PLEDGE AND SECURITY AGREEMENT
Execution
EXHIBIT 7.04
SECURITY
AND PLEDGE AGREEMENT
This
PLEDGE AND SECURITY
AGREEMENT, dated 22 November 2010 (as amended, supplemented or otherwise
modified from time to time, this “Agreement”),
by and among Yang Tianfu (杨天夫), holder of the
People’s Republic of China passport No. X00000000 (together with his successors
and permitted assigns, the “Pledgor”)
as pledgor, and China Development Bank Corporation Hong Kong Branch (the “Lender”)
as pledgee.
WITNESSETH:
WHEREAS, by a term loan
facility agreement dated 22 November 2010 between Harbin Electric, Inc., a
Nevada corporation, as borrower (the “Borrower”)
and the Lender as lender (the “Loan
Agreement”), the Lender has agreed to make available to the Borrower a US
Dollar term loan facility and a RMB term loan facility in an aggregate principal
amount of up to USD35,000,000 and RMB100,000,000 respectively (collectively, the
“Facilities”)
subject to the terms and conditions of the Loan Agreement;
WHEREAS, in consideration of,
and as a condition to the availability of the Facilities, the Pledgor has agreed
to enter into this Agreement with the Lender;
WHEREAS, the Pledgor is the
legal and beneficial owner of 9,663,354 shares of common stock par value
USD0.00001 of the Borrower (the “Common
Stock”), of which 7,000,000 shares are initially pledged to the Lender
(the “Initial
Pledged Shares”); and
WHEREAS, capitalized terms
used herein but not defined herein shall have the respective meanings ascribed
thereto in the Loan Agreement;
NOW, THEREFORE, in
consideration of the premises set forth above, the terms and conditions
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section
1. Pledge. The Pledgor
hereby pledges to the Lender, and grants to the Lender a security interest in,
the following (the “Pledged
Collateral”):
(a) all
of the Initial Pledged Shares;
(b) all
additional Pledged Shares (together with the Initial Pledged Shares, the “Pledged
Shares”) and Pledged Cash from time to time pledged pursuant to Section
14;
(c) all
dividends, cash, instruments and other property, from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the foregoing and in all profits and other distributions to which the Pledgor
shall at any time be entitled in respect of all of the foregoing;
(d) all
other payments due or to become due to the Pledgor in respect of any of the
foregoing, whether under any partnership agreement, limited liability company
agreement, other agreement or otherwise, whether as contractual obligations,
damages, insurance proceeds or otherwise;
1
(e) all
of the Pledgor’s claims, rights, powers, privileges, authority, puts, calls,
options, security interests, liens and remedies, if any, under any partnership
agreement, limited liability company agreement, other agreement or at law or
otherwise in respect of any of the foregoing;
(f) all
of the Pledgor’s rights under any partnership agreement, limited liability
company agreement, other agreement or at law to exercise and enforce every
right, power, remedy, authority, option and privilege of the Pledgor relating to
any of the foregoing;
(g) all
other property hereafter delivered in substitution for or in addition to any of
the foregoing;
(h) all
certificates and instruments representing or evidencing any of the foregoing;
and
(i) all
proceeds, including cash, securities, interest, distributions, dividends, rights
and other property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all the
foregoing.
Section
2. Security for
Obligations. This Agreement secures and the Pledged Collateral is
security for the following obligations (the “Secured
Obligations”):
(a) the
due and punctual payment by the Borrower of (i) the unpaid principal of and
interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the loans made to the Borrower under
the Loan Agreement, when and as due, whether at maturity, by acceleration, upon
one or more dates set for prepayment or otherwise and (ii) all other monetary
obligations of the Borrower to the Lender under the Loan Agreement and each
other Finance Documents to which it is a party, including obligations to
pay fees, expense and indemnification obligations, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other
similar proceeding, regardless of whether allowed or allowable in such
proceeding);
(b) the
due and punctual performance of all covenants, agreements, obligations and
liabilities of the Borrower under or pursuant to this Agreement and each other
Finance Documents to which it is a party; and
(c) the
due and punctual payment and performance of all the covenants, agreements,
obligations and liabilities of any guarantor or pledgor (including the Pledgor
under or pursuant to this Agreement) under or pursuant to the Loan Agreement and
each other Finance Documents to which it is a party (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such
proceeding).
2
Section 3.
Delivery of Pledged
Collateral. All certificates or instruments representing or evidencing
the Pledged Collateral shall be delivered to an agent in New York appointed by
the Lender (the “Agent”)
and held by the Agent on behalf of the Lender pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form to be provided by
the Pledgor. Upon the occurrence and during the continuance of a Potential Event
of Default or an Event of Default, the Lender shall have the right but no
obligation, at any time in its discretion and without notice to the Pledgor, to
transfer to or to register in its name or in the name of any of its nominees any
or all of the Pledged Collateral. In addition, the Lender shall have the right
but no obligation at any time to exchange certificates or instruments
representing or evidencing any of the Pledged Collateral for certificates or
instruments of smaller or larger denominations.
Section
4. Representations and
Warranties. The Pledgor represents and warrants that each of the
following representations is true on the date of this Agreement and shall be
true on each Utilisation Date and on each date on which an amendment to this
Agreement is delivered pursuant to Section
14:
(a) (i) The
Pledged Shares have been duly authorized and validly issued and are
fully paid and non-assessable.
