EXHIBIT 10.3
 
SUBSIDIARY ACQUISITION OPTION AGREEMENT

This SUBSIDIARY ACQUISITION OPTION AGREEMENT (the “Agreement”) is dated as of
April 25, 2012 (the “Effective Date”), by and between Biopack Environmental
Solutions, Inc., a Nevada corporation (the “Company” or “BPAC”), on the one
hand, and Xinghui Ltd., a Chinese entity (“Purchaser“), on the other hand.  Each
of the Company and Purchaser shall be referred to herein as a “Party” and
collectively as the “Parties.”

WITNESSETH

WHEREAS, the Company owns 100% of the issued and outstanding shares (the
“Subsidiary Shares”) of Roots Biopack (Intellectual Property) Limited,
incorporated in Hong Kong, Roots Biopark Limited, incorporated in Hong Kong,
Jiangmen Roots Biopack Ltd., incorporated in the People’s Republic of China,
Starmetro Group Limited, incorporated in the British Virgin Islands and Biopack
Environmental Limited (fka E-ware Corporation Limited), incorporated in Hong
Kong (together the “BPAC Subsidiaries”);

WHEREAS, Purchaser and BPAC are parties to that certain Agreement for the
Purchase of Preferred Stock dated April 25, 2012 (the “Stock Purchase
Agreement”), wherein the holders of the outstanding preferred stock of the
Company (the “Preferred Shares”), which represents the voting control of the
Company, is selling the Preferred Shares to that certain purchaser named in the
Stock Purchase Agreement (the “Preferred Stock Purchaser”);

WHEREAS, as a condition to the Preferred Stock Purchaser acquiring the Preferred
Shares, they want to have the option of requiring the Company to sell the
Subsidiary Shares at its sole discretion;

WHEREAS, the Purchaser wishes to acquire the Subsidiary Shares and the BPAC
Subsidiaries if the Company, at the request of the Preferred Stock Purchaser,
exercises its right to sell the Subsidiary Shares pursuant to this Agreement;

WHEREAS, the Parties wish to enter into an agreement under which BPAC has the
option, in its sole discretion when approved by the Preferred Shares Purchaser,
to sell the Subsidiary Shares to Purchaser in exchange for certain outstanding
liabilities of the Company that exist at Closing under the Stock Purchase
Agreement;

NOW THEREFORE, in consideration of the premises and respective mutual
agreements, covenants, representations and warranties herein contained, it is
agreed between the Parties hereto as follows:
 
 
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ARTICLE 1
OPTION FOR SALE OF THE SUBSIDIARY SHARES

1.1          Option to Sell the Subsidiary Shares.  The Parties hereby agree
that the Company may, in its sole discretion and at any time after the close of
the transaction contemplated by the Stock Purchase Agreement, sell the
Subsidiary Shares to Purchaser.   If the Company elects to sell the Subsidiary
Shares to Purchaser it will execute and submit to the Escrow Agent, as defined
below, an executed copy of the Notice of Exercise of Option to Sell Subsidiary
Shares, attached hereto as Exhibit A (“Notice of Exercise”).  Upon submission of
the Notice of Exercise to the Escrow Agent, subject to the terms and conditions
set forth herein, and on the basis of the representations, warranties and
agreements herein contained, the Company shall sell to Purchaser and Purchaser
shall purchase from the Company, all of the Subsidiary Shares.

1.2          Purchase Price.  If the Company exercises its option to sell the
Subsidiary Shares as set forth in Section 1.1, then, as consideration for the
Subsidiary Shares, Purchaser will assume all liabilities of the Company that
existed at Closing (as defined in the Stock Purchase Agreement) (together, the
“Purchase Price”). The liabilities to be assumed by the Purchaser will include,
but are not limited to, Purchaser assuming and agreeing to fully perform and
satisfy and be liable for all of the liabilities and obligations of the Company
except for the $400,000 principal amount convertible note that was owed to
Trilane Limited at Closing  (the “Assumed Liabilities”).

1.3
 
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PURCHASER

2.1          Representations and Warranties of Purchaser.  To induce the Company
to enter into this Agreement and to consummate the transactions contemplated
hereby, Purchaser represents and warrants as of the date hereof and as of the
Closing, as follows:

2.1.1          Authority of Purchaser; Acquisition of Subsidiary
Shares/Assumption of Assumed Liabilities.  Purchaser has the full right, power
and authority to enter into this Agreement and to carry out and consummate the
transactions contemplated herein.  This Agreement, and all of the Exhibits
attached hereto, constitutes the legal, valid and binding obligation of
Purchaser.  If required under this Agreement, Purchaser shall acquire the
Subsidiary Shares and assume the Assumed Liabilities as set forth herein.
 
