English Translation of Call Option Agreement dated December 20, 2005



 Exhibit 10.26 
 Call Option Agreement 
 CALL OPTION AGREEMENT 
 OF 
 BEIJING HONGCHENG EDUCATION TECHNOLOGY CO., LTD. 
 BETWEEN 
 XIE CHANGQING 
 AND 
 HONGCHENG TECHNOLOGY DEVELOPMENT CO.,
LTD. 
 December 20, 2005 







 CALL OPTION AGREEMENT 
 This CALL OPTION AGREEMENT (this “AGREEMENT”) is entered into in Beijing of the People’s Republic of China (the “PRC”) as of December 20, 2005 by and between the following Parties:

  

	(1)	XIE CHANGQING, a PRC citizen, 

 ID NO: 11010819630719185X,

 CONTACT ADDRESS: Room 230, No. 22 Building, Yannanyuan, Peking University, Haidian District, Beijing (XIE CHANGQING hereinafter shall
be referred to as the “SHAREHOLDER”); and 
  

	(2)	HONGCHENG TECHNOLOGY DEVELOPMENT CO., LTD., a wholly foreign-owned enterprise duly organized under PRC Law (hereinafter referred to as “HONGCHENG TECHNOLOGY”)


 (The parties shall hereinafter be individually referred to as a “PARTY” and collectively referred to as the
“PARTIES”.) 
 WHEREAS: 
  

	(1)	The Shareholder is an enrolled shareholder of BEIJING HONGCHENG EDUCATION TECHNOLOGY CO., LTD., (a company with limited liability duly organized and validly existing under PRC Law,
registered address: Room 2502, Unit 3, Building 1, No. 6 Xueyuan Road, Haidian District, Beijing, hereinafter referred to as “HONGCHENG EDUCATION”), legally holding 72% of the equity of Hongcheng Education. The equity structure of
Hongcheng Education as of the date of execution of this Agreement is shown in Appendix I. 

  

	(2)	The Shareholder intends to transfer to Hongcheng Technology, and Hongcheng Technology is willing to accept, all their respective equity interest in Hongcheng Education, to the
extent not violating PRC Law. 

  

	(3)	In order to conduct the above equity transfer, the Shareholder agrees to grant Hongcheng Technology an irrevocable call option for equity transfer (hereinafter the “Call
Option”), under which and to the extent permitted by PRC Law, the Shareholder shall on demand of Hongcheng Technology transfer the Option Equity (as defined below) to Hongcheng Technology and/or any other entity or individual designated by it
in accordance with the provisions contained herein. 

 THEREFORE, the Parties hereby have reached the following agreement upon mutual
consultations: 
 ARTICLE 1 - DEFINITION 
  

	1.1	Except as otherwise construed in the context, the following terms in this Agreement shall be interpreted to have the following meanings: 

  

			
	“PRC LAW”	 	shall mean the then valid laws, administrative regulations, administrative rules,

  

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		  	local regulations, judicial interpretations and other binding regulatory documents of the People’s Republic of China.
		
	“OPTION EQUITY”	  	shall mean all equity interest held by each Shareholder in Hongcheng Education Registered Capital (as defined below).
		
	 “HONGCHENG EDUCATION
 REGISTERED CAPITAL”
	  	shall mean as of the execution date of this Agreement, the registered capital of Hongcheng Education of RMB 54,200,000 Yuan, which shall include any expanded registered capital as the result of
any capital increase within the term of this Agreement.
		
	“TRANSFERRED EQUITY”	  	shall mean the equity of Hongcheng Education which Hongcheng Technology has the right to require the Shareholder to transfer to it or its designated entity or individual when Hongcheng
Technology exercises its Call Option (hereinafter the “EXERCISE OF OPTION”) in accordance with Article 3.2 herein, the amount of which may be all or part of the Option Equity and the details of which shall be determined by Hongcheng
Technology at its sole discretion in accordance with the then valid PRC Law and its commercial consideration.
		
	“TRANSFER PRICE”	  	shall mean all the consideration that Hongcheng Technology or its designated entity or individual is required to pay to the Shareholder in order to obtain the Transferred Equity upon each
Exercise of Option. Upon each Exercise of Option, all the Transfer Price that Hongcheng Technology or its designated entity or individual shall pay to the Shareholder shall be the lowest price permitted by PRC Law.
		
	“BUSINESS PERMITS”	  	shall mean any approvals, permits, filings, registrations, and so on, which Hongcheng Education is required to have for legally and validly operating all its businesses, including but not
limited to the Business License of the Corporate Legal Person, the Tax Registration Certificate and such other relevant licenses and permits as required by the then PRC Law.
		
