Commercial Financing Contract
Exhibit
10.18
Contract
No. Year 2008 H7n0370
Important
remainder: This contract is executed by both parties, as equals, according
to
relevant laws and regulations after voluntary negotiations. All the clauses
reflect both parties’ true intentions. To insure the security of the Lender’s
lien, the Borrower is willing to provide collateral to the loan. In order to
fully protect the Lender’s lawful interests, the Lender hereby reminds the
Borrower to read the provisions in bold of the contract carefully, and pay
sufficient attention to its content.
Party
A:
(Lender/Pledgee) Industrial and Commercial Bank of China. (“ICBC”)
Address:
Legal
Person: Xxxxxxxx Xxxx
Party
B:
(Borrower/Pledgor): Danyang Lihua Electron Co., Ltd
Address:
Legal
Person: Xxxxxxx Xxx
As
specified in Clause 1.1, Party B hereby applies to Party A for the loan. To
insure that the Borrower shall fully perform its obligations under this
contract, Party B is willing to provide collateral to Party A. Through equal
negotiations, both parties reached the following agreement. They hereby
memorialize the contract and agree to abide by its terms.
Clause
1. Use of the Loan Proceeds, Loan Amount and Term
1.1
The
loan proceeds shall be used to purchase raw materials. Party B shall not use
the
loan proceeds for other purposes without written consent from Party
A.
1.2
The
currency for the loan is RMB, and the amount is 10 MILLION.
1.3
The
term of the loan is 6 months, starting from the date the loan is first
withdrawn.
1.4
The
actual withdrawal date and repayment date shall be determined according to
the
certificates of borrowing. Certificates of borrowing shall be part of the
contract and have the same legal effect as this contract.
Clause
2 Loan Rate and Interest
2.1
If
the currency of the loan is RMB, then the Loan Rate shall be set in the
following way:
2.1.1
The
Loan Rate is the Base Rate plus a Float Rate. The Base Rate is defined as RMB
loan rate published for loans of same term and category by China People’s Bank
on the withdrawal date of the loan. The Float Rate is 10%.
2.1.2
If
the Base Rate is adjusted after Party B’s withdrawal of loan proceeds, then the
Loan Rate shall be adjusted in the following way:
Loan
Rate
shall be adjusted in every period, three month constituting one period. The
rate
setting date for the first period is the first withdrawal date. The following
rate setting date shall be the corresponding date of the first withdrawal date,
the following rate shall be set by the Base Rate published for loans with same
term and category by China People’s Bank on the corresponding date and the
Floating Rate specified in Clause 2.1.1. The interest is calculated separately
in different periods. If there is no corresponding withdrawal date in the
adjusting month, then the last date of the adjusting month shall be the
corresponding date.
The
corresponding date of the withdrawal date is the corresponding date after one
period, for example, if the withdrawal date is May 9th,
then
the corresponding date for the second period of a three-month period is August
9th
of the
same year, the corresponding date for the second period of a six-month period
is
November 9th
of the
same year.
2.3
If
Party B does not repay the loan after the maturity date, the rate of the overdue
portion is set by the same method above.
2.4
If
China People’s Bank adjusts its method in setting the rate of loans, then the
rate of this Loan shall be adjusted accordingly.
Clause
3. Collateral and Guaranty
3.1
Party
B will provide collateral to guarantee its performance of this
contract.
3.2
The
guaranty will cover the difference between the loan amount under this contract
and the deposit Party B has already paid to Party A, the amount is RMB 10
MILLION (hereinafter, the “Principal”).
3.3
The
guaranty covers: Principal, interest, penalty interest, compounding interest,
damages, keeper’s fee, and all the other costs incurred by Party B to realize
its creditor’s rights.
3.4
The
parties agree on the following regarding the collateral:
3.4.1
The
collateral shall be supervised by China National Foreign Trade Transportation
Corporation, Jiangsu subsidiary. The detailed information about the collateral
could be found under the “ Collateral Information” (or “List of Collaterals”)
Section of the Commodity Financing Collateral Supervision Agreement No.
