Document:

Exhibit 10.7

 

FORM OF

 

STOCKHOLDERS’ AGREEMENT

 

This STOCKHOLDERS’ AGREEMENT (this “Agreement”), dated as of                 , 2018, is entered into by and among Cactus, Inc., a Delaware corporation (the “Company”), Cadent Energy Partners II, L.P., a Delaware limited partnership (“Cadent”), Cactus WH Enterprises, LLC, a Delaware limited liability company (“Holdco” and, together with Cadent, the “Principal Stockholders”).

 

WHEREAS, in connection with, and effective upon, the completion of the underwritten initial public offering (the “IPO”) of shares of the Company’s Class A Common Stock (as defined below), the Principal Stockholders and the Company have entered into this Agreement to set forth certain understandings among such parties, including with respect to certain governance matters.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I
 DEFINITIONS

 

Section 1.1                                    Certain Definitions.  As used in this Agreement, the following terms shall have the following meanings:

 

“A&R OpCo Agreement” means the Second Amended and Restated Limited Liability Company Agreement of the Company, dated as of                 , 2018, as amended, restated, supplemented or otherwise modified from time to time.

 

“Affiliate” means, with respect to any specified Person, a Person that directly or indirectly Controls or is Controlled by, or is under common Control with, such specified Person. For purposes of this Agreement, (i) no Principal Stockholder (other than Holdco) shall be deemed to be an Affiliate of Holdco and (ii) no party to this Agreement shall be deemed to be an Affiliate of another party to this Agreement solely by reason of the execution and delivery of this Agreement.

 

“Beneficial Owner” of a security is a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares (a) voting power, which includes the power to vote, or to direct the voting of, such security and/or (b) investment power, which includes the power to dispose of, or to direct the disposition of, such security. The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings. For the avoidance of doubt, for purposes of this Agreement each Principal Stockholder is deemed to Beneficially Own the shares of Common Stock (or other securities of the Company into which such shares of Common Stock may be converted or for which such shares of Common Stock may be exchanged) owned by it, notwithstanding the fact that such shares or other securities are

 

 

subject to this Agreement. In addition, for purposes of this Agreement, (i) no Principal Stockholder (other than Holdco) will be deemed to Beneficially Own any shares of Common Stock (or other securities of the Company into which such shares of Common Stock may be converted or for which such shares of Common Stock may be exchanged) owned by Holdco and (ii) no Principal Stockholder will be deemed to Beneficially Own shares of Common Stock (or other securities of the Company into which such shares of Common Stock may be converted or for which such shares of Common Stock may be exchanged) held by any other Principal Stockholder solely due to the fact that any such shares or other securities are subject to this Agreement.

 

“Board” means the Board of Directors of the Company.

 

“Class A Common Stock” means the shares of Class A common stock, par value $0.01 per share, of the Company, and any other capital stock of the Company into which such stock is reclassified or reconstituted.

 

“Class B Common Stock” means the shares of Class B common stock, par value $0.01 per share, of the Company, and any other capital stock of the Company into which such stock is reclassified or reconstituted.

 

“Common Stock” means the Class A Common Stock and the Class B Common Stock, collectively.

 

“Control” (including the terms “Controls,” “Controlled by” and “under common Control with”) means the possession, direct or indirect, of the power to (a) direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise or (b) vote 10% or more of the securities having ordinary voting power for the election of directors of a Person.

 

“Necessary Action” means, with respect to a specified result, all actions (to the extent such actions are permitted by applicable law and, in the case of any action by the Company that requires a vote or other action on the part of the Board, to the extent such action is consistent with the fiduciary duties that the Company’s directors may have in such capacity) necessary to cause such result, including (i) voting or providing a written consent or proxy with respect to shares of Common Stock, (ii) causing the adoption of stockholders’ resolutions and amendments to the organizational documents of the Company, (iii) executing agreements and instruments and (iv) making or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such result.

 

“OpCo” means Cactus Wellhead, LLC, a Delaware limited liability company.

 

“OpCo Unit” means any class of units or interests that is established in OpCo.

