Document:

cchc_s1-ex1005.htm

Exhibit 10.5

 

EQUITY PLEDGE AGREEMENT

 

THIS EQUITY PLEDGE AGREEMENT (hereinafter this “Agreement”) is dated January 16, 2006, and entered into in Quanzhou City, Fujian Province of The People’s Republic of China

BETWEEN

Quanzhou Dongxiang Chemical & Light Industrial Textile Company Limited (泉州市东翔化工轻纺有限公司),with a registered address at No. 2-12 (E) Economic & Technology Development Zone, Quanzhou City, Fujian Province, the People’s Republic of China (“Pledgee”),

AND

Dong Yuan Fu Rong Nonwoven PP Fabric Shop, Chen Dai County, Jinjiang City (晋江市陈埭镇东源富榮布店), with a business address at No. 116, Qi Yi Zhong Road, Si Jing Community, Chen Dai County, Jinjian City, Fujian Province, The People’s Republic of China (the “Company”)

AND

The sole proprietor of the Company listed on the signature pages hereto (collectively, the “Pledgors”),

 

RECITALS

 

1.  The Pledgee, a company incorporated under laws of The People’s Republic of China, has the expertise in the business of providing advisory and services in production, sales and marketing of polypropylene filament and non-woven polypropylene fabric in China.

 

2. The Pledgors are sole proprietor of the Company and collectively own 100% of the outstanding equity interests or ownership right of the Company.  

3.  Pledgee and the Company have executed a Consulting Services Agreement (hereinafter “Consulting Services Agreement”) dated January 16, 2006. Based on this agreement, the Company shall pay technical consulting and service fees (hereinafter the “Consulting Services Fees”) to Pledgee for offering consulting and related services.

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

 

  

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

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

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

	  
	
“Equity Interest” refers to all the equity interest or ownership right in the Company legally held by the Pledgors.

	  
	
“Term of Pledge” refers to the period provided for under Section 3.1 hereunder.

	  
	
“PRC” or “China” refers to The People’s Republic of China excluding Hong Kong SAR, Macau SAR and Taiwan.

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

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

 

2.  Pledge. The Pledgors agree to pledge their equity interest in the Company to the Pledgee (“Pledged Collateral”) as a security for the obligations of the Company under the Consulting Services Agreement. Pledge under this Agreement refers to the rights owned by the Pledgee, who shall be entitled to a priority in receiving payment by the evaluation or proceeds from the auction or sale of the equity interest pledged by the Pledgors to the Pledgee.

3. Term of Pledge.

3.1  The Pledge shall take effect as of the date when the Pledge of the equity interest under this Agreement is recorded in the Register of Shareholder of the Company. The term of the Pledge shall last until two (2) years after the obligations under the Consulting Services Agreement are fulfilled.

3.2 During the term of the Pledge, the Pledgee shall be entitled to vote, control, sell or dispose of the pledged assets in accordance with this Agreement in the event that Pledgors do not perform their obligation under the Consulting Services Agreement; and the Company fails to pay the Consulting Service Fees in accordance with the Consulting Services Agreement.

 

3.3 During the term of the Pledge, the Pledgee shall be entitled to collect any and all dividends declared or paid in connection with the equity interest.

 

  

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4. Pledge Procedure and Registration

4.1 The Pledge under this Agreement shall be recorded in the Register of Shareholders of the Company. The Pledgors shall, within thirty (30) days after the date of this Agreement, process the registration procedures with Jinjiang City Administrative Bureau of Industry and Commerce concerning the Pledge.

 

5.  Representation and Warranties of Pledgors.

 

5.1 The Pledgors are the legal owners of the equity interest pledged.

 

5.2 The Pledgors have not pledged the equity interest to any other party, and or the equity interest is not encumbered to any other person except for the Pledgee.

 

6.  Covenants of Pledgors.

 

6.1 During the effective term of this Agreement, the Pledgors promise to the Pledgee for its benefit that the Pledgors shall:

 

6.1.1 not transfer or assign the equity interest, create or permit to create any pledges which may have an adverse effect on the rights or benefits of the Pledgee without prior written consent from the Pledgee.

 

6.1.2 comply with and implement laws and regulations with respect to the pledge of rights; present to the Pledgee the notices, orders or suggestions with respect to the Pledge issued or made by the competent authority within five (5) days upon receiving such notices, orders or suggestions; and comply with such notices, orders or suggestions; or object to the foregoing matters at the reasonable request of the Pledgee or with consent from the Pledgee.