TS-G5-05309.
3.4.2
When Party B pledged the collateral, the value of the collateral is only used
to
calculate the collateral ratio under this contract. This value shall not be
used
to estimate the value of the collateral when Party A disposes the collateral.
It
shall not limit Party A’s rights with regards to the collateral.
3.4.3
While the lien on the collateral continues, Party A has the right to adjust
the
value of the collateral according to the change of its market value. If the
ratio of collateral over the unpaid loan balance is less than 125% (the range
is
125%-200%, the lowest is 125%), Party B shall within five business days after
receiving a notice from Party A, add more collateral or submit more deposits
to
restore the collateral ratio back to its original level. Otherwise, Party A
shall have the right to dispose the collateral according to this contract and
has priority in repayment from such funds. If the ratio of the collateral is
over the unpaid loan balance is less than 120% (the range is 120%-180%, the
lowest is 120%), Party A shall have the right to dispose the collateral
according to this contract and has priority in repayment from such
funds.
3.5
Both
parties reach the following agreement regarding to the transfer and supervision
of the collateral:
3.5.1
The
transfer of collateral under this contract shall be governed by the Commodity
Financing Collateral Supervision Agreement signed by Party A, Party B, and
the
Supervisor. Party A and Party B shall send a Collateral Notice (or a Notice
of
the Minimum Requirements of the Type and Price of Collateral) to the Supervisor
and the Supervisor shall issue a custody certificate to Party A and Party B
after verifying the accuracy of the information contained therein. The custody
related fees and method of payment shall be governed by the Commodity Financing
Collateral Supervision Agreement.
3.5.2
The
List of the Collateral under this contract shall be issued to Party A by the
supervisor. The property title certificate of the collateral, receipts, and
other related materials shall be confirmed and sealed by both parties, and
then
kept by Party A.
3.5.3
If
Party B fully performs its obligation after the loan matures or Party B prepays
the loan, Party A shall notify the Supervisor to return the collateral to Party
B according to the Commodity Financing Collateral Supervision
Agreement.
3.6
Both
parties reach the following agreement regarding to the safe keeping and
withdrawal of the collateral:
3.6.1
If
Party A cannot keep the collateral properly and causes the damage or loss
thereof, Party B can ask Party A to deposit the collateral with a third party
for safe keeping. The related expenses shall be borne by Party B.
3.6.2
If
the collateral provided by Party B is damaged or the value of the pledged goods
may be diminished significantly so as to potentially jeopardize the rights
of
Party A, and Party B refuses to provide the sufficient guaranty thereof, Party
A
can auction or sell the collateral to realize its creditor’s rights under this
contract with the proceeds from the auction or sale, or Party A may choose
to
deposit the collateral with a third party. The related expenses shall be borne
by Party B.
3.7
Both
parties reach the following agreement regarding the insurance of the
collateral:
3.7.1
Before the collateral is transferred to the Supervisor and the issuance of
the
“List of the Collaterals”, Party B shall obtain basic property insurance and any
additional insurance from certain insurance agencies. The term of the insurance
shall not be shorter than that of this contract. The amount insured shall not
be
less than the sum of the Principal and interest under this contract.
3.7.2
Party B shall specify in the insurance policy that the Party A is the first
beneficiary of the insurance. The insurance policy shall not contain any clause
which may limit Party A’s rights. The insurance certificate shall be kept by
Party A. Once the insurance policy is triggered, the insured party shall
transfer the insurance compensation to an account designated by Party A; if
before the insurance policy is triggered and Party B has performed its
obligations under this contract, Party A shall return the insurance certificate
back to Party B.
3.7.3
When the contract is still effective, Party B shall not discontinue or revoke
the insurance for any reason. If insurance is stopped or revoked, Party A has
the right to insure the goods for Party B. Party B shall cover all the related
expenses.