 
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2.1.2          Subsidiary Shares to be Restricted Securities.  Purchaser
acknowledges that the Subsidiary Shares will be “restricted securities” (as such
term is defined in Rule 144 promulgated under the Securities Act of 1933, as
amended (“Rule 144”)), will include the customary restrictive legend, and,
except as otherwise set forth in this Agreement, that the Subsidiary Shares
cannot be sold for a period of at least one year from the date of issuance
unless registered with the United States Securities and Exchange Commission (the
“SEC”) and qualified by appropriate state securities regulators, and otherwise
complies with an exemption from such registration and qualification (including,
without limitation, compliance with Rule 144).

2.1.3          BPAC Subsidiaries Acquired “As Is”.  If the Company exercises its
option under this Agreement to transfer the Subsidiary Shares to Purchaser under
this Agreement, the Company makes no representations or warranties regarding
BPAC Subsidiaries, including, but not limited to, its business, its financial
condition or statements, its prospects, its employment matters, and its
regulatory matters.  Purchaser acknowledges that he is intimately familiar with
BPAC Subsidiaries, its business operations, and its financial condition, and is
receiving control of BPAC Subsidiaries on an “as is” basis.

2.1.4          Company Option.  The option to sell the Subsidiary Shares is in
the sole discretion of the Company and if the Company submits the Notice of
Exercise then Purchaser must accept the Subsidiary Shares in exchange for the
Purchase Price.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY

3.1          Representations and Warranties of the Company.  To induce Purchaser
to enter into this Agreement and to consummate the transactions contemplated
hereby, the Company represents and warrants, as of the date hereof and as of the
Closing, as follows:

3.1.1          Authority of the Company/Transfer of Subsidiary Shares.  The
Company has the full right, power and authority to enter into this Agreement and
to carry out and consummate the transactions contemplated herein.  This
Agreement, and all of the Exhibits attached hereto, constitutes the legal, valid
and binding obligation of the Company.  If it opts to sell the Subsidiary
Shares, the Company shall transfer title in and to the Subsidiary Shares to
Purchaser free and clear of all liens, security interests, pledges,
encumbrances, charges, restrictions, demands, and claims of any kind or nature
whatsoever, whether direct or indirect or contingent, other than those imposed
by the Securities Act of 1933.

3.1.2          Corporate Existence and Authority of the Company.  The Company is
a corporation duly organized, validly existing and in good standing under the
laws of Nevada.  It has all requisite corporate power, franchises, licenses,
permits and authority to own its properties and assets and to carry on its
business as it has been and is being conducted.  It is in good standing in each
state, nation or other jurisdiction in each state, nation or other jurisdiction
wherein the character of the business transacted by it makes such qualification
necessary.

3.1.3          Execution of Agreement.  The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not: (a) violate, conflict with, modify or cause any default under or
acceleration of (or give any Party any right to declare any default or
acceleration upon notice or passage of time or both), in whole or in part, any
charter, article of incorporation, bylaw, mortgage, lien, deed of trust,
indenture, lease, agreement, instrument, order, injunction, decree, judgment,
law or any other restriction of any kind to which the Company is a party or by
which it or any of its properties are bound; (b) result in the creation of any
security interest, lien, encumbrance, adverse claim, proscription or restriction
on any property or asset (whether real, personal, mixed, tangible or
intangible), right, contract, agreement or business of the Company; (c) violate
any law, rule or regulation of any federal or state regulatory agency; or (d)
permit any federal or state regulatory agency to impose any restrictions or
limitations of any nature on the Company or any of its actions.
 
 
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3.1.4          Subsidiary Shares.  The Subsidiary Shares, as of the Effective
Date of this Agreement, are free and clear of all liens, security interests,
pledges, encumbrances, charges, restrictions, demands, and claims of any kind or
nature whatsoever, whether direct or indirect or contingent, other than those
imposed by the Securities Act of 1933.

ARTICLE 4
CLOSING AND DELIVERY OF DOCUMENTS

4.1          Closing.  The Closing (the “Closing”) shall take place on April 25,
2012, or at such other place, date and time as the Parties may agree in writing
(the “Closing Date”).