 

“Outstanding Cactus Interests” means, collectively, (i) the outstanding shares of Class A Common Stock and (ii) the OpCo Units held by Persons other than the Company. For purposes of calculating any proportion of Outstanding Cactus Interests, the number of Outstanding Cactus Interests held by any Person shall consist of the sum of (a) the number of shares of Class A Common Stock held by such Person and (b) the number of shares of Class A Common Stock

 

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such Person would receive upon the exchange of all OpCo Units held by such Person in accordance with the A&R OpCo Agreement.

 

“Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof or other entity, and also includes any managed investment account.

 

Section 1.2                                    Rules of Construction.

 

(a)                                 Unless the context requires otherwise: (i) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms; (ii) references to Articles and Sections refer to articles and sections of this Agreement; (iii) the terms “include,” “includes,” “including” and words of like import shall be deemed to be followed by the words “without limitation”; (iv) the terms “hereof,” “hereto,” “herein” or “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; (v) unless the context otherwise requires, the term “or” is not exclusive and shall have the inclusive meaning of “and/or”; (vi) defined terms herein will apply equally to both the singular and plural forms and derivative forms of defined terms will have correlative meanings; (vii) references to any law or statute shall include all rules and regulations promulgated thereunder, and references to any law or statute shall be construed as including any legal and statutory provisions consolidating, amending, succeeding or replacing the applicable law or statute; (viii) references to any Person include such Person’s successors and permitted assigns; and (ix) references to “days” are to calendar days unless otherwise indicated.

 

(b)                                 The headings in this Agreement are for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof.

 

(c)                                  This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party that drafted or caused this Agreement to be drafted.

 

ARTICLE II
 VOTING AND GOVERNANCE MATTERS

 

Section 2.1                                    Designees.

 

(a)                                 Upon the closing of the IPO, the Board shall initially consist of seven directors, including Bruce Rothstein, Scott Bender, Joel Bender, John (Andy) O’Donnell, Michael McGovern, Alan Semple and Gary Rosenthal (the “Initial Directors”). Of the Initial Directors, (x) Bruce Rothstein, John (Andy) O’Donnell and Michael McGovern are each deemed to be designees of Cadent and (y) Scott Bender, Joel Bender and Alan Semple are each deemed to be designees of Holdco. From and after the closing of the IPO, the rights of each of Cadent and Holdco to designate directors to the Board shall be as set forth in the remainder of this Section 2.1.

 

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(b)                                 (i) The Company and Holdco shall take all Necessary Action to cause the Board to include a number of directors designated by Cadent (each such director, a “Cadent Director”) such that:

 

(A)                               at least 50% of the directors on the Board are Cadent Directors for so long as Cadent and its Affiliates collectively beneficially own at least 20% of the Outstanding Cactus Interests;

 

(B)                               at least 25% of the directors on the Board are Cadent Directors for so long as Cadent  and its Affiliates collectively beneficially own less than 20% but at least 10% of the Outstanding Cactus Interests; and

 

(C)                               at least one director on the Board is a Cadent Director for so long as Cadent and its Affiliates collectively beneficially own less than 10% but at least 5% of the Outstanding Cactus Interests.

 

If Cadent and its Affiliates collectively Beneficially Own less than 5% of the Outstanding Cactus Interests, Cadent shall not be entitled to designate a nominee.

 

(ii)                                  The Company and Cadent shall take all Necessary Action to cause the Board to include a number of directors designated by Holdco (each such director, a “Holdco Director”) such that:

 

(A)                               at least 50% of the directors on the Board are Holdco Directors for so long as Holdco and its Affiliates collectively beneficially own at least 20% of the Outstanding Cactus Interests;

 

(B)                               at least 25% of the directors on the Board are Holdco Directors for so long as Holdco and its Affiliates collectively beneficially own less than 20% but at least 10% of the Outstanding Cactus Interests; and

 

(C)                               at least one director on the Board is a Holdco Director for so long as Holdco and its Affiliates collectively beneficially own less than 10% but at least 5% Outstanding Cactus Interests.

 

If Holdco and its Affiliates collectively Beneficially Own less than 5% of the Outstanding Cactus Interests, Holdco shall not be entitled to designate a nominee.

 

(iii)                               For purposes of calculating the number of Cadent Directors that Cadent is entitled to designate or Holdco Directors that Holdco is entitled to designate, as the case may be, pursuant to this Section 2.1(b), any fractional amounts shall automatically be rounded upward to the nearest whole number of Cadent Directors or Holdco Directors, as applicable, that is greater than such fractional amount, and any such calculations shall be made on a pro forma basis; provided, however, that neither Cadent nor Holdco shall have the right to designate more than one half of the members of the Board.

