Hoku Scientific, Inc. 1288 Ala Moana Blvd., Suite 220 Honolulu, Hawaii 96814, USA Hoku Materials, Inc. 1288 Ala Moana Blvd., Suite 220 Honolulu, Hawaii 96814, USA Re: Loan Implementation Agreement Ladies and Gentlemen:
December
22, 2009
Hoku
Scientific, Inc.
0000 Xxx
Xxxxx Xxxx., Xxxxx 000
Xxxxxxxx,
Xxxxxx 00000, XXX
Hoku
Materials, Inc.
0000 Xxx
Xxxxx Xxxx., Xxxxx 000
Xxxxxxxx,
Xxxxxx 00000, XXX
Re: Loan
Implementation Agreement
Ladies
and Gentlemen:
Reference
is made to the Securities Purchase Agreement (the “Securities Purchase
Agreement”) dated as of September 28, 2009 between Tianwei New Energy
Holdings Co., Ltd., a corporation organized under the laws of the People’s
Republic of China (“Tianwei”) and Hoku Scientific,
Inc., a Delaware corporation (the “Company”). Capitalized terms
used and not defined in this letter agreement shall have the meanings given to
them in the Securities Purchase Agreement unless specified
otherwise.
1. Loan Implementation.
Pursuant to Section 5.12 of the Securities Purchase Agreement, Tianwei has
agreed to cause the Bank to provide the Company with $50,000,000 in aggregate
debt financing (the “Debt Financing”). For good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and accepted, and intending to be legally bound hereby, the parties
hereto hereby agree to implement the Debt Financing as follows:
(a) The Debt
Financing shall be provided to the Company through the Bank in two tranches: a
loan in the amount of $20,000,000 (the “Tranche 1 Loan”) and a loan in
the amount of $30,000,000 (the “Tranche 2 Loan”).
(b) Within
two (2) Business Days after the completion of all actions by or in respect of or
filings with any Governmental Authority required to permit the consummation of
the Tranche 1 Loan, including the approval by the State Administration of
Foreign Exchange of the PRC and the issuance of the related approval
certificate, (i) each of Tianwei and the Company shall, and Tianwei shall cause
the Bank to, execute and deliver an Entrustment Loan Contract in the form
attached hereto as Exhibit A (and,
subject to Section 8.15 of the Securities Purchase Agreement, a Chinese
translation thereof, reasonably acceptable to Tianwei and the Company) (the
“Tranche 1 Loan
Contract”), and (ii) each of Tianwei, the Company and Hoku Materials
shall execute and deliver a Security
(c) Within
two (2) Business Days after the completion of all actions by or in respect of or
filings with any Governmental Authority required to permit the consummation of
the Tranche 2 Loan, including the approval by the State Administration of
Foreign Exchange of the PRC and the issuance of the related approval
certificate, each of Tianwei and the Company shall, and Tianwei shall cause the
Bank to, execute and deliver an Entrustment Loan Contract in the form attached
hereto as Exhibit
E (and, subject to Section 8.15 of the Securities Purchase Agreement, a
Chinese translation thereof, reasonably acceptable to Tianwei and the Company)
(the “Tranche 2 Loan Contract;” and together
with the Tranche 1 Loan Contract, the “Loan Contracts”). Each of
Tianwei and the Company agrees to use best efforts to cause the Tranche 2 Loan
Contract to be executed and delivered, upon the terms and subject to the
conditions set forth herein, within sixty (60) calendar days after the Closing
Date. Upon the terms and subject to the conditions set forth in the Tranche 2
Loan Contract, Tianwei shall advance the Tranche 2 Loan to the Company through
the Bank.
(d) Each of
the Company and Hoku Material agrees to, from time to time upon the request of
Tianwei, execute and deliver such further documents and diligently perform such
other acts and things in any jurisdiction as Tianwei may reasonably request to
fully effect the purposes of the Loan Contracts and the Parent Indemnity and
Subsidiary Guarantee or to further assure the priority status of the security
interests and liens created pursuant to the Security Agreements.
2. Amendment to Securities
Purchase Agreement. Tianwei and the Company hereby agree that the
Securities Purchase Agreement is hereby amended as follows:
(a) The
definition of “Entrustment Loan Contract” set forth in Section 1.01 of the
Securities Purchase Agreement is amended and restated as follows:
2
“Entrustment Loan
Contract” means the Tranche 1 Loan Contract and the Tranche 2 Loan
Contract (as each such term is defined the letter agreement dated as of the
Closing Date among Buyer, the Company and Hoku Materials).”
(b)
Section 3.02 of the Securities Purchase Agreement is amended and restated in its
entirety as follows:
“Section
3.02. Corporate
Authorization. The execution, delivery and performance by the Company of
this Agreement and the other Transaction Documents and the consummation by the
Company of the transactions contemplated hereby and thereby are within the
Company’s corporate powers and have been duly authorized by all necessary
corporate action on the part of the Company. Prior to the date hereof, the
Company has obtained the written approval of NASDAQ with respect to the
consummation of the transactions contemplated by this Agreement by the Company
without obtaining the approval of the Company’s stockholders pursuant to NASDAQ
Listing Rule 5635(f) (the “NASDAQ Exemption”). The
Company has heretofore made available to Buyer a complete and correct copy of
the NASDAQ Exemption. In reliance on the NASDAQ Exemption, no approval of the
stockholders of the Company is required in connection with the consummation of
the transactions contemplated by this Agreement. This Agreement has been, the
other Transaction Documents (other than the Entrustment Loan Contract) will be
at the Closing, and the Entrustment Loan Contract will be upon the execution and
delivery thereof, duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Buyer, this Agreement constitutes,
and the other Transaction Documents (other than the Entrustment Loan Contract)
will constitute at the Closing, and the Entrustment Loan Contract will
constitute upon the execution and delivery thereof, legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except that such enforceability (i) may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws, now or hereafter in effect, affecting or relating to creditors’ rights and
remedies generally and (ii) is subject to general principles of
equity.”
(c)
Section 4.02 of the Securities Purchase Agreement is amended and restated in its
entirety as follows:
“Section
4.02. Corporate
Authorization. The execution, delivery and performance by Buyer of this
Agreement and the other Transaction Documents and the consummation by Buyer of
the transactions contemplated hereby and thereby are within Buyer’s corporate
powers and have been duly authorized by all necessary corporate action on the
part of Buyer. This Agreement has been, and the other (other than the
Entrustment Loan Contract) will be at the Closing, and the Entrustment
3
(d)
Section 6.02(e) of the Securities Purchase Agreement is amended and restated in
its entirety as follows:
“(e) (i)
The Company shall have executed and delivered to Buyer the Investor Rights
Agreement, (ii) Hoku Materials shall have executed and delivered to Buyer the
Supply Agreement Amendments and (iv) the current directors and executive
officers of the Company shall have executed and delivered to Buyer the Lock-Up
Agreements.”
(e)
Section 6.03(d) of the Securities Purchase Agreement is amended and restated in
its entirety as follows:
“(d)
Buyer shall have executed and delivered to the Company the Investor Rights
Agreement and the Supply Agreement Amendments.”
3.
Miscellaneous.
(a) Hoku
Materials hereby represents and warrants to Tianwei that the purpose of the Debt
Financing is in compliance with laws and regulations, and the project relating
to which the Debt Financing is to be used has been approved by the competent
Governmental Authorities if necessary.
(b) If any
provision contained in this letter agreement shall for any reason be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this letter agreement,
but this letter agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
(c) This
letter agreement shall be binding upon and shall inure to the benefit of and be
enforceable by each of the parties hereto and their respective successors and
permitted assigns (but no other persons). Any assignment by the Company or Hoku
Materials of any of its rights or obligations under this letter agreement shall
be subject to the prior written consent of Tianwei.
(d) No
amendment or waiver of any provision of this letter agreement shall be binding
unless executed in writing by each of the parties hereto. No oral amendments or
modifications of this letter agreement shall be binding between the
parties.
4
(f) This
letter agreement shall be governed by and construed in accordance with the law
of the State of New York, without regard to the conflicts of law rules of such
state.
[Remainder of page is intentionally
blank]
5
Very
truly yours,
By:
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/s/
Xxxxx Xxxx
|
||
Title: Legal Representative |
Agreed
and accepted:
HOKU
SCIENTIFIC, INC.
By:
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/s/
Xxxxxx X. Xxxxxx
|
|
Title:
President and CEO
|
HOKU
MATERIALS, INC.
By:
|
/s/
Xxxxxx X. Xxxxxx
|
|
Title:
President and CEO
|
[English
Translation of Tranche 1 Entrustment Loan Contract]
EXHIBIT A TO
LOAN IMPLEMENTATION
AGREEMENT
among
HOKU
SCIENTIFIC, INC.
as
Borrower
as
Entrusting Lender
and
CHINA
CONSTRUCTION BANK CORPORATION SHUANGLIU SUB-BRANCH
as
Agent
ENTRUSTMENT
LOAN CONTRACT
This
Entrustment Loan
Contract (this “Contract”) is entered
into
BY
AND BETWEEN
HOKU SCIENTIFIC, INC. as
borrower, a corporation formed under the laws of the State of Delaware and located at
0000 Xxx Xxxxx Xxxx., Xxxxx 000, Xxxxxxxx, Xxxxxx 00000, the United States of
America, its fax number being + 0 000-000-0000 and its telephone number being +
0 000-000-0000 (“Party
A”);
TIANWEI NEW ENERGY HOLDINGS CO., LTD.
as entrusting lender, located at No 0, Xxxxxxx Xxxx, Xxxxxxxxx
Airport Economic Development Zone, Chengdu, China 610200 with Xxxxx Xxxx as its
legal representative (or principal officer), its fax number being +86-28-6705-
0035 and its telephone number being x00-00-0000-0000 (“Party B”); and
CHINA CONSTRUCTION BANK CORPORATION
SHUANGLIU SUB-BRANCH as agent, located at
[address, post code] with [•] as its principal officer, its fax number being [•]
and its telephone number being [•] (“Party C”);
Party A,
Party B and Party C hereinafter are collectively referred to as the “Parties” and individually as a
“Party”.
WHEREAS
Upon the
request of Party A, Party B hereby entrusts Party C to release an entrustment
loan to Party A.
NOW,
THEREFORE upon consultation, the Parties hereto agree as follows:
1.
|
LOAN
AMOUNT
|
The
amount of the loan that Party B entrusts Party C to release to Party A hereunder
shall be U.S. Dollar TWENTY MILLION (the “Loan”).
2.
|
PURPOSE
OF THE LOAN
|
Party A
shall utilize the Loan for the purpose of satisfying vendor payables outstanding
as of the date hereof, payables relating to pilot testing and achieving at least
40 metric tons of solar-grade polysilicon that meet customer specifications at
the polysilicon plant currently being constructed by Hoku Materials, Inc., a
wholly-owned subsidiary of Party A (“Hoku Materials”), in
Pocatello, Idaho, and other uses approved by the board of directors of Party A.
Party A hereby guarantees that such purpose shall comply with applicable laws,
regulations, rules, and policies of PRC and of the country where Party A is
located. Party A may not utilize any part of the Loan for any other purpose
without
consent
of Party B and a written notice of such consent to Party
C.
3.
|
TERM
OF THE LOAN
|
The term
of the Loan shall be two years, commencing from the effective date hereof and
expiring on the second anniversary of the effective date hereof (the “Term”).
Where the
above commencement date is inconsistent with the date set forth on the Loan- to
Deposit Certificate (“LDC”, or Loan Receipt), the
date set forth on the LDC for the first advance of the Loan shall be the
commencement date of the Term and the expiry date of the Term shall be adjusted
accordingly. The LDC shall constitute an integral part of this Contract and have
the equal legal force as this Contract.
4.
|
INTEREST
RATE ON THE LOAN, INTEREST CALCULATION AND
SETTLEMENT
|
The
interest rate on the Loan shall be 5.94% per annum (such interest shall be
calculated on a daily basis and the daily interest rate shall equal to the
annual interest rate divided by 360 days).
The
interest on the Loan shall be calculated and settled by the following
methods:
The
interest on the Loan shall be calculated on the basis of the actual number of
days elapsed in a year of 365 days and settled quarterly in arrears at the end
of each quarter of the bank (each, an “interest settlement
date”).
5.
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DELIVERY
OF THE ENTRUSTMENT FUNDS AND RELEASE OF THE
LOAN
|
5.1
|
Party
B shall deliver a sufficient amount of the entrustment funds to Party C
prior to the release date set forth on the Notification to Release
Entrustment Loan.
|
The
entrustment loan fund account hereunder is not and shall not be construed as
Party B’s deposit account with Party C and the balance therein is not and shall
not be construed as Party B’s deposit balance with Party C. Such account is
established only for the purpose of Party C’s internal account treatment and no
interest shall accrue on the balance in such account.
5.2
|
Conditions
precedent to advance the
Loan:
|
|
(1)
|
Party
C has received the entrustment funds, and such funds are free of seizure,
freezing or mandatory transfer by any competent
authority;
|
|
(2)
|
Party
C has received the Notification to Release Entrustment Loan from Party
B;
|
2
(3)
|
Party
A has opened a special foreign exchange deposit account, where the Loan is
in a foreign currency;
|
(4)
|
neither
Party A nor Party B has breached any provision
herein.
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5.3
|
Where
the amount of the entrustment funds actually delivered by Party B to Party
C is less than the amount of the advance agreed to be released, Party C
may refuse the release. If Party B has expressly instructed Party C in the
Notification to Release Entrustment Loan to release the loan in the amount
of the entrustment funds
actually delivered, Party C may release the loan to Party A in such amount
as actually delivered, and Party A shall not raise any objection
thereto.
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|
5.4
|
The
Loan shall be advanced in accordance with the schedule specified below:
The advance schedule shall be as
follows:
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Advance
Date(d/m/y)
|
Amount
|
|
1
|
effective
date of this Contract
|
US$20
million
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5.5
|
Where
Party C fails to release the Loan in accordance with this Contract due to
any reason attributable to Party B, Party B shall be solely liable to
Party A for such failure and Party C shall not be liable in any
way.
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6.
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SECURITY
FOR THE LOAN
|
6.1
|
The
Loan shall be secured in the form of items (1) and (2)
below
|
(1)
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a
security agreement to be executed by Party A, Party B and Hoku Materials;
and
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(2)
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a
mortgage to be executed by Party B, Hoku Materials and Alliance Title
& Escrow Corp.
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6.2
|
Where
registration is required for the security to be effective or enforceable,
Party B shall be solely responsible for such
registration.
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6.3
|
Both
the security provider and the security shall be supervised by Party B
alone, unless otherwise agreed between Party B and Party C in
writing.
|
7.
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REPAYMENT
|
3
7.1
|
General
Principles of Repayment
Unless
Party A and Party B have agreed otherwise in writing and notified Party C
of such agreement in writing, Party A’s repayment hereunder shall be in
the order of interest first and principal second adhering to the principle
that the interest shall be fully repaid concurrently with the repayment in
full of all the principal amounts.
|
7.2
|
Interest
Payment
Party
A shall pay Party B through Party C any due interest on each interest
settlement date. The first interest payment date shall be the first
interest settlement date after advance of the Loan. All the interest and
principal amounts outstanding shall be paid in full on the date the Term
expires.
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7.3
|
Principal
Repayment
Party
A shall repay the principal of the Loan in accordance with the following
schedule:
|
Repayment
Date(d/m/y)
|
Amount
|
|
1
|
second
anniversary of the
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US$20
million
|
effective
date of this
|
||
Contract
|
In case
of any adjustment to the above schedule, Party A and Party B shall enter into a
written agreement and notify Party C in writing of such agreement.
7.4
|
Repayment
Method
Party
A shall deposit a sufficient amount into its bank account at Party C
before the repayment date and each interest settlement date and transfer
such amount to repay the Loan (Party C may also debit such amount from
such account to repay the Loan), or transfer such amount from another bank
account of Party A to repay the
Loan.
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7.5
|
Prepayment
Subject
to the consent between Party A and Party B and a written notice of such
consent being sent to Party C, Party A may prepay all or any part of the
principal of and the interest on the Loan.
The
interest on any principal so prepaid shall be calculated on the basis
of the
|
4
number
of days actually lapsed and the interest rate specified
herein.
If
Party A is required to repay the Loan in installments and prepays part of
the principal, the prepaid amount shall be applied in the reverse order of
the repayment schedule. After partial prepayment, the outstanding Loan
shall still be subject to the interest rate provided herein.
With
respect to any prepaid loan, Party C is not obligated to return any
handling charges that it has previously received.
