PURCHASE OPTION AND COOPERATION AGREEMENT Among Yan Tinghe, Shandong Yong Chun Tang Bioengineering Co. Ltd. and Shandong Spring Pharmaceutical Co., Ltd., Effective as of April 1, 2008
Among
Yan
Tinghe,
Shandong
Xxxx Xxxx Xxxx Bioengineering Co. Ltd.
and
Shandong
Spring Pharmaceutical Co., Ltd.,
Effective
as of April 1, 2008
This Purchase Option and Cooperation
Agreement ("this Agreement") is entered into in Shandong, People's Republic of
China (the "PRC") on 4th day of
April, 2008 by and among:
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Party
A:
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Party
B:
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Yan
Tinghe, a citizen of PRC with ID Card number 210105681115317, who owns
100% of Shandong Xxxx Xxxx Tang Bioengineering Co.
Ltd.
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Party
C:
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Shandong
Xxxx Xxxx Xxxx Bioengineering Co. Ltd., an enterprise incorporated and
existing within the territory of China in accordance with the law of the
People's Republic of China, the registration number of its legal and valid
Business License is 370831228000622, and the legal registered address is
Gucheng West Road Sihe Office, Sishui County,
Shandong
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WHEREAS,
The Parties hereto wish to grant Party
A the exclusive purchase option to acquire, at any time upon satisfaction of the
requirements under the PRC law, the entire or a portion of Party B's share of
the equity/assets owned by Party C.
NOW AND THEREFORE, in accordance with
the principle of sincere cooperation, mutual benefit and joint development and
after friendly negotiations, the Parties hereby enter into the following
agreements pursuant to the provisions of relevant laws and regulations of the
PRC
ARTICLE
1: THE GRANT AND EXERCISE OF PURCHASE OPTION
1.1 The
Parties hereto agree that Party A shall be granted an exclusive purchase option
to acquire, at any time upon satisfaction of the requirements under applicable
laws and conditions as agreed in this Agreement (including, without limitation,
as under applicable laws, when Party B ceases to be Party C's director, or Party
B attempts to transfer his share equity in Party C to any person, the entire or
a portion of Party C's share equity owned by Party B, or the entire or portion
of assets owned by Party C. The purchase option granted hereby shall be
irrevocable during the term of this Agreement and may be exercised by Party A or
any eligible entity designated by Party A.
1.2 Party
A may exercise the aforesaid purchase option by delivering a written notice to
Party B or Party C (the "Exercise Notice").
1.3 Within
thirty (30) days of the receipt of the Exercise Notice, Party B or Party C (as
the case may be) shall execute a share/asset transfer contract and other
documents necessary to effect the respective transfer of share equity or assets
with Party A (or any eligible Party designated by Party A).
1.4 When
applicable laws permit the exercise of the purchase option provided hereunder
and Party A elects to exercise such purchase option, Party B and Party C shall
unconditionally assist Party A to obtain all approvals, permits, registrations,
filings and other procedures necessary to effect the transfer of relevant share
equity or assets.
ARTICLE
2: REPRESENTATIONS AND WARRANTIES
Each party hereto represents to the
other parties that:
2.1 Each
party hereto represents to the other parties that: (1) it has all the necessary
rights, powers and authorizations to enter into this Agreement and perform its
duties and obligations hereunder; and (2) the execution or performance of this
Agreement shall not violate any significant contract or agreement to which it is
a party or by which it or its assets are bounded.
2.2
Party B represents to Party A that: (1) he is the legally registered shareholder
of party C and has paid Party C the full amount of Party C's registered capital
required under Chinese law; (2) Party B has not created any mortgage, pledge,
secured interests or other form of debt liabilities over the Share Equity; and
(3) Party B has not sold nor will he sell to any third party his Share Equity in
Party C.
