Central Development Holdings Limited — Capital/Financing Update 2015

Jul 5, 2015

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

ZHONG FA ZHAN HOLDINGS LIMITED 中發展控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code : 475)

(1) ISSUE OF SHARES AND WARRANTS UNDER SPECIFIC MANDATE TO SUNCOOL AB;

(2) ISSUE OF SHARES UNDER SPECIFIC MANDATE TO THE INVESTORS;

(3) THE ENTERING INTO OF THE LICENCE AGREEMENT;

(4) THE ENTERING INTO OF THE CONSULTANCY AGREEMENT; AND (5) RESUMPTION OF TRADING

THE SUBSCRIPTION AGREEMENTS

On 1 July 2015, the Company and each of the Subscribers entered into the Subscription Agreements pursuant to which the Company has conditionally agreed to (i) allot and issue the Suncool Subscription Shares, being 6,000,000 new Shares, at the subscription price, being HK$2.10 per Suncool Subscription Share, to Suncool AB, and grant the Warrants to Suncool AB to subscribe for an aggregate of 24,000,000 Warrant Shares (subject to adjustment) at the Exercise Price, being HK$2.50 per Warrant Share under the Suncool Subscription Agreement; (ii) allot and issue the Investor Subscription Shares, being 36,000,000 new Shares in aggregate, at the subscription price, being HK$2.10 per Investor Subscription Share, to the Investors under the Investor Subscription Agreements. The Subscription Agreements are separate and not inter-conditional.

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To the best of the knowledge, information and belief of the Directors and having made all reasonable enquiries, each of the Subscribers and their respective ultimate beneficial owners are Independent Third Parties. The Subscription Shares and the Warrant Shares will be issued under the Specific Mandate to be sought at the EGM.

The total of 42,000,000 Subscription Shares represents (i) approximately 14.30% of the issued share capital of the Company as at the date of this announcement, (ii) approximately 12.51% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares, and (iii) approximately 11.67% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Warrant Shares.

Upon full exercise of 24,000,000 Warrants, 24,000,000 Warrant Shares will be issued, representing (i) approximately 8.17% of the issued share capital of the Company as at the date of this announcement, (ii) approximately 7.55% of the issued share capital of the Company as enlarged by the allotment and issue of the Warrant Shares; and (iii) approximately 6.67% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Warrant Shares.

The Company will apply to the Stock Exchange for the listing of, and the permission to deal in, the Subscription Shares and the Warrant Shares which may fall to be allotted and issued upon exercise of the subscription rights attaching to the Warrants. No listing of the Warrants will be sought on the Stock Exchange or any other stock exchanges.

Subscription Completion is subject to, among other things, fulfillment of the conditions precedent thereto respectively. As such, the Subscriptions may or may not proceed. Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

THE LICENCE AGREEMENT

On the same date, Suncool AB and Nation Power entered into the Licence Agreement in relation to the grant of exclusive right and licence to Nation Power to exploit the CoolStore IPR and the Licensed Technology within the CoolStore Field of Use and CoolStore Territory for a term of 15 years upon the Suncool Subscription Completion.

THE CONSULTANCY AGREEMENT

In order to develop the Solar Business in the PRC, on 1 July 2015, the Group entered into the Consultancy Agreement with CULCE (Jiangyin) in relation to the consultancy services to be provided by CULCE (Jiangyin).

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GENERAL

The EGM will be held for the Shareholders to consider and, if thought fit, approve the ordinary resolutions in respect of Subscription Agreements and the transactions contemplated thereunder and the allotment and issue of the Subscription Shares and the Warrant Shares under the Specific Mandate. As no Shareholder has an interest in each of the Subscription Agreements that is materially different from the other Shareholders, no Shareholder is required to abstain from voting at the EGM in respect of the Subscription Agreements.

A circular containing further details of the Subscription Agreements, valuation report of the Warrants and the notice of EGM will be despatched to the Shareholders on or before 24 July 2015.

RESUMPTION OF TRADING

At the request of the Company, trading in the Shares on the Stock Exchange has been halted with effect from 9:00 a.m. on 2 July 2015 pending the release of this announcement. Application has been made by the Company to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange with effect from 9:00 a.m. on 6 July 2015.

BACKGROUND

The Board is pleased to announce that on 1 July 2015, the Company and each of the Subscribers entered into the Subscription Agreements pursuant to which the Company has agreed to (i) allot and issue to Suncool AB, the Suncool Subscription Shares, being 6,000,000 new Shares, at the subscription price, being HK$2.10 per Suncool Subscription Share, and grant the Warrants to Suncool AB to subscribe for an aggregate of 24,000,000 Warrant Shares (subject to adjustment) at the Exercise Price, being HK$2.50 per Warrant Share under the Suncool Subscription Agreement; (ii) allot and issue the Investor Subscription Shares, being 36,000,000 new Shares in aggregate, at the subscription price, being HK$2.10 per Investor Subscription Share, to the Investors under the Investor Subscription Agreements. The Subscription Agreements are separate and not inter-conditional.

On the same date, Suncool AB, and Nation Power, a wholly-owned subsidiary of the Company, entered into the Licence Agreement in relation to the grant of exclusive right and licence to Nation Power to exploit the CoolStore IPR and the Licensed Technology within the CoolStore Field of Use and CoolStore Territory for a term of 15 years upon the Suncool Subscription Completion.