6.1.3 timely notify the Pledgee of any events or any received notices which may affect the Pledgor’s equity interest or any part of its right, and any events or any received notices which may change the Pledgor’s any warranty and obligation under this Agreement or affect the Pledgor’s performance of its obligations under this Agreement.

6.2 The Pledgors agree that the Pledgee’s right to the Pledge obtained from this Agreement shall not be suspended or inhibited by any legal procedure launched by the Pledgor or any successors of the Pledgor or any person authorized by the Pledgor or any such other person.

6.3 The Pledgors promise to the Pledgee that in order to protect or perfect the security for the payment of the Consulting Services Fees, the Pledgors shall execute in good faith and cause other parties who have interests in the Pledge to execute all the title certificates, contracts, and perform actions and cause other parties who have interests to take action, as required by the Pledgee; and make access to exercise the rights and authorization vested in the Pledgee under this Agreement.

 

  

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6.4 The Pledgors promise to the Pledgee that they will execute all amendment documents (if applicable and necessary) in connection with any registration of the Pledge with the Pledgee or its designated person (natural person or a legal entity), and provide the notice, order and decision to the Pledgee as necessary, within a reasonable amount of time upon request.

6.5 The Pledgors promise to the Pledgee that they will comply with and perform all the guarantees, covenants, warranties, representations and conditions for the benefits of the Pledgee. The Pledgors shall compensate all the losses suffered by the Pledgee as a result of the Pledgors failing perform or fully perform their guarantees, covenants, warranties, representations and conditions.

 

7. Events Of Default.

 

7.1 The following events shall be regarded as the Events of Default:

7.1.1  This Agreement is deemed illegal by a governing authority in the PRC, or the Pledgor is not capable of continuing to perform the obligations herein due to any reason except  Force Majeure ;

7.1.2  The Company fails to make full payment of the Consulting Services Fees as scheduled under the Consulting Service Agreement;

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

7.1.4  A Pledgor breaches the covenants under Section 6 herein;

7.1.5  A Pledgor breaches the term or condition herein;

7.1.6  A Pledgor waives the pledged equity interest or transfers or assigns the pledged equity interest without prior written consent of the Pledgee;

7.1.7  The Company is incapable of repaying the general debt or other debt;

7.1.8  The property of the Pledgor is adversely affected causing the Pledgee to believe that the capability of the Pledgor to perform the obligations herein is adversely affected;

7.1.9  The successors or agents of the Company are only able to perform a portion of or refuse to perform the payment obligations under the Service Agreement;

 

7.1.10  The breach of the other terms by action or inaction under this agreement by the Pledgor.  

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

 

  

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7.3  Unless the Event of Default under Section 7.1 herein has been solved to the Pledgee’s satisfaction, the Pledgee, at any time when the Event of Default occurs or thereafter, may give a written notice of default to the Pledgor and require the Pledgor to immediately make full payment of the outstanding Service Fees under the Consulting Service Agreement and other payables or exercise other rights in accordance with Section 8 herein.

8. Exercise of Remedies.

8.1 Authorized Action by Secured Party. The Pledgors hereby irrevocably appoint Pledgee the attorney-in-fact of the Pledgors for the purpose of carrying out the security provisions of this Agreement and taking any action and executing any instrument that the Pledgee may deem necessary or advisable to accomplish the purposes of this Agreement. If an Event of Default occurs, or is continuing, Pledgee shall have the right to exercise the following rights and powers:

 

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

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

(c) transfer the Pledged Collateral to its own or its nominee’s name;

 

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

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

(f) all rights of the Pledgors to exercise the voting and other consensual rights it would otherwise be entitled to exercise without any action or the giving of any notice shall cease, and all such rights shall thereupon become vested in the Pledgee;

(g) all rights of the Pledgors to receive distributions with respect to the Pledged Collateral which it would otherwise be authorized to receive and retain shall cease and all such rights shall thereupon become vested in the Pledgee; and

(h)  the Pledgors shall execute and deliver to the Pledgee appropriate instruments as the Pledgee may request in order to permit the Pledgee to exercise the voting and other rights which it may be entitled to exercise and to receive all distributions which it may be entitled to receive.

