Document:

Unassociated Document

Exhibit 10.06

 

EQUITY PLEDGE AGREEMENT

 

This Equity Pledge Agreement (hereinafter this “Agreement”) is dated May 26, 2010, and is entered into in Ningguo City, Anhui Province, People’s Republic of China (“PRC” or “China”) by and among Ningguo Taiyang Incubation Plant Co., Ltd. (“Pledgee”), and each of the shareholders listed on the signature pages hereto (each a “Pledgor” and collectively, the “Pledgors”) of Auhui Taiyang Poultry Co., Ltd. (“Company”). The Company is made a party to this Agreement for the purpose of acknowledging the Agreement.

 

RECITALS

 

1.           The Pledgee incorporated in the PRC as a foreign investment enterprise and specializes in the business of consulting.

 

2.           Company is engaged in cultivating and trading ducks; processing, trading and selling ducklings, feeds, byproducts of ducklings, and raw materials and byproducts of feeds (to operate according to relevant administration license where so required for an item) (the “Business”).

 

3.           The Pledgors are shareholders of the Company, each legally holding such amount of equity interest of the Company as set forth on the signature page of this Agreement and collectively holding 100% of the issued and outstanding equity interests of the Company (collectively the “Equity Interest”).

 

4.           The Pledgee and the Company have executed a Consulting Services Agreement dated May 26, 2010 (the “Consulting Services Agreement”) concurrently herewith, pursuant to which the Company shall pay consulting and service fees (the “Consulting Services Fee”) to the Pledgee for consulting and related services in connection with the Business.

 

5.           In order to ensure that the Company will perform its obligations under the Consulting Services Agreement, and in order to provide an additional mechanism for the Pledgee to enforce its rights to collect the Consulting Services Fee from the Company, the Pledgors agree to pledge all their equity interests in the Company as security for the performance of the obligations of the Company under the Consulting Services Agreement, including payment of the Consulting Services Fee.

 

NOW THEREFORE, the Pledgee and the Pledgors through mutual negotiations hereby enter into this Agreement based upon the following terms:

 

  

  

  

 

1.   Definitions and Interpretation. Unless otherwise provided in this Agreement, the following terms shall have the following meanings:

 

      1.1    “Pledge” refers to the full content of Section 2 hereunder.

 

      1.2    “Equity Interest” refers to all the equity interests in the Company legally held by the Pledgors.

 

      1.3    “Term of Pledge” refers to the period provided for under Section 3.2 hereunder.

 

      1.4    “Event of Default” refers to any event in accordance with Section 7.1 hereunder.

 

      1.5    “Notice of Default” refers to the notice of default issued by the Pledgee in accordance with this Agreement.

 

2.   The Pledge. The Pledgors hereby pledge the Equity Interest to the Pledgee as a security for the obligations of the Company under the Consulting Services Agreement (the “Pledge”). Pursuant thereto, the Pledgee shall have priority in receiving payments from the evaluation or the proceeds from the auction or sale of the Equity Interest. The Equity Interest shall hereinafter be referred to as the “Pledged Collateral”.

 

3.   Term of Pledge.

 

      3.1    The Pledge shall take effect as of the date when the Pledge is recorded in the Company’s Register of Shareholders, and shall expire two (2) years from the Company’s satisfaction of all its obligations under the Consulting Services Agreement (the “Term”).

 

      3.2    During the Term, the Pledgee shall be entitled to vote, control, sell, or dispose of the Pledged Collateral in accordance with this Agreement in the event that the Company does not perform its obligations under the Consulting Services Agreement, including without limitations thee failures to pay the Consulting Service Fee.

 

      3.3    During the Term, the Pledgee shall be entitled to collect any and all dividends declared or paid in connection with the Pledged Collateral.

 

4.   Pledge Procedure and Registration.

 

      4.1    The Pledge shall be recorded in the Company’s Register of Shareholders. The Pledgors shall, after the date of this Agreement, process the registration procedures with the Administration for Industry and Commerce concerning the Pledge.

 

      4.2    To the maximum extent permitted by the PRC laws, the Pledgors and Pledgee will file the application with Administration for Industry and Commerce with competent authority to register the Pledge within the term of this Agreement.

 

      4.3    Pledgors and Pledgee agree to use their best efforts to take any action required for the completion of the registration of the Pledge, including without limitation, the execution of documents, the payment of filing fees and submission of applications.

 

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5.   Representation and Warranties of Pledgors.

 

      5.1    The Pledgors are the legal owners of the Pledged Collateral.

 

      5.2    Other than to the Pledgee, the Pledgors have not pledged the Pledged Collateral to any other party, and the Pledged Collateral is not encumbered to any other party.

 

6.   Covenants of Pledgors.

 

      6.1    During the Term, the Pledgors represent and warrant to the Pledgee for the Pledgee’s benefit that the Pledgors shall:

 

              6.1.1    Not transfer or assign the Pledged Collateral, nor create or permit to create any pledge or encumbrance to the Pledged Collateral which may adversely affect the rights and/or benefits of the Pledgee without the Pledgee’s prior written consent.