(ii) The
Pledgor holds no options, warrants or other agreements with respect to
any equity interests in the Borrower and there are no outstanding options,
warrants or other agreements with respect to any equity interests in the
Borrower, except as disclosed in the Borrower’s Annual Report on Form 10-K for
its fiscal year ended 31 December 2009, as filed with the United States
Securities and Exchange Commission.
(iii) The
Pledgor is not in default in the payment of any portion of any mandatory capital
contribution, cash call, or other funding, if any, required to be made under any
governing document relating to any of the Pledged Collateral.
(iv) The
Pledgor is not in violation or default of any other material provisions of any
such governing document.
(v) No
Pledged Collateral is subject to any defense, offset or counterclaim, nor, to
the Pledgor’s knowledge, have any of the foregoing been asserted or alleged
against the Pledgor by any person or entity.
(b) The
Pledgor is the legal and beneficial owner of the Pledged Collateral pledged by
it hereunder free and clear of any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security interest, lien, charge,
easement (other than any easement not materially impairing usefulness or
marketability), encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any finance
or capital lease, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing or any sale and
leaseback transaction) (“Lien”),
except for the Lien and security interest created by this
Agreement.
(c) The
pledge of the Pledged Shares pursuant to this Agreement creates a valid and
perfected first priority security interest in the Pledged Collateral, securing
the payment of all of the Secured Obligations.
3
(d) No
consent, authorization, approval, or other action by, and no notice to or filing
with, any governmental agency or any other person is required either (i) for the
pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement or
for the due execution, delivery or performance of this Agreement by the Pledgor,
or (ii) for the exercise by the Lender of the voting or other rights provided
for in this Agreement or of the remedies in respect of the Pledged Collateral
pursuant to this Agreement, except as may be required in connection with the
disposition of the Pledged Collateral by laws affecting the offering and sale of
securities generally.
(e) The
Pledgor’s obligations under this Agreement are binding and are enforceable
against it in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar legal requirement relating to, or affecting generally the
enforcement of, creditors’ rights and remedies or by other equitable principles
of general application.
(f) No
litigation is pending or, to the Pledgor’s knowledge, threatened against the
Pledgor’s interest in the Pledged Collateral.
(g) No
consent by any person is required for the transfer of the Pledged
Collateral.
(h) There
are no agreements among shareholders or between shareholders and the Borrower
which affect the Pledged Collateral.
(i) The
Pledgor is not acting, and has not agreed to act, in any plan to sell or dispose
of any Pledged Shares in a manner intended to circumvent the registration
requirements of the Securities Act of 1933, as amended, or any applicable state
law.
(j) The
Pledgor has been advised by counsel of the elements of a bona-fide pledge for
the purpose of Rule 144(d)(3)(iv) under the Securities Act of 1933, as
amended, including the relevant interpretations by the Securities and Exchange
Commission, and affirms that the pledge of the Pledged Collateral by the Pledgor
pursuant to this Agreement will constitute a bona-fide pledge for the purpose of
such Rule.
(k) Perfection
of Security Interest under U.C.C.
(i) All
notifications and other actions, including (A) all deposits of certificates
and instruments evidencing any Pledged Collateral (duly endorsed or
accompanied by appropriate instruments of transfer), (B) all notices to and
acknowledgments of any bailee or other Person, (C) all acknowledgments and
agreements respecting the right of the Lender to obtain control (within the
meaning of Article 8 of the U.C.C.) with respect to any Pledged Collateral, and
(D) all filings, registrations and recordings, which are (x) required by the
terms of this Agreement to have been given, made, obtained, done and
accomplished, and (y) necessary to create, preserve, protect and perfect the
security interest granted by the Pledgor to the Lender hereby in respect
of the Pledged Collateral (including all actions that are necessary under
the laws of the People’s Republic of China therefor), have been given, made,
obtained, done and accomplished.
(ii) After
giving effect to all such actions , the security interest granted by the
Pledgor to the Lender pursuant to this Agreement in and to the Pledged
Collateral will be perfected to the maximum extent a security interest in the
Pledgor’s portion of the Pledged Collateral can be perfected under the laws of
any applicable jurisdiction.
4
(l) The
representations set out in Sections 4(a), (b), (d), (g) and (h) above are subject
to the arrangements set out in the Consortium Agreement (as defined in the
Loan Agreement). Notwithstanding the aforesaid, all necessary consent and/or
waiver to enable the Pledgor to enter into and perform the obligations under
this Agreement has been obtained from Baring Asia (as defined in the Loan
Agreement) and such consent and/or waiver remain valid, enforceable and
effective and, having given effect to such consent and/or waiver, nothing
in the Consortium Agreement shall conflict with or operate to restrict or limit
any rights, interest and powers of, or remedies available to, the Lender
conferred by this Agreement.
Section
5. Further Assurances,
Authorization of Financing Statements, Etc.
(a) The
Pledgor agrees that at any time and from time to time, at its cost and expense,
it will promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that the Lender
may reasonably request, in order to perfect and protect the Lien and security
interest granted or purported to be granted hereby or to enable the Lender to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral.