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||
7.6
|
Repayment
through Party C
|
(1)
|
Party
A shall make all repayments through Party C and may not make any repayment
directly to Party B. Party C shall promptly notify Party B upon its
receipt of any repayment from Party A.
Upon
its receipt of any repayment directly from Party A, Party B shall promptly
notify Party C thereof and deliver such repayment to Party C for Party C
to complete appropriate account treatment in accordance with the normal
repayment procedures.
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(2)
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In
case of any breach of this Contract by Party A or Party B that renders
Party C unable to complete appropriate account treatment in a timely and
accurate manner or unable to perform its tax withholding obligations,
Party A and Party B shall be jointly and severally liable for any and all
consequences arising therefrom and for any and all losses suffered by
Party C.
|
7.7
|
Principles
of Repayment upon Multiple Loans Due Simultaneously
Where
any proprietary loan provided by Party C to Party A matures concurrently
with any entrustment loan provided by Party C to Party A at the request of
Party B, Party C may apply Party A's repayment to first repay such
proprietary loan if Party A does not designate the order of such
repayment, Party C may also debit any of Party A's accounts with Party C
for the purpose of repaying first such proprietary loan.
Where
there are multiple entrustment loans by Party C to Party A at the request
of Party B and such loans mature concurrently, Party A shall designate the
order of such repayment, failing which Party C may at its sole discretion
determine the order of the
repayment.
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8.
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WITHHOLDING
OF BUSINESS TAX AND OTHER TAXES
|
5
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8.1
|
Party
C may withhold in accordance with applicable laws any business tax and
other taxes payable by Party B in connection with the entrustment loan
hereunder.
|
8.2
|
Party
A and Party B shall not agree between them that Party A pays the interest
on the Loan directly to Party B. In case Party A pays any interest
directly to Party B, Party C may debit any of Party A’s or Party B’s
accounts in any currency with Party C for a corresponding amount to fully
satisfy its tax withholding
obligations.
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8.3
|
Where
Party C fails to perform its withholding obligations due to any reason
attributable to Party A or Party B, which results in Party C suffering
penalties by the tax authority, or advancing any tax payment, or incurrng
any other liabilities, Party A and Party B shall be jointly and severally
liable for full compensation.
|
9.
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HANDLING
CHARGES AND OTHER FEES AND EXPENSES
|
9.1
|
The
handling charges under this Contract shall be paid in accordance with Item
(3) below:
|
(1)
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by
Party A.
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(2)
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by
Party B.
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(3)
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50%
by Party A and 50% by Party B.
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9.2
|
The
party obligated to pay the handling charges (the “Payer”) shall punctually
and fully pay to Party C the handling charges in connection with the Loan
in accordance with this Section 9, regardless of whether or not Party A
has repaid the principal, or interest or has committed any other breach
hereunder. In case the lender-borrower relationship between Party A and
Party B or the entrustment relationship between Party B and Party C is
void, any handling charges received by Party C will not be returned. The
Payer shall remain obligated to pay any payable and outstanding handling
charges.
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9.3
|
The
rate, schedule and methods of payment of the handling charges shall be as
follows:
The
handling charges for the Loan shall be 0.2% of the entrusting amount
(which means the amount released under this Contract) per annum and shall
be payable in advance in U.S. dollars for the full Term (two years) upon
the advance of the Loan. If the Loan is overdue or the Term is extended,
additional handling charges shall be payable pursuant to the then
applicable standard rate for handling charges for entrustment loan. The
handling charges for the Loan shall be payable regardless of whether the
principal and interest of the Loan are repaid or paid on
time.
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6
9.4
|
In
case the Payer defaults on payment of any handling charges in accordance
with the above provisions, Party C is entitled to charge a default fee on
such unpaid handling charges at a rate of 0.1% per day commencing from the
date of such default, and may also debit any of such Payer’s accounts with
Party C in any currency for payment of such charges and
fees.
|
9.5
|
The
costs and expenses in association with the legal service, insurance,
valuation/appraisal, registration, custody, authentication and
notarization arising in connection with this Contract or the security
related thereto shall be borne by Party A and Party B in equal
portions.
Party
C shall not bear any costs and expenses hereunder. Where Party C advances
any costs and expenses, including without limitation, any legal, attorney
fees, registration fees, notarization fees and public announcement fees,
Party A and Party B shall each reimburse Party C half of such advances
within 10 working days after the issuance by Party C of a written notice,
or Party C may debit any of Party A’s or Party B’s accounts with Party C
for such reimbursement.
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9.6
|
Party
A and Party B shall be jointly and severally liable to Party C in
connection with obligations as specified in this Section
9.
|
10.
|
PARTY
A’S RIGHTS AND OBLIGATIONS
|
10.1
|
Party
A’s Rights Party A has the right
to:
|
(1)
|
request
Party B to notify Party C to release the Loan in accordance with this
Contract;
|
(2)
|
utilize
the Loan for the purpose agreed
herein;
|
(3)
|
subject
to the requirements of Party B, apply to Party B for an extension of the
Term and execute an extension agreement with Party B and Party C after its
application is accepted by both Party B and Party
C;
|
(4)
|
require
both Party B and Party C to keep confidential the relevant information
furnished by Party A except provided otherwise by law, regulations, rules
or this Contract; and
|
(5)
|
reject
Party B or Party C or any of their employees asking for bribe, and lodge a
complaint with the competent authority about such misconduct and any other
act of Party B or Party C that may violate any PRC laws
and
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7
regulations.
|
10.2
|
Party
A’s Obligations
|
(1)
|
Party
A shall utilize the Loan in accordance with the purpose as provided
herein, and shall not misappropriate any Loan proceeds. Party A shall
support and cooperate with Party B in its inspection of Party A’s
utilization of the Loan proceeds hereunder. Party A shall furnish Party B
with its financial and accounting information as well as manufacturing and
operating information as requested by Party B and shall ensure the
accuracy, completeness and validity of any information it
provides.
|
(2)
|
Party
A shall promptly notify Party B upon the occurrence of any of the
following events to Party A:
|
(i)
|
contracting,
trustee (receiver) being appointed, lease, shareholding restructuring,
investment, joint operation, mergers and acquisitions, acquisition and
restructuring, division, joint venture, applying for temporary cessation
of operation or dissolution, revocation, applying for (or subject to an
application for) bankruptcy, change of controlling shareholders/actual
controllers, transfer of material assets, suspension of production or
operation, significant penalty imposed by regulatory authorities,
cancellation of registration, revocation of business license, involvement
in material legal proceedings, severe deterioration in operation and
financial condition, legal representative/principal officer being unable
to perform their duties; or
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(ii)
|
any
change to Party A’s name, legal representative (or principal officer),
registered address, business scope, registered capital, or articles of
association or any other registration with industrial and commercial
authority;
|
(3)
|
Party
A shall perform any other obligation of Party A as provided
herein.
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11.
|
PARTY
B’S RIGHTS AND OBLIGATIONS
|
11.1
|
As
the lender hereunder, Party B shall enjoy all the rights and interests as
a lender and assume all the obligations, responsibilities and risks as a
lender.
|
11.2
|
Party
B shall conduct an independent review of the feasibility and legality of
the project related to the Loan hereunder, and of the creditworthiness,
repayment ability, and performance ability of Party A and/or the security
provider, and shall
|
8
make an
independent judgment and assume any risks that may arise from the failure of the
recovery of the Loan on time and in full.
11.3
|
After
the release of the Loan, Party B shall continuously supervise Party A’s
utilization of the Loan and pay close attention to Party A’s operating and
financial condition and repayment ability, and shall promptly take
appropriate measures upon the occurrence of any event to Party A that may
adversely affect the realization of Party B’s creditor’s rights. Party B
understands and agrees that Party C has no obligation in this
respect.
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11.4
|
Party
B’s obligations to Party C hereunder shall not be affected by the failure
of Party A to repay the principal or interest, nor by any breach of this
Contract or any violation of law, nor by the invalidity of the
lender-borrower relationship
hereunder.
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11.5
|
Party
B has the right to inspect and supervise Party A’s utilization of the Loan
and to request Party A to provide Party A’s financial and accounting
information as well as manufacturing and operating information and shall
keep the above information confidential, unless otherwise provided by
applicable laws, regulations or rules or otherwise required by competent
authorities.
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11.6
|
Upon
the maturity of the Loan, Party B shall promptly demand payment, bring
lawsuits against Party A and/or the security provider, apply for
enforcement, declare creditor’s rights in bankruptcy proceedings, and/or
take any other remedies permitted by law, as the case may be. Party C
shall not be held liable in any way even though it is obligated to assist
Party B in the recovery of the
Loan.
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11.7
|
Any
instruction issued by Party B to Party C shall be timely, clear, complete,
consistent and in compliance with laws and this Contract, otherwise, Party
C may refuse to follow such instruction. In the case of such refusal,
Party B shall be liable for any and all consequences arising therefrom.
Party B shall be liable for any and all legal consequences arising from
any act by Party C pursuant to instructions of Party
B.
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11.8
|
Party
B shall not request Party C to issue any deposit certificate with respect
to any entrustment funds. Even if Party C issues a deposit certificate in
any form with respect to any entrustment funds, Party B shall not
transfer, pledge or otherwise
dispose of such deposit certificate and shall return it to Party C prior
to Party C’s release to Party A of the Loan. Party B shall not request
Party C to make any payment or hold Party C liable by invoking such
deposit certificate.
|
|
11.9
|
Other rights and obligations of Party B agreed herein. |
12.
|
PARTY
C’S RIGHTS AND OBLIGATIONS
|
9
12.1
|
Party
C shall assist Party B in the supervision of the use by Party A of the
Loan for the agreed purposes.
|
“Party C
shall assist Party B in the supervision” shall mean that, in respect of each
loan advance, Party C shall provide to Party B with the statements of Party A’s
deposit account with Party C to which such advance has been credited for the
period commencing from the date of such advance being credited to the date that
falls twenty-four months thereafter.
12.2
|
Party
C has the right to provide to Party B any information about Party A
relating to the Loan or to Party A’s deposits, loans and settlement
practices with Party C.
|
12.3
|
Party
C shall not be liable for any dispute between Party B and Party A or for
any act of Party A or Party B that violates law or
regulations.
|
12.4
|
Where
Party A fails to punctually repay the Loan in full and Party C compensates
Party B in accordance with a court judgment or arbitral award, any and all
the rights of Party B against Party A and/or the security provider shall
be promptly assigned to Party C. In such case, Party A shall not raise any
objection to such assignment and shall perform the obligations and
liabilities to Party C immediately after receipt of a written notice from
Party B.
|
12.5
|
Party
C shall assist Party B in the recovery of the Loan in accordance with the
following provisions:
|
(1)
|
prior
to the maturity of the principal of the Loan (including the principal
payable in installments)
Party
C shall calculate and settle the interest on the Loan in accordance with
the relevant provisions herein. After each installment repayment by Party
A, Party C shall complete appropriate account treatment and report to
Party B about the amount and time of such repayment and the amount of the
outstanding principal and interest. Following its receipt of the above
financial information reported by Party C, Party B shall promptly check
such information and raise any question about or disagreement to such
information, if any, to Party C within 5 working days. Party C shall not
be liable for any loss suffered by Party A or Party B arising from the
failure of Party B to raise such question or disagreement as required
above. If on any interest settlement date Party A fails to pay the
relevant interest on the Loan, Party C shall notify Party B thereof in
writing.
|
(2)
|
after
the maturity of the principal of the
Loan
|
10
(i)
|
If
Party A repays punctually and in full upon the maturity of the principal
of the Loan, Party C shall credit the appropriate account following normal
procedures and notify Party B thereof in a timely manner. If Party A fails
to repay punctually and in full, Party C shall notify Party B in writing
of such failure and shall, within one month thereafter, make demand, once
and only once, for repayment by Party A . Party C shall be deemed to have
fulfilled its obligation of assistance in the recovery of the Loan as long
as Party C has issued a written demand in accordance with the name,
address and telephone fax) number provided by Party A or Party B, or there
is proof that Party C has demanded Party A for repayment by any other
means.
|
(ii)
|
If
Party B desires to entrust Party C to continue the assistance in the Loan
recovery after all the principal matures, it shall execute a separate
written entrustment agreement with Party C in respect thereof. Where Party
B and Party C fail to reach such agreement within one month after such
maturity date, all the obligations of Party C hereunder shall
automatically terminate forthwith and Party C has the right to write off
the accounts relating to the
Loan.
|
(3)
|
Party
C’s obligations to assist Party B in the recovery of the Loan shall be
limited to those specified in this
Section.
|
|
12.6
|
Party
C shall have no obligation to participate in any litigation, arbitration,
bankruptcy proceedings relating to the Loan and the security related
thereto, nor shall it have any obligation towards Party B to dispose of
any debt-offsetting assets.
|
13.
|
EVENT
OF DEFAULT AND LIABILITIES
|
13.1
|
Party
A’s Events of Default and
Liabilities
|
(1)
|
Any
of the following events shall constitute an event of default of Party
A:
|
(i)
|
any
breach by Party A of any provision of this Contract, and in the case of
any breach other than breach of any of Sections 2, 4, 7.2 and 7.3, Party A
fails to cure such breach within fifteen (15) working days of receipt of
written notice from Party B or Party C;
and
|
(ii)
|
any
event that in the reasonable opinion of Party B may adversely affect the
realization of its creditor’s rights
hereunder.
|
11
(2)
|
Party
A’s liabilities for default:
Upon
the occurrence of any of the above events, Party B may adopt any one or
more of the following remedial
measures:
|
(i)
|
request
Party A to remedy its default within a specified time
limit;
|
(ii)
|
notify
Party C to suspend the part of the Loan yet to be
released;
|
(iii)
|
charge
default interest (if any) as provided
herein;
|
(iv)
|
accelerate
the maturity of all principal and interests and demand immediate payment
by Party A; and
|
(v)
|
any
other remedial measures permitted by
law.
|
13.2
|
Party
B’s Events of Default and Liabilities for
Default
|
(1)
|
Any
of the following events shall constitute an event of default of Party
B:
|
(i)
|
failure
of Party B to deliver sufficient entrustment funds to Party C in a timely
manner, or failure of release of the Loan as provided herein for any other
reason attributable to Party
B;
|
(ii)
|
the
source of entrustment funds being in violation of law or regulations, or
any representation or warranty of Party B being false, inaccurate or
incomplete;
|
(iii)
|
failure
of Party B to pay Party C punctually and fully any Loan handling charges;
and
|
(iv)
|
any
breach by Party B of any other provision
herein.
|
(2)
|
Party
B’s liabilities for default:
|
(i)
|
Upon
the occurrence of an event of default of Party B, Party A has the right to
request Party B to remedy such default within a specified time limit and
to compensate losses and/or take any other remedial
measures.
|
(ii)
|
Party
C has the right to adopt any one or more of the following remedial
measures upon the occurrence of any event of default of Party
B:
|
12
(A)
|
request
Party B to remedy its default within a specified time
limit;
|
(B)
|
refuse
to provide entrustment loan services for Party
B;
|
(C)
|
directly
debit any account of Party B for handling
charges;
|
(D)
|
request
Party B to compensate losses;
|
(E)
|
terminate
the entrustment relationship between Party B and Party C;
and
|
(F)
|
any
other measures permitted by
law.
|
13.3
|
Party
C’s Events of Default and Liabilities for
Default:
|
(1)
|
If
Party C delays without any justifiable reason in releasing the Loan to
Party A after Party B delivers sufficient entrustment funds to Party C in
accordance with this Contract, Party B has the right to request Party C to
release the Loan
immediately.
|
(2)
|
If
Party C fails to perform its obligations to assist Party B in the recovery
of the Loan in accordance with this Contract, which results in Party B
being unable to punctually recover the principal and the interest on the
Loan, and Party B is not at fault, Party C shall to the extent of and in
proportion to Party C’s fault be liable for direct losses suffered by
Party B.
|
14.
|
REPRESENTATIONS
AND WARRANTIES
|
14.1
|
Party
A hereby represents and warrants as
follows:
|
(1)
|
it
has read all the provisions in this Contract and fully knows and
understands the meaning and legal consequences
thereof;
|
(2)
|
the
execution and performance of this Contract by Party A is in compliance
with laws of the country in which Party A is located, administrative
regulations, rules and Party A’s certificate of incorporation and bylaws
and has been approved by its board of directors and, if necessary, the
competent government authorities of the country where Party A is located;
and
|
(3)
|
the
purpose of the Loan is in compliance with laws and regulations, and the
project relating to which the Loan is to be used has been approved by the
competent authorities if necessary.