 

              6.1.2    Comply with the laws and regulations with respect to the Pledge; present to Pledgee any notices, orders or advisements with respect to the Pledge that may be issued or made by a competent PRC authority within five (5) days upon receiving such notices, orders or advisements; comply with such notices, orders or advisements; or object to the foregoing matters upon the reasonable request of the Pledgee or with consent from the Pledgee.

 

              6.1.3    Timely notify the Pledgee of any events which may affect the Pledged Collateral or the Pledgors’ rights thereto, or which may change any of the Pledgors’ warranties or affect the Pledgor’s performance of their obligations under this Agreement.

 

      6.2    The Pledgors agree that the Pledgee’s right to the Pledge pursuant to this Agreement shall not be suspended or inhibited by any legal proceedings initiated by the Pledgors, jointly or separately, or by any successor of or any person authorized by the Pledgors.

 

      6.3    The Pledgors represent and warrant to the Pledgee that in order to protect and perfect the security for the payment of the Consulting Services Fee, the Pledgors shall execute in good faith and cause other parties who have interests in the Pledged Collateral to execute all the title certificates, contracts, and perform actions and cause other parties who have interests to take action, as required by the Pledgee.

 

      6.4    The Pledgors represent and warrant to the Pledgee or its appointed representative (whether a natural person or a legal entity) that they will execute all applicable and required amendments in connection with the registration of the Pledge, and within a reasonable amount of time upon request, provide the relevant notice, order and decision regarding such registration to the Pledgee.

 

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     6.5    The Pledgors represent and warrant to the Pledgee that they will abide by and perform all relevant guarantees, covenants, warranties, representations and conditions necessary to insure the rights of the Pledgee under this Agreement. The Pledgors shall compensate all the losses suffered by the Pledgee as a result of the Pledgors’ failure to perform any such guarantees, covenants, warranties, representations or conditions.

 

7.   Events of Default.

 

      7.1    The occurrence of any one of the following events shall be regarded as an “Event of Default”:

 

              7.1.1    This Agreement is deemed illegal by a governing authority of the PRC, or the Pledgor is incapable of continuing to perform the obligations herein due to any reason except force majeure;

 

              7.1.2    The Company fails to timely pay the Consulting Services Fee in full as required under the Consulting Service Agreement;

 

              7.1.3    A Pledgor makes any materially false or misleading representations or warranties under Section 5 herein, or breaches any warranties under Section 5 herein;

 

              7.1.4    A Pledgor breaches the covenants under Section 6 herein;

 

              7.1.5    A Pledgor breaches any terms and conditions of this Agreement;

 

              7.1.6    A Pledgor transfers or assigns, cause to be transferred or assigned, or otherwise abandons the Pledged Collateral without the prior written consent of the Pledgee;

 

              7.1.7    The Company is incapable of repaying debt;

 

              7.1.8    The assets of a Pledgor are adversely affected so as to cause the Pledgee to believe that such Pledgor’s ability to perform the obligations herein is adversely affected;

 

              7.1.9    The successors or agents of the Company refuse, or are only partly able, to perform the payment obligations under the Consulting Services Agreement;

 

      7.2    A Pledgor shall immediately give a written notice to the Pledgee if such Pledgor is aware of or discovers that any event under Section 7.1 herein, or any event that may result in any one of the foregoing events, has occurred or is likely to occur.

 

      7.3    Unless an Event of Default has been resolved to the Pledgee’s satisfaction within 15 days of its occurrence (the “Cure Period”), the Pledgee may, at any time thereafter, give a written default notice (the “Default Notice”) to the Pledgor and require the Pledgors to immediately make full payment of the then outstanding Consulting Service Fee and any other outstanding payables in accordance with Section 8 herein.

 

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8.   Exercise of Remedies.

 

      8.1   Authorized Action by Secured Party. The Pledgors hereby irrevocably appoint Pledgee as the attorney-in-fact of the Pledgors for the purpose of carrying out the security provisions of this Agreement and to take any action and execute any instrument that the Pledgee may deem necessary or advisable to accomplish the purpose of this Agreement. Such power of attorney shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Collateral) by any person, upon the occurrence an Event of Default. Pledgee shall not have any duty to exercise any such right or to preserve the same and shall not be liable for any failure to do so or for any delay in doing so.

 

If an Event of Default occurs, or is already proceeding, Pledgee shall have the right to exercise the following rights:

 

(a)           Collect by legal proceedings or otherwise, and endorse and/or receive all payments, proceeds and other sums and property now or hereafter payable on or on account of the Pledged Collateral;

 

(b)           Enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Pledged Collateral;

 

(c)           Transfer the Pledged Collateral under the Pledgee’s name or under an appointed nominee;

 

(d)           Make any compromise or settlement, and take any action the Pledgee deems advisable, with respect to the Pledged Collateral;

 

(e)           Notify any obligor with respect to the Pledged Collateral to make payment directly to the Pledgee;

 

(f)           All rights of the Pledgors that they would otherwise be entitled to enjoy or exercise with respect to the Pledged Collateral, including without limitations the rights to vote and to receive distributions, shall cease without any further action by or notice, and all such rights shall thereupon become vested in the Pledgee; and

 

(g)           The Pledgors shall execute and deliver to the Pledgee such other instruments as the Pledgee may request in order to permit the Pledgee to exercise the rights set forth herein.

