OPTION AGREEMENT (English Translation)
(English
Translation)
This
Option Agreement (this “Agreement”) is entered into as of August 25, 2006,
between and among Shiming (Xi’an) Enterprise Management & Consutling Co.,
Ltd. a company incorporated under the laws of the People’s Republic of China,
located at Xx. 0, 00xx
Xxxxx,
Xxxxxx 0xx
Xxxx,
Xxxxxxx Security Plaza, Xi’an High Tech and New Technology Development Zone,
Xi’an, Shaanxi Province,, China 710075, (“Party
A”),
and
Shaanxi Shiming Science & Technology Joint Stock Co., Ltd., a joint stock
limited liability company organized under the laws of the PRC (“Party B”), and
the shareholders of Party B listed in Annex
1
hereto.
In this Agreement, Party A, Party B, and Party C are referred to collectively
in
this Agreement as the “Parties” and each of them is referred to as a “Party”.
RECITALS
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1.
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Party
A is a company incorporated in Xi’an, China under the laws of the People’s
Republic of China, which has the technological expertise in development
and sales of consumer electronics;
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2.
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Party
B is a high tech company incorporated in Xi’an, China, and is engaged in
development and sales of consumer electronics, and through its majority
owned subsidiary, Shenzhen Seathan Technology Co., Ltd. (“Seathan
Technology”), designs and manufactures high-definition televisions and
computer monitors (the “Business”);
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3.
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Party
C is comprised of holders of substantially all of the issued and
outstanding shares of Party B (“Equity Interest”);
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4.
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Party
A and Party B have entered into a certain Consulting Agreement
concurrently with this Agreement, which grants Party A management
power,
authority, control and beneficial ownership of the business of Party
B;
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5.
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Party
A and Party B have also concurrently entered into an Operating Agreement
which further defines the rights and powers of Party A with respect
to the
business of Party B;
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6.
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Party
A, Party B and Party C have also concurrently entered into an Pledge
Agreement pursuant to which Party C has pledged all right title and
interest in their shares of Party B to Party A;
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7.
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The
Parties are entering into this Option Agreement in conjunction with
the
Pledge Agreement, Consulting Services Agreement, Operating Agreement,
and
related agreements.
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NOW,
THEREFORE,
the
Parties to this Agreement hereby agree as follows:
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1.
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Purchase
and Sale of Equity Interest
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1.1
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Grant
of Rights.
Party C and Party D (hereafter collectively the “Transferor”)
hereby irrevocably grants to Party A an option to purchase or cause
any
person designated by Party A (“Designated Persons”) to purchase, to the
extent permitted under PRC Law, according to the steps determined
by Party
A, at the price specified in Section 1.3 of this Agreement, at any
time
from the Transferor a portion or all of the equity interests held
by
Transferor in Party B (the “Option”).
No Option shall be granted to any third party other than Party A
and/or
the Designated Persons. Party B hereby agrees to the granting of
the
Option by Party C to Party A and/or the Designated Persons. The “person”
set forth in this clause and this Agreement means an individual person,
corporation, joint venture, partnership, enterprise, trust or a
non-corporation organization.
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1.2
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Exercise
of Rights.
According to the stipulations of PRC laws and regulation, Party A
and/or
the Designated Persons may exercise Option by issuing a written notice
(the “Notice”)
to the Transferor and specifying the equity interest purchased from
Transferor (the “Purchased
Equity Interest”)
and the manner of purchase.
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1.3
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Purchase
Price.
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1.3.1
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For
Party A to exercise the Option, the purchase price of the Purchased
Equity
Interest (“Purchase
Price”)
shall be equal to the original paid-in price of the Purchased Equity
Interest by the Transferor, unless the applicable PRC laws and regulations
require appraisal of the equity interests or stipulate other restrictions
on the purchase price of equity interests.
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1.3.2
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If
the applicable PRC laws require appraisal of the equity interests
or
stipulates other restrictions on the purchase price of the Equity
Interest
at the time that Party A exercise the Option, the Parties agree that
the
Purchase Price shall be set at the lowest price permissible under
the
applicable laws.
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1.4
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Transfer
of the Purchased Equity Interest.