4.2          Deliveries by BPAC.  At the Closing, BPAC shall deliver the
following:

4.2.1          BPAC shall deliver to the Escrow Agent to be held in the Escrow
Account and governed by this Subsidiary Acquisition Option Agreement:
 
(a)  
a signed copy of this Agreement;

(b)  
written confirmation of the approval of this Agreement and the herein described
transactions by BPAC’s Board of Directors; and

(c)  
stock certificate(s) evidencing the Subsidiary Shares subject to no liens,
security interests, pledges, encumbrances, charges, restrictions, demands or
claims in any other party whatsoever, other than those imposed by federal and
state securities laws.

4.3          Delivery by Purchaser:  At the Closing, Purchaser shall deliver the
following:

4.3.1          Purchaser shall deliver to the Escrow Agent to be held in the
Escrow Account and governed by the Subsidiary Acquisition Option Agreement:

(a)  
a signed copy of this Agreement;

(b)  
written confirmation of the approval of this Agreement and the herein described
transactions by Purchaser’s Board of Directors, if a corporation; and

(c)  
a signed copy of the Assumption of Liabilities in the form attached hereto as
Exhibit B.

 
 
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ARTICLE 5
TERMINATION, AMENDMENT AND WAIVER

5.1          Termination.  Notwithstanding anything to the contrary contained in
this Agreement, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned prior to the Closing Date only by the
mutual consent of all of the Parties.

5.2          Waiver and Amendment.  Any term, provision, covenant,
representation, warranty or condition of this Agreement may be waived, but only
by a written instrument signed by the Party entitled to the benefits
thereof.  The failure or delay of any Party at any time or times to require
performance of any provision hereof or to exercise its rights with respect to
any provision hereof shall in no manner operate as a waiver of or affect such
Party’s right at a later time to enforce the same.  No waiver by any Party of
any condition, or of the breach of any term, provision, covenant, representation
or warranty contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach or waiver of any other condition or of the breach of any
other term, provision, covenant, representation or warranty.  No modification or
amendment of this Agreement shall be valid and binding unless it be in writing
and signed by all Parties hereto.

ARTICLE 6
COVENANTS, INDEMNIFICATION

6.1          To induce the Company to enter into this Agreement and to
consummate the transactions contemplated hereby, and without limiting any
covenant, agreement, representation or warranty made, the Purchaser covenants
and agrees as follows:

6.1.1          Notices and Approvals.  Purchaser agrees: (a) to give all notices
to third parties which may be necessary or desired by the Company in connection
with this Agreement and the consummation of the transactions contemplated
hereby; (b) to use his best efforts to obtain all federal and state governmental
regulatory agency approvals, consents, permit, authorizations, and orders
required or requested by the Company in connection with this Agreement and the
consummation of the transaction contemplated hereby; and (c) to use his best
efforts to obtain all consents and authorizations of any other third parties
necessary or requested by the Company in connection with this Agreement and the
consummation of the transactions contemplated hereby.

6.1.2          Information for the Company’s Statements and
Applications.  Purchaser, and his accountants and attorneys shall cooperate
fully with the Company in the preparation of any filings, statements or
applications made by the Company to any federal or state governmental regulatory
agency in connection with this Agreement and the transactions contemplated
hereby and to furnish the Company with all information concerning the Company
and/or BPAC Subsidiaries necessary or deemed desirable by the Company for
inclusion in such statements and applications, including, without limitation,
all requisite financial statements and schedules.
 
 
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6.1.3          Access to Information.  The Company, together with its
appropriate attorneys, agents and representatives, shall be permitted to make
the full and complete investigation of Purchaser relative to the transaction
contemplated by this Agreement and have full access to all of the books and
records of Purchaser, relative to the transaction contemplated by this
Agreement, and BPAC Subsidiaries during reasonable business
hours.  Notwithstanding the foregoing, such parties shall treat all such
information as confidential and shall not disclose such information without the
prior consent of the other.

6.2          Indemnification.

6.2.1          Indemnity of the Company.  Purchaser agrees to indemnify, defend
and hold the Company harmless from and against any and all Losses (as
hereinafter defined) arising out of or resulting from the breach by Purchaser of
any representation, warranty, covenant or agreement of Purchaser contained in
this Agreement or the schedules and exhibits hereto.  For purposes of Section
6.3, the term “Losses” shall mean all damages, costs and expenses (including
reasonable attorneys’ fees) of every kind, nature or description, it being the
intent of the Parties that the amount of any such Loss shall be the amount
necessary to restore the indemnified party to the position it would have been in
(economically or otherwise), including any costs or expenses incident to such
restoration, had the breach, event, occurrence or condition occasioning such
Loss never occurred.  Notwithstanding the foregoing provisions of this section,
no claim for indemnification shall be made by the Company under this Section
unless and until the aggregate amount of all Losses of the Company in respect
thereof shall exceed $5,000.