 

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      8.2   Other Remedies. Upon the expiration of the Cure Period, the Pledgee, in addition to the remedies set forth in Section 8.1 or such other rights in law, equity or otherwise, may, without notice or demand on the Pledgors, elect any of the following:

 

(a)           Require the Pledgors to immediately pay all outstanding unpaid amounts due under the Consulting Services Agreement;

 

(b)           Foreclose or otherwise enforce the Pledgee’s security interest to the Pledged Collateral in any manner permitted by law or provided under this Agreement;

 

(c)           Terminate this Agreement pursuant to Section 11;

 

(d)           Exercise any and all rights as the beneficial and legal owner of the Pledged Collateral, including, without limitation, the transfer and exercise of voting and any other rights to the Pledged Collateral; and

 

(e)           Exercise any and all rights and remedies of a secured party under applicable laws.

 

      8.3    The Pledgee has priority in the receipt of payments from the proceeds of auction or sale of the Pledged Collateral, in part or in whole, in accordance with legal procedures, until all payment obligations under the Consulting Services Agreement are satisfied.

 

      8.4    The Pledgors shall not hinder the Pledgee from exercising its rights in accordance with this Agreement and shall give necessary assistance so that the Pledgee may exercise its rights in full.

 

9.   Assignment.

 

      9.1    The Pledgors shall not assign or otherwise transfer the rights and obligations herein without the Pledgee’s prior written consent.

 

      9.2    This Agreement shall be binding upon each of the Pledgors and their respective successors, and shall be binding on the Pledgee and each of its successor and assignee.

 

      9.3    Upon the transfer or assignment by the Pledgee of any or all of its rights and obligations under the Consulting Service Agreement, the Pledgee’s transferee or assignee shall enjoy and undertake the same rights and obligations as the Pledgee under this Agreement. The Pledgors shall be notified of any such transfer or assignment by written notice and at the request of the Pledgee, the Pledgors shall execute such relevant agreements and/or documents with respect to such transfer or assignment.

 

      9.4    In the event of the Pledgee’s change in control resulting in the transfer or assignment of this Agreement, the successor to the Pledgee and the Pledgors shall execute a new equity pledge agreement.

 

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10.         Formalities, Fees and Other Charges.

 

      10.1         The Pledgors shall be responsible for all the fees and expenses in relation to this Agreement, including, but not limited, to legal fees, cost of production, stamp tax and any other taxes and charges. If the Pledgee pays the relevant taxes in accordance with applicable law, the Pledgors shall fully reimburse the Pledgee of such taxes.

 

      10.2         The Pledgors shall be responsible for all expenses (including, but not limited to, any taxes, application fees, management fees, litigation costs, attorney’s fees, and various insurance premiums in connection with the disposition of the Pledge) incurred by the Pledgee in its recourse to collect from the Pledgors arising from the Pledgors’ failure to pay any relevant taxes and fees.

 

11.         Force Majeure.

 

      11.1         “Force Majeure” shall include, but not be limited, to acts of governments, acts of nature, fire, explosion, typhoon, flood, earthquake, tide, lightning, war, and any unforeseen events beyond a Party’s reasonable control or which cannot be prevented with reasonable care. However, any shortage of credit, capital or finance shall not be regarded as an event beyond a Party’s reasonable control. A Party affected by Force Majeure shall promptly notify the other Parties of such event in order to be exempted from such Party’s obligations under this Agreement.

 

      11.2         In the event that the affected Party is delayed or prevented from performing its obligations under this Agreement due to Force Majeure, the affected Party shall not be responsible for any damage caused by the delay or prevention of such performance, as long as such damage is within the scope of such delay or prevention. The affected Party shall take appropriate means to minimize or remove the effects of Force Majeure and attempt to resume performance of the obligations delayed or prevented by Force Majeure. When such Force Majeure ceases to exist, both Parties covenant and agree to resume the performance of this Agreement with their best efforts.

 

12.         Confidentiality. The Parties hereby acknowledge and agree to ensure the confidentiality of all oral and written materials exchanged relating to this Agreement. No Party shall disclose any confidential information to any other third party without the other Parties’ prior written approval, unless: (a) such information was in the public domain at the time it was communicated (unless it entered the public domain without the authorization of the disclosing Party); (b) the disclosure was in response to the relevant laws, regulations, or stock exchange rules; or (c) the disclosure was required by any of the Party’s legal counsel or financial consultant for the purpose of the transaction underlying this Agreement. However, such legal counsel and/or financial consultant shall also comply with the confidentiality as stated hereof. The disclosure of confidential information by employees or agents of the disclosing Party is deemed to be an act of the disclosing Party, and such disclosing Party shall bear all liabilities for any breach of confidentiality.

 

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13.         Dispute Resolution.

 

      13.1          This Agreement shall be governed by and construed in accordance with the laws of the PRC.

 

      13.2          The Parties shall strive to resolve any disputes arising from the interpretation or performance of this Agreement through amicable negotiations. If a dispute cannot be settled, any Party may submit such dispute to China International Economic and Trade Arbitration Commission (“CIETAC”) for arbitration. The arbitration shall abide by the then current rules of CIETAC, and the arbitration proceedings shall be conducted in Beijing, China in Chinese. The decision of CIETA shall be final and binding upon the parties.

