Document:

fs1a2ex10ix_chinateletech.htm

Exhibit 10.9

China Teletech Limited

 

 

 

and

 

 

 

Liu Dong

 

 

 

 

Call Option Agreement

 

 

  

1

  

 

Call Option Agreement

This agreement is made on the _____________day of _____________ in China

BETWEEN

	
(1)  

	
China Teletech Limited, a BVI company with register address in P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands (“CTL”);

	
(2) 

	
Mr. Liu Dong (Holder of the PRC passport number G28108652), a PRC national residing at RoomA,20/F, International Trade Residential and commercial Building, Nanhu Road, Shenzhen China 518002 (Mr. Liu)

(In the following text, either party of CTL or Mr. Liu   will be called as “One Party”, and both parties will be called as “Both Parties”)

 

Whereas:

	
(1)

	
Mr. Liu, the shareholder of the Chinese operating company, hold 51% equity interest in the Chinese company. See details in Exhibit 1.

	
(2)

	
Mr. Liu   has the intention to transfer part or all of his equity interest in the Chinese company to CTL without violating the regulations of PRC law, and CTL has the intention to accept the transfer.

	
(3)

	
In order to implement the transfer of the equity interest above, Mr. Liu agree to give an unconditional, irrevocable and exclusive call option to purchase this equity interest.

	
(4)

	
The arrangements under this agreement have been approved by the shareholder of the Chinese operating company, and Mr. Liu has given up the priority to purchase the company stock.

The two parties enter into this contract through the principle of willingness and equality. The two parties agree as follow:

	
1.

	
Definitions

	
1.1

	
The following terms shall have the following meanings, unless there are additional provisions in this agreement:

	
“This agreement”

	
Means the agreement and its exhibits, attachments, amendments and abalienating (if any).

	 	 
	
“Chinese operating company”

	
Means “Shenzhen Rongxin Investment Company Limited”, a company incorporated in China Shenzhen with good standing (“the compnay”). It locates at  RoomA,20/F, International Trade Residential and commercial Building, Nanhu Road, Shenzhen China, with register number of 440301102999655..

 

  

2

  

 

	
“Register capital”

	
On the date of this agreement, The register capital of the Chinese operating company above is RMB10,000,000.

	 	 
	
“share transfer”

	
According to Section3.2, When CTL execute the call option(“option execution”), CTL has right to ask Mr. Liu  transfer certain amount of the Chinese operating company’s shares to CTL or its designee. The share amounts (partial or the whole shares) will be determined by CTL according to the terms of this agreement and China law.

	 	 
	
“price of transferred shares”

	
When CTL execute its option, CTL or its designee have to pay the price of transferred shares to Mr. Liu  according to the setting standard of price in Section 4.

	 	 
	
“Business certificates”

	
The Chinese operating company is running business in good standing, and has obtained all permitted certificates, including certificate of incorporation and tax registration.

	 	 
	
“Assets”

	
All materiality or immateriality asserts owned by the Chinese operating company, including but not limited to any  realty, movable property, goodwill, trade mark, and other intellectual property right including copyright, patent, domain name, usufruct of software, etc.

	 	 
	
“Material agreemets”

	
Any material agreement that will affect the business or assets of the Chinese operating company, including but not limited to the agreements may be singed between the company and CTL in future.

	 	 
	
“Pledge agreement”

	
The Pledge agreement signed by CTL and Mr. Liu in 2009 that Mr. Liu pledges 51% equity interest of the Chinese operating company to CTL.

	 	 
	
“Loan agreement”

	
The agreement signed between CTL and Mr. Liu in 2009, in connection with Mr. Liu borrows RMB 5,100,000 from CTL to set up and take 51% equity of the Chinese Operating Company.

	 	 

 

  

3

  

 

	
“Business date”

	
Except for Saturday, the normal working days of Chinese banks

	 	 
	
“China”

	
People’s Republic of China. Particular in this agreement, it does not include Hong Kong, Macau and Taiwan.

	 	 
	
“Hong Kong”

	
Hong Kong Special Administrative Region;

	 	 
	
“RMB”

	
The legal Currency used in China

	 	 
	
“HKD”

	
The legal Currency used in Hong Kong

	 	 
	
“USD”

	
The legal Currency used in the United States.

	 	 
	
“Chinese law”

	
Means the effective Chinese constitution, law, administrative law, local regulation, rules from ministries and commissions of State Department, local government rules and documents with legal force.(including explanations made by the entitled agencies)

	 	 
	
“%”

	
Percentage.

	
1.2  

	
Conditions mentioned in this agreement are the terms of this agreement; Sections mentioned in this agreement means the sections appeared in this agreement.

	
1.3  

	
The singular words in this agreement include plural words, vice versa. The words with gender or neutral include all gender. The mention to “person”, “third party”, “third person ”shall include natural person, a corporate body or non-corporate entity (other organizations), including government agents.

	
1.4  

	
In the agreement, unless otherwise stated, “day” means calendar day, which does not exclusive of compulsory holiday, Saturday and Sunday. One year is 365 days, or 366 days for leap year.

	
1.5  

	
Unless otherwise stated, “behavior” means doing something or not doing something

 

	
1.6  

	
Titles or index of the agreement is only used for easy reading, not effect on the explanation of the document.

 

	
1.7  

	
If any terms of law are quoted, it includes the terms in the law and its revision, amendment, or extended explanation if any.

 

  

4

  

 

	
2.  

	
The grant of call option.