 

  

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The Pledgors hereby grant to Pledgee an exclusive, irrevocable power of attorney, with full power and authority in the place and stead of the Pledgors to take all such action permitted under this Section 8.1. Such power of attorney shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Collateral) by any person, upon the occurrence and continuance of an event of default. Pledgee shall not have any duty to exercise any such right or to preserve the same and shall not be liable for any failure to do so or for any delay in doing so.

 

8.2 Event of Defaults; Remedies. Upon the occurrence of an Event of Default, Pledgee may, without notice to or demand on the Pledgors and in addition to all rights and remedies available to Pledgee, at law, in equity or otherwise, do any of the following:

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

(b) foreclose or otherwise enforce Pledgee’s security interest in any manner permitted by law or provided for in this Agreement;

(c) terminate this Agreement pursuant to Section 11;

(d)  exercise any and all rights as beneficial and legal owner of the Pledged Collateral, including, without limitation, perfecting assignment of and exercising any and all voting, consensual and other rights and powers with respect to any Pledged Collateral; and

 

(e)  exercise any and all the rights and remedies of a secured party upon default under applicable law.

 

8.3 The Pledgee shall give a notice of default to the Pledgors when the Pledgee exercises its remedies under this Agreement.

8.4 Subject to Section 7.3, the Pledgee may exercise its remedies under this Agreement at any time after the Pledgee gives a notice of default in accordance with Section 7.3 or thereafter.

8.5 The Pledgee is entitled to priority in receiving payment by the evaluation or proceeds from the auction or sale of whole or part of the equity interest pledged herein in accordance with legal procedure until the unpaid Consulting Services Fees under the Consulting Services Agreement are repaid.

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

 

9. Assignment.

9.1  The Pledgors shall not donate or transfer rights and obligations herein without prior consent from the Pledgee.

 

  

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

 

9.3 The Pledgee may transfer or assign all or any of its rights and obligations under this Agreement to any third party as its needs (natural person or legal entity) at any time. In this case, the assignee shall enjoy and undertake the same rights and obligations herein of the Pledgee as if the assignee is a party hereto. When the Pledgee transfers or assigns the rights and obligations under the Service Agreement, and such transfer shall only be subject to a written notice serviced to Pledgors (and no any further consent from Pledgors will be required), and at the request of the Pledgee, the Pledgors shall duly execute the relevant agreements and/or documents with respect to such transfer or assignment.

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

 

10. Formalities, Fees and Other Charges.

 

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

 

10.2 The Pledgors shall be responsible for all the fees (including but not limited to any taxes, formalities fees, management fees, litigation fees, attorney’s fees, and various insurance premiums in connection with disposition of Pledge) incurred by the Pledgee for the reason that the Pledgors fail to pay any payable taxes, fees or charges for other reasons which cause the Pledgee to recourse by any means or ways.

11. Force Majeure.

 

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

11.2 In the event that the affected party is delayed in or prevented from performing its obligations under this Agreement by Force Majeure , only within the scope of such delay or prevention, the affected party will not be responsible for any damage by reason of such a failure or delay of performance. The affected party shall take appropriate means to minimize or remove the effects of Force Majeure and attempt to resume performance of the obligations delayed or prevented by the event of Force Majeure . After occurrence of an event of Force Majeure , when such event or condition ceases to exist, both parties agree to resume the performance of this Agreement with their best efforts.

 

12.  Confidentiality. The parties of this agreement acknowledge and make sure that all the oral and written materials exchanged relating to this contract are confidential. All the parties have to keep them confidential and can not disclose them to any other third party without other parties’ prior written approval, unless: (a) the public know and will know the materials (not because of the disclosure by any contractual party); (b) the disclosed materials are required by laws or stock exchange rules; or (c) materials relating to this transaction are disclosed to parties’ legal consultants or financial advisors, however, who have to keep them confidential as well. Disclosure of confidential information by Employees or hired institutions of the parties is deemed as the act by the parties, therefore, subjecting them to liability.

 

  

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13. Dispute Resolution.

13.1 The execution, validity, construing and performance of this Agreement and the resolution of disputes under this Agreement shall be governed by the laws of PRC.

13.2 The parties shall strive to settle any dispute arising from the interpretation or performance, or in connection with this Agreement through friendly consultation. In case no settlement can be reached through consultation within thirty (30) days, each party can submit such matter to Beijing branch of the China International Economic and Trade Arbitration Commission (“CIETAC”) for arbitration in accordance with its arbitration rules in force at the date of this Agreement including such addition to the CIETAC arbitration rules as are therein contained. Arbitration shall take place in Shenzhen of PRC and the arbitration proceedings shall be conducted in Chinese. There shall be only one (1) arbitrator. Any resulting arbitration award shall be final, conclusive and binding upon the parties.

