporations and 16% for unincorporated businesses.
In addition, Hong Kong does not impose withholding tax on gains derived from the sale of stock in Hong Kong companies and does not impose withholding tax on dividends paid outside of Hong

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Kong by Hong Kong companies. Accordingly, investors will not be subject to Hong Kong withholding tax with respect to a disposition of their ADSs or with respect to the receipt of dividends on their ADSs, if any. No income tax treaty relevant to the acquiring, withholding or dealing in the ADSs or the ordinary shares underlying our ADSs exists between Hong Kong and the U.S.
Estate duty. Estate duties are imposed upon the value of properties situated or deemed to be situated in Hong Kong that pass to a person’s estate upon his or her death. Our ordinary shares are Hong Kong property under Hong Kong law, and accordingly may be subject to estate duty on the death of the beneficial owner of such ordinary shares, regardless of the place of the owner’s residence, citizenship or domicile. We cannot assure you that the Hong Kong Inland Revenue Department will not treat the ADSs as Hong Kong property that may be subject to estate duty on the death of the beneficial owner of the ADSs, notwithstanding that the ADRs representing such ADSs may be situated outside Hong Kong at the date of such death. Hong Kong estate duty is currently imposed on a progressive scale from 5% to 15%, which rate and threshold has been adjusted on a fairly regular basis in the past. No estate duty is payable when the aggregate value of the dutiable estate does not exceed HK$7.5 million, and the maximum rate of 15% applies when the aggregate value of the dutiable estate exceeds HK$10.5 million. The Hong Kong Financial Secretary proposed in his 2005/2006 Budget to abolish estate duty, but the necessary legislative changes have not yet been made as at the date of this document.
Stamp duty. Hong Kong stamp duty is generally payable on the transfer of shares in companies incorporated in Hong Kong. The stamp duty is payable both by the purchaser on every purchase and by the seller on every sale of such shares at the ad valorem rate of HK$1.00 per HK$1,000 or part thereof, on the higher of the consideration for or the value of the shares transferred. In addition, a fixed duty, currently of HK$5, is payable on an instrument of transfer of such shares. Where one party to the sale is a non-resident of Hong Kong and does not pay the required stamp duty, the stamp duty not paid will be assessed on the instrument of transfer of such shares (if any), and the purchaser will be liable for payment of such stamp duty. A withdrawal of ordinary shares upon the surrender of ADSs, and the issuance of ADSs upon the deposit of ordinary shares, will also require payment of Hong Kong stamp duty at the rate described above for sale and purchase transactions, unless such withdrawal or deposit does not result in a change in the beneficial ownership of shares under Hong Kong law. The issuance of the ADSs upon the deposit of ordinary shares issued directly to the depositary or for the account of the depositary does not require payment of stamp duty. In addition, no Hong Kong stamp duty is payable upon the transfer of ADSs effected outside Hong Kong.
United States federal income taxation
This discussion describes the material U.S. federal income tax consequences of the purchase, ownership and disposition of our ADSs. This discussion does not address any aspect of U.S. federal gift or estate tax, or the state, local or foreign tax consequences of an investment in our ADSs. This discussion applies to you only if you hold and beneficially own our ADSs as capital assets for tax purposes. This discussion does not apply to you if you are a member of a class of holders subject to special rules, such as:
  •   dealers in securities or currencies;
 
  •   traders in securities that elect to use a mark-to-market method of accounting for securities holdings;
 
  •   banks or other financial institutions;
 
  •   insurance companies;

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  •   tax-exempt organizations;
 
  •   partnerships and other entities treated as partnerships for U.S. federal income tax purposes or persons holding ADSs through any such entities;
 
  •   persons that hold ADSs as part of a hedge, straddle, constructive sale, conversion transaction or other integrated investment;
 
  •   U.S. Holders (as defined below) whose functional currency for tax purposes is not the U.S. dollar;
 
  •   persons liable for alternative minimum tax; or
 
  •   persons who actually or constructively own 10% or more of the total combined voting power of all classes of our shares (including ADSs) entitled to vote.
This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, which we refer to in this discussion as the Code, its legislative history, existing and proposed regulations promulgated thereunder, published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. In addition, this discussion relies on our assumptions regarding the value of our shares and the nature of our business over time. Finally, this discussion is based in part upon the representations of the depositary and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms. For U.S. federal income tax purposes, as a holder of ADSs, you are treated as the owner of the underlying ordinary shares represented by such ADSs.
You should consult your own tax advisor concerning the particular U.S. federal income tax consequences to you of the purchase, ownership and disposition of our ADSs, as well as the consequences to you arising under the laws of any other taxing jurisdiction.
For purposes of the U.S. federal income tax discussion below, you are a “U.S. Holder” if you beneficially own ADSs and are:
  •   a citizen or resident of the United States for U.S. federal income tax purposes;
 
  •   a corporation, or other entity taxable as a corporation, that was created or organized in or under the laws of the United States or any political subdivision thereof;
 
  •   an estate the income of which is subject to U.S. federal income tax regardless of its source; or
 
  •   a trust if (a) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has a valid election in effect to be treated as a U.S. person.
If you are not a U.S. person, please refer to the discussion below under “Non-U.S. Holders.”
For U.S. federal income tax purposes, income earned through a foreign or domestic partnership or other flow-through entity is attributed to its owners. Accordingly, if a partnership or other flow-through entity holds ADSs, the tax treatment of the holder will generally depend on the status of the partner or other owner and the activities of the partnership or other flow-through entity.
U.S. Holders

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Dividends on ADSs
We do not anticipate paying dividends on our ordinary shares or indirectly on our ADSs, in the foreseeable future. See “Dividend policy.”
Subject to the “Passive Foreign Investment Company” discussion below, if we do make distributions and you are a U.S. Holder, the gross amount of any distributions you receive on your ADSs will generally be treated as dividend income if the distributions are made from our current or accumulated earnings and profits, calculated according to U.S. federal income tax principles. Dividends will generally be subject to U.S. federal income tax as ordinary income on the day you actually or constructively receive such income. However, if you are an individual and have held your ADSs for a sufficient period of time, dividend distributions on our ADSs will generally constitute qualified dividend income taxed at a preferential rate (generally 15% for dividend distributions before January 1, 2009) as long as our ADSs continue to be readily tradable on Nasdaq and certain other conditions apply. You should consult your own tax adviser as to the rate of tax that will apply to you with respect to dividend distributions, if any, you receive from us.
We do not intend to calculate our earnings and profits according to U.S. tax accounting principles. Accordingly, distributions on our ADSs, if any, will generally be taxed to you as dividend distributions for U.S. tax purposes. Even if you are a corporation, you will not be entitled to claim a dividends-received deduction with respect to distributions you receive from us. Dividends generally will constitute foreign source passive income for U.S. foreign tax credit limitation purposes.
Sales and other dispositions of ADSs
Subject to the “Passive Foreign Investment Company” discussion below, when you sell or otherwise dispose of ADSs, you will generally recognize capital gain or loss in an amount equal to the difference between the amounts realized on the sale or other disposition and your adjusted tax basis in the ADSs, both as determined in U.S. dollars. Your adjusted tax basis will generally equal the amount you paid for the ADSs. Any gain or loss you recognize will be long-term capital gain or loss if your holding period in our ADSs is more than one year at the time of disposition. If you are an individual, any such long-term capital gain will be taxed at preferential rates. Your ability to deduct capital losses will be subject to various limitations.
Passive Foreign Investment Company
If we were a Passive Foreign Investment Company or “PFIC” in any taxable year in which you hold our ADSs, as a U.S. Holder, you would generally be subject to adverse U.S. tax consequences, in the form of increased tax liabilities and special U.S. tax reporting requirements.
We will be classified as a PFIC in any taxable year if either: (1) the average percentage value of our gross assets during the taxable year that produce passive income or are held for the production of passive income is at least 50% of the value of our total gross assets or (2) 75% or more of our gross income for the taxable year is passive income (such as certain dividends, interest or royalties). For purposes of the first test: (1) any cash, cash equivalents, and cash invested in short-term, interest bearing, debt instruments, or bank deposits that is readily convertible into cash, will generally count as producing passive income or held for the production of passive income and (2) the average value of our gross assets is calculated based on our market capitalization.
We believe that we were not a PFIC for the taxable year 2007. However, there can be no assurance that we will not be a PFIC for the taxable year 2007 and/or later taxable years, as PFIC status is re-tested each year and depends on the facts in such year. For example, we would be a PFIC for the taxable year 2008 if the sum of our average market capitalization, which is our share

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price multiplied by the total amount of our outstanding shares, and our liabilities over that taxable year is not more than twice the value of our cash, cash equivalents, and other assets that are readily converted into cash. In particular, we currently deposit a substantial portion of our net proceeds from our initial public offering in interest bearing bank accounts, as well as the substantial portion of cash generated from our core business, both of which we book as cash and cash equivalents, but the value of our ADSs have declined to a high of $47.68 per ADS on October 3, 2007 from a lowest achieved of $4.53 per ADS during 2007. If the value of our outstanding stock were to adversely decrease for an extended period of time in which we hold substantial cash and cash equivalents, we would likely become a PFIC. We could also be a PFIC for any taxable year if the gross income that we and our subsidiaries earn from investing the portion of the cash raised in our initial public offering in 2004 that exceeds the immediate capital needs of our active online business is substantial in comparison with the gross income from our business operations.
If we were a PFIC, you would generally be subject to additional taxes and interest charges on certain “excess” distributions we make and on any gain realized on the disposition or deemed disposition of your ADSs, regardless of whether we continue to be a PFIC in the year in which you receive an “excess” distribution or dispose of or are deemed to dispose of your ADSs. Distributions in respect of your ADSs during a taxable year would generally constitute “excess” distributions if, in the aggregate, they exceed 125% of the average amount of distributions in respect of your ADSs over the three preceding taxable years or, if shorter, the portion of your holding period before such taxable year.
To compute the tax on “excess” distributions or any gain, (1) the “excess” distribution or the gain would be allocated ratably to each day in your holding period, (2) the amount allocated to the current year and any tax year before we became a PFIC would be taxed as ordinary income in the current year, (3) the amount allocated to other taxable years would be taxable at the highest applicable marginal rate in effect for that year, and (4) an interest charge at the rate for underpayment of taxes for any period described under (3) above would be imposed with respect to any portion of the “excess” distribution or gain that is allocated to such period. In addition, if we were a PFIC, no distribution that you receive from us would qualify for taxation at the preferential rate discussed in the “Dividends on ADSs” section above.
If we were a PFIC in any year, as a U.S. Holder, you would be required to make an annual return on IRS Form 8621 regarding your ADSs. However, we do not intend to generate, or share with you, information that you might need to properly complete IRS Form 8621. You should consult with your own tax adviser regarding reporting requirements with regard to your ADSs.
If we were a PFIC in any year, you would generally be able to avoid the “excess” distribution rules described above by making a timely so-called “mark-to-market” election with respect to your ADSs provided our ADSs are “marketable”. Our ADSs will be “marketable” as long as they remain regularly traded on a national securities exchange, such as Nasdaq. If you made this election in a timely fashion, you would generally recognize as ordinary income or ordinary loss the difference between the fair market value of your ADSs on the first day of any taxable year and their value on the last day of that taxable year. Any ordinary income resulting from this election would generally be taxed at ordinary income rates and would not be eligible for the reduced rate of tax applicable to qualified dividend income. Any ordinary losses would be limited to the extent of the net amount of previously included income as a result of the mark-to-market election, if any. Your basis in the ADSs would be adjusted to reflect any such income or loss. You should consult with your own tax adviser regarding potential advantages and disadvantages to you of making a “mark-to-market” election with respect to your ADSs. Separately, if we were a PFIC in any year, you would be able to avoid the “excess” distribution rules by making a timely election to treat us as a so-called “Qualified Electing Fund” or “QEF.” You would then generally be required to include in gross income for any taxable year (1) as ordinary income, your pro rata share of our ordinary earnings for the taxable year, and (2) as long-term capital gain, your pro rata share of our

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net capital gain for the taxable year. However, we do not intend to provide you with the information you would need to make or maintain a “QEF” election and you will, therefore, not be able to make or maintain such an election with respect to your ADSs.
Non-U.S. Holders
If you beneficially own ADSs and are not a U.S. Holder for U.S. federal income tax purposes (a “Non-U.S. Holder”), you generally will not be subject to U.S. federal income tax or withholding on dividends received from us with respect to ADSs unless that income is considered effectively connected with your conduct of a U.S. trade or business and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal income tax with respect to income from your ADSs, such dividends are attributable to a permanent establishment that you maintain in the United States. You generally will not be subject to U.S. federal income tax, including withholding tax, on any gain realized upon the sale or exchange of ADSs, unless:
  •   that gain is effectively connected with the conduct of a U.S. trade or business and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal income tax with respect to income from your ADSs, such gain is attributable to a permanent establishment that you maintain in the United States; or
 
  •   you are a nonresident alien individual and are present in the United States for at least 183 days in the taxable year of the sale or other disposition and either (1) your gain is attributable to an office or other fixed place of business that you maintain in the United States or (2) you have a tax home in the United States.
If you are engaged in a U.S. trade or business, unless an applicable tax treaty provides otherwise, the income from your ADSs, including dividends and the gain from the disposition of ADSs, that is effectively connected with the conduct of that trade or business will generally be subject to the rules applicable to U.S. Holders discussed above. In addition, if you are a corporation, you may be subject to an additional branch profits tax at a rate of 30% or any lower rate under an applicable tax treaty.
U.S. information reporting and backup withholding rules
In general, dividend payments with respect to the ADSs and the proceeds received on the sale or other disposition of those ADSs may be subject to information reporting to the IRS and to backup withholding (currently imposed at a rate of 28%). Backup withholding will not apply, however, if you (1) are a corporation or come within certain other exempt categories and, when required, can demonstrate that fact or (2) provide a taxpayer identification number, certify as to no loss of exemption from backup withholding and otherwise comply with the applicable backup withholding rules. To establish your status as an exempt person, you will generally be required to provide certification on IRS Form W-9, W-8BEN or W-8ECI, as applicable. Any amounts withheld from payments to you under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability, provide that you furnish the required information to the IRS.
HOLDERS OF OUR ADSs SHOULD CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES RESULTING FROM PURCHASING, HOLDING OR DISPOSING OF THE ADSs, INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS OF ANY STATE, LOCAL OR FOREIGN JURISDICTION AND INCLUDING ESTATE, GIFT, AND INHERITANCE LAWS.
F. Dividends and paying agents.

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Not applicable.
G. Statement by experts.
Not applicable.
H. Documents on display.
We have previously filed with the Commission our registration statement on Form F-1, as amended, and our prospectus under the Securities Act of 1933, with respect to our ordinary shares.
We are subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the Securities and Exchange Commission. Specifically, we are required to file annually a Form 20-F no later than six months after the close of each fiscal year, which is December 31. Copies of reports and other information, when so filed, may be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional office of the Securities and Exchange Commission located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the Commission at 1-800-SEC-0330. The SEC also maintains a Web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
Our financial statements have been prepared in accordance with U.S. GAAP.
We will furnish our shareholders with annual reports, which will include a review of operations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP.
I. Subsidiaries information.
Not Applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Please refer to Item 5, “Operating and Financial Review and Prospects; Quantitative and qualitative disclosures about market risk.”
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not Applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not Applicable.

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ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
We received net proceeds of approximately US$58.5 million from our initial public offering and have previously disclosed the application of all the offering proceeds.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of Zhiwei Zhao, our chief executive officer, and Jun Wang, our chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or Exchange Act, as of the end of the fiscal year covered by this report. Based on such evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of the fiscal year covered by this report, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act.
There have not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal year covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
The management of China Finance Online Co. Limited, or the Company, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management, with the participation of the Company’s principal executive and principal financial officers, assessed the effectiveness of the Company’s internal control over financial reporting as of end of the most recent fiscal year, December 31, 2007. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on its assessment, management concluded that, as of the end of the Company’s most recent fiscal year, December 31, 2007, the Company’s internal control over financial reporting is effective based on those criteria. The assessment excluded the internal controls over financial reporting relating to Daily Growth Securities because the entity was acquired on November 23, 2007, as described in note 3 to the Consolidated Financial Statements.
Key sub-totals that result from the financial statements of Daily Growth Securities, whose internal controls have not been assessed, are set out below.
         
    2007(USD)
 
Total assets
     8,109,972  
Net assets
     3,999,090  
Revenue
     80,896  
Loss for the financial year
     (103,180 )
 

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The Company’s independent registered public accounting firm, who audited the financial statements included in Form 20-F, has issued an attestation report on management’s assessment of the effectiveness of the Company’s internal control over financial reporting.
Report of the Independent Registered Public Accounting Firm
To the board of directors and shareholders of China Finance Online Co. Limited
We have audited the internal control over financial reporting of China Finance Online Co. Limited and its subsidiaries and variable interest entities (the “Group”) as of December 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit.
As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Daily Growth Securities Limited, which was acquired on November 23, 2007 and whose financial statements constitute 5.9 percent and 7.8 percent of net and total assets, respectively, 0.3 percent of revenues, and 2.5 percent of net loss of the consolidated financial statement amounts as of and for the year ended December 31, 2007. Accordingly, our audit did not include the internal control over financial reporting at Daily Growth Securities Limited.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any

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evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Group’s consolidated balance sheets as of December 31, 2006 and 2007 and the related consolidated statements of operations, shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2007, and the related financial statement schedule included in Schedule I and our report dated May 30, 2008 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Group’s adoption of the recognition and measurement methods under Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” and change of its method of accounting for stock-based compensation to conform to FASB Statement No. 123 (revised 2004), “Share-Based Payment”.
Deloitte Touche Tohmatsu CPA Ltd.
Beijing, the People’s Republic of China
May 30, 2008
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
See Item 6.C. of this annual report, “Directors, Senior Management and Employees — Board Practices.”
Our board of directors has concluded that Mr. Kheng Nam Lee, a member of our audit committee, meets the criteria for an “audit committee financial expert” as established by the U.S. Securities and Exchange Commission.
Mr. Kheng Nam Lee will not be deemed an “expert” for any purpose, including, without limitation, for purposes of section 11 of the U.S. Securities Act of 1933, as amended, as a result of being designated or identified as an audit committee financial expert. The designation or identification of Mr. Kheng Nam Lee as an audit committee financial expert does not impose on him any duties, obligations or liability that are greater than the duties, obligations and liability imposed on him as a member of the audit committee and board of directors in the absence of such designation or identification. The designation or identification of Mr. Kheng Nam Lee as an audit committee financial expert does not affect the duties, obligations or liability of any other member of the audit committee or board of directors.
ITEM 16B. CODE OF ETHICS
See Item 6.C. of this annual report, “Directors, Senior Management and Employees — Board Practices.”
Our board of directors has adopted a code of ethics, which is applicable to our senior executive and financial officers and any other persons who perform similar functions for us. We have posted the text of our code of ethics on our Internet website at www.chinafinanceonline.com/investor/governance.asp.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by category specified below in connection with certain professional services rendered by Deloitte Touche Tohmatsu CPA Ltd., our independent

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registered public accounting firm, for the periods indicated. We did not pay any other fees to our independent registered public accounting firm during the periods indicated below.
                                                 
    For the Year Ended December 31,
    2007   2006   2005
Audit Fees(1)
           US$ 635,000             US$ 257,000             US$ 192,500  
                                     
Tax Fees(2)
             22,278                                  
                                     
 
(1)   “Audit Fees” means the aggregate fees in each of the fiscal years listed for professional services rendered by Deloitte Touche Tohmatsu CPA Ltd. for the audit of our annual financial statements, review of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements.
 
(2)   “Tax Fees” means the aggregate fees billed in each of the fiscal years listed for professional tax services rendered by Deloitte Touche Tohmatsu CPA Ltd.
ITEM 16D. EXEMPTION FROM THE LISTING STANDARD FOR AUDIT COMMITTEES
Not Applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
NONE
PART III
ITEM 17. FINANCIAL STATEMENT
We have elected to provide financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The consolidated financial statements for China Finance Online Co. Limited and its subsidiaries are included at the end of this annual report.
ITEM 19. EXHIBITS
Index to exhibits
     
Exhibit    
Number   Description
 
    
1.1
  Amended and Restated Memorandum and Articles of Association of China Finance Online Co. Limited (incorporated by reference to Exhibit 3.1 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the

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Exhibit    
Number   Description
 
    
 
  Securities and Exchange Commission on October 4, 2004)
 
    
2.1
  Specimen ordinary share certificate (incorporated by reference to Exhibit 4.1 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
 
    
2.2
  Specimen American depositary receipt of China Finance Online Co. Limited (Incorporated by reference to the Registration Statement on Form F-6 (File No. 333-119530) filed with the Securities and Exchange Commission with respect to American depositary shares representing ordinary shares on October 5, 2004
 
    
2.3
  Shareholders Agreement of China Finance Online Co. Limited dated June 2000 among China Finance Online Co., Ltd. and certain of its shareholders (incorporated by reference to Exhibit 4.2 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
 
    
4.1
  2004 Incentive Stock Option Plan and form of option agreement (incorporated by reference to Exhibit 4.1 from our 2006 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.2
  Restricted Stock Issuance and Allocation Agreement-2007 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 on Form 6-K (File No. 000-50975) filed with the Securities and Exchange Commission on August 24, 2007
 
    
4.3
  Form of Option Agreement with outside consultants and strategic advisors (incorporated by reference to Exhibit 10.2 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
 
    
4.4
  Purchase Option and Cooperation Agreement dated May 27, 2004 among China Finance Online Co. Limited, Jun Ning, Wu Chen and CFO Fuhua Innovation Technology Development Co., Ltd. (incorporated by reference to Exhibit 10.3 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
 
    
4.5
  Share Pledge Agreement dated May 27, 2004 among Jun Ning, Wu Chen and China Finance Online (Beijing) Co., Ltd. (incorporated by reference to Exhibit 10.4 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
 
    
4.6
  Proxy from Wu Chen to Jian Feng dated May 27, 2004 (incorporated by reference to Exhibit 10.6 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
 
    
4.7
  Framework Agreement on Exercising Purchase Option dated November 20, 2006 by and among Jun Ning, Wu Chen, Zhiwei Zhao, CFO Fuhua Innovation Technology Development Co., Ltd. and China Finance Online (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.7 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)

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Exhibit    
Number   Description
 
    
4.8
  Share Transfer Contract (related to shares of Beijing Fuhua Innovation Technology Development Co., Ltd.) dated November 20, 2006 by and between Jun Ning and Zhiwei Zhao (incorporated by reference to Exhibit 4.8 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.9
  Loan Agreement dated November 20, 2006 by and between China Finance Online Co. Limited by and Zhiwei Zhao (incorporated by reference to Exhibit 4.9 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.10
  Purchase Option and Cooperation Agreement dated November 20, 2006 among China Finance Online Co. Limited, Zhiwei Zhao, Wu Chen, Fuhua Innovation Technology Development Co., Ltd. and China Finance Online (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.10 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.11
  Share Pledge Agreement dated November 20, 2006 among Zhiwei Zhao, Wu Chen, Fuhua Innovation Technology Development Co., Ltd. and China Finance Online (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.11 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.12
  Equipment Lease Agreement between China Finance Online (Beijing) Co., Ltd. and Fuhua Innovative Technology Development Co., Ltd. dated May 27, 2004 (incorporated by reference to Exhibit 10.7 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
 
    
4.13
  Technical Support Agreement between China Finance Online (Beijing) Co., Ltd. and Fuhua Innovative Technology Development Co., Ltd. dated May 27, 2004 (incorporated by reference to Exhibit 10.8 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
 
    
4.14
  Amended and Restated Strategic Consulting Agreement between China Finance Online (Beijing) Co., Ltd. and Fuhua Innovative Technology Development Co., Ltd. dated May 27, 2004 (incorporated by reference to Exhibit 10.9 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
 
    
4.15*
  Framework Agreement on Exercising Purchase Option dated October 18, 2007 by and among China Finance Online Co. Limited, Wu Chen, Zhiwei Zhao, Jun Wang, CFO Fuhua Innovation Technology Development Co., Ltd and China Finance Online (Beijing) Co., Ltd.
 
    
4.16*
  Loan Agreement between China Finance Online Co. Limited and Jun Wang dated October 18, 2007
 
    
4.17*
  Share Transfer Contract (related to shares of Beijing Fuhua Innovation Technology Development Co., Ltd.) dated October 18, 2007 by and between Wu Chen and Jun Wang

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Exhibit    
Number   Description
 
    
4.18*
  Share Pledge Agreement dated October 18, 2007 among Zhiwei Zhao, Jun Wang, Fuhua Innovation Technology Development Co., Ltd. and China Finance Online (Beijing) Co., Ltd.
 
    
4.19*
  Purchase Option and Cooperation Agreement dated October 18, 2007 among China Finance Online Co. Limited, Zhiwei Zhao, Jun Wang and CFO Fuhua Innovation Technology Development Co., Ltd.
 
    
4.20*
  Purchase Option and Coopration Agreement dated March 3, 2008 among China Finance Online Co. Limited, Zhiwei Zhao, Jun Wang and CFO Fuhua Innovation Technology Development Co., Ltd.
 
    
4.21*
  Capital Increase Agreement relating to CFO Fuhua Innovation Technology Development Co., Ltd. dated March 3, 2008 among CFO Fuhua Innovation Technology Development Co., Ltd. , Jun Wang and Zhiwei Zhao
 
    
4.22*
  Loan Agreement dated March 3, 2008 among China Finance Online (Beijing) Co., Ltd., Jun Wang and Zhiwei Zhao
 
    
4.23*
  Share Pledge Agreement dated March 3, 2008 among Zhiwei Zhao, Jun Wang, Fuhua Innovation Technology Development Co., Ltd. and China Finance Online (Beijing) Co., Ltd.
 
    
4.24*
  Loan Agreement dated August 21, 2007 among Fortune Software (Beijing) Co., Ltd., Wei Xiong and Zhenfei Fan
 
    
4.25*
  Operation Agreement among dated August 21, 2007 by and between Fortune Software (Beijing) Co., Ltd. and Beijing CFO Premium Technology Co., Ltd.
 
    
4.26*
  Technical Support Agreement between Fortune Software (Beijing) Co., Ltd. and Beijing CFO Premium Technology Co., Ltd. dated August 21, 2007
 
    
4.27*
  Strategic Consulting and Service Agreement between Fortune Software (Beijing) Co., Ltd. and Beijing Premium Technology Co., Ltd. dated August 21, 2007
 
    
4.28*
  Purchase Option Agreement dated August 21, 2007 among Fortune Software (Beijing) Co. Limited, Wei Xiong, Zhenfei Fan and Beijing Premium Technology Co., Ltd.
 
    
4.29*
  Framework Agreement among Fortune Software (Beijing) Co., Ltd., Wu Chen, Jun Wang and Beijing Glory Co., Ltd. dated September 10, 2007
 
    
4.30*
  Loan Agreement dated September 1, 2007 among Fortune Software (Beijing) Co., Ltd., Wu Chen and Zhiwei Zhao
 
    
4.31*
  Share Transfer Contract (related to shares of Beijing Glory Co., Ltd.) dated September 10, 2007 by and between Wu Chen and Jun Wang
 
    
4.32*
  Operation Agreement among dated September 10, 2007 by and between Fortune Software (Beijing) Co.,Ltd. and Beijing Glory Co., Ltd.
 
    
4.33*
  Technical Support Agreement between Fortune Software (Beijing) Co., Ltd. and Beijing CFO Glory Co., Ltd. dated September 10, 2007

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Exhibit    
Number   Description
 
    
4.34*
  Strategic Consulting and Service Agreement between Fortune Software (Beijing) Co., Ltd. and Beijing Glory Co., Ltd. dated September 10, 2007
 
    
4.35*
  Purchase Option Agreement dated September 10, 2007 among China Finance Online Co. Limited, Jun Wang, Zhiwei Zhao and Beijing Glory Co., Ltd.
 
    
4.36
  Shanghai Stock Exchange Level-II Quotations License Agreement dated June 15, 2006 between SSE Infonet Ltd. and Fortune Software (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.15 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.37*
  License Agreement relating to the distribution of TopView between Fortune Software (Beijing) Co., Ltd. and Shanghai Stock Exchange Information Network Co., Ltd. dated December 26, 2007
 
    
4.38
  Shenzhen Stock Exchange Proprietary Information License Agreement dated March 20, 2007 between Fortune Software (Beijing) Co., Ltd. and Shenzhen Securities Information Co., Ltd. (incorporated by reference to Exhibit 4.16 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.39
  Domain Name Transfer Agreement dated October 30, 2006 by and among China Finance Online Co., Ltd., China Finance Online (Beijing) Co., Ltd. and Being Fuhua Innovation Technology Development Co., Ltd.(incorporated by reference to Exhibit 4.17 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.40
  Domain Name Transfer Agreement dated October 30, 2006 between Stockstar Information Technology (Shanghai) Co., Ltd. and Shanghai Meining Computer Software Company Limited (incorporated by reference to Exhibit 4.18 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.41
  Lease Contract for Housing Unit of Corporate Square dated January 19, 2006 between Fortune Software (Beijing) Co. Ltd. and China Galaxy Securities Company Limited (incorporated by reference to Exhibit 4.20 from our Annual Report on Form 20-F filed with the Securities and Exchange Commission on May 23, 2006)
 
    
4.42
  Lease Contract for Housing Unit of Corporate Square dated January 19, 2006 between Beijing Fuhua Innovation Technology Co., Ltd. and China Galaxy Securities Company Limited (incorporated by reference to Exhibit 4.20 from our Annual Report on Form 20-F filed with the Securities and Exchange Commission on May 23, 2006)
 
    
4.43
  Lease Contract for Housing Unit of Corporate Square dated January 19, 2006 between China Finance Online Co., Ltd. and China Galaxy Securities Company Limited (incorporated by reference to Exhibit 4.20 from our Annual Report on Form 20-F filed with the Securities and Exchange Commission on May 23, 2006)

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Exhibit    
Number   Description
 
    
4.44
  Lease Contract for Housing Unit of Corporate Square dated December 29, 2006 between Beijing Fuhua Innovation Technology Co., Ltd. and China Galaxy Securities Company Limited (incorporated by reference to Exhibit 4.22 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.45
  Lease Contract for Housing Unit of Corporate Square dated December 29, 2006 between Fortune Software (Beijing) Co. Ltd. and China Galaxy Securities Company Limited (incorporated by reference to Exhibit 4.23 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.46*
  Lease Contract for Housing Unit of Corporate Square dated August 9, 2007 between Fortune Software (Beijing) Co. Ltd. and China Galaxy Securities Company Limited
 
    
4.47*
  Lease Contract for Housing Unit of Corporate Square dated August 9, 2007 between Beijing Fuhua Innovation Technology Co., Ltd. and China Galaxy Securities Company Limited
 
    
4.48*
  Lease Contract for Housing Unit of Corporate Square dated August 1, 2007 between China Finance Online (Beijing) Co., Ltd. and China Galaxy Securities Company Limited
 
    
4.49*
  Lease Contract for Housing Unit of Corporate Square dated August 1, 2007 between Beijing Fuhua Innovation Technology Co., Ltd. and China Galaxy Securities Company Limited
 
    
4.50*
  Lease Contract for Housing Unit of Corporate Square dated August 1, 2007 between Fortune Software (Beijing) Co. Ltd. and China Galaxy Securities Company Limited
 
    
4.51*
  Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among William Wang, FNG International Holdings Limited and China Finance Online Co. Limited
 
    
4.52*
  Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Tsang Kin-Woo, FNG International Holdings Limited and China Finance Online Co., Limited
 
    
4.53*
  Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Wong Chan Miu-Wan Stella, FNG International Holdings Limited and China Finance Online Co. Limited
 
    
4.54*
  Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Shun Kin Enterprises Limited, FNG International Holdings Limited and China Finance Online Co. Limited
 
    
4.55*
  Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Midopa Enterprises Limited, FNG International Holdings Limited and China Finance Online Co. Limited

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Exhibit    
Number   Description
 
    
4.56*
  Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Hung Yung, FNG International Holdings Limited and China Finance Online Co. Limited
 
    
4.57*
  Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Chu Ping-Im, FNG International Holdings Limited and China Finance Online Co. Limited
 
    
4.58*
  Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Eternal Growth Investment Limited, FNG International Holdings Limited and China Finance Online Co. Limited
 
    
4.59
  Form of indemnification agreement for directors and officers (incorporated by reference to Exhibit 10.18 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004)
 
    
4.60
  Labor Contract of Jeff Wang dated May 24, 2006 (incorporated by reference to Exhibit 4.25 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.61
  Labor Contract of Zhao Zhiwei dated June 21, 2005 (incorporated by reference to Exhibit 4.26 from our Annual Report on Form 20-F filed with the Securities and Exchange Commission on May 23, 2006)
 
    
4.62
  [Intentionally Omitted]
 
    
4.63
  [Intentionally Omitted]
 
    
4.64
  Form of Change in Control Agreement (incorporated by reference to Exhibit 10.1 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on October 4, 2004)
 
    
4.65
  Shanghai Meining Computer Software Company Limited Share Transfer Agreement dated August 15, 2006 among Shanghai Kemei Taidi Telecommunication Equipment Co., Ltd., Beijing Fuhua Innovation Technology Development Co., Ltd., China Finance Online (Beijing) Co., Ltd.(incorporated by reference to Exhibit 4.30 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.66
  Stockstar Information Technology (Shanghai) Co., Ltd. Share Transfer Agreement dated August 15, 2006 by and among Stockstar.com, Inc. and China Finance Online Co., Ltd.(incorporated by reference to Exhibit 4.31 from our 2006 Annual Report on Form 20-F (File No.000-50975 ) filed with the Securities and Exchange Commission on May 29, 2007)
 
    
4.67*
  Engagement Letter between China Finance Online Co., Ltd. and Deloitte Touche Tohmatsu CPA. Ltd dated February 26, 2008
 
    
8.1*
  List of subsidiaries
 
    
10.1*
  Consent of Deloitte Touche Tohmatsu CPA Ltd.

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Exhibit    
Number   Description
 
    
12.1*
  CEO Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) (17 CFR 240.13a-14(a)) or Rule 15d-1(a) (17 CFR 240.15d-14(a))
 
    
12.2*
  CFO Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-1(a) (17 CFR 240.15d-14(a))
 
    
13.1*
  CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
    
13.2*
  CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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CHINA FINANCE ONLINE CO. LIMITED
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
         
Date: June 4, 2008  CHINA FINANCE ONLINE CO. LIMITED

 		  
  /s/ Jeff Wang    
  Name:   Jeff Wang   
  Title:   Chief Financial Officer   

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CHINA FINANCE ONLINE CO. LIMITED
 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
CHINA FINANCE ONLINE CO. LIMITED
We have audited the accompanying consolidated balance sheets of China Finance Online Co. Limited and its subsidiaries and variable interest entities (the “Group”) as of December 31, 2006 and 2007 and the related consolidated statements of operations, shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2007, and the related financial statement schedule included in Schedule I. These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of China Finance Online Co. Limited and its subsidiaries and variable interest entities as of December 31, 2006 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.
As described in Note 2 to the consolidated financial statements, 1) effective on January 1, 2007, the Group adopted the recognition and measurement methods under Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No.109”; 2) effective on January 1, 2006, the Group changed its method of accounting for stock-based compensation to conform to Statement of Financial Accounting Standard No. 123 (revised 2004), “Share-Based Payment”.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Group’s internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 30, 2008 expressed an unqualified opinion on the Group’s internal control over financial reporting.
Deloitte Touche Tohmatsu CPA Ltd.
Beijing, the People’s Republic of China
May 30, 2008

F-2

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
CONSOLIDATED BALANCE SHEETS
(In U.S. dollars, except share-related data)
                 
    December 31,  
    2006     2007  
 
                
Assets
                
 
                
Current assets:
                
Cash and cash equivalents
  $ 44,955,553     $ 74,729,033  
Prepaid expenses and other current assets
    927,697       2,947,054  
Trust bank balances held on behalf of customers
    —       2,850,541  
Advances to employees
    —       1,672,575  
Accounts receivable
    477,778       1,491,454  
Deferred tax assets
    170,478       1,129,515  
 
            
Total current assets
    46,531,506       84,820,172  
 
            
Property and equipment, net
    1,697,481       5,454,858  
Acquired intangible assets, net
    2,045,224       1,938,177  
Cost method investment
    12,606,571       1,479,571  
Rental deposits
    86,216       500,222  
Goodwill
    8,151,851       9,651,719  
Other assets
    —       25,647  
Deferred tax assets, non-current
    —       14,382  
 
            
Total assets
  $ 71,118,849     $ 103,884,748  
 
            
 
                
Liabilities and shareholders’ equity
                
 
                
Current liabilities:
                
Deferred revenue
  $ 6,418,502     $ 20,457,316  
Accrued expenses and other current liabilities
    2,086,017       6,950,254  
Amounts due to customers for the trust bank balances held on their behalf
    —       2,850,541  
Accounts payable
    10,535       763,458  
Income taxes payable
    5,483       11,968  
 
            
Total current liabilities
    8,520,537       31,033,537  
 
            
Deferred revenue, non-current
    —       4,665,112  
Deferred tax liabilities, non-current
    145,533       352,273  
 
            
Total liabilities
    8,666,070       36,050,922  
 
            
 
                
Commitments (Note 15)
                
 
                
Minority interests
    —       471,431  
 
                
Shareholders’ equity:
                
Ordinary shares ($0.00013 par value; 500,000,000 shares authorized; shares issued and outstanding 104,384,933 in 2006 and 109,754,433 in 2007)
    13,474       14,172  
Additional paid-in capital
    52,555,919       58,727,378  
Accumulated other comprehensive income
    1,634,269       4,501,432  
Retained earnings
    8,249,117       4,119,413  
 
            
Total shareholders’ equity
    62,452,779       67,362,395  
 
            
Total liabilities, minority interests and shareholders’ equity
  $ 71,118,849     $ 103,884,748  
 
            
See notes to consolidated financial statements.

F-3

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In U.S. dollars, except share-related data)
                         
    Years ended December 31,  
    2005     2006     2007  
 
Net revenues
  $ 7,482,166     $ 7,128,078     $ 25,903,074  
Cost of revenues (including stock-based compensation of $740, $111,612 and $16,192, respectively)
    482,068       1,467,745       4,426,602  
 
                  
Gross profit
    7,000,098       5,660,333       21,476,472  
 
                  
 
                        
Operating expenses:
                        
General and administrative (including stock-based compensation of $365,949, $833,685 and $2,667,613 respectively)
    1,740,117       2,955,948       7,783,668  
Product development (including stock-based compensation of $1,610, $131,134 and $123,461 respectively)
    236,438       742,728       2,268,878  
Sales and marketing (including stock-based compensation of $2,482, $107,231 and $139,074, respectively)
    1,794,569       2,665,847       6,924,336  
 
                  
Total operating expenses
    3,771,124       6,364,523       16,976,882  
 
                  
Government subsidies
    —       —       135,834  
 
                  
Income (loss) from operations
    3,228,974       (704,190 )     4,635,424  
Interest income
    1,486,276       1,002,975       1,104,701  
Other income, net
    365,965       381,875       433,069  
Loss from impairment of cost method investment
    —       (1,322,000 )     (11,127,000 )
 
                  
Income before income tax (provision) benefit
    5,081,215       (641,340 )     (4,953,806 )
Income tax (provision) benefit
    (457,028 )     40,707       808,625  
Minority interest in net loss of consolidated subsidiary
    —       —       15,477  
 
                  
Net income (loss)
  $ 4,624,187     $ (600,633 )   $ (4,129,704 )
 
                  
 
                        
Income (loss) per share
                        
Basic
  $ 0.05     $ (0.01 )   $ (0.04 )
 
                  
Diluted
  $ 0.04     $ (0.01 )   $ (0.04 )
 
                  
 
                        
Weighted average shares used in calculating net income (loss) per share
                        
Basic
    94,341,061       93,650,653       94,500,529  
 
                  
Diluted
    104,781,492       93,650,653       94,500,529  
 
                  
See notes to consolidated financial statements.

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Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
(In U.S. dollars, except share-related data)
                                                                 
                                    Accumulated                      
                                    other                      
                    Additional     Deferred     comprehensive             Total        
    Ordinary shares     paid-in     stock-based     income     Retained     shareholders’     Comprehensive  
    Shares     Amount     capital     compensation     (loss)     earnings     equity     income  
Balances as of January 1, 2005
    99,329,933     $ 12,814     $ 64,175,132     $ (325,221 )   $ (11 )   $ 4,225,563     $ 68,088,277          
Repurchase of ordinary shares
    —       —       (13,200,394 )     —       —       —       (13,200,394 )        
Issuance of ordinary shares to employees
    2,000,000       263       276,713       —       —       —       276,976          
Stock options issued to non-employees
    —       —       112,689       —       —       —       112,689          
Amortization of deferred stock-based compensation
     —       —       —       258,092       —       —       258,092          
Foreign currency translation adjustment
    —       —       —       —       671,133       —       671,133     $ 671,133  
Net income
    —       —       —       —       —       4,624,187       4,624,187       4,624,187  
 
                                                
Balance as of December 31, 2005
    101,329,933       13,077       51,364,140       (67,129 )     671,122       8,849,750       60,830,960     $ 5,295,320  
 
                                                
 
                                                                
Amortization of deferred stock-based compensation
     —       —       (67,129 )     67,129       —       —       —          
Issuance of ordinary shares for exercise of stock option by employees
    3,000,000       390       66,453       —       —       —       66,843          
Exercise of share options by non-employees
    55,000       7       8,793       —       —       —       8,800          
Stock-based compensation
    —       —       1,183,662       —       —       —       1,183,662          
Foreign currency translation adjustment
    —       —       —       —       963,147       —       963,147     $ 963,147  
Net loss
    —       —       —       —       —       (600,633 )     (600,633 )     (600,633 )
 
                                                
Balance as of December 31, 2006
    104,384,933       13,474       52,555,919       —       1,634,269       8,249,117       62,452,779     $ 362,514  
 
                                                
 
                                                                
Exercise of stock option by employees
    —       —       2,366,697       —       —       —       2,366,697          
Exercise of share options by non-employees
    5,369,500       698       858,422       —       —       —       859,120          
Stock-based compensation
    —       —       2,946,340       —       —       —       2,946,340          
Foreign currency translation adjustment
    —       —       —       —       2,867,163       —       2,867,163     $ 2,867,163  
Net loss
    —       —       —       —       —       (4,129,704 )     (4,129,704 )     (4,129,704 )
 
                                                
Balance as of December 31, 2007
    109,754,433     $ 14,172     $ 58,727,378     $ —     $ 4,501,432     $ 4,119,413     $ 67,362,395     $ (1,262,541 )
 
                                                
See notes to consolidated financial statements.

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Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars)
                         
    Years ended December 31,  
    2005     2006     2007  
Operating activities:
                        
Net income (loss)
  $ 4,624,187     $ (600,633 )   $ (4,129,704 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                        
Stock-based compensation
    370,781       1,183,662       2,946,340  
Depreciation and amortization
    129,833       301,941       973,953  
Deferred taxes
    322,289       (40,081 )     (737,712 )
Loss on disposal of property and equipment
    9,686       —       84,796  
Loss from impairment of cost method investment
    —       1,322,000       11,127,000  
Gain from disposal of cost method investment
    —       (116,071 )     —  
Minority interest
    —       —       (15,477 )
Changes in assets and liabilities:
                        
Accounts receivable
    (110,773 )     122,363       37,377  
Income taxes recoverable
    14,573       —       —  
Prepaid expenses and other current assets
    (799,572 )     334,687       (1,786,912 )
Advances to employees
    —       —       (1,672,575 )
Trust bank balances held on behalf of customers
    —       —       (465,101 )
Rental deposits
    (10,657 )     (31,955 )     (403,912 )
Deferred revenue
    (1,627,937 )     3,840,892       17,509,161  
Account payable
    —       —       (30,297 )
Accrued expenses and other current liabilities
    95,997       (388,662 )     4,566,829  
Amounts due to customers for the trust bank balance held on their behalf
    —       —       465,101  
Income taxes payable
    40,762       (36,041 )     (43,267 )
 
                  
Net cash provided by operating activities
    3,059,169       5,892,102       28,425,600  
 
                  
Investing activities:
                        
Purchase of property and equipment
    (234,696 )     (1,042,423 )     (3,836,412 )
Acquisition of businesses (net of cash acquired of $828,494, for the year ended December 31, 2006, and $2,631,008 for the year ended December 31, 2007)
    —       (8,346,856 )     (993,845 )
Proceeds from partial sale of cost method investment
    —       1,187,500       —  
Acquisition of cost investment
    (15,000,000 )     —       —  
 
                  
Net cash used in investing activities
    (15,234,696 )     (8,201,779 )     (4,830,257 )
 
                  
Financing activities:
                        
Proceeds from stock options exercised by employees
    276,976       66,843       2,366,697  
Proceeds from exercise of options granted to non-employee
    —       8,800       859,120  
Repurchase of ordinary shares
    (13,200,394 )     —       —  
 
                  
Net cash (used in) provided by financing activities
    (12,923,418 )     75,643       3,225,817  
 
                  
Effect of exchange rate changes
    671,133       1,021,202       2,952,320  
 
                  
Net (decrease) increase in cash and cash equivalents
    (24,427,812 )     (1,212,832 )     29,773,480  
Cash and cash equivalents, beginning of year
    70,596,197       46,168,385       44,955,553  
 
                  
Cash and cash equivalents, end of year
  $ 46,168,385       44,955,553       74,729,033  
 
                  
Supplemental disclosure of cash flow information Income taxes paid
  $ 93,977     $ 36,089     $ 38,761  
 
                  
See notes to consolidated financial statements.

F-6

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
China Finance Online Co. Limited (“China Finance Online” or the “Company”) was incorporated in Hong Kong on November 2, 1998. China Finance Online and its subsidiaries including its variable interest entities (collectively, the “Group”) are principally engaged in the sale of online financial services analyzing financial and listed company information in the People’s Republic of China (“PRC”). The services are provided through proprietary research tools on their website www.jrj.com and www.stockstar.com.
Details of China Finance Online’s subsidiaries and variable interest entities as of December 31, 2007 were as follows:
             
        Date of   Beneficial
    Place of   incorporation or   ownership
Company name   incorporation   establishment   interest
 
            
China Finance Online (Beijing) Co., Ltd. (“CFO Beijing”)
  Beijing, PRC   Jul.9, 1998   100%
Fortune Software (Beijing) Co., Ltd. (“CFO Software”)
  Beijing, PRC   Dec.7, 2004   100%
Beijing Fuhua Innovation Technology Investment Co., Ltd. (CFO Fuhua)*
  Beijing, PRC   Dec.31, 2000   100%
Beijing CFO Premium Technology Co., Ltd. (“CFO Premium)*
  Beijing, PRC   Aug.31, 2007   100%
Beijing CFO Glory Technology Co., Ltd. (“CFO Glory”)*
  Beijing, PRC   Sep.11, 2007   100%
Fortune (Beijing) Wisdom Technology Co., Ltd. (“CFO Wisdom”)
  Beijing, PRC   Oct.16, 2007   100%
Fortune (Beijing) Success Technology Co., Ltd. (“CFO Success”)
  Beijing, PRC   Oct.16, 2007   100%
Shenzhen Genius Information Technology Co., Ltd. (“CFO Genius”) (Note 3)
  Shenzhen, PRC   Sep.21, 2006   100%
Jujin Software (Shenzhen) Co., Ltd. (“CFO Jujin”)
  Shenzhen, PRC   Mar.9, 2007   100%
Shanghai Meining Computer Software Co., Ltd. (“CFO Meining”) (Note 3)
  Shanghai, PRC   Oct.1, 2006   100%
Stockstar Information Technology (Shanghai) Co., Ltd. (“CFO Stockstar”) (Note 3)
  Shanghai, PRC   Oct.1, 2006   100%
Zhengning Information & Technology (Shanghai) Co., Ltd. (“CFO Zhengning”)
  Shanghai, PRC   Jan.31, 2007   100%
FNG International Holdings Limited (“CFO FNG”)
  BVI   Jul.16, 2007   100%
Giant Bright International Holdings Limited (“CFO Giant Bright”)
  BVI   Jul.16, 2007   100%
Mount First Investments Limited (“CFO Mount First”)
  BVI   Jul.23, 2007   100%
Team Gear Limited (“CFO Team Gear”)
  HongKong, PRC   Oct.22, 2007   100%
Kinco Limited (“CFO Kinco”)
  HongKong, PRC   Oct.22, 2007   100%
Danford (H.K) Limited (“CFO Danford”)
  HongKong, PRC   Nov.30, 2007   100%
Daily Growth Securities Limited (“CFO Daily Growth”) (Note 3)
  HongKong, PRC   Nov.23, 2007   85%
 
*   Represents variable interest entity (“VIE”)
PRC regulations prohibit direct foreign ownership of business entities providing certain services in PRC, such as internet content service. China Finance Online and its wholly owned subsidiaries, CFO Beijing and CFO software are foreign or foreign invested enterprise under PRC law and accordingly are ineligible for certain operations. In order to comply with these regulations, the Group established CFO Fuhua, CFO Premium and CFO Glory three variable interest entities, (the “VIEs”), as VIE is defined by the Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (revised) (“FIN 46(R)”) through designated equity owners who are PRC citizens and legally own the VIEs.

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Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES — continued
CFO Fuhua
In 2000, the Company established CFO Fuhua, through two equity owners who are PRC citizens designated by the Company and legally own CFO Fuhua.
In 2004, China Finance Online signed a series of agreements with CFO Fuhua and its shareholders that provide the Group with the substantial ability to control CFO Fuhua. Pursuant to these contractual arrangements with CFO Fuhua, China Finance Online provides equipment, services and a domain name license to CFO Fuhua in exchange for fees. China Finance Online has the right to determine the amount of these fee and they are intended to transfer substantially all of the economic benefits of CFO Fuhua to the Company. The principal equipment lease, services and domain name license agreements that the Group has entered into with CFO Fuhua include:
  •   an equipment leasing agreement, pursuant to which CFO Fuhua leases a substantial majority of its operating assets from CFO Beijing;
 
  •   a technical support agreement, pursuant to which CFO Beijing provides technical support for CFO Fuhua’s operations;
 
  •   an amended and restated strategic consulting agreement, pursuant to which CFO Beijing provides strategic consulting services to CFO Fuhua, including consulting services in relation to CFO Fuhua’s online advertising business; and
 
  •   a domain name licensing agreement, pursuant to which CFO Beijing licenses to CFO Fuhua its domain name, www.jrj.com.cn.
As a result of a Ministry of Information Industry circular issued in 2006 regulating among other things the ownership of domain names by foreign invested value-added telecommunications businesses (including Internet and wireless content providers), China Finance Online and CFO Beijing transferred ownership of the domain names, www.jrj.com and www.jrj.com.cn, to CFO Fuhua and terminated its licensing arrangements regarding www.jrj.com.cn.
China Finance Online has the right to determine the amount of these fees and they are intended to transfer substantially all of the economic benefits of CFO Fuhua to the Company.
In addition, China Finance Online has entered into agreements with CFO Fuhua and its shareholders that provide CFO Beijing with the substantial ability to control CFO Fuhua. Pursuant to these contractual arrangements:
  •   the shareholders of CFO Fuhua have granted China Finance Online or individuals designated by China Finance Online an irrevocable proxy to exercise all their voting rights as shareholders of CFO Fuhua, including the right to appoint directors, the general manager and other senior management of CFO Fuhua;

F-8

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES — continued
CFO Fuhua — continued
  •   CFO Fuhua will not enter into any transaction that may materially affect its assets, liabilities, equity or operations without China Finance Online’s prior written consent;
 
  •   CFO Fuhua will not distribute any dividends;
 
  •   China Finance Online may purchase the entire equity interest in, or all the assets of, CFO Fuhua at a price equal to the total principal amount of the loan lent by the Company to the owners of CFO Fuhua when and if such purchase is permitted by PRC law or the current shareholders of CFO Fuhua cease to be directors or employees of CFO Fuhua;
 
  •   the shareholders of CFO Fuhua have pledged their equity interest in CFO Fuhua to CFO Beijing to secure the payment obligations of CFO Fuhua under the equipment leasing agreement, the technical support agreement and the amended and restated strategic consulting agreement between CFO Beijing and CFO Fuhua; and
 
  •   the shareholders of CFO Fuhua will not transfer, sell, pledge, dispose of or create any encumbrance on their equity interest in CFO Fuhua without the prior written consent of CFO Beijing.
Each of the contractual arrangement with CFO Fuhua and its shareholders can only be amended with the approval of our audit committee or another independent body of China Finance Online’s board of directors.
China Finance Online made a loan to each of two owners of CFO Fuhua solely for the purposes of capitalizing CFO Fuhua. Pursuant to the loan agreements, these loans can only be repaid by transferring all of their interests in CFO Fuhua to China Finance Online or a third party designated by China Finance Online. While Hong Kong law limits the maximum interest payment chargeable under a loan to 60% of the outstanding principal amount per annum, China Finance Online does not believe this limitation will have a material adverse effect on its business and operations, or will result in a material amount being paid to the shareholders of CFO Fuhua if and when they are permitted to transfer their interests in CFO Fuhua to China Finance Online. China Finance Online does not regard the shareholders of CFO Fuhua as having any interest in CFO Fuhua.
China Finance Online made a loan to CFO Fuhua in 2006 to finance its acquisition of RMB12,000,000.

F-9

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES — continued
CFO Premium and CFO Glory
In 2007, the Group established CFO Premium and CFO Glory through equity owners who are PRC citizens designated by the Company and own CFO Premium and CFO Glory.
CFO Software signed a series of agreements with CFO Premium and CFO Glory and its shareholders that provide the Group with the substantial ability to control CFO Premium and CFO Glory. Pursuant to these contractual arrangements with, CFO Software provides services to CFO Premium and CFO Glory in exchange for fees. The principal services agreements that CFO Software has entered into with CFO Premium and CFO Glory include:
  •   strategic consulting services agreement, pursuant to which the amount of the fee to be charged is 30% of CFO Premium and CFO Glory’s income before tax ;
 
  •   technical support services agreement, pursuant to which the amount of the fee to be charged is 30% of CFO Premium and CFO Glory’s income before tax;
 
  •   operating support services agreement, pursuant to which the amount of the fee to be charged is 40% of CFO Premium and CFO Glory’s income before tax;
CFO Software has the right to receive substantially all of the economic benefits of CFO Premium and CFO Glory to the Group.
In addition, CFO Software has entered into agreements with CFO Premium and CFO Glory and its shareholders that provide CFO Software with the substantial ability to control CFO Premium and CFO Glory. Pursuant to these contractual arrangements:
  •   the shareholders of CFO Premium and CFO Glory have granted CFO Software or individuals designated by CFO Software an irrevocable proxy to exercise all their voting rights as shareholders of CFO Premium and CFO Glory, including the right to appoint directors, the general manager and other senior management of CFO Premium and CFO Glory;
 
  •   CFO Premium and CFO Glory will not enter into any transaction that may materially affect its assets, liabilities, equity or operations without CFO Software’s prior written consent;
 
  •   CFO Premium and CFO Glory will not distribute any dividends;
 
  •   CFO Premium and CFO Glory may purchase the entire equity interest in, or all the assets of, CFO Premium and CFO Glory at a price equal to the total principal amount of the loan lent by the Company to the owners of CFO Premium and CFO Glory when and if such purchase is permitted by PRC law or the current shareholders of CFO Premium and CFO Glory cease to be directors or employees of CFO Premium and CFO Glory;

F-10

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES — continued
CFO Premium and CFO Glory — continued
  •   the shareholders of CFO Premium and CFO Glory will not transfer, sell, pledge, dispose of or create any encumbrance on their equity interest in CFO Premium and CFO Glory without the prior written consent of CFO Software.
CFO Software also made loans to the shareholders of CFO Premium and CFO Glory solely for the purposes of capitalizing CFO Premium and CFO Glory. Pursuant to the loan agreements, these loans can only be repaid by transferring all of their interests in CFO Premium and CFO Glory to CFO Software or a third party designated by CFO Software.
Through the contractual agreements described above, CFO Fuhua, CFO Premium and CFO Glory are VIEs in accordance with FIN 46R because the equity owners (1) lack the right to receive the expected residual returns of the VIEs, (2) lack the ability to make decisions about the VIEs’ activities that have a significant effect on their success, and (3) substantially all of the VIEs’ businesses are conducted on behalf of the Group. The Group is the primary beneficiary of the VIEs because it holds all the variable interests in the VIEs. As a result, the accounts and operations of the VIEs are included in the accompanying consolidated financial statements effective as of the date of the above agreements. Because the Company and the VIEs are under common control by the same shareholders, the VIEs are accounted for as common control transfer and are consolidated on a carryover basis.
The VIEs and the following financial statement amounts and balances were included in the accompanying consolidated financial statements as of and for the years ended December 31, 2007:
                                 
    Year ended December 31,  
    2006     2007  
    CFO Fuhua     CFO Fuhua     CFO Premium     CFO Glory  
 
                                
Total assets
   $ 3,294,204     $ 3,215,556     $ 617,495     $ 13,838,596  
Total liabilities
     2,915,166       3,865,930       480,708       13,709,484  
 
                        
                                         
    Year ended December 31,
    2005   2006   2007
    CFO Fuhua   CFO Fuhua   CFO Fuhua   CFO Premium   CFO Glory
 
                                        
Net revenue
     1,222,747       1,286,614       1,022,735       —       —  
Net income (loss)
     435       (4,999 )     (1,013,166 )     (296 )     (7,828 )
 
                                        

F-11

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Basis of consolidation
The consolidated financial statements include the financial statements of China Finance Online, its subsidiaries and its variable interest entities All inter-company transactions and balances have been eliminated upon consolidation.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have remaining maturities of three months or less when purchased.
Trust bank balances held on behalf of customers
CFO Daily Growth receives fund from customers for purpose of buying or selling securities on behalf of its customers and deposits the fund in its interest-bearing bank account. Such bank balance represents an asset of the Company and is recorded as amounts due to customers for the trust bank balance held on their behalf and payable to customers on demand. The Company recognizes a corresponding liability.
Advance to employees
The Group has made advances to certain individuals to enable them to participate in stock trading in the Stock Exchange Campaign which was launched by the Group for marketing purposes. The balances represent $nil and $1,672,575 as of December 31, 2006 and 2007, respectively, and are repayable to the Group on demand.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses in the financial statements and accompanying notes. Significant accounting estimates reflected in the Group’s financial statements include collectibility of account receivable, valuation allowance for deferred tax assets, fair value of stock option and non-vested shares, useful lives and impairment of property and equipment, and impairment of cost method investment and goodwill. Actual results could differ from those estimates.

F-12

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued
Property and equipment, net
Property and equipment, net are carried at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following estimated useful lives:
     
Technology infrastructure
  5 years
Computer equipment
  5 years
Furniture, fixtures and equipment
  5 years
Motor vehicle
  5 years
Leasehold improvements
  Shorter of the lease term or 5 years
Acquired intangible assets, net
Acquired intangible assets consists of intangible assets other than goodwill acquired through various acquisitions as described in note 3 and are amortized on a straight-line basis over their expected useful economic lives.
If an intangible asset is determined to have an indefinite useful life, it is should not be amortized until its useful life is determined to be no longer indefinite. The Group reviews intangible assets’ remaining useful lives in each reporting period. If such an asset is later determined to have a finite useful life, the asset will be tested for impairment. That asset will then be amortized prospectively over its estimated remaining useful life and accounted for in the same way as intangible assets subject to amortization.
The Group evaluates the recoverability of identifiable intangible assets with determinable useful lives whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. The Group measures the carrying amount of an intangible asset against the estimated undiscounted future cash flows associated with it. Impairment exists when the sum of the expected future net cash flows is less than the carrying value of the asset being evaluated. Impairment loss is calculated as the amount by which the carrying value of the asset exceeds its fair value. Fair value is estimated based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires the Group to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. During the years ended December 31, 2005, 2006 and 2007, the Group did not record any impairment losses associated with intangible assets.
An intangible asset that is not subject to amortization is tested for impairment at least annually if events or changes in circumstances indicate that the asset might be impaired. Such impairment test consists of a comparison of the fair values of the assets with their carrying amounts and an impairment loss is recognized if and when the carrying amounts exceed the fair values. The estimates of fair values of intangible assets not subject to amortization are determined using various discounted cash flow valuation methodologies. Significant assumptions are inherent in this process, including estimates of discount rates. Discount rate assumptions are based on an assessment of the risk inherent in the respective intangible assets. During the years ended December 31, 2005, 2006 and 2007, the Group did not record any impairment losses associated with intangible assets.

F-13

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued
Impairment of long-lived assets
The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Group measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Group would recognize an impairment loss based on the fair value of the assets. There were no impairment losses in the years ended December 31, 2005, 2006 and 2007.
Goodwill
The excess of the purchase price over the fair value of net assets acquired is recorded on the consolidated balance sheet as goodwill.
The Group tests goodwill annually following a two-step process in accordance with SFAS No. 142. The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill.
The Group performs goodwill impairment tests annually on December 31 by comparing the book value to the fair value of each reporting unit. Based on the Group’s assessment, there was no impairment of goodwill for the years ended December 31, 2005, 2006 and 2007.

F-14

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued
Revenue recognition
The Group generates revenue primarily from annual subscription fees from subscribers to their financial data and information services including their downloadable proprietary research tools. The Group recognizes revenues when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the fee is fixed or determinable and (4) collectibility is probable. Upon receipt of the upfront cash payments from the subscriber, the Group will activate the subscribers account and provide the subscriber the access code. This will commence a certain subscription period according to the customer demand and the full payment will be deferred and recognized ratably over the one-year subscription period. Since the Group does not have sufficient vendor specific objective evidence to allocate revenue to the various elements of the arrangement, the Group recognizes revenue ratably over the life of the arrangement.
The Group provides short messaging services (“SMS”) which are delivered primarily through intermediary companies licensed to provide SMS services on behalf of mobile phone service providers. The Group evaluates the criteria outlined in EITF No. 99-19, “Reporting Revenue Gross as Principal Versus Net as an Agent,” in determining whether it is appropriate to record the gross amount of revenues and related costs or the net amount earned after deducting service and network fees paid to the mobile phone service providers. The Group records the gross amounts billed to its customers when the Group is the primary obligor in these transactions as it has latitude in establishing prices, is involved in the determination of the service specifications and has the right to select suppliers. When recording the gross revenue, the Group measures its revenues based on the total amount paid by its customers, for which the mobile phone service provider bills and collects on the Group’s behalf. Accordingly, the 15-35% service fee paid to the mobile phone service provider is included in the cost of revenues.
The Group generally derives its advertising fees from advertising sales on their Website principally for a fixed period of time, generally less than one year. Revenues from advertising arrangements are recognized ratably over the period the advertising is displayed.
The Group also derives its commission from its brokerage services provided by the newly acquired subsidiary, CFO Daily Growth, which buys or sells securities on their customers’ behalf. The commission income is recognized on a trade date basis as securities transactions occur.

F-15

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued
Business taxes and value added taxes
Revenue is recorded net of business taxes when incurred. The Group is subject to business taxes of approximately 5% on taxable services provided to its customers. During the years ended December 31, 2005, 2006, and 2007, business taxes totaled $144,590, $208,559, and $667,400 respectively.
The Group’s PRC subsidiaries are subject to value added tax at a rate of 17% on subscription-based revenue. Value added tax payable on subscription-based revenue is computed net of value added tax paid on purchases. In respect of subscription-based revenue, however, if the net amount of value added tax payable exceeds 3% of subscription-based revenue, the excess portion of value added tax can be refunded immediately. The Group therefore is subject to an effective net value added tax burden of 3% from subscription-based revenue and records value added tax on a net basis. Net amount of value added tax is recorded either in the line item of other current liabilities or prepaid expenses and other current assets on the face of consolidated balance sheet.
Subscription-based revenue includes the benefit of the rebate of value added taxes on sale of the downloadable software received from the Chinese tax authorities as part of the PRC government policy of encouraging software development in the PRC. In 2005, 2006 and 2007, the Group recognized $708,613, $516,773, and $2,233,528, respectively, in value added tax refunds.
Government subsidies
The Group records government subsidies when received from local government authority and are not subject to future return or reimbursement. Government subsidies received totaled $nil, $nil and $135,834 for the years ended December 31, 2005, 2006 and 2007, respectively.
Deferred revenue
Payments receive in advance of service are recorded as deferred revenue until earned and when the relevant revenue recognition requirements have been met.
Cost method investment
In December 2005, the Group purchased 9,800,000 Series B preferred shares in a private company, Moloon International Inc., (“Moloon”) for $15,000,000, which represents a 25% interest in Moloon on an if-converted basis. China Finance Online’s investment in these preferred shares is not in-substance common stock, and accordingly, the investment has been recorded as a cost method investment. As Moloon does not have readily determinable fair value, the Group carries the investment at cost and only adjusted for other-than-temporary declines in fair value and distributions of earnings. The management regularly evaluates the impairment of the cost method investment based on performance and the financial position of the investee as well as other evidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash position, recent financings, projected and historical financial performance, cash flow forecasts and financing needs. An impairment loss is recognized in earnings equal to the difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value of the investment would then become the new cost basis of the investment. The Group recorded an other-than-temporary impairment charge totaling $1,322,000 during the year ended December 31, 2006, and $11,127,000 during the year ended December 31, 2007. No impairment charges were recorded during the year ended December 31, 2005.

F-16

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued
Foreign currency translation
The functional currency of China Finance Online’s subsidiaries and variable interest entities is Renminbi (“RMB”) except CFO Daily Growth, of which the functional currency is Hong Kong dollar. Monetary assets and liabilities denominated in other currencies are translated into the applicable functional currencies at rates of exchange in effect at the balance sheet date. Nonmonetary assets and liabilities are remeasured into the applicable functional currencies at historical exchange rates and transactions denominated in other currencies are translated using the average rate for the year. Exchange gains and losses are recorded in the consolidated statement of operations.
China Finance Online uses the U.S. dollar as its functional and reporting currency. Accordingly assets and liabilities are translated using the exchange rates in effect on the balance sheet date. Transactions in currencies other than the U.S. dollar are translated using the average exchange rate prevailing in the period when transactions occurred. Translation adjustments are reported as cumulative transition adjustments and are shown as a separate component of other comprehensive income (loss) in the accompanying consolidated statements of shareholders’ equity and comprehensive income (loss).
Foreign currency risk
The RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of Renminbi into foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. Cash and cash equivalents of the Group included aggregate amounts of $39,197,490 and $51,150,706 at December 31, 2006 and 2007 which were denominated in RMB.
Cost of raw data
Cost of raw data is expensed as incurred and is recorded in cost of revenues.
Product development expenses
Costs of product development, including database technology, are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized. To date, the Group has essentially completed its development concurrently with the establishment of technological feasibility, and, accordingly, no costs have been capitalized.

F-17

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued
Advertising costs
The Group expenses advertising costs as incurred. Total advertising expenses were $1,389,899, $921,365, and $158,631 for the years ended December 31, 2005, 2006 and 2007, respectively, and have been included as part of sales and marketing expenses.
Income taxes
Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109”. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006, with early adoption permitted. The Group adopted FIN 48 on January 1, 2007, the adoption of FIN 48 did not result in a cumulative adjustment on January 1, 2007 and had no significant impact on the Group’s accounting for income taxes for the year ended December 31, 2007. The Group did not incur any interest and penalties related to potential underpaid income tax expenses. The management does not expect to have a significant increase or decrease on the unrecognized tax benefits within 12 months from December 31, 2007.
Comprehensive income
Comprehensive income includes net income (loss) and foreign currency translation adjustments. Comprehensive income is reported as a component of the consolidated statements of shareholders’ equity and comprehensive income.
Fair value of financial instruments
Financial instruments include cash and cash equivalents and accounts receivable and accounts payable. The carrying values of cash and cash equivalents and accounts receivable approximate their fair value due to their short-term maturities. The Group does not use derivative instruments to manage risks.

F-18

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued
Concentrations of credit risk
Financial instruments that potentially expose the Group to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Group places its cash and cash equivalents with financial institutions with high-credit ratings and quality.
The Group conducts ongoing credit evaluations of its customers and generally does not require collateral or other security from its customers. The Group manages its credit risk by collecting up-front retainers from its customers and billing at regular intervals during the contract period. The Group assesses the adequacy of allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers.
There were no customers with 10% or more of the Group’s revenues and accounts receivable during 2005, 2006, or 2007.
Stock-based compensation
Effective January 1, 2006, the Group adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), using the modified prospective transition method. Under this method, stock-based compensation expense recognized beginning January 1, 2006 includes: (a) compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of January 1, 2006 based on the fair market value as of the grant date, measured in accordance with SFAS 123, and (b) compensation expense for all stock-based compensation awards granted on or subsequent to January 1, 2006, based on grant-date fair vale estimated in accordance with the provisions of SFAS 123(R). The Group recognizes stock-based compensation costs on an accelerated method over the requisite service period which is generally the vesting period.
For options vested prior to January 1, 2006, the Group accounted for share-based compensation plans in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”, as amended (“APB 25”). Accordingly, the Group recognized compensation expense only when options were granted with a discounted exercise price. The compensation expense was recognized ratably over the requisite service period, which was generally the vesting period of the options.
Income (loss) per share
Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding during the period. Diluted income (loss) per ordinary share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares.

F-19

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued
Recent accounting standards
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” which provides enhanced guidance for using fair value to measure assets and liabilities. SFAS No. 157 also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. SFAS No. 157 does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 (fiscal years beginning after November 15, 2008 for all nonrecurring fair value measurements of nonfinancial assets and nonfinancial liabilities) and interim periods within those fiscal years. The Group is currently evaluating whether the adoption of SFAS No. 157 will have a material effect on its consolidated financial position, results of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, Including an amendment of FASB Statement No. 115”. SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value. SFAS No. 159 requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the Group’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which a Group has chosen to use fair value on the face of the balance sheet. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. The Group is currently evaluating whether the adoption of SFAS No. 159 will have a significant effect on its consolidated results of operations and financial position.
In December 2007, the FASB issued SFAS No. 141R, “Business Combination”, to improve reporting creating greater consistency in the accounting and financial reporting of business combinations. The standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The Group is currently evaluating whether the adoption of SFAS No. 141R will have a significant effect on its consolidated financial position, results of operations or cash flows.

F-20

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued
Recent accounting standards — continued
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” to improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same way as required in the consolidated financial statements. Moreover, SFAS No. 160 eliminates the diversify that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transaction. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The Group is currently evaluating whether the adoption of SFAS No. 160 will have a significant effect on its consolidated financial position, results of operations or cash flows.
In March 2008, The FASB issued FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Group has not yet begun the process of assessing the potential impact of the adoption of FASB No. 161 may have on its consolidated financial position or results of operations.
3. ACQUISITIONS
To expand in markets during 2006 and 2007, China Finance Online made a number of acquisitions of businesses. Each acquisition has been recorded using the purchase method of accounting, and accordingly the acquired assets and liabilities were recorded at their fair values on the dates of acquisitions and the results of their operations have been included in the Group’s results of operations since the dates of their acquisitions. The fair values of the assets and liabilities acquired were estimated using a combination of valuation methods, such as “income approach”, “market approach” and “cost approach” method, considering, among other factors, forecasted financial performance of the acquired business, market performance, and market potential of the acquired business in China.

F-21

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
3. ACQUISITIONS — continued
Acquisition of CFO Daily Growth
On November 23, 2007, China Finance Online acquired 85% of the equity interest in CFO Daily Growth, which is a licensed securities brokerage firm with a history of 36 years and primarily engages in the business of providing brokerage services. With the acquisition of CFO Daily Growth, the Group is able to provide a diversified portfolio of brokerage and other related services to its customers. For the acquisition, the total cash consideration was $3,624,853, including $706,371 in transaction costs.
                 
            Amortization  
            period  
 
                
Purchase Price allocation (preliminary):
                
Cash and cash equivalents
  $ 2,631,008          
Accounts receivable
    998,320          
Trust bank balance held on behalf of customers
    2,391,925          
Prepaid and other current assets
    55,761          
Property and equipment, net
    26,100          
Account payable
    (350,261 )        
Amount due to customers for the trust bank balance held on their behalf
    (2,391,925 )        
Accrued expenses and other current liabilities
    (57,137 )        
Income tax payable
    (49,225 )        
Deferred tax liabilities
    (9,562 )        
Minority interest
    (488,186 )        
Acquired intangible asset:
                
Stock Exchange Trading Right
    54,642     Indefinite
Goodwill
    813,393          
 
              
Total
     3,624,853          
 
              
CFO Daily Growth has been identified as a reporting unit for goodwill allocation purposes and the goodwill arising from this acquisition is fully allocated to this reporting unit.

F-22

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
3. ACQUISITIONS — continued
Acquisition of CFO Genius
On September 21, 2006 China Finance Online entered into an agreement to acquire all the equity interest in CFO Genius, CFO Genius engages in the business of constructing and maintaining financial information databases and providing networked information solution. It was the first company of its kind in China to build databases and to provide electronic information networks for domestic securities and investment firms at the time of its establishment in 1994. The acquisition is expected to strengthen the Group’s position in the industry and provide future opportunities to develop database products. CFO-Genius is a financial information database provider primarily serving domestic securities and investment firms, for a total cash consideration of $1,040,081, including $40,081 in transaction costs.
                 
            Amortization  
            period  
 
                
Purchase price allocation:
                
Cash and cash equivalents
  $ 35,802          
Accounts receivable
    14,174          
Prepaid and other current assets
    14,023          
Property and equipment, net
    42,506     3-5 years
Acquired intangible assets:
                
Completed technology
    332,545     5.3 years
Trademark
    75,866     Indefinite
Customer relationships
    117,592     5.3 years
 
              
Total assets acquired
    632,508          
Deferred revenue
    (361,361 )        
Accrued expenses and other current liabilities
     (231,904 )        
Deferred tax liabilities related to acquired intangible assets
     (67,520 )        
 
              
Total net liabilities
    (28,277 )        
Goodwill
    1,068,358          
 
              
Total
   $ 1,040,081          
 
              
CFO Genius has been identified as a reporting unit for goodwill allocation purposes and the goodwill arising from this acquisition is fully allocated to this reporting unit.

F-23

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
3. ACQUISITIONS — continued
Acquisition of CFO Meining and CFO Stockstar
On October 1, 2006, China Finance Online acquired two companies to expand its business in China. The Group acquired all the equity interests of CFO Stockstar and CFO Meining. Stockstar is a leading finance and securities website in China, it will alter China Finance Online’s overall composition. For the acquisition, total cash consideration was $8,135,269 including transaction costs of $117,953. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.
                 
            Amortization  
            Period  
 
                
Purchase price allocation:
                
Cash and cash equivalents
  $ 792,692          
Accounts receivable
    432,753          
Prepaid expenses and other current assets
    78,298          
Property and equipment
    297,024          
Acquired intangible assets:
                
Trademark
    652,446     Indefinite
Completed technology
    402,089     5.3 years
Agreements with mobile operators
    10,495     3 years
Customer relationships
    475,426     4.3 years
Value-added service license
    23,392     3.3 years
 
              
Total assets acquired
    3,164,615          
Deferred revenue
    (222,868 )        
Accrued expenses and other current liabilities
     (1,702,727 )        
Deferred tax liabilities related to acquired intangible assets
    (136,710 )        
 
              
Total net assets
    1,102,310          
Goodwill
    7,032,959          
 
              
Total
   $ 8,135,269          
 
              
CFO Meining and CFO Stockstar have been identified as a single reporting unit for goodwill allocation purposes and the goodwill arising from this acquisition is fully allocated to this reporting unit.

F-24

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
3. ACQUISITIONS — continued
The following summarized unaudited pro forma results of operations for the years ended December 31,2005, 2006 and 2007 assuming that all significant acquisitions during the year ended December 31,2005, 2006 and 2007 occurred as of January 1, 2005, 2006 and 2007 respectively. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the significant acquisitions occurred as of January 1, 2005, 2006 and 2007, nor is it indicative of future operating results.
                         
    For the years ended December 31,  
    2005     2006     2007  
    (unaudited)     (unaudited)     (unaudited)  
 
                        
Revenues
  $ 10,915,618     $ 10,671,796     $ 26,930,986  
Net income (loss)
  $ 2,136,433     $ (2,891,544 )   $ 235,997  
Income per share — basic
  $ 0.02     $ (0.03 )   $ 0.00  
 
                  
Income per share — diluted
  $ 0.02     $ (0.03 )   $ 0.00  
 
                  
4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
     Prepaid expenses and other current assets consisted of the following:
                 
    December 31,  
    2006     2007  
 
                
VAT refund receivable
  $ —     $ 844,800  
Advances to suppliers
    181,913       809,221  
Prepaid capital to be injected in VIE (note 1)
    —       685,439  
Interest receivable (note 2)
    415,441       216,947  
Other current assets
    330,343       390,647  
 
            
 
   $ 927,697     $ 2,947,054  
 
            
Notes:
 
1.   As of December 31, 2007, $685,439 had been held by the CEO, who is the designated owner of CFO Fuhua, for the additional capital to be injected to CFO Fuhua.
 
2.   Interest receivable is interest earned from the Group’s bank deposits.

F-25

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
5. COST METHOD INVESTMENT
In December 2005, the Group purchased 9,800,000 Series B preferred shares in Moloon for $15,000,000, which represents a 25% interest in Moloon on an if-converted basis. China Finance Online’s investment in these preferred shares is not in-substance common stock, and accordingly, the investment has been recorded as a cost method investment.
In April 2006, the Group sold part of its investment in Moloon to a third party for a cash consideration of $1,187,500, resulting in a gain of $116,071 which has been recorded as a non operating income in the accompanying consolidated statements of operations. As a result of this disposal, the Group’s investment in Moloon’s preferred shares decreases to 9,100,000 shares.
Moloon is a Chinese wireless technology and service provider. During the second half of 2006, China Mobile Communication Corporation announced policy changes which, among others, required mobile value added service, or MVAS, providers to extend free trial periods for customers prior to subscriptions and to send reminders to customers confirming new and existing subscriptions. These policy changes had a substantial negative impact on Moloon’s MVAS business. Consequently, following an independent valuation, the Group determined that its investment in Moloon was impaired and recorded an impairment loss of $1,322,000 in the accompanying consolidated statements of operations for 2006.
Thereafter, Moloon adopted new strategies to transform itself into a provider of mobile online gaming services in China. However, despite the new strategies Moloon’s financial conditions have deteriorated and, following an independent valuation of the Group’s cost method investment in Moloon, the Group determined that its investment in Moloon was further impaired and recorded an additional impairment loss of $11,127,000 in 2007, reducing the carrying balance of such investment to $1,479,571.
6. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of:
                 
    December 31,  
    2006     2007  
Technology infrastructure
  $ 1,277,972     $ 3,360,909  
Computer equipment
    255,246       1,036,325  
Furniture, fixtures and equipment
    354,488       894,783  
Motor vehicle
    64,374       129,636  
Leasehold improvements
    354,399       1,268,731  
 
            
 
     2,306,479       6,690,384  
Less: accumulated depreciation
    (608,998 )     (1,235,526 )
 
            
 
   $ 1,697,481     $ 5,454,858  
 
            
Depreciation expense for the years ended December 31, 2005, 2006, and 2007 were $129,833, $230,552, and $680,702, respectively.

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Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
7. ACQUIRED INTANGIBLE ASSETS, NET
Acquired intangible assets, net arose from the acquisitions of CFO Genius, CFO Meining, CFO-Stockstar and CFO Daily Growth during 2006 and 2007 and consisted of the following:
                 
    December 31,  
    2006     2007  
Intangible assets not subject to amortization:
                
Trademarks
    737,638       789,625  
Stock exchange trading right
    —       54,498  
 
                
Intangible assets subject to amortization:
                
Completed technology
  $ 744,042     $ 796,480  
Customer relationship
    600,612       642,941  
Value-added service license
    23,692       25,361  
Agreement with mobile operators
    10,629       11,378  
 
            
 
     2,116,613       2,320,283  
Less: Accumulated amortization
    (71,389 )     (382,106 )
 
            
 
   $ 2,045,224     $ 1,938,177  
 
            
Amortization expense for the years ended December 31, 2005, 2006 and 2007 was $nil, $71,389 and $293,251, respectively. Future amortization expenses of acquired intangible assets in the next 5 years with determinable lives are $305,685, $305,117, $300,201, $183,051 and $nil for 2008, 2009, 2010, 2011 and 2012, respectively.
8. GOODWILL
Changes in goodwill for the years ended December 31, 2005, 2006 and 2007 were as follows:
         
Balance as of January 1, 2006
    50,534  
Acquisitions (Note 3):
        
CFO Genius
    1,068,358  
CFO Meining and CFO Stockstar
    7,032,959  
 
        
Balance as of December 31, 2006
    8,151,851  
Acquisition of CFO Daily Growth (Note 3)
    813,393  
Exchange difference
    686,475  
 
        
Balance as of December 31, 2007
     9,651,719  
 
        

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CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of:
                 
    December 31,  
    2006     2007  
 
                
Accrued bonus
  $ 598,388     $ 1,956,670  
Accrued professional service fees
    200,706       1,188,163  
Withholding individual income tax-option exercise
    13,268       1,139,110  
Value added taxes payable
    386,806       936,625  
Other taxes payable
    56,811       440,149  
Accrued raw data cost
    303,474       425,076  
Accrued rental
    120,538       130,820  
Accrued welfare benefits
    18,891       81,406  
Others
    387,135       652,235  
 
            
 
   $ 2,086,017     $ 6,950,254  
 
            
10. STOCK OPTIONS AND NONVESTED SHARES
As of December 31, 2007, the Company has two share-based compensation plans, which are described below. The compensation cost that has been charged against income for those plans was $370,781, $1,183,662, and $2,946,340 for 2005, 2006, and 2007, respectively.
2004 Stock incentive plan
In January 2004, the Company adopted the 2004 stock incentive plan (the “2004 Plan”) which allows the Company to offer a variety of incentive awards to employees, directors, officers and other eligible persons in the Group. Options to purchase 5,688,488 ordinary shares are authorized under the Plan. In September 2004 and December 2006, the Company increased the total number of ordinary shares available for issuance under the Plan by an additional 5,000,000 shares, respectively, resulting in a total of 15,688,488 options to purchase ordinary shares under the Plan. Options are generally granted at a price equal to the fair market value of the Company’s shares at the date of grant. Prior to the Company’s initial public offering the market value of the ordinary shares underlying the stock option was determined by the Board of Directors. As of December 31, 2007, options to purchase 10,557,568 shares of ordinary shares were outstanding. All of the options granted under the Plan to our directors and managers have vesting period of one to four years, while options granted under the Plan to our other employees vest over a period of three to five years. The options we granted to consultants and advisers vested immediately upon grant or from two to three years after grant. A specified portion of the shares subject to each option vests at the end of the first year and the balance vests each quarter thereafter. The amortization of options granted is based on the graded vesting schedule.

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Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
10. STOCK OPTIONS AND NONVESTED SHARES — continued
2004 Stock incentive plan — continued
Options to employees
In February 2005, the Company granted 4,053,000 stock options to directors, officers and employees at an exercise price that equaled the trading price of the stock upon the stock option grant. In November 2005, the Company granted 400,000 stock options to the Company’s CEO and 200,000 stock options to the Company’s Vice President. The Company accounted for these options under APB 25.
In July 2006, the Company granted an additional 400,000 stock options to the Company’s CEO and 300,000 stock options to the Chief Financial Officer. The exercise prices equaled the trading price of the stock at the grant date of the option. These options are vested over 2 years.
During 2007, the Company granted totaling 3,848,000 stock options to directors, officers and employees at an exercise price that equaled the trading price of the stock upon the stock option grant. These options are vested over 3 years except the 400,000 shares granted to the four directors in January 2007 are vested over 2 years. The fair value of employee options is estimated on the basis of the Black-Scholes Option Pricing model with the following assumptions:
                 
    Years ended December 31,
    2006   2007
 
                
Weighted average risk free rate of return
    5.24 %     4.71 %
Weighted average expected option life
  5.75 years   5.96 years
Volatility rate
    58.84 %     59.92 %
Dividend yield
    —       —  
Options to non-employees
The Company granted stock options to purchase up to 6,829,500 ordinary shares outside of the 2004 Plan, which vested immediately and 90,000 options to purchase ordinary shares under the Plan to consultants and strategic advisors, which vested over 2 years in 2004. The Company also granted 350,000 options under the 2004 Plan to consultants and strategy advisors in 2005. The fair value of non-employee options is estimated using the Black-Scholes Option Pricing model as such method provided a more accurate estimate of the fair value of services provided by the consultants and strategic advisers. The fair value of the stock options is remeasured as of the end of each reporting period until the services of these non-employees are complete under the service contracts.

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Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
10. STOCK OPTIONS AND NONVESTED SHARES — continued
2004 Stock incentive plan — continued
Options to non-employees — continued
The following assumptions were used in the option pricing model:
                         
    Years ended December 31,  
    2005     2006     2007  
 
                        
Options to non-employees:
                        
Weighted average risk-free rate of return
    3.48 %     4.70 %     3.26 %
Weighted average expected option life
  2.14 years   5.76 years   3.73 years
Volatility
    56.96 %     53.33 %     51.85 %
Dividend yield
    —       —       —  
Summary of stock options to employees and non-employees
A summary of the stock option activity is as follows:
                                                 
    2005     2006     2007  
            Weighted             Weighted             Weighted  
    Number     average     Number     average     Number     average  
    of options     exercise price     of options     exercise price     of options     exercise price  
 
                                                
Outstanding at beginning of year
    12,492,988     $ 0.18       15,250,488     $ 0.52       14,843,688     $ 0.56  
Granted
    5,003,000     $ 1.29       700,000     $ 1.07       3,848,000     $ 1.07  
Exercised
    (1,731,500 )   $ 0.16       (473,000 )   $ 0.17       (7,746,280 )   $ 0.42  
Forfeited
    (514,000 )   $ 1.05       (633,800 )   $ 0.69       (387,840 )   $ 0.87  
 
                                    
Outstanding at end of year
    15,250,488     $ 0.52       14,843,688     $ 0.56       10,557,568     $ 0.84  
 
                                    
Shares exercisable at end of year
    9,986,488     $ 0.29       11,705,508     $ 0.43       5,939,888     $ 0.68  
 
                                    

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Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
10. STOCK OPTIONS AND NONVESTED SHARES — continued
2004 Stock incentive plan — continued
Summary of stock options to employees and non-employees — continued
The following table summarizes information with respect to stock options outstanding at December 31, 2007:
                                                         
    Options outstanding     Option exercisable  
                            Aggregate                     Aggregate  
            Weighted     Weighted     intrinsic             Weighted     intrinsic  
            average     average     value as of             average     value as of  
    Number     remaining     exercise     December 31     Number     exercise     December 31  
    outstanding     contractual life     price     2007     exercisable     price     2007  
Ordinary shares
                                                        
$0.16
    3,373,988                               3,069,988                  
$1.04
    200,000                               200,000                  
$1.31
    1,846,580                               1,700,900                  
$1.32
    27,000                               19,000                  
$1.12
    400,000                               400,000                  
$1.16
    200,000                               200,000                  
$1.07
    700,000                               350,000                  
$0.96
    3,240,000                               —                  
$1.25
    100,000                               —                  
$1.32
    150,000                               —                  
$2.03
    317,000                               —                  
$2.19
    3,000                               —                  
 
                                                    
 
     10,557,568     5.97 years   $ 0.83     $ 3.55       5,939,888     $ 0.68     $ 3.70  
 
                                          
The weighted-average grant-date fair value of options granted during the years 2005, 2006 and 2007 was $0.75, $0.63 and $0.64, respectively. The total intrinsic value of options exercised during the years ended December 31, 2005, 2006 and 2007 was $1,797,394, $796,348 and $25,541,496, respectively.
As of December 31, 2007, options to purchase 2,009,640 ordinary shares were available for future grant.
Prior to January 1, 2006, the Company accounted for share-based compensation plans under Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and related Interpretations, as permitted by Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation”, (“SFAS 123”). Accordingly, the Company recognized compensation expense only when options were granted with an exercise price below the fair value of the underlying shares. The compensation expense was recognized ratably over the requisite service period, which was generally the vesting period of the options.

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Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
10. STOCK OPTIONS AND NONVESTED SHARES — continued
2004 Stock incentive plan — continued
Summary of stock options to employees and non-employees — continued
Prior to January 1, 2006, the Company provided pro forma disclosure amounts in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (“SFAS 148”), as if the fair value method defined by SFAS 123 had been applied to its stock-based compensation. For purpose of this reconciliation, the Company added back all stock-based employee compensation expense recorded in accordance with APB 25 in the statement of operations, then deducted the stock-based employee compensation expense determined under SFAS 123. The following table summarizes the reconciliations for the year ended December 31, 2005.
         
    Year ended  
    December 31, 2005  
 
        
Income attributable to ordinary shareholders as reported:
    4,624,187  
Add: Stock-based compensation as reported
    13,589  
Less: Stock-based compensation determined using the fair value method
    (1,935,649 )
 
      
Pro forma income attributable to ordinary shareholders
     2,702,127  
 
      
 
        
Basic net income per share:
        
As reported
  $ 0.05  
 
      
 
        
Pro forma
   $ 0.04  
 
      
 
        
Diluted net income per share:
        
As reported
  $ 0.04  
 
      
 
        
Pro forma
   $ 0.03  
 
      
The fair value of each option and share granted is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants during the applicable period.
         
    Year ended
Option grants   December 31, 2005
 
        
Weighted average risk-free rate of return
    3.37 %
Weighted average expected option life
  2.94 years
Volatility
    65.08 %
Dividend yield
    —  

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Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
10. STOCK OPTIONS AND NONVESTED SHARES — continued
2004 Stock incentive plan — continued
Summary of stock options to employees and non-employees — continued
The Company recognizes the compensation costs net of a forfeiture rate. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock compensation expense to be recognized in the future periods.
The Company granted additional options under the 2004 Plan with the right to purchase ordinary shares 390,000 in January 2008 and 100,000 in March 2008 to employees.
2007 Equity incentive plan
In July 2007, the Company adopted the 2007 Equity incentive plan (the “2007 Plan”) and granted non-vested shares covering 10,558,493 ordinary shares of the Company to the employees who are eligible for the 2007 Plan. The vesting of the non-vested shares are subject to achieving certain financial performance targets and rendering service to the Company for the requisite service period stated in the 2007 Plan.
The grant date fair value of a non-vested share is measured at the quoted market price of the Company’s equity shares. The non-vested shares shall become vested during the three years following the grant date based on the Company’s certain annual operating performance goals for the years 2008 and 2009. The Company recognized a compensation expense of $1,143,233 for the non-vested shares in 2007.
A summary of the status of the non-vested shares as of December 31, 2007, and changes during the year ended December 31, 2007 is presented below.
                                 
            Weighted-   Weighted-    
            average   average   Aggregate
            exercise   grant date   intrinsic
Non-vested shares   Shares   price   fair value   value
 
                                
At beginning of year 2007
    —               —          
Granted
    10,558,493               1.84          
Vested
    —               —          
Forfeited
    —               —          
 
                                
At end of year 2007
    10,558,493       —       1.84       46,246,199  
 
                                
As of December 31, 2007, there was $5.7 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2007 Plan. That cost is expected to be recognized over a weighted-average period of 2.5 years.

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Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
11. INCOME TAXES
China Finance Online, CFO Team Gear, CFO Kinco and CFO Danford have not recorded tax provision for Hong Kong tax purposes as these companies have no assessable profits arising in or derived from Hong Kong. CFO Daily Growth is subject to Hong Kong Profits Tax at a rate of 17.5%. For the year ended 2007, income tax benefit $23,757 for CFO Daily Growth has been made in consolidated financial statements.
CFO FNG, CFO Giant Bright and CFO Mount First are tax-exempted companies incorporated in the British Virgin Islands.
A summary of the tax concessions available to the PRC entities for the year ended December 31, 2007 is as follows:
                                 
    Chinese state   Chinese   Concession from   Concession from   Year of
    income   local income   Chinese State   Chinese local   commencement
PRC entities   tax rate   tax rate   unified income tax*   income tax   of tax holiday
 
                                
CFO Beijing
    24 %     3 %   Full exemption for the year 2003and 2004; 50% tax relief from 2005 to 2007   Full exemption from 2003 to 2007     2003  
 
                                
CFO Software
    15 %     3 %   Full exemption from 2005 to 2007   Full exemption from 2005 to 2007     2005  
 
                                
CFO Fuhua
    30 %     3 %   N/A   N/A     N/A  
 
                                
CFO Meining
    15 %     N/A     15% in 2007   N/A     N/A  
 
                                
CFO Stockstar
    15 %     N/A     Same as CFO Meining   N/A     N/A  
 
                                
CFO Zhenning
    15 %     N/A     Same as CFO Meining   N/A     N/A  
 
                                
CFO Genius
    15 %     N/A     Same as CFO Meining   N/A     N/A  
 
                                
CFO Jujin
    15 %     N/A     Same as CFO Meining   N/A     N/A  
 
                                
CFO Wisdom
    30 %     3 %   N/A   N/A     N/A  
 
                                
CFO Success
    30 %     3 %   N/A   N/A     N/A  
 
                                
CFO Premium
    30 %     3 %   N/A   N/A     N/A  
 
                                
CFO Glory
    30 %     3 %   N/A   N/A     N/A  
 
*   The concession from Chinese State unified income tax is shown on the assumption that the subsidiary, VIE and the VIE’s subsidiaries will not be qualified as a “high and new technology enterprise strongly supported by the state” by the authorities.
Based on the recently issued tax regulation after 2007.
CFO Wisdom, CFO Success, CFO Premium and CFO Glory are subject to the standard 33% tax rate in 2007, and no provision for PRC Enterprise Income Tax as these four subsidiaries or VIEs do not have any assessable profit.

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Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
11. INCOME TAXES — continued
Income tax (provision) benefit was as follows:
                         
    December 31,  
    2005     2006     2007  
Income taxes expenses:
                        
Current
   $ (134,739 )   $ 626     $ 70,913  
Deferred
     (322,289 )     40,081       737,712  
 
                  
Total
   $ (457,028 )   $ 40,707     $ 808,625  
 
                  
The principal components of deferred income taxes were as follows:
                 
    December 31,  
    2006     2007  
Current deferred tax assets:
                
Deferred revenue — current
  $ 135,658     $ 841,315  
Accrued expenses and other liability
    34,820       288,200  
 
            
Current deferred tax assets
  $ 170,478     $ 1,129,515  
 
            
 
                
Non-current deferred tax assets (liabilities):
                
Net operating loss carry forwards
  $ 802,010     $ 1,136,729  
Intangible assets
    (204,043 )     (321,816 )
Property and equipment
    —       (30,457 )
 
            
 
     597,967       784,456  
Less: valuation allowance
    (743,500 )     (1,136,729 )
 
            
Non-current deferred tax liabilities, net
  $ (145,533 )   $ (352,273 )
 
            
 
                
Non-current deferred tax asset:
                
Deferred revenue — non-current
  $ —     $ 14,382  
 
            
A valuation allowance of $743,500 and $1,136,729 were established as of December 31, 2006 and 2007, respectively, for the entities that have incurred losses because the Group believes that it is more likely than not that the related deferred tax assets will not be realized in the future. At December 31, 2007, tax loss carry forwards amounting to approximately $3.8 million which will expire by 2012, and $2 million which will carry forward indefinitely.
During the years ended December 31, 2005, 2006 and 2007, if the China Finance Online’s subsidiaries in the PRC were neither in the tax holiday period nor had they been specifically allowed special tax concessions, they would have recorded additional income tax expense of $1,448,866, $786,385 and $4,414,697 respectively, and both basic and diluted income per share would have been $0.03, ($0.01) and ($0.09) for the years ended December 31, 2005, 2006 and 2007, respectively.