	 “HONGCHENG EDUCATION
 ASSETS”
	  	shall mean, in respect of Hongcheng Education, all the tangible and intangible assets which Hongcheng Education owns or has the right to use during the

  

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		  	term of this Agreement, including but not limited to any immoveable and moveable assets, and such intellectual property rights as trademarks, copyrights, patents, proprietary know-how, domain
names and software use rights.
		
	“MATERIAL AGREEMENT”	  	shall mean an agreement to which Hongcheng Education is a party and which has a material impact on the businesses or assets of Hongcheng Education.
		
	“LOAN AGREEMENT”	  	shall mean the Loan Agreement entered into between the Shareholder and PRCEDU Corporation (a company registered and organized in British Cayman Islands) on July 15, 2005.

  

	1.2	The references to any PRC Law herein shall be deemed 

  

	 	(1)	to include the references to the amendments, changes, supplements and reenactments of such law, irrespective of whether they take effect before or after the formation of this
Agreement; and 

  

	 	(2)	to include the references to other decisions, notices or regulations enacted in accordance therewith or effective as a result thereof. 

  

	1.3	Except as otherwise stated in the context herein, all references to an Article, clause, item or paragraph shall refer to the relevant part of this Agreement.


 ARTICLE 2 - GRANT OF CALL OPTION 
  

	2.1	The Shareholder hereby agrees to grant Hongcheng Technology irrevocably and without any additional conditions with a Call Option, under which Hongcheng Technology shall have the
right to require the Shareholder to transfer the Option Equity to Hongcheng Technology or its designated entity or individual in such method as set out herein and as permitted by PRC Law. Hongcheng Technology also agrees to accept such Call Option.


 ARTICLE 3 - METHOD OF EXERCISE OF OPTION 
  

	3.1	To the extent permitted by PRC Law, Hongcheng Technology shall have the sole discretion to determine the specific time, method and times of its Exercise of Option.


  

	3.2	If the then PRC Law permits Hongcheng Technology and/or other entity or individual designated by it to hold all the equity interest of Hongcheng Education, then Hongcheng
Technology shall have the right to elect to exercise all of its Call Option at once, where Hongcheng Technology and/or other entity or individual designated by it shall accept all the Option Equity from the Shareholder at once; if the
then PRC Law permits Hongcheng Technology and/or other entity or individual designated by it to hold only part of the equity in Hongcheng Education, Hongcheng Technology shall have the right to 

  

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determine the amount of the Transferred Equity within the extent not exceeding the upper limit of shareholding ratio set out by the then PRC Law
(hereinafter the “SHAREHOLDING LIMIT”), where Hongcheng Technology and/or other entity or individual designated by it shall accept such amount of the Transferred Equity from the Shareholder. In the latter case, Hongcheng
Technology shall have the right to exercise its Call Option at multiple times in line with the gradual deregulation of PRC Law on the permitted Shareholding Limit, with a view to ultimately acquiring all the Option Equity. 

 

	3.3	At each Exercise of Option by Hongcheng Technology, the Shareholder shall transfer its equity in Hongcheng Education to Hongcheng Technology and/or other entity or individual
designated by it in accordance with the amount of Transferred Equity specified by Hongcheng Technology in the Exercise of Option. Hongcheng Technology and other entity or individual designated by it shall pay the Transfer Price to the
Shareholder who has transferred the Transferred Equity for the Transferred Equity accepted in each Exercise of Option. 

  

	3.4	In each Exercise of Option, Hongcheng Technology may accept the Transferred Equity by itself or designate any third party to accept all or part of the Transferred Equity.


  

	3.5	On deciding each Exercise of Option, Hongcheng Technology shall issue to the Shareholder a notice for exercising the Call Option (hereinafter the “EXERCISE
NOTICE”, the form of which is set out as Appendix II hereto). The Shareholder shall, upon receipt of the Exercise Notice, forthwith transfer all the Transferred Equity in accordance with the Exercise Notice to Hongcheng
Technology and/or other entity or individual designated by Hongcheng Technology in such method as described in Article 3.3 herein. 