|
13
14.2
|
Party
B hereby represents and warrants as
follows:
|
(1)
|
it
has the legal qualification to entrust any other person to release the
Loan;
|
(2)
|
the
entrustment fund comes from legal sources and not from bank financing, nor
from corporate or public funds deposited in the name of an individual, nor
from any fund that is prohibited from being used for entrustment loan
purposes under applicable laws, regulations or
rules;
|
(3)
|
it
has the lawful right and has been approved by competent authorities to
dispose of the entrustment funds;
and
|
(4)
|
grant
of the Loan is not for the purpose of violation or evasion of any PRC
laws, regulations, rules or regulatory measures, and does not cause any
damage to any lawful interests of the State, any collective organization
or any third party.
|
15.
|
MISCELLANEOUS
|
15.1
|
Direct
Debit Right
Party
C is entitled to debit, without prior notice to either Party A or Party B,
any account of Party A or Party B at China Construction Bank in RMB or
other currencies to pay all amounts payable to Party C by Party A or Party
B under this Contract. Party A or Party B shall assist Party C to complete
any procedures for foreign exchange settlement or sale, and Party A or
Party B shall bear the risk of exchange rate
fluctuation.
|
15.2
|
Party
C’s Records as Evidence
Unless
there is any reliable and definitive evidence to the contrary, Party C’s
internal records of principal, interest, expenses and repayment, receipts,
vouchers made or retained by Party C during the course of drawdown,
repayment, interest payment, and records and vouchers relating to
collections by Party C shall constitute valid evidence of the
creditor-debtor relationship between Party A and Party B and the
performance of obligations by Party C. Party A and Party B hereby agree
that they shall not raise any objection
thereto.
|
15.3
|
Assignment
and Succession
|
(1)
|
Any
assignment by Party A of any of its rights or obligations hereunder shall
be subject to the written consent of both Party B and Party
C.
|
(2)
|
Any
assignment by Party B of any of its rights or obligations hereunder shall
be subject to the written consent of Party
C.
|
14
(3)
|
Any
assignment by Party C of any of its rights or obligations hereunder shall
be subject to the written consent of Party B; provided however that, in
case of any merger, division, setting up subsidiaries or organizational or
business function restructuring of China Construction Bank, Party C’s
rights and obligations hereunder may be assigned to or succeeded by a
third party with legal qualification to operate entrustment loan business
as long as Party C issues a notice to Party A and Party B through
correspondence, telephone or press
release.
|
|
15.4
|
Consequences
of Invalidity or Rescission
In
case the entrustment relationship and/or lender-borrower relationship
hereunder are/or is invalid or rescinded pursuant to any
law,
|
(1)
|
If
the entrustment relationship between Party B and Party C is valid while
the lender-borrower relationship between Party A and Party B is invalid or
rescinded, Party C shall not be held liable,
and
|
|
(i)
|
where
Party C has not delivered the entrustment funds to Party A, it shall
return the entrustment funds to Party B without any
interest;
|
|
(ii)
|
where
Party C has delivered the entrustment funds to Party A, Party B shall
directly request Party A to return the entrustment funds and Party C shall
not be liable for any losses suffered by Party B arising therefrom;
and
|
|
(iii)
|
where
any third party has suffered losses as a result of such invalidity or
rescission, Party A and Party B shall be liable in proportion to their
respective fault and Party C shall not be
liable.
|
(2)
|
If
the entrustment relationship is held invalid or rescinded while the
lender-borrower relationship is
valid,
|
(i)
|
where
Party C has not delivered the entrustment funds to Party A, it shall
return the entrustment funds to Party B without any interest;
and
|
(ii)
|
where
Party C has delivered the entrustment funds to Party A, Party A and Party
B shall resolve the issues relating to the entrustment funds through
consultations in accordance with applicable laws and Party C shall not be
liable in any way.
|
(3)
|
If
both the entrustment relationship and the lender-borrower relationship
are invalid or
rescinded,
|
15
(i)
|
where
Party C has not delivered the entrustment funds to Party A, it shall
return the entrustment funds to Party B without any
interest;
|
(ii)
|
where
Party C has delivered the entrustment funds to Party A, Party B shall
directly request Party A to return the entrustment funds and Party C shall
not be liable for any losses suffered by Party B;
and
|
(iii)
|
where
any third party has suffered losses as a result of such invalidity or
rescission, Party A and Party B shall be liable in proportion
to their respective fault and Party C shall not
be liable.
|
15.5
|
Party
B shall supervise and inspect Party A, and obtain information about Party
A through other channels and shall not rely on Party C in this respect.
Party C may at its sole discretion, report to Party B the information it
possesses; provided however that, Party C shall not be liable for the
promptness, truthfulness, completeness, accuracy and validity of any such
information.
|
15.6
|
In
the event of any change to the address or other contact information of any
Party set forth herein, such Party shall promptly notify the other Parties
of such change in writing. Such Party shall be liable for any loss caused
by its failure of giving prompt notice of such
change.
|
15.7
|
Any
rights that Party C has under law or this Contract shall not be
interpreted as the obligations of Party C. In case Party C fails to
exercise or waives any of such rights, neither Party A nor Party B may
hold Party C legally liable on this
ground.
|
15.8
|
Notification
to Release Entrustment Loan, conformations, acknowledgements, certificates
and other documents relating to this Contract shall constitute integral
parts of this Contract.
|
15.9
|
This
Contract shall be executed in six (6)
counterparts.
|
15.10
|
Governing
Law
This
Contract shall be governed by the laws of the People’s Republic of China
(excluding the Hong Kong Special Administrative Region, the Macau Special
Administrative Region and Taiwan for the purposes of this Contract
only).
|
15.11
|
Dispute
Resolution
Any dispute arising from the performance of this Contract may be settled by
|
16
consultation.
If the dispute cannot be resolved through consultation, such dispute shall be
resolved pursuant to clause (ii) below:
(i)
|
the
People’s court within the jurisdiction where Party C is located;
or
|
(ii)
|
arbitration
at the local branch of the China International Economic and Trade
Arbitration Commission in the principal place of business of Party B. The
arbitration award shall be final and binding on the Parties
hereto.
|
The
provisions hereunder not subject to the dispute shall remain enforceable during
the process of litigation or arbitration.
15.12
|
Effectiveness
of This Contract
This
Contract shall become effective
upon:
|
(i)
|
signing
by the legal representative/(principal officer) or authorized
representative of Party A and Party B and being affixed with the company
chop of Party B; and
|
(ii)
|
signing
by the principal officer or authorized representative of Party C and being
affixed with the company chop of Party
C.
|
[Signature
Page Follows]
17
Party
A
HOKU
SCIENTIFIC, INC.
By the
legal representative (principal officer) or authorized
representative:
Signature:
__________________________
Date:
_____________________
Party B (company
chop)
By the
legal representative (principal officer) or authorized
representative:
Signature:
________________________
Date:
_____________________
Party C (company
chop)
CHINA
CONSTRUCTION BANK CORPORATION SHUANGLIU SUB-BRANCH
By the
principal officer or authorized representative:
Signature:
________________________
Date:
_____________________
18
LOAN IMPLEMENTATION
AGREEMENT
SECURITY
AGREEMENT
dated as
of
________
__, 2009
among
HOKU
SCIENTIFIC, INC.
and
HOKU
MATERIALS, INC.,
as lien
grantors
and
TABLE
OF CONTENTS
PAGE
Section
1.
|
Definitions
|
2
|
Section
2.
|
Grant
of Transaction Liens
|
9
|
Section
3.
|
Representations
and Warranties
|
11
|
Section
4.
|
Further
Assurances; General Covenants
|
13
|
Section
5.
|
Recordable
Intellectual Property
|
15
|
Section
6.
|
Investment
Property
|
16
|
Section
7.
|
Deposit
Accounts
|
17
|
Section
8.
|
Commercial
Tort Claims
|
18
|
Section
9.
|
Transfer
of Record Ownership
|
18
|
Section
10.
|
Right
to Vote Securities
|
18
|
Section
11.
|
Certain
Cash Distributions
|
19
|
Section
12.
|
Remedies
upon Event of Default
|
19
|
Section
13.
|
Application
of Proceeds
|
21
|
Section
14.
|
Fees
and Expenses; Indemnification
|
21
|
Section
15.
|
Authority
to Administer Collateral
|
22
|
Section
16.
|
[reserved].
|
23
|
Section
17.
|
Limitation
on Duty in Respect of Collateral
|
23
|
Section
18.
|
Termination
of Transaction Liens; Release of Collateral
|
23
|
Section
19.
|
Notices
|
24
|
Section
20.
|
No
Implied Waivers; Remedies Not Exclusive
|
24
|
Section
21.
|
Successors
and Assigns
|
24
|
Section
22.
|
Amendments
and Waivers
|
25
|
Section
23.
|
Choice
of Law
|
25
|
Section
24.
|
Waiver
of Jury Trial
|
25
|
Section
25.
|
Severability
|
25
|
i
SCHEDULES:
Schedule
1
|
Equity
Interests In Subsidiaries And Affiliates Owned By
Grantors
|
|
Schedule
2
|
Investment
Property Owned By Grantors
|
|
Schedule
3
|
Material
Commercial Tort Claims
|
|
Schedule
4
|
Existing
Permitted Xxxx
|
xx
SECURITY
AGREEMENT
SECURITY
AGREEMENT dated as of ______ __, 2009 (“Agreement”) among Hoku
Scientific, Inc., a Delaware corporation (“Party A” and the “Parent Indemnitor”), Tianwei New
Energy Holdings Co., Ltd., a People’s Republic of China company (“Party B” and the “Secured Party”) and Hoku
Materials, Inc., a Delaware corporation (the “Subsidiary Guarantor”, and
together with Party A, the “Grantors”). Certain
capitalized terms used in this Agreement have the meanings ascribed to them in
Section 1.
WHEREAS,
Party A, as borrower, Party B, as entrusting lender and China Construction Bank
Corporation Shuangliu Sub-Branch, a People’s Republic of China bank (“CCB”), as bank have entered
into the Tranche 1 Loan Contract dated as of the date hereof (the “Tranche 1 Loan Contract”) and
the Tranche 2 Loan Contract dated as of the date hereof (the “Tranche 2 Loan Contract” and
together with the Tranche 1 Loan Contract, the “Loan Contracts”);
WHEREAS,
pursuant to each Loan Contract, Party B agreed to entrust a Loan to CCB for the
benefit of, and release to, Party A;
WHEREAS,
the Parent Indemnitor and Party B have entered into the Parent Indemnity (the
“Parent Indemnity”), and
the Subsidiary Guarantor and Party B have entered into the Subsidiary Guarantee
(the “Subsidiary Guarantee”), each contained in
the letter agreement dated as of the date hereof (the “Parent Indemnity and Subsidiary
Guarantee Letter Agreement”);
WHEREAS,
pursuant to the Parent Indemnity, the Parent Indemnitor agreed to indemnify the
foregoing obligations of Party A and is willing to secure its indemnitee thereof
by granting Liens on its assets to the Secured Party as provided in the Security
Documents;
WHEREAS,
pursuant to the Subsidiary Guarantee, the Subsidiary Guarantor agreed to
guarantee the foregoing obligations of Party A and is willing to secure its
guarantee thereof by granting Liens on its assets to the Secured Party as
provided in the Security Documents;
WHEREAS,
Party B and CCB are not willing to enter into the Loan Contracts, unless the
foregoing obligations of each of the Grantors are secured as described above and
this Agreement is duly executed and delivered to the Secured Party;
NOW,
THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Definitions. (a) Terms Not Defined
Herein. Unless otherwise expressly
indicated, terms not otherwise defined in subsection (b) or (c) of this Section
have, as used herein, the respective meanings provided for in the Loan
Contracts.
(b) Terms Defined in UCC. As used
herein, each of the following terms has the meaning specified in the
UCC:
Term
|
UCC
|
Account
|
9-102
|
Authenticate
|
9-102
|
Certificated
Security
|
8-102
|
Chattel
Paper
|
9-102
|
Commercial
Tort Claim
|
9-102
|
Commodity
Account
|
9-102
|
Commodity
Customer
|
9-102
|
Commodity
Intermediary
|
9-102
|
Deposit
Account
|
9-102
|
Document
|
9-102
|
Entitlement
Holder
|
8-102
|
Entitlement
Order
|
8-102
|
Equipment
|
9-102
|
Financial
Asset
|
8-102 & 103
|
General
Intangibles
|
9-102
|
Instrument
|
0-000
|
Xxxxxxxxx
|
9-102
|
Investment
Property
|
9-102
|
Letter-of-Credit
Right
|
9-102
|
Record
|
9-102
|
Securities
Account
|
8-501
|
Securities
Intermediary
|
8-102
|
Security
|
8-102 & 103
|
Security
Entitlement
|
8-102
|
Supporting
Obligations
|
9-102
|
Uncertificated
Security
|
8-102
|
(c) Additional Definitions. The
following additional terms, as used herein, have the following
meanings:
“Account Control Agreement”
means a Commodity Control Agreement, a Deposit Account Control Agreement or a
Securities Account Control Agreement.
2
“Cash Distributions” means
dividends, interest and other distributions and payments (including proceeds of
liquidation, sale or other disposition) made or received in cash upon or with
respect to any Collateral.
“Collateral” means all
property, whether now owned or hereafter acquired, on which a Lien is granted or
purports to be granted to the Secured Party pursuant to the Security Documents.
When used with respect to a specific Grantor, the term “Collateral” means all
its property on which such a Lien is granted or purports to be
granted.
“Collateral Accounts” means the
Controlled Commodity Accounts, the Controlled Deposit Accounts and the
Controlled Securities Accounts.
“Commodity Account Control
Agreement” means, with respect to any Commodity Account of any Grantor, a
Commodity Account Control Agreement in form and substance reasonably
satisfactory to Party B among such Grantor, the Secured Party and the relevant
Commodity Intermediary.
“Control” has the meaning
specified in UCC Section 8-106, 9-104, 9-105, 9-106 or 9-107, as may be
applicable to the relevant Collateral.
“Controlled Commodity Account”
means a Commodity Account that is subject to a Commodity Account Control
Agreement.
“Controlled Deposit Account”
means a Deposit Account that is subject to a Deposit Account Control
Agreement.
“Controlled Securities Account”
means a Securities Account that (i) is maintained in the name of a Grantor at an
office of a Securities Intermediary located in the United States and (ii)
together with all Financial Assets credited thereto and all related Security
Entitlements, is subject to a Securities Account Control Agreement among such
Grantor, the Secured Party and such Securities Intermediary.
“Copyright License” means any
agreement now or hereafter in existence granting to any Grantor, or pursuant to
which any Grantor grants to any other Person, any right to use, copy, reproduce,
distribute, prepare derivative works, display or publish any records or other
materials on which a Copyright is in existence or may come into
existence.
“Copyrights” means all the
following: (i) all copyrights under the laws of the United States or any other
country (whether or not the underlying works of authorship have been published),
all registrations and recordings thereof, all copyrightable works of authorship
(whether or not published), and all applications for copyrights under the laws
of the United States or any other country, including
3
registrations,
recordings and applications in the United States Copyright Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, (ii) all renewals of any of the
foregoing, (iii) all claims for, and rights to xxx for, past or future
infringements of any of the foregoing, and (iv) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements
thereof.
“Copyright Security Agreement”
means a Copyright Security Agreement, in form and substance reasonably
satisfactory to Party B, executed and delivered by a Grantor in favor of the
Secured Party.
“Deposit Account Control
Agreement” means, with respect to any Deposit Account of any Grantor, a
Deposit Account Control Agreement in form and substance reasonably satisfactory
to Party B among such Grantor, the Secured Party and the relevant Depositary
Bank.
“Depositary Bank” means a bank
at which a Controlled Deposit Account is maintained.
“Equity Interest” means (i) in
the case of a corporation, any shares of its capital stock, (ii) in the case of
a limited liability company, any membership interest therein, (iii) in the case
of a partnership, any partnership interest (whether general or limited) therein,
(iv) in the case of any other business entity, any participation or other
interest in the equity or profits thereof, (v) any warrant, option or other
right to acquire any Equity Interest described in this definition or (vi) any
Security Entitlement in respect of any Equity Interest described in this
definition.
“Event of Default” means the
occurrence of any of the following events:
(i) the
occurrence of any “Event of Default” under, and as defined in, any Loan
Contract;
(ii) a failure
by any Grantor to observe or perform any covenant or agreement contained in any
Security Document, and such failure shall continue unremedied for a period of 15
days after notice thereof from the Secured Party to the relevant
Grantor;
(iii) any
Transaction Lien purported to be created under any Security Document shall cease
to be, or shall be asserted by any Grantor not to be, a valid and perfected Lien
in favor of the Secured Party on any Collateral, with the priority required by
the applicable Security Document; or
4
(iv) any
representation or warranty made or deemed made by or on behalf of any Grantor
under or in connection with any Security Document shall prove to have been
incorrect in any material respect on the date made or deemed made.