F-35

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
11. INCOME TAXES — continued
A reconciliation between the statutory PRC enterprise income tax rate of 33% and the effective tax rate is as follows:
                         
    Years ended December 31,
    2005   2006   2007
    %   %   %
 
                        
Statutory tax rate in PRC
    33.0       (33.0 )     (33.0 )
Effect of tax holiday
    (18.0 )     (92.1 )     (91.8 )
Non-deductible expenses
    3.6       139.9       99.7  
Non-taxable income
    (10.3 )     (54.8 )     (16.7 )
Effect on deferred taxes due to changes in tax rates under the new law for certain subsidiaries
    —       —       18.5  
Change in valuation allowance
    0.7       33.7       7.0  
 
                        
Effective tax rate
    9.0       (6.3 )     (16.3 )
 
                        
On March 16th, 2007, the national People’s Congress adopted the Enterprise Income Tax Law (the “New Income Tax Law”), which will become effective from January 1, 2008 and will replace the existing separate income tax laws for domestic enterprises and foreign-invested enterprises, which are PRC subsidiaries of the Group, by adopting unified income tax rate of 25% for most enterprises. Due to the changes in the new tax law in March 2007, the Group’s deferred tax balances were calculated based on the newly enacted tax rate to be effective January 1, 2008 in accordance with applicable transitional terms of the New Income Tax Law.
In accordance with the implementation rules of New Income Tax Law, the existing preferential tax treatments granted to CFO Software, because it qualifies as a “high and new technology enterprise” may not continue to qualify as a high and new technology enterprise strongly supported by the State” under the new rules, until these subsidiaries receive official approval for this status.
Furthermore, under the New Income Tax Law, a “resident enterprise,” which includes an enterprise established outside of the PRC with management located in the PRC, will be subject to the PRC income tax. If the PRC tax authorities subsequently determine that the Company and its subsidiaries registered outside the PRC are resident enterprises, the Company and its subsidiaries registered outside the PRC will be subject to the PRC income tax at a rate of 25%. The Company is still evaluating its resident status under the new law and related guidance.
If the PRC tax authorities subsequently determine that the Company is non-resident enterprises, the dividends paid by the Company’s PRC subsidiaries to the Company, will be subject to the withholding tax of 10% and in the case of subsidiary 25% or more directly owned by the resident in Hong Kong, the withholding tax would be 5%. However, no such withholding tax provision has been made by the Group’s PRC subsidiaries as of December 31, 2007 because the aggregated undistributed earnings of the Group’s PRC subsidiaries and VIEs are considered to be indefinitely reinvested under APB opinion No. 23. The Chinese tax authorities have also clarified that the distribution made out of pre January 1, 2008 retained earnings will not be subject to the withholding tax.

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CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
12. SHAREHOLDERS’ EQUITY
In October 2005, the Group issued 2,000,000 ordinary shares to its American Depositary Receipt bank and in exchange received 400,000 American Depositary Shares (“ADSs”) for purposes of future exercise of share options by employees.
In 2006, all 400,000 ADSs had been issued to employees who exercised their options. In January 2006, the Group issued 3,000,000 ordinary shares to its American Depositary Receipt bank and in exchange received 600,000 ADSs for purposes of future exercise of share options by employees.
As of December 31, 2007, 9,051,256 ADSs had been issued to employees and the remaining 94,744 ADSs continued to be held by the Group for future exercises. These 94,744 ADSs represent 473,720 ordinary shares of the Group, which are considered as issued and outstanding as of December 31, 2007.
     Repurchased shares
In 2005, the Group repurchased 10,708,030 ordinary shares at prices ranging from $1.13 to $1.41 per share, including brokerage commission, for a total consideration of $13,200,394. In 2007, the Group granted 10,558,493 non-vested shares to BVI companies out of the repurchased shares. Therefore the remaining is about 149,537 shares.
13. OTHER (EXPENSES) INCOME, NET
Other (expenses) income, net consisted of:
                         
    2005     2006     2007  
 
                        
Exchange gain, net
  $ 365,965     $ 267,302     $ 424,338  
Gain on partial disposal of an investment in Moloon (see Note 5)
    —       116,071       —  
Others
    —       (1,498 )     8,731  
 
                  
 
   $ 365,965     $ 381,875     $ 433,069  
 
                  
Exchange gain is primarily derived from intercompany transactions and cash and cash equivalents in foreign currency.

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CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
14. INCOME (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted income (loss) per share for the years indicated:
                         
    Years ended December 31,  
    2005     2006     2007  
Net income (loss) attributable to ordinary shareholders, basic and diluted
  $ 4,624,187     $ (600,633 )   $ (4,129,704 )
 
                  
Weighted average ordinary shares outstanding used in computing basic net income per share
    94,341,061       93,650,653       94,500,529  
Plus: Incremental shares from assumed conversions of stock options
    10,440,431       —       —  
 
                  
Weighted average ordinary shares outstanding used in computing diluted net income per share (note)
    104,781,492       93,650,653       94,500,529  
 
                  
Net income (loss) per share-basic
  $ 0.05     $ (0.01 )   $ (0.04 )
 
                  
Net income (loss) per share-diluted
  $ 0.04     $ (0.01 )   $ (0.04 )
 
                  
Actual ordinary shares issued and upon exercises of options are included when calculating weighted average ordinary shares outstanding used in computing basic net income per share.
Note:   
 
1.   In 2006, the Company transferred 3,000,000 ordinary shares to its depositary bank representing 750,000 ADSs to be issued to employees and non-employees upon the exercise of their vested share options. As of December 31, 2007, shares out of such 2,526,280 shares had been issued to the employees and non-employees upon exercise of their share options and 473,720 shares remained available for future issuances. As a result, 473,720 ordinary shares were excluded in computing basic net income per share.
 
2.   In July 2007, the Company adopted granted non-vested shares covering 10,558,493 ordinary shares of the Company to the employees who are eligible for the 2007 Plan. The vesting of the non-vested shares are subject to achieving certain financial performance targets stated in the 2007 Plan. Nonvested shares have not be included in the computation of basic earnings per share as such shares are considered contingently returnable shares if the employee does not render the requisite service, the shares are returned to the Company.
 
3.   The Group has options and non-vested shares outstanding which could potentially dilute basic net income/(loss) per share, but which were excluded from the computation of diluted net income/(loss) per share for the year end December 31, 2006 and 2007, as their effects would have been auti-dilutive. Such outstanding options and non-vested shares consist of 15,950,488 options for year end December 31, 2006, and 18,691,688 options and 10,558,493 non-vested shares for year end December 31, 2007.

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CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
15. MAINLAND CHINA CONTRIBUTION PLAN AND PROFIT APPROPRIATION
Full time employees of the Group in the PRC participate in a government-mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Group to accrue for these benefits based on certain percentages of the employees’ salaries. The total provisions for such employee benefits were $107,552, $270,576 and $948,100 for the years ended December 31, 2005, 2006 and 2007 respectively.
16. COMMITMENTS
The Group leases certain office premises and purchases data under non-cancelable leases. The office lease expires in 2012. Rent expense under operating leases for 2005, 2006 and 2007 were $242,765, $520,590 and $1,057,624, respectively.
Future minimum lease payments under non-cancelable operating leases and data purchase agreements were as follows:
         
Year ending        
2008
   $ 2,007,800  
2009
     1,496,496  
2010
     1,046,944  
2011
     324,338  
2012
     22,128  
 
      
Total
   $ 4,897,706  
 
      
17. SEGMENT AND GEOGRAPHIC INFORMATION
The Group has two principal operating segments (1) online financial data subscription service and other related services, (2) brokerage service. These operating segments were determined based on the nature of the services offered. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Group’s chief executive officer and chief operating officer have been identified as the chief operating decision makers. The Group’s chief operating decision makers direct the allocation of resources to operating segments based on the profitability and cash flows of each respective segment.

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CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
17. SEGMENT AND GEOGRAPHIC INFORMATION — continued
The Group evaluates performance based on several factors, including net revenue, cost of revenue, operating expenses, income from operation. The accounting policies of the business segments are the same as those described in “Note 2: Summary of Significant Accounting Policies.” The following tables show the operations of the Group’s operating segments:
For the year ended December 31, 2007
                         
    Subscription              
    services and              
    other related     Brokerage        
    services     services     Consolidated  
 
                        
Net revenue
  $ 25,822,178     $ 80,896     $ 25,903,074  
Cost of revenue
    (4,403,605 )     (22,997 )     (4,426,602 )
Operating expenses
                        
General and administrative
    (7,599,367 )     (184,301 )     (7,783,668 )
Product development
    (2,268,878 )     —       (2,268,878 )
Sales and marketing
    (6,911,624 )     (12,712 )     (6,924,336 )
 
                  
Total operating expenses
    (16,779,869 )     (197,013 )     (16,976,882 )
 
                  
Government subsidies
    135,834       —       135,834  
 
                  
Income (loss) from operations
    4,774,538       (139,114 )     4,635,424  
 
                  
Total assets
    95,774,776       8,109,972       103,884,748  
 
                  
The Group started to provide brokerage service after the acquisition of CFO Daily Growth in 2007 and therefore only had one segment in 2005 and 2006.
The Group derives revenue from external customers for each of the following services during the years presented:
                         
    Years ended December 31,  
    2005     2006     2007  
 
                        
Subscription fees
  $ 5,811,395     $ 5,075,830     $ 22,712,043  
Advertising revenue
    996,311       1,337,630       1,560,194  
SMS revenue
    —       298,232       1,339,321  
Brokerage service revenue
    —       —       80,896  
Others
    674,460       416,386       210,620  
 
                  
 
   $ 7,482,166     $ 7,128,078     $ 25,903,074  
 
                  

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CHINA FINANCE ONLINE CO. LIMITED
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — continued
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars)
18. RESTRICTED NET ASSETS
PRC legal restrictions permit payments of dividends by China Finance Online’s PRC subsidiaries only out of their retained earnings, if any, determined in accordance with PRC accounting standards and regulations. The general reserve, which requires annual appropriations of 10% of after-tax profit should be set aside prior to the payment of dividends. As a result of these PRC laws and regulations, the Group’s PRC subsidiaries and variable interest entities are restricted in their abilities to transfer a portion of their net assets to the Group. As of December 31, 2007, the amount of restricted net assets was approximately $45,750,588.
Pursuant to the laws applicable to the PRC’s Foreign Investment Enterprises, the Group’s subsidiaries in the PRC must make appropriations from after-tax profit to non-distributable reserves as determined by the board of directors of the these subsidiaries. These reserves include a (i) general reserve, (ii) enterprise expansion reserve, and (iii) staff bonus and welfare reserve. Subject to certain cumulative limits, the general reserve requires annual appropriations of 10% of after-tax profit (as determined under PRC GAAP at each year-end); amounts to be appropriated for the other two reserves are determined at the board of directors’ discretion. These reserves can only be used for specific purposes and are not distributable as cash dividends. Appropriations to the staff welfare and bonus reserve are charged to general and administrative expenses and amounted to $26,889, $nil and $nil in 2005, 2006 and 2007, respectively. Appropriation to the general reserve amounted to $268,891, $nil and $3,709,549 in 2005, 2006 and 2007, respectively. There were no appropriations to the staff welfare and bonus reserve or the general reserve during 2006.
19. SUBSEQUENT EVENT
In March 2008, the Group injected further capital of $11,565,000 (equivalent to HK$90,000,000) in CFO Daily Growth; consequently, the Group’s equity interest in CFO Daily Growth increased from 85% to 98.5%.

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CHINA FINANCE ONLINE CO. LIMITED
Additional Information — Financial Statement Schedule I
Financial information of Parent Company
Balance sheets
(In U.S. dollars, except share-related data)
                 
    December 31,  
    2006     2007  
Assets
                
 
                
Current assets:
                
Cash and cash equivalents
  $ 5,758,063     $ 19,374,617  
Amounts due from subsidiaries
    64,172       4,408,362  
Prepaid expenses and other current assets
    93,618       133,572  
Dividends receivable
    2,473,269       —  
 
            
Total current assets
    8,389,122       23,916,551  
Investments in subsidiaries
    37,615,158       43,844,335  
Cost-method investment
    12,606,571       1,479,571  
Goodwill
    50,534       50,534  
Loans receivable from subsidiaries
    4,000,000       —  
 
            
Total assets
  $ 62,661,385     $ 69,290,991  
 
            
Liabilities and shareholders’ equity
                
 
                
Current liabilities:
                
Accrued expenses and other current liabilities
    148,072       1,868,059  
Amounts due to a subsidiary
    60,534       60,537  
 
            
Total current liabilities
  $ 208,606     $ 1,928,596  
 
            
Shareholders’ equity
                
Ordinary shares ($0.00013 par value; 500,000,000 shares authorized; shares issued and outstanding 104,384,933 in 2006 and 109,754,433 in 2007)
    13,474       14,172  
Additional paid-in capital
    52,555,919       58,727,378  
Accumulated other comprehensive income
    1,634,269       4,501,432  
Retained earnings
    8,249,117       4,119,413  
 
            
Total shareholders’ equity
    62,452,779       67,362,395  
 
            
Total liabilities and shareholders’ equity
  $ 62,661,385     $ 69,290,991  
 
            

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CHINA FINANCE ONLINE CO. LIMITED
Financial information of Parent Company
Statements of operations
(In U.S. dollars)
                         
    December 31,  
    2005     2006     2007  
Operating expenses:
                        
General and administrative
  $ 692,453     $ 873,496     $ 975,931  
Stock-based compensation
    370,781       1,183,662       2,946,340  
 
                  
Total operating expenses
    1,063,234       2,057,158       3,922,271  
 
                  
Interest income
    560,772       202,484       253,003  
Equity in earnings of subsidiaries and VIEs
    5,126,649       2,395,622       10,299,974  
Other income
    —       180,419       366,590  
Loss from impairment of cost method investment
    —       (1,322,000 )     (11,127,000 )
 
                  
Net income (loss)
  $ 4,624,187     $ (600,633 )   $ (4,129,704 )
 
                  

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CHINA FINANCE ONLINE CO. LIMITED
 
Financial Information of Parent Company
Statement of Shareholders’ Equity and Other Comprehensive Income
(In U.S. dollars, except share-related data)
                                                                 
                                    Accumulated                      
                                    other                      
                    Additional     Deferred     comprehensive             Total        
    Ordinary shares     paid-in     stock-based     income     Retained     shareholders’     Comprehensive  
    Shares     Amount     capital     compensation     (loss)     earnings     equity     income  
Balances as of January 1, 2005
    99,329,933     $ 12,814     $ 64,175,132     $ (325,221 )   $ (11 )   $ 4,225,563     $ 68,088,277          
Repurchase of ordinary shares
    —       —       (13,200,394 )     —       —       —       (13,200,394 )        
Issuance of ordinary shares to employees
    2,000,000       263       276,713       —       —       —       276,976          
Stock options issued to non-employees
    —       —       112,689       —       —       —       112,689          
Amortization of deferred stock-based compensation
     —       —       —       258,092       —       —       258,092          
Foreign currency translation adjustment
    —       —       —       —       671,133       —       671,133     $ 671,133  
Net income
    —       —       —       —       —       4,624,187       4,624,187       4,624,187  
 
                                                
Balance as of December 31, 2005
    101,329,933       13,077       51,364,140       (67,129 )     671,122       8,849,750       60,830,960     $ 5,295,320  
 
                                                
 
                                                                
Amortization of deferred stock-based compensation
     —       —       (67,129 )     67,129       —       —       —          
Issuance of ordinary shares for exercise of stock option by employees
    3,000,000       390       66,453       —       —       —       66,843          
Exercise of share options by non-employees
    55,000       7       8,793       —       —       —       8,800          
Stock-based compensation
    —       —       1,183,662       —       —       —       1,183,662          
Foreign currency translation adjustment
    —       —       —       —       963,147       —       963,147     $ 963,147  
Net loss
    —       —       —       —       —       (600,633 )     (600,633 )     (600,633 )
 
                                                
Balance as of December 31, 2006
    104,384,933       13,474       52,555,919       —       1,634,269       8,249,117       62,452,779     $ 362,514  
 
                                                
 
                                                                
Exercise of stock option by employees
    —       —       2,366,697       —       —       —       2,366,697          
Exercise of share options by non-employees
    5,369,500       698       858,422       —       —       —       859,120          
Stock-based compensation
    —       —       2,946,340       —       —       —       2,946,340          
Foreign currency translation adjustment
    —       —       —       —       2,867,163       —       2,867,163     $ 2,867,163  
Net loss
    —       —       —       —       —       (4,129,704 )     (4,129,704 )     (4,129,704 )
 
                                                
Balance as of December 31, 2007
    109,754,433     $ 14,172     $ 58,727,378     $ —     $ 4,501,432     $ 4,119,413     $ 67,362,395     $ (1,262,541 )
 
                                                
See notes to consolidated financial statements.

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CHINA FINANCE ONLINE CO. LIMITED
 
Financial information of Parent Company
Statements of cash flows
(In U.S. dollars, except share-related data)
                         
    December 31,  
    2005     2006     2007  
Operating activities:
                        
Net income (loss)
    4,624,187       (600,633 )     (4,129,704 )
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
                        
Stock-based compensation
    370,781       1,183,662       2,946,340  
Loss from impairment of cost method investment
    —       1,322,000       11,127,000  
Gain from disposal of cost method investment
    —       (116,071 )     —  
Equity in earnings of subsidiaries
    (4,455,510 )     (958,872 )     (10,299,974 )
Changes in assets and liabilities:
                        
Dividend receivable
     —       (2,473,269 )     2,473,269  
Prepaid expenses and other current assets
    42,226       (56,221 )     (39,954 )
Amounts due from subsidiaries
    —       (64,543 )     (4,344,190 )
Accrued expenses and other current liabilities
    (27,234 )     27,032       1,719,911  
Amounts due to subsidiaries
    (477,841 )     41,947       3  
 
                  
Net cash provided by (used in) operating activities
     76,609       (1,694,968 )     (547,299 )
 
                  
 
                        
Investing activities:
                        
Net increase in loans to subsidiaries
    (13,990,000 )     9,990,000       4,000,000  
Proceeds from partial sale of cost method investment
            1,187,500       —  
Acquisition of businesses
    —       (6,582,144 )     (2,300,476 )
Investments in subsidiaries
    (20,500,000 )     —       —  
Acquisition of cost investment
    (15,000,000 )     —       —  
 
                  
Net cash (used in) provided by investing activities
    (49,490,000 )     4,595,356       1,699,524  
 
                  
 
                        
Financing activities:
                        
Proceeds from stock options exercised by employees
    276,976       66,843       2,366,697  
Proceeds from exercise of options granted to non-employee
     —       8,800       859,120  
Repurchase of treasury shares
    (13,200,394 )     —       —  
Dividend from a subsidiary
    5,373,182       —       9,238,436  
 
                  
Net cash provided by (used in) financing activities
    (7,550,236 )     75,643       12,464,253  
 
                  
Effect of exchange rate changes
    (6 )     5       76  
 
                  
Net increase (decrease) in cash and cash equivalents
    (56,963,633 )     2,976,036       13,616,554  
Cash and cash equivalents, beginning of the year
    59,745,660       2,782,027       5,758,063  
 
                  
Cash and cash equivalents, end of the year
  $ 2,782,027     $ 5,758,063     $ 19,374,617  
 
                  
Note:
Basis for preparation

 

Table of Contents

CHINA FINANCE ONLINE CO. LIMITED
 
The parent-company only Financial Information of China Finance Online has been prepared using the same accounting policies as set out in the Company’s consolidated financial statements except that China Finance Online has used equity method to account for its investments in its subsidiaries and variable interest entities.

 