  

	3.6	The Shareholder hereby undertakes and guarantees that once Hongcheng Technology issues the Exercise Notice: 

  

	 	(1)	it shall immediately request to hold a Shareholder’ meeting and adopt a resolution through the Shareholder’ meeting, and take all other necessary actions to
agree to the transfer of all the Call Option to Hongcheng Technology and/or other entity or individual designated by it at the Transfer Price; 

  

	 	(2)	it shall immediately enter into an equity transfer agreement with Hongcheng Technology and/or other entity or individual designated by it for transfer of all the
Transferred Equity to Hongcheng Technology and/or other entity or individual designated by it at the Transfer Price; and 

  

	 	(3)	it shall provide Hongcheng Technology with necessary support (including providing and executing all the relevant legal documents, processing all the procedures for
government approvals and registrations and bearing all the relevant obligations) in accordance with the requirements of Hongcheng Technology and of the laws and regulations, in order that Hongcheng Technology and/or other entity or
individual designated by it may take all the Transferred Equity free from any legal defect. 

  

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	3.7	At the meantime of this Agreement, the Shareholder shall enter into a power of attorney (hereinafter the “POWER OF ATTORNEY”, the form of which is set out as
Appendix III hereto), authorizing in writing any person designated by Hongcheng Technology to, on behalf of such Shareholder, to enter into any and all of the legal documents in accordance with this Agreement so as to ensure that
Hongcheng Technology and/or other entity or individual designated by it take all the Transferred Equity free from any legal defect. Such Power of Attorney shall be delivered for custody by Hongcheng Technology and Hongcheng Technology
may, at any time if necessary, require the Shareholder to enter into multiple copies of the Power of Attorney respectively and deliver the same to the relevant government department. 

  

	3.8	If the Transfer Price at each Exercise of Option is RMB 1.00, the transferee of the Transferred Equity shall, at the same time, assume the Shareholder’ repayment obligations
under the Loan Agreement in proportion to the Transferred Equity accepted. If the Transfer Price is higher than RMB 1.00, the transfer price paid by the transferee shall first be used to repay the loans borrowed by the Shareholder under the Loan
Agreement. After the repayment, the transferee of the Transferred Equity shall, in accordance with the balance of loan that has not been repaid under the Loan Agreement, assume the repayment obligations under the Loan Agreement in proportion to the
Transferred Equity accepted. 

 ARTICLE 4 - REPRESENTATIONS AND WARRANTIES 
  

	4.1	The Shareholder hereby represents and warrants as follows: 

  

	 	4.1.1	The Shareholder is PRC citizen with full capacity and is a person with full and independent legal status and legal capacity to execute, deliver and perform this Agreement,
and may act independently as a litigant party. 

  

	 	4.1.2	The Shareholder has the full right to execute and deliver this Agreement and all other documents that it will execute in respect of the transactions mentioned herein, and the full
right to complete the transactions mentioned herein. This Agreement is executed and delivered by the Shareholder legally and properly. This Agreement constitutes the legal and binding obligations on the Shareholder and is enforceable on
them in accordance with its terms and conditions. 

  

	 	4.1.3	The Shareholder is the enrolled legal owner of the Option Equity as of the effective date of this Agreement, and except for the rights created by this Agreement; there is
no lien, pledge, claim or other encumbrances or third party rights on the Option Equity. In accordance with this Agreement, Hongcheng Technology and/or other entity or individual designated by it may, after the Exercise
of Option, obtain the proper title to the Transferred Equity free from any lien, pledge, claim and other encumbrances and third party rights. 

  

	 	4.1.4	Hongcheng Education owns, as of the date this Agreement becomes effective, the complete Business Permits as necessary for its operations and other business relating to its
current business structure. Hongcheng Education has conducted its business legally since its establishment and has not acted in any way that has violated or may violate the regulations and requirements set forth by the government
departments of commerce and industry, tax, education, quality and technology supervision, labor and social security and others. Nor has it any disputes in respect of breach of contract. 

  

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	4.2	Hongcheng Technology hereby represents and warrants as follows: 

  

	 	4.2.1	Hongcheng Technology is a wholly foreign-owned enterprise duly organized and validly existing under PRC Law with full and independent legal status and legal capacity
to execute, deliver and perform this Agreement, and may act independently as a litigant party. 

  

	 	4.2.2	Hongcheng Technology has the full internal right and authorization of the Company to execute and deliver this Agreement and all other documents that it will execute in respect of
the transactions mentioned herein, and the full right and authorization to complete the transactions mentioned herein. 

 ARTICLE 5 - UNDERTAKINGS BY THE SHAREHOLDER 
 The Shareholder hereby makes the following undertakings: 
  

	5.1	Within the term of this Agreement, it must take all necessary measures to ensure that Hongcheng Education is able to obtain all the Business Permits in a timely manner and all
the Business Permits remain effective at any time. 