	
2.1 

	
Mr. Liu hereby irrepealably and unconditionally grants an exclusive call option to CTL. According to this call option, CTL or its designees has the right to accept the share transfer from Mr. Liu at a price and method set in this agreement within the terms of this agreement. The premise is that CTL is allowed to be the holder of the transferred shares according to Chinese law.

 

	
3.  

	
Execution of the option.

 

	
3.1  

	
CTL has absolutely direction to decide the time, manner and times to execute the option on the premise that CTL is allowed to be the holder of the transferred shares according to Chinese law.

 

	
3.2  

	
If the current China law allows CTL and/or designee to hold all the shares of the Chinese operating company, CTL can execute all the call options at one time, and CTL and/or designee receives all the transferred shares from Mr. Liu  at one time; If the current China law only allows CTL and/or designee to hold part of the shares of the Chinese operating company, CTL has the right to decide the amount of the transferred shares, which should not be over the limited percentage of the company stocks. On the latter situation, CTL can increase its holding shares according to the newly laws in China. It can execute the option many times so that it can acquire all the shares of the Chinese company gradually.

 

	
3.3  

	
Each time when CTL execute the option, CTL has the right to decide the percentage of the shares to be transferred from Mr. Liu to CTL and/or its designee. Mr. Liu shall transfer such shares according to CTL’s requirements to CTL and/or its designee. And CTL and/or its designee should pay Mr. Liu for the shares transferred each time.

 

	
3.4  

	
Each time when CTL execute the option, CTL and/or its designee can be the transferee of the shares.

 

	
3.5  

	
Each time when CTL decide to execute the option, its should send a notice of the execution of option (“Execution  notice”, an example is attached as Exhibit 1) to Mr. Liu. Mr. Liu should transfer all the shares described in the notice to CTL and/or its designee at once, according to Section 3.6 in this agreement.

 

	
3.6  

	
Mr. Liu hereby makes warrants that it will do the following upon receipt of the Execution notice:

 

	
(1)  

	
Convene a shareholder meeting, reach resolutions in the meeting, and take any necessary actions, including agreements made by the shareholders of the Chinese company that they give up any priority of purchasing the company’s shares, and agree to transfer the shares to CTL and/or its designees according to the instructions to the execution notice.

 

	
(2)  

	
Mr. Liu should immediately sign a share transfer agreement with CTL and/or its designees to transfer the shares in the amount described in the execution notice to CTL and/or its designees.

 

	
(3)  

	
 Mr. Liu  should provide necessary support and cooperation (including provide and sign other relating law documents, perform all government approval, registration, filing procedures and bear all the relevant obligations) to enable CTL and/or its designees to obtain the transferred shares without legal flaws.

 

  

5

  

 

	
3.7  

	
In order to actualize the transactions in this agreement, Mr. Liu hereby ensures that any agreements signed in future shall not include any conditions or terms against the regulations in this agreement, or conditions which are restricted by this agreement.

 

	
4.  

	
Share Price and payments.

	
4.1

	
In this agreement, CTL purchase shares of the Chinese operating company owned by Mr. Liu at the price of either calculation below:

 

	
  

	
(a)

	
If the valuation of company asset is unnecessary according to China law, the price of total share is RMB 5,100,000.

 

	
  

	
(b)

	
If the valuation of company asset is necessary according to China law, the price of total share is 80% of the total valuation price of company asset.

	
  

	
If CTL only request to purchase partial shares of the company, the calculation of the shares is: 80% of corresponding evaluation price of the request shares.

	
4.2

	
On the premise of no violations of China law, CTL has right to require that the transferee bear the Repayment obligations of Mr. Liu in this agreement by the corresponding proportion of the transferred ownership; or release the corresponding proportion of the loan under this agreement to offset the corresponding payment to Mr. Liu of the transferred ownership. Mr. Liu will unconditionally grants this arrangements by CTL.

	
5.

	
Representations and warrants.

	
5.1

	
Mr. Liu hereby makes representations and warrants to CTL as follows:

 

	
  

	
(a)

	
Mr. Liu has legal right and capacity to execute and fulfill this agreement, and other documents concerned by the transaction mentioned in this agreement. It has legal right and capacity to bear obligation and liabilities according to this agreement and it can independently act as a litigation participants.

	
  

	
(b)

	
This agreement shall be legally and properly executed, and has legal effect, and can be enforced according to the terms of this agreement.

 

	
  

	
(c)

	
The registered capital has been fully paid by shareholders of the Chinese operating company. The tax fess and expense arouse by the consideration of the share transfer have been fully paid by Mr. Liu.

 

	
  

	
(d)

	
It is the recorded legal owner of the transferred shares. Except the rights stipulated in this agreement and the pledge agreement, there are no trust, custody, lien, pledge, claim rights and other restrictions on security interests and rights from third parties on the shares. According to this agreement, once CTL and/or its designees execute the option, they can obtain Good, complete, not with any trust, custody, lien, pledge, claim rights and other security interest or a third party’s ownership restrictions on the transferred shares.

 

  

6

  

 

	
  

	
(e)

	
The execution and implement of this agreement have No violations or conflicts with other agreement which Mr. Liu is a party.

 

	
  

	
(f)

	
There is not any law suit or legal request by any governments, court, or arbitral tribunal against Mr. Liu , its property or the pledged shares, as known by Mr. Liu, which will be significant effect on its ability to fulfill its guaranteed obligations as defined in this Agreement.