EX-4.15 2 h02185exv4w15.txt EX-4.15 FRAMEWORK AGREEMENT EXHIBIT 4.15 - -------------------------------------------------------------------------------- [Translated from the Chinese original] FRAMEWORK AGREEMENT ON EXERCISING PURCHASE OPTION The framework agreement is entered into as of the date of October 18, 2007 in Beijing by and among the following parties: PARTY A: CHINA FINANCE ONLINE CO., LTD. Registered Address: Unit C, 8/F, East Wing, Sincere Insurance Building 4-6, Hennessy Road, Hong Kong SAR, China PARTY B: CHEN WU Address: Room 616, Tower A, COFCO Plaza, 8 Jianguomennei Avenue, Beijing, China ID No.: 110108491204891 PARTY C: ZHAO ZHIWEI Address: Floor 9, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, China ID No: 110102196307100139 PARTY D: WANG JUN Address: Floor 9, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, China ID No.: 370102197012163311 PARTY E: BEIJING FUHUA INNOVATION TECHNOLOGY DEVELOPMENT CO., LTD. Register Address: Room 938-941, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, China Postal Code: 100032 PARTY F: CHINA FINANCE ONLINE (BEIJING) CO., LTD. Registered Address: Room 946-949, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, China Postal Code: 100032 1 Whereas: 1. Party B and Party C are current shareholders of Party E which have made registrations at the Administration of Industry and Commerce authorities, and each holding 55% and 45% shares in Party E respectively; 2. Party A is a limited liability company duly organized and validly existing under the laws of Hong Kong Special Administration Region of the People's Republic of China, and through its wholly owned enterprise in China -- Party F to provide technical support, strategic consultation and other relevant services to Party E; 3. To finance the investment by Party B and Party C in Party D, Party A has entered into Loan Agreements with Party B and Party C respectively on May 27, 2004, and November 20, 2006 providing Party B and Party C with loans of RMB 1,650,000 and RMB 1,350,000, respectively. Pursuant to the Loan Agreement, Party B and Party C has invested the full amount of the loans in Party E's registered capital; 4. As the consideration for the loans provided by Party A to Party B and Party C, Party B and Party C entered into a Purchase Option and Cooperation Agreement ("Purchase Option Agreement") with Party A, Party E and Party F on November 20, 2006, granting Party A the exclusive option to purchase all or part of shares/assets in Party E holding by both parties or either party of Party B and Party C at any time, in accordance with China laws; 5. For making securities of the payment obligations of Party E under numerous agreements executed between Party E and Party F, Party B and Party C entered into a Share Pledge Agreement ("Pledge Agreement") with Party F on November 20, 2006, pledging their respective shares in Party E to Party F; 6. Party A is intended to exercise the purchase option to purchase entire shares in Party E held by Party B in accordance with the Purchase Option Agreement, and designates Party D as the subject to exercise the aforesaid purchase option. THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development, through friendly negotiation, the Parties hereby enter into the following agreements: 1. EXERCISE OF THE PURCHASE OPTION 1.1. Party A hereby authorizes Party D in accordance with the purchase option granted to Party A under Article 2.1 of the Purchase Option Agreement, and Party D agrees to accept the aforesaid authorization, on behalf of Party A, to purchase entire shares in Party E holding by Party B in accordance with the conditions stipulated in the Purchase Option Agreement . 1.2. In accordance with Article 4 under the Purchase Option Agreement, the purchase price of entire shares in Party E held by Party B, purchased by Party D in accordance with Party A's authorization, shall be the sum of the loan principal lent by Party A to Party B, which is equivalent to RMB 1,650,000. ("Purchase Price"). 2 2. SHARE TRANSFER 2.1. Party B shall enter into a Share Transfer Agreement with Party D, in accordance with the content and form of Appendix II hereto, within thirty (30) days after receiving exercise notice from Party A ("Appendix I"), in accordance with Article 2.3 of the Purchase Option Agreement, and other documents required to make change registrations at industrial and commerce authorities. 2.2. Party C hereby agrees to waive its shareholder's first right of refusal for the shares in Party E holding by Party B, which is enjoyed by Party C in accordance with articles of association of Party E or relevant laws and regulations. 3. LOAN ARRANGEMENTS 3.1. The purchase price of entire shares in Party E holding by Party B, purchased by Party D shall be contributed in full amount by Party A. However, Party D shall enter into a loan agreement with Party A to the satisfaction of Party A, in accordance with the content and form of Appendix III hereto. 3.2. Party D agrees and irrevocably instructs Party A to pay the aforesaid loan provided to Party D, which used to purchase Party B's shares, directly to Party B, in accordance with the conditions and terms stated in the frame agreement. 3.3. Party B agrees to contribute its entire income obtained from selling the shares in Party E in accordance with the agreement, to perform its repayment obligations to Party A under the Loan Agreement. The Loan Agreement between Party B and Party A will be terminated when Party B pay off all the loans in accordance with Article 4.2 hereof. 4. PAYMENT AND OBLIGATION SET-OFF 4.1. In accordance with article 3.2 hereof, the parties agree the purchase price shall be paid by Party A to Party B directly, at the day of share change registration procedures at industrial and commerce authorities are completed, concerning entire shares in Party E holding by Party B, purchased by Party D ("registration day"). Whereas Party B shall pay off all the loans when Party A exercises the purchase option, in accordance with article 1.1 of Loan Agreement, Party A and Party B agree the aforesaid payment made by Party A to Party B will then be set off by the loan principal which shall be paid by Party B to Party A under the Loan Agreement. As the aforesaid set-off is completed, Party A is not required to make any other payments to Party B for the purpose of paying for the purchase price, and Party B is not required to make any other payments to Party A for the purpose of repaying the loan. 4.2. Notwithstanding the foregoing agreement, when the set-off is completed, Party B shall issue a receipt to Party D for all purchase price it received ("Party B's receipt", as Appendix IV hereto), and shall expressly acknowledge Party D's payment obligation under the Share Transfer Agreement has been carried out. Party A shall issue immediately a receipt to Party B for entire loan principal it received ("Party A's receipt", as Appendix V hereto) after Party B have issued the aforesaid party B's receipt, and shall expressly acknowledge Party B's payment obligation under the Loan Agreement has been carried out. 3 5. CHANGE OF PURCHASE OPTION AGREEMENT 5.1. The parties agree that, as one prerequisite to Party A's contribution of purchase price to Paty D, Party D shall enter into a new purchase option and cooperation agreement with Party A, Party C, Party E and Party F, in accordance with the content and form stipulated in Appendix VI hereto, at the date of the execution of the Share Transfer Agreement. 5.2. Except as otherwise stated or agreed by the parties, all obligations of Party B under the original Purchase Option Agreement will be terminated at the registration day. 6. CHANGE OF PLEDGE AGREEMENT 6.1. The parties agree that, as one prerequisite to Party A's contribution of purchase price to Paty D, Party D shall enter into a new pledge agreement with Party C, Party F and Party A, in accordance with the content and form stipulated in Appendix VII hereto, at the date of the execution of the Share Transfer Agreement. 6.2. The original Pledge Agreement will be terminated at registration day. Except as otherwise stated or agreed by the parties, all obligations of Party B under the original Pledge Agreement will be terminated at the registration day. 7. CONFIDENTIALITY Without prior approval of the parties, any party shall keep confidential the content of the agreement, and shall not disclose to any other person the content of the agreement or make any public disclosure of the content hereof. However, the article does not make any restrictions on (i) any disclosure made in accordance with relevant laws or regulations of any stock exchange market; (ii) any disclosed information which may be obtained through public channels, and is not caused so by the defaulting of the disclosing party; (iii) any disclosure to shareholders, legal consultants, accountants, financial consultants and other professional consultants of any parties; or (iv) disclosure made to one party's potential buyer of shares/assets, other investors, debt or share financing providers, and the receiving party shall make proper confidentiality undertakings (in the event that the transfer party is not Party A, the approval from Party A shall be obtained as well). 8. NOTIFICATION 8.1. Any notice, request, requirement and other correspondences required by the agreement or made in accordance with the agreement, shall be made in written form and sent to the addresses of the parties first above written herein. 4 8.2. Notices hereunder shall be sent to the other party's address and/or number, by ways of personal delivery, prepaid registered airmail, acknowledged carrier or fax. Such notices shall be deemed to have been effectively given on the following dates: (1) notices delivered by person shall be deemed to have been effectively served on the date of personal delivery; (2) notices sent by prepaid registered airmail shall be deemed to have been effectively served on the seventh day after the day they were delivered for mailing (as indicated by the postmark); (3) notices sent by courier service shall be deemed to have been effectively served on the third day after they were delivered to an acknowledged courier; (4) notices sent by facsimile shall be deemed to have been effectively served on the first working day after being transmitted. 9. DISPUTE RESOLUTION 9.1. Any dispute arises from the interpretation or performance of terms hereof by the parties, shall be settled through friendly consultation. If the parties fail to make an written agreement after consultation, the dispute shall be submitted for arbitration in accordance with the agreement. The arbitration shall be final and exclusive. Unless otherwise expressly stipulated herein, any party waives expressly its right to submit a dispute to court for a legal action, and the waiver is irrevocable. 9.2. The arbitration shall be submitted to China International Economic and Trade Arbitration Committee ("Arbitration Committee") to be arbitrated in accordance with then-in-force arbitration rules. The place of arbitration shall be Beijing. Unless otherwise stipulated in the arbitration award, the arbitration fee (including reasonable attorney fees and expenses) shall be borne by the losing party. 10. SUPPLEMENTARY PROVISIONS 10.1.The failure or delay of any party hereof to exercise any right hereunder shall not be deemed as a waiver thereof, nor any single or partial exercise of any right preclude further exercise thereof in future by the party. 10.2.The headings of articles herein are provided for the purpose of index. Such headings shall in no event be used or affected interpretations of the terms herein. 10.3.The conclusion, effectiveness, interpretation of the agreement and the settlement of disputes in connection therewith, shall be governed by laws of Hong Kong Special Administration Region of the People's Republic of China. 10.4.Each party hereunder concludes the agreement with legal purpose. Each term hereof is severable and independent from the others. If at any time one or more of such terms is or becomes invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining terms hereof shall not in any way be affected thereby; and the parties shall make every endeavor to negotiate and arrive at new terms to substitute the invalid, illegal and unenforceable terms, and preserve as near as possible business purposes of the original terms. 5 10.5.Upon the effectiveness of the agreement, the parties shall fully perform the agreement. Any modifications of the agreement shall only be effective in written form, through consultations of the parties, and obtained necessary authorization and approval by Party A, Party E and Party F respectively (including Party A shall obtain approval from its board's auditing committee conforming to Sarbanes-Oxley Act and NASDAQ rules or other independent organizations). 10.6.Matters not covered in the agreement shall be dealt with in a supplementary agreement, and annexed hereto. The supplementary agreement shall have the same legal force as the agreement. 10.7.The agreement is executed in six original copies, and are equally authentic. Each party hereto shall hold one copy. 10.8. The agreement shall be effective upon execution. (The reminder of this page is intentionally left blank.) 6 [Signature page, no body text] The Frame Agreement is executed by the following parties(pound)(0) Party A: China Finance Online Co., Ltd. Seal: Authorized Representative (signature): Party B: Chen Wu (signature): Party C: Zhao Zhiwei (signature): Party D: Wang Jun (signature): Party E: Beijing Fuhua Innovation Technology Development Co., Ltd. Seal: Authorized Representative (signature): Party F: China Finance Online (Beijing) Co., Ltd. Seal: Authorized Representative (signature): 7 EX-4.16 3 h02185exv4w16.txt EX-4.16 LOAN AGREEMENT EXHIBIT 4.16 [Translated from Chinese Original] LOAN AGREEMENT The Loan Agreement (the "Agreement") is entered into as of October 18, 2007 between the following two parties: (1) CHINA FINANCE ONLINE CO. LIMITED. (the "Lender"), a limited liability company established and registered in Hong Kong, SAR. Registered Address: Unit C, 8/F, East Wing, Sincere Insurance Building 4-6, Hennessy Road, Hong Kong, SAR. (2) JUN WANG (the "Borrower") ID No.: 370102197012163311 Address: 9/F., Tower C, Corporation Mansion, No. 35 Financial Avenue Xicheng District, Beijing 100032 China Lender and Borrower will each be referred to as a "Party" and collectively referred to as the "Parties." WHEREAS, Borrower is to acquire from an existing shareholder (Mr. Chen Wu) 55% of the equity ("Fuhua Equity") of Fuhua Innovation Technology Development Co., Ltd. ("Fuhua"), a limited liability company established and registered in the People's Republic of China (the "PRC") corresponding to the registered capital contribution of RMB 1,650,000,. WHEREAS, Borrower wishes to borrow a loan from Lender to finance his investment in Fuhua and Lender agrees to provide such loan to Borrower. NOW THEREFORE, the Parties agree as follows: ARTICLE 1. LOAN 1.1 Lender agrees to provide a loan to Borrower with the principal amount equal to the US Dollar equivalent of RMB 1,650,000 in accordance with the terms and conditions set forth herein (the "Loan"). Term for such loan shall be ten (10) years which may be extended upon the agreement of the Parties (the "Term"). Notwithstanding the foregoing, in the following circumstances, Borrower shall repay the Loan regardless if the Term has expired: (1) Borrower deceases or becomes a person without legal capacity or with limited legal capacity; (2) Borrower commits a crime or is involved in a criminal act; or (3) Lender or its designated assignee can legally purchase Borrower's interest in Fuhua under the PRC law and Lender chooses to do so. 1.2 Borrower hereby irrevocably instructs Lender to remit the amount of the Loan direct to Chen Wu as Borrower's payment of the purchase price of the equity. 1 1.3 The Loan shall only be used by Borrower to acquire the equity of Fuhua. Without Lender's prior written consent, Borrower shall not use the Loan for any other purpose or transfer or pledge his interest in Fuhua to any third party. 1.4 Borrower can only repay the Loan by transferring all of his interest in Fuhua to Lender or a third party designated by Lender when such transfer is permitted under the PRC law. 1.5 In the event Borrower transfers his interest to any third party other than Lender, Borrower shall pay the full amount of the proceeds it receives from such transfer to Lender regardless if the amount of such proceeds exceeds the amount of the Loan. 1.6 Lender and Borrower hereby jointly agree and confirm that Lender has the right to, but has no obligation to, purchase or designate a third party (legal person or natural person) to purchase all or part of Borrower's interest in Fuhua at a price equal to the amount of the Loan when such purchase is allowed under the PRC law. If Lender or the third party assignee designated by Lender only purchases part of Borrower's interest in Fuhua, the purchase price shall be reduced on a pro rata basis. 1.7 In the event when Borrower transfers his interest in Fuhua to Lender or a third party transferee designated by Lender, (i) if the actual transfer price paid by Lender or the third party transferee equals or is less than the principal amount of the Loan, the Loan shall be deemed as interest free; or (ii) if the actual transfer price paid by Lender or the third party transferee is higher than the principal amount of the Loan, the amount exceeding the principal amount of the Loan shall be deemed as an interest accrued on the Loan and paid by Borrower to Lender in full. ARTICLE 2. CONDITIONS PRECEDENT TO DISBURSEMENT The following conditions must be satisfied before the Loan is disbursed to Borrower: 2.1 The representation and warranties under Section 3 remain true and correct on the day when the disbursement notice is delivered to Lender and on the date the Loan is disbursed to Borrower as if such representations and warranties are made as of such dates. 2.2 Borrower has not materially breached any terms or conditions hereof. ARTICLE 3. REPRESENTATION AND WARRANTIES 3.1 Lender hereby represents and warrants to Borrower that: (a) Lender is a company registered and validly existing under the laws of Hong Kong, SAR; (b) subject to its Memorandum and Articles of Association and other organizational documents, Lender has full right, power and all necessary approvals and authorizations to execute and perform this Agreement; 2 (c) the execution and the performance of this Agreement will not contravene any provision of law applicable to Lender or any contractual restriction binding on or affecting him; and (d) this Agreement shall constitute the legal, valid and binding obligations of Lender, which is enforceable against Lender in accordance with its terms upon its execution. 3.2 Borrower hereby represents and warrants to Lender that: (a) Fuhua is a limited liability company registered and validly existing under the laws of PRC; (b) Borrower has full right, power and all necessary and appropriate approval and authorization to execute and perform this Agreement; (c) the execution and the performance of this Agreement will not contravene any provision of law applicable to Borrower or any contractual restriction binding on or affecting Borrower; (d) this Agreement shall constitute the legal and valid obligations of Borrower, which is enforceable against Borrower in accordance with its terms upon its execution; and (e) there are no legal or other proceedings before any court, tribunal or other regulatory authority pending or threatened against Borrower. ARTICLE 4. NOTIFICATIONS Notice or other communications under this Agreement shall be delivered personally or sent by facsimile transmission or by registered mail to the address set forth below, except that such address has been changed in writing. The date noted on the return receipt of the registered mail is the service date of the notice if the notice is sent by registered mail; the sending date is the service date of the notice if the notice is sent personally or by facsimile transmission. The original of the notice shall be sent personally or by registered mail to the following address after the notice is sent by facsimile. Lender: China Finance Online Co., Ltd. Address: Unit C, 8/F, East Wing Sincere Insurance Building 4-6 Hennessy Road, Hong Kong, SAR. Borrower: Jun Wang Address: 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China 3 ARTICLE 5. CONFIDENTIALITY The Parties acknowledge and confirm that any oral or written materials concerning this Agreement exchanged between them are confidential information. The Parties shall protect and maintain the confidentiality of all such confidential data and information and shall not disclose to any third party without the other party's written consent, except (a) the data or information that was in the public domain or later becomes published or generally known to the public, provided that it is not released by the receiving party, (b) the data or information that shall be disclosed pursuant to applicable laws or regulations, and (c) the data or information that shall be disclosed to One Party's legal counsel or financial counsel who shall also bear the obligation of maintaining the confidentiality similar to the obligations hereof. The undue disclosing of the confidential data or information of One Party's legal counsel or financial counsel shall be deemed the undue disclosing of such party who shall take on the liability of breach of this Agreement. ARTICLE 6. GOVERNING LAW AND SETTLEMENT OF DISPUTES 6.1 The execution, validity, interpretation, performance, implementation, termination and settlement of disputes of this Agreement shall be governed by the laws of Hong Kong, SAR. 6.2 In event of any dispute arising from or in connection with this Agreement, the Parties shall attempt to resolve the dispute through friendly consultations. In the event that satisfactory resolution is not reached within thirty (30) days after commencement of such consultation, the dispute shall be submitted (which submission may be made by either Borrower or Lender) to resolution by arbitration administered by Hong Kong International Arbitration Center(the "Center") in Hong Kong, in accordance with the procedural rules of the Center, which are in effect at the time the application for arbitration is made. The arbitral award shall be final and binding upon all parties hereto. 6.3 In case of any disputes arising out of the interpretation and performance of this Agreement or any pending arbitration of such dispute, the Parties shall continue to perform their rights and obligations under this Agreement, except that such maters are involved in the disputes. ARTICLE 7. MISCELLANEOUS 7.1 This Agreement can only be amended by written agreements jointly executed by the parties. 7.2 Any provision of this Agreement that is invalid or unenforceable shall not affect the validity and enforceability of any other provisions hereof. 7.3 This Agreement is executed in two (2) counterparts. Party A and Party B shall each hold one counterpart. IN WITNESS WHEREOF, the Parties have duly executed this Agreement, or have caused this Agreement to be duly executed on their behalf, as of the date and year first hereinabove set forth. 4 LENDER: CHINA FINANCE ONLINE CO., LTD ----------------------------- By: Title: BORROWER: JUN WANG ----------------------------- 5 EX-4.17 4 h02185exv4w17.txt EX-4.17 SHARE TRANSFER CONTRACT EXHIBIT 4.17 - -------------------------------------------------------------------------------- [Translated from Chinese Original] WU CHEN AND JUN WANG SHARE TRANSFER CONTRACT IN RELATION TO SHARES IN BEIJING FUHUA INNOVATION TECHNOLOGY DEVELOPMENT CO., LTD. OCTOBER, 2007
TABLE OF CONTENT ARTICLE 1 DEFINITIONS........................................................................1 1.1 Definitions........................................................................1 1.2 Interpretation.....................................................................2 ARTICLE 2 TRANSFER...........................................................................2 ARTICLE 3 CONSIDERATION......................................................................2 ARTICLE 4 TERM AND TERMINATION...............................................................2 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR...................................3 ARTICLE 6 NOTICES............................................................................3 ARTICLE 7 GOVERNING LAW AND DISPUTE RESOLUTION...............................................4 7.1 Governing Law......................................................................4 7.2 Arbitration........................................................................4 ARTICLE 8 MISCELLANEOUS......................................................................4 8.1 Further Assurance..................................................................4 8.2 Non-Assignability..................................................................4 8.3 Waivers............................................................................4 8.4 Amendments.........................................................................5 8.5 Severability.......................................................................5 8.6 Entire Agreement...................................................................5 8.7 Force Majeure......................................................................5 8.8 Successors and Assigns.............................................................6 8.9 Counterparts.......................................................................6 8.10 Signature and Language.............................................................6 8.11 Third Party Agreements.............................................................6 8.12 No Third Party Beneficiaries.......................................................6
SHARE TRANSFER CONTRACT This Share Transfer Contract is entered into by the following Parties on October 18, 2007: (1) WU CHEN (the "TRANSFEROR"), Address: Room 616, Tower A, COFCO Plaza, 8 Jianguomennei Avenue, Beijing, China ID Number: 110108491204891; and (2) JUN WANG (the "TRANSFEREE") Address: 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China ID Number: 370102197012163311 WHEREAS: 1(pound)(R) Fuhua Innovation Technology Development Co., Ltd. (the "Company") is a limited liability company registered in Beijing, PRC in compliance with law of China, and its registered capital is RMB 3,000,000. 2(pound)(R) The Transferor is the beneficiary owner of 55% of equity shares of the Company. 3(pound)(R) The Transferor desires to sell to the Transferee, and the Transferee desires to purchase from the Transferor, all shares of the Company owned by the Transferor, representing 55% of the total share capital of the Company. NOW, THEREFORE, after friendly consultations conducted in accordance with the principles of equality, the Transferor and the Transferee hereby agree as follows: ARTICLE 1. DEFINITIONS 1.1 Definitions The following terms as used in this Contract shall have the meanings set forth below unless otherwise specified: (1) CONTRACT: shall mean this Share Transfer Contract; (2) SHARES: shall mean all shares of the Company owned by the Transferor, representing 55% of the total share capital of the Company; (3) RMB: shall mean the lawful currency of China; (4) PRC/CHINA: shall mean the People's Republic of China which, for the purposes of this Contract, does not include the Hong Kong Special Administrative Regions, the Macau Special Administrative Region, and Taiwan.
1 1.2 Interpretation (1) The articles of the Whereas clause and the Schedule of this Contract form an integral part of this Contract and shall have the same effect as if set out in the body of this Contract. References to this Contract shall be construed as this Contract in its form as so supplemented, revised, altered, or amended, and shall include their articles under the Whereas section and Schedules; (2) The headings of each article and schedule are for convenience only and shall not affect or restrict the meaning or interpretation of this Contract; and (3) Each of the Transferor and the Transferee is also be referred to as "a Party" and collectively as "the Parties" to this Contract. ARTICLE 2.TRANSFER Subject to the terms and conditions of this Contract, the Transferor agrees to sell the Shares to the Transferee, and the Transferee agrees to purchase the Shares from the Transferor. ARTICLE 3.CONSIDERATION Both Parties agree after negotiation that the consideration for the transfer of the Shares shall be an aggregate of the RMB 1,650,000. ARTICLE 4.TERM AND TERMINATION 4.1 This Contract and the rights and obligations of the Parties to this Contract shall take effect upon the execution of this Contract and shall continue in full force and effect unless earlier terminated as provided herein. 4.2 This Contract may be terminated as follows: (1) The Parties unanimously agree to terminate this Contract through consultation. (2) If any Party enters into any voluntary or involuntary bankruptcy proceedings unless the same are dismissed within 90 days after their commencement or such Party is declared bankrupt by courts or any other Governing Authorities, any of the other Parties may terminate this Contract upon written notice to such Party. (3) This Contract may be terminated due to the occurrence of any event of Force Majeure under Article 8.7. (4) If, because of any substantial change in Applicable Laws or the interpretation thereof, or any amendment or supplement to or rescission by any Governing Authority thereof, the major objectives of any of the Relevant Contracts cannot be achieved or the major interests of any Party thereunder cannot be realized, the affected Party may upon written notice to the other Party terminate this Contract. 2 4.3 When the term of this Contract expires or in the event of earlier termination, unless such earlier termination is due to a material breach of a Party and Article 8 above applies, this Contract shall become invalid and the Parties shall not be required to bear the obligations and duties under the terms of this Contract unless otherwise required herein (that is Articles 10, 11, 12, 13, 14,15 and 16 of this Contract). ARTICLE 5.REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR 5.1 The execution and performance by the Transferor of this Contract does not contravene any law or contract binding on it. 5.2 The Transferor is the legal owner of the Shares and has full legal right, power and authority to enter into this Contract, and to perform all its obligations hereunder. 5.3 As of the Execution Date, the Company is duly incorporated and validly existing. All required approval and permission relating to the production and operations of Lucky Film have been properly obtained. To the knowledge of the Transferor in its capacity as the controlling shareholder of Lucky Film, Lucky Film is not in material violation of any statute, rule or regulation and is not subject to any ongoing or potential litigation, arbitration, or disputes. ARTICLE 6.NOTICES Any and all notices, requests, demands and other communications required or otherwise contemplated to be made under this Contract shall be in writing and in English and Chinese and shall be provided by one or more of the following means, and the effective date thereof shall be deemed to be (a) when received, if delivered personally, (b) on the date of transmission with receipt of a transmittal confirmation, if transmitted by facsimile, or (c) on the fourth (4th) Business Day following the date of deposit with a courier service, or such earlier delivery date as may be confirmed in writing to the sender by a courier service, if sent by EMS or other courier service. All such notices, requests, demands and other communications shall be addressed as follows or as a Party may notify the other Party from time to time: Transferor: Wu Chen Address: Room 616, Tower A, COFCO Plaza, 8 Jianguomennei Dajie, Beijing, China Telephone: 010-65264022 Fax: Transferee: Jun Wang Address: 9/F.,Tower C, Corporation Mansion, No. 35 Financial Avenue Xicheng District, Beijing 100032 China Telephone: 010-58325388 Fax: 010-58325300
3 ARTICLE 7.GOVERNING LAW AND DISPUTE RESOLUTION 7.1 Governing Law This Contract shall be governed by and construed under the laws of China. 7.2 Arbitration Any dispute arising out of or in connection with, or related to, this Contract, including any question regarding its existence, validity or termination or as to rights or obligations of the Parties hereunder which is not settled by friendly discussions shall be referred to the Beijing Arbitration Commission for final resolution in accordance with its Arbitration Rules from time to time in force which rules are deemed to be incorporated by reference into this Article. The Parties hereby exclude any rights of appeals to any court on the merits of the dispute subject to arbitration. ARTICLE 8.MISCELLANEOUS 8.1 Further Assurance During all time after the Execution Date, for the realization of the interests of the other Party, and in consummation of the Transaction described herein, each Party shall take all necessary action and execute all documents as reasonably requested by the other Party, and shall act as reasonably requested by the other Party. The Parties shall use their best efforts to cause any other third party to execute such documents and to perform such acts. 8.2 Non-Assignability Unless otherwise agreed in writing by the Parties to this Contract, neither this Contract nor any of the rights, interests or obligations hereunder may be assigned by either of the Parties without the prior written consent of the other Party. 8.3 Waivers No waiver of any right of a Party under this Contract will be effective unless evidenced by an instrument in writing duly executed by such Party. No failure on the part of a Party to exercise, and no delay in exercising, any of its rights hereunder will operate as a waiver thereof (for the avoidance of doubt, if the exercise of any right is subject to a term, such right shall be exercised within such term), nor will any single or partial exercise by either Party of any right preclude any other or future exercise thereof or the exercise of any other right. 8.4 Amendments Amendments to this Contract (or documents mentioned herein) shall be made in writing and signed by the Parties or their duly authorized representatives and shall be subject to the completion of the examination and approval procedures as required by laws and regulations (if applicable). 4 8.5 Severability If any provision of this Contract should be or become fully or partly invalid, illegal or unenforceable in any respect for any reason whatsoever, such provision shall have no effect to the extent that it is invalid or unenforceable and shall be deemed to be excluded from this Contract. The validity and enforceability of the remaining provisions of this Contract shall not be impaired. The Parties shall use their best reasonable efforts to substitute such invalid or unenforceable provision with a suitable and equitable provision that serves the intent and purpose of such invalid or unenforceable provision. If the exclusion of a provision of this Contract results in the inability of the Parties to achieve the material objectives of this Contract, the Parties will negotiate in good faith to amend or terminate this Contract on mutually acceptable terms. 8.6 Entire Agreement This Contract and the Cooperation Framework Contract constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof. 8.7 Force Majeure "Force Majeure" shall mean unforeseeable, unavoidable and insurmountable objective conditions (such conditions include but shall not be limited to earthquakes, typhoons, flood, fire, strikes, war, or riots). If an event of Force Majeure occurs and affects a Party's performance of its obligations under this Contract, such performance shall be suspended during the period of delay caused by the Force Majeure and shall be extended, without penalty, for a period equal to such suspension. The Party claiming Force Majeure shall promptly inform the other Party in writing and shall, within seven (7) Business Days of the occurrence of the event of Force Majeure, or in the event of communication disruption, within seven (7) Business Days upon the restoration of the communication facilities, furnish the other Party by fax and by express-mail with sufficient detailed information regarding the event of Force Majeure and shall provide proof of the occurrence and duration of such Force Majeure. If such Party claiming Force Majeure fails to notify the other Party and furnish it with proof pursuant to the above provision, such Party shall not be excused from the non-performance of its obligations hereunder. The Party so affected by the event of Force Majeure shall use the reasonable efforts to minimize the consequences of such Force Majeure and to promptly resume performance hereunder whenever the causes of such excuse are cured. Should the Party so affected by the event of Force Majeure fail to resume performance hereunder when the causes of such excuse are cured, such Party shall be liable to the other Party. In the event of Force Majeure, the Parties shall immediately consult with each other in order to find an equitable solution and shall use all reasonable endeavours to minimize the consequences of such Force Majeure. 5 8.8 Successors and Assigns This Contract is executed for the interests of the Parties and their respective successors and authorized assigns and shall be binding among them. 8.9 Counterparts This Contract may be executed in any number of counterparts, and each counterpart, upon execution and delivery, shall constitute an original instrument, but all such separate counterparts shall constitute only one and the same instrument. 8.10 Signature and Language This Contact shall be executed in 2 original copies in Chinese with equal validity. 8.11 Third Party Agreements Neither Party shall make any separate agreement with any third party that is inconsistent with any of the provisions of this Contract. 8.12 No Third Party Beneficiaries No provisions of this Contract, whether expressed or implied, are intended or shall be construed to confer upon or give to any person or entity other than the specific parties hereto any rights, remedies or other benefits under or by reason of this Contract. 6 (Execution Page) IN WITNESS WHEREOF, the Parties hereto have signed this Contract as of the date first written above. Transferor: Wu Chen _________________(signature) Transferee: Jun Wang ________________(signature) 7 EX-4.18 5 h02185exv4w18.txt EX-4.18 SHARE PLEDGE AGREEMENT EXHIBIT 4.18 [Translated from Chinese Original] SHARE PLEDGE AGREEMENT This Share Pledge Agreement (this "Agreement") is executed by and among the following parties on October 18, 2007. PLEDGOR A: ZHIWEI ZHAO ID NUMBER: 110102196307100139 ADDRESS: 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue, Xicheng District, Beijing 100032 China PLEDGOR B: JUN WANG ID NUMBER: 370102197012163311 ADDRESS: 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue, Xicheng District, Beijing 100032 China PLEDGEE: CHINA FINANCE ONLINE (BEIJING) CO., LTD. REGISTERED ADDRESS: ROOM 946-949, 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China Unless otherwise provided hereunder, Pledgor A and Pledgor B shall hereinafter be referred to collectively as the "Pledgors". WHEREAS: 1. Zhiwei Zhao, Pledgor A, and Jun Wang, Pledgor B, are both citizens of the People's Republic of China (the "PRC"), and each holds 45% and 55% interests in Beijing Fuhua Innovation Technology Development Co., Ltd. ("Fuhua"), respectively. Fuhua is a company registered in Beijing, PRC, engaged in the business of network operation. 2. Pledgee is a wholly foreign-own enterprise registered in Beijing, PRC, with approvals from the relevant PRC authorities to engage in the business of, among others, internet technology consulting and technology services. Fuhua and Pledgee have entered into the agreements (collectively, the "Service Agreements"). 3. To secure the fees payable under the Service Agreements (the "Service Fee") from Fuhua to Pledgee, Pledgors hereby pledge their respective interests in Fuhua to Pledgee. Pursuant to the provisions of the Service Agreements, Pledgors and Pledgee have agreed to enter into this Agreement according to the following terms and conditions. ARTICLE 1. DEFINITIONS Unless otherwise provided herein, the terms below shall have the following meanings: 1.1 "Pledge Rights" means the rights set forth in Article 2 of this Agreement. 1.2 "Share Equity" means the equity interest held by Pledgors in Fuhua. 1.3 "Pledged Property" means the share interest and the dividends deriving therefrom pledged by Pledgors to Pledgee under this Agreement. 1.4 "Secured Indebtedness" means all the amounts payable by Fuhua to Pledgee under the Service Agreements, including the Service Fee and interests accrued thereon, liquidated damages, compensations, costs and expenses incurred by Pledgee in connection with collection of such fees, interest, damages and compensations, and losses incurred to Pledgee as a result of any default by Fuhua and other expenses payable under the Service Agreements. 1.5 "Term of Pledge" means the term stated in Section 4.1 of this Agreement. 1.6 "Service Agreements" means all the agreements entered into by Fuhua and Pledgee, including but not limited to Strategy Consulting Services Agreement, Technical Support Agreement and Equipment Rent Agreement. 1.7 "Event of Default" means any event set forth in Article 8 of this Agreement. 1.8 "Notice of Default" means the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default. ARTICLE 2. PLEDGE RIGHTS 2.1 Pledgors hereby pledge to Pledgee all of their Share Equity in Fuhua to secure the Secured Indebtedness of Fuhua. Pledge Rights shall mean Pledgee's priority right in receiving compensation from the sale or auction proceeds of the Pledged Property (including the dividends generated by the Share Equity during the term of this Agreement). ARTICLE 3. SCOPE OF PLEDGE SECURITY 3.1 The scope of pledge security hereunder shall cover all of the Secured Indebtedness, including all the Service Fee and interest accrued thereon, liquidated damages, compensation, costs and expenses incurred by Pledgee to collect such fee, interests, damages and compensation, and losses incurred to Pledgee as a result of any default by Fuhua and all other expenses payable under the Service Agreements. ARTICLE 4. TERM OF PLEDGE AND REGISTRATION 4.1 This Agreement shall become effective on the date when the Pledge hereunder is registered in the Shareholders' List of Fuhua. The term of the Pledge shall be the same as the term of the Strategy Consulting Services Agreement (should the term of the Strategy Consulting Services Agreement be extended, the term of the Pledge shall be extended accordingly). Pledgors shall cause Fuhua to register the Pledge hereunder in its Shareholders' List within three (3) days after this Agreement is executed. 4.2 In the event that any change of the matters registered in Fuhua's Shareholders' List is required as a result of change of any matters relating to the Pledge, Pledgors and Pledgee shall cause the matters registered in Fuhua's Shareholders' List be changed accordingly within fifteen (15) days after such change takes place. ARTICLE 5. CUSTODY OF CERTIFICATES Pledgors shall deliver to Pledgee the capital contribution certificates with respect to their interest in Fuhua and Fuhua's Shareholders' List within seven (7) days after this Agreement is executed. ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF PLEDGORS 6.1 Pledgors are legally registered shareholders of Fuhua and have paid Fuhua the full amount of their respective portions of Fuhua's registered capital required under Chinese law. Pledgors neither have sold nor will sell to any third party their Share Equity in Fuhua. 6.2 Pledgors fully understand the contents of the Service Agreements and have entered into this Agreement voluntarily. The signatories signing this Agreement on behalf of Pledgors have the rights and authorizations to do so. 6.3 All documents, materials and certificates provided by Pledgors to Pledgee hereunder are correct, true, complete and valid. 6.4 When Pledgee exercises its right hereunder in accordance with this Agreement, there shall be no intervention from any other parties. 6.5 Pledgee shall have the right to dispose of and transfer the Pledge Rights in accordance with the provisions hereof. 6.6 Pledgors have not created any mortgage, pledge, secured interests or other form of debt liabilities over the Share Equity other than the Pledge created hereunder. ARTICLE 7. COVENANTS OF PLEDGORS 7.1 For the benefit of Pledgee, Pledgors hereby make the following covenants, during the term of this Agreement: 7.1.1 without the prior written consent of Pledgee, Pledgors shall not transfer the Share Equity, or create or consent to any creation of any pledge over, the Share Equity that may affect Pledgee's rights and interests hereunder, or cause the shareholders' meetings of Fuhua to adopt any resolution on sale, transfer, pledge or in other manner disposal of the Share Equity or approving the creation of any other security interest on the Share Equity, provided that the Share Equity may be transferred to Pledgee or any party designated by Pledgee according to Purchase Option and Cooperation Agreement dated [ ], 2007 among Pledgee, Pledgors, China Finance Online Co., Ltd. and Fuhua and Pledgors may transfer the Share Equity to China Finance Online Co., Ltd. or to each other to the extent such transfer will not effect Pledgee's interest (the transferring Pledgor shall deliver a prior notice to Pledgee before making the transfer). 7.1.2 Pledgors shall comply with all laws and regulations applicable to the Pledge. Within five (5) days of receipt of any notice, order or recommendation issued or promulgated by competent government authorities relating to the Pledge, Pledgors shall deliver such notice, order or recommendation to Pledgee, and shall comply with the same, or make objections or statements with respect to the same upon Pledgee's reasonable request or with Pledgee's consent. 7.1.3 Pledgors shall promptly notify Pledgee of any event or notice received by Pledgors that may have a material effect on Pledgee's rights in the Pledged Property or any portion thereof, as well as promptly notify Pledgee of any change to any warranty or obligation of Pledgors hereunder, or any event or notice received by Pledgors that may have a material effect to any warranty or obligation of the Pledgors hereunder. 7.2 Pledgors warrant that Pledgee's exercise of the Pledge Rights as pledgee pursuant to this Agreement shall not be interrupted or impaired by Pledgors or any successors or representatives of Pledgors or any other parties through any legal proceedings. 7.3 Pledgors hereby warrant to Pledgee that, to protect or perfect the security interest created by this Agreement to secure the Secured Indebtedness, Pledgors will execute in good faith, and cause other parties who have an interest in the Pledge Rights to execute, all certificates of rights and instruments as requested by Pledgee, and/or take any action, and cause other parties who have an interest in the Pledge Rights to take any action, as requested by Pledgee, and facilitate the exercise by Pledgee of its rights and authority provided hereunder, and execute all amendment documents relating to certificates of Share Equity with Pledgee or its designated person(s) (natural persons/legal persons), and shall provide Pledgee, within a reasonable period of time, with all notices, orders and decisions regarding the Pledge Rights requested by Pledgee. Pledgors hereby warrant to Pledgee that, for Pledgee's benefit, Pledgors shall comply with all warranties, covenants, agreements, representations and conditions provided hereunder. In the event that Pledgors fail to comply with or perform any warranties, covenants, agreements, representations and conditions, Pledgors shall indemnify Pledgee for all of its losses resulting therefrom. ARTICLE 8. EVENTS OF DEFAULT 8.1 Each of the following events shall constitute an Event of Default: 8.1.1 Fuhua fails to pay in full any Secured Indebtedness on time; 8.1.2 Any representation or warranty made by Pledgors under Article 6 of this Agreement is misleading or untrue, or Pledgors have violated any of the warranties in Article 6 of this Agreement; 8.1.3 Pledgors breach any of the covenants in Article 7 of this Agreement; 8.1.4 Pledgors breach any other provisions of this Agreement; 8.1.5 Pledgors give up all or any part of the Pledged Property, or transfer all or any part of the Pledged Property without the written consent of Pledgee (except the transfers permitted hereunder); 8.1.6 Any of Pledgors' loans, guarantees, indemnification, commitment or other indebtedness to any third party (1) have been subject to a demand of early repayment due to an event of default; or (2) have become due but failed to be repaid in a timely manner, thus leading Pledgee to believe that Pledgors' ability to perform their obligations under this Agreement has been impaired; 8.1.7 Pledgors are unable to repay any other material debts; 8.1.8 Any applicable laws have rendered this Agreement illegal or made it impossible for Pledgors to continue to perform their obligations hereunder; 8.1.9 All approvals, licenses, permits or authorizations from government agencies that make this Agreement enforceable, legal and effective have been withdrawn, terminated, invalidated or substantively revised; 8.1.10 Any adverse change has taken place to any properties owned by Pledgors, which leads Pledgee to believe that Pledgors' ability to perform their obligations under this Agreement has been affected; 8.1.11 The successor or trustee of Fuhua is only able to partially perform or refuses to perform the payment obligations under the Service Agreements; 8.1.12 Any breach of other provisions of this Agreement resulting from any action or omission by Pledgors; and 8.1.13 Any other event whereby Pledgee is unable to exercise its right with respect to the Pledge hereunder pursuant to relevant laws. 8.2 Pledgors shall immediately notify Pledgee in writing of any event set forth in Section 8.1 or any circumstance which many lead to any such event as soon as Pledgors know or are aware of such event. 8.3 Unless an Event of Default set forth in this Section 8.1 has been resolved to the satisfaction of Pledgee, Pledgee may, upon the occurrence of an Event of Default or at any time thereafter, issue a Notice of Default to Pledgors in writing and demand that Pledgors to immediately pay all the amounts due under the Service Agreements and all other amounts payable due to Pledgee, or exercise Pledge Rights in accordance with the provisions of this Agreement. ARTICLE 9. EXERCISE OF PLEDGE RIGHTS 9.1 Prior to the full payment of Secured Indebtedness under the Service Agreements, Pledgors shall not assign, or in any manner dispose of, the Pledged Property without Pledgee's written consent. 9.2 Pledgee shall issue a Notice of Default to Pledgors when exercising the Pledge Rights. 9.3 Subject to the provisions of Section 8.3, Pledgee may exercise the right to dispose of the Pledged Property concurrently with the issuance of the Notice of Default in accordance with Section 8.3 or at any time after the issuance of the Notice of Default. 9.4 Pledgee shall have the right to dispose of the Pledged Property under this Agreement in part or in whole in accordance with legal procedures (including but not limited to negotiated transfer, auction or sale of the Pledged Property) and receive a priority payment from the proceeds of the Pledged Property until all of the Secured Indebtedness have been fully repaid. 9.5 When Pledgee exercises its rights under the Pledge in accordance with this Agreement, Pledgors shall not create any impediment, and shall provide necessary assistance to enable Pledgee to exercise the Pledge Rights. ARTICLE 10. ASSIGNMENT 10.1 Without Pledgee's prior consent, Pledgors cannot give away or assign to any party their rights and obligations under this Agreement. 10.2 This Agreement shall be valid and binding on each Pledgor and their respective successors. 10.3 Pledgee may assign any and all of its rights and obligations under the Service Agreements to its designated person(s) (natural/legal persons) at any time, in which case the assignees shall have the rights and obligations of Pledgee under this Agreement, as if it were a party to this Agreement. 10.4 In the event that the Pledgee changes due to any transfer permitted hereunder, the new parties to the Pledge shall execute a new pledge agreement. ARTICLE 11. TERMINATION This Agreement shall be terminated when the Secured Indebtedness has been fully repaid and Fuhua is no longer obliged to undertake any obligations under the Service Agreements. In this circumstance, Pledgee shall cancel or terminate this Agreement as soon as reasonably practicable. ARTICLE 12. HANDLING FEES AND OTHER EXPENSES 12.1 All fees and out of pocket expenses relating to this Agreement, including but not limited to legal fees, cost of documentation, stamp duty and any other taxes and fees, shall be borne by Pledgors. In the event that the law requires Pledgee to pay any taxes, Pledgors shall reimburse Pledgee for such taxes paid by Pledgee. 12.2 In the event that Pledgors fail to pay any taxes or fees in accordance with the provisions of this Agreement, or due to any other reasons, Pledgee has to recover such taxes and fees payable by Pledgors through any means or in any manner, all costs and expenses (including but not limited to all the taxes, handling fees, management fees, cost of litigation, attorney's fees and insurance premiums) resulting therefrom shall be borne by Pledgors. ARTICLE 13. FORCE MAJEURE 13.1 In the event that the performance of this Agreement is delayed or impeded by "an event of force majeure", the party affected by such event of force majeure shall not be liable for any liability hereunder with respect to the part of performance being delayed or impeded. "An event of force majeure" means any event beyond the reasonable control of the effected party and cannot be avoided even if the affected party has exercised reasonable care, which include but not limited to government actions, acts of God, fire, explosions, geographic changes, storms, flood, earthquakes, tides, lightning and war. Notwithstanding the foregoing, a lack of credit, funds or financing shall not be deemed as a circumstance beyond the reasonable control of an effected party. The party affected by "an event of force majeure" and seeking to relieve the performance liability under this Agreement or any provisions thereof shall notify the other party of its intention for seeking such relief and the measures it will take to reduce the impact of the force majeure as soon as possible. 13.2 The party affected by force majeure shall not be liable for any liability with respect to the part of performance being delayed or impeded if the effected party has taken reasonable efforts to perform this Agreement. As soon as the course of such relief is eliminated, the Parties shall use their best efforts to resume the performance of this Agreement. ARTICLE 14. RESOLUTION OF DISPUTES 14.1 This Agreement shall be governed by and construed according to the laws of PRC. 14.2 In the event of any dispute with respect to the construction and performance of the provisions of this Agreement, the parties shall first try to resolve the dispute through friendly consultations. Upon failure of such consultations, any party may submit the relevant disputes to the China International Economic and Trade Arbitration Commission for arbitration in accordance with its then effective arbitration rules. The arbitration shall be administered in Beijing and the language used for the arbitration shall be Chinese. The arbitration award shall be final and binding on all parties. ARTICLE 15. NOTICES Notices sent by the parties hereto shall be in writing ("in writing" shall include facsimiles and telexes). If sent by hand, such notice shall be deemed to have been delivered upon actual delivery; if sent by telex or facsimile, such notice shall be deemed to have been delivered at the time of transmission. If the date of transmission is not a business day or if transmission is after working hours, then the next business day shall be deemed as the date of delivery. The address of delivery shall be the addresses of the Parties stated on the first page of this Agreement or addresses notified in writing at any time after this Agreement is executed. ARTICLE 16. AMENDMENTS, TERMINATION AND CONSTRUCTION 16.1 No amendment to this Agreement shall be effective unless such amendment has been agreed by all of the Parties and Party A and Party D have obtained necessary authorization and approvals with respect to such amendment (including the approval that Party A must obtain from the audit committee or other independent body established according to the Sarbanes-Oxley Act and the NASDAQ Rules under the board of directors of its overseas holding company -- China Finance Online Co., Limited). 16.2 The provisions to this Agreement are severable from each other. Theiiinvalidity of any provision hereof shall not effect the validity oriienforceability of any other provision hereof. ARTICLE 17. EFFECTIVENESS AND OTHERS 17.1 This Agreement shall take effect upon satisfaction of the following conditions: (1) This Agreement has been executed by all parties hereto; and (2) Pledgors have recorded the Pledge hereunder in the Shareholders' Listiiof Fuhua. 17.2 This Agreement is written in Chinese in three counterparts. Each of the Parties shall hold one counterpart. IN WITNESS WHEREOF, the parties have caused this Agreement executed by their duly authorized representatives in Beijing on the date first above written. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] [execution page only] Pledgor A: Zhiwei Zhao - ---------------------- Signature: Pledgor B: Jun Wang - ---------------------- Signature: Pledgee: China Finance Online(Beijing) Co., Ltd. [COMPANY SEAL] Authorized representative: EX-4.19 6 h02185exv4w19.txt EX-4.19 PURCHASE OPTION AND COOPERATION AGREEMENT EXHIBIT 4.19 [Translated from Chinese Original] PURCHASE OPTION AND COOPERATION AGREEMENT among CHINA FINANCE ONLINE CO. LIMITED ZHIWEI ZHAO WANG JUN and BEIJING FUHUA INNOVATION TECHNOLOGY DEVELOPMENT CO., LTD. CHINA FINANCE ONLINE (BEIJING) CO., LTD. October, 2007 BEIJING, CHINA PURCHASE OPTION AND COOPERATION AGREEMENT This Purchase Option and Cooperation Agreement ("this Agreement") is entered into in Beijing, People's Republic of China (the "PRC") on this 18th day of October, 2007 by and among: Party A: China Finance Online Co., Limited. Address: Unit C, 8/F, East Wing, Sincere Insurance Building 4-6, Hennessy Road Hong Kong Special Administrative Region ("SAR"), China Party B: ZHIWEI ZHAO Address: 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China ID Number: 110102196307100139 Party C: JUN WANG Address: 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China ID Number: 370102197012163311 Party D: Beijing Fuhua Innovation Technology Development Co., Ltd. Address: ROOM 938-941, 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China Party E: China Finance Online (Beijing) Co., Ltd. Address: ROOM 946-949, 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China WHEREAS, (1) Party A, a company with limited liability duly organized and validly existing under the laws of the Hong Kong SAR, provides through its wholly owned subsidiary in the PRC, Party E, certain technical support, strategic consulting and other services to Party D, and currently is a major business partner of Party D; (2) To finance the investment by Party B and Party C in Party D, Party A has entered into loan agreements (hereafter the "Loan Agreement" respectively with Party B and Party C on November 20, 2006 and October 18,2007, providing Party B and Party C with loans of 1,350,000 RMB Yuan and 1,650,000 RMB Yuan, respectively. Pursuant to the Loan Agreement, Party B and Party C has invested the full amount of the loans in Party D's registered capital, and each holds 45% and 55% equity interests in Party D, respectively; (3) The Parties hereto wish to grant Party A the exclusive purchase option to acquire, at any time upon satisfaction of the requirements under the PRC law, the entire or a portion of Party D's share equity/assets owned by Party B and/or Party C. Unless expressly provided otherwise, Party E may exercise all rights granted to Party A hereunder as authorized by Party A NOW AND THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development and after friendly negotiations, the Parties hereby enter into the following agreements pursuant to the provisions of relevant laws and regulations of the PRC ARTICLE 1. DEFINITIONS The terms used in this Agreement shall have the meanings set forth below: 1.1 "This Agreement" means this Purchase Option and Cooperation Agreement and all appendices thereto, including written instruments as originally executed and as may from time to time be amended or supplemented by the Parties hereto through written agreements; 1.2 "The PRC" means, for the purpose of this Agreement, the People's Republic of China, excluding Hong Kong, Taiwan and Macao 1.3 "Date" means the year, month and day. In this Agreement, "within" or "no later than", when used before a year, month or day, shall always include the relevant year, month or day ARTICLE 2. THE GRANT AND EXERCISE OF PURCHASE OPTION 2.1 The Parties hereto agree that Party A shall be granted an exclusive purchase option to acquire, at any time upon satisfaction of the requirements under applicable laws and conditions as agreed in this Agreement (including, without limitation, as under applicable laws, when Party B and/or Party C cease to be Party D's directors or employees, or Party B and/or Party C attempt to transfer their share equity in Party D to any party other than the existing shareholders of Party D), the entire or a portion of Party D's share equity owned by Party B and/or Party C, or the entire or portion of the assets owned by Party D. The purchase option granted hereby shall be irrevocable during the term of this Agreement and may be exercised by Party A or any eligible entity designated by Party A. 2.2 Party A may exercise the aforesaid purchase option by delivering a written notice to any of Party B, Party C and Party D (the "Exercise Notice"). 2.3 Within thirty (30) days of the receipt of the Exercise Notice, Party B, Party C or Party D (as the case may be) shall execute a share/asset transfer contract and other documents (collectively, the "Transfer Documents") necessary to effect the respective transfer of share equity or assets with Party A (or any eligible party designated by Party A). 2.4 When applicable laws permit the exercise of the purchase option provided hereunder and Party A elects to exercise such purchase option, Party B, Party C and Party D shall unconditionally assist Party A to obtain all approvals, permits, registrations, filings and other procedures necessary to effect the transfer of relevant share equity or assets. ARTICLE 3. REPRESENTATIONS AND WARRANTIES 3.1 Each party hereto represents to the other parties that: (1) it has all the necessary rights, powers and authorizations to enter into this Agreement and perform its duties and obligations hereunder; and (2) the execution or performance of this Agreement shall not violate any significant contract or agreement to which it is a party or by which it or its assets are bounded. 3.2 Party B and Party C hereto represent to Party A and Party E that: (1).they are both legally registered shareholders of party D and have paid Party D the full amount of their respective portions of Party D's registered capital required under Chinese law; (2) neither Party B nor Party C has created any mortgage, pledge, secured interests or other form of debt liabilities over the Share Equity other than the Pledge created under the Share Pledge Agreement; and (3) neither Party B nor Party C has sold or will sell to any third party its Share Equity in Party D. 3.3 Party D hereto represents to Party A and Party E that: (1) it is a limited liability company duly registered and validly existing under the PRC law; and (2) its business operations are in compliance with applicable laws of the PRC in all material respect. ARTICLE 4. EXERCISE PRICE When it is permitted by applicable laws, Party A (or any eligible party designated by Party A) shall have the right to acquire, at any time, all of Party D's assets or its share equity owned by Party B and Party C, at a price equal to the sum of the principles of the loans from Party A to Party B and Party C under the Loan Agreement (RMB3,000,000). If Party A (or any eligible party designated by Party A) elects to purchase a portion of Party D's share equity or assets, then the exercise price for such purpose shall be adjusted accordingly based on the percentage of such share equity or assets to be purchased over the total share equity or assets. When Party A (or a qualified entity designated by party A) is to acquire all or a portion of Party D's equity share or assets from Party B and Party C pursuant to this Agreement, Party A has the right to substitute the principle amounts Party B and Party C respectively owe Party A under the Loan Agreement for the purchase prices payable to Party B and Party C, respectively. When acquiring share equity or assets from Party B, Party C, or Party D pursuant to this Agreement, Party A shall pay an actual exercise price based on the exercise price under applicable Chinese laws or requirements of relevant authorities, if the exercise price under applicable laws or requirements of relevant authorities is higher than the exercise price under this Agreement. ARTICLE 5. COVENANTS The Parties further agree as follows: 5.1 Before Party A has acquired all the equity/assets of Party D by exercising the purchase option provided hereunder, Party D shall not: 5.1.1 sell, assign, mortgage or otherwise dispose of, or create any encumbrance on, any of its assets, operations or any legal or beneficiary interests with respect to its revenues (unless such sale, assignment, mortgage, disposal or encumbrance is relating to its daily operation or has been disclosed to and agreed by Party A in writing); 5.1.2 enter into any transaction which may materially affect its assets, liability, operation, equity or other legal rights (unless such transaction is relating to its daily operation or has been disclosed to and agreed by Party A in writing); and 5.1.3 distribute any dividend to its shareholders in any manner. 5.2 Before Party A has acquired all the equity/assets of Party D by exercising the purchase option provided hereunder, Party B and/or Party C shall not individually or collectively: 5.2.1 supplement, alter or amend the articles of association of Party D in any manner to the extent that such supplement, alteration or amendment may have a material effect on Party D's assets, liability, operation, equity or other legal rights (except for pro rata increase of registered capital mandated by applicable laws); 5.2.2 cause Party D enter into any transaction to the extent such transaction may have a material effect on Party D's assets, liability, operation, equity or other legal rights (unless such transaction is relating to Party D's daily operation or has been disclosed to and agreed by Party A in writing); and 5.2.3 cause Party D's board of directors adopt any resolution on distributing dividends to its shareholders. 5.3 After the execution of this Agreement, Party B and Party C (the "Principals") shall each execute and deliver a proxy to the agents (the "Agents") to the satisfaction of Party A to grant the Agents all voting rights as shareholders of Party D, including without limitations the right to appoint and elect Party D's directors, general manager and other senior officers in Party D's shareholders meetings. The initial term of such proxies shall be twenty (20) years, and the initial term shall be renewed automatically upon expiry of the proxies unless Party A notifies the Principals in writing thirty (30) days prior to the expiry date to terminate the proxies. Such proxies shall be based on the conditions that the Agents are Chinese citizens employed by Party A or Party E and shall be subject to Party A's consent. Once the Agents cease to be employed by Party A or Party A delivers a written notice to the Principals requesting the proxies to be terminated, the Principals shall revoke the relevant proxy immediately and grant the same rights as provided in the proxies to other PRC citizens employed and designed by Party A. The Agents have agreed to act with due care and diligence in exercising their rights under the proxies and indemnify and keep the Principals harmless from any loss or damages caused by any action in connection with exercise of their rights under the proxies (unless any loss or damage is caused by the Principals' own intentional or material negligent actions). 5.4 Party B and Party C shall, to the extent permitted by applicable laws, cause Party D's operational term to be extended to equal the operational term of Party A. 5.5 Party A shall provide or arrange other parties to provide financings to Party D to the extent Party D needs such financing to finance its operation. In the event that Party D is unable to repay such financing due to its losses, Party A shall waive or cause the relevant parties to waive all recourse against Party D with respect to such financing. 5.6 To the extent Party B and/or Party C are subject to any legal or economic liabilities to any institution or individual other than Party A or Party E as a result of performing their obligations under this Agreement or any other agreements between them and Party A or Party E, Party E shall provide all support necessary to enable Party B and/or Party C to duly perform their obligations under this Agreement and any other agreements and to hold Party B and/or Party C harmless against any loss or damage caused by their performance of obligations under such agreements. ARTICLE 6. CONFIDENTIALITY Each Party shall keep confidential all the content of this Agreement. Without the prior consent of all Parties, no Party shall disclose any content of this Agreement to any other party or make any public announcements with respect to any content of this Agreement. Notwithstanding the forgoing provisions of this Article 6, the following disclosure shall be permitted: (i) disclosure made pursuant to any applicable laws or any rules of any stock exchange; (ii) disclosure of information which has become public information other than due to any breach by the disclosing party; (iii) disclosure to any Party's shareholders, legal counsel, accountants, financial advisors or other professional advisors, or (iv) disclosure to any potential purchasers of a Party or its shareholders' equity/assets, its other investors, debts or equity financing providers, provided that the receiving party of confidential information has agreed to keep the relevant information confidential (such disclosure shall be subject to the consent of Party A in the event that Party A is not the potential purchaser). ARTICLE 7. APPLICABLE LAW AND EVENTS OF DEFAULT The execution, effectiveness, interpretation, performance and dispute resolution of this Agreement shall be governed by the laws of the PRC. Any violation of any provision hereof, incomplete performance of any obligation provided hereunder, any misrepresentation made hereunder, material concealment or omission of any material fact or failure to perform any covenants provided hereunder by any Party shall constitute an event of default. The defaulting Party shall assume all the legal liabilities pursuant to the applicable laws. ARTICLE 8. DISPUTE RESOLUTION 8.1 Any dispute arising from the performance of this Agreement shall be first subject to the Parties' friendly consultations. In the event any dispute cannot be solved by friendly consultations, the relevant dispute shall be submitted for arbitration; 8.2 The arbitration shall be administered by the Beijing branch of China International Economic and Trade Arbitration Commission in accordance with the then effective arbitration rules of the Commission. 8.3 The arbitration award shall be final and binding on the Parties. The costs of the arbitration (including but not limited to arbitration fee and attorney fee) shall be borne by the losing party, unless the arbitration award stipulates otherwise. ARTICLE 9. EFFECTIVENESS This Agreement shall be effective upon the execution hereof by all Parties hereto and shall remain effective thereafter. This Agreement may not be terminated without the unanimous consent of all the Parties except Party A may, by giving a thirty (30) days prior notice to the other Parties hereto, terminate this Agreement. ARTICLE 10. AMENDMENT All Parties hereto shall fulfill their respective obligations hereunder. No amendment to this Agreement shall be effective unless such amendment has been agreed by all of the Parties and Party A and Party D have obtained necessary authorization and approvals with respect to such amendment (including the approval that Party A must obtain from the audit committee or other independent body established under the Sarbanes-Oxley Act, the NASDAQ Rules under the board of directors of its overseas holding company - China Finance Online Co., Limited). ARTICLE 11. COUNTERPARTS This Agreement is executed in five (5) counterparts. Party A, Party B, Party C, Party D and Party E shall each hold one counterpart. ARTICLE 12. MISCELLANEOUS 12.1 Party B and Party C's obligations, covenants and liabilities to Party A hereunder are joint and several, and Party B and Party C shall assume joint and several liabilities with respect to such obligations, covenants and liabilities. With respect to Party A, a default by Party B shall automatically constitute a default by Party C, and vice versa; 12.2 The title and headings contained in this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of any provision of this Agreement; 12.3 The Parties may enter into supplementary agreements to address any issue not covered by this Agreement. The supplementary agreements so entered shall be an appendix hereto and shall have the same legal effect as this Agreement. [execution page only] Party A: China Finance Online Co. Limited [COMPANY SEAL] Authorized Representative (Signature): [ ] Party B: ZHIWEI ZHAO (Signature): Party C: JUN WANG (Signature): Party D: Beijing Fuhua Innovation Technology Development Co., Ltd. [COMPANY SEAL] Authorized Representative (Signature): Party E: China Finance Online (Beijing) Co., Ltd. [COMPANY SEAL] Authorized Representative (Signature): EX-4.20 7 h02185exv4w20.txt EX-4.20 PURCHASE OPTION AND COOPERATION AGREEMENT EXHIBIT 4.20 [Translated from Chinese Original] PURCHASE OPTION AND COOPERATION AGREEMENT among CHINA FINANCE ONLINE (BEIJING) CO., LTD. ZHIWEI ZHAO WANG JUN and BEIJING FUHUA INNOVATION TECHNOLOGY DEVELOPMENT CO., LTD. CHINA FINANCE ONLINE CO. LIMITED March 2008 BEIJING, CHINA PURCHASE OPTION AND COOPERATION AGREEMENT This Purchase Option and Cooperation Agreement ("this Agreement") is entered into in Beijing, People's Republic of China (the "PRC") on this March 3, 2008 by and among: Party A CHINA FINANCE ONLINE (BEIJING) CO., LTD. Address Room 946-949, Tower C, Corporation Mansion, No. 35 Financial Avenue Xicheng District, Beijing 100032 China Party B: JUN WANG Address: 9/F.,Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China ID Number: 370102197012163311 Party C: ZHIWEI ZHAO Address: 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China ID Number: 110102196307100139 Party D: BEIJING FUHUA INNOVATION TECHNOLOGY DEVELOPMENT CO., LTD. Address: Room 938-941, 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China Party E: CHINA FINANCE ONLINE CO. LIMITED Registered Address: Unit C, 8/F East Wing, Sincere Insurance Building 406, Hennessey Road, Hong Kong SAR, China WHEREAS, (1) Party E, a company with limited liability duly organized and validly existing under the laws of the Hong Kong SAR, provides through its wholly owned subsidiary in the PRC, Party A, certain technical support, strategic consulting and other services to Party D, and currently is a major business partner of Party D; (2) To finance the investment by Party B and Party C in Party D, Party A has entered into loan agreements (hereafter the "Loan Agreement" respectively with Party B and Party C on March 2008, providing Party B and Party C with loans of 3,850,000 RMB Yuan and 3,150,000 RMB Yuan, respectively. Pursuant to the Loan Agreement, Party B and Party C have invested the full amount of the loans in Party D's registered capital; (3) For securing the payment obligation of Party D to Party A under the several agreements, Party B and Party C entered into a Share Pledge Agreement with Party A in March 2008 (" Share Pledge Agreement") by which they pledge their holding shares in Party D to Party A, and (4) The Parties hereto wish to grant Party A the exclusive purchase option to acquire, at any time upon satisfaction of the requirements under the PRC law, the entire or a portion of Party D's share equity/assets owned by Party B and/or Party C by the Loan. Unless expressly provided otherwise, Party E may exercise all rights granted to Party A hereunder as authorized by Party A NOW AND THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development and after friendly negotiations, the Parties hereby enter into the following agreements pursuant to the provisions of relevant laws and regulations of the PRC ARTICLE 1. DEFINITIONS The terms used in this Agreement shall have the meanings set forth below: 1.1 "This Agreement" means this Purchase Option and Cooperation Agreement and all appendices thereto, including written instruments as originally executed and as may from time to time be amended or supplemented by the Parties hereto through written agreements; 1.2 "The PRC" means, for the purpose of this Agreement, the People's Republic of China, excluding Hong Kong, Taiwan and Macao 1.3 "Date" means the year, month and day. In this Agreement, "within" or "no later than", when used before a year, month or day, shall always include the relevant year, month or day ARTICLE 2. THE GRANT AND EXERCISE OF PURCHASE OPTION 2.1 The Parties hereto agree that Party A shall be granted an exclusive purchase option to acquire, at any time upon satisfaction of the requirements under applicable laws and conditions as agreed in this Agreement (including, without limitation, as under applicable laws, when Party B and/or Party C cease to be Party D's directors or employees, or Party B and/or Party C attempt to transfer their share equity in Party D to any party other than the existing shareholders of Party D), the entire or a portion of Party D's share equity owned by Party B and/or Party C, or the entire or portion of the assets owned by Party D. The purchase option granted hereby shall be irrevocable during the term of this Agreement and may be exercised by Party A or any eligible entity designated by Party A. 2.2 Party A may exercise the aforesaid purchase option by delivering a written notice to any of Party B, Party C and Party D (the "Exercise Notice"). 2.3 Within thirty (30) days of the receipt of the Exercise Notice, Party B, Party C or Party D (as the case may be) shall execute a share/asset transfer contract and other documents (collectively, the "Transfer Documents") necessary to effect the respective transfer of share equity or assets with Party A (or any eligible party designated by Party A). 2.4 When applicable laws permit the exercise of the purchase option provided hereunder and Party A elects to exercise such purchase option, Party B, Party C and Party D shall unconditionally assist Party A to obtain all approvals, permits, registrations, filings and other procedures necessary to effect the transfer of relevant share equity or assets. ARTICLE 3. REPRESENTATIONS AND WARRANTIES 3.1 Each party hereto represents to the other parties that: (1) it has all the necessary rights, powers and authorizations to enter into this Agreement and perform its duties and obligations hereunder; and (2) the execution or performance of this Agreement shall not violate any significant contract or agreement to which it is a party or by which it or its assets are bounded. 3.2 Party B and Party C hereto represent to Party A and Party E that: (1).they are both legally registered shareholders of party D and have paid Party D the full amount of their respective portions of Party D's registered capital required under Chinese law; (2) neither Party B nor Party C has created any mortgage, pledge, secured interests or other form of debt liabilities over the Share Equity other than the Pledge created under the Share Pledge Agreement; and (3) neither Party B nor Party C has sold or will sell to any third party its Share Equity in Party D. 3.3 Party D hereto represents to Party A and Party E that: (1) it is a limited liability company duly registered and validly existing under the PRC law; and (2) its business operations are in compliance with applicable laws of the PRC in all material respect. ARTICLE 4. EXERCISE PRICE When it is permitted by applicable laws, Party A (or any eligible party designated by Party A) shall have the right to acquire, at any time, all of Party D's assets or its share equity owned by Party B and Party C, at a price equal to the sum of the principles of the loans from Party A to Party B and Party C under the Loan Agreement. If Party A (or any eligible party designated by Party A) elects to purchase a portion of Party D's share equity or assets, then the exercise price for such purpose shall be adjusted accordingly based on the percentage of such share equity or assets to be purchased over the total share equity or assets. When Party A (or a qualified entity designated by party A) is to acquire all or a portion of Party D's equity share or assets from Party B and Party C pursuant to this Agreement, Party A has the right to substitute the principle amounts Party B and Party C respectively owe Party A under the Loan Agreement for the purchase prices payable to Party B and Party C, respectively. When acquiring share equity or assets from Party B, Party C, or Party D pursuant to this Agreement, Party A shall pay an actual exercise price based on the exercise price under applicable Chinese laws or requirements of relevant authorities, if the exercise price under applicable laws or requirements of relevant authorities is higher than the exercise price under this Agreement. ARTICLE 5. COVENANTS The Parties further agree as follows: 5.1 Before Party A (or any eligible party designated by Party A) has acquired all the equity/assets of Party D by exercising the purchase option provided hereunder, Party D shall not: 5.1.1 sell, assign, mortgage or otherwise dispose of, or create any encumbrance on, any of its assets, operations or any legal or beneficiary interests with respect to its revenues (unless such sale, assignment, mortgage, disposal or encumbrance is relating to its daily operation or has been disclosed to and agreed by Party A in writing); 5.1.2 enter into any transaction which may materially affect its assets, liability, operation, equity or other legal rights (unless such transaction is relating to its daily operation or has been disclosed to and agreed by Party A in writing); and 5.1.3 distribute any dividend to its shareholders in any manner. 5.2 Before Party A (or any eligible party designated by Party A) has acquired all the equity/assets of Party D by exercising the purchase option provided hereunder, Party B and/or Party C shall not individually or collectively: 5.2.1 supplement, alter or amend the articles of association of Party D in any manner to the extent that such supplement, alteration or amendment may have a material effect on Party D's assets, liability, operation, equity or other legal rights (except for pro rata increase of registered capital mandated by applicable laws); 5.2.2 cause Party D enter into any transaction to the extent such transaction may have a material effect on Party D's assets, liability, operation, equity or other legal rights (unless such transaction is relating to Party D's daily operation or has been disclosed to and agreed by Party A in writing); and 5.2.3 cause Party D's board of directors adopt any resolution on distributing dividends to its shareholders. 5.3 After the execution of this Agreement, Party B and Party C (the "Principals") shall each execute and deliver a proxy to the agents (the "Agents") to the satisfaction of Party A to grant the Agents all voting rights as shareholders of Party D, including without limitations the right to appoint and elect Party D's directors, general manager and other senior officers in Party D's shareholders meetings. The initial term of such proxies shall be twenty (20) years, and the initial term shall be renewed automatically upon expiry of the proxies unless Party A notifies the Principals in writing thirty (30) days prior to the expiry date to terminate the proxies. Such proxies shall be based on the conditions that the Agents are Chinese citizens employed by Party A or Party E and shall be subject to Party A's consent. Once the Agents cease to be employed by Party A or Party A delivers a written notice to the Principals requesting the proxies to be terminated, the Principals shall revoke the relevant proxy immediately and grant the same rights as provided in the proxies to other PRC citizens employed and designed by Party A. The Agents have agreed to act with due care and diligence in exercising their rights under the proxies and indemnify and keep the Principals harmless from any loss or damages caused by any action in connection with exercise of their rights under the proxies (unless any loss or damage is caused by the Principals' own intentional or material negligent actions). 5.4 Party B and Party C shall, to the extent permitted by applicable laws, cause Party D's operational term to be extended to equal the operational term of Party A. 5.5 Party A shall provide or arrange other parties to provide financings to Party D to the extent Party D needs such financing to finance its operation. In the event that Party D is unable to repay such financing due to its losses, Party A shall waive or cause the relevant parties to waive all recourse against Party D with respect to such financing. 5.6 To the extent Party B and/or Party C are subject to any legal or economic liabilities to any institution or individual other than Party A or Party E as a result of performing their obligations under this Agreement or any other agreements between them and Party A or Party E, Party E shall provide all support necessary to enable Party B and/or Party C to duly perform their obligations under this Agreement and any other agreements and to hold Party B and/or Party C harmless against any loss or damage caused by their performance of obligations under such agreements. ARTICLE 6. CONFIDENTIALITY Each Party shall keep confidential all the content of this Agreement. Without the prior consent of all Parties, no Party shall disclose any content of this Agreement to any other party or make any public announcements with respect to any content of this Agreement. Notwithstanding the forgoing provisions of this Article 6, the following disclosure shall be permitted: (i) disclosure made pursuant to any applicable laws or any rules of any stock exchange; (ii) disclosure of information which has become public information other than due to any breach by the disclosing party; (iii) disclosure to any Party's shareholders, legal counsel, accountants, financial advisors or other professional advisors, or (iv) disclosure to any potential purchasers of a Party or its shareholders' equity/assets, its other investors, debts or equity financing providers, provided that the receiving party of confidential information has agreed to keep the relevant information confidential (such disclosure shall be subject to the consent of Party A in the event that Party A is not the potential purchaser). ARTICLE 7. APPLICABLE LAW AND EVENTS OF DEFAULT The execution, effectiveness, interpretation, performance and dispute resolution of this Agreement shall be governed by the laws of the PRC. Any violation of any provision hereof, incomplete performance of any obligation provided hereunder, any misrepresentation made hereunder, material concealment or omission of any material fact or failure to perform any covenants provided hereunder by any Party shall constitute an event of default. The defaulting Party shall assume all the legal liabilities pursuant to the applicable laws. ARTICLE 8. DISPUTE RESOLUTION 8.1 Any dispute arising from the performance of this Agreement shall be first subject to the Parties' friendly consultations. In the event any dispute cannot be solved by friendly consultations, the relevant dispute shall be submitted for arbitration; 8.2 The arbitration shall be administered by the Beijing branch of China International Economic and Trade Arbitration Commission in accordance with the then effective arbitration rules of the Commission. 8.3 The arbitration award shall be final and binding on the Parties. The costs of the arbitration (including but not limited to arbitration fee and attorney fee) shall be borne by the losing party, unless the arbitration award stipulates otherwise. ARTICLE 9. EFFECTIVENESS This Agreement shall be effective upon the execution hereof by all Parties hereto and shall remain effective thereafter. This Agreement may not be terminated without the unanimous consent of all the Parties except Party A may, by giving a thirty (30) days prior notice to the other Parties hereto, terminate this Agreement. ARTICLE 10. AMENDMENT All Parties hereto shall fulfill their respective obligations hereunder. No amendment to this Agreement shall be effective unless such amendment has been agreed by all of the Parties and Party A and Party D and Party E have obtained necessary authorization and approvals with respect to such amendment (including the approval that Party E must obtain from the audit committee or other independent body established under the Sarbanes-Oxley Act, the NASDAQ Rules under the board of directors of its overseas holding company - China Finance Online Co., Limited). ARTICLE 11. COUNTERPARTS This Agreement is executed in five (5) counterparts. Party A, Party B, Party C, Party D and Party E shall each hold one counterpart. ARTICLE 12. MISCELLANEOUS 12.1 Party B and Party C's obligations, covenants and liabilities to Party A hereunder are joint and several, and Party B and Party C shall assume joint and several liabilities with respect to such obligations, covenants and liabilities. With respect to Party A, a default by Party B shall automatically constitute a default by Party C, and vice versa. 12.2 The title and headings contained in this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of any provision of this Agreement. 12.3 This Agreement shall substitute any option purchase agreement entered into prior to the execution of this Agreement between Party A (if applicable), Party D, or Party E (if applicable) and the shareholders of Party B or Party C which specifies when it is permitted by applicable laws, it shall have the right to acquire, at any time, all or part of Party D's assets or its share equity owned by such shareholders. [execution page only] Party A: China Finance Online (Beijing) Co. Limited [COMPANY SEAL] Authorized Representative (Signature): [ ] Party B: JUN WANG (Signature): Party C: ZHIWEI ZHAO (Signature): Party D: Beijing Fuhua Innovation Technology Development Co., Ltd. [COMPANY SEAL] Authorized Representative (Signature): Party E: China Finance Online Co., Ltd. [COMPANY SEAL] Authorized Representative (Signature): EX-4.21 8 h02185exv4w21.txt EX-4.21 CAPITAL INCREASE AGREEMENT EXHIBIT 4.21 [Translated from Chinese Original] CAPITAL INCREASE AGREEMENT OF BEIJING FUHUA INNOVATION TECHNOLOGY DEVELOPMENT CO., LTD. MARCH 2008 This Agreement is entered into in Beijing as of March 3, 2008 by and among the following parties: PARTY A: BEIJING FUHUA INNOVATION TECHNOLOGY DEVELOPMENT CO., LTD. Registered Address: Room 938-941, Power C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, the People's Republic of China (the "PRC") Postal Code: 100032 PARTY B: WANG JUN Address: Floor 9, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, the PRC ID No. :370102197012163311 PARTY C: ZHAO ZHIWEI Address: Floor 9, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, the PRC ID No. :110102196307100139 Whereas A. Party A is a limited liability company duly organized and validly existing under the laws of the PRC, with a registered capital of RMB 3,000,000. B. Party B and Party C are current shareholders of Party A; Party B holds RMB 1.65 million contribution (55%) in the registered capital of Party A, and Party C holds RMB 1.35 million contribution (45%) in the registered capital of Party A. C Party A intends to increase its registered capital, and Party B and Party C agree to subscribe and contribute to the newly increased registered capital in accordance with this Agreement. THEREFORE, in accordance with the principle of fairness and mutual benefit, through friendly negotiation, the Parties hereby enter into the following agreements: 1. Definitions and Interpretations 1.1 Definitions Unless otherwise specified herein, the terms used in this Agreement shall have the meanings set forth below: "Articles of Association" means the amended Articles of Association, which shall reflect the terms of this Agreement executed by the Parties. "Company" means Beijing Fuhua Innovation Technology Development Co., Ltd. "Effective Date" means the date when this Agreement takes effect pursuant to Article 5.1 herein. "Newly Increased Registered Capital" means the registered capital Party A intends to increase, i.e. RMB 7 million. "Increased Registered Capital" means the registered capital of the Company after the capital increase pursuant to this Agreement, i.e. RMB 10 million. 1.2 Interpretation The headings of articles herein are provided for the purpose of reference. Such headings shall in no event be used or affected interpretations of the terms herein. 2. Capital Increase 2.1 Party A has the registered capital of RMB 3 million and has decided to increase the registered capital to RMB 10 million ("Increased Registered Capital"), in which the amount of the newly increased registered capital is RMB 7 million ("Newly Increased Registered Capital"). 2.2 Party B agrees to contribute RMB 3.85 million to Party B for the subscription of the Newly Increased Registered Capital; Party C agrees to contribute RMB 3.15 million to Party B for the subscription of the Newly Increased Registered Capital. After completing the above capital increase, Party B will account for RMB 5.50 million (55%) in the registered capital of Party A, and Party C will account for RMB 4.50 million (45%) in the registered capital of Party A. 2.3 Party A agrees Party B and Party C to subscribe for the Newly Increased Registered Capital of Party A pursuant to this Agreement. 2.4 The Parties shall amend the Articles of Association of Party A and other relevant legal documents pursuant to this Agreement, and assist Party A in completing the registration procedures at the industry and commerce authorities. 3. Closing 3.1 Party B and Party C shall contribute all the subscriptions of the Newly Increased Registered Capital to Party A in one payment prior to March 10, 2008. 3.2 After receiving the payment for the Newly Increased Registered Capital from Party B and Party C, Party A shall immediately arrange a PRC certified accountant to make the capital verification of the capital contributed by Party B and Party C within the time period specified by the Articles of Association, and issue a capital verification report and capital contribution certification to Party B and Party C. 4. Representation and Warranties Each party hereby represents to the other parties that: 4.1 It has all the necessary rights, powers and authorizations to enter into this Agreement and perform its duties and obligations hereunder. 4.2 The execution or performance of this Agreement shall not violate any significant contract or agreement to which it is a party or by which it is or its assets are bounded. 4.3 This Agreement will constitute legal, valid and binding obligations to such Party, and such obligations can be enforced upon the execution of this Agreement. 5. Effectiveness 5.1 The agreement shall be effective upon execution ("Effective Date"). 6. Breach of this Agreement 6.1 Any non performance of any provision hereof, incomplete performance of any obligation provided hereunder by any Party shall constitute an event of default. The defaulting Party shall assume all the losses of other Parties suffered. If any violation of the obligations hereunder or the misrepresentation made in the representation, undertakings and warranties hereunder fail to be remedied effectively within 15 days after the non-breaching party sent a written notice ( or such other longer time as agreed by the non-breach party in writing), the non-breaching party is entitled to terminate this Agreement immediately unilaterally. The defaulting Party shall assume all the losses of other Parties suffered. 7. Dispute Resolution 7.1 Any dispute arises from the interpretation or performance of terms hereof by the parties, shall be settled through friendly consultation. If the parties fail to make an written agreement after consultation, the dispute shall be submitted for arbitration in accordance with the agreement. The arbitration shall be final and exclusive. Unless otherwise expressly stipulated herein, any party waives expressly its right to submit a dispute to court for a legal action, and the waiver is irrevocable. 7.2 The arbitration shall be submitted to China International Economic and Trade Arbitration Committee ("Arbitration Committee") to be arbitrated in accordance with then-in-force arbitration rules. The place of arbitration shall be Beijing. Unless otherwise stipulated in the arbitration award, the arbitration fee (including reasonable attorney fees and expenses) shall be borne by the losing party. 8. Miscellaneous 8.1 The failure or delay of any party hereof to exercise any right hereunder shall not be deemed as a waiver thereof, nor any single or partial exercise of any right preclude further exercise thereof in future by the party. 8.2 Each party hereunder concludes the agreement with legal purpose. Each term hereof is severable and independent from the others. If at any time one or more of such terms is or becomes invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining terms hereof shall not in any way be affected thereby; and the parties shall make every endeavor to negotiate and arrive at new terms to substitute the invalid, illegal and unenforceable terms, and preserve as near as possible business purposes of the original terms. 8.3 Matters not covered in the agreement shall be dealt with by the Parties otherwise, pursuant to Chinese laws. 8.4 The agreement is executed in five original copies, and are equally authentic. Each party hereto shall hold one copy, and the remaining two shall be used for relevant industry and commerce registration procedures. (The reminder of this page is intentionally left blank.) This Agreement is executed by the following parties on March 3, 2008: Party A: Beijing Fuhua Innovation Technology Development Co., Ltd. SEAL: Party B: Wang Jun Signature: Party C: Zhao Zhiwei Signature: EX-4.22 9 h02185exv4w22.txt EX-4.22 LOAN AGREEMENT EXHIBIT 4.22 [Translated from Chinese Original] LOAN AGREEMENT The Loan Agreement (the "Agreement") is entered into as of March 3, 2008 between the following parties: Lender: CHINA FINANCE ONLINE CO., (BEIJING) LTD. Registered Address: Room 946-949, Tower C, Corporation Mansion, No.35 Financial Street Xicheng District, Beijing 100032 China. Legal Representative: Zhao Zhiwei Borrower A: JUN WANG Address: 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China ID No.: 370102197012163311 Borrower: ZHAO ZHIWEI Address: 9/F, Tower C, Corporation Mansion, No. 35 Financial Avenue Xicheng District, Beijing 100032 China ID No. :110102196307100139 (Borrower B and Borrower C are collectively referred to as "Borrowers"). WHEREAS, (1) Borrowers enter into the Capital Increase Agreement with Fuhua Innovation Technology Development Co., Ltd. (the "Company"), whereby the Borrowers will contribute RMB 7 million fort he subscription of the newly increased registered capital of the Company; (2) Borrowers wishes to borrow a loan from Lender to finance his subscription for the newly increased registered capital of the Company; (3) Lender wishes to offer such Loan to Borrowers. THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development, through friendly negotiation, the Parties hereby enter into the following agreements pursuant to relevant Chinese laws and regulations: ARTICLE 1. LOAN 1.1 Lender agrees to provide the Loan to Borrowers as follows: providing RMB 3.85 million to Borrower A, and RMB 3.15 million to Borrow B. 1.2 Term for such Loan shall be ten (10) years which may be extended upon the agreement of the Parties (the "Term"). 1.3 Notwithstanding the foregoing, in the following circumstances, Borrowers shall repay the Loan regardless if the Term has expired: (1) Borrower deceases or becomes a person without legal capacity or with limited legal capacity; (2) Borrower commits a crime or is involved in a criminal act; or (3) Lender or its designated assignee can legally purchase Borrower's interest in the Company under the PRC law and Lender chooses to do so. 1.4 Subject to the satisfaction of the conditions precedent as specified in Article 2, Lender shall remit the amount of the Loan direct to the bank account designated by Borrowers payment within 7 days after receiving the written request of payment of Borrowers. Borrowers shall send a written receipt of the Loan to Lender within 1 days after receiving the Loan. 1.5 The Loan shall only be used by Borrowers to the contribution of the newly increased registered capital of the Company. Without Lender's prior written consent, Borrowers shall not use the Loan for any other purpose or transfer or pledge his interest in the Company to any third party. 1.6 Borrowers can only repay the Loan by transferring all of his interest in the Company obtained by using the Loan to Lender or a third party designated by Lender when such transfer is permitted under the PRC law. 1.7 Lender and Borrowers hereby jointly agree and confirm that Lender has the right to, but has no obligation to, purchase or designate a third party (legal person or natural person) to purchase all or part of Borrowers' shares in the Company at a price equal to the amount of the Loan when such purchase is allowed under the PRC law. If Lender or the third party assignee designated by Lender only purchases part of Borrowers' interest in the Company, the purchase price shall be reduced on a pro rata basis. 1.8 In the event when Borrowers transfer their shares in the Company to Lender or a third party transferee designated by Lender, (i) if the actual transfer price paid by Lender or the third party transferee equals or is less than the principal amount of the Loan, the Loan shall be deemed as interest free; or (ii) if the actual transfer price paid by Lender or the third party transferee is higher than the principal amount of the Loan, the amount exceeding the principal amount of the Loan shall be deemed as an interest accrued on the Loan and paid by Borrowers to Lender in full. ARTICLE 2. CONDITIONS PRECEDENT TO DISBURSEMENT The following conditions must be satisfied before the Loan is disbursed to Borrowers: 2.1 Lender has received the request of payment sent by Borrowers pursuant to Article 1.2; 2.2 Borrowers and Lender have executed the Share Pledge Agreement to the satisfaction of Lender; 2.3 Borrowers and Lender have executed the Option Purchase and Cooperative Agreement to the satisfaction of Lender; 2 2.4 The above Share Pledge Agreement and the Option Purchase and Cooperative Agreement have been and remain effective. The parties to the contracts or agreements have not materially breached any term or condition thereof, and all the necessary governmental approval, consent, authorization and registration have been obtained or completed. 2.5 The representations and warranties specified in Article 3 herein is true and accurate on the date of Lender's receiving the request of payment and the date of making the payment. 2.6 Borrowers have not materially breached any terms or conditions hereof. ARTICLE 3. REPRESENTATION AND WARRANTIES 3.1 Lender hereby represents and warrants to Borrowers that: (a) Lender is a company registered and validly existing under the laws of China; (b) Lender has full right, power and all necessary approvals and authorizations to execute and perform this Agreement; (c) the execution and the performance of this Agreement will not contravene any provision of law applicable to Lender or any contractual restriction binding on or affecting him; and (d) this Agreement shall constitute the legal, valid and binding obligations of Lender, which is enforceable against Lender in accordance with its terms upon its execution. 3.2 Borrowers hereby represent and warrant to Lender that: (a) Borrowers have full right, power and all necessary and appropriate approval and authorization to execute and perform this Agreement; (c) the execution and the performance of this Agreement will not contravene any provision of law applicable to Borrowers or any contractual restriction binding on or affecting Borrowers; (d) this Agreement shall constitute the legal and valid obligations of Borrowers, which is enforceable against Borrowers in accordance with its terms upon its execution; and (e) there are no legal or other proceedings before any court, tribunal or other regulatory authority pending or threatened against Borrowers. 3 ARTICLE 4. CONFIDENTIALITY Without prior approval of the parties, any party shall keep confidential the content of the agreement, and shall not disclose to any other person the content of the agreement or make any public disclosure of the content hereof. However, the article does not make any restrictions on (i) any disclosure made in accordance with relevant laws or regulations of any stock exchange market; (ii) any disclosed information which may be obtained through public channels, and is not caused so by the defaulting of the disclosing party; (iii) any disclosure to shareholders, legal consultants, accountants, financial consultants and other professional consultants of any parties; or (iv) disclosure made to one party's potential buyer of shares/assets, other investors, debt or share financing providers, and the receiving party shall make proper confidentiality undertakings (in the event that the transfer party is not Lender, the approval from Lender shall be obtained as well). ARTICLE 5. GOVERNING LAW AND LIABILITY FOR BREACH 5.1 The execution, validity, interpretation, performance, implementation, termination and settlement of disputes of this Agreement shall be governed by the laws of People's Republic of China. 5.2 Any violation of any provision hereof, incomplete performance of any obligation provided hereunder, any misrepresentation made hereunder, material concealment or omission of any material fact or failure to perform any covenants provided hereunder by any Party shall constitute an event of default. The defaulting Party shall assume all the legal liabilities pursuant to the applicable laws. ARTICLE 6. SETTLEMENT OF DISPUTES 6.1 Any dispute arising from the performance of this Agreement shall be first subject to the Parties' friendly consultations. If such consultation fails, such dispute can be submitted to arbitration. 6.2 The arbitration shall be administered by the Beijing branch of China International Economic and Trade Arbitration Commission in accordance with the then effective arbitration rules of the Commission in Beijing. 6.3 The arbitration award shall be final and binding on the Parties. The costs of the arbitration (including but not limited to arbitration fee and attorney fee) shall be borne by the losing party, unless the arbitration award stipulates otherwise. ARTICLE 7.MISCELLANEOUS 7.1 This Agreement shall take effect after the execution of the Parties. 7.2 Upon the effectiveness of the agreement, the parties shall fully perform the agreement. Any modifications of the agreement shall only be effective in written form, through consultations of the parties. 7.3 This Agreement is executed in three (3) counterparts. Each Party shall each hold one counterpart. (The reminder of this page is intentionally left blank.) 4 [Signature page, no body text] LENDER: CHINA FINANCE ONLINE (BEIJING) CO., LTD. Seal: Authorized Representative: BORROWER A: Wang Jun (Signature) BORROWER B: Zhao Zhiwei (Signature) 5 EX-4.23 10 h02185exv4w23.txt EX-4.23 SHARE PLEDGE AGREEMENT EXHIBIT 4.23 [Translated from Chinese Original] SHARE PLEDGE AGREEMENT This Share Pledge Agreement (this "Agreement") is executed by and among the following parties on March 3, 2008. Pledgor A: Zhiwei Zhao ID No.: 110102196307100139 Address: 9/F.,Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China Pledgor B: Jun Wang ID No.: 370102197012163311 Address: 9/F.,Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China Pledgee: China Finance Online (Beijing) Co., Ltd. Address: ROOM 946-949, 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing 100032 China Unless otherwise provided hereunder, Pledgor A and Pledgor B shall hereinafter be referred to collectively as the "Pledgors". WHEREAS: 1. Zhiwei Zhao, Pledgor A, and Jun Wang, Pledgor B, are both citizens of the People's Republic of China (the "PRC"), and each holds 45% and 55% interests in Beijing Fuhua Innovation Technology Development Co., Ltd. ("Fuhua"), respectively. Fuhua is a company registered in Beijing, PRC, engaged in the business of network operation. 2. Pledgee is a wholly foreign-own enterprise registered in Beijing, PRC, with approvals from the relevant PRC authorities to engage in the business of, among others, internet technology consulting and technology services. Fuhua and Pledgee have entered into the agreements (collectively, the "Service Agreements"). 3. To secure the fees payable under the Service Agreements (the "Service Fee") from Fuhua to Pledgee, Pledgors hereby pledge their respective interests in Fuhua to Pledgee. Pursuant to the provisions of the Service Agreements, Pledgors and Pledgee have agreed to enter into this Agreement according to the following terms and conditions. ARTICLE 1. DEFINITIONS Unless otherwise provided herein, the terms below shall have the following meanings: 1.1 "Pledge Rights" means the rights set forth in Article 2 of this Agreement. 1.2 "Share Equity" means the equity interest held by Pledgors in Fuhua. 1.3 "Pledged Property" means the share interest and the dividends deriving therefrom pledged by Pledgors to Pledgee under this Agreement. 1.4 "Secured Indebtedness" means all the amounts payable by Fuhua to Pledgee under the Service Agreements, including the Service Fee and interests accrued thereon, liquidated damages, compensations, costs and expenses incurred by Pledgee in connection with collection of such fees, interest, damages and compensations, and losses incurred to Pledgee as a result of any default by Fuhua and other expenses payable under the Service Agreements. 1.5 "Term of Pledge" means the term stated in Section 4.1 of this Agreement. 1.6 "Service Agreements" means all the agreements entered into by Fuhua and Pledgee , including but not limited to Strategy Consulting Services Agreement, Technical Support Agreement and Equipment Rent Agreement. 1.7 "Event of Default" means any event set forth in Article 8 of this Agreement. 1.8 "Notice of Default" means the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default. ARTICLE 2. PLEDGE RIGHTS 2.1 Pledgors hereby pledge to Pledgee all of their Share Equity in Fuhua to secure the Secured Indebtedness of Fuhua. Pledge Rights shall mean Pledgee's priority right in receiving compensation from the sale or auction proceeds of the Pledged Property (including the dividends generated by the Share Equity during the term of this Agreement). ARTICLE 3. SCOPE OF PLEDGE SECURITY 3.1 The scope of pledge security hereunder shall cover all of the Secured Indebtedness, including all the Service Fee and interest accrued thereon, liquidated damages, compensation, costs and expenses incurred by Pledgee to collect such fee, interests, damages and compensation, and losses incurred to Pledgee as a result of any default by Fuhua and all other expenses payable under the Service Agreements. ARTICLE 4. TERM OF PLEDGE AND REGISTRATION 4.1 This Agreement shall become effective on the date when the Pledge hereunder is registered in the Shareholders' List of Fuhua. The term of the Pledge shall be the same as the term of the Strategy Consulting Services Agreement (should the term of the Strategy Consulting Services Agreement be extended, the term of the Pledge shall be extended accordingly). Pledgors shall cause Fuhua to register the Pledge hereunder in its Shareholders' List within three (3) days after this Agreement is executed. 4.2 In the event that any change of the matters registered in Fuhua's Shareholders' List is required as a result of change of any matters relating to the Pledge, Pledgors and Pledgee shall cause the matters registered in Fuhua's Shareholders' List be changed accordingly within fifteen (15) days after such change takes place. ARTICLE 5. CUSTODY OF CERTIFICATES Pledgors shall deliver to Pledgee the capital contribution certificates with respect to their interest in Fuhua and Fuhua's Shareholders' List within seven (7) days after this Agreement is executed. ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF PLEDGORS 6.1 Pledgors are legally registered shareholders of Fuhua and have paid Fuhua the full amount of their respective portions of Fuhua's registered capital required under Chinese law. Pledgors neither have sold nor will sell to any third party their Share Equity in Fuhua. 6.2 Pledgors fully understand the contents of the Service Agreements and have entered into this Agreement voluntarily. The signatories signing this Agreement on behalf of Pledgors have the rights and authorizations to do so. 6.3 All documents, materials and certificates provided by Pledgors to Pledgee hereunder are correct, true, complete and valid. 6.4 When Pledgee exercises its right hereunder in accordance with this Agreement, there shall be no intervention from any other parties. 6.5 Pledgee shall have the right to dispose of and transfer the Pledge Rights in accordance with the provisions hereof. 6.6 Pledgors have not created any mortgage, pledge, secured interests or other form of debt liabilities over the Share Equity other than the Pledge created hereunder. ARTICLE 7. COVENANTS OF PLEDGORS 7.1 For the benefit of Pledgee, Pledgors hereby make the following covenants, during the term of this Agreement: 7.1.1 without the prior written consent of Pledgee, Pledgors shall not transfer the Share Equity, or create or consent to any creation of any pledge over, the Share Equity that may affect Pledgee's rights and interests hereunder, or cause the shareholders' meetings of Fuhua to adopt any resolution on sale, transfer, pledge or in other manner disposal of the Share Equity or approving the creation of any other security interest on the Share Equity, provided that the Share Equity may be transferred to Pledgee or any party designated by Pledgee according to Purchase Option and Cooperation Agreement dated March 3, 2008 among Pledgee, Pledgors, China Finance Online Co., Ltd. and Fuhua and Pledgors may transfer the Share Equity to China Finance Online Co., Ltd. or to each other to the extent such transfer will not effect Pledgee's interest (the transferring Pledgor shall deliver a prior notice to Pledgee before making the transfer). 7.1.2 Pledgors shall comply with all laws and regulations applicable to the Pledge. Within five (5) days of receipt of any notice, order or recommendation issued or promulgated by competent government authorities relating to the Pledge, Pledgors shall deliver such notice, order or recommendation to Pledgee, and shall comply with the same, or make objections or statements with respect to the same upon Pledgee's reasonable request or with Pledgee's consent. 7.1.3 Pledgors shall promptly notify Pledgee of any event or notice received by Pledgors that may have a material effect on Pledgee's rights in the Pledged Property or any portion thereof, as well as promptly notify Pledgee of any change to any warranty or obligation of Pledgors hereunder, or any event or notice received by Pledgors that may have a material effect to any warranty or obligation of the Pledgors hereunder. 7.2 Pledgors warrant that Pledgee's exercise of the Pledge Rights as pledgee pursuant to this Agreement shall not be interrupted or impaired by Pledgors or any successors or representatives of Pledgors or any other parties through any legal proceedings. 7.3 Pledgors hereby warrant to Pledgee that, to protect or perfect the security interest created by this Agreement to secure the Secured Indebtedness, Pledgors will execute in good faith, and cause other parties who have an interest in the Pledge Rights to execute, all certificates of rights and instruments as requested by Pledgee, and/or take any action, and cause other parties who have an interest in the Pledge Rights to take any action, as requested by Pledgee, and facilitate the exercise by Pledgee of its rights and authority provided hereunder, and execute all amendment documents relating to certificates of Share Equity with Pledgee or its designated person(s) (natural persons/legal persons), and shall provide Pledgee, within a reasonable period of time, with all notices, orders and decisions regarding the Pledge Rights requested by Pledgee. Pledgors hereby warrant to Pledgee that, for Pledgee's benefit, Pledgors shall comply with all warranties, covenants, agreements, representations and conditions provided hereunder. In the event that Pledgors fail to comply with or perform any warranties, covenants, agreements, representations and conditions, Pledgors shall indemnify Pledgee for all of its losses resulting therefrom. ARTICLE 8. EVENTS OF DEFAULT 8.1 Each of the following events shall constitute an Event of Default: 8.1.1 Fuhua fails to pay in full any Secured Indebtedness on time; 8.1.2 Any representation or warranty made by Pledgors under Article 6 of this Agreement is misleading or untrue, or Pledgors have violated any of the warranties in Article 6 of this Agreement; 8.1.3 Pledgors breach any of the covenants in Article 7 of this Agreement; 8.1.4 Pledgors breach any other provisions of this Agreement; 8.1.5 Pledgors give up all or any part of the Pledged Property, or transfer all or any part of the Pledged Property without the written consent of Pledgee (except the transfers permitted hereunder); 8.1.6 Any of Pledgors' loans, guarantees, indemnification, commitment or other indebtedness to any third party (1) have been subject to a demand of early repayment due to an event of default; or (2) have become due but failed to be repaid in a timely manner, thus leading Pledgee to believe that Pledgors' ability to perform their obligations under this Agreement has been impaired; 8.1.7 Pledgors are unable to repay any other material debts; 8.1.8 Any applicable laws have rendered this Agreement illegal or made it impossible for Pledgors to continue to perform their obligations hereunder; 8.1.9 All approvals, licenses, permits or authorizations from government agencies that make this Agreement enforceable, legal and effective have been withdrawn, terminated, invalidated or substantively revised; 8.1.10 Any adverse change has taken place to any properties owned by Pledgors, which leads Pledgee to believe that Pledgors' ability to perform their obligations under this Agreement has been affected; 8.1.11 The successor or trustee of Fuhua is only able to partially perform or refuses to perform the payment obligations under the Service Agreements; 8.1.12 Any breach of other provisions of this Agreement resulting from any action or omission by Pledgors; and 8.1.13 Any other event whereby Pledgee is unable to exercise its right with respect to the Pledge hereunder pursuant to relevant laws. 8.2 Pledgors shall immediately notify Pledgee in writing of any event set forth in Section 8.1 or any circumstance which many lead to any such event as soon as Pledgors know or are aware of such event. 8.3 Unless an Event of Default set forth in this Section 8.1 has been resolved to the satisfaction of Pledgee, Pledgee may, upon the occurrence of an Event of Default or at any time thereafter, issue a Notice of Default to Pledgors in writing and demand that Pledgors to immediately pay all the amounts due under the Service Agreements and all other amounts payable due to Pledgee, or exercise Pledge Rights in accordance with the provisions of this Agreement. ARTICLE 9. EXERCISE OF PLEDGE RIGHTS 9.1 Prior to the full payment of Secured Indebtedness under the Service Agreements, Pledgors shall not assign, or in any manner dispose of, the Pledged Property without Pledgee's written consent. 9.2 Pledgee shall issue a Notice of Default to Pledgors when exercising the Pledge Rights. 9.3 Subject to the provisions of Section 8.3, Pledgee may exercise the right to dispose of the Pledged Property concurrently with the issuance of the Notice of Default in accordance with Section 8.3 or at any time after the issuance of the Notice of Default. 9.4 Pledgee shall have the right to dispose of the Pledged Property under this Agreement in part or in whole in accordance with legal procedures (including but not limited to negotiated transfer, auction or sale of the Pledged Property) and receive a priority payment from the proceeds of the Pledged Property until all of the Secured Indebtedness have been fully repaid. 9.5 When Pledgee exercises its rights under the Pledge in accordance with this Agreement, Pledgors shall not create any impediment, and shall provide necessary assistance to enable Pledgee to exercise the Pledge Rights. ARTICLE 10. ASSIGNMENT 10.1 Without Pledgee's prior consent, Pledgors cannot give away or assign to any party their rights and obligations under this Agreement. 10.2 This Agreement shall be valid and binding on each Pledgor and their respective successors. 10.3 Pledgee may assign any and all of its rights and obligations under the Service Agreements to its designated person(s) (natural/legal persons) at any time, in which case the assignees shall have the rights and obligations of Pledgee under this Agreement, as if it were a party to this Agreement. 10.4 In the event that the Pledgee changes due to any transfer permitted hereunder, the new parties to the Pledge shall execute a new pledge agreement. ARTICLE 11. TERMINATION This Agreement shall be terminated when the Secured Indebtedness has been fully repaid and Fuhua is no longer obliged to undertake any obligations under the Service Agreements. In this circumstance, Pledgee shall cancel or terminate this Agreement as soon as reasonably practicable. ARTICLE 12. HANDLING FEES AND OTHER EXPENSES 12.1 All fees and out of pocket expenses relating to this Agreement, including but not limited to legal fees, cost of documentation, stamp duty and any other taxes and fees, shall be borne by Pledgors. In the event that the law requires Pledgee to pay any taxes, Pledgors shall reimburse Pledgee for such taxes paid by Pledgee. 12.2 In the event that Pledgors fail to pay any taxes or fees in accordance with the provisions of this Agreement, or due to any other reasons, Pledgee has to recover such taxes and fees payable by Pledgors through any means or in any manner, all costs and expenses (including but not limited to all the taxes, handling fees, management fees, cost of litigation, attorney's fees and insurance premiums) resulting therefrom shall be borne by Pledgors. ARTICLE 13. FORCE MAJEURE 13.1 In the event that the performance of this Agreement is delayed or impeded by "an event of force majeure", the party affected by such event of force majeure shall not be liable for any liability hereunder with respect to the part of performance being delayed or impeded. "An event of force majeure" means any event beyond the reasonable control of the effected party and cannot be avoided even if the affected party has exercised reasonable care, which include but not limited to government actions, acts of God, fire, explosions, geographic changes, storms, flood, earthquakes, tides, lightning and war. Notwithstanding the foregoing, a lack of credit, funds or financing shall not be deemed as a circumstance beyond the reasonable control of an effected party. The party affected by "an event of force majeure" and seeking to relieve the performance liability under this Agreement or any provisions thereof shall notify the other party of its intention for seeking such relief and the measures it will take to reduce the impact of the force majeure as soon as possible. 13.2 The party affected by force majeure shall not be liable for any liability with respect to the part of performance being delayed or impeded if the effected party has taken reasonable efforts to perform this Agreement. As soon as the course of such relief is eliminated, the Parties shall use their best efforts to resume the performance of this Agreement. ARTICLE 14. RESOLUTION OF DISPUTES 14.1 This Agreement shall be governed by and construed according to the laws of PRC. 14.2 In the event of any dispute with respect to the construction and performance of the provisions of this Agreement, the parties shall first try to resolve the dispute through friendly consultations. Upon failure of such consultations, any party may submit the relevant disputes to the China International Economic and Trade Arbitration Commission for arbitration in accordance with its then effective arbitration rules. The arbitration shall be administered in Beijing and the language used for the arbitration shall be Chinese. The arbitration award shall be final and binding on all parties. ARTICLE 15. NOTICES Notices sent by the parties hereto shall be in writing ("in writing" shall include facsimiles and telexes). If sent by hand, such notice shall be deemed to have been delivered upon actual delivery; if sent by telex or facsimile, such notice shall be deemed to have been delivered at the time of transmission. If the date of transmission is not a business day or if transmission is after working hours, then the next business day shall be deemed as the date of delivery. The address of delivery shall be the addresses of the Parties stated on the first page of this Agreement or addresses notified in writing at any time after this Agreement is executed. ARTICLE 16. AMENDMENTS, TERMINATION AND CONSTRUCTION 16.1 No amendment to this Agreement shall be effective unless such amendment has been agreed by all of the Parties and Party A and Party D have obtained necessary authorization and approvals with respect to such amendment (including the approval that Pledgee must obtain from the audit committee or other independent body established according to the Sarbanes-Oxley Act and the NASDAQ Rules under the board of directors of its overseas holding company -- China Finance Online Co., Limited). 16.2 The provisions to this Agreement are severable from each other. The invalidity of any provision hereof shall not effect the validity or enforceability of any other provision hereof. ARTICLE 17. EFFECTIVENESS AND OTHERS 17.1 This Agreement shall take effect upon satisfaction of the following conditions: (1) This Agreement has been executed by all parties hereto; and (2) Pledgors have recorded the Pledge hereunder in the Shareholders' List of Fuhua. 17.2 This Agreement is written in Chinese in three counterparts. Each of the Parties shall hold one counterpart. IN WITNESS WHEREOF, the parties have caused this Agreement executed by their duly authorized representatives in Beijing on the date first above written. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] [execution page only] Pledgor A: Zhiwei Zhao - ---------------------- Signature: Pledgor B: Jun Wang - --------------------- Signature: Pledgee: China Finance Online(Beijing) Co., Ltd. [COMPANY SEAL] Authorized representative: EX-4.24 11 h02185exv4w24.txt EX-4.24 LOAN AGREEMENT EXHIBIT 4.24 [Translated from Chinese original] LOAN AGREEMENT AMONG FORTUNE SOFTWARE (BEIJING) CO. LTD. XIONG WEI AND FAN ZHENFEI AUGUST 2007 BEIJING LOAN AGREEMENT The Loan Agreement (the "Agreement") is entered into as of August 21, 2007 among the following parties in Beijing, the People's Republic of China (the "PRC"): PARTY A: FORTUNE SOFTWARE (BEIJING) CO., LTD. (the "Lender") Address: Floor 9, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, the People's Republic of China (the "PRC") Legal Representative: Zhao Zhiwei PARTY B: XIONG WEI Address: Floor 9, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, the PRC ID No.: 610113197206201645 Tel: 010-58325321 PARTY C: FAN ZHENFEI Address: Floor 9, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, the PRC ID No. :370282197711186915 Tel: 010-58325320 Party B and Party C are collectively referred to as the "Borrowers". Party A, Party B and Party C will each be referred to as a "Party" and collectively referred to as the "Parties." WHEREAS, 1. The Lender is a wholly foreign owned enterprise duly organized and validly existing under the laws of the PRC. 2. The Borrowers desire to establish a company in the PRC ("New Company"), and will collectively hold 100% equity interest in the Company. 3. The Borrowers desire to borrow loans from the Lender to invest in the New Company, and the Lender agrees to provide such loans to Borrowers. THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development, through friendly negotiation, the Parties hereby enter into the following agreements pursuant to relevant PRC laws and regulations. 2 ARTICLE 1. AMOUNT AND PURPOSE 1.1 Loan Amount: the Lender agrees to provide a loan from its self-owned fund to Party B and Party with the amount of RMB 550,000, and RMB 450,000 respectively. 1.2 Purpose of the Loan: the Borrowers shall only use the Loan hereunder to establish the New Company as registered capital. Without the prior written consent of the Lender, the Borrowers shall not use such Loan for any other purpose, or pledge their equity interests in the New Company to any other third party. ARTICLE 2. PAYMENT FOR THE LOAN 2.1 Payment Notice: the Lender shall deposit the loan amount to the following accounts designated by the Borrowers within ten days after the execution of this Agreement: Party B: Bank of deposit: Bank of Communication, Beijing Branch Account Name: Xiong Wei Account No.: 6222 6009 1002 0808 945 Party C: Bank of deposit: CITIC Bank Account Name: Fan Zhenfie Account No.: 6226 9007 0313 2890 ARTICLE 3. TERM, REPAYMENT AND INTEREST OF THE LOAN 3.1 The term of the loan shall be 10 years and may be renewed pursuant to the agreement between the Parties ("Term"). Notwithstanding the foregoing, in the following circumstances, the Borrowers shall repay the Loan regardless if the Term has expired: (1) The Borrowers deceases or becomes a person without legal capacity or with limited legal capacity; (2) The Borrowers commit a crime or are involved in a criminal act; or (3) The Lender or its designated assignee can legally purchase the Borrowers' shares in the New Company under the PRC law and the Lender chooses to do so. 3.2 The Borrowers can repay the Loan by transferring all of their equity interests in the New Company to the Lender or a third party designated by the Lender when such transfer is permitted under the PRC law. In the event (1) the Borrowers transfer all of their equity interests in the New Company to the Lender or a third party designated by the Lender when such transfer is permitted under the PRC law, or (2) the Borrowers receive dividends from the New Company, the Borrowers shall deposit all the funds or dividends obtained from such transfer or the New Company, as the case may be, to the account designated by the Lender (no matter such amount is higher or less than the principal amount of the Loan). 3.3 The Lender and the Borrowers hereby jointly agree and confirm that the Lender, has the right to, but has no obligation to, purchase or designate a third party (legal person or natural person) to purchase all or part of Borrower's interest in the New Company at a price equal to the amount of the Loan when such purchase is allowed under the PRC law. If Lender or the third party assignee designated by Lender only purchases part of Borrower's interest in the New Company, the purchase price shall be reduced on a pro rata basis. 3 3.4 In the event when the Borrowers transfer their interest in the New Company to the Lender or a third party transferee designated by Lender, (i) if the total of (1) the actual transfer price paid by Lender or the third party transferee and (2) the dividends obtained from the New Company by the Lender (if applicable) equals or is less than the principal amount of the Loan, the Loan shall be deemed as interest free; (ii) if the total of (1) the actual transfer price paid by Lender or the third party transferee and (2) the dividends obtained from the New Company by the Lender (if applicable) is higher than the principal amount of the Loan, the amount exceeding the principal amount of the Loan shall be deemed as an interest accrued on the Loan and paid by Borrowers to Lender in full. ARTICLE 4. CONFIDENTIALITY The Parties acknowledge and confirm that any oral or written materials concerning this Agreement exchanged between them are confidential information. The Parties shall protect and maintain the confidentiality of all such confidential data and information and shall not disclose to any third party without the other party's written consent, except (a) the data or information that was in the public domain or later becomes published or generally known to the public, provided that it is not released by the receiving party, (b) the data or information that shall be disclosed pursuant to applicable laws or regulations, and (c) the data or information that shall be disclosed to One Party's legal counsel or financial counsel who shall also bear the obligation of maintaining the confidentiality similar to the obligations hereof. The undue disclosing of the confidential data or information of One Party's legal counsel or financial counsel shall be deemed the undue disclosing of such party who shall take on the liability of breach of this Agreement. ARTICLE 5. DISPUTE RESOLUTION 5.1 The execution, validity, interpretation, performance, implementation, termination and settlement of disputes of this Agreement shall be governed by the laws of the PRC. 5.2 Any dispute arising from or in connection with this Agreement shall be settled through friendly negotiation. If the parties fail to make any written agreement within thirty days after consultation, such dispute will be submitted (by the Lender or the Borrowers) to the China International Economic and Trade Arbitration Commission ("CIETAC") in accordance with its arbitration rules/procedures. The arbitration shall commence from the date of filing. The tribunal will be composed of one (1) arbitrator appointed by the chairman of CIETAC. The arbitration shall be final and bind the Parties. Unless otherwise stipulated by the arbitrator, the arbitration fee (including reasonable attorney fees and attorney expenses) shall be borne by the losing party. ARTICLE 6. EFFECTIVENESS 6.1 This Agreement shall become effective after the execution of the Parties. The Agreement can be terminated by one Party through sending a written notice to the other Parties thirty days prior to the termination. Otherwise any Party shall not terminate this Agreement unilaterally without the mutual agreement of the Parties. ARTICLE 7. AMENDMENT 7.1 Upon the effectiveness of the agreement, the parties shall fully perform the agreement. Any modifications of the agreement shall only be effective in written form through consultations of the parties. Any modification and supplementary to this Agreement after signed by both Parties, become an integral part of this Agreement, and has the same legal force with this Agreement. 4 ARTICLE 8.MISCELLANEOUS 8.1 The headings of articles herein are provided for the purpose of reference. Such headings shall in no event be used or affected interpretations of the terms herein. 8.2 Matters not covered in the agreement shall be dealt with in a supplementary agreement, and annexed hereto. The supplementary agreement shall be an integral part of this Agreement and have the same legal force as the agreement. 8.3 Any provision of this Agreement that is invalid or unenforceable shall not affect the validity and enforceability of any other provisions hereof. 8.4 The agreement is executed in three original copies, and are equally authentic. Each party hereto shall hold one copy. IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date and year first hereinabove set forth. Party A: FORTUNE SOFTWARE CO., LTD ------------------------- Seal Authorized Representative: Party B: XIONG WEI ------------------------- (signature) PARTY C: FAN ZHENFI ------------------------- (signature)