“Foreign Subsidiary” means any
subsidiary of any Grantor which is a “controlled foreign corporation” within the
meaning of the Internal Revenue Code of 1986, as amended from time to
time.
“Grantors” has the meaning set
forth in the Preamble of this Agreement.
“Intellectual Property” means
all intellectual and similar property of any Grantor of every kind and nature
now owned or hereafter acquired by any Grantor, including inventions,
discoveries, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets,
confidential or proprietary technical and business information, industrial
property rights, know-how, show-how or other data or information, software and
databases, moral rights, publicity rights and privacy rights, and all
embodiments or fixations thereof and related documentation, registrations and
franchises, and all additions, improvements and accessions to, and books and
records describing or used in connection with, any of the
foregoing.
“Intellectual Property Filing”
means (i) with respect to any Patent, Patent License, Trademark or Trademark
License, the filing of the applicable Patent Security Agreement or Trademark
Security Agreement with the United States Patent and Trademark Office, together
with an appropriately completed recordation form, and (ii) with respect to any
Copyright or Copyright License, the filing of the applicable Copyright Security
Agreement with the United States Copyright Office, together with an
appropriately completed recordation form, in each case sufficient to record the
Transaction Lien granted to the Secured Party in such Recordable Intellectual
Property.
“Intellectual Property Security
Agreement” means a Copyright Security Agreement, a Patent Security
Agreement or a Trademark Security Agreement.
“Issuer Control Agreement”
means an issuer control agreement in form and substance reasonably satisfactory
to Party B.
“License” means any Patent
License, Trademark License, Copyright License or other license or sublicense
agreement relating to Intellectual Property to which any Grantor is a
party.
“Lien” means, with respect to
any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation,
encumbrance, charge or security interest in, on or of such asset, (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital
lease or title retention agreement (or any financing lease
5
having
substantially the same economic effect as any of the foregoing) relating to such
asset and (c) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities.
“Loan” has the meaning set
forth in Section 1 of each Loan Contract.
“Loan Contracts” has the
meaning set forth in the Recitals of this Agreement.
“Material Commercial Tort
Claim” means a Commercial Tort Claim involving a claim for more than
$50,000.
“Mortgage” shall have the
meaning ascribed to it in the Loan Contracts.
“Opinion of Counsel” means a
written opinion of legal counsel (who may be counsel to a Grantor or other
counsel, in either case approved by the Secured Party) addressed and delivered
to the Secured Party.
“own” refers to the possession
of sufficient rights in property to grant a security interest therein as
contemplated by UCC Section 9-203, and “acquire” refers to the
acquisition of any such rights.
“Parent Indemnitee” has the
meaning set forth in the Preamble of this Agreement.
“Parent Indemnitor” has the
meaning set forth in the Preamble of this Agreement.
“Parent Indemnity and Subsidiary
Guarantee Letter Agreement” has the meaning set forth in the Preamble of
this Agreement.
“Party A” has the meaning set
forth in the Preamble of this Agreement.
“Party B” has the meaning set
forth in the Preamble of this Agreement.
“Patent License” means any
agreement now or hereafter in existence granting to any Grantor, or pursuant to
which any Grantor grants to any other Person, any right with respect to any
Patent or any invention now or hereafter in existence, whether patentable or
not, whether a patent or application for patent is in existence on such
invention or not, and whether a patent or application for patent on such
invention may come into existence or not.
“Patents” means (i) all letters
patent and design letters patent of the United States or any other country and
all applications for letters patent or design letters patent of the United
States or any other country, including applications in the United States Patent
and Trademark Office or in any similar office or agency
6
of the
United States, any State thereof or any other country or any political
subdivision thereof, (ii) all reissues, divisions, continuations, continuations
in part, revisions and extensions of any of the foregoing, (iii) all claims for,
and rights to xxx for, past or future infringements of any of the foregoing and
(iv) all income, royalties, damages and payments now or hereafter due or payable
with respect to any of the foregoing, including damages and payments for past or
future infringements thereof.
“Patent Security Agreement”
means a Patent Security Agreement in form and substance reasonably satisfactory
to Party B, executed and delivered by a Grantor in favor of the Secured
Party.
“Perfection Certificate” means,
with respect to any Grantor, a certificate in form and substance reasonably
satisfactory to Party B, executed by an officer of such Grantor.
“Permitted Liens” means (i)
Liens for taxes not yet due or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the applicable Person in accordance with GAAP, (ii)
carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like
Liens arising in the ordinary course of business which are not overdue for a
period of more than 30 days or which are being contested or intended to be
timely contested in good faith and by appropriate proceedings, (iii) liens
securing cash deposits or prepayments in respect of the sale of Inventory
provided to any Grantor by any customers and perfected prior to the date hereof,
(iv) liens existing on the date hereof and listed on Schedule 4, and (v) the
Transaction Liens.
“Pledged”, when used in
conjunction with any type of asset, means at any time an asset of such type that
is included (or that creates rights that are included) in the Collateral at such
time. For example, “Pledged Equity Interest” means an Equity Interest that is
included in the Collateral at such time.
“Post-Petition Interest” means
any interest that accrues after the commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency or reorganization of any one
or more of the Grantors (or would accrue but for the operation of applicable
bankruptcy or insolvency laws), whether or not such interest is allowed or
allowable as a claim in any such proceeding.
“Proceeds” means all proceeds
of, and all other profits, products, rents or receipts, in whatever form,
arising from the collection, sale, lease, exchange, assignment, licensing or
other disposition of, or other realization upon, any Collateral, including all
claims of the relevant Grantor against third parties for loss of, damage to or
destruction of, or for proceeds payable under, or unearned
7
premiums
with respect to, policies of insurance in respect of, any Collateral, and any
condemnation or requisition payments with respect to any
Collateral.
“Recordable Intellectual
Property” means (i) any Patent registered with the United States Patent
and Trademark Office, and any Patent License with respect to a Patent so
registered, (ii) any Trademark registered with the United States Patent and
Trademark Office, and any Trademark License with respect to a Trademark so
registered, (iii) any Copyright registered with the United States Copyright
Office and any Copyright License with respect to a Copyright so registered, and
all rights in or under any of the foregoing.
“Release Condition” means all
the Secured Obligations and Transaction Liens under the Loan Contracts, the
Parent Indemnity, the Subsidiary Guarantee and the Security Documents shall have
been fully satisfied or terminated.
“Secured Obligations” means (i)
all indemnitee obligations (including Post-Petition Interest thereon) of the
Parent Indemnitor pursuant to the Parent Indemnity, (ii) all guarantee
obligations of the Subsidiary Guarantor pursuant to the Subsidiary Guarantee and
(iii) all other obligations of each Grantor under the Security
Documents.
“Secured Party” has the meaning
set forth in the Preamble of this Agreement.
“Securities Account Control
Agreement” means, when used with respect to a Securities Account, a
Securities Account Control Agreement in form and substance reasonably
satisfactory to Party B among the relevant Securities Intermediary, the relevant
Grantor and the Secured Party.
“Security Documents” means this
Agreement, the Mortgage, any Deposit Account Control Agreements, any Issuer
Control Agreements, any Securities Account Control Agreements, any Intellectual
Property Security Agreements and all other supplemental or additional security
agreements, control agreements, mortgages or similar instruments delivered in
connection with the Loan Contracts and this Agreement.
“Subsidiary Guarantee” has the
meaning set forth in the Preamble of this Agreement.
“Subsidiary Guarantor” has the
meaning set forth in the Preamble of this Agreement.
“Trademark License” means any
agreement now or hereafter in existence granting to any Grantor, or pursuant to
which any Grantor grants to any other Person, any right to use any
Trademark.
8
“Trademarks” means: (i) all
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos, brand names,
certification marks, trade dress, domain names and any other indications of
origin, prints and labels on which any of the foregoing have appeared or appear,
package and other designs, and all other source or business identifiers, and all
general intangibles of like nature, and the rights in any of the foregoing which
arise under applicable law, (ii) the goodwill of the business symbolized thereby
or associated with each of them, (iii) all registrations and applications in
connection therewith, including registrations and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, (iv) all renewals of any of the foregoing, (v) all claims
for, and rights to xxx for, past or future infringements of any of the foregoing
and (vi) all income, royalties, damages and payments now or hereafter due or
payable with respect to any of the foregoing, including damages and payments for
past or future infringements thereof.
“Trademark Security Agreement”
means a Trademark Security Agreement, in form and substance reasonably
satisfactory to Party B, executed and delivered by a Grantor in favor of the
Secured Party.
“Tranche 1 Loan Document” has
the meaning set forth in the Preamble of this Agreement.
“Tranche 2 Loan Document” has
the meaning set forth in the Preamble of this Agreement.
“Transaction Liens” means the
Liens granted by the Grantors under the Security Documents.
“UCC” means the Uniform
Commercial Code as in effect from time to time in the State of New York; provided that, if perfection
or the effect of perfection or non-perfection or the priority of any Transaction
Lien on any Collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than New York, “UCC” means the Uniform Commercial Code
as in effect from time to time in such other jurisdiction for purposes of the
provisions hereof relating to such perfection, effect of perfection or
non-perfection or priority.
SECTION 2. Grant of Transaction
Liens. (a)
Each Grantor, in order to secure the Secured
Obligations, grants to the Secured Party a continuing security interest in and
Lien upon all the following property of such Grantor, whether now owned or
existing or hereafter acquired or arising and regardless of where
located:
(i) all
Accounts;
9
(ii)
all
Chattel Paper;
(iii)
all
cash and Deposit Accounts;
(iv)
all
Documents;
(v)
all
Equipment;
(vi)
all
General Intangibles (including (x) any Equity Interests in other Persons that do
not constitute Investment Property and (y) any Intellectual
Property);
(vii)
all
Instruments;
(viii)
all
Inventory;
(ix)
all
Investment Property;
(x)
the
Commercial Tort Claims described in Schedule 3;
(xi)
all
Letter-of-Credit Rights;
(xii) all books
and records (including customer lists, credit files, computer programs,
printouts and other computer materials and records) of such Grantor pertaining
to any of its Collateral;
(xiii) such
Grantor’s ownership interest in (1) its Collateral Accounts, (2) all Financial
Assets credited to its Collateral Accounts from time to time and all Security
Entitlements in respect thereof and (3) all cash held in its Collateral Accounts
from time to time; and
(xiv) all
Proceeds of the Collateral described in the foregoing clauses (i) through
(xi);
provided that the following
property is excluded from the foregoing security interests: (A) motor
vehicles the perfection of a security interest in which is excluded from the
Uniform Commercial Code in the relevant jurisdiction, (B) voting Equity
Interests in any Foreign Subsidiary, to the extent (but only to the extent)
required to prevent the Collateral from including more than 66% of all voting
Equity Interests in such Foreign Subsidiary and (C) any property to the extent
that the grant of a security interest therein is prohibited by any applicable
law or regulation, requires a consent not obtained of any governmental authority
pursuant to any applicable law or regulation, or is prohibited by, or
constitutes a breach or default under or results in the termination of or
requires any consent not obtained under, any contract, license, agreement,
instrument or other document evidencing or giving rise to such property or, in
the case of any Investment
10
Property,
any applicable shareholder or similar agreement, except to the extent that such
law or regulation or the term in such contract, license, agreement, instrument
or other document or shareholder or similar agreement providing for such
prohibition, breach, default or termination or requiring such consent is
ineffective under applicable law. Each Grantor shall upon request of the Secured
Party use all reasonable efforts to obtain any such required consent that is
reasonably obtainable.
(b) With
respect to each right to payment or performance included in the Collateral from
time to time, the Transaction Lien granted therein includes a continuing
security interest in (i) any Supporting Obligation that supports such payment or
performance and (ii) any Lien that (x) secures such right to payment or
performance or (y) secures any such Supporting Obligation.
(c) The
Transaction Liens are granted as security only and shall not subject the Secured
Party to, or transfer or in any way affect or modify, any obligation or
liability of any Grantor with respect to any of the Collateral or any
transaction in connection therewith.
SECTION 3. Representations and
Warranties. Each Grantor
represents and
warrants that:
(a) Such
Grantor is duly organized, validly existing and in good standing under the laws
of the jurisdiction identified as its jurisdiction of organization in its
Perfection Certificate.
(b) With
respect to each Grantor, Schedule 1 lists all Equity Interests owned by such
Grantor as of the date hereof. Such Grantor holds all such Equity Interests
directly (i.e., not
through a Subsidiary, a Securities Intermediary or any other
Person).
(c) With
respect to each Grantor, Schedule 2 lists, as of the date hereof, (i) all
Securities owned by such Grantor (except Securities evidencing Equity Interests)
and (ii) all Securities Accounts to which Financial Assets are credited in
respect of which such Grantor owns Security Entitlements.
(d) Grantor
owns no Commodity Account in respect of which such Grantor is the Commodity
Customer.
(e) All
Pledged Equity Interests owned by such Grantor are owned by it free and clear of
any Lien other than (i) the Transaction Liens and (ii) any Permitted Liens. All
shares of capital stock included in such Pledged Equity Interests (including
shares of capital stock in respect of which such Grantor owns a Security
Entitlement) have been duly authorized and validly issued and are fully paid and
non-assessable. None of such Pledged Equity Interests is subject to
any
11
option to
purchase or similar right of any Person. Such Grantor is not and will not become
a party to or otherwise bound by any agreement which restricts in any manner the
rights of any present or future holder of any Pledged Equity Interest with
respect thereto.
(f) Such
Grantor has good and marketable title to all its Collateral (subject to
exceptions that are, in the aggregate, not material), free and clear of any Lien
other than Permitted Liens.
(g) Such
Grantor has not performed any acts that might prevent the Secured Party from
enforcing any of the provisions of the Security Documents or that would limit
the Secured Party in any such enforcement. No financing statement, security
agreement, mortgage or similar or equivalent document or instrument covering all
or part of the Collateral owned by such Grantor is on file or of record in any
jurisdiction in which such filing or recording would be effective to perfect or
record a Lien on such Collateral, except financing statements, mortgages or
other similar or equivalent documents with respect to Permitted Liens. After the
date hereof, no Collateral owned by such Grantor will be in the possession or
under the Control of any other Person having a claim thereto or security
interest therein.
(h) The
Transaction Liens on all Collateral owned by such Grantor (i) have been validly
created, (ii) will attach to each item of such Collateral on the date hereof
(or, if such Grantor first obtains rights thereto on a later date, on such later
date) and (iii) when so attached, will secure all the Secured
Obligations.
(i) Such
Grantor has delivered a Perfection Certificate to the Secured Party. With
respect to each Grantor, information set forth therein is correct and complete
as of the date hereof. Within 60 days from the date hereof, such Grantor will
furnish to the Secured Party a file search report from each UCC filing office
listed in its Perfection Certificate, showing the filing made at such filing
office to perfect the Transaction Liens on its Collateral.
(j) Upon (i)
the filing of a UCC financing statement in proper and appropriate form in the
relevant filing office with respect to any Grantor, to the extent that the
security interest granted hereunder in the Collateral of such Grantor may be
perfected by filing a UCC financing statement, and (ii) the taking of possession
in the case of Collateral with respect to which a security interest may be
perfected through possession, such security interest will constitute a perfected
security interest in such Collateral. When, in addition to the filing of such
UCC financing statements, the applicable Intellectual Property Filings have been
made with respect to such Grantor’s Recordable Intellectual Property (including
any future filings required pursuant to Sections 4(a) and 5(a)), the Transaction
Liens will constitute perfected security interests in all right, title and
interest of such
12
Grantor
in its Recordable Intellectual Property to the extent that security interests
therein may be perfected by such filings, prior to all Liens and rights of
others therein except Permitted Liens. Except for (i) the filing of such UCC
financing statements and (ii) such Intellectual Property Filings, no
registration, recordation or filing with any governmental body, agency or
official is required in connection with the execution or delivery of the
Security Documents or is necessary for the validity or enforceability thereof or
for the perfection or due recordation of the Transaction Liens or for the
enforcement of the Transaction Liens. Upon execution and delivery of an Account
Control Agreement in respect of each Collateral Account, the security interest
of the Secured Party with respect to such Collateral Account shall be perfected
by Control.
(k) Such
Grantor has taken, and will continue to take, all actions necessary under the
UCC to perfect its interest in any Accounts or Chattel Paper purchased or
otherwise acquired by it, as against its assignors and creditors of its
assignors.