ARTICLE
3: EXERCISE PRICE
3.1 When
it is permitted by applicable laws, Party A (or any eligible Party designated by
Party A) shall have the right to acquire, at any time, all of Party C's assets
or its share equity owned by Party B at a to be determined fair value
price If Party A (or any eligible Party designated by Party A) elects
to purchase a portion of Party C's share equity or assets, then the exercise
price for such purpose shall be adjusted accordingly based on the percentage of
such share equity or assets to be purchased over the total share equity or
assets. When Party A (or a qualified entity designated by party A) is to acquire
all or a portion of Party C's equity share or assets from Party B pursuant to
this Agreement, Party A has the right to offset any principal amounts Party C
owes Party A against the purchase price payable to Party B. When
acquiring share equity or assets from Party B or Party C pursuant to this
Agreement, Party A shall pay an actual purchase price based on the purchase
price under applicable Chinese laws or requirements of relevant authorities, if
the purchase price under applicable laws or requirements of relevant authorities
is higher than the purchase price under this Agreement.
3.2 In
satisfaction of all or part of the purchase price payable to Party B, Party A
shall be entitled to deliver shares of the common stock of China YCT
International Group, Inc., if the common stock is listed on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ Stock Market. Any
shares delivered in payment of the purchase price will be valued at the last
trade price reported on the primary exchange for the shares on the day
immediately preceding the date on which Party A gives written notice to Party C
of the exercise of the option.
ARTICLE
4: COVENANTS
The Parties further agree as
follows:
4.1 Before
Party A has acquired all the equity/assets of Party C by exercising the purchase
option provided hereunder, Party C shall not:
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4.1.1
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sell,
assign, mortgage or otherwise dispose of, or create any encumbrance on,
any of its assets, operations or any legal or beneficiary interests with
respect to its revenues (unless such sale, assignment, mortgage, disposal
or encumbrance is relating to its daily operation or has been disclosed to
and agreed by Party A in writing);
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4.1.2
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enter
into any transaction which may materially affect its assets, liability,
operation, equity or other legal rights (unless such transaction is
relating to its daily operation or has been disclosed to and agreed by
Party A in writing); or
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4.1.3
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distribute
any dividend to its shareholders in any
manner.
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4.2 Before
Party A has acquired all the equity/assets of Party C by exercising the purchase
option provided hereunder, Party B shall not:
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4.2.1
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supplement,
alter or amend the articles of association of Party C in any manner to the
extent that such supplement, alteration or amendment may have a material
effect on Party C's assets, liability, operation, equity or other legal
rights (except for pro rata increase of registered capital mandated by
applicable laws);
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4.2.2
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cause
Party C enter into any transaction to the extent such transaction may have
a material effect on Party C's assets, liability, operation, equity or
other legal rights (unless such transaction is relating to Party C's daily
operation or has been disclosed to and agreed by Party A in writing);
and
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4.2.3
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cause
Party C's board of directors to adopt any resolution on distributing
dividends to its shareholders.
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4.3 After
the execution of this Agreement, Party B shall execute and deliver a proxy to
the agents (the “Agents”) to the satisfaction of Party A to grant the Agents all
voting rights as shareholders of Party C, including without limitations the
right to appoint and elect Party C's directors, general manager and other senior
officers in Party C's shareholders meetings. The initial term of such proxies
shall be twenty (20) years, and the initial term shall be renewed automatically
upon expiration of the proxies unless Party A notifies Party B in writing thirty
(30) days prior to the expiry date to terminate the proxies. Such proxies shall
be based on the conditions that the Agents are Chinese citizens employed by
Party A and shall be subject to Party A's consent. Once the Agents cease to be
employed by Party A or Party A delivers a written notice to Party B requesting
the proxies to be terminated, Party B shall revoke the relevant proxy
immediately and grant the same rights as provided in the proxies to other PRC
citizens employed and designed by Party A. The Agents have agreed to act with
due care and diligence in exercising their rights under the proxies and
indemnify and keep the Principals harmless from any loss or damages caused by
any action in connection with exercise of their rights under the proxy (unless
any loss or damage is caused by Party B’s own intentional or material negligent
actions).