5 EX-4.25 12 h02185exv4w25.txt EX-4.25 OPERATION AGREEMENT EXHIBIT 4.25 [Translated from Chinese Original] OPERATION AGREEMENT between FORTUNE SOFTWARE (BEIJING) CO., LTD. and BEIJING PREMIUM TECHNOLOGY CO., LTD. August, 2007 BEIJING, CHINA OPERATION AGREEMENT This Operation Agreement ("this Agreement") is entered into in Beijing, People's Republic of China (the "PRC") on this August 21, 2007 between: Party A: Fortune Software (Beijing) Co., Ltd Address: Room 626, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nalu Road, Haidian District, Beijing Legal Representative: Zhao Zhiwei Tel: 010-58325388 Party B: Beijing Premium Technology Co., Ltd. Address: Room 619, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nalu Road, Haidian District, Beijing Legal Representative: Xiong Wei Tel: 010-58325388 WHEREAS, (1) Party A is a wholly foreign owned enterprise duly organized and validly existing under the laws of PRC, and has expertise and resources in developing and manufacturing computer hardware and software, system software, and application software; Party A desires to provide to Party B operational services in connection with developing and manufacturing computer hardware and software, system software, and application software. (2) Party B is a company with limited liability duly organized and validly existing under the laws of PRC; and to expanding its business operation in the aspects of developing and producing computer hardware, software, system software, and application software, Party B engages Party A to provide the operational services in connection with such operation. (3) Party A has entered into a technical support agreement and strategic consulting agreement with Party B (collectively the "Binding Agreements"), and hence the Parties have established certain business relationship. NOW AND THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development and after friendly negotiations, the Parties hereby enter into the following agreements pursuant to the provisions of relevant laws and regulations of the PRC ARTICLE 1. DEFINITIONS The terms used in this Agreement shall have the meanings set forth below: 1.1 "This Agreement" means this Operation Agreement and all appendices thereto, including written instruments as originally executed and as may from time to time be amended or supplemented by the Parties hereto through written agreements. 1.2 "The PRC" means, for the purpose of this Agreement, the People's Republic of China, excluding Hong Kong, Taiwan and Macao. 1.3 "Date" means the year, month and day. In this Agreement, "within" or "no later than", when used before a year, month or day, shall always include the relevant year, month or day. ARTICLE 2. OPERATIONAL SUPPORT 2.1 Party A agrees, according to the operational needs of Party B, to act as the guarantor of Party B in the contracts, agreements, or transactions entered into between Party B and third parties, in order to fully guarantee the performance by Party B of such contracts, agreements, and transactions. 2.2 Party A agrees, according to the operational needs Party B, to recommend directors and senior management to Party B and Party B agrees to appoint the such personnel recommended by Party A to be its directors and senior management. The relevant personnel recommended by Party A pursuant to this Article shall meet the qualification requirements for directors and senior management under applicable laws. 2.3 To ensure the performance of this Agreement, Party A agrees to provide to Party B cooperative policy advice and guidance, which is consistent with the daily operation and financial management and the employment policy of Party B. ARTICLE 3. OBLIGATIONS OF PARTY B 3.1 Party B agrees not to conduct the following business which may materially affect its assets, rights, obligations and operation (except for the sales or purchase of assets, and contracts and agreements entered into during the ordinary course of business of Party B, and the lien imposed by the contracting parties pursuant to the above contracts), without the prior written consent of Party A, including but not limited to: 3.1.1 borrowing loans from any third party or bearing any debt liability; 3.1.2 selling to or obtaining any asset or rights from any third party; and 3.1.3 using its own assets to secure any real obligation of any third party. 3.2 Without the written consent of Party A, Party B shall not transfer its rights and obligations hereunder to any third party. Party B agrees, Party A may transfer its rights and obligations hereunder as it finds necessary, and Party A only needs to give a written notice to Party B after such transfer, without the necessity to obtain any consent from Party B. ARTICLE 4. CONSIDERATION FOR PROVIDING OPERATIONAL SUPPORT 4.1 In consideration of the above operational support provided by Party A, Party B shall pay to Party A certain fees as specified in Exhibit 1 attached hereto. ARTICLE 5. REPRESENTATIONS AND WARRANTIES 5.1 Each Party hereby represents to the other Party that: 5.1.1 It has all the necessary rights, powers and authorizations to enter into this Agreement and to perform its duties and obligations hereunder; and 5.1.2 The execution or performance of this Agreement does not violate any significant contract or agreement to which it is a party or any contract of agreement that binds it or its assets. ARTICLE 6. CONFIDENTIALITY 6.1 Each Party shall keep confidential all the content of this Agreement. Without the prior consent of all Parties, no Party shall disclose any content of this Agreement to any other party or make any public announcements with respect to any content of this Agreement. Notwithstanding the forgoing provisions of this Article 6, the following disclosure shall be permitted: (i) disclosure made pursuant to any applicable laws or any rules of any stock exchange of the United States, the PRC or other relevant jurisdictions; (ii) disclosure of information which has become public information other than due to any breach by the disclosing party; or (iii) disclosure to any Party's shareholders, legal counsel, accountants, financial advisors or other professional advisors who bear the obligation of confidentiality to such Party. 6.2 The Parties agree this Article 6 will survive any invalidity, modification, cancellation or termination of this Agreement, if applicable. ARTICLE 7. GOVERNING LAW AND OBLIGATIONS UPON DEFAULT 7.1 The execution, effectiveness, interpretation, performance and dispute resolution of this Agreement shall be governed by the laws of the PRC. 7.2 Any violation of any provision hereof, incomplete performance of any obligation provided hereunder, any misrepresentation made hereunder, material concealment or omission of any material fact or failure to perform any covenants provided hereunder by any Party shall constitute an event of default. The defaulting Party shall assume all the legal liabilities pursuant to the applicable laws. ARTICLE 8. DISPUTE RESOLUTION 8.1 Any dispute arising from the performance of this Agreement shall be first subject to the Parties' friendly consultations. If the parties fail to make an written agreement within thirty days after consultation, such dispute will be submitted to the China International Economic and Trade Arbitration Commission ("CIETAC") in accordance with its arbitration rules/procedures. The arbitration tribunal will be composed of three (3) arbitrators, two of which shall be appointed by both Parties hereto, and the third one shall be appointed by the chairman of CIETAC. 8.2 The arbitration shall be administered by the Beijing branch of CIETAC in accordance with the then effective arbitration rules of the Commission in Beijing. 8.3 The arbitration award shall be final and binding on the Parties. The costs of the arbitration (including but not limited to arbitration fee and attorney fee) shall be borne by the losing party, unless the arbitration award stipulates otherwise. ARTICLE 9. EFFECTIVENESS 9.1 This Agreement shall be effective upon the execution hereof by both Parties hereto. 9.2 The term of this Agreement shall be ten (10) years. Party B shall not terminate this Agreement during this term. 9.3 Unless Party A notifies Party B of no renewal of this Agreement by giving a thirty (30) days prior notice. This Agreement will be renewed for one year automatically after the expiry of the term hereof. This provision will apply to all the subsequent renewal. ARTICLE 10. NO SUBSEQUENT OBLIGATION 10.1 Once this Agreement is terminated, Party A will not have any obligation to provide to Party B any operational support hereunder. ARTICLE 11. AMENDMENT 11.1 All Parties hereto shall fulfill their respective obligations hereunder. No amendment to this Agreement shall be effective unless such amendment has been made in written form, and agreed by both Parties and both Parties have obtained necessary authorization and approvals with respect to such amendment. Any modification and supplementary to this Agreement after signed by both Parties, become an integral part of this Agreement, and has the same legal force with this Agreement. ARTICLE 12. COUNTERPARTS 12.1 This Agreement is executed in duplicate, and are equally authentic. Party A and Party B shall each hold one counterpart. ARTICLE 13. MISCELLANEOUS 13.1 The title and headings contained in this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of any provision of this Agreement. 13.2 The Parties may enter into supplementary agreements to address any issue not covered by this Agreement. The supplementary agreements so entered shall be an appendix hereto and shall have the same legal effect as this Agreement. [The remaining of this page is intentionally left blank] Exhibit 1 Consideration for Operation Guarantee The annual fees in consideration of provision of the operational support by Party A ("Consideration") shall be 40% of the "profits" of Party B in such year. The "profits" of Party B in such year should be equal to (gross revenue of Party B in such year) minus (the sales tax, sales expenses, management fees, financial expenses and other expenses resulting from the daily operation and outside daily operation of Party B), and such "profit" shall be the profit before paying for other service fees as specified by the Binding Agreements. Such expenses shall be determined by both Parties every quarter in written form, and shall be paid by Party B within three (3) months after the accounting date. [execution page only] This Agreement is executed by the following Parties as of the date listed first above. Party A: Fortune Software (Beijing) Co., Limited Seal: Authorized Representative (Signature): Party B: Beijing Premium Technology Co., Ltd. Seal: Authorized Representative (Signature): EX-4.26 13 h02185exv4w26.txt EX-4.26 TECHNICAL SUPPORT AGREEMENT EXHIBIT 4.26 - -------------------------------------------------------------------------------- [Translated from Chinese Original] TECHNICAL SUPPORT AGREEMENT between FORTUNE SOFTWARE (BEIJING) CO., LTD. and BEIJING PREMIUM TECHNOLOGY CO., LTD. August, 2007 BEIJING, CHINA TECHNICAL SUPPORT AGREEMENT This Technical Support Agreement ("this Agreement") is entered into in Beijing, the People's Republic of China (the "PRC") on this August 21, 2007 between: Party A: Fortune Software (Beijing) Co., Ltd. Address: Room 626, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nanlu Road, Haidian District, Beijing Postal code: 100080 Party B: Beijing Premium Technology Co., Ltd. Address: Room 619, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nalu Road, Haidian District, Beijing Postal code: 100080 WHEREAS, (1) Party A is a wholly foreign owned enterprise duly organized and validly existing under the laws of the PRC, and has expertise and resources in developing and manufacturing computer hardware and software, system software, and application software; Party A desires to provide to Party B relevant services, including without limitation technical support services, in connection with developing and manufacturing computer hardware and software, system software, and application software; (2) Party B is a company with limited liability duly organized and validly existing under the laws of the PRC. In order to expand Party B's business in the aspects of developing and manufacturing computer hardware and software, system software and the network operation of application software, Party B engages Party A to provide the technical support services in connection with the foregoing. NOW AND THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development and after friendly negotiations, the parties hereby enter into the following agreements pursuant to the provisions of relevant laws and regulations of the PRC. ARTICLE 1. DEFINITIONS The terms used in this Agreement shall have the meanings set forth below: 1.1 "This Agreement" means this Technical Support Agreement and all appendices thereto, including written instruments as originally executed and as may from time to time be amended or supplemented by the parties hereto through written agreements. 1.2 "The PRC" means, for the purpose of this Agreement, the People's Republic of China, excluding Hong Kong, Taiwan and Macao. 1.3 "Date" means the year, month and day. In this Agreement, "within" or "no later than", when used before a year, month or day, shall always include the relevant year, month or day. ARTICLE 2. TECHNICAL SUPPORT SERVICES 2.1 The technical support services (the "Services"): Party A agrees to provide to Party B the relevant services requested by Party B, which are specified in Exhibit 1 attached hereto ("Exhibit 1"). 2.2 Exclusive Services Provider: Party A is the exclusive services provider of Party B. Without the written consent of Party A, Party B shall not entrust any other third party to provide the Services stated herein. ARTICLE 3. TECHNICAL SUPPORT SERVICES FEE 3.1 Amount and payment: Party B shall pay certain fees in accordance with the provisions of Exhibit 2 to Party B in consideration of the technical support service provided by Party A (the "Service Fee"). 3.2 Reasonable expenses: besides the Service Fee, Party A shall charge Party B for all the reasonable expenses relating to the Services, including but not limited to travel, accommodation, traffic and communication expenses. ARTICLE 4. REPRESENTATIONS AND WARRANTIES 4.1 Each party hereto represents to the other party that: 4.1.1 it has all the necessary rights, powers and authorizations to enter into this Agreement and to perform its duties and obligations hereunder; and 4.1.2 the execution or performance of this Agreement shall not violate any significant contract or agreement to which it is a party or by which it is or its assets are bounded. ARTICLE 5. CONFIDENTIALITY 5.1 Each party shall keep confidential all the content of this Agreement. Without the prior consent of all parties, no party shall disclose any content of this Agreement to any other party or make any public announcements with respect to any content of this Agreement. Notwithstanding the forgoing provisions of this Article 5, the following disclosure shall be permitted: (i) disclosure made pursuant to any applicable laws or any rules of any stock exchange of US, PRC or relevant countries; (ii) disclosure of information which has become public information other than due to any breach by the disclosing party; or (iii) disclosure to any party's shareholders, legal counsel, accountants, financial advisors or other professional advisors who bear the obligation of confidentiality to such party. 5.2 The parties agree this Article 5 will survive any invalidity, modification, cancellation or termination of this Agreement, if applicable. ARTICLE 6. GOVERNING LAW AND EVENTS OF DEFAULT 6.1 The execution, effectiveness, interpretation, performance and dispute resolution of this Agreement shall be governed by the laws of the PRC. 6.2 Any violation of any provision hereof, incomplete performance of any obligation provided hereunder, any misrepresentation made hereunder, material concealment or omission of any material fact or failure to perform any covenant provided hereunder by any party shall constitute an event of default. The defaulting party shall assume all the legal liabilities pursuant to the applicable laws. ARTICLE 7. DISPUTE RESOLUTION 7.1 Any dispute arising from the performance of this Agreement shall be first subject to the parties' friendly consultations. If the parties fail to make an written agreement within thirty days after consultation, such dispute will be submitted to the China International Economic and Trade Arbitration Commission ("CIETAC") in accordance with its arbitration rules/procedures. 7.2 The arbitration shall be administered by the Beijing branch of China International Economic and Trade Arbitration Commission in accordance with the then effective arbitration rules of the Commission in Beijing. The tribunal will be composed of one (1) arbitrator appointed by the chairman of CIETAC 7.3 The arbitration award shall be final and binding on the parties. The costs of the arbitration (including but not limited to arbitration fee and attorney fee) shall be borne by the losing party, unless the arbitration award stipulates otherwise. ARTICLE 8. EFFECTIVENESS 8.1 This Agreement shall become effective upon the execution by both parties hereto. 8.2 The term of this Agreement shall be ten (10) years. Party B shall not terminate this Agreement during this term. 8.3 Unless Party A notifies Party B of no renewal of this Agreement by giving a thirty (30) days prior notice, this Agreement will be renewed for one year automatically after the expiry of the term hereof. This provision will apply to all the subsequent renewal. ARTICLE 9. NO SUBSEQUENT OBLIGATION 9.1 Once this Agreement is terminated, Party A will not have any obligation of providing to Party B any Service hereunder. ARTICLE 10. TRANSFER LIMITATION 10.1 Without the prior written consent of the other party, neither party shall transfer any of their rights or obligations hereunder. ARTICLE 11. AMENDMENT 11.1 Both parties hereto shall fulfill their respective obligations hereunder. No amendment to this Agreement shall be effective unless such amendment has been made in written form, and agreed by both parties and both parties have obtained necessary authorization and approvals with respect to such amendment. Any modification and supplementary to this Agreement after signed by both parties, become an integral part of this Agreement, and has the same legal force with this Agreement. ARTICLE 12. COUNTERPARTS 12.1 This Agreement is executed in two counterparts, with Party A and Party B each hold a counterpart. Each counterpart has the same legal force. ARTICLE 13. MISCELLANEOUS 13.1 The title and headings contained in this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of any provision of this Agreement; 13.2 The parties may enter into supplementary agreements to address any issue not covered by this Agreement. The supplementary agreements so entered shall be an appendix hereto and shall have the same legal effect as this Agreement. [The remaining of this page is intentionally left blank] Exhibit 1 --------- Content of the Technical Support Services Party A shall provide the following technical support services to Party B to the extent permitted by PRC laws: (1) providing the technical support and professional trainings necessary for Party B to operate its business; (2) maintaining the computer system of Party B; (3) providing Party B with website design, and the design, installation, adjustment and maintenance services of Party B's computer network system; (4) providing comprehensive security services of Party B's websites; (5) providing database support and software services; (6) other services in connection with Party B's business; (7) providing labor support upon requested by Party B, including but not limited to sending or dispatching relevant personnel to Party B (provided however that Party B shall bear the relevant labor costs); and (8) other services agreed to by the parties. Exhibit 2 --------- Technical Support Service Fee The Service Fee in consideration of provision of the Service provided by Party A shall be 30% of the "profits" of Party B in such year. The "profits" of Party B in such year should be equal to gross revenue of Party B in such year minus (the sales tax, sales expenses, management fees, financial expenses and other expenses resulting from the daily operation and other business operation of Party B, and such "profit" shall be the profit before paying for other service fees as specified by the Binding Agreements. Such expenses shall be determined by both parties every quarter in written form, and shall be paid by Party B within three (3) months after the accounting date. [execution page only] This Agreement is executed by the following parties as of the date listed first above. Party A: Fortune Software (Beijing )Co. Limited Seal: Authorized Representative (Signature): Party B: Beijing Premium Technology Co, Ltd. Seal: Authorized Representative (Signature): EX-4.27 14 h02185exv4w27.txt EX-4.27 STRATEGIC CONSULTING AND SERVICE AGREEMENT EXHIBIT 4.27 [Translated from Chinese Original] STRATEGIC CONSULTING SERVICE AGREEMENT between BEIJING PREMIUM TECHNOLOGY CO., LTD. and FORTUNE SOFTWARE (BEIJING) CO., LTD. August, 2007 BEIJING, CHINA STRATEGIC CONSULTING SERVICE AGREEMENT This Strategic Consulting Service Agreement ("this Agreement") is entered into in Beijing, the People's Republic of China (the "PRC") on this August 21, 2007 beween: Party A: Beijing Premium Technology Co., Ltd. Address: Room 621, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nalu Road, Haidian District, Beijing, the PRC Legal Representative: Xiong Wei Postal code: 100080 Party B: Fortune Software (Beijing) Co., Ltd. Address: Room 626, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nanlu Road, Haidian District, Beijing, the PRC Legal Representative: Zhao Zhiwei Postal code: 100080 WHEREAS, (1) Party A is a company with limited liability duly organized and validly existing under the laws of the PRC, primarily engaged in developing and manufacturing of computer hardware and software, system software and application software, etc. (the "Business"). (2) Party B is a wholly foreign owned enterprise duly organized and validly existing under the laws of the PRC, and has expertise and resources in providing strategic consulting services in the foregoing business area. (3) Party A agrees to engage Party B to provide strategic consulting services in the foregoing area, and Party A desires to accept such strategic consulting services according to the terms and conditions of this Agreement. NOW AND THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development and after friendly negotiations, the parties hereby enter into the following agreements pursuant to the provisions of relevant laws and regulations of the PRC. ARTICLE 1. DEFINITIONS The terms used in this Agreement shall have the meanings set forth below: 1.1 "This Agreement" means this Strategic Consulting Service Agreement and all appendices thereto, including written instruments as originally executed and as may from time to time be amended or supplemented by the parties hereto through written agreements. 1.2 "The PRC" means, for the purpose of this Agreement, the People's Republic of China, excluding Hong Kong, Taiwan and Macao. 1.3 "Date" means the year, month and day. In this Agreement, "within" or "no later than", when used before a year, month or day, shall always include the relevant year, month or day. ARTICLE 2. TECHNICAL SUPPORT SERVICES 2.1 The strategic consulting services (the "Services"): Party A engages Party B to provide to Party A the strategic consulting services specified in Exhibit 1 attached hereto ("Exhibit 1") from the execution date of this Agreement. 2.2 Exclusive Services Provider: Party B is the exclusive services provider of Party A. Without the written consent of Party B, Party A shall not entrust any other third party to provide the Services stated herein. ARTICLE 3. STRATEGIC CONSULTING SERVICE FEE 3.1 Amount and payment: Party A shall pay certain fees in accordance with the provisions of Exhibit 2 to Party B in consideration of the technical support service provided by Party A (the "Service Fee"); 3.2 Reasonable expenses: besides the Service Fee, Party B shall charge Party A for all the reasonable expenses relating to the Services, including but not limited to travel, accommodation, traffic and communication expenses. ARTICLE 4. REPRESENTATIONS AND WARRANTIES 4.1 Each party hereto represents to the other party that: 4.1.1 it has all the necessary rights, powers and authorizations to enter into this Agreement and to perform its duties and obligations hereunder; and 4.1.2 the execution or performance of this Agreement shall not violate any significant contract or agreement to which it is a party or by which it is or its assets are bounded. ARTICLE 5. CONFIDENTIALITY 5.1 Each party shall keep confidential all the content of this Agreement. Without the prior consent of all parties, no party shall disclose any content of this Agreement to any other party or make any public announcements with respect to any content of this Agreement. Notwithstanding the forgoing provisions of this Article 5, the following disclosure shall be permitted: (i) disclosure made pursuant to any applicable laws or any rules of any stock exchange of US, PRC or relevant countries; (ii) disclosure of information which has become public information other than due to any breach by the disclosing party; or (iii) disclosure to any party's shareholders, legal counsel, accountants, financial advisors or other professional advisors who bear the obligation of confidentiality to such party. 5.2 The parties agree this Article 5 will survive any invalidity, modification, cancellation or termination of this Agreement, if applicable. ARTICLE 6. GOVERNING LAW AND EVENTS OF DEFAULT 6.1 The execution, effectiveness, interpretation, performance and dispute resolution of this Agreement shall be governed by the laws of the PRC. 6.2 Any violation of any provision hereof, incomplete performance of any obligation provided hereunder, any misrepresentation made hereunder, material concealment or omission of any material fact or failure to perform any covenant provided hereunder by any party shall constitute an event of default. The defaulting party shall assume all the legal liabilities pursuant to the applicable laws. ARTICLE 7. DISPUTE RESOLUTION 7.1 Any dispute arising from the performance of this Agreement shall be first subject to the parties' friendly consultations. If the parties fail to make an written agreement within thirty days after consultation, such dispute will be submitted to the China International Economic and Trade Arbitration Commission ("CIETAC") in accordance with its arbitration rules/procedures. 7.2 The arbitration shall be administered by the Beijing branch of China International Economic and Trade Arbitration Commission in accordance with the then effective arbitration rules of the Commission in Beijing. The tribunal will be composed of one (1) arbitrator appointed by the chairman of CIETAC. 7.3 The arbitration award shall be final and binding on the parties. The costs of the arbitration (including but not limited to arbitration fee and attorney fee) shall be borne by the losing party, unless the arbitration award stipulates otherwise. ARTICLE 8. EFFECTIVENESS 8.1 This Agreement shall become effective upon the execution by both parties hereto. 8.2 The term of this Agreement shall be twenty (20) years. Party A shall not terminate this Agreement during this term. 8.3 Unless Party B notifies Party A of no renewal of this Agreement by giving a thirty (30) days prior notice, this Agreement will be renewed for one year automatically after the expiry of the term hereof. This provision will apply to all the subsequent renewal. ARTICLE 9. NO SUBSEQUENT OBLIGATION 9.1 Once this Agreement is terminated, Party A will not have any obligation of providing to Party B any Service hereunder. ARTICLE 10. TRANSFER LIMITATION 10.1 Without the prior written consent of the other party, neither party shall transfer any of their rights or obligations hereunder. ARTICLE 11. AMENDMENT 11.1 Both parties hereto shall fulfill their respective obligations hereunder. No amendment to this Agreement shall be effective unless such amendment has been made in written form, and agreed by both parties and both parties have obtained necessary authorization and approvals with respect to such amendment. Any modification and supplementary to this Agreement after signed by both parties, become an integral part of this Agreement, and has the same legal force with this Agreement. ARTICLE 12. COUNTERPARTS 12.1 This Agreement is executed in two counterparts, with Party A and Party B each hold a counterpart. Each counterpart has the same legal force. ARTICLE 13. MISCELLANEOUS 13.1 The title and headings contained in this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of any provision of this Agreement; 13.2 The parties may enter into supplementary agreements to address any issue not covered by this Agreement. The supplementary agreements so entered shall be an appendix hereto and shall have the same legal effect as this Agreement. [The remaining of this page is intentionally left blank] Exhibit 1 --------- Content of the Strategic Consulting Services Party B shall provide the following strategic consultation services to Party A pursuant to this Agreement to the extent permitted by PRC laws: (1) evaluation of new products/services; (2) industry and client research; (3) marketing strategies; (4) training of Party A's personnel; and (5) other services in connection with Party A's business. Exhibit 2 --------- Strategic Consulting Service Fee The Service Fee in consideration of provision of the Service provided by Party B shall be 30% of the "profits" of Party A in such year. The "profits" of Party A in such year should be equal to gross revenue of Party A in such year minus (the sales tax, sales expenses, management fees, financial expenses and other expenses resulting from the daily operation and other business operation of Party A, and such "profit" shall be the profit before paying for other service fees as specified by the Binding Agreements. Such expenses shall be determined by both parties every quarter in written form, and shall be paid by Party B within three (3) months after the accounting date. [execution page only] This Agreement is executed by the following parties as of the date listed first above. Party A: Beijing Premium Technology Co., Ltd. Seal: Authorized Representative (Signature): Party B: Fortune Software (Beijing )Co. Ltd. Seal: Authorized Representative (Signature): EX-4.28 15 h02185exv4w28.txt EX-4.28 PURCHASE OPTION AGREEMENT EXHIBIT 4.28 [Translated from Chinese Original] PURCHASE OPTION AGREEMENT among FORTUNE SOFTWARE (BEIJING) CO., LTD. XIONG WEI FAN ZHENFEI and BEIJING PREMIUM TECHNOLOGY CO., LTD. August, 2007 BEIJING, CHINA PURCHASE OPTION AGREEMENT This Purchase Option Agreement ("this Agreement") is entered into in Beijing, People's Republic of China (the "PRC") on this August 21, 2007 by and among: Party A: Fortune Software (Beijing) Co. Ltd. Address: Room 626, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nalu Road, Haidian District, Beijing, the People's Republic of China (the "PRC") Postal code: 100080 Party B: Xiong Wei Address: 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue, Xicheng District, Beijing, the PRC ID No.: 610113197206201645 Party C: Fan Zhenfei Address: 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District Beijing, the PRC ID No.: 370282197711186915 Party D: Beijing Premium Technology Co., Ltd. Address: Room 621, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nalu Road, Haidian District, Beijing Postal code: 100080 Party A, Party B, Party C and Party D will each be referred to as a "Party" and collectively referred to as the "Parties. WHEREAS, (1) Party D is a company with limited liability duly organized and validly existing under the laws of PRC; Party B and Party C are current shareholders of Party D and each holding 55% and 45% shares in Party D respectively. (2) To finance the investment by Party B and Party C in Party D, Party A has entered into loan agreements respectively with Party B and Party C on September 10, 2007, providing Party B and Party C with loans of RMB 550,000 Yuan and RMB 450,000 Yuan, respectively. Pursuant to the Loan Agreement, Party B and Party C has invested the full amount of the loans in Party D's registered capital. (3) Party B and Party C hereto wish to grant Party A or the qualified entity designated by Party A the exclusive purchase option to acquire, at any time upon satisfaction of the requirements under the PRC law, the entire or a portion of Party D's share equity owned by Party B and/or Party C, or the all or a portion of the Party's D's assets. NOW AND THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development and after friendly negotiations, the Parties hereby enter into the following agreements pursuant to the provisions of relevant laws and regulations of the PRC. ARTICLE 1. DEFINITIONS The terms used in this Agreement shall have the meanings set forth below: 1.1 "This Agreement" means this Purchase Option Agreement and all appendices thereto, including written instruments as originally executed and as may from time to time be amended or supplemented by the Parties hereto through written agreements. 1.2 "The PRC" means, for the purpose of this Agreement, the People's Republic of China, excluding Hong Kong, Taiwan and Macao. 1.3 "Date" means the year, month and day. In this Agreement, "within" or "no later than", when used before a year, month or day, shall always include the relevant year, month or day. ARTICLE 2. THE GRANT AND EXERCISE OF PURCHASE OPTION 2.1 The Parties hereto agree that Party A shall be granted an exclusive purchase option to acquire, at any time upon satisfaction of the requirements under applicable laws and conditions as agreed in this Agreement (including, without limitation, as under applicable laws, when Party B and/or Party C cease to be Party D's directors or employees, or Party B and/or Party C propose to transfer their share equity in Party D to any party other than the existing shareholders of Party D), the entire or a portion of Party D's share equity owned by Party B and/or Party C, or the entire or portion of the assets owned by Party D ("Purchase Option"). The Purchase Option granted hereby shall be irrevocable during the term of this Agreement and may be exercised by Party A or any eligible entity designated by Party A. 2.2 Party A (or the eligible entity designated by Party A) may exercise the aforesaid purchase option by delivering a written notice to Party B, Party C and/or Party D (as the case may be) subject to the PRC laws and regulations (the "Exercise Notice"), specifying the number of shares intended to be purchased from Party B and/or Party C, or the amount of assets intended to be purchased from Party B ("Purchased Shares (Assets)"), and the method of purchase. 2.3 Within thirty (30) days of the receipt of the Exercise Notice, Party B, Party C or Party D (as the case may be) shall execute a share/asset transfer contract and other documents (collectively, the "Transfer Documents") necessary to effect the respective transfer of share equity or assets with Party A (or any eligible party designated by Party A). 2.4 When applicable laws permit the exercise of the purchase option provided hereunder and Party A elects to exercise such purchase option, Party B, Party C and Party D shall unconditionally assist Party A to obtain all approvals, permits, registrations, filings and other procedures necessary to effect the transfer of relevant share equity or assets. ARTICLE 3. EXERCISE PRICE 3.1 When it is permitted by applicable laws, Party A (or any eligible party designated by Party A) shall have the right to acquire, at any time, all of Party D's assets or its share equity owned by Party B and Party C, at a price equal to the registered capital of Party D. 3.2 If Party A (or any eligible party designated by Party A) elects to purchase a portion of Party D's share equity or assets, then the exercise price for such purpose shall be adjusted accordingly based on the percentage of such share equity or assets to be purchased over the total share equity or assets. 3.3 When Party A (or a qualified entity designated by party A) is to acquire all or a portion of Party D's equity share from Party B and Party C pursuant to this Agreement, Party A has the right to substitute the principle amounts Party B and Party C respectively owe Party A under the Loan Agreement for the purchase prices payable to Party B and Party C, respectively. 3.4 When acquiring share equity or assets from Party B, Party C, or Party D pursuant to this Agreement, Party A (or a qualified entity designated by party A) shall pay an actual exercise price based on the exercise price under applicable PRC laws or requirements of relevant authorities, if the exercise price under applicable laws or requirements of relevant authorities is higher than the exercise price under this Agreement. ARTICLE 4. REPRESENTATIONS AND WARRANTIES 4.1 Each party hereto represents to the other parties that: 4.1.1 it has all the necessary rights, powers and authorizations to enter into this Agreement and perform its duties and obligations hereunder; and 4.1.2 the execution or performance of this Agreement shall not violate any significant contract or agreement to which it is a party or by which it or its assets are bounded. ARTICLE 5. OTHER COVENANTS The Parties further agree as follows: 5.1 Before Party A (or a qualified entity designated by party A) has acquired all the equity/assets of Party D by exercising the purchase option provided hereunder, Party D shall not: 5.1.1 sell, assign, mortgage or otherwise dispose of, or create any encumbrance on, any of its assets, operations or any legal or beneficiary interests with respect to its revenues (unless such sale, assignment, mortgage, disposal or encumbrance is relating to its daily operation or has been disclosed to and agreed by Party A in writing); 5.1.2 enter into any transaction which may materially affect its assets, liability, operation, equity or other legal rights (unless such transaction is relating to its daily operation or has been disclosed to and agreed by Party A in writing); and 5.1.3 distribute any dividend to its shareholders in any manner. 5.2 Before Party A (or a qualified entity designated by party A) has acquired all the equity/assets of Party D by exercising the purchase option provided hereunder, Party B and/or Party C shall not individually or collectively: 5.2.1 supplement, alter or amend the articles of association of Party D in any manner to the extent that such supplement, alteration or amendment may have a material effect on Party D's assets, liability, operation, equity or other legal rights (except for pro rata increase of registered capital mandated by applicable laws); 5.2.2 cause Party D enter into any transaction to the extent such transaction may have a material effect on Party D's assets, liability, operation, equity or other legal rights (unless such transaction is relating to Party D's daily operation or has been disclosed to and agreed by Party A in writing); and 5.2.3 cause Party D's board of directors adopt any resolution on distributing dividends to its shareholders. 5.3 Party B and Party C shall, to the extent permitted by applicable laws, cause Party D's operational term to be extended to equal the operational term of Party A. 5.4 Party A shall provide or arrange other parties to provide financings to Party D to the extent Party D needs such financing to finance its operation. In the event that Party D is unable to repay such financing due to its losses, Party A shall waive or cause the relevant parties to waive all recourse against Party D with respect to such financing. 5.5 To the extent Party B and/or Party C are subject to any legal or economic liabilities to any institution or individual as a result of performing their obligations under this Agreement or any other agreements between them and Party A, Party A shall provide all support necessary to enable Party B and/or Party C to duly perform their obligations under this Agreement and any other agreements and to hold Party B and/or Party C harmless against any loss or damage caused by their performance of obligations under such agreements. 5.6 If Party A decides to transfer its rights under the Loan Agreement to any third party, and has sent a written notice to the other Parties, Party A has the right to transfer its rights and obligation hereunder to such third party at the same time, with no need to obtain the prior consent of the Parties hereto. 5.7 Party B and Party C shall execute a Proxy of voting rights to the satisfaction of Party A, attached hereto as Exhibit 1, authorizing a qualified third party designated by Party A to exercise all the voting rights on behalf of Party B and Party C. The first term of such Proxy shall be 20 years. Unless Party A notifies Party B and Party C in writing to terminate such Proxy, the term of this Proxy will be extended automatically after the expiry of the first term. ARTICLE 6. CONFIDENTIALITY 6.1 Each Party shall keep confidential all the content of this Agreement. Without the prior consent of all Parties, no Party shall disclose any content of this Agreement to any other party or make any public announcements with respect to any content of this Agreement. Notwithstanding the forgoing provisions of this Article 6, the following disclosure shall be permitted: (i) disclosure made pursuant to any applicable laws or any rules of any stock exchange of US, PRC or relevant countries; (ii) disclosure of information which has become public information other than due to any breach by the disclosing party; (iii) disclosure to any Party's shareholders, legal counsel, accountants, financial advisors or other professional advisors, or (iv) disclosure to any potential purchasers of a Party or its shareholders' equity/assets, its other investors, debts or equity financing providers, provided that the receiving party of confidential information has agreed to keep the relevant information confidential (such disclosure shall be subject to the consent of Party A in the event that Party A is not the potential purchaser). 6.2 The Parties agree this Article 6 will survive any invalidity, modification, cancellation or termination of this Agreement, if applicable. ARTICLE 7. APPLICABLE LAW AND EVENTS OF DEFAULT 7.1 The execution, effectiveness, interpretation, performance and dispute resolution of this Agreement shall be governed by the laws of the PRC. 7.2 Any violation of any provision hereof, incomplete performance of any obligation provided hereunder, any misrepresentation made hereunder, material concealment or omission of any material fact or failure to perform any covenants provided hereunder by any Party shall constitute an event of default. The defaulting Party shall assume all the legal liabilities pursuant to the applicable laws. ARTICLE 8. DISPUTE RESOLUTION 8.1 Any dispute arising from the performance of this Agreement shall be first subject to the Parties' friendly consultations. If the parties fail to make an written agreement within thirty days after consultation, such dispute will be submitted to the China International Economic and Trade Arbitration Commission ("CIETAC") in accordance with its arbitration rules/procedures. The tribunal will be composed of one (1) arbitrator appointed by the chairman of CIETAC. 8.2 The arbitration shall be administered by the Beijing branch of China International Economic and Trade Arbitration Commission in accordance with the then effective arbitration rules of the Commission in Beijing. 8.3 The arbitration award shall be final and binding on the Parties. The costs of the arbitration (including but not limited to arbitration fee and attorney fee) shall be borne by the losing party, unless the arbitration award stipulates otherwise. ARTICLE 9. EFFECTIVENESS 9.1 This Agreement shall be effective upon the execution hereof by all Parties hereto and shall remain effective thereafter. This Agreement may not be terminated without the unanimous consent of all the Parties except Party A may, by giving a thirty (30) days prior notice to the other Parties hereto, terminate this Agreement. 9.2 If during the term of this Agreement, the operation term of Party A or Party D (including any extended term) expires or is terminated due to other reasons, this Agreement shall be terminated at the time such Party terminates, unless Party A has transferred its rights and obligations hereunder to others pursuant to Article 5.6. ARTICLE 10. AMENDMENT 10.1 All Parties hereto shall fulfill their respective obligations hereunder. No amendment to this Agreement shall be effective unless such amendment has been made in written form, and agreed by all of the Parties and Party A and Party D have obtained necessary authorization and approvals with respect to such amendment. Any modification and supplementary to this Agreement after signed by both Parties, become an integral part of this Agreement, and has the same legal force with this Agreement. ARTICLE 11. COUNTERPARTS 11.1 This Agreement is executed in four (4) counterparts, and are equally authentic. . Party A, Party B, Party C, and Party D shall each hold one counterpart. ARTICLE 12. MISCELLANEOUS 12.1 Party B and Party C's obligations, covenants and liabilities to Party A hereunder are joint and several, and Party B and Party C shall assume joint and several liabilities with respect to such obligations, covenants and liabilities. With respect to Party A, a default by Party B shall automatically constitute a default by Party C, and vice versa. 12.2 The title and headings contained in this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of any provision of this Agreement. 12.3 The Parties may enter into supplementary agreements to address any issue not covered by this Agreement. The supplementary agreements so entered shall be an appendix hereto and shall have the same legal effect as this Agreement. [The remaining of this page is intentionally left blank] Exhibit 1 --------- Proxy I, Xiong Wei the citizen of People Republic of China, ID No. 610113197206201645, hereby authorizes Fortune Software Beijing to exercise the following rights and powers during the term of this Proxy: (1) attend the shareholders' meeting of Beijing Premium Technology Co. Ltd. ("Company") as my proxy, and exercise all the voting rights of shareholders granted by the relevant laws and the Articles of Association of the Company on behalf of the Company; and (2) Designate and appoint the directors, general manager, chief financial officer and other senior management of the Company as my authorized representative; Party A hereby accepts the authorization herein. The above authorization shall be subject to Fortune Software (Beijing) Co. Ltd. continuing to be the designated party (or appointed party). Unless Fortune Software (Beijing) Co. Ltd. (the appointed party) sends a written notice to terminate or replace the title of Fortune Software (Beijing) Co. Ltd. as the designated party (or appointed party), this Proxy shall continue to be valid for 20 years after the execution, and shall be renewed automatically after the expiry of the first term. Entrusting Party(signature): Date: Exhibit 1 --------- Proxy I, Fan Zhenfei, the citizen of People Republic of China, ID No. 370282197711186915, hereby authorizes Fortune Software to exercise the following rights and powers during the term of this Proxy: (1) attend the shareholders' meeting of Beijing Premium Technology Co. Ltd. ("Company") as my proxy, and exercise all the voting rights of shareholders granted by the relevant laws and the Articles of Association of the Company on behalf of the Company; and (2) Designate and appoint the directors, general manager, chief financial officer and other senior management of the Company as my authorized representative; Party A hereby accepts the authorization herein. The above authorization shall be subject to Fortune Software (Beijing) Co. Ltd. continuing to be the designated party (or appointed party). Unless Fortune Software (Beijing) Co. Ltd. (the appointed party) sends a written notice to terminate or replace the title of Fortune Software (Beijing) Co. Ltd. as the designated party (or appointed party), this Proxy shall continue to be valid for 20 years after the execution, and shall be renewed automatically after the expiry of the first term. Entrusting Party(signature): Date: [execution page only] Party A: Fortune Software (Beijing )Co. Limited Seal: Authorized Representative (Signature): Party B: Xiong Wei (Signature): Party C: Fan Zhenfei (Signature): Party D: Beijing Premium Technology Co, Ltd. Seal: Authorized Representative (Signature): EX-4.29 16 h02185exv4w29.txt EX-4.29 FRAMEWORK AGREEMENT EXHIBIT 4.29 [Translated from Chinese original] FRAMEWORK AGREEMENT The Framework Agreement is entered into as of the date of September 10, 2007 in Beijing, the People's Republic of China (the "PRC") by and among the following parties: PARTY A: FORTUNE SOFTWARE (BEIJING) CO, LTD. Registered Address: Room 626, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nanlu Road, Haidian District, Beijing, the PRC PARTY B: CHEN WU Address: Room 616, Tower A, COFCO Plaza, No. 8, Jiangguomennei Avenue, Beijing, the PRC ID No.: 110108491204891 PARTY C: WANG JUN ADDRESS: FLOOR 9, TOWER C, CORPORATE SQUARE, NO. 35 FINANCIAL STREET, XICHENG DISTRICT, Beijing, the PRC ID No. :370102197012163311 PARTY D: BEIJING GLORY CO, LTD. Address: Room 621, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nanlu Road, Haidian District, Beijing, the PRC Party A, Party B, Party C and Party D will each be referred to as a "Party" and collectively referred to as the "Parties." WHEREAS: 1. Party B is the current shareholder of Party D which has made registrations at the Administration of Industry and Commerce authorities, and holding 55% shares in Party D; 2. Party D is a limited liability company duly organized and validly existing under the laws of the PRC; 3. Party A is a limited liability company duly organized and validly existing under the laws of the PRC; 4. To finance the investment by Party B in Party D, Party A has entered into the Loan Agreement with Party B on September 1, 2007, providing Party B with loans of RMB 550,000. Pursuant to the Loan Agreement, Party B has invested the full amount of the Loan in Party D's registered capital; 5. Party B intends to transfer its shares in Party D to Party C; and 6. Party C intends to enter into a loan agreement with Party A and get loan from Party A as the purchase price paid to Party B. FRAMEWORK AGREEMENT THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development, through friendly negotiation, the Parties hereby enter into the following agreements: ARTICLE 1. SHARE TRANSFER 1.1 The Parties agree that Party B shall enter into a Share Transfer Agreement with Party C ("Exhibit 1"). 1.2 For the purpose of this Agreement, the Completion Day referred to herein shall mean the date of completing the procedures of changing the registration of Party D's shares at the industry and commerce authorities(the "Completion Day"). From the Completion Day of shares transfer, Party C shall replace Party B to enjoy all the rights and perform all the obligations in relations to the Party B's transferred shares in Party D. 1.3 The Parties shall take all the necessary actions to assist Party C and Party D in completing all the necessary procedures of shares transfer until the Completion Day. ARTICLE 2. LOAN ARRANGEMENTS 2.1 The purchase price of shares held by Party B, purchased by Party C shall be contributed in full amount by Party A. Without the consent of Party A, Party C shall not use such Loan for the purposes other than paying for the shares purchase price. Party C shall enter into a loan agreement with Party A to the satisfaction of Party A, in accordance with the content and form specified in Exhibit 2 attached hereto. 2.2 Party A agrees to offer the Loan to Party C after the execution of the loan agreement with Party C, in accordance with the terms and conditions stated herein. ARTICLE 3. REPAYMENT OBLIGATION 3.1 Party B agrees to contribute its entire income obtained from selling the shares in Party D in accordance with the Agreement, to perform its repayment obligations to Party A under the Loan Agreement. The Loan Agreement between Party B and Party A will be terminated when Party B pays off all the loans in accordance with Article 4.2 hereof. ARTICLE 4. PAYMENT AND OBLIGATION SET-OFF 4.1 In accordance with the Share Transfer Agreement, the Parties agree that the share purchase price shall be paid by Party C to Party B directly on the Completion Day; the Loan Agreement between Party A and Party B provides that Party B may repay the loan by transferring its shares in Party D to Party A or a third party designated by Party A to the extent permitted by PRC laws; and the contemplated Loan Agreement to be entered into between Party A and Party C provides that Party A will pay Party C the price for acquiring Party B's shares. The Parties agree, the payment obligation of Party C to Party B for the share purchase price under the Shares Transfer Agreement, the repayment obligation of Party B under the Loan Agreement between Party A and Party B, and loan extended by Party A under the Loan Agreement between Party A and Party C, will set off one another. Upon the completion of the aforesaid set-off , Party C is not required to make any 2 FRAMEWORK AGREEMENT other payments to Party B for the purpose of paying for the purchase price; Party B is not required to make any other payments to Party A for the purpose of repaying the loan; and Party A is not required to offer any loan to Party C. 4.2 Notwithstanding the foregoing, when the set-off is completed, Party B shall issue a receipt to Party C for all purchase price it received ("Party B's receipt" attached hereto as Exhibit 3 ), and shall expressly acknowledge Party C's payment obligation under the Share Transfer Agreement has been fulfilled. Party A shall immediately issue a receipt to Party B for the entire loan principal it received ("Party A's receipt", attached hereto as Exhibit 4) after Party B issued the aforesaid party B's receipt, and shall expressly acknowledge Party B's payment obligation under the Loan Agreement has been fulfilled. Party C shall issue immediately a receipt to Party A for the entire loan principal it received ("Party C's receipt", attached hereto as Exhibit 5) after Party B issued the aforesaid party B's receipt and Party A has issued the aforesaid Party A's receipt, and shall expressly acknowledge Party A's payment obligation under the Loan Agreement has been fulfilled out. ARTICLE 5. CONFIDENTIALITY Without prior approval of the parties, any party shall keep confidential the content of the Agreement, and shall not disclose to any other person the content of the agreement or make any public disclosure of the content hereof. However, the article does not make any restrictions on (i) any disclosure made in accordance with relevant laws or regulations of any stock exchange; (ii) any disclosed information which may be obtained through public channels, and is not caused so by the defaulting of the disclosing party; (iii) any disclosure to shareholders, legal consultants, accountants, financial consultants and other professional consultants of any parties. ARTICLE 6. NOTIFICATION 6.1 Any notice, request, requirement and other correspondences required by the agreement or made in accordance with the agreement, shall be made in written form and sent to the addresses of the parties first above written herein. 6.2 Notices hereunder shall be sent to the other party's address and/or number, by ways of personal delivery, prepaid registered airmail, acknowledged carrier or fax. Such notices shall be deemed to have been effectively given on the following dates: (1) notices delivered by person shall be deemed to have been effectively served on the date of personal delivery; (2) notices sent by prepaid registered airmail shall be deemed to have been effectively served on the seventh day after the day they were delivered for mailing (as indicated by the postmark); (3) notices sent by courier service shall be deemed to have been effectively served on the third day after they were delivered to an acknowledged courier; (4) notices sent by facsimile shall be deemed to have been effectively served on the first working day after being transmitted. ARTICLE 7. DISPUTE RESOLUTION 7.1 Any dispute arises from the interpretation or performance of terms hereof by the parties, shall be settled through friendly consultation. If the parties fail to make an written agreement after consultation, the dispute shall be submitted for arbitration in accordance with the agreement. The arbitration shall be final and exclusive. Unless otherwise expressly stipulated herein, any party waives expressly its right to submit a dispute to court for a legal action, and the waiver is irrevocable. 3 FRAMEWORK AGREEMENT 7.2 The arbitration shall be submitted to China International Economic and Trade Arbitration Committee ("Arbitration Committee") to be arbitrated in accordance with then-in-force arbitration rules. The place of arbitration shall be Beijing. Unless otherwise stipulated in the arbitration award, the arbitration fee (including reasonable attorney fees and expenses) shall be borne by the losing party. ARTICLE 8. MISCELLANEOUS 8.1 The failure or delay of any party hereof to exercise any right hereunder shall not be deemed as a waiver thereof, nor any single or partial exercise of any right preclude further exercise thereof in future by the party. 8.2 The headings of articles herein are provided for the purpose of index. Such headings shall in no event be used or affected interpretations of the terms herein. 8.3 The conclusion, effectiveness, interpretation of the agreement and the settlement of disputes in connection therewith, shall be governed by laws of People's Republic of China. 8.4 Each party hereunder concludes the agreement with legal purpose. Each term hereof is severable and independent from the others. If at any time one or more of such terms is or becomes invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining terms hereof shall not in any way be affected thereby; and the parties shall make every endeavor to negotiate and arrive at new terms to substitute the invalid, illegal and unenforceable terms, and preserve as near as possible business purposes of the original terms. 8.5 Upon the effectiveness of the agreement, the parties shall fully perform the agreement. Any modifications of the agreement shall only be effective in written form, through consultations of the Parties, and obtained necessary authorization and approval by Party A, Party D and Party B respectively. 8.6 Matters not covered in the agreement shall be dealt with in a supplementary agreement, and annexed hereto. The supplementary agreement shall have the same legal force as the agreement. 8.7 The agreement is executed in four original copies, and are equally authentic. Each party hereto shall hold one copy. 8.8 The agreement shall be effective upon execution. (The reminder of this page is intentionally left blank.) 4 FRAMEWORK AGREEMENT Exhibit 1 Share Transfer Agreement 5 FRAMEWORK AGREEMENT Exhibit 2 Loan Agreement 6 FRAMEWORK AGREEMENT Exhibit 3 Party B Receipt 7 FRAMEWORK AGREEMENT Exhibit 4 Party A Receipt 8 FRAMEWORK AGREEMENT Exhibit 5 Party C Receipt 9 FRAMEWORK AGREEMENT [Signature page, no body text] The Frame Agreement is executed by the following parties: Party A: Seal: Authorized Representative (signature): Party B: (signature): Party C: (signature): Party D: Seal: Authorized Representative (signature): 10 EX-4.30 17 h02185exv4w30.txt EX-4.30 LOAN AGREEMENT EXHIBIT 4.30 [Translated from Chinese original] LOAN AGREEMENT AMONG FORTUNE SOFTWARE (BEIJING) CO. LTD. CHEN WU AND ZHAO ZHIWEI SEPTEMBER 2007 BEIJING LOAN AGREEMENT The Loan Agreement (the "Agreement") is entered into as of September 1, 2007 among the following parties in Beijing, the People's Republic of China (the "PRC"): PARTY A: FORTUNE SOFTWARE (BEIJING) CO., LTD. (the "Lender") Registered Address: Floor 9, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, the People's Republic of China (the "PRC") Legal Representative: Zhao Zhiwei PARTY B: CHEN WU Address: Floor 9, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, the PRC ID No.: 110108194912048913 Tel: 010-58325388 PARTY C: ZHAO ZHIWEI Address: Floor 9, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, the PRC ID No. :110102196307100139 Tel: 010-58325388 Party B and Party C are collectively referred to as the "Borrowers". Party A, Party B and Party C will each be referred to as a "Party" and collectively referred to as the "Parties." WHEREAS, 1. The Lender is a wholly foreign owned enterprise duly organized and validly existing under the laws of the PRC. 2. The Borrowers desire to establish a company in the PRC ("New Company"), and will collectively hold 100% equity interest in the Company. 3. The Borrowers desire to borrow loans from the Lender to invest in the New Company, and the Lender agrees to provide such loans to Borrowers. THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development, through friendly negotiation, the Parties hereby enter into the following agreements pursuant to relevant PRC laws and regulations. ARTICLE 1. AMOUNT AND PURPOSE 2 1.1 Loan Amount: the Lender agrees to provide a loan from its self-owned fund to Party B and Party with the amount of RMB 550,000, and RMB 450,000 respectively. 1.2 Purpose of the Loan: the Borrowers shall only use the Loan hereunder to establish the New Company as registered capital. Without the prior written consent of the Lender, the Borrowers shall not use such Loan for any other purpose, or pledge their equity interests in the New Company to any other third party. ARTICLE 2. PAYMENT FOR THE LOAN 2.1 Payment Notice: the Lender shall deposit the loan amount to the following accounts designated by the Borrowers within ten days after the execution of this Agreement: Party B: Bank of deposit: CITIC Bank Account Name: Chen Wu Account No.: 7110 3101 9201 1228 584 Party C: Bank of deposit: CITIC Bank Account Name: Zhiwei Zhao Account No.: 7112 3101 9200 9610 244 ARTICLE 3. TERM, REPAYMENT AND INTEREST OF THE LOAN 3.1 The term of the loan shall be 10 years and may be renewed pursuant to the agreement between the Parties ("Term"). Notwithstanding the foregoing, in the following circumstances, the Borrowers shall repay the Loan regardless if the Term has expired: (1) The Borrowers deceases or becomes a person without legal capacity or with limited legal capacity; (2) The Borrowers commit a crime or are involved in a criminal act; or (3) The Lender or its designated assignee can legally purchase the Borrowers' shares in the New Company under the PRC law and the Lender chooses to do so. 3.2 The Borrowers can repay the Loan by transferring all of their equity interests in the New Company to the Lender or a third party designated by the Lender when such transfer is permitted under the PRC law. In the event (1) the Borrowers transfer all of their equity interests in the New Company to the Lender or a third party designated by the Lender when such transfer is permitted under the PRC law, or (2) the Borrowers receive dividends from the New Company, the Borrowers shall deposit all the funds or dividends obtained from such transfer or the New Company, as the case may be, to the account designated by the Lender (no matter such amount is higher or less than the principal amount of the Loan). 3.3 The Lender and the Borrowers hereby jointly agree and confirm that the Lender, has the right to, but has no obligation to, purchase or designate a third party (legal person or natural person) to purchase all or part of Borrower's interest in the New Company at a price equal to the amount of the Loan when such purchase is allowed under the PRC law. If Lender or the third party assignee designated by Lender only purchases part of Borrower's interest in the New Company, the purchase price shall be reduced on a pro rata basis. 3 3.4 In the event when the Borrowers transfer their interest in the New Company to the Lender or a third party transferee designated by Lender, (i) if the total of (1) the actual transfer price paid by Lender or the third party transferee and (2) the dividends obtained from the New Company by the Lender (if applicable) equals or is less than the principal amount of the Loan, the Loan shall be deemed as interest free; (ii) if the total of (1) the actual transfer price paid by Lender or the third party transferee and (2) the dividends obtained from the New Company by the Lender (if applicable) is higher than the principal amount of the Loan, the amount exceeding the principal amount of the Loan shall be deemed as an interest accrued on the Loan and paid by Borrowers to Lender in full. ARTICLE 4. CONFIDENTIALITY The Parties acknowledge and confirm that any oral or written materials concerning this Agreement exchanged between them are confidential information. The Parties shall protect and maintain the confidentiality of all such confidential data and information and shall not disclose to any third party without the other party's written consent, except (a) the data or information that was in the public domain or later becomes published or generally known to the public, provided that it is not released by the receiving party, (b) the data or information that shall be disclosed pursuant to applicable laws or regulations, and (c) the data or information that shall be disclosed to One Party's legal counsel or financial counsel who shall also bear the obligation of maintaining the confidentiality similar to the obligations hereof. The undue disclosing of the confidential data or information of One Party's legal counsel or financial counsel shall be deemed the undue disclosing of such party who shall take on the liability of breach of this Agreement. ARTICLE 5. DISPUTE RESOLUTION 5.1 The execution, validity, interpretation, performance, implementation, termination and settlement of disputes of this Agreement shall be governed by the laws of the PRC. 5.2 Any dispute arising from or in connection with this Agreement shall be settled through friendly negotiation. If the parties fail to make any written agreement within thirty days after consultation, such dispute will be submitted (by the Lender or the Borrowers) to the China International Economic and Trade Arbitration Commission ("CIETAC") in accordance with its arbitration rules/procedures. The arbitration shall commence from the date of filing. The tribunal will be composed of one (1) arbitrator appointed by the chairman of CIETAC. The arbitration shall be final and bind the Parties. Unless otherwise stipulated by the arbitrator, the arbitration fee (including reasonable attorney fees and attorney expenses) shall be borne by the losing party. ARTICLE 6. EFFECTIVENESS 6.1 This Agreement shall become effective after the execution of the Parties. The Agreement can be terminated by one Party through sending a written notice to the other Parties thirty days prior to the termination. Otherwise any Party shall not terminate this Agreement unilaterally without the mutual agreement of the Parties. ARTICLE 7. AMENDMENT 7.1 Upon the effectiveness of the agreement, the parties shall fully perform the agreement. Any modifications of the agreement shall only be effective in written form through 4 consultations of the parties. Any modification and supplementary to this Agreement after signed by both Parties, become an integral part of this Agreement, and has the same legal force with this Agreement. ARTICLE 8.MISCELLANEOUS 8.1 The headings of articles herein are provided for the purpose of reference. Such headings shall in no event be used or affected interpretations of the terms herein. 8.2 Matters not covered in the agreement shall be dealt with in a supplementary agreement, and annexed hereto. The supplementary agreement shall be an integral part of this Agreement and have the same legal force as the agreement. 8.3 Any provision of this Agreement that is invalid or unenforceable shall not affect the validity and enforceability of any other provisions hereof. 8.4 The agreement is executed in three original copies, and are equally authentic. Each party hereto shall hold one copy. IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date and year first hereinabove set forth. Party A: FORTUNE SOFTWARE CO., LTD ------------------------- Seal Authorized Representative: Party B: CHEN WU ------------------------- (signature) PARTY C: ZHAO ZHIWEI ------------------------- (signature) 5 EX-4.31 18 h02185exv4w31.txt EX-4.31 SHARE TRANSFER CONTRACT EXHIBIT 4.31 [Translated from Chinese Original] SHARE TRANSFER AGREEMENT This Share Transfer Agreement is entered into by the following Parties on September 10, 2007: CHEN WU (the "TRANSFEROR"), Address: Room 616, Tower A, COFCO Plaza, 8 Jianguomennei Avenue, Beijing, the People's Republic of China (the "PRC") ID Number: 110108194912048913; and WANG JUN (the "TRANSFEREE") Address: 9/F., Tower C, Corporation Mansion, No.35 Financial Street, Xicheng District, Beijing, the PRC ID Number: 370102197012163311 WHEREAS: 1. Beijing Glory, Ltd. (the "Company") is a limited liability company registered in Beijing, PRC in compliance with law of China, and its registered capital is RMB 1,000,000. 2. The Transferor is the beneficiary owner of 55% of equity shares of the Company, and have paid up its contributions. 3. The Transferor desires to sell to the Transferee, and the Transferee desires to purchase from the Transferor, all shares of the Company owned by the Transferor, representing 55% of the total share capital of the Company. NOW, THEREFORE, after friendly consultations conducted in accordance with the principles of equality, the Transferor and the Transferee hereby agree as follows: ARTICLE 1. TRANSFER SUBJECT 1.1 Subject to the terms and conditions of this Agreement, the Transferor agrees to sell the Shares to the Transferee, and the Transferee agrees to purchase the shares representing the registered capital of RMB 550,000 (55% in the total registered capital of the Company) which has been paid up by the Transferor and all the rights and benefits belonging to such shares (collectively "Shareholder's Equity"). ARTICLE 2. CONSIDERATION AND PAYMENT 2.1 Transfer consideration: The Transferee shall pay RMB 550,000 ("Consideration") to the Transferor to the account designated by the Transferee, as the consideration for the Shareholder's Equity transferred by the Transferor to the Transferee pursuant to this Agreement. 1 2.2 Date of Payment: the Transferee shall pay the Consideration to the Transferor within thirty days after the execution of this Agreement. ARTICLE 3. SHARE TRANSFER 3.1 For the purpose of this Agreement, the Completion Day referred to herein shall mean the date of completing the procedures of changing the registration of Party D's shares at the industry and commerce authorities ("Completion Day"). From the Completion Day of shares transfer, Party C shall enjoy all the rights and perform all the obligations hereunder within the scope of the transferred shares which have once been enjoyed or performed by Party B. 3.2 The Parties shall take all the necessary actions to assist Party B and Party C in completing all the necessary procedures of shares transfer until the Completion Day. 3.3 All the expenses and the taxation incurred from this Shares Transfer shall be borne by the Parties respectively in accordance with laws. ARTICLE 4. REPRESENTATIONS AND WARRANTIES 4.1 The Transferor represents and warrants to the Transferee unconditionally and irrevocably: 4.1.1 The Transferor is the legal and actual owner of the Shareholder's Equity, which is free and clear of any lien, pledge, claim, or the securities or the right of third parties, and is not subject to any binding of priority right (including but not limited to the right of first refusal and the right of first purchase). The Shareholder's Equity after transferred to the Transferee will not be claimed by any third party. 4.1.2 The Company is a limited liability company duly incorporated and validly existing under the laws of China. The share transfer hereunder will not contravene any provision of the Articles of Association of the Company. 4.1.3 The execution by the Transferor of this Agreement and the completion of the transaction hereunder does not lead to the violation, cancellation or termination of any Agreement it has executed, or any branch of any agreement, undertaking or other formal document. 4.1.4 The warranty and representation made by the Transferor and the statement relevant to this transfer is true, accurate, and complete as of the date of this Agreement, without any concealment or misleading content. 4.2 The Transferee represents and warrants to the Transferor unconditionally and irrevocably: 4.2.1 The execution by the Transferee of this Agreement and the completion of the transaction hereunder does not lead to the violation, cancellation or termination of any 2 Agreement it has executed, or any branch of any agreement, undertaking or other formal document. 4.2.2 The warranty and representation made by the Transferor and the statement relevant to this transfer is true, accurate, and complete as of the date of this Agreement, without any concealment or misleading content. ARTICLE 5. NOTICES Any and all notices, requests, demands and other communications required or otherwise contemplated to be made under this Agreement shall be in writing. Notices hereunder shall be sent to the other party's address and/or number, by ways of personal delivery, prepaid registered airmail, acknowledged carrier or fax. Such notices shall be deemed to have been effectively given on the following dates: (1) notices delivered by person shall be deemed to have been effectively served on the date of personal delivery; (2) notices sent by prepaid registered airmail shall be deemed to have been effectively served on the seventh day after the day they were delivered for mailing (as indicated by the postmark); (3) notices sent by courier service shall be deemed to have been effectively served on the third day after they were delivered to an acknowledged courier; (4) notices sent by facsimile shall be deemed to have been effectively served on the first working day after being transmitted. ARTICLE 6. DISPUTE RESOLUTION After the execution of this Agreement, if either Party breaches or fails to perform any of its obligations hereunder, such Party shall bear the liability for breach, and bear all the economic losses of the other Party incurred from such. ARTICLE 7. APPLICABLE LAW 7.1 This Agreement shall be governed by and construed under the laws of China. 7.2 If any provision of this Agreement is determined as invalid or unenforceable by relevant effective laws and regulations, but does not affect the effectiveness of this Agreement, the remaining provisions of this Agreement will not be affected. The Parties shall revise such invalid or unenforceable provision pursuant to the relevant effective laws and regulations to make it a valid provision, which should reflect the principle and spirit of this Agreement to the greatest extent. ARTICLE 8.EFFECTIVENESS AND DISPUTE RESOLUTION 8.1 This Agreement shall become effective after the execution of the Parties. 8.2 Any dispute arises from the interpretation or performance of terms hereof by the parties, shall be settled through friendly consultation. If the parties fail to make a written agreement after consultation, the dispute shall be submitted for arbitration in accordance with the agreement. The arbitration shall be final and exclusive. Unless otherwise expressly stipulated herein, any party waives expressly its right to submit a 3 dispute to court for a legal action, and the waiver is irrevocable. The Parties hereby exclude any rights of appeals to any court on the merits of the dispute subject to arbitration. 8.3 Arbitration shall be submitted to China International Economic and Trade Arbitration Committee ("Arbitration Committee") to be arbitrated in accordance with then-in-force arbitration rules. The place of arbitration shall be Beijing. Unless otherwise stipulated in the arbitration award, the arbitration fee (including reasonable attorney fees and expenses) shall be borne by the losing party. ARTICLE 9.MISCELLANEOUS 9.1 The failure or delay of any party hereof to exercise any right hereunder shall not be deemed as a waiver thereof, nor any single or partial exercise of any right preclude further exercise thereof in future by the party. 9.2 The headings of articles herein are provided for the purpose of index. Such headings shall in no event be used or affected interpretations of the terms herein. 9.3 Each party hereunder concludes the agreement with legal purpose. Each term hereof is severable and independent from the others. If at any time one or more of such terms is or becomes invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining terms hereof shall not in any way be affected thereby; and the parties shall make every endeavor to negotiate and arrive at new terms to substitute the invalid, illegal and unenforceable terms, and preserve as near as possible business purposes of the original terms. 9.4 This Agreement shall bind the legal transferees of the Parties. 9.5 Matters not covered in the agreement shall be dealt with in a supplementary agreement. The supplementary agreement shall only be effective in written form, with the signatures of the Parties. 9.6 The agreement is executed in four original copies, and are equally authentic. Each party hereto shall hold one copy, and the remaining two shall be used for relevant legal procedures. (The reminder of this page is intentionally left blank.) 4 (Execution Page) IN WITNESS WHEREOF, the Parties hereto have signed this Agreement as of the date first written above. Transferor: Chen Wu - ------------------- (signature) Transferee: Wang Jun - ------------------- (signature) 5 EX-4.32 19 h02185exv4w32.txt EX-4.32 OPERATION AGREEMENT EXHIBIT 4.32 [Translated from Chinese Original] OPERATION AGREEMENT between FORTUNE SOFTWARE (BEIJING) CO., LTD. and BEIJING GLORY CO., LTD. September, 2007 BEIJING, CHINA OPERATION AGREEMENT This Operation Agreement ("this Agreement") is entered into in Beijing, People's Republic of China (the "PRC") on this September 10, 2007 between: Party A: Fortune Software (Beijing) Co., Ltd Address: Room 626, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nalu Road, Haidian District, Beijing Legal Representative: Zhao Zhiwei Tel: 010-58325388 Party B: Beijing Glory Co., Ltd. Address: Room 621, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nalu Road, Haidian District, Beijing Legal Representative: Zhao Zhiwei Tel: 010-58325388 WHEREAS, (1) Party A is a wholly foreign owned enterprise duly organized and validly existing under the laws of PRC, and has expertise and resources in developing and manufacturing computer hardware and software, system software, and application software; Party A desires to provide to Party B operational services in connection with developing and manufacturing computer hardware and software, system software, and application software. (2) Party B is a company with limited liability duly organized and validly existing under the laws of PRC; and to expand its business operation in the aspects of developing and manufacturing computer hardware, software, system software, and application software, Party B engages Party A to provide the operational services in connection with the foregoing. (3) Party A has entered into a technical support agreement and strategic consulting service agreement with Party B (collectively the "Binding Agreements"), and hence the Parties have established certain business relationship. NOW AND THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development and after friendly negotiations, the Parties hereby enter into the following agreements pursuant to the provisions of relevant laws and regulations of the PRC. ARTICLE 1. DEFINITIONS The terms used in this Agreement shall have the meanings set forth below: 1.1 "This Agreement" means this Operation Agreement and all appendices thereto, including written instruments as originally executed and as may from time to time be amended or supplemented by the Parties hereto through written agreements. 1.2 "The PRC" means, for the purpose of this Agreement, the People's Republic of China, excluding Hong Kong, Taiwan and Macao. 1.3 "Date" means the year, month and day. In this Agreement, "within" or "no later than", when used before a year, month or day, shall always include the relevant year, month or day. ARTICLE 2. OPERATIONAL SUPPORT 2.1 Party A agrees, according to the operational needs of Party B, to act as the guarantor of Party B in the contracts, agreements, or transactions entered into between Party B and third parties, in order to fully guarantee the performance by Party B of such contracts, agreements, and transactions. 2.2 Party A agrees, according to the operational needs Party B, to recommend directors and senior management to Party B and Party B agrees to appoint the such personnel recommended by Party A to be its directors and senior management. The relevant personnel recommended by Party A pursuant to this Article shall meet the qualification requirements for directors and senior management under applicable laws. 2.3 To ensure the performance of this Agreement, Party A agrees to provide to Party B cooperative policy advice and guidance, which is consistent with the daily operation and financial management and the employment policy of Party B. ARTICLE 3. OBLIGATIONS OF PARTY B 3.1 Party B agrees not to conduct the following business which may materially affect its assts, rights, obligations and operation (except for the sales or purchase of assets, and contracts and agreements entered into during the ordinary course of business of Party B, and the lien imposed by the contracting parties pursuant to the above contracts), without the prior written consent of Party A, including but not limited to: 3.1.1 borrowing loans from any third party or bearing any debt liability; 3.1.2 selling to or obtaining any asset or rights from any third party; and 3.1.3 using its own assets to secure any real obligation of any third party. 3.2 Without the written consent of Party A, Party B shall not transfer its rights and obligations hereunder to any third party. Party B agrees, Party A may transfer its rights and obligations hereunder as it finds necessary, and Party A only needs to give a written notice to Party B after such transfer, without the necessity to obtain any consent from Party B. ARTICLE 4. CONSIDERATION FOR PROVIDING OPERATIONAL SUPPORT 4.1 In consideration of the above operational support provided by Party A, Party B shall pay to Party A certain fees as specified in Exhibit 1 attached hereto. ARTICLE 5. REPRESENTATIONS AND WARRANTIES 5.1 Each Party hereby represents to the other Party that: 5.1.1 It has all the necessary rights, powers and authorizations to enter into this Agreement and to perform its duties and obligations hereunder; and 5.1.2 The execution or performance of this Agreement does not violate any significant contract or agreement to which it is a party or any contract of agreement that binds it or its assets. ARTICLE 6. CONFIDENTIALITY 6.1 Each Party shall keep confidential all the content of this Agreement. Without the prior consent of all Parties, no Party shall disclose any content of this Agreement to any other party or make any public announcements with respect to any content of this Agreement. Notwithstanding the forgoing provisions of this Article 6, the following disclosure shall be permitted: (i) disclosure made pursuant to any applicable laws or any rules of any stock exchange of the United States, the PRC or other relevant jurisdictions; (ii) disclosure of information which has become public information other than due to any breach by the disclosing party; or (iii) disclosure to any Party's shareholders, legal counsel, accountants, financial advisors or other professional advisors who bear the obligation of confidentiality to such Party. 6.2 The Parties agree this Article 6 will survive any invalidity, modification, cancellation or termination of this Agreement, if applicable. ARTICLE 7. GOVERNING LAW AND OBLIGATIONS UPON DEFAULT 7.1 The execution, effectiveness, interpretation, performance and dispute resolution of this Agreement shall be governed by the laws of the PRC. 7.2 Any violation of any provision hereof, incomplete performance of any obligation provided hereunder, any misrepresentation made hereunder, material concealment or omission of any material fact or failure to perform any covenants provided hereunder by any Party shall constitute an event of default. The defaulting Party shall assume all the legal liabilities pursuant to the applicable laws. ARTICLE 8. DISPUTE RESOLUTION 8.1 Any dispute arising from the performance of this Agreement shall be first subject to the Parties' friendly consultations. If the parties fail to make an written agreement within thirty days after consultation, such dispute will be submitted to the China International Economic and Trade Arbitration Commission ("CIETAC") in accordance with its arbitration rules/procedures. The arbitration tribunal will be composed of three (3) arbitrators, two of which shall be appointed by both Parties hereto, and the third one shall be appointed by the chairman of CIETAC. 8.2 The arbitration shall be administered by the Beijing branch of CIETAC in accordance with the then effective arbitration rules of the Commission in Beijing. 8.3 The arbitration award shall be final and binding on the Parties. The costs of the arbitration (including but not limited to arbitration fee and attorney fee) shall be borne by the losing party, unless the arbitration award stipulates otherwise. ARTICLE 9. EFFECTIVENESS 9.1 This Agreement shall be effective upon the execution hereof by both Parties hereto. 9.2 The term of this Agreement shall be ten (10) years. Party B shall not terminate this Agreement during this term. 9.3 Unless Party A notifies Party B of no renewal of this Agreement by giving a thirty (30) days prior notice. This Agreement will be renewed for one year automatically after the expiry of the term hereof. This provision will apply to all the subsequent renewal. ARTICLE 10. NO SUBSEQUENT OBLIGATION 10.1 Once this Agreement is terminated, Party A will not have any obligation to provide to Party B any operational support hereunder. ARTICLE 11. AMENDMENT 11.1 All Parties hereto shall fulfill their respective obligations hereunder. No amendment to this Agreement shall be effective unless such amendment has been made in written form, and agreed by both Parties and both Parties have obtained necessary authorization and approvals with respect to such amendment. Any modification and supplementary to this Agreement after signed by both Parties, become an integral part of this Agreement, and has the same legal force with this Agreement. ARTICLE 12. COUNTERPARTS 12.1 This Agreement is executed in duplicate, and are equally authentic. Party A and Party B shall each hold one counterpart. ARTICLE 13. MISCELLANEOUS 13.1 The title and headings contained in this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of any provision of this Agreement. 13.2 The Parties may enter into supplementary agreements to address any issue not covered by this Agreement. The supplementary agreements so entered shall be an appendix hereto and shall have the same legal effect as this Agreement. [The remaining of this page is intentionally left blank] Exhibit 1 Consideration for Operation Guarantee The annual fees in consideration of provision of the operational support by Party A ("Consideration") shall be 40% of the "profits" of Party B in such year. The "profits" of Party B in such year should be equal to (gross revenue of Party B in such year) minus (the sales tax, sales expenses, management fees, financial expenses and other expenses resulting from the daily operation and outside daily operation of Party B), and such "profit" shall be the profit before paying for other service fees as specified by the Binding Agreements. Such expenses shall be determined by both Parties every quarter in written form, and shall be paid by Party B within three (3) months after the accounting date. [execution page only] This Agreement is executed by the following Parties as of the date listed first above. Party A: Fortune Software (Beijing) Co., Ltd. Seal: Authorized Representative (Signature): [ ] Party B: Beijing Glory Co., Ltd. Seal: Authorized Representative (Signature): [ ] EX-4.33 20 h02185exv4w33.txt EX-4.33 TECHNICAL SUPPORT AGREEMENT EXHIBIT 4.33 [Translated from Chinese Original] TECHNICAL SUPPORT AGREEMENT between FORTUNE SOFTWARE (BEIJING) CO., LTD. and BEIJING GLORY CO., LTD. September, 2007 BEIJING, CHINA TECHNICAL SUPPORT AGREEMENT This Technical Support Agreement ("this Agreement") is entered into in Beijing, the People's Republic of China (the "PRC") on this September 10, 2007 between: Party A: Fortune Software (Beijing) Co., Ltd. Address: Room 626, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nanlu Road, Haidian District, Beijing Postal code: 100080 Party B: Beijing Glory Co., Ltd. Address: Room 621, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nalu Road, Haidian District, Beijing Postal code: 100080 WHEREAS, (1) Party A is a wholly foreign owned enterprise duly organized and validly existing under the laws of the PRC, and has expertise and resources in developing and manufacturing computer hardware and software, system software, and application software; Party A desires to provide to Party B relevant services, including without limitation technical support services, in connection with developing and manufacturing computer hardware and software, system software, and application software; (2) Party B is a company with limited liability duly organized and validly existing under the laws of the PRC. In order to expand Party B's business in the aspects of developing and manufacturing computer hardware and software, system software and the network operation of application software, Party B engages Party A to provide the technical support services in connection with the foregoing. NOW AND THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development and after friendly negotiations, the parties hereby enter into the following agreements pursuant to the provisions of relevant laws and regulations of the PRC. ARTICLE 1. DEFINITIONS The terms used in this Agreement shall have the meanings set forth below: 1.1 "This Agreement" means this Technical Support Agreement and all appendices thereto, including written instruments as originally executed and as may from time to time be amended or supplemented by the parties hereto through written agreements. 1.2 "The PRC" means, for the purpose of this Agreement, the People's Republic of China, excluding Hong Kong, Taiwan and Macao. 1.3 "Date" means the year, month and day. In this Agreement, "within" or "no later than", when used before a year, month or day, shall always include the relevant year, month or day. ARTICLE 2. TECHNICAL SUPPORT SERVICES 2.1 The technical support services (the "Services"): Party A agrees to provide to Party B the relevant services requested by Party B, which are specified in Exhibit 1 attached hereto ("Exhibit 1"). 2.2 Exclusive Services Provider: Party A is the exclusive services provider of Party B. Without the written consent of Party A, Party B shall not entrust any other third party to provide the Services stated herein. ARTICLE 3. TECHNICAL SUPPORT SERVICES FEE 3.1 Amount and payment: Party B shall pay certain fees in accordance with the provisions of Exhibit 2 to Party B in consideration of the technical support service provided by Party A (the "Service Fee"). 3.2 Reasonable expenses: besides the Service Fee, Party A shall charge Party B for all the reasonable expenses relating to the Services, including but not limited to travel, accommodation, traffic and communication expenses. ARTICLE 4. REPRESENTATIONS AND WARRANTIES 4.1 Each party hereto represents to the other party that: 4.1.1 it has all the necessary rights, powers and authorizations to enter into this Agreement and to perform its duties and obligations hereunder; and 4.1.2 the execution or performance of this Agreement shall not violate any significant contract or agreement to which it is a party or by which it is or its assets are bounded. ARTICLE 5. CONFIDENTIALITY 5.1 Each party shall keep confidential all the content of this Agreement. Without the prior consent of all parties, no party shall disclose any content of this Agreement to any other party or make any public announcements with respect to any content of this Agreement. Notwithstanding the forgoing provisions of this Article 5, the following disclosure shall be permitted: (i) disclosure made pursuant to any applicable laws or any rules of any stock exchange of US, PRC or relevant countries; (ii) disclosure of information which has become public information other than due to any breach by the disclosing party; or (iii) disclosure to any party's shareholders, legal counsel, accountants, financial advisors or other professional advisors who bear the obligation of confidentiality to such party. 5.2 The parties agree this Article 5 will survive any invalidity, modification, cancellation or termination of this Agreement, if applicable. ARTICLE 6. GOVERNING LAW AND EVENTS OF DEFAULT 6.1 The execution, effectiveness, interpretation, performance and dispute resolution of this Agreement shall be governed by the laws of the PRC. 6.2 Any violation of any provision hereof, incomplete performance of any obligation provided hereunder, any misrepresentation made hereunder, material concealment or omission of any material fact or failure to perform any covenant provided hereunder by any party shall constitute an event of default. The defaulting party shall assume all the legal liabilities pursuant to the applicable laws. ARTICLE 7. DISPUTE RESOLUTION 7.1 Any dispute arising from the performance of this Agreement shall be first subject to the parties' friendly consultations. If the parties fail to make an written agreement within thirty days after consultation, such dispute will be submitted to the China International Economic and Trade Arbitration Commission ("CIETAC") in accordance with its arbitration rules/procedures. 7.2 The arbitration shall be administered by the Beijing branch of China International Economic and Trade Arbitration Commission in accordance with the then effective arbitration rules of the Commission in Beijing. The tribunal will be composed of one (1) arbitrator appointed by the chairman of CIETAC 7.3 The arbitration award shall be final and binding on the parties. The costs of the arbitration (including but not limited to arbitration fee and attorney fee) shall be borne by the losing party, unless the arbitration award stipulates otherwise. ARTICLE 8. EFFECTIVENESS 8.1 This Agreement shall become effective upon the execution by both parties hereto. 8.2 The term of this Agreement shall be ten (10) years. Party B shall not terminate this Agreement during this term. 8.3 Unless Party A notifies Party B of no renewal of this Agreement by giving a thirty (30) days prior notice, this Agreement will be renewed for one year automatically after the expiry of the term hereof. This provision will apply to all the subsequent renewal. ARTICLE 9. NO SUBSEQUENT OBLIGATION 9.1 Once this Agreement is terminated, Party A will not have any obligation of providing to Party B any Service hereunder. ARTICLE 10. TRANSFER LIMITATION 10.1 Without the prior written consent of the other party, neither party shall transfer any of their rights or obligations hereunder. ARTICLE 11. AMENDMENT 11.1 Both parties hereto shall fulfill their respective obligations hereunder. No amendment to this Agreement shall be effective unless such amendment has been made in written form, and agreed by both parties and both parties have obtained necessary authorization and approvals with respect to such amendment. Any modification and supplementary to this Agreement after signed by both parties, become an integral part of this Agreement, and has the same legal force with this Agreement. ARTICLE 12. COUNTERPARTS 12.1 This Agreement is executed in two counterparts, with Party A and Party B each hold a counterpart. Each counterpart has the same legal force. ARTICLE 13. MISCELLANEOUS 13.1 The title and headings contained in this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of any provision of this Agreement; 13.2 The parties may enter into supplementary agreements to address any issue not covered by this Agreement. The supplementary agreements so entered shall be an appendix hereto and shall have the same legal effect as this Agreement. [The remaining of this page is intentionally left blank] Exhibit 1 Content of the Technical Support Services Party A shall provide the following technical support services to Party B to the extent permitted by PRC laws: (1) providing the technical support and professional trainings necessary for Party B to operate its business; (2) maintaining the computer system of Party B; (3) providing Party B with website design, and the design, installation, adjustment and maintenance services of Party B's computer network system; (4) providing comprehensive security services of Party B's websites; (5) providing database support and software services; (6) other services in connection with Party B's business; (7) providing labor support upon requested by Party B, including but not limited to sending or dispatching relevant personnel to Party B (provided however that Party B shall bear the relevant labor costs); and (8) other services agreed to by the parties. Exhibit 2 Technical Support Service Fee The Service Fee in consideration of provision of the Service provided by Party A shall be 30% of the "profits" of Party B in such year. The "profits" of Party B in such year should be equal to gross revenue of Party B in such year minus (the sales tax, sales expenses, management fees, financial expenses and other expenses resulting from the daily operation and other business operation of Party B, and such "profit" shall be the profit before paying for other service fees as specified by the Binding Agreements. Such expenses shall be determined by both parties every quarter in written form, and shall be paid by Party B within three (3) months after the accounting date. [execution page only] This Agreement is executed by the following parties as of the date listed first above. Party A: Fortune Software (Beijing )Co. Limited Seal: Authorized Representative (Signature): Party B: Beijing Glory Co, Ltd. Seal: Authorized Representative (Signature): EX-4.34 21 h02185exv4w34.txt EX-4.34 STRATEGIC CONSULTING AND SERVICE AGREEMENT EXHIBIT 4.34 [Translated from Chinese Original] STRATEGIC CONSULTING SERVICE AGREEMENT between FORTUNE SOFTWARE (BEIJING) CO., LTD. and BEIJING GLORY CO., LTD. September, 2007 BEIJING, CHINA STRATEGIC CONSULTING SERVICE AGREEMENT This Strategic Consulting Service Agreement ("this Agreement") is entered into in Beijing, the People's Republic of China (the "PRC") on this September 10, 2007 between: Party A: Beijing Glory Co., Ltd. Address: Room 621, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nalu Road, Haidian District, Beijing, the PRC Postal code: 100080 Party B: Fortune Software (Beijing) Co., Ltd. Address: Room 626, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nanlu Road, Haidian District, Beijing, the PRC Postal code: 100080 WHEREAS, (1) Party A is a company with limited liability duly organized and validly existing under the laws of the PRC, primarily engaged in developing and manufacturing of computer hardware and software, system software and application software, etc. (the "Business"). (2) Party B is a wholly foreign owned enterprise duly organized and validly existing under the laws of the PRC, and has expertise and resources in providing strategic consulting services in the foregoing business area. (3) Party A agrees to engage Party B to provide strategic consulting services in the foregoing area, and Party A desires to accept such strategic consulting services according to the terms and conditions of this Agreement. NOW AND THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development and after friendly negotiations, the parties hereby enter into the following agreements pursuant to the provisions of relevant laws and regulations of the PRC. ARTICLE 1. DEFINITIONS The terms used in this Agreement shall have the meanings set forth below: 1.1 "This Agreement" means this Strategic Consulting Service Agreement and all appendices thereto, including written instruments as originally executed and as may from time to time be amended or supplemented by the parties hereto through written agreements. 1.2 "The PRC" means, for the purpose of this Agreement, the People's Republic of China, excluding Hong Kong, Taiwan and Macao. 1.3 "Date" means the year, month and day. In this Agreement, "within" or "no later than", when used before a year, month or day, shall always include the relevant year, month or day. ARTICLE 2. TECHNICAL SUPPORT SERVICES 2.1 The strategic consulting services (the "Services"): Party A engages Party B to provide to Party A the strategic consulting services specified in Exhibit 1 attached hereto ("Exhibit 1") from the execution date of this Agreement. 2.2 Exclusive Services Provider: Party B is the exclusive services provider of Party A. Without the written consent of Party B, Party A shall not entrust any other third party to provide the Services stated herein. ARTICLE 3. STRATEGIC CONSULTING SERVICE FEE 3.1 Amount and payment: Party A shall pay certain fees in accordance with the provisions of Exhibit 2 to Party B in consideration of the technical support service provided by Party A (the "Service Fee"); 3.2 Reasonable expenses: besides the Service Fee, Party B shall charge Party A for all the reasonable expenses relating to the Services, including but not limited to travel, accommodation, traffic and communication expenses. ARTICLE 4. REPRESENTATIONS AND WARRANTIES 4.1 Each party hereto represents to the other party that: 4.1.1 it has all the necessary rights, powers and authorizations to enter into this Agreement and to perform its duties and obligations hereunder; and 4.1.2 the execution or performance of this Agreement shall not violate any significant contract or agreement to which it is a party or by which it is or its assets are bounded. ARTICLE 5. CONFIDENTIALITY 5.1 Each party shall keep confidential all the content of this Agreement. Without the prior consent of all parties, no party shall disclose any content of this Agreement to any other party or make any public announcements with respect to any content of this Agreement. Notwithstanding the forgoing provisions of this Article 5, the following disclosure shall be permitted: (i) disclosure made pursuant to any applicable laws or any rules of any stock exchange of US, PRC or relevant countries; (ii) disclosure of information which has become public information other than due to any breach by the disclosing party; or (iii) disclosure to any party's shareholders, legal counsel, accountants, financial advisors or other professional advisors who bear the obligation of confidentiality to such party. 5.2 The parties agree this Article 5 will survive any invalidity, modification, cancellation or termination of this Agreement, if applicable. ARTICLE 6. GOVERNING LAW AND EVENTS OF DEFAULT 6.1 The execution, effectiveness, interpretation, performance and dispute resolution of this Agreement shall be governed by the laws of the PRC. 6.2 Any violation of any provision hereof, incomplete performance of any obligation provided hereunder, any misrepresentation made hereunder, material concealment or omission of any material fact or failure to perform any covenant provided hereunder by any party shall constitute an event of default. The defaulting party shall assume all the legal liabilities pursuant to the applicable laws. ARTICLE 7. DISPUTE RESOLUTION 7.1 Any dispute arising from the performance of this Agreement shall be first subject to the parties' friendly consultations. If the parties fail to make an written agreement within thirty days after consultation, such dispute will be submitted to the China International Economic and Trade Arbitration Commission ("CIETAC") in accordance with its arbitration rules/procedures. 7.2 The arbitration shall be administered by the Beijing branch of China International Economic and Trade Arbitration Commission in accordance with the then effective arbitration rules of the Commission in Beijing. The tribunal will be composed of one (1) arbitrator appointed by the chairman of CIETAC. 7.3 The arbitration award shall be final and binding on the parties. The costs of the arbitration (including but not limited to arbitration fee and attorney fee) shall be borne by the losing party, unless the arbitration award stipulates otherwise. ARTICLE 8. EFFECTIVENESS 8.1 This Agreement shall become effective upon the execution by both parties hereto. 8.2 The term of this Agreement shall be twenty (20) years. Party A shall not terminate this Agreement during this term. 8.3 Unless Party B notifies Party A of no renewal of this Agreement by giving a thirty (30) days prior notice, this Agreement will be renewed for one year automatically after the expiry of the term hereof. This provision will apply to all the subsequent renewal. ARTICLE 9. NO SUBSEQUENT OBLIGATION 9.1 Once this Agreement is terminated, Party A will not have any obligation of providing to Party B any Service hereunder. ARTICLE 10. TRANSFER LIMITATION 10.1 Without the prior written consent of the other party, neither party shall transfer any of their rights or obligations hereunder. ARTICLE 11. AMENDMENT 11.1 Both parties hereto shall fulfill their respective obligations hereunder. No amendment to this Agreement shall be effective unless such amendment has been made in written form, and agreed by both parties and both parties have obtained necessary authorization and approvals with respect to such amendment. Any modification and supplementary to this Agreement after signed by both parties, become an integral part of this Agreement, and has the same legal force with this Agreement. ARTICLE 12. COUNTERPARTS 12.1 This Agreement is executed in two counterparts, with Party A and Party B each hold a counterpart. Each counterpart has the same legal force. ARTICLE 13. MISCELLANEOUS 13.1 The title and headings contained in this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of any provision of this Agreement; 13.2 The parties may enter into supplementary agreements to address any issue not covered by this Agreement. The supplementary agreements so entered shall be an appendix hereto and shall have the same legal effect as this Agreement. [The remaining of this page is intentionally left blank] Exhibit 1 Content of the Strategic Consulting Services Party B shall provide the following strategic consultation services to Party A pursuant to this Agreement to the extent permitted by PRC laws: (1) evaluation of new products/services; (2) industry and client research; (3) marketing strategies; (4) training of Party A's personnel; and (5) other services in connection with Party A's business. Exhibit 2 Strategic Consulting Service Fee The Service Fee in consideration of provision of the Service provided by Party B shall be 30% of the "profits" of Party A in such year. The "profits" of Party A in such year should be equal to gross revenue of Party A in such year minus (the sales tax, sales expenses, management fees, financial expenses and other expenses resulting from the daily operation and other business operation of Party A, and such "profit" shall be the profit before paying for other service fees as specified by the Binding Agreements. Such expenses shall be determined by both parties every quarter in written form, and shall be paid by Party B within three (3) months after the accounting date. [execution page only] This Agreement is executed by the following parties as of the date listed first above. Party A: Fortune Software (Beijing )Co. Limited Seal: Authorized Representative (Signature): Party B: Beijing Glory Co., Ltd. Seal: Authorized Representative (Signature): EX-4.35 22 h02185exv4w35.txt EX-4.35 PURCHASE OPTION AGREEMENT EXHIBIT 4.35 [Translated from Chinese Original] PURCHASE OPTION AGREEMENT among FORTUNE SOFTWARE (BEIJING) CO., LTD. WANG JUN ZHAO ZHIWEI and BEIJING GLORY CO., LTD. September, 2007 BEIJING, CHINA PURCHASE OPTION AGREEMENT This Purchase Option Agreement ("this Agreement") is entered into in Beijing, People's Republic of China (the "PRC") on this August 21, 2007 by and among: Party A: Fortune Software Co. Limited. Address: Room 626, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nalu Road, Haidian District, Beijing, the People's Republic of China (the "PRC") Postal code: 100080 Party B: Wang Jun Address: 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing, the PRC ID No.: 370102197012163311 Party C: Zhao Zhiwei Address: 9/F., Tower C, Corporation Mansion, No.35 Financial Avenue Xicheng District, Beijing, the PRC ID No.: 110102196307100139 Party D: Beijing Glory Co., Ltd. Address: Room 621, Beijing Hangtian Jingmi Mansion, No. 30 Haidian Nalu Road, Haidian District, Beijing Postal code: 100080 Party A, Party B, Party C and Party D will each be referred to as a "Party" and collectively referred to as the "Parties". WHEREAS, (1) Party D is a company with limited liability duly organized and validly existing under the laws of PRC; Party B and Party C are current shareholders of Party D and each holding 55% and 45% shares in Party D respectively. (2) To finance the investment by Party B and Party C in Party D, Party A has entered into loan agreements respectively with Party B and Party C on September 10, 2007, providing Party B and Party C with loans of RMB 550,000 Yuan and RMB 450,000 Yuan, respectively. Pursuant to the Loan Agreement, Party B and Party C has invested the full amount of the loans in Party D's registered capital. (3) Party B and Party C hereto wish to grant Party A or the qualified entity designated by Party A the exclusive purchase option to acquire, at any time upon satisfaction of the requirements under the PRC law, the entire or a portion of Party D's share equity owned by Party B and/or Party C, or the all or a portion of the Party's D's assets. NOW AND THEREFORE, in accordance with the principle of sincere cooperation, mutual benefit and joint development and after friendly negotiations, the Parties hereby enter into the following agreements pursuant to the provisions of relevant laws and regulations of the PRC. ARTICLE 1. DEFINITIONS The terms used in this Agreement shall have the meanings set forth below: 1.1 "This Agreement" means this Purchase Option Agreement and all appendices thereto, including written instruments as originally executed and as may from time to time be amended or supplemented by the Parties hereto through written agreements. 1.2 "The PRC" means, for the purpose of this Agreement, the People's Republic of China, excluding Hong Kong, Taiwan and Macao. 1.3 "Date" means the year, month and day. In this Agreement, "within" or "no later than", when used before a year, month or day, shall always include the relevant year, month or day. ARTICLE 2. THE GRANT AND EXERCISE OF PURCHASE OPTION 2.1 The Parties hereto agree that Party A shall be granted an exclusive purchase option to acquire, at any time upon satisfaction of the requirements under applicable laws and conditions as agreed in this Agreement (including, without limitation, as under applicable laws, when Party B and/or Party C cease to be Party D's directors or employees, or Party B and/or Party C propose to transfer their share equity in Party D to any party other than the existing shareholders of Party D), the entire or a portion of Party D's share equity owned by Party B and/or Party C, or the entire or portion of the assets owned by Party D ("Purchase Option"). The Purchase Option granted hereby shall be irrevocable during the term of this Agreement and may be exercised by Party A or any eligible entity designated by Party A. 2.2 Party A (or the eligible entity designated by Party A) may exercise the aforesaid purchase option by delivering a written notice to Party B, Party C and/or Party D (as the case may be) subject to the PRC laws and regulations (the "Exercise Notice"), specifying the number of shares intended to be purchased from Party B and/or Party C, or the amount of assets intended to be purchased from Party B ("Purchased Shares (Assets)"), and the method of purchase. 2.3 Within thirty (30) days of the receipt of the Exercise Notice, Party B, Party C or Party D (as the case may be) shall execute a share/asset transfer contract and other documents (collectively, the "Transfer Documents") necessary to effect the respective transfer of share equity or assets with Party A (or any eligible party designated by Party A). 2.4 When applicable laws permit the exercise of the purchase option provided hereunder and Party A elects to exercise such purchase option, Party B, Party C and Party D shall unconditionally assist Party A to obtain all approvals, permits, registrations, filings and other procedures necessary to effect the transfer of relevant share equity or assets. ARTICLE 3. EXERCISE PRICE 3.1 When it is permitted by applicable laws, Party A (or any eligible party designated by Party A) shall have the right to acquire, at any time, all of Party D's assets or its share equity owned by Party B and Party C, at a price equal to the registered capital of Party D. 3.2 If Party A (or any eligible party designated by Party A) elects to purchase a portion of Party D's share equity or assets, then the exercise price for such purpose shall be adjusted accordingly based on the percentage of such share equity or assets to be purchased over the total share equity or assets. 3.3 When Party A (or a qualified entity designated by party A) is to acquire all or a portion of Party D's equity share from Party B and Party C pursuant to this Agreement, Party A has the right to substitute the principle amounts Party B and Party C respectively owe Party A under the Loan Agreement for the purchase prices payable to Party B and Party C, respectively. 3.4 When acquiring share equity or assets from Party B, Party C, or Party D pursuant to this Agreement, Party A (or a qualified entity designated by party A) shall pay an actual exercise price based on the exercise price under applicable PRC laws or requirements of relevant authorities, if the exercise price under applicable laws or requirements of relevant authorities is higher than the exercise price under this Agreement. ARTICLE 4. REPRESENTATIONS AND WARRANTIES 4.1 Each party hereto represents to the other parties that: 4.1.1 it has all the necessary rights, powers and authorizations to enter into this Agreement and perform its duties and obligations hereunder; and 4.1.2 the execution or performance of this Agreement shall not violate any significant contract or agreement to which it is a party or by which it or its assets are bounded. ARTICLE 5. OTHER COVENANTS The Parties further agree as follows: 5.1 Before Party A (or a qualified entity designated by party A) has acquired all the equity/assets of Party D by exercising the purchase option provided hereunder, Party D shall not: 5.1.1 sell, assign, mortgage or otherwise dispose of, or create any encumbrance on, any of its assets, operations or any legal or beneficiary interests with respect to its revenues (unless such sale, assignment, mortgage, disposal or encumbrance is relating to its daily operation or has been disclosed to and agreed by Party A in writing); 5.1.2 enter into any transaction which may materially affect its assets, liability, operation, equity or other legal rights (unless such transaction is relating to its daily operation or has been disclosed to and agreed by Party A in writing); and 5.1.3 distribute any dividend to its shareholders in any manner. 5.2 Before Party A (or a qualified entity designated by party A) has acquired all the equity/assets of Party D by exercising the purchase option provided hereunder, Party B and/or Party C shall not individually or collectively: 5.2.1 supplement, alter or amend the articles of association of Party D in any manner to the extent that such supplement, alteration or amendment may have a material effect on Party D's assets, liability, operation, equity or other legal rights (except for pro rata increase of registered capital mandated by applicable laws); 5.2.2 cause Party D enter into any transaction to the extent such transaction may have a material effect on Party D's assets, liability, operation, equity or other legal rights (unless such transaction is relating to Party D's daily operation or has been disclosed to and agreed by Party A in writing); and 5.2.3 cause Party D's board of directors adopt any resolution on distributing dividends to its shareholders. 5.3 Party B and Party C shall, to the extent permitted by applicable laws, cause Party D's operational term to be extended to equal the operational term of Party A. 5.4 Party A shall provide or arrange other parties to provide financings to Party D to the extent Party D needs such financing to finance its operation. In the event that Party D is unable to repay such financing due to its losses, Party A shall waive or cause the relevant parties to waive all recourse against Party D with respect to such financing. 5.5 To the extent Party B and/or Party C are subject to any legal or economic liabilities to any institution or individual as a result of performing their obligations under this Agreement or any other agreements between them and Party A, Party A shall provide all support necessary to enable Party B and/or Party C to duly perform their obligations under this Agreement and any other agreements and to hold Party B and/or Party C harmless against any loss or damage caused by their performance of obligations under such agreements. 