Exhibit 10.40
EXECUTION VERSION
OPTION AGREEMENT
THIS OPTION AGREEMENT (this “Agreement”), dated as of May 13, 2011 (the
“Effective Date”), by and between (i) Mr. Chongxin Xu, an individual citizen of
Australia (the “Grantor”); and (ii) Mr. Guo Wang, an individual citizen of the
People’s Republic of China (the “Optionee”) (each of the foregoing, a “Party”
and together, the “Parties”) with respect to shares of Xiangrui Pharmaceutical
International Limited, a company organized under the laws of the British Virgin
Islands (“Xiangrui”). Capitalized terms not otherwise defined have the meanings
assigned to them in Exhibit A to this Agreement.
RECITALS

A.  
The Grantor is the sole shareholder of Xiangrui.

B.  
Xiangrui is the sole equity holder of a wholly foreign-owned enterprise
organized and existing under the laws of the People’s Republic of China
(“WFOE”).

C.  
The Grantor intends to enter into a share exchange agreement (the “Exchange
Agreement”) with a United States-domiciled public reporting shell company SMSA
Freemont Acquisition Corp. (the “Shell Company”) whose securities are quoted on
the over-the-counter bulletin board. Upon consummation of the transactions
contemplated by the Exchange Agreement (the “Exchange Transaction”), the Shell
Company will acquire 100% of the issued and outstanding capital stock of
Xiangrui, and, indirectly, sole ownership of the WFOE, in exchange for the
issuance of 12,363,885 shares of the common stock of the Shell Company to the
Grantor (the “Exchange Shares”) representing 93% of the issued and outstanding
shares of the Shell Company.

D.  
The Grantor desires to grant to the Optionee, and the Optionee desires to accept
from the Grantor, an option to purchase certain number of shares of the Company
currently held by the Grantor, on the terms and subject to the conditions set
forth in this Agreement.

AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged by the Parties, the Parties agree as
follows:
Article I. OPTION RIGHT

1.1  
Option Right. The Grantor hereby grants to the Optionee the right and option
(the “Option Right”), during the Option Period (as defined below), to purchase
from the Grantor, and upon the exercise of such right and option the Grantor
will have the obligation to sell to the Optionee, Two Hundred Forty Seven
Thousand Two Hundred Seventy Seven (247,277) shares of the capital stock of
Xiangrui currently held by the Grantor representing Two percent (2.0)% of the
issued and outstanding capital stock of Xiangrui, and, upon consummation of the
share exchange under the Exchange Agreement in accordance with the provisions of
this Agreement, Two Hundred Forty Seven Thousand Two Hundred Seventy Seven
(247,277) of the shares of the capital stock of the Shell Company in exchange
therefore (the “Option Shares”).

1.2  
Option Period. The Option Right will be effective during the period (the “Option
Period”) commencing on the date which is three months after the date hereof and
ending on the second anniversary of the date hereof (such date or the earlier
expiration of the Option Right is referred to herein as the “Expiration Date”).

 

 

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1.3  
Exercise Process. In order to exercise its Option Right during the Option
Period, the Optionee must deliver to the Grantor a written notice of such
exercise substantially in the form attached hereto as Exhibit B (the “Exercise
Notice”) to the address or facsimile number set forth therein. Provided the
Exercise Notice is delivered in accordance with SECTION 5.2. to the Grantor on
or prior to 5:00 p.m. (Hong Kong time) on a Business Day, the date of exercise
(the “Exercise Date”) of the Option Right will be the date of such delivery of
such Exercise Notice. In the event the Exercise Notice is delivered after 5:00
p.m. (Hong Kong time) on any day or on a date which is not a Business Day, the
Exercise Date will be deemed to be the first Business Day after the date of such
delivery of such Exercise Notice. The delivery of an Exercise Notice in
accordance herewith will constitute a binding obligation (a) on the part of the
Optionee to purchase and (b) on the part of the Grantor to sell, the Option
Shares which are the subject of such Exercise Notice in accordance with the
terms of this Agreement. The Option Right shall be exercisable only in
compliance with all applicable Laws. The Optionee shall undertake any and all
approval or registration procedures with the relevant Governmental Bodies that
may arise out of or in connection with the exercise of the Option Right in
accordance with applicable Laws.