 

(iv)                              For the avoidance of doubt, the rights granted to each of Cadent and Holdco to designate members of the Board are additive to, and not intended to limit in any way,

 

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the respective rights that Cadent or Holdco or their respective Affiliates may have to nominate, elect or remove directors under the Company’s certificate of incorporation, bylaws or the Delaware General Corporation Law.

 

(v)                                 The Company agrees, to the fullest extent permitted by applicable law (including with respect to any applicable fiduciary duties under Delaware law), that taking all Necessary Action to effectuate the above shall include (A) including the persons designated pursuant to this Section 2.1(b) in the slate of nominees recommended by the Board for election at any meeting of stockholders called for the purpose of electing directors, (B) nominating and recommending each such individual to be elected as a director as provided herein and (C) soliciting proxies or consents in favor thereof.  The Company is entitled to identify such individual as a Cadent Director or a Holdco Director, as the case may be, pursuant to this Agreement.

 

(c)                                  At any time the members of the Board are allocated among separate classes of directors, (i) the Cadent Directors and the Holdco Directors shall be evenly distributed in different classes of directors to the extent practicable and (ii) after taking into account clause (i) of this Section 2.1(c), each of Cadent and Holdco shall be permitted to designate the class or classes to which each Cadent Director and Holdco, as applicable, shall be allocated.

 

(d)                                 Cadent shall have the right to remove any Cadent Director (with or without cause) appointed by it, from time to time and at any time, from the Board, exercisable upon written notice to the Company, and the Company shall take all Necessary Action to cause such removal. Holdco shall have the right to remove any Holdco (with or without cause) appointed by it, from time to time and at any time, from the Board, exercisable upon written notice to the Company, and the Company shall take all Necessary Action to cause such removal.

 

(e)                                  (i)                                     In the event that a vacancy is created on the Board by the death, disability, resignation or removal (whether by Cadent or otherwise in accordance with the Company’s certificate of incorporation and bylaws, as either may be amended or restated from time to time) of a Cadent Director, Cadent shall be entitled to designate an individual to fill the vacancy so long as the total number of persons that will serve on the Board as designees of Cadent immediately following the filling of such vacancy will not exceed the total number of persons Cadent is entitled to designate pursuant to Section 2.1(b) on the date of such replacement designation.  The Company and Holdco shall take all Necessary Action to cause such replacement designee to become a member of the Board.

 

(ii)                                  In the event that a vacancy is created on the Board by the death, disability, resignation or removal (whether by Holdco or otherwise in accordance with the Company’s certificate of incorporation and bylaws, as either may be amended or restated from time to time) of a Holdco Director, Holdco shall be entitled to designate an individual to fill the vacancy so long as the total number of persons that will serve on the Board as designees of Holdco immediately following the filling of such vacancy will not exceed the total number of persons Holdco is entitled to designate pursuant to Section 2.1(b) on the date of such replacement designation.  The Company and Cadent shall take all Necessary Action to cause such replacement designee to become a member of the Board.

 

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(f)                                   (i)                                     If (A) at the time of any annual meeting of the Company held for the election of directors, Cadent and its Affiliates collectively Beneficially Own less than 50% of the Outstanding Cactus Interests but more than 25% of the Outstanding Cactus Interests, then if requested by the Company, Cadent shall take such actions as are reasonably necessary to remove such excess Cadent Directors from the Board and (B) at any time the number of Cadent Directors exceeds the number of Cadent Directors that Cadent is then entitled to designate to the Board and at such time Cadent and its Affiliates collectively Beneficially Own less than 25% of the Outstanding Cactus Interests, then if requested by the Company, Cadent shall take such actions as are reasonably necessary to remove such excess Cadent Directors from the Board immediately.