3.7.4
As
to the insurance compensation, Party B agrees the Party A has the right to
choose the following way to dispose it and agrees to provide necessary
help:
A.
Repay
or repay in advance the Principal and interest of the loan under this contract
and the related expenses;
B.
Transformed to a CD, the CD is used as pledge;
C.
With
Party A’s agreement, to repair the collateral to restore its value;
D.
Deposited with a third party designated by Party A;
E.
Party
B can dispose the insurance compensation freely after providing a new pledge
meets the requirement of Party A.
Xxxxxx
4.
Withdrawal
4.1
Party
B must meet the following condition to withdraw the loan, otherwise, Party
A
does not have the obligation to provide the loan to Party B:
A.
Complete the loan application as required by Party A;
B.
Party
B has completed pledge process as required by Party A;
C.
Party
A receives the List of the Collateral from the supervisor;
D.
Party
B submitted all the legal document related to this loan contract to Party A,
including but not limited to the property right certificate of the collateral,
receipts, insurance policy and other related materials;
E.
There
is no breach of this contract.
4.2
Party
B shall submit a withdrawal application three days in advance of the withdrawal.
Once the application is submitted, it can not be revoked without a written
approval of Party A.
4.3
After
Party B meets all the condition set by Party A, Party A shall wire the loan
amount into a bank account owned or designated by Party B in Party A’s banking
system.
Name
of
the account: Xxxxxx Xxxxx Electron Co., Ltd.
Account
No.: 1104025019200107461
Bank:
Danyang ICBC
Clause
5
Repayment
5.1
Party
B shall pay full amount of the interest according to this contract, and it
will
pay
the
Principal all at once.
5.2
One
business day before the interest or Principal is due, Party B shall wire enough
fund into its bank account opened in Party A’s bank system to cover the due
Principal, interest and other related expense, and shall authorized Party A
to
withdraw the fund on the due date.
5.3
If
the fund in Party B’s bank account is not sufficient to cover all the Principal,
interest and related expenses, Party A has the right to decide the order of
payment.
5.4
If
Party B wants to pay off all or part of the loan in advance, it shall notify
Party A in writing 10 business days before the repayment.
5.6
When
repay the loan in advance, Party B shall pay all the Principal, interest and
other related expenses under this contract up to the repayment date. The repaid
amount shall not be re-withdrawal.
5.7
Any
repayment or the advance repayment of the loan shall be in the same currency
as
the loan.
Clause
6
the Realization of the pledge right
6.1
If
Party B does not repay the loan when it is due or when Party A announce the
loan
is due before the original due date according to the terms of this contract,
Party A has the right to dispose the collateral and get compensated from the
fund derived.
6.2
When
Party A disposes the collateral, Party B shall fully corporate and not to set
any obstacles.
6.3
If
Party B does not repay the loan Principal, interest or other related expenses
at
the due date, Party A has the right to dispose the collateral.
6.4
Party
A has the right to dispose the collateral if any situation under 3.4.3
happens.
6.5
Under
the following situations, Party A can dispose the collateral in advance, and
get
compensated from the fund derived:
6.5.1
If
under this contract, the liability has been partially or fully generated and
the
contract has not yet been fully performed, the contract is dissolved according
to the contract law.
6.5.2
If
Party A wants to retract the loan according to this contract and its lien has
not been fully realized.
6.5.3
If
the situations under 8.11 , 8.12 happen and Party B does not provide other
collateral.
6.5.4
If
Party A can exercise its pledge rights under the terms of this
contract.
6.6
The
pledge under this contract includes the interest generated by the collateral,
and the insurance compensation generated because of the damage of the
goods.
Clause
7
Statement and Warranty of Party B
Party
B
makes the following statements and warrants to Party A and they shall remain
effective during the contract period.