(b) The
Pledgor agrees to defend the title to the Pledged Collateral and the Lien
thereon and security interest therein of the Lender against the claim of any
other person and to maintain and preserve such Lien and security interest until
indefeasible payment in full of all of the Secured Obligations.
(c) The
Pledgor agrees, by itself or through its affiliates, counsel and other
representatives, at any time and from time to time as reasonably requested by
the Lender and at the expense payable by the Pledgor, to (or, if so requested by
the Lender, to authorize the Lender to) file or record financing statements,
amendments to financing statements, and other filing or recording documents or
instruments with respect to the Pledged Collateral in such form and in such
offices to perfect the security interests of the Lender under this Agreement.
The Pledgor hereby also agrees, by itself or through its affiliates, counsel and
other representatives, at any time and from time to time, as reasonably
requested by the Lender and at the expense payable by the Pledgor, to (or, if so
requested by the Lender, to authorize the Lender to) file continuation
statements with respect to previously filed financing statements. The Pledgor
agrees to promptly complete such filings and furnish the Lender with documents
evidencing such filings.
(d) The
Pledgor hereby agrees, by itself or through its affiliates, counsel and other
representatives, at any time and from time to time and at the expense payable by
the Pledgor, to cause the Borrower to timely file all periodic reports required
to be filed by the Borrower under the Securities Exchange Act of 1934, as
amended.
(e) Unless
otherwise provided in this Agreement, the Pledgor agrees not to give any
direction to the Borrower or any register or transfer agent with respect to
the transfer of the Pledged Shares.
(f) The
Pledgor agrees to deliver to the Lender any documents in its possession that
relate to the Pledged Collateral or the Lender’s security interest
therein.
5
(g) The
Pledgor agrees to notify the Lender if a Triggering Event or an Event of
Default occurs.
Section
6. Voting Rights, Dividends,
Etc.
(a) As
long as no Potential Event of Default or Event of Default shall have occurred
and be continuing (or, in the case of subsection (a)(i) of this Section 6, as long as
no notice thereof shall have been given by the Lender to the
Pledgor):
(i)
The Pledgor shall be entitled to exercise any and
all voting and other consensual rights pertaining to its Pledged Collateral
or any part thereof for any purpose not inconsistent with the terms of this
Agreement, the Loan Agreement or any other Finance Document; provided, however, that the Pledgor
shall not exercise or shall refrain from exercising any such right if such
action would have a material adverse effect on the value of the Pledged
Collateral or any part thereof.
(ii)
The Pledgor shall be entitled to receive and retain any
and all dividends paid in respect of its Pledged Collateral, other than any
and all:
(1) instruments
and other property received, receivable or otherwise distributed in respect
of, or in exchange for, any of its Pledged Collateral,
(2) dividends
and other distributions paid or payable in cash in respect of any of its
Pledged Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in-surplus, and
(3) cash
paid, payable or otherwise distributed in redemption of, or in exchange
for, any of its Pledged Collateral,
all of
which shall be forthwith delivered to the Lender to hold as Pledged Collateral
and shall, if received by the Pledgor, be received in trust for the benefit of
the Lender, be segregated from the other property or funds of the Pledgor, and
be forthwith delivered to the Lender as Pledged Collateral in the same form as
so received (with any necessary endorsement).
(iii)
The Lender shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other instruments in
the form to be provided by the Pledgor as the Pledgor may reasonably request for
the purpose of enabling the Pledgor to exercise the voting and other rights
which it is entitled to exercise pursuant to paragraph (i) above and to receive
the dividends which it is authorized to receive and retain pursuant to paragraph
(ii) above.
(b) Upon
the occurrence and during the continuance of a Potential Event of Default or
an Event of Default:
(i) Upon
the Pledgor’s receipt of written notice from the Lender, all rights of the
Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 6(a)(i) above
shall cease, and all such rights shall thereupon become vested in the Lender who
shall thereupon have the sole right to exercise such voting and other consensual
rights.
6
(ii)
All rights of the Pledgor to receive the dividends
which it would otherwise be authorized to receive and retain pursuant to Section 6(a)(ii)
above shall cease, and all such rights shall thereupon become vested in the
Lender who shall thereupon have the sole right to receive and hold as Pledged
Collateral such dividends.
(iii)
All dividends which are received by the Pledgor
contrary to the provisions of paragraph (ii) of this Section 6(b) shall be
received in trust for the benefit of the Lender, shall be segregated from other
funds of the Pledgor and shall be forthwith paid over to the Lender as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
(iv)
The Pledgor shall, if necessary to permit the Lender to
exercise the voting and other rights which it may be entitled to exercise
pursuant to Section
6(b)(i) above and to receive all dividends and distributions which it may
be entitled to receive under Section 6(b)(ii)
above, execute and deliver to the Lender, from time to time and upon written
notice of the Lender, appropriate proxies, dividend payment orders and other
instruments as the Lender may reasonably request. The foregoing shall not in any
way limit the Lender’s power and authority granted pursuant to Section 8
hereof.
Section
7. Transfers and Other
Liens. The Pledgor agrees that it will not, directly or indirectly, (i)
transfer, sell or otherwise dispose of, or grant any option or warrant with
respect to, any of the Pledged Collateral, without the prior written consent of
the Lender, or (ii) create, suffer or permit to exist any Lien upon or with
respect to any of the Pledged Collateral, except for the Lien and security
interest created pursuant to this Agreement.