 

	
  

	
(g)

	
The Chinese Operating Company is a limited liability company, legally set up as according to China law.  It is a legal person, which can take actions legally independent and can act as a litigation participant.

 

	
  

	
(h)

	
There is not any law suit or legal request by any governments, court, or arbitral tribunal against Mr. Liu, its property or the pledged shares, as known by Mr. Liu, which will be significant effect on its ability to fulfill its guaranteed obligations as defined in this Agreement.

 

	
  

	
(i)

	
The Chinese operating company runs business in accordance with law and there is no violation of the rules of Industry and commerce, taxation, quality and technical supervision, labor and social security and regulations of other government departments. There is no dispute caused by breaching of contracts. 

 

	
  

	
(j)

	
The Chinese operating company has all the necessary business licenses, permission or approval to operate. The Chinese operating company has full rights and qualifications to operate related business in China within the business scope of the company.

 

	
5.2

	
Mr. Liu makes guarantees to CTL that the statements and warrants above are true, complete and accurate, without any Omission, misleading or incorrect as of the effective date of this agreement.

	
6.

	
Special Commitments of Mr. Liu.

 

	
6.1

	
In order to maintain and increase the equity value of the company, Mr. Liu hereby makes commitments as follow:

 

	
  

	
(a)

	
Mr. Liu must adopt all necessary measures to enable the company to obtain all business licenses, approvals and permits in time and let them continue to be effective within the terms of this agreement.

 

	
  

	
(b)

	
Within the terms of this agreement and without written agreements from CTL,

	
  

	
(i)

	
Mr. Liu shall not transfer its shares or set a trust, custody, any security interest or other rights of third parties on its shares.

 

	
(ii)

	
Mr. Liu shall not point out, or associate with or agree with any shareholders of record to point out a proposal to increase or decrease the register capital of the Chinese operating company.

 

	
(iii)

	
Mr. Liu shall not handle or cause management of the Chinese company to handle any assets of the company.

 

	
(iv)

	
Mr. Liu shall not terminate or cause the management to terminate any material agreements made by the Chinese operating company, or enter into any agreements which has conflicts with the current material agreements.

 

  

7

  

 

	
(v)

	
Mr. Liu shall not appoint or replace of any executing director or members of the board, supervisors or other management members of the Chinese operating company.

 

	
(vi)

	
Mr. Liu shall not cause the company to declare the distribution or actual release of any Distributable profits, dividends or share interest.

 

	
(vii)

	
Mr. Liu shall not propose to amend or cause the company’s management to amend the Chinese operating company’s Articles of Association.

 

	
(viii)

	
Mr. Liu commits to CTL that the Chinese operating company will not lend or borrow any money, provide any warrants, or bear any actual liabilities out of the scope of normal business activities.

 

	
(ix)

	
Mr. Liu shall not propose, associate with any other shareholder of record to propose, or agree with any other shareholder of record to change the Percentage of shareholders investments.

 

	
  

	
(c)

	
Mr. Liu will ensure the good standing of the Chinese operating company, and ensures the company will not to be terminated, merged, devised, clear or dissolved.

 

	
  

	
(d)

	
Within the terms of this agreement, Mr. Liu shall try its best to develop the company’s business to ensure the company’s legal and compliant operation. And it will not carry any action may cause harm to the company’s assets, goodwill or the validity of business licenses.

 

	
  

	
(e)

	
After execution of this agreement, Mr. Liu(“Consigner”) will sign an authorization letter according to CTL’s requirements, to authorize the designee of CTL(“Assignee”) to be the representative of CTL on the shareholder meetings of the Chinese operating company to execute all the rights of the company’s shareholders,  including voting rights. The premise of the authorization is that the designees are Chinese and CTL agree to make authorization and agree with the content of the authorization. Once CTL issue a written notice to dismiss and replace the designees, Mr. Liu should withdrawal the entrust made to the designee upon receipt of such written notice, and designate the new designees appointed by CTL to execute all the rights of the company’s shareholders. Mr. Liu commits it will not withdraw the authorization to the designee unilaterally within the terms of this agreement.

 

	
  

	
(f)

	
When CTL execute its option, Mr. Liu shall try its best to actualize CTL’s options right, including but not limited to rights of relating law (but mandatory rules of China law or conditions of this agreement are exceptions).

 

	
7.

	
Confidential.

	
7.1

	
Both parties shall keep confidential of the contents of this agreement, and shall not reveal any content of this agreement to any other persons or release any content of this agreement by any form, except that (1) Any disclosures of the regulations of applicable law or  stock exchange institutions; (2) the disclosed information is public available and its disclosure is not result from the violations of the breaker of this agreement; (3) any disclosures made to any party’s shareholder, legal consultant, accountants, financial consultant or other professional consultant; (4) disclosures granted by any party to the other party of this agreement.

 

	
7.2

	
The regulations of this section shall not be affected by the pause or termination of the agreement.

 

  

8

  

 

	
8.

	
Events of defaults

	
8.1

	
Except the breach of the stipulations, representation, warranty or promise made in this agreement, the following conditions will also constitute the defaults of Mr. Liu:

 

	
  

	
(a)

	
Mr. Liu’s external Loans, guarantees, compensation, commitments or other redemption duties: (1) Early repayment or performance because of default; or (2) Not to repay or discharge on track on the expired date. These will result in CTL’s consideration that Mr. Liu’s abilities have been badly affected or threatened.

 

	
  

	
(b)

	
Shanghai fails to repay momentous loan aroused by Infringement, unjust enrichment, management.

