Option Agreement (English Translation)
EXHIBIT
10.5
(English
Translation)
Beicang
Hou,
a
citizen of the People’s Republic of China (“PRC”), Identification Card No.:
140103630213215 (hereinafter “Party A” or “Shareholder”).
Shanxi
Bestlink Management Consulting Co., Ltd.,
a legal
person under the laws of the PRC, with its legal address 8/F, Beicang Building,
Jianshe North Road No76, Taiyuan, Shanxi Province, PRC, its facsimile number
as
0351-4656787, and its legal representative as Beicang Hou (hereinafter “Party B”
or “Option Holder”).
Yaoting
Ren,
a
citizen of The People's Republic of China, Identification Card No.:
142732641117001 (hereinafter “Party C”).
Pinglu
County Changhong Ferroalloy Co., Ltd.,
a legal
person under the law of the PRC, with its legal address in the 6
residents group , Shangling Village,
MaoJin
Economic Development Zone, PingLu County, ShanXi province, PRC, its facsimile
number as 0359-3553666, and its legal representative as Beicang Hou (hereinafter
“Party D” or “Company”).
Zengguan
Li,
a
citizen of The People's Republic of China, ID card number: ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
(hereinafter “Party E”).
Party
A
holds more than 51% of Party D’s outstanding shares (the “Shares”), and is the
legal holder and beneficiary of the Shares to be optioned hereunder.
The
parties hereto have agreed to enter into certain agreements for loan, operation
and services, and will execute those agreements concurrently with this option
agreement (the “Agreement”).
As
guarantee
of Party
B’s
rights in the above-described agreements, Party A hereby grants Party B an
option, and the parties agree as follows as of January 5, 2006:
Article
1 Definition
Unless
otherwise
provided, the following terms shall be defined as follows in this Agreement:
“Option”:
shall
refer to the option set forth in Section 2.1 of this Option
Agreement;
“Encumbrances”:
shall
refer to all encumbrances,
including lien, mortgage,
and pledge,
attached
to the option;
“Exercise
Period”:
shall
be from the effective date of this Option Agreement to the earlier of (a)
December 31, 2025; (b) the establishment of a liquidation committee by the
Company.
“Optioned
Shares”:
shall
refer to all or any of the Shares that Party A owns in the Company.
“Method
of Option Exercise”:
shall
be determined by the documents signed jointly by Party A and Party B from the
effective date of this Option Agreement through the Exercise Period.
“Parties”:
shall
refer collectively to Party A, Party B, Party C, Party D, and Party
E.
Article
2 Application
and Exercise
of Option Rights
2.1
In
consideration of the financial support and management services to be provided
by
Party B, Party A hereby grants Party B or its designee the Option to acquire
all
or any of the Shares of Party A during the Exercise Period in accordance with
this Agreement.
2.2
At
any
time during the Exercise Period, Party B may notify Party A in writing (the
“Initial Notice”) of its intention to exercise the Option. Within
5
working days of the Initial Notice, Party
A
shall communicate to Party B in writing as to Party B’s shortcomings as to the
disclosures and promises that it made (“Disclosure
Letter”). Party
B
may exercise the Option within 5 working days of its receipt of the Letter
or
within 15 working days after the Initial Notice, and shall issue a notice to
Party A regarding the exercise of option (“Option Exercise Notice”). The
transfer of the Optioned Shares shall become effective 3 days from the date
of
the Option Exercise Notice (“Exercise Date”), and
the
Disclosure Letter
shall be
Party A’s disclosures and promises. The
Disclosure Letter
may be
revised upon mutual consent of Party A and Party B.
2.3
Within
two days of the Exercise Date (in accordance with Beijing Time), Party A and
Party B shall execute the agreement to transfer the Optioned Shares (“Share
Transfer Agreement”). The exercise price shall be Party A’s original paid-in
price of the Optioned Shares, or a different price agreed to by the parties,
provided that any such price cannot exceed the appraisal price of a PRC
register-capital appraiser. On the Exercise Date, Party A shall transfer to
Party B the Optioned Shares, and Party B shall have no obligation to pay until
the transfer of the Optioned Shares is effective.