Section
8. Lender Appointed
Attorney-in-Fact and Proxy. The Pledgor hereby irrevocably constitutes
and appoints the Lender and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact and proxy with full
irrevocable power and authority in the place and stead of the Pledgor and in the
name of the Pledgor or in its own name, from time to time in the Lender’s
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute and deliver any and all documents
and instruments which the Lender may deem necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to the Pledgor representing any
dividend or other distribution or payment in respect of the Pledged Collateral
or any part thereof and to give full discharge for the same and to vote or grant
any consent in respect of the Pledged Shares authorized by Section 6(b) hereof.
The Pledgor hereby ratifies, to the extent permitted by law, all that any said
attorney shall lawfully do or cause to be done by virtue hereof. This power,
being coupled with an interest, is irrevocable until the Secured Obligations are
paid in full. The power of attorney granted by the Pledgor to the Lender
hereunder shall only be exercised by the Lender following the occurrence and
during the continuance of a Potential Event of Default or an Event of
Default.
Section
9. Lender May Perform.
If the Pledgor fails to perform any agreement contained herein, the Lender may
itself perform, or cause performance of, such agreement, and the expenses of the
Lender incurred in connection therewith shall be payable by the Pledgor under
Section 12
hereof and constitute Secured Obligations secured hereby.
7
Section
10. Reasonable Care. The
Lender shall be deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral in its possession if the Lender acts or
omits to act in accordance with any instruction, direction or request delivered
to them in writing. The Lender may rely upon and shall not be liable for acting
or refraining from acting upon any written notice, instruction or request
furnished to it under this Agreement which it believes to be genuine and to have
been signed or presented by the proper party or parties. The Lender shall be
under no duty to inquire into or investigate the validity, accuracy or content
of any such document. It being understood that the Lender shall not have
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Lender has or is deemed to have knowledge
of any such matter, or (ii) taking any necessary steps to preserve rights
against any person with respect to any Pledged Collateral.
Section
11. Remedies upon
Default. If any Event of Default shall have occurred and be
continuing:
(a) The
Lender may exercise in respect of the Pledged Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party after default under the Uniform
Commercial Code (the “Code”)
in effect in the State of New York at that time, and the Lender may also,
without notice except as specified below, sell the Pledged Collateral or any
part thereof in one or more parcels at public or private sale, at any exchange,
broker’s board or at any office of the Lender or elsewhere, for cash, on credit
or for future delivery, and upon such other terms as the Lender may deem
commercially reasonable. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days’ notice to the Pledgor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Lender shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. The Lender may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. The Pledgor hereby waives (i) any claims against the Lender arising
by reason of the fact that the price at which any Pledged Collateral may have
been sold at such a private sale was less than the price which might have been
obtained at a public sale, even if the Lender accepts the first offer received
and does not offer such Pledged Collateral to more than one offeree and (ii) any
and all claims against the Lender in respect of the selection of any part of the
Pledged Collateral, which selection shall be at the sole and absolute discretion
of the Lender.
(b) If
the Lender shall determine to exercise its right to sell all or any of the
Pledged Collateral pursuant to this Section 11, the
Pledgor agrees that, upon request of the Lender, the Pledgor will, at its own
cost and expense:
(i) (for
so long as the Common Stock is listed or quoted on a Trading Market (as defined
in Section 14))
execute and deliver, and use its best efforts to cause the issuer of the Pledged
Shares and its directors and officers to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts and
things, as may be necessary or, in the opinion of the Lender, necessary or
advisable to register such Pledged Shares under the provisions of the Securities
Act of 1933, as from time to time amended (the “Securities
Act”), and to cause the registration statement relating thereto to become
effective and to remain effective for such period as prospectuses are required
by law to be furnished, and to make all amendments and supplements thereto and
to the related prospectus which, in the opinion of the Lender, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission (“SEC”)
applicable thereto;
8
(ii) (for
so long as the Common Stock is listed or quoted on a Trading Market (as defined
in Section 14))
use its best efforts to qualify the Pledged Collateral under the state
securities or “Blue Sky” laws and to obtain all necessary governmental approvals
for the sale of the Pledged Collateral, as requested by the Lender;
and
(iii) do
or cause to be done all such other acts and things as may be necessary to make
such sale of the Pledged Collateral or any part thereof valid and binding and in
compliance with applicable law.
The
Pledgor further acknowledges the impossibility of ascertaining the amount of
damages which would be suffered by the Lender by reason of the failure by the
Pledgor to perform any of the covenants contained in this Section 11 and,
consequently, agrees that, if the Pledgor shall fail to perform any of such
covenants, the Pledgor shall be liable to pay, as liquidated damages and not as
a penalty, an aggregate amount equal to the value of the Pledged Collateral on
the date the Lender shall demand compliance with this Section.