 

14.        Notices. Any notice given by the parties hereto for the purpose of performing the rights and obligations hereunder shall be in writing. If such notice is delivered by messenger, the time of receipt is the time when such notice is received by the addressee; if such notice is transmitted by facsimile, the time of receipt is the time when such notice is transmitted. If the notice does not reach the addressee by the end of the business day, the following business day shall be the date of receipt. The place of delivery is the Party’s address as set forth in the signature pages hereto or the address advised in writing including via facsimile.

 

15.         Entire Contract. The Parties agree that this Agreement constitutes the entire agreement of the Parties upon its effectiveness and supersedes all prior oral and/or written agreements and understandings relating to this Agreement.

 

16.         Severability. If any provision or provisions of this Agreement shall be held by a proper authority to be invalid, illegal, unenforceable or in conflict with the laws and regulations of the PRC, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

17.         Appendices. The appendices to this Agreement are incorporated into and are a part of this Agreement.

 

18.         Amendment or Supplement.

 

      18.1         The Parties may amend this Agreement in writing, provided that such amendment shall be duly executed and signed by the Pledgee, the Company, and such Pledgors collectively holding a majority of the Equity Interests, and such amendment shall thereupon become a part of this Agreement and shall have the same legal effect as this Agreement.

 

      18.2         This Agreement and any amendments, modification, supplements, additions or changes hereto shall be in writing and come into effect upon being executed and stamped by the parties hereto. The registration of the Pledge under section 4 will not affect the validity and enforcement of this Agreement.

 

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19.         Language and Copies of the Agreement. This Agreement shall be executed in English in four (4) original copies. Each Party shall receive one (1) original copy, all of which shall be equally valid and enforceable.

 

[SIGNATURE PAGE FOLLOWS]

 

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[SIGNATURE PAGE]

 

      IN WITNESS WHEREOF this Agreement is duly executed by each Party or its legal representatives as of the date first set forth above.

 

	PLEDGEE:	Ningguo Taiyang Incubation Plant Co., Ltd.
	 	 
	 	Legal/Authorized Representative:	/s/ WU Qiyou	 
	 	

Name: WU Qiyou

	 	Title: Executive Director

 

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PLEDGOR SIGNATURE PAGE

 

	
PLEDGORS:

	  
	 	 
	
/s/ WU Qiyou

	  
	
WU Qiyou

	  
	
ID Card No.:

	  
	
Owns 96% of Auhui Taiyang Poultry Co., Ltd.

	  
	 	 
	
/s/ CHEN Beihuang

	  
	
CHEN Beihuang

	  
	
ID Card No.:

	  
	
Owns 2% of Auhui Taiyang Poultry Co., Ltd.

	  
	 	 
	
/s/ WU Qida

	  
	
WU Qida

	  
	
ID Card No.:

	  
	
Owns 2% of Auhui Taiyang Poultry Co., Ltd.

	  

 

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ACKNOWLEDGED BY:

 

THE COMPANY:

 

	 	Auhui Taiyang Poultry Co., Ltd.
	 	 
	 	Legal/Authorized Representative:	/s/ WU Qiyou	 
	 	

Name: WU Qiyou

	 	Title: Executive Director

 

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Appendix 1

 

RESOLUTIONS OF THE SHAREHOLDERS

OF

ANHUI TAIYANG POULTRY CO., LTD.

 

WHEREAS, Auhui Taiyang Poultry Co., Ltd. (“Company”) has entered into a Consulting Services Agreement with Ningguo Taiyang Incubation Plant Co., Ltd., a wholly foreign-owned enterprise under laws of China (the “WFOE”), pursuant to which the Company is obligated to pay certain fees in exchange for WFOE’s consultation and related services;

 

WHEREAS, the undersigned shareholders of the Company (the “Shareholders”) collectively hold 100% of the issued and outstanding equity interests of the Company (the “Equity Interest”), and have been requested by the Company to pledge the Equity Interest to WFOE pursuant to an Equity Pledge Agreement in order to secure the Company’s payment obligations under the Consulting Services Agreement; and

 

WHEREAS, it is in the best interest of the Company and the Shareholders to enter into the Pledge Agreement;

 

RESOLVED, that the Shareholders shall pledge the Equity Interest to WFOE pursuant to the Equity Pledge Agreement, the terms and conditions of which are hereby approved.

 

[SIGNATURE PAGE FOLLOWS]

 

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These resolutions were executed and submitted on May 26, 2010 by the undersigned shareholders:

 

	
SHAREHOLDERS:

	  
	 	 
	
/s/ WU Qiyou

	  
	
WU Qiyou

	  
	
ID Card No.:

	  
	
Owns 96% of Auhui Taiyang Poultry Co., Ltd.

	  
	 	 
	
/s/ CHEN Beihuang

	  
	
CHEN Beihuang

	  
	
ID Card No.:

	  
	
Owns 2% of Auhui Taiyang Poultry Co., Ltd.