2.4
Party
C
and Party E hereby consent to this Agreement, and hereby forfeit any rights,
including preferential rights, that they may have contractually or be legally
entitled to with respect to the Option, and shall cooperate as necessary to
facilitate in the transactions contemplated herein, including the execution
of
all documents to evidence their consent hereto. Party D hereby consent to this
Agreement and shall cooperate with the other parties as necessary.
2.5. If
Party
A attempts to transfer the Shares, Party B shall have the right of first refusal
with respect to these shares, upon the same terms and conditions of the
attempted transfer.
Article
3 Representations
and Warranties
3.1
Party
A
hereby represents and warrants to Party B as follows:
3.1.1
Party
A
is the legal holder and beneficiary of the Optioned Shares;
3.1.2
Except
for this Agreement, the Optioned Shares have no Liabilities and are not subject
to any other option and/or similar arrangements.
3.1.3
Party
A
has the authority to enter into this Agreement, including all necessary
authorization and approval of third parties, if any. In entering into this
Agreement, Party A will not be in breach of the Company’s bylaws or any
applicable laws, regulations, orders or agreements.
3.1.4
During
the Exercise Period, Party A may not, without Party B’s express written consent,
encumber or cause to be encumbered the Optioned Shares in any way.
3.1.5
Party
A
agrees and acknowledges that Disclosure
Letter
will be
its disclosures and promises under the Share Transfer Agreement. Accordingly,
from the execution of this Agreement until the execution of the Share Transfer
Agreement, Party A shall not take any action that may render the disclosures
and
promises of the Disclosure
Letter
untrue
or inaccurate, and in the event that any such action is taken, shall notify
Party B in writing within 2 days of taking the action.
3.1.6
Party
A
shall maintain the existence and normal operations of the Company, and shall
not
amend the Company bylaws or other documents.
3.1.7
Party
A
will borne all expenses incurred in connection with the transactions
contemplated herein.
3.1.8
Party
A
hereby acknowledges the efforts and expenses incurred by Party B in connection
with this Agreement, and agrees that in the event of breach by Party A,
liquidated damages in the sum of RMB 8 million represents a fair and equitable
sum for Party B’s damages. Party A further acknowledges that in addition to the
liquidated damages, Party B may elect to continue this Agreement.
3.2
Party
B
hereby represents and warrants that it is authorized to enter into this
Agreement.
Article
4 Validity
of Agreement
This
Agreement is effective upon the parties’ execution and seal. If no Option
Exercise Notice is issued on or before the last day of the Exercise Period,
this
Agreement shall automatically terminate on the last day of the Exercise
Period.
Article
5 Authorization
5.1
To
carry
out the terms of this Agreement, Party A hereby irrevocably grants Party
B
the authority to sign on its behalf any and all necessary documents and to
comply with any and all other formalities, and Party A may provide Party B
with
the necessary proxy to effectuate this herein provision, which proxy shall
exclude all matters beyond the scope of this Agreement. Said proxy shall
automatically terminate 90 days from the termination date of this Agreement.
5.2
From
the
effective date of this Agreement until December 31, 2025, Party A hereby
irrevocably and without condition entrust Party B or its designee with all
of
Party A’s voting rights as a shareholder of the Company. Party B shall have
complete autonomy to exercise such rights, including the election of Company
management and all other matters.
Article
6 Confidentiality
6.1
The
parties shall maintain in confidence all matters relating to a transfer of
the
Optioned Shares.
6.2
If
any
party breaches the confidentiality obligation, said party shall be liable for
all resulting damages to the other parties and to the Company.
Article
7 Breach
7.1
A
breaching party shall pay the non-breaching party the sum of RMB 1 million
as
penalty for breach of the confidentiality provision or any of the party’s
representations and warranties.