5.6 If Party A decides to transfer its rights under the Loan Agreement to any third party, and has sent a written notice to the other Parties, Party A has the right to transfer its rights and obligation hereunder to such third party at the same time, with no need to obtain the prior consent of the Parties hereto. 5.7 Party B and Party C shall execute a Proxy of voting rights to the satisfaction of Party A, attached hereto as Exhibit 1, authorizing a qualified third party designated by Party A to exercise all the voting rights on behalf of Party B and Party C. The first term of such Proxy shall be 20 years. Unless Party A notifies Party B and Party C in writing to terminate such Proxy, the term of this Proxy will be extended automatically after the expiry of the first term. ARTICLE 6. CONFIDENTIALITY 6.1 Each Party shall keep confidential all the content of this Agreement. Without the prior consent of all Parties, no Party shall disclose any content of this Agreement to any other party or make any public announcements with respect to any content of this Agreement. Notwithstanding the forgoing provisions of this Article 6, the following disclosure shall be permitted: (i) disclosure made pursuant to any applicable laws or any rules of any stock exchange of US, PRC or relevant countries; (ii) disclosure of information which has become public information other than due to any breach by the disclosing party; (iii) disclosure to any Party's shareholders, legal counsel, accountants, financial advisors or other professional advisors, or (iv) disclosure to any potential purchasers of a Party or its shareholders' equity/assets, its other investors, debts or equity financing providers, provided that the receiving party of confidential information has agreed to keep the relevant information confidential (such disclosure shall be subject to the consent of Party A in the event that Party A is not the potential purchaser). 6.2 The Parties agree this Article 6 will survive any invalidity, modification, cancellation or termination of this Agreement, if applicable. ARTICLE 7. APPLICABLE LAW AND EVENTS OF DEFAULT 7.1 The execution, effectiveness, interpretation, performance and dispute resolution of this Agreement shall be governed by the laws of the PRC. 7.2 Any violation of any provision hereof, incomplete performance of any obligation provided hereunder, any misrepresentation made hereunder, material concealment or omission of any material fact or failure to perform any covenants provided hereunder by any Party shall constitute an event of default. The defaulting Party shall assume all the legal liabilities pursuant to the applicable laws. ARTICLE 8. DISPUTE RESOLUTION 8.1 Any dispute arising from the performance of this Agreement shall be first subject to the Parties' friendly consultations. If the parties fail to make an written agreement within thirty days after consultation, such dispute will be submitted to the China International Economic and Trade Arbitration Commission ("CIETAC") in accordance with its arbitration rules/procedures. The tribunal will be composed of one (1) arbitrator appointed by the chairman of CIETAC. 8.2 The arbitration shall be administered by the Beijing branch of China International Economic and Trade Arbitration Commission in accordance with the then effective arbitration rules of the Commission in Beijing. 8.3 The arbitration award shall be final and binding on the Parties. The costs of the arbitration (including but not limited to arbitration fee and attorney fee) shall be borne by the losing party, unless the arbitration award stipulates otherwise. ARTICLE 9. EFFECTIVENESS 9.1 This Agreement shall be effective upon the execution hereof by all Parties and shall remain effective thereafter. This Agreement may not be terminated without the unanimous consent of all the Parties except Party A may, by giving a thirty (30) days prior notice to the other Parties hereto, terminate this Agreement. 9.2 If during the term of this Agreement, the operation term of Party A or Party D (including any extended term) expires or is terminated due to other reasons, this Agreement shall be terminated at the time such Party terminates, unless Party A has transferred its rights and obligations hereunder to others pursuant to Article 5.6. ARTICLE 10. AMENDMENT 10.1 All Parties hereto shall fulfill their respective obligations hereunder. No amendment to this Agreement shall be effective unless such amendment has been made in written form, and agreed by all of the Parties and Party A and Party D have obtained necessary authorization and approvals with respect to such amendment. Any modification and supplementary to this Agreement after signed by both Parties, become an integral part of this Agreement, and has the same legal force with this Agreement. ARTICLE 11. COUNTERPARTS 11.1 This Agreement is executed in four (4) counterparts, and are equally authentic. . Party A, Party B, Party C, and Party D shall each hold one counterpart. ARTICLE 12. MISCELLANEOUS 12.1 Party B and Party C's obligations, covenants and liabilities to Party A hereunder are joint and several, and Party B and Party C shall assume joint and several liabilities with respect to such obligations, covenants and liabilities. With respect to Party A, a default by Party B shall automatically constitute a default by Party C, and vice versa. 12.2 The title and headings contained in this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of any provision of this Agreement. 12.3 The Parties may enter into supplementary agreements to address any issue not covered by this Agreement. The supplementary agreements so entered shall be an appendix hereto and shall have the same legal effect as this Agreement. [The remaining of this page is intentionally left blank] Exhibit 1 Proxy I, Wang Jun the citizen of People Republic of China, ID No. 370102197012163311, hereby authorizes Fortune Software to exercise the following rights and powers during the term of this Proxy: (1) attend the shareholders' meeting of Beijing Glory Co. Ltd. ("Company") as my proxy, and exercise all the voting rights of shareholders granted by the relevant laws and the Articles of Association of the Company on behalf of the Company; and (2) Designate and appoint the directors, general manager, chief financial officer and other senior management of the Company as my authorized representative; Party A hereby accepts the authorization herein. The above authorization shall be subject to Fortune Software (Beijing) Co. Ltd. continuing to be the designated party (or appointed party). Unless Fortune Software (Beijing) Co. Ltd. (the appointed party) sends a written notice to terminate or replace the title of Fortune Software (Beijing) Co. Ltd. as the designated party (or appointed party), this Proxy shall continue to be valid for 20 years after the execution, and shall be renewed automatically after the expiry of the first term. Entrusting Party(signature): Date: Exhibit 1 Proxy I, Zhao Zhiwei, the citizen of People Republic of China, ID No. 110102196307100139, hereby authorizes Fortune Software to exercise the following rights and powers during the term of this Proxy: (1) attend the shareholders' meeting of Beijing Glory Co. Ltd. ("Company") as my proxy, and exercise all the voting rights of shareholders granted by the relevant laws and the Articles of Association of the Company on behalf of the Company; and (2) Designate and appoint the directors, general manager, chief financial officer and other senior management of the Company as my authorized representative; Party A hereby accepts the authorization herein. The above authorization shall be subject to Fortune Software (Beijing) Co. Ltd. continuing to be the designated party (or appointed party). Unless Fortune Software (Beijing) Co. Ltd. (the appointed party) sends a written notice to terminate or replace the title of Fortune Software (Beijing) Co. Ltd. as the designated party (or appointed party), this Proxy shall continue to be valid for 20 years after the execution, and shall be renewed automatically after the expiry of the first term. Entrusting Party(signature): Date: [execution page only] Party A: Fortune Software (Beijing )Co. Limited Seal: Authorized Representative (Signature): Party B: Wang Jun (Signature): Party C: Zhao Zhiwei (Signature): Party D: Beijing Glory Co, Ltd. Seal: Authorized Representative (Signature): EX-4.37 23 h02185exv4w37.txt EX-4.37 LICENSE AGREEMENT EXHIBIT 4.37 LICENSE NO.:TVPH04-2008 [Translated from the original Chinese version] SHANGHAI STOCK EXCHANGE AFTER-HOURS TRADING DATA AND STATISTICS LICENSE AGREEMENT Party A: SSE INFONET LTD. Address: No.528, Pudong Nan Lu, Shanghai Party B: Fortune Software (Beijing) Co. Ltd. Address: Floor 9, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, China Whereas: Party A hereto is an organization fully authorized by the Shanghai Stock Exchange to distribute stock information of the Shanghai Stock Exchange; Party B is an information management company willing to pay for the distribution of stock information of the Shanghai Stock Exchange at cost. Through friendly consultation, both parties hereby enter into this agreement with respect to Party A granting to Party B the license to distribute the Shanghai Stock Exchange TopView After-Hours Trading Data and Statistics. LICENSE NO.:TVPH04-2008 ARTICLE 1. DEFINITIONS 1. "SSE" means the Shanghai Stock Exchange. 2. "SSE TopView" means the brand used by Party A for its static information products. 3. "After-Hours Trading Data and Statistics" means the information product developed by SSE based on After-Hours analysis of real trade data on the stock market in accordance with the Securities Law of the Peoples Republic of China and relevant regulations promulgated by China Securities and Regulatory Commission and SSE. 4. "License for After-Hours Trading Data and Statistics " (hereinafter referred to as the "License") means the certifying documents issued by Party A to Party B, authorizing Party B to distribute After-Hours Trading Data and Statistics within a limited scope and term, and in certain ways. 5. "Terminal Users" means the end users who receive and use value-added products developed by Party B based on After-Hours Trading Data and Statistics, or special customers who directly receive After-Hours Trading Data and Statistics through Party B. 6. "User Charge" means the charge by Party A to Party B for After-Hours Trading Data and Statistics according to Appendix I-A or B attached hereto. 7. "End Users" means the end users who can only use After-Hours Trading Data and Statistics or Party B Products on their own, but cannot provide the foregoing (including derivatives developed based on Party B Products or After-Hours Trading Data and Statistics) to any third party by any means (including without limitation, re-license, transfer, assign, distribute, duplicate, or spread, etc.). 8. "Party B Products" means value-added products developed by Party B based on After-Hours Trading Data and Statistics ARTICLE 2. RECEIVING INFORMATION 1. Party B shall receive After-Hours Trading Data and Statistics with the receiving methods approved by Party A in writing. If Party B's receiving methods fail to get approval from Party A, Party A is entitled to refuse to transmit After-Hours Trading Data and Statistics to Party B. 2. If Party B encounters technical problems while receiving After-Hours Trading Data and Statistics, it may contact Party A on a timely basis, and Party A shall assist in solving the problems to enable Party B to obtain After-Hours Trading Data and Statistics in a customary fashion. 3. Party A has the right to change the transmitting method, but shall notify Party B in writing one month in advance of such change. 2 LICENSE NO.:TVPH04-2008 4. Regardless of the reason for terminating the transmitting and receiving relations by both parties, in the event of such termination, each party shall return the relevant equipment provided by the other party in good and intact conditions. ARTICLE 3. MANAGEMENT OF INFORMATION 1. Party A agrees that Party B may operate the business in a manner that is within the scope and purposes as specified in Appendix I (License) hereto, and within the term of the License (the License shall be deemed becoming invalid upon the expiration or revocation of the License by Party A in accordance with this agreement). 2. Party B agrees to be bound by the following terms and conditions: (1) covenants to manage After-Hours Trading Data and Statistics in accordance with this agreement (including the Appendices thereto). (2) covenants not to provide all or any part of After-Hours Trading Data and Statistics to any entities or individuals not specified in the License, or use such information in other aspects or purposes, without written approval of Party A. (3) Before transmitting After-Hours Trading Data and Statistics or providing Party B Products to users, Party B shall enter into binding agreements with its users which shall expressively specify the rights and obligations of the contracting parties and set forth the following provisions: (A) all intellectual rights with respect to After-Hours Trading Data and Statistics belong to SSE and Party A; (B) SSE and Party A shall bear no liability with respect to the completeness, timeliness, or accuracy of the information provided. (4) Party B shall enter into agreements with special users (the special users are End Users permitted by Party A in advance to utilize to After-Hours Trading Data and Statistics, and such End Users shall be entities not individuals) specified under the item "Usage" on the License before transmitting After-Hours Trading Data and Statistics to such special users. Such agreements shall contain provisions requiring such special user to protect the intellectual property rights relating to After-Hours Trading Data and Statistics, including without limitation, requiring such special user not to distribute, spread, transfer or develop derivatives of After-Hours Trading Data and Statistics in any direct or indirect way, or allow other persons to duplicate, distribute, spread, edit, transfer or develop derivatives of After-Hours Trading Data and Statistics in any direct or indirect way. (5) Party B shall be responsible for supervising the special users' utilization of After-Hours Trading Data and Statistics. If Party B discovers any violation of the above Item 2(4) of this Article, which is regarded as the infringement on Party A's intellectual property rights by such special user, Party B shall immediately report to Party A and request such special user to stop the infringement immediately. In the meanwhile, Party B shall be responsible for retrieving the benefits such special user gained from the infringement and transfer such benefits to Party A (which shall not preclude the right of Party A to directly retrieve such benefits from the special user). If such special user 3 LICENSE NO.:TVPH04-2008 does not stop infringement within the time limit set by Party A, Party B shall immediately suspend transmitting After-Hours Trading Data and Statistics to such special user until Party A acknowledges that such special user has corrected its wrong doing and allows Party B to transmit After-Hours Trading Data and Statistics to such special user. (6) covenants not to use all or part of After-Hours Trading Data and Statistics for any illegal purpose, or to provide such information to a third party to be used for any illegal purpose. (7) covenants to respect the value of After-Hours Trading Data and Statistics, and to take no unfair competitive measures to manage relevant information such as low-price dumping, sale under cost, etc. (8) Party B covenants to provide complete, accurate and timely After-Hours Trading Data and Statistics to its special users; if omissions, errors, or delays occur, it shall promptly remedy such problems and report to Party A, orally and in writing. (9) Upon the occurrence of disruption of After-Hours Trading Data and Statistics transmitted by Party A to Party B for any reason, or the disruption of the provision of After-Hours Trading Data and Statistics or Party B Products by Party B to its users for any other reasons, Party B shall make an announcement upon Party A's approval through a media outlet named by Party A in accordance with Party A's requirements, within the time specified by Party A, and shall bear and deal with all the subsequent matters. A sample of the announcement is attached as Appendix III hereto. (10) Without written approval from Party A, Party B shall not enter into a sub-license or re-license of After-Hours Trading Data and Statistics License issued by Party A, and shall not sell or purchase such license. (11) Without Party A's written approval otherwise, all users of Party B shall only be End Users. ARTICLE 4. EXPENSES Party B agrees to pay the expenses to Party A in accordance with Appendix I-A "Expense Payment Agreement". ARTICLE 5. INTELLECTUAL PROPERTY AND PROTECTION 1. SSE and Party A have the rights of After-Hours Trading Data and Statistics specified herein and in the License; without Party A's written approval, any organizations or individuals (including Party B, its directors, supervisors, managers or staffs, etc.) shall not save or permanently use After-Hours Trading Data and Statistics (including but not limited to copy, translate, distribute, edit, transfer, license others to use or develop derivatives in any direct or indirect way, etc.). 2. Party B shall get written approval from Party A before providing test result or announced After-Hours Trading Data and Statistics by Party B to any third party. If Party B provides such information to any third party without Party A's written 4 LICENSE NO.:TVPH04-2008 approval, upon Party A's warning letter, Party B shall cease such provision; in the event Party B ignores such warning letter and fails to stop such provision by the following day after Party A sends such warning letter, Party A may suspend provision of After-Hours Trading Data and Statistics to Party B directly without bearing any liabilities. 3. Any Party B Products shall be announced (including but not limited to providing to a third party) or updated to the public only after submitting an announcement or an updating application and other relevant materials to Party A and getting Party A's written approval. Party B shall warrant that the application and materials are true, accurate and complete. Without Party A's written approval, Party B shall not announce or update any Party B Products to the public. 4. Party B shall accept and cooperate in the regular or irregular technical inspection of Party B Products by Party A or a third party entrusted by Party A. During the term of the agreement, if any Party B Products have serious problems such as a security problem, including but not limited to difficulty of user certification, susceptibility of data being stolen, systems vulnerability, or nonconformity of products to materials submitted to Party A, Party B shall make corrections within the specified time, according to Party A's requirements, after receiving Party A's written notice. 5. Party B warrants to only use display data provided by Party A for demonstration of relevant products or services to clients. Without written approval of Party A, Party B shall not provide trials of the relevant products to any third party. 6. Party B shall note on the interface of its users' terminals that the source of After-Hours Trading Data and Statistics is Party A, and the name, number and term of the license certificate issued. 7. During the data processing of Party B Products , Party B shall prohibit the users saving After-Hours Trading Data and Statistics and files on the users' terminals to prevent effectively the occurrence of the data being transferred or duplicated. Party B shall warrant all or part of After-Hours Trading Data and Statistics will be not be misappropriated though Party B Products. 8. As to advertising or public statements of Party B: (1) for any relevant text with "SSE", "SSE Infonet Ltd.", "SSE TopView", "After-Hours Trading Data and Statistics" or any introduction to the content of After-Hours Trading Data and Statistics, Party B shall complete the Approval Letter (in accordance with the form attached hereto as Appendix IV) for relevant advertisements or pamphlets and submit it to Party A for approval, at least one working day in advance. Such advertisements and pamphlets shall only be used upon Party A's written approval. Party B shall not use the name, brand, logo (including but not limited to text, patterns or marks, etc.) of SSE or Party A without getting written approval from Party A. (2) public statements regarding the License obtained by Party B shall note the number, validity, purposes and scope of the License. 5 LICENSE NO.:TVPH04-2008 (3) if the License is expired and not extended, or is revoked by Party A, Party B shall not continue to make public statements that After-Hours Trading Data and Statistics are sourced from Party A, and shall not include any information from the former License on the interface of its terminals. 9. Party B agrees to accept and cooperate with Party A in the supervision of the relevant operations by Party A: (1) Before the Party B Products are available online, Party B shall give Party A the access to sales statistics of After-Hours Trading Data and Statistics and value-added products for the convenience of Party A to supervise and examine the sales performance of Party B's distributors from time to time. (2) Party B shall submit the statistical reports on the users of After-Hours Trading Data and Statistics and Party B Products on a regular basis to Party A, in accordance with Appendix II of this agreement, "Supervision and Management of Information", and warrant that the data submitted shall be true, complete and accurate. (3) Party B shall keep the original material of its users and charges for three (3) years, and warrant that the aforesaid materials shall be complete and accurate. (4) Party B shall accept and cooperate with Party A or a third Party entrusted by Party A to make inspections of Party B's income derived from the management of After-Hours Trading Data and Statistics and Party B Products and users of the foregoing (including Party may entrust of relevant personnel to audit the income derived from After-Hours Trading Data and Statistics and Party B Products.) If Party A discovers any cover-up, or omitted or discounted reports of sales volume of Party B, Party B shall not only make up such covered-up, omitted or discounted portion of revenue but also pay to Party A in the amount of ten (10) times of the foregoing as the defaulting fine. In addition, Party A is entitled to ask Party B to bear all reasonable expenses incurred from the inspection (including auditing fees, travel fees, etc.) and ask Party B to make corrections in a limited time period. 10. Party B shall be responsible for supervising its users to comply with the Item 2 (3) and (4) of Article 3 hereof. ARTICLE 6. DISCLAIMERS 1. SSE and Party A shall bear no liability for completeness, timeliness, or accuracy of the information provided (including but not limited to After-Hours Trading Data and Statistics). 2. Party B agrees that SSE and Party A bear no liability for abnormal information results or abnormal information transmission for whatever reasons. 3. Party B undertakes that it will always avoid and eliminate factors which may have an adverse effect on SSE and Party A, such as omission, mistakes, losses, delay and intermissions of information, and that it will protect SSE and Party A from economic 6 LICENSE NO.:TVPH04-2008 and credit losses, and shall not claim compensations from SSE or Party A for aforesaid reasons in connection herewith. 4. SSE and Party A shall bear no liability for any business risks Party B may take, or resulting from the management of After-Hours Trading Data and Statistics 5. SSE and Party A shall bear no liability for any risks Party B or its users may take, or resulting from investments based on After-Hours Trading Data and Statistics. ARTICLE 7. LIABILITY FOR BREACH OF AGREEMENT 1. If Party B breaches the agreement, and fails to remedy such breach within the specified term stated in the written notice and requiring corrections requested by Party A, Party A is entitled to cancel the agreement, and revoke the License. Meanwhile, Party B shall pay any applicable penalty and compensation to Party A in accordance with the agreement, in addition to all payable expenses as stated herein. Party B bears all other liabilities and consequences incurred from such default. 2. If Party B breaches Item 2 (2) and (10) of Article 3, Party B shall transfer to Party A the earnings from such breach, and shall pay any applicable defaulting fine to Party A (which shall be equivalent to twice the earnings from the breach); meanwhile, Party B shall take prompt and effective measures to terminate such breach. 3. If Party B breaches the covenants as set forth in Item 2 (4) and (5) of Article 3, the loss of Party A caused by the infringement of such customers shall be bore by Party B. 4. If Party B fails to pay for the relevant expenses in accordance with the time stated herein, Party B shall pay 0.3% of all past due payments per day as the defaulting fine (calculated from the due date). If Party B fails to pay after Party A's call, Party A shall be entitled to cancel this agreement, revoke the License, and cease to provide After-Hours Trading Data and Statistics to Party B. Meanwhile, Party B shall pay a defaulting fine to Party A, equivalent to twice of past due payments, and compensate Party A for other losses incurred from such default. 5. Except for liabilities due to breaches of this agreement set forth above in the above item 2, 3, and 4 of this Article and Item 9(4) of Article 5 hereof, if Party B fails to perform other terms herein, Party B shall pay a defaulting fine to Party A (equivalent to twice the amount of the monthly base fee stated in Appendix I-A "Payment Agreement"); if there are any losses of Party A as a result of such breach, Party B shall compensate Party A for all losses. 6. Once Party A discovers that Party B breaches Item 7 of Article 5 hereof, Party A shall be entitled to stop transmitting After-Hours Trading Data and Statistics to Party B immediately and Party A shall bear no liabilities for such termination. However, Party B shall bear all the loss and liabilities resulting from such breach. . ARTICLE 8. EFFECTIVENESS, AMENDMENT AND TERMINATION OF THE AGREEMENT 1. This agreement shall be effective when signed and stamped by a legal representative or an authorized representative of both parties. The term of this agreement is three (3) years. If for six (6) consecutive months, the aggregate amount of revenue to be 7 LICENSE NO.:TVPH04-2008 distributed to Party A, which is derived from the sales revenue of Party B is not higher than the aggregate amount of base fees payable to Party A for such six months (see Item 1 of Article 2 of the Appendix I-A attached hereto for details on the base fees), Party A is entitled to terminate this agreement and revoke the License at any time. 2. Any provisions herein shall only be modified with written approval from both parties; any modified provisions confirmed in written form shall be deemed to be an integral part of the agreement. The License shall be changed in the event of major modification. 3. Upon the expiration of Appendix I hereto, Appendix I-A shall also be terminated. Party B may make a written application to Party A for an extension or change of the license thirty (30) business days prior to the expiration of the License. Upon the approval of Party A, both parties may extend Appendix I-A. Upon the extension of the aforesaid Appendix I-A and Party B's payment specified in Appendix I-A, Party A will issue a new term License to Party B, and the agreement will also extend in accordance with the valid term specified in the new license. Both parties shall perform all rights and obligations in accordance with this agreement, as modified by additional content agreed upon by both parties. 4. If this agreement expires or Party A does not give approval for the renewal of the license, Party A will cease to provide After-Hours Trading Data and Statistics to Party B, and Party B shall not continue to manage After-Hours Trading Data and Statistics. 5. Upon the termination of this agreement, Party B shall pay all expenses to Party A in accordance with this agreement (including but not limited to the expenses which are due but Party B has failed to pay, any defaulting fine, compensations, or payable expenses which are not yet due) within ten (10) business days prior to the termination of the agreement. If Party B fails to make a payment in time, Party B shall pay 0.3% of the payable expenses per day as a defaulting fine to Party A, after the due date. 6. Articles 5, 6 and 7 herein will not become invalid even if the remaining sections herein are found to be invalid, or this agreement is terminated. ARTICLE 9. DISPUTE RESOLUTION Any dispute that arises from the performance of this agreement or in connection herewith, shall be settled though friendly consultation by both parties; if the dispute is not settled through friendly consultation, both parties agree to submit the dispute to People's Court at the place of Party A for settlement. All reasonable expenses of either party, including attorneys' fees, auditing fees, travel fees, etc, shall be borne by the losing party. ARTICLE 10. APPENDIX TO THE AGREEMENT The appendices included hereto have the same legal force as this agreement. Appendices include the following documents and other documents signed during the performance of the agreement: Appendix I: After-Hours Trading Data and Statistics License Certificate; Appendix I-A: Expense Payment Agreement; 8 LICENSE NO.:TVPH04-2008 Appendix I --B: Pricing Scheme for TopView After-Hours Trading Data and Statistics Appendix II: Agreement on Supervision and Management of Information Operation; Appendix III: Announcement (Sample); Appendix IV: Approval Letter for Relevant Advertisements or Pamphlets (Sample) ARTICLE 11. MISCELLANEOUS 1. This agreement is governed by laws and regulations of PRC (excluding Hong Kong, Macau, and Taiwan), regulations of China Securities Regulatory Commission and the rules of SSE. If any change in relevant regulations occurs, the relevant provisions herein are changed accordingly without conditions. 2. Notices or documents issued by both parties may be delivered by hand, post or in other ways. The addresses of the addressees are as indicated herein. 3. Notices or documents shall be deemed to have been effectively given as of the following dates: (1) if delivered by hand, the served date shall be the signed date on the receipt. (2) if delivered by post, the served date shall be the date noted on the return of service. 4. Contact Information: (1) Party A: SSE Infonet Ltd. Address: Building 12, Nantai, No. 528, Pudong Nan Lu, Shanghai, China 200120 (2) Party B: Fortune Software (Beijing) Co. Ltd. Address: Floor 9, Tower C, Corporate Square, No. 35 Financial Street, Xicheng District, Beijing, China Attn: Ma Linghai Tel: 010-58325300 5. Upon the effectiveness of this agreement, this agreement shall supersede all previous relevant agreements by both parties on TopView license, including but not limited to any written or oral agreements, contracts, consultations, representations, plans, and appendices, etc. 6. All the headings herein are for the convenience of reading, and shall not affect the interpretation and meaning of the agreement. 7. This agreement is executed in four (4) originals. Each party holds two (2) originals. Each original has equal legal effect. 9 LICENSE NO.:TVPH04-2008 PARTY A: SSE INFONET LTD. (Company Seal) Signature of Authorized Person:____________________ Date: December 26, 2007 PARTY B: FORTUNE SOFTWARE (BEIJING ) CO. LTD. (Company Seal) Signature of Authorized Person:____________________ Date: December 26, 2007 10 LICENSE NO.:TVPH04-2008 APPENDIX I: SSE TOPVIEW AFTER-HOURS TRADING DATA AND STATISTICS LICENSE CERTIFICATE License No.: TVPH04-2008 NAME OF LICENSEE: Fortune Software (Beijing ) Co. Ltd. ADDRESS OF LICENSEE: Floor 9, Tower C, Corporate Square, No. 35 Financial Street LEGAL REPRESENTATIVE OF LICENSEE: Zhao Zhiwei LICENSED PRODUCT INFORMATION: After-Hours Trading Data and Statistics PURPOSE: (1) May utilize the licensed information product to develop value-added products and transmit such value-added products to End Users through internet; the End Users may utilize such value-added products through special terminals and display software, but cannot receive all or part of the information product licensed by this certificate through any method; (2) May transmit the licensed information product to special users recognized by the Licensor as well as utilize the licensed information product to provide to special users value-added development services. Special users refer to those End Users permitted by the Licensor to use After-Hours Trading Data and Statistics in advance, who must be entities not individuals. SCOPE: China Mainland (excluding Hong Kong, Macau, and Taiwan) TERM: from January 1, 2008 to December 31, 2008 DATE OF ISSUE: January 1, 2008 LICENSOR: SSE Infonet Ltd. Appendix I --A and B attached hereto: 11 LICENSE NO.:TVPH04-2008 APPENDIX I- A. EXPENSE PAYMENT AGREEMENT TO LICENSE (No: TVPH04-2008) I. User Charge shall be calculated as follows: 1. The price of products sold to entity users shall be determined by both parties through consultations. Party B shall submit the price of products for Party A's approval prior to applying such prices. Party A and Party B shall distribute the sales revenues according to this agreement, the details of the distribution scheme is set forth in Appedix I-B, "Pricing Schemen of TopView After-Hours Trading Data and Statistics" attached hereto. 2. The User Charge shall be calculated on a monthly basis. II. Party B shall pay Party A User Charge calculated as follows: After Party B obtains the License, it shall pay Party A User Charge on monthly basis. The base fee for each month shall be RMB 800,000 ("Base Fee"). If the monthly User Charge calculated according to Article 1 of this agreement exceeds the Base Fee (i.e. RMB 800,000), Party B shall pay Party A the actually incurred User Charge of such month, otherwise the Base Fee shall apply. III. Payment Agreement Party B shall remit the payment hereunder to the bank of deposit and account designated by Party A, in accordance with the following dates and amounts. 1. Party B shall pay the Base Fee for the current month plus the exceeding portion of the Base Fee for the previous month before the fifth working day of each month. 2. Bank account information of Party A: Bank of Deposit: Shanghai Branch of China Merchants Bank Owner of Account: SSE Infonet Ltd. Bank Account: 06945-65808018001 12 LICENSE NO.:TVPH04-2008 PARTY A: SSE INFONET LTD. (Company Seal) Signature of Authorized Person:____________________ Date: December 26, 2007 PARTY B: FORTUNE SOFTWARE (BEIJING ) CO. LTD. (Company Seal) Signature of Authorized Person:____________________ Date: December 26, 2007 13 LICENSE NO.:TVPH04-2008 APPENDIX I- B. PRICING SCHEME FOR TOPVIEW AFTER-HOURS TRADING DATA AND STATISTICS I. TYPE OF DATA PROVIDED BY TOPVIEW Party B may provide to users four types of data including T+1 daily data, T+2 daily data, weekly data and monthly data. 1. Daily Data: Party B may control in its self-developed products the frequency of daily data it provides to users. Based on different frequencies, the daily data may be divided into two categories, i.e. T+1 and T+2. T+1 daily data: refers to the TopView After-Hours Trading Data and Statistics of the previous trading day reported by Party A after closing of the stock market on T day. T+2: refers to the TopView After-Hours Trading Data and Statistics of the day before previous trading day reported by Party A after closing of the stock market on T day. 2. Weekly Data: means the TopView After-Hours Trading Data and Statistics of the current week reported by Party A after closing of the stock market of each week. 3. Monthly Data: means the TopView After-Hours Trading Data and Statistics of the current month reported by Party A after closing of the stock market of each month. II. DATA UTILIZATION AND PRICING Party B will utilize the TopView After-Hours Trading Data and Statistics in two forms, i.e. in the form of terminals and other forms. 1. If Party B utilizes the TopView After-Hours Trading Data and Statistics in the form of terminals, it shall pay relevant fees to Party A as follows: a. If only using terminals of monthly data, Party B shall pay Party A RMB 2,000 for each terminal annually; b. If only using terminals of weekly data, Party B shall pay Party A RMB 4,000 for each terminal annually; c. If only using terminals of T+2 daily data, Party B shall pay Party A RMB 6,000 for each terminal annually; and d. If only using terminals of T+1 daily data, Party B shall pay Party A RMB 8,000 for each terminal annually. 14 LICENSE NO.:TVPH04-2008 2. If Party B utilizes the TopView After-Hours Trading Data and Statistics in other forms (including in the form of clicking on the search function and only using partial data, etc.), Party B shall pay Party A 30% of sales revenue. III. MINIMUM FEE PAYMENT REQUEST After settlement of accounts on a monthly basis, Party B shall pay Party A relevant fees according to Appendix I-A and I-B, which shall not be lower than RMB 800,000 per month ("Base Fee"), i.e., where the fees payable by Party B to Party A is less than RMB 800,000, such Base Fee shall apply. IV. DISCOUNT AWARDS In order to encourage Party B to expand its business on the market, Party A will give Party B certain discount awards with respect to fees exceeding the Base Fee. In particular, as for the portion exceeding 0%--50% of the Base Fee, Party A will return to Party B 5% of such exceeding portion; as for the portion exceeding 50%--100% of the Base Fee, Party A will return to Party B 5% of such exceeding portion; as for the portion exceeding 100% of the Base Fee, Party A will return to Party B 15% of such exceeding portion. 15 LICENSE NO.:TVPH04-2008 APPENDIX II: AGREEMENT ON SUPERVISION AND INFORMATION OPERATION 1. Party B shall provide detailed data of End Users as to the real time use, in accordance with the methods, forms and content specified by Party A. 2. Party B shall submit the Monthly Statistics Report of Users to Party A by 10:00 am of the first working day of each month, stating the detail of the use of After-Hours Trading Data and Statistics by its End Users. 3. A Monthly Statistics Report of Users shall be submitted in written form with Party B's signature and seal, in the following forms and content: Monthly Statistics Report of Users Filing Date: 1. Party B's products: (1) aggregate entity users of previous month: _________ ; aggregate entity users of previous year: _________ ; (2) aggregate individual users of previous month:_________; aggregate individual users of previous year: _________ ; (3) aggregate special users of previous month:_________; aggregate special users of previous year:_________. (If this item is zero, please provide the name of the special user, amount of charges and reasons of above users, a separate form may be attached.) 2. After-Hours Trading Data and Statistics: Aggregate entity users of previous month:_________; aggregate entity users of previous year:________________. 3. Total User Charge of the previous month: Person to submit:____________ Date:___________ Company (Seal): Notes: Date: the form shall be yyyy/ mm. The month means the month of submission. The statistics of End Users of all categories shall follow the methods required by Party A. Aggregate user number of the previous month: means the number of users who receive information services relating to After-Hours Trading Data and Statistics and from whom Party A receives the User Charge in accordance with the sales price and allocation of revenue agreed to by Party A and Party B; 16 LICENSE NO.:TVPH04-2008 Aggregate special user number of the previous month: means the number of special users who receive information services relating to After-Hours Trading Data and Statistics after obtaining prior permission of Party A for special reasons and from whom Party A receives special User Charge in accordance with the sales price and relevant allocation of revenue agreed to by Party A and Party B; Total User Charge: means the total User Charges payable to Party A by Party B in accordance with the aggregate total number of each item. 4. Contacting Information during the Performance of the Agreement Operation Monitoring Port: [ ] website visit link: [ ] special terminal (including installation software package) Financial contact: Tel: e-mail: Technical contact: Tel: e-mail: Emergency contact.: Emergency call: 5. Party A is entitled to make adjustments to the abovementioned agreement based on actual conditions. PARTY A: SSE INFONET LTD. (Company Seal) Signature of Authorized Person:____________________ Date: December 26, 2007 PARTY B: FORTUNE SOFTWARE (BEIJING ) CO. LTD. (Company Seal) Signature of Authorized Person:____________________ Date: December 26, 2007 17 LICENSE NO.:TVPH04-2008 APPENDIX III: ANNOUNCEMENT (SAMPLE) This is to announce that, After-Hours Trading Data and Statistics provided by _________was suspended as of ___ (time) of_____(DD/MM/ YYYY). The reason is ___________. Fortune Software (Beijing) Co. Ltd. Date:_______________________ 18 LICENSE NO.:TVPH04-2008 APPENDIX IV: INVITATION LETTER FOR RELEVANT ADVERTISEMENTS OR PAMPHLETS (Sample) Subject and Purpose for Advertisement or Publicity: - -------------------------------------------------------------------------------- Distribution Channel: [ ]Web, Website address; [ ]Radio Station, TV, Name of the radio station, TV station or channel; [ ]Print Media, Name of the print media and layout; [ ]Fax; [ ]E-mail; [ ]Others Contents: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Distribution Time: - -------------------------------------------------------------------------------- Distribution Scope: - -------------------------------------------------------------------------------- Notes: 1. "Contents" shall state the places in the advertisement or pamphlets that contain actual text or implications of "SSE", "SSE Infonet Ltd.", "After-Hours Trading Data and Statistics", or relevant introduction to After-Hours Trading Data and Statistics content. 2. A sample of the advertisement or pamphlet is submitted as an attachment. Applicant (seal): Fortune Software (Beijing) Co. Ltd. Date:_____________ 19 EX-4.46 24 h02185exv4w46.txt EX-4.46 LEASE CONTRACT EXHIBIT 4.46 [Translated from Chinese Original] LEASE CONTRACT FOR HOUSING UNIT OF CORPORATE SQUARE Numbers: [2007] Guo Zu No. H07 PARTY A (the Lessor): China Galaxy Securities Company Limited Legal Representative: Xu Guoping Title: chairman Address: Tower C, Corporate Square, 35 Financial Street, Xicheng District, Beijing Postal code: 100032 Phone: (8610) 66568629 Fax: (8610) 66568253 PARTY B (the Lessee): Fortune Software (Beijing) Co., Ltd. Legal Representative: Zhao Zhiwei Title: CEO Address: Room 610, Ping'an Plaza, 23 Financial Street, Xicheng District, Beijing Postal code: Phone: Fax: Pursuant to the Contracts Law and related laws and regulations of the People's Republic of China, and for the purpose of defining their rights and obligations, the Parties hereby agree on the contract as follows (the "Contract") after friendly negotiations: ARTICLE 1. QUALIFICATION, REPRESENTATIONS AND WARRANTIES 1.1 Party A is a company duly established and existing under the laws of the People's Republic of China and the legal owner of Tower C of Corporate Square located at 35 Financial Street in Xicheng District in Beijing. 1.2 Party B is a company duly established and existing under the law of the People's Republic of China and has the full qualification and power to sign and perform the Contract hereto. 1.3 Party A and Party B both represent that they have completely understood and agreed on each provision of the Contract and are clearly aware of the benefits, risks and liabilities under the Contract. 1.4 Party A and Party B both undertake to perform the Contract in a positive, careful and complete manner, following principles of fairness, justice and good faith and in compliance with requirements of relevant policies, laws and regulations. ARTICLE 2. SCOPE, AREA, TERM AND PURPOSE OF THE LEASE 2.1 Per Party B's request, Party A agrees to lease to Party B the housing units of 942 to 945 of the ninth floor of Tower C of Corporate Square as indicated in Appendix 1 (the "Leased Units"), with a total area of 494.21 square meters (referring to the construction area measured by the Bureau of Land Resources and Housing Management of Beijing Municipality) for a lease term of 55 months (the "Lease Term"), commencing on August 9, 2007 (the "Commencement Date") and ending on February 8, 2012. ARTICLE 3. DELIVERY OF LEASED UNITS AND CONDITIONS FOR DELIVERY 3.1 Party A shall deliver to Party B the Leased Units on the Commencement Date. Party A shall guarantee that the equipment for electricity, lighting, air conditioning, elevators and washing have been installed in the public areas of the Leased Units and are operating in good condition. 3.2 Party A provides Party B with equipment and facilities in the Leased Units including but not limited to air conditioning, temperature controllers, alarms and fire sprinkler system, which shall be examined and confirmed by Party B's signature if no objection. ARTICLE 4. DECORATION AND PLACEMENT 4.1 In the case of decoration, placement and other changes to the Leased Units made by Party B, Party B shall give a prior notice to Party A and timely provide Party A or the Property Management Department of Corporate Square with various patterns, design plans, list of decoration materials and other documents with respect to decorating and placing internal equipment and auxiliary objects to facilitate the procedure for related approvals. 4.2 Party B shall conduct the decoration after receipt of examination and approvals. Party B shall strictly perform in compliance with the approved decoration plan and relevant regulations set forth in Appendix 1 by the Property Management Department of Corporate Square. Party B shall pay the price of decoration and other related expenses. 4.3 Party B shall undertake that decorations shall not have a negative impact either on the structure and framework of Corporate Square or on the interests of other lessees and users. Otherwise, Party B and not Party A shall exclusively bear all liabilities and losses arisen thereby. 4.4 Party B shall undertake to be responsible for the equipment and facilities altered and improved in the decoration and to never violate related laws, regulations, rules or connected rules of Corporate Square listed in Appendix 1. ARTICLE 5. FREE LEASE PERIOD, PREEMPTED RIGHT OF RENEWAL AND SUBLEASE 5.1 Party B has a right to a free lease period for 0 days from the Commencement Date. The term of free lease period is included in the whole Lease Term. Within the term of the free lease period, Party B shall have free rent, but it shall pay for fees other than the rent specified in accordance with the Contract. 5.2 Upon the expiration of the Contract, Party B has a right to demand renewal of the lease, provided the conditions of Party B are the same as other parties have. Both parties shall negotiate and sign a new contract with respect to the rent and other fees during the renewal of the lease. Party B shall be deemed to waive the right of renewal in the event that Party B cannot notify Party A of the renewal request at least 3 months prior to the expiration of the Contract or both parties cannot reach a new contract at least 1 month prior to the expiration of the Contract. ARTICLE 6. RENT, PROPERTY MANAGEMENT FEE, DEPOSIT AND PAYMENT 6.1 The rent and property management fee are calculated in accordance with construction area measured by the Bureau of Land Resources and Housing Management of Beijing Municipality. 6.2 The rent and property management fee shall be calculated in RMB and shall be collected monthly. The rent for each square meter per day is RMB4.62 yuan and the property management fee for each square meter per day is RMB0.98 yuan. 6.3 The property management fee shall be calculated on the basis of the property management fee charged by the Property Management Department in compliance with the rules of Corporate Square. Party A can adjust reasonably the property management fee pursuant to the conditions and procedures of Corporate Square. 6.4 Within 3 working days after the execution of the Contract, Party B shall pay to Party A rent and property management fees for a 3 month period, in the total amount of RMB 22541.31 yuan as the deposit, functioning as the security of Party B to make in time all payment of rent and property management fees to Party A. 6.5 Within 3 working days after the execution of the Contract, Party B shall pay to Party A the property management fee of the first month in the amount of RMB 84180.44 yuan. Party B shall pay for the rent and property management fee of every month after term of the free lease period. Subsequent payment for the rent and property management fee of each month shall be made by Party B within the first 3 working days of such month. If the Commencement Date is not the initial date of a month, payment for the rent and property management fee of the month shall be calculated upon the actual days for lease. 6.6 Party B shall remit the money for payment through bank transfer to the account designated by Party A as follows: Account: China Galaxy Securities Company Limited Bank: China Construction Bank, Beijing Fuxing Branch Account Number: 11001046500053002517 6.7 If Party B makes the payment by RMB within the territory of People's Republic of China, the exchange rate between US dollars and RMB shall adopt the middle rate announced by Bank of People's China on the first day of the month it makes the payment. ARTICLE 7. RIGHTS AND OBLIGATIONS OF PARTY A 7.1 Party A is entitled to the ownership and beneficial right of the Leased Units and any other property rights provided pursuant to the laws and regulations. 7.2 During the Lease Term, Party A has a right to transfer the ownership of the Leased Units in whole to third parties. Party A shall transfer its rights and obligations under the Contract to such third parties. The rights and obligations of Party B under the Contract shall not be affected by the ownership transfer. In the event Party A transfers separate parts of the Leased Units, Party B shall has the right of first refusal based on the same conditions. 7.3 During the Lease Term, Party A has a right to set up a mortgage, offer to compensate and exchange on the Leased Units, in whole or part, regardless of consent from Party B. The rights and obligations of Party B under the Contract shall not be affected by the Party A's activities as aforesaid. 7.4 During the Lease Term, Party A shall pay the taxes imposed upon it by relevant laws and regulations. 7.5 Party A has a right to dispatch its personnel to inspect the equipment and hardware of Corporate Square in the Leased Units, giving a prior notice to Party B except in emergency circumstances. Party A shall use its best endeavors to avoid any interruption to the ordinary working environment of Party B. ARTICLE 8. RIGHTS AND OBLIGATIONS OF PARTY B 8.1 Party B is entitled to use the Leased Units in accordance with the Contract. Party B may set a notable mark on the exit of elevators of the floor of leasing pursuant to the relevant management regulations of the Corporate Squares. The detailed conditions shall be discussed by both Parties. 8.2 Party B shall carry out the business activities in the Leased Units in compliance with laws, regulations and rules of the People's Republic of China and is prohibited to harm Party A's reputation through its activities. 8.3 Party B shall duly make the payments with respect to the rent, property management fee, electricity usage fee and any other charges it shall be responsible for. 8.4 Starting from the Commencement Date, Party B shall purchase insurance for the properties in the Leased Units, including property insurance and third party liability insurance. Otherwise, Party B and not Party A shall be solely responsible for all liabilities and losses. 8.5 Party B shall not alter the purpose of use of the Leased Units without consent in writing from Party A. 8.6 Party B shall not re-lend, sublease, and exchange the Leased Units, in whole or part, to third parties or allow third parties to use the Leased Units by other means, without consent in writing from Party A. 8.7 Party B shall not alter the locking and security system on the gate of the Leased Units without consent in writing from Party A or approval from related departments. 8.8 Party B shall not alter or move the equipment for usage of water and electricity and shall not enlarge the capacities of central air conditioning, without consent in writing from Party A. 8.9 Party B shall take necessary actions to prevent the Leased Units from fires accident or man-made damage. Party B shall immediately notify to Party A with respect to any damage of the Leased Units. Party B shall restore the damaged parts of the Leased Units to their former condition within one month upon receipt of Party A's notice, provided that the damages resulted from negligence by Party B and its employees. If Party B fails to do so timely, Party A has the right to repair the damaged parts. All the expenses thus incurred shall be borne by Party B. 8.10 Party B is entitled to require Party A repairing the Leased Units, and the public facilities and equipment, and repair such based on the original standards by itself if Party A fails to perform the obligation of repairing timely and affects the normal use of such. All the expenses thus incurred shall be borne by Party A. The equipment newly added or improved by Party B shall be repaired by Party B. ARTICLE 9. LIABILITIES FOR BREACH 9.1 The party in breach shall be responsible for the liabilities resulting from the breach. If both parties are deemed to be in breach of the Contract, liabilities shall be allocated between the two parties in accordance with corresponding facts and actual results of the breach. 9.2 The party in breach shall pay liquidated damages to the other party duly performing the Contract. The other party is entitled to claim all of its losses incurred but with a limit to all actual losses. 9.3 If Party A delays in delivering to Party B the Leased Units, it shall pay a late payment charge in the amount of 0.5% of the monthly rent for each day of delay. 9.4 If Party B delays in making payment of fees, it shall pay a late payment charge in the amount of 0.5% of unpaid fees for each day of delay. 9.5 If Party B delays in moving out of the Leased Units, it shall pay a late payment charge in amount of 1% of the monthly rent for each day of delay. 9.6 If Party B in breach cannot duly pay the liquidated damages, late payment charge or indemnity due upon receipt of a notice from Party A asking for payment, Party B agrees that all the properties in the Leased Units can be taken by Party A as a lien and Party A has a right to dispose the properties in accordance with the laws. ARTICLE 10. EXPIRATION AND TERMINATION OF THE CONTRACT 10.1 The Contract shall be terminated automatically upon expiration of the Lease Term. Party A shall return the deposit of the rent and property management fee (less the amount ought to be paid by Party B and not including addition of interests or indemnity) to Party B within 10 days after Party B's completion of its performance. 10.2 Party B shall complete the obligations below upon the expiration of the Lease Term or 7 days before the termination of the Contract: (1) Party B shall deliver to Party A the equipment and facilities in the Leased Units in good operating condition, except normal wear and tear, damages existing before the Lease Term or caused by force majeure events. (2) Party B shall uninstall the decoration and equipment subsequently improved and restore the Leased Units to their former condition when moving out, except if given a written consent from Party A to maintain the decoration and improvement. (3) Party B shall pay off the rent, property management fee and electricity usage fee and other fees required. 10.3 Party A has a right to unilaterally terminate the contract and keep the rent, provided that Party B has acted as follows. Party B shall be bound to pay the liquidated damages equal to 3 months' rent and other damages to any economic losses of Party A if: (1) Party B conducts illegal business activities. (2) Party B alters the purpose of use of the Leased Units without consent from Party A. (3) The Leased Units are used by third parties other than Party B without consent from Party A. (4) The Leased Units, in whole or part, are subleased, re-lent and exchanged to third parties or used in common by Party B and third parties, without consent from Party A. (5) Party B delays for more than 30 days in making payment for the rent, property management fee and other fees set forth in Article 6 of the Contract. (6) Party B is in a breach of Article 7 of the Contract and cannot efficiently redress within 30 days upon notice from Party A. 10.4 Party B has a right to terminate the Contract before the expiration of the Lease Term because of the business development, after giving notice to Party A 3 months in advance and obtaining mutual consent. This Contract may be terminated in advance through the mutual agreement of both Parties, the deposit of Party B will not be returned. 10.5 Party B has a right to terminate the contract and claim twice the amount of the deposit, provided that Party A cannot deliver the Leased Units within 30 days from execution of the Contract and the receipt of the deposit from Party B. 10.6 If Party A terminates the Contract for no reason, it shall pay to Party B twice the amount of the deposit and shall indemnify the direct losses suffered by Party B, such as decoration expenses. 10.7 Upon the expiration of the Lease Term or 15 days after the termination of the Contract, any properties in the Leased Units that have not been moved out are regarded as being given up by Party B and Party B agrees to authorize Party A to dispose of these properties and charge Party B for any related costs. Party B warrants it will not interfere or intervene such disposal. ARTICLE 11. FORCE MAJEURE 11.1 If one party cannot perform the Contract due to earthquake, typhoon, war, turbulence and other unexpected and inevitable factors, the party encountering the force majeure event shall immediately notify the other party and provide detailed information about the force majeure event and a certificate of non-performance, partial non-performance or delayed-performance within 15 days. The certificate shall be issued by a local notary public from the place having the force majeure event. The party encountering the force majeure event shall not be held liable for indemnification. 11.2 If Party B cannot properly use the Leased Units due to the force majeure event, both parties shall negotiate to agree on subtraction of the rent and property management fee. If Party B cannot use the Leased Units at all due to the force majeure event, the payment for the rent and property management fee shall not be made until the Leased Units can be used in good condition. If the Leased Units cannot be used in good condition continuously for 30 days or accumulated for 90 days, Party B has a right to notify Party A of termination of the Contract, Party B shall reimburse the deposit and the rent paid in advance (less the actual usage fee and normal wear and tear) to Party B within 30 days upon receipt of a notice. ARTICLE 12. GOVERNING LAW AND DISPUTE SETTLEMENT 12.1 The Contract shall be governed by and construed in accordance with the laws of the People's Republic of China. 12.2 Any dispute arising out of or relating to the Contract shall be resolved through friendly consultation between both parties. If the dispute is not resolved through consultation, any party has a right to submit to the China International Economic and Trade Arbitration ("CIETAC") for arbitration in accordance with the Arbitration Rules of CIETAC. The award of the arbitration tribunal shall be final and binding upon the two parties. ARTICLE 13. MISCELLANEOUS 13.1 Party B agrees that the Leased Units shall be managed by Party A (or the Property Management Company designated by Party A). 13.2 The property management services shall include the cleaning of toilets, elevators, public corridors and maintenance of the equipment of Corporate Square, excluding the equipment improved by Party B inside the Leased Units. 13.3 Party A and Party B both agree that they will conclude a separate contract with respect to the lease of underground parking spaces. ARTICLE 14. ANNEX 14.1 Any notice under the Contract shall be sent by means of fax, registered mail, courier or sent by specific individual to the legal addresses of the parties. 14.2 If any provision of the Contract shall be held invalid, illegal or unenforceable, the validity and legality of the remaining provisions shall not be affected and shall not form a basis for both parties to refuse the performance of the Contract. 14.3 Any matters not covered by the Contract may be negotiated and included in a supplementary contract entered into by both parties. Any supplementary contract and appendices shall be integrated into the Contract and have the same legal effect as that of the Contract. 14.4 The Contract is made in four copies. Each party shall hold two. All copies have the same legal effect. 14.5 The Contract comes into effect upon the signing by legal representatives or authorized representatives with chopped seals and comes to an end upon expiration of the Lease Term. APPENDIX 1. MAP OF LEASED UNITS PARTY A: China Galaxy Securities Company Limited /s/ [COMPANY SEAL] - ------------------------------------- By: /s/ Zhu Li - ------------------------------------- Legal Representative or authorized representative Date: PARTY B: By: /s/ [COMPANY SEAL] ---------------------------------- /s/ Junling Cai - ------------------------------------- Legal Representative or authorized representative Date: Place: 10/F, Tower C, Corporate Square EX-4.47 25 h02185exv4w47.txt EX-4.47 LEASE CONTRACT EXHIBIT 4.47 [Translated from Chinese original] LEASE CONTRACT FOR HOUSING UNIT OF CORPORATE SQUARE Numbers: [2007] Guo Zu No. H05 PARTY A (the Lessor): China Galaxy Securities Company Limited Legal Representative: Xu Guoping Title: chairman Address: Tower C, Corporate Square, 35 Financial Street, Xicheng District, Beijing Postal code: 100032 Phone: (8610) 66568629 Fax: (8610) 66568253 PARTY B (the Lessee): Beijing Fuhua Innovation Technology Development Co., Ltd. Legal Representative: Title: Address: Postal code: Phone: Fax: Pursuant to the Contracts Law and related laws and regulations of the People's Republic of China, and for the purpose of defining their rights and obligations, the Parties hereby agree on the contract as follows (the "Contract") after friendly negotiations: ARTICLE 1. QUALIFICATION, REPRESENTATIONS AND WARRANTIES 1.1 Party A is a company duly established and existing under the laws of the People's Republic of China and the legal owner of Tower C of Corporate Square located at 35 Financial Street in Xicheng District in Beijing. 1.2 Party B is a company duly established and existing under the law of the People's Republic of China and has the full qualification and power to sign and perform the Contract hereto. 1.3 Party A and Party B both represent that they have completely understood and agreed on each provision of the Contract and are clearly aware of the benefits, risks and liabilities under the Contract. 1.4 Party A and Party B both undertake to perform the Contract in a positive, careful and complete manner, following principles of fairness, justice and good faith and in compliance with requirements of relevant policies, laws and regulations. ARTICLE 2. SCOPE, AREA, TERM AND PURPOSE OF THE LEASE 2.1 Per Party B's request, Party A agrees to lease to Party B the housing units of 938 to 941 of the ninth floor of Tower C of Corporate Square as indicated in Appendix 1 (the "Leased Units"), with a total area of 494.21 square meters (referring to the construction area measured by the Bureau of Land Resources and Housing Management of Beijing Municipality) for a lease term of 54 months (the "Lease Term"), commencing on August 9, 2007 (the "Commencement Date") and ending on February 8, 2012. ARTICLE 3. DELIVERY OF LEASED UNITS AND CONDITIONS FOR DELIVERY 3.1 Party A shall deliver to Party B the Leased Units on the Commencement Date. Party A shall guarantee that the equipment for electricity, lighting, air conditioning, elevators and washing have been installed in the public areas of the Leased Units and are operating in good condition. 3.2 Party A provides Party B with equipment and facilities in the Leased Units including but not limited to air conditioning, temperature controllers, alarms and fire sprinkler system, which shall be examined and confirmed by Party B's signature if no objection. ARTICLE 4. DECORATION AND PLACEMENT 4.1 In the case of decoration, placement and other changes to the Leased Units made by Party B, Party B shall give a prior notice to Party A and timely provide Party A or the Property Management Department of Corporate Square with various patterns, design plans, list of decoration materials and other documents with respect to decorating and placing internal equipment and auxiliary objects to facilitate the procedure for related approvals. 4.2 Party B shall conduct the decoration after receipt of examination and approvals. Party B shall strictly perform in compliance with the approved decoration plan and relevant regulations set forth in Appendix 1 by the Property Management Department of Corporate Square. Party B shall pay the price of decoration and other related expenses. 4.3 Party B shall undertake that decorations shall not have a negative impact either on the structure and framework of Corporate Square or on the interests of other lessees and users. Otherwise, Party B and not Party A shall exclusively bear all liabilities and losses arisen thereby. 4.4 Party B shall undertake to be responsible for the equipment and facilities altered and improved in the decoration and to never violate related laws, regulations, rules or connected rules of Corporate Square listed in Appendix 1. ARTICLE 5. FREE LEASE PERIOD, PREEMPTED RIGHT OF RENEWAL AND SUBLEASE 5.1 Party B has a right to a free lease period for 0 days from the Commencement Date. The term of free lease period is included in the whole Lease Term. Within the term of the free lease period, Party B shall have free rent, but it shall pay for fees other than the rent specified in accordance with the Contract. 5.2 Upon the expiration of the Contract, Party B has a right to demand renewal of the lease, provided the conditions of Party B are the same as other parties have. Both parties shall negotiate and sign a new contract with respect to the rent and other fees during the renewal of the lease. Party B shall be deemed to waive the right of renewal in the event that Party B cannot notify Party A of the renewal request at least 3 months prior to the expiration of the Contract or both parties cannot reach a new contract at least 1 month prior to the expiration of the Contract. ARTICLE 6. RENT, PROPERTY MANAGEMENT FEE, DEPOSIT AND PAYMENT 6.1 The rent and property management fee are calculated in accordance with construction area measured by the Bureau of Land Resources and Housing Management of Beijing Municipality. 6.2 The rent and property management fee shall be calculated in RMB and shall be collected monthly. The rent for each square meter per day is RMB4.62 yuan and the property management fee for each square meter per day is RMB0.98 yuan. 6.3 The property management fee shall be calculated on the basis of the property management fee charged by the Property Management Department in compliance with the rules of Corporate Square. Party A can adjust reasonably the property management fee pursuant to the conditions and procedures of Corporate Square. 6.4 Within 3 working days after the execution of the Contract, Party B shall pay to Party A rent and property management fees for a 3 month period, in the total amount of RMB 22541.31 yuan as the deposit, functioning as the security of Party B to make in time all payment of rent and property management fees to Party A. 6.5 Within 3 working days after the execution of the Contract, Party B shall pay to Party A the property management fee of the first month in the amount of RMB 84180.44 yuan. Party B shall pay for the rent and property management fee of every month after term of the free lease period. Subsequent payment for the rent and property management fee of each month shall be made by Party B within the first 3 working days of such month. If the Commencement Date is not the initial date of a month, payment for the rent and property management fee of the month shall be calculated upon the actual days for lease. 6.6 Party B shall remit the money for payment through bank transfer to the account designated by Party A as follows: Account: China Galaxy Securities Company Limited Bank: China Construction Bank, Beijing Fuxing Branch Account Number: 11001046500053002517 6.7 If Party B makes the payment by RMB within the territory of People's Republic of China, the exchange rate between US dollars and RMB shall adopt the middle rate announced by Bank of People's China on the first day of the month it makes the payment. ARTICLE 7. RIGHTS AND OBLIGATIONS OF PARTY A 7.1 Party A is entitled to the ownership and beneficial right of the Leased Units and any other property rights provided pursuant to the laws and regulations. 7.2 During the Lease Term, Party A has a right to transfer the ownership of the Leased Units in whole to third parties. Party A shall transfer its rights and obligations under the Contract to such third parties. The rights and obligations of Party B under the Contract shall not be affected by the ownership transfer. In the event Party A transfers separate parts of the Leased Units, Party B shall has the right of first refusal based on the same conditions. 7.3 During the Lease Term, Party A has a right to set up a mortgage, offer to compensate and exchange on the Leased Units, in whole or part, regardless of consent from Party B. The rights and obligations of Party B under the Contract shall not be affected by the Party A's activities as aforesaid. 7.4 During the Lease Term, Party A shall pay the taxes imposed upon it by relevant laws and regulations. 7.5 Party A has a right to dispatch its personnel to inspect the equipment and hardware of Corporate Square in the Leased Units, giving a prior notice to Party B except in emergency circumstances. Party A shall use its best endeavors to avoid any interruption to the ordinary working environment of Party B. ARTICLE 8. RIGHTS AND OBLIGATIONS OF PARTY B 8.1 Party B is entitled to use the Leased Units in accordance with the Contract. Party B may set a notable mark on the exit of elevators of the floor of leasing pursuant to the relevant management regulations of the Corporate Squares. The detailed conditions shall be discussed by both Parties. 8.2 Party B shall carry out the business activities in the Leased Units in compliance with laws, regulations and rules of the People's Republic of China and is prohibited to harm Party A's reputation through its activities. 8.3 Party B shall duly make the payments with respect to the rent, property management fee, electricity usage fee and any other charges it shall be responsible for. 8.4 Starting from the Commencement Date, Party B shall purchase insurance for the properties in the Leased Units, including property insurance and third party liability insurance. Otherwise, Party B and not Party A shall be solely responsible for all liabilities and losses. 8.5 Party B shall not alter the purpose of use of the Leased Units without consent in writing from Party A. 8.6 Party B shall not re-lend, sublease, and exchange the Leased Units, in whole or part, to third parties or allow third parties to use the Leased Units by other means, without consent in writing from Party A. 8.7 Party B shall not alter the locking and security system on the gate of the Leased Units without consent in writing from Party A or approval from related departments. 8.8 Party B shall not alter or move the equipment for usage of water and electricity and shall not enlarge the capacities of central air conditioning, without consent in writing from Party A. 8.9 Party B shall take necessary actions to prevent the Leased Units from fires accident or man-made damage. Party B shall immediately notify to Party A with respect to any damage of the Leased Units. Party B shall restore the damaged parts of the Leased Units to their former condition within one month upon receipt of Party A's notice, provided that the damages resulted from negligence by Party B and its employees. If Party B fails to do so timely, Party A has the right to repair the damaged parts. All the expenses thus incurred shall be borne by Party B. 8.10 Party B is entitled to require Party A repairing the Leased Units, and the public facilities and equipment, and repair such based on the original standards by itself if Party A fails to perform the obligation of repairing timely and affects the normal use of such. All the expenses thus incurred shall be borne by Party A. The equipment newly added or improved by Party B shall be repaired by Party B. ARTICLE 9. LIABILITIES FOR BREACH 9.1 The party in breach shall be responsible for the liabilities resulting from the breach. If both parties are deemed to be in breach of the Contract, liabilities shall be allocated between the two parties in accordance with corresponding facts and actual results of the breach. 9.2 The party in breach shall pay liquidated damages to the other party duly performing the Contract. The other party is entitled to claim all of its losses incurred but with a limit to all actual losses. 9.3 If Party A delays in delivering to Party B the Leased Units, it shall pay a late payment charge in the amount of 0.5% of the monthly rent for each day of delay. 9.4 If Party B delays in making payment of fees, it shall pay a late payment charge in the amount of 0.5% of unpaid fees for each day of delay. 9.5 If Party B delays in moving out of the Leased Units, it shall pay a late payment charge in amount of 1% of the monthly rent for each day of delay. 9.6 If Party B in breach cannot duly pay the liquidated damages, late payment charge or indemnity due upon receipt of a notice from Party A asking for payment, Party B agrees that all the properties in the Leased Units can be taken by Party A as a lien and Party A has a right to dispose the properties in accordance with the laws. ARTICLE 10. EXPIRATION AND TERMINATION OF THE CONTRACT 10.1 The Contract shall be terminated automatically upon expiration of the Lease Term. Party A shall return the deposit of the rent and property management fee (less the amount ought to be paid by Party B and not including addition of interests or indemnity) to Party B within 10 days after Party B's completion of its performance. 10.2 Party B shall complete the obligations below upon the expiration of the Lease Term or 7 days before the termination of the Contract: (1) Party B shall deliver to Party A the equipment and facilities in the Leased Units in good operating condition, except normal wear and tear, damages existing before the Lease Term or caused by force majeure events. (2) Party B shall uninstall the decoration and equipment subsequently improved and restore the Leased Units to their former condition when moving out, except if given a written consent from Party A to maintain the decoration and improvement. (3) Party B shall pay off the rent, property management fee and electricity usage fee and other fees required. 10.3 Party A has a right to unilaterally terminate the contract and keep the rent, provided that Party B has acted as follows. Party B shall be bound to pay the liquidated damages equal to 3 months' rent and other damages to any economic losses of Party A if: (1) Party B conducts illegal business activities. (2) Party B alters the purpose of use of the Leased Units without consent from Party A. (3) The Leased Units are used by third parties other than Party B without consent from Party A. (4) The Leased Units, in whole or part, are subleased, re-lent and exchanged to third parties or used in common by Party B and third parties, without consent from Party A. (5) Party B delays for more than 30 days in making payment for the rent, property management fee and other fees set forth in Article 6 of the Contract. (6) Party B is in a breach of Article 7 of the Contract and cannot efficiently redress within 30 days upon notice from Party A. 10.4 Party B has a right to terminate the Contract before the expiration of the Lease Term because of the business development, after giving notice to Party A 3 months in advance and obtaining mutual consent. This Contract may be terminated in advance through the mutual agreement of both Parties, the deposit of Party B will not be returned. 10.5 Party B has a right to terminate the contract and claim twice the amount of the deposit, provided that Party A cannot deliver the Leased Units within 30 days from execution of the Contract and the receipt of the deposit from Party B. 10.6 If Party A terminates the Contract for no reason, it shall pay to Party B twice the amount of the deposit and shall indemnify the direct losses suffered by Party B, such as decoration expenses. 10.7 Upon the expiration of the Lease Term or 15 days after the termination of the Contract, any properties in the Leased Units that have not been moved out are regarded as being given up by Party B and Party B agrees to authorize Party A to dispose of these properties and charge Party B for any related costs. Party B warrants it will not interfere or intervene such disposal. ARTICLE 11. FORCE MAJEURE 11.1 If one party cannot perform the Contract due to earthquake, typhoon, war, turbulence and other unexpected and inevitable factors, the party encountering the force majeure event shall immediately notify the other party and provide detailed information about the force majeure event and a certificate of non-performance, partial non-performance or delayed-performance within 15 days. The certificate shall be issued by a local notary public from the place having the force majeure event. The party encountering the force majeure event shall not be held liable for indemnification. 11.2 If Party B cannot properly use the Leased Units due to the force majeure event, both parties shall negotiate to agree on subtraction of the rent and property management fee. If Party B cannot use the Leased Units at all due to the force majeure event, the payment for the rent and property management fee shall not be made until the Leased Units can be used in good condition. If the Leased Units cannot be used in good condition continuously for 30 days or accumulated for 90 days, Party B has a right to notify Party A of termination of the Contract, Party B shall reimburse the deposit and the rent paid in advance (less the actual usage fee and normal wear and tear) to Party B within 30 days upon receipt of a notice. ARTICLE 12. GOVERNING LAW AND DISPUTE SETTLEMENT 12.1 The Contract shall be governed by and construed in accordance with the laws of the People's Republic of China. 12.2 Any dispute arising out of or relating to the Contract shall be resolved through friendly consultation between both parties. If the dispute is not resolved through consultation, any party has a right to submit to the China International Economic and Trade Arbitration ("CIETAC") for arbitration in accordance with the Arbitration Rules of CIETAC. The award of the arbitration tribunal shall be final and binding upon the two parties. ARTICLE 13. MISCELLANEOUS 13.1 Party B agrees that the Leased Units shall be managed by Party A (or the Property Management Company designated by Party A). 13.2 The property management services shall include the cleaning of toilets, elevators, public corridors and maintenance of the equipment of Corporate Square, excluding the equipment improved by Party B inside the Leased Units. 13.3 Party A and Party B both agree that they will conclude a separate contract with respect to the lease of underground parking spaces. ARTICLE 14. ANNEX 14.1 Any notice under the Contract shall be sent by means of fax, registered mail, courier or sent by specific individual to the legal addresses of the parties. 14.2 If any provision of the Contract shall be held invalid, illegal or unenforceable, the validity and legality of the remaining provisions shall not be affected and shall not form a basis for both parties to refuse the performance of the Contract. 14.3 Any matters not covered by the Contract may be negotiated and included in a supplementary contract entered into by both parties. Any supplementary contract and appendices shall be integrated into the Contract and have the same legal effect as that of the Contract. 14.4 The Contract is made in four copies. Each party shall hold two. All copies have the same legal effect. 14.5 The Contract comes into effect upon the signing by legal representatives or authorized representatives with chopped seals and comes to an end upon expiration of the Lease Term. APPENDIX 1. MAP OF LEASED UNITS PARTY A: China Galaxy Securities Company Limited /s/ [COMPANY SEAL] - ------------------------------------- By: /s/ Zhu Li - ------------------------------------- Legal Representative or authorized representative Date: PARTY B: By: /s/ [COMPANY SEAL] --------------------------------- /s/ Junling Cai - ------------------------------------- Legal Representative or authorized representative Date: Place: 10/F, Tower C, Corporate Square EX-4.48 26 h02185exv4w48.txt EX-4.48 LEASE CONTRACT EXHIBIT 4.48 [Translated from Chinese Original] LEASE CONTRACT FOR HOUSING UNIT OF CORPORATE SQUARE Numbers: [2007] Guo Zu No. H03 PARTY A (the Lessor): China Galaxy Securities Company Limited Legal Representative: Xu Guoping Title: chairman Address: Tower C, Corporate Square, 35 Financial Street, Xicheng District, Beijing Postal code: 100032 Phone: (8610) 66568629 Fax: (8610) 66568253 PARTY B (the Lessee): China Finance Online (Beijing) Co., Ltd. Legal Representative: Title: Address: Postal code: Phone: Fax: Pursuant to the Contracts Law and related laws and regulations of the People's Republic of China, and for the purpose of defining their rights and obligations, the Parties hereby agree on the contract as follows (the "Contract") after friendly negotiations: ARTICLE 1. QUALIFICATION, REPRESENTATIONS AND WARRANTIES 1.1 Party A is a company duly established and existing under the laws of the People's Republic of China and the legal owner of Tower C of Corporate Square located at 35 Financial Street in Xicheng District in Beijing. 1.2 Party B is a company duly established and existing under the law of the People's Republic of China and has the full qualification and power to sign and perform the Contract hereto. 1.3 Party A and Party B both represent that they have completely understood and agreed on each provision of the Contract and are clearly aware of the benefits, risks and liabilities under the Contract. 1.4 Party A and Party B both undertake to perform the Contract in a positive, careful and complete manner, following principles of fairness, justice and good faith and in compliance with requirements of relevant policies, laws and regulations. ARTICLE 2. SCOPE, AREA, TERM AND PURPOSE OF THE LEASE 2.1 Per Party B's request, Party A agrees to lease to Party B the housing units of 946 to 949 of the ninth floor of Tower C of Corporate Square as indicated in Appendix 1 (the "Leased Units"), with a total area of 441 square meters (referring to the construction area measured by the Bureau of Land Resources and Housing Management of Beijing Municipality) for a lease term of 38 months (the "Lease Term"), commencing on August 1, 2007 (the "Commencement Date") and ending on February 28, 2011. ARTICLE 3. DELIVERY OF LEASED UNITS AND CONDITIONS FOR DELIVERY 3.1 Party A shall deliver to Party B the Leased Units on the Commencement Date. Party A shall guarantee that the equipment for electricity, lighting, air conditioning, elevators and washing have been installed in the public areas of the Leased Units and are operating in good condition. 3.2 Party A provides Party B with equipment and facilities in the Leased Units including but not limited to air conditioning, temperature controllers, alarms and fire sprinkler system, which shall be examined and confirmed by Party B's signature if no objection. ARTICLE 4. DECORATION AND PLACEMENT 4.1 In the case of decoration, placement and other changes to the Leased Units made by Party B, Party B shall give a prior notice to Party A and timely provide Party A or the Property Management Department of Corporate Square with various patterns, design plans, list of decoration materials and other documents with respect to decorating and placing internal equipment and auxiliary objects to facilitate the procedure for related approvals. 4.2 Party B shall conduct the decoration after receipt of examination and approvals. Party B shall strictly perform in compliance with the approved decoration plan and relevant regulations set forth in Appendix 1 by the Property Management Department of Corporate Square. Party B shall pay the price of decoration and other related expenses. 4.3 Party B shall undertake that decorations shall not have a negative impact either on the structure and framework of Corporate Square or on the interests of other lessees and users. Otherwise, Party B and not Party A shall exclusively bear all liabilities and losses arisen thereby. 4.4 Party B shall undertake to be responsible for the equipment and facilities altered and improved in the decoration and to never violate related laws, regulations, rules or connected rules of Corporate Square listed in Appendix 1. ARTICLE 5. FREE LEASE PERIOD, PREEMPTED RIGHT OF RENEWAL AND SUBLEASE 5.1 Party B has a right to a free lease period for 0 days from the Commencement Date. The term of free lease period is included in the whole Lease Term. Within the term of the free lease period, Party B shall have free rent, but it shall pay for fees other than the rent specified in accordance with the Contract. 5.2 Upon the expiration of the Contract, Party B has a right to demand renewal of the lease, provided the conditions of Party B are the same as other parties have. Both parties shall negotiate and sign a new contract with respect to the rent and other fees during the renewal of the lease. Party B shall be deemed to waive the right of renewal in the event that Party B cannot notify Party A of the renewal request at least 3 months prior to the expiration of the Contract or both parties cannot reach a new contract at least 1 month prior to the expiration of the Contract. ARTICLE 6. RENT, PROPERTY MANAGEMENT FEE, DEPOSIT AND PAYMENT 6.1 The rent and property management fee are calculated in accordance with construction area measured by the Bureau of Land Resources and Housing Management of Beijing Municipality. 6.2 The rent and property management fee shall be calculated in RMB and shall be collected monthly. The rent for each square meter per day is RMB4.62 yuan and the property management fee for each square meter per day is RMB0.98 yuan. 6.3 The property management fee shall be calculated on the basis of the property management fee charged by the Property Management Department in compliance with the rules of Corporate Square. Party A can adjust reasonably the property management fee pursuant to the conditions and procedures of Corporate Square. 6.4 Within 3 working days after the execution of the Contract, Party B shall pay to Party A rent and property management fees for a 3 month period, in the total amount of RMB 225,351 yuan as the deposit, functioning as the security of Party B to make in time all payment of rent and property management fees to Party A. 6.5 Within 3 working days after the execution of the Contract, Party B shall pay to Party A the property management fee of the first month in the amount of RMB 75117 yuan. Party B shall pay for the rent and property management fee of every month after term of the free lease period. Subsequent payment for the rent and property management fee of each month shall be made by Party B within the first 3 working days of such month. If the Commencement Date is not the initial date of a month, payment for the rent and property management fee of the month shall be calculated upon the actual days for lease. 6.6 Party B shall remit the money for payment through bank transfer to the account designated by Party A as follows: Account: China Galaxy Securities Company Limited Bank: China Construction Bank, Beijing Fuxing Branch Account Number: 11001046500053002517 6.7 If Party B makes the payment by RMB within the territory of People's Republic of China, the exchange rate between US dollars and RMB shall adopt the middle rate announced by Bank of People's China on the first day of the month it makes the payment. ARTICLE 7. RIGHTS AND OBLIGATIONS OF PARTY A 7.1 Party A is entitled to the ownership and beneficial right of the Leased Units and any other property rights provided pursuant to the laws and regulations. 7.2 During the Lease Term, Party A has a right to transfer the ownership of the Leased Units in whole to third parties. Party A shall transfer its rights and obligations under the Contract to such third parties. The rights and obligations of Party B under the Contract shall not be affected by the ownership transfer. In the event Party A transfers separate parts of the Leased Units, Party B shall has the right of first refusal based on the same conditions. 7.3 During the Lease Term, Party A has a right to set up a mortgage, offer to compensate and exchange on the Leased Units, in whole or part, regardless of consent from Party B. The rights and obligations of Party B under the Contract shall not be affected by the Party A's activities as aforesaid. 7.4 During the Lease Term, Party A shall pay the taxes imposed upon it by relevant laws and regulations. 7.5 Party A has a right to dispatch its personnel to inspect the equipment and hardware of Corporate Square in the Leased Units, giving a prior notice to Party B except in emergency circumstances. Party A shall use its best endeavors to avoid any interruption to the ordinary working environment of Party B. ARTICLE 8. RIGHTS AND OBLIGATIONS OF PARTY B 8.1 Party B is entitled to use the Leased Units in accordance with the Contract. Party B may set a notable mark on the exit of elevators of the floor of leasing pursuant to the relevant management regulations of the Corporate Squares. The detailed conditions shall be discussed by both Parties. 8.2 Party B shall carry out the business activities in the Leased Units in compliance with laws, regulations and rules of the People's Republic of China and is prohibited to harm Party A's reputation through its activities. 8.3 Party B shall duly make the payments with respect to the rent, property management fee, electricity usage fee and any other charges it shall be responsible for. 8.4 Starting from the Commencement Date, Party B shall purchase insurance for the properties in the Leased Units, including property insurance and third party liability insurance. Otherwise, Party B and not Party A shall be solely responsible for all liabilities and losses. 8.5 Party B shall not alter the purpose of use of the Leased Units without consent in writing from Party A. 8.6 Party B shall not re-lend, sublease, and exchange the Leased Units, in whole or part, to third parties or allow third parties to use the Leased Units by other means, without consent in writing from Party A. 8.7 Party B shall not alter the locking and security system on the gate of the Leased Units without consent in writing from Party A or approval from related departments. 8.8 Party B shall not alter or move the equipment for usage of water and electricity and shall not enlarge the capacities of central air conditioning, without consent in writing from Party A. 8.9 Party B shall take necessary actions to prevent the Leased Units from fires accident or man-made damage. Party B shall immediately notify to Party A with respect to any damage of the Leased Units. Party B shall restore the damaged parts of the Leased Units to their former condition within one month upon receipt of Party A's notice, provided that the damages resulted from negligence by Party B and its employees. If Party B fails to do so timely, Party A has the right to repair the damaged parts. All the expenses thus incurred shall be borne by Party B. 8.10 Party B is entitled to require Party A repairing the Leased Units, and the public facilities and equipment, and repair such based on the original standards by itself if Party A fails to perform the obligation of repairing timely and affects the normal use of such. All the expenses thus incurred shall be borne by Party A. The equipment newly added or improved by Party B shall be repaired by Party B. ARTICLE 9. LIABILITIES FOR BREACH 9.1 The party in breach shall be responsible for the liabilities resulting from the breach. If both parties are deemed to be in breach of the Contract, liabilities shall be allocated between the two parties in accordance with corresponding facts and actual results of the breach. 9.2 The party in breach shall pay liquidated damages to the other party duly performing the Contract. The other party is entitled to claim all of its losses incurred but with a limit to all actual losses. 9.3 If Party A delays in delivering to Party B the Leased Units, it shall pay a late payment charge in the amount of 0.5% of the monthly rent for each day of delay. 9.4 If Party B delays in making payment of fees, it shall pay a late payment charge in the amount of 0.5% of unpaid fees for each day of delay. 9.5 If Party B delays in moving out of the Leased Units, it shall pay a late payment charge in amount of 1% of the monthly rent for each day of delay. 9.6 If Party B in breach cannot duly pay the liquidated damages, late payment charge or indemnity due upon receipt of a notice from Party A asking for payment, Party B agrees that all the properties in the Leased Units can be taken by Party A as a lien and Party A has a right to dispose the properties in accordance with the laws. ARTICLE 10. EXPIRATION AND TERMINATION OF THE CONTRACT 10.1 The Contract shall be terminated automatically upon expiration of the Lease Term. Party A shall return the deposit of the rent and property management fee (less the amount ought to be paid by Party B and not including addition of interests or indemnity) to Party B within 10 days after Party B's completion of its performance. 10.2 Party B shall complete the obligations below upon the expiration of the Lease Term or 7 days before the termination of the Contract: (1) Party B shall deliver to Party A the equipment and facilities in the Leased Units in good operating condition, except normal wear and tear, damages existing before the Lease Term or caused by force majeure events. (2) Party B shall uninstall the decoration and equipment subsequently improved and restore the Leased Units to their former condition when moving out, except if given a written consent from Party A to maintain the decoration and improvement. (3) Party B shall pay off the rent, property management fee and electricity usage fee and other fees required. 10.3 Party A has a right to unilaterally terminate the contract and keep the rent, provided that Party B has acted as follows. Party B shall be bound to pay the liquidated damages equal to 3 months' rent and other damages to any economic losses of Party A if: (1) Party B conducts illegal business activities. (2) Party B alters the purpose of use of the Leased Units without consent from Party A. (3) The Leased Units are used by third parties other than Party B without consent from Party A. (4) The Leased Units, in whole or part, are subleased, re-lent and exchanged to third parties or used in common by Party B and third parties, without consent from Party A. (5) Party B delays for more than 30 days in making payment for the rent, property management fee and other fees set forth in Article 6 of the Contract. (6) Party B is in a breach of Article 7 of the Contract and cannot efficiently redress within 30 days upon notice from Party A. 10.4 Party B has a right to terminate the Contract before the expiration of the Lease Term because of the business development, after giving notice to Party A 3 months in advance and obtaining mutual consent. This Contract may be terminated in advance through the mutual agreement of both Parties, the deposit of Party B will not be returned. 10.5 Party B has a right to terminate the contract and claim twice the amount of the deposit, provided that Party A cannot deliver the Leased Units within 30 days from execution of the Contract and the receipt of the deposit from Party B. 10.6 If Party A terminates the Contract for no reason, it shall pay to Party B twice the amount of the deposit and shall indemnify the direct losses suffered by Party B, such as decoration expenses. 10.7 Upon the expiration of the Lease Term or 15 days after the termination of the Contract, any properties in the Leased Units that have not been moved out are regarded as being given up by Party B and Party B agrees to authorize Party A to dispose of these properties and charge Party B for any related costs. Party B warrants it will not interfere or intervene such disposal. ARTICLE 11. FORCE MAJEURE 11.1 If one party cannot perform the Contract due to earthquake, typhoon, war, turbulence and other unexpected and inevitable factors, the party encountering the force majeure event shall immediately notify the other party and provide detailed information about the force majeure event and a certificate of non-performance, partial non-performance or delayed-performance within 15 days. The certificate shall be issued by a local notary public from the place having the force majeure event. The party encountering the force majeure event shall not be held liable for indemnification. 11.2 If Party B cannot properly use the Leased Units due to the force majeure event, both parties shall negotiate to agree on subtraction of the rent and property management fee. If Party B cannot use the Leased Units at all due to the force majeure event, the payment for the rent and property management fee shall not be made until the Leased Units can be used in good condition. If the Leased Units cannot be used in good condition continuously for 30 days or accumulated for 90 days, Party B has a right to notify Party A of termination of the Contract, Party B shall reimburse the deposit and the rent paid in advance (less the actual usage fee and normal wear and tear) to Party B within 30 days upon receipt of a notice. ARTICLE 12. GOVERNING LAW AND DISPUTE SETTLEMENT 12.1 The Contract shall be governed by and construed in accordance with the laws of the People's Republic of China. 12.2 Any dispute arising out of or relating to the Contract shall be resolved through friendly consultation between both parties. If the dispute is not resolved through consultation, any party has a right to submit to the China International Economic and Trade Arbitration ("CIETAC") for arbitration in accordance with the Arbitration Rules of CIETAC. The award of the arbitration tribunal shall be final and binding upon the two parties. ARTICLE 13. MISCELLANEOUS 13.1 Party B agrees that the Leased Units shall be managed by Party A (or the Property Management Company designated by Party A). 13.2 The property management services shall include the cleaning of toilets, elevators, public corridors and maintenance of the equipment of Corporate Square, excluding the equipment improved by Party B inside the Leased Units. 13.3 Party A and Party B both agree that they will conclude a separate contract with respect to the lease of underground parking spaces. ARTICLE 14. ANNEX 14.1 Any notice under the Contract shall be sent by means of fax, registered mail, courier or sent by specific individual to the legal addresses of the parties. 14.2 If any provision of the Contract shall be held invalid, illegal or unenforceable, the validity and legality of the remaining provisions shall not be affected and shall not form a basis for both parties to refuse the performance of the Contract. 14.3 Any matters not covered by the Contract may be negotiated and included in a supplementary contract entered into by both parties. Any supplementary contract and appendices shall be integrated into the Contract and have the same legal effect as that of the Contract. 14.4 The Contract is made in four copies. Each party shall hold two. All copies have the same legal effect. 14.5 The Contract comes into effect upon the signing by legal representatives or authorized representatives with chopped seals and comes to an end upon expiration of the Lease Term. APPENDIX 1. MAP OF LEASED UNITS PARTY A: China Galaxy Securities Company Limited /s/ [COMPANY SEAL] - ------------------------------------- By: /s/ Zhu Li - ------------------------------------- Legal Representative or authorized representative Date: PARTY B: By: /s/ [COMPANY SEAL] --------------------------------- /s/ Junling Cai - ------------------------------------- Legal Representative or authorized representative Date: Place: 10/F, Tower C, Corporate Square EX-4.49 27 h02185exv4w49.txt EX-4.49 LEASE CONTRACT EXHIBIT 4.49 [Translated from Chinese Original] LEASE CONTRACT FOR HOUSING UNIT OF CORPORATE SQUARE Numbers: [2007] Guo Zu No. H04 PARTY A (the Lessor): China Galaxy Securities Company Limited Legal Representative: Xu Guoping Title: chairman Address: Tower C, Corporate Square, 35 Financial Street, Xicheng District, Beijing Postal code: 100032 Phone: (8610) 66568629 Fax: (8610) 66568253 PARTY B (the Lessee): Beijing Fuhua Innovation Technology Development Co., Ltd. Legal Representative: Title: Address: Postal code: Phone: Fax: Pursuant to the Contracts Law and related laws and regulations of the People's Republic of China, and for the purpose of defining their rights and obligations, the Parties hereby agree on the contract as follows (the "Contract") after friendly negotiations: ARTICLE 1. QUALIFICATION, REPRESENTATIONS AND WARRANTIES 1.1 Party A is a company duly established and existing under the laws of the People's Republic of China and the legal owner of Tower C of Corporate Square located at 35 Financial Street in Xicheng District in Beijing. 1.2 Party B is a company duly established and existing under the law of the People's Republic of China and has the full qualification and power to sign and perform the Contract hereto. 1.3 Party A and Party B both represent that they have completely understood and agreed on each provision of the Contract and are clearly aware of the benefits, risks and liabilities under the Contract. 1.4 Party A and Party B both undertake to perform the Contract in a positive, careful and complete manner, following principles of fairness, justice and good faith and in compliance with requirements of relevant policies, laws and regulations. ARTICLE 2. SCOPE, AREA, TERM AND PURPOSE OF THE LEASE 2.1 Per Party B's request, Party A agrees to lease to Party B the housing units of 925, 926, 933 and 950 of the ninth floor of Tower C of Corporate Square as indicated in Appendix 1 (the "Leased Units"), with a total area of 468.68 square meters (referring to the construction area measured by the Bureau of Land Resources and Housing Management of Beijing Municipality) for a lease term of 43 months (the "Lease Term"), commencing on August 1, 2007 (the "Commencement Date") and ending on February 28, 2011. ARTICLE 3. DELIVERY OF LEASED UNITS AND CONDITIONS FOR DELIVERY 3.1 Party A shall deliver to Party B the Leased Units on the Commencement Date. Party A shall guarantee that the equipment for electricity, lighting, air conditioning, elevators and washing have been installed in the public areas of the Leased Units and are operating in good condition. 3.2 Party A provides Party B with equipment and facilities in the Leased Units including but not limited to air conditioning, temperature controllers, alarms and fire sprinkler system, which shall be examined and confirmed by Party B's signature if no objection. ARTICLE 4. DECORATION AND PLACEMENT 4.1 In the case of decoration, placement and other changes to the Leased Units made by Party B, Party B shall give a prior notice to Party A and timely provide Party A or the Property Management Department of Corporate Square with various patterns, design plans, list of decoration materials and other documents with respect to decorating and placing internal equipment and auxiliary objects to facilitate the procedure for related approvals. 4.2 Party B shall conduct the decoration after receipt of examination and approvals. Party B shall strictly perform in compliance with the approved decoration plan and relevant regulations set forth in Appendix 1 by the Property Management Department of Corporate Square. Party B shall pay the price of decoration and other related expenses. 4.3 Party B shall undertake that decorations shall not have a negative impact either on the structure and framework of Corporate Square or on the interests of other lessees and users. Otherwise, Party B and not Party A shall exclusively bear all liabilities and losses arisen thereby. 4.4 Party B shall undertake to be responsible for the equipment and facilities altered and improved in the decoration and to never violate related laws, regulations, rules or connected rules of Corporate Square listed in Appendix 1. ARTICLE 5. FREE LEASE PERIOD, PREEMPTED RIGHT OF RENEWAL AND SUBLEASE 5.1 Party B has a right to a free lease period for 0 days from the Commencement Date. The term of free lease period is included in the whole Lease Term. Within the term of the free lease period, Party B shall have free rent, but it shall pay for fees other than the rent specified in accordance with the Contract. 5.2 Upon the expiration of the Contract, Party B has a right to demand renewal of the lease, provided the conditions of Party B are the same as other parties have. Both parties shall negotiate and sign a new contract with respect to the rent and other fees during the renewal of the lease. Party B shall be deemed to waive the right of renewal in the event that Party B cannot notify Party A of the renewal request at least 3 months prior to the expiration of the Contract or both parties cannot reach a new contract at least 1 month prior to the expiration of the Contract. ARTICLE 6. RENT, PROPERTY MANAGEMENT FEE, DEPOSIT AND PAYMENT 6.1 The rent and property management fee are calculated in accordance with construction area measured by the Bureau of Land Resources and Housing Management of Beijing Municipality. 6.2 The rent and property management fee shall be calculated in RMB and shall be collected monthly. The rent for each square meter per day is RMB 3.28 yuan and the property management fee for each square meter per day is RMB0.98 yuan. 6.3 The property management fee shall be calculated on the basis of the property management fee charged by the Property Management Department in compliance with the rules of Corporate Square. Party A can adjust reasonably the property management fee pursuant to the conditions and procedures of Corporate Square. 6.4 Within 3 working days after the execution of the Contract, Party B shall pay to Party A rent and property management fees for a 3 month period, in the total amount of RMB 180632.73 yuan as the deposit, functioning as the security of Party B to make in time all payment of rent and property management fees to Party A. 6.5 Within 3 working days after the execution of the Contract, Party B shall pay to Party A the property management fee of the first month in the amount of RMB 13851.34 yuan. Party B shall pay for the rent and property management fee of every month after term of the free lease period. Subsequent payment for the rent and property management fee of each month shall be made by Party B within the first 3 working days of such month. If the Commencement Date is not the initial date of a month, payment for the rent and property management fee of the month shall be calculated upon the actual days for lease. 6.6 Party B shall remit the money for payment through bank transfer to the account designated by Party A as follows: Account: China Galaxy Securities Company Limited Bank: China Construction Bank, Beijing Fuxing Branch Account Number: 11001046500053002517 6.7 If Party B makes the payment by RMB within the territory of People's Republic of China, the exchange rate between US dollars and RMB shall adopt the middle rate announced by Bank of People's China on the first day of the month it makes the payment. ARTICLE 7. RIGHTS AND OBLIGATIONS OF PARTY A 7.1 Party A is entitled to the ownership and beneficial right of the Leased Units and any other property rights provided pursuant to the laws and regulations. 7.2 During the Lease Term, Party A has a right to transfer the ownership of the Leased Units in whole to third parties. Party A shall transfer its rights and obligations under the Contract to such third parties. The rights and obligations of Party B under the Contract shall not be affected by the ownership transfer. In the event Party A transfers separate parts of the Leased Units, Party B shall has the right of first refusal based on the same conditions. 7.3 During the Lease Term, Party A has a right to set up a mortgage, offer to compensate and exchange on the Leased Units, in whole or part, regardless of consent from Party B. The rights and obligations of Party B under the Contract shall not be affected by the Party A's activities as aforesaid. 7.4 During the Lease Term, Party A shall pay the taxes imposed upon it by relevant laws and regulations. 7.5 Party A has a right to dispatch its personnel to inspect the equipment and hardware of Corporate Square in the Leased Units, giving a prior notice to Party B except in emergency circumstances. Party A shall use its best endeavors to avoid any interruption to the ordinary working environment of Party B. ARTICLE 8. RIGHTS AND OBLIGATIONS OF PARTY B 8.1 Party B is entitled to use the Leased Units in accordance with the Contract. Party B may set a notable mark on the exit of elevators of the floor of leasing pursuant to the relevant management regulations of the Corporate Squares. The detailed conditions shall be discussed by both Parties. 8.2 Party B shall carry out the business activities in the Leased Units in compliance with laws, regulations and rules of the People's Republic of China and is prohibited to harm Party A's reputation through its activities. 8.3 Party B shall duly make the payments with respect to the rent, property management fee, electricity usage fee and any other charges it shall be responsible for. 8.4 Starting from the Commencement Date, Party B shall purchase insurance for the properties in the Leased Units, including property insurance and third party liability insurance. Otherwise, Party B and not Party A shall be solely responsible for all liabilities and losses. 8.5 Party B shall not alter the purpose of use of the Leased Units without consent in writing from Party A. 8.6 Party B shall not re-lend, sublease, and exchange the Leased Units, in whole or part, to third parties or allow third parties to use the Leased Units by other means, without consent in writing from Party A. 8.7 Party B shall not alter the locking and security system on the gate of the Leased Units without consent in writing from Party A or approval from related departments. 8.8 Party B shall not alter or move the equipment for usage of water and electricity and shall not enlarge the capacities of central air conditioning, without consent in writing from Party A. 8.9 Party B shall take necessary actions to prevent the Leased Units from fires accident or man-made damage. Party B shall immediately notify to Party A with respect to any damage of the Leased Units. Party B shall restore the damaged parts of the Leased Units to their former condition within one month upon receipt of Party A's notice, provided that the damages resulted from negligence by Party B and its employees. If Party B fails to do so timely, Party A has the right to repair the damaged parts. All the expenses thus incurred shall be borne by Party B. 8.10 Party B is entitled to require Party A repairing the Leased Units, and the public facilities and equipment, and repair such based on the original standards by itself if Party A fails to perform the obligation of repairing timely and affects the normal use of such. All the expenses thus incurred shall be borne by Party A. The equipment newly added or improved by Party B shall be repaired by Party B. ARTICLE 9. LIABILITIES FOR BREACH 9.1 The party in breach shall be responsible for the liabilities resulting from the breach. If both parties are deemed to be in breach of the Contract, liabilities shall be allocated between the two parties in accordance with corresponding facts and actual results of the breach. 9.2 The party in breach shall pay liquidated damages to the other party duly performing the Contract. The other party is entitled to claim all of its losses incurred but with a limit to all actual losses. 9.3 If Party A delays in delivering to Party B the Leased Units, it shall pay a late payment charge in the amount of 0.5% of the monthly rent for each day of delay. 9.4 If Party B delays in making payment of fees, it shall pay a late payment charge in the amount of 0.5% of unpaid fees for each day of delay. 9.5 If Party B delays in moving out of the Leased Units, it shall pay a late payment charge in amount of 1% of the monthly rent for each day of delay. 9.6 If Party B in breach cannot duly pay the liquidated damages, late payment charge or indemnity due upon receipt of a notice from Party A asking for payment, Party B agrees that all the properties in the Leased Units can be taken by Party A as a lien and Party A has a right to dispose the properties in accordance with the laws. ARTICLE 10. EXPIRATION AND TERMINATION OF THE CONTRACT 10.1 The Contract shall be terminated automatically upon expiration of the Lease Term. Party A shall return the deposit of the rent and property management fee (less the amount ought to be paid by Party B and not including addition of interests or indemnity) to Party B within 10 days after Party B's completion of its performance. 10.2 Party B shall complete the obligations below upon the expiration of the Lease Term or 7 days before the termination of the Contract: (1) Party B shall deliver to Party A the equipment and facilities in the Leased Units in good operating condition, except normal wear and tear, damages existing before the Lease Term or caused by force majeure events. (2) Party B shall uninstall the decoration and equipment subsequently improved and restore the Leased Units to their former condition when moving out, except if given a written consent from Party A to maintain the decoration and improvement. (3) Party B shall pay off the rent, property management fee and electricity usage fee and other fees required. 10.3 Party A has a right to unilaterally terminate the contract and keep the rent, provided that Party B has acted as follows. Party B shall be bound to pay the liquidated damages equal to 3 months' rent and other damages to any economic losses of Party A if: (1) Party B conducts illegal business activities. (2) Party B alters the purpose of use of the Leased Units without consent from Party A. (3) The Leased Units are used by third parties other than Party B without consent from Party A. (4) The Leased Units, in whole or part, are subleased, re-lent and exchanged to third parties or used in common by Party B and third parties, without consent from Party A. (5) Party B delays for more than 30 days in making payment for the rent, property management fee and other fees set forth in Article 6 of the Contract. (6) Party B is in a breach of Article 7 of the Contract and cannot efficiently redress within 30 days upon notice from Party A. 10.4 Party B has a right to terminate the Contract before the expiration of the Lease Term because of the business development, after giving notice to Party A 3 months in advance and obtaining mutual consent. This Contract may be terminated in advance through the mutual agreement of both Parties, the deposit of Party B will not be returned. 10.5 Party B has a right to terminate the contract and claim twice the amount of the deposit, provided that Party A cannot deliver the Leased Units within 30 days from execution of the Contract and the receipt of the deposit from Party B. 10.6 If Party A terminates the Contract for no reason, it shall pay to Party B twice the amount of the deposit and shall indemnify the direct losses suffered by Party B, such as decoration expenses. 10.7 Upon the expiration of the Lease Term or 15 days after the termination of the Contract, any properties in the Leased Units that have not been moved out are regarded as being given up by Party B and Party B agrees to authorize Party A to dispose of these properties and charge Party B for any related costs. Party B warrants it will not interfere or intervene such disposal. ARTICLE 11. FORCE MAJEURE 11.1 If one party cannot perform the Contract due to earthquake, typhoon, war, turbulence and other unexpected and inevitable factors, the party encountering the force majeure event shall immediately notify the other party and provide detailed information about the force majeure event and a certificate of non-performance, partial non-performance or delayed-performance within 15 days. The certificate shall be issued by a local notary public from the place having the force majeure event. The party encountering the force majeure event shall not be held liable for indemnification. 11.2 If Party B cannot properly use the Leased Units due to the force majeure event, both parties shall negotiate to agree on subtraction of the rent and property management fee. If Party B cannot use the Leased Units at all due to the force majeure event, the payment for the rent and property management fee shall not be made until the Leased Units can be used in good condition. If the Leased Units cannot be used in good condition continuously for 30 days or accumulated for 90 days, Party B has a right to notify Party A of termination of the Contract, Party B shall reimburse the deposit and the rent paid in advance (less the actual usage fee and normal wear and tear) to Party B within 30 days upon receipt of a notice. ARTICLE 12. GOVERNING LAW AND DISPUTE SETTLEMENT 12.1 The Contract shall be governed by and construed in accordance with the laws of the People's Republic of China. 12.2 Any dispute arising out of or relating to the Contract shall be resolved through friendly consultation between both parties. If the dispute is not resolved through consultation, any party has a right to submit to the China International Economic and Trade Arbitration ("CIETAC") for arbitration in accordance with the Arbitration Rules of CIETAC. The award of the arbitration tribunal shall be final and binding upon the two parties. ARTICLE 13. MISCELLANEOUS 13.1 Party B agrees that the Leased Units shall be managed by Party A (or the Property Management Company designated by Party A). 13.2 The property management services shall include the cleaning of toilets, elevators, public corridors and maintenance of the equipment of Corporate Square, excluding the equipment improved by Party B inside the Leased Units. 13.3 Party A and Party B both agree that they will conclude a separate contract with respect to the lease of underground parking spaces. ARTICLE 14. ANNEX 14.1 Any notice under the Contract shall be sent by means of fax, registered mail, courier or sent by specific individual to the legal addresses of the parties. 14.2 If any provision of the Contract shall be held invalid, illegal or unenforceable, the validity and legality of the remaining provisions shall not be affected and shall not form a basis for both parties to refuse the performance of the Contract. 14.3 Any matters not covered by the Contract may be negotiated and included in a supplementary contract entered into by both parties. Any supplementary contract and appendices shall be integrated into the Contract and have the same legal effect as that of the Contract. 14.4 The Contract is made in four copies. Each party shall hold two. All copies have the same legal effect. 14.5 The Contract comes into effect upon the signing by legal representatives or authorized representatives with chopped seals and comes to an end upon expiration of the Lease Term. APPENDIX 1. MAP OF LEASED UNITS PARTY A: China Galaxy Securities Company Limited /s/ [COMPANY SEAL] - ------------------------------------- By: /s/ Zhu Li - ------------------------------------- Legal Representative or authorized representative Date: PARTY B: By: /s/ [COMPANY SEAL] --------------------------------- /s/ Junling Cai - ------------------------------------- Legal Representative or authorized representative Date: Place: 10/F, Tower C, Corporate Square EX-4.50 28 h02185exv4w50.txt EX-4.50 LEASE CONTRACT EXHIBIT 4.50 [Translated from Chinese original] LEASE CONTRACT FOR HOUSING UNIT OF CORPORATE SQUARE Numbers: [2007] Guo Zu No. H06 PARTY A (the Lessor): China Galaxy Securities Company Limited Legal Representative: Xu Guoping Title: chairman Address: Tower C, Corporate Square, 35 Financial Street, Xicheng District, Beijing Postal code: 100032 Phone: (8610) 66568629 Fax: (8610) 66568253 PARTY B (the Lessee): Fortune Software (Beijing) Co., Ltd. Legal Representative: Zhao Zhiwei Title: CEO Address: Room 610, Ping'an Plaza, 23 Financial Street, Xicheng District, Beijing Postal code: Phone: Fax: Pursuant to the Contracts Law and related laws and regulations of the People's Republic of China, and for the purpose of defining their rights and obligations, the Parties hereby agree on the contract as follows (the "Contract") after friendly negotiations: ARTICLE 1. QUALIFICATION, REPRESENTATIONS AND WARRANTIES 1.1 Party A is a company duly established and existing under the laws of the People's Republic of China and the legal owner of Tower C of Corporate Square located at 35 Financial Street in Xicheng District in Beijing. 1.2 Party B is a company duly established and existing under the law of the People's Republic of China and has the full qualification and power to sign and perform the Contract hereto. 1.3 Party A and Party B both represent that they have completely understood and agreed on each provision of the Contract and are clearly aware of the benefits, risks and liabilities under the Contract. 1.4 Party A and Party B both undertake to perform the Contract in a positive, careful and complete manner, following principles of fairness, justice and good faith and in compliance with requirements of relevant policies, laws and regulations. ARTICLE 2. SCOPE, AREA, TERM AND PURPOSE OF THE LEASE 2.1 Per Party B's request, Party A agrees to lease to Party B the housing units of 934 to 937 of the ninth floor of Tower C of Corporate Square as indicated in Appendix 1 (the "Leased Units"), with a total area of 517.73 square meters (referring to the construction area measured by the Bureau of Land Resources and Housing Management of Beijing Municipality) for a lease term of 55 months (the "Lease Term"), commencing on August 1, 2007 (the "Commencement Date") and ending on February 28, 2011. ARTICLE 3. DELIVERY OF LEASED UNITS AND CONDITIONS FOR DELIVERY 3.1 Party A shall deliver to Party B the Leased Units on the Commencement Date. Party A shall guarantee that the equipment for electricity, lighting, air conditioning, elevators and washing have been installed in the public areas of the Leased Units and are operating in good condition. 3.2 Party A provides Party B with equipment and facilities in the Leased Units including but not limited to air conditioning, temperature controllers, alarms and fire sprinkler system, which shall be examined and confirmed by Party B's signature if no objection. ARTICLE 4. DECORATION AND PLACEMENT 4.1 In the case of decoration, placement and other changes to the Leased Units made by Party B, Party B shall give a prior notice to Party A and timely provide Party A or the Property Management Department of Corporate Square with various patterns, design plans, list of decoration materials and other documents with respect to decorating and placing internal equipment and auxiliary objects to facilitate the procedure for related approvals. 4.2 Party B shall conduct the decoration after receipt of examination and approvals. Party B shall strictly perform in compliance with the approved decoration plan and relevant regulations set forth in Appendix 1 by the Property Management Department of Corporate Square. Party B shall pay the price of decoration and other related expenses. 4.3 Party B shall undertake that decorations shall not have a negative impact either on the structure and framework of Corporate Square or on the interests of other lessees and users. Otherwise, Party B and not Party A shall exclusively bear all liabilities and losses arisen thereby. 4.4 Party B shall undertake to be responsible for the equipment and facilities altered and improved in the decoration and to never violate related laws, regulations, rules or connected rules of Corporate Square listed in Appendix 1. ARTICLE 5. FREE LEASE PERIOD, PREEMPTED RIGHT OF RENEWAL AND SUBLEASE 5.1 Party B has a right to a free lease period for 0 days from the Commencement Date. The term of free lease period is included in the whole Lease Term. Within the term of the free lease period, Party B shall have free rent, but it shall pay for fees other than the rent specified in accordance with the Contract. 5.2 Upon the expiration of the Contract, Party B has a right to demand renewal of the lease, provided the conditions of Party B are the same as other parties have. Both parties shall negotiate and sign a new contract with respect to the rent and other fees during the renewal of the lease. Party B shall be deemed to waive the right of renewal in the event that Party B cannot notify Party A of the renewal request at least 3 months prior to the expiration of the Contract or both parties cannot reach a new contract at least 1 month prior to the expiration of the Contract. ARTICLE 6. RENT, PROPERTY MANAGEMENT FEE, DEPOSIT AND PAYMENT 6.1 The rent and property management fee are calculated in accordance with construction area measured by the Bureau of Land Resources and Housing Management of Beijing Municipality. 6.2 The rent and property management fee shall be calculated in RMB and shall be collected monthly. The rent for each square meter per day is RMB4.62 yuan and the property management fee for each square meter per day is RMB0.98 yuan. 6.3 The property management fee shall be calculated on the basis of the property management fee charged by the Property Management Department in compliance with the rules of Corporate Square. Party A can adjust reasonably the property management fee pursuant to the conditions and procedures of Corporate Square. 6.4 Within 3 working days after the execution of the Contract, Party B shall pay to Party A rent and property management fees for a 3 month period, in the total amount of RMB 264,560.03 yuan as the deposit, functioning as the security of Party B to make in time all payment of rent and property management fees to Party A. 6.5 Within 3 working days after the execution of the Contract, Party B shall pay to Party A the property management fee of the first month in the amount of RMB 88186.68 yuan. Party B shall pay for the rent and property management fee of every month after term of the free lease period. Subsequent payment for the rent and property management fee of each month shall be made by Party B within the first 3 working days of such month. If the Commencement Date is not the initial date of a month, payment for the rent and property management fee of the month shall be calculated upon the actual days for lease. 6.6 Party B shall remit the money for payment through bank transfer to the account designated by Party A as follows: Account: China Galaxy Securities Company Limited Bank: China Construction Bank, Beijing Fuxing Branch Account Number: 11001046500053002517 6.7 If Party B makes the payment by RMB within the territory of People's Republic of China, the exchange rate between US dollars and RMB shall adopt the middle rate announced by Bank of People's China on the first day of the month it makes the payment. ARTICLE 7. RIGHTS AND OBLIGATIONS OF PARTY A 7.1 Party A is entitled to the ownership and beneficial right of the Leased Units and any other property rights provided pursuant to the laws and regulations. 7.2 During the Lease Term, Party A has a right to transfer the ownership of the Leased Units in whole to third parties. Party A shall transfer its rights and obligations under the Contract to such third parties. The rights and obligations of Party B under the Contract shall not be affected by the ownership transfer. In the event Party A transfers separate parts of the Leased Units, Party B shall has the right of first refusal based on the same conditions. 7.3 During the Lease Term, Party A has a right to set up a mortgage, offer to compensate and exchange on the Leased Units, in whole or part, regardless of consent from Party B. The rights and obligations of Party B under the Contract shall not be affected by the Party A's activities as aforesaid. 7.4 During the Lease Term, Party A shall pay the taxes imposed upon it by relevant laws and regulations. 7.5 Party A has a right to dispatch its personnel to inspect the equipment and hardware of Corporate Square in the Leased Units, giving a prior notice to Party B except in emergency circumstances. Party A shall use its best endeavors to avoid any interruption to the ordinary working environment of Party B. ARTICLE 8. RIGHTS AND OBLIGATIONS OF PARTY B 8.1 Party B is entitled to use the Leased Units in accordance with the Contract. Party B may set a notable mark on the exit of elevators of the floor of leasing pursuant to the relevant management regulations of the Corporate Squares. The detailed conditions shall be discussed by both Parties. 8.2 Party B shall carry out the business activities in the Leased Units in compliance with laws, regulations and rules of the People's Republic of China and is prohibited to harm Party A's reputation through its activities. 8.3 Party B shall duly make the payments with respect to the rent, property management fee, electricity usage fee and any other charges it shall be responsible for. 8.4 Starting from the Commencement Date, Party B shall purchase insurance for the properties in the Leased Units, including property insurance and third party liability insurance. Otherwise, Party B and not Party A shall be solely responsible for all liabilities and losses. 8.5 Party B shall not alter the purpose of use of the Leased Units without consent in writing from Party A. 8.6 Party B shall not re-lend, sublease, and exchange the Leased Units, in whole or part, to third parties or allow third parties to use the Leased Units by other means, without consent in writing from Party A. 8.7 Party B shall not alter the locking and security system on the gate of the Leased Units without consent in writing from Party A or approval from related departments. 8.8 Party B shall not alter or move the equipment for usage of water and electricity and shall not enlarge the capacities of central air conditioning, without consent in writing from Party A. 8.9 Party B shall take necessary actions to prevent the Leased Units from fires accident or man-made damage. Party B shall immediately notify to Party A with respect to any damage of the Leased Units. Party B shall restore the damaged parts of the Leased Units to their former condition within one month upon receipt of Party A's notice, provided that the damages resulted from negligence by Party B and its employees. If Party B fails to do so timely, Party A has the right to repair the damaged parts. All the expenses thus incurred shall be borne by Party B. 8.10 Party B is entitled to require Party A repairing the Leased Units, and the public facilities and equipment, and repair such based on the original standards by itself if Party A fails to perform the obligation of repairing timely and affects the normal use of such. All the expenses thus incurred shall be borne by Party A. The equipment newly added or improved by Party B shall be repaired by Party B. ARTICLE 9. LIABILITIES FOR BREACH 9.1 The party in breach shall be responsible for the liabilities resulting from the breach. If both parties are deemed to be in breach of the Contract, liabilities shall be allocated between the two parties in accordance with corresponding facts and actual results of the breach. 9.2 The party in breach shall pay liquidated damages to the other party duly performing the Contract. The other party is entitled to claim all of its losses incurred but with a limit to all actual losses. 9.3 If Party A delays in delivering to Party B the Leased Units, it shall pay a late payment charge in the amount of 0.5% of the monthly rent for each day of delay. 9.4 If Party B delays in making payment of fees, it shall pay a late payment charge in the amount of 0.5% of unpaid fees for each day of delay. 9.5 If Party B delays in moving out of the Leased Units, it shall pay a late payment charge in amount of 1% of the monthly rent for each day of delay. 9.6 If Party B in breach cannot duly pay the liquidated damages, late payment charge or indemnity due upon receipt of a notice from Party A asking for payment, Party B agrees that all the properties in the Leased Units can be taken by Party A as a lien and Party A has a right to dispose the properties in accordance with the laws. ARTICLE 10. EXPIRATION AND TERMINATION OF THE CONTRACT 10.1 The Contract shall be terminated automatically upon expiration of the Lease Term. Party A shall return the deposit of the rent and property management fee (less the amount ought to be paid by Party B and not including addition of interests or indemnity) to Party B within 10 days after Party B's completion of its performance. 10.2 Party B shall complete the obligations below upon the expiration of the Lease Term or 7 days before the termination of the Contract: (1) Party B shall deliver to Party A the equipment and facilities in the Leased Units in good operating condition, except normal wear and tear, damages existing before the Lease Term or caused by force majeure events. (2) Party B shall uninstall the decoration and equipment subsequently improved and restore the Leased Units to their former condition when moving out, except if given a written consent from Party A to maintain the decoration and improvement. (3) Party B shall pay off the rent, property management fee and electricity usage fee and other fees required. 10.3 Party A has a right to unilaterally terminate the contract and keep the rent, provided that Party B has acted as follows. Party B shall be bound to pay the liquidated damages equal to 3 months' rent and other damages to any economic losses of Party A if: (1) Party B conducts illegal business activities. (2) Party B alters the purpose of use of the Leased Units without consent from Party A. (3) The Leased Units are used by third parties other than Party B without consent from Party A. (4) The Leased Units, in whole or part, are subleased, re-lent and exchanged to third parties or used in common by Party B and third parties, without consent from Party A. (5) Party B delays for more than 30 days in making payment for the rent, property management fee and other fees set forth in Article 6 of the Contract. (6) Party B is in a breach of Article 7 of the Contract and cannot efficiently redress within 30 days upon notice from Party A. 10.4 Party B has a right to terminate the Contract before the expiration of the Lease Term because of the business development, after giving notice to Party A 3 months in advance and obtaining mutual consent. This Contract may be terminated in advance through the mutual agreement of both Parties, the deposit of Party B will not be returned. 10.5 Party B has a right to terminate the contract and claim twice the amount of the deposit, provided that Party A cannot deliver the Leased Units within 30 days from execution of the Contract and the receipt of the deposit from Party B. 10.6 If Party A terminates the Contract for no reason, it shall pay to Party B twice the amount of the deposit and shall indemnify the direct losses suffered by Party B, such as decoration expenses. 10.7 Upon the expiration of the Lease Term or 15 days after the termination of the Contract, any properties in the Leased Units that have not been moved out are regarded as being given up by Party B and Party B agrees to authorize Party A to dispose of these properties and charge Party B for any related costs. Party B warrants it will not interfere or intervene such disposal. ARTICLE 11. FORCE MAJEURE 11.1 If one party cannot perform the Contract due to earthquake, typhoon, war, turbulence and other unexpected and inevitable factors, the party encountering the force majeure event shall immediately notify the other party and provide detailed information about the force majeure event and a certificate of non-performance, partial non-performance or delayed-performance within 15 days. The certificate shall be issued by a local notary public from the place having the force majeure event. The party encountering the force majeure event shall not be held liable for indemnification. 11.2 If Party B cannot properly use the Leased Units due to the force majeure event, both parties shall negotiate to agree on subtraction of the rent and property management fee. If Party B cannot use the Leased Units at all due to the force majeure event, the payment for the rent and property management fee shall not be made until the Leased Units can be used in good condition. If the Leased Units cannot be used in good condition continuously for 30 days or accumulated for 90 days, Party B has a right to notify Party A of termination of the Contract, Party B shall reimburse the deposit and the rent paid in advance (less the actual usage fee and normal wear and tear) to Party B within 30 days upon receipt of a notice. ARTICLE 12. GOVERNING LAW AND DISPUTE SETTLEMENT 12.1 The Contract shall be governed by and construed in accordance with the laws of the People's Republic of China. 12.2 Any dispute arising out of or relating to the Contract shall be resolved through friendly consultation between both parties. If the dispute is not resolved through consultation, any party has a right to submit to the China International Economic and Trade Arbitration ("CIETAC") for arbitration in accordance with the Arbitration Rules of CIETAC. The award of the arbitration tribunal shall be final and binding upon the two parties. ARTICLE 13. MISCELLANEOUS 13.1 Party B agrees that the Leased Units shall be managed by Party A (or the Property Management Company designated by Party A). 13.2 The property management services shall include the cleaning of toilets, elevators, public corridors and maintenance of the equipment of Corporate Square, excluding the equipment improved by Party B inside the Leased Units. 13.3 Party A and Party B both agree that they will conclude a separate contract with respect to the lease of underground parking spaces. ARTICLE 14. ANNEX 14.1 Any notice under the Contract shall be sent by means of fax, registered mail, courier or sent by specific individual to the legal addresses of the parties. 14.2 If any provision of the Contract shall be held invalid, illegal or unenforceable, the validity and legality of the remaining provisions shall not be affected and shall not form a basis for both parties to refuse the performance of the Contract. 14.3 Any matters not covered by the Contract may be negotiated and included in a supplementary contract entered into by both parties. Any supplementary contract and appendices shall be integrated into the Contract and have the same legal effect as that of the Contract. 14.4 The Contract is made in four copies. Each party shall hold two. All copies have the same legal effect. 14.5 The Contract comes into effect upon the signing by legal representatives or authorized representatives with chopped seals and comes to an end upon expiration of the Lease Term. APPENDIX 1. MAP OF LEASED UNITS PARTY A: China Galaxy Securities Company Limited /s/ [COMPANY SEAL] - ------------------------------------- By: /s/ Zhu Li - ------------------------------------- Legal Representative or authorized representative Date: PARTY B: By: /s/ [COMPANY SEAL] --------------------------------- /s/ Junling Cai - ------------------------------------- Legal Representative or authorized representative Date: Place: 10/F, Tower C, Corporate Square EX-4.51 29 h02185exv4w51.txt EX-4.51 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES Exhibit 4.51 DATED THE ______ DAY OF _____, 2007 WANG WILLIAM and FNG INTERNATIONAL HOLDINGS LIMITED and CHINA FINANCE ONLINE CO. LIMITED ---------- AGREEMENT for the sale and purchase of shares in Daily Growth Investment Company Limited (Chinese Characters) ---------- F. ZIMMERN & CO. Solicitors & Notaries Suites 1501-1503, 15th Floor, Gloucester Tower, The Landmark, 15 Queen's Road Central, Hong Kong Tel: (852) 2526-4373 Fax: (852) 2801-4548 Ref: AN/PC/S14/2007 THIS AGREEMENT is made on the ______ day of ____________, 2007. BETWEEN :- 1. WANG WILLIAM whose correspondence address is at Block D, 6th Floor, Dragon Industrial Building, 93-95 King Lam Street, Lai Chi Kok, Kowloon, Hong Kong (the "VENDOR"); 2. FNG INTERNATIONAL HOLDINGS LIMITED, a company incorporated in the British Virgin Islands whose registered address is at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands (the "PURCHASER"); and 3. CHINA FINANCE ONLINE CO. LIMITED, a company incorporated in Hong Kong whose registered office is situate at Room 908, 9th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong (the "GUARANTOR"). (The Vendor and the Purchaser are collectively referred to as the "PARTIES" and each as a "PARTY") WHEREAS :- (A) Daily Growth Investment Company Limited (Chinese Characters) (the "COMPANY") is a private limited company incorporated under the laws of Hong Kong on 6 October 1971 and has an authorised share capital of HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each, of which 100,000 ordinary shares have been issued and are fully paid up. The Company is a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong. Particulars of the Company are set out in Schedule 1. (B) The Vendor is the legal and beneficial owner of 5,000 issued ordinary shares of the Company, representing 5 per cent. of the entire issued share capital of the Company (the "SALE SHARES"). (C) The Vendor has agreed to sell, and the Purchaser has agreed to purchase, the 1 Sale Shares on the terms and conditions hereinafter appearing. (D) The Purchaser is a wholly owned subsidiary of the Guarantor. (E) The Guarantor has agreed to guarantee as the primary obligor for the due performance of the Purchaser under this Agreement. AND NOW IT IS HEREBY AGREED as follows 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, unless otherwise expressed or required by context, the following expressions shall have the respective meanings set opposite thereto :-