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In order to develop the Solar Business in the PRC, on 1 July 2015, the Group also entered into the Consultancy Agreement with CULCE (Jiangyin) in relation to the consultancy services to be provided by CULCE (Jiangyin).

THE SUBSCRIPTION AGREEMENTS

The Suncool Subscription Agreement

Date: 1 July 2015 Parties: (a) Issuer: the Company; and (b) Subscriber: Suncool AB Suncool AB and its ultimate beneficial owner(s) are, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Independent Third Parties. As at the date of this announcement, Suncool AB did not hold any Shares.

Pursuant to the Suncool Subscription Agreement, the Company has conditionally agreed to (i) allot and issue to Suncool AB, the Suncool Subscription Shares, being 6,000,000 new Shares at the subscription price, being HK$2.10 per Suncool Subscription Share, and (ii) grant the Warrants at nil consideration to Suncool AB to subscribe for an aggregate of 24,000,000 Warrant Shares (subject to adjustment) at the Exercise Price, being HK$2.50 per Warrant Share.

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Investor Subscription Agreements

Date:

1 July 2015

Parties:

(a) Issuer: the Company; and (b) Subscriber: the respective Investors Each of the Investors and their respective ultimate beneficial owner(s) are, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Independent Third Parties. As at the date of this announcement, each of the Investors did not hold any Shares.

Pursuant to the Investor Subscription Agreements, the Company has conditionally agreed to allot and issue, (i) Investor A, 12,000,000 Subscription Shares; (ii) Investor B, 6,000,000 Subscription Shares; (iii) Investor C, 6,000,000 Subscription Shares; (iv) Investor D, 6,000,000 Subscription Shares; (v) Investor E, 3,000,000 Subscription Shares, and (vi) Investor F, 3,000,000 Subscription Shares, being 36,000,000 new Shares in aggregate, at the subscription price, being HK$2.10 per Investor Subscription Share.

The principal terms of the Subscription Agreements with each of the Investors are identical, except for the number of the Subscription Shares, to be subscribed by each of the Investors and total subscription price payable therefor.

SUBSCRIPTION PRICE

The subscription price is HK$2.10 per Subscription Share. The aggregate consideration for the Subscription Shares shall be HK$88,200,000, which shall be payable by electronic funds transfer for value on the date of Subscription Completion to the Company’s bank account or by such other means as the Company may agree.

The subscription price of HK$2.10 represents:

• (a) a discount of approximately 14.29% to the closing price of HK$2.45 per Share as quoted on the Stock Exchange on 30 June 2015, being the Last Trading Day;

• (b) a discount of approximately 15.32% to the average closing price of approximately HK$2.48 per Share as quoted on the Stock Exchange for the last 5 consecutive trading days up to and including the Last Trading Day; and

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• (c) a discount of approximately 16.00% to the average closing price of approximately HK$2.50 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Last Trading Day.

The subscription price was arrived at after arm’s length negotiations between the Company and the Subscribers, taking into account, among others, the current market conditions and the recent trading price of the Shares. The Directors consider that the subscription price is fair and reasonable.

The total of 42,000,000 Subscription Shares represents (i) approximately 14.30% of the issued share capital of the Company as at the date of this announcement, (ii) approximately 12.51% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and (iii) approximately 11.67% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Warrant Shares. The Subscription Shares will have a nominal value of HK$420,000 based on the par value of HK$0.01 per Share.

The Subscription Shares shall be allotted and issued as fully paid (or credited as fully paid) and free from all third party rights and shall rank pari passu in all respects among themselves and all other existing Shares in issue on the date of allotment and issue and with all rights then attaching to them including the right to receive all distributions and dividends declared, paid or made in respect of the Subscription Shares after the Subscription Completion.

PRINCIPAL TERMS OF THE WARRANTS

Number of Warrants to 24,000,000 Warrants, each Warrant has the right to subscribe for be issued one Share, subject to adjustment as set out in the section headed “Adjustment” below

Issue price: Nil

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Exercise period:

The Warrants are fully exercisable in multiples of 2,000,000 at any time after their respective vesting date in the manner as below:

Number

Number
of
Warrants	Vesting date	Exercise period
8,000,000	1 October 2016	From 1 October 2016 to
		30 September 2018
8,000,000	1 April 2017	From 1 April 2017 to
		30 September 2018
8,000,000	1 October 2017	From 1 October 2017 to
		30 September 2018

• Exercise Price: HK$2.50 per Warrant Share, payable in full upon exercise of the respective Warrants

Transferability:

Warrants in multiples of 2,000,000, may be transferred at any time after the respective vesting date of the Warrants, provided that prior approval of the Stock Exchange shall be obtained (if required) for any transfer to any person who the transferor knows to be a connected person of the Company

• Restriction on the The exercise of the Warrants shall be restricted, if such exercise of exercise rights of the the Warrants would render the Shares held in public hands being Warrants: less than the minimum public float of the Shares required under the Listing Rules

• Ranking of the Warrant The Warrant Shares, when allotted and issued, will rank pari Shares: passu in all respects among themselves and with all other Shares then in issue

• Rights for holder of Holder of Warrants will not be entitled to receive notice of or Warrants: attend or vote at general meetings of the Company by reason only of being the holder of the Warrants. Holder of Warrants will not be entitled to participate in any distribution or further issues of securities of the Company as a result of them being holders of Warrants

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If the Company is wound up during the exercise period of the Warrants, all exercise rights of the Warrants which have not been exercised at the commencement of the winding up shall lapse, save for in the event of voluntary winding up, the holders of the Warrants shall be entitled by irrevocable surrender of their Warrants to the Company and the Company shall as soon as possible and in any event no later than the day immediately prior to the date of the proposed shareholders’ meeting allot such number of Warrant Shares to the holders of the Warrants which fall to be issued.