7.2
Party
A
hereby
agrees and acknowledges that the terms of this Agreement, including Article
5
above, are crucial to Party B and its business objectives, and Party A hereby
agrees that in the event of its breach of this Agreement, Party B may elect
to
have Party A specifically perform its obligations thereto.
7.3 If
the
terms of this Agreement cannot ultimately be performed, the breaching party
shall be liable for all the direct economic damages of the non-breaching party.
If the damages cannot be determined, then the breaching party shall pay as
penalty to the non-breaching party a sum equal to twenty percent of the price
of
the Optioned Shares.
Article
8 Resolutions
Applicable to Law and Disputes
8.1
This
Agreement shall be governed by the laws of the PRC.
8.2
The
parties shall strive to settle any dispute arising from this Agreement
through
friendly
consultation. In case no settlement can be reached through consultation, either
party may submit the dispute to China International Economic and Trade
Arbitration Commission (“CIETAC”) for arbitration in accordance with the rules
of CIETAC. The arbitration proceedings shall take place in Beijing and shall
be
conducted in Chinese. The losing side shall bear all arbitration-related fees.
Article
9 Other
conditions
9.1
If
any
clause of this Agreement is determined to be invalid or non-enforceable, such
clause shall be deemed invalid only with respect to the affected clauses, and
without affecting other clauses of the Agreement in any way.
9.2 Notices
pursuant to this Agreement shall be written in Chinese and shall be delivered
or
sent by mail, telegram or facsimile transmission to the address of the relevant
party set forth below. A party shall provide written notice of any change in
address or facsimile number within 10 days prior to the change.
Party
A:
Beicang Hou
Address:
▇▇/▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ No76, Taiyuan, Shanxi Province,
PRC
Facsimile:
0351-4656111
Attention:
Beicang Hou
Party
B:
Shanxi Bestlink Management Consulting Co., Ltd.
Address:
▇/▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ No76, Taiyuan, Shanxi Province,
PRC
Facsimile:
0351-4656787
Attention:
Beicang Hou
Party
C:
Yaoting Ren
Address:
6 residents group, Shangling Village, MaoJin Economic Development Zone, PingLu
County, ShanXi province, PRC
Facsimile:
0359-3553666
Attention:
Yaoting Ren
Party
D:
Pinglu County Changhong Ferroalloy Co., Ltd.
Address:
the 6
residents group, Shangling Village,
MaoJin
Economic Development Zone, PingLu County, ShanXi province, PRC
Facsimile:
0359-3553666
Attention:
Yaoting Ren
Party
E:
Zengguan Li
Address:
the 6
residents group, Shangling Village,
MaoJin
Economic Development Zone, PingLu County, ShanXi province, PRC
Facsimile:
0359-3553666
Attention:
Zengguan Li
The
date
when the notice is deemed duly served shall be determined as follows: (a) a
notice delivered personally or
mailed
is deemed duly served upon the delivery, (b) a notice sent by facsimile
transmission is deemed duly served upon the completion of the transmission,
except that if the notice is transmitted on a non-work day, the notice is deemed
duly served upon the first work-day thereafter.
9.3
This
Agreement and any attachment thereto constitute the entire agreement of the
parties relating to the subject matter of this Agreement and supersedes all
previous agreements or understanding. No amendment of this Agreement shall
be
valid unless it is in writing and signed by the Parties.
9.4
This
Agreement shall be in Chinese, with 6 copies, one to each of Party A, Party
C,
Party D and Party E and two copies to Party B.
Party
A:
/s/
Beicang Hou
Beicang
Hou
Date:
January 5, 2006
Party
B:
Shanxi
Bestlink Management Consulting Co., Ltd.
/s/
Beicang Hou
Legal
Representative
Date:
January 5, 2006
Party
C:
/s/
Yaoting Ren
Yaoting
Ren
Date:
January 5, 2006
Party
D:
Pinglu
County Changhong Ferroalloy Co., Ltd.
/s/
Beicang Hou
Legal
Representative
Date:
January 5, 2006
Party
E:
/s/
Zengguan Li
Zengguan
Li
Date:
January 5, 2006