1.4  
Option Price.

  (a)  
The aggregate price (the “Option Price”) for all of the Option Shares will be
equal to Four Hundred U.S. Dollars (US$ 400).

  (b)  
The payment of any Option Price will be in accordance with written instructions
delivered by the Grantor to the Optionee within five (5) days of delivery of the
Exercise Notice.

1.5  
Delivery of the Shares. Upon the receipt of an Exercise Notice and the payment
of the Option Price, the Grantor will deliver, or take all steps necessary to
cause to be delivered, the Option Shares being purchased pursuant to such
Exercise Notice.

Article II. ENCUMBRANCES; TRANSFERS, SET-OFF

2.1  
Encumbrances. Upon exercise of the Option Right, the Option Shares being
purchased will be sold, transferred and delivered to the Optionee free and clear
of any claim, pledge, charge, lien, preemptive rights, restrictions on transfers
(except as required by securities laws of the United States), proxies, voting
agreements and/or any other Encumbrance.

2.2  
Lock-up; Transfers. Prior to the Expiration Date, the Grantor will not transfer
to any other Person and will continue to own, free and clear of any Encumbrance,
the Option Shares.

2.3  
Legend. The certificates evidencing the Option Shares will bear a legend in
substantially the form as follows:

“THE SHARES REGISTERED IN THE NAME OF [ • ] OR REPRESENTED BY THIS CERTIFICATE,
AS THE CASE MAY BE, ARE SUBJECT TO AN OPTION RIGHT WHICH PROHIBITS THEIR
TRANSFER TO ANY PERSON OTHER THAN THE HOLDER OF THAT RIGHT PRIOR TO THE EXERCISE
OF THE RIGHT OR ITS EXPIRATION. ANY PERSON ACCEPTING ANY INTEREST IN THE SHARES
WILL BE DEEMED TO AGREE TO AND WILL BECOME BOUND BY ALL THE PROVISIONS OF THE
OPTION AGREEMENT IN WHICH THAT OPTION RIGHT IS SET FORTH, AND THE SHARES WILL
REMAIN SUBJECT TO THE OPTION RIGHT AS PROVIDED THEREIN. A COPY OF THE OPTION
AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT
CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.”

2.4  
Set-off. The Optionee will be absolutely entitled to receive all the Option
Shares to which it is entitled pursuant to the exercise of an Option Right, and
for the purposes of this Agreement, the Grantor hereby waives, as against the
Optionee, all rights of set-off or counterclaim that would or might otherwise be
available to the Grantor.

 

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Article III. REPRESENTATIONS AND WARRANTIES

3.1  
Representations and Warranties of the Grantor. The Grantor represents and
warrants to the Optionee, that:

  (a)  
Due Authorization. This Agreement, and all agreements and documents executed and
delivered pursuant to this Agreement, constitute valid and binding obligations
of the Grantor, enforceable against the Grantor in accordance with their terms,
subject to applicable Bankruptcy Laws and other laws or equitable principles of
general application affecting the rights of creditors generally.

  (b)  
No Conflicts. Neither the execution or delivery of this Agreement by the Grantor
nor the fulfillment or compliance by the Grantor with or of any of the terms
hereof will, with or without the giving of notice and/or the passage of time,
(i) conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any contract or any judgment, decree or order
to which the Grantor is subject or by which the Grantor is bound, or
(ii) require any consent, license, permit, authorization, approval or other
action by any Person or Governmental Body which has not yet been obtained or
received. The execution, delivery and performance of this Agreement by the
Grantor or compliance with the provisions hereof by the Grantor does not, and
will not, violate any provision of any Law to which the Grantor is subject or by
which it is bound.

  (c)  
No Actions. There are no lawsuits, actions or, to the best knowledge of the
Grantor, investigations, claims or demands or other proceedings pending or, to
the best knowledge of the Grantor, threatened against the Grantor that, if
resolved in a manner adverse to the Grantor, would adversely affect the right or
ability of the Grantor to carry out its obligations set forth in this Agreement.

  (d)  
Title. The Grantor owns the Option Shares free and clear of any Encumbrance
whatsoever, except as contemplated by this Agreement. The Grantor has not
entered into nor is a party to any agreement that would cause the Grantor to not
own the Option Shares free and clear of any Encumbrance, except as contemplated
by this Agreement.