4.4 Party
B shall, to the extent permitted by applicable laws, cause Party C's operational
term to be extended to equal the operational term of Party A.
4.5 Party
A shall provide or arrange other parties to provide financings to Party C to the
extent Party C needs such financing to finance its operation. In the event that
Party C is unable to repay such financing due to its losses, Party A shall waive
or cause the relevant parties to waive all recourse against Party C with respect
to such financing.
4.6 To
the extent Party B is subject to any legal or economic liabilities to any
institution or individual other than Party A as a result of performing his
obligations under this Agreement or any other agreements between him and Party
A, Party A shall provide all support necessary to enable Party B to duly perform
his obligations under this Agreement and any other agreements and to hold Party
B harmless against any loss or damage caused by his performance of obligations
under such agreements.
ARTICLE
5: CONFIDENTIALITY
Each Party shall keep confidential all
the content of this Agreement. Without the prior consent of all
Parties, no Party shall disclose any content of this Agreement to any other
party or make any public announcements with respect to any content of this
Agreement. Notwithstanding the forgoing provisions of this Article 5, the
following disclosure shall be permitted: (i) disclosure made pursuant to any
applicable laws or any rules of any stock exchange; (ii) disclosure of
information which has become public information other than due to any breach by
the disclosing party; (iii) disclosure to any Party's shareholders, legal
counsel, accountants, financial advisors or other professional advisors, or (iv)
disclosure to any potential purchasers of a Party or its shareholders'
equity/assets, its other investors, debts or equity financing providers,
provided that the receiving party of confidential information has agreed to keep
the relevant information confidential (such disclosure shall be subject to the
consent of Party A in the event that Party A is not the potential
purchaser).
ARTICLE
6: APPLICABLE LAW AND EVENTS OF DEFAULT
The execution, effectiveness,
interpretation, performance and dispute resolution of this Agreement shall be
governed by the laws of the PRC.
Any violation of any provision hereof,
incomplete performance of any obligation provided hereunder, any
misrepresentation made hereunder, material concealment or omission of any
material fact or failure to perform any covenants provided hereunder by any
Party shall constitute an event of default. The defaulting Party
shall assume all the legal liabilities pursuant to the applicable
laws.
ARTICLE
7: DISPUTE RESOLUTION
7.1 Any
dispute arising from the performance of this Agreement shall be first subject to
the Parties' friendly consultations. In the event any dispute cannot be solved
by friendly consultations, the relevant dispute shall be submitted for
arbitration;
7.2 The
arbitration shall be administered by the Shandong branch of China International
Economic and Trade Arbitration Commission in accordance with the then effective
arbitration rules of the Commission.
7.3 The
arbitration award shall be final and binding on the Parties. The costs of the
arbitration (including but not limited to arbitration fee and attorney fee)
shall be borne by the losing party, unless the arbitration award stipulates
otherwise.
ARTICLE
8: EFFECTIVENESS
This Agreement shall be effective upon
the execution hereof by all Parties hereto and shall remain effective
thereafter.
This Agreement may not be terminated
without the unanimous consent of all the Parties except Party A may, by giving a
thirty (30) days prior notice to the other Parties hereto, terminate this
Agreement.
ARTICLE
9: AMENDMENT
All Parties hereto shall fulfill their
respective obligations hereunder. No amendment to this Agreement shall be
effective unless such amendment has been agreed by all of the Parties and Party
A and Party C have obtained necessary authorization and approvals with respect
to such amendment.
IN WITNESS WHEREOF, the parties have
executed this agreement.
Party
A
Shandong
Spring Pharmaceutical Co., Ltd. (official seal)
By: /s/ Yan
Tinghe
Authorized
representative: Yan Tinghe
Party
B
/s/ Xxx
Xxxxxx
Xxx
Tinghe
Party
C:
Shandong
Xxxx Xxxx Tang Bioengineering Co., Ltd. (official seal)
By: /s/ Yan
Tinghe
Authorized
representative: Yan Tinghe