14. Notices. Any notice which is given by the parties hereto for the purpose of performing the rights and obligations hereunder shall be in writing. Where such notice is delivered personally, the time of notice is the time when such notice actually reaches the addressee; where such notice is transmitted by facsimile, the notice time is the time when such notice is transmitted. If such notice does not reach the addressee on business date or reaches the addressee after the business time, the next business day following such day is the date of notice. The delivery place is the address first written above of the parties hereto or the address advised in writing including via facsimile from time to time.

 

15. Entire Contract. All Parties agree that this Agreement constitute the entire agreement of the Parties with respect to the subject matter therein upon its effectiveness and supersedes and replaces all prior oral and/or written agreements and understandings relating to this Agreement.

 

16. Severability. Any provision of this Agreement which is invalid or unenforceable because of inconsistent with the relevant laws shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability, without affecting in any way the remaining provisions hereof.

17. Appendices. The appendices to this Agreement are entire and integral part of this Agreement.

 

18. Amendment or Supplement.

 

18.1 Parties may amend and supply this Agreement with a written agreement, provided that such amendment shall be duly executed and signed by the Pledgee, The Company, and holders of a majority of the shares of The Company held by the Pledgors, and such amendment shall thereupon become a part of this Agreement and shall have the same legal effect as this Agreement.

18.2 This agreement and any amendments, modification, supplements, additions or changes hereto shall be in writing and come into effect upon being executed and sealed by the parties hereto.

19. Language and Copies of the Agreement. This Agreement has been executed in three (3) duplicate originals in English, each Party has received one (1) duplicate original, and all originals shall be equally valid.

 

[INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

 

  

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SIGNATURE PAGE

IN WITNESS WHEREOF both parties hereto have caused this Agreement to be duly executed by their legal representatives and duly authorized representatives on their behalf as of the date first set forth above.

	
PLEDGEE:

	
Quanzhou Dongxiang Chemical & Light Industrial Textile Company Limited

	 	 
	  	
By:   /s/ Kei Wai TING                             

	  	  
	
THE COMPANY:

	
Dong Yuan Fu Rong Nonwoven PP Fabric Shop

	 	 
	 	
By:   /s/ Xiu Qi DING                               

	  	  

PLEDGEE SIGNATURE PAGE

	
PLEDGORS:

	
PROPRIETOR OF THE COMPANY:

	  	  
	  	
/s/ Xiu Qi DING                                         

	  	
Owns 100% of Dong Yuan Fu Rong Nonwoven PP Fabric Shop

 

 

 

 

 

 

 

  

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Appendix 1

DONG YUAN FU RONG NONWOVEN PP FABRIC SHOP

(registered in JinJiang City, Fujian Province of The People’s Republic of China)

WRITTEN RESOLUTIONS OF THE GENERAL SHAREHOLDERS’

MEETING OF THE COMPANY

WHEREAS, that the sole proprietor of Company have presented a plan to pledge their shares or ownership right of this Company under an Equity Pledge Agreement dated January 16, 2006; and

WHEREAS, it is in the best interest of the Company for the sole proprietor to enter into such Equity Pledge Agreement.

RESOLVED, that the pledge of shares or ownership right held by the sole proprietor  of the Company under the Equity Pledge Agreement is hereby approved.

This resolution was executed and submitted on January 16, 2006 by the undersigned shareholders:

 

	
SHAREHOLDERS:

	  	  
	  	  	  
	  	  	  
	  	  	
Signature:     /s/ Xiu Qi DING                                             

	  	  	  
	  	  	  

 

 

 

 

A-1cchc_s1-ex1006.htm

Exhibit 10.6

EXCLUSIVE OPTION AGREEMENT

 

This Exclusive Option Agreement (this “Option Agreement”) is entered into, as of January 16, 2006, in Quanzhou City, Fujian Province of The People’s Republic of China

BETWEEN

Quanzhou Dongxiang Chemical & Light Industrial Textile Company Limited (泉州市东翔化工轻纺有限公司),with a registered address at No. 2-12 (E) Economic & Technology Development Zone, Quanzhou City, Fujian Province, the People’s Republic of China (“Party A”);

AND

Dongyuan Fu Rong Nonwoven PP Fabric Shop, Chen Dai County, Jinjiang City (晋江市陈埭镇东源富荣布店), with a business address at No. 116, Qi Yi Zhong Road, Si Jing Community, Chen Dai County, Jinjian City, Fujian Province, The People’s Republic of China (“ Party B ”);

AND

The sole proprietor of Party B listed on the signature pages hereto (collectively, the “Party C ”).