 

	
  

	
(c)

	
Mr. Liu fails to perform the obligation because the transactions and arrangements in this agreement become illegal according to the promulgations and amendments in China law.

 

	
  

	
(d)

	
If the required Consent, permission, approval, registration or authorization from the government to perform this agreement was withdrawn, revoked, suspended, invalid or changed substantively;

 

	
  

	
(e)

	
Adverse changes in the assets owned by Mr. Liu makes CTL think that the Mr. Liu’s abilities have been badly affected or threatened.

 

	
  

	
(f)

	
Mr. Liu is filed for bankruptcy or initiates to apply for bankruptcy, or a serious threat for bankruptcy exists in bankruptcy;

 

	
  

	
(g)

	
The Chinese operating company is filed for bankruptcy, dissolution, separation, reorganization, liquidation, business license is revoked, or it initiates to apply for bankruptcy, dissolution, separation, reorganization, liquidation, or apply for cancellation of business registration, or serious threat for these events exist in the company;

 

	
  

	
(h)

	
The required approval, permit, registration or record to operate businesses are revoked, or the legal qualifications to be engaged in business within the scope of its operations are severely restricted or impaired.

 

	
8.2

	
Any party (the "breaker”) breach the obligations of this agreement with the premise that it doesn’t affect other rights enjoyed by another party(the “keeper”), the breaker should take responsibilities of the liabilities of breach, including but not limited to actual performance, adoption of remedial measures and redemption of damages.

 

	
8.3

	
If Mr. Liu breaches any obligations under this Agreement the situation, it shall take responsibilities of the legal liabilities of the pledge agreement signed with CTL, except the legal liabilities set in Section 8.2 and other agreements (if any).

 

	
8.4

	
The termination or release of this agreement shall neither affect any party’s liabilities of this agreement before its termination or release, nor any party’s right to purse the responsibilities of breach.

	
9.

	
Validation, expired date and termination.

	
9.1

	
This agreement shall be valid upon the executions by both Parties or authorized representatives by both sides on the written day above.

 

  

9

  

 

	
9.2

	
Unless otherwise stated, this agreement will be terminated automatically when all the company shares have been transferred to CTL and/or its designees according to the terms of this agreement, and the requirements of China law.

	
9.3  

	
This agreement will be terminated before the expired date once the following happens:

 

	
  

	
(a)

	
Mr. Liu fails to transfer the shares to CTL and/or its designees according to Section 4 because of the limitation of China law, and CTL also inform Mr. Liu the termination by written notice.

 

	
  

	
(b)

	
When CTL executes the rights of auction sale, sale-off or transfer of shares under the pledge agreement, which lead to a situation that Mr. Liu is no longer a beneficial owner of any company shares, and Mr. Liu issues a written notice of the termination.

	
10.

	
Tax and fees.

 

	
10.1

	
Both parties shall bear its own legal, financial, commercial or other expenses or cost related to negotiate, draft, or finalize this Agreement/.

 

	
10.2

	
The taxes or charges according to the China law resulting from this Agreement shall be borne by the party as according to the China Law.

	
11.

	
Notice.

	
11.1

	
Notices sent by the parties to perform the rights and obligations under this Agreement shall be in writing. If sent by personal delivery, EMS, or prepaid registered letter, such a notice shall be sent to the receiver’s address as follows or the receiver shall inform the sender other address in written in five days dance; if sent by t facsimile, such a notice shall be faxed to the number as follows:

	
  

	
If to China Telecom Limited

	
  

	
Address: 20A Guomao Commercial Building 3009 Nanhu Road, Luohu District, Shenzhen, China.

	
  

	
If to Mr. Liu Dong

	
  

	
Address: RoomA,20/F, International Trade Residential and commercial Building, Nanhu Road, Shenzhen China 518002

	
11.2

	
To avoid any mis-understanding, if sent by personal delivery, such a notice shall be deemed served upon actual delivery; if sent by telex or facsimile, such a notice shall be deemed served at the time of transmission.  However, the original copy need to be sent out by personal delivery after that. If sent by EMS or prepaid Registered letter, such a notice shall be deemed served after 48 hours of sending, or 10 days if is oversea’s mail.  To prove the effectiveness of sending, address or dispatching on the notice need to be shown.

 

  

10

  

 

	
12.

	Transferring.

 

	
12.1

	
Mr. Liu certifies that:  CTL has the right to transfer all or partial of its rights or obligations as defined in this Agreement without agreed by Mr. Liu.  CTL only need to inform Mr. Liu of the transferring during a reasonable period after transferring.

	
12.2

	
Without written agreement by CTL, Mr. Liu can not transfer the rights or obligations as defined in this Agreement.

 

	13.	Governing laws

 

	
13.1

	
This agreement shall be governed by and construed in all respects in accordance with the laws of PRC.

 

	
13.2

	
Both Parties agrees without redemption that: if any disputes in connection with the Agreement, both parties need to negotiate with each to resolve; If the disputes can not be negotiated, the disputes need to be summit to Chinese International Economic Trading Arbitration Committee, Southern China Branch, in accordance with effective International arbitration regulations.  This arbitration result is final one which is binding to both parties.  It can be executed court or other execution organization under governing.

	
14.  

	
General regulations.

	
14.1

	
CTL and Mr. Liu agree to complete, sign, submit and fulfill and ensure other related parties to complete, sign, submit and fulfill further actions, signed documents and provided data, to facilitate this Agreement under expected arrangement.