 

(ii)                                  If (A) at the time of any annual meeting of the Company held for the election of directors, Holdco and its Affiliates collectively Beneficially Own less than 50% of the Outstanding Cactus Interests but more than 25% of the Outstanding Cactus Interests, then if requested by the Company, Holdco shall take such actions as are reasonably necessary to remove such excess Holdco Directors from the Board and (B) at any time the number of Holdco Directors exceeds the number of Holdco Directors that Holdco is then entitled to designate to the Board and at such time Holdco and its Affiliates collectively Beneficially Own less than 25% of the Outstanding Cactus Interests, then if requested by the Company, Holdco shall take such actions as are reasonably necessary to remove such excess Holdco Directors from the Board immediately.

 

Section 2.2                                    Restrictions on Other Agreements.  No Principal Stockholder shall, directly or indirectly, grant any proxy or enter into or agree to be bound by any voting trust, agreement or arrangement of any kind with respect to its shares of Common Stock (or other securities of the Company into which such shares of Common Stock may be converted or for which such shares of Common Stock may be exchanged) if and to the extent the terms thereof conflict with the provisions of this Agreement (whether or not such proxy, voting trust, agreement or agreements are with other Principal Stockholders, holders of shares of Common Stock or other securities of the Company into which such shares of Common Stock may be converted or for which such shares of Common Stock may be exchanged, that are not parties to this Agreement or otherwise).

 

ARTICLE III
 EFFECTIVENESS AND TERMINATION

 

Section 3.1                                    Effectiveness.  This Agreement shall become effective upon the closing of the IPO.  To the extent the closing of the IPO does not occur, the provisions of this Agreement shall be without any force or effect.

 

Section 3.2                                    Termination.  This Agreement shall terminate upon the delivery of written notice to the Company by all of the Principal Stockholders requesting the termination of this Agreement.  Further, at such time as a particular Principal Stockholder no longer Beneficially Owns any shares of Common Stock (or other securities of the Company into which such shares of Common Stock may be converted or for which such shares of Common Stock may be exchanged), all rights and obligations of such Principal Stockholder under this Agreement shall terminate.

 

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Notwithstanding the foregoing, all rights and obligations set forth in Article II shall terminate upon the fifth anniversary of the date of this Agreement, unless earlier terminated pursuant to the immediately preceding paragraph of this Section 3.2.

 

ARTICLE IV
 MISCELLANEOUS

 

Section 4.1                                    Notices.  All notices, requests, demands and other communications under this Agreement shall be in writing and shall be personally delivered, sent by nationally recognized overnight courier, mailed by registered or certified mail or be sent by facsimile or electronic mail to such party at the address set forth below (or such other address as shall be specified by like notice).  Notices will be deemed to have been duly given hereunder if (a) personally delivered, when received, (b) sent by nationally recognized overnight courier, one business day after deposit with the nationally recognized overnight courier, (c) mailed by registered or certified mail, five business days after the date on which it is so mailed, and (d) sent by facsimile or electronic mail, on the date sent so long as such communication is transmitted before 5:00 p.m. in the time zone of the receiving party on a business day, otherwise, on the next business day.

 

(a)                                 If to the Company, to:

 

Cactus, Inc.
 Cobalt Center
 920 Memorial City Way, Suite 300
 Houston, TX 77024
 Attention: Scott Bender
 E-mail: scott.bender@cactuswellhead.com

 

(b)                                 If to Cadent, to:

 

Cadent Energy Partners, LLC
 800 Westchester Avenue, Suite S-436
 Rye Brook, NY 10573
 Attention: Bruce Rothstein
 E-mail: rothstein@cadentenergy.com

 

Section 4.2                                    Severability.  The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or any circumstance, is found to be invalid or unenforceable in any jurisdiction, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

 

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Section 4.3            Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, taken together, shall be considered one and the same agreement.

 

Section 4.4            Entire Agreement; No Third Party Beneficiaries.  This Agreement (a) constitutes the entire agreement and supersedes all other prior agreements, both written and oral, among the parties hereto with respect to the subject matter hereof and (b) is not intended to confer upon any Person, other than the parties hereto, any rights or remedies hereunder.

 

Section 4.5            Further Assurances.  Each party hereto shall execute, deliver, acknowledge and file such other documents and take such further actions as may be reasonably requested from time to time by the other parties hereto to give effect to and carry out the transactions contemplated herein.