6.2.2          Indemnification Procedure.

          (a)        An indemnified party shall notify the indemnifying party of
any claim of such indemnified party for indemnification under this Agreement
within thirty days (30) of the date on which such indemnified party or an
executive officer or representative of such indemnified party first becomes
aware of the existence of such claim.  Such notice shall specify the nature of
such claim in reasonable detail and the indemnifying party shall be given
reasonable access to any documents or properties within the control of the
indemnified party as may be useful in the investigation of the basis for such
claim.  The failure to so notify the indemnifying party within such thirty-day
(30) period shall not constitute a waiver of such claim but an indemnified party
shall not be entitled to receive any indemnification with respect to any
additional loss that occurred as a result of the failure of such person to give
such notice.
 
In the event any indemnified party is entitled to indemnification hereunder
based upon a claim asserted by a third party (including a claim arising from an
assertion or potential assertion of a claim for Taxes), the indemnifying party
shall be given prompt notice thereof, in reasonable detail. The failure to so
notify the indemnifying party shall not constitute a waiver of such claim but an
indemnified party shall not be entitled to receive any indemnification with
respect to any Loss that occurred as a result of the failure of such person to
give such notice.  The indemnifying party shall have the right (without
prejudice to the right of any indemnified party to participate at its expense
through counsel of its own choosing) to defend or prosecute such claim at its
expense and through counsel of its own choosing if it gives written notice of
its intention to do so not later than twenty (20) days following notice thereof
by the indemnifying party or such shorter time period as required so that the
interests of the indemnified party would not be materially prejudiced as a
result of its failure to have received such notice; provided, however, that if
the defendants in any action shall include both an indemnifying party and an
indemnified party and the indemnified party shall have reasonably concluded that
counsel selected by the indemnifying party has a conflict of interest because of
the availability of different or additional defenses to the indemnified party,
the indemnified party shall have the right to select separate counsel to
participate in the defense of such action on its behalf, at the expense of the
indemnifying party.  If the indemnifying party does not so choose to defend or
prosecute any such claim asserted by a third party for which any indemnified
party would be entitled to indemnification hereunder, then the indemnified party
shall be entitled to recover from the indemnifying party, on a monthly basis,
all of its attorneys’ reasonable fees and other costs and expenses of litigation
of any nature whatsoever incurred in the defense of such claim.  Notwithstanding
the assumption of the defense of any claim by an indemnifying party pursuant to
this paragraph, the indemnified party shall have the right to approve the terms
of any settlement of a claim (which approval shall not be unreasonably
withheld).
 
 
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          (b)        The indemnifying party and the indemnified party shall
cooperate in furnishing evidence and testimony and in any other manner which the
other may reasonably request, and shall in all other respects have an obligation
of good faith dealing, one to the other, so as not to unrea­sonably expose the
other to an undue risk of loss.  The indemnified party shall be entitled to
reimbursement for out-of-pocket expenses reasonably incurred by it in
connec­tion with such cooperation.  Except for fees and expenses for which
indemnification is provided pursuant to Section 6.3, as the case may be, and as
provided in the preceding sentence, each party shall bear its own fees and
expenses incurred pursuant to this paragraph (b).

ARTICLE 7
MISCELLANEOUS

7.1          Expenses.  Except as otherwise specifically provided for herein,
whether or not the transactions contemplated hereby are consummated, each of the
Parties hereto shall bear the cost of all fees and expenses relating to or
arising from its compliance with the various provisions of this Agreement and
such Party’s covenants to be performed hereunder, and except as otherwise
specifically provided for herein, each of the Parties hereto agrees to pay all
of its own expenses (including, without limitation, attorneys and accountants’
fees and printing expenses) incurred in connection with this Agreement, the
transactions contemplated hereby, the negotiations leading to the same and the
preparations made for carrying the same into effect, and all such fees and
expenses of the Parties hereto shall be paid prior to Closing.

7.2          Any notice, request, instruction or other document required by the
terms of this Agreement, or deemed by any of the parties hereto to be desirable,
to be given to any other party hereto shall be in writing and shall be delivered
by facsimile or overnight courier to the following addresses:

If to Purchaser:

Xinghui Ltd.
78 Dres Voeux Rd
Central Hong Kong China
Attn. Tsang Yin Chiu
Telephone:  _______________
Facsimile:  _______________
Email: _______________

If to the Company:

Biopack Environmental Solutions, Inc.
Room 1302, 13/F, Enterprise Center
4 Hart Avenue
Tsim Sha Tsui, Kowloon, Hong Kong
Attn:
Telephone: _______________
Facsimile:  _______________
 
The persons and addresses set forth above may be changed from time to time by a
notice sent as aforesaid.  Notice shall be conclusively deemed given at the time
of delivery if made during normal business hours, otherwise notice shall be
deemed given on the next business day.
 