(Party A, Party B and Party C are referred to collectively in this Option Agreement as the “Parties”.)

RECITALS

	 	
1. 

	
Party A, a company incorporated under the law of The People’s Republic of China (“PRC”) and has the expertise in the business of providing advisory and services in production, sales and marketing of polypropylene filament and non-woven polypropylene fabric in China;

	 	
2. 

	
Party B is a private-owned individual business registered in PRC, and is engaged in sales and marketing of non-woven polypropylene fabric in China (the “Business”);

	 	
3. 

	
Party C refers collectively to the sole proprietor of Party B, and has the ownership of 100% equity interest and ownership right in Party B (each, an “Equity Interest” and collectively the “Equity Interests”)

	 	
4. 

	
A series agreements, including the Business Operating Agreement, Consulting Services Agreement and the Equity Pledge Agreement (collectively the “Said Agreements”), have been entered into by and among the Parties on January 16, 2006;

	 	
5. 

	
The Parties are entering into this Option Agreement in conjunction with the Said Agreements

 

  

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

	
1.  

	
Purchase and Sale of Equity Interest

	 	
1.1. 

	
Grant of Rights. Party C (hereafter collectively the “Transferor”) hereby irrevocably grants to Party A an exclusive option to purchase or cause any person designated by Party A (“Designated Persons”) to purchase, to the extent permitted under PRC Law, according to the steps determined by Party A, at the price specified in Section 1.3 of this Option Agreement, at any time from the Transferor a portion or all of the Equity Interests held by Transferor in Party B (the “Option”). No Option shall be granted to any third party other than Party A and/or its Designated Persons. Party B hereby agrees to the granting of the Option by Party C to Party A and/or its Designated Persons. The “person” set forth in this clause and this Option Agreement means an individual person, corporation, joint venture, partnership, enterprise, trust or a non-corporation organization.

	 	
1.2. 

	
Exercise of Rights. According to the stipulations of PRC laws and regulations, Party A and/or its Designated Persons may exercise Option by issuing a written notice (the “Notice”) to the Transferor and specifying the equity interest purchased from Transferor (the “Purchased Equity Interest”) and the manner of purchase.

	 	
1.3. 

	
Purchase Price. For Party A to exercise the Option, the purchase price of the Purchased Equity Interest (“Purchase Price”) shall be equal to the lowest price permissible under the applicable laws.

	 	
1.4. 

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

	 	
1.4.1. 

	
The Transferor shall ask Party C to convene a shareholders’ meeting. During the meeting, the resolutions shall be proposed, approving the transfer of the appropriate Equity Interest to Party A and/or its Designated Persons. Party C could approve such transfer by a written resolution;

	 	
1.4.2. 

	
The Transferor shall, upon the terms and conditions of this Option Agreement and the Notice related to the Purchased Equity Interest, enter into Equity Interest purchase agreement in a form reasonably acceptable to Party A, with Party A and/or its Designated Persons (as applicable);

	 	
1.4.3. 

	
The related parties shall execute all other requisite contracts, agreements or documents, obtain all requisite approval and consent of the government, conduct all necessary actions, without any Security Interest, transfer the valid ownership of the Purchased Equity Interest to Party A and/or its Designated Persons, and cause Party A and/or its Designated Persons to be the registered owner of the Purchased Equity Interest. In this clause and this Option Agreement, “Security Interest” means any mortgage, pledge, the right or interest of the third party, any purchase right of equity interest, right of acquisition, right of first refusal, right of set-off, ownership detainment or other security arrangements, however, it does not include any security interest created under the Equity Pledge Agreement.

 

 

  

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1.5. 

	
Payment. The payment of the Purchase Price shall be determined by the consultation of Party A and/or its Designated Persons with the Transferor according to the applicable PRC laws at the time of exercise of the Option.

	
2.  

	
Promises Relating Equity Interest.

	 	
2.1. 

	
Promises Related to Party B. Party B and Party C hereby promise:

	 	
2.1.1. 