	  
	 	 
	
/s/ WU Qida

	  
	
WU Qida

	  
	
ID Card No.:

	  
	
Owns 2% of Auhui Taiyang Poultry Co., Ltd.

	  

 

Equity Pledge Agreement

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Exhibit 10.07

 

OPTION AGREEMENT

 

This Option Agreement (this “Agreement”) is dated May 26, 2010, and is entered into in Ningguo City, Anhui Province, People’s Republic of China (“PRC” or “China”) by and between Ningguo Taiyang Incubation Plant Co., Ltd. (“Party A”), and Auhui Taiyang Poultry Co., Ltd. (“Party B”), and the undersigned shareholders of Party B (each a “Shareholder” and collectively the “Shareholders”). Party A, Party B and the Shareholders are each referred to in this Agreement as a “Party” and collectively as the “Parties.”

 

R E C I T A L S

 

1.           Party B is engaged in the business of cultivating and trading ducks; processing, trading and selling ducklings, feeds, byproducts of ducklings, and raw materials and byproducts of feeds (to operate according to relevant administration license where so required for an item) (the “Business”). Party A has the expertise in consulting, and Party A and Party B has entered into a Consulting Services Agreement to provide Party B with various consulting services in connection with the Business.

 

2.           The Shareholders collectively holds 100% of the issued and outstanding equity interests of Party B (collectively the “Equity Interest”).

 

3.           The Parties are entering into this Agreement in connection with the Consulting Services Agreement.

 

NOW, THEREFORE, the Parties to this Agreement hereby agree as follows:

 

1.           PURCHASE AND SALE OF EQUITY INTEREST

 

1.1           Grant of Rights. The Shareholders (hereinafter the “Transferors”) hereby collectively and irrevocably grant to Party A or a designee of Party A (the “Designee”) an option to purchase at any time, to the extent permitted under PRC Law, all or a portion of the Equity Interest in accordance with such procedures as determined by Party A, at the price specified in Section 1.3 of this Agreement (the “Option”). No Option shall be granted to any party other than to Party A and/or a Designee. Party B hereby agrees to grant the Party C’s Option to Party A and/or the Designee. As used herein, Designee may be an individual person, a corporation, a joint venture, a partnership, an enterprise, a trust or an unincorporated organization.

 

1.2           Exercise of Rights. According with the requirements of applicable PRC laws and regulations, Party A and/or the Designee may exercise the Option at any time by issuing a written notice (the “Notice”) to one or more of the Transferors and specifying the amount of the Equity Interest to be purchased from such Transferor(s) and the manner of purchase.

 

  

  

  

 

1.3          Purchase Price.

 

1.3.1           The purchase price of the Equity Interest pursuant to an exercise of the Option shall be equal to the capital paid in by the Transferors, adjusted pro rata for purchase of less than all of the Equity Interest, unless applicable PRC laws and regulations require an appraisal of the Equity Interest or stipulate other restrictions regarding the purchase price of the Equity Interest.

 

1.3.2           If the applicable PRC laws and regulations require an appraisal of the Equity Interest or stipulate other restrictions regarding the purchase price of the Equity Interest at the time Party A exercises the Option, the Parties agree that the purchase price shall be set at the lowest price permissible under the applicable laws and regulations.

 

1.4          Transfer of Equity Interest. Upon each exercise of the Option under this Agreement:

 

1.4.1           The Transferors shall hold or cause to be held a meeting of shareholders of Party B in order to adopt such resolutions as necessary in order to approve the transfer of the relevant Equity Interest (such Equity Interest hereinafter the “Purchased Equity Interest”) to Party A and/or the Designee;

 

1.4.2           The relevant Parties shall, enter into an Equity Interest Purchase Agreement, in a form reasonably acceptable to Party A, setting forth the terms and conditions for the sale and transfer of the Purchased Equity Interest;

 

1.4.3           The relevant Parties shall execute, without any security interest, all other requisite contracts, agreements or documents, obtain all requisite approval and consent of the government, conduct all necessary actions, transfer the valid ownership of the Purchased Equity Interest to Party A and/or the Designee, and cause Party A and/or the Designee to be the registered owner of the Purchased Equity Interest. As used herein, “security interest” means any mortgage, pledge, the right or interest of the third party, any purchase right of equity interest, right of acquisition, right of first refusal, right of set-off, ownership detainment or other security arrangements; however, such term shall not include any security interest created under that certain Equity Pledge Agreement dated as of May 26, 2010 by and among the Parties (the “Pledge Agreement”).

 

1.5          Payment. Payment of the purchase price shall be determined through negotiation between the Transferors and Party A (including the Designee) in accordance with the applicable laws at the time of the exercise of the Option.