  

	5.2	Within the term of this Agreement, without the prior written consent by Hongcheng Technology, 

  

	 	5.2.1	it shall not transfer or otherwise dispose of any Option Equity or create any encumbrance or other third party right on any Option Equity; 

  

	 	5.2.2	it shall not increase or decrease Hongcheng Education Registered Capital; 

  

	 	5.2.3	it shall not dispose of or cause the management of Hongcheng Education to dispose of any of Hongcheng Education Assets (except for the disposal during the ordinary cause of
business); 

  

	 	5.2.4	it shall not terminate or cause the management of Hongcheng Education to terminate any Material Agreements entered into by Hongcheng Education, or enter into any other
Material Agreements in conflict with the existing Material Agreements; 

  

	 	5.2.5	it shall not appoint or replace any executive directors or members of the board of directors (if any), supervisors or any other management personnel of Hongcheng Education
that should be appointed or dismissed by the Shareholder; 

  

	 	5.2.6	it shall not announce the distribution of or in practice release any distributable profit or dividend; 

  

	 	5.2.7	it shall ensure that Hongcheng Education shall validly exist and prevent it from being terminated, liquidated or dissolved; 

  

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	 	5.2.8	it shall not amend the Articles of Association of Hongcheng Education; and 

  

	 	5.2.9	it shall ensure that Hongcheng Education shall not lend or borrow any money, or provide guarantee or provide security in any other forms, or bear any material obligations
other than during the ordinary cause of business; and 

  

	5.3	It must make all its efforts during the term of this Agreement to develop the business of Hongcheng Education, and ensure that the operations of Hongcheng Education
are legal and in compliance with the regulations and that it shall not engage in any actions or omissions which might harm Hongcheng Education Assets, its business reputations, or affect the validity of the Business Permits of
Hongcheng Education. 

 ARTICLE 6 - CONFIDENTIALITY 
  

	6.1	Notwithstanding the termination of this Agreement, the Shareholder shall be obligated to keep in confidence the following information (hereinafter collectively the
“CONFIDENTIAL INFORMATION”): 

  

	 	(i)	information on the execution, performance and the contents of this Agreement; 

  

	 	(ii)	the commercial secret, proprietary information and customer information in relation to Hongcheng Technology known to or received by it as the result of execution and
performance of this Agreement; and 

  

	 	(iii)	the commercial secrets, proprietary information and customer information in relation to Hongcheng Education known to or received by it as the shareholder of Hongcheng
Education. 

 The Shareholder may use such Confidential Information only for the purpose of performing their obligations
under this Agreement. The Shareholder shall not disclose the above Confidential Information to any third parties without the written consent from Hongcheng Technology, or it shall bear the default liability and indemnify the losses.

  

	6.2	Upon termination of this Agreement, the Shareholder shall, upon demand by Hongcheng Technology, return, destroy or otherwise dispose of all the documents, materials or
software containing the Confidential Information and suspend using such Confidential Information. 

  

	6.3	Notwithstanding any other provision herein, the validity of this Article shall not be affected by the suspension or termination of this Agreement. 

 ARTICLE 7 - TERM OF AGREEMENT 
  

	7.1	This Agreement shall take effect as of the date of formal execution by the Parties and shall terminate after all the Option Equity has been transferred to Hongcheng Technology
and/or any other entity or individual designated by it in accordance with the provisions contained herein. 

  

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 ARTICLE 8 - NOTICE 
  

	8.1	Any notice, request, demand and other correspondences made as required by or in accordance with this Agreement shall be made in writing and delivered to the relevant
Party. 

  

	8.2	The abovementioned notice or other correspondences shall be deemed to have been delivered when it is transmitted if transmitted by facsimile; it shall be deemed to have
been delivered when it is delivered if delivered in person; it shall be deemed to have been delivered five (5) days after posting the same if posted by mail. 

 ARTICLE 9 - LIABILITY FOR BREACH OF CONTRACT 
  

	9.1	The Parties agree and confirm that, if any party (hereinafter the “DEFAULTING PARTY”) breaches substantially any of the provisions herein or fails substantially
to perform any of the obligations under this Agreement, it shall constitute a default under this Agreement (hereinafter a “DEFAULT”), and Hongcheng Technology shall have the right to require the Defaulting Party to rectify such
Default or take remedial measures within a reasonable period. If the Defaulting Party fails to rectify such Default or take remedial measures within such reasonable period or within ten (10) days of Hongcheng Technology’s
notifying the Defaulting Party in writing and requiring it to rectify the Default, Hongcheng Technology shall have the right at its own discretion to select any of the following remedial measures: 

  

	 	(1)	to terminate this Agreement and require the Defaulting Party to indemnify it for all the damages; or 

  

	 	(2)	mandatory performance of the obligations of the Defaulting Party hereunder and require the Defaulting Party to indemnify it for all the damages. 