3.2  
Representations and Warranties of the Optionee. The Optionee represents and
warrants to the Grantor, that:

  (a)  
Due Authorization. This Agreement, and all agreements and documents executed and
delivered pursuant to this Agreement, constitute valid and binding obligations
of the Optionee, enforceable against the Optionee in accordance with their
terms, subject to applicable Bankruptcy Laws and other laws or equitable
principles of general application affecting the rights of creditors generally.

  (b)  
No Conflicts. Neither the execution or delivery of this Agreement by the
Optionee nor the fulfillment or compliance by the Optionee with or of any of the
terms hereof will, with or without the giving of notice and/or the passage of
time, (i) conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract or any judgment,
decree or order to which the Optionee is subject or by which the Optionee is
bound, or (ii) require any consent, license, permit, authorization, approval or
other action by any Person or Governmental Body which has not yet been obtained
or received. The execution, delivery and performance of this Agreement by the
Optionee or compliance with the provisions hereof by the Optionee does not, and
will not, violate any provision of any Law to which the Optionee is subject or
by which it is bound.

  (c)  
No Actions. There are no lawsuits, actions or, to the best knowledge of the
Optionee, investigations, claims or demands or other proceedings pending or, to
the best knowledge of the Optionee, threatened against the Optionee that, if
resolved in a manner adverse to the Optionee, would adversely affect the right
or ability of the Optionee to carry out its obligations set forth in this
Agreement.

 

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NEGATIVE COVENANTS

3.3  
Covenants of the Grantor. The Grantor agrees that, prior to the termination of
this Agreement, the Grantor will not transfer, sell, or assign to any other
Person, or otherwise dispose of, pledge, encumber, or suffer any Encumbrance
upon, any shares of capital stock of Xiangrui which the Grantor owns, including
the Option Shares. The Grantor further agrees that, prior to the termination of
this Agreement, the Grantor will not, without the prior written approval of the
Optionee, vote (in person, by proxy or by action by written consent, as
applicable) any of the Option Shares in favor of, or to adopt or approve any of
the following actions with regard to Xiangrui or any direct or indirect
subsidiary or affiliate of Xiangrui (referred to individually and collectively
as the “Company”):

  (a)  
Any increase of the number of authorized shares of capital stock of the Company;

  (b)  
Any transfer, sale, assignment, or other disposition of, or pledge or
encumbrance of, any of the Company’s material assets except as contemplated by
SECTION 3.1. (e);

  (c)  
Any Change of Control with regard to the Company. “Change of Control” means the
first to occur of any of the following events:

  (i)  
An acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the United States Securities Exchange Act of
1934 (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the
meaning of Rule 13(d)(3) promulgated under the Exchange Act) of twenty percent
(20%) or more of either (A) the then outstanding shares of the common or
ordinary stock of the Company (the “Outstanding Common Stock”) or (B) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding Voting
Securities”); excluding, however, the following: (1) any acquisition directly
from the Company, other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself acquired
directly from the Company, (2) any acquisition by the Company, (3) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any entity controlled by the Company, or (4) any
acquisition pursuant to a transaction which complies with clauses (A), (B) and
(C) of paragraph (iii) of this definition;

  (ii)  
A change in the composition of the Board of Directors of the Company (the
“Board”) such that the individuals who, as of the date of this Agreement,
constitute such board of directors (such Board will be hereinafter referred to
as the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, for purposes of this definition any individual
who becomes a member of the Board subsequent to the date of this Agreement,
whose election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of those individuals who are members
of the Board and who were also members of the Incumbent Board (or deemed to be
such pursuant to this proviso) will be considered as though such individual were
a member of the Incumbent Board; and provided further, that any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board will not be so considered as a member of the Incumbent Board;

 

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  (iii)  
Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company or the
acquisition by the Company of assets or stock of another entity (“Corporate
Transaction”); excluding, however, such a Corporate Transaction following which
(A) all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Common Stock and Outstanding
Voting Securities immediately prior to such Corporate Transaction beneficially
own, directly or indirectly, more than fifty percent (50%) of, respectively, the
outstanding shares of Common Stock, and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially the
same proportions, as their ownership immediately prior to such Corporate
Transaction, of the Outstanding Common Stock and Outstanding Company Securities,
as the case may be, (B) no Person (other than the Company, or any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Corporate Transaction) beneficially owns, directly or indirectly,
twenty percent (20%) or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding voting securities of such corporation
entitled to vote generally in the election of directors except to the extent
that such ownership existed prior to the Corporate Transaction, and
(C) individuals who were members of the Incumbent Board at the time of the
execution of the initial agreement or of the Board action providing for such
Corporate Transaction constitute at least a majority of the members of the board
of directors of the corporation resulting from such Corporate Transaction; or