 

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2.           REPRESENTATIONS RELATING TO EQUITY INTEREST

 

2.1          Party B’s Representations. Party B hereby represents and warrants:

 

2.1.1           Without Party A’s prior written consent, Party B’s Articles of Association shall not be supplemented, changed or renewed in any way, Party B’s registered capital of shall not be increased or decreased, and the structure of the registered capital shall not be changed in any form;

 

2.1.2           To maintain the corporate existence of Party B and to prudently and effectively operate the business according with customary fiduciary standards applicable to managers with respect to corporations and their shareholders;

 

2.1.3           Without Party A’s prior written consent, upon the execution of this Agreement, to not sell, transfer, mortgage, create pledges, liens, or any other encumbrances on or dispose, in any other form, any asset, legitimate or beneficial interest of business or income, or encumber or approve any encumbrance or imposition of any security interest on Party B’s assets;

 

2.1.4           Without Party A’s prior written consent, to not issue or provide any guarantee or permit the existence of any debt, other than (i) such debt that may arise from Party B’s normal or daily business (excepting a loan); and (ii) such debt which has been disclosed to Party A before this Agreement;

 

2.1.5           To operate and conduct all business operations in the ordinary course of business, without damaging Party B’s business or the value of its assets;

 

2.1.6           Without Party A’s prior written consent, to not enter into any material agreements, other than agreements entered into in the ordinary course of business (for purpose of this paragraph, if any agreement for an amount in excess of One Hundred Thousand Renminbi (RMB 100,000) shall be deemed a material agreement);

 

2.1.7           Without Party A’s prior written consent, to not provide loan or credit to any other party or organization;

 

2.1.8           To provide to Party A all relevant documents relating to its business operations and finance at the request of Party A;

 

2.1.9           To purchase and maintain general business insurance of the type and amount comparable to those held by companies in the same industry, with similar business operations and assets as Party B, from an insurance company approved by Party A;

 

2.1.10         Without Party A’s prior written consent, to not enter into any merger, cooperation, acquisition or investment;

 

2.1.11         To notify Party A of the occurrence or the potential occurrence of litigation, arbitration or administrative procedure relating to Party B’s assets, business operations and/or income;

 

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2.1.12         In order to guarantee the ownership of Party B’s assets, to execute all requisite or relevant documents, take all requisite or relevant actions, and make and pursue all relevant claims;

 

2.1.13         Without Party A’s prior written notice, to not assign the Equity Interest in any form; however, Party B shall distribute dividends to the Shareholders upon the request of Party A; and

 

2.1.14         In accordance with Party A’s request, to appoint any person designated by Party A to be a management member of Party B.

 

2.2          Transferors’ Representations. The Transferors hereby represent and warrant:

 

2.2.1           Without Party A’s prior written consent, upon the execution of this Agreement, to not sell, transfer, mortgage, create pledges, liens, or any other encumbrances on or dispose in any other form any legitimate or beneficial interest of the Equity Interest, or to approve any security interest, except as created pursuant to the Pledge Agreement;

 

2.2.2           Without Party A’s prior written notice, to not adopt or support or execute any shareholders resolution at any meeting of the shareholders of Party B that seeks to approve any sale, transfer, mortgage or disposal of any legitimate or beneficial interest of the Equity Interest, or to allow any attachment of security interests, except as created pursuant to the Pledge Agreement;

 

2.2.3           Without Party A’s prior written notice, to not agree or support or execute any shareholders resolution at any meeting of the shareholders of Party B that seeks to approve Party B’s merger, cooperation, acquisition or investment;

 

2.2.4           To notify Party A the occurrence or the potential occurrence of any litigation, arbitration or administrative procedure relevant to the Equity Interest;

 

2.2.5           To cause Party B’s Board of Directors to approve the transfer of the Purchased Equity Interest pursuant to this Agreement;

 

2.2.6           In order to maintain the ownership of Equity Interest, to execute all requisite or relevant documents, conduct all requisite or relevant actions, and make all requisite or relevant claims, or make requisite or relevant defense against all claims of compensation;

 

2.2.7           Upon the request of Party A, to appoint any person designated by Party A to be a director of Party B; and

 

2.2.8           To prudently comply with the provisions of this Agreement and any other agreements entered into with Party A and Party B in connection therewith, and to perform all obligations under all such agreements, without taking any action or nonfeasance that may affect the validity and enforceability of such agreements.

 

Option Agreement

TAIYANG

 

  

-4-

  

 

3.           Representations and Warranties. As of the execution date of this Agreement and on each transfer of Purchased Equity Interest pursuant to an exercise of the Option, Party B and the Transferors hereby represent and warrant as follows:

 

3.1           Such Parties shall have the power and ability to enter into and deliver this Agreement and to perform their respective obligations thereunder, and at each transfer of Purchased Equity Interest, the relevant Equity Interest Purchase Agreement and to perform their obligations thereunder. Upon execution, this Agreement and each Equity Interest Purchase Agreement will constitute legal, valid and binding obligations and be fully enforceable in accordance with their terms;

 

3.2           The execution and performance of this Agreement and any Equity Interest Purchase Agreement shall not: (i) violate any relevant laws and regulations of the PRC; (ii) conflict with the Articles of Association or other organizational documents of Party B; (iii) cause to breach any agreements or instruments or having binding obligation on it, or constitute a breach under any agreements or instruments or having binding obligation on it; (iv) breach relevant authorization of any consent or approval and/or any effective conditions; or (v) cause any authorized consent or approval to be suspended, removed, or cause other added conditions;

 

3.3           The Equity Interest is transferable in whole and in part, and neither Party B nor the Transferors has permitted or caused any security interest to be imposed upon the Equity Interest other than pursuant to the Pledge Agreement;

 

3.4           Party B does not have any unpaid debt, other than (i) such debt that may arise during the ordinary course of business; and (ii) debt either disclosed to Party A before this Agreement or incurred pursuant to Party A’s written consent;

 

3.5           Party B has complied with all applicable PRC laws and regulations in connection with this Agreement;

 

3.6           There are no pending or ongoing litigation, arbitration or administrative procedures with respect Party B, its assets or the Equity Interests, and Party B and the Transferors have no knowledge of any pending or threatened claims to the best of their knowledge; and

 

3.7           The Transferors own the Equity Interest free and clear of encumbrances of any kind, other than the security interest pursuant to the Pledge Agreement.