Upon each exercise of the Option rights under this
Agreement:
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1.4.1
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One
or more members of Party C shall convene a shareholders’ meeting, or cause
such meeting to be convened. During the meeting, the resolutions
shall be
proposed, approving the transfer of the appropriate Equity Interest
to
Party A and/or the Designated Persons;
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1.4.2
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The
Transferor shall, upon the terms and conditions of this Agreement
and the
Notice related to the Purchased Equity Interest, enter into Equity
Interest purchase agreement in a form reasonably acceptable to Party
A,
with Party A and/or the Designated Persons (as applicable);
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1.4.3
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The
related parties shall execute all other requisite contracts, agreements
or
documents, obtain all requisite approval and consent of the government,
conduct all necessary actions, without any security interest, transfer
the
valid ownership of the Purchased Equity Interest to Party A and/or
the
Designated Persons, and cause Party A and/or the Designated Persons
to be
the registered owner of the Purchased Equity Interest. In this clause
and
this Agreement, “Security Interest” means any mortgage, pledge, the right
or interest of the third party, any purchase right of equity interest,
right of acquisition, right of first refusal, right of set-off, ownership
detainment or other security arrangements, however, it does not include
any security interest created under the Equity Pledge Agreement.
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1.5
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Payment.
The payment of the Purchase Price shall be determined by the consultation
of Party A and/or the Designated Persons with the Transferor according
to
the applicable laws at the time of exercise of the Option.
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2.
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Promises
Relating Equity Interest.
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2.1
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Promises
Related to Party B.
Party B and Party C hereby promise:
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2.1.1
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Without
prior written consent by Party A, not, in any form, to supplement,
change
or renew the Articles of Association of Party B, to increase or decrease
registered capital of the corporation, or to change the structure
of the
registered capital in any other forms;
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2.1.2
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According
to customary fiduciary standards applicable to managers with respect
to
corporations and their shareholders, to maintain the existence of
the
corporation, prudently and effectively operate the
business;
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2.1.3
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Without
prior written consent by Party A, not, upon the execution of this
Agreement, to sell, transfer, mortgage or dispose, in any other form,
any
asset, legitimate or beneficial interest of business or income of
Party B,
or encumber or approve any encumbrance or imposition of any security
interest on Party A’s assets;
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2.1.4
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Without
prior written notice by Party A, not issue or provide any guarantee
or
permit the existence of any debt, other than (i) the debt arising
from
normal or daily business but not from borrowing; and (ii) the debt
disclosed to Party A and obtained the written consent from Party
A;
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2.1.5
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To
normally operate all business to maintain the asset value of Party
B,
without taking any action or failing to take any action that would
result
in a material adverse effect on the business or asset value of Party
B;
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2.1.6
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Without
prior written consent by Party A, not to enter into any material
agreement, other than agreements in the ordinary course of business
(for
purposes of this paragraph, if the amount of the Agreement involves
an
amount that exceeds a hundred thousand Yuan (RMB 100,000) the agreement
shall be deemed material);
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2.1.7
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Without
prior written consent by Party A, not to provide loan or credit loan
to
any others;
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2.1.8
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Upon
the request of Party A, to provide all materials of operation and
finance
relevant to Party B;
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2.1.9
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Purchases
and holds the insurance from the insurance company accepted by Party
A,
the insurance amount and category shall be the same with those held
by the
companies in the same industry or field, operating the similar business
and owning the similar properties and assets as Party B;
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2.1.10
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Without
prior written consent by Party A, not to merge or associate with
any
person, or acquire or invest in any person;
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2.1.11
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To
notify Party A of the occurrence or the potential occurrence of the
litigation, arbitration or administrative procedure related to the
assets,
business and income of Party B;
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2.1.12
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In
order to keep the ownership of Party B to all its assets, to execute
all
requisite or appropriate documents, take all requisite or appropriate
actions, and pursue all appropriate claims, or make requisite or
appropriate pleas for all claims;
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2.1.13
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Without
prior written notice by Party A, not to assign equity interests to
shareholders in any form; however, Party A shall distribute all or
part of
its distributable profits to their own shareholders upon request
by Party
A;
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2.1.14
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According
to the request of Party A, to appoint any person designated by Party
A to
be the directors of Party B.
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2.2
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Promises
Related to Transferor.