Early exercise of Warrants:

Upon the occurrence of any of the following:

• (i) any breach by Nation Power of any material term of the Licence Agreement;

• (ii) any breach by the Company of any material term of the Suncool Subscription Agreement;

• (iii) an offer for all of the Shares becoming or being declared unconditional in all respects and the offeror becoming entitled to exercise compulsory acquisition rights to acquire those Shares not acquired under the offer; or

• (iv) an offer by way of scheme of arrangement for all of the Shares being sanctioned by the relevant court and being duly approved by the Shareholders,

the holder of Warrants shall have the right to immediately exercise the Warrants (although the respective vesting date may not have occurred) and subscribe for Shares

Listing:

The Warrants will not be listed on any stock exchange

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Issue price and the Exercise Price of the Warrants

The Exercise Price HK$2.50 represents:

• (i) a premium of approximately 2.04% over the closing price of HK$2.45 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (ii) a premium of approximately 0.81% over the average of the closing price of HK$2.48 per Share as quoted on the Stock Exchange for the last five consecutive trading days including the Last Trading Day; and

• (iii) approximately the same as the average of the closing price of HK$2.50 per Share as quoted on the Stock Exchange for the last ten consecutive trading days including the Last Trading Day.

The issue price and the Exercise Price were arrived at after an arm’s length negotiation between the Company and Suncool AB with reference to the recent trading performance of the Shares in particular that the Exercise Price is at a premium of approximately 0.81% over the last five consecutive trading days up to and including the Last Trading Day, and the Group’s existing financial position. Based on the above factors, the Directors consider that the issue price and the Exercise Price and the terms and conditions of the Warrant Subscription are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Upon full exercise of the Warrants, 24,000,000 Warrant Shares will be issued, representing (i) approximately 8.17% of the issued share capital of the Company as at the date of this announcement, (ii) approximately 7.55% of the issued share capital of the Company as enlarged by the allotment and issue of the Warrant Shares, and (iii) approximately 6.67% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Warrant Shares.

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Adjustment

The number of Warrant Shares that each Warrant may subscribe for will be adjusted in the event of a consolidation, subdivision or reclassification of Shares so that if and whenever there shall be an alteration to the nominal value of the Shares as a result of consolidation, subdivision or reclassification, the number of Warrant Shares that shall be issued upon exercise of each Warrant shall be adjusted by multiplying the number of Warrant Shares that would have been issued on the exercise of each Warrant immediately before such alteration by the following fraction:

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where:

• A is the number of Shares in issue immediately after such alteration; and

• B is the number of Shares in issue immediately before such alteration.

Lapse of the Warrants

All Warrants shall automatically lapse and each shall cease to be valid for any purpose to the extent outstanding at 30 September 2018 without compensation to the holders of the Warrants.

CONDITIONS PRECEDENT TO THE SUBSCRIPTIONS

Completion of each of the Subscriptions is conditional upon:

• (a) the Stock Exchange granting the listing of and permission to deal in the Suncool Subscription Shares and the Warrant Shares in respect of the Suncool Subscriptions, or the Investor Subscription Shares in respect of the Investor Subscriptions, as the case may be;

• (b) the passing of the necessary resolution(s) by the Shareholders at the EGM to approve the Subscription Agreements and the transactions contemplated thereunder, including the creation of the warrant instrument and the issue of the Subscription Shares and the Warrant Shares pursuant to the exercise of the subscription rights attaching to the Warrants;

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• (c) in respect of the Suncool Subscriptions, the passing of the necessary resolution(s) by the shareholders of Suncool AB to approve the entry into the Suncool Subscription Agreement and the transactions contemplated thereunder, including the payment of the subscription price for the Suncool Share Subscription and the Suncool Subscriptions;

• (d) if required, all other necessary consents, approvals and waivers from the Stock Exchange, the SFC or such other government authorities for the Subscription Agreements and the transactions contemplated thereunder having been obtained and fulfilled (save and except the approval as referred to in clause (a) above); and

• (e) all representations and undertakings given by each of the Subscribers remaining true and accurate as at the date of the respective Subscription Agreements and the date of Subscription Completion.

As at the date of this announcement, none of the above conditions had been fulfilled.

None of the conditions set out above can be waived. In the event that the conditions (a) to (d) set out above shall not have been fulfilled by 5:00 p.m. on 31 October 2015 (or such other time and date as may be agreed in writing by the Company), all rights, obligations and liabilities of the parties thereunder shall cease and determine and neither party shall have any claim against the other, save for any antecedent breaches of the Subscription Agreements.

LOCK-UP UNDERTAKINGS

Each of the Subscribers undertakes to the Company that from the respective Subscription Completion to 31 March 2016 (both dates inclusive), it shall not dispose of, or enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of any of the Subscription Shares.

SUBSCRIPTION COMPLETION

Completion of each of the Subscriptions shall take place on the 15th Business Day after the date on which the last condition of the respective Subscription Agreements have been satisfied (or such other date as the Company and the respective Subscribers may agree in writing).