 

Option Agreement

TAIYANG

 

  

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4.           ASSIGNMENT OF AGREEMENT

 

4.1           Party B and the Transferors shall not transfer their rights and obligations under this Agreement to any third party without Party A’s prior written consent.

 

4.2           Party B and the Transferors hereby agrees that Party A shall be able to transfer all of its rights and obligations under this Agreement to any third party, and such transfer shall only be subject to a written notice of Party A to Party B and the Transferors without any further consent from Party B or the Transferors.

 

5.           EFFECTIVE DATE AND TERM

 

5.1           This Agreement shall be effective as of the date first set forth above.

 

5.2           The term of this Agreement shall commence from the effective date and shall last for the maximum period of time permitted by law unless it is early terminated in accordance with this Agreement.

 

5.3           At the end of the term of this Agreement (including any extension thereto), or if earlier terminated pursuant to Section 5.2, the Parties agree that any transfer of rights and obligations pursuant to Section 4.2 shall continue to be in effect.

 

6.           APPLICABLE LAWS AND DISPUTE RESOLUTION

 

6.1           Applicable Laws. The execution, validity, interpretation and performance of this Agreement and the dispute resolution under this Agreement shall be governed by the laws of PRC.

 

6.2           Dispute Resolution. The Parties shall strive to resolve any disputes arising from the interpretation or performance of this Agreement through amicable negotiations. If such dispute cannot be settled within thirty (30) days, any Party may submit such dispute to China International Economic and Trade Arbitration Commission (“CIETAC”) for arbitration. There shall be three (3) arbitrators. Party B shall select one (1) arbitrator and Party A shall select one (1) arbitrator, and both arbitrators shall be selected within thirty (30) days after giving or receiving the demand for arbitration. Such arbitrators shall be freely selected, and the Parties shall not be limited in their selection to any prescribed list. The chairman of the CIETAC shall select the third arbitrator. If a Party does not appoint an arbitrator who consents to participate within thirty (30) days after giving or receiving the demand for arbitration, the relevant appointment shall be made by the chairman of the CIETAC. The arbitration shall abide by the rules of CIETAC, and the arbitration proceedings shall be conducted in Beijing, China in English. The determination of CIETAC shall be final and binding upon the Parties.

 

7.           Taxes and Expenses. Each Party shall, according with PRC laws, bear any and all registration taxes, costs and expenses for the transfer of equity arising from the preparation, execution and completion of this Agreement and all Equity Interest Purchase Agreements.

 

Option Agreement

TAIYANG

 

  

-6-

  

 

8.           Notices. Notices or other communications required to be given by any Party pursuant to this Agreement shall be written in English and Chinese and delivered personally or sent by registered mail or prepaid mail or by a recognized courier service or by facsimile transmission to the relevant address of each Party as set forth below or other addresses of the Party as specified by such Party from time to time. The date when the notice is deemed to be duly served shall be determined as follows: (a) a notice delivered personally is deemed duly served upon the delivery; (b) a notice sent by mail is deemed duly served the tenth (10th) day after the date of the air registered mail with the postage prepaid has been sent out (as is shown on the postmark), or the fourth (4th) day after the delivery by an internationally recognized courier service; and (c) a notice sent by facsimile transmission is deemed duly served upon the receipt time as shown on the transmission confirmation.

 

	
Party A

	
 

	
Ningguo Taiyang Incubation Plant Co., Ltd.

	 	 	 
	
 

	
 

	
Address: Heli Park, Ningguo Economic and Technology Development Zone,

	 	 	Anhui Province, China
	
 

	
 

	
Attn: WU Qiyou

	 	 	 
	
 

	
 

	
Fax: +86-563-4309932

	
 

	
 

	
Tel: +86-563-4309932

	  	  
	
Party B:

	
 

	
Auhui Taiyang Poultry Co., Ltd.