	
Without prior written consent by Party A, not, in any form, to supplement, change or renew the Articles of Association of Party B, to increase or decrease registered capital of the corporation, or to change the structure of the registered capital in any other forms;

	 	
2.1.2. 

	
According to customary fiduciary standards applicable to managers with respect to corporations and their shareholders, to maintain the existence of the corporation, prudently and effectively operate the business;

	 	
2.1.3. 

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

	 	
2.1.4. 

	
Without prior written notice by Party A, not issue or provide any guarantee or permit the existence of any debt, other than (i) the debt arising from normal or daily business but not from borrowing; and (ii) the debt disclosed to Party A and obtained the written consent from Party A;

	 	
2.1.5. 

	
To normally operate all business to maintain the asset value of Party B, without taking any action or failing to take any action that would result in a material adverse effect on the business or asset value of Party B;

	 	
2.1.6. 

	
Without prior written consent by Party A, not to enter into any material agreement, other than agreements in the ordinary course of business (for purposes of this paragraph, if the amount of the agreement involves an amount that exceeds a hundred thousand Yuan Renminbi (RMB 100,000) the agreement shall be deemed material);

	 	
2.1.7. 

	
Without prior written consent by Party A, not to provide loan or credit loan to any others;

	 	
2.1.8. 

	
Upon the request of Party A, to provide all materials of operation and finance relevant to Party B;

	 	
2.1.9. 

	
Purchases and holds the insurance from the insurance company accepted by Party A, the insurance amount and category shall be the same with those held by the companies in the same industry or field, operating the similar business and owning the similar properties and assets as Party B;

	 	
2.1.10. 

	
Without prior written consent by Party A, not to merge or associate with any person, or acquire or invest in any person;

	 	
2.1.11. 

	
To notify Party A of the occurrence or the potential occurrence of the litigation, arbitration or administrative procedure related to the assets, business and income of Party B;

	 	
2.1.12. 

	
In order to keep the ownership of Party B to all its assets, to execute all requisite or appropriate documents, take all requisite or appropriate actions, and pursue all appropriate claims, or make requisite or appropriate pleas for all claims;

	 	
2.1.13. 

	
Without prior written notice by Party A, not to assign equity interests to shareholders in any form; however, Party B shall distribute all or part of its distributable profits to its own shareholders upon request by Party A;

	 	
2.1.14. 

	
According to the request of Party A, to appoint any person designated by Party A to be the director(s) or key management of Party B.

 

  

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2.2. 

	
Promises Related to Transferor. Party C hereby promise:

	 	
2.2.1. 

	
Without prior written consent by Party A, not, upon the execution of this Option Agreement, to sell, transfer, mortgage or dispose in any other form any legitimate or beneficial interest of equity interest, or to approve any other security interest set on it, with the exception of the pledge set on the equity interest of the Transferor subject to Equity Pledge Agreement;

	 	
2.2.2. 

	
Without the prior written notice by Party A, not to decide or support or execute any shareholder resolution at any shareholder meeting of Party B that approves any sale, transfer, mortgage or dispose of any legitimate or beneficial interest of equity interest, or allows any other security interest set on it, other than the pledge on the equity interests of Transferor pursuant to Equity Pledge Agreement;

	 	
2.2.3. 

	
Without prior written notice by Party A, the Parties shall not agree or support or execute any shareholders resolution at any shareholder meeting of Party B that approves Party B’s merger or association with any person, acquisition of any person or investment in any person;

	 	
2.2.4. 

	
To notify Party A the occurrence or the potential occurrence of the litigation, arbitration or administrative procedure related to the equity interest owned by them;

	 	
2.2.5. 

	
To cause the Board of Directors, or other equivalent management body, of Party B to approve the transfer of the Purchased Equity Interest subject to this Option Agreement;

	 	
2.2.6. 

	
In order to keep its ownership of the equity interest, to execute all requisite or appropriate documents, conduct all requisite or appropriate actions, and make all requisite or appropriate claims, or make requisite or appropriate defend against fall claims of compensation;

	 	
2.2.7. 

	
Upon the request of Party A, to appoint any person designated by Party A to be the directors or key management of Party B;

	 	
2.2.8. 

	
Upon the request of Party A at any time, to transfer its Equity Interest immediately to the representative designated by Party A unconditionally at any time and abandon its prior right of first refusal of such equity interest transferring to another available shareholder;

	 	
2.2.9. 