  (iv)  
The approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company;

  (d)  
Any sale or other issuance of any equity interest, shares of capital or other
securities of the Company;

  (e)  
Any declaration, accrual, set aside or payment of any dividend or other
distribution in respect of any equity interest or any shares of capital stock or
other securities of the Company or any repurchase or redemption of any equity
interest or any shares of capital stock or other securities of the Company; or

  (f)  
Any agreement, commitment or offers of the Company, whether or not in writing,
to take any of the actions prohibited by clauses (a) through (e);

provided however, that neither the consummation of the transactions contemplated
by this Agreement, the Exchange Transaction, nor any of the other transactions
contemplated hereby will be deemed to be a “Change of Control” or otherwise
prohibited by the covenants contained in this SECTION 3.3..

3.4  
The Grantor will cause Xiangrui and each of its subsidiaries to preserve intact
the business and management organization of Xiangrui and all of its
subsidiaries.
 

Article IV. EVENTS OF DEFAULT AND TERMINATION

4.1  
Events of Default. The occurrence at any time with respect to a Party (the
“Defaulting Party”) of any of the following events will constitute an event of
default (an “Event of Default”) with respect to such Party:

  (a)  
Failure to Pay or Deliver. The failure by a Party to make, when due, any payment
under this Agreement or deliver the Option Shares in accordance with this
Agreement, if such failure is not remedied on or before the third (3rd )
Business Day after notice of such failure is given to the Defaulting Party.

  (b)  
Breach of Agreement. The failure by a Party to comply with or perform any
agreement, covenant or obligation (other than a failure described in SECTION
4.1. (a), which will be governed by SECTION 4.1. (a)) to be complied with or
performed by such Party in accordance with this Agreement if such failure is not
remedied on or before the tenth (10th ) Business Day after notice of such
failure is given to the Defaulting Party.

 

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  (c)  
Bankruptcy. A Party (1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or
fails or admits in writing its inability generally to pay its debts as they
become due; (3) makes a general assignment, arrangement or composition with or
for the benefit of its creditors; (4) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any relief under
any Bankruptcy Law, or a petition is presented for its winding-up or
liquidation, and in the case of any such proceeding or petition instituted or
presented against it, such proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief or the making of an
order for its winding-up or liquidation or (B) is not dismissed, discharged,
stayed or restrained in each case within thirty (30) days of the institution or
presentation thereof; (5) has a resolution passed for its winding-up, official
management or liquidation (other than pursuant to a consolidation, amalgamation
or merger); (6) seeks or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all of its assets; (7) has a
secured party take possession of all or substantially all of its assets or has a
distress, execution, attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all of its assets and such
secured party maintains possession, or any such process is not dismissed,
discharged, stayed or rescinded, in each case within thirty (30) days
thereafter; (8) causes or is subject to any event with respect to it that, under
applicable Law, has an analogous effect to any of the events described in
clauses (1) through (7); or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the foregoing
acts.

4.2  
Termination.

  (a)  
If at any time an Event of Default with respect to a Party has occurred and is
continuing, the other Party may terminate this Agreement and deem the Expiration
Date to have occurred by giving written notice to the Defaulting Party
specifying the relevant Event of Default.

  (b)  
Unless otherwise terminated pursuant to SECTION 4.2. (a), this Agreement will
terminate on the earlier of the Expiration Date and the date on which one
hundred percent (100%) of the Option Shares have been transferred and conveyed
to the Optionee hereunder.

Article V. MISCELLANEOUS PROVISIONS

5.1  
Further Assurances. Each Party will execute and/or cause to be delivered to the
other Party such instruments and other documents, and will take such other
actions, as such other Party may reasonably request for the purpose of carrying
out or evidencing any of the transactions contemplated by this Agreement.