Party C hereby promises:
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2.2.1
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Without
prior written consent by Party A, upon the execution of this Agreement,
not to sell, transfer, mortgage or dispose in any other form any
legitimate or beneficial interest of equity interest, or to approve
any
other security interest set on it, with the exception of the pledge
set on
the equity interest of the Transferor subject to Equity Pledge Agreement;
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2.2.2
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Without
the prior written notice by Party A, not to decide or support or
execute
any shareholder resolution at any shareholder meeting of Party B
that
approves any sale, transfer, mortgage or dispose of any legitimate
or
beneficial interest of equity interest, or allows any other security
interest set on it, other than the pledge on the equity interests
of
Transferor pursuant to Equity Pledge Agreement;
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2.2.3
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Without
prior written notice by Party A, the Parties shall not agree or support
or
execute any shareholders resolution at any shareholder meeting of
Party B
that approves Party B’s merger or association with any person, acquisition
of any person or investment in any person;
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2.2.4
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To
notify Party A the occurrence or the potential occurrence of the
litigation, arbitration or administrative procedure related to the
equity
interest owned by them;
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2.2.5
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To
cause the Board of Directors of Party B to approve the transfer of
the
Purchased Equity Interest subject to this Agreement;
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2.2.6
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In
order to keep its ownership of the equity interest, to execute all
requisite or appropriate documents, conduct all requisite or appropriate
actions, and make all requisite or appropriate claims, or make requisite
or appropriate defend against fall claims of compensation;
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2.2.7
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Upon
the request of Party A, to appoint any person designated by Party
A to be
the directors of Party B;
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2.2.8
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Upon
the request of Party A at any time, to transfer its Equity Interest
immediately to the representative designated by Party A unconditionally
at
any time and abandon its prior right of first refusal of such equity
interest transferring to another available shareholder;
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2.2.9
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To
prudently comply with the provisions of this Agreement and other
Agreements entered into collectively or respectively by the Transferor,
Party B and Party A and perform all obligations under these Agreements,
without taking any action or any nonfeasance that sufficiently affects
the
validity and enforceability of these Agreements;
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3.
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Representations
and Warranties.
As of the execution date of this Agreement and every transferring
date,
Party B and Party C hereby represent and warrant collectively and
respectively to Party A as follows:
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3.1
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It
has the power and ability to enter into and deliver this Agreement,
and
any equity interest transferring Agreement (“Transferring
Agreement,”
respectively) having it as a party, for every single transfer of
the
Purchased Equity Interest according to this Agreement, and to perform
its
obligations under this Agreement and any Transferring Agreement.
Upon
execution, this Agreement and the Transferring Agreements having
it as a
party will constitute a legal, valid and binding obligation of it
enforceable against it in accordance with its terms;
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3.2
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The
execution, delivery of this Agreement and any Transferring Agreement
and
performance of the obligations under this Agreement and any Transferring
Agreement will not: (i) cause to violate any relevant laws and regulations
of PRC; (ii) constitute a conflict with its Articles of Association
or
other organizational documents; (iii) cause to breach any Agreement
or
instruments to which it is a party or having binding obligation on
it, or
constitute the breach under any Agreement or instruments to which
it is a
party or having binding obligation on it; (iv) cause to violate relevant
authorization of any consent or approval to it and/or any continuing
valid
condition; or (v) cause any consent or approval authorized to it
to be
suspended, removed, or into which other requests be
added;
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3.3
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The
shares of Party B are transferable, and Party B has not permitted
or
caused any security interest to be imposed upon the shares of Party
B.
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3.4
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Party
B does not have any unpaid debt, other than (i) debt arising from
its
normal business; and (ii) debt disclosed to Party A and obtained
by
written consent of Party A;
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3.5
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Party
B has complied with all PRC laws and regulations applicable to the
acquisition of assets and securities in connection with this Agreement;
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3.6
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No
litigation, arbitration or administrative procedure relevant to the
Equity
Interests and assets of Party B or Party B itself is in process or
to be
settled and the Parties have no knowledge of any pending or threatened
claim;
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3.7
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The
Transferor bears the fair and salable ownership of its Equity Interest
free of encumbrances of any kind, other than the security interest
pursuant to the Equity Pledge Agreement.
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4.
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Assignment
of Agreement
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4.1
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Party
B and Party C shall not transfer their rights and obligations under
this
Agreement to any third party without the prior written consent of
the
Party A.
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4.2
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Party
B and Party C hereby agree that Party A shall be able to transfer
all of
its rights and obligation under this Agreement to any third party
with its
needs, and such transfer shall only be subject to a written notice
sent to
Party B and Party C by Party A, and no any further consent from Party
B
and Party C will be required.
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5.
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Effective
Date and Term
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5.1
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This
Agreement shall be effective as of the date first set forth above.
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5.2
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The
term of this Agreement is ten (10) years unless the early termination
in
accordance with this Agreement or other terms of the relevant agreements
stipulated by the Parties. This Agreement may be extended according
to the
written consent of Party A before the expiration of this Agreement.