(c) The
Pledgor recognizes that, by reason of prohibitions contained in the Securities
Act and applicable state securities laws, the Lender may, at its option,
elect not to require the Pledgor to register all or any part of the Pledged
Collateral and may therefore be compelled, with respect to any sale of all or
any part of the Pledged Collateral, to limit purchasers to those who will agree,
among other things, to acquire such securities for their own account, for
investment, and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such sale may result in prices and
other terms less favorable to the seller than if such sale were a public sale
without such restrictions and, notwithstanding such circumstances, agrees that
any such sale shall be deemed to have been made in a commercially reasonable
manner. The Lender shall be under no obligation to delay the sale of any of the
Pledged Collateral for the period of time necessary to permit the Pledgor to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if the Pledgor would agree to do
so.
(d) If
the Lender determines to exercise its right to sell any or all of the Pledged
Collateral, upon written request, the Pledgor shall, from time to time, furnish
to the Lender all such information as the Lender may reasonably request in order
to determine the number of shares and other instruments included in the Pledged
Collateral which may be sold by the Lender as exempt transactions under the
Securities Act and rules of the SEC thereunder, as the same are from time to
time in effect.
(e) Any
cash held by the Lender as Pledged Collateral and all cash proceeds received by
the Lender in respect of any sale of, collection from, or other realization upon
all or any part of the Pledged Collateral shall be applied by the
Lender:
9
First, to the payment of the
costs and expenses of such sale, including, without limitation, expenses of the
Lender and its agents including the reasonable fees and expenses of its counsel,
and all expenses, liabilities and advances made or incurred by the Lender in
connection therewith or pursuant to Section 9
hereof;
Next, to the payment of the
Secured Obligations, in such order as the Loan Agreement shall prescribe;
and
Finally, after payment in
full of all of the Secured Obligations, to the payment to the Pledgor, or his
successors or assigns, or to whomsoever may be lawfully entitled to receive the
same as a court of competent jurisdiction may direct.
Section
12. Expenses. The Pledgor
will upon demand be liable to pay to the Lender the amount of any and all
Lender’s commissions and expenses, including, without limitation, the reasonable
fees and expenses of the Lender’s counsel and of any experts and agents, which
the Lender may reasonably incur in connection with (i) the administration of
this Agreement, (ii) the custody or preservation of, sale of, collection from,
or other realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights and remedies hereunder of the Lender, or (iv)
the failure by the Pledgor to perform or observe any of the provisions
hereof.
Section
13. Security Interest
Absolute. All rights of the Lender and security interests hereunder, and
all obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any
lack of validity or enforceability of any provision of or any Finance Document
or any other agreement or instrument relating thereto;
(b) any
change in the time, manner or place of payment of, or in any other term of, or
any increase in the amount of, all or any of the Secured Obligations, or any
other amendment or waiver of any term of, or any consent to any departure from
any requirement of, any Finance Document;
(c) any
exchange, release or non-perfection of any Lien on any other collateral, or any
release or amendment or waiver of any term of any guaranty of, or consent to
departure from any requirement of any guaranty of, all or any of the Secured
Obligations.
Section
14. Additional Pledged Shares
and Pledged Cash.
(a) The
Pledgor agrees that if, at any time, the Share Value (as defined below) of the
Pledged Shares is less than the Top-up Threshold, the Pledgor shall upon
five (5) business days’ written notice of such an event (a “Triggering
Event”) from the Lender in the form set forth in Schedule I attached
hereto, pledge and perfect a first priority security interest in, in favor of
the Lender, such additional shares of the Borrower owned by the Pledgor (“Additional
Pledged Shares”), and to the extent such additional shares of are not
sufficient, cash (“Pledged
Cash”), as may be necessary such that the Share Value of the Pledged
Collateral is increased to the Target Collateral Level. The Pledgor shall
perfect a first priority security interest in such Pledged Cash by placing the
Pledged Cash into an interest bearing cash collateral account maintained by the
Lender over which the Pledgor shall not have any right of withdrawal. For the
avoidance of doubt, the Initial Pledged Shares are not part of the Additional
Pledged Shares.
10
For
purposes of this Section 14 and Section 15, the
following definitions shall apply:
“Market
Value” of the Pledged Shares shall mean the number of Pledged Shares
multiplied by the VWAP of the Common Stock for the preceding 15 Trading Days;
provided, however, that for the purpose
of this Agreement, the VWAP on or before the first Utilisation Date (as defined
in the Loan Agreement) shall in no event be deemed to be higher than US$17.58
per share (as proportionately adjusted hereafter for any stock split,
combination, recapitalization and the like).
“NAV”
means at any time, the value being either of the following, at the election of
the Lender:-
(a) by
reference to the latest audited consolidated financial statements of the
Borrower, the aggregate of the amounts paid up or credited as paid up on
the issued shares of the Common Stock of the Borrower and the amount standing to
the credit of the reserves of the Group, including retained earnings and any
amount credited to the share premium account,
but
deducting:
(i) any
debit balance on the profit and loss account of the Group;
(ii) any
amount in respect of interests of non-Group members in Group
Companies;
(iii) (to
the extent included) any provision for deferred taxation of the Group;
and
(iv) any
amount in respect of any dividend or distribution declared, recommended or made
by any Group Companies to the extent payable to a person who is not a Group
Company and to the extent such distribution is not provided for in the most
recent financial statements,
and so
that no amount shall be included or excluded more than once; or
(b) the
net asset value of the Borrower as shown in its latest audited financial
statements.