 
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7.3          Entire Agreement.  This Agreement, together with the schedules and
exhibits hereto, sets forth the entire agreement and understanding of the
Parties hereto with respect to the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and understandings related to the
subject matter hereof.  No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written or oral,
express or implied, whether by statute or otherwise, has been made by any Party
hereto which is not embodied in this Agreement, or exhibits hereto or the
written statements, certificates, or other documents delivered pursuant hereto
or in connection with the transactions contemplated hereby, and no Party hereto
shall be bound by or liable for any alleged understanding, promise, inducement,
statement, representation, warranty, covenant or condition not so set forth.

7.4          Survival of Representations.  All statements of fact (including
financial statements) contained in the schedules, the exhibits, the certificates
or any other instrument delivered by or on behalf of the Parties hereto, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties by the respective Party hereunder.  All
representations, warranties, agreements, and covenants hereunder shall survive
the Closing and remain effective regardless of any investigation or audit at any
time made by or on behalf of the Parties or of any information a Party may have
in respect thereto. Consummation of the transactions contemplated hereby shall
not be deemed or construed to be a waiver of any right or remedy possessed by
any Party hereto, notwithstanding that such Party knew or should have known at
the time of Closing that such right or remedy existed.

7.5          Incorporated by Reference.  All documents (including, without
limitation, all financial statements) delivered as part hereof or incident
hereto are incorporated as a part of this Agreement by reference.

7.6          Remedies Cumulative.  No remedy herein conferred upon any Party is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.

7.7          Execution of Additional Documents.  Each Party hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and take
all such other actions as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.

7.8          Finders’ and Related Fees.  Each of the Parties hereto is
responsible for, and shall indemnify the other against, any claim by any third
party to a fee, commission, bonus or other remuneration arising by reason of any
services alleged to have been rendered to or at the instance of said Party to
this Agreement with respect to this Agreement or to any of the transactions
contemplated hereby.

7.9          Governing Law.  This Agreement has been negotiated and executed in
the State of Texas and shall be construed and enforced in accordance with the
laws of such state.
 
 
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7.10        Forum.  Each of the Parties hereto agrees that any action or suit
which may be brought by any Party hereto against any other Party hereto in
connection with this Agreement or the transactions contemplated hereby may be
brought only in a federal or state court in Fort Bend County, Texas.

7.11        Attorneys’ Fees.  Except as otherwise provided herein, if a dispute
should arise between the Parties including, but not limited to arbitration, the
prevailing Party shall be reimbursed by the nonprevailing Party for all
reasonable expenses incurred in resolving such dispute, including reasonable
attorneys’ fees exclusive of such amount of attorneys’ fees as shall be a
premium for result or for risk of loss under a contingency fee arrangement.

7.12        Binding Effect and Assignment.  This Agreement shall inure to the
benefit of and be binding upon the Parties hereto and their respective heirs,
executors, administrators, legal representatives and assigns.

7.13        Third Party Beneficiary.  The Preferred Stock Purchaser is a third
party beneficiary under this Agreement.  Except as to the Preferred Stock
Purchaser, this Agreement is not intended to and does not confer any rights on
any third party, and no such third party shall be a third party beneficiary
under or in respect of this Agreement.

7.14        Counterparts.  This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.  In making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.

[Remainder of page intentionally left blank; signatures to follow]
 
 
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first written hereinabove.
 
“Purchaser”
 
“Company”
         
Xinghui Ltd.,
 
Biopack Environmental Solutions, Inc.
 
a Chinese entity
 
a Nevada corporation
          By:
/s/ Tsang Yin Chiu
  By:
/s/ Gerald Lau 
   
Tsang Yin Chiu
   
Gerald Lau
         
President
 

 
 
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Exhibit A

Form of Notice of Exercise

The undersigned, the holder of the option under that certain Subsidiary
Acquisition Option Agreement to sell 100% of the shares of  the BPAC
Subsidiaries (“Subsidiary Shares”) to Xinghui Ltd., in exchange for the Purchase
Price, hereby irrevocably elects to exercise its right to sell  the Subsidiary
Shares to Xinghui Ltd., in exchange for the Purchase Price.
 

Dated: __________, 20___
By:
     
Its: 
   

 
 
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Exhibit B

Assumption of Liabilities
 

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