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UNDERTAKINGS UNDER THE SUNCOOL SUBSCRIPTION AGREEMENT

The Company undertakes that as soon as practicable after the date of the Suncool Subscription Completion, it shall procure the establishment of the WFOE in the PRC. The Company further undertakes that, within five Business Days after the date of establishment of the WFOE, it shall procure the passing of the resolution(s) of the shareholders and/or the directors of the WFOE, as required, to approve the appointment of such person as nominated by Suncool AB as director to the board of directors of the WFOE.

SPECIFIC MANDATE

The Subscription Shares and the Warrant Shares will be allotted and issued under the Specific Mandate to be sought at the EGM.

APPLICATION FOR LISTING

Application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares and the Warrant Shares.

EFFECT ON SHAREHOLDING STRUCTURE

The Company had 293,754,000 Shares in issue as at the date of this announcement. The table below is for illustrative purposes only and sets out the shareholding structure of the Company (i) as at the date of this announcement; (ii) upon allotment and issue of the Subscription Shares; and (iii) upon allotment and issue of the Subscription Shares, and the Warrant

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Shares, assuming no other Shares will be issued or repurchased between the date of this announcement and the date of Subscription Completion:

Name of Shareholders Directors/substantial Shareholders Resources Rich Capital Limited_(Note 1) Hu Yangjun(Note 2) Hu Yishi(Note 3) Wu Hao(Note 4) Li Wei Qi, Jacky(Note 5)_ Public Shareholders Suncool AB Investor A Investor B Investor C Investor D Investor E Investor F Other public Shareholders Total	As at the date of this announcement No. of Shares % 204,718,000 69.69 2,736,000 0.93 2,736,000 0.93 2,736,000 0.93 2,736,000 0.93 – – – – – – – – – – – – – – 78,092,000 26.59 293,754,000 100.00	Immediately after the Subscription Completion (assuming the Warrants are not exercised) No. of Shares % 204,718,000 60.97 2,736,000 0.81 2,736,000 0.81 2,736,000 0.81 2,736,000 0.81 6,000,000 1.79 12,000,000 3.57 6,000,000 1.79 6,000,000 1.79 6,000,000 1.79 3,000,000 0.89 3,000,000 0.89 78,092,000 23.28 335,754,000 100.00	Immediately after the Subscription Completion and the exercise in full of the Warrants No. of Shares % 204,718,000 56.90 2,736,000 0.76 2,736,000 0.76 2,736,000 0.76 2,736,000 0.76 30,000,000 8.34 12,000,000 3.34 6,000,000 1.67 6,000,000 1.67 6,000,000 1.67 3,000,000 0.83 3,000,000 0.83 78,092,000 21.71 359,754,000 100.00	Immediately after the Subscription Completion and the exercise in full of the Warrants No. of Shares % 204,718,000 56.90 2,736,000 0.76 2,736,000 0.76 2,736,000 0.76 2,736,000 0.76 30,000,000 8.34 12,000,000 3.34 6,000,000 1.67 6,000,000 1.67 6,000,000 1.67 3,000,000 0.83 3,000,000 0.83 78,092,000 21.71 359,754,000 100.00
				100.00

Notes:

1. The entire issued share capital of Resources Rich Capital Limited is owned as to 50% by Mr. Hu Yangjun, an executive Director, and as to 50% by Mr. Hu Yishi, an executive Director.

2. Mr. Hu Yangjun is an executive Director.

3. Mr. Hu Yishi is an executive Director.

4. Mr. Wu Hao is an executive Director,

5. Mr. Li Wei Qi, Jacky is a non-executive Director.

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THE LICENCE AGREEMENT

The principal terms of the Licence Agreement are as follows:

Date:

1 July 2015

• Parties: (a) Suncool AB as the licencor. Save for that Suncool AB is a party to the Suncool Subscription Agreement, Suncool AB and its ultimate beneficial owner(s) are, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Independent Third Parties. As at the date of this announcement, Suncool AB did not hold any Shares; and

• (b) Nation Power as the licensee.

• Licence: the grant of exclusive right and licence to Nation Power to exploit the CoolStore IPR and the Licensed Technology within the CoolStore Field of Use and CoolStore Territory

• Effectiveness: the Licence Agreement shall become effective upon the Suncool Subscription Completion

• Licence period: 15 years from the Suncool Subscription Completion

• Royalty: Suncool AB shall be entitled to receive from Nation Power or the relevant entities to be mutually agreed by Nation Power and Suncool AB of 5% of the Revenue generated from the Solar Business within the CoolStore Field of Use in the CoolStore Territory up to and until the CoolStore IPR and the Licensed Technology have been acquired by the NP Group or the expiry of the Licence Agreement. Suncool AB shall annually be entitled to receive a preliminary payment of the Royalty on or before 30 November which preliminary payment shall be calculated for the period up to and including 30 June the same year. The payment of the Royalty for the preceding financial year shall be made annually on or before 30 April of the following year for which the amount of the aforesaid preliminary payment paid shall be deducted. In the case of any late payment by Nation Power, Suncool AB shall be entitled to 10% per annum interest on the sum overdue.

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Technical support:

• Suncool AB shall arrange at least three engineers to provide technical support to Nation Power or, at the request of Nation Power, to the WFOE or any wholly owned subsidiary of Nation Power in operating the Solar Business for at least three years following the Suncool Subscription Completion. In consideration for such technical support, Suncool AB shall be entitled to service fee of RMB0.75 million for every six months during the first two years and RMB0.5 million for every six months during the third year. Nation Power or the relevant entities to be mutually agreed by Nation Power and Suncool AB shall make payment to Suncool AB against invoice issued by Suncool AB at the beginning of each six months period with payment terms of 30 days.