	
14.2

	
Timing is an important factor of this Agreement.

 

	
14.3

	
Any content in this Agreement shall not be considered that both parties are in a partnership or any of one party is another party’s agent, any one party is not granted the rights to set obligation against the other party.

 

	
14.4

	
Without written consent by both parties regarding this Agreement, any revision, changes or adding of rights or obligations of the terms in this Agreement, including but not limit to the changes, revision or adding according to the government’s approval and revision advice, are considered as invalid.

 

	
14.5

	
This Agreement is the sole and complete agreement of both Parties for the transaction as defined in this Agreement, which will replace any commitments, contracts, arrangements, statements, willingness, presentations or understandings before signing off this Agreement.

	
14.6

	
Any one party grants to third party of ceasing to execute, forgiving or not able to execute certain rights will not decrease, waive off or limit the rights as defined in this Agreement and the right to pursue the third party.  The Keeper waive off the breaking obligation of the Breaker, shall not be considered as waiving off final compensation right against the Breaker.  If partially or individually executing any rights in accordance with this Agreement, It will not take any effect of this Party to further execute the rights or execute other rights.

 

  

11

  

 

	
14.7

	
The rights, benefits and compensation request as defined in this Agreement can be accumulated and added.  If any one party executes the rights, benefits or compensation requests as defined in this Agreement, it can also enjoy, execute or claim for any rights, rescuing, compensation request as granted by laws.

 

	
14.8

	
If under certain circumstances, any terms of this Agreement is announced to be invalid by any court, arbitration organization, or other organizations with governing right, where it is permitted under laws, these terms will be treated to be deleted in this Agreement.  However, even though, the validation, legality, and compulsory execution of other terms in this Agreement will not change and will be still valid.

 

	
14.9

	
This Agreement is still applicable to the successors, inheritors or transferees of each party, regardless of changing of name, organization forms, or in-charging governor of each party or its successors, inheritors or transferees.

 

	
14.10

	
This Agreement is written in Chinese with 3 copies at equal legal effect.  Both parties take one copy each and another for Chinese Operating Company.

 

	
14.11

	
The two parties can sign this agreement together or separately (only applicable on the occasion of executing through fax or mailing), and signed agreement will be treated valid by either way. This agreement shall take effective up executions of the two parties or their authorized representatives. The agreement signed by the two parties separately will constitute one entire instrument.

 

 

(No content following)

  

12

  

 

Signature page

Each Party or its representative sign off this Agreement as of the date set out in first page of this Agreement:

Zhao Yuan

On behalf of China Teletech Limited

Zhao Yuan /s/

Liu Dong

Liu Dong /s/

  

13

  

 

Exhibit 1

	Company name:	Shenzhen Rongxin Investment Company Limited
	 	 
	Registered capital: 	RMB10,000,000

 

                                           

	Shareholder: 	Name	paid capital amount	percentage of equity interest
	 	 	 	 
	 	Liu Dong	RMB 5,100,000	51%
	 	 	 	 
	 	Zhao Yuan	 RMB 4,900,000	49%
	 	 	 	 
	 	
Total

	
RMB 10,000,000

	
100%

 

 

14fs1a2ex10x_chinateletech.htm

Exhibit 10.10

 

Share Pledge Agreement

 

This agreement is made on the _____________day of _____________ in China

BETWEEN

 (1)           China Teletech Limited (“CTL”) is a company registered in British Virgin Island, with its Registration address of P.O.Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

 (2) Zhao Yuan (Holder of the PRC passport number G34862025), a PRC national residing at 904, Block C, 149 Fengyuan Road, Guangzhou, China, 510130(Mr. Zhao)

 (In the following text, either party of CTL or Shanghai Classic will be called as “One Party”, and both parties will be called as “Both Parties”.

Whereas

 

	
  

	(1)Mr. Zhao is a registered shareholder of a Chinese operating company. As of this Agreement date, its investment and percentage of ownership in this Chinese operating company as set out in Exhibit I.

 

	
  

	
(2) Pursuant to the terms of the loan Agreement signed between CTL and Mr. Zhao, Mr. Zhao borrows a loan of RMB 4,900,000 from CTL.

 

	
  

	(3) Pursuant to the terms of the call option agreement signed between Mr. Zhao and China Teletech Limited, Mr. Zhao shall transfer all or partial of its equity investment in the Chinese operation company, as according to the instruction by CTL, to CTL or any its assigned parties.

 

	
  

	
 (4) As a guarantee of the obligation to repay its debt for Mr. Zhao, Mr. Zhao is willing to pledge all its shares equity in the Chinese operating company to CTL, and grant CTL as its first pledge beneficiary.  CTL is also willing to accept the shares pledge and enjoy the first pledge beneficiary of such pledged shares.

 

	
  

	
 (5) The pledging of Mr. Zhao‘s all equity shares of the Chinese Operating company has been approved by Chinese operating company’s Registered shareholders.  In addition, Mr. Zhaoabandons its priority right to purchase these pledged shares.

Under the basis of fair, equality, Both Parties agreed as follows:

1           Definition

2           Unless otherwise stated, the following words contained in the whole agreement will be explained as set out in the table below:

	
  

	
“

This Agreement

This agreement and its appendixes, tables, and other amendment or transferring if any;

 

Chinese Operating Company (“the company”)                                                                                     

Guangzhou Yueshen Network Technology Co., Ltd., a company Registered in Guangzhou, China, with its business license number of 007709, and adderss of Ground Floor, 139 Yingyuan Road, Yuexiu District.  Its fundamental materials are set out in Exhibit I.

