OPTION AGREEMENT (English Translation)
Exhibit
10.4
(English
Translation)
This
Option Agreement (this “Agreement”)
is
entered into as of August 17, 2007 and effective as of March 8, 2006 between
and
among Shaanxi
Xilan Natural Gas Equipment Co.,Ltd.,
a
company incorporated under the laws of the PRC, (“Party
A”),
and
Xi'an
Xilan Natural Gas Co.,Ltd.,
Ltd., a
company with joint stock limited liability organized under the laws of the
PRC
(“Party
B”),
with
a registered address at 19th
floor, Van Metropolis B, Tangyan RD,Hi-techZone, Xi’an, Shanxi Province,
China 710065, Mr. Qinan Ji, chairman and shareholder of Party B (“Chairman”),
and
each of the shareholders of Party B listed on Appendix 1 of this Agreement
(the
“Shareholders”).
In
this Agreement, Party A, Party B, the Chairman and the Shareholders 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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A.
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Party
A is a company incorporated in PRC under the laws of the PRC, which
has
the technological expertise in natural gas industrial transportation
and
machinery ;
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B.
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Party
B is a natural gas company with limited liability incorporated in
Xi’an,
Shanxi Province, China.
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C.
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The
Chairman and the Shareholders are shareholders of Party B. The Chairman
and the Shareholders collectively own more than 50% of the outstanding
equity interest in Party B (each, an “Equity
Interest”
and collectively the “Equity
Interest”);
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D.
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A
series of agreements such as the Consulting Services Agreement (the
“Service
Agreement”)
have been entered into between Party A and Party B concurrently with
this
Agreement;
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E.
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An
Equity Pledge Agreement (the “Equity
Pledge Agreement”)
has been entered into by the Parties concurrently herewith;
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F.
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The
Parties are entering into this Option Agreement in conjunction with
the
Pledge Agreement, Consulting Services 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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Option
Grant
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1.1
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Grant
of Rights.
The Chairman and the Shareholders (hereafter collectively referred
to as
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 or similar right shall be granted by Transferor to any
third
party other than Party A and/or the Designated Persons. Party B hereby
agrees to the granting of the Option by The Chairman and the Shareholders
to Party A and/or the Designated Persons. The “person” set forth in this
clause and this Agreement means an individual, 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 regulations, 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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Party
B shall convene a shareholders’ meeting upon request by the Transferor,
and Transferor agrees to call such meeting. During the meeting,
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, the Chairman and the Shareholders 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 to the extent they are in possession of such
materials;
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2.1.9
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Purchase
and hold insurance from an insurance company acceptable to Party
A, and
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 cause Party B 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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To
cause Party B to maintain and preserve its assets, and 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.
The Chairman and the Shareholders hereby promise:
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2.2.1
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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
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 shareholder 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, the Chairman and the Shareholders hereby jointly and severally
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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To
its knowledge and without independent verification, 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 (if an entity); (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, the Chairman and the Shareholders 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, the Chairman and the Shareholders 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, the Chairman and the Shareholders
by
Party A, and no any further consent from Party B, the Chairman and
the
Shareholders will be required.
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5.
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Termination. Party
A shall have the right to terminate this Agreement at any time by
issuing
a thirty (30) days prior written notice to Party B, except in the
event
where 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.
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Party
A:
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Shaanxi
Xilan Natural Gas Equipment Co.,Ltd.
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Address:
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3th
Floor, Xx.0 Xxxxxxx Xxxx
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Xx'xx
Xxxxxxx Xxxxxx,
Xx’xx
Xxxxxxx Xxxxxxxx, Xxxxx (710065)
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Fax:
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(000)
00000000
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Phone:
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(000)
00000000
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Party
B:
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Xi'an
Xilan Natural Gas Co, Ltd.
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Address:
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19th
floor, Van Metropolis B,
Tangyan
RD,Hi-techZone,
Xi’an,
Shanxi Province, China (710065)
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Fax:
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(000)
00000000
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Phone:
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(000)
00000000
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Chairman:
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To
the address printed on the signature page hereto.
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Shareholders:
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To
the respective addresses printed on the signature pages
hereto.
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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
(except that written approval of the Shareholders shall not be required),
any Party shall not disclose to any third party any relevant materials,
but the following circumstances shall be
excluded:
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9.1
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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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9.2
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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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9.3
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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 is written in both English and Chinese language and
has
been executed in English in duplicate originals; each Party holds
one (1)
original and each duplicate original shall have the same legal effect.
In
the event there is any conflict between the Chinese Version and English
Version, the English version shall
prevail.
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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.
PARTY
A:
| Shaanxi Xilan Natural Gas Equipment Co.,Ltd. | |||
| By: /s/ Qinan Ji | |||
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| Name: Qinan Ji | |||
Title:
Chairman
PARTY
B:
| Xi'an Xilan Natural Gas Co, Ltd. | |||
| By: /s/ Qinan Ji | |||
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| Name: Qinan Ji | |||
Title:
Chairman
CHAIRMAN:
| /s/ Qinan Ji | |||
|
Qinan
Ji
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SHAREHOLDERS:
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By:
/s/ Qinan Ji
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Name:
QINAN JI
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By:
/s/ Xxxxxxxx Xxx
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Name:
XXXXXXXX XXX
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By:
/s/ Liyin Shi
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Name:
LIYIN SHI
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By:
/s/ Shaohu Jia
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Name:
SHAOHU JIA
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By:
/s/ Yuai She
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Name:
YUAI SHE
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By:
/s/ Xxxxxx Xxx
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Name:
XXXXXX XXX
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By:
/s/ Jiaoyin Shi
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Name:
JIAOYIN SHI
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By:
/s/ Xiang Ji
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Name:
XIANG JI
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By:
/s/ Xxxxxx Xxx
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Name:
XXXXXX XXX
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By:
/s/ Shengming Li
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Name:
SHENGMING LI
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By:
/s/ Xingiao Han
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Name:
XINGIAO HAN
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_______________________