Expression Meaning - ---------- ------- "Accounts" means the audited profit and loss accounts for the period ended on and the balance sheet as at the Accounts Date of the Company; "Accounts Date" means 31 December 2006; "Approval" have the meaning ascribed to it in Clause 2.1(b) hereof; "Business Day" means a day, other than a "general holiday" (as defined in the General Holidays Ordinance (Chapter 149 of the Laws of Hong Kong)), Saturday and any day on which a tropical cyclone warning No. 8 or above is hoisted or remains hoisted between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon or on which a "black" rainstorm warning signal is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon, on which commercial banks are generally
2 open for banking business in Hong Kong; "Completion Accounts" means the profit and loss accounts for the period ended on and the balance sheet as at the Completion Date of the Company; "Completion Date" means the date on which completion of the sale and purchase of the Sale Shares takes place as mentioned in Clause 4 hereof; "Consideration" has the meaning ascribed to it in Clause 3 hereof; "Deposit" has the meaning ascribed to it in Clause 3.2(a) hereof; "Disclosure Letter" means the disclosure letter from the Vendor to the Purchaser to be delivered at Completion in the form identical to that attached hereto as Schedule 3 hereto or with lesser disclosures; "Hong Kong" means the Hong Kong Special Administrative Region of the People's Republic of China; "Liabilities" means the total liabilities of the Company whether actual or contingent as at Completion, and for the avoidance of doubt, including all provisions for taxation and bad debts; "NAV" means the Tangible Assets less the Liabilities; "Shares" means issued ordinary shares of HK$100 each in the capital of the Company, and "Shareholders" shall be construed accordingly; "SFC" means the Securities and Futures Commission; "SFO" means the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong);
3 "Stock Exchange" The Stock Exchange of Hong Kong Limited; "Tangible Assets" means the total tangible assets of the Company as at Completion, including an amount of HK$794,157.41 due from Mr. Cheung Wing Cheung as at 1 August 2007 to the Company to be accepted by the Parties as accounts receivable without any provision for non-recovery; "Vendor's Solicitors" means F. Zimmern & Co; and "HK$" and "Cent" means Hong Kong Dollars and Cents respectively.
1.2 The headings to the Clauses of this Agreement are for ease of reference only and shall be ignored in interpreting this Agreement. 1.3 Reference to Clauses and Schedules are references to Clauses and Schedules of or to this Agreement. 1.4 Words and expressions in the singular include the plural and vice versa. 1.5 Reference to person include any public body and any body of persons, corporate or unincorporated. 1.6 Reference to ordinances, statutes, legislation or enactments shall be construed as a reference to such Ordinances, statutes, legislation or enactments as may be amended or re-enacted from time to time and for the time being in force. 2. CONDITIONS PRECEDENT 2.1 Completion of this Agreement shall be conditional upon :- (a) the Company remains a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the SFO up to Completion; 4 (b) the SFC giving its written approval to approve the Purchaser to become a substantial shareholder of the Company (the "APPROVAL"); and (c) the Purchaser shall, in addition to the Sale Shares to be acquired pursuant hereto, acquire on the Completion Date Shares from other existing Shareholders which together with the Sale Shares, shall in aggregate represent not less than 75% of the entire issued share capital of the Company as at the Completion Date. 2.2 The Vendor will use his best endeavours to procure the fulfilment of the condition set out in Clauses 2.1 (a) and 2.1(c) hereof and the Purchaser will use its best endeavours to procure the fulfilment of the condition set out in Clause 2.1(b) hereof. 2.3 If (i) the condition as set out in Clause 2.1(a) hereof cannot be fulfilled on the Completion Date, the Vendor or the Purchaser may, or (ii) the condition as set out in Clause 2.1(c) hereof cannot be fulfilled on the Completion Date, the Purchaser may terminate this Agreement. In any of such event, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Upon the refund, this Agreement shall lapse and no Party shall have any claim against the other Party except in respect of any antecedent breach. 2.4 If the condition as set out in Clause 2.1(b) hereof cannot be fulfilled on or before 31 December 2007 (the "CONDITIONS DEADLINE"), the Vendor will allow the Purchaser to extend the Conditions Deadline for a period up to three (3) calendar months from 1 January 2008 (the "EXTENDED PERIOD") provided that the Purchaser shall pay compensation (the "COMPENSATION") to the Vendor, unless the delay is due to the proven default of the Vendor, to be arrived at by the following formula :- C = [(HK$3 * S) * 3] * D/91 C = the total Compensation payable by the Purchaser to the Vendor S = the number of the Sale Shares D = the number of days from 1 January 2008 up to and including (i) 5 the Completion Date; or (ii) the day of the receipt of the Notice (as defined below) by the Vendor; or (iii) 31 March 2008, as the case may be, to be determined in the manner as provided in Clauses 2.5 (a) and (b) The Purchaser may serve a written notice to the Vendor not to proceed with the Completion (the "NOTICE") during the Extended Period. 2.5 (a) In the event that Completion takes place before the expiry of the Extended Period, the Purchaser shall pay the Compensation calculated up to the Completion Date to the Vendor on the Completion Date. (b) In the event that the Purchaser shall fail to complete the purchase of the Sale Shares in accordance with the terms of this Agreement (including failure to complete by reason of the failure to obtain the Approval) other than due to the proven default of the Vendor, half of the Deposit shall be forfeited to the Vendor as liquidated damages (the "FORFEITURE") and in addition, if the Conditions Deadline is extended, the Vendor shall also be entitled to deduct the Compensation (calculated up to the day of the receipt of the Notice by the Vendor if the Notice is served by the Purchaser or calculated up to 31 March 2008 if no Notice is served by the Purchaser) from the balance of the Deposit (the "DEDUCTION"). The remaining balance of the Deposit (after the Forfeiture and any Deduction) shall be returned to the Purchaser without interest within seven (7) days from the date of the receipt of the Notice by the Vendor or 31 March 2008, as the case may be. After the Forfeiture and any Deduction, the Vendor shall have no claim whatsoever against the Purchaser under this Agreement. 2.6 If the Vendor shall fail to complete the sale of the Sale Shares in accordance with the terms of this Agreement due to the proven default of the Vendor, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Subject to the aforesaid payment, the Purchaser shall have no claim whatsoever against the Vendor under this Agreement. 6 3. SALE AND PURCHASE OF THE SALE SHARES AND THE CONSIDERATION 3.1 Subject to the terms and conditions of this Agreement, the Vendor as beneficial owner hereby agrees to sell to the Purchaser and the Purchaser, relying on the representations and warranties made or given by the Vendor and subject to the terms and conditions contained in this Agreement, agree to purchase from the Vendor the Sale Shares free from all claims, charges, liens, encumbrances, equities and third party rights and together with all rights attached thereto and all dividends and distributions declared, paid or made in respect thereof after the Completion Date at a consideration (the "CONSIDERATION") to be arrived at by the following formula :- C = P * S C = the total consideration payable by the Purchaser to the Vendor for the Sale Shares P = the price per Share based on the NAV as at the Completion Date plus a premium of HK$15 per Share (which is to reflect the value of the trading right held by the Company in the Stock Exchange) S = the number of Sale Shares 3.2 Subject to Clause 3.3 hereof, the Consideration shall be paid by the Purchaser to the Vendor as follows:- (a) a sum of HK$250,000 (i.e. HK$50 per Sale Share) as deposit and part payment of the Consideration (the "DEPOSIT") to be paid on the signing of this Agreement by way of delivering a solicitor's cheque to the Vendor's Solicitors as stakeholder to be held by it subject to the provisions of this Agreement and the sum of HK$1,000,000 being the earnest money already paid by the Purchaser to the Purchaser's Solicitors as stakeholder under the term sheet dated 25 July 2007 be released to the Purchaser after payment of the Deposit; and (b) the balance of the Consideration to be paid on Completion by way of a solicitor's cheque to the Vendor. 7 3.3 (a) The Vendor shall procure that the draft pro-forma Completion Accounts (the "DRAFT PRO-FORMA COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser not less than six (6) days prior to the Completion Date. Completion shall take place on the basis of the draft pro-forma Completion Accounts. (b) After Completion, the Vendor shall procure the final Completion Accounts (the "FINAL COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser within fourteen (14) days after the Completion Date. Subject to Clause 3.3(d), if the final Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. If the final Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. The Purchaser shall provide with the Vendor full access to the books, records and resources of the Company so as to enable the Vendor to procure the final Completion Accounts to be drawn up. (c) The basis and policy of accounting adopted in preparing the pro-forma draft Completion Accounts and the final Completion Accounts shall be in accordance with the generally accepted accounting practices in Hong Kong. (d) In the event of a dispute between the Parties as to the amount of the NAV as shown in the final Completion Accounts, the Vendor or the Purchaser may procure that the final Completion Accounts be audited by the auditors of the Company within forty-five (45) days from the date of delivery of the final Completion Accounts provided that the procurement of the audited final Completion Accounts shall be made by the relevant Party within seven (7) days from the date of delivery of 8 the final Completion Accounts. (e) If the audited Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. If the audited Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. The Vendor together with the other vendors of the one part and the Purchaser of the other part shall each be responsible for payment of 50% of the cost and expenses for the preparation and completion of the audited Completion Accounts. 4. COMPLETION 4.1 Subject to the provisions in Clause 2 hereof, completion of the sale and purchase of the Sale Shares shall take place at the offices of Arculli Fong & Ng (the "PURCHASER'S SOLICITORS"), the Solicitors for the Purchaser, at 908 Hutchison House, Central, Hong Kong or any other place as the Parties may agree at 5:00 p.m. on a Friday of the week immediately following the week when the Approval is granted by the SFC, when the following business shall simultaneously be transacted :- (a) the Purchaser shall deliver to the Vendor the following :- (i) a solicitor's cheque for payment of the balance of the Consideration and the Vendor's Solicitors will release the Deposit to the Vendor; and (ii) a certified copy of each of the minutes of the board of directors of the Purchaser and the Guarantor approving this 9 Agreement and authorizing/confirming the authorization of an authorised person for signing of this Agreement and (for the Purchaser) the bought note and the instrument of transfer and any other incidental documents hereof; (b) the Vendor shall deliver to the Purchaser the following :- (i) sold notes and instrument of transfer in favour of the Purchaser in respect of the Sale Shares all executed by the Vendor in accordance with the Stamp Duty Ordinance; (ii) original share certificate(s) or re-issued share certificate(s) in respect of the Sale Shares; (iii)such other documents as may be reasonably required to give a good and effective transfer of title to the Sale Shares to the Purchaser and to enable them to become the registered holders thereof; (iv) a cheque drawn in favour of the Government of the Hong Kong Special Administrative Region for an amount equivalent to the stamp duty payable under the Stamp Duty Ordinance in respect of the sold notes in respect of the Sale Shares; (v) a certified copy of the minutes of the board of directors of the Vendor (if the Vendor is a corporate) approving the sale of the Sale Shares and authorizing/confirming the authorization of an authorised person for signing of this Agreement and the sold note and the instrument of transfer and any other incidental documents hereof; (vi) to the extent that the same are not already in the possession of the Company or its agents, the certificate of incorporation, business registration certificate, common seal of the Company, all copies of memorandum and articles of association of the Company, the statutory books of the Company duly made up to date, any unissued share 10 certificates, all current insurance policies, books and accounts and other records, cheque books, title deeds and evidence of ownership to all assets of the Company and all current contracts; (vii) an original of the Disclosure Letter duly executed by the Vendor in the form identical to that attached as Schedule 3 hereto or with lesser disclosures; (c) the Vendor shall cause a meeting of the board of directors of the Company to be held at which resolutions shall be passed to :- (i) approve the transfer of the Sale Shares; (ii) register (subject to stamping) the transfer of the Sale Shares referred to above and to issue new certificate(s) for the Sale Shares in the name(s) of the Purchaser; (iii) appoint one person as the Purchaser may nominate as the Chairman of the Company and such person(s) as the Purchaser may nominate as director(s) of the Company and (subject to the approval of the SFC) one person as the Purchaser may nominate as the Responsible Officer of the Company all to take effect from the close of business of the said meeting if so required by the Purchaser; and (iv) amend all banking authorisations, instructions and mandates of the Company in such manner as the Purchaser may direct; and (d) the Purchaser shall :- (i) produce for inspection by the Vendor the bought notes in respect of the Sale Shares executed by the Purchaser in compliance with the Stamp Duty Ordinance; and (ii) procure the stamping of the bought and sold notes and the instrument of transfer in respect of the Sale Shares as soon 11 as practicable thereafter and present the said instrument of transfer together with the share certificate(s) in respect of the Sale Shares to the Company for registration of the transfer. 4.2 The transactions described in Clause 4.1 hereof shall take place at the same time, so that in default of the performance of any such transactions by a Party, the other Party shall not be obliged to complete the sale and purchase aforesaid. 5. REPRESENTATIONS AND WARRANTIES AND GUARANTEE 5.1 Save as disclosed in the Disclosure Letter and documents and information provided to the Purchaser and/or its advisors, the Vendor hereby represents and warrants to the Purchaser that each of the matters set out in Schedule 2 are as at the date hereof and will be for all times up to and including the Completion Date, true and correct in all material respects. 5.2 From the date of this Agreement until the Completion Date the Vendor shall use his best endeavours to procure that (save with the prior consent in writing or of the Purchaser, such consent not to be unreasonably withheld or delayed) the Company shall not :- (a) issue or agree to issue any of its share or loan capital or grant or agree to grant any option over or right to acquire any of its share or loan capital; (b) enter into any contract (otherwise than in the ordinary course of business) or any capital commitment; (c) create or permit to arise any lien, charge, pledge, mortgage or other security interest on or in respect of any of its undertaking, property or assets; (d) appoint any directors other than as provided in this Agreement; or (e) increase the remuneration of its employees (save as payment of discretionary bonus and save that the increase is made pursuant to the 12 relevant employment contract) and the Vendor shall use his best endeavours to procure that the Purchaser be kept regularly informed of the affairs of the Company until the Completion Date. 5.3 The liability of the Vendor in respect of any breach of the warranties or representations as set out in Schedule 2 shall be limited as follows:- (a) the maximum liability of the Vendor, if any, under this Agreement shall be 25% of the Consideration; (b) no claims may be brought against the Vendor in respect of any claim of damages for breach of warranty(ies) or representation(s) as set out in Schedule 2 after the expiry of six months from the Completion Date. 5.4 In consideration of the Vendor agreeing to enter into this Agreement, the Guarantor (as principal obligor and not merely as surety) unconditionally and irrevocably guarantees performance by the Purchaser of all its obligations and liabilities under or arising out of or in connection with this Agreement (referred to herein as the "GUARANTEED OBLIGATIONS") and undertakes to the Vendor that if and whenever the Purchaser is in default, the Guarantor shall duly and promptly perform or procure such performance of the Guaranteed Obligations and indemnify the Vendor against any loss, damage, costs, expenses and liabilities that he may suffer in connection with or arising out of any such failure on the part of the Purchaser. 6. SEVERABILITY If at any time any one or more provisions hereof is or becomes invalid, illegal, unenforceable or incapable of performance in any respect, the validity, legality, enforceability or performance of the remaining provisions hereof shall not thereby in any way be affected or impaired. 7. ENTIRE AGREEMENT This Agreement constitutes the entire agreement and understanding between 13 the Parties in connection with the subject-matter of this Agreement and supersedes all previous proposals, representations, warranties, agreements or undertakings relating thereto whether oral, written or otherwise and none of the Parties has relied on any such proposals, representations, warranties, agreements or undertakings. 8. TIME 8.1 Time shall be of the essence of this Agreement. 8.2 No time or indulgence given by any Party to the other Party shall be deemed or in any way be construed as a waiver of any of his/its rights and remedies hereunder. 9. CONFIDENTIALITY Other than such disclosure as may be required by law, the SFC, the Stock Exchange or other competent authority, neither of the parties hereto shall make any announcement or release or disclose any information concerning this Agreement or the transactions herein referred to or disclose the identity of the other party(ies) hereto (save disclosure to their respective professional advisers under a duty of confidentiality) without the written consent of the other parties hereto. 10. ASSIGNMENT This Agreement shall be binding on and shall enure for the benefits of the successors and assigns of the Parties but shall not be assigned by any party hereto without the prior written consent of the other parties hereto. 11. NOTICES AND OTHER COMMUNICATION 11.1 Any notice or other communication to be given under this Agreement shall be in writing and may be given by hand, by post or facsimile to the following 14 address/number of the party hereto to be served or to such other address/number as shall be notified by such party to the other in writing:- The Vendor Address : Block D, 6th Floor, Dragon Industrial Building, 93-95 King Lam Street, Lai Chi Kok, Kowloon, Hong Kong Facsimile no. : 852-2516 6596 The Purchaser Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 The Guarantor Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 11.2 Any such notice or communication shall be sent to the party hereto to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject-matter of this Agreement. If so given by hand or facsimile, such notice or communication shall be deemed received on the date of despatch and if so sent by post (or, if sent to an address outside of Hong Kong, so sent by first class air-mail) shall be deemed received two (2) Business Days after the date of despatch (in case to an address in Hong Kong) or five (5) Business Days after the date of despatch (in case to an address 15 outside of Hong Kong). 12. COSTS AND EXPENSES Each party hereto shall bear his/its own legal and professional fees, costs and expenses incurred in the negotiation, preparation and execution of this Agreement. The stamp duty in respect of the Sale Shares shall be borne by the Vendor and the Purchaser in equal shares. 13. COUNTERPARTS This Agreement may be executed in any number of counterparts each of which when executed and delivered is an original, but all the counterparts together constitute the same document. 14. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of Hong Kong and the parties hereto agree to submit to the non-exclusive jurisdiction of the courts of Hong Kong. 15. PROCESS AGENT The Purchaser hereby irrevocably authorizes and appoints the Purchaser's Solicitors (or such other person(s), being resident in Hong Kong, as it may from time to time appoint as its agent(s) and notify to the Vendor) to accept service of all legal process arising out or in connection with this Agreement and service on the Purchaser's Solicitors (or such substitute(s)) shall be deemed to be service on the Purchaser. [Remainder of this page intentionally left blank] 16 IN WITNESS whereof the Parties have executed this Agreement the day and year first above written. SIGNED by Ms. Wang Zau, ) Chin Ngo, the lawful attorney ) of Mr. Wang William ) in the presence of :- ) ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of FNG ) International Holdings ) Limited in the presence of :- ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of China ) Finance Online Co. Limited ) in the presence of :- ) 17 SCHEDULE 1 PARTICULARS OF THE COMPANY 1. Name : Daily Growth Investment Company Limited (Chinese Characters) 2. Registered office : Room 603, Peter Building, 58-62 Queen's Road, Central, Hong Kong. 3. Company Number : 025436 4. Date of Incorporation : 6 October 1971 5. Place of Incorporation : Hong Kong 6. Authorised share capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 7. Issued and paid up capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 8. Directors : TING WANG Wan-sun, Nancy WAI CHAN Ye, Kannie WAI Heung-wah, Hayles YEH WANG Zung-sing, Helen WONG Long-sau, Ivis 9. Secretary : Hang Cheuk Secretaries Limited 10 Auditors : J Kong & Co. 11. Financial year end : 31 December 18 SCHEDULE 2 REPRESENTATIONS AND WARRANTIES General; Corporate Status 1.1 All information regarding the Company provided by or on behalf of the Vendor and/or the Company to the Purchaser is complete, correct and true in a material respect. 1.2 The Company has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation, and there has been no resolution, petition or order for the winding-up of the Company and no receiver has been appointed in respect thereof, nor are any such resolutions, orders and appointments imminent or likely. Shareholdings and Share Capital etc. 2.1 The Sale Shares comprise a percentage (as referred to in Recital (B)) of the issued share capital of the Company, and there are not in issue any other shares, debentures, warrants, options or securities. 2.2 The Company is not under any contract, options, warrants or any other obligations regarding any part of its capital, issued or unissued, or for the issue of any shares, debentures, warrants, options, or other similar securities. 2.3 Save as disclosed in the Disclosure Letter, the Vendor has acquired the Shares in compliance with the articles of association of the Company and the laws under the Companies Ordinance and is the beneficial owner of the Sale Shares free from all liens, charges, pledges, options, contracts, preemption rights, third party rights and equities, and incumbrances of whatever nature and the same are freely transferable by the Vendor without the consent, approval, permission, licence or concurrence of any third party. 2.4 The Vendor is fully capable of entering into this Agreement and to perform all 19 obligations and duties hereunder without the consent, approval, permission, licence or concurrence of any third party. Business etc. 3.1 The principal business activity of the Company is security trading. 3.2 In respect of the said business being carried on, all qualifications, registrations, licences or other approvals necessary for the proper conduct of business have been obtained and maintained and to the knowledge of the Vendor, all the relevant rules and regulations of the SFC and the Stock Exchange applicable to the Company have been observed and complied with in a material respect and no event has occurred whereby any of the same or the renewal thereof is or likely to be thereby adversely affected, suspended or revoked. Accounts 4.1 The Accounts have been prepared in accordance with generally accepted accounting practice in Hong Kong and comply with the Companies Ordinance, and show a true and fair view of the affairs and financial position of the Company as at, and the profits and loss of the Company for the period ended on, the Accounts Date. 4.2 All accounting records of the Company for the past seven (7) years are in the possession of the Company and have been properly written up, kept and maintained in accordance with generally accepted accounting practice and together shows a true and fair view of the affairs and financial position of the Company. Taxation 5.1 The Company has paid all taxes, duties and levies as the same became due and payable and to the knowledge of the Vendor, the Company is not nor is likely to be subject to any tax penalties. 20 5.2 The Company has complied with the Inland Revenue Ordinance and has kept proper records for tax purposes for the past seven (7) years and have filed all tax returns, and to the knowledge of the Vendor, there is no pending dispute with the Inland Revenue Department. Dispute, Claims and Litigation 6. There is no claim, arbitration or litigation to which the Company is a party or which, to the knowledge of the Vendor, is pending or threatened. Repetition at Completion 7. All warranties and representations contained in the foregoing provisions of this Schedule shall be deemed to be repeated immediately before completion of this Agreement and to relate to the facts then existing. 21 SCHEDULE 3 FORM OF DISCLOSURE LETTER [DATE] FNG INTERNATIONAL HOLDINGS LIMITED Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands Dear Sirs, DISCLOSURE LETTER This is the Disclosure Letter referred to in the Sale and Purchase Agreement dated [DATE] and entered into by and between Wang William, FNG International Holdings Limited and China Finance Online Co. Limited (the "Agreement"). Capitalized terms appearing in this letter shall adopt the same meaning as defined in the Agreement. A. GENERAL DISCLOSURES The following matters are deemed to be disclosed by this letter: 1. AGREEMENT: All matters set out or referred to in the Agreement, including, without limitation, all schedules and documents annexed thereto and any other agreements entered into pursuant to, or contemplated by, the Agreement. 2. COMPANIES REGISTRY: All matters registered against, or which would be disclosed by a search made in respect of the Company at the Companies Registry in Hong Kong. 3. ACCOUNTS: All matters disclosed, provided for, noted or referred to in the audited accounts of the Company which have been provided to the Purchaser. 4. INSPECTION: All matters which have or ought reasonably to have, been disclosed by inspection of the statutory books, books of account and business records of 22 the Company, all of which have been made available to the Purchaser and/or its advisers for inspection. 5. OTHERS MATTERS DISCLOSED: All matters set out or referred to in any letter, note, schedule or other document from or provided by the Vendor, the Company and/or their advisers and/or agents to the Purchaser and/or its advisers and/or agents in connection with the sale and purchase of the Sale Shares. Where any such letter, note, schedule or other document includes an expression of opinion, no representation or warranty is given as to its accuracy. B. SPECIFIC DISCLOSURE We write to disclose the following and the paragraph numbers used below correspond to the representations and warranties as set out in Schedule 2 to the Agreement: Paragraphs 1.1 and 2.3 The following documents cannot be found in the company kit of the Company or located by the Vendor or are incomplete. As such, no representation and warranty will be made on these missing or incomplete documents :- 1. Original corporate documents from the date of incorporation to the year of 1987; 2. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 1 share from Helen Zung Sing Yeh to Shun Kin Enterprises Limited on 20th February 1987; 3. Original cancelled share certificate in the names of Helen Zung Sing Yeh and Shun Kin Enterprises Limited; 4. Original Application for 42,300 shares made on 24th February 1987 - 8 sets; 5. Original share certificates in respect of the allotment made on 24th February 1987; 6. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares from Mr. Basil D.C. Wood to Mrs. Nancy Ting on 26th April 1988; 7. Original share certificates in respect of the transfer made on 26th April 1988; 8. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 20,525 shares in respect of the following transfer: Mr. Basil D.C. Wood to Midopa Enterprises Limited - 7,610 shares on 23 21.7.1988 Mrs. Wendy Wood to Midopa Enterprises Limited - 1,694 shares on 21.7.1988 Mr. Hsu Zing Ping to Midopa Enterprises Limited - 3,196 shares on 21.7.1988 Mr. Hsu Zing Ping to Billion System Co., Limited - 2,500 shares on 21.7.1988 Mr. Hsu Zing Ping to Mrs. Wang Zau Chin Ngo - 240 shares on 21.7.1988 Mr. Hsu Zing Ping to Eternal Growth Investment Ltd. - 525 shares on 21.7.1988 Mr. Koo Kam Kang to Eternal Growth Investment Ltd. - 4,760 shares on 21.7.1988 9. Original share certificates in respect of the transfer made on 21.7.1988; 10. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 7,715 shares in respect of the following transfer: Ms. Nancy Ting to Ho Chi Kuen Bernard - 2,000 shares on 29.7.1988 Ms. Nancy Ting to Billion System Co., Ltd. - 2,500 shares on 29.7.1988 Ms. Nancy Ting to Stella Wong - 545 shares on 29.7.1988 Shun Kin Ent. Ltd. to Stella Wong - 195 shares on 29.7.1988 Eileen Hwa to Stella Wong - 260 shares on 29.7.1988 Ms. Nancy Ting to Eternal Growth Inv. Ltd. - 2,215 shares on 29.7.1988 11. Original share certificates in respect of the transfer made on 29.7.1988 12. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the transfer from Eileen Hwa to Wong Oi Lun, Ellen on 17.3.1989; 13. Original share certificates in respect of the transfer made on 17.3.1989; 14. Form X(ii) or Form (IXA) showing the resignation of Ms. Stella Wong as the director of the Company made on 1.4.1989; 15. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Wong Oi Lun Ellen to Stella Wong - 1,000 shares on 31.5.1990 Wong Oi Lun Ellen to Tsang Kin Woo - 500 shares on 31.5.1990 Wong Oi Lun Ellen to Chu Ping Im - 500 shares on 31.5.1990 16. Original share certificates in respect of the transfer made on 31.5.1990 17. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Bernard Ho to Zone Bo Ltd. - 2,000 shares on 19.7.1990 18. Original share certificates in respect of the transfer made on 19.7.1990 19. Copy of Consent to act as director of the Company by Mr. Yap E. Hock on 24 9.12.1992 20. A letter dated 10th October 1994, from King Cause Limited and Asian Capital Partners (HK) Limited reporting that 10 share certificates for 50,000 shares have been mislaid and requesting 2 share certificates be issued to them 21. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 50,000 shares in respect of the following transfer: King Cause Ltd.to Billion System Co. Ltd.- 5,000 shares on 12.12.1994; King Cause Ltd. to Eternal Growth Investment Ltd.- 7,500 shares on 12.12.1994; King Cause Ltd. to Midpoa Enterprises Limited- 12,500 shares on 12.12.1994; King Cause Ltd. to Shun Kin Ent. Limited- 17,500 shares on 12.12.1994; King Cause Ltd. to Wang Zau Chin Ngo- 2,500 shares on 12.12.1994; King Cause Ltd. to Tsang Kin Woo- 499 shares on 12.12.1994; King Cause Ltd. to Chu Ping Im - 500 shares on 12.12.1994 King Cause Ltd. to Stella Wong- 2,000 shares on 12.12.1994; King Cause Ltd. to Zone Bo Limited- 2,000 shares on 12.12.1994; King Cause Ltd. and Asian Capital Partners (HK) Limited to Tsang Kin Woo- 1 share on 12.12.1994; 22. Original share certificates in respect of the transfer made on 12.12.1994; 23. Original Declaration of Trust given by King Cause Limited and Asian Capital Partners (HK) Limited on 9.12.1992; 24. Copy of Form D2 and Consent to act reporting the appointment of Mr. Ho Chi Kuen as the director of the company; 25. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares in respect of the following transfer: Billion System Co. Ltd. to Zone Bo Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Eternal Growth Inv. Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Midopa Enterprises Ltd.- 1,250 shares on 15.12.2000; Billion System Co. Ltd. to Shun Kin Enterprises Ltd.- 1,750 shares on 15.12.2000; Billion System Co. Ltd. to Tsang Kin Woo- 500 shares on 15.12.2000; Billion System Co. Ltd. to Chu Ping Im- 500 shares on 15.12.2000; 26. Original share certificates in respect of the transfer made on 15.12.2000; 27. Original Share Certificate of Wang William; 28. Original Board Minutes for approving the share transfer from Zone Bo Limited to Hung Yung made on 22.06.2007; 25 29. Share Certificate of Hung Yung in respect of 5,000 shares; 30. Original Consent to Short Notice dated 16.03.1987 - Elieen Hwa Wang Vung Sing (with the signature of Elieen missing); and 31. Original Consent to Short Notice for 2005 AGM dated 30.05.2005 (missing signatures from Midopa Enterprises Limited, Wong Chan Miu Wan Stella, Chu Ping Im, Tsang Kin Woo). Yours sincerely, - ----------------------------------- Wang William 26 EX-4.52 30 h02185exv4w52.txt EX-4.52 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES Exhibit 4.52 DATED THE ___________ DAY OF _____, 2007 TSANG KIN-WOO and FNG INTERNATIONAL HOLDINGS LIMITED and CHINA FINANCE ONLINE CO. LIMITED ---------- AGREEMENT for the sale and purchase of shares in Daily Growth Investment Company Limited (Chinese Characters) ---------- F. ZIMMERN & CO. Solicitors & Notaries Suites 1501-1503, 15th Floor, Gloucester Tower, The Landmark, 15 Queen's Road Central, Hong Kong Tel: (852) 2526-4373 Fax: (852) 2801-4548 Ref: AN/PC/S14/2007 THIS AGREEMENT is made on the __________ day of _____, 2007. BETWEEN :- 1. TSANG KIN-WOO whose correspondence address is at Flat A, 8th Floor, Harrison Court II, 90A Waterloo Road, Kowloon, Hong Kong (the "VENDOR"); 2. FNG INTERNATIONAL HOLDINGS LIMITED, a company incorporated in the British Virgin Islands whose registered address is at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands (the "PURCHASER"); and 3. CHINA FINANCE ONLINE CO. LIMITED, a company incorporated in Hong Kong whose registered office is situate at Room 908, 9th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong (the "GUARANTOR"). (The Vendor and the Purchaser are collectively referred to as the "PARTIES" and each as a "PARTY") WHEREAS :- (A) Daily Growth Investment Company Limited (Chinese Characters) (the "COMPANY") is a private limited company incorporated under the laws of Hong Kong on 6 October 1971 and has an authorised share capital of HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each, of which 100,000 ordinary shares have been issued and are fully paid up. The Company is a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong. Particulars of the Company are set out in Schedule 1. (B) The Vendor is the legal and beneficial owner of 2,000 issued ordinary shares of the Company, representing 2 per cent. of the entire issued share capital of the Company (the "SALE SHARES"). (C) The Vendor has agreed to sell, and the Purchaser has agreed to purchase, the 1 Sale Shares on the terms and conditions hereinafter appearing. (D) The Purchaser is a wholly owned subsidiary of the Guarantor. (E) The Guarantor has agreed to guarantee as the primary obligor for the due performance of the Purchaser under this Agreement. AND NOW IT IS HEREBY AGREED as follows 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, unless otherwise expressed or required by context, the following expressions shall have the respective meanings set opposite thereto :-
Expression Meaning - ---------- ------- "Accounts" means the audited profit and loss accounts for the period ended on and the balance sheet as at the Accounts Date of the Company; "Accounts Date" means 31 December 2006; "Approval" have the meaning ascribed to it in Clause 2.1(b) hereof; "Business Day" means a day, other than a "general holiday" (as defined in the General Holidays Ordinance (Chapter 149 of the Laws of Hong Kong)), Saturday and any day on which a tropical cyclone warning No. 8 or above is hoisted or remains hoisted between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon or on which a "black" rainstorm warning signal is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon, on which commercial banks are generally
2 open for banking business in Hong Kong; "Completion Accounts" means the profit and loss accounts for the period ended on and the balance sheet as at the Completion Date of the Company; "Completion Date" means the date on which completion of the sale and purchase of the Sale Shares takes place as mentioned in Clause 4 hereof; "Consideration" has the meaning ascribed to it in Clause 3 hereof; "Deposit" has the meaning ascribed to it in Clause 3.2(a) hereof; "Disclosure Letter" means the disclosure letter from the Vendor to the Purchaser to be delivered at Completion in the form identical to that attached hereto as Schedule 3 hereto or with lesser disclosures; "Hong Kong" means the Hong Kong Special Administrative Region of the People's Republic of China; "Liabilities" means the total liabilities of the Company whether actual or contingent as at Completion, and for the avoidance of doubt, including all provisions for taxation and bad debts; "NAV" means the Tangible Assets less the Liabilities; "Shares" means issued ordinary shares of HK$100 each in the capital of the Company, and "Shareholders" shall be construed accordingly; "SFC" means the Securities and Futures Commission; "SFO" means the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong);
3 "Stock Exchange" The Stock Exchange of Hong Kong Limited; "Tangible Assets" means the total tangible assets of the Company as at Completion, including an amount of HK$794,157.41 due from Mr. Cheung Wing Cheung as at 1 August 2007 to the Company to be accepted by the Parties as accounts receivable without any provision for non-recovery; "Vendor's Solicitors" means F. Zimmern & Co; and "HK$" and "Cent" means Hong Kong Dollars and Cents respectively.
1.2 The headings to the Clauses of this Agreement are for ease of reference only and shall be ignored in interpreting this Agreement. 1.3 Reference to Clauses and Schedules are references to Clauses and Schedules of or to this Agreement. 1.4 Words and expressions in the singular include the plural and vice versa. 1.5 Reference to person include any public body and any body of persons, corporate or unincorporated. 1.6 Reference to ordinances, statutes, legislation or enactments shall be construed as a reference to such Ordinances, statutes, legislation or enactments as may be amended or re-enacted from time to time and for the time being in force. 2. CONDITIONS PRECEDENT 2.1 Completion of this Agreement shall be conditional upon :- (a) the Company remains a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the SFO up to Completion; 4 (b) the SFC giving its written approval to approve the Purchaser to become a substantial shareholder of the Company (the "APPROVAL"); and (c) the Purchaser shall, in addition to the Sale Shares to be acquired pursuant hereto, acquire on the Completion Date Shares from other existing Shareholders which together with the Sale Shares, shall in aggregate represent not less than 75% of the entire issued share capital of the Company as at the Completion Date. 2.2 The Vendor will use his best endeavours to procure the fulfilment of the condition set out in Clauses 2.1 (a) and 2.1(c) hereof and the Purchaser will use its best endeavours to procure the fulfilment of the condition set out in Clause 2.1(b) hereof. 2.3 If (i) the condition as set out in Clause 2.1(a) hereof cannot be fulfilled on the Completion Date, the Vendor or the Purchaser may, or (ii) the condition as set out in Clause 2.1(c) hereof cannot be fulfilled on the Completion Date, the Purchaser may terminate this Agreement. In any of such event, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Upon the refund, this Agreement shall lapse and no Party shall have any claim against the other Party except in respect of any antecedent breach. 2.4 If the condition as set out in Clause 2.1(b) hereof cannot be fulfilled on or before 31 December 2007 (the "CONDITIONS DEADLINE"), the Vendor will allow the Purchaser to extend the Conditions Deadline for a period up to three (3) calendar months from 1 January 2008 (the "EXTENDED PERIOD") provided that the Purchaser shall pay compensation (the "COMPENSATION") to the Vendor, unless the delay is due to the proven default of the Vendor, to be arrived at by the following formula :- C = [(HK$3 * S) * 3] * D/91 C = the total Compensation payable by the Purchaser to the Vendor S = the number of the Sale Shares D = the number of days from 1 January 2008 up to and including (i) 5 the Completion Date; or (ii) the day of the receipt of the Notice (as defined below) by the Vendor; or (iii) 31 March 2008, as the case may be, to be determined in the manner as provided in Clauses 2.5 (a) and (b) The Purchaser may serve a written notice to the Vendor not to proceed with the Completion (the "NOTICE") during the Extended Period. 2.5 (a) In the event that Completion takes place before the expiry of the Extended Period, the Purchaser shall pay the Compensation calculated up to the Completion Date to the Vendor on the Completion Date. (b) In the event that the Purchaser shall fail to complete the purchase of the Sale Shares in accordance with the terms of this Agreement (including failure to complete by reason of the failure to obtain the Approval) other than due to the proven default of the Vendor, half of the Deposit shall be forfeited to the Vendor as liquidated damages (the "FORFEITURE") and in addition, if the Conditions Deadline is extended, the Vendor shall also be entitled to deduct the Compensation (calculated up to the day of the receipt of the Notice by the Vendor if the Notice is served by the Purchaser or calculated up to 31 March 2008 if no Notice is served by the Purchaser) from the balance of the Deposit (the "DEDUCTION"). The remaining balance of the Deposit (after the Forfeiture and any Deduction) shall be returned to the Purchaser without interest within seven (7) days from the date of the receipt of the Notice by the Vendor or 31 March 2008, as the case may be. After the Forfeiture and any Deduction, the Vendor shall have no claim whatsoever against the Purchaser under this Agreement. 2.6 If the Vendor shall fail to complete the sale of the Sale Shares in accordance with the terms of this Agreement due to the proven default of the Vendor, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Subject to the aforesaid payment, the Purchaser shall have no claim whatsoever against the Vendor under this Agreement. 6 3. SALE AND PURCHASE OF THE SALE SHARES AND THE CONSIDERATION 3.1 Subject to the terms and conditions of this Agreement, the Vendor as beneficial owner hereby agrees to sell to the Purchaser and the Purchaser, relying on the representations and warranties made or given by the Vendor and subject to the terms and conditions contained in this Agreement, agree to purchase from the Vendor the Sale Shares free from all claims, charges, liens, encumbrances, equities and third party rights and together with all rights attached thereto and all dividends and distributions declared, paid or made in respect thereof after the Completion Date at a consideration (the "CONSIDERATION") to be arrived at by the following formula :- C = P * S C = the total consideration payable by the Purchaser to the Vendor for the Sale Shares P = the price per Share based on the NAV as at the Completion Date plus a premium of HK$15 per Share (which is to reflect the value of the trading right held by the Company in the Stock Exchange) S = the number of Sale Shares 3.2 Subject to Clause 3.3 hereof, the Consideration shall be paid by the Purchaser to the Vendor as follows:- (a) a sum of HK$100,000 (i.e. HK$50 per Sale Share) as deposit and part payment of the Consideration (the "DEPOSIT") to be paid on the signing of this Agreement by way of delivering a solicitor's cheque to the Vendor's Solicitors as stakeholder to be held by it subject to the provisions of this Agreement and the sum of HK$1,000,000 being the earnest money already paid by the Purchaser to the Purchaser's Solicitors as stakeholder under the term sheet dated 25 July 2007 be released to the Purchaser after payment of the Deposit; and (b) the balance of the Consideration to be paid on Completion by way of a solicitor's cheque to the Vendor. 7 3.3 (a) The Vendor shall procure that the draft pro-forma Completion Accounts (the "DRAFT PRO-FORMA COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser not less than six (6) days prior to the Completion Date. Completion shall take place on the basis of the draft pro-forma Completion Accounts. (b) After Completion, the Vendor shall procure the final Completion Accounts (the "FINAL COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser within fourteen (14) days after the Completion Date. Subject to Clause 3.3(d), if the final Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. If the final Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. The Purchaser shall provide with the Vendor full access to the books, records and resources of the Company so as to enable the Vendor to procure the final Completion Accounts to be drawn up. (c) The basis and policy of accounting adopted in preparing the pro-forma draft Completion Accounts and the final Completion Accounts shall be in accordance with the generally accepted accounting practices in Hong Kong. (d) In the event of a dispute between the Parties as to the amount of the NAV as shown in the final Completion Accounts, the Vendor or the Purchaser may procure that the final Completion Accounts be audited by the auditors of the Company within forty-five (45) days from the date of delivery of the final Completion Accounts provided that the procurement of the audited final Completion Accounts shall be made by the relevant Party within seven (7) days from the date of delivery of 8 the final Completion Accounts. (e) If the audited Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. If the audited Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. The Vendor together with the other vendors of the one part and the Purchaser of the other part shall each be responsible for payment of 50% of the cost and expenses for the preparation and completion of the audited Completion Accounts. 4. COMPLETION 4.1 Subject to the provisions in Clause 2 hereof, completion of the sale and purchase of the Sale Shares shall take place at the offices of Arculli Fong & Ng (the "PURCHASER'S SOLICITORS"), the Solicitors for the Purchaser, at 908 Hutchison House, Central, Hong Kong or any other place as the Parties may agree at 5:00 p.m. on a Friday of the week immediately following the week when the Approval is granted by the SFC, when the following business shall simultaneously be transacted :- (a) the Purchaser shall deliver to the Vendor the following :- (i) a solicitor's cheque for payment of the balance of the Consideration and the Vendor's Solicitors will release the Deposit to the Vendor; and (ii) a certified copy of each of the minutes of the board of directors of the Purchaser and the Guarantor approving this 9 Agreement and authorizing/confirming the authorization of an authorised person for signing of this Agreement and (for the Purchaser) the bought note and the instrument of transfer and any other incidental documents hereof; (b) the Vendor shall deliver to the Purchaser the following :- (i) sold notes and instrument of transfer in favour of the Purchaser in respect of the Sale Shares all executed by the Vendor in accordance with the Stamp Duty Ordinance; (ii) original share certificate(s) or re-issued share certificate(s) in respect of the Sale Shares; (iii)such other documents as may be reasonably required to give a good and effective transfer of title to the Sale Shares to the Purchaser and to enable them to become the registered holders thereof; (iv) a cheque drawn in favour of the Government of the Hong Kong Special Administrative Region for an amount equivalent to the stamp duty payable under the Stamp Duty Ordinance in respect of the sold notes in respect of the Sale Shares; (v) a certified copy of the minutes of the board of directors of the Vendor (if the Vendor is a corporate) approving the sale of the Sale Shares and authorizing/confirming the authorization of an authorised person for signing of this Agreement and the sold note and the instrument of transfer and any other incidental documents hereof; (vi) to the extent that the same are not already in the possession of the Company or its agents, the certificate of incorporation, business registration certificate, common seal of the Company, all copies of memorandum and articles of association of the Company, the statutory books of the Company duly made up to date, any unissued share 10 certificates, all current insurance policies, books and accounts and other records, cheque books, title deeds and evidence of ownership to all assets of the Company and all current contracts; (vii) an original of the Disclosure Letter duly executed by the Vendor in the form identical to that attached as Schedule 3 hereto or with lesser disclosures; (c) the Vendor shall cause a meeting of the board of directors of the Company to be held at which resolutions shall be passed to :- (i) approve the transfer of the Sale Shares; (ii) register (subject to stamping) the transfer of the Sale Shares referred to above and to issue new certificate(s) for the Sale Shares in the name(s) of the Purchaser; (iii) appoint one person as the Purchaser may nominate as the Chairman of the Company and such person(s) as the Purchaser may nominate as director(s) of the Company and (subject to the approval of the SFC) one person as the Purchaser may nominate as the Responsible Officer of the Company all to take effect from the close of business of the said meeting if so required by the Purchaser; and (iv) amend all banking authorisations, instructions and mandates of the Company in such manner as the Purchaser may direct; and (d) the Purchaser shall :- (i) produce for inspection by the Vendor the bought notes in respect of the Sale Shares executed by the Purchaser in compliance with the Stamp Duty Ordinance; and (ii) procure the stamping of the bought and sold notes and the instrument of transfer in respect of the Sale Shares as soon 11 as practicable thereafter and present the said instrument of transfer together with the share certificate(s) in respect of the Sale Shares to the Company for registration of the transfer. 4.2 The transactions described in Clause 4.1 hereof shall take place at the same time, so that in default of the performance of any such transactions by a Party, the other Party shall not be obliged to complete the sale and purchase aforesaid. 5. REPRESENTATIONS AND WARRANTIES AND GUARANTEE 5.1 Save as disclosed in the Disclosure Letter and documents and information provided to the Purchaser and/or its advisors, the Vendor hereby represents and warrants to the Purchaser that each of the matters set out in Schedule 2 are as at the date hereof and will be for all times up to and including the Completion Date, true and correct in all material respects. 5.2 From the date of this Agreement until the Completion Date the Vendor shall use his best endeavours to procure that (save with the prior consent in writing or of the Purchaser, such consent not to be unreasonably withheld or delayed) the Company shall not :- (a) issue or agree to issue any of its share or loan capital or grant or agree to grant any option over or right to acquire any of its share or loan capital; (b) enter into any contract (otherwise than in the ordinary course of business) or any capital commitment; (c) create or permit to arise any lien, charge, pledge, mortgage or other security interest on or in respect of any of its undertaking, property or assets; (d) appoint any directors other than as provided in this Agreement; or (e) increase the remuneration of its employees (save as payment of discretionary bonus and save that the increase is made pursuant to the 12 relevant employment contract) and the Vendor shall use his best endeavours to procure that the Purchaser be kept regularly informed of the affairs of the Company until the Completion Date. 5.3 The liability of the Vendor in respect of any breach of the warranties or representations as set out in Schedule 2 shall be limited as follows:- (a) the maximum liability of the Vendor, if any, under this Agreement shall be 25% of the Consideration; (b) no claims may be brought against the Vendor in respect of any claim of damages for breach of warranty(ies) or representation(s) as set out in Schedule 2 after the expiry of six months from the Completion Date. 5.4 In consideration of the Vendor agreeing to enter into this Agreement, the Guarantor (as principal obligor and not merely as surety) unconditionally and irrevocably guarantees performance by the Purchaser of all its obligations and liabilities under or arising out of or in connection with this Agreement (referred to herein as the "GUARANTEED OBLIGATIONS") and undertakes to the Vendor that if and whenever the Purchaser is in default, the Guarantor shall duly and promptly perform or procure such performance of the Guaranteed Obligations and indemnify the Vendor against any loss, damage, costs, expenses and liabilities that he may suffer in connection with or arising out of any such failure on the part of the Purchaser. 6. SEVERABILITY If at any time any one or more provisions hereof is or becomes invalid, illegal, unenforceable or incapable of performance in any respect, the validity, legality, enforceability or performance of the remaining provisions hereof shall not thereby in any way be affected or impaired. 7. ENTIRE AGREEMENT This Agreement constitutes the entire agreement and understanding between 13 the Parties in connection with the subject-matter of this Agreement and supersedes all previous proposals, representations, warranties, agreements or undertakings relating thereto whether oral, written or otherwise and none of the Parties has relied on any such proposals, representations, warranties, agreements or undertakings. 8. TIME 8.1 Time shall be of the essence of this Agreement. 8.2 No time or indulgence given by any Party to the other Party shall be deemed or in any way be construed as a waiver of any of his/its rights and remedies hereunder. 9. CONFIDENTIALITY Other than such disclosure as may be required by law, the SFC, the Stock Exchange or other competent authority, neither of the parties hereto shall make any announcement or release or disclose any information concerning this Agreement or the transactions herein referred to or disclose the identity of the other party(ies) hereto (save disclosure to their respective professional advisers under a duty of confidentiality) without the written consent of the other parties hereto. 10. ASSIGNMENT This Agreement shall be binding on and shall enure for the benefits of the successors and assigns of the Parties but shall not be assigned by any party hereto without the prior written consent of the other parties hereto. 11. NOTICES AND OTHER COMMUNICATION 11.1 Any notice or other communication to be given under this Agreement shall be in writing and may be given by hand, by post or facsimile to the following 14 address/number of the party hereto to be served or to such other address/number as shall be notified by such party to the other in writing:- The Vendor Address : Flat A, 8th Floor, Harrison Court II, 90A Waterloo Road, Kowloon, Hong Kong Facsimile no. : 852-2760 1922 The Purchaser Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 The Guarantor Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 11.2 Any such notice or communication shall be sent to the party hereto to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject-matter of this Agreement. If so given by hand or facsimile, such notice or communication shall be deemed received on the date of despatch and if so sent by post (or, if sent to an address outside of Hong Kong, so sent by first class air-mail) shall be deemed received two (2) Business Days after the date of despatch (in case to an address in Hong Kong) or five (5) Business Days after the date of despatch (in case to an address outside of Hong Kong). 15 12. COSTS AND EXPENSES Each party hereto shall bear his/its own legal and professional fees, costs and expenses incurred in the negotiation, preparation and execution of this Agreement. The stamp duty in respect of the Sale Shares shall be borne by the Vendor and the Purchaser in equal shares. 13. COUNTERPARTS This Agreement may be executed in any number of counterparts each of which when executed and delivered is an original, but all the counterparts together constitute the same document. 14. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of Hong Kong and the parties hereto agree to submit to the non-exclusive jurisdiction of the courts of Hong Kong. 15. PROCESS AGENT The Purchaser hereby irrevocably authorizes and appoints the Purchaser's Solicitors (or such other person(s), being resident in Hong Kong, as it may from time to time appoint as its agent(s) and notify to the Vendor) to accept service of all legal process arising out or in connection with this Agreement and service on the Purchaser's Solicitors (or such substitute(s)) shall be deemed to be service on the Purchaser. [Remainder of this page intentionally left blank] 16 IN WITNESS whereof the Parties have executed this Agreement the day and year first above written. SIGNED by Mr. Tsang ) Kin-woo in the presence of :- ) ) ) ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of FNG ) International Holdings ) Limited in the presence of :- ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of China ) Finance Online Co. Limited ) in the presence of :- ) 17 SCHEDULE 1 PARTICULARS OF THE COMPANY 1. Name : Daily Growth Investment Company Limited (Chinese Characters) 2. Registered office : Room 603, Peter Building, 58-62 Queen's Road, Central, Hong Kong. 3. Company Number : 025436 4. Date of Incorporation : 6 October 1971 5. Place of Incorporation : Hong Kong 6. Authorised share capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 7. Issued and paid up capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 8. Directors : TING WANG Wan-sun, Nancy WAI CHAN Ye, Kannie WAI Heung-wah, Hayles YEH WANG Zung-sing, Helen WONG Long-sau, Ivis 9. Secretary : Hang Cheuk Secretaries Limited 10 Auditors : J Kong & Co. 11. Financial year end : 31 December 18 SCHEDULE 2 REPRESENTATIONS AND WARRANTIES General; Corporate Status 1.1 All information regarding the Company provided by or on behalf of the Vendor and/or the Company to the Purchaser is complete, correct and true in a material respect. 1.2 The Company has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation, and there has been no resolution, petition or order for the winding-up of the Company and no receiver has been appointed in respect thereof, nor are any such resolutions, orders and appointments imminent or likely. Shareholdings and Share Capital etc. 2.1 The Sale Shares comprise a percentage (as referred to in Recital (B)) of the issued share capital of the Company, and there are not in issue any other shares, debentures, warrants, options or securities. 2.2 The Company is not under any contract, options, warrants or any other obligations regarding any part of its capital, issued or unissued, or for the issue of any shares, debentures, warrants, options, or other similar securities. 2.3 Save as disclosed in the Disclosure Letter, the Vendor has acquired the Shares in compliance with the articles of association of the Company and the laws under the Companies Ordinance and is the beneficial owner of the Sale Shares free from all liens, charges, pledges, options, contracts, preemption rights, third party rights and equities, and incumbrances of whatever nature and the same are freely transferable by the Vendor without the consent, approval, permission, licence or concurrence of any third party. 2.4 The Vendor is fully capable of entering into this Agreement and to perform all 19 obligations and duties hereunder without the consent, approval, permission, licence or concurrence of any third party. Business etc. 3.1 The principal business activity of the Company is security trading. 3.2 In respect of the said business being carried on, all qualifications, registrations, licences or other approvals necessary for the proper conduct of business have been obtained and maintained and to the knowledge of the Vendor, all the relevant rules and regulations of the SFC and the Stock Exchange applicable to the Company have been observed and complied with in a material respect and no event has occurred whereby any of the same or the renewal thereof is or likely to be thereby adversely affected, suspended or revoked. Accounts 4.1 The Accounts have been prepared in accordance with generally accepted accounting practice in Hong Kong and comply with the Companies Ordinance, and show a true and fair view of the affairs and financial position of the Company as at, and the profits and loss of the Company for the period ended on, the Accounts Date. 4.2 All accounting records of the Company for the past seven (7) years are in the possession of the Company and have been properly written up, kept and maintained in accordance with generally accepted accounting practice and together shows a true and fair view of the affairs and financial position of the Company. Taxation 5.1 The Company has paid all taxes, duties and levies as the same became due and payable and to the knowledge of the Vendor, the Company is not nor is likely to be subject to any tax penalties. 20 5.2 The Company has complied with the Inland Revenue Ordinance and has kept proper records for tax purposes for the past seven (7) years and have filed all tax returns, and to the knowledge of the Vendor, there is no pending dispute with the Inland Revenue Department. Dispute, Claims and Litigation 6. There is no claim, arbitration or litigation to which the Company is a party or which, to the knowledge of the Vendor, is pending or threatened. Repetition at Completion 7. All warranties and representations contained in the foregoing provisions of this Schedule shall be deemed to be repeated immediately before completion of this Agreement and to relate to the facts then existing. 21 SCHEDULE 3 FORM OF DISCLOSURE LETTER [DATE] FNG INTERNATIONAL HOLDINGS LIMITED Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands Dear Sirs, DISCLOSURE LETTER This is the Disclosure Letter referred to in the Sale and Purchase Agreement dated [DATE] and entered into by and between Tsang Kin-woo, FNG International Holdings Limited and China Finance Online Co. Limited (the "Agreement"). Capitalized terms appearing in this letter shall adopt the same meaning as defined in the Agreement. A. GENERAL DISCLOSURES The following matters are deemed to be disclosed by this letter: 1. AGREEMENT: All matters set out or referred to in the Agreement, including, without limitation, all schedules and documents annexed thereto and any other agreements entered into pursuant to, or contemplated by, the Agreement. 2. COMPANIES REGISTRY: All matters registered against, or which would be disclosed by a search made in respect of the Company at the Companies Registry in Hong Kong. 3. ACCOUNTS: All matters disclosed, provided for, noted or referred to in the audited accounts of the Company which have been provided to the Purchaser. 4. INSPECTION: All matters which have or ought reasonably to have, been disclosed by inspection of the statutory books, books of account and business records of 22 the Company, all of which have been made available to the Purchaser and/or its advisers for inspection. 5. OTHERS MATTERS DISCLOSED: All matters set out or referred to in any letter, note, schedule or other document from or provided by the Vendor, the Company and/or their advisers and/or agents to the Purchaser and/or its advisers and/or agents in connection with the sale and purchase of the Sale Shares. Where any such letter, note, schedule or other document includes an expression of opinion, no representation or warranty is given as to its accuracy. B. SPECIFIC DISCLOSURE We write to disclose the following and the paragraph numbers used below correspond to the representations and warranties as set out in Schedule 2 to the Agreement: Paragraphs 1.1 and 2.3 The following documents cannot be found in the company kit of the Company or located by the Vendor or are incomplete. As such, no representation and warranty will be made on these missing or incomplete documents :- 1. Original corporate documents from the date of incorporation to the year of 1987; 2. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 1 share from Helen Zung Sing Yeh to Shun Kin Enterprises Limited on 20th February 1987; 3. Original cancelled share certificate in the names of Helen Zung Sing Yeh and Shun Kin Enterprises Limited; 4. Original Application for 42,300 shares made on 24th February 1987 - 8 sets; 5. Original share certificates in respect of the allotment made on 24th February 1987; 6. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares from Mr. Basil D.C. Wood to Mrs. Nancy Ting on 26th April 1988; 7. Original share certificates in respect of the transfer made on 26th April 1988; 8. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 20,525 shares in respect of the following transfer: Mr. Basil D.C. Wood to Midopa Enterprises Limited - 7,610 shares on 23 21.7.1988 Mrs. Wendy Wood to Midopa Enterprises Limited - 1,694 shares on 21.7.1988 Mr. Hsu Zing Ping to Midopa Enterprises Limited - 3,196 shares on 21.7.1988 Mr. Hsu Zing Ping to Billion System Co., Limited - 2,500 shares on 21.7.1988 Mr. Hsu Zing Ping to Mrs. Wang Zau Chin Ngo - 240 shares on 21.7.1988 Mr. Hsu Zing Ping to Eternal Growth Investment Ltd. - 525 shares on 21.7.1988 Mr. Koo Kam Kang to Eternal Growth Investment Ltd. - 4,760 shares on 21.7.1988 9. Original share certificates in respect of the transfer made on 21.7.1988; 10. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 7,715 shares in respect of the following transfer: Ms. Nancy Ting to Ho Chi Kuen Bernard - 2,000 shares on 29.7.1988 Ms. Nancy Ting to Billion System Co., Ltd. - 2,500 shares on 29.7.1988 Ms. Nancy Ting to Stella Wong - 545 shares on 29.7.1988 Shun Kin Ent. Ltd. to Stella Wong - 195 shares on 29.7.1988 Eileen Hwa to Stella Wong - 260 shares on 29.7.1988 Ms. Nancy Ting to Eternal Growth Inv. Ltd. - 2,215 shares on 29.7.1988 11. Original share certificates in respect of the transfer made on 29.7.1988 12. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the transfer from Eileen Hwa to Wong Oi Lun, Ellen on 17.3.1989; 13. Original share certificates in respect of the transfer made on 17.3.1989; 14. Form X(ii) or Form (IXA) showing the resignation of Ms. Stella Wong as the director of the Company made on 1.4.1989; 15. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Wong Oi Lun Ellen to Stella Wong - 1,000 shares on 31.5.1990 Wong Oi Lun Ellen to Tsang Kin Woo - 500 shares on 31.5.1990 Wong Oi Lun Ellen to Chu Ping Im - 500 shares on 31.5.1990 16. Original share certificates in respect of the transfer made on 31.5.1990 17. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Bernard Ho to Zone Bo Ltd. - 2,000 shares on 19.7.1990 18. Original share certificates in respect of the transfer made on 19.7.1990 19. Copy of Consent to act as director of the Company by Mr. Yap E. Hock on 24 9.12.1992 20. A letter dated 10th October 1994, from King Cause Limited and Asian Capital Partners (HK) Limited reporting that 10 share certificates for 50,000 shares have been mislaid and requesting 2 share certificates be issued to them 21. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 50,000 shares in respect of the following transfer: King Cause Ltd.to Billion System Co. Ltd.- 5,000 shares on 12.12.1994; King Cause Ltd. to Eternal Growth Investment Ltd.- 7,500 shares on 12.12.1994; King Cause Ltd. to Midpoa Enterprises Limited- 12,500 shares on 12.12.1994; King Cause Ltd. to Shun Kin Ent. Limited- 17,500 shares on 12.12.1994; King Cause Ltd. to Wang Zau Chin Ngo- 2,500 shares on 12.12.1994; King Cause Ltd. to Tsang Kin Woo- 499 shares on 12.12.1994; King Cause Ltd. to Chu Ping Im - 500 shares on 12.12.1994 King Cause Ltd. to Stella Wong- 2,000 shares on 12.12.1994; King Cause Ltd. to Zone Bo Limited- 2,000 shares on 12.12.1994; King Cause Ltd. and Asian Capital Partners (HK) Limited to Tsang Kin Woo- 1 share on 12.12.1994; 22. Original share certificates in respect of the transfer made on 12.12.1994; 23. Original Declaration of Trust given by King Cause Limited and Asian Capital Partners (HK) Limited on 9.12.1992; 24. Copy of Form D2 and Consent to act reporting the appointment of Mr. Ho Chi Kuen as the director of the company; 25. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares in respect of the following transfer: Billion System Co. Ltd. to Zone Bo Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Eternal Growth Inv. Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Midopa Enterprises Ltd.- 1,250 shares on 15.12.2000; Billion System Co. Ltd. to Shun Kin Enterprises Ltd.- 1,750 shares on 15.12.2000; Billion System Co. Ltd. to Tsang Kin Woo- 500 shares on 15.12.2000; Billion System Co. Ltd. to Chu Ping Im- 500 shares on 15.12.2000; 26. Original share certificates in respect of the transfer made on 15.12.2000; 27. Original Share Certificate of Wang William; 28. Original Board Minutes for approving the share transfer from Zone Bo Limited to Hung Yung made on 22.06.2007; 25 29. Share Certificate of Hung Yung in respect of 5,000 shares; 30. Original Consent to Short Notice dated 16.03.1987 - Elieen Hwa Wang Vung Sing (with the signature of Elieen missing); and 31. Original Consent to Short Notice for 2005 AGM dated 30.05.2005 (missing signatures from Midopa Enterprises Limited, Wong Chan Miu Wan Stella, Chu Ping Im, Tsang Kin Woo). Yours sincerely, - ------------------------------------- Tsang Kin-woo 26 EX-4.53 31 h02185exv4w53.txt EX-4.53 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES Exhibit 4.53 DATED THE __________ DAY OF __________, 2007 WONG CHAN MIU-WAN STELLA and FNG INTERNATIONAL HOLDINGS LIMITED and CHINA FINANCE ONLINE CO. LIMITED ---------- AGREEMENT for the sale and purchase of shares in Daily Growth Investment Company Limited (Chinese Characters) ---------- F. ZIMMERN & CO. Solicitors & Notaries Suites 1501-1503, 15th Floor, Gloucester Tower, The Landmark, 15 Queen's Road Central, Hong Kong Tel: (852) 2526-4373 Fax: (852) 2801-4548 Ref: AN/PC/S14/2007 THIS AGREEMENT is made on the __________ day of __________, 2007. BETWEEN :- 1. WONG CHAN MIU-WAN STELLA whose correspondence address is at House 6, Capital Garden, Lot 253, DD223, Ta Ku Ling San Chuer, Clear Water Bay, Kowloon, Hong Kong (the "VENDOR"); 2. FNG INTERNATIONAL HOLDINGS LIMITED, a company incorporated in the British Virgin Islands whose registered address is at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands (the "PURCHASER"); and 3. CHINA FINANCE ONLINE CO. LIMITED, a company incorporated in Hong Kong whose registered office is situate at Room 908, 9th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong (the "GUARANTOR"). (The Vendor and the Purchaser are collectively referred to as the "PARTIES" and each as a "PARTY") WHEREAS :- (A) Daily Growth Investment Company Limited (Chinese Characters) (the "COMPANY") is a private limited company incorporated under the laws of Hong Kong on 6 October 1971 and has an authorised share capital of HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each, of which 100,000 ordinary shares have been issued and are fully paid up. The Company is a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong. Particulars of the Company are set out in Schedule 1. (B) The Vendor is the legal and beneficial owner of 4,000 issued ordinary shares of the Company, representing 4 per cent. of the entire issued share capital of the Company (the "SALE SHARES"). (C) The Vendor has agreed to sell, and the Purchaser has agreed to purchase, the 1 Sale Shares on the terms and conditions hereinafter appearing. (D) The Purchaser is a wholly owned subsidiary of the Guarantor. (E) The Guarantor has agreed to guarantee as the primary obligor for the due performance of the Purchaser under this Agreement. AND NOW IT IS HEREBY AGREED as follows 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, unless otherwise expressed or required by context, the following expressions shall have the respective meanings set opposite thereto :-
Expression Meaning - ---------- ------- "Accounts" means the audited profit and loss accounts for the period ended on and the balance sheet as at the Accounts Date of the Company; "Accounts Date" means 31 December 2006; "Approval" have the meaning ascribed to it in Clause 2.1(b) hereof; "Business Day" means a day, other than a "general holiday" (as defined in the General Holidays Ordinance (Chapter 149 of the Laws of Hong Kong)), Saturday and any day on which a tropical cyclone warning No. 8 or above is hoisted or remains hoisted between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon or on which a "black" rainstorm warning signal is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon, on which commercial banks are generally
2 open for banking business in Hong Kong; "Completion Accounts" means the profit and loss accounts for the period ended on and the balance sheet as at the Completion Date of the Company; "Completion Date" means the date on which completion of the sale and purchase of the Sale Shares takes place as mentioned in Clause 4 hereof; "Consideration" has the meaning ascribed to it in Clause 3 hereof; "Deposit" has the meaning ascribed to it in Clause 3.2(a) hereof; "Disclosure Letter" means the disclosure letter from the Vendor to the Purchaser to be delivered at Completion in the form identical to that attached hereto as Schedule 3 hereto or with lesser disclosures; "Hong Kong" means the Hong Kong Special Administrative Region of the People's Republic of China; "Liabilities" means the total liabilities of the Company whether actual or contingent as at Completion, and for the avoidance of doubt, including all provisions for taxation and bad debts; "NAV" means the Tangible Assets less the Liabilities; "Shares" means issued ordinary shares of HK$100 each in the capital of the Company, and "Shareholders" shall be construed accordingly; "SFC" means the Securities and Futures Commission; "SFO" means the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong);
3 "Stock Exchange" The Stock Exchange of Hong Kong Limited; "Tangible Assets" means the total tangible assets of the Company as at Completion, including an amount of HK$794,157.41 due from Mr. Cheung Wing Cheung as at 1 August 2007 to the Company to be accepted by the Parties as accounts receivable without any provision for non-recovery; "Vendor's Solicitors" means F. Zimmern & Co; and "HK$" and "Cent" means Hong Kong Dollars and Cents respectively.
1.2 The headings to the Clauses of this Agreement are for ease of reference only and shall be ignored in interpreting this Agreement. 1.3 Reference to Clauses and Schedules are references to Clauses and Schedules of or to this Agreement. 1.4 Words and expressions in the singular include the plural and vice versa. 1.5 Reference to person include any public body and any body of persons, corporate or unincorporated. 1.6 Reference to ordinances, statutes, legislation or enactments shall be construed as a reference to such Ordinances, statutes, legislation or enactments as may be amended or re-enacted from time to time and for the time being in force. 2. CONDITIONS PRECEDENT 2.1 Completion of this Agreement shall be conditional upon :- (a) the Company remains a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the SFO up to Completion; 4 (b) the SFC giving its written approval to approve the Purchaser to become a substantial shareholder of the Company (the "APPROVAL"); and (c) the Purchaser shall, in addition to the Sale Shares to be acquired pursuant hereto, acquire on the Completion Date Shares from other existing Shareholders which together with the Sale Shares, shall in aggregate represent not less than 75% of the entire issued share capital of the Company as at the Completion Date. 2.2 The Vendor will use her best endeavours to procure the fulfilment of the condition set out in Clauses 2.1 (a) and 2.1(c) hereof and the Purchaser will use its best endeavours to procure the fulfilment of the condition set out in Clause 2.1(b) hereof. 2.3 If (i) the condition as set out in Clause 2.1(a) hereof cannot be fulfilled on the Completion Date, the Vendor or the Purchaser may, or (ii) the condition as set out in Clause 2.1(c) hereof cannot be fulfilled on the Completion Date, the Purchaser may terminate this Agreement. In any of such event, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Upon the refund, this Agreement shall lapse and no Party shall have any claim against the other Party except in respect of any antecedent breach. 2.4 If the condition as set out in Clause 2.1(b) hereof cannot be fulfilled on or before 31 December 2007 (the "CONDITIONS DEADLINE"), the Vendor will allow the Purchaser to extend the Conditions Deadline for a period up to three (3) calendar months from 1 January 2008 (the "EXTENDED PERIOD") provided that the Purchaser shall pay compensation (the "COMPENSATION") to the Vendor, unless the delay is due to the proven default of the Vendor, to be arrived at by the following formula :- C = [(HK$3 * S) * 3] * D/91 C = the total Compensation payable by the Purchaser to the Vendor S = the number of the Sale Shares D = the number of days from 1 January 2008 up to and including (i) 5 the Completion Date; or (ii) the day of the receipt of the Notice (as defined below) by the Vendor; or (iii) 31 March 2008, as the case may be, to be determined in the manner as provided in Clauses 2.5 (a) and (b) The Purchaser may serve a written notice to the Vendor not to proceed with the Completion (the "NOTICE") during the Extended Period. 2.5 (a) In the event that Completion takes place before the expiry of the Extended Period, the Purchaser shall pay the Compensation calculated up to the Completion Date to the Vendor on the Completion Date. (b) In the event that the Purchaser shall fail to complete the purchase of the Sale Shares in accordance with the terms of this Agreement (including failure to complete by reason of the failure to obtain the Approval) other than due to the proven default of the Vendor, half of the Deposit shall be forfeited to the Vendor as liquidated damages (the "FORFEITURE") and in addition, if the Conditions Deadline is extended, the Vendor shall also be entitled to deduct the Compensation (calculated up to the day of the receipt of the Notice by the Vendor if the Notice is served by the Purchaser or calculated up to 31 March 2008 if no Notice is served by the Purchaser) from the balance of the Deposit (the "DEDUCTION"). The remaining balance of the Deposit (after the Forfeiture and any Deduction) shall be returned to the Purchaser without interest within seven (7) days from the date of the receipt of the Notice by the Vendor or 31 March 2008, as the case may be. After the Forfeiture and any Deduction, the Vendor shall have no claim whatsoever against the Purchaser under this Agreement. 2.6 If the Vendor shall fail to complete the sale of the Sale Shares in accordance with the terms of this Agreement due to the proven default of the Vendor, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Subject to the aforesaid payment, the Purchaser shall have no claim whatsoever against the Vendor under this Agreement. 6 3. SALE AND PURCHASE OF THE SALE SHARES AND THE CONSIDERATION 3.1 Subject to the terms and conditions of this Agreement, the Vendor as beneficial owner hereby agrees to sell to the Purchaser and the Purchaser, relying on the representations and warranties made or given by the Vendor and subject to the terms and conditions contained in this Agreement, agree to purchase from the Vendor the Sale Shares free from all claims, charges, liens, encumbrances, equities and third party rights and together with all rights attached thereto and all dividends and distributions declared, paid or made in respect thereof after the Completion Date at a consideration (the "CONSIDERATION") to be arrived at by the following formula :- C = P * S C = the total consideration payable by the Purchaser to the Vendor for the Sale Shares P = the price per Share based on the NAV as at the Completion Date plus a premium of HK$15 per Share (which is to reflect the value of the trading right held by the Company in the Stock Exchange) S = the number of Sale Shares 3.2 Subject to Clause 3.3 hereof, the Consideration shall be paid by the Purchaser to the Vendor as follows:- (a) a sum of HK$200,000 (i.e. HK$50 per Sale Share) as deposit and part payment of the Consideration (the "DEPOSIT") to be paid on the signing of this Agreement by way of delivering a solicitor's cheque to the Vendor's Solicitors as stakeholder to be held by it subject to the provisions of this Agreement and the sum of HK$1,000,000 being the earnest money already paid by the Purchaser to the Purchaser's Solicitors as stakeholder under the term sheet dated 25 July 2007 be released to the Purchaser after payment of the Deposit; and (b) the balance of the Consideration to be paid on Completion by way of a solicitor's cheque to the Vendor. 7 3.3 (a) The Vendor shall procure that the draft pro-forma Completion Accounts (the "DRAFT PRO-FORMA COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser not less than six (6) days prior to the Completion Date. Completion shall take place on the basis of the draft pro-forma Completion Accounts. (b) After Completion, the Vendor shall procure the final Completion Accounts (the "FINAL COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser within fourteen (14) days after the Completion Date. Subject to Clause 3.3(d), if the final Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. If the final Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. The Purchaser shall provide with the Vendor full access to the books, records and resources of the Company so as to enable the Vendor to procure the final Completion Accounts to be drawn up. (c) The basis and policy of accounting adopted in preparing the pro-forma draft Completion Accounts and the final Completion Accounts shall be in accordance with the generally accepted accounting practices in Hong Kong. (d) In the event of a dispute between the Parties as to the amount of the NAV as shown in the final Completion Accounts, the Vendor or the Purchaser may procure that the final Completion Accounts be audited by the auditors of the Company within forty-five (45) days from the date of delivery of the final Completion Accounts provided that the procurement of the audited final Completion Accounts shall be made by the relevant Party within seven (7) days from the date of delivery of 8 the final Completion Accounts. (e) If the audited Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. If the audited Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. The Vendor together with the other vendors of the one part and the Purchaser of the other part shall each be responsible for payment of 50% of the cost and expenses for the preparation and completion of the audited Completion Accounts. 4. COMPLETION 4.1 Subject to the provisions in Clause 2 hereof, completion of the sale and purchase of the Sale Shares shall take place at the offices of Arculli Fong & Ng (the "PURCHASER'S SOLICITORS"), the Solicitors for the Purchaser, at 908 Hutchison House, Central, Hong Kong or any other place as the Parties may agree at 5:00 p.m. on a Friday of the week immediately following the week when the Approval is granted by the SFC, when the following business shall simultaneously be transacted :- (a) the Purchaser shall deliver to the Vendor the following :- (i) a solicitor's cheque for payment of the balance of the Consideration and the Vendor's Solicitors will release the Deposit to the Vendor; and (ii) a certified copy of each of the minutes of the board of directors of the Purchaser and the Guarantor approving this 9 Agreement and authorizing/confirming the authorization of an authorised person for signing of this Agreement and (for the Purchaser) the bought note and the instrument of transfer and any other incidental documents hereof; (b) the Vendor shall deliver to the Purchaser the following :- (i) sold notes and instrument of transfer in favour of the Purchaser in respect of the Sale Shares all executed by the Vendor in accordance with the Stamp Duty Ordinance; (ii) original share certificate(s) or re-issued share certificate(s) in respect of the Sale Shares; (iii)such other documents as may be reasonably required to give a good and effective transfer of title to the Sale Shares to the Purchaser and to enable them to become the registered holders thereof; (iv) a cheque drawn in favour of the Government of the Hong Kong Special Administrative Region for an amount equivalent to the stamp duty payable under the Stamp Duty Ordinance in respect of the sold notes in respect of the Sale Shares; (v) a certified copy of the minutes of the board of directors of the Vendor (if the Vendor is a corporate) approving the sale of the Sale Shares and authorizing/confirming the authorization of an authorised person for signing of this Agreement and the sold note and the instrument of transfer and any other incidental documents hereof; (vi) to the extent that the same are not already in the possession of the Company or its agents, the certificate of incorporation, business registration certificate, common seal of the Company, all copies of memorandum and articles of association of the Company, the statutory books of the Company duly made up to date, any unissued share 10 certificates, all current insurance policies, books and accounts and other records, cheque books, title deeds and evidence of ownership to all assets of the Company and all current contracts; (vii) an original of the Disclosure Letter duly executed by the Vendor in the form identical to that attached as Schedule 3 hereto or with lesser disclosures; (c) the Vendor shall cause a meeting of the board of directors of the Company to be held at which resolutions shall be passed to :- (i) approve the transfer of the Sale Shares; (ii) register (subject to stamping) the transfer of the Sale Shares referred to above and to issue new certificate(s) for the Sale Shares in the name(s) of the Purchaser; (iii) appoint one person as the Purchaser may nominate as the Chairman of the Company and such person(s) as the Purchaser may nominate as director(s) of the Company and (subject to the approval of the SFC) one person as the Purchaser may nominate as the Responsible Officer of the Company all to take effect from the close of business of the said meeting if so required by the Purchaser; and (iv) amend all banking authorisations, instructions and mandates of the Company in such manner as the Purchaser may direct; and (d) the Purchaser shall :- (i) produce for inspection by the Vendor the bought notes in respect of the Sale Shares executed by the Purchaser in compliance with the Stamp Duty Ordinance; and (ii) procure the stamping of the bought and sold notes and the instrument of transfer in respect of the Sale Shares as soon 11 as practicable thereafter and present the said instrument of transfer together with the share certificate(s) in respect of the Sale Shares to the Company for registration of the transfer. 4.2 The transactions described in Clause 4.1 hereof shall take place at the same time, so that in default of the performance of any such transactions by a Party, the other Party shall not be obliged to complete the sale and purchase aforesaid. 5. REPRESENTATIONS AND WARRANTIES AND GUARANTEE 5.1 Save as disclosed in the Disclosure Letter and documents and information provided to the Purchaser and/or its advisors, the Vendor hereby represents and warrants to the Purchaser that each of the matters set out in Schedule 2 are as at the date hereof and will be for all times up to and including the Completion Date, true and correct in all material respects. 5.2 From the date of this Agreement until the Completion Date the Vendor shall use her best endeavours to procure that (save with the prior consent in writing or of the Purchaser, such consent not to be unreasonably withheld or delayed) the Company shall not :- (a) issue or agree to issue any of its share or loan capital or grant or agree to grant any option over or right to acquire any of its share or loan capital; (b) enter into any contract (otherwise than in the ordinary course of business) or any capital commitment; (c) create or permit to arise any lien, charge, pledge, mortgage or other security interest on or in respect of any of its undertaking, property or assets; (d) appoint any directors other than as provided in this Agreement; or (e) increase the remuneration of its employees (save as payment of discretionary bonus and save that the increase is made pursuant to the 12 relevant employment contract) and the Vendor shall use her best endeavours to procure that the Purchaser be kept regularly informed of the affairs of the Company until the Completion Date. 5.3 The liability of the Vendor in respect of any breach of the warranties or representations as set out in Schedule 2 shall be limited as follows:- (a) the maximum liability of the Vendor, if any, under this Agreement shall be 25% of the Consideration; (b) no claims may be brought against the Vendor in respect of any claim of damages for breach of warranty(ies) or representation(s) as set out in Schedule 2 after the expiry of six months from the Completion Date. 5.4 In consideration of the Vendor agreeing to enter into this Agreement, the Guarantor (as principal obligor and not merely as surety) unconditionally and irrevocably guarantees performance by the Purchaser of all its obligations and liabilities under or arising out of or in connection with this Agreement (referred to herein as the "GUARANTEED OBLIGATIONS") and undertakes to the Vendor that if and whenever the Purchaser is in default, the Guarantor shall duly and promptly perform or procure such performance of the Guaranteed Obligations and indemnify the Vendor against any loss, damage, costs, expenses and liabilities that she may suffer in connection with or arising out of any such failure on the part of the Purchaser. 6. SEVERABILITY If at any time any one or more provisions hereof is or becomes invalid, illegal, unenforceable or incapable of performance in any respect, the validity, legality, enforceability or performance of the remaining provisions hereof shall not thereby in any way be affected or impaired. 7. ENTIRE AGREEMENT This Agreement constitutes the entire agreement and understanding between 13 the Parties in connection with the subject-matter of this Agreement and supersedes all previous proposals, representations, warranties, agreements or undertakings relating thereto whether oral, written or otherwise and none of the Parties has relied on any such proposals, representations, warranties, agreements or undertakings. 8. TIME 8.1 Time shall be of the essence of this Agreement. 8.2 No time or indulgence given by any Party to the other Party shall be deemed or in any way be construed as a waiver of any of her/its rights and remedies hereunder. 9. CONFIDENTIALITY Other than such disclosure as may be required by law, the SFC, the Stock Exchange or other competent authority, neither of the parties hereto shall make any announcement or release or disclose any information concerning this Agreement or the transactions herein referred to or disclose the identity of the other party(ies) hereto (save disclosure to their respective professional advisers under a duty of confidentiality) without the written consent of the other parties hereto. 10. ASSIGNMENT This Agreement shall be binding on and shall enure for the benefits of the successors and assigns of the Parties but shall not be assigned by any party hereto without the prior written consent of the other parties hereto. 11. NOTICES AND OTHER COMMUNICATION 11.1 Any notice or other communication to be given under this Agreement shall be in writing and may be given by hand, by post or facsimile to the following 14 address/number of the party hereto to be served or to such other address/number as shall be notified by such party to the other in writing :- The Vendor Address : House 6, Capital Garden, Lot 253, DD223, Ta Ku Ling San Chuer, Clear Water Bay, Kowloon, Hong Kong Facsimile no. : 852-2724 0616 The Purchaser Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 The Guarantor Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 11.2 Any such notice or communication shall be sent to the party hereto to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject-matter of this Agreement. If so given by hand or facsimile, such notice or communication shall be deemed received on the date of despatch and if so sent by post (or, if sent to an address outside of Hong Kong, so sent by first class air-mail) shall be deemed received two (2) Business Days after the date of despatch (in case to an address in Hong Kong) or five (5) Business Days after the date of despatch (in case to an address outside of Hong Kong). 15 12. COSTS AND EXPENSES Each party hereto shall bear her/its own legal and professional fees, costs and expenses incurred in the negotiation, preparation and execution of this Agreement. The stamp duty in respect of the Sale Shares shall be borne by the Vendor and the Purchaser in equal shares. 13. COUNTERPARTS This Agreement may be executed in any number of counterparts each of which when executed and delivered is an original, but all the counterparts together constitute the same document. 14. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of Hong Kong and the parties hereto agree to submit to the non-exclusive jurisdiction of the courts of Hong Kong. 15. PROCESS AGENT The Purchaser hereby irrevocably authorizes and appoints the Purchaser's Solicitors (or such other person(s), being resident in Hong Kong, as it may from time to time appoint as its agent(s) and notify to the Vendor) to accept service of all legal process arising out or in connection with this Agreement and service on the Purchaser's Solicitors (or such substitute(s)) shall be deemed to be service on the Purchaser. [Remainder of this page intentionally left blank] 16 IN WITNESS whereof the Parties have executed this Agreement the day and year first above written. SIGNED by Mrs. Wong ) Chan Miu-wan, Stella ) in the presence of :- ) ) ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of FNG ) International Holdings ) Limited in the presence of :- ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of China ) Finance Online Co. Limited ) in the presence of :- ) 17 SCHEDULE 1 PARTICULARS OF THE COMPANY 1. Name : Daily Growth Investment Company Limited (Chinese Characters) 2. Registered office : Room 603, Peter Building, 58-62 Queen's Road, Central, Hong Kong. 3. Company Number : 025436 4. Date of Incorporation : 6 October 1971 5. Place of Incorporation : Hong Kong 6. Authorised share capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 7. Issued and paid up capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 8. Directors : TING WANG Wan-sun, Nancy WAI CHAN Ye, Kannie WAI Heung-wah, Hayles YEH WANG Zung-sing, Helen WONG Long-sau, Ivis 9. Secretary : Hang Cheuk Secretaries Limited 10 Auditors : J Kong & Co. 11. Financial year end : 31 December 18 SCHEDULE 2 REPRESENTATIONS AND WARRANTIES General; Corporate Status 1.1 All information regarding the Company provided by or on behalf of the Vendor and/or the Company to the Purchaser is complete, correct and true in a material respect. 1.2 The Company has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation, and there has been no resolution, petition or order for the winding-up of the Company and no receiver has been appointed in respect thereof, nor are any such resolutions, orders and appointments imminent or likely. Shareholdings and Share Capital etc. 2.1 The Sale Shares comprise a percentage (as referred to in Recital (B)) of the issued share capital of the Company, and there are not in issue any other shares, debentures, warrants, options or securities. 2.2 The Company is not under any contract, options, warrants or any other obligations regarding any part of its capital, issued or unissued, or for the issue of any shares, debentures, warrants, options, or other similar securities. 2.3 Save as disclosed in the Disclosure Letter, the Vendor has acquired the Shares in compliance with the articles of association of the Company and the laws under the Companies Ordinance and is the beneficial owner of the Sale Shares free from all liens, charges, pledges, options, contracts, preemption rights, third party rights and equities, and incumbrances of whatever nature and the same are freely transferable by the Vendor without the consent, approval, permission, licence or concurrence of any third party. 2.4 The Vendor is fully capable of entering into this Agreement and to perform all 19 obligations and duties hereunder without the consent, approval, permission, licence or concurrence of any third party. Business etc. 3.1 The principal business activity of the Company is security trading. 3.2 In respect of the said business being carried on, all qualifications, registrations, licences or other approvals necessary for the proper conduct of business have been obtained and maintained and to the knowledge of the Vendor, all the relevant rules and regulations of the SFC and the Stock Exchange applicable to the Company have been observed and complied with in a material respect and no event has occurred whereby any of the same or the renewal thereof is or likely to be thereby adversely affected, suspended or revoked. Accounts 4.1 The Accounts have been prepared in accordance with generally accepted accounting practice in Hong Kong and comply with the Companies Ordinance, and show a true and fair view of the affairs and financial position of the Company as at, and the profits and loss of the Company for the period ended on, the Accounts Date. 4.2 All accounting records of the Company for the past seven (7) years are in the possession of the Company and have been properly written up, kept and maintained in accordance with generally accepted accounting practice and together shows a true and fair view of the affairs and financial position of the Company. Taxation 5.1 The Company has paid all taxes, duties and levies as the same became due and payable and to the knowledge of the Vendor, the Company is not nor is likely to be subject to any tax penalties. 20 5.2 The Company has complied with the Inland Revenue Ordinance and has kept proper records for tax purposes for the past seven (7) years and have filed all tax returns, and to the knowledge of the Vendor, there is no pending dispute with the Inland Revenue Department. Dispute, Claims and Litigation 6. There is no claim, arbitration or litigation to which the Company is a party or which, to the knowledge of the Vendor, is pending or threatened. Repetition at Completion 7. All warranties and representations contained in the foregoing provisions of this Schedule shall be deemed to be repeated immediately before completion of this Agreement and to relate to the facts then existing. 21 SCHEDULE 3 FORM OF DISCLOSURE LETTER [DATE] FNG INTERNATIONAL HOLDINGS LIMITED Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands Dear Sirs, DISCLOSURE LETTER This is the Disclosure Letter referred to in the Sale and Purchase Agreement dated [DATE] and entered into by and between Wong Chan Miu-wan, Stella, FNG International Holdings Limited and China Finance Online Co. Limited (the "Agreement"). Capitalized terms appearing in this letter shall adopt the same meaning as defined in the Agreement. A. GENERAL DISCLOSURES The following matters are deemed to be disclosed by this letter: 1. AGREEMENT: All matters set out or referred to in the Agreement, including, without limitation, all schedules and documents annexed thereto and any other agreements entered into pursuant to, or contemplated by, the Agreement. 2. COMPANIES REGISTRY: All matters registered against, or which would be disclosed by a search made in respect of the Company at the Companies Registry in Hong Kong. 3. ACCOUNTS: All matters disclosed, provided for, noted or referred to in the audited accounts of the Company which have been provided to the Purchaser. 4. INSPECTION: All matters which have or ought reasonably to have, been disclosed by inspection of the statutory books, books of account and business records of 22 the Company, all of which have been made available to the Purchaser and/or its advisers for inspection. 5. OTHERS MATTERS DISCLOSED: All matters set out or referred to in any letter, note, schedule or other document from or provided by the Vendor, the Company and/or their advisers and/or agents to the Purchaser and/or its advisers and/or agents in connection with the sale and purchase of the Sale Shares. Where any such letter, note, schedule or other document includes an expression of opinion, no representation or warranty is given as to its accuracy. B. SPECIFIC DISCLOSURE We write to disclose the following and the paragraph numbers used below correspond to the representations and warranties as set out in Schedule 2 to the Agreement: Paragraphs 1.1 and 2.3 The following documents cannot be found in the company kit of the Company or located by the Vendor or are incomplete. As such, no representation and warranty will be made on these missing or incomplete documents :- 1. Original corporate documents from the date of incorporation to the year of 1987; 2. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 1 share from Helen Zung Sing Yeh to Shun Kin Enterprises Limited on 20th February 1987; 3. Original cancelled share certificate in the names of Helen Zung Sing Yeh and Shun Kin Enterprises Limited; 4. Original Application for 42,300 shares made on 24th February 1987 - 8 sets; 5. Original share certificates in respect of the allotment made on 24th February 1987; 6. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares from Mr. Basil D.C. Wood to Mrs. Nancy Ting on 26th April 1988; 7. Original share certificates in respect of the transfer made on 26th April 1988; 8. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 20,525 shares in respect of the following transfer: Mr. Basil D.C. Wood to Midopa Enterprises Limited - 7,610 shares on 23 21.7.1988 Mrs. Wendy Wood to Midopa Enterprises Limited - 1,694 shares on 21.7.1988 Mr. Hsu Zing Ping to Midopa Enterprises Limited - 3,196 shares on 21.7.1988 Mr. Hsu Zing Ping to Billion System Co., Limited - 2,500 shares on 21.7.1988 Mr. Hsu Zing Ping to Mrs. Wang Zau Chin Ngo - 240 shares on 21.7.1988 Mr. Hsu Zing Ping to Eternal Growth Investment Ltd. - 525 shares on 21.7.1988 Mr. Koo Kam Kang to Eternal Growth Investment Ltd. - 4,760 shares on 21.7.1988 9. Original share certificates in respect of the transfer made on 21.7.1988; 10. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 7,715 shares in respect of the following transfer: Ms. Nancy Ting to Ho Chi Kuen Bernard - 2,000 shares on 29.7.1988 Ms. Nancy Ting to Billion System Co., Ltd. - 2,500 shares on 29.7.1988 Ms. Nancy Ting to Stella Wong - 545 shares on 29.7.1988 Shun Kin Ent. Ltd. to Stella Wong - 195 shares on 29.7.1988 Eileen Hwa to Stella Wong - 260 shares on 29.7.1988 Ms. Nancy Ting to Eternal Growth Inv. Ltd. - 2,215 shares on 29.7.1988 11. Original share certificates in respect of the transfer made on 29.7.1988 12. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the transfer from Eileen Hwa to Wong Oi Lun, Ellen on 17.3.1989; 13. Original share certificates in respect of the transfer made on 17.3.1989; 14. Form X(ii) or Form (IXA) showing the resignation of Ms. Stella Wong as the director of the Company made on 1.4.1989; 15. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Wong Oi Lun Ellen to Stella Wong - 1,000 shares on 31.5.1990 Wong Oi Lun Ellen to Tsang Kin Woo - 500 shares on 31.5.1990 Wong Oi Lun Ellen to Chu Ping Im - 500 shares on 31.5.1990 16. Original share certificates in respect of the transfer made on 31.5.1990 17. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Bernard Ho to Zone Bo Ltd. - 2,000 shares on 19.7.1990 18. Original share certificates in respect of the transfer made on 19.7.1990 19. Copy of Consent to act as director of the Company by Mr. Yap E. Hock on 24 9.12.1992 20. A letter dated 10th October 1994, from King Cause Limited and Asian Capital Partners (HK) Limited reporting that 10 share certificates for 50,000 shares have been mislaid and requesting 2 share certificates be issued to them 21. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 50,000 shares in respect of the following transfer: King Cause Ltd.to Billion System Co. Ltd.- 5,000 shares on 12.12.1994; King Cause Ltd. to Eternal Growth Investment Ltd.- 7,500 shares on 12.12.1994; King Cause Ltd. to Midpoa Enterprises Limited- 12,500 shares on 12.12.1994; King Cause Ltd. to Shun Kin Ent. Limited- 17,500 shares on 12.12.1994; King Cause Ltd. to Wang Zau Chin Ngo- 2,500 shares on 12.12.1994; King Cause Ltd. to Tsang Kin Woo- 499 shares on 12.12.1994; King Cause Ltd. to Chu Ping Im - 500 shares on 12.12.1994 King Cause Ltd. to Stella Wong- 2,000 shares on 12.12.1994; King Cause Ltd. to Zone Bo Limited- 2,000 shares on 12.12.1994; King Cause Ltd. and Asian Capital Partners (HK) Limited to Tsang Kin Woo- 1 share on 12.12.1994; 22. Original share certificates in respect of the transfer made on 12.12.1994; 23. Original Declaration of Trust given by King Cause Limited and Asian Capital Partners (HK) Limited on 9.12.1992; 24. Copy of Form D2 and Consent to act reporting the appointment of Mr. Ho Chi Kuen as the director of the company; 25. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares in respect of the following transfer: Billion System Co. Ltd. to Zone Bo Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Eternal Growth Inv. Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Midopa Enterprises Ltd.- 1,250 shares on 15.12.2000; Billion System Co. Ltd. to Shun Kin Enterprises Ltd.- 1,750 shares on 15.12.2000; Billion System Co. Ltd. to Tsang Kin Woo- 500 shares on 15.12.2000; Billion System Co. Ltd. to Chu Ping Im- 500 shares on 15.12.2000; 26. Original share certificates in respect of the transfer made on 15.12.2000; 27. Original Share Certificate of Wang William; 28. Original Board Minutes for approving the share transfer from Zone Bo Limited to Hung Yung made on 22.06.2007; 25 29. Share Certificate of Hung Yung in respect of 5,000 shares; 30. Original Consent to Short Notice dated 16.03.1987 - Elieen Hwa Wang Vung Sing (with the signature of Elieen missing); and 31. Original Consent to Short Notice for 2005 AGM dated 30.05.2005 (missing signatures from Midopa Enterprises Limited, Wong Chan Miu Wan Stella, Chu Ping Im, Tsang Kin Woo). Yours sincerely, - ------------------------------------ Wong Chan Miu-wan, Stella 26 EX-4.54 32 h02185exv4w54.txt EX-4.54 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES Exhibit 4.54 DATED THE _____ DAY OF ____, 2007 SHUN KIN ENTERPRISES LIMITED and FNG INTERNATIONAL HOLDINGS LIMITED and CHINA FINANCE ONLINE CO. LIMITED ---------- AGREEMENT for the sale and purchase of shares in Daily Growth Investment Company Limited (Chinese Characters) ---------- F. ZIMMERN & CO. Solicitors & Notaries Suites 1501-1503, 15th Floor, Gloucester Tower, The Landmark, 15 Queen's Road Central, Hong Kong Tel: (852) 2526-4373 Fax: (852) 2801-4548 Ref: AN/PC/S14/2007 THIS AGREEMENT is made on the _____________ day of __, 2007. BETWEEN :- 1. SHUN KIN ENTERPRISES LIMITED, a company incorporated in Hong Kong whose registered office is at Hsin Chong Center, 107-109 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong (the "VENDOR"); 2. FNG INTERNATIONAL HOLDINGS LIMITED, a company incorporated in the British Virgin Islands whose registered address is at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands (the "PURCHASER"); and 3. CHINA FINANCE ONLINE CO. LIMITED, a company incorporated in Hong Kong whose registered office is situate at Room 908, 9th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong (the "GUARANTOR"). (The Vendor and the Purchaser are collectively referred to as the "PARTIES" and each as a "PARTY") WHEREAS :- (A) Daily Growth Investment Company Limited (Chinese Characters) (the "COMPANY") is a private limited company incorporated under the laws of Hong Kong on 6 October 1971 and has an authorised share capital of HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each, of which 100,000 ordinary shares have been issued and are fully paid up. The Company is a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong. Particulars of the Company are set out in Schedule 1. (B) The Vendor is the legal and beneficial owner of 29,000 issued ordinary shares of the Company, representing 29 per cent. of the entire issued share capital of the Company (the "SALE SHARES"). (C) The Vendor has agreed to sell, and the Purchaser has agreed to purchase, the 1 Sale Shares on the terms and conditions hereinafter appearing. (D) The Purchaser is a wholly owned subsidiary of the Guarantor. (E) The Guarantor has agreed to guarantee as the primary obligor for the due performance of the Purchaser under this Agreement. AND NOW IT IS HEREBY AGREED as follows 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, unless otherwise expressed or required by context, the following expressions shall have the respective meanings set opposite thereto :-
Expression Meaning - ---------- ------- "Accounts" means the audited profit and loss accounts for the period ended on and the balance sheet as at the Accounts Date of the Company; "Accounts Date" means 31 December 2006; "Approval" have the meaning ascribed to it in Clause 2.1(b) hereof; "Business Day" means a day, other than a "general holiday" (as defined in the General Holidays Ordinance (Chapter 149 of the Laws of Hong Kong)), Saturday and any day on which a tropical cyclone warning No. 8 or above is hoisted or remains hoisted between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon or on which a "black" rainstorm warning signal is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon, on which commercial banks are generally