SECTION 4. Further Assurances; General
Covenants. Each Grantor covenants as
follows:
(a) Such
Grantor will, from time to time, at such Grantor’s expense, execute, deliver,
file and record any statement, assignment, instrument, document, agreement or
other paper and take any other action (including any Intellectual Property
Filing) that from time to time may be necessary or desirable, or that the
Secured Party may reasonably request, in order to:
(i) create,
preserve, perfect, confirm or validate the Transaction Liens on such Grantor’s
Collateral;
(ii) in the
case of Pledged Deposit Accounts and Pledged Investment Property, cause the
Secured Party to have Control thereof;
(iii) enable
the Secured Party to obtain the full benefits of the Security Documents;
or
(iv) enable
the Secured Party to exercise and enforce any of its rights, powers and remedies
with respect to any of such Grantor’s Collateral.
Such
Grantor authorizes the Secured Party to execute and file such financing
statements or continuation statements in such jurisdictions with such
descriptions of collateral (including “all assets” or “all personal property” or
other words to that effect) and other information set forth therein as the
Secured Party may reasonably deem necessary or desirable for the purposes set
forth in the preceding sentence. Each Grantor also ratifies its authorization
for the Secured Party to file
13
in any
such jurisdiction any initial financing statements or amendments thereto if
filed prior to the date hereof. The Secured Party is further authorized to file
with the United States Patent and Trademark Office or United States Copyright
Office (or any successor office or any similar office in any other country) such
documents as may reasonably be necessary or advisable for the purpose of
perfecting, confirming, continuing, enforcing or protecting the security
interests granted by each Grantor, without the signature of any Grantor, and
naming any Grantor or the Grantors as debtors and the Secured Party as secured
party. The relevant Grantor will pay the costs of, or incidental to, any
Intellectual Property Filings and any recording or filing of any financing or
continuation statements or other documents recorded or filed pursuant
hereto.
(b) Such
Grantor will not (i) change its name or organizational form or structure, (ii)
change its location (determined as provided in UCC Section 9-307) or (iii)
become bound, as provided in UCC Section 9-203(d) or otherwise, by a security
agreement entered into by another Person, unless it shall have given the Secured
Party prior notice thereof and delivered an Opinion of Counsel with respect
thereto in accordance with Section 4(c).
(c) At least
30 days before it takes any action contemplated by Section 4(b), such Grantor
will, at its expense, cause to be delivered to the Secured Party an Opinion of
Counsel, in form and substance reasonably satisfactory to Party B, to the effect
that (i) all financing statements and amendments or supplements thereto,
continuation statements and other documents required to be filed or recorded in
order to perfect and protect the Transaction Liens against all creditors of and
purchasers from such Grantor after it takes such action (except any continuation
statements specified in such Opinion of Counsel that are to be filed more than
six months after the date thereof) have been filed or recorded in each office
necessary for such purpose, (ii) all fees and taxes, if any, payable in
connection with such filings or recordations have been paid in full and (iii)
except as otherwise agreed by the Secured Party, such action will not adversely
affect the perfection or priority of the Transaction Lien on any Collateral to
be owned by such Grantor after it takes such action or the accuracy of such
Grantor’s representations and warranties herein relating to such
Collateral.
(d) If any of
its Collateral is in the possession or control of a warehouseman, bailee or
agent at any time, such Grantor will (i) notify such warehouseman, bailee or
agent of the relevant Transaction Liens, (ii) instruct such warehouseman, bailee
or agent to hold all such Collateral for the Secured Party’s account subject to
the Secured Party’s instructions (which shall permit such Collateral to be
removed by such Grantor in the ordinary course of business until the Secured
Party notifies such warehouseman, bailee or agent that an Event of Default has
occurred and is continuing), (iii) cause such warehouseman, bailee or agent to
Authenticate a Record acknowledging that it holds possession of such Collateral
for the Secured Party’s benefit and (iv) make such Authenticated Record
available to the Secured Party.
14
(e) Such
Grantor will not sell, lease, exchange, assign or otherwise dispose of, or grant
any option with respect to, any of its Collateral; provided that such Grantor
may do any of the foregoing unless (i) doing so would violate a provision of
this Agreement or the Loan Contracts or (ii) an Event of Default shall have
occurred and be continuing and either (A) the Secured Party shall have notified
such Grantor that its right to do so is terminated, suspended or otherwise
limited or (B) the maturity of any or all of any Secured Obligations shall have
been accelerated. Concurrently with any sale, lease or other disposition (except
a sale or disposition to another Grantor or a lease) permitted by the foregoing
proviso, the
Transaction Liens on the assets sold or disposed of (but not in any Proceeds arising from
such sale or disposition) will cease immediately without any action by the
Secured Party. The Secured Party will, at Party A’s expense, execute and deliver
to the relevant Grantor such documents as such Grantor shall reasonably request
to evidence the fact that any asset so sold or disposed of is no longer subject
to a Transaction Lien.
(f) Such
Grantor will, promptly upon request, provide to the Secured Party all
information and evidence concerning such Grantor’s Collateral that the Secured
Party may reasonably request from time to time to enable it to enforce the
provisions of the Security Documents.
SECTION 5. Recordable Intellectual
Property. Each Grantor
covenants as
follows:
(a) Promptly
(and in any event within 20 business days) upon request by Party B, each Grantor
will promptly sign and deliver to the Secured Party Intellectual Property
Security Agreements with respect to all Recordable Intellectual Property then
owned by it. Within 30 days after each December 31 thereafter, it will sign and
deliver to the Secured Party an appropriate Intellectual Property Security
Agreement covering any Recordable Intellectual Property owned by it on such
December 31 that is not covered by any previous Intellectual Property Security
Agreement so signed and delivered by it. In each case, it will promptly make all
Intellectual Property Filings necessary to record the Transaction Liens on such
Recordable Intellectual Property.
(b) Upon the
occurrence and during the continuance of an Event of Default, each Grantor shall
use its best efforts to obtain all requisite consents or approvals by the
licensor of each Copyright License, Patent License or Trademark License under
which such Grantor is a licensee to effect the assignment of all such Grantor’s
right, title and interest thereunder to Party B for the benefit of the Secured
Party.
15
SECTION 6. Investment Property. Each Grantor represents,
warrants and
covenants as follows:
(a) Certificated Securities. On
the date hereof, each Grantor will deliver to the Secured
Party as Collateral hereunder all certificates representing Pledged Certificated
Securities then owned by such Grantor. Thereafter, whenever such Grantor
acquires any other certificate representing a Pledged Certificated Security,
such Grantor will immediately deliver such certificate to the Secured Party as
Collateral hereunder. The provisions of this subsection are subject to the
limitation in Section 6(g) in the case of voting Equity Interests in a Foreign
Subsidiary.
(b) Uncertificated Securities.
Upon request by Party B, each Grantor will promptly (and in
any event within 20 business days) enter into (and cause the relevant issuer to
enter into) an Issuer Control Agreement in respect of each Pledged
Uncertificated Security then owned by such Grantor and deliver such Issuer
Control Agreement to the Secured Party (which shall enter into the same).
Thereafter, whenever such Grantor acquires any other Pledged Uncertificated
Security, such Grantor will enter into (and cause the relevant issuer to enter
into) an Issuer Control Agreement in respect of such Pledged Uncertificated
Security and deliver such Issuer Control Agreement to the Secured Party (which
shall enter into the same). The provisions of this subsection are subject to the
limitation in Section 6(g) in the case of voting Equity Interests in a Foreign
Subsidiary.
(c) Security Entitlements. Upon
request by Party B, each Grantor will, with respect to each
Security Entitlement then owned by it, promptly enter into (and cause the
relevant Securities Intermediary to enter into) a Securities Account Control
Agreement in respect of such Security Entitlement and the Securities Account to
which the underlying Financial Asset is credited and will deliver such
Securities Account Control Agreement to the Secured Party (which shall enter
into the same). Thereafter, whenever such Grantor acquires any other Security
Entitlement, such Grantor will, as promptly as practicable, cause the underlying
Financial Asset to be credited to a Controlled Securities Account.
(d) Agreement as to Applicable
Jurisdiction. In respect of all Security Entitlements owned by
such Grantor, and all Securities Accounts to which the related Financial Assets
are credited, the Securities Intermediary’s jurisdiction (determined as provided
in UCC Section 8-110(e)) will at all times be located in the United
States.
(e) Delivery of Pledged
Certificates. All Pledged Certificates, when delivered to the
Secured Party, will be in suitable form for transfer by delivery, or accompanied
by duly executed instruments of transfer or assignment in blank, with
signatures appropriately guaranteed, all in form and substance reasonably
satisfactory to Party B.
16
(f) Communications. Each Grantor
will promptly give to the Secured Party copies of any
notices and other communications received by it with respect to (i) Pledged
Securities registered in the name of such Grantor or its nominee and
(ii) Pledged
Security Entitlements as to which such Grantor is the Entitlement
Holder.
(g) Foreign Subsidiaries. A
Grantor will not be obligated to comply with the provisions of
this Section at any time with respect to any voting Equity Interest in a Foreign
Subsidiary if and to the extent (but only to the extent) that such voting Equity
Interest is excluded from the Transaction Liens at such time pursuant to clause
(B) of the proviso at the end of Section 2.
(h) Certification of Limited Liability
Company and Partnership Interests. Any limited liability company and any
partnership controlled by any Grantor shall either
(i) not include in its operative documents any provision that any Equity
Interests in such limited liability company or such partnership be a “security”
as defined under Article 8 of the Uniform Commercial Code, or (ii) certificate
any Equity Interests in any such limited liability company or such partnership.
To the extent an interest in any limited liability company or partnership
controlled by any Grantor and pledged hereunder is certificated or becomes
certificated, each such certificate shall be delivered to the Secured Party
pursuant to Section 6(a) and such Grantor shall fulfill all other requirements
under Section 6 applicable in respect thereof.
SECTION 7. Deposit Accounts. Each Grantor represents,
warrants and covenants as
follows:
(a)
Promptly (and in any event within 20 business days) upon the request of Party B,
each Grantor shall, with respect to each Deposit Account and Commodity Account
then maintained by it, enter into (and cause the relevant Depositary Bank and
Commodity Intermediary to enter into) a Deposit Account Control Agreement and
Commodity Account Control Agreement, as applicable, in form and substance
reasonably satisfactory to Party B in respect of such Deposit Account or
Commodity Account, as applicable, and will deliver such control agreement to the
Secured Party (which shall enter into the same). Thereafter, all cash owned by
such Grantor will be deposited, upon or promptly after the receipt thereof, in
one or more Controlled Deposit Accounts. Whenever any Grantor establishes any
other Deposit Account or Commodity Account, such Grantor shall promptly (and in
any event within 20 business days) upon the Party B’s request, cause the
relevant Depositary Bank and Commodity Intermediary to enter into a Deposit
Account Control Agreement and Commodity Account Control
Agreement, as applicable, in form and substance reasonably satisfactory to Party
B over such Deposit Account or Commodity Account for the benefit of the Secured
Party.
17
(b) In
respect of each Controlled Deposit Account, the Depositary Bank’s jurisdiction
(determined as provided in UCC Section 9-304) will at all times be a
jurisdiction in which Article 9 of the Uniform Commercial Code is in
effect.
(c) The
Secured Party agrees that it will not (i) originate any instructions directing
disposition of funds in any Deposit Account or any other instruction in respect
of the Deposit Accounts or (ii) issue a Notice of Control or Notice of Exclusive
Control (as defined in the relevant Deposit Account Control Agreement) in
respect of any Deposit Account unless, in either case, an Event of Default shall
have occurred and be continuing, and in each case the Secured Party shall
promptly provide a copy to Party A of such instructions or notice.
(d) So long
as the Secured Party has Control of a Controlled Deposit Account, the
Transaction Lien on such Controlled Deposit Account will be perfected, subject
to no prior Liens or rights of others (except CCB’s right to deduct its normal
operating charges and any uncollected funds previously credited
thereto).
SECTION 8. Commercial Tort
Claims. Each
Grantor represents, warrants and covenants
that Schedule 3 accurately describes, with the specificity required to satisfy
Official Comment 5 to UCC Section 9-108, each Material Commercial Tort Claim
with respect to which such Grantor is the claimant as of the date
hereof.
SECTION 9. Transfer of Record
Ownership. At any time when an
Event of Default
shall have occurred and be continuing, the Secured Party may (and to the extent
that action by it is required, the relevant Grantor, if directed to do so by the
Secured Party, will as promptly as practicable) cause each of the Pledged
Securities (or any portion thereof specified in such direction) to be
transferred of record into the name of the Secured Party or its nominee. Each
Grantor will take any and all actions reasonably requested by the Secured Party
to facilitate compliance with this Section. If the provisions of this Section
are implemented, Section 6(b) shall not thereafter apply to any Pledged Security
that is registered in the name of the Secured Party or its nominee. The Secured
Party will promptly give to the relevant Grantor copies of any notices and other
communications received by the Secured Party with respect to Pledged Securities
registered in the name of the Secured Party or its nominee.
SECTION 10. Right to Vote
Securities. (a) Unless an Event of
Default shall have
occurred and be continuing, each Grantor will have the right, from time
to time, to vote and to give consents, ratifications and waivers with
respect to any Pledged Security owned by it and the Financial Asset underlying
any Pledged Security Entitlement owned by it, and the Secured Party will, upon
receiving a written request from such Grantor, deliver to such Grantor or as
specified in such request such proxies, powers of attorney, consents,
ratifications and waivers in respect of any such Pledged Security that is
registered in the name of the Secured Party or its nominee or any such Pledged
Security Entitlement as to which the Secured Party or its nominee is the
Entitlement Holder, in each case as shall be specified in such request and be in
form and substance reasonably satisfactory to Party B.
(b) If an
Event of Default shall have occurred and be continuing, Party B on behalf of the
Secured Party will have the exclusive right to the extent permitted by law to
vote, to give consents, ratifications and waivers and to take any other action
with respect to the Pledged Investment Property, the other Pledged Equity
Interests and the Financial Assets underlying the Pledged Security Entitlements,
with the same force and effect as if the Secured Party were the absolute and
sole owner thereof, and each Grantor will take all such action as Party B may
reasonably request from time to time to give effect to such right.
SECTION 11. Certain Cash
Distributions. At any time after Party
B shall have
requested that Deposit Account Control Agreements be executed in respect of any
Deposit Accounts of any Grantor pursuant to Section 7(a) above, Cash
Distributions with respect to any Pledged Equity Interest or Pledged Debt of
such Grantor that is not held in a Collateral Account (whether held in the name
of a Grantor or in the name of Party B or its nominee) shall be deposited,
promptly upon receipt thereof, in a Controlled Deposit Account of the relevant
Grantor.
SECTION 12. Remedies upon Event of
Default. (a)
If an Event of Default shall have
occurred and be continuing, the Secured Party may exercise any or all of the
remedies available to it under the Security Documents.
(b)
Without limiting the generality of the foregoing, if an Event of Default shall
have occurred and be continuing, the Secured Party may exercise all the rights
of a secured party under the UCC (whether or not in effect in the jurisdiction
where such rights are exercised) with respect to any Collateral and, in
addition, the Secured Party may, without being required to give any notice,
except as herein provided or as may be required by mandatory provisions of law,
sell or otherwise dispose of the Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker’s board or at any of
the Secured Party’s offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as the Secured Party may deem commercially reasonable, irrespective of the
impact of any such sales on the market price of the Collateral. To the maximum
extent permitted by
19
applicable
law, the Secured Party may be the purchaser of any or all of the Collateral at
any such sale and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply all of any part of the
Secured Obligations as a credit on account of the purchase price of any
Collateral payable at such sale. Upon any sale of Collateral by the Secured
Party (including pursuant to a power of sale granted by statute or under a
judicial proceeding), the receipt of the Secured Party or of the officer making
the sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid to the Secured
Party or such officer or be answerable in any way for the misapplication
thereof. Each purchaser at any such sale shall hold the property sold absolutely
free from any claim or right on the part of any Grantor, and each Grantor hereby
waives (to the extent permitted by law) all rights of redemption, stay or
appraisal that it now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted. The Secured Party shall not
be obliged to make any sale of Collateral regardless of notice of sale having
been given. The Secured Party 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. To the maximum extent permitted by law, each Grantor hereby waives
any claim against the Secured Party arising because the price at which any
Collateral may have been sold at such a private sale was less than the price
that might have been obtained at a public sale, even if the Secured Party
accepts the first offer received and does not offer such Collateral to more than
one offeree. The Secured Party may disclaim any warranty, as to title or as to
any other matter, in connection with such sale or other disposition, and its
doing so shall not be considered adversely to affect the commercial
reasonableness of such sale or other disposition.