The
term of extension will be decided unanimously through mutual agreement
of
the Parties.
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5.3
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If
Party A or Party B terminates by the expiration of its operating
period
(including any extended period) or other causes in the term set forth
in
Section 5.2, this Agreement shall be terminated simultaneously, except
Party A has transferred its rights and obligations in accordance
with
Section 4.2 of this Agreement.
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6.
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Applicable
Law and Dispute Resolution
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6.1
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Applicable
Law.
The execution, validity, construing and performance of this Agreement
and
the resolution of disputes under this Agreement shall be governed
by the
laws of PRC.
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6.2
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Dispute
Resolution.
The parties shall strive to settle any dispute arising from the
interpretation or performance in connection with this Agreement through
friendly consultation. In case no settlement can be reached through
consultation within thirty (30) days after such dispute is raised,
each
party can submit such matter to China International Economic and
Trade
Arbitration Commission (the “CIETAC”) in accordance with its rules.
Arbitration shall take place in Beijing and the proceedings shall
be
conducted in Chinese. Any resulting arbitration award shall be final
conclusive and binding upon both
parties.
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7.
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Taxes
and Expenses.
Each Party shall, according to the PRC laws, bear any and all registering
taxes, costs and expenses for equity transfer arising from the preparation
and execution of this Agreement and all Transferring Agreements,
and the
completion of the transactions under this Agreement and all Transferring
Agreements.
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8.
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Notices.
Notices or other communications required to be given by any party
pursuant
to this Agreement shall be written in English and Chinese and delivered
personally or sent by registered mail or postage prepaid mail or
by a
recognized courier service or by facsimile transmission to the address
of
relevant each party or both parties set forth below or other address
of
the party or of the other addressees specified by such party from
time to
time. The date when the notice is deemed to be duly served shall
be
determined as the follows: (a) a notice delivered personally is deemed
duly served upon the delivery; (b) a notice sent by mail is deemed
duly
served the tenth (10th)
day after the date when the air registered mail with postage prepaid
has
been sent out (as is shown on the postmark), or the fourth (4th)
day after the delivery date to the internationally recognized courier
service agency; and (c) a notice sent by facsimile transmission is
deemed
duly served upon the receipt time as is shown on the transmission
confirmation of relevant documents. The addresses for notices for
each
respective member of Party C shall be as set forth in the shareholder
records of Party B, and the parties hereto shall at all times be
entitled
to rely upon such records for purposes of this Agreement.
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9.
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Confidentiality.
The Parties acknowledge and confirm any oral or written materials
exchanged by the Parties in connection with this Agreement are
confidential. The Parties shall maintain the secrecy and confidentiality
of all such materials. Without the written approval by the other
Parties,
any Party shall not disclose to any third party any relevant materials,
but the following circumstances shall be
excluded:
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a.
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The
materials that is known or may be known by the general public (but
not
include the materials disclosed by each party receiving the materials);
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b.
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The
materials required to be disclosed subject to the applicable laws
or the
rules or provisions of stock exchange; or
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c.
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The
materials disclosed by each Party to its legal or financial consultant
relating the transaction of this Agreement, and this legal or financial
consultant shall comply with the confidentiality set forth in this
Section. The disclosure of the confidential materials by staff or
employed
institution of any Party shall be deemed as the disclosure of such
materials by such Party, and such Party shall bear the liabilities
for
breaching the contract. This clause shall survive whatever this Agreement
is invalid, amended, revoked, terminated or unable to implement by
any
reason.
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10.
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Further
Warranties.
The Parties agree to promptly execute documents reasonably required
to
perform the provisions and the aim of this Agreement or documents
beneficial to it, and to take actions reasonably required to perform
the
provisions and the aim of this Agreement or actions beneficial to
it.
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11.
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Miscellaneous.
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11.1
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Amendment,
Modification and Supplement.
Any amendment and supplement to this Agreement shall only be effective
is
made by the Parties in writing.
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11.2
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Entire
Agreement.
Notwithstanding the Article 5 of this Agreement, the Parties acknowledge
that this Agreement constitutes the entire agreement of the Parties
with
respect to the subject matters therein and supercede and replace
all prior
or contemporaneous agreements and understandings in verb or/and in
writing.
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11.3
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Severability.