“Relevant
Exposure” means, at any time, the aggregate of the amount of the
outstanding Loans and an amount determined by the Lender to be an approximation
of the expected interest payments in respect of the Loans for the following
twelve (12) month period provided that, on each day prior to the first
Utilisation Date, the “Relevant
Exposure” shall be the amount which would have been the Relevant Exposure
had a Utilisation in the amount of, in aggregate, USD35,000,000 and the USD
equivalent of RMB100,000,000 been made on the date of this Agreement in
accordance with the Loan Agreement.
“Share
Value” of the Pledged Shares shall mean, at any time (x) if the Common
Stock is then listed or quoted on a Trading Market, the Market Value or (y) if
not, the NAV multiplied by a fraction of which the numerator is the number of
shares in the Common Stock comprised in the Pledged Shares and the denominator
is the total number of shares of the Common Stock in issue.
11
“Target
Collateral Level” shall mean, at any time (x) if the Common Stock is then
listed or quoted on a Trading Market, 200% of the Relevant Exposure, or (y) if
not, 143% of the Relevant Exposure.
“Top-up
Threshold” shall mean, at any time (x) if the Common Stock is then listed
or quoted on a Trading Market, 167% of the Relevant Exposure, or (y) if not,
such percentage of the Relevant Exposure to be mutually agreed between the
Lender and the Pledgor in writing.
“Trading
Day” shall mean (x) if the Common Stock is listed or admitted for trading
on the New York Stock Exchange, a day on which trades may be made on such
exchange, (y) if the Common Stock is quoted on the Nasdaq National Market, a day
on which trades may be made thereon or (z) if the Common Stock is not so listed,
admitted for trading or quoted, any day other than a Saturday or Sunday or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
“Trading
Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the Nasdaq
Capital Market, the New York Stock Exchange, the Nasdaq Global Market, the
Nasdaq Global Select Market or the OTC Bulletin Board.
“VWAP”
means, for any date, the price determined by the first of the following clauses
that applies: (x) if the Common Stock is then listed or quoted on a Trading
Market, the daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted for trading as reported by Bloomberg Financial
L.P. through its “Volume at Price” functions (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time); (y) if the OTC
Bulletin Board is not a Trading Market, the volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; or (z) if the Common Stock is not then quoted for trading on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the “Pink
Sheets” published by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the average of the highest
closing bid price and lowest closing ask price of any of the market makers for
such security as reported, and in each of the foregoing clauses ignoring any
block trade (which for purposes of this definition means any transfer of more
than 100,000 shares); If the VWAP cannot be calculated for such security on such
date basis, the VWAP of such security on such date shall be the fair market
value as mutually determined by the Pledgor and the Lender.
12
(c) The
Pledgor shall deliver to the Lender an amendment to this Agreement within five
(5) business days following the Pledgor’s receipt of the notice issued pursuant
to Section
14(a), duly executed by the Pledgor and in the form set forth in Schedule II attached
hereto, in respect of such Additional Pledged Shares and Pledged Cash, pursuant
to which the Pledgor shall pledge to the Lender such Additional Pledged Shares
and Pledged Cash. Pursuant to such amendment, the Pledgor shall within the
aforesaid period of time (i) deliver the certificates representing
such Additional Pledged Shares to the Lender in the manner described in
Section 3, (ii)
deliver to the Lender stock power(s) with respect to the Additional Pledged
Shares, (iii) make the necessary Uniform Commercial Code filings to perfect the
Lender first priority security interest in such Additional Pledged Shares or
Pledged Cash in the manner described in Section 5, and (iv)
place the Pledged Cash, if any, into a cash collateral account maintained by the
Lender over which the Pledgor shall not have any right of withdrawal. The
Pledgor hereby authorizes the Lender to attach such amendment to this Agreement
and agree that all Additional Pledged Shares and Pledged Cash listed on any such
amendment delivered to the Lender shall for all purposes hereunder be considered
Pledged Collateral.
(d) In
the event that the Pledgor is required to pledge additional shares of the
Borrower under Clause 4.2 (Conditions of Utilisation) of
and Part B of Schedule 2 (Conditions Precedent) to the
Loan Agreement, the Pledgor shall, within the time required by the Loan
Agreement, deliver to the Lender an amendment to this Agreement duly executed by
the Pledgor and in the form set forth in Schedule II attached
hereto, in respect of such additional shares, pursuant to which the Pledgor
shall pledge to the Lender on behalf of the Lender such additional shares.
Pursuant to such amendment, the Pledgor shall within the time required by the
Loan Agreement (i) deliver the certificates representing such additional shares
to the Lender in the manner described in Section 3, (ii)
deliver to the Lender stock power(s) with respect to the additional shares, and
(iii) make the necessary Uniform Commercial Code filings to perfect the Lender
first priority security interest in such additional shares in the manner
described in Section
5. The Pledgor hereby authorizes the Lender to attach such amendment to
this Agreement and agree that all the additional shares listed on any such
amendment delivered to the Lender shall for all purposes hereunder be considered
Pledged Collateral.