 

	9.2	The Parties agree and confirm that in no circumstances shall any Shareholder request the termination of this Agreement for any reason. 

  

	9.3	The rights and remedies prescribed herein are cumulative, and other rights or remedies prescribed by the law are not precluded. 

  

	9.4	Notwithstanding any other provisions herein, the validity of this Article shall not be affected by the suspension or termination of this Agreement. 

 ARTICLE 10 - MISCELLANEOUS 
  

	10.1	This Agreement is prepared in the Chinese language in three (3) original copies, with each involved Party holding one (1) copy hereof. 

  

	10.2	The formation, validity, performance, amendment, interpretation and termination of this Agreement shall be subject to PRC Law. 

  

	10.3	Any disputes arising hereunder and in connection herewith shall be settled through consultations among the Parties to the dispute, and if the Parties to the dispute cannot
reach an agreement regarding such disputes within thirty (30) days of their 

  

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 occurrence, such disputes shall be submitted to China International Economic and Trade Arbitration
Commission Beijing Branch for arbitration in Beijing in accordance with the arbitration rules of such Commission, and the arbitration award shall be final and binding on all Parties to the dispute. 
  

	10.4	Any rights, powers and remedies empowered to any Party by any provisions herein shall not preclude any other rights, powers and remedies enjoyed by such Party in
accordance with laws and other provisions under this Agreement, and the exercise of its rights, powers and remedies by a Party shall not preclude its exercise of its other rights, powers and remedies by such Party.


  

	10.5	Any failure or delay by a Party in exercising any of its rights, powers and remedies hereunder or in accordance with laws (hereinafter the “PARTY’S RIGHTS”)
shall not lead to a waiver of such rights, and the waiver of any single or partial exercise of the Party’s Rights shall not preclude such Party from exercising such rights in any other way and exercising the remaining part of the
Party’s Rights. 

  

	10.6	The titles of the Articles contained herein shall be for reference only, and in no circumstances shall such titles be used in or affect the interpretation of the
provisions hereof. 

  

	10.7	Each provision contained herein shall be severable and independent from each of other provisions, and if at any time any one or more articles herein become invalid,
illegal or unenforceable, the validity, legality or enforceability of the remaining provisions herein shall not be affected as a result thereof. 

  


	10.8	Upon execution, this Agreement shall substitute any other legal documents previously executed by the Parties on the same subject. Any amendments or supplements to this
Agreement shall be made in writing and shall take effect only when properly signed by the Parties to this Agreement. 

  

	10.9	Without prior written consent by Hongcheng Technology, the Shareholder shall not transfer to any third party any of its rights and/or obligations under this Agreement, and
Hongcheng Technology shall have the right to transfer to any third party designated by it any of its rights and/or obligations under this Agreement after providing notice to the Shareholder. 

  

	10.10	This Agreement shall be binding on the legal successors of the Parties. 

  

	    	[The remainder of this page is left blank] 

  

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 IN WITNESS HEREOF, the following Parties have caused this Call Option Agreement to be executed as of the date and in the
place first here above mentioned. 
  

			
	XIE CHANGQING	 	
		
	 /s/ Xie Changqing
	 	
	
	HONGCHENG TECHNOLOGY DEVELOPMENT CO., LTD.
		
	Authorized Representative:	 	
		
	 /s/ Huang Bo
	 	
	Name:	 	
	Position:	 	

  

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 APPENDIX I: 
 BASIC INFORMATION OF HONGCHENG EDUCATION 
 Company Name:     BEIJING HONGCHENG EDUCATION TECHNOLOGY CO., LTD.

 Registered Capital: RMB 54,200,000 
 Equity Structure:

  

							
	 Name of Shareholder
	  	 Amount of
 Investment
 (RMB)
	  	 Equity
 Proportion
	 
	 XIE CHANGQING
	  	RMB	39,200,000	  	72	%
	 YANG XUESHAN
	  	RMB	15,000,000	  	28	%
	 TOTAL
	  	RMB	54,200,000	  	100	%

  

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