Contact Obligation                                           

The obligations of Mr. Zhaoas stipulated in the Loan Agreement with China Teletech Limited and as stipulated in the Pledge Agreement with China Teletech Limited.

 

  

1

  

 

Repayment of liability

The damages to CTL which is resulting from Mr. Zhao’s defaults, including direct, indirect, growing damages and any assessable loss on potential income, and the expenses incurred by CTL to obligate Mr. Zhao to fulfill its obligation.  The above said amount will be determined by CTL, as permitted by China Laws.

Repayment of Guaranteed Liabilities:

Repayment liability or fulfill the obligations according to the agreement by Shanghai Classic

Transaction Agreements: The Loan Agreement and Warrant Agreement

Defaults

Any defaults of Shanghai Classic in connection with the Loan Agreement and Warrant Agreement or This Agreement.

Pledged Shares

The shares legally owned by Mr. Zhao, and pledged to CTL according to This Agreement, as its guarantee to fulfill its obligations and repayment of debts, and the additional investment to the investee according to the term 2.6 and 2.7 of This Agreement or dividend, bonus and interest of these shares.

CTL Loan Agreement

 

The agreement signed between CTL and Mr. Zhao in 2009, in connection with Mr. Zhao borrows RMB 4,900,000 from CTL to set up and take 49% equity of Chinese Operating Company.

 

CTL Call Option Agreement

 

The agreement signed between CTL and Mr. Zhao in 2009, regarding Mr. Zhao transferring all or partial of its equity interest in Chinese Operating Company, to CTL or other parties assigned by CTL, as requested by CTL.

 

	
Business day:

	
Except for Saturday, the normal working days of Chinese banks

 

	
China: 

	
People’s Republic of China. Particular in this agreement, it does not include Hong Kong, Macau and Taiwan.

	
Hong Kong:

	
Hong Kong Special Administrative Region

	
RMB:

	
Dominant currency in China

	
Hk$:

	
Dominant currency in Hong Kong

	
US$:

	
Dominant currency in United States

	
China Laws:

	
The laws, regulations, rules other ruling documents stipulated by the Administration departments of China or local governments of China.

	
%

	
Percentage

1           All the terms or sub-terms mentioned are the terms and sub-terms in this agreement.

2           In this agreement, singular word may include plural meaning, vise versa; If any word with gender meaning, it includes all genders; “person”, “third party” include natural person, legal person, organization and government.

3           In the agreement, unless otherwise stated, “day” means calendar day, which does not exclusive of compulsory holiday, Saturday and Sunday.  One year is 365 days, or 366 days for leap year.

4           Unless otherwise stated, “behavior” means doing something or not doing something

5           Titles or index of the agreement is only used for easy reading, not effect on the explanation of the document

6           If any terms of law is quoted, it includes the terms in the law and its revision, amendment, or extended explanation if any.

2           Shares pledge

 

2.1        Mr. Zhaoagrees to pledge its pledged shares, which is legally owned and with disposition right, to CTL, according to the terms of this Agreement, as a guarantee of fulfill its obligation and repay its liabilities.

2.2        The photocopy of shareholders list of Chinese Operating Company as of the date of signing off this Agreement, and the photocopy of certificate of investment by Mr. Zhao are attached as the Appendix I of this Agreement.

2.3        Within the validation of this Agreement, Unless due to CTL’s fault resulting in the reducing in the value of the pledged shares, CTL should not take any responsibility of the changes of the value on the pledged shares, thus, Mr. Zhao shall not request the compensation from CTL.

2.4         Under the presumption that not conflicting the Term 2.3, if any possibility of reducing the value of the pledged shares which may cause damage to CTL, CTL can dispose the pledged shares on behalf of Mr. Liu , and then negotiate with Mr. Zhao to settle the guaranteed liabilities by the disposed amount.  All the cost related will be borne by CTL.

2.5        If any defaults, CTL has the right to dispose the pledged shares as according to the Term 3 of this Agreement.

2.6        Upon agreed by CTL in written in advance, Mr. Zhao can invest into Chinese Operating Company by cash or via capital surplus or retained earnings. However, the increment capital in the Chinese Operating Company by Mr. Zhao is also included in the pledged shares and subject to the terms of this Agreement.

2.7        Upon agreed by CTL in written in advance, Mr. Zhao can get the dividend, bonus or other statutory interest of the pledged shares.  The dividend, bonus or other statutory interest of the pledged shares need to deposit into the bank account assigned by CTL, which will be used to settle the guaranteed liabilities in priority.

2.8        CTL has the right to dispose all or partial of the pledged shares according to this Agreement if any defaults.

 

  

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3          Disposition of pledged shares

 

3.1       Mr.   and CTL agreed that if any defaults, CTL can , after informing Mr. Zhao  in written, take actions to recover its economic damage in case of defaults according to the China law, the Transaction Agreement and this Agreement.  Such actions will include but not limit to auction or disposition the pledged shares to recover the liability in priority.

3.2       CTL has the right to assign, in written, its attorney or other representative to execute part or all of the rights as mentioned above.  Mr. Zhao and Chinese Operating Company as controlled by Mr. Zhao shall not object to it.

3.3        The reasonable expenses incurred by CTL to execute the above rights can be deducted from the proceeds by the execution of CTL’s right.