(c) If the
Secured Party sells any of the Collateral upon credit, the Grantors will be
credited only with payment actually made by the purchaser, received by the
Secured Party and applied in accordance with Section 13 hereof. In the event the
purchaser fails to pay for the Collateral, the Secured Party may resell the
same, subject to the same rights and duties set forth herein.
(d) Notice of
any such sale or other disposition shall be given to the relevant Grantor(s) as
(and if) required by Section 15.
(e) For the
purpose of enabling the Secured Party to exercise rights and remedies under this
Agreement at such time as the Secured Party shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Secured
Party an irrevocable license (exercisable without payment of royalty or other
compensation to the Grantors), to use, license or sublicense any
20
of the
Collateral consisting of Intellectual Property now owned or hereafter acquired
by such Grantor, and including in such license access to all media in which any
of the licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof. The use of such license
by the Secured Party may be exercised only upon the occurrence and during the
continuation of an Event of Default; provided, however, that any license,
sublicense or other transaction entered into by the Secured Party in accordance
herewith shall be binding upon each Grantor notwithstanding any subsequent cure
of an Event of Default.
SECTION 13. Application of
Proceeds. (a) If an Event of
Default shall have
occurred and be continuing, the Secured Party may apply (i) any cash held in the
Collateral Accounts and (ii) the proceeds of any sale or other disposition of
all or any part of the Collateral, in the following order of
priorities:
first, to pay the expenses of
such sale or other disposition, including reasonable
compensation to agents of and counsel for the Secured Party, and all expenses,
liabilities and advances incurred or made by the Secured Party in connection
with the Security Documents, and any other amounts then due and payable to the
Secured Party pursuant to Section 14;
second, to pay all Secured
Obligations ratably ; and
finally, if (and only if) the
Release Condition, have been satisfied, to pay to the relevant
Grantor, or as a court of competent jurisdiction may direct, any surplus then
remaining from the proceeds of the Collateral owned by it;
provided that Collateral
owned by a subsidiary and any proceeds thereof shall be applied pursuant to the
foregoing clauses first
and second only to the
extent permitted by the limitations set forth in Section 4 of the Parent
Indemnity and Subsidiary Guarantee Letter Agreement.
SECTION 14. Fees and Expenses;
Indemnification. (a) Each Grantor agrees, jointly and
severally, to forthwith upon demand pay to the Secured Party:
(i) the
amount of any taxes that the Secured Party may have been required to pay by
reason of the Transaction Liens or to free any Collateral from any other Lien
thereon;
(ii) the
amount of any and all reasonable out-of-pocket expenses, including transfer
taxes and reasonable fees and expenses of counsel and other experts, that the
Secured Party may incur in connection with (x) the administration or enforcement
of the Security Documents,
21
including
such expenses as are incurred to preserve the value of the Collateral or the
validity, perfection, rank or value of any Transaction Lien, (y) the collection,
sale or other disposition of any Collateral or (z) the exercise by the Secured
Party of any of its rights or powers under the Security Documents;
(iii) the
amount of any fees that any Grantor shall have agreed in writing to pay to the
Secured Party and that shall have become due and payable in accordance with such
written agreement; and
(iv) the
amount required to indemnify the Secured Party for, or hold it harmless and
defend it against, any loss, liability or expense (including the reasonable fees
and expenses of its counsel and any experts or agents appointed by it hereunder)
incurred or suffered by the Secured Party in connection with the Security
Documents, except to the extent that such loss, liability or expense arises from
the Secured Party’s gross negligence or willful misconduct or a breach of any
duty that the Secured Party has under this Agreement (after giving effect to
Section 17).
Any such
amount not paid to the Secured Party on demand will bear interest for each day
thereafter until paid at a rate per annum equal to the sum of 2% plus the rate
applicable to the Loans.
(b) If any
transfer tax, documentary stamp tax or other tax is payable in connection with
any transfer or other transaction provided for in the Security Documents, Party
A will pay such tax and provide any required tax stamps to the Secured Party or
as otherwise required by law.
(c) The
Grantors shall, jointly and severally, indemnify each of the Secured Parties and
their respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an “Indemnitee”) against, and hold
each Indemnitee harmless from, any and all liabilities, losses, damages, costs
and expenses of any kind arising out of, or in connection with the Loan
Contracts or any Security Document, except to the extent that such loss,
liability or expense arises from such Indemnitee’s gross negligence or willful
misconduct.
SECTION 15. Authority to Administer
Collateral. Each Grantor irrevocably appoints the
Secured Party its true and lawful attorney, with full power of substitution, in
the name of such Grantor, for the sole use and benefit of the Secured Party, but
at Party A’s expense, to the extent permitted by law to exercise, at any time
and from time to time while an Event of Default shall have occurred and be
continuing, all or any of the following powers with respect to all or any of
such Grantor’s Collateral:
22
(a) to
demand, xxx for, collect, receive and give acquittance for any and all monies
due or to become due upon or by virtue thereof,
(b) to
settle, compromise, compound, prosecute or defend any action or proceeding with
respect thereto,
(c) to sell,
lease, license or otherwise dispose of the same or the proceeds or avails
thereof, as fully and effectually as if the Secured Party were the absolute
owner thereof, and
(d) to extend
the time of payment of any or all thereof and to make any allowance or other
adjustment with reference thereto;
provided that, except in the
case of Collateral that is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, the Secured Party
will give the relevant Grantor at least ten days’ prior written notice of the
time and place of any public sale thereof or the time after which any private
sale or other intended disposition thereof will be made. Any such notice shall
(i) contain the information specified in UCC Section 9-613, (ii) be
Authenticated and (iii) be sent to the parties required to be notified pursuant
to UCC Section 9-611(c); provided that, if the Secured
Party fails to comply with this sentence in any respect, its liability for such
failure shall be limited to the liability (if any) imposed on it as a matter of
law under the UCC.
SECTION 16. [reserved].
SECTION 17. Limitation on Duty in Respect of
Collateral. Beyond the exercise of reasonable
care in the custody and preservation thereof, the Secured Party will have no
duty as to any Collateral in its possession or control or in the possession or
control of any sub-agent or bailee or any income therefrom or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. The Secured Party will be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession or control if
such Collateral is accorded treatment substantially equal to that which it
accords its own property, and will not be liable or responsible for any loss or
damage to any Collateral, or for any diminution in the value thereof, by reason
of any act or omission of any sub-agent or bailee selected by the Secured Party
in good faith, except to the extent that such liability arises from the Secured
Party’s gross negligence or willful misconduct.
SECTION 18. Termination of
Transaction Liens; Release of Collateral.
(a) The
Transaction Liens granted by each Grantor shall terminate when all the Release
Condition is satisfied.
23
(b) At any
time before the Transaction Liens granted by each Grantor shall terminate, Party
B may in its sole discretion, on behalf of the Secured Party, at the written
request of the relevant Grantor, release any Collateral.
(c) Upon any
termination of a Transaction Lien or release of Collateral, the Secured Party
will, at the expense of the relevant Grantor, execute and deliver to such
Grantor such documents as such Grantor shall reasonably request to evidence the
termination of such Transaction Lien or the release of such Collateral, as the
case may be.
SECTION 19. Notices. Each notice, request or
other communication given to any party
hereunder shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopier as
follows:
(a) Party
A, the Parent Indemnitor, the Subsidiary Guarantor or the Grantors:
0000 Xxx
Xxxxx Xxxx., Xxxxx 000
Xxxxxxxx,
Xxxxxx 00000
Attention:
Chief Executive Officer
Facsimile
No.: + 0 000-000-0000
(b) Party
B or the Secured Party:
Xx. 0,
Xxxxxxx Xxxx,
Xxxxxxxxx
Airport Economic Development Zone,
Chengdu,
China 610200
Attention:
Xxx Xxx
Facsimile
No.: x00-00-0000-0000
SECTION 20. No Implied Waivers; Remedies Not
Exclusive. No failure by the Secured Party to
exercise, and no delay in exercising and no course of dealing with respect to,
any right or remedy under any Security Document shall operate as a waiver
thereof; nor shall any single or partial exercise by the Secured Party of any
right or remedy under in connection with any of the Secured Obligations preclude
any other or further exercise thereof or the exercise of any other right or
remedy. The rights and remedies specified in connection with the Secured
Obligations are cumulative and are not exclusive of any other rights or remedies
provided by law.
SECTION 21. Successors and
Assigns. This Agreement is for
the benefit of the
Secured Party. If all or any part of the Secured Party’s interest in any Secured
Obligation is assigned or otherwise transferred, the transferor’s rights
hereunder, to the extent applicable to the obligation so transferred, shall
be
automatically
transferred with such obligation. This Agreement shall be binding on the
Grantors and their respective successors and assigns; provided that no Grantor may
assign or otherwise transfer its obligations hereunder without the express
written consent of Party B and any purported assignment in violation of this
provision shall be null and void.
SECTION 22. Amendments and
Waivers. Neither this Agreement
nor any provision
hereof may be waived, amended, modified or terminated except pursuant to an
agreement or agreements in writing entered into by the Secured Party. No such
waiver, amendment or modification shall be binding upon any Grantor, except with
its written consent.
SECTION 23. Choice of Law. This Agreement shall be
construed in accordance with and
governed by the laws of the State of New York, except as otherwise required by
mandatory provisions of law and except to the extent that remedies provided by
the laws of any jurisdiction other than the State of New York are governed by
the laws of such jurisdiction.
SECTION 24. Waiver of Jury Trial. EACH PARTY HERETO WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO ANY
SECURITY DOCUMENT OR ANY TRANSACTION CONTEMPLATED THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 25. Severability. If any provision of any
Security Document is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions of the Security Documents shall remain in full force
and effect in such jurisdiction and shall be liberally construed in favor of the
Secured Party in order to carry out the intentions of the parties thereto as
nearly as may be possible and (ii) the invalidity or unenforceability of such
provision in such jurisdiction shall not affect the validity or enforceability
thereof in any other jurisdiction.
[Remainder of page is intentionally
blank]
25
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
|
HOKU
SCIENTIFIC, INC.
|
||
By:
|
|
||
Name:
|
|||
Title: |
|
HOKU
MATERIALS, INC.
|
||
By:
|
|
||
Name:
|
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Title: |
[Signature
Page to Security Agreement]
SCHEDULE
1
EQUITY
INTERESTS IN SUBSIDIARIES AND AFFILIATES OWNED BY GRANTORS
(as
of ______ __, 2009)
Issuer
|
Jurisdiction of |
Owner
of Equity
Interest |
Percentage Owned |
Number
of Shares
or |
S-1-1
SCHEDULE
2
INVESTMENT
PROPERTY OWNED BY GRANTORS
(other
than Equity Interests in Subsidiaries and Affiliates)
(as
of ______ __, 2009)
PART
1 — Securities
Issuer
|
Jurisdiction of |
Owner
of Securities
|
Amount Owned |
Type
of Security |
PART
2 — Securities Accounts
The
Grantors own Security Entitlements with respect to Financial Assets credited to
the following Securities Accounts:
Owner
|
Securities
Intermediary
|
Account
Number
|
S-2-1
SCHEDULE
3
MATERIAL
COMMERCIAL TORT CLAIMS
Describe
each existing Material Commercial Tort Claim with the specificity required to
satisfy Official Comment 5 to UCC Section 9-108.
S-3-1
SCHEDULE
4
EXISTING
PERMITTED LIENS
Pursuant
to (i) the letter agreement between Hoku Materials, Inc. and Trance, TCS
Americas dated as of September 4, 2009 and (ii) the UCC financing statement
filed on September 30, 2009 with the Idaho Secretary of State with the filing
number B 0000-0000000-0, Trane US, Inc.’s security interest in the following
equipment located at the Hoku job site in Pocatello, Idaho:
20-HVA-AHU-001,
20-HVA-AHU-002, 20-HVA-AHU-003, 20-HVA- AHU-004, 00-XXX-XXX-000, 00-XXX-XXX-000,
00-XXX-XXX-000, 20-HVA-AHU-008, 20-HVA-CAF-0001, 20-HVA-CAF-0002, 20-HVA-
EFN-001, 20-HVA-EFN-002, 20-HVA-EFN-003, 20-HVA-EFN-004, 00- XXX-XXX-000,
00-XXX-XXX-000, 00-XXX-XXX-0000, 00-XXX-XXX- 0000, 20-HVA-ERC-0003,
20-HVA-ERC-0004, 20-HVA-ERC-0005, 20- HVA-ERC-0006
S-4-1
EXHIBIT C
TO
LOAN IMPLEMENTATION
AGREEMENT
RECORDING
REQUESTED BY AND
WHEN
RECORDED RETURN TO:
Xxxxxx
Xxxx
Xxxxx
Polk & Xxxxxxxx LLP
000
Xxxxxxxxx Xxxxxx
Xxx
Xxxx, XX 00000
(Space
Above For Recorder’s Use)
DEED
OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING
GRANTOR:
|
HOKU
MATERIALS, INC., a Delaware
corporation
|
TRUSTEE:
|
ALLIANCE TITLE & ESCROW
CORP.
|
BENEFICIARY:
|
TIANWEI
NEW ENERGY HOLDINGS CO., LTD., a People’sRepublic
of China company
|
DATE:
|
_______________,
2009
|
DEED
OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING
THIS DEED
OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING (the “Deed of Trust”) effective
as of ________ __, 2009, by HOKU MATERIALS, INC., a Delaware corporation, whose
address is 0000 Xxx Xxxxx Xxxx., Xxxxx 000, Xxxxxxxx, Xxxxxx 00000, the United States
of America, as grantor (the “Grantor”), ALLIANCE TITLE & ESCROW CORP., whose address is
P.O. Box 1176, 2350 Xxx Xxxxxxxxx, Xxxxxxxxx, Xxxxx 00000, as trustee (the
“Trustee”), and TIANWEI NEW
ENERGY HOLDINGS CO., LTD., a People’s Republic of China company, its
successors and assigns, whose address is No 0, Xxxxxxx Xxxx, Xxxxxxxxx Airport
Economic Development Xxxx, Xxxxxxx, Xxxxx 000000, as beneficiary (the
“Beneficiary”).
RECITALS
A. Pursuant
to the that letter agreement (the “Loan Implementation Agreement”) dated as of
December 22, 2009 among Hoku Scientific, Inc. (the “Parent Indemnitor”), Grantor
and Beneficiary, Parent Indemnitor, as borrower, Beneficiary, as entrusting
lender, and China Construction Bank Corporation Shuangliu Sub-Branch, a People’s
Republic of China bank (“CCB”), as agent, have entered into the Tranche 1 Loan
Contract dated as of the date hereof (the “Tranche 1 Loan Contract”) and, as
obligated under the Loan Implementation Agreement, will enter into the Tranche 2
Loan Contract (the “Tranche 2 Loan Contract” and together with the Tranche 1
Loan Contract, the “Entrustment Loan Contract”).
B. Pursuant
to the Entrustment Loan Contract, Beneficiary agreed to entrust a loan to CCB
for the benefit of, and release to, Parent Indemnitor (the “Entrustment
Loan”).
C. Parent
Indemnitor and Beneficiary have entered into the Parent Indemnity (the “Parent
Indemnity”), and Grantor and Beneficiary have entered into the Subsidiary
Guarantee (the “Subsidiary Guarantee”), each contained in the letter agreement
dated as of the date hereof (the “Parent Indemnity and Subsidiary Guarantee
Letter Agreement”). Pursuant to the Parent Indemnity, the Parent Indemnitor
agreed to indemnify the foregoing obligations of Beneficiary and is willing to
secure its indemnitee thereof by granting liens on its assets to the
Beneficiary. Pursuant to the Subsidiary Guarantee, Grantor agreed to guarantee
the foregoing obligations of Parent Indemnitor and is willing to secure its
guarantee thereof by granting liens on its assets to the
Beneficiary.
D. Beneficiary,
as a condition precedent to the extension of credit and the making of the
Entrustment Loan, has required that Grantor provide Beneficiary with security
for the foregoing obligations as well as for the performance, observance and
discharge by Grantor or Parent Indemnitor of various covenants, conditions and
agreements made by Grantor or Parent Indemnitor to, with, in favor of, and for
the benefit of, Beneficiary with respect to such obligations and
security.
E. In
addition, Grantor and Tianwei New Energy (Chengdu) Wafer Co., Ltd. (“Tianwei
Wafer”), an affiliate of Beneficiary have entered into an Amended and Restated
Supply Agreement No. 1 and an Amended and Restated Supply Agreement No. 2, each
dated as
of
December 22, 2009 (collectively, the “Supply Agreements”), pursuant to which
Grantor has agreed to sell to Beneficiary, and Beneficiary has agreed to
purchase from Grantor, a certain amount of Products (as defined in the Supply
Agreements) over a ten-year period. Beneficiary is not willing to purchase
Products under the Supply Agreements unless the obligations of Grantor under the
Supply Agreements are secured. Grantor is willing to secure its obligations
under the Supply Agreements by granting liens on its assets to
Beneficiary.