2 open for banking business in Hong Kong; "Completion Accounts" means the profit and loss accounts for the period ended on and the balance sheet as at the Completion Date of the Company; "Completion Date" means the date on which completion of the sale and purchase of the Sale Shares takes place as mentioned in Clause 4 hereof; "Consideration" has the meaning ascribed to it in Clause 3 hereof; "Deposit" has the meaning ascribed to it in Clause 3.2(a) hereof; "Disclosure Letter" means the disclosure letter from the Vendor to the Purchaser to be delivered at Completion in the form identical to that attached hereto as Schedule 3 hereto or with lesser disclosures; "Hong Kong" means the Hong Kong Special Administrative Region of the People's Republic of China; "Liabilities" means the total liabilities of the Company whether actual or contingent as at Completion, and for the avoidance of doubt, including all provisions for taxation and bad debts; "NAV" means the Tangible Assets less the Liabilities; "Shares" means issued ordinary shares of HK$100 each in the capital of the Company, and "Shareholders" shall be construed accordingly; "SFC" means the Securities and Futures Commission; "SFO" means the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong);
3 "Stock Exchange" The Stock Exchange of Hong Kong Limited; "Tangible Assets" means the total tangible assets of the Company as at Completion, including an amount of HK$794,157.41 due from Mr. Cheung Wing Cheung as at 1 August 2007 to the Company to be accepted by the Parties as accounts receivable without any provision for non-recovery; "Vendor's Solicitors" means F. Zimmern & Co; and "HK$" and "Cent" means Hong Kong Dollars and Cents respectively.
1.2 The headings to the Clauses of this Agreement are for ease of reference only and shall be ignored in interpreting this Agreement. 1.3 Reference to Clauses and Schedules are references to Clauses and Schedules of or to this Agreement. 1.4 Words and expressions in the singular include the plural and vice versa. 1.5 Reference to person include any public body and any body of persons, corporate or unincorporated. 1.6 Reference to ordinances, statutes, legislation or enactments shall be construed as a reference to such Ordinances, statutes, legislation or enactments as may be amended or re-enacted from time to time and for the time being in force. 2. CONDITIONS PRECEDENT 2.1 Completion of this Agreement shall be conditional upon :- (a) the Company remains a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the SFO up to Completion; (b) the SFC giving its written approval to approve the Purchaser to 4 become a substantial shareholder of the Company (the "APPROVAL"); and (c) the Purchaser shall, in addition to the Sale Shares to be acquired pursuant hereto, acquire on the Completion Date Shares from other existing Shareholders which together with the Sale Shares, shall in aggregate represent not less than 75% of the entire issued share capital of the Company as at the Completion Date. 2.2 The Vendor will use its best endeavours to procure the fulfilment of the condition set out in Clauses 2.1 (a) and 2.1(c) hereof and the Purchaser will use its best endeavours to procure the fulfilment of the condition set out in Clause 2.1(b) hereof. 2.3 If (i) the condition as set out in Clause 2.1(a) hereof cannot be fulfilled on the Completion Date, the Vendor or the Purchaser may, or (ii) the condition as set out in Clause 2.1(c) hereof cannot be fulfilled on the Completion Date, the Purchaser may terminate this Agreement. In any of such event, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Upon the refund, this Agreement shall lapse and no Party shall have any claim against the other Party except in respect of any antecedent breach. 2.4 If the condition as set out in Clause 2.1(b) hereof cannot be fulfilled on or before 31 December 2007 (the "CONDITIONS DEADLINE"), the Vendor will allow the Purchaser to extend the Conditions Deadline for a period up to three (3) calendar months from 1 January 2008 (the "EXTENDED PERIOD") provided that the Purchaser shall pay compensation (the "COMPENSATION") to the Vendor, unless the delay is due to the proven default of the Vendor, to be arrived at by the following formula :- C = [(HK$3 * S) * 3] * D/91 C = the total Compensation payable by the Purchaser to the Vendor S = the number of the Sale Shares D = the number of days from 1 January 2008 up to and including (i) the Completion Date; or (ii) the day of the receipt of the Notice 5 (as defined below) by the Vendor; or (iii) 31 March 2008, as the case may be, to be determined in the manner as provided in Clauses 2.5 (a) and (b) The Purchaser may serve a written notice to the Vendor not to proceed with the Completion (the "NOTICE") during the Extended Period. 2.5 (a) In the event that Completion takes place before the expiry of the Extended Period, the Purchaser shall pay the Compensation calculated up to the Completion Date to the Vendor on the Completion Date. (b) In the event that the Purchaser shall fail to complete the purchase of the Sale Shares in accordance with the terms of this Agreement (including failure to complete by reason of the failure to obtain the Approval) other than due to the proven default of the Vendor, half of the Deposit shall be forfeited to the Vendor as liquidated damages (the "FORFEITURE") and in addition, if the Conditions Deadline is extended, the Vendor shall also be entitled to deduct the Compensation (calculated up to the day of the receipt of the Notice by the Vendor if the Notice is served by the Purchaser or calculated up to 31 March 2008 if no Notice is served by the Purchaser) from the balance of the Deposit (the "DEDUCTION"). The remaining balance of the Deposit (after the Forfeiture and any Deduction) shall be returned to the Purchaser without interest within seven (7) days from the date of the receipt of the Notice by the Vendor or 31 March 2008, as the case may be. After the Forfeiture and any Deduction, the Vendor shall have no claim whatsoever against the Purchaser under this Agreement. 2.6 If the Vendor shall fail to complete the sale of the Sale Shares in accordance with the terms of this Agreement due to the proven default of the Vendor, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Subject to the aforesaid payment, the Purchaser shall have no claim whatsoever against the Vendor under this Agreement. 6 3. SALE AND PURCHASE OF THE SALE SHARES AND THE CONSIDERATION 3.1 Subject to the terms and conditions of this Agreement, the Vendor as beneficial owner hereby agrees to sell to the Purchaser and the Purchaser, relying on the representations and warranties made or given by the Vendor and subject to the terms and conditions contained in this Agreement, agree to purchase from the Vendor the Sale Shares free from all claims, charges, liens, encumbrances, equities and third party rights and together with all rights attached thereto and all dividends and distributions declared, paid or made in respect thereof after the Completion Date at a consideration (the "CONSIDERATION") to be arrived at by the following formula :- C = P * S C = the total consideration payable by the Purchaser to the Vendor for the Sale Shares P = the price per Share based on the NAV as at the Completion Date plus a premium of HK$15 per Share (which is to reflect the value of the trading right held by the Company in the Stock Exchange) S = the number of Sale Shares 3.2 Subject to Clause 3.3 hereof, the Consideration shall be paid by the Purchaser to the Vendor as follows:- (a) a sum of HK$1,450,000 (i.e. HK$50 per Sale Share) as deposit and part payment of the Consideration (the "DEPOSIT") to be paid on the signing of this Agreement by way of delivering a solicitor's cheque to the Vendor's Solicitors as stakeholder to be held by it subject to the provisions of this Agreement and the sum of HK$1,000,000 being the earnest money already paid by the Purchaser to the Purchaser's Solicitors as stakeholder under the term sheet dated 25 July 2007 be released to the Purchaser after payment of the Deposit; and (b) the balance of the Consideration to be paid on Completion by way of a solicitor's cheque to the Vendor. 7 3.3 (a) The Vendor shall procure that the draft pro-forma Completion Accounts (the "DRAFT PRO-FORMA COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser not less than six (6) days prior to the Completion Date. Completion shall take place on the basis of the draft pro-forma Completion Accounts. (b) After Completion, the Vendor shall procure the final Completion Accounts (the "FINAL COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser within fourteen (14) days after the Completion Date. Subject to Clause 3.3(d), if the final Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. If the final Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. The Purchaser shall provide with the Vendor full access to the books, records and resources of the Company so as to enable the Vendor to procure the final Completion Accounts to be drawn up. (c) The basis and policy of accounting adopted in preparing the pro-forma draft Completion Accounts and the final Completion Accounts shall be in accordance with the generally accepted accounting practices in Hong Kong. (d) In the event of a dispute between the Parties as to the amount of the NAV as shown in the final Completion Accounts, the Vendor or the Purchaser may procure that the final Completion Accounts be audited by the auditors of the Company within forty-five (45) days from the date of delivery of the final Completion Accounts provided that the procurement of the audited final Completion Accounts shall be made by the relevant Party within seven (7) days from the date of delivery of 8 the final Completion Accounts. (e) If the audited Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. If the audited Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. The Vendor together with the other vendors of the one part and the Purchaser of the other part shall each be responsible for payment of 50% of the cost and expenses for the preparation and completion of the audited Completion Accounts. 4. COMPLETION 4.1 Subject to the provisions in Clause 2 hereof, completion of the sale and purchase of the Sale Shares shall take place at the offices of Arculli Fong & Ng (the "PURCHASER'S SOLICITORS"), the Solicitors for the Purchaser, at 908 Hutchison House, Central, Hong Kong or any other place as the Parties may agree at 5:00 p.m. on a Friday of the week immediately following the week when the Approval is granted by the SFC, when the following business shall simultaneously be transacted :- (a) the Purchaser shall deliver to the Vendor the following :- (i) a solicitor's cheque for payment of the balance of the Consideration and the Vendor's Solicitors will release the Deposit to the Vendor; and (ii) a certified copy of each of the minutes of the board of directors of the Purchaser and the Guarantor approving this Agreement and authorizing/confirming the authorization of 9 an authorised person for signing of this Agreement and (for the Purchaser) the bought note and the instrument of transfer and any other incidental documents hereof; (b) the Vendor shall deliver to the Purchaser the following :- (i) sold notes and instrument of transfer in favour of the Purchaser in respect of the Sale Shares all executed by the Vendor in accordance with the Stamp Duty Ordinance; (ii) original share certificate(s) or re-issued share certificate(s) in respect of the Sale Shares; (iii) such other documents as may be reasonably required to give a good and effective transfer of title to the Sale Shares to the Purchaser and to enable them to become the registered holders thereof; (iv) a cheque drawn in favour of the Government of the Hong Kong Special Administrative Region for an amount equivalent to the stamp duty payable under the Stamp Duty Ordinance in respect of the sold notes in respect of the Sale Shares; (v) a certified copy of the minutes of the board of directors of the Vendor (if the Vendor is a corporate) approving the sale of the Sale Shares and authorizing/confirming the authorization of an authorised person for signing of this Agreement and the sold note and the instrument of transfer and any other incidental documents hereof; (vi) to the extent that the same are not already in the possession of the Company or its agents, the certificate of incorporation, business registration certificate, common seal of the Company, all copies of memorandum and articles of association of the Company, the statutory books of the Company duly made up to date, any unissued share certificates, all current insurance policies, books and accounts 10 and other records, cheque books, title deeds and evidence of ownership to all assets of the Company and all current contracts; (vii) an original of the Disclosure Letter duly executed by the Vendor in the form identical to that attached as Schedule 3 hereto or with lesser disclosures; (c) the Vendor shall cause a meeting of the board of directors of the Company to be held at which resolutions shall be passed to :- (i) approve the transfer of the Sale Shares; (ii) register (subject to stamping) the transfer of the Sale Shares referred to above and to issue new certificate(s) for the Sale Shares in the name(s) of the Purchaser; (iii) appoint one person as the Purchaser may nominate as the Chairman of the Company and such person(s) as the Purchaser may nominate as director(s) of the Company and (subject to the approval of the SFC) one person as the Purchaser may nominate as the Responsible Officer of the Company all to take effect from the close of business of the said meeting if so required by the Purchaser; and (iv) amend all banking authorisations, instructions and mandates of the Company in such manner as the Purchaser may direct; and (d) the Purchaser shall :- (i) produce for inspection by the Vendor the bought notes in respect of the Sale Shares executed by the Purchaser in compliance with the Stamp Duty Ordinance; and (ii) procure the stamping of the bought and sold notes and the instrument of transfer in respect of the Sale Shares as soon as practicable thereafter and present the said instrument of 11 transfer together with the share certificate(s) in respect of the Sale Shares to the Company for registration of the transfer. 4.2 The transactions described in Clause 4.1 hereof shall take place at the same time, so that in default of the performance of any such transactions by a Party, the other Party shall not be obliged to complete the sale and purchase aforesaid. 4.3 Immediately after Completion, the Purchaser and the Vendor shall enter into an option agreement in the form and substance as set out in Schedule 4 hereto. 5. REPRESENTATIONS AND WARRANTIES AND GUARANTEE 5.1 Save as disclosed in the Disclosure Letter and documents and information provided to the Purchaser and/or its advisors, the Vendor hereby represents and warrants to the Purchaser that each of the matters set out in Schedule 2 are as at the date hereof and will be for all times up to and including the Completion Date, true and correct in all material respects. 5.2 From the date of this Agreement until the Completion Date the Vendor shall use its best endeavours to procure that (save with the prior consent in writing or of the Purchaser, such consent not to be unreasonably withheld or delayed) the Company shall not :- (a) issue or agree to issue any of its share or loan capital or grant or agree to grant any option over or right to acquire any of its share or loan capital; (b) enter into any contract (otherwise than in the ordinary course of business) or any capital commitment; (c) create or permit to arise any lien, charge, pledge, mortgage or other security interest on or in respect of any of its undertaking, property or assets; (d) appoint any directors other than as provided in this Agreement; or (e) increase the remuneration of its employees (save as payment of 12 discretionary bonus and save that the increase is made pursuant to the relevant employment contract) and the Vendor shall use its best endeavours to procure that the Purchaser be kept regularly informed of the affairs of the Company until the Completion Date. 5.3 The liability of the Vendor in respect of any breach of the warranties or representations as set out in Schedule 2 shall be limited as follows:- (a) the maximum liability of the Vendor, if any, under this Agreement shall be the amount of the Consideration; (b) no claims may be brought against the Vendor in respect of any claim of damages for breach of warranty(ies) or representation(s) as set out in Schedule 2 after the expiry of six months from the Completion Date. 5.4 In consideration of the Vendor agreeing to enter into this Agreement, the Guarantor (as principal obligor and not merely as surety) unconditionally and irrevocably guarantees performance by the Purchaser of all its obligations and liabilities under or arising out of or in connection with this Agreement (referred to herein as the "GUARANTEED OBLIGATIONS") and undertakes to the Vendor that if and whenever the Purchaser is in default, the Guarantor shall duly and promptly perform or procure such performance of the Guaranteed Obligations and indemnify the Vendor against any loss, damage, costs, expenses and liabilities that it may suffer in connection with or arising out of any such failure on the part of the Purchaser. 6. SEVERABILITY If at any time any one or more provisions hereof is or becomes invalid, illegal, unenforceable or incapable of performance in any respect, the validity, legality, enforceability or performance of the remaining provisions hereof shall not thereby in any way be affected or impaired. 7. ENTIRE AGREEMENT This Agreement constitutes the entire agreement and understanding between the Parties in connection with the subject-matter of this Agreement and 13 supersedes all previous proposals, representations, warranties, agreements or undertakings relating thereto whether oral, written or otherwise and none of the Parties has relied on any such proposals, representations, warranties, agreements or undertakings. 8. TIME 8.1 Time shall be of the essence of this Agreement. 8.2 No time or indulgence given by any Party to the other Party shall be deemed or in any way be construed as a waiver of any of its rights and remedies hereunder. 9. CONFIDENTIALITY Other than such disclosure as may be required by law, the SFC, the Stock Exchange or other competent authority, neither of the parties hereto shall make any announcement or release or disclose any information concerning this Agreement or the transactions herein referred to or disclose the identity of the other party(ies) hereto (save disclosure to their respective professional advisers under a duty of confidentiality) without the written consent of the other parties hereto. 10. ASSIGNMENT This Agreement shall be binding on and shall enure for the benefits of the successors and assigns of the Parties but shall not be assigned by any party hereto without the prior written consent of the other parties hereto. 11. NOTICES AND OTHER COMMUNICATION 11.1 Any notice or other communication to be given under this Agreement shall be in writing and may be given by hand, by post or facsimile to the following address/number of the party hereto to be served or to such other address/number as shall be notified by such party to the other in writing :- 14 The Vendor Address : Hsin Chong Center, 107-109 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong Attention : YEH WANG Zung-sing, Helen Facsimile no. : 852-2516 6596 The Purchaser Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 The Guarantor Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 11.2 Any such notice or communication shall be sent to the party hereto to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject-matter of this Agreement. If so given by hand or facsimile, such notice or communication shall be deemed received on the date of despatch and if so sent by post (or, if sent to an address outside of Hong Kong, so sent by first class air-mail) shall be deemed received two (2) Business Days after the date of despatch (in case to an address in Hong Kong) or five (5) Business Days after the date of despatch (in case to an address outside of Hong Kong). 15 12. COSTS AND EXPENSES Each party hereto shall bear its own legal and professional fees, costs and expenses incurred in the negotiation, preparation and execution of this Agreement. The stamp duty in respect of the Sale Shares shall be borne by the Vendor and the Purchaser in equal shares. 13. COUNTERPARTS This Agreement may be executed in any number of counterparts each of which when executed and delivered is an original, but all the counterparts together constitute the same document. 14. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of Hong Kong and the parties hereto agree to submit to the non-exclusive jurisdiction of the courts of Hong Kong. 15. PROCESS AGENT The Purchaser hereby irrevocably authorizes and appoints the Purchaser's Solicitors (or such other person(s), being resident in Hong Kong, as it may from time to time appoint as its agent(s) and notify to the Vendor) to accept service of all legal process arising out or in connection with this Agreement and service on the Purchaser's Solicitors (or such substitute(s)) shall be deemed to be service on the Purchaser. [Remainder of this page intentionally left blank] 16 IN WITNESS whereof the Parties have executed this Agreement the day and year first above written. SIGNED by ) ) a director, for and on ) behalf of Shun Kin ) Enterprises Limited ) in the presence of :- ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of FNG ) International Holdings ) Limited in the presence of :- ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of China ) Finance Online Co. Limited ) in the presence of :- ) 17 SCHEDULE 1 PARTICULARS OF THE COMPANY 1. Name : Daily Growth Investment Company Limited (Chinese Characters) 2. Registered office : Room 603, Peter Building, 58-62 Queen's Road, Central, Hong Kong. 3. Company Number : 025436 4. Date of Incorporation : 6 October 1971 5. Place of Incorporation : Hong Kong 6. Authorised share capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 7. Issued and paid up capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 8. Directors : TING WANG Wan-sun, Nancy WAI CHAN Ye, Kannie WAI Heung-wah, Hayles YEH WANG Zung-sing, Helen WONG Long-sau, Ivis 9. Secretary : Hang Cheuk Secretaries Limited 10 Auditors : J Kong & Co. 11. Financial year end : 31 December 18 SCHEDULE 2 REPRESENTATIONS AND WARRANTIES General; Corporate Status 1.1 All information regarding the Company provided by or on behalf of the Vendor and/or the Company to the Purchaser is complete, correct and true in a material respect. 1.2 The Company has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation, and there has been no resolution, petition or order for the winding-up of the Company and no receiver has been appointed in respect thereof, nor are any such resolutions, orders and appointments imminent or likely. Shareholdings and Share Capital etc. 2.1 The Sale Shares comprise a percentage (as referred to in Recital (B)) of the issued share capital of the Company, and there are not in issue any other shares, debentures, warrants, options or securities. 2.2 The Company is not under any contract, options, warrants or any other obligations regarding any part of its capital, issued or unissued, or for the issue of any shares, debentures, warrants, options, or other similar securities. 2.3 Save as disclosed in the Disclosure Letter, the Vendor has acquired the Shares in compliance with the articles of association of the Company and the laws under the Companies Ordinance and is the beneficial owner of the Sale Shares free from all liens, charges, pledges, options, contracts, preemption rights, third party rights and equities, and incumbrances of whatever nature and the same are freely transferable by the Vendor without the consent, approval, permission, licence or concurrence of any third party. 2.4 The Vendor is fully capable of entering into this Agreement and to perform all 19 obligations and duties hereunder without the consent, approval, permission, licence or concurrence of any third party. Business etc. 3.1 The principal business activity of the Company is security trading. 3.2 In respect of the said business being carried on, all qualifications, registrations, licences or other approvals necessary for the proper conduct of business have been obtained and maintained and to the knowledge of the Vendor, all the relevant rules and regulations of the SFC and the Stock Exchange applicable to the Company have been observed and complied with in a material respect and no event has occurred whereby any of the same or the renewal thereof is or likely to be thereby adversely affected, suspended or revoked. Accounts 4.1 The Accounts have been prepared in accordance with generally accepted accounting practice in Hong Kong and comply with the Companies Ordinance, and show a true and fair view of the affairs and financial position of the Company as at, and the profits and loss of the Company for the period ended on, the Accounts Date. 4.2 All accounting records of the Company for the past seven (7) years are in the possession of the Company and have been properly written up, kept and maintained in accordance with generally accepted accounting practice and together shows a true and fair view of the affairs and financial position of the Company. Taxation 5.1 The Company has paid all taxes, duties and levies as the same became due and payable and to the knowledge of the Vendor, the Company is not nor is likely to be subject to any tax penalties. 20 5.2 The Company has complied with the Inland Revenue Ordinance and has kept proper records for tax purposes for the past seven (7) years and have filed all tax returns, and to the knowledge of the Vendor, there is no pending dispute with the Inland Revenue Department. Dispute, Claims and Litigation 6. There is no claim, arbitration or litigation to which the Company is a party or which, to the knowledge of the Vendor, is pending or threatened. Repetition at Completion 7. All warranties and representations contained in the foregoing provisions of this Schedule shall be deemed to be repeated immediately before completion of this Agreement and to relate to the facts then existing. 21 SCHEDULE 3 FORM OF DISCLOSURE LETTER [DATE] FNG INTERNATIONAL HOLDINGS LIMITED Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands Dear Sirs, DISCLOSURE LETTER This is the Disclosure Letter referred to in the Sale and Purchase Agreement dated [DATE] and entered into by and between Shun Kin Enterprises Limited, FNG International Holdings Limited and China Finance Online Co. Limited (the "Agreement"). Capitalized terms appearing in this letter shall adopt the same meaning as defined in the Agreement. A. GENERAL DISCLOSURES The following matters are deemed to be disclosed by this letter: 1. AGREEMENT: All matters set out or referred to in the Agreement, including, without limitation, all schedules and documents annexed thereto and any other agreements entered into pursuant to, or contemplated by, the Agreement. 2. COMPANIES REGISTRY: All matters registered against, or which would be disclosed by a search made in respect of the Company at the Companies Registry in Hong Kong. 3. ACCOUNTS: All matters disclosed, provided for, noted or referred to in the audited accounts of the Company which have been provided to the Purchaser. 4. INSPECTION: All matters which have or ought reasonably to have, been disclosed by inspection of the statutory books, books of account and business records of 22 the Company, all of which have been made available to the Purchaser and/or its advisers for inspection. 5. OTHERS MATTERS DISCLOSED: All matters set out or referred to in any letter, note, schedule or other document from or provided by the Vendor, the Company and/or their advisers and/or agents to the Purchaser and/or its advisers and/or agents in connection with the sale and purchase of the Sale Shares. Where any such letter, note, schedule or other document includes an expression of opinion, no representation or warranty is given as to its accuracy. B. SPECIFIC DISCLOSURE We write to disclose the following and the paragraph numbers used below correspond to the representations and warranties as set out in Schedule 2 to the Agreement: Paragraphs 1.1 and 2.3 The following documents cannot be found in the company kit of the Company or located by the Vendor or are incomplete. As such, no representation and warranty will be made on these missing or incomplete documents :- 1. Original corporate documents from the date of incorporation to the year of 1987; 2. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 1 share from Helen Zung Sing Yeh to Shun Kin Enterprises Limited on 20th February 1987; 3. Original cancelled share certificate in the names of Helen Zung Sing Yeh and Shun Kin Enterprises Limited; 4. Original Application for 42,300 shares made on 24th February 1987 - 8 sets; 5. Original share certificates in respect of the allotment made on 24th February 1987; 6. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares from Mr. Basil D.C. Wood to Mrs. Nancy Ting on 26th April 1988; 7. Original share certificates in respect of the transfer made on 26th April 1988; 8. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 20,525 shares in respect of the following transfer: Mr. Basil D.C. Wood to Midopa Enterprises Limited - 7,610 shares on 23 21.7.1988 Mrs. Wendy Wood to Midopa Enterprises Limited - 1,694 shares on 21.7.1988 Mr. Hsu Zing Ping to Midopa Enterprises Limited - 3,196 shares on 21.7.1988 Mr. Hsu Zing Ping to Billion System Co., Limited - 2,500 shares on 21.7.1988 Mr. Hsu Zing Ping to Mrs. Wang Zau Chin Ngo - 240 shares on 21.7.1988 Mr. Hsu Zing Ping to Eternal Growth Investment Ltd. - 525 shares on 21.7.1988 Mr. Koo Kam Kang to Eternal Growth Investment Ltd. - 4,760 shares on 21.7.1988 9. Original share certificates in respect of the transfer made on 21.7.1988; 10. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 7,715 shares in respect of the following transfer: Ms. Nancy Ting to Ho Chi Kuen Bernard - 2,000 shares on 29.7.1988 Ms. Nancy Ting to Billion System Co., Ltd. - 2,500 shares on 29.7.1988 Ms. Nancy Ting to Stella Wong - 545 shares on 29.7.1988 Shun Kin Ent. Ltd. to Stella Wong - 195 shares on 29.7.1988 Eileen Hwa to Stella Wong - 260 shares on 29.7.1988 Ms. Nancy Ting to Eternal Growth Inv. Ltd. - 2,215 shares on 29.7.1988 11. Original share certificates in respect of the transfer made on 29.7.1988 12. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the transfer from Eileen Hwa to Wong Oi Lun, Ellen on 17.3.1989; 13. Original share certificates in respect of the transfer made on 17.3.1989; 14. Form X(ii) or Form (IXA) showing the resignation of Ms. Stella Wong as the director of the Company made on 1.4.1989; 15. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Wong Oi Lun Ellen to Stella Wong - 1,000 shares on 31.5.1990 Wong Oi Lun Ellen to Tsang Kin Woo - 500 shares on 31.5.1990 Wong Oi Lun Ellen to Chu Ping Im - 500 shares on 31.5.1990 16. Original share certificates in respect of the transfer made on 31.5.1990 17. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Bernard Ho to Zone Bo Ltd. - 2,000 shares on 19.7.1990 18. Original share certificates in respect of the transfer made on 19.7.1990 19. Copy of Consent to act as director of the Company by Mr. Yap E. Hock on 24 9.12.1992 20. A letter dated 10th October 1994, from King Cause Limited and Asian Capital Partners (HK) Limited reporting that 10 share certificates for 50,000 shares have been mislaid and requesting 2 share certificates be issued to them 21. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 50,000 shares in respect of the following transfer: King Cause Ltd.to Billion System Co. Ltd.- 5,000 shares on 12.12.1994; King Cause Ltd. to Eternal Growth Investment Ltd.- 7,500 shares on 12.12.1994; King Cause Ltd. to Midpoa Enterprises Limited- 12,500 shares on 12.12.1994; King Cause Ltd. to Shun Kin Ent. Limited- 17,500 shares on 12.12.1994; King Cause Ltd. to Wang Zau Chin Ngo- 2,500 shares on 12.12.1994; King Cause Ltd. to Tsang Kin Woo- 499 shares on 12.12.1994; King Cause Ltd. to Chu Ping Im - 500 shares on 12.12.1994 King Cause Ltd. to Stella Wong- 2,000 shares on 12.12.1994; King Cause Ltd. to Zone Bo Limited- 2,000 shares on 12.12.1994; King Cause Ltd. and Asian Capital Partners (HK) Limited to Tsang Kin Woo- 1 share on 12.12.1994; 22. Original share certificates in respect of the transfer made on 12.12.1994; 23. Original Declaration of Trust given by King Cause Limited and Asian Capital Partners (HK) Limited on 9.12.1992; 24. Copy of Form D2 and Consent to act reporting the appointment of Mr. Ho Chi Kuen as the director of the company; 25. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares in respect of the following transfer: Billion System Co. Ltd. to Zone Bo Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Eternal Growth Inv. Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Midopa Enterprises Ltd.- 1,250 shares on 15.12.2000; Billion System Co. Ltd. to Shun Kin Enterprises Ltd.- 1,750 shares on 15.12.2000; Billion System Co. Ltd. to Tsang Kin Woo- 500 shares on 15.12.2000; Billion System Co. Ltd. to Chu Ping Im- 500 shares on 15.12.2000; 26. Original share certificates in respect of the transfer made on 15.12.2000; 27. Original Share Certificate of Wang William; 28. Original Board Minutes for approving the share transfer from Zone Bo Limited to Hung Yung made on 22.06.2007; 25 29. Share Certificate of Hung Yung in respect of 5,000 shares; 30. Original Consent to Short Notice dated 16.03.1987 - Elieen Hwa Wang Vung Sing (with the signature of Elieen missing); and 31. Original Consent to Short Notice for 2005 AGM dated 30.05.2005 (missing signatures from Midopa Enterprises Limited, Wong Chan Miu Wan Stella, Chu Ping Im, Tsang Kin Woo). Yours sincerely, - ------------------------------------- Shun Kin Enterprises Limited 26 SCHEDULE 4 FORM OF OPTION AGREEMENT THIS AGREEMENT is made the ___________ day of __, 2007 BETWEEN :- 1. SHUN KIN ENTERPRISES LIMITED, a company incorporated in Hong Kong whose registered office is at Hsin Chong Center, 107-109 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong ("SHUN KIN"); 2. FNG INTERNATIONAL HOLDINGS LIMITED, a company incorporated in the British Virgin Islands whose registered address is at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands (the "PURCHASER"); and 3. CHINA FINANCE ONLINE CO. LIMITED, a company incorporated in Hong Kong whose registered office is situate at Room 908, 9th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong (the "GUARANTOR"). (Shun Kin and the Purchaser are collectively referred to as the "PARTIES" and each as a "PARTY") WHEREAS :- (A) Daily Growth Investment Company Limited (Chinese Characters) (the "COMPANY") is a private limited company incorporated under the laws of Hong Kong on 6 October 1971 and has an authorised share capital of HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each (the "SHARES"), of which 100,000 Shares have been issued and are fully paid up. The Company is a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong. 27 (B) By a sale and purchase agreement dated [*] 2007 entered into between Shun Kin and the Purchaser pursuant to which Shun Kin agreed to sell and the Purchaser agreed to purchase 29,000 Shares, representing 29% of the issued share capital of the Company upon and subject to the terms and conditions thereof (the "S&P AGREEMENT"). Completion of the S&P Agreement took place immediately before the signing of this Agreement. (C) Shun Kin is now the legal and beneficial owner of 9,500 Shares, representing 9.5 per cent. of the issued share capital of the Company. (D) The Purchaser has agreed to grant to Shun Kin a put option to require the Purchaser to purchase the Option Shares at the Put Option Price on the terms and conditions hereinafter appearing. (E) Shun Kin has also agreed to grant to the Purchaser a call option to require Shun Kin to sell the Option Shares to the Purchaser at the Call Option Price on the terms and conditions hereinafter appearing. NOW IT IS HEREBY AGREED as follows :- 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, unless otherwise expressed or required by context, the following words or expressions shall have the respective meanings set opposite thereto :- "Auditors" the auditors for the time being of the Company; "Business Day" a day, other than a "general holiday" (as defined in the General Holidays Ordinance (Chapter 149 of the Laws of Hong Kong)), Saturday and any day on which a tropical cyclone warning No. 8 or above is hoisted or remains hoisted between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon or on which a "black" rainstorm warning signal is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon, on
28 which commercial banks are generally open for banking business in Hong Kong; "Call Option" the call option to require Shun Kin to sell all the Option Shares to the Purchaser at the Call Option Price upon and subject to the terms and conditions contained herein; "Call Option Notice" the notice in the form set out in Schedule A hereto; "Call Option Price" a price equal to 20% above the Put Option Price; "Hong Kong" the Hong Kong Special Administrative Region of the People's Republic of China; "Net Asset Value" subject to Clause 3.4, has the meaning ascribed to it in Clause 3.3; "Option Completion Date" the date when completion of the sale and purchase of the Option Shares shall take place pursuant to Clause 4; "Option Period" the period of five (5) years commencing on the date hereof; "Option Shares" 9,500 Shares now beneficially owned by Shun Kin, and all other shares (if any) in the issued share capital of the Company resulting from any sub-division, consolidation or re-classification of such shares in the Company and further or additional shares in the Company hereinafter acquired by Shun Kin pursuant to a capitalisation issue; "Original Price" the price per Share based on the NAV as at the Completion Date (both as defined in the S&P Agreement) plus a premium of HK$15 per Share;
29 "Put Option" the put option to require the purchase by the Purchaser of all the Option Shares from Shun Kin at the Put Option Price upon and subject to the terms and conditions contained herein; "Put Option Notice" the notice in the form set out in Schedule B hereto; "Put Option Price" a price equal to the higher of (i) the Original Price or (ii) the price per Share based on the Net Asset Value of the Company (subject to any adjustment provided in Clause 3.4), plus a premium of HK$15 per Share; "Relevant Event" (i) Any variation in the share capital of the Company arising from any reduction, sub-division or consolidation of share capital or the issue of any share capital (including any securities convertible into share capital or warrants or options to subscribe for any share capital) by way of capitalisation of profits or reserves or in connection with an offer made pro rata to shareholders of the Company; or (ii) Any distribution of the Company's capital assets to shareholders of the Company pro rata, whether in cash or specie, except dividend paid out of the net profits attributable to shareholders of the Company for each financial year of the Company; and "HK$" or "Cents" Hong Kong Dollars and cents respectively.
1.2 The headings to the Clauses of this Agreement are for ease of reference only and shall be ignored in interpreting this Agreement. 30 1.3 References to Clauses and Schedules are references to Clauses and Schedules of or to this Agreement. 1.4 Words and expressions in the singular include the plural and vice versa. 1.5 Reference to person includes any public body and any body of persons, corporate or unincorporated. 1.6 Reference to ordinances, statutes, legislation or enactments shall be construed as a reference to such ordinances, statutes, legislation or enactments as may be amended or re-enacted from time to time and for the time being in force. 2. GRANT OF PUT OPTION AND CALL OPTION 2.1 In consideration of Shun Kin agreeing to enter into this Agreement, the Purchaser hereby grants to Shun Kin the Put Option subject to the terms and conditions herein contained. 2.2 In consideration of the Purchaser agreeing to enter into this Agreement, Shun Kin hereby grants to the Purchaser the Call Option subject to the terms and conditions herein contained. 2.3 Upon exercise of the Put Option or the Call Option (as the case may be) as hereinafter provided, Shun Kin shall sell as beneficial owner of the Option Shares to the Purchaser free from all liens, charges, encumbrances and third party rights of any kind and together with all rights attaching thereto as at and all dividends and distributions declared, paid or made in respect thereof after the date of exercise of the Put Option or the Call Option (as the case may be). To avoid any doubt, it is hereby expressly agreed that until exercise of the Put Option or the Call Option (as the case may be) as hereinafter provided Shun Kin shall have absolute control of the Option Shares, including the voting rights attaching thereto. 3. EXERCISE OF PUT OPTION OR CALL OPTION 3.1 The Put Option may be exercised by Shun Kin at any time during the Option Period by serving a Put Option Notice on the Purchaser. The date of exercise 31 of the Put Option shall be the date that the Put Option Notice is received by the Purchaser. The Purchaser shall, within fourteen (14) days after the receipt of the Put Option Notice, provide Shun Kin with the latest audited accounts of the Company (the "AUDITED ACCOUNTS") and the latest management accounts of the Company as at the last day of the precedent month immediately before the exercise of the Put Option (the "MANAGEMENT ACCOUNTS"). 3.2 The Call Option may be exercised by the Purchaser at any time during the Option Period by serving a Call Option Notice, accompanied by the Audited Accounts and the Management Accounts, on Shun Kin. The date of exercise of the Call Option shall be the date that the Call Option Notice, the Audited Accounts and the Management Accounts are received by Shun Kin. 3.3 In the event of the exercise of the Put Option or the Call Option, as the case may be, and in the event that Clause 3.4 does not apply, Shun Kin shall have the sole right to elect either (i) the net asset value of the Company as shown in the Management Accounts; or (ii) the average of the net asset values of the Company as shown in the Management Accounts and the Audited Accounts respectively to be the net asset value of the Company for the purpose of the calculation of the Put Option Price and the Call Option Price. Such net asset value of the Company to be elected by Shun Kin (the "NET ASSET VALUE") shall be conclusive and binding on the Purchaser. Shun Kin shall give written notice (the "NOTICE") to the Purchaser informing it the amount of the Net Asset Value within (seven 7) days from the date of receipt of the Management Accounts and the Audited Accounts by Shun Kin from the Purchaser. For the purpose of this Agreement, the net asset value of the Company shall be the total tangible assets of the Company less the total liabilities of the Company whether actual or contingent, including all provisions for taxation but excluding provision for bad or doubtful debts. 3.4 In the event that any Relevant Event has occurred before the exercise of the Put Option or the Call Option and no adjustment to the Put Option Price and the Call Option Price has been made in the Audited Accounts, the Parties shall procure the Put Option Price to be adjusted in such manner as shall be certified by the Auditors as fair and reasonable in the circumstances. For the 32 avoidance of doubt and notwithstanding anything herein to the contrary, no premium comprising the Put Option Price shall be subject to adjustment and the net asset value of the Company as at the date of the exercise of the Put Option or the Call Option shall be deemed to be the Net Asset Value for the purpose of the calculation of the Put Option Price and the Call Option Price. A copy of the certificate of the Auditors relating to any such adjustment shall be given to Shun Kin and the Purchaser within fourteen (14) days of the exercise of the Put Option or the Call Option. The certificate of the Auditors shall, in the absence of fraud or manifest error, be final and binding on each of the Parties. The cost of the Auditors relating to any such adjustment shall be borne by the Company. 3.5 The Put Option Notice or the Call Option Notice (as the case may be), once issued, is binding on both Parties and may not be withdrawn. The Put Option or the Call Option (as the case may be) must be exercised in full. 4. COMPLETION 4.1 Completion of the sale and purchase of the Option Shares shall take place on a Business Date falling the expiry of one month, and in any event not more than forty-five (45) days, after (a) the date of giving of the Notice by Shun Kin to the Purchaser (when Clause 3.3 applies) or (b) the date of receipt of the certificate of the Auditors by Shun Kin and the Purchaser as referred to in Clause 3.4 (when Clause 3.4 applies) at the registered office of the Company when the following business will be simultaneously transacted :- (i) the Purchaser shall deliver to Shun Kin a cashier order for the total Put Option Price of the Option Shares (in case the exercise of the Put Option) or total Call Option Price of the Option Shares (in case the exercise of the Call Option); and (ii) Shun Kin shall deliver to the Purchaser the following:- (a) sold notes and instrument of transfer in favour of the Purchaser and/or its nominee(s) in respect of the Option Shares all executed by Shun Kin in accordance with the Stamp Duty Ordinance; 33 (b) original share certificate(s) in respect of the Option Shares; and (c) in the event of the exercise of the Put Option, a sum in favour of the Government of the Hong Kong Special Administrative Region for an amount equivalent to the stamp duty payable under the Stamp Duty Ordinance in respect of the bought and sold notes of the Option Shares. 5. WARRANTIES, REPRESENTATIONS, UNDERTAKINGS AND GUARANTEE 5.1 Shun Kin hereby warrants and represents to the Purchaser that :- (i) during the Option Period, Shin Kin shall not dispose, or authorise or permit any party to dispose the Option Shares; (ii) Shun Kin is and shall on the Option Completion Date be legally and beneficially entitled to sell the Option Shares to the Purchaser; and (iii) on the Option Completion Date, the Option Shares will be sold to the Purchaser free from all liens, charges, encumbrances and third party rights of any kind, and together with all rights attaching thereto as at and all dividends and distributions declared, paid or made in respect thereof after the date of exercise of the Put Option or the Call Option (as the case may be). 5.2 The Purchaser undertakes to notify Shun Kin in writing within fourteen (14) days from the date when (a) it agrees to sell 50% or more of the shareholding of the Company during the Option Period or (b) any of the Relevant Events has occurred. 5.3 In consideration of Shun Kin agreeing to enter into this Agreement, the Guarantor (as principal obligor and not merely as surety) unconditionally and irrevocably guarantees performance by the Purchaser of all its obligations and liabilities under or arising out of or in connection with this Agreement (referred to herein as the "GUARANTEED OBLIGATIONS") and undertakes to Shun Kin that if and whenever the Purchaser is in default, the Guarantor shall duly and promptly perform or procure such performance of the Guaranteed 34 Obligations and indemnify Shun Kin against any loss, damage, costs, expenses and liabilities that it may suffer in connection with or arising out of any such failure on the part of the Purchaser. 6. CONFIDENTIALITY Other than such disclosure as may be required by law, The Stock Exchange of Hong Kong Limited, the Securities & Futures Commission or any competent authority, neither of the parties hereto shall make any announcement or release or disclose any information concerning this Agreement or the transactions herein referred to or disclose the identity of the other party(ies) hereto (save disclosure to their respective professional advisers under a duty of confidentiality) without the written consent of the other parties hereto. 7. ASSIGNMENT This Agreement shall be binding on and shall enure for the benefits of the successors and assigns of the parties hereto but shall not be assigned by any party hereto without the prior written consent of the other parties hereto. 8. NOTICES AND OTHER COMMUNICATION 8.1 Any notice or other communication to be given under this Agreement shall be in writing and may be given by hand, by post or facsimile to the following address/number of the party hereto to be served or to such other address/number as shall be notified by such party to the other in writing :- Shun Kin Address : Hsin Chong Center, 107-109 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong Attention : YEH WANG Zung-sing, Helen Facsimile no. : 852-2516 6596 35 The Purchaser Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 The Guarantor Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 8.2 Any such notice or communication shall be sent to the party hereto to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject-matter of this Agreement. If so given by hand or facsimile, such notice or communication shall be deemed received on the date of despatch and if so sent by post (or, if sent to an address outside of Hong Kong, so sent by first class air-mail) shall be deemed received two (2) Business Days after the date of despatch (in case to an address in Hong Kong) or five (5) Business Days after the date of despatch (in case to an address outside of Hong Kong). 9. COSTS AND EXPENSES Each party hereto shall bear its own legal costs and expenses incurred in the negotiation, preparation and execution of this Agreement. Stamp duty payable in respect of the sale and purchase of the Option Shares shall be borne by Shun Kin if Shun Kin exercises the Put Option or by the Purchaser if the Purchaser exercises the Call Option, as the case may be. 36 10. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the Laws of Hong Kong and the parties hereto agree to submit to the non-exclusive jurisdiction of its courts. 11. PROCESS AGENT The Purchaser hereby irrevocably authorizes and appoints Arculli Fong & Ng (the "PURCHASER'S SOLICITORS") at 908 Hutchison House, Central, Hong Kong (or such other person(s), being resident in Hong Kong, as it may from time to time appoint as its agent(s) and notify to Shun Kin) to accept service of all legal process arising out or in connection with this Agreement and service on the Purchaser's Solicitors (or such substitute(s)) shall be deemed to be service on the Purchaser. [Remainder of this page intentionally left blank] 37 IN WITNESS whereof the parties hereto have signed this Agreement the day and year first above written. SIGNED by ) ) a director, for and on ) behalf of Shun Kin ) Enterprises Limited ) in the presence of :- ) SIGNED by ) ) a director, for and on ) behalf of FNG International ) Holdings Limited ) in the presence of :- ) SIGNED by ) ) a director, for and on ) behalf of China Finance ) Online Co. Limited ) in the presence of :- ) 38 SCHEDULE A CALL OPTION NOTICE [Date] [Name and address of Shun Kin] Dear Sirs, We refer to the option agreement dated *, 2007 (the "Agreement") entered into between you and us relating to shares in Daily Growth Investment Company Limited (Chinese Characters) and hereby exercise the Call Option in accordance with the terms and conditions contained in the Agreement by giving you this Call Option Notice and that completion of the sale and purchase of the Option Shares shall take place on [date] at * a.m./p.m. at [address]. Terms defined in the Agreement have the same meanings herein. Yours faithfully, for and on behalf of FNG International Holdings Limited 39 SCHEDULE B PUT OPTION NOTICE [Date] [Name and address of the Purchaser] Dear Sirs, We refer to the option agreement dated *, 2007 (the "Agreement") entered into between you and us relating to shares in Daily Growth Investment Company Limited (Chinese Characters) and hereby exercise the Put Option in accordance with the terms and conditions contained in the Agreement by giving you this Put Option Notice and that completion of the sale and purchase of the Option Shares shall take place on [date] at * a.m./p.m. at [address]. Terms defined in the Agreement have the same meanings herein. Yours faithfully, for and on behalf of Shun Kin Enterprises Limited 40 EX-4.55 33 h02185exv4w55.txt EX-4.55 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES Exhibit 4.55 DATED THE __________ DAY OF _____, 2007 MIDOPA ENTERPRISES LIMITED and FNG INTERNATIONAL HOLDINGS LIMITED and CHINA FINANCE ONLINE CO. LIMITED ---------- AGREEMENT for the sale and purchase of shares in Daily Growth Investment Company Limited (Chinese Characters) ---------- F. ZIMMERN & CO. Solicitors & Notaries Suites 1501-1503, 15th Floor, Gloucester Tower, The Landmark, 15 Queen's Road Central, Hong Kong Tel: (852) 2526-4373 Fax: (852) 2801-4548 Ref: AN/PC/S14/2007 THIS AGREEMENT is made on the __________ day of _____, 2007. BETWEEN :- 1. MIDOPA ENTERPRISES LIMITED, a company incorporated in Hong Kong whose registered office is at 1, Sheung Hong Street, Flat C-1, Everwell Garden, Homantin, Kowloon, Hong Kong (the "VENDOR"); 2. FNG INTERNATIONAL HOLDINGS LIMITED, a company incorporated in the British Virgin Islands whose registered address is at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands (the "PURCHASER"); and 3. CHINA FINANCE ONLINE CO. LIMITED, a company incorporated in Hong Kong whose registered office is situate at Room 908, 9th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong (the "GUARANTOR"). (The Vendor and the Purchaser are collectively referred to as the "PARTIES" and each as a "PARTY") WHEREAS :- (A) Daily Growth Investment Company Limited (Chinese Characters) (the "COMPANY") is a private limited company incorporated under the laws of Hong Kong on 6 October 1971 and has an authorised share capital of HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each, of which 100,000 ordinary shares have been issued and are fully paid up. The Company is a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong. Particulars of the Company are set out in Schedule 1. (B) The Vendor is the legal and beneficial owner of 27,500 issued ordinary shares of the Company, representing 27.50 per cent. of the issued share capital of the Company. 1 (C) The Vendor has agreed to sell, and the Purchaser has agreed to purchase, 22,000 issued ordinary shares of the Company, representing 22 per cent. of the issued share capital of the Company (the "SALE SHARES") on the terms and conditions hereinafter appearing. (D) By another conditional sale and purchase agreement entered into between the Vendor as vendor and Yayeka Enterprises Limited ("YAYEKA") as purchaser of even date, the Vendor has agreed to sell, and Yayeka has agreed to purchase, its remaining 5,500 issued ordinary shares of the Company, representing 5.5 per cent. of the issued share capital of the Company. Yayeka is a company incorporated in Hong Kong whose registered office is at Flat A, 8th Floor, 360 Ma Tau Wai Road, Kowloon, Hong Kong and whose director is Mr. Wai Heung Wah Hayles, also a director of the Company and the Vendor." (E) The Purchaser is a wholly owned subsidiary of the Guarantor. (F) The Guarantor has agreed to guarantee as the primary obligor for the due performance of the Purchaser under this Agreement. AND NOW IT IS HEREBY AGREED as follows 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, unless otherwise expressed or required by context, the following expressions shall have the respective meanings set opposite thereto :- Expression Meaning "Accounts" means the audited profit and loss accounts for the period ended on and the balance sheet as at the Accounts Date of the Company; "Accounts Date" means 31 December 2006; "Approval" have the meaning ascribed to it in Clause 2.1(b) hereof;
2 "Business Day" means a day, other than a "general holiday" (as defined in the General Holidays Ordinance (Chapter 149 of the Laws of Hong Kong)), Saturday and any day on which a tropical cyclone warning No. 8 or above is hoisted or remains hoisted between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon or on which a "black" rainstorm warning signal is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon, on which commercial banks are generally open for banking business in Hong Kong; "Completion Accounts" means the profit and loss accounts for the period ended on and the balance sheet as at the Completion Date of the Company; "Completion Date" means the date on which completion of the sale and purchase of the Sale Shares takes place as mentioned in Clause 4 hereof; "Consideration" has the meaning ascribed to it in Clause 3 hereof; "Deposit" has the meaning ascribed to it in Clause 3.2(a) hereof; "Disclosure Letter" means the disclosure letter from the Vendor to the Purchaser to be delivered at Completion in the form identical to that attached hereto as Schedule 3 hereto or with lesser disclosures; "Hong Kong" means the Hong Kong Special Administrative Region of the People's Republic of China; "Liabilities" means the total liabilities of the Company whether actual or contingent as at Completion, and for the avoidance of doubt, including all provisions for
3 taxation and bad debts; "NAV" means the Tangible Assets less the Liabilities; "Shares" means issued ordinary shares of HK$100 each in the capital of the Company, and "Shareholders" shall be construed accordingly; "SFC" means the Securities and Futures Commission; "SFO" means the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong); "Stock Exchange" The Stock Exchange of Hong Kong Limited; "Tangible Assets" means the total tangible assets of the Company as at Completion, including an amount of HK$794,157.41 due from Mr. Cheung Wing Cheung as at 1 August 2007 to the Company to be accepted by the Parties as accounts receivable without any provision for non-recovery; "Vendor's Solicitors" means F. Zimmern & Co; and "HK$" and "Cent" means Hong Kong Dollars and Cents respectively.
1.2 The headings to the Clauses of this Agreement are for ease of reference only and shall be ignored in interpreting this Agreement. 1.3 Reference to Clauses and Schedules are references to Clauses and Schedules of or to this Agreement. 1.4 Words and expressions in the singular include the plural and vice versa. 1.5 Reference to person include any public body and any body of persons, corporate or unincorporated. 1.6 Reference to ordinances, statutes, legislation or enactments shall be construed 4 as a reference to such Ordinances, statutes, legislation or enactments as may be amended or re-enacted from time to time and for the time being in force. 2. CONDITIONS PRECEDENT 2.1 Completion of this Agreement shall be conditional upon :- (a) the Company remains a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the SFO up to Completion; (b) the SFC giving its written approval to approve the Purchaser to become a substantial shareholder of the Company (the "APPROVAL"); and (c) the Purchaser shall, in addition to the Sale Shares to be acquired pursuant hereto, acquire on the Completion Date Shares from other existing Shareholders which together with the Sale Shares, shall in aggregate represent not less than 75% of the entire issued share capital of the Company as at the Completion Date. 2.2 The Vendor will use its best endeavours to procure the fulfilment of the condition set out in Clauses 2.1 (a) and 2.1(c) hereof and the Purchaser will use its best endeavours to procure the fulfilment of the condition set out in Clause 2.1(b) hereof. 2.3 If (i) the condition as set out in Clause 2.1(a) hereof cannot be fulfilled on the Completion Date, the Vendor or the Purchaser may, or (ii) the condition as set out in Clause 2.1(c) hereof cannot be fulfilled on the Completion Date, the Purchaser may terminate this Agreement. In any of such event, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Upon the refund, this Agreement shall lapse and no Party shall have any claim against the other Party except in respect of any antecedent breach. 2.4 If the condition as set out in Clause 2.1(b) hereof cannot be fulfilled on or 5 before 31 December 2007 (the "CONDITIONS DEADLINE"), the Vendor will allow the Purchaser to extend the Conditions Deadline for a period up to three (3) calendar months from 1 January 2008 (the "EXTENDED PERIOD") provided that the Purchaser shall pay compensation (the "COMPENSATION") to the Vendor, unless the delay is due to the proven default of the Vendor, to be arrived at by the following formula :- C = [(HK$3 * S) * 3] * D/91 C = the total Compensation payable by the Purchaser to the Vendor S = the number of the Sale Shares D = the number of days from 1 January 2008 up to and including (i) the Completion Date; or (ii) the day of the receipt of the Notice (as defined below) by the Vendor; or (iii) 31 March 2008, as the case may be, to be determined in the manner as provided in Clauses 2.5 (a) and (b) The Purchaser may serve a written notice to the Vendor not to proceed with the Completion (the "NOTICE") during the Extended Period. 2.5 (a) In the event that Completion takes place before the expiry of the Extended Period, the Purchaser shall pay the Compensation calculated up to the Completion Date to the Vendor on the Completion Date. (b) In the event that the Purchaser shall fail to complete the purchase of the Sale Shares in accordance with the terms of this Agreement (including failure to complete by reason of the failure to obtain the Approval) other than due to the proven default of the Vendor, half of the Deposit shall be forfeited to the Vendor as liquidated damages (the "FORFEITURE") and in addition, if the Conditions Deadline is extended, the Vendor shall also be entitled to deduct the Compensation (calculated up to the day of the receipt of the Notice by the Vendor if the Notice is served by the Purchaser or calculated up to 31 March 2008 if no Notice is -- served by the Purchaser) from the balance of the Deposit (the "DEDUCTION"). The remaining balance of the Deposit (after the Forfeiture and any Deduction) shall be returned to the Purchaser without interest within seven (7) days from the date of the receipt of the Notice by the Vendor or 31 March 2008, as the case may 6 be. After the Forfeiture and any Deduction, the Vendor shall have no claim whatsoever against the Purchaser under this Agreement. 2.6 If the Vendor shall fail to complete the sale of the Sale Shares in accordance with the terms of this Agreement due to the proven default of the Vendor, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Subject to the aforesaid payment, the Purchaser shall have no claim whatsoever against the Vendor under this Agreement. 3. SALE AND PURCHASE OF THE SALE SHARES AND THE CONSIDERATION 3.1 Subject to the terms and conditions of this Agreement, the Vendor as beneficial owner hereby agrees to sell to the Purchaser and the Purchaser, relying on the representations and warranties made or given by the Vendor and subject to the terms and conditions contained in this Agreement, agree to purchase from the Vendor the Sale Shares free from all claims, charges, liens, encumbrances, equities and third party rights and together with all rights attached thereto and all dividends and distributions declared, paid or made in respect thereof after the Completion Date at a consideration (the "CONSIDERATION") to be arrived at by the following formula :- C = P * S C = the total consideration payable by the Purchaser to the Vendor for the Sale Shares P = the price per Share based on the NAV as at the Completion Date plus a premium of HK$15 per Share (which is to reflect the value of the trading right held by the Company in the Stock Exchange) S = the number of Sale Shares 3.2 Subject to Clause 3.3 hereof, the Consideration shall be paid by the Purchaser to the Vendor as follows:- (a) a sum of HK$1,100,000 (i.e. HK$50 per Sale Share) as deposit and part payment of the Consideration (the "DEPOSIT") to be paid on the 7 signing of this Agreement by way of delivering a solicitor's cheque to the Vendor's Solicitors as stakeholder to be held by it subject to the provisions of this Agreement and the sum of HK$1,000,000 being the earnest money already paid by the Purchaser to the Purchaser's Solicitors as stakeholder under the term sheet dated 25 July 2007 be released to the Purchaser after payment of the Deposit; and (b) the balance of the Consideration to be paid on Completion by way of a solicitor's cheque to the Vendor. 3.3 (a) The Vendor shall procure that the draft pro-forma Completion Accounts (the "DRAFT PRO-FORMA COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser not less than six (6) days prior to the Completion Date. Completion shall take place on the basis of the draft pro-forma Completion Accounts. (b) After Completion, the Vendor shall procure the final Completion Accounts (the "FINAL COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser within fourteen (14) days after the Completion Date. Subject to Clause 3.3(d), if the final Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. If the final Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. The Purchaser shall provide with the Vendor full access to the books, records and resources of the Company so as to enable the Vendor to procure the final Completion Accounts to be drawn up. (c) The basis and policy of accounting adopted in preparing the pro-forma draft Completion Accounts and the final Completion Accounts shall be 8 in accordance with the generally accepted accounting practices in Hong Kong. (d) In the event of a dispute between the Parties as to the amount of the NAV as shown in the final Completion Accounts, the Vendor or the Purchaser may procure that the final Completion Accounts be audited by the auditors of the Company within forty-five (45) days from the date of delivery of the final Completion Accounts provided that the procurement of the audited final Completion Accounts shall be made by the relevant Party within seven (7) days from the date of delivery of the final Completion Accounts. (e) If the audited Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts , the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. If the audited Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. The Vendor together with the other vendors of the one part and the Purchaser of the other part shall each be responsible for payment of 50% of the cost and expenses for the preparation and completion of the audited Completion Accounts. 4. COMPLETION 4.1 Subject to the provisions in Clause 2 hereof, completion of the sale and purchase of the Sale Shares shall take place at the offices of Arculli Fong & Ng (the "PURCHASER'S SOLICITORS"), the Solicitors for the Purchaser, at 908 Hutchison House, Central, Hong Kong or any other place as the Parties may agree at 5:00 p.m. on a Friday of the week immediately following the week when the Approval is granted by the SFC, when the following business shall 9 simultaneously be transacted :- (a) the Purchaser shall deliver to the Vendor the following :- (i) a solicitor's cheque for payment of the balance of the Consideration and the Vendor's Solicitors will release the Deposit to the Vendor; and (ii) a certified copy of each of the minutes of the board of directors of the Purchaser and the Guarantor approving this Agreement and authorizing/confirming the authorization of an authorised person for signing of this Agreement and (for the Purchaser) the bought note and the instrument of transfer and any other incidental documents hereof; (b) the Vendor shall deliver to the Purchaser the following :- (i) sold notes and instrument of transfer in favour of the Purchaser in respect of the Sale Shares all executed by the Vendor in accordance with the Stamp Duty Ordinance; (ii) original share certificate(s) or re-issued share certificate(s) in respect of the Sale Shares; (iii) such other documents as may be reasonably required to give a good and effective transfer of title to the Sale Shares to the Purchaser and to enable them to become the registered holders thereof; (iv) a cheque drawn in favour of the Government of the Hong Kong Special Administrative Region for an amount equivalent to the stamp duty payable under the Stamp Duty Ordinance in respect of the sold notes in respect of the Sale Shares; (v) a certified copy of the minutes of the board of directors of the Vendor (if the Vendor is a corporate) approving the sale of the Sale Shares and authorizing/confirming the authorization 10 of an authorised person for signing of this Agreement and the sold note and the instrument of transfer and any other incidental documents hereof; (vi) to the extent that the same are not already in the possession of the Company or its agents, the certificate of incorporation, business registration certificate, common seal of the Company, all copies of memorandum and articles of association of the Company, the statutory books of the Company duly made up to date, any unissued share certificates, all current insurance policies, books and accounts and other records, cheque books, title deeds and evidence of ownership to all assets of the Company and all current contracts; (vii) an original of the Disclosure Letter duly executed by the Vendor in the form identical to that attached as Schedule 3 hereto or with lesser disclosures; (c) the Vendor shall cause a meeting of the board of directors of the Company to be held at which resolutions shall be passed to :- (i) approve the transfer of the Sale Shares; (ii) register (subject to stamping) the transfer of the Sale Shares referred to above and to issue new certificate(s) for the Sale Shares in the name(s) of the Purchaser; (iii) appoint one person as the Purchaser may nominate as the Chairman of the Company and such person(s) as the Purchaser may nominate as director(s) of the Company and (subject to the approval of the SFC) one person as the Purchaser may nominate as the Responsible Officer of the Company all to take effect from the close of business of the said meeting if so required by the Purchaser; and (iv) amend all banking authorisations, instructions and mandates of the Company in such manner as the Purchaser may direct; 11 and (d) the Purchaser shall :- (i) produce for inspection by the Vendor the bought notes in respect of the Sale Shares executed by the Purchaser in compliance with the Stamp Duty Ordinance; and (ii) procure the stamping of the bought and sold notes and the instrument of transfer in respect of the Sale Shares as soon as practicable thereafter and present the said instrument of transfer together with the share certificate(s) in respect of the Sale Shares to the Company for registration of the transfer. 4.2 The transactions described in Clause 4.1 hereof shall take place at the same time, so that in default of the performance of any such transactions by a Party, the other Party shall not be obliged to complete the sale and purchase aforesaid. 4.3 Immediately after Completion, the Purchaser and Yayeka shall enter into an option agreement in the form and substance as set out in Schedule 4 hereto. 5. REPRESENTATIONS AND WARRANTIES AND GUARANTEE 5.1 Save as disclosed in the Disclosure Letter and documents and information provided to the Purchaser and/or its advisors, the Vendor hereby represents and warrants to the Purchaser that each of the matters set out in Schedule 2 are as at the date hereof and will be for all times up to and including the Completion Date, true and correct in all material respects. 5.2 From the date of this Agreement until the Completion Date the Vendor shall use its best endeavours to procure that (save with the prior consent in writing or of the Purchaser, such consent not to be unreasonably withheld or delayed) the Company shall not :- (a) issue or agree to issue any of its share or loan capital or grant or agree to grant any option over or right to acquire any of its share or loan 12 capital; (b) enter into any contract (otherwise than in the ordinary course of business) or any capital commitment; (c) create or permit to arise any lien, charge, pledge, mortgage or other security interest on or in respect of any of its undertaking, property or assets; (d) appoint any directors other than as provided in this Agreement; or (e) increase the remuneration of its employees (save as payment of discretionary bonus and save that the increase is made pursuant to the relevant employment contract) and the Vendor shall use its best endeavours to procure that the Purchaser be kept regularly informed of the affairs of the Company until the Completion Date. 5.3 The liability of the Vendor in respect of any breach of the warranties or representations as set out in Schedule 2 shall be limited as follows:- (a) the maximum liability of the Vendor, if any, under this Agreement shall be the amount of the Consideration; (b) no claims may be brought against the Vendor in respect of any claim of damages for breach of warranty(ies) or representation(s) as set out in Schedule 2 after the expiry of six months from the Completion Date. 5.4 In consideration of the Vendor agreeing to enter into this Agreement, the Guarantor (as principal obligor and not merely as surety) unconditionally and irrevocably guarantees performance by the Purchaser of all its obligations and liabilities under or arising out of or in connection with this Agreement (referred to herein as the "GUARANTEED OBLIGATIONS") and undertakes to the Vendor that if and whenever the Purchaser is in default, the Guarantor shall duly and promptly perform or procure such performance of the Guaranteed Obligations and indemnify the Vendor against any loss, damage, costs, expenses and liabilities that it may suffer in connection with or arising out of any such failure on the part of the Purchaser. 13 6. SEVERABILITY If at any time any one or more provisions hereof is or becomes invalid, illegal, unenforceable or incapable of performance in any respect, the validity, legality, enforceability or performance of the remaining provisions hereof shall not thereby in any way be affected or impaired. 7. ENTIRE AGREEMENT This Agreement constitutes the entire agreement and understanding between the Parties in connection with the subject-matter of this Agreement and supersedes all previous proposals, representations, warranties, agreements or undertakings relating thereto whether oral, written or otherwise and none of the Parties has relied on any such proposals, representations, warranties, agreements or undertakings. 8. TIME 8.1 Time shall be of the essence of this Agreement. 8.2 No time or indulgence given by any Party to the other Party shall be deemed or in any way be construed as a waiver of any of its rights and remedies hereunder. 9. CONFIDENTIALITY Other than such disclosure as may be required by law, the SFC, the Stock Exchange or other competent authority, neither of the parties hereto shall make any announcement or release or disclose any information concerning this Agreement or the transactions herein referred to or disclose the identity of the other party(ies) hereto (save disclosure to their respective professional advisers under a duty of confidentiality) without the written consent of the other parties hereto. 14 10. ASSIGNMENT This Agreement shall be binding on and shall enure for the benefits of the successors and assigns of the Parties but shall not be assigned by any party hereto without the prior written consent of the other parties hereto. 11. NOTICES AND OTHER COMMUNICATION 11.1 Any notice or other communication to be given under this Agreement shall be in writing and may be given by hand, by post or facsimile to the following address/number of the party hereto to be served or to such other address/number as shall be notified by such party to the other in writing:- The Vendor Address : 1, Sheung Hong Street, Flat C-1, Everwell Garden, Homantin, Kowloon, Hong Kong Attention : WAI Heung-wah, Hayles Facsimile no. : 852-2716 2668 The Purchaser Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 The Guarantor Address : Room 908, 9th floor, Hutchison House, 15 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 11.2 Any such notice or communication shall be sent to the party hereto to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject-matter of this Agreement. If so given by hand or facsimile, such notice or communication shall be deemed received on the date of despatch and if so sent by post (or, if sent to an address outside of Hong Kong, so sent by first class air-mail) shall be deemed received two (2) Business Days after the date of despatch (in case to an address in Hong Kong) or five (5) Business Days after the date of despatch (in case to an address outside of Hong Kong). 12. COSTS AND EXPENSES Each party hereto shall bear its own legal and professional fees, costs and expenses incurred in the negotiation, preparation and execution of this Agreement. The stamp duty in respect of the Sale Shares shall be borne by the Vendor and the Purchaser in equal shares. 13. COUNTERPARTS This Agreement may be executed in any number of counterparts each of which when executed and delivered is an original, but all the counterparts together constitute the same document. 14. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of Hong Kong and the parties hereto agree to submit to the non-exclusive jurisdiction of the courts of Hong Kong. 16 15. PROCESS AGENT The Purchaser hereby irrevocably authorizes and appoints the Purchaser's Solicitors (or such other person(s), being resident in Hong Kong, as it may from time to time appoint as its agent(s) and notify to the Vendor) to accept service of all legal process arising out or in connection with this Agreement and service on the Purchaser's Solicitors (or such substitute(s)) shall be deemed to be service on the Purchaser. [Remainder of this page intentionally left blank] 17 IN WITNESS whereof the Parties have executed this Agreement the day and year first above written. SIGNED by ) ) a director, for and on ) behalf of Midopa ) Enterprises Limited ) in the presence of:- ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of FNG ) International Holdings ) Limited in the presence of:- ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of China ) Finance Online Co. Limited ) in the presence of:- ) 18 SCHEDULE 1 PARTICULARS OF THE COMPANY 1. Name : Daily Growth Investment Company Limited (Chinese Characters) 2. Registered office : Room 603, Peter Building, 58-62 Queen's Road, Central, Hong Kong. 3. Company Number : 025436 4. Date of Incorporation : 6 October 1971 5. Place of Incorporation : Hong Kong 6. Authorised share capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 7. Issued and paid up capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 8. Directors : TING WANG Wan-sun, Nancy WAI CHAN Ye, Kannie WAI Heung-wah, Hayles YEH WANG Zung-sing, Helen WONG Long-sau, Ivis 9. Secretary : Hang Cheuk Secretaries Limited 10 Auditors : J Kong & Co. 11. Financial year end : 31 December 19 SCHEDULE 2 REPRESENTATIONS AND WARRANTIES General; Corporate Status 1.1 All information regarding the Company provided by or on behalf of the Vendor and/or the Company to the Purchaser is complete, correct and true in a material respect. 1.2 The Company has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation, and there has been no resolution, petition or order for the winding-up of the Company and no receiver has been appointed in respect thereof, nor are any such resolutions, orders and appointments imminent or likely. Shareholdings and Share Capital etc. 2.1 The Sale Shares comprise a percentage (as referred to in Recital (B)) of the issued share capital of the Company, and there are not in issue any other shares, debentures, warrants, options or securities. 2.2 The Company is not under any contract, options, warrants or any other obligations regarding any part of its capital, issued or unissued, or for the issue of any shares, debentures, warrants, options, or other similar securities. 2.3 Save as disclosed in the Disclosure Letter, the Vendor has acquired the Shares in compliance with the articles of association of the Company and the laws under the Companies Ordinance and is the beneficial owner of the Sale Shares free from all liens, charges, pledges, options, contracts, preemption rights, third party rights and equities, and incumbrances of whatever nature and the same are freely transferable by the Vendor without the consent, approval, permission, licence or concurrence of any third party. 2.4 The Vendor is fully capable of entering into this Agreement and to perform all 20 obligations and duties hereunder without the consent, approval, permission, licence or concurrence of any third party. Business etc. 3.1 The principal business activity of the Company is security trading. 3.2 In respect of the said business being carried on, all qualifications, registrations, licences or other approvals necessary for the proper conduct of business have been obtained and maintained and to the knowledge of the Vendor, all the relevant rules and regulations of the SFC and the Stock Exchange applicable to the Company have been observed and complied with in a material respect and no event has occurred whereby any of the same or the renewal thereof is or likely to be thereby adversely affected, suspended or revoked. Accounts 4.1 The Accounts have been prepared in accordance with generally accepted accounting practice in Hong Kong and comply with the Companies Ordinance, and show a true and fair view of the affairs and financial position of the Company as at, and the profits and loss of the Company for the period ended on, the Accounts Date. 4.2 All accounting records of the Company for the past seven (7) years are in the possession of the Company and have been properly written up, kept and maintained in accordance with generally accepted accounting practice and together shows a true and fair view of the affairs and financial position of the Company. Taxation 5.1 The Company has paid all taxes, duties and levies as the same became due and payable and to the knowledge of the Vendor, the Company is not nor is likely to be subject to any tax penalties. 21 5.2 The Company has complied with the Inland Revenue Ordinance and has kept proper records for tax purposes for the past seven (7) years and have filed all tax returns, and to the knowledge of the Vendor, there is no pending dispute with the Inland Revenue Department. Dispute, Claims and Litigation 6. There is no claim, arbitration or litigation to which the Company is a party or which, to the knowledge of the Vendor, is pending or threatened. Repetition at Completion 7. All warranties and representations contained in the foregoing provisions of this Schedule shall be deemed to be repeated immediately before completion of this Agreement and to relate to the facts then existing. 22 SCHEDULE 3 FORM OF DISCLOSURE LETTER [DATE] FNG INTERNATIONAL HOLDINGS LIMITED Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands Dear Sirs, DISCLOSURE LETTER This is the Disclosure Letter referred to in the Sale and Purchase Agreement dated [DATE] and entered into by and between Midopa Enterprises Limited, FNG International Holdings Limited and China Finance Online Co. Limited (the "Agreement"). Capitalized terms appearing in this letter shall adopt the same meaning as defined in the Agreement. A. GENERAL DISCLOSURES The following matters are deemed to be disclosed by this letter: 1. AGREEMENT: All matters set out or referred to in the Agreement, including, without limitation, all schedules and documents annexed thereto and any other agreements entered into pursuant to, or contemplated by, the Agreement. 2. COMPANIES REGISTRY: All matters registered against, or which would be disclosed by a search made in respect of the Company at the Companies Registry in Hong Kong. 3. ACCOUNTS: All matters disclosed, provided for, noted or referred to in the audited accounts of the Company which have been provided to the Purchaser. 4. INSPECTION: All matters which have or ought reasonably to have, been disclosed by inspection of the statutory books, books of account and business records of 23 the Company, all of which have been made available to the Purchaser and/or its advisers for inspection. 5. OTHERS MATTERS DISCLOSED: All matters set out or referred to in any letter, note, schedule or other document from or provided by the Vendor, the Company and/or their advisers and/or agents to the Purchaser and/or its advisers and/or agents in connection with the sale and purchase of the Sale Shares. Where any such letter, note, schedule or other document includes an expression of opinion, no representation or warranty is given as to its accuracy. B. SPECIFIC DISCLOSURE We write to disclose the following and the paragraph numbers used below correspond to the representations and warranties as set out in Schedule 2 to the Agreement: Paragraphs 1.1 and 2.3 The following documents cannot be found in the company kit of the Company or located by the Vendor or are incomplete. As such, no representation and warranty will be made on these missing or incomplete documents :- 1. Original corporate documents from the date of incorporation to the year of 1987; 2. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 1 share from Helen Zung Sing Yeh to Shun Kin Enterprises Limited on 20th February 1987; 3. Original cancelled share certificate in the names of Helen Zung Sing Yeh and Shun Kin Enterprises Limited; 4. Original Application for 42,300 shares made on 24th February 1987 - 8 sets; 5. Original share certificates in respect of the allotment made on 24th February 1987; 6. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares from Mr. Basil D.C. Wood to Mrs. Nancy Ting on 26th April 1988; 7. Original share certificates in respect of the transfer made on 26th April 1988; 8. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 20,525 shares in respect of the following transfer: Mr. Basil D.C. Wood to Midopa Enterprises Limited - 7,610 shares on 24 21.7.1988 Mrs. Wendy Wood to Midopa Enterprises Limited - 1,694 shares on 21.7.1988 Mr. Hsu Zing Ping to Midopa Enterprises Limited - 3,196 shares on 21.7.1988 Mr. Hsu Zing Ping to Billion System Co., Limited - 2,500 shares on 21.7.1988 Mr. Hsu Zing Ping to Mrs. Wang Zau Chin Ngo - 240 shares on 21.7.1988 Mr. Hsu Zing Ping to Eternal Growth Investment Ltd. - 525 shares on 21.7.1988 Mr. Koo Kam Kang to Eternal Growth Investment Ltd. - 4,760 shares on 21.7.1988 9. Original share certificates in respect of the transfer made on 21.7.1988; 10. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 7,715 shares in respect of the following transfer: Ms. Nancy Ting to Ho Chi Kuen Bernard - 2,000 shares on 29.7.1988 Ms. Nancy Ting to Billion System Co., Ltd. - 2,500 shares on 29.7.1988 Ms. Nancy Ting to Stella Wong - 545 shares on 29.7.1988 Shun Kin Ent. Ltd. to Stella Wong - 195 shares on 29.7.1988 Eileen Hwa to Stella Wong - 260 shares on 29.7.1988 Ms. Nancy Ting to Eternal Growth Inv. Ltd. - 2,215 shares on 29.7.1988 11. Original share certificates in respect of the transfer made on 29.7.1988 12. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the transfer from Eileen Hwa to Wong Oi Lun, Ellen on 17.3.1989; 13. Original share certificates in respect of the transfer made on 17.3.1989; 14. Form X(ii) or Form (IXA) showing the resignation of Ms. Stella Wong as the director of the Company made on 1.4.1989; 15. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Wong Oi Lun Ellen to Stella Wong - 1,000 shares on 31.5.1990 Wong Oi Lun Ellen to Tsang Kin Woo - 500 shares on 31.5.1990 Wong Oi Lun Ellen to Chu Ping Im - 500 shares on 31.5.1990 16. Original share certificates in respect of the transfer made on 31.5.1990 17. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Bernard Ho to Zone Bo Ltd. - 2,000 shares on 19.7.1990 18. Original share certificates in respect of the transfer made on 19.7.1990 19. Copy of Consent to act as director of the Company by Mr. Yap E. Hock on 25 9.12.1992 20. A letter dated 10th October 1994, from King Cause Limited and Asian Capital Partners (HK) Limited reporting that 10 share certificates for 50,000 shares have been mislaid and requesting 2 share certificates be issued to them 21. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 50,000 shares in respect of the following transfer: King Cause Ltd.to Billion System Co. Ltd.- 5,000 shares on 12.12.1994; King Cause Ltd. to Eternal Growth Investment Ltd.- 7,500 shares on 12.12.1994; King Cause Ltd. to Midpoa Enterprises Limited- 12,500 shares on 12.12.1994; King Cause Ltd. to Shun Kin Ent. Limited- 17,500 shares on 12.12.1994; King Cause Ltd. to Wang Zau Chin Ngo- 2,500 shares on 12.12.1994; King Cause Ltd. to Tsang Kin Woo- 499 shares on 12.12.1994; King Cause Ltd. to Chu Ping Im - 500 shares on 12.12.1994 King Cause Ltd. to Stella Wong- 2,000 shares on 12.12.1994; King Cause Ltd. to Zone Bo Limited- 2,000 shares on 12.12.1994; King Cause Ltd. and Asian Capital Partners (HK) Limited to Tsang Kin Woo- 1 share on 12.12.1994; 22. Original share certificates in respect of the transfer made on 12.12.1994; 23. Original Declaration of Trust given by King Cause Limited and Asian Capital Partners (HK) Limited on 9.12.1992; 24. Copy of Form D2 and Consent to act reporting the appointment of Mr. Ho Chi Kuen as the director of the company; 25. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares in respect of the following transfer: Billion System Co. Ltd. to Zone Bo Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Eternal Growth Inv. Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Midopa Enterprises Ltd.- 1,250 shares on 15.12.2000; Billion System Co. Ltd. to Shun Kin Enterprises Ltd.- 1,750 shares on 15.12.2000; Billion System Co. Ltd. to Tsang Kin Woo- 500 shares on 15.12.2000; Billion System Co. Ltd. to Chu Ping Im- 500 shares on 15.12.2000; 26. Original share certificates in respect of the transfer made on 15.12.2000; 27. Original Share Certificate of Wang William; 28. Original Board Minutes for approving the share transfer from Zone Bo Limited to Hung Yung made on 22.06.2007; 26 29. Share Certificate of Hung Yung in respect of 5,000 shares; 30. Original Consent to Short Notice dated 16.03.1987 - Elieen Hwa Wang Vung Sing (with the signature of Elieen missing); and 31. Original Consent to Short Notice for 2005 AGM dated 30.05.2005 (missing signatures from Midopa Enterprises Limited, Wong Chan Miu Wan Stella, Chu Ping Im, Tsang Kin Woo). Yours sincerely, - ------------------------------------- Midopa Enterprises Limited 27 SCHEDULE 4 FORM OF OPTION AGREEMENT THIS AGREEMENT is made the __________ day of _____, 2007 BETWEEN :- 1. YAYEKA ENTERPRISES LIMITED, a company incorporated in Hong Kong whose registered office is at Flat A, 8th Floor, 360 Ma Tau Wai Road, Kowloon, Hong Kong ("YAKEKA"); 2. FNG INTERNATIONAL HOLDINGS LIMITED, a company incorporated in the British Virgin Islands whose registered address is at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands (the "PURCHASER"); and 3. CHINA FINANCE ONLINE CO. LIMITED, a company incorporated in Hong Kong whose registered office is situate at Room 908, 9th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong (the "GUARANTOR"). (Yakeka and the Purchaser are collectively referred to as the "PARTIES" and each as a "PARTY") WHEREAS :- (A) Daily Growth Investment Company Limited (Chinese Characters) (the "COMPANY") is a private limited company incorporated under the laws of Hong Kong on 6 October 1971 and has an authorised share capital of HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each (the "SHARES"), of which 100,000 Shares have been issued and are fully paid up. The Company is a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong. 28 (B) By a sale and purchase agreement dated [*] 2007 entered into between Midopa Enterprises Limited ("Midopa") and the Purchaser pursuant to which Midopa agreed to sell and the Purchaser agreed to purchase 22,000 Shares, representing 22% of the issued share capital of the Company upon and subject to the terms and conditions thereof (the "S&P AGREEMENT"). By another sale and purchase agreement dated [*] 2007 entered into between Midopa and Yayeka pursuant to which Midopa agreed to sell and Yayeka agreed to purchase 5,500 Shares (the "YAYEKA S&P AGREEMENT"). Completion of the S&P Agreement and Yayeka S&P Agreement took place simultaneously and immediately before the signing of this Agreement. (C) Yayeka is now the legal and beneficial owner of 5,500 Shares, representing 5.5 per cent. of the issued share capital of the Company. (D) The Purchaser has agreed to grant to Yayeka a put option to require the Purchaser to purchase the Option Shares at the Put Option Price on the terms and conditions hereinafter appearing. (E) Yayeka has also agreed to grant to the Purchaser a call option to require Yayeka to sell the Option Shares to the Purchaser at the Call Option Price on the terms and conditions hereinafter appearing. NOW IT IS HEREBY AGREED as follows :- 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, unless otherwise expressed or required by context, the following words or expressions shall have the respective meanings set opposite thereto:- "Auditors" the auditors for the time being of the Company; "Business Day" a day, other than a "general holiday" (as defined in the General Holidays Ordinance (Chapter 149 of the Laws of Hong Kong)), Saturday and any day on which a tropical cyclone warning No. 8 or above is hoisted or remains hoisted between 9:00 a.m. and 12:00 noon and is not lowered at or
29 before 12:00 noon or on which a "black" rainstorm warning signal is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon, on which commercial banks are generally open for banking business in Hong Kong; "Call Option" the call option to require Yayeka to sell all the Option Shares to the Purchaser at the Call Option Price upon and subject to the terms and conditions contained herein; "Call Option Notice" the notice in the form set out in Schedule A hereto; "Call Option Price" a price equal to 20% above the Put Option Price; "Hong Kong" the Hong Kong Special Administrative Region of the People's Republic of China; "Net Asset Value" subject to Clause 3.4, has the meaning ascribed to it in Clause 3.3; "Option Completion Date" the date when completion of the sale and purchase of the Option Shares shall take place pursuant to Clause 4; "Option Period" the period of five (5) years commencing on the date hereof; "Option Shares" 5,500 Shares now beneficially owned by Yayeka, and all other shares (if any) in the issued share capital of the Company resulting from any sub-division, consolidation or re-classification of such shares in the Company and further or additional shares in the Company hereinafter acquired by Yayeka pursuant to a capitalisation issue;
30 "Original Price" the price per Share based on the NAV as at the Completion Date (both as defined in the S&P Agreement) plus a premium of HK$15 per Share; "Put Option" the put option to require the purchase by the Purchaser of all the Option Shares from Yayeka at the Put Option Price upon and subject to the terms and conditions contained herein; "Put Option Notice" the notice in the form set out in Schedule B hereto; "Put Option Price" a price equal to the higher of (i) the Original Price or (ii) the price per Share based on the Net Asset Value of the Company (subject to any adjustment provided in Clause 3.4), plus a premium of HK$15 per Share; "Relevant Event" (i) Any variation in the share capital of the Company arising from any reduction, sub-division or consolidation of share capital or the issue of any share capital (including any securities convertible into share capital or warrants or options to subscribe for any share capital) by way of capitalisation of profits or reserves or in connection with an offer made pro rata to shareholders of the Company; or (ii) Any distribution of the Company's capital assets to shareholders of the Company pro rata, whether in cash or specie, except dividend paid out of the net profits attributable to shareholders of the Company for each financial year of the Company; and
31 "HK$" or "Cents" Hong Kong Dollars and cents respectively.
1.2 The headings to the Clauses of this Agreement are for ease of reference only and shall be ignored in interpreting this Agreement. 1.3 References to Clauses and Schedules are references to Clauses and Schedules of or to this Agreement. 1.4 Words and expressions in the singular include the plural and vice versa. 1.5 Reference to person includes any public body and any body of persons, corporate or unincorporated. 1.6 Reference to ordinances, statutes, legislation or enactments shall be construed as a reference to such ordinances, statutes, legislation or enactments as may be amended or re-enacted from time to time and for the time being in force. 2. GRANT OF PUT OPTION AND CALL OPTION 2.1 In consideration of Yayeka agreeing to enter into this Agreement, the Purchaser hereby grants to Yayeka the Put Option subject to the terms and conditions herein contained. 2.2 In consideration of the Purchaser agreeing to enter into this Agreement, Yayeka hereby grants to the Purchaser the Call Option subject to the terms and conditions herein contained. 2.3 Upon exercise of the Put Option or the Call Option (as the case may be) as hereinafter provided, Yayeka shall sell as beneficial owner of the Option Shares to the Purchaser free from all liens, charges, encumbrances and third party rights of any kind and together with all rights attaching thereto as at and all dividends and distributions declared, paid or made in respect thereof after the date of exercise of the Put Option or the Call Option (as the case may be). To avoid any doubt, it is hereby expressly agreed that until exercise of the Put Option or the Call Option (as the case may be) as hereinafter provided Yayeka shall have absolute control of the Option Shares, including the voting rights attaching thereto. 32 3. EXERCISE OF PUT OPTION OR CALL OPTION 3.1 The Put Option may be exercised by Yayeka at any time during the Option Period by serving a Put Option Notice on the Purchaser. The date of exercise of the Put Option shall be the date that the Put Option Notice is received by the Purchaser. The Purchaser shall, within fourteen (14) days after the receipt of the Put Option Notice, provide Yayeka with the latest audited accounts of the Company (the "AUDITED ACCOUNTS") and the latest management accounts of the Company as at the last day of the precedent month immediately before the exercise of the Put Option (the "MANAGEMENT ACCOUNTS"). 3.2 The Call Option may be exercised by the Purchaser at any time during the Option Period by serving a Call Option Notice, accompanied by the Audited Accounts and the Management Accounts, on Yayeka. The date of exercise of the Call Option shall be the date that the Call Option Notice, the Audited Accounts and the Management Accounts are received by Yayeka. 3.3 In the event of the exercise of the Put Option or the Call Option, as the case may be, and in the event that Clause 3.4 does not apply, Yayeka shall have the sole right to elect either (i) the net asset value of the Company as shown in the Management Accounts; or (ii) the average of the net asset values of the Company as shown in the Management Accounts and the Audited Accounts respectively to be the net asset value of the Company for the purpose of the calculation of the Put Option Price and the Call Option Price. Such net asset value of the Company to be elected by Yayeka (the "NET ASSET VALUE") shall be conclusive and binding on the Purchaser. Yayeka shall give written notice (the "NOTICE") to the Purchaser informing it the amount of the Net Asset Value within (seven 7) days from the date of receipt of the Management Accounts and the Audited Accounts by Yayeka from the Purchaser. For the purpose of this Agreement, the net asset value of the Company shall be the total tangible assets of the Company less the total liabilities of the Company whether actual or contingent, including all provisions for taxation but excluding provision for bad or doubtful debts. 3.4 In the event that any Relevant Event has occurred before the exercise of the Put Option or the Call Option and no adjustment to the Put Option Price and 33 the Call Option Price has been made in the Audited Accounts, the Parties shall procure the Put Option Price to be adjusted in such manner as shall be certified by the Auditors as fair and reasonable in the circumstances. For the avoidance of doubt and notwithstanding anything herein to the contrary, no premium comprising the Put Option Price shall be subject to adjustment and the net asset value of the Company as at the date of the exercise of the Put Option or the Call Option shall be deemed to be the Net Asset Value for the purpose of the calculation of the Put Option Price and the Call Option Price. A copy of the certificate of the Auditors relating to any such adjustment shall be given to Yayeka and the Purchaser within fourteen (14) days of the exercise of the Put Option or the Call Option. The certificate of the Auditors shall, in the absence of fraud or manifest error, be final and binding on each of the Parties. The cost of the Auditors relating to any such adjustment shall be borne by the Company. 3.5 The Put Option Notice or the Call Option Notice (as the case may be), once issued, is binding on both Parties and may not be withdrawn. The Put Option or the Call Option (as the case may be) must be exercised in full. 4. COMPLETION 4.1 Completion of the sale and purchase of the Option Shares shall take place on a Business Date falling the expiry of one month, and in any event not more than forty-five (45) days, after (a) the date of giving of the Notice by Yayeka to the Purchaser (when Clause 3.3 applies) or (b) the date of receipt of the certificate of the Auditors by Yayeka and the Purchaser as referred to in Clause 3.4 (when Clause 3.4 applies) at the registered office of the Company when the following business will be simultaneously transacted :- (i) the Purchaser shall deliver to Yayeka a cashier order for the total Put Option Price of the Option Shares (in case the exercise of the Put Option) or total Call Option Price of the Option Shares (in case the exercise of the Call Option); and (ii) Yayeka shall deliver to the Purchaser the following:- (a) sold notes and instrument of transfer in favour of the Purchaser and/or its nominee(s) in respect of the Option Shares all 34 executed by Yayeka in accordance with the Stamp Duty Ordinance; (b) original share certificate(s) in respect of the Option Shares; and (c) in the event of the exercise of the Put Option, a sum in favour of the Government of the Hong Kong Special Administrative Region for an amount equivalent to the stamp duty payable under the Stamp Duty Ordinance in respect of the bought and sold notes of the Option Shares. 5. WARRANTIES, REPRESENTATIONS, UNDERTAKINGS AND GUARANTEE 5.1 Yayeka hereby warrants and represents to the Purchaser that :- (i) during the Option Period, Shin Kin shall not dispose, or authorise or permit any party to dispose the Option Shares; (ii) Yayeka is and shall on the Option Completion Date be legally and beneficially entitled to sell the Option Shares to the Purchaser; and (iii) on the Option Completion Date, the Option Shares will be sold to the Purchaser free from all liens, charges, encumbrances and third party rights of any kind, and together with all rights attaching thereto as at and all dividends and distributions declared, paid or made in respect thereof after the date of exercise of the Put Option or the Call Option (as the case may be). 5.2 The Purchaser undertakes to notify Yayeka in writing within fourteen (14) days from the date when (a) it agrees to sell 50% or more of the shareholding of the Company during the Option Period or (b) any of the Relevant Events has occurred. 5.3 In consideration of Yayeka agreeing to enter into this Agreement, the Guarantor (as principal obligor and not merely as surety) unconditionally and irrevocably guarantees performance by the Purchaser of all its obligations and liabilities under or arising out of or in connection with this Agreement 35 (referred to herein as the "GUARANTEED OBLIGATIONS") and undertakes to Yayeka that if and whenever the Purchaser is in default, the Guarantor shall duly and promptly perform or procure such performance of the Guaranteed Obligations and indemnify Yayeka against any loss, damage, costs, expenses and liabilities that it may suffer in connection with or arising out of any such failure on the part of the Purchaser. 6. CONFIDENTIALITY Other than such disclosure as may be required by law, The Stock Exchange of Hong Kong Limited, the Securities & Futures Commission or any competent authority, neither of the parties hereto shall make any announcement or release or disclose any information concerning this Agreement or the transactions herein referred to or disclose the identity of the other party(ies) hereto (save disclosure to their respective professional advisers under a duty of confidentiality) without the written consent of the other parties hereto. 7. ASSIGNMENT This Agreement shall be binding on and shall enure for the benefits of the successors and assigns of the parties hereto but shall not be assigned by any party hereto without the prior written consent of the other parties hereto. 8. NOTICES AND OTHER COMMUNICATION 8.1 Any notice or other communication to be given under this Agreement shall be in writing and may be given by hand, by post or facsimile to the following address/number of the party hereto to be served or to such other address/number as shall be notified by such party to the other in writing :- Yayeka Address : Flat A, 8th Floor, 360 Ma Tau Wai Road, Kowloon, Hong Kong Attention : WAI Heung-wah, Hayles Facsimile no. : 852-2716 2668 36 The Purchaser Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 The Guarantor Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 8.2 Any such notice or communication shall be sent to the party hereto to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject-matter of this Agreement. If so given by hand or facsimile, such notice or communication shall be deemed received on the date of despatch and if so sent by post (or, if sent to an address outside of Hong Kong, so sent by first class air-mail) shall be deemed received two (2) Business Days after the date of despatch (in case to an address in Hong Kong) or five (5) Business Days after the date of despatch (in case to an address outside of Hong Kong). 9. COSTS AND EXPENSES Each party hereto shall bear its own legal costs and expenses incurred in the negotiation, preparation and execution of this Agreement. Stamp duty payable in respect of the sale and purchase of the Option Shares shall be borne by Yayeka if Yayeka exercises the Put Option or by the Purchaser if the Purchaser exercises the Call Option, as the case may be. 37 10. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the Laws of Hong Kong and the parties hereto agree to submit to the non-exclusive jurisdiction of its courts. 11. PROCESS AGENT [PLEASE NOTE THAT FULL NAME AND ADDRESS OF THE PURCHASER'S SOLICITORS HAVE BEEN STATED] The Purchaser hereby irrevocably authorizes and appoints Arculli Fong & Ng (the "PURCHASER'S SOLICITORS") at 908 Hutchison House, Central, Hong Kong (or such other person(s), being resident in Hong Kong, as it may from time to time appoint as its agent(s) and notify to Yayeka) to accept service of all legal process arising out or in connection with this Agreement and service on the Purchaser's Solicitors (or such substitute(s)) shall be deemed to be service on the Purchaser. [Remainder of this page intentionally left blank] 38 IN WITNESS whereof the parties hereto have signed this Agreement the day and year first above written. SIGNED by ) ) a director, for and on ) behalf of Yayeka ) Enterprises Limited ) in the presence of :- ) SIGNED by ) ) a director, for and on ) behalf of FNG International ) Holdings Limited ) in the presence of :- ) SIGNED by ) ) a director, for and on ) behalf of China Finance ) Online Co. Limited ) in the presence of :- ) 39 SCHEDULE A CALL OPTION NOTICE [Date] [Name and address of Yayeka] Dear Sirs, We refer to the option agreement dated * , 2007 (the "Agreement") entered into between you and us relating to shares in Daily Growth Investment Company Limited (Chinese Characters) and hereby exercise the Call Option in accordance with the terms and conditions contained in the Agreement by giving you this Call Option Notice and that completion of the sale and purchase of the Option Shares shall take place on [date] at * a.m./p.m. at [address]. Terms defined in the Agreement have the same meanings herein. Yours faithfully, for and on behalf of FNG International Holdings Limited 40 SCHEDULE B PUT OPTION NOTICE [Date] [Name and address of the Purchaser] Dear Sirs, We refer to the option agreement dated *, 2007 (the "Agreement") entered into between you and us relating to shares in Daily Growth Investment Company Limited (Chinese Characters) and hereby exercise the Put Option in accordance with the terms and conditions contained in the Agreement by giving you this Put Option Notice and that completion of the sale and purchase of the Option Shares shall take place on [date] at * a.m./p.m. at [address]. Terms defined in the Agreement have the same meanings herein. Yours faithfully, for and on behalf of Yayeka Enterprises Limited 41 EX-4.56 34 h02185exv4w56.txt EX-4.56 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES Exhibit 4.56 DATED THE _____ DAY OF __________, 2007 HUNG YUNG and FNG INTERNATIONAL HOLDINGS LIMITED and CHINA FINANCE ONLINE CO. LIMITED ---------- AGREEMENT for the sale and purchase of shares in Daily Growth Investment Company Limited (Chinese Characters) ---------- F. ZIMMERN & CO. Solicitors & Notaries Suites 1501-1503, 15th Floor, Gloucester Tower, The Landmark, 15 Queen's Road Central, Hong Kong Tel: (852) 2526-4373 Fax: (852) 2801-4548 Ref: AN/PC/S14/2007 THIS AGREEMENT is made on the ____________ day of ____________, 2007. BETWEEN:- 1. HUNG YUNG whose correspondence address is at Flat F, 13th Floor, On Ping Mansion, Lei King Wan, Sai Wan Ho, Hong Kong (the "VENDOR"); 2. FNG INTERNATIONAL HOLDINGS LIMITED, a company incorporated in the British Virgin Islands whose registered address is at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands (the "PURCHASER"); and 3. CHINA FINANCE ONLINE CO. LIMITED, a company incorporated in Hong Kong whose registered office is situate at Room 908, 9th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong (the "GUARANTOR"). (The Vendor and the Purchaser are collectively referred to as the "PARTIES" and each as a "PARTY") WHEREAS:- (A) Daily Growth Investment Company Limited (Chinese Characters) (the "COMPANY") is a private limited company incorporated under the laws of Hong Kong on 6 October 1971 and has an authorised share capital of HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each, of which 100,000 ordinary shares have been issued and are fully paid up. The Company is a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong. Particulars of the Company are set out in Schedule 1. (B) The Vendor is the legal and beneficial owner of 5,000 issued ordinary shares of the Company, representing 5 per cent. of the entire issued share capital of the Company (the "SALE SHARES"). (C) The Vendor has agreed to sell, and the Purchaser has agreed to purchase, the Sale Shares on the terms and conditions hereinafter appearing. 1 (D) The Purchaser is a wholly owned subsidiary of the Guarantor. (E) The Guarantor has agreed to guarantee as the primary obligor for the due performance of the Purchaser under this Agreement. AND NOW IT IS HEREBY AGREED as follows 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, unless otherwise expressed or required by context, the following expressions shall have the respective meanings set opposite thereto :-
Expression Meaning - ---------- ------- "Accounts" means the audited profit and loss accounts for the period ended on and the balance sheet as at the Accounts Date of the Company; "Accounts Date" means 31 December 2006; "Approval" have the meaning ascribed to it in Clause 2.1(b) hereof; "Business Day" means a day, other than a "general holiday" (as defined in the General Holidays Ordinance (Chapter 149 of the Laws of Hong Kong)), Saturday and any day on which a tropical cyclone warning No. 8 or above is hoisted or remains hoisted between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon or on which a "black" rainstorm warning signal is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon, on which commercial banks are generally open for banking business in Hong Kong;
2 "Completion Accounts" means the profit and loss accounts for the period ended on and the balance sheet as at the Completion Date of the Company; "Completion Date" means the date on which completion of the sale and purchase of the Sale Shares takes place as mentioned in Clause 4 hereof; "Consideration" has the meaning ascribed to it in Clause 3 hereof; "Deposit" has the meaning ascribed to it in Clause 3.2(a) hereof; "Disclosure Letter" means the disclosure letter from the Vendor to the Purchaser to be delivered at Completion in the form identical to that attached hereto as Schedule 3 hereto or with lesser disclosures; "Hong Kong" means the Hong Kong Special Administrative Region of the People's Republic of China; "Liabilities" means the total liabilities of the Company whether actual or contingent as at Completion, and for the avoidance of doubt, including all provisions for taxation and bad debts; "NAV" means the Tangible Assets less the Liabilities; "Shares" means issued ordinary shares of HK$100 each in the capital of the Company, and "Shareholders" shall be construed accordingly; "SFC" means the Securities and Futures Commission; "SFO" means the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong);
3 "Stock Exchange" The Stock Exchange of Hong Kong Limited; "Tangible Assets" means the total tangible assets of the Company as at Completion, including an amount of HK$794,157.41 due from Mr. Cheung Wing Cheung as at 1 August 2007 to the Company to be accepted by the Parties as accounts receivable without any provision for non-recovery; "Vendor's Solicitors" means F. Zimmern & Co; and "HK$" and "Cent" means Hong Kong Dollars and Cents respectively.