3.4        The proceeds from the execution of CTL’s right will be arranged according to following order.

First of all, pay the expenses, including the compensation of the attorney, incurred by CTL in order to execute CTL’s rights.

Second, pay the taxes of disposition of the pledged shares

Third, repay the guaranteed liability

After deducting of above amount, CTL shall return the balance to Mr. Zhao if any, as according to China law.

3.5       CTL can take actions simultaneously or one by one, to recover any of its economic compensation.  CTL is not necessary to execute other compensation methods before disposition of pledged shares.

4          Release of pledge

 

After Mr. Zhao fulfills its obligation in effectiveness and in actuality, CTL shall release the pledge of the pledged shares as requested by Mr. Zhao .  Both parties shall take actions to release the pledge in the shareholders’ list of Chinese Operating Company or applying for the releasing the Registration of the pledge in local government according to the laws or regulations, if any.  Such reasonable expenses related to release of pledge will be borne by CTL.

5          Rescuing measures

o        5.1

5.1       Under the presumption that it is not conflicted to this Agreements, if any changes in Registration process due to revision, new rules, new explanation, new application of China laws, which resulted in the illegalness of CTL to execute its rights, keep pledge right, or dispose of the pledged shares because of the conflicts of the laws, Mr. Zhao shall take actions as according to the CTL’s reasonable request in written, including but not limit to sign off agreements or other documents, to

o  (a) make this Agreement valid

o       (b) keep and satisfy the guarantee and its validation, as set or intentionally set by this Agreement; and

o       (c)Facilitate the disposition of pledged shares as according to this Agreement.

 

6           Representation and warranties of Mr. Zhao

 

o         6.1  Mr. Zhao represent and warranty as follows:

o       (a) Mr. Zhao is a legal entity which enjoys or takes full civil rights and obligations.  It has right to sign off this Agreement, it can fulfill the terms in this Agreement and can take the obligations of the Agreement.

 

  

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o        (b) All documents, report, files and information provided by Mr. Zhao to CTL prior to validation of this Agreement, is true , complete and correct before signing off this Agreement.

o        (c) All documents, report, files and information provided by Mr. Zhao to CTL after validation of this Agreement, is true , complete and correct when provided.

o        (d) As of the validation date of this Agreement, Mr. Zhao is the sole owner of the pledged shares, without any disputes in connection with the pledged shares.  Mr. Zhao has the right to dispose all or any part of the pledged shares.

o (e) Except the pledge rights as set in accordance with this Agreement, or in the Transaction Agreement , there are not placed any other pledge rights, trust, other any other third party rights on the Shares.

o (f) Pledged shares can be pledged and transferred according to the law.  Mr. Zhao has the full right to pledge the pledged shares to CTL as according to this Agreement.

o (g) This agreement will be valid to Mr. Zhao ’s obligations, after Mr. Zhao ’s properly signing off.

o   (h) If approval, permits from any third parties, governments or registration in governments is necessary according to the law, in connection of pledging the shares, has already been approved, obtained or done and will be still valid during the validation of this Agreement.

o (i) Mr. Zhao ’s signing off and execution of this Agreement does not conflict to any applicable China law, or any other agreements, any court verdict, arbitration award, or any local regulations.

o (j) The pledge as set forth in this Agreement is the first priority guaranteed right of the pledged shares.

o (k) The capital related to the pledged shares has been paid up timely, fully and legally into the Chinese Operating Company.  All the taxes and expenses related to get the pledge right of the pledged shares are borne by Mr. Zhao .

  

o (l) There is not any law suit or legal request by any governments, court, or arbitral tribunal against Mr. Liu, its property or the pledged shares, as known by Mr. Zhao , which will be significant effect on its ability to fulfill its guaranteed obligations as defined in this Agreement.

o

o 6.2  Mr. Zhao  represent and warranty in connection with Chinese Operating Company as follows:

 

	
(a)

	
Chinese Operating Company is a limited liability company, legally set up as according to China law.  It is a legal person, which can take actions legally independent and can act as a litigation participant.

	
(b)

	
All documents, report, files and information provided by Chinese Operating Company to CTL prior to validation of this Agreement, is true , complete and correct before signing off this Agreement.

	
(c) 

	
All documents, report, files and information provided by Chinese Operating Company to CTL after validation of this Agreement, is true , complete and correct when provided.

	
(d)

	
There is not any law suit or legal request by any governments, court, or arbitral tribunal against Chinese Operating Company, its property or the pledged shares, as known by Mr. Zhao , which will be significant effect on its economic status of Chinese Operation Company or on Mr. Zhao ’s ability to fulfill its guaranteed obligations as defined in this Agreement.

 

  

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6.3       Mr. Zhao  warranty to CTL that above representation and warranties are true, complete, correct and will be fully complied, before repay of debt or fully fulfill its obligation, under any circumstances.

7          Events of defaults

 

7.1       Any party who break this Agreement (“Breaker”) shall, under the presumption that not affect other benefits of the party who keep the agreement (“keeper”), take the responsibility of breaking this Agreement, including but not limit to fulfilling its obligations, adopting rescuing measures, compensations.

7.2       The termination of this Agreement will not take any effect on the liabilities already existed before or as of termination date, as defined in this Agreement.  It will not take any effect on the rights of Keeper requesting of Breaker of its responsibility of breaking this Agreement.