1.
|
Grants
of Security.
|
1.1 Property Granted. In
consideration of and in order to secure the repayment, observance, performance
and discharge by Parent Indemnitor and Grantor of the Secured Obligations (as
defined in Section 1.4 below), Grantor grants, bargains, sells, aliens, remises,
releases, conveys, assigns, transfers, pledges, delivers, sets over,
hypothecates, warrants, and confirms to Trustee, in trust, with power of sale,
for the benefit and security of Beneficiary, as beneficiary hereunder, subject
to the terms and conditions of this Deed of Trust, all estate, right, title and
interest that Grantor now has or may later acquire in and to the following
described properties, rights and interests and all replacements of,
substitutions for, and additions thereto (all of which are referred to below as
the “Property”):
1.1.1 Real Property. The
leasehold interest in real property in Bannock County, Idaho, described in
Exhibit A attached hereto and made a part hereof (the “Real Property”), which
Real Property is located within an incorporated city or village.
1.1.2 Improvements. All
buildings, structures and other improvements of any kind, nature or
description now or hereafter erected, constructed, placed or located upon the
Real Property (the “Improvements”).
1.1.3 Appurtenances. All
tenements, hereditaments, strips and gores of land, rights-of-way,
easements, privileges and other appurtenances now or hereafter belonging or in
any way appertaining to the Real Property, including, without limitation, all
right, title and interest of the Grantor in any after-acquired right, title,
interest, remainder or reversion, in and to the beds of any ways, streets,
avenues, roads, alleys, passages and public places, open or proposed, in front
of, running through, adjoining or adjacent to the Real Property; to the extent
owned by Grantor, all minerals, royalties, gas rights, water, water rights,
water stock, flowers, shrubs, lawn plants, crops, trees, timber and other
emblements now or hereafter located on, under, or above all or any part of the
Real Property (the “Appurtenances”).
1.1.4 Leases and Rents. All
leases and other agreements affecting the use, enjoyment or occupancy
of all or any part of the Real Property or the Improvements heretofore or
hereafter entered into whether before or after the filing by or against Grantor
of any petition for relief under 11 U.S.C. 101, et seq. (the “Bankruptcy Code”),
as the same may be amended from time to time (the “Leases”) and all right, title
and interest of Grantor, its successors and assigns therein and thereunder,
including, without limitation, cash or securities deposited thereunder to secure
the performance by the lessees of their obligations thereunder and all rents,
additional rents, revenues, income, issues and profits (including all oil and
gas or other mineral
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1.1.5 Condemnation Awards. Any
and all awards, payments or settlements, including interest
thereon, and the right to receive the same, as a result of (a) the exercise of
the right of eminent domain, (b) the alteration of the grade of any street, and
(c) any other injury, damage or casualty to, taking of, or decrease in the value
of, the Property, to the extent of all amounts that may be secured by this Deed
of Trust at the date of any such award or payment, including but not limited to
Reasonable Attorneys’ Fees (as defined below), costs, and disbursements incurred
by Beneficiary in connection with the collection of such award or
payment.
1.1.6 Fixtures and Personal Property.
All machinery, equipment, fixtures (including, but not
limited to all heating, air conditioning, plumbing, lighting, communications and
elevator fixtures) and other property of every kind and nature whatsoever owned
by Grantor, or in which Grantor has or shall have an interest, now or hereafter
located upon the Real Property or the Improvements, or appurtenant thereto, and
used in connection with the present or future operation and occupancy of the
Real Property and the Improvements and all building equipment, materials and
supplies of any nature whatsoever owned by Grantor, or in which Grantor has or
shall have an interest, now or hereafter located upon the Real Property and the
Improvements, or appurtenant thereto, or used in connection with the present or
future operation and occupancy of the Real Property and the Improvements
(together referred to as the “Fixtures and Personal Property,” which term
expressly excludes any toxic waste or substance deemed hazardous under federal,
regional, state, or local laws).
1.1.7 Insurance Proceeds. All
proceeds of and any unearned premiums on any insurance policies
covering the Property, including, without limitation, the right to receive and
apply the proceeds of any insurance judgments, or settlements made in lieu
thereof, for damage to the Property.
1.1.8 Agreements. All
agreements, contracts, certificates, instruments, franchises, permits,
licenses, plans, specifications and other documents, now or hereafter entered
into, and all rights therein and thereto, respecting or pertaining to the use,
occupation, construction, management or operation of the Real Property and any
part thereof and any Improvements or respecting any business or activity
conducted on the Real Property and any part thereof and all right, title and
interest of Grantor therein and thereunder, including, without limitation, the
right to receive and collect any sums payable to Grantor
thereunder.
1.1.9 Intangibles. All trade
names, trademarks, service marks, logos, copyrights, goodwill,
books and records and all other general intangibles specific to or used in
connection with the operation of the Property.
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1.2 Assignment of Leases and Rents.
Grantor absolutely and unconditionally assigns to Beneficiary
all of Grantor’s right, title and interest in and to all current and future
Leases and Rents (the “Assignment of Leases and Rents”); it being intended by
Grantor that this assignment constitutes a present, absolute assignment and not
an assignment for additional security only. Nevertheless, subject to the terms
of this Deed of Trust, Beneficiary grants to Grantor a revocable license to
collect and receive the Rents. Grantor shall hold a portion of the Rents
sufficient to discharge all current sums due under the Parent Indemnity and
Subsidiary Guarantee Letter Agreement and the Supply Agreements, for use in the
payment of such sums.
1.3 Security Agreement. This Deed
of Trust is both a real property deed of trust and a “security agreement”
within the meaning of the Idaho Uniform Commercial Code. The Property includes
all rights and interests, whether tangible or intangible in nature, of Grantor
in the Property. By executing and delivering this Deed of Trust, Grantor grants
Beneficiary, as security for the Secured Obligations, a security interest in the
Property that is personal property (the “Personal Property”) to the full extent
that the Personal Property may be subject to the Idaho Uniform Commercial Code.
Upon its recording, this Deed of Trust shall operate as and constitute a
financing statement filed as a fixture filing, covering any of the Property that
now is or later becomes fixtures attached to the Real Property or the
Improvements. For purposes of this filing, Grantor is the debtor and Beneficiary
is the secured party. The City of Pocatello, a municipal corporation of Idaho,
is the record owner of the Real Property. The name and mailing address of the
Grantor, as debtor, and name and the mailing address of the Beneficiary, as
secured party, are as set forth in the initial paragraph of this Deed of Trust.
The debtor is an organization, the type of organization is a corporation; the
jurisdiction in which the debtor is organized is Delaware; the organizational
number in such jurisdiction for the organization is 4300110.
1.4 Secured Obligations. This Deed
of Trust and the grants, assignments and transfers made herein
are given for the purpose of securing all of the following, in such order of
priority as Beneficiary may determine in its sole discretion (the “Secured
Obligations”):
1.4.1 The payment of the
indemnity obligations of the Parent Indemnitor evidenced by the Parent
Indemnity in lawful money of the United States of America.
1.4.2 The payment of interest,
default interest, late charges and other sums, as provided in the Parent
Indemnity and Subsidiary Guarantee Letter Agreement, this Deed of Trust or the
other Credit Documents (as defined below).
1.4.3 The payment of all other
monies agreed or provided to be paid by Parent Indemnitor or Grantor in
the Parent Indemnity and Subsidiary Guarantee Letter Agreement, this Deed of
Trust or the other Credit Documents.
1.4.4 The payment of all sums
advanced pursuant to this Deed of Trust to protect and preserve the
Property and the lien and the security interest created hereby.
1.4.5 The payment of all sums
advanced and costs and expenses incurred by Beneficiary in
connection with the Secured Obligations or any part thereof, any
renewal,
1.4.6 The
performance of all other obligations of Grantor herein.
1.4.7 The
performance of each obligation of Grantor in the Credit Documents in
addition
to the payment of the indemnity obligations of the Parent
Indemnitor.
1.4.8 The performance of each
obligation in the Credit Documents of any person guaranteeing the
payment of the indemnity obligations of the Parent Indemnitor or any portion
thereof or performance by Grantor of any terms of this Deed of Trust, if
any.
1.4.9 The performance of each
obligation of Grantor and any guarantor of the Secured Obligations
(“Guarantor”) in any renewal, extension, modification, consolidation, change,
substitution, replacement for, restatement or increase of all or any part of the
Parent Indemnity and Subsidiary Guarantee Letter Agreement, this Deed of Trust
or the other Credit Documents.
1.4.10 The payment
and performance of each obligation of Grantor under each of the
following:
1.4.10.1 That certain Ground
Lease dated March 22, 2007, between Grantor, as Tenant, and
the City of Pocatello, a municipal corporation of Idaho, as Landlord, and all
modifications, amendment and addendums thereto, regarding the Real Property
including, without limitation, the First Amendment to Lease dated June 6, 2008,
and the Second Amendment to Lease dated June 19, 2008 (the “Ground
Lease”);
1.4.10.2 The Supply
Agreements.
The
obligations secured hereby may provide for the interest rate, payment terms or
balance due to be indexed, adjusted, renewed or renegotiated.
2.
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Grantor
Covenants. Grantor covenants and agrees as
follows:
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2.1 Payment of Obligations.
Grantor shall pay or cause Parent Indemnitor to pay any amounts due under
the Parent Indemnity and Subsidiary Guarantee Letter Agreement or the Supply
Agreements, together with all interest thereon, in accordance with the terms of
the Parent Indemnity and Subsidiary Guarantee Letter Agreement or the Supply
Agreements, as applicable, promptly at the times, at the place and in the manner
that said amounts shall become due, and to promptly and punctually pay all other
sums required to be paid by Grantor or Parent Indemnitor pursuant to the terms
of the Parent Indemnity and Subsidiary Guarantee Letter Agreement, the Supply
Agreements, this Deed of Trust, the Assignment of Leases and Rents set forth
herein (the “Assignment”) and all other documents and instruments executed as
further evidence of, as additional security for, or executed in connection with,
the obligations evidenced by the Parent Indemnity and Subsidiary Guarantee
Letter Agreement or the Supply Agreements, as applicable,
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and
secured by this Deed of Trust, including the Loan Implementation Agreement and
the Entrustment Loan Contract, are collectively referred to as the “Credit
Documents.”
2.2 Performance of Other Obligations.
Grantor shall perform, comply with, and abide by each and every
one of the covenants, agreements and conditions contained and set forth in the
Parent Indemnity and Subsidiary Guarantee Letter Agreement, this Deed of Trust,
the other Credit Documents, and the Secured Obligations, and shall comply with
all laws, ordinances, rules, regulations and orders of any governmental
authorities having jurisdiction over the Property that now or hereafter affect
the Property or requires any alterations or improvements to be made thereon, and
shall perform all of its obligations under any covenant, condition, restriction
or agreement of record affecting the Property, including, but not limited to,
the Ground Lease, and shall insure that at all times the Property constitutes
one or more legal lots capable of being conveyed without violation of any
subdivision or platting laws, ordinances, rules or regulations, or other laws
relating to the division or separation of real property.
2.3 Preservation and Maintenance of
Property. Grantor shall keep all Improvements now
existing or hereafter erected on the Real Property in good order and repair and
shall not do or permit any waste, impairment or deterioration thereof or
thereon, nor alter, remove, or demolish any of the Improvements or any Fixtures
and Personal Property attached or appertaining thereto, without the prior
written consent of Beneficiary. Grantor shall not initiate, join in, or consent
to any change in any private restrictive covenant, zoning ordinance or other
public or private restrictions limiting or defining the uses that may be made of
the Property or any part thereof, nor do or permit any other act whereby the
Property shall become less valuable, be used for purposes contrary to applicable
law, or be used in any manner that will increase the premium for or result in a
termination or cancellation of the insurance policies hereinafter required to be
kept and maintained on the Property. Grantor shall effect such repairs as
Beneficiary may reasonably require, and from time to time make all needful and
proper replacements so that the Improvements, Appurtenances, Fixtures and
Personal Property will, at all times, be in good condition, fit and proper for
the respective purposes for which they were originally erected or
installed.
2.4 Hazardous
Waste.
2.4.1 Subject to the terms and
conditions set forth below, Grantor at all times shall keep the Property
and ground water of the Property free of Hazardous Materials (as defined below).
Grantor shall not and shall not knowingly permit its tenants or any third party
requiring the consent of Grantor to enter the Property, to use, generate,
manufacture, treat, store, release, threaten release, or dispose of Hazardous
Materials in, on, or about the Property or the ground water of the Property in
violation of any federal, regional, state, or local law, decision, statute,
rule, ordinance or regulation currently in existence or hereinafter enacted or
rendered (collectively the “Hazardous Waste Laws”). Grantor shall give
Beneficiary prompt written notice of any claim by any person, entity, or
governmental agency that a significant release or disposal of Hazardous
Materials has occurred in, on, or under the Property in excess of legal limits.
Grantor, through its professional engineers and at its cost, shall promptly and
thoroughly investigate suspected Hazardous Materials contamination of the
Property. Grantor shall
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forthwith
remove, repair, clean up, and/or detoxify any Hazardous Materials found on the
Property or in the ground water of the Property if such actions are required by
Hazardous Waste Laws, and whether or not Grantor was responsible for the
existence of the Hazardous Materials in, on or about the Property or the ground
water of the Property. “Hazardous Materials” shall include but not be limited to
substances defined as “hazardous substances,” “hazardous materials,” or “toxic
substances” in The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, by the Superfund Amendments and
Reauthorization Act of 1986, The Hazardous Materials Transportation Act of 1994,
The Resource Conservation and Recovery Act of 1976, as amended by The Used Oils
Recycling Act of 0000, Xxx Xxxxx Xxxxx Xxxxxxxx Xxx amendment of 1984, The Toxic
Substances Control Act, The Clean Air Act, The Clean Water Act, Idaho
Environmental Protection and Health Act (Idaho Code §§ 39 101 to 39 130), Idaho
Water Quality Act (Idaho Code §§ 39 3601 to 39 3639), Idaho Hazardous Waste
Management Act (Idaho Code §§ 39 4401 to 39 4432), Idaho Hazardous Substance
Emergency Response Act (Idaho Code §§ 39 7101 to 39 7115), Idaho Petroleum Clean
Water Trust Fund Act (Idaho Code §§ 41 4901 to 41 4946), Idaho Land Reclamation
Act (Idaho Code §§ 39 7201 to 39 7210), Idaho Solid Waste Facilities Act (Idaho
Code §§ 39 7401 to 39 7420), Idaho Sale and Disposal of Batteries Act (Idaho
Code §§ 39 7001 to 39 7004), or in any other Hazardous Waste Laws. Hazardous
materials shall not include small quantities of paints, solvents, lubricants or
cleaning materials used in the maintenance or operation of the Property. In
addition, Grantor shall not put any underground storage tanks on the Real
Property.
2.4.2 Grantor shall indemnify
Beneficiary and hold Beneficiary harmless from and against any and all
losses, liabilities, damages, injuries, costs, expenses and claims of any and
every kind whatsoever paid, incurred or suffered by, or asserted against
Beneficiary for, with respect to, or as a direct or indirect result of, the
presence in, on, or under, or the escape, seepage, leakage, spillage, discharge,
emission, or release from, the Property of any Hazardous Materials (including,
without limitation, any losses, liabilities, damages, injuries, costs, expenses
or claims asserted or arising under any Hazardous Waste Laws), regardless of the
source of origination and whether or not caused by, or within the control of,
Grantor.
2.4.3 Liability under this
Section 2.4 and similar provisions in this Deed of Trust and the other
Credit Documents concerning Hazardous Materials shall survive repayment of the
obligations under the Parent Indemnity and Subsidiary Guarantee Letter Agreement
and the Supply Agreements and satisfaction of this Deed of Trust; provided,
however, Grantor shall have no liability under this Section 2.4 regarding
Hazardous Materials if the Property becomes contaminated subsequent to
Beneficiary’s acquisition of the Property by foreclosure, or acceptance by
Beneficiary of a deed in lieu thereof, or subsequent to any transfer of
ownership of the Property that was approved or authorized by Beneficiary in
writing, pursuant to this Deed of Trust, provided that such transferee assumes
in writing all of the obligations of Grantor under the Credit Documents with
respect to Hazardous Materials. The burden of proof under this section with
regard to establishing the date upon which any Hazardous Material was placed or
appeared in, on, or under the Property shall be upon Grantor.