	
To prudently comply with the provisions of this Option Agreement and other Said Agreements entered into collectively or respectively by the Transferor, Party B and Party A and perform all obligations under these Said Agreements, without taking any action or any nonfeasance that sufficiently affects the validity and enforceability of these Said Agreements.

	
3.  

	
Representations and Warranties. As of the execution date of this Option Agreement and every transferring date, Party B and Party C hereby represent and warrant collectively and respectively to Party A as follows:

	 	
3.1. 

	
It has the power and ability to enter into and deliver this Option Agreement, and for every single transfer of Purchased Equity Interest according to this Option Agreement, the corresponding equity interest transferring agreement (each a “Transferring Agreement”) of which it as a party, and to perform its obligations under this Option Agreement and any Transferring Agreement. Upon execution, this Option Agreement and the Transferring Agreements of which it as a party will constitute legal, valid and binding obligations and enforceable against it in accordance with the applicable terms;

	 	
3.2. 

	
The execution, delivery of this Option Agreement and any Transferring Agreement and performance of the obligations under this Option Agreement and any Transferring Agreement will not: (i) cause to violate any relevant laws and regulations of PRC; (ii) constitute a conflict with its Articles of Association or other organizational documents; (iii) cause to breach any Agreement or instruments to which it is a party or having binding obligation on it, or constitute the breach under any Agreement or instruments to which it is a party or having binding obligation on it; (iv) cause to violate relevant authorization of any consent or approval to it and/or any continuing valid condition; or (v) cause any consent or approval authorized to it to be suspended, removed, or into which other requests be added;

	 	
3.3. 

	
The shares of Party B are transferable, and Party B has not permitted or caused any security interest to be imposed upon the shares of Party B.

 

  

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3.4. 

	
Party B does not have any unpaid debt, other than (i) debt arising from its normal business; and (ii) debt disclosed to Party A and obtained by written consent of Party A;

	 	
3.5. 

	
Party B has complied with all PRC laws and regulations applicable to the acquisition of assets and securities in connection with this Option Agreement.

	 	
3.6. 

	
No litigation, arbitration or administrative procedure relevant to the Equity Interests and assets of Party B or Party B itself is in process or to be settled and the Parties have no knowledge of any pending or threatened claim.

	 	
3.7. 

	
The Transferor bears the fair and salable ownership of its Equity Interest free of encumbrances of any kind, other than the security interest pursuant to the Equity Pledge Agreement.

	
4.  

	
Assignment of Agreement

	 	
4.1. 

	
Party B and Party C shall not transfer their rights and obligations under this Option Agreement to any third party without the prior written consent of the Party A.

	 	
4.2. 

	
Party B and Party C hereby agrees that Party A shall be able to transfer all of its rights and obligation under this Option Agreement to any third party as its needs (natural person or legal entity) at any time, and such transfer shall only be subject to a written notice sent to Party B, Party C by Party A, and no any further consent from Party B and/or Party C will be required.

	
5.  

	
Effective Date and Term

	 	
5.1. 

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

	 	
5.2. 

	
The term of this Option Agreement is ten (10) years unless the early termination in accordance with this Option Agreement or other terms of the relevant agreements stipulated by the Parties. This Agreement may be extended according to the written consent of Party A before the expiration of this Option Agreement. The term of extension will be decided unanimously through mutual agreement of the Parties.

	 	
5.3. 

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

	
6.  

	
Applicable Law and Dispute Resolution

	 	
6.1. 

	
Applicable Law. The execution, validity, construing and performance of this Option Agreement and the resolution of disputes under this Option Agreement shall be governed by the laws of PRC.

	 	
6.2. 

	
Dispute Resolution. The parties shall strive to settle any dispute arising from the interpretation or performance, or in connection with this Agreement through friendly consultation. In case no settlement can be reached through consultation within thirty (30) days, each party can submit such matter to Beijing branch of the China International Economic and Trade Arbitration Commission (“CIETAC”) for arbitration in accordance with its arbitration rules in force at the date of this Agreement including such addition to the CIETAC arbitration rules as are therein contained. Arbitration shall take place in Shenzhen of PRC and the arbitration proceedings shall be conducted in Chinese. There shall be only one (1) arbitrator. Any resulting arbitration award shall be final conclusive and binding upon the parties.

 

 

  

5

  

 

	
7.  

