Exhibit 10.4
OPTION AGREEMENT
This Option Agreement
(this "Agreement") is entered into, as of November 1,
2005, in Zhejiang
China by Capital
Future Development
Limited, incorporated
under law of British
Virgin Islands
("Party A"), Zhejiang Yong Xin Digital
Technology Co., Ltd., duly established under law of People's Republic of
China,
with a registered address at No. 315 Hu Shu Nan Rd, Gong Ye
District,
Hangzhou,
China ("Party
B") and each of the shareholders 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 Agreement as the
"Parties."
RECITALS
1. (1) Party A,
a company duly incorporated under law of British Islands,
has
the
expertise in the business of digital products;
2. (1) Party B
is a limited company
incorporated in China,
and is engaged in
the
selling, circulation and modern logistics of 3C products
(communication
products, information
technology ("IT")
products and digital products) in
China (the "Business");
3. Party C is
the shareholders of Party B. Party C has the ownership of
[100%]
equity interest in Party B.(each, an "Equity Interest" and
collectively the
"Equity Interest")
4. A series
agreements such as the Consulting Services Agreement (the
"Service
Agreement") have been entered into the Parties on November 1,
2005;
5. An Equity
Pledge Agreement (the "Equity Pledge Agreement") has been
entered
into
by the Parties as of November 1, 2005;
6. The Parties
are entering into this Option Agreement in conjunction with the
Pledge Agreement, Consulting Services Agreement and related
agreements.
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NOW, THEREFORE, the Parties to this 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
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
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
the Designated
Persons. Party B
hereby agrees to the granting of the
Option by Party C to
Party A and/or the Designated Persons. The
"person" set
forth in this clause and this 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
regulation, Party A
and/or the 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.
1.3.1 For Party A to
exercise the Option,
the purchase price of
the
Purchased Equity Interest ("Purchase Price") shall be equal
to
the original paid-in
price of the Purchased Equity Interest by
the Transferor, unless
the applicable PRC laws and regulations
require appraisal of
the equity interests
or stipulate other
restrictions on the purchase price of equity interests.
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<PAGE>
1.3.2 If the
applicable
PRC laws require appraisal of the equity
interests or
stipulates
other restrictions on the purchase
price of the Equity
Interest at the time that Party A exercise
the Option, the
Parties agree that the Purchase Price shall be
set at the lowest price permissible under the applicable laws.
1.4
Transfer of the
Purchased Equity Interest. Up[on each exercise of the
Option rights under this 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 the Designated Persons;
1.4.2 The Transferor shall, upon the terms and conditions of this
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 the
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
the Designated Persons, and cause Party A and/or the Designated
Persons to be the
registered
owner of the
Purchased Equity
Interest. In
this clause and this 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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<PAGE>
1.5
Payment. The payment of the Purchase Price
shall be determined by the
consultation of
Party A and/or the Designated Persons with the
Transferor according to the applicable laws at the time of exercise
of
the Option.
2. Promises Relating Equity Interest.
2.1
Promises Related to
Party B. Party B, 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
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;
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<PAGE>
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 (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;
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<PAGE>
2.1.13 Without prior
written notice by
Party A, not to assign equity
interests to shareholders in any form; however, Party A shall
distribute all or part
of its distributable
profits to their
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 directors of Party B.
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
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 n