 

Section 4.6            Governing Law; Equitable Remedies.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF). The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties hereto shall be entitled to an injunction or injunctions and other equitable remedies to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any of the Selected Courts (as defined below), this being in addition to any other remedy to which they are entitled at law or in equity. Any requirements for the securing or posting of any bond with respect to such remedy are hereby waived by each of the parties hereto. Each party hereto further agrees that, in the event of any action for an injunction or other equitable remedy in respect of such breach or enforcement of specific performance, it will not assert the defense that a remedy at law would be adequate.

 

Section 4.7            Consent To Jurisdiction.  With respect to any suit, action or proceeding (“Proceeding”) arising out of or relating to this Agreement, each of the parties hereto hereby irrevocably (a) submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware and the United States District Court for the District of Delaware and the appellate courts therefrom (the “Selected Courts”) and waives any objection to venue being laid in the Selected Courts whether based on the grounds of forum non conveniens or otherwise and hereby agrees not to commence any such Proceeding other than before one of the Selected Courts; provided, however, that a party may commence any Proceeding in a court other than a Selected Court solely for the purpose of enforcing an order or judgment issued by one of the Selected Courts; (b) consents to service of process in any Proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, or by recognized international express carrier or delivery service, to their respective addresses referred to in Section 4.1 hereof; provided, however, that nothing herein shall affect the right of any party hereto to serve process in any other manner permitted by law; and (c) TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS AGREEMENT, WHETHER NOW EXISTING

 

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OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AND AGREES THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT AND TO HAVE ALL MATTERS RELATING TO THIS AGREEMENT BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

Section 4.8            Amendments; Waivers.

 

(a)           No provision of this Agreement may be amended or waived unless such amendment or waiver is in writing and signed (i) in the case of an amendment, by each of the parties hereto, and (ii) in the case of a waiver, by each of the parties against whom the waiver is to be effective.

 

(b)           No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

Section 4.9            Assignment.  Neither this Agreement nor any of the rights or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties; provided, however, that the Principal Stockholders may each assign any of its respective rights hereunder to any of its Affiliates. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.

 

[Signature page follows.]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
CACTUS, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
HOLDCO:
    
	
 
    	
 
    
	
 
    	
CACTUS WH   ENTERPRISES, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to Stockholders’ Agreement]

 

 

	
 
    	
CADENT:
    
	
 
    	
 
    
	
 
    	
CADENT ENERGY PARTNERS   II, L.P.:
    
	
 
    	
 
    
	
 
    	
By:
    	
Cadent Energy Partners II GP,   L.P.,
    
	
 
    	
 
    	
its general partner
    
	
 
    	
 
    
	
 
    	
By:
    	
CEP II-GP, LLC, its general   Partner
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to Stockholders’ Agreement]Exhibit
10.5

 

	18 January  2018	Our
    Ref.: R26417B         

 

The
Directors

Tang
Dynasty Investment Group Limited 

Room
503 Fourseas Building

208-212
Nathan Road

Kowloon

Hong
Kong

 

Dear
Sirs,

 

	RE:
    	Various
    properties at Yangshou County, Guilin City, Guangxi Zhuang Autonomous Region, the People’s Republic of China (the “Properties”)

 

In
accordance with your instructions for us to value the property interest held by Tang Dynasty Investment Group Limited (hereinafter
referred to as the “Company”) and its subsidiaries (hereinafter referred to as the “Group”) in the People’s
Republic of China (hereinafter referred to as “the PRC”), we confirm that we have made relevant enquiries and obtained
such further information as we consider necessary of providing you with our opinion of the market value of such property interest
as at 30 September 2017 (“the Valuation Date”) for accounting purposes.

 

Our
valuation is our opinion of the market value of the property interest which we would define as intended to mean “the estimated
amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an
arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without
compulsion”.

 

Market
Value is understood as the value of a property estimated without regard to costs of sale or purchase (or transaction) and without
offset for any associated taxes or potential taxes.

 

In
valuing the property interests, we have adopted the market approach. The market approach provides an indication of value by comparing
the asset with identical or comparable (that is similar) assets for which price information is available.

 

The
valuations have been made on the assumption that the owner sells the property interest on the market in their existing state without
the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would
serve to affect its value.

 

No
allowance has been made in our valuation for any charge, mortgage or amount owing on the Properties nor for any expenses or taxation
which may be incurred in effecting a sale. It is assumed that the Properties is free from encumbrances, restrictions and outgoings
of an onerous nature which could affect its value.