2.5 Accessibility.
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2.5.1 Grantor at all times
shall maintain the Property in full compliance with all existing and hereafter
enacted federal, state, county, regional or local laws, ordinances, rules and
regulations governing accessibility for the disabled, including but not limited
to The Architectural Barriers Act of 1968, The Rehabilitation Act of 1973, The
Fair Housing Act of 1988, and The Americans with Disabilities Act (the
“Accessibility Laws”).
2.5.2 Grantor shall indemnify
Beneficiary and hold Beneficiary harmless from and against any and all
losses, liabilities, damages, injuries, costs, expenses and claims of any and
every kind whatsoever paid, incurred or suffered by, or asserted against
Beneficiary for, with respect to, or as a direct or indirect result of, the
non-compliance of the Property with the Accessibility Laws whether or not caused
by, or within the control of, Grantor.
2.5.3 Liability under this
Section 2.5 and similar provisions in this Deed of Trust and the other
Credit Documents concerning Accessibility Laws shall survive repayment of the
obligations under the Parent Indemnity and Subsidiary Guarantee Letter Agreement
and the Supply Agreements and satisfaction of this Deed of Trust; provided,
however, Grantor shall not be liable under this Section 2.5 for compliance with
any Accessibility Laws if such Accessibility Laws first become effective, or
such violations result from alterations or improvements to the Property that are
performed subsequent to Beneficiary’s acquisition of the Property by foreclosure
or acceptance of a deed in lieu thereof, or subsequent to any transfer that was
approved or authorized by Beneficiary pursuant to this Deed of Trust, provided
that such transferee assumes in writing all obligations pertaining to
Accessibility Laws pursuant to this Deed of Trust and the other Credit
Documents.
2.6 Use of Property. The Property
shall be used only for any legal use including, without limitation, the
construction and operation of a polysilicon manufacturing facility and for no
other use without the prior written consent of Beneficiary, which consent may be
withheld in Beneficiary’s discretion.
2.7 Payment of Taxes, Assessments and
Other Charges. Except as otherwise provided in the Ground
Lease, Grantor shall pay all taxes, assessments, and other charges that are or
may be hereafter levied or assessed upon or against the Property, when the same
shall become due and payable according to law, before the same become
delinquent, and before any interest or penalty shall attach thereto. Grantor
shall deliver official receipts evidencing the payment of the same to
Beneficiary not later than thirty (30) days following payment. Grantor shall
have the right to contest, in good faith, the proposed assessment of ad valorem
taxes or special assessments by governmental authorities having jurisdiction
over the Property; provided, however, Grantor shall give written notice thereof
to Beneficiary and Beneficiary may, in its sole discretion, require Grantor to
post a bond or other collateral satisfactory to Beneficiary in connection with
any such action by Grantor.
2.8 Payment of Liens, Charges and
Encumbrances. Grantor shall immediately pay and discharge from time
to time when the same shall become due all lawful claims and demands of
mechanics, materialmen, laborers and others that, if unpaid, might result in, or
permit the creation of, a lien, charge or encumbrance upon the Property or any
part thereof, or on the rents,
8
issues,
income, revenues, profits and proceeds arising therefrom and, in general, to do
or cause to be done everything necessary so that the lien of this Deed of Trust
shall be fully preserved, at the cost of Grantor, without expense to
Beneficiary. Grantor shall have the right to contest, in good faith and in
accordance with applicable laws and procedures, mechanics’ and materialmens’
liens filed against the Property; provided however, that Grantor shall give
written notice thereof to Beneficiary, and Beneficiary may, in its sole
discretion, require Grantor to post a bond or other collateral satisfactory to
Beneficiary (and acceptable to the title insurance company insuring this Deed of
Trust) in connection with any such action by Grantor.
2.9 Payment of Junior Encumbrances.
Grantor shall not permit default or delinquency under any
lien, imposition, charge or encumbrance against the Property, even though junior
and inferior to the lien of this Deed of Trust; provided however, the foregoing
shall not be construed to permit any other lien or encumbrance against the
Property.
2.10 Payment of Mortgage Taxes.
Grantor shall pay any and all taxes that may be levied or assessed under
the laws of the United States of America or the political subdivisions
thereunder directly or indirectly upon the Parent Indemnity and Subsidiary
Guarantee Letter Agreement and/or this Deed of Trust (except for income taxes
payable by Beneficiary) or the obligations secured hereby, without regard to any
law that may be hereafter enacted imposing payment of the whole or any part
thereof upon Beneficiary, its successors or assigns.
2.11 Insurance.
2.11.1 Grantor shall obtain
and maintain, or cause to be maintained, insurance for Grantor and the Property
providing at least the following coverages:
(a) Property Insurance.
Insurance with respect to the Improvements and building equipment
insuring against any peril as set forth under the Causes of Loss-Special Form in
an amount equal to amounts at all times sufficient to prevent Beneficiary from
becoming a co-insurer within the terms of the applicable policies and under
applicable law, but in any event such insurance shall be maintained in an amount
equal to the full insurable value of the Improvements and building equipment on
the Property. The term “full insurable value” means the actual replacement cost
of the Improvements and building equipment (without taking into account any
depreciation, and exclusive of excavations, footings and foundations,
landscaping, and paving).
(b) Liability Insurance.
Commercial general liability insurance, including bodily injury,
death and property damage liability insurance, against any and all claims,
including all legal liability to the extent insurable and imposed upon
Beneficiary and all court costs and attorneys’ fees and expenses, arising out of
or connected with the possession, use, leasing, operation, maintenance or
condition of the Property in such amounts as are generally available at
commercially reasonable premiums and are generally required by institutional
lenders for properties comparable to the Property but in no event for a combined
single limit of less than $3,000,000.00.
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(c) Business Interruption.
Business interruption and/or loss of “rental income”
insurance in an amount sufficient to avoid any co-insurance penalty and to
provide proceeds that will cover a period of not less than one (1) year from the
date of casualty or loss, the term “rental income” to mean the sum of (A) the
total then ascertainable Rents payable under the Leases and (B) the total
ascertainable amount of all other amounts to be received by Grantor from third
parties that are the legal obligation of the tenants, reduced to the extent such
amounts would not be received because of operating expenses not incurred during
a period of non-occupancy of that portion of the Property then not being
occupied.
(d) Flood Insurance. Flood
insurance in an amount at least equal to the lesser of (A) the
principal balance of the Entrustment Loan Contract, or (B) the maximum limit of
coverage available for the Property under the National Flood Insurance Act of
1968, The Flood Disaster Protection Act of 1973 or the National Flood Insurance
Reform Act of 1994, as each may be amended, or any successor law (the “Flood
Acts”), if any portion of the Improvements is now or at any time in the future
located within an area identified by the Secretary of Housing and Urban
Development or any successor thereto as an area having special flood hazards
pursuant to the Flood Acts.
(e) Other Insurance. Such
other insurance with respect to the Property against loss or
damage of the kinds from time to time customarily insured against and in such
amounts as are generally available at commercially reasonable premiums and are
generally required by institutional lenders for properties comparable to the
Property.
2.11.2 All insurance provided
for in Subsection 2.11.1 shall be obtained under valid and enforceable
policies (the “Policies” or in the singular, the “Policy”), and shall be issued
by one or more domestic primary insurer(s) having (i) an investment grade rating
or claims paying ability assigned by one or more credit rating agencies approved
by Beneficiary (a “Rating Agency”) and (ii) a general policy rating of A or
better and a financial class of VI or better by A.M. Best Company, Inc. (each
such insurer shall be referred to below as a “Qualified Insurer”). All insurers
providing insurance required by this Deed of Trust shall be authorized to issue
insurance in the state in which the Property is located. The Policy referred to
in Paragraph (b) above shall name Beneficiary as an additional named insured and
the Policy referred to in Paragraphs (a), (c), (d), and (e) above shall provide
that all proceeds be payable to Beneficiary as set forth in this Deed of Trust.
The Policies referred to in Paragraphs (a), (d), and (e) shall also contain: (i)
a standard “non-contributory mortgagee” endorsement or its equivalent (such as
the Beneficiary’s Loss Payable endorsement 438 BFU, in long form) relating,
inter alia, to recovery by Beneficiary notwithstanding the negligent or willful
acts or omission of Grantor; (ii) to the extent available at commercially
reasonable rates, a waiver of subrogation endorsement as to Beneficiary; and
(iii) an endorsement providing for a deductible per loss of an amount not more
than that which is customarily maintained by prudent owners of similar
properties in the general vicinity of the Property, but in no event in excess of
an amount approved by Beneficiary. All Policies described in Subsection 2.11.1
shall contain (i) a provision that such policies shall not be canceled or
terminated, nor shall they expire, without at least thirty (30) days’ prior
written notice to Beneficiary in each instance; and (ii) include effective
waivers by the insurer of all claims for Insurance Premiums (defined below)
against any loss payees, additional insureds and
10
named
insureds (other than Grantor). Certificates of insurance with respect to all
renewal and replacement Policies shall be delivered to Beneficiary not less than
thirty (30) days prior to the expiration date of any of the Policies required to
be maintained hereunder which certificates shall bear notations evidencing
payment of applicable premiums (the “Insurance Premiums”). Originals or
certificates of such replacement Policies shall be delivered to Beneficiary
promptly after Grantor’s receipt thereof but in any case within thirty (30) days
after the effective date thereof. If Grantor fails to maintain and deliver to
Beneficiary the original Policies or certificates of insurance required by this
Deed of Trust, Beneficiary may procure such insurance at Grantor’s sole cost and
expense.
2.11.3 Grantor shall comply
with all insurance requirements and shall not bring or keep or permit to be
brought or kept any article upon any of the Property or cause or permit any
condition to exist thereon that would be prohibited by an insurance requirement,
or would invalidate the insurance coverage required hereunder to be maintained
by Grantor on or with respect to any part of the Property pursuant to this
Section.
2.11.4 If the Property shall
be damaged or destroyed, in whole or in part, by fire or other casualty,
Grantor shall give prompt notice of such damage to Beneficiary and provided that
Grantor shall have received the Net Proceeds (defined below), Grantor shall promptly
commence and diligently prosecute the completion of the repair and restoration
of the property as nearly as possible to the condition the Property was in
immediately prior to such fire or other casualty, with such alterations as may
be approved by Beneficiary (the “Restoration”) and otherwise in accordance with
Section 2.13 of this Deed of Trust.
2.11.5 The insurance coverage
required under Subsection 2.11.1 may be effected under a blanket policy
or policies covering the Property and other properties and assets not
constituting a part of the security hereunder; provided that any such blanket
policy shall specify, except in the case of public liability insurance, the
portion of the total coverage of such policy that is allocated to the Property,
and any sublimit in such blanket policy applicable to the Property, and shall in
any case comply in all other respects with the requirements of this
Section.
2.11.6 Grantor waives any and
all right to claim or recover against Beneficiary, its officers, employees,
agents and representatives, by way of subrogation or otherwise, for any loss
sustained by Grantor, or any loss or damage to the Property, Grantor’s property
or the property of others under Grantor’s control from any cause insured against
or required to be insured against by the provisions of this Deed of
Trust.
2.12 Condemnation. Grantor
shall promptly give Beneficiary notice of the actual or threatened commencement
of any condemnation or eminent domain proceeding and shall deliver to
Beneficiary copies of any and all papers served in connection with such
proceedings. Beneficiary may participate in any such proceedings to the extent
permitted by law. Upon an Event of Default, Grantor shall deliver to Beneficiary
all instruments requested by it to permit such participation. Grantor shall, at
its expense, diligently prosecute any such proceedings, and shall consult with
Beneficiary, its attorneys and experts, and cooperate with them in the carrying
on or defense of any such proceedings. Notwithstanding any taking by any public
or quasi-
11
public
authority through eminent domain or otherwise (including, but not limited to any
transfer made in lieu of or in anticipation of the exercise of such taking),
Grantor shall continue to pay the Secured Obligations at the time and in the
manner provided for its payment in the Parent Indemnity and Subsidiary Guarantee
Letter Agreement, the Supply Agreements and in this Deed of Trust and the
Secured Obligations shall not be reduced until any award or payment therefor
shall have been actually received and applied by Beneficiary, after the
deduction of expenses of collection, to the reduction or discharge of such
obligations. Beneficiary shall not be limited to the interest paid on the award
by the condemning authority but shall be entitled to receive out of the award
interest at the rate or rates provided herein or in the Parent Indemnity and
Subsidiary Guarantee Letter Agreement. If the property or any portion thereof is
taken by the power of eminent domain, Grantor shall promptly commence and
diligently prosecute the Restoration of the Property in accordance with this
Deed of Trust. If the Property is sold, through foreclosure or otherwise, prior
to the receipt by Beneficiary of the award or payment, Beneficiary shall have
the right, whether or not a deficiency judgment on the Parent Indemnity and
Subsidiary Guarantee Letter Agreement shall have been sought, recovered or
denied, to receive the award or payment, or a portion thereof sufficient to pay
the Secured Obligations.
2.13 Restoration
After Casualty or Condemnation.
In the
event of a casualty or a taking by eminent domain, the following provisions
shall apply in connection with the Restoration of the Property:
2.13.1 If (i) the Net Proceeds
(defined below) do not exceed Fifty Thousand Dollars ($50,000.00)
(“Casualty Amount”); (ii) the costs of completing the Restoration as reasonably
estimated by Grantor shall be less than or equal to the Casualty Amount; (iii)
no Event of Default shall have occurred and be continuing under the Parent
Indemnity and Subsidiary Guarantee Letter Agreement, this Deed of Trust, the
other Credit Documents, or any of the Secured Obligations; (iv) the Property and
the use thereof after the Restoration will be in compliance with, and permitted
under, all applicable zoning laws, ordinances, rules and regulations; and (v)
such fire or other casualty or taking, as applicable, does not materially impair
access to the Property or the Improvements, then the Net Proceeds will be
disbursed directly to Grantor and Grantor shall commence and diligently
prosecute to completion, the Restoration of the Property to as nearly as
possible the condition it was in immediately prior to such fire or other
casualty or such taking. Except upon the occurrence and continuance of an Event
of Default, Grantor shall settle any insurance claims with respect to the Net
Proceeds which in the aggregate are less than or equal to the Casualty Amount.
Beneficiary shall have the right to participate in and reasonably approve any
settlement for insurance claims with respect to the Net Proceeds that in the
aggregate are equal to or greater than the Casualty Amount. If an Event of
Default shall have occurred and be continuing, Grantor irrevocably empowers
Beneficiary, in the name of Grantor as its true and lawful attorney-in-fact, to
file and prosecute such claim and to collect and to make receipt for any such
payment. If the Net Proceeds are received by Grantor, such Net Proceeds shall,
until the completion of the related work, be held in trust for Beneficiary and
shall be segregated from other funds of Grantor to be used to pay for the cost
of the Restoration in accordance with the terms hereof.
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2.13.2 If the Net Proceeds are
greater than the Casualty Amount, such Net Proceeds shall be paid
to Beneficiary to be held by Beneficiary to be made available to Grantor for the
Restoration in accordance with the provisions of this Subsection. Grantor shall
commence and diligently prosecute to completion the Restoration (in the case of
a taking, to the extent the Property is capable of being restored). The term
“Net Proceeds” for purposes of this Section shall mean: (i) the net amount of
all insurance proceeds under the Policies carried pursuant to Paragraphs
2.11.1(a), (d), (e), and (f) of this Deed of Trust as a result of such damage or
destruction, after deduction of its reasonable costs and expenses (including,
but not limited to reasonable counsel fees), if any, in collecting the same, or
(ii) the net amount of all awards and payments received by Beneficiary with
respect to a taking referenced in Section 2.12 of this Deed of Trust, after
deduction of its reasonable costs and expenses (including, but not limited to
reasonable counsel fees), if any, in collecting the same, whichever the case may
be.
(a) The
Net Proceeds shall be made available to Grantor for payment of, or reimbursement
of Grantor’s expenses in connection with, the Restoration, subject to the
following conditions:
(i) No
Event of Default shall have occurred and be continuing under the Parent
Indemnity and Subsidiary Guarantee Letter Agreement, this Deed of Trust, the
other Credit Documents, or any of the Secured Obligations;
(ii)
Beneficiary shall, within a reasonable period of time prior to request for
initial disbursement, be furnished with an estimate of the cost of the
Restoration accompanied by an architect’s certification as to such costs and
appropriate plans and specifications for the Restoration;
(iii) The
Net Proceeds, together with any cash or cash equivalent deposited by Grantor
with Beneficiary, are sufficient to cover the cost of the Restoration as such
costs are certified by the architect;
(iv)
Beneficiary shall be satisfied that any operating deficits, including all
scheduled payments under the Entrustment Loan Contract and the Supply Agreements