7.1
Party
B shall have legal right to borrow, shall have the qualification and ability
to
sign and perform the contract.
7.2
All
the documents provided to Party A are true, accurate, complete and effective
in
all aspects. There is no false record, material overlook or misleading
statement.
7.3
Party
B has gained the authority and approval to sign this contract. Signing and
performing of this contract shall not violate Party B’s charter or any related
law and regulation. This contract does not contradict with any contract Party
B
already signed or still under negotiation.
7.4
Party
B does not withhold any information regarding litigation, arbitration
matters.
7.5
Party
B makes the following statement and warranty regarding its pledge under this
contract:
7.5.1
Party B is the sole, valid, and legal owner of the collateral under this
contract. There is no dispute regarding to the ownership or administration
right
of the collateral.
7.5.2
Party B voluntarily provide the collateral under this contract, all the
expression made under this contract is real.
7.5.3
All
the collateral under this contract are pledgeable and does not have any
limitation on them.
7.5.4
Party B shall provide a full and reasonable explanation to any deficiency of
the
pledged goods under this contract.
7.5.5
The
pledged goods are not pledged, transferred before the signing of this
contract.
7.5.6
If
Party B does not perform its liability under this contract, with other pledge
contract or not, Party A has the right to ask Party B to should its pledge
responsibility within the scope of this pledge contract, and Party B has given
up the right to raise objections.
Clause
8
Party B’s promise
Party
B
makes the following promises:
8.1
Party
B shall use the loan according to the loan period and usage of the loan
specified in this contract. The borrowed fund shall not be used in any ways
in
securities market, futures market, or other investment related to the stock.
The
fund shall not be used in any way which is prohibited by law and
regulation.
8.2
Party
B shall pay the principle, interest and other amount due as specified under
this
contract.
8.3
Party
B shall provide financial accounting material such as the balance sheet, cash
flow chart, and income statement as required by Party A. Party B shall actively
corporate with Party A to enable Party A to better understand its production,
management and financial situations.
8.4
Party
B shall not engage in the following activities unless it has notified Party
A 30
days in advance and obtained a written approval from Party A or has made a
satisfactory arrangement for Party A’s creditor right: leasing, share structure
change, alliance, merger, acquisition, joint venture, split, capital reduction,
major asset transfer, transfer of debt or other activities which might affect
Party A’s right as creditor.
8.5
Party
B shall notify Party A of the following changes as soon as
possible:
A.
There
is a change in Party B’s Charter, scope of business, registered capital, legal
person, address, telephone number;
B.
There
is a halt of the business, dissolution, winding, revocation of license,
application to bankruptcy;
C.
Party
B is involved or possibly involved in a significant economic dispute,
litigation, arbitration, or its asset is seized, attached, or
supervised.
D.
Member
of the board of directors or the management is involved in a economic crime
or
dispute;
E.
There
is a dispute as to the property ownership of the pledged goods.
8.6
Party
B shall notify Party A of any major transactions as soon as
possible.
8.7
Party
B shall sign the notice to pay the loan sent by Party A in a timely
manner.
8.8
During the effective period of the contract, Party B shall not harm Party A’s
interest by providing pledge to a third party.
8.9
Party
B shall not transfer or give away the pledged goods under this contract as
long
as the contract is still effective.
8.10
Party B shall be responsible for all the cost related to this contract. The
costs include but are not limited to legal service, evaluation, examination,
storage, supervision, trade or litigation.
8.11
If
Party B’s action will reduce the value of the pledged goods, Party B shall stop
its action. If Party B causes the reduction of the value of the pledged goods,
it has the obligation to restore the value, or provide a new warranty with
the
equivalent value of the reduced value.
8.12
while the lien is continuing, if the value of the collateral is diminished
or
the collateral is damaged or lost due to third party’s actions, the compensation
received shall be deposited into an account designated by Party A. If Party
B
can not provide new collateral satisfactory to Party A, Party B agrees that
the
compensation received shall become part of the collateral, together with the
undamaged portion of the collateral. If Party B provides new collateral
satisfactory to Party A, Party A shall return the compensation to Party
B.