IPR purchase option:

• The NP Group shall, subject to applicable laws and regulations or the requirements of the Stock Exchange, have the right to acquire the CoolStore IPR and the Licensed Technology from Suncool AB commencing from the expiry of 30 months from the Suncool Subscription Completion until the expiry of the Licence Agreement.

The purchase price shall be the fair market value of the CoolStore IPR and the Licensed Technology sold on an “as is” basis after deduction of any Royalty paid or payable up to the date of purchase.

In the event that the IPR purchase option is exercised and the actual purchase price for the acquisition of the CoolStore IPR and the Licensed Technology results in the transaction which may constitute a notifiable transaction to the Company under the Listing Rules, the Company will make further announcement as and when appropriate in accordance with the Listing Rules’ requirements.

Reservation of In the event that the aggregate amount of Revenue generated from Suncool AB’s right: the Solar Business by the NP Group is less than RMB30 million by 31 December 2018, Suncool AB expressly reserves the right to exploit and to otherwise explore any further commercial use of the CoolStore IPR and the Licensed Technology in parallel with the NP Group within the CoolStore Field of Use and the CoolStore Territory from 1 January 2019.

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Termination:

• (i) In the event that a party to the Licence Agreement suffers an event of default, the non-defaulting party may terminate the Licence Agreement by serving the other party a notice in writing and the Licence Agreement shall be terminated immediately upon receipt of such notice by the other party.

• (ii) The following shall constitute an “event of default”:

• (1) a party is in material breach of any of the provisions thereof and such breach continues for 30 calendar days after written notice by the other party, specifying the breach and demanding that it be rectified;

• (2) a party is in breach of the Confidentiality Agreement;

• (3) a party is declared insolvent, undertakes liquidation proceedings or is declared bankrupt, or any procedure is commenced with a view to the appointment of an administrator, receiver or trustee in bankruptcy in relation to such party or substantially all of such party’s assets or such party admits in writing its inability to pay debts as they mature; or

• (4) with respect to each of Nation Power, the WFOE and any wholly-owned subsidiary of Nation Power, ceasing to be, directly or indirectly, wholly-owned by the Company

Undertaking from ClimateWell in relation to the Licence Agreement

Pursuant to the undertaking given by ClimateWell in favour of the Company and Nation Power in consideration of Suncool AB entering into of the Licence Agreement, ClimateWell undertakes:

• (a) to transfer or license (as applicable) the CoolStore IPR and the Licensed Technology to Suncool AB on or before 15 September 2015 to the extent required to allow it to fulfill Suncool AB’s obligations under the Licence Agreement;

• (b) it shall continuously during the term of the Licence Agreement transfer or license (as applicable) all its know-how relating to the Coolstore IPR and the Licensed Technology to Suncool AB for the purpose of Suncool AB’s performance of its obligations under the Licence Agreement; and

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• (c) it shall allocate the necessary resources to Suncool AB during a transition period until Suncool AB has hired enough of its own staff to fulfill the technical support obligations to Nation Power under the Licence Agreement, provided that such obligation shall, unless otherwise terminated, terminate on 31 December 2016.

THE CONSULTANCY AGREEMENT

In order to develop the Solar Business based on the use of the CoolStore IPR and the Licensed Technology granted under the Licence Agreement, on 1 July 2015, the Company entered into the Consultancy Agreement with CULCE (Jiangyin), a subsidiary of 中英低碳創業投資有限 公司(China-UK Low Carbon Enterprise Co., Ltd) (“ China-UK* ”). The principal terms of the Consultancy Agreement are as follows:

Date: 1 July 2015

Parties: (a) the Company

• (b) CULCE (Jiangyin), which is principally engaged in the provision of consultation service and management service to venture capital institution. CULCE (Jiangyin) is a wholly owned subsidiary of China-UK. Based on the information provided by CULCE (Jiangyin), China-UK is owned as to 20% by Ecowise Co, 72.65% by China Energy Conservation and Environment Protection Group and 7.35% by Carbon Trust. CULCE (Jiangyin) and its ultimate beneficial owner(s) are, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Independent Third Parties.

Scope of service:

CULCE (Jiangyin) shall assist in selecting and hiring of management team of WFOE, marketing, sales and product marketing, further development in product research and development, rental of land and buildings, and provide advisory on strategy and decision making

• For identification purpose only

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Service fee: CULCE (Jiangyin) shall not be entitled to any service fee under the Consultancy Agreement. However, the Company/WFOE shall pay to CULCE (Jiangyin) reimbursements for all pre-approved expenses reasonably incurred during the provision of services under the Consultancy Agreement

15 years upon signing

• Term: 15 years upon signing Termination: (i) the Company shall have the right to terminate the Consultancy Agreement by giving CULCE (Jiangyin) not less than 60 days notice in writing

• (ii) each party shall have the right to terminate the Consultancy Agreement by giving the other party not less than 60 days notice in writing if there is a material breach by the other party and have failed to remedy such breach within 10 days after receipt of written notice

INFORMATION ON SUNCOOL AB AND THE INVESTORS

According to Suncool AB, each of ClimateWell and Suncool AB is a company incorporated under the laws of Sweden. Industrifonden, a Swedish governmental venture capital fund and leading investor in green technology, is the single largest shareholder in ClimateWell. ClimateWell’s technology is currently applied in the fields of solar-powered heating and cooling in buildings, heat-driven air conditioning in heavy-duty vehicles and gas-fired water heaters for residential. ClimateWell’s components are integrated in those applications by major OEM customers like GE, Rheem and Caterpillar. Suncool AB’s Licensed Technology, which was originally developed by ClimateWell, an award-winning and leading provider of sorption components, is based on salt crystals, which can store chemical energy and convert it to heating and cooling without using any electricity or moving parts. The Licensed Technology enables the world’s first solar thermal collector with integrated cooling and was launched and successfully demonstrated in a first large-scale installation in Europe.