1.2 The headings to the Clauses of this Agreement are for ease of reference only and shall be ignored in interpreting this Agreement. 1.3 Reference to Clauses and Schedules are references to Clauses and Schedules of or to this Agreement. 1.4 Words and expressions in the singular include the plural and vice versa. 1.5 Reference to person include any public body and any body of persons, corporate or unincorporated. 1.6 Reference to ordinances, statutes, legislation or enactments shall be construed as a reference to such Ordinances, statutes, legislation or enactments as may be amended or re-enacted from time to time and for the time being in force. 2. CONDITIONS PRECEDENT 2.1 Completion of this Agreement shall be conditional upon :- (a) the Company remains a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the SFO up to Completion; (b) the SFC giving its written approval to approve the Purchaser to 4 become a substantial shareholder of the Company (the "APPROVAL"); and (c) the Purchaser shall, in addition to the Sale Shares to be acquired pursuant hereto, acquire on the Completion Date Shares from other existing Shareholders which together with the Sale Shares, shall in aggregate represent not less than 75% of the entire issued share capital of the Company as at the Completion Date. 2.2 The Vendor will use her best endeavours to procure the fulfilment of the condition set out in Clauses 2.1 (a) and 2.1(c) hereof and the Purchaser will use its best endeavours to procure the fulfilment of the condition set out in Clause 2.1(b) hereof. 2.3 If (i) the condition as set out in Clause 2.1(a) hereof cannot be fulfilled on the Completion Date, the Vendor or the Purchaser may, or (ii) the condition as set out in Clause 2.1(c) hereof cannot be fulfilled on the Completion Date, the Purchaser may terminate this Agreement. In any of such event, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Upon the refund, this Agreement shall lapse and no Party shall have any claim against the other Party except in respect of any antecedent breach. 2.4 If the condition as set out in Clause 2.1(b) hereof cannot be fulfilled on or before 31 December 2007 (the "CONDITIONS DEADLINE"), the Vendor will allow the Purchaser to extend the Conditions Deadline for a period up to three (3) calendar months from 1 January 2008 (the "EXTENDED PERIOD") provided that the Purchaser shall pay compensation (the "COMPENSATION") to the Vendor, unless the delay is due to the proven default of the Vendor, to be arrived at by the following formula :- C = [(HK$3 * S) * 3] * D/91 C = the total Compensation payable by the Purchaser to the Vendor S = the number of the Sale Shares D = the number of days from 1 January 2008 up to and including (i) the Completion Date; or (ii) the day of the receipt of the Notice 5 (as defined below) by the Vendor; or (iii) 31 March 2008, as the case may be, to be determined in the manner as provided in Clauses 2.5 (a) and (b) The Purchaser may serve a written notice to the Vendor not to proceed with the Completion (the "NOTICE") during the Extended Period. 2.5 (a) In the event that Completion takes place before the expiry of the Extended Period, the Purchaser shall pay the Compensation calculated up to the Completion Date to the Vendor on the Completion Date. (b) In the event that the Purchaser shall fail to complete the purchase of the Sale Shares in accordance with the terms of this Agreement (including failure to complete by reason of the failure to obtain the Approval) other than due to the proven default of the Vendor, half of the Deposit shall be forfeited to the Vendor as liquidated damages (the "FORFEITURE") and in addition, if the Conditions Deadline is extended, the Vendor shall also be entitled to deduct the Compensation (calculated up to the day of the receipt of the Notice by the Vendor if the Notice is served by the Purchaser or calculated up to 31 March 2008 if no Notice is served by the Purchaser) from the balance of the Deposit (the "DEDUCTION"). The remaining balance of the Deposit (after the Forfeiture and any Deduction) shall be returned to the Purchaser without interest within seven (7) days from the date of the receipt of the Notice by the Vendor or 31 March 2008, as the case may be. After the Forfeiture and any Deduction, the Vendor shall have no claim whatsoever against the Purchaser under this Agreement. 2.6 If the Vendor shall fail to complete the sale of the Sale Shares in accordance with the terms of this Agreement due to the proven default of the Vendor, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Subject to the aforesaid payment, the Purchaser shall have no claim whatsoever against the Vendor under this Agreement. 6 3. SALE AND PURCHASE OF THE SALE SHARES AND THE CONSIDERATION 3.1 Subject to the terms and conditions of this Agreement, the Vendor as beneficial owner hereby agrees to sell to the Purchaser and the Purchaser, relying on the representations and warranties made or given by the Vendor and subject to the terms and conditions contained in this Agreement, agree to purchase from the Vendor the Sale Shares free from all claims, charges, liens, encumbrances, equities and third party rights and together with all rights attached thereto and all dividends and distributions declared, paid or made in respect thereof after the Completion Date at a consideration (the "CONSIDERATION") to be arrived at by the following formula :- C = P * S C = the total consideration payable by the Purchaser to the Vendor for the Sale Shares P = the price per Share based on the NAV as at the Completion Date plus a premium of HK$15 per Share (which is to reflect the value of the trading right held by the Company in the Stock Exchange) S = the number of Sale Shares 3.2 Subject to Clause 3.3 hereof, the Consideration shall be paid by the Purchaser to the Vendor as follows:- (a) a sum of HK$250,000 (i.e. HK$50 per Sale Share) as deposit and part payment of the Consideration (the "DEPOSIT") to be paid on the signing of this Agreement by way of delivering a solicitor's cheque to the Vendor's Solicitors as stakeholder to be held by it subject to the provisions of this Agreement and the sum of HK$1,000,000 being the earnest money already paid by the Purchaser to the Purchaser's Solicitors as stakeholder under the term sheet dated 25 July 2007 be released to the Purchaser after payment of the Deposit; and (b) the balance of the Consideration to be paid on Completion by way of a solicitor's cheque to the Vendor. 7 3.3 (a) The Vendor shall procure that the draft pro-forma Completion Accounts (the "DRAFT PRO-FORMA COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser not less than six (6) days prior to the Completion Date. Completion shall take place on the basis of the draft pro-forma Completion Accounts. (b) After Completion, the Vendor shall procure the final Completion Accounts (the "FINAL COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser within fourteen (14) days after the Completion Date. Subject to Clause 3.3(d), if the final Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. If the final Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. The Purchaser shall provide with the Vendor full access to the books, records and resources of the Company so as to enable the Vendor to procure the final Completion Accounts to be drawn up. (c) The basis and policy of accounting adopted in preparing the pro-forma draft Completion Accounts and the final Completion Accounts shall be in accordance with the generally accepted accounting practices in Hong Kong. (d) In the event of a dispute between the Parties as to the amount of the NAV as shown in the final Completion Accounts, the Vendor or the Purchaser may procure that the final Completion Accounts be audited by the auditors of the Company within forty-five (45) days from the date of delivery of the final Completion Accounts provided that the procurement of the audited final Completion Accounts shall be made by the relevant Party within seven (7) days from the date of delivery of 8 the final Completion Accounts. (e) If the audited Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. If the audited Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. The Vendor together with the other vendors of the one part and the Purchaser of the other part shall each be responsible for payment of 50% of the cost and expenses for the preparation and completion of the audited Completion Accounts. 4. COMPLETION 4.1 Subject to the provisions in Clause 2 hereof, completion of the sale and purchase of the Sale Shares shall take place at the offices of Arculli Fong & Ng (the "PURCHASER'S SOLICITORS"), the Solicitors for the Purchaser, at 908 Hutchison House, Central, Hong Kong or any other place as the Parties may agree at 5:00 p.m. on a Friday of the week immediately following the week when the Approval is granted by the SFC, when the following business shall simultaneously be transacted :- (a) the Purchaser shall deliver to the Vendor the following :- (i) a solicitor's cheque for payment of the balance of the Consideration and the Vendor's Solicitors will release the Deposit to the Vendor; and (ii) a certified copy of each of the minutes of the board of directors of the Purchaser and the Guarantor approving this 9 Agreement and authorizing/confirming the authorization of an authorised person for signing of this Agreement and (for the Purchaser) the bought note and the instrument of transfer and any other incidental documents hereof; (b) the Vendor shall deliver to the Purchaser the following :- (i) sold notes and instrument of transfer in favour of the Purchaser in respect of the Sale Shares all executed by the Vendor in accordance with the Stamp Duty Ordinance; (ii) original share certificate(s) or re-issued share certificate(s) in respect of the Sale Shares; (iii) such other documents as may be reasonably required to give a good and effective transfer of title to the Sale Shares to the Purchaser and to enable them to become the registered holders thereof; (iv) a cheque drawn in favour of the Government of the Hong Kong Special Administrative Region for an amount equivalent to the stamp duty payable under the Stamp Duty Ordinance in respect of the sold notes in respect of the Sale Shares; (v) a certified copy of the minutes of the board of directors of the Vendor (if the Vendor is a corporate) approving the sale of the Sale Shares and authorizing/confirming the authorization of an authorised person for signing of this Agreement and the sold note and the instrument of transfer and any other incidental documents hereof; (vi) to the extent that the same are not already in the possession of the Company or its agents, the certificate of incorporation, business registration certificate, common seal of the Company, all copies of memorandum and articles of association of the Company, the statutory books of the Company duly made up to date, any unissued share 10 certificates, all current insurance policies, books and accounts and other records, cheque books, title deeds and evidence of ownership to all assets of the Company and all current contracts; (vii) an original of the Disclosure Letter duly executed by the Vendor in the form identical to that attached as Schedule 3 hereto or with lesser disclosures; (c) the Vendor shall cause a meeting of the board of directors of the Company to be held at which resolutions shall be passed to :- (i) approve the transfer of the Sale Shares; (ii) register (subject to stamping) the transfer of the Sale Shares referred to above and to issue new certificate(s) for the Sale Shares in the name(s) of the Purchaser; (iii) appoint one person as the Purchaser may nominate as the Chairman of the Company and such person(s) as the Purchaser may nominate as director(s) of the Company and (subject to the approval of the SFC) one person as the Purchaser may nominate as the Responsible Officer of the Company all to take effect from the close of business of the said meeting if so required by the Purchaser; and (iv) amend all banking authorisations, instructions and mandates of the Company in such manner as the Purchaser may direct; and (d) the Purchaser shall :- (i) produce for inspection by the Vendor the bought notes in respect of the Sale Shares executed by the Purchaser in compliance with the Stamp Duty Ordinance; and (ii) procure the stamping of the bought and sold notes and the instrument of transfer in respect of the Sale Shares as soon 11 as practicable thereafter and present the said instrument of transfer together with the share certificate(s) in respect of the Sale Shares to the Company for registration of the transfer. 4.2 The transactions described in Clause 4.1 hereof shall take place at the same time, so that in default of the performance of any such transactions by a Party, the other Party shall not be obliged to complete the sale and purchase aforesaid. 5. REPRESENTATIONS AND WARRANTIES AND GUARANTEE 5.1 Save as disclosed in the Disclosure Letter and documents and information provided to the Purchaser and/or its advisors, the Vendor hereby represents and warrants to the Purchaser that each of the matters set out in Schedule 2 are as at the date hereof and will be for all times up to and including the Completion Date, true and correct in all material respects. 5.2 From the date of this Agreement until the Completion Date the Vendor shall use her best endeavours to procure that (save with the prior consent in writing or of the Purchaser, such consent not to be unreasonably withheld or delayed) the Company shall not :- (a) issue or agree to issue any of its share or loan capital or grant or agree to grant any option over or right to acquire any of its share or loan capital; (b) enter into any contract (otherwise than in the ordinary course of business) or any capital commitment; (c) create or permit to arise any lien, charge, pledge, mortgage or other security interest on or in respect of any of its undertaking, property or assets; (d) appoint any directors other than as provided in this Agreement; or (e) increase the remuneration of its employees (save as payment of discretionary bonus and save that the increase is made pursuant to the 12 relevant employment contract) and the Vendor shall use her best endeavours to procure that the Purchaser be kept regularly informed of the affairs of the Company until the Completion Date. 5.3 The liability of the Vendor in respect of any breach of the warranties or representations as set out in Schedule 2 shall be limited as follows:- (a) the maximum liability of the Vendor, if any, under this Agreement shall be 25% of the Consideration; (b) no claims may be brought against the Vendor in respect of any claim of damages for breach of warranty(ies) or representation(s) as set out in Schedule 2 after the expiry of six months from the Completion Date. 5.4 In consideration of the Vendor agreeing to enter into this Agreement, the Guarantor (as principal obligor and not merely as surety) unconditionally and irrevocably guarantees performance by the Purchaser of all its obligations and liabilities under or arising out of or in connection with this Agreement (referred to herein as the "GUARANTEED OBLIGATIONS") and undertakes to the Vendor that if and whenever the Purchaser is in default, the Guarantor shall duly and promptly perform or procure such performance of the Guaranteed Obligations and indemnify the Vendor against any loss, damage, costs, expenses and liabilities that she may suffer in connection with or arising out of any such failure on the part of the Purchaser. 6. SEVERABILITY If at any time any one or more provisions hereof is or becomes invalid, illegal, unenforceable or incapable of performance in any respect, the validity, legality, enforceability or performance of the remaining provisions hereof shall not thereby in any way be affected or impaired. 7. ENTIRE AGREEMENT This Agreement constitutes the entire agreement and understanding between 13 the Parties in connection with the subject-matter of this Agreement and supersedes all previous proposals, representations, warranties, agreements or undertakings relating thereto whether oral, written or otherwise and none of the Parties has relied on any such proposals, representations, warranties, agreements or undertakings. 8. TIME 8.1 Time shall be of the essence of this Agreement. 8.2 No time or indulgence given by any Party to the other Party shall be deemed or in any way be construed as a waiver of any of her/its rights and remedies hereunder. 9. CONFIDENTIALITY Other than such disclosure as may be required by law, the SFC, the Stock Exchange or other competent authority, neither of the parties hereto shall make any announcement or release or disclose any information concerning this Agreement or the transactions herein referred to or disclose the identity of the other party(ies) hereto (save disclosure to their respective professional advisers under a duty of confidentiality) without the written consent of the other parties hereto. 10. ASSIGNMENT This Agreement shall be binding on and shall enure for the benefits of the successors and assigns of the Parties but shall not be assigned by any party hereto without the prior written consent of the other parties hereto. 11. NOTICES AND OTHER COMMUNICATION 11.1 Any notice or other communication to be given under this Agreement shall be in writing and may be given by hand, by post or facsimile to the following 14 address/number of the party hereto to be served or to such other address/number as shall be notified by such party to the other in writing :- The Vendor Address : Flat F, 13th Floor, On Ping Mansion, Lei King Wan, Sai Wan Ho, Hong Kong Facsimile no. : 852-2362 3655 The Purchaser Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 The Guarantor Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 11.2 Any such notice or communication shall be sent to the party hereto to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject-matter of this Agreement. If so given by hand or facsimile, such notice or communication shall be deemed received on the date of despatch and if so sent by post (or, if sent to an address outside of Hong Kong, so sent by first class air-mail) shall be deemed received two (2) Business Days after the date of despatch (in case to an address in Hong Kong) or five (5) Business Days after the date of despatch (in case to an address outside of Hong Kong). 15 12. COSTS AND EXPENSES Each party hereto shall bear her/its own legal and professional fees, costs and expenses incurred in the negotiation, preparation and execution of this Agreement. The stamp duty in respect of the Sale Shares shall be borne by the Vendor and the Purchaser in equal shares. 13. COUNTERPARTS This Agreement may be executed in any number of counterparts each of which when executed and delivered is an original, but all the counterparts together constitute the same document. 14. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of Hong Kong and the parties hereto agree to submit to the non-exclusive jurisdiction of the courts of Hong Kong. 15. PROCESS AGENT The Purchaser hereby irrevocably authorizes and appoints the Purchaser's Solicitors (or such other person(s), being resident in Hong Kong, as it may from time to time appoint as its agent(s) and notify to the Vendor) to accept service of all legal process arising out or in connection with this Agreement and service on the Purchaser's Solicitors (or such substitute(s)) shall be deemed to be service on the Purchaser. [Remainder of this page intentionally left blank] 16 IN WITNESS whereof the Parties have executed this Agreement the day and year first above written. SIGNED by Ms. Hung Yung ) in the presence of :- ) ) ) ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of FNG ) International Holdings ) Limited in the presence of :- ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of China ) Finance Online Co. Limited ) in the presence of :- ) 17 SCHEDULE 1 PARTICULARS OF THE COMPANY 1. Name : Daily Growth Investment Company Limited (Chinese Characters) 2. Registered office : Room 603, Peter Building, 58-62 Queen's Road, Central, Hong Kong. 3. Company Number : 025436 4. Date of Incorporation : 6 October 1971 5. Place of Incorporation : Hong Kong 6. Authorised share capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 7. Issued and paid up capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 8. Directors : TING WANG Wan-sun, Nancy WAI CHAN Ye, Kannie WAI Heung-wah, Hayles YEH WANG Zung-sing, Helen WONG Long-sau, Ivis 9. Secretary : Hang Cheuk Secretaries Limited 10 Auditors : J Kong & Co. 11. Financial year end : 31 December 18 SCHEDULE 2 REPRESENTATIONS AND WARRANTIES General; Corporate Status 1.1 All information regarding the Company provided by or on behalf of the Vendor and/or the Company to the Purchaser is complete, correct and true in a material respect. 1.2 The Company has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation, and there has been no resolution, petition or order for the winding-up of the Company and no receiver has been appointed in respect thereof, nor are any such resolutions, orders and appointments imminent or likely. Shareholdings and Share Capital etc. 2.1 The Sale Shares comprise a percentage (as referred to in Recital (B)) of the issued share capital of the Company, and there are not in issue any other shares, debentures, warrants, options or securities. 2.2 The Company is not under any contract, options, warrants or any other obligations regarding any part of its capital, issued or unissued, or for the issue of any shares, debentures, warrants, options, or other similar securities. 2.3 Save as disclosed in the Disclosure Letter, the Vendor has acquired the Shares in compliance with the articles of association of the Company and the laws under the Companies Ordinance and is the beneficial owner of the Sale Shares free from all liens, charges, pledges, options, contracts, preemption rights, third party rights and equities, and incumbrances of whatever nature and the same are freely transferable by the Vendor without the consent, approval, permission, licence or concurrence of any third party. 2.4 The Vendor is fully capable of entering into this Agreement and to perform all 19 obligations and duties hereunder without the consent, approval, permission, licence or concurrence of any third party. Business etc. 3.1 The principal business activity of the Company is security trading. 3.2 In respect of the said business being carried on, all qualifications, registrations, licences or other approvals necessary for the proper conduct of business have been obtained and maintained and to the knowledge of the Vendor, all the relevant rules and regulations of the SFC and the Stock Exchange applicable to the Company have been observed and complied with in a material respect and no event has occurred whereby any of the same or the renewal thereof is or likely to be thereby adversely affected, suspended or revoked. Accounts 4.1 The Accounts have been prepared in accordance with generally accepted accounting practice in Hong Kong and comply with the Companies Ordinance, and show a true and fair view of the affairs and financial position of the Company as at, and the profits and loss of the Company for the period ended on, the Accounts Date. 4.2 All accounting records of the Company for the past seven (7) years are in the possession of the Company and have been properly written up, kept and maintained in accordance with generally accepted accounting practice and together shows a true and fair view of the affairs and financial position of the Company. Taxation 5.1 The Company has paid all taxes, duties and levies as the same became due and payable and to the knowledge of the Vendor, the Company is not nor is likely to be subject to any tax penalties. 20 5.2 The Company has complied with the Inland Revenue Ordinance and has kept proper records for tax purposes for the past seven (7) years and have filed all tax returns, and to the knowledge of the Vendor, there is no pending dispute with the Inland Revenue Department. Dispute, Claims and Litigation 6. There is no claim, arbitration or litigation to which the Company is a party or which, to the knowledge of the Vendor, is pending or threatened. Repetition at Completion 7. All warranties and representations contained in the foregoing provisions of this Schedule shall be deemed to be repeated immediately before completion of this Agreement and to relate to the facts then existing. 21 SCHEDULE 3 FORM OF DISCLOSURE LETTER [DATE] FNG INTERNATIONAL HOLDINGS LIMITED Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands Dear Sirs, DISCLOSURE LETTER This is the Disclosure Letter referred to in the Sale and Purchase Agreement dated [DATE] and entered into by and between Hung Yung, FNG International Holdings Limited and China Finance Online Co. Limited (the "Agreement"). Capitalized terms appearing in this letter shall adopt the same meaning as defined in the Agreement. A. GENERAL DISCLOSURES The following matters are deemed to be disclosed by this letter: 1. AGREEMENT: All matters set out or referred to in the Agreement, including, without limitation, all schedules and documents annexed thereto and any other agreements entered into pursuant to, or contemplated by, the Agreement. 2. COMPANIES REGISTRY: All matters registered against, or which would be disclosed by a search made in respect of the Company at the Companies Registry in Hong Kong. 3. ACCOUNTS: All matters disclosed, provided for, noted or referred to in the audited accounts of the Company which have been provided to the Purchaser. 4. INSPECTION: All matters which have or ought reasonably to have, been disclosed by inspection of the statutory books, books of account and business records of 22 the Company, all of which have been made available to the Purchaser and/or its advisers for inspection. 5. OTHERS MATTERS DISCLOSED: All matters set out or referred to in any letter, note, schedule or other document from or provided by the Vendor, the Company and/or their advisers and/or agents to the Purchaser and/or its advisers and/or agents in connection with the sale and purchase of the Sale Shares. Where any such letter, note, schedule or other document includes an expression of opinion, no representation or warranty is given as to its accuracy. B. SPECIFIC DISCLOSURE We write to disclose the following and the paragraph numbers used below correspond to the representations and warranties as set out in Schedule 2 to the Agreement: Paragraphs 1.1 and 2.3 The following documents cannot be found in the company kit of the Company or located by the Vendor or are incomplete. As such, no representation and warranty will be made on these missing or incomplete documents :- 1. Original corporate documents from the date of incorporation to the year of 1987; 2. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 1 share from Helen Zung Sing Yeh to Shun Kin Enterprises Limited on 20th February 1987; 3. Original cancelled share certificate in the names of Helen Zung Sing Yeh and Shun Kin Enterprises Limited; 4. Original Application for 42,300 shares made on 24th February 1987 - 8 sets; 5. Original share certificates in respect of the allotment made on 24th February 1987; 6. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares from Mr. Basil D.C. Wood to Mrs. Nancy Ting on 26th April 1988; 7. Original share certificates in respect of the transfer made on 26th April 1988; 8. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 20,525 shares in respect of the following transfer: Mr. Basil D.C. Wood to Midopa Enterprises Limited - 7,610 shares on 23 21.7.1988 Mrs. Wendy Wood to Midopa Enterprises Limited - 1,694 shares on 21.7.1988 Mr. Hsu Zing Ping to Midopa Enterprises Limited - 3,196 shares on 21.7.1988 Mr. Hsu Zing Ping to Billion System Co., Limited - 2,500 shares on 21.7.1988 Mr. Hsu Zing Ping to Mrs. Wang Zau Chin Ngo - 240 shares on 21.7.1988 Mr. Hsu Zing Ping to Eternal Growth Investment Ltd. - 525 shares on 21.7.1988 Mr. Koo Kam Kang to Eternal Growth Investment Ltd. - 4,760 shares on 21.7.1988 9. Original share certificates in respect of the transfer made on 21.7.1988; 10. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 7,715 shares in respect of the following transfer: Ms. Nancy Ting to Ho Chi Kuen Bernard - 2,000 shares on 29.7.1988 Ms. Nancy Ting to Billion System Co., Ltd. - 2,500 shares on 29.7.1988 Ms. Nancy Ting to Stella Wong - 545 shares on 29.7.1988 Shun Kin Ent. Ltd. to Stella Wong - 195 shares on 29.7.1988 Eileen Hwa to Stella Wong - 260 shares on 29.7.1988 Ms. Nancy Ting to Eternal Growth Inv. Ltd. - 2,215 shares on 29.7.1988 11. Original share certificates in respect of the transfer made on 29.7.1988 12. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the transfer from Eileen Hwa to Wong Oi Lun, Ellen on 17.3.1989; 13. Original share certificates in respect of the transfer made on 17.3.1989; 14. Form X(ii) or Form (IXA) showing the resignation of Ms. Stella Wong as the director of the Company made on 1.4.1989; 15. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Wong Oi Lun Ellen to Stella Wong - 1,000 shares on 31.5.1990 Wong Oi Lun Ellen to Tsang Kin Woo - 500 shares on 31.5.1990 Wong Oi Lun Ellen to Chu Ping Im - 500 shares on 31.5.1990 16. Original share certificates in respect of the transfer made on 31.5.1990 17. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Bernard Ho to Zone Bo Ltd. - 2,000 shares on 19.7.1990 18. Original share certificates in respect of the transfer made on 19.7.1990 19. Copy of Consent to act as director of the Company by Mr. Yap E. Hock on 24 9.12.1992 20. A letter dated 10th October 1994, from King Cause Limited and Asian Capital Partners (HK) Limited reporting that 10 share certificates for 50,000 shares have been mislaid and requesting 2 share certificates be issued to them 21. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 50,000 shares in respect of the following transfer: King Cause Ltd.to Billion System Co. Ltd.- 5,000 shares on 12.12.1994; King Cause Ltd. to Eternal Growth Investment Ltd.- 7,500 shares on 12.12.1994; King Cause Ltd. to Midpoa Enterprises Limited- 12,500 shares on 12.12.1994; King Cause Ltd. to Shun Kin Ent. Limited- 17,500 shares on 12.12.1994; King Cause Ltd. to Wang Zau Chin Ngo- 2,500 shares on 12.12.1994; King Cause Ltd. to Tsang Kin Woo- 499 shares on 12.12.1994; King Cause Ltd. to Chu Ping Im - 500 shares on 12.12.1994 King Cause Ltd. to Stella Wong- 2,000 shares on 12.12.1994; King Cause Ltd. to Zone Bo Limited- 2,000 shares on 12.12.1994; King Cause Ltd. and Asian Capital Partners (HK) Limited to Tsang Kin Woo- 1 share on 12.12.1994; 22. Original share certificates in respect of the transfer made on 12.12.1994; 23. Original Declaration of Trust given by King Cause Limited and Asian Capital Partners (HK) Limited on 9.12.1992; 24. Copy of Form D2 and Consent to act reporting the appointment of Mr. Ho Chi Kuen as the director of the company; 25. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares in respect of the following transfer: Billion System Co. Ltd. to Zone Bo Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Eternal Growth Inv. Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Midopa Enterprises Ltd.- 1,250 shares on 15.12.2000; Billion System Co. Ltd. to Shun Kin Enterprises Ltd.- 1,750 shares on 15.12.2000; Billion System Co. Ltd. to Tsang Kin Woo- 500 shares on 15.12.2000; Billion System Co. Ltd. to Chu Ping Im- 500 shares on 15.12.2000; 26. Original share certificates in respect of the transfer made on 15.12.2000; 27. Original Share Certificate of Wang William; 28. Original Board Minutes for approving the share transfer from Zone Bo Limited to Hung Yung made on 22.06.2007; 25 29. Share Certificate of Hung Yung in respect of 5,000 shares; 30. Original Consent to Short Notice dated 16.03.1987 - Elieen Hwa Wang Vung Sing (with the signature of Elieen missing); and 31. Original Consent to Short Notice for 2005 AGM dated 30.05.2005 (missing signatures from Midopa Enterprises Limited, Wong Chan Miu Wan Stella, Chu Ping Im, Tsang Kin Woo). Yours sincerely, - ------------------------------------- Hung Yung 26 EX-4.57 35 h02185exv4w57.txt EX-4.57 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES Exhibit 4.57 DATED THE ________ DAY OF _____________, 2007 CHU PING-IM and FNG INTERNATIONAL HOLDINGS LIMITED and CHINA FINANCE ONLINE CO. LIMITED ---------- AGREEMENT for the sale and purchase of shares in Daily Growth Investment Company Limited (Chinese Characters) ---------- F. ZIMMERN & CO. Solicitors & Notaries Suites 1501-1503, 15th Floor, Gloucester Tower, The Landmark, 15 Queen's Road Central, Hong Kong Tel: (852) 2526-4373 Fax: (852) 2801-4548 Ref: AN/PC/S14/2007 THIS AGREEMENT is made on the ___________ day of _______________, 2007. BETWEEN :- 1. CHU PING-IM whose correspondence address is at Flat H, 17th Floor, Tung Ting Mansion, 4 Taikoo Shing Road, Taikoo Shing, Hong Kong (the "VENDOR"); 2. FNG INTERNATIONAL HOLDINGS LIMITED, a company incorporated in the British Virgin Islands whose registered address is at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands (the "PURCHASER"); and 3. CHINA FINANCE ONLINE CO. LIMITED, a company incorporated in Hong Kong whose registered office is situate at Room 908, 9th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong (the "GUARANTOR"). (The Vendor and the Purchaser are collectively referred to as the "PARTIES" and each as a "PARTY") WHEREAS :- (A) Daily Growth Investment Company Limited (Chinese Characters) (the "COMPANY") is a private limited company incorporated under the laws of Hong Kong on 6 October 1971 and has an authorised share capital of HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each, of which 100,000 ordinary shares have been issued and are fully paid up. The Company is a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong. Particulars of the Company are set out in Schedule 1. (B) The Vendor is the legal and beneficial owner of 2,000 issued ordinary shares of the Company, representing 2 per cent. of the entire issued share capital of the Company (the "SALE SHARES"). (C) The Vendor has agreed to sell, and the Purchaser has agreed to purchase, the 1 Sale Shares on the terms and conditions hereinafter appearing. (D) The Purchaser is a wholly owned subsidiary of the Guarantor. (E) The Guarantor has agreed to guarantee as the primary obligor for the due performance of the Purchaser under this Agreement. AND NOW IT IS HEREBY AGREED as follows 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, unless otherwise expressed or required by context, the following expressions shall have the respective meanings set opposite thereto :-
Expression Meaning - ---------- ------- "Accounts" means the audited profit and loss accounts for the period ended on and the balance sheet as at the Accounts Date of the Company; "Accounts Date" means 31 December 2006; "Approval" have the meaning ascribed to it in Clause 2.1(b) hereof; "Business Day" means a day, other than a "general holiday" (as defined in the General Holidays Ordinance (Chapter 149 of the Laws of Hong Kong)), Saturday and any day on which a tropical cyclone warning No. 8 or above is hoisted or remains hoisted between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon or on which a "black" rainstorm warning signal is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon, on which commercial banks are generally
2 open for banking business in Hong Kong; "Completion Accounts" means the profit and loss accounts for the period ended on and the balance sheet as at the Completion Date of the Company; "Completion Date" means the date on which completion of the sale and purchase of the Sale Shares takes place as mentioned in Clause 4 hereof; "Consideration" has the meaning ascribed to it in Clause 3 hereof; "Deposit" has the meaning ascribed to it in Clause 3.2(a) hereof; "Disclosure Letter" means the disclosure letter from the Vendor to the Purchaser to be delivered at Completion in the form identical to that attached hereto as Schedule 3 hereto or with lesser disclosures; "Hong Kong" means the Hong Kong Special Administrative Region of the People's Republic of China; "Liabilities" means the total liabilities of the Company whether actual or contingent as at Completion, and for the avoidance of doubt, including all provisions for taxation and bad debts; "NAV" means the Tangible Assets less the Liabilities; "Shares" means issued ordinary shares of HK$100 each in the capital of the Company, and "Shareholders" shall be construed accordingly; "SFC" means the Securities and Futures Commission; "SFO" means the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong);
3 "Stock Exchange" The Stock Exchange of Hong Kong Limited; "Tangible Assets" means the total tangible assets of the Company as at Completion, including an amount of HK$794,157.41 due from Mr. Cheung Wing Cheung as at 1 August 2007 to the Company to be accepted by the Parties as accounts receivable without any provision for non-recovery; "Vendor's Solicitors" means F. Zimmern & Co; and "HK$" and "Cent" means Hong Kong Dollars and Cents respectively.
1.2 The headings to the Clauses of this Agreement are for ease of reference only and shall be ignored in interpreting this Agreement. 1.3 Reference to Clauses and Schedules are references to Clauses and Schedules of or to this Agreement. 1.4 Words and expressions in the singular include the plural and vice versa. 1.5 Reference to person include any public body and any body of persons, corporate or unincorporated. 1.6 Reference to ordinances, statutes, legislation or enactments shall be construed as a reference to such Ordinances, statutes, legislation or enactments as may be amended or re-enacted from time to time and for the time being in force. 2. CONDITIONS PRECEDENT 2.1 Completion of this Agreement shall be conditional upon :- (a) the Company remains a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the SFO up to Completion; 4 (b) the SFC giving its written approval to approve the Purchaser to become a substantial shareholder of the Company (the "APPROVAL"); and (c) the Purchaser shall, in addition to the Sale Shares to be acquired pursuant hereto, acquire on the Completion Date Shares from other existing Shareholders which together with the Sale Shares, shall in aggregate represent not less than 75% of the entire issued share capital of the Company as at the Completion Date. 2.2 The Vendor will use his best endeavours to procure the fulfilment of the condition set out in Clauses 2.1 (a) and 2.1(c) hereof and the Purchaser will use its best endeavours to procure the fulfilment of the condition set out in Clause 2.1(b) hereof. 2.3 If (i) the condition as set out in Clause 2.1(a) hereof cannot be fulfilled on the Completion Date, the Vendor or the Purchaser may, or (ii) the condition as set out in Clause 2.1(c) hereof cannot be fulfilled on the Completion Date, the Purchaser may terminate this Agreement. In any of such event, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Upon the refund, this Agreement shall lapse and no Party shall have any claim against the other Party except in respect of any antecedent breach. 2.4 If the condition as set out in Clause 2.1(b) hereof cannot be fulfilled on or before 31 December 2007 (the "CONDITIONS DEADLINE"), the Vendor will allow the Purchaser to extend the Conditions Deadline for a period up to three (3) calendar months from 1 January 2008 (the "EXTENDED PERIOD") provided that the Purchaser shall pay compensation (the "COMPENSATION") to the Vendor, unless the delay is due to the proven default of the Vendor, to be arrived at by the following formula :- C = [(HK$3 * S) * 3] * D/91 C = the total Compensation payable by the Purchaser to the Vendor S = the number of the Sale Shares D = the number of days from 1 January 2008 up to and including (i) 5 the Completion Date; or (ii) the day of the receipt of the Notice (as defined below) by the Vendor; or (iii) 31 March 2008, as the case may be, to be determined in the manner as provided in Clauses 2.5 (a) and (b) The Purchaser may serve a written notice to the Vendor not to proceed with the Completion (the "NOTICE") during the Extended Period. 2.5 (a) In the event that Completion takes place before the expiry of the Extended Period, the Purchaser shall pay the Compensation calculated up to the Completion Date to the Vendor on the Completion Date. (b) In the event that the Purchaser shall fail to complete the purchase of the Sale Shares in accordance with the terms of this Agreement (including failure to complete by reason of the failure to obtain the Approval) other than due to the proven default of the Vendor, half of the Deposit shall be forfeited to the Vendor as liquidated damages (the "FORFEITURE") and in addition, if the Conditions Deadline is extended, the Vendor shall also be entitled to deduct the Compensation (calculated up to the day of the receipt of the Notice by the Vendor if the Notice is served by the Purchaser or calculated up to 31 March 2008 if no Notice is served by the Purchaser) from the balance of the Deposit (the "DEDUCTION"). The remaining balance of the Deposit (after the Forfeiture and any Deduction) shall be returned to the Purchaser without interest within seven (7) days from the date of the receipt of the Notice by the Vendor or 31 March 2008, as the case may be. After the Forfeiture and any Deduction, the Vendor shall have no claim whatsoever against the Purchaser under this Agreement. 2.6 If the Vendor shall fail to complete the sale of the Sale Shares in accordance with the terms of this Agreement due to the proven default of the Vendor, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Subject to the aforesaid payment, the Purchaser shall have no claim whatsoever against the Vendor under this Agreement. 6 3. SALE AND PURCHASE OF THE SALE SHARES AND THE CONSIDERATION 3.1 Subject to the terms and conditions of this Agreement, the Vendor as beneficial owner hereby agrees to sell to the Purchaser and the Purchaser, relying on the representations and warranties made or given by the Vendor and subject to the terms and conditions contained in this Agreement, agree to purchase from the Vendor the Sale Shares free from all claims, charges, liens, encumbrances, equities and third party rights and together with all rights attached thereto and all dividends and distributions declared, paid or made in respect thereof after the Completion Date at a consideration (the "CONSIDERATION") to be arrived at by the following formula :- C = P * S C = the total consideration payable by the Purchaser to the Vendor for the Sale Shares P = the price per Share based on the NAV as at the Completion Date plus a premium of HK$15 per Share (which is to reflect the value of the trading right held by the Company in the Stock Exchange) S = the number of Sale Shares 3.2 Subject to Clause 3.3 hereof, the Consideration shall be paid by the Purchaser to the Vendor as follows:- (a) a sum of HK$100,000 (i.e. HK$50 per Sale Share) as deposit and part payment of the Consideration (the "DEPOSIT") to be paid on the signing of this Agreement by way of delivering a solicitor's cheque to the Vendor's Solicitors as stakeholder to be held by it subject to the provisions of this Agreement and the sum of HK$1,000,000 being the earnest money already paid by the Purchaser to the Purchaser's Solicitors as stakeholder under the term sheet dated 25 July 2007 be released to the Purchaser after payment of the Deposit; and (b) the balance of the Consideration to be paid on Completion by way of a solicitor's cheque to the Vendor. 7 3.3 (a) The Vendor shall procure that the draft pro-forma Completion Accounts (the "DRAFT PRO-FORMA COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser not less than six (6) days prior to the Completion Date. Completion shall take place on the basis of the draft pro-forma Completion Accounts. (b) After Completion, the Vendor shall procure the final Completion Accounts (the "FINAL COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser within fourteen (14) days after the Completion Date. Subject to Clause 3.3(d), if the final Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. If the final Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. The Purchaser shall provide with the Vendor full access to the books, records and resources of the Company so as to enable the Vendor to procure the final Completion Accounts to be drawn up. (c) The basis and policy of accounting adopted in preparing the pro-forma draft Completion Accounts and the final Completion Accounts shall be in accordance with the generally accepted accounting practices in Hong Kong. (d) In the event of a dispute between the Parties as to the amount of the NAV as shown in the final Completion Accounts, the Vendor or the Purchaser may procure that the final Completion Accounts be audited by the auditors of the Company within forty-five (45) days from the date of delivery of the final Completion Accounts provided that the procurement of the audited final Completion Accounts shall be made by the relevant Party within seven (7) days from the date of delivery of 8 the final Completion Accounts. (e) If the audited Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. If the audited Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. The Vendor together with the other vendors of the one part and the Purchaser of the other part shall each be responsible for payment of 50% of the cost and expenses for the preparation and completion of the audited Completion Accounts. 4. COMPLETION 4.1 Subject to the provisions in Clause 2 hereof, completion of the sale and purchase of the Sale Shares shall take place at the offices of Arculli Fong & Ng (the "PURCHASER'S SOLICITORS"), the Solicitors for the Purchaser, at 908 Hutchison House, Central, Hong Kong or any other place as the Parties may agree at 5:00 p.m. on a Friday of the week immediately following the week when the Approval is granted by the SFC, when the following business shall simultaneously be transacted :- (a) the Purchaser shall deliver to the Vendor the following :- (i) a solicitor's cheque for payment of the balance of the Consideration and the Vendor's Solicitors will release the Deposit to the Vendor; and (ii) a certified copy of each of the minutes of the board of directors of the Purchaser and the Guarantor approving this 9 Agreement and authorizing/confirming the authorization of an authorised person for signing of this Agreement and (for the Purchaser) the bought note and the instrument of transfer and any other incidental documents hereof; (b) the Vendor shall deliver to the Purchaser the following :- (i) sold notes and instrument of transfer in favour of the Purchaser in respect of the Sale Shares all executed by the Vendor in accordance with the Stamp Duty Ordinance; (ii) original share certificate(s) or re-issued share certificate(s) in respect of the Sale Shares; (iii) such other documents as may be reasonably required to give a good and effective transfer of title to the Sale Shares to the Purchaser and to enable them to become the registered holders thereof; (iv) a cheque drawn in favour of the Government of the Hong Kong Special Administrative Region for an amount equivalent to the stamp duty payable under the Stamp Duty Ordinance in respect of the sold notes in respect of the Sale Shares; (v) a certified copy of the minutes of the board of directors of the Vendor (if the Vendor is a corporate) approving the sale of the Sale Shares and authorizing/confirming the authorization of an authorised person for signing of this Agreement and the sold note and the instrument of transfer and any other incidental documents hereof; (vi) to the extent that the same are not already in the possession of the Company or its agents, the certificate of incorporation, business registration certificate, common seal of the Company, all copies of memorandum and articles of association of the Company, the statutory books of the Company duly made up to date, any unissued share 10 certificates, all current insurance policies, books and accounts and other records, cheque books, title deeds and evidence of ownership to all assets of the Company and all current contracts; (vii) an original of the Disclosure Letter duly executed by the Vendor in the form identical to that attached as Schedule 3 hereto or with lesser disclosures; (c) the Vendor shall cause a meeting of the board of directors of the Company to be held at which resolutions shall be passed to :- (i) approve the transfer of the Sale Shares; (ii) register (subject to stamping) the transfer of the Sale Shares referred to above and to issue new certificate(s) for the Sale Shares in the name(s) of the Purchaser; (iii) appoint one person as the Purchaser may nominate as the Chairman of the Company and such person(s) as the Purchaser may nominate as director(s) of the Company and (subject to the approval of the SFC) one person as the Purchaser may nominate as the Responsible Officer of the Company all to take effect from the close of business of the said meeting if so required by the Purchaser; and (iv) amend all banking authorisations, instructions and mandates of the Company in such manner as the Purchaser may direct; and (d) the Purchaser shall :- (i) produce for inspection by the Vendor the bought notes in respect of the Sale Shares executed by the Purchaser in compliance with the Stamp Duty Ordinance; and (ii) procure the stamping of the bought and sold notes and the instrument of transfer in respect of the Sale Shares as soon 11 as practicable thereafter and present the said instrument of transfer together with the share certificate(s) in respect of the Sale Shares to the Company for registration of the transfer. 4.2 The transactions described in Clause 4.1 hereof shall take place at the same time, so that in default of the performance of any such transactions by a Party, the other Party shall not be obliged to complete the sale and purchase aforesaid. 5. REPRESENTATIONS AND WARRANTIES AND GUARANTEE 5.1 Save as disclosed in the Disclosure Letter and documents and information provided to the Purchaser and/or its advisors, the Vendor hereby represents and warrants to the Purchaser that each of the matters set out in Schedule 2 are as at the date hereof and will be for all times up to and including the Completion Date, true and correct in all material respects. 5.2 From the date of this Agreement until the Completion Date the Vendor shall use his best endeavours to procure that (save with the prior consent in writing or of the Purchaser, such consent not to be unreasonably withheld or delayed) the Company shall not :- (a) issue or agree to issue any of its share or loan capital or grant or agree to grant any option over or right to acquire any of its share or loan capital; (b) enter into any contract (otherwise than in the ordinary course of business) or any capital commitment; (c) create or permit to arise any lien, charge, pledge, mortgage or other security interest on or in respect of any of its undertaking, property or assets; (d) appoint any directors other than as provided in this Agreement; or (e) increase the remuneration of its employees (save as payment of discretionary bonus and save that the increase is made pursuant to the 12 relevant employment contract) and the Vendor shall use his best endeavours to procure that the Purchaser be kept regularly informed of the affairs of the Company until the Completion Date. 5.3 The liability of the Vendor in respect of any breach of the warranties or representations as set out in Schedule 2 shall be limited as follows:- (a) the maximum liability of the Vendor, if any, under this Agreement shall be 25% of the Consideration; (b) no claims may be brought against the Vendor in respect of any claim of damages for breach of warranty(ies) or representation(s) as set out in Schedule 2 after the expiry of six months from the Completion Date. 5.4 In consideration of the Vendor agreeing to enter into this Agreement, the Guarantor (as principal obligor and not merely as surety) unconditionally and irrevocably guarantees performance by the Purchaser of all its obligations and liabilities under or arising out of or in connection with this Agreement (referred to herein as the "GUARANTEED OBLIGATIONS") and undertakes to the Vendor that if and whenever the Purchaser is in default, the Guarantor shall duly and promptly perform or procure such performance of the Guaranteed Obligations and indemnify the Vendor against any loss, damage, costs, expenses and liabilities that he may suffer in connection with or arising out of any such failure on the part of the Purchaser. 6. SEVERABILITY If at any time any one or more provisions hereof is or becomes invalid, illegal, unenforceable or incapable of performance in any respect, the validity, legality, enforceability or performance of the remaining provisions hereof shall not thereby in any way be affected or impaired. 7. ENTIRE AGREEMENT This Agreement constitutes the entire agreement and understanding between 13 the Parties in connection with the subject-matter of this Agreement and supersedes all previous proposals, representations, warranties, agreements or undertakings relating thereto whether oral, written or otherwise and none of the Parties has relied on any such proposals, representations, warranties, agreements or undertakings. 8. TIME 8.1 Time shall be of the essence of this Agreement. 8.2 No time or indulgence given by any Party to the other Party shall be deemed or in any way be construed as a waiver of any of his/its rights and remedies hereunder. 9. CONFIDENTIALITY Other than such disclosure as may be required by law, the SFC, the Stock Exchange or other competent authority, neither of the parties hereto shall make any announcement or release or disclose any information concerning this Agreement or the transactions herein referred to or disclose the identity of the other party(ies) hereto (save disclosure to their respective professional advisers under a duty of confidentiality) without the written consent of the other parties hereto. 10. ASSIGNMENT This Agreement shall be binding on and shall enure for the benefits of the successors and assigns of the Parties but shall not be assigned by any party hereto without the prior written consent of the other parties hereto. 11. NOTICES AND OTHER COMMUNICATION 11.1 Any notice or other communication to be given under this Agreement shall be in writing and may be given by hand, by post or facsimile to the following 14 address/number of the party hereto to be served or to such other address/number as shall be notified by such party to the other in writing :- The Vendor Address : Flat H, 17th Floor, Tung Ting Mansion, 4 Taikoo Shing Road, Taikoo Shing, Hong Kong Facsimile no. : 612-9869 3445 The Purchaser Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 The Guarantor Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 11.2 Any such notice or communication shall be sent to the party hereto to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject-matter of this Agreement. If so given by hand or facsimile, such notice or communication shall be deemed received on the date of despatch and if so sent by post (or, if sent to an address outside of Hong Kong, so sent by first class air-mail) shall be deemed received two (2) Business Days after the date of despatch (in case to an address in Hong Kong) or five (5) Business Days after the date of despatch (in case to an address outside of Hong Kong). 15 12. COSTS AND EXPENSES Each party hereto shall bear his/its own legal and professional fees, costs and expenses incurred in the negotiation, preparation and execution of this Agreement. The stamp duty in respect of the Sale Shares shall be borne by the Vendor and the Purchaser in equal shares. 13. COUNTERPARTS This Agreement may be executed in any number of counterparts each of which when executed and delivered is an original, but all the counterparts together constitute the same document. 14. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of Hong Kong and the parties hereto agree to submit to the non-exclusive jurisdiction of the courts of Hong Kong. 15. PROCESS AGENT The Purchaser hereby irrevocably authorizes and appoints the Purchaser's Solicitors (or such other person(s), being resident in Hong Kong, as it may from time to time appoint as its agent(s) and notify to the Vendor) to accept service of all legal process arising out or in connection with this Agreement and service on the Purchaser's Solicitors (or such substitute(s)) shall be deemed to be service on the Purchaser. [Remainder of this page intentionally left blank] 16 IN WITNESS whereof the Parties have executed this Agreement the day and year first above written. SIGNED by Mr. Chu Ping-im ) in the presence of :- ) ) ) ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of FNG ) International Holdings ) Limited in the presence of :- ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of China ) Finance Online Co. Limited ) in the presence of :- ) 17 SCHEDULE 1 PARTICULARS OF THE COMPANY 1. Name : Daily Growth Investment Company Limited (Chinese Characters) 2. Registered office : Room 603, Peter Building, 58-62 Queen's Road, Central, Hong Kong. 3. Company Number : 025436 4. Date of Incorporation : 6 October 1971 5. Place of Incorporation : Hong Kong 6. Authorised share capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 7. Issued and paid up capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 8. Directors : TING WANG Wan-sun, Nancy WAI CHAN Ye, Kannie WAI Heung-wah, Hayles YEH WANG Zung-sing, Helen WONG Long-sau, Ivis 9. Secretary : Hang Cheuk Secretaries Limited 10 Auditors : J Kong & Co. 11. Financial year end : 31 December 18 SCHEDULE 2 REPRESENTATIONS AND WARRANTIES General; Corporate Status 1.1 All information regarding the Company provided by or on behalf of the Vendor and/or the Company to the Purchaser is complete, correct and true in a material respect. 1.2 The Company has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation, and there has been no resolution, petition or order for the winding-up of the Company and no receiver has been appointed in respect thereof, nor are any such resolutions, orders and appointments imminent or likely. Shareholdings and Share Capital etc. 2.1 The Sale Shares comprise a percentage (as referred to in Recital (B)) of the issued share capital of the Company, and there are not in issue any other shares, debentures, warrants, options or securities. 2.2 The Company is not under any contract, options, warrants or any other obligations regarding any part of its capital, issued or unissued, or for the issue of any shares, debentures, warrants, options, or other similar securities. 2.3 Save as disclosed in the Disclosure Letter, the Vendor has acquired the Shares in compliance with the articles of association of the Company and the laws under the Companies Ordinance and is the beneficial owner of the Sale Shares free from all liens, charges, pledges, options, contracts, preemption rights, third party rights and equities, and incumbrances of whatever nature and the same are freely transferable by the Vendor without the consent, approval, permission, licence or concurrence of any third party. 2.4 The Vendor is fully capable of entering into this Agreement and to perform all 19 obligations and duties hereunder without the consent, approval, permission, licence or concurrence of any third party. Business etc. 3.1 The principal business activity of the Company is security trading. 3.2 In respect of the said business being carried on, all qualifications, registrations, licences or other approvals necessary for the proper conduct of business have been obtained and maintained and to the knowledge of the Vendor, all the relevant rules and regulations of the SFC and the Stock Exchange applicable to the Company have been observed and complied with in a material respect and no event has occurred whereby any of the same or the renewal thereof is or likely to be thereby adversely affected, suspended or revoked. Accounts 4.1 The Accounts have been prepared in accordance with generally accepted accounting practice in Hong Kong and comply with the Companies Ordinance, and show a true and fair view of the affairs and financial position of the Company as at, and the profits and loss of the Company for the period ended on, the Accounts Date. 4.2 All accounting records of the Company for the past seven (7) years are in the possession of the Company and have been properly written up, kept and maintained in accordance with generally accepted accounting practice and together shows a true and fair view of the affairs and financial position of the Company. Taxation 5.1 The Company has paid all taxes, duties and levies as the same became due and payable and to the knowledge of the Vendor, the Company is not nor is likely to be subject to any tax penalties. 20 5.2 The Company has complied with the Inland Revenue Ordinance and has kept proper records for tax purposes for the past seven (7) years and have filed all tax returns, and to the knowledge of the Vendor, there is no pending dispute with the Inland Revenue Department. Dispute, Claims and Litigation 6. There is no claim, arbitration or litigation to which the Company is a party or which, to the knowledge of the Vendor, is pending or threatened. Repetition at Completion 7. All warranties and representations contained in the foregoing provisions of this Schedule shall be deemed to be repeated immediately before completion of this Agreement and to relate to the facts then existing. 21 SCHEDULE 3 FORM OF DISCLOSURE LETTER [DATE] FNG INTERNATIONAL HOLDINGS LIMITED Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands Dear Sirs, DISCLOSURE LETTER This is the Disclosure Letter referred to in the Sale and Purchase Agreement dated [DATE] and entered into by and between Chu Ping-im, FNG International Holdings Limited and China Finance Online Co. Limited (the "Agreement"). Capitalized terms appearing in this letter shall adopt the same meaning as defined in the Agreement. A. GENERAL DISCLOSURES The following matters are deemed to be disclosed by this letter: 1. AGREEMENT: All matters set out or referred to in the Agreement, including, without limitation, all schedules and documents annexed thereto and any other agreements entered into pursuant to, or contemplated by, the Agreement. 2. COMPANIES REGISTRY: All matters registered against, or which would be disclosed by a search made in respect of the Company at the Companies Registry in Hong Kong. 3. ACCOUNTS: All matters disclosed, provided for, noted or referred to in the audited accounts of the Company which have been provided to the Purchaser. 4. INSPECTION: All matters which have or ought reasonably to have, been disclosed by inspection of the statutory books, books of account and business records of 22 the Company, all of which have been made available to the Purchaser and/or its advisers for inspection. 5. OTHERS MATTERS DISCLOSED: All matters set out or referred to in any letter, note, schedule or other document from or provided by the Vendor, the Company and/or their advisers and/or agents to the Purchaser and/or its advisers and/or agents in connection with the sale and purchase of the Sale Shares. Where any such letter, note, schedule or other document includes an expression of opinion, no representation or warranty is given as to its accuracy. B. SPECIFIC DISCLOSURE We write to disclose the following and the paragraph numbers used below correspond to the representations and warranties as set out in Schedule 2 to the Agreement: Paragraphs 1.1 and 2.3 The following documents cannot be found in the company kit of the Company or located by the Vendor or are incomplete. As such, no representation and warranty will be made on these missing or incomplete documents :- 1. Original corporate documents from the date of incorporation to the year of 1987; 2. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 1 share from Helen Zung Sing Yeh to Shun Kin Enterprises Limited on 20th February 1987; 3. Original cancelled share certificate in the names of Helen Zung Sing Yeh and Shun Kin Enterprises Limited; 4. Original Application for 42,300 shares made on 24th February 1987 - 8 sets; 5. Original share certificates in respect of the allotment made on 24th February 1987; 6. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares from Mr. Basil D.C. Wood to Mrs. Nancy Ting on 26th April 1988; 7. Original share certificates in respect of the transfer made on 26th April 1988; 8. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 20,525 shares in respect of the following transfer: Mr. Basil D.C. Wood to Midopa Enterprises Limited - 7,610 shares on 23 21.7.1988 Mrs. Wendy Wood to Midopa Enterprises Limited - 1,694 shares on 21.7.1988 Mr. Hsu Zing Ping to Midopa Enterprises Limited - 3,196 shares on 21.7.1988 Mr. Hsu Zing Ping to Billion System Co., Limited - 2,500 shares on 21.7.1988 Mr. Hsu Zing Ping to Mrs. Wang Zau Chin Ngo - 240 shares on 21.7.1988 Mr. Hsu Zing Ping to Eternal Growth Investment Ltd. - 525 shares on 21.7.1988 Mr. Koo Kam Kang to Eternal Growth Investment Ltd. - 4,760 shares on 21.7.1988 9. Original share certificates in respect of the transfer made on 21.7.1988; 10. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 7,715 shares in respect of the following transfer: Ms. Nancy Ting to Ho Chi Kuen Bernard - 2,000 shares on 29.7.1988 Ms. Nancy Ting to Billion System Co., Ltd. - 2,500 shares on 29.7.1988 Ms. Nancy Ting to Stella Wong - 545 shares on 29.7.1988 Shun Kin Ent. Ltd. to Stella Wong - 195 shares on 29.7.1988 Eileen Hwa to Stella Wong - 260 shares on 29.7.1988 Ms. Nancy Ting to Eternal Growth Inv. Ltd. - 2,215 shares on 29.7.1988 11. Original share certificates in respect of the transfer made on 29.7.1988 12. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the transfer from Eileen Hwa to Wong Oi Lun, Ellen on 17.3.1989; 13. Original share certificates in respect of the transfer made on 17.3.1989; 14. Form X(ii) or Form (IXA) showing the resignation of Ms. Stella Wong as the director of the Company made on 1.4.1989; 15. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Wong Oi Lun Ellen to Stella Wong - 1,000 shares on 31.5.1990 Wong Oi Lun Ellen to Tsang Kin Woo - 500 shares on 31.5.1990 Wong Oi Lun Ellen to Chu Ping Im - 500 shares on 31.5.1990 16. Original share certificates in respect of the transfer made on 31.5.1990 17. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Bernard Ho to Zone Bo Ltd. - 2,000 shares on 19.7.1990 18. Original share certificates in respect of the transfer made on 19.7.1990 19. Copy of Consent to act as director of the Company by Mr. Yap E. Hock on 24 9.12.1992 20. A letter dated 10th October 1994, from King Cause Limited and Asian Capital Partners (HK) Limited reporting that 10 share certificates for 50,000 shares have been mislaid and requesting 2 share certificates be issued to them 21. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 50,000 shares in respect of the following transfer: King Cause Ltd.to Billion System Co. Ltd.- 5,000 shares on 12.12.1994; King Cause Ltd. to Eternal Growth Investment Ltd.- 7,500 shares on 12.12.1994; King Cause Ltd. to Midpoa Enterprises Limited- 12,500 shares on 12.12.1994; King Cause Ltd. to Shun Kin Ent. Limited- 17,500 shares on 12.12.1994; King Cause Ltd. to Wang Zau Chin Ngo- 2,500 shares on 12.12.1994; King Cause Ltd. to Tsang Kin Woo- 499 shares on 12.12.1994; King Cause Ltd. to Chu Ping Im - 500 shares on 12.12.1994 King Cause Ltd. to Stella Wong- 2,000 shares on 12.12.1994; King Cause Ltd. to Zone Bo Limited- 2,000 shares on 12.12.1994; King Cause Ltd. and Asian Capital Partners (HK) Limited to Tsang Kin Woo- 1 share on 12.12.1994; 22. Original share certificates in respect of the transfer made on 12.12.1994; 23. Original Declaration of Trust given by King Cause Limited and Asian Capital Partners (HK) Limited on 9.12.1992; 24. Copy of Form D2 and Consent to act reporting the appointment of Mr. Ho Chi Kuen as the director of the company; 25. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares in respect of the following transfer: Billion System Co. Ltd. to Zone Bo Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Eternal Growth Inv. Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Midopa Enterprises Ltd.- 1,250 shares on 15.12.2000; Billion System Co. Ltd. to Shun Kin Enterprises Ltd.- 1,750 shares on 15.12.2000; Billion System Co. Ltd. to Tsang Kin Woo- 500 shares on 15.12.2000; Billion System Co. Ltd. to Chu Ping Im- 500 shares on 15.12.2000; 26. Original share certificates in respect of the transfer made on 15.12.2000; 27. Original Share Certificate of Wang William; 28. Original Board Minutes for approving the share transfer from Zone Bo Limited to Hung Yung made on 22.06.2007; 25 29. Share Certificate of Hung Yung in respect of 5,000 shares; 30. Original Consent to Short Notice dated 16.03.1987 - Elieen Hwa Wang Vung Sing (with the signature of Elieen missing); and 31. Original Consent to Short Notice for 2005 AGM dated 30.05.2005 (missing signatures from Midopa Enterprises Limited, Wong Chan Miu Wan Stella, Chu Ping Im, Tsang Kin Woo). Yours sincerely, - ------------------------------------- Chu Ping-im 26 EX-4.58 36 h02185exv4w58.txt EX-4.58 AGREEMENT FOR THE SALE AND PURCHASE OF SHARES Exhibit 4.58 DATED THE ________ DAY OF ______________, 2007 ETERNAL GROWTH INVESTMENT LIMITED and FNG INTERNATIONAL HOLDINGS LIMITED and CHINA FINANCE ONLINE CO. LIMITED ---------- AGREEMENT for the sale and purchase of shares in Daily Growth Investment Company Limited (Chinese Characters) ---------- F. ZIMMERN & CO. Solicitors & Notaries Suites 1501-1503, 15th Floor, Gloucester Tower, The Landmark, 15 Queen's Road Central, Hong Kong Tel: (852) 2526-4373 Fax: (852) 2801-4548 Ref: AN/PC/S14/2007 THIS AGREEMENT is made on the ___________ day of _______________, 2007. BETWEEN :- 1. ETERNAL GROWTH INVESTMENT LIMITED, a company incorporated in Hong Kong whose registered office is at 11th Floor, 22 Kai Cheung Road, Kowloon Bay, Kowloon, Hong Kong (the "VENDOR"); 2. FNG INTERNATIONAL HOLDINGS LIMITED, a company incorporated in the British Virgin Islands whose registered address is at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands (the "PURCHASER"); and 3. CHINA FINANCE ONLINE CO. LIMITED, a company incorporated in Hong Kong whose registered office is situate at Room 908, 9th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong (the "GUARANTOR"). (The Vendor and the Purchaser are collectively referred to as the "PARTIES" and each as a "PARTY") WHEREAS :- (A) Daily Growth Investment Company Limited (Chinese Characters) (the "COMPANY") is a private limited company incorporated under the laws of Hong Kong on 6 October 1971 and has an authorised share capital of HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each, of which 100,000 ordinary shares have been issued and are fully paid up. The Company is a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong. Particulars of the Company are set out in Schedule 1. (B) The Vendor is the legal and beneficial owner of 16,000 issued ordinary shares of the Company, representing 16 per cent. of the entire issued share capital of the Company (the "SALE SHARES"). (C) The Vendor has agreed to sell, and the Purchaser has agreed to purchase, the 1 Sale Shares on the terms and conditions hereinafter appearing. (D) The Purchaser is a wholly owned subsidiary of the Guarantor. (E) The Guarantor has agreed to guarantee as the primary obligor for the due performance of the Purchaser under this Agreement. AND NOW IT IS HEREBY AGREED as follows 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement, unless otherwise expressed or required by context, the following expressions shall have the respective meanings set opposite thereto :-
Expression Meaning - ---------- ------- "Accounts" means the audited profit and loss accounts for the period ended on and the balance sheet as at the Accounts Date of the Company; "Accounts Date" means 31 December 2006; "Approval" have the meaning ascribed to it in Clause 2.1(b) hereof; "Business Day" means a day, other than a "general holiday" (as defined in the General Holidays Ordinance (Chapter 149 of the Laws of Hong Kong)), Saturday and any day on which a tropical cyclone warning No. 8 or above is hoisted or remains hoisted between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon or on which a "black" rainstorm warning signal is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon, on which commercial banks are generally
2 open for banking business in Hong Kong; "Completion Accounts" means the profit and loss accounts for the period ended on and the balance sheet as at the Completion Date of the Company; "Completion Date" means the date on which completion of the sale and purchase of the Sale Shares takes place as mentioned in Clause 4 hereof; "Consideration" has the meaning ascribed to it in Clause 3 hereof; "Deposit" has the meaning ascribed to it in Clause 3.2(a) hereof; "Disclosure Letter" means the disclosure letter from the Vendor to the Purchaser to be delivered at Completion in the form identical to that attached hereto as Schedule 3 hereto or with lesser disclosures; "Hong Kong" means the Hong Kong Special Administrative Region of the People's Republic of China; "Liabilities" means the total liabilities of the Company whether actual or contingent as at Completion, and for the avoidance of doubt, including all provisions for taxation and bad debts; "NAV" means the Tangible Assets less the Liabilities; "Shares" means issued ordinary shares of HK$100 each in the capital of the Company, and "Shareholders" shall be construed accordingly; "SFC" means the Securities and Futures Commission; "SFO" means the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong);
3 "Stock Exchange" The Stock Exchange of Hong Kong Limited; "Tangible Assets" means the total tangible assets of the Company as at Completion, including an amount of HK$794,157.41 due from Mr. Cheung Wing Cheung as at 1 August 2007 to the Company to be accepted by the Parties as accounts receivable without any provision for non-recovery; "Vendor's Solicitors" means F. Zimmern & Co; and "HK$" and "Cent" means Hong Kong Dollars and Cents respectively.
1.2 The headings to the Clauses of this Agreement are for ease of reference only and shall be ignored in interpreting this Agreement. 1.3 Reference to Clauses and Schedules are references to Clauses and Schedules of or to this Agreement. 1.4 Words and expressions in the singular include the plural and vice versa. 1.5 Reference to person include any public body and any body of persons, corporate or unincorporated. 1.6 Reference to ordinances, statutes, legislation or enactments shall be construed as a reference to such Ordinances, statutes, legislation or enactments as may be amended or re-enacted from time to time and for the time being in force. 2. CONDITIONS PRECEDENT 2.1 Completion of this Agreement shall be conditional upon :- (a) the Company remains a licensed corporation to engage in type 1 regulated activity (dealing in securities) under the SFO up to Completion; 4 (b) the SFC giving its written approval to approve the Purchaser to become a substantial shareholder of the Company (the "APPROVAL"); and (c) the Purchaser shall, in addition to the Sale Shares to be acquired pursuant hereto, acquire on the Completion Date Shares from other existing Shareholders which together with the Sale Shares, shall in aggregate represent not less than 75% of the entire issued share capital of the Company as at the Completion Date. 2.2 The Vendor will use its best endeavours to procure the fulfilment of the condition set out in Clauses 2.1 (a) and 2.1(c) hereof and the Purchaser will use its best endeavours to procure the fulfilment of the condition set out in Clause 2.1(b) hereof. 2.3 If (i) the condition as set out in Clause 2.1(a) hereof cannot be fulfilled on the Completion Date, the Vendor or the Purchaser may, or (ii) the condition as set out in Clause 2.1(c) hereof cannot be fulfilled on the Completion Date, the Purchaser may terminate this Agreement. In any of such event, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Upon the refund, this Agreement shall lapse and no Party shall have any claim against the other Party except in respect of any antecedent breach. 2.4 If the condition as set out in Clause 2.1(b) hereof cannot be fulfilled on or before 31 December 2007 (the "CONDITIONS DEADLINE"), the Vendor will allow the Purchaser to extend the Conditions Deadline for a period up to three (3) calendar months from 1 January 2008 (the "EXTENDED PERIOD") provided that the Purchaser shall pay compensation (the "COMPENSATION") to the Vendor, unless the delay is due to the proven default of the Vendor, to be arrived at by the following formula :- C = [(HK$3 * S) * 3] * D/91 C = the total Compensation payable by the Purchaser to the Vendor S = the number of the Sale Shares D = the number of days from 1 January 2008 up to and including (i) 5 the Completion Date; or (ii) the day of the receipt of the Notice (as defined below) by the Vendor; or (iii) 31 March 2008, as the case may be, to be determined in the manner as provided in Clauses 2.5 (a) and (b) The Purchaser may serve a written notice to the Vendor not to proceed with the Completion (the "NOTICE") during the Extended Period. 2.5 (a) In the event that Completion takes place before the expiry of the Extended Period, the Purchaser shall pay the Compensation calculated up to the Completion Date to the Vendor on the Completion Date. (b) In the event that the Purchaser shall fail to complete the purchase of the Sale Shares in accordance with the terms of this Agreement (including failure to complete by reason of the failure to obtain the Approval) other than due to the proven default of the Vendor, half of the Deposit shall be forfeited to the Vendor as liquidated damages (the "FORFEITURE") and in addition, if the Conditions Deadline is extended, the Vendor shall also be entitled to deduct the Compensation (calculated up to the day of the receipt of the Notice by the Vendor if the Notice is served by the Purchaser or calculated up to 31 March 2008 if no Notice is served by the Purchaser) from the balance of the Deposit (the "DEDUCTION"). The remaining balance of the Deposit (after the Forfeiture and any Deduction) shall be returned to the Purchaser without interest within seven (7) days from the date of the receipt of the Notice by the Vendor or 31 March 2008, as the case may be. After the Forfeiture and any Deduction, the Vendor shall have no claim whatsoever against the Purchaser under this Agreement. 2.6 If the Vendor shall fail to complete the sale of the Sale Shares in accordance with the terms of this Agreement due to the proven default of the Vendor, the Deposit shall be returned to the Purchaser in full together with interest calculated at the rate of three (3) per cent. per annum from the date of payment of the Deposit by the Purchaser up to the date of refund. Subject to the aforesaid payment, the Purchaser shall have no claim whatsoever against the Vendor under this Agreement. 6 3. SALE AND PURCHASE OF THE SALE SHARES AND THE CONSIDERATION 3.1 Subject to the terms and conditions of this Agreement, the Vendor as beneficial owner hereby agrees to sell to the Purchaser and the Purchaser, relying on the representations and warranties made or given by the Vendor and subject to the terms and conditions contained in this Agreement, agree to purchase from the Vendor the Sale Shares free from all claims, charges, liens, encumbrances, equities and third party rights and together with all rights attached thereto and all dividends and distributions declared, paid or made in respect thereof after the Completion Date at a consideration (the "CONSIDERATION") to be arrived at by the following formula :- C = P * S C = the total consideration payable by the Purchaser to the Vendor for the Sale Shares P = the price per Share based on the NAV as at the Completion Date plus a premium of HK$15 per Share (which is to reflect the value of the trading right held by the Company in the Stock Exchange) S = the number of Sale Shares 3.2 Subject to Clause 3.3 hereof, the Consideration shall be paid by the Purchaser to the Vendor as follows:- (a) a sum of HK$800,000 (i.e. HK$50 per Sale Share) as deposit and part payment of the Consideration (the "DEPOSIT") to be paid on the signing of this Agreement by way of delivering a solicitor's cheque to the Vendor's Solicitors as stakeholder to be held by it subject to the provisions of this Agreement and the sum of HK$1,000,000 being the earnest money already paid by the Purchaser to the Purchaser's Solicitors as stakeholder under the term sheet dated 25 July 2007 be released to the Purchaser after payment of the Deposit; and (b) the balance of the Consideration to be paid on Completion by way of a solicitor's cheque to the Vendor. 7 3.3 (a) The Vendor shall procure that the draft pro-forma Completion Accounts (the "DRAFT PRO-FORMA COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser not less than six (6) days prior to the Completion Date. Completion shall take place on the basis of the draft pro-forma Completion Accounts. (b) After Completion, the Vendor shall procure the final Completion Accounts (the "FINAL COMPLETION ACCOUNTS") be drawn up and delivered to the Purchaser within fourteen (14) days after the Completion Date. Subject to Clause 3.3(d), if the final Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. If the final Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within ten (10) days from the date of delivery of the final Completion Accounts by way of solicitor's cheque. The Purchaser shall provide with the Vendor full access to the books, records and resources of the Company so as to enable the Vendor to procure the final Completion Accounts to be drawn up. (c) The basis and policy of accounting adopted in preparing the pro-forma draft Completion Accounts and the final Completion Accounts shall be in accordance with the generally accepted accounting practices in Hong Kong. (d) In the event of a dispute between the Parties as to the amount of the NAV as shown in the final Completion Accounts, the Vendor or the Purchaser may procure that the final Completion Accounts be audited by the auditors of the Company within forty-five (45) days from the date of delivery of the final Completion Accounts provided that the procurement of the audited final Completion Accounts shall be made by the relevant Party within seven (7) days from the date of delivery of 8 the final Completion Accounts. (e) If the audited Completion Accounts shall show that the NAV per Share is less than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Vendor shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Purchaser within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. If the audited Completion Accounts shall show that the NAV per Share is more than the NAV per Share as shown in the draft pro-forma Completion Accounts, the Purchaser shall pay the amount of the difference of the NAV per Share multiplied by the number of the Sale Shares to the Vendor within seven (7) days from the date of delivery of the audited Completion Accounts by way of solicitor's cheque. The Vendor together with the other vendors of the one part and the Purchaser of the other part shall each be responsible for payment of 50% of the cost and expenses for the preparation and completion of the audited Completion Accounts. 4. COMPLETION 4.1 Subject to the provisions in Clause 2 hereof, completion of the sale and purchase of the Sale Shares shall take place at the offices of Arculli Fong & Ng (the "PURCHASER'S SOLICITORS"), the Solicitors for the Purchaser, at 908 Hutchison House, Central, Hong Kong or any other place as the Parties may agree at 5:00 p.m. on a Friday of the week immediately following the week when the Approval is granted by the SFC, when the following business shall simultaneously be transacted :- (a) the Purchaser shall deliver to the Vendor the following :- (i) a solicitor's cheque for payment of the balance of the Consideration and the Vendor's Solicitors will release the Deposit to the Vendor; and (ii) a certified copy of each of the minutes of the board of directors of the Purchaser and the Guarantor approving this 9 Agreement and authorizing/confirming the authorization of an authorised person for signing of this Agreement and (for the Purchaser) the bought note and the instrument of transfer and any other incidental documents hereof; (b) the Vendor shall deliver to the Purchaser the following :- (i) sold notes and instrument of transfer in favour of the Purchaser in respect of the Sale Shares all executed by the Vendor in accordance with the Stamp Duty Ordinance; (ii) original share certificate(s) or re-issued share certificate(s) in respect of the Sale Shares; (iii)such other documents as may be reasonably required to give a good and effective transfer of title to the Sale Shares to the Purchaser and to enable them to become the registered holders thereof; (iv) a cheque drawn in favour of the Government of the Hong Kong Special Administrative Region for an amount equivalent to the stamp duty payable under the Stamp Duty Ordinance in respect of the sold notes in respect of the Sale Shares; (v) a certified copy of the minutes of the board of directors of the Vendor (if the Vendor is a corporate) approving the sale of the Sale Shares and authorizing/confirming the authorization of an authorised person for signing of this Agreement and the sold note and the instrument of transfer and any other incidental documents hereof; (vi) to the extent that the same are not already in the possession of the Company or its agents, the certificate of incorporation, business registration certificate, common seal of the Company, all copies of memorandum and articles of association of the Company, the statutory books of the Company duly made up to date, any unissued share 10 certificates, all current insurance policies, books and accounts and other records, cheque books, title deeds and evidence of ownership to all assets of the Company and all current contracts; (vii) an original of the Disclosure Letter duly executed by the Vendor in the form identical to that attached as Schedule 3 hereto or with lesser disclosures; (c) the Vendor shall cause a meeting of the board of directors of the Company to be held at which resolutions shall be passed to :- (i) approve the transfer of the Sale Shares; (ii) register (subject to stamping) the transfer of the Sale Shares referred to above and to issue new certificate(s) for the Sale Shares in the name(s) of the Purchaser; (iii) appoint one person as the Purchaser may nominate as the Chairman of the Company and such person(s) as the Purchaser may nominate as director(s) of the Company and (subject to the approval of the SFC) one person as the Purchaser may nominate as the Responsible Officer of the Company all to take effect from the close of business of the said meeting if so required by the Purchaser; and (iv) amend all banking authorisations, instructions and mandates of the Company in such manner as the Purchaser may direct; and (d) the Purchaser shall :- (i) produce for inspection by the Vendor the bought notes in respect of the Sale Shares executed by the Purchaser in compliance with the Stamp Duty Ordinance; and (ii) procure the stamping of the bought and sold notes and the instrument of transfer in respect of the Sale Shares as soon 11 as practicable thereafter and present the said instrument of transfer together with the share certificate(s) in respect of the Sale Shares to the Company for registration of the transfer. 4.2 The transactions described in Clause 4.1 hereof shall take place at the same time, so that in default of the performance of any such transactions by a Party, the other Party shall not be obliged to complete the sale and purchase aforesaid. 5. REPRESENTATIONS AND WARRANTIES AND GUARANTEE 5.1 Save as disclosed in the Disclosure Letter and documents and information provided to the Purchaser and/or its advisors, the Vendor hereby represents and warrants to the Purchaser that each of the matters set out in Schedule 2 are as at the date hereof and will be for all times up to and including the Completion Date, true and correct in all material respects. 5.2 From the date of this Agreement until the Completion Date the Vendor shall use its best endeavours to procure that (save with the prior consent in writing or of the Purchaser, such consent not to be unreasonably withheld or delayed) the Company shall not :- (a) issue or agree to issue any of its share or loan capital or grant or agree to grant any option over or right to acquire any of its share or loan capital; (b) enter into any contract (otherwise than in the ordinary course of business) or any capital commitment; (c) create or permit to arise any lien, charge, pledge, mortgage or other security interest on or in respect of any of its undertaking, property or assets; (d) appoint any directors other than as provided in this Agreement; or (e) increase the remuneration of its employees (save as payment of discretionary bonus and save that the increase is made pursuant to the 12 relevant employment contract) and the Vendor shall use its best endeavours to procure that the Purchaser be kept regularly informed of the affairs of the Company until the Completion Date. 5.3 The liability of the Vendor in respect of any breach of the warranties or representations as set out in Schedule 2 shall be limited as follows:- (a) the maximum liability of the Vendor, if any, under this Agreement shall be 25% of the Consideration; (b) no claims may be brought against the Vendor in respect of any claim of damages for breach of warranty(ies) or representation(s) as set out in Schedule 2 after the expiry of six months from the Completion Date. 5.4 In consideration of the Vendor agreeing to enter into this Agreement, the Guarantor (as principal obligor and not merely as surety) unconditionally and irrevocably guarantees performance by the Purchaser of all its obligations and liabilities under or arising out of or in connection with this Agreement (referred to herein as the "GUARANTEED OBLIGATIONS") and undertakes to the Vendor that if and whenever the Purchaser is in default, the Guarantor shall duly and promptly perform or procure such performance of the Guaranteed Obligations and indemnify the Vendor against any loss, damage, costs, expenses and liabilities that it may suffer in connection with or arising out of any such failure on the part of the Purchaser. 6. SEVERABILITY If at any time any one or more provisions hereof is or becomes invalid, illegal, unenforceable or incapable of performance in any respect, the validity, legality, enforceability or performance of the remaining provisions hereof shall not thereby in any way be affected or impaired. 7. ENTIRE AGREEMENT This Agreement constitutes the entire agreement and understanding between 13 the Parties in connection with the subject-matter of this Agreement and supersedes all previous proposals, representations, warranties, agreements or undertakings relating thereto whether oral, written or otherwise and none of the Parties has relied on any such proposals, representations, warranties, agreements or undertakings. 8. TIME 8.1 Time shall be of the essence of this Agreement. 8.2 No time or indulgence given by any Party to the other Party shall be deemed or in any way be construed as a waiver of any of its rights and remedies hereunder. 9. CONFIDENTIALITY Other than such disclosure as may be required by law, the SFC, the Stock Exchange or other competent authority, neither of the parties hereto shall make any announcement or release or disclose any information concerning this Agreement or the transactions herein referred to or disclose the identity of the other party(ies) hereto (save disclosure to their respective professional advisers under a duty of confidentiality) without the written consent of the other parties hereto. 10. ASSIGNMENT This Agreement shall be binding on and shall enure for the benefits of the successors and assigns of the Parties but shall not be assigned by any party hereto without the prior written consent of the other parties hereto. 11. NOTICES AND OTHER COMMUNICATION 11.1 Any notice or other communication to be given under this Agreement shall be in writing and may be given by hand, by post or facsimile to the following 14 address/number of the party hereto to be served or to such other address/number as shall be notified by such party to the other in writing:- The Vendor Address : 11th Floor, 22 Kai Cheung Road, Kowloon Bay, Kowloon, Hong Kong Attention : TING WANG Wan-sun, Nancy Facsimile no. : 852-2111 9470 The Purchaser Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 The Guarantor Address : Room 908, 9th floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Attention : Mr. Jun Wang Facsimile no. : 8610-5832 5200 11.2 Any such notice or communication shall be sent to the party hereto to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject-matter of this Agreement. If so given by hand or facsimile, such notice or communication shall be deemed received on the date of despatch and if so sent by post (or, if sent to an address outside of Hong Kong, so sent by first class air-mail) shall be deemed received two (2) Business Days after the date of despatch (in case to an address in Hong Kong) or five (5) Business Days after the date of despatch (in case to an address 15 outside of Hong Kong). 12. COSTS AND EXPENSES Each party hereto shall bear its own legal and professional fees, costs and expenses incurred in the negotiation, preparation and execution of this Agreement. The stamp duty in respect of the Sale Shares shall be borne by the Vendor and the Purchaser in equal shares. 13. COUNTERPARTS This Agreement may be executed in any number of counterparts each of which when executed and delivered is an original, but all the counterparts together constitute the same document. 14. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of Hong Kong and the parties hereto agree to submit to the non-exclusive jurisdiction of the courts of Hong Kong. 15. PROCESS AGENT The Purchaser hereby irrevocably authorizes and appoints the Purchaser's Solicitors (or such other person(s), being resident in Hong Kong, as it may from time to time appoint as its agent(s) and notify to the Vendor) to accept service of all legal process arising out or in connection with this Agreement and service on the Purchaser's Solicitors (or such substitute(s)) shall be deemed to be service on the Purchaser. [Remainder of this page intentionally left blank] 16 IN WITNESS whereof the Parties have executed this Agreement the day and year first above written. SIGNED by ) ) a director, for and on ) behalf of Eternal Growth ) Investment Limited ) in the presence of :- ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of FNG ) International Holdings ) Limited in the presence of :- ) SIGNED by Mr. Jun Wang ) (Chinese Characters), the lawful attorney ) for and on behalf of China ) Finance Online Co. Limited ) in the presence of :- ) 17 SCHEDULE 1 PARTICULARS OF THE COMPANY 1. Name : Daily Growth Investment Company Limited (Chinese Characters) 2. Registered office : Room 603, Peter Building, 58-62 Queen's Road, Central, Hong Kong. 3. Company Number : 025436 4. Date of Incorporation : 6 October 1971 5. Place of Incorporation : Hong Kong 6. Authorised share capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 7. Issued and paid up capital : HK$10,000,000 divided into 100,000 ordinary shares of HK$100 each 8. Directors : TING WANG Wan-sun, Nancy WAI CHAN Ye, Kannie WAI Heung-wah, Hayles YEH WANG Zung-sing, Helen WONG Long-sau, Ivis 9. Secretary : Hang Cheuk Secretaries Limited 10 Auditors : J Kong & Co. 11. Financial year end : 31 December 18 SCHEDULE 2 REPRESENTATIONS AND WARRANTIES General; Corporate Status 1.1 All information regarding the Company provided by or on behalf of the Vendor and/or the Company to the Purchaser is complete, correct and true in a material respect. 1.2 The Company has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation, and there has been no resolution, petition or order for the winding-up of the Company and no receiver has been appointed in respect thereof, nor are any such resolutions, orders and appointments imminent or likely. Shareholdings and Share Capital etc. 2.1 The Sale Shares comprise a percentage (as referred to in Recital (B)) of the issued share capital of the Company, and there are not in issue any other shares, debentures, warrants, options or securities. 2.2 The Company is not under any contract, options, warrants or any other obligations regarding any part of its capital, issued or unissued, or for the issue of any shares, debentures, warrants, options, or other similar securities. 2.3 Save as disclosed in the Disclosure Letter, the Vendor has acquired the Shares in compliance with the articles of association of the Company and the laws under the Companies Ordinance and is the beneficial owner of the Sale Shares free from all liens, charges, pledges, options, contracts, preemption rights, third party rights and equities, and incumbrances of whatever nature and the same are freely transferable by the Vendor without the consent, approval, permission, licence or concurrence of any third party. 2.4 The Vendor is fully capable of entering into this Agreement and to perform all 19 obligations and duties hereunder without the consent, approval, permission, licence or concurrence of any third party. Business etc. 3.1 The principal business activity of the Company is security trading. 3.2 In respect of the said business being carried on, all qualifications, registrations, licences or other approvals necessary for the proper conduct of business have been obtained and maintained and to the knowledge of the Vendor, all the relevant rules and regulations of the SFC and the Stock Exchange applicable to the Company have been observed and complied with in a material respect and no event has occurred whereby any of the same or the renewal thereof is or likely to be thereby adversely affected, suspended or revoked. Accounts 4.1 The Accounts have been prepared in accordance with generally accepted accounting practice in Hong Kong and comply with the Companies Ordinance, and show a true and fair view of the affairs and financial position of the Company as at, and the profits and loss of the Company for the period ended on, the Accounts Date. 4.2 All accounting records of the Company for the past seven (7) years are in the possession of the Company and have been properly written up, kept and maintained in accordance with generally accepted accounting practice and together shows a true and fair view of the affairs and financial position of the Company. Taxation 5.1 The Company has paid all taxes, duties and levies as the same became due and payable and to the knowledge of the Vendor, the Company is not nor is likely to be subject to any tax penalties. 20 5.2 The Company has complied with the Inland Revenue Ordinance and has kept proper records for tax purposes for the past seven (7) years and have filed all tax returns, and to the knowledge of the Vendor, there is no pending dispute with the Inland Revenue Department. Dispute, Claims and Litigation 6. There is no claim, arbitration or litigation to which the Company is a party or which, to the knowledge of the Vendor, is pending or threatened. Repetition at Completion 7. All warranties and representations contained in the foregoing provisions of this Schedule shall be deemed to be repeated immediately before completion of this Agreement and to relate to the facts then existing. 21 SCHEDULE 3 FORM OF DISCLOSURE LETTER [DATE] FNG INTERNATIONAL HOLDINGS LIMITED Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands Dear Sirs, DISCLOSURE LETTER This is the Disclosure Letter referred to in the Sale and Purchase Agreement dated [DATE] and entered into by and between Eternal Growth Investment Limited, FNG International Holdings Limited and China Finance Online Co. Limited (the "Agreement"). Capitalized terms appearing in this letter shall adopt the same meaning as defined in the Agreement. A. GENERAL DISCLOSURES The following matters are deemed to be disclosed by this letter: 1. AGREEMENT: All matters set out or referred to in the Agreement, including, without limitation, all schedules and documents annexed thereto and any other agreements entered into pursuant to, or contemplated by, the Agreement. 2. COMPANIES REGISTRY: All matters registered against, or which would be disclosed by a search made in respect of the Company at the Companies Registry in Hong Kong. 3. ACCOUNTS: All matters disclosed, provided for, noted or referred to in the audited accounts of the Company which have been provided to the Purchaser. 4. INSPECTION: All matters which have or ought reasonably to have, been disclosed by inspection of the statutory books, books of account and business records of 22 the Company, all of which have been made available to the Purchaser and/or its advisers for inspection. 5. OTHERS MATTERS DISCLOSED: All matters set out or referred to in any letter, note, schedule or other document from or provided by the Vendor, the Company and/or their advisers and/or agents to the Purchaser and/or its advisers and/or agents in connection with the sale and purchase of the Sale Shares. Where any such letter, note, schedule or other document includes an expression of opinion, no representation or warranty is given as to its accuracy. B. SPECIFIC DISCLOSURE We write to disclose the following and the paragraph numbers used below correspond to the representations and warranties as set out in Schedule 2 to the Agreement: Paragraphs 1.1 and 2.3 The following documents cannot be found in the company kit of the Company or located by the Vendor or are incomplete. As such, no representation and warranty will be made on these missing or incomplete documents :- 1. Original corporate documents from the date of incorporation to the year of 1987; 2. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 1 share from Helen Zung Sing Yeh to Shun Kin Enterprises Limited on 20th February 1987; 3. Original cancelled share certificate in the names of Helen Zung Sing Yeh and Shun Kin Enterprises Limited; 4. Original Application for 42,300 shares made on 24th February 1987 - 8 sets; 5. Original share certificates in respect of the allotment made on 24th February 1987; 6. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares from Mr. Basil D.C. Wood to Mrs. Nancy Ting on 26th April 1988; 7. Original share certificates in respect of the transfer made on 26th April 1988; 8. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 20,525 shares in respect of the following transfer: Mr. Basil D.C. Wood to Midopa Enterprises Limited - 7,610 shares on 23 21.7.1988 Mrs. Wendy Wood to Midopa Enterprises Limited - 1,694 shares on 21.7.1988 Mr. Hsu Zing Ping to Midopa Enterprises Limited - 3,196 shares on 21.7.1988 Mr. Hsu Zing Ping to Billion System Co., Limited - 2,500 shares on 21.7.1988 Mr. Hsu Zing Ping to Mrs. Wang Zau Chin Ngo - 240 shares on 21.7.1988 Mr. Hsu Zing Ping to Eternal Growth Investment Ltd. - 525 shares on 21.7.1988 Mr. Koo Kam Kang to Eternal Growth Investment Ltd. - 4,760 shares on 21.7.1988 9. Original share certificates in respect of the transfer made on 21.7.1988; 10. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 7,715 shares in respect of the following transfer: Ms. Nancy Ting to Ho Chi Kuen Bernard - 2,000 shares on 29.7.1988 Ms. Nancy Ting to Billion System Co., Ltd. - 2,500 shares on 29.7.1988 Ms. Nancy Ting to Stella Wong - 545 shares on 29.7.1988 Shun Kin Ent. Ltd. to Stella Wong - 195 shares on 29.7.1988 Eileen Hwa to Stella Wong - 260 shares on 29.7.1988 Ms. Nancy Ting to Eternal Growth Inv. Ltd. - 2,215 shares on 29.7.1988 11. Original share certificates in respect of the transfer made on 29.7.1988 12. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the transfer from Eileen Hwa to Wong Oi Lun, Ellen on 17.3.1989; 13. Original share certificates in respect of the transfer made on 17.3.1989; 14. Form X(ii) or Form (IXA) showing the resignation of Ms. Stella Wong as the director of the Company made on 1.4.1989; 15. Original transfer documents (including instruments of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Wong Oi Lun Ellen to Stella Wong - 1,000 shares on 31.5.1990 Wong Oi Lun Ellen to Tsang Kin Woo - 500 shares on 31.5.1990 Wong Oi Lun Ellen to Chu Ping Im - 500 shares on 31.5.1990 16. Original share certificates in respect of the transfer made on 31.5.1990 17. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 2,000 shares in respect of the following transfer: Bernard Ho to Zone Bo Ltd. - 2,000 shares on 19.7.1990 18. Original share certificates in respect of the transfer made on 19.7.1990 19. Copy of Consent to act as director of the Company by Mr. Yap E. Hock on 24 9.12.1992 20. A letter dated 10th October 1994, from King Cause Limited and Asian Capital Partners (HK) Limited reporting that 10 share certificates for 50,000 shares have been mislaid and requesting 2 share certificates be issued to them 21. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 50,000 shares in respect of the following transfer: King Cause Ltd.to Billion System Co. Ltd.- 5,000 shares on 12.12.1994; King Cause Ltd. to Eternal Growth Investment Ltd.- 7,500 shares on 12.12.1994; King Cause Ltd. to Midpoa Enterprises Limited- 12,500 shares on 12.12.1994; King Cause Ltd. to Shun Kin Ent. Limited- 17,500 shares on 12.12.1994; King Cause Ltd. to Wang Zau Chin Ngo- 2,500 shares on 12.12.1994; King Cause Ltd. to Tsang Kin Woo- 499 shares on 12.12.1994; King Cause Ltd. to Chu Ping Im - 500 shares on 12.12.1994 King Cause Ltd. to Stella Wong- 2,000 shares on 12.12.1994; King Cause Ltd. to Zone Bo Limited- 2,000 shares on 12.12.1994; King Cause Ltd. and Asian Capital Partners (HK) Limited to Tsang Kin Woo- 1 share on 12.12.1994; 22. Original share certificates in respect of the transfer made on 12.12.1994; 23. Original Declaration of Trust given by King Cause Limited and Asian Capital Partners (HK) Limited on 9.12.1992; 24. Copy of Form D2 and Consent to act reporting the appointment of Mr. Ho Chi Kuen as the director of the company; 25. Original transfer documents (including instrument of transfer and bought and sold notes) in respect of the transfer of 5,000 shares in respect of the following transfer: Billion System Co. Ltd. to Zone Bo Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Eternal Growth Inv. Ltd.- 500 shares on 15.12.2000; Billion System Co. Ltd. to Midopa Enterprises Ltd.- 1,250 shares on 15.12.2000; Billion System Co. Ltd. to Shun Kin Enterprises Ltd.- 1,750 shares on 15.12.2000; Billion System Co. Ltd. to Tsang Kin Woo- 500 shares on 15.12.2000; Billion System Co. Ltd. to Chu Ping Im- 500 shares on 15.12.2000; 26. Original share certificates in respect of the transfer made on 15.12.2000; 27. Original Share Certificate of Wang William; 28. Original Board Minutes for approving the share transfer from Zone Bo Limited to Hung Yung made on 22.06.2007; 25 29. Share Certificate of Hung Yung in respect of 5,000 shares; 30. Original Consent to Short Notice dated 16.03.1987 - Elieen Hwa Wang Vung Sing (with the signature of Elieen missing); and 31. Original Consent to Short Notice for 2005 AGM dated 30.05.2005 (missing signatures from Midopa Enterprises Limited, Wong Chan Miu Wan Stella, Chu Ping Im, Tsang Kin Woo). Yours sincerely, - ------------------------------------- Eternal Growth Investment Limited 26 EX-4.67 37 h02185exv4w67.txt EX-4.67 ENGAGEMENT LETTER Exhibit 4.67 February 26, 2008 Mr. Lee Kheng Nam, Chairman of the Audit Committee The Audit Committee of China Finance Online Co. Limited Mr. Zhao Zhiwei Chief Executive Officer China Finance Online Co. Limited 9th Floor of Tower C, Corporate Square No. 35 Financial Street, Xicheng Street Beijing, 100032 The People's Republic of China Dear Sirs, This letter is to confirm various matters relating to the engagement of Deloitte Touche Tohmatsu CPA Ltd. ("DTTC") to serve as the independent registered public accounting firm of China Finance Online Co., Ltd.(the "Company"). This engagement letter will replace any previous oral or written agreements (other than any waiver given to us by the Company) which may have existed between the Company and us relating to the engagement, and governs the totality of our relationship with the Company in respect of the work to be done as described herein. In addition to the audit and review services we are engaged to provide under this engagement letter, we would also be pleased to assist the Company on issues as they arise throughout the year. Hence, we hope that you will call Mr. Taylor Lam or Ms. Elsie Zhou whenever you believe DTTC can be of assistance. This assistance will require approval by the Company's audit committee (the "Audit Committee") in accordance with its preapproval policies and procedures. We will perform this engagement subject to the terms and conditions set forth herein and in the accompanying appendices. February 26, 2008 China Finance Online Co. Limited Page 2 This letter sets out the terms of our engagement under the following main headings: 1. audit of consolidated financial statements and the effectiveness of the Company's internal control over financial reporting; 2. reviews of interim financial information and performance of quarterly procedures; 3. management's responsibilities; 4. Audit Committee's responsibility and auditor communications; 5. our service team; 6. fees; 7. inclusion of DTTC reports or references to DTTC in other documents or electronic sites; 8. termination; 9. law and jurisdiction; 10. limitation on actions; and governs the totality of our relationship with you in respect of the work to be done as described herein. 1. AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS AND THE EFFECTIVENESS OF THE COMPANY'S INTERNAL CONTROL OVER FINANCIAL REPORTING Our engagement is to perform an integrated audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the "PCAOB Standards"). The objectives of an integrated audit conducted in accordance with the PCAOB Standards are: - To express an opinion on the fairness of the presentation of the Company's consolidated financial statements for the year ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America ("generally accepted accounting principles"), in all material respects - To express an opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2007 based on the criteria established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO Framework"). Appendix A contains a description of an integrated audit under the PCAOB Standards. Our ability to express such opinions and the wording thereof will, of course, be dependent on the facts and circumstances at the date of our reports. If, for any reason, we are unable to complete the integrated audit or are unable to form or have not formed such opinions, we may decline to express any opinion or decline to issue any report as a result of this engagement. If we are unable to complete our integrated audit or if any report to be issued by DTTC as a result of this engagement requires modification, the reasons therefore will be discussed with the Audit Committee and the Company's management. February 26, 2008 China Finance Online Co. Limited Page 3 2. REVIEWS OF INTERIM FINANCIAL INFORMATION We will also perform reviews of the Company's interim financial information in accordance with the PCAOB Standards for the quarter ending December 31, 2007 and each of the three quarters in the period ending September 30, 2008, prepared for the Company's earnings release to be filed on Form 6-K for submission to the Securities and Exchange Commission (the "SEC"). The objective of reviews of interim financial information performed in accordance with the PCAOB Standards is to provide us with a basis for communicating whether we are aware of any material modifications that should be made to the interim financial information for it to conform with generally accepted accounting principles. Appendix B contains a description of an interim review under the PCAOB Standards. If we become aware of material modifications that should be made to the interim financial information for it to conform with generally accepted accounting principles or if we become aware of deficiencies in internal control over financial reporting so significant that they would preclude management's preparation of interim financial information in conformity with generally accepted accounting principles, we may be precluded from completing our review. However, should such circumstance arise, we would advise the Audit Committee and the Company's management that we are unable to complete the review and identify the deficiencies that preclude the completion of our review. 3. MANAGEMENT'S RESPONSIBILITIES Appendix C describes management's responsibilities for (1) the financial statements and the effectiveness of internal control over financial reporting, (2) representation letters, (3) the process for obtaining preapproval of services, (4) independence matters relating to financial interests and providing certain services, and (5) independence matters relating to hiring. 4. AUDIT COMMITTEE'S RESPONSIBILITY AND AUDITOR COMMUNICATIONS As the independent registered public accounting firm of the Company, we acknowledge that the Audit Committee is directly responsible for the appointment, compensation, and oversight of our work and, accordingly, except as otherwise specifically noted, we will report directly to the Audit Committee. You have advised us that the services to be performed under this engagement letter, including, where applicable, the use by DTTC of affiliates or related entities as subcontractors in connection with this engagement, have been approved by the Audit Committee in accordance with the Audit Committee's established preapproval policies and procedures. Under the PCAOB Standards and Rule 2-07 of SEC Regulation S-X, we are required to communicate with the Audit Committee about various matters in connection with our integrated audit and reviews of the related interim financial information. Appendix D describes such communications. February 26, 2008 China Finance Online Co. Limited Page 4 5. OUR SERVICE TEAM 5.1 Mr. Taylor Lam and Ms. Elsie Zhou, Partners of DTTC will be in charge of this engagement, while Lili Shan and Xiaogang Tong, managers of DTTC will be responsible for controlling the engagement on a day to day basis. A team of professionals from DTTC, and/or other member firms of Deloitte Touche Tohmatsu, their subsidiaries or affiliates may support the engagement as we see fit. We reserve the right to change personnel responsible for the engagement with others of similar competence. 5.2 Deloitte Touche Tohmatsu is a worldwide organisation of separate individual partnerships and companies. Deloitte and/or "(Chinese Characters)" refer to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firm, and their respective subsidiaries and affiliates. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other's acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names "Deloitte", "Deloitte & Touche", "Deloitte Touche Tohmatsu", "(Chinese Characters)" or other related name. The services described herein are provided by the member firms and not by the Deloitte Touche Tohmatsu Verein. 5.3 This engagement letter is between you and DTTC only. In the course of providing the services DTTC may, at its discretion, draw on the resources of other Deloitte Touche Tohmatsu member firms, partnerships, companies or their subsidiaries and affiliates ("other Deloitte Firms"). Any partner, director or employee of any other Deloitte Firms who deal with you in connection with our services does so on behalf of DTTC alone. DTTC accepts responsibility for the actions of any partner, director or employee of any other Deloitte Firms assisting in the provision of our services as set out herein. 5.4 The provisions of Section 6.3 above have been stipulated by DTTC expressly for the benefit of other Deloitte Firms, their partners, directors and employees (together "the Beneficiaries"). You agree that each of the Beneficiaries shall have the right to rely on this Section 6 as if they were parties to this engagement letter. Each other Deloitte Firms which agree to assist in the provision of our services does so in reliance on the protections afforded to it by Sections 6.3 and 6.4, the benefit of which we formally accept on their behalf. February 26, 2008 China Finance Online Co. Limited Page 5 6. FEES We estimate that our fees for the integrated audit and the reviews of the related interim financial information for the year ended December 31, 2007 will be the amounts in US$ equivalent to RMB4,760,000, plus business tax, at the prevailing exchange rate announced by the people's bank of China on the dates when fee note is billed. Based on the anticipated timing of the work, our fees for the integrated audit and the reviews of the related interim financial information will be billed approximately as follows:
INVOICE DATE AMOUNT - ------------ --------- Upon signing of the engagement letter 4,140,000 June 6 260,000 August 15, 2008 250,000 November 15, 2008 250,000
We anticipate sending invoices for the integrated audit according to the schedule above, and payments are due on receipt. We will notify you promptly of any circumstances we encounter that could significantly affect our estimates and discuss with you any additional fees, as necessary. Additional services provided beyond the scope of services described herein will be billed separately. 7. INCLUSION OF DTTC REPORTS OR REFERENCES TO DTTC IN OTHER DOCUMENTS OR ELECTRONIC SITES If the Company intends to publish or otherwise reproduce in any document any report issued as a result of this engagement, or otherwise make reference to DTTC in a document that contains other information in addition to the audited financial statements (e.g., in a periodic filing with the SEC or other regulator, in a debt or equity offering circular, or in a private placement memorandum), thereby associating DTTC with such document, the Company agrees that its management will provide DTTC with a draft of the document to read and obtain our approval for the inclusion or incorporation by reference of any of our reports, or the reference to DTTC, in such document before the document is printed and distributed. The inclusion or incorporation by reference of any of our reports in any such document would constitute the reissuance of such reports. The Company also agrees that its management will notify us and obtain our approval prior to including any of our reports on an electronic site. February 26, 2008 China Finance Online Co. Limited Page 6 Our engagement to perform the services described herein does not constitute our agreement to be associated with any such documents published or reproduced by or on behalf of the Company. Any request by the Company to reissue any report issued as a result of this engagement, to consent to any such report's inclusion or incorporation by reference in an offering or other document, or to agree to any such report's inclusion on an electronic site will be considered based on the facts and circumstances existing at the time of such request. The estimated fees outlined herein do not include any services that would need to be performed in connection with any such request; fees for such services (and their scope) would be subject to the mutual agreement of the Company and DTTC at such time as DTTC is engaged to perform the services and would be described in a separate engagement letter. 8. TERMINATION DTTC reserves the right to resign from this engagement by giving you reasonable notice (taking account of the circumstances of the case) in writing if there arise any circumstances, including regulatory requirements, which in the opinion of DTTC, makes it inadvisable for DTTC to continue to provide the service to you as set out in this engagement letter. In any event of termination of this engagement, you and DTTC agree that DTTC shall be entitled to a reasonable fee according to DTTC's contribution and involvement in this engagement or the relevant transaction up to the date of termination. DTTC accepts no liability whatsoever in relation to the termination of engagement as a result of this clause. 9. LAW AND JURISDICTION The terms of our engagement shall be governed in all respect by the laws of the Hong Kong Special Administrative Region ("HKSAR") and the courts of the HKSAR shall have exclusive jurisdiction over any dispute which may arise in any way in connection with this engagement or any work or assignment arising from same. However, notwithstanding the above, we reserve the right to take legal action in the courts of any appropriate jurisdiction to recover any fees owing to us by you. 10. LIMITATION ON ACTIONS No action, regardless of form, arising hereunder or relating to this engagement, may be brought by either party more than three years after the cause of action has accrued except that an action for non-payment of fees may be brought by a party not later than three years following the date of the last payment due to such party hereunder. February 26, 2008 China Finance Online Co. Limited Page 7 This engagement letter, including the appendices attached hereto and made a part hereof, constitutes the entire agreement between the parties with respect to this engagement and supersedes all other prior and contemporaneous agreements or understandings between the parties, whether written or oral, relating to this engagement. If the above terms are acceptable and the services described are in accordance with your understanding, please sign the copy of this engagement letter in the space provided and return it to us. Yours faithfully, Acknowledged and approved on behalf of the Audit Committee of China Finance Online Co. Limited : By: /s/ Title: Date: Accepted and agreed to by China Finance Online Co. Limited: By: /s/ Title: Date: APPENDIX A DESCRIPTION OF AN INTEGRATED AUDIT UNDER THE PCAOB STANDARDS CHINA FINANCE ONLINE CO. LIMITED YEAR ENDED DECEMBER 31, 2007 AND THREE QUARTERS ENDING SEPTEMBER 30, 2008 COMPONENTS OF AN INTEGRATED AUDIT An integrated audit includes the following: - Examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements - Inquiring directly of the Audit Committee regarding its views about the risk of fraud and whether the Audit Committee has knowledge of any fraud or suspected fraud affecting the Company - Assessing the accounting principles used and significant estimates made by management - Evaluating the overall financial statement presentation - Examining, on a test basis, evidence supporting the design and operating effectiveness of the Company's internal control over financial reporting - Evaluating the effectiveness of the Company's internal control over financial reporting REASONABLE ASSURANCE An integrated audit is planned and performed to obtain reasonable, rather than absolute, assurance about (1) whether the financial statements are free of material misstatement, whether caused by error or fraud, and (2) whether material weaknesses exist as of the date specified in management's assessment of the effectiveness of the Company's internal control over financial reporting. Because of the characteristics of fraud, a properly planned and performed audit may not detect a material misstatement or material weakness. Accordingly, there is some risk that a material misstatement of the financial statements or a material weakness in internal control over financial reporting would remain undetected. Also, an integrated audit is not designed to detect error or fraud that is immaterial to the financial statements or deficiencies in internal control over financial reporting that, individually or in combination, are less severe than a material weakness. APPENDIX A - CONTINUED INHERENT LIMITATIONS OF INTERNAL CONTROL OVER FINANCIAL REPORTING Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to the risk that the internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. APPENDIX B DESCRIPTION OF AN INTERIM REVIEW UNDER THE PCAOB STANDARDS CHINA FINANCE ONLINE CO. LIMITED YEAR ENDED DECEMBER 31, 2007 AND THREE QUARTERS ENDING SEPTEMBER 30, 2008 A review of interim financial information is substantially less in scope than an audit in accordance with the PCAOB Standards, the objective of which is to express an opinion on the financial statements taken as a whole. Accordingly, a review will not result in the expression of an opinion concerning the fairness of the presentation of the interim financial information in conformity with generally accepted accounting principles and cannot be relied on to reveal all significant matters that would be disclosed in an audit. A review consists principally of applying analytical procedures to pertinent financial data and making inquiries of and evaluating responses from certain management personnel of the Company who have responsibility for financial and accounting matters. A review also includes obtaining sufficient knowledge of the Company's business and its internal control as it relates to the preparation of both annual and interim financial information to identify the types of potential material misstatements in the interim financial information, to consider the likelihood of their occurrence, and to select the inquiries and analytical procedures that will provide us with a basis for communicating whether we are aware of any material modifications that should be made to the interim financial information for it to conform with generally accepted accounting principles. A review is not designed to provide assurance on internal control or to identify control deficiencies. APPENDIX C MANAGEMENT'S RESPONSIBILITIES CHINA FINANCE ONLINE CO. LIMITED YEAR ENDED DECEMBER 31, 2007 AND THREE QUARTERS ENDING SEPTEMBER 30, 2008 FINANCIAL STATEMENTS AND THE EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REPORTING The overall accuracy of the financial statements, including interim financial information, and their conformity with generally accepted accounting principles is the responsibility of the Company's management. The assessment of the effectiveness of internal control over financial reporting to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and related SEC rules and regulations is also the responsibility of the Company's management. In this regard, management has the responsibility for, among other things: - Establishing and maintaining effective internal control over financial reporting and informing DTTC of all deficiencies in the design or operation of internal control over financial reporting identified by management, including separately disclosing to DTTC all such deficiencies that management believes to be significant deficiencies or material weaknesses in internal control over financial reporting. - Informing DTTC of any significant changes in the design or operation of the Company's internal control over financial reporting that occurred during each fiscal quarter or subsequent to the date being reported on - Identifying and ensuring that the Company complies with the laws and regulations applicable to its activities and informing us of any known material violations of such laws or regulations - Adjusting the financial statements to correct material misstatements - Making all financial records and related information available to us. REPRESENTATION LETTERS We will make specific inquiries of the Company's management about the representations embodied in the financial statements and management's assessment of the effectiveness of the Company's internal control over financial reporting. Additionally, we will request that management provide to us the written representations the Company is required to provide to its independent registered public accounting firm under the PCAOB Standards. As part of our integrated audit procedures, we will request that management provide us with a representation letter that includes, among other things: APPENDIX C - CONTINUED - Acknowledgment of management's responsibility for the preparation of the financial statements and for establishing and maintaining effective internal control over financial reporting. - Affirmation of management's belief that the effects of any uncorrected financial statement misstatements aggregated by us during the current audit engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. - Acknowledgment that management disclosed to us all deficiencies in the design or operation of internal control over financial reporting identified by management, including separately disclosing to us all such deficiencies that management believes to be significant deficiencies or material weaknesses in internal control over financial reporting. We will also request that management confirm certain representations made to us during our audit. The responses to those inquiries and related written representations of management required by the PCAOB Standards are part of the evidential matter that DTTC will rely on in forming its opinions. We will request a similar representation letter as part of our interim reviews, including representations about the disclosures related to changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting. PROCESS FOR OBTAINING PREAPPROVAL OF SERVICES Management is responsible for the coordination of obtaining the preapproval of the Audit Committee, in accordance with the Audit Committee's preapproval process, for any services to be provided by DTTC to the Company. INDEPENDENCE MATTERS RELATING TO FINANCIAL INTERESTS AND PROVIDING CERTAIN SERVICES In connection with our engagement, DTTC, management, and the Audit Committee will assume certain roles and responsibilities in an effort to assist DTTC in maintaining independence and ensuring compliance with the securities laws and regulations. DTTC will communicate to its partners, principals, and employees that the Company is an attest client. Management of the Company will ensure that the Company, together with its subsidiaries and other entities that comprise the Company for purposes of the consolidated financial statements, has policies and procedures in place for the purpose of ensuring that neither the Company nor any such subsidiary or other entity will act to engage DTTC or accept from DTTC any service that either has not been subjected to their preapproval process or that under SEC or other applicable rules would impair DTTC's independence. All potential services are to be discussed with Mr. Taylor Lam or Ms. Elsie Zhou. APPENDIX C - CONTINUED In connection with the foregoing, the Company agrees to furnish to DTTC and keep DTTC updated with respect to (1) a corporate tree that identifies the legal names of the Company's affiliates (e.g., parents, subsidiaries, investors, or investees), together with the ownership relationship among such entities, and (2) equity and debt securities of the Company and its affiliates (including, without limitation, tax-advantaged debt of such entities that is issued through governmental authorities) that are available to individual investors (whether through stock, bond, commodity, futures or similar markets, or equity, debt, or any other securities offerings), together with related securities identification information (e.g., ticker symbols or CUSIP(R), ISIN(R), or Sedol(R) numbers). The Company acknowledges and consents that such information may be treated by DTTC as being in the public domain. INDEPENDENCE MATTERS RELATING TO HIRING Management will coordinate with DTTC to ensure that DTTC's independence is not impaired by hiring former or current DTTC partners, principals, or professional employees for certain positions. Management of the Company will ensure that the Company, together with its subsidiaries and other entities that comprise the Company for purposes of the consolidated financial statements, also has policies and procedures in place for purposes of ensuring that DTTC's independence will not be impaired by hiring a former or current DTTC partner, principal, or professional employee in an accounting role or financial reporting oversight role that would cause a violation of securities laws and regulations. Any employment opportunities with the Company for a former or current DTTC partner, principal, or professional employee should be discussed with Mr. Taylor Lam or Ms. Elsie Zhou and approved by the Audit Committee before entering into substantive employment conversations with the former or current DTTC partner, principal, or professional employee, if such opportunity relates to serving (1) as chief executive officer, controller, chief financial officer, chief accounting officer, or any equivalent position for the Company or in a comparable position at a significant subsidiary of the Company; (2) on the Company's board of directors; (3) as a member of the Audit Committee; or (4) in any other position that would cause a violation of securities laws and regulations. For purposes of the preceding four paragraphs, "DTTC" shall include Deloitte Touche Tohmatsu CPA Ltd., its partners, directors, consultants and employees, and to the extent providing services under the engagement letter to which these terms are attached, any member firm of Deloitte Touche Tohmatsu, their subsidiaries and affiliates and all of their partners, principals, members, owners, directors, staff and agents, and in all cases any successor or assignee. This paragraph is additional to and shall not be taken to detract from Sections 6.3 and 6.4 of the engagement letter to which these terms are annexed. APPENDIX D AUDIT COMMITTEE COMMUNICATIONS CHINA FINANCE ONLINE CO. LIMITED YEAR ENDED DECEMBER 31, 2007 AND THREE QUARTERS ENDING SEPTEMBER 30, 2008 INDEPENDENCE COMMUNICATIONS We have the responsibility to comply with the requirements of the securities laws and regulations administered by the SEC regarding auditor independence. To demonstrate compliance with those requirements and in accordance with Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees ("Independence Standard No. 1"), we will disclose to the Audit Committee, in writing, all relationships between DTTC and the Company and its related entities, that in our professional judgment may reasonably be thought to bear on our independence and confirm to the Audit Committee in such letter whether, in our professional judgment, we are independent of the Company within the meaning of the securities laws and regulations. We also will discuss our independence with the Audit Committee in accordance with Independence Standard No. 1. For purposes of this paragraph, "DTTC" shall mean DTTC and its subsidiaries; Deloitte Touche Tohmatsu, its member firms, the affiliates of DTTC, Deloitte Touche Tohmatsu and its member firms; and, in all cases, any successor or assignee. OTHER COMMUNICATIONS ARISING FROM THE AUDIT OR REVIEWS Fraud and Illegal Acts We will report directly to the Audit Committee any fraud of which we become aware that involves senior management, and any fraud (whether caused by senior management or other employees) of which we become aware that causes a material misstatement of the financial statements. We will report to senior management any fraud perpetrated by lower level employees of which we become aware that does not cause a material misstatement of the financial statements; however, we will not report such matters directly to the Audit Committee, unless otherwise directed by the Audit Committee. We will inform the appropriate level of management of the Company and determine that the Audit Committee is adequately informed with respect to illegal acts that have been detected or have otherwise come to our attention in the course of our audit, unless the illegal acts are clearly inconsequential. APPENDIX D - CONTINUED Internal Control Matters We will communicate, in writing, to management and the Audit Committee all material weaknesses identified during the integrated audit prior to the issuance of our report on the effectiveness of the Company's internal control over financial reporting. We will also communicate in writing to the Audit Committee any significant deficiencies identified during the integrated audit. If we conclude that the oversight of the Company's external financial reporting and internal control over financial reporting by the Audit Committee is ineffective, we will also communicate that conclusion in writing to the Company's board of directors. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. In addition, we will communicate to management, in writing, all deficiencies in internal control over financial reporting (that is, those deficiencies in internal control over financial reporting that are of a lesser magnitude than material weaknesses) identified during the integrated audit and inform the Audit Committee when such a communication has been made. When making this communication, we will not repeat information about such deficiencies that has been included in previously issued written communications, whether those communications were made by us, internal auditors, or others within the Company. Other Matters We will communicate matters required by PCAOB AU 380, Communications with Audit Committees, and Rule 2-07 of SEC Regulation S-X prior to the Company filing our report or consent with the SEC. Communications Related to Interim Reviews At the Audit Committee's request, we will not issue a written review report upon completion of our interim reviews; however, we will report to the Audit Committee and the Company's management (1) matters that cause us to believe that material modifications should be made to the interim financial information for it to conform with generally accepted accounting principles or (2) that the Company furnished the Form 6-K before the completion of our review. When conducting our review of interim financial information, we will also determine whether any other matters required by regulations or the PCAOB Standards as they relate to interim financial information have been identified. If such matters have been identified, we will communicate them to the Audit Committee prior to the submission of interim financial information with the SEC or, if such communication cannot be made before the submission, as soon as practicable under the circumstances. EX-8.1 38 h02185exv8w1.txt EX-8.1 LIST OF SUBSIDIARIES . . . Exhibit 8.1
PERCENTAGE COUNTRY OF OWNERSHIP NAME INCORPORATION INTEREST - ---- ------------- ---------- Fortune Software (Beijing) Co., Ltd China 100 China Finance Online (Beijing) Co., Ltd. China 100 Beijing Fuhua Innovation Technology Development Co., Ltd.* China 100 Stockstar Information Technology (Shanghai) Co., Ltd China 100 Shanghai Meining Computer Software Co., Ltd. China 100 Zhengning Information & Technology (Shanghai) Co., Ltd. China 100 Shenzhen Genius Information Technology Co., Ltd. China 100 Jujin Software (Shenzhen) Co., Ltd. China 100
* Denotes variable interest entity EX-10.1 39 h02185exv10w1.txt EX-10.1 CONSENT OF DELOITTE TOUCHE TOHMATSU CPA LTD. Exhibit 10.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the Registration Statement Nos. 333-139192 and 333-123802 on Form S-8 of our reports (which report expresses an unqualified opinion and includes an explanatory paragraph, effective on January 1, 2007, relating to the adoption of the recognition and measurement methods under Financial Accounting Standards Board Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" and effective on January 1, 2006, changing its method of accounting for stock-based compensation to conform to Statement of Financial Accounting Standard No. 123 (revised 2004), "Share-Based Payment") relating to the consolidated financial statements and financial statement schedule of China Finance Online Co. Limited and the effectiveness of China Finance Online Co. Limited's internal control over financial reporting dated May 30, 2008, appearing in this Annual Report on Form 20-F of China Finance Online Co. Limited for the year ended December 31, 2007. (DELOITTE TOUCHE TOHMATSU CPA LTD.) Beijing, the People's Republic of China June 4, 2008 EX-12.1 40 h02185exv12w1.txt EX-12.1 CEO CERTIFICATION PURSUANT TO RULE 13A-14(A) EXHIBIT 12.1 CERTIFICATION I, Zhao Zhiwei, certify that: 1. I have reviewed this annual report on Form 20-F of China Finance Online Co. Limited; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and 5. The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting. Date: June 5, 2008 /s/ Zhao Zhiwei - --------------------- Name: Zhao Zhiwei Title: Chief Executive Officer EX-12.2 41 h02185exv12w2.txt EX-12.2 CFO CERTIFICATION PURSUANT TO RULE 13A-14(A) EXHIBIT 12.2 CERTIFICATION I, Jeff Wang, certify that: 1. I have reviewed this annual report on Form 20-F of China Finance Online Co. Limited; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and 5. The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting. Date: June 5, 2008 /s/ Jeff Wang - --------------------- Name: Jeff Wang Title: Chief Financial Officer 2 EX-13.1 42 h02185exv13w1.txt EX-13.1 CEO CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 13.1 CERTIFICATION OF PERIODIC FINANCIAL REPORT Pursuant to 18 U.S.C. Section 1350 In connection with the Annual Report of China Finance Online Co. Limited (the "Company") on Form 20-F for the fiscal year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Zhiwei Zhao, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: June 5, 2008 /s/ Zhao Zhiwei --------------------------- Name: Zhao Zhiwei Title: Chief Executive Officer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 3 EX-13.2 43 h02185exv13w2.txt EX-13.2 CFO CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 13.2 CERTIFICATION OF PERIODIC FINANCIAL REPORT Pursuant to 18 U.S.C. Section 1350 In connection with the Annual Report of China Finance Online Co. Limited (the "Company") on Form 20-F for the fiscal year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeff Wang, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 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