	 	 	 
	
 

	
 

	
Address: No.88 East Waihuan Road, Ningguo City, Anhui Province, China

	 	 	 
	
 

	
 

	
Attn: WU Qiyou

	 	 	 
	
 

	
 

	
Fax: +86-563-4309977

	
 

	
 

	
Tel: +86-563-4309933

 

Option Agreement

TAIYANG

 

  

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Party C:

	  	  
	  	
PartyC1

	
: WU Qiyou

	 	 	 
	  	  	
Address: No.88 East Waihuan Road, Ningguo City, Anhui Province, China

	 	 	 
	  	  	
Tel: +86-563-4309999

	  	  	
Fax: +86-563-4309977

	 	 	 
	 	

PartyC2:

	 
	  	
 

	
CHEN Beihuang

	 	 	 
	  	  	
Address: No.88 East Waihuan Road, Ningguo City, Anhui Province, China

	 	 	 
	  	  	
Tel: +86-563-4309998

	  	  	
Fax: +86-563-4309977

	 	 	 
	 	

PartyC3:

	 
	  	
 

	
WU Qida

	 	 	 
	  	  	
Address: No.88 East Waihuan Road, Ningguo City, Anhui Province, China

	 	 	 
	  	  	
Tel: +86-563-4309998

	  	  	
Fax: +86-563-4309977

 

9.           Confidentiality. The Parties acknowledge and confirm that any oral or written information exchanged by the Parties in connection with this Agreement is confidential. The Parties shall maintain the confidentiality of all such information. Without the written approval by the other Parties, any Party shall not disclose to any third party any confidential information except as follows:

 

(a)           Such information was in the public domain at the time it was communicated;

 

(b)           Such information is required to be disclosed pursuant to the applicable laws, regulations, policies relating to the stock exchange; or

 

(c)           Such information is required to be disclosed to a Party’s legal counsel or financial consultant, provided however, such legal counsel and/or financial consultant shall also comply with the confidentiality as stated hereof. The disclosure of confidential information by employees or agents of the disclosing Party is deemed to be an act of the disclosing Party, and such Party shall be responsible for all breach of confidentiality arising from such disclosure. This provision shall survive even if certain clauses of this Agreement are subsequently amended, revoked, terminated or determined to be invalid or unable to implement for any reason.

 

Option Agreement

TAIYANG

 

  

-8-

  

 

10.          Further Warranties. The Parties agree to promptly execute such documents as required to perform the provisions of this Agreement, and to take such actions as may be reasonably required to perform the provisions of this Agreement.

 

11.          MISCELLANEOUS

 

11.1         Amendment, Modification and Supplement. Any amendments and supplements to this Agreement shall only take effect if executed by both Parties in writing.

 

11.2         Entire Agreement. Notwithstanding Article 5 of this Agreement, the Parties acknowledge that this Agreement constitutes the entire agreement of the Parties with respect to the subject matters therein and supersede and replace all prior or contemporaneous agreements and understandings, whether oral or in writing.

 

11.3         Severability. If any provision of this Agreement is deemed invalid or non-enforceable according with relevant laws, such provision shall be deemed invalid only within the applicable laws and regulations of the PRC, and the validity, legality and enforceability of the other provisions hereof shall not be affected or impaired in any way. The Parties shall, through reasonable negotiation, replace such invalid, illegal or non-enforceable provisions with valid provisions in order to bring similar economic effects of those invalid, illegal or non-enforceable provisions.

 

11.4         Headings. The headings contained in this Agreement are for reference only and shall not affect the interpretation and explanation of the provisions in this Agreement.

 

11.5         Language and Copies. This Agreement shall be executed in English in five (5) duplicate originals. Each Party shall hold one (1) original, each of which shall have the same legal effect.

 

11.6         Successor. This Agreement shall be binding on the successors of each Party and the transferee allowed by each Party.

 

11.7         Survival. Each Party shall continue to perform its obligations notwithstanding the expiration or termination of this Agreement. Article 6, Article 8, Article 9 and Section 11.7 hereof shall continue to be in full force and effect after the termination of this Agreement.

 

11.8         Waiver. Any Party may waive the terms and conditions of this Agreement in writing with the written approval of all the Parties. Under certain circumstances, any waiver by a Party to the breach of other Parties shall not be construed as a waiver of any other breach by any other Parties under similar circumstances.

 

[SIGNATURE PAGE FOLLOWS]

 

Option Agreement

TAIYANG

 

  

-9-

  

 

IN WITNESS WHEREOF this Agreement is duly executed by each Party or its legal representatives as of the date first set forth above.

 

PARTY A:          Ningguo Taiyang Incubation Plant Co., Ltd.

 

Legal/Authorized Representative: /s/ WU Qiyou

Name: WU Qiyou

Title: Executive Director

 

PARTY B:          Auhui Taiyang Poultry Co., Ltd.

 

Legal/Authorized Representative: /s/ WU Qiyou

Name: WU Qiyou

Title: Executive Director

 

Option Agreement

TAIYANG

 

  

-10-

  

 

SIGNATURE PAGE FOR SHAREHOLDERS OF PARTY B

 

SHAREHOLDERS OF PARTY B:

 

	
/s/ WU Qiyou

	  
	
WU Qiyou

	  
	
ID Card No.:

	  
	
Owns 96% of Auhui Taiyang Poultry Co., Ltd.

	  
	  	  
	
/s/ CHEN Beihuang

	  
	
CHEN Beihuang

	  
	
ID Card No.:

	  
	
Owns 2% of Auhui Taiyang Poultry Co., Ltd.

	  
	  	  
	
/s/ WU Qida

	  
	
WU Qida

	  
	
ID Card No.:

	  
	
Owns 2% of Auhui Taiyang Poultry Co., Ltd.

	  

 

Option Agreement

TAIYANG

 

  

-11-

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