 

We
have not caused searches to be made regarding the title to the Properties. We have been provided with copies of certain extracts
on title documents relating to the Properties by the Group. However, we have not searched the original documents to verify ownership
or to verify the existence of any amendments which do not appear on the copies handed to us.

 

Our
valuation has been made on the assumption that the owner sell the property interest on the open market in their existing states
without the benefit of deferred terms contract, leaseback, joint venture, management agreements or any similar arrangement which
would serve to increase the values of the property interest.

 

    	

 

    	Our
                                         Ref.: R26417B

    

 

We
have inspected the exteriors, and wherever possible, the interior of the Properties. However, no structural survey has been made
and we are therefore unable to report as to whether the Properties are or not free of rot, infestation or any other structural
defects. No tests have been carried out on any of the services.

 

We
have relied on a considerable extent on information provided by you and have accepted advise given to us on such matters as planning
approvals, statutory notices, easements, tenure, occupancy, lettings, site and floor areas, room and facilities schedule and in
the identification of the Properties. No on-site measurement has been taken. All dimensions, measurements and areas are approximations
only.

 

No
allowance has been made in our valuation report for any charges, mortgages or amounts owing on the Properties nor for any expenses
or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the Properties is free from
encumbrances, restrictions and outgoings of any onerous nature which could affect its value.

 

The
valuation report is prepared for the sole use of the addressee and for the stated particular purpose only. The valuation report
is regarded as confidential information which shall be disclosed to and used by the client and his professional advisers only.
We accept no responsibility if this valuation report is used or relied upon by any person other than the client himself.

 

Neither
the whole nor any part of this valuation report or any reference thereto may be included in any published document, circular or
statement nor published in any way without our written approval of the form and context in which it may appear.

 

Our
valuation is prepared in accordance with the HKIS Valuation Standards 2017 published by the Hong Kong Institute of Surveyors (HKIS).

 

Unless
otherwise stated, all monetary amounts stated are in RENMINBI (RMB).

 

    	2

    	Our
                                         Ref.: R26417B

    

 

We
enclose herewith the summary of valuation and the valuation report.

 

	Yours
        faithfully,

        For
        and on behalf of

        GRANT
        SHERMAN APPRAISAL LIMITED
	 
	 	 
	 	 
	Lawrence
        Chan Ka Wah

        MRICS
        MHKIS RPS(GP) MCIREA MHIREA 

        Director
        

        Real
        Estate Group
	 

 

    	3

    	Our
                                         Ref.: R26417B

    

 

SUMMARY
OF VALUATION

 

	 	Property	 	

Market Value

in existing state as at

30 September 2017

	 	 	 	 
	1.	No.28
        Shenshan Road, Yangshou Town,

        Yangshou
        County, Guilin City,

        Guangxi
        Zhuang Autonomous Region,

        the
        PRC
	 	No
    commercial value
	 	 	 	 
	2.	A
        land parcel at Dongling Road, Yangshou Town,

        Yangshou
        County, Guilin City,

        Guangxi
        Zhuang Autonomous Region,

        the
        PRC
	 	RMB
    2,300,000
	 	 	 	 
	3.	No.20
        Chengzhong Road, Yangshou Town,

        Yangshou
        County, Guilin City,

        Guangxi
        Zhuang Autonomous Region,

        the
        PRC
	 	RMB
    9,800,000
	 	Total	 	RMB
    12,100,000

 

    	4

    	Our
                                         Ref.: R26417B

    

 

VALUATION
REPORT

 

	 	Property	 	Description
    and Tenure	 	Particulars
    of occupancy	 	Market
        Value 

        in
        existing state 

        as
        at

        30
        September 2017

        (Subject
        to 

        assumptions
        

        made
        on Note 3)

	 	 	 	 	 	 	 	 
	1.	No.28
        Shenshan Road,

        Yangshou
        Town,

        Yangshou
        County,

        Guilin
        City,

        Guangxi
        Zhuang Autonomous Region,

        the
PRC
	 	The
        Property comprises a parcel of land with a site area of approximately 734.4 sq.m..

         

        The
land use rights of the Property are allocated for residential use.
	 	As
        advised by the Company, the Property was vacant as at the Valuation Date.