8.13
If
Party A’s lien is jeopardized or potentially jeopardized by any third party,
Party B is obligated to notify Party A immediately and assist Party
A.
8.14
After the effectiveness of this contract, If Party A transfers the collateral
to
a third party, Party B shall continue to perform its obligation under the
contract.
8.15
After the repayment in full by Party B under the contract, Party B is no longer
obligated to provide the collateral. If Party B’s repayment is adjudicated to be
invalid, Party B shall continue to perform its obligation under the contract.
8.16
Without the written consent from Party A, Party B shall not transfer in whole
or
in part its rights or obligations under the contract.
Clause
9
Party A’s Covenants
Party
A
covenants the following with Party B:
9.1
Party
A is obligated to disburse the fund to Party B.
9.2
Party
A shall keep confidential such materials and information provide by Party B
as
related to Party B’s credit, finance, manufacture and business operation, unless
otherwise covered by this contract or exempt by laws and
regulations.
9.3
Party
A is obligated to keep the collateral in good repairs. For details, please
refers to Commodity Financing Pledge Supervision Agreement executed by Party
A,
Party B and supervisor.
9.4
During the term of the contract, when Party A is transferring the lien, it
shall
notify Party B in a timely manner.
9.5
For
the disposition of the collateral, the proceeds received shall be first applied
to the payment and the balance shall be returned to Party B.
Clause
10
Events of Default
10.1
It
shall be a Party B event of default if one of the following occurs:
A.
Party
B fails to pay any principal, interest or any other amount due; misuses the
loan
proceeds; fails to perform its obligations under this contract; or breaches
any
representation, warranty or covenants;
B.
There
is material adverse change affecting Party A’s lien and Party B fails to provide
any additional collateral satisfactory to Party A;
C.
Party
B fails to pay any debt due (including accelerated debts), or fails to perform
or breaches obligations under other contracts, such that such failure has or
may
adversely affect its performance under this contract.
D.
There
are major adverse changes in the business operation of Party B, such that such
change has or may adversely affect its performance under this
contract.
E.
Assets
of Party B have been attached, confiscated, or seized such that such action
has
or may adversely affect its performance under this contract.
F.
Party
B is involved or may getting involved in major economic disputes, litigation
or
arbitration, such that such proceeding has or may adversely affect its
performance under this contract;
G.
Party
B is investigated or fined by the law enforcement agencies, tax authorities,
or
other government authorities, such that such penalty has or may adversely affect
its performance under this contract;
H.
The
abnormal change in the major investor in Party B oir its key management
personnel, or when such person is under criminal investigation such that such
action has or may adversely affect its performance under this contract;
I.
The
cease of operation, dissolution, accounting, reorganization, revocation of
license, involuntary filing of bankruptcy of Party B;
J.
Any
false representation and warranty in Clause 7 of this contract;
K.
The
invalidation of the contract is due to the fault of Party B;
L.
Any
other event or circumstances that may adversely affect Party A’s perfection of
its lien under this contract.
10.2
If
Party B breaches and Party A wants to cure, Party B shall take such measures
that are satisfactory to Party A within the time period specified by Party
A.
Otherwise, Party A shall have the right to take any of the action by itself
or
in combination below:
A.
Stop
disbursing loan proceeds to Party B and cancel the balance of the loan in whole
or in part;
B.
Accelerate the loan in whole or in part and make it due and payable
immediately;
C.
Dispose directly the collateral and apply funds received for payment of the
loan
under this contract;
X.
Xxxxxx
Party B to pay Party A’s damages, including but not limited to, attorney’s cots,
legal fees, and other expenses related to the realization of the
lien;
E.
Any
other remedies available under the laws and the regulations or this
contract.