5.2  
Notices. Any notice or other communication required or permitted to be delivered
to any Party will be in writing and will be deemed properly delivered, given and
received upon dispatch by hand, courier or express delivery service with receipt
confirmed by signature of the addressee, to the address set forth beneath the
name of such Party below (or to such other address as such Party may specify in
a written notice given to the other Party):

     
If to the Grantor to:
  Ruixing Industry Park
 
  Room 206, Building #6, Unit #3,
 
  #17 Pengjizhen Guodao,
 
  Dongping County, Shandong Province, 271509
 
  Attention: Guangxiang Meng
 
  c/o Chongxin Xu
 
   
If to the Optionee to:
  Shandong Xiangrui Pharmacy Co., Ltd.
 
  Pengji Town, Dongping County, Shandong Province
 
  Attention: Huang Lingfa

 

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5.3  
Time of The Essence. Time is of the essence of this Agreement.

5.4  
Headings, Gender and Usage. The headings contained in this Agreement are for
convenience of reference only, will not be deemed to be a part of this Agreement
and will not be referred to in connection with the construction or
interpretation of this Agreement. For purposes of this Agreement: (a) the words
“include” and “including” will be taken to include the words, “without
limitation;” and (b) whenever the context requires, the singular number will
include the plural, and vice versa; and each of the masculine, feminine and
neuter genders will refer to the others.

5.5  
Governing Law and Language. This Agreement, including all matters of
construction, validity and performance, will in all respects be governed by, and
construed in accordance with, the laws of the State of New York (without giving
effect to principles relating to conflict of laws). This Agreement is written in
English and the English language will govern any interpretation of this
Agreement.

5.6  
Venue and Jurisdiction. If any legal proceeding or other legal action relating
to this Agreement is brought or otherwise initiated, the venue therefore will be
in Hong Kong, which will be deemed to be a convenient forum. Each of the Parties
hereby expressly and irrevocably consents and submits to the jurisdiction of the
courts in Hong Kong.

5.7  
Interpretation. Each Party acknowledges that it has participated in the drafting
of this Agreement, and any applicable rule of construction to the effect that
ambiguities are to be resolved against the drafting party may not be applied in
connection with the construction or interpretation of this Agreement.

5.8  
Successors and Assigns. Each of the Parties may assign this Agreement or any
rights or obligations hereunder without the prior written consent of each other
Party. This Agreement is binding upon, inures to the benefit of and is
enforceable by the Optionee, the Grantor and their respective successors and
assigns.

5.9  
Waiver.

  (a)  
No failure on the part of any Person to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of any Person in
exercising any power, right, privilege or remedy under this Agreement, will
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy will preclude any
other or further exercise thereof or of any other power, right, privilege or
remedy.

  (b)  
No Person will be deemed to have waived any claim arising out of this Agreement,
or any power, right, privilege or remedy under this Agreement, unless the waiver
of such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such Person; and any
such waiver will not be applicable or have any effect except in the specific
instance in which it is given.

5.10  
Entire Agreement; Amendment. This Agreement sets forth the entire understanding
of the Parties relating to the subject matter hereof and supersedes all prior
agreements and understandings among or between any of the parties relating to
the subject matter thereof. Any term of this Agreement may be amended only with
the written consent of each Party.

5.11  
Severability. In the event that any provision of this Agreement, or the
application of any such provision to any Person or set of circumstances, will be
determined to be invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such provision to Persons or
circumstances other than those as to which it is determined to be invalid,
unlawful, void or unenforceable, will not be impaired or otherwise affected and
will continue to be valid and enforceable to the fullest extent permitted by
law.

5.12  
Counterparts. This Agreement may be executed in several counterparts, each of
which will constitute an original and all of which, when taken together, will
constitute one agreement.

[Signature Page to Follow]

 

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IN WITNESS WHEREOF, the Parties have caused this Option Agreement to be executed
and delivered as of the date first set forth above.