         
	 	No
        commercial

        value

         

         

 

Notes:

 

	1.	Pursuant
    to a State-owned Land Use Certificate (Document No.: 朔国用(2015)第500号) dated 10 July 2015,
    the land use rights of the Property are allocated to 阳朔县兴源铅锌矿有限责任公司for
    residential use.
	 	 
	2.	In
                                         the course of our valuation, we have ascribed no commercial value to the Property due
                                         to the land use rights are allocated in
                                         nature, hence they are not entitled to be transferred, leased and mortgaged.

	 	 
	 	However,
                                         for indicative purpose, the market value of the Property as at the Valuation Date is
                                         RMB 1,900,000 by assuming that the Property is legal transferrable in the market, with
                                         a tenure term of 70 years from 10 July 2015(the issuance date of the State-owned Land
                                         Use Certificate stated in Note 1) and a maximum plot ratio of 1.8.

	 	 
	3.	In
    the course of our valuation, we have made the following assumptions:
	 	 
	 	(a)	the
    Property has obtained the relevant title documents and, whether as a whole or on a strata-title basis, is freely transferable
    to any third party (both overseas and domestic) in the open market without payment of any land premiums or any incidental
    costs;
	 	 	 
	 	(b)	all
    land premiums and other costs of ancillary utility services have been settled in full;
	 	 	 
	 	(c)	the
    Property is free from any mortgages, orders and other legal encumbrances which may cause adverse effect to the title of the
    Property;
	 	 	 
	 	(d)	the tenure of the land use
                                         rights of the Property was allocated on 10 July 2015 for a term of 70 years; and

	 	 	 
	 	(e)	We inspected the Property on 11 January 2018
    (the “Inspection Date”) whereas we are instructed to appraise the market value of the Property as at 30 September
    2017. We assumed that the condition, occupancy status and other information of the Property between the Inspection Date and
    Valuation Date are the same. If there are any differences on the Property between Inspection Date and Valuation Date, we reserved
    our rights to amend our valuation opinions.

 

    	5

    	Our
                                         Ref.: R26417B

    

 

VALUATION
REPORT

 

	 	Property	 	Description and Tenure	 	Particulars of occupancy	 	
        Market Value 

        in existing state 

        as at

        30 September 2017

        (Subject to 

        assumptions 

        made on Note 4)

	 	 	 	 	 	 	 	 
	2.	
        A land parcel at Dongling Road,

        Yangshou Town,

        Yangshou County,

        Guilin City,

        Guangxi Zhuang Autonomous Region,

        the PRC

         
	 	
        The Property comprises a parcel of
        land together with a single-storey warehouse completed over 20 years erected thereon.

         

        The Property has a site area and a total gross
        floor area of approximately 4,093.8 sq.m. and 277.2 sq.m. respectively.

         

        The land use rights of the Property are granted
        for a term expiring on 30 October 2053 for industrial use.
	 	
        As advised by the Company,
        the Property was vacant as at the Valuation Date.

         
	 	
        RMB 2,300,000

         

         

 

Notes:

 

	1.	Pursuant to a State-owned Land Use Certificate (Document No.: 朔国用(2000)字第293号) dated 18 December 2003, the land use rights of the Property are allocated to 阳朔县兴源铅锌矿有限责任公司a term expiring on 30 October 2053 for industrial use.
	 	 
	2.	Pursuant to a Building Ownership Certificate (Document No.: 朔房权证阳朔镇字第00003940号) dated 17 October 2002, the ownership of the building of the Property with a gross floor area of approximately 277.2 sq.m. is vested in阳朔县兴源铅锌矿有限责任公司.
	 	 
	3.	According to the information provided by the
    Company, the building erected thereon is built over 20 years.
	 	 
	4.	In the course of our valuation, we have made the following assumptions:
	 	 
	 	(a)	the Property has obtained the relevant title documents and, whether as a whole or on a strata-title basis, is freely transferable to any third party (both overseas and domestic) in the open market without payment of any land premiums or any incidental costs;
	 	 	 
	 	(b)	all land premiums and other costs of ancillary utility services have been settled in full;
	 	 	 
	 	(c)	the Property is free from any mortgages, orders and other legal encumbrances which may cause adverse effect to the title of the Property; and
	 	 	 
	 	(d)	We inspected the Property on 11 January 2018 (the “Inspection Date”) whereas we are instructed to appraise the market value of the Property as at 30 September 2017. We assumed that the condition, occupancy status and other information of the Property between the Inspection Date and Valuation Date are the same. If there are any differences on the Property between Inspection Date and Valuation Date, we reserved our rights to amend our valuation opinions.