Investor A is Zheng Yifei, an Independent Third Party, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries.

Investor B is Li Xi, an Independent Third Party, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries.

Investor C is Wu Xunzhi, an Independent Third Party, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries.

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Investor D is Cui Weizhen, an Independent Third Party, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries.

Investor E is Zou Ping, an Independent Third Party, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries.

Investor F is Li Kai Kai, Bobo, an Independent Third Party, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries.

REASONS FOR AND BENEFITS OF THE SUBSCRIPTIONS, THE ENTERING INTO OF THE LICENCE AGREEMENT AND THE CONSULTANCY AGREEMENT

The Group is principally engaged in the design, manufacture and wholesale of fine jewelry products in the PRC.

The Directors consider that entering into the Subscription Agreements represents a good opportunity to (i) raise additional funds for the Company; (ii) improve the financial position and liquidity of the Group; (iii) capture any prospective investment opportunities as and when they arise; and (iv) enable the Company to develop a new business segment relating to solar technology industry in the PRC in parallel to its existing business. The Warrants are issued in consideration of the grant of exclusive right and licence by Suncool AB to Nation Power under the Licence Agreement. The Warrants are not interest bearing and will not result in any immediate dilution effect on the shareholding of the existing Shareholders. The Directors are of the view that the terms of the Subscription Agreements are on normal commercial terms after arm’s length negotiation and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

As set out in the Company’s annual results announcement for the year ended 31 March 2015, in regards to the market situation, the Group will consider and closely look for opportunities for fund raising activities from time to time with a view to expanding the total asset value base of the Group, and should suitable investment or business opportunities arise, the Group may consider diversifying its business with an objective to broaden its income source.

The Directors considered that energy is the foundation of the existence and development of the modern society. The continuous development of the global economy and society has given rise to sustainable growth of energy consumption. With the passage of time, the scarcity of fossil fuels becomes more and more prominent, which is gradually reflected in the price of energy. Due to the shortage of fossil energy, large-scale exploration and utilisation of renewable energy has played an important part in the world’s future energy strategy. Solar energy is inexhaustible and renewable energy for humans. It is clean, absolutely safe, relatively extensive, long-lasting, free of maintenance and adequate, which makes it significant in the long-term energy strategy.

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Traditionally, the solar energy can be used to generate electricity and heat. Using solar-powered air conditioning system can greatly reduce the consumption of non-renewable energy and electricity and the low power consumption has reduced the environmental pollution caused by the burning of conventional fuels such as coal for power generation. With the development of economy and the rise in the people’s living standard, the demand for air conditioning became bigger. In the view of such increasing global demand for renewable energy, the Directors are of the view that the Solar Business in the PRC offers attractive potential growth and return. The Directors have no current intention to discontinue any existing business of the Group.

CoolStore cooling-stored pipe is a photovoltaic solar-assisted photo-thermal pump component designed by Suncool AB with unique patented pipes’ internal structure, specially processed through reversible chemical reaction of salt solution as well as realising cooling and heating function, which is an epoch-making product. In daytime, salt solution in reactors is transformed into dry salt through heating, with steam moving from reactor to condenser and steam condensed in the condenser along releasing heat. At the same time, the heat can be used immediately or stored in the tank for heating. The heat can be used to warm, preheat rooms and swimming pool, or provide hot water. At night, the collector can be heated and cooled sustainably. When the collector is cooled, steam in the tube moving from condenser to reactor end. At the same time, dry salt in reactor can absorb liquors after devaporation. In the process, it can absorb the heat and produce cooling effect and transmit cooling effect into air-conditioner system of building. The cooling energy can be directly used or stored, such as stored in an external tank system that can be used when needed. When cooled, reactor releases heat due to devaporation and chemical reaction. The heat can then be used at night.

The CoolStore cooling-stored pipe integrates cooling function, as a part of solar collectors, realising heating, cooling and energy storage. It is an environmental and efficient way for the area with sufficient solar radiation to use the energy. It produces high energy output, which is more than two times the normal output efficiency of solar collectors. It directly integrates into the solar collector, which greatly reduces the need for external devices, installation effort and large-scale installation could be finished quickly. It does not require any refrigerant which will produce greenhouse gas and thus is more environmental-friendly. It can be driven only by solar energy without any electricity. It is easy to install without moving parts, operates continuously and stable for more than 15 years and with low maintenance cost after installation. It can produce cold and heat simultaneously at night, especially suitable for the areas with large different in temperature between day and night. It can largely reduce energy loss and can be flexibly applied to all size of projects. It mainly uses glass and salt solution as raw materials.