If any provision of this Agreement is judged as invalid or non-enforceable
according to relevant Laws, the provision shall be deemed invalid
only
within the applicable laws and regulations of the PRC, and the validity,
legality and enforceability of the other provisions hereof shall
not be
affected or impaired in any way. The Parties shall, through fairly
consultation, replace those invalid, illegal or non-enforceable provisions
with valid provisions that may bring the similar economic effects
with the
effects caused by those invalid, illegal or non-enforceable provisions.
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11.4
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Headings.
The headings contained in this Agreement are for the convenience
of
reference only and shall not affect the interpretation, explanation
or in
any other way the meaning of the provisions of this Agreement.
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11.5
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Language
and Copies.
This Agreement has been executed in Chinese in four (4) duplicate
originals; each Party holds one (1) original and each duplicate original
shall have the same legal effect.
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11.6
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Successor.
This Agreement shall bind and benefit the successor of each Party
and the
transferee allowed by each Party.
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11.7
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Survival.
Any obligation taking place or at term hereof prior to the end or
termination ahead of the end of this Agreement shall continue in
force and
effect notwithstanding the occurrence of the end or termination ahead
of
the end of the Agreement. Article 6, Article 8, Article 9 and Section
11.7
hereof shall continue in force and effect after the termination of
this
Agreement.
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11.8
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Waiver.
Any Party may waive the terms and conditions of this Agreement in
writing
with the signature of the Parties. Any waiver by a Party to the breach
by
other Parties within certain situation shall not be construed as
a waiver
to any similar breach by other Parties within other situations.
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[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF,
the
parties hereof have caused this Agreement to be executed by their duly
authorized representatives as of the date first written above.
[Signature
Page]
| PARTY A: | Shiming (Xi’an) Enterprise Management & Consulting Co., Ltd. | |
| /s/ Xxxxxxx Xxxx | ||
| Chairman | ||
| PARTY B: | Shaanxi Shiming Science & Technology Joint Stock Co., Ltd. | |
| /s/ Xxxxxxx Xxxx | ||
| President |
| PARTY C: | |||
| Shaanxi Meixian Shiming Non-Ferrous Metallurgy Co., Ltd. (“Meixian”) | |||
| Shares of Shiming Company owned by Meixian 38000000 | |||
| /s/ Xxxxxxx Xxxx | |||
| President | |||
| /s/ Xxxxxxx Xxxx | |||
| Xxxxxxx Xxxx (PRC ID Card No.: 610326570221061) | |||
| Shares of Shiming Company owned by Xxxxxxx Xxxx: 12900000 | |||
| /s/ Nairang Liu | |||
| Nairang Liu (PRC ID Card No.: 610326631127043) | |||
| Shares of Shiming Company owned by Nairang Liu: 3470000 | |||
| /s/ Liehua Wang | |||
| Liehua Wang (PRC ID Card No.: 610421541129002) | |||
| Shares of Shiming Company owned by Liehua Wang: 3408800 | |||
| /s/ Genyun Qu | |||
| Genyun Qu (PRC ID Card No.: 000000000000000) | |||
| Shares of Shiming Company owned by Genyun Qu: 2930000 | |||
| /s/ Xxx Xxxx | |||
| Xxx Xxxx (PRC ID Card No.: 000000000000000) | |||
| Shares of Shiming Company owned by Xxx Xxxx: 2720000 | |||
| /s/ Xxxxxx Xx | |||
| Xxxxxx Xx (PRC ID Card No.: 610102621205358) | |||
| Shares of Shiming Company owned by Xxxxxx Xx: 435000 | |||
| /s/ Xxx Xxx | |||
| Xxx Xxx (PRC ID Card No.: 51012619720106140X) | |||
| Shares of Shiming Company owned by Xxx Xxx: 435000 | |||
| /s/ Cunhu Yang | |||
| Cunhu Yang (PRC ID Card No.: 610104196210016177) | |||
| Shares of Shiming Company owned by Cunhu Yang: 362400 | |||
| /s/ Xxxxxx Xxx | |||
| Xxxxxx Xxx (PRC ID Card No.: 610124510805001) | |||
| Shares of Shiming Company owned by Xxxxxx Xxx: 271800 | |||
| Attorney-in-fact for certain shareholders of Party B: | |||
| Shiming (Xi’an) Enterprise Management & Consulting Co., Ltd. | |||
| /s/ Xxxxxxx Xxxx | |||
| By: Xxxxxxx Xxxx | |||
| As attorney-in-fact pursuant to that certain Power of Attorney, Shareholders’ Voting Rights, Proxy Agreement and Covenant Not to Xxx dated January 15, 2006 | |||