Section
15. Partial Release. If,
at any time, the Share Value of the Pledged Shares exceeds (a) (if the Common
Stock is then listed or quoted on a Trading Market) 250% of the Relevant
Exposure or (b) (if not) such percentage of the Relevant Exposure to be mutually
agreed by the Pledgor and the Lender in writing, and no Event of Default has
occurred and is continuing, the Lender shall, at the cost of the Pledgor and
within fourteen (14) business days following the Lender’s receipt of the
Pledgor’s request for such release, release and discharge such part of the
Pledged Collateral as the Lender in its absolute discretion determines provided
the Value of the Pledged Collateral shall not be less than the Target Collateral
Level after such release and discharge.
Section
16. Amendments, Etc. No
amendment or waiver of any provision of this Agreement nor consent to any
departure by the Pledgor herefrom shall in any event be effective unless the
same shall be in writing, approved and signed by the Lender and the Pledgor, and
then such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
Section
17. Addresses for
Notices. All notices and other communications provided for hereunder
shall be in writing and mailed, telecopied or delivered by hand, if to the
Pledgor or the Lender, addressed to the Pledgor or the Lender at the following
address:
13
the
Lender
China
Development Bank Corporation Hong Kong Branch
Address: Suite
3307-15, 33/F, One International Finance Centre,
Xx. 0 Xxxxxxx Xxxx Xxxxxx, Xxxxxxx,
Xxxx Xxxx
Fax
No.: x000 0000 0000
Attention: Xx.
Xxxx Zhongwen
the
Pledgor
Yang
Tianfu
Address:
Xx. 0 Xx Xxxx Xx Xx, Xx Ping Lu Xx Xxxxx Qu,
Xxxxxx Xxx Xx Xx, Xxxxxx, Xxxxx
000000
Fax
No.: 00-000-0000-0000
or at
such other address as shall be designated by such party in a written notice to
each other party complying as to delivery with the terms of this Section. All
such notices and other communications shall, when mailed, telecopied or
delivered, be effective when deposited in the mails, telecopied with
confirmation of receipt, or delivered by hand to the addressee or its agent,
respectively.
Section
18. Continuing Security
Interest; Transfer of Loan or Obligations. This Pledge Agreement shall
create a continuing security interest in the Pledged Collateral and shall (i)
remain in full force and effect until indefeasible payment in full of the
Secured Obligations, (ii) be binding upon the Pledgor, its successors and
assigns, and (iii) inure, together with the rights and remedies of the Lender
hereunder, to the benefit of and be enforceable by the Lender and its
successors, transferees and assigns. Upon the payment in full of the Secured
Obligations, the Pledgor shall be entitled to the return, within fourteen (14)
business days following the Pledgor’s request and at its expense, of such of its
Pledged Collateral as shall not have been sold or otherwise applied pursuant to
the terms hereof.
Section
19. Indemnity. The
Pledgor shall indemnify each of the Lender and the officers, directors,
employees and agents of the Lender and their respective affiliates and
subsidiaries (an “Indemnified
Party”) against any and all losses, claims, damages, penalties, fines,
liabilities or expenses, including reasonable and documented incidental and
out-of-pocket expenses and reasonable and documented attorneys fees (for
purposes of this Section, “losses”)
incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Agreement, including the costs and
expenses of enforcing this Agreement and the Pledged Collateral hereunder
against the Pledgor (including this Section) and defending itself against any
claim (whether asserted by the Pledgor or the Lender or any other person) or
liability in connection with the exercise or performance of any of its powers or
duties hereunder, except to the extent such losses may be attributable to its
gross negligence or willful misconduct. Each Indemnified Party shall notify the
Pledgor promptly of any claim for which it may seek indemnity. Failure by the
Indemnified Party to so notify the Pledgor shall not relieve the Pledgor of its
obligations under this Section, to the extent the Pledgor has been prejudiced
thereby. The Pledgor shall defend the claim, and the Indemnified Party shall
cooperate in the defense. The Pledgor need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld. The
Pledgor need not reimburse any expense or indemnify against any loss incurred by
an Indemnified Party through its own willful misconduct or gross
negligence.
14
The
obligations of the Pledgor under this Section shall survive the satisfaction and
discharge of this Agreement, the resignation or removal of the Lender and
payment in full of the Secured Obligations through the expiration of the
applicable statute of limitations.
Section
20. Not Liable for
Actions. The Lender and the officers, directors, employees and agents of
the Lender and their respective affiliates and subsidiaries (the “Lender
Parties”) shall not be liable for any action taken or omitted by them
except to the extent that a court of competent jurisdiction determines that the
gross negligence or willful misconduct of the Lender Parties was the primary
cause of any loss to the Pledgor. Notwithstanding any other term or provision of
this Agreement to the contrary, the Lender and the officers, directors,
employees and agents of the Lender and their respective affiliates and
subsidiaries shall not be liable under any circumstances for special, punitive,
indirect or consequential loss or damage of any kind whatsoever including but
not limited to loss of profits, regardless of whether the claim for such loss or
damage is made in negligence, for breach of contract, breach of trust, breach of
fiduciary obligation or otherwise. The provisions of this Section shall survive
the termination or expiration of this Agreement or the resignation or removal of
the Lender.