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The Directors intend to establish the WFOE to operate the new business segment of the manufacturing and distribution of CoolStore cooling-stored pipes based on the CoolStore IPR and the Licensed Technology granted by Suncool AB under the Licence Agreement. As the Company does not intend to invest large amount of capital in the new business, the Company decided not to acquire any land use right or construct any production plants in the PRC for the time being. Rather, the Company has had general preliminary discussions with third parties regarding the possible rental of land and production plants in Yuyao, the PRC, including but not limited to a piece of land where Mr. Hu Yishi, an executive Director, has interests in, for manufacturing purpose. None of these discussions have progressed into any advanced business arrangements as at the date of this announcement. In the event that such general discussions materialise and/or the Group enters into any rental agreement with any third party which any Director may have interests in, it may constitute a notifiable transaction under the Listing Rules. Further announcement(s) will be made by the Company as and when appropriate.

The Directors believe that CULCE (Jiangyin), being a wholly owned subsidiary of China-UK has extensive experience, strong expertise and a wide business network in the solar technology industry in the PRC. The Directors are of the view that services provided by CULCE (Jiangyin) under the Consultancy Agreement are necessary and desirable for the Group to commence and develop the new Solar Business in the PRC. Having considered the aforesaid, and that the terms of the Licence Agreement and the Consultancy Agreement are determined between the parties thereto after arm’s length negotiations, the Directors are of the view that the terms of the Licence Agreement and the Consultancy Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

USE OF PROCEEDS FROM THE ISSUE OF SUBSCRIPTION SHARES AND WARRANT SHARES

The gross proceeds from the issue of the Subscription Shares will amount to HK$88,200,000. The net proceeds from the issue of the Subscription Shares, after deduction of related expenses payable by the Company will be approximately HK$86,000,000, representing a net price of approximately HK$2.05 per Subscription Share, which will be used as to approximately 60% of the net proceeds for the development of the Solar Business in the PRC, and as to approximately 40% of the net proceeds general working capital purpose.

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The gross proceeds from the issue of the Warrant Shares will amount to HK$60,000,000. The net proceeds from the issue of the Warrant Shares, after deduction of related expenses payable by the Company will be approximately HK$60,000,000, representing a net price of approximately HK$2.5 per Warrant Share, will be used for general working capital purpose.

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

The Company had not conducted any equity fund raising exercise in the past twelve months immediately preceding the date of this announcement.

GENERAL

The EGM will be held for the Shareholders to consider and, if thought fit, approve the ordinary resolutions in respect of Subscription Agreements and the transaction contemplated thereunder, the allotment and issue of the Subscription Shares and the Warrant Shares under the Specific Mandate. As no Shareholder has an interest in each of the Subscription Agreements that is materially different from the other Shareholders, no Shareholder is required to abstain from voting at the EGM in respect of the Subscription Agreements.

A circular containing further details of the Subscription Agreements, valuation report of the Warrants and the notice of EGM will be despatched to the Shareholders on or before 24 July 2015.

RESUMPTION OF TRADING

At the request of the Company, trading in the Shares on the Stock Exchange has been halted with effect from 9:00 a.m. on 2 July 2015 pending the release of this announcement. Application has been made by the Company to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange with effect from 9:00 a.m. on 6 July 2015.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following terms have the following meanings:

“associate(s)” has the same meaning as ascribed to it under the Listing Rules

“Board” the board of Directors

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• “Business Day(s)”

• a day, other than a Saturday and Sunday and a day on which a tropical cyclone warning no. 8 or above or a “black rainstorm warning signal” is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m., on which licensed banks in Hong Kong are open for general banking business throughout their normal business hours

• “ClimateWell”

• ClimateWell AB (publ), a company incorporated under the laws of Sweden, being the holding company of Suncool AB

• “Company”

• Zhong Fa Zhan Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on the Stock Exchange

• “Confidentiality Agreement”

• the separate confidentiality agreement entered into between Suncool AB and Nation Power on 1 July 2015 in accordance with the terms of the Licence Agreement in respect of the exchange of confidential information

• “connected person(s)”

• has the meaning ascribed thereto in the Listing Rules

• “Consultancy Agreement”

• the consultancy agreement entered into between CULCE (Jiangyin) and the Company on 1 July 2015

• “CoolStore”

• Suncool AB’s CoolStore concept for solar heating and cooling collectors, based on ClimateWell’s proprietary triple-state absorption technology

• “CoolStore Field of Use”

• solar thermal powered indoor climate solutions for buildings

• “CoolStore IPR” IPR related to CoolStore within the CoolStore Field of Use and CoolStore Territory

• “CoolStore Territory” Greater China, including the PRC, Taiwan, Hong Kong and Macau Special Administrative Region of the PRC

• “CULCE (Jiangyin)”

• China-UK Low Carbon Enterprise (Jiangyin) Investment Management Ltd, a company established in the PRC

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“Directors” the directors of the Company “EGM” the extraordinary general meeting of the Company to be convened and held to approve, among others, the Subscription Agreements and the Specific Mandate “Exercise Price” HK$2.50, at which the holder of the Warrants may subscribe for each Warrant Share “Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Independent Third person(s) or entity(ies) who/which is/are independent of and Party(ies)” not connected with any connected person of the Company, and not a connected person of the Company “Investor A” Zheng Yifei “Investor B” Li Xi “Investor C” Wu Xunzhi “Investor D” Cui Weizhen “Investor E” Zou Ping “Investor F” Li Kai Kai, Bobo “Investor Subscription the subscription agreements dated 1 July 2015 entered into Agreements” by the Company and each of the Investors in relation to the Investor Subscriptions “Investor Subscription 36,000,000 new Shares in aggregate to be allotted and Shares” issued to the Investors pursuant to the Investor Subscription Agreements “Investor Subscriptions” the subscriptions in an aggregate amount of 36,000,000 Investor Subscription Shares by the Investors pursuant to the terms of the Investor Subscription Agreements