8          Validation

o

8.1       This Agreement will be valid when all following criteria are met:

o (a) This Agreement is singed by both parties properly

o (b) pledged shares as defined in this Agreement has been properly recorded in the shareholders’ list of Chinese Operating Company.

o

8.2        The validation will not be expired until CTL dispose the pledged shares according to the Section 3 or release the pledged shares according to Section 4.

o

9          Taxes and expenses

 

9.1       Both parties shall bear its own legal, financial, commercial or other expenses or cost related to negotiate, draft, or finalize this Agreement/.

9.2       The taxes or charges according to the China law resulting from this Agreement shall be borne by the party as according to the China Law.

10        Notices

10.1     Notices sent by the parties to perform the rights and obligations under this Agreement shall be in writing. If sent by personal delivery, EMS, or prepaid registered letter, such a notice shall be sent to the receiver’s address as follows or the receiver shall inform the sender other address in written in five days dance; if sent by t facsimile, such a notice shall be faxed to the number as follows:

 

If to China Telecom Limited

Address: 20A International and Commercial Building, 3009 Nanhu Road, Luohu District, Shenzhen, China.

  

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If to Mr. Zhao Yuan

 

Address:  904, Block C, 149 Fengyuan Road, Guangzhou, China, 510130

 

10.2     To avoid any misunderstanding, if sent by personal delivery, such a notice shall be deemed served upon actual delivery; if sent by telex or facsimile, such a notice shall be deemed served at the time of transmission.  However, the original copy needed to be sent out by personal delivery after that. If sent by EMS or prepaid registered letter, such a notice shall be deemed served after 48 hours of sending, or 10 days if it’s oversea.  To prove the effectiveness of sending, address or dispatching on the notice need to be shown.

11        Transferring

 

11.1     Mr. Zhao certifies that:  CTL has the right to transfer all or partial of its rights or obligations as defined in this Agreement without agreed by Mr. Zhao .  CTL only need to inform Mr. Zhao of the transferring during a reasonable period after transferring.

11.2     Without written agreement by CTL, Mr. Zhao  can not transfer the rights or obligations as defined in this Agreement.

12           Governing laws

 

12.1           This Agreement is subject to China law and its explanation.

12.2           Both Parties agrees without redemption that: if any disputes in connection with the Agreement, both parties need to negotiate with each to resolve; If the disputes can not be negotiated, the disputes need to be summit to Chinese International Economic Trading Arbitration Committee, Southern China Branch, in accordance with effective International arbitration regulations.  This arbitration result is final one which is binding to both parties.  It can be executed court or other execution organization under governing.

 

13        General regulations.

13.1     CTL and Mr. Zhao  agree to complete, sign, submit and fulfill and ensure other related parties to complete, sign, submit and fulfill further actions, signed documents and provided data, to facilitate this Agreement under expected arrangement.

13.2     Timing is an important factor of this Agreement.

13.3     Any content in this Agreement shall not be considered that both parties are in a partnership or any of one party is another party’s agent, any one party is not granted the rights to set obligation against the other party.

13.4     Without written consent by both parties regarding this Agreement, any revision, changes or adding of rights or obligations of the terms in this Agreement, including but not limit to the changes, revision or adding according to the government’s approval and revision advice, are considered as invalid.

13.5     This Agreement is the sole and complete agreement of both Parties for the transaction as defined in this Agreement, which will replace any commitments, contracts, arrangements, statements, willingness, presentations or understandings before signing off this Agreement.

13.6     Any one party grants to third party of ceasing to execute, forgiving or not able to execute certain rights will not decrease, waive off or limit the rights as defined in this Agreement and the right to pursue the third party.  The Keeper waive off the breaking obligation of the Breaker, shall not be considered as waiving off final compensation right against the Breaker.  If partially or individually executing any rights in accordance with this Agreement, It will not take any effect of this Party to further execute the rights or execute other rights.

 

  

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13.7     The rights, benefits and compensation request as defined in this Agreement can be accumulated and added.  If any one party executes the rights, benefits or compensation requests as defined in this Agreement, it can also enjoy, execute or claim for any rights, rescuing, compensation request as granted by laws.

13.8     If under certain circumstances, any terms of this Agreement are announced to be invalid by any court, arbitration organization, or other organizations with governing right, where it is permitted under laws, these terms will be treated to be deleted in this Agreement.  However, even though, the validation, legality, and compulsory execution of other terms in this Agreement will not change and will be still valid.

13.9     This Agreement is still applicable to the successors, inheritors or transferees of each party, regardless of changing of name, organization forms, or in-charging governor of each party or its successors, inheritors or transferees.

13.10   This Agreement is written in Chinese with 3 copies at equal legal effect.  Both parties take one copy each and another for Chinese Operating Company.

13.11   This Agreement can be signed by Both Parties simultaneously or respectively; The Agreement will not be valid until Both Parties or their representatives sign off this Agreement. The signed agreement from each party respectively will jointly become a complete agreement of this Agreement.

(No content following)

 

  

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Signature page

Both Party or its representative sign off this Agreement as of the date set out in first page of this Agreement:

Zhao Yuan

On behalf of China Teletech Limited

Zhao Yuan /s/

Zhao Yuan

Zhao Yuan /s/

  

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Exhibit 1

 

	 Company name:	 Shenzhen Rongxin Investment Company Limited
	 	 
	 Registered capital:	 RMB10,000,000

 

       

	 Shareholder:Name  	 paid capital amount     	 percentage of equity interest
	 	 	 
	
Liu Dong

	
RMB 5,100,000

	
51%

	
Zhao Yuan

	
RMB 4,900,000

	
49%

	
Total

	
RMB 10,000,000

	
100%

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