Section
21. Delegation and Expert
Advice. The Lender may execute any of its powers and perform any of its
duties hereunder directly or through delegates or attorneys and may consult with
counsel, accountants and other skilled persons to be selected and retained by
it. The Lender shall not be liable for the acts of such delegates or attorneys,
or for anything done, suffered or omitted by it in accordance with the advice or
opinion of any such counsel, accountants or other skilled persons. The Lender
may engage and consult, at the reasonable expense of the Pledgor with any legal
adviser and professional adviser selected by it and rely upon any advice so
obtained and each of the Lender and its directors, officers, employees and duly
appointed agents shall be protected and shall not be liable in respect of any
action taken, or omitted to be done or suffered to be taken, in accordance with
such advice.
Section
22. Successor. Any
corporation into which the Lender may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Lender shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of the
Lender, shall be the successor to the Lender hereunder without the execution or
filing of any papers or any further act on the part of any of the parties
hereto.
Section
23. Assignment. The
Pledgor shall not assign or transfer any of its rights or obligations hereunder.
The Lender shall have the full and unfettered right to assign the whole or any
part of the benefit of this Agreement in accordance with the Finance Documents,
and any assignee shall be entitled to enforce and proceed upon this Agreement in
the same manner as if named herein.
15
Section
24. Governing Law; Severability
Terms; Waiver of Immunities. This Agreement shall be governed by, and be
construed and interpreted in accordance with, the law of the State of New York.
Wherever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and without invalidating the remaining provisions of this Agreement.
Unless otherwise defined herein or in the Loan Agreement, terms defined in
Article 9 of the Uniform Commercial Code as in effect in the State of New York
are used herein as therein defined. The Pledgor hereby irrevocably agrees to
appoint prior to the first Utilisation Date in the State of New York an
authorized agent upon whom process may be served in any suit, action or
proceeding arising out of or based upon this Agreement or the transactions
contemplated herein until the Release Date. The Pledgor irrevocably waives any
objection that it may have to the venue of any suit, action or proceeding with
respect to this Agreement or the transactions contemplated hereby in the courts
of the State of New York or the courts of the United States of America, in each
case, located in the Borough of Manhattan, City and State of New York, or that
such suit, action or proceeding brought in the courts of the State of New York
or the United States of America, in each case, located in the Borough of
Manhattan, City and State of New York was brought in an inconvenient court and
agrees not to plead or claim the same. To the extent that the Pledgor has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service of notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, the Pledgor hereby irrevocably waives such immunity in respect of its
Secured Obligations under this Agreement and the Loan Agreement, to the extent
permitted by law.
Section
25. Waiver of Jury Trial.
The Pledgor waives any right it may have to a trial by jury in respect of any
litigation based on, or arising out of, under or in connection with, this
Agreement, or any other Finance Document, or any course of conduct, course of
dealing, verbal or written statement or other action of any loan party or any
secured party.
Section
26. Section Titles. The
Section titles contained in this Agreement are and shall be without substantive
meaning or content of any kind whatsoever and are not part of this
Agreement.
[Remainder
of This Page Intentionally Left Blank]
16
Accepted
and Agreed:
IN
WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly executed and
delivered by its duly authorized officer on the date first above
written.
|
/s/ Tiangu Yan
|
|
|
Name:
Yang Tianfu (杨天夫)
|
CHINA DEVELOPMENT BANK CORPORATION
HONG KONG BRANCH
(as
pledgee)
|
By:
|
/s/ Wang
Wu Ping(王武平)
|
|
|
Title:
|
Alternate
Chief Executive
|
[SIGNATURE
PAGE TO PLEDGE AND SECURITY AGREEMENT]
SCHEDULE
I
NOTICE
Yang
Tianfu (杨天夫)
(the “Pledgor”)
Xx. 0 Xx
Xxxx Xx Xx, Xx Ping Lu Xx Xxxxx Qu, Xxxxxx Xxx Fa Qu, Harbin, China
150060
Dear
Pledgor:
In
accordance with Section 14 of that certain Pledge and Security Agreement, dated
22 November 2010 (the “Pledge
Agreement”), since the Value of the Pledged Shares is less than the
Top-Up Threshold, we hereby notify you that additional Pledged Collateral at
least in the aggregate amount of US$
, either in the form of Additional Pledged Shares or Pledged Cash
or the combination of both, must be delivered to the Lender by
.
Terms
used in this Notice but not otherwise defined herein shall have the same meaning
as in the Pledge Agreement.
China
Development Bank Corporation Hong Kong Branch
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
Sch. I -
1
SCHEDULE
II
PLEDGE
AMENDMENT
This
Pledge Amendment, dated ,
is delivered pursuant to [Section 14(b)/Section 14(c)] * of the Pledge Agreement
referred to below. The undersigned hereby agrees that this Pledge Amendment may
be attached to the Pledge Agreement, dated 22 November 2010, by the undersigned
in favor of China Development Bank Corporation Hong Kong Branch as pledgee
referred to therein and that the additional shares listed on this Pledge
Amendment shall be and become part of the Pledged Collateral referred to in the
Pledge Agreement and shall secure all the Pledgor’s obligations under the Loan
Agreement. The terms defined in the Pledge Agreement or Loan Agreement are being
used herein as therein defined.
Yang
Tianfu (杨天夫)
STOCK
|
Stock
Company
|
Class of Stock
|
Certificate Nos.
|
Par Value
|
Number of Shares
|
Pledged By
|
|||||
|
|
|
|
|
|
* please
delete as appropriate
Sch. II -
1