 

    	6

    	Our
                                         Ref.: R26417B

    

 

VALUATION
REPORT

 

	 	Property	 	Description
    and Tenure	 	Particulars
    of occupancy	 	Market
        Value 

        in
        existing state 

        as
        at

        30
        September 2017

        (Subject
        to 

        assumptions
        

        made
        on Note 4)

	 	 	 	 	 	 	 	 
	3.	No.20
        Chengzhong Road,

        Yangshou
        Town,

        Yangshou
        County,

        Guilin
        City,

        Guangxi
        Zhuang Autonomous Region,

        the
        PRC

         
	 	The
                                         Property comprises a parcel of land together with a 3-storey commercial building completed
                                         in over 20 years erected thereon.

         

        The
        Property has a site area and a total gross floor area of approximately 1,119.5 sq.m. and 471.52 sq.m. respectively.

         

        The
land use rights of the Property are granted for a term expiring on 28 March 2049 for industrial use.
	 	As
        advised by the Company, the Property was vacant as at the Valuation Date.

         
	 	RMB
                                         9,800,000

         

         

 

Notes:

 

	1.	Pursuant
    to a State-owned Land Use Certificate (Document No.: 朔国用(2004)字第001号), the
    land use rights of the Property are allocated to 阳朔县兴源铅锌矿有限责任公司a
    term expiring on 30 October 2053 for industrial use.
	 	 
	2.	Pursuant
    to a Building Ownership Certificate (Document No.: 朔房权证阳朔字第0003941号),
    the ownership of the building of the Property with a gross floor area of approximately 471.52 sq.m. is vested in阳朔县兴源铅锌矿有限责任公司.
	 	 
	3.	According
    to the information provided by the Company, the building erected thereon is built over 20 years.
	 	 
	4.	In
    the course of our valuation, we have made the following assumptions:
	 	 
	 	(a)
    	the
    Property has obtained the relevant title documents and, whether as a whole or on a strata-title basis, is freely transferable
    to any third party (both overseas and domestic) in the open market without payment of any land premiums or any incidental
    costs;
	 	 	 
	 	(b)	all
    land premiums and other costs of ancillary utility services have been settled in full;
	 	 	 
	 	(c)	the
    Property is free from any mortgages, orders and other legal encumbrances which may cause adverse effect to the title of the
    Property; and
	 	 	 
	 	(d)	We
    inspected the Property on 11 January 2018 (the “Inspection Date”) whereas we are instructed to appraise the market
    value of the Property as at 30 September 2017. We assumed that the condition, occupancy status and other information
    of the Property between the Inspection Date and Valuation Date are the same. If there are any differences on the Property
    between Inspection Date and Valuation Date, we reserved our rights to amend our valuation opinions.

 

    	7

    	

    

 

NORMAL
SERVICE CONDITIONS

 

The
services provided by Grant Sherman Appraisal Limited will be performed in accordance with professional standards. We assume, without
independent verification, the accuracy of all data provided to us. Our valuation report is to be used for the specific purposes
stated herein and any other use is invalid. No one should rely on our valuation report as a substitute for their own due diligence.
No reference to our name or our valuation report, in whole or in part, in any document you prepare or distribute to third parties
may be made without our written consent. All files, workpapers or documents developed by us during the course of the engagement
will be our property. We will retain this data for at least five years.

 

You
agree to indemnify and hold us harmless against and from any and all losses, claims, actions, damages, expenses, or liabilities,
including reasonable attorneys’ fees, to which we may become subject in connection with this engagement. You will not be
liable for our negligence. In the event we are subject to any liability in connection with this engagement, such liability will
be limited to the amount of fees we received for this engagement.

 

We
reserve the right to include your company name in our client list, but we will maintain the confidentiality of all conversations,
documents provided to us, and the contents of our valuation report, subject to legal or administrative process or proceedings.

 

    	

 

    	

    

 

 

 

 

-
END OF VALUATION REPORT -

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