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“Investors”

the Investor A, the Investor B, the Investor C, the Investor D, the Investor E and the Investor F

• “IPR”

• (whether registered or not, including applications for the registration of the following): i) inventions, patents, including reissues, divisions, continuations and extensions thereof; ii) trademarks, trade names and domain names; iii) designs; iv) copyrights in works of authorship of any kind (including copyrights in software), neighbouring rights and database rights; and v) any other rights of similar kind as any of the foregoing

• “Last Trading Day”

• 30 June 2015, being the last trading day of the Shares on the Stock Exchange prior to the publication of this announcement

• “Licence Agreement” the licence agreement dated 1 July 2015 entered into between Suncool AB and Nation Power in relation to the grant of exclusive right and licence to Nation Power to exploit the CoolStore IPR and the Licensed Technology within the CoolStore Field of Use and CoolStore Territory for a term of 15 years upon the Suncool Subscription Completion

• “Licensed Technology”

• the technologies related to the CoolStore IPR including the patents and know-how owned by Suncool AB within the CoolStore Territory

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Nation Power”

• Nation Power Group Limited, a company incorporated in the British Virgin Islands, is a wholly-owned subsidiary of the Company

• “NP Group”

• Nation Power or the WFOE or any wholly-owned subsidiary/ies of Nation Power

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“PRC”

the People’s Republic of China, for the purpose of this announcement, shall exclude Taiwan, Hong Kong and Macau Special Administrative Region of the PRC

“Revenue”

the gross selling price, which the Group has invoiced its customers dealing on arms-length basis, less the following amounts:

• (i) trade discounts;

• (ii) costs for packing, transport and insurance of the product;

• (iii) the invoiced cost (CIF, Incoterms 2010) paid by the Group for any components purchased from Suncool AB and incorporated in a product;

• (iv) import duties, value-added tax or similar indirect taxes, customs clearance charges imposed by competent authorities on components mentioned in (iii) above

“Royalty”

fees payable by Nation Power or the relevant entities to be mutually agreed by Nation Power and Suncool AB to Suncool AB as set out in the Licence Agreement

“SFC”

the Securities and Futures Commission of Hong Kong

“Share(s)”

ordinary share(s) of HK$0.01 each in the share capital of the Company

“Shareholder(s)” the holder(s) of Shares

“Solar Business”

the manufacturing and distribution of cooling-stored pipes based on the CoolStore IPR and the Licensed Technology

“Specific Mandate”

the specific mandate required to be granted to the Directors by the Shareholders at the EGM for allotment and issue of the Subscription Shares and the Warrant Shares

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“Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Subscribers” Suncool AB and the Investors “Subscription Agreements” the Suncool Subscription Agreement and the Investor Subscription Agreements

• “Subscription Completion ” completion of the Suncool Subscriptions and/or the Investor Subscriptions, as the case may be

• “Subscription Shares” Suncool Subscription Shares and Investor Subscription Shares

• “Subscriptions” Suncool Subscriptions and the Investor Subscriptions “Suncool AB” Suncool AB, a company incorporated under the laws of Sweden

• “Suncool Share the subscription of 6,000,000 Suncool Subscription Shares Subscription” by Suncool AB pursuant to the terms of the Suncool Subscription Agreement

• “Suncool Subscription the subscription agreement dated 1 July 2015 entered into Agreement” between the Company and Suncool AB in relation to the Suncool Subscriptions

• “Suncool Subscription completion of the Suncool Subscriptions Completion”

• “Suncool Subscription 6,000,000 new Shares to be allotted and issued to Suncool Shares” AB pursuant to the Suncool Subscription Agreement

• “Suncool Subscriptions” the Suncool Share Subscription and the Warrant Subscription

“Warrant(s)” the 24,000,000 unlisted warrant(s) carrying the subscription rights to subscribe for new Share(s) to be issued by the Company to Suncool AB pursuant to the Suncool Subscription Agreement

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“Warrant Share(s)” new Share(s) to be allotted and issued upon the exercise of the subscription rights attaching to the Warrants

“Warrant Subscription” the subscription of the Warrants by Suncool AB pursuant to the terms of the Suncool Subscription Agreement

• “WFOE” a wholly foreign owned enterprise to be established by the Group in the PRC to operate the Solar Business

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

• “RMB” Renminbi, the lawful currency of the PRC

“%” per cent.

By Order of the Board Zhong Fa Zhan Holdings Limited Chan Wing Yuen, Hubert Chief Executive & Executive Director

Hong Kong, 5 July 2015

As at the date of this announcement, the Board consists of five executive Directors, namely Mr. Wu Hao, Mr. Hu Yangjun, Mr. Hu Yishi, Mr. Chan Wing Yuen, Hubert and Ms. Kwong Wai Man, Karina; a non-executive Director, namely Mr. Li Wei Qi, Jacky; and three independent non-executive Directors, namely Mr. Wu Chi Keung, Mr. Heung Chee Hang, Eric and Ms. Kwok Pui Ha.

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