10.3
When
the loan is due (including acceleration of the loan) and Party B fails to pay
the loan, Party A shall have the right to add a 40% penalty interest to the
original loan interest rate from the due date. For any overdue interest, the
interest shall be compounded at the penalty rate.
10.4
For
any misuse of the loan proceeds of Party B, Party A shall have the right to
add
a 50% penalty interest to the original loan interest rate from the date of
misuse. For any overdue interest during the period of misuse, the interest
shall
be compounded at the penalty rate.
10.5
If
the event described in 10.3 and 10.4 occur simultaneously, the penalty rate
shall be the higher one.
10.6
When
the loan is due (including acceleration of the loan) and Party B fails to pay
the loan principal, interest, or other fees, Party A has the right to offset
corresponding amount from Party B’s bank accounts established with Party A or
ICBC or its branches. If the currency of the offset amount is different from
that under this contact, the offset amount shall be determined according to
the
foreign exchange purchase rate published by Party A on the date of the setoff.
Any interest and fees accrued from the offset date to the repayment date (Party
A according to the national foreign currency management policy, coverts the
currency of the offset amount in to the currency of this contract), together
with any difference caused by the fluctuation of the foreign exchange rate
shall
be borne by Party B.
Clause
11
Effectiveness, amendment, cancellation and termination
11.1
This
contract shall be established as the date of execution by the signatures (
or
seals) of the legal persons of Party A and Party B (authorized representative
or
authorized signatory) and the affixation of the official seals of the parties
hereto. The contract shall be effective from the verification of the collateral
by the supervisor and issuance of related certificates and shall terminate
when
Party B performs in full all of its obligations under this
contract.
11.2
Any
amendment of the contract shall be in writing and agreed to by both parties.
Such amendments shall become part of the contract and have the same legal effect
of this contract. Other provisions of the contract unaffected by any amendment
shall continue to be valid. Before the effectiveness of any amendments, the
existing provisions shall be continue to be valid.
11.3
After Party B performs in full all of its obligations under this contract,
Party
A shall notify the supervisor to free the collateral.
11.4
The
amendment and cancellation of this contract shall not affect any remedies
entitled by the parties. The dispute resolution provision shall survive the
cancellation or termination of the contract.
Clause
12
Dispute resolution
12.1
The
laws of the People’s Republic of China shall apply to the establishment,
validity, interpretation, performance and dispute resolution of this contract.
Both parties shall resolve any dispute arising from or related to this contract.
If such negotiation is not successful, the dispute shall be resolved by
litigation at the district court having jurisdiction over Party A.
Clause13
Other terms
13.1
If
Party A does not exercise, exercise in part or delay in exercising any rights
under this contract, it shall not constitute waiver or amendment of such right
or any other right and it shall not affect its exercising of this right or
other
right in the future.
13.2
Any
invalidity or inapplicability of a provision of this contract shall not affect
the validity or applicability of any other provision of this contract, or the
validity of this contract as a whole.
13.3
The
terms in this contract: “related party”, “related party‘s relations”, ‘related
party transactions’, “major investor”, “key management personnel” shall have the
same meaning as those in the Corporate Accounting Guidelines- the Disclosure
of
the Related Party Relations and Transactions.
13.4
This
contract has two counterparts, Party A and Party B shall each hold a copy with
the same legal effects.
Clause
14
Miscellaneous
14.1___________________________
14.2___________________________
Clause
15
Annexes
15.1
The
Annexes of this contract is an inalienable part of the contract, have the same
legal effect as the contract.
15.2
the
Annexes of the contract include:
Party
A:
ICBC Seal
Signature
by Authorized Representative: ________ (illegible)
Date:
April 28 ,2008
Party
B:
Danyang Lihua Electron Co., Ltd. Seal
Signature
by Legal Person or Authorized Representative: Xxx, XxxxXxx
Date:
April 28, 2008