	
Taxes and Expenses. Each Party shall, according to the PRC laws, bear any and all registering taxes, costs and expenses for equity transfer arising from the preparation and execution of this Option Agreement and all Transferring Agreements, and the completion of the transactions under this Option Agreement and all Transferring Agreements.

	
8.  

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

	
9.  

	
Confidentiality. The Parties acknowledge and confirm any oral or written materials exchanged by the Parties in connection with this Option Agreement are confidential. The Parties shall maintain the secrecy and confidentiality of all such materials. Without the written approval by the other Parties, any Party shall not disclose to any third party any relevant materials, but the following circumstances shall be excluded: (a) the materials that is known or may be known by the general public (but not include the materials disclosed by each party receiving the materials); (b) the materials required to be disclosed subject to the applicable laws or the rules or provisions of stock exchange; or (c) The materials disclosed by each Party to its legal or financial consultant relating the transaction of this Option Agreement, and this legal or financial consultant shall comply with the confidentiality set forth in this Section. The disclosure of the confidential materials by staff or employed institution of any Party shall be deemed as the disclosure of such materials by such Party, and such Party shall bear the liabilities for breaching the contract. This clause shall survive whatever this Option Agreement is invalid, amended, revoked, terminated or unable to implement by any reason.

	
10.  

	
Further Warranties. The Parties agree to promptly execute documents reasonably required to perform the provisions and the aim of this Option Agreement or documents beneficial to it, and to take actions reasonably required to perform the provisions and the aim of this Option Agreement or actions beneficial to it.

	
11.  

	
Miscellaneous.

	 	
11.1. 

	
Amendment, Modification and Supplement. Any amendment and supplement to this Option Agreement shall only be effective is made by the Parties in writing.

	 	
11.2. 

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

	 	
11.3. 

	
Severability. If any provision of this Option Agreement is judged as invalid or non-enforceable according to relevant Laws, the provision shall be deemed invalid only within the applicable laws and regulations of the PRC, and the validity, legality and enforceability of the other provisions hereof shall not be affected or impaired in any way. The Parties shall, through fairly consultation, replace those invalid, illegal or non-enforceable provisions with valid provisions that may bring the similar economic effects with the effects caused by those invalid, illegal or non-enforceable provisions.

	 	
11.4. 

	
Headings. The headings contained in this Option Agreement are for the convenience of reference only and shall not affect the interpretation, explanation or in any other way the meaning of the provisions of this Option Agreement.

 

 

  

6

  

 

	 	
11.5. 

	
Language and Copies. This Agreement has been executed in English in three (3) duplicate originals; each Party holds one (1) original and each duplicate original shall have the same legal effect.

	 	
11.6. 

	
Successor. This Agreement shall bind and benefit the successor of each Party and the transferee allowed by each Party.

	 	
11.7. 

	
Survival. Any obligation taking place or at term hereof prior to the end or termination ahead of the end of this Option Agreement shall continue in force and effect notwithstanding the occurrence of the end or termination ahead of the end of the Agreement. Article 6, Article 8, Article 9 and Section 11.7 hereof shall continue in force and effect after the termination of this Option Agreement.

	 	
11.8. 

	
Waiver. Any Party may waive the terms and conditions of this Option Agreement in writing with the signature of the Parties. Any waiver by a Party to the breach by other Parties within certain situation shall not be construed as a waiver to any similar breach by other Parties within other situations.

[INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

 

 

 

 

 

 

 

 

  

7

  

SIGNATURE PAGE

IN WITNESS WHEREOF both parties hereto have caused this Option Agreement to be duly executed by their legal representatives and duly authorized representatives on their behalf as of the date first set forth above.

 

	
PARTY A:

	  	
Quanzhou Dongxiang Chemical & Light Industrial Textile Co., Ltd.

	  	  	  
	  	  	
Legal/Authorized Representative:

	  	  	  
	  	  	  
	  	  	
/s/ Kei Wai Ting                                                                      

	  	  	
Title: Director

	  	  	  
	
PARTY B:

	  	
Dong Yuan Fu Rong Nonwoven PP Fabric Shop

	  	  	  
	  	  	
Authorized Representative:

	  	  	  
	  	  	  
	  	  	
/s/ Xiu Qi Ding                                                                         

	  	  	

Title: Proprietor

	  	  	  
	
PARTY C:

	  	
/s/ Xiu Qi Ding                                                                         

	  	  	
owns 100% shares of Dong Yuan Fu Rong Nonwoven PP Fabric Shop

 

 

 

 

 

 

 

  

8

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