         
“GRANTOR”
  “OPTIONEE”    
CHONGXIN XU
  GUO WANG    
 
       
/s/
  /s/    
 
 
 
   
Name: Chongxin Xu
  Name: Guo Wang    

     
Attachments:
     
Exhibit A
  Certain Definitions
Exhibit B
  Form of Option Exercise Notice

 

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EXHIBIT A
CERTAIN DEFINITIONS
For purposes of this Agreement (including this Exhibit A):
“Bankruptcy Law” means any Law of any jurisdiction relating to bankruptcy,
insolvency, corporate reorganization, company arrangement, civil rehabilitation,
special liquidation, moratorium, readjustment of debt, appointment of a
conservator, trustee or receiver, or similar debtor relief.
“Board” is defined in SECTION 3.3. (c)(ii).
“Business Day” means a day on which the commercial banks located in Hong Kong
are open for regular business.
“Change of Control” is defined in SECTION 3.3. (c).
“Company” is defined in SECTION 3.3.
“Corporate Transaction” is defined in SECTION 3.3. (c)(iii).
“Effective Date” is defined in the Preamble.
“Encumbrance” means any lien, pledge, hypothecation, charge, mortgage, security
interest, encumbrance, equity, trust, equitable interest, claim, preference,
right of possession, lease, tenancy, license, encroachment, covenant,
infringement, interference, order, proxy, option, right of first refusal,
preemptive right, community property interest, legend, defect, impediment,
exception, reservation, limitation, impairment, imperfection of title, condition
or restriction of any nature (including any restriction on the transfer of any
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
“Exchange Act” is defined in SECTION 3.3. (c)(i).
“Exchange Agreement” is defined in the Recitals.
“Exchange Shares” is defined in the Recitals.
“Exchange Transaction” is defined in the Recitals.
“Exercise Date” is defined in SECTION 1.3.
“Exercise Notice” is defined in SECTION 1.3.
“Expiration Date” is defined in SECTION 1.2.
“Governmental Body” means any: (a) nation, principality, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any
nature; (b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-Governmental Body of any nature (including any
governmental division, subdivision, department, agency, bureau, branch, office,
commission, council, board, instrumentality, officer, official, representative,
organization, unit, body or Entity and any court or other tribunal);
(d) multi-national organization or body; or (e) individual, Entity or body
exercising, or entitled to exercise, any executive, legislative, judicial,
administrative, regulatory, police, military or taxing authority or power of any
nature.

 

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“Grantor” is defined in the Preamble.
“Incumbent Board” is defined in SECTION 3.3. (c)(ii).
“Law” means any national, federal, state, local, municipal, foreign or other
law, statute, legislation, constitution, principle of common law, resolution,
ordinance, code, edict, decree, proclamation, treaty, convention, rule,
regulation, ruling, directive, pronouncement, requirement, specification,
determination, decision, opinion or interpretation issued, enacted, adopted,
passed, approved, promulgated, made, implemented or otherwise put into effect by
or under the authority of any Governmental Body.
“Option Period” is defined in SECTION 1.2.
“Option Price” is defined in SECTION 1.4. (a).
“Option Right” is defined in SECTION 1.1.
“Option Shares” is defined in SECTION 1.1.
“Optionee” is defined in the Preamble.
“Outstanding Common Stock” is defined in SECTION 3.3. (c)(i).
“Outstanding Voting Securities” is defined in SECTION 3.3. (c)(i).
“Party” and “Parties” are defined in the Preamble.
“Person” means an individual, a corporation, a partnership, an association, a
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof, except as used in SECTION
3.3(c)(i), (ii) and (iii), where its meaning is defined in SECTION 3.3. (c)(i).
“Shell Company” is defined in the Recitals.
“WFOE” is defined in the Recitals.
“Xiangrui” is defined in the Preamble.

 

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EXHIBIT B
FORM OF OPTION EXERCISE NOTICE
[Date]
Ruixing Industry Park
Room 206, Building #6, Unit #3,
#17 Pengjizhen Guodao,
Dongping County, Shandong Province, 271509
Attention: Guangxiang Meng

     
Re:
  Option Agreement dated May 13, 2011 (the “Option Agreement”), between Guo Wang
(the “Optionee”) and Chongxin Xu (the “Grantor”)

Dear Sir:
In accordance with SECTION 1.3 of the Option Agreement, the Optionee hereby
provides this notice of exercise of the Option Right in the manner specified
below:

  (a)  
The Optionee hereby exercises his Option Right with respect to the Option Shares
pursuant to the Option Agreement.

  (b)  
The Optionee will pay the sum of US$ 400 to the Grantor.

  (d)  
Pursuant to this exercise, the Grantor will deliver to                      the
Option Shares in accordance with the instructions attached hereto.

Dated:                     , ______

     
 
   
 
  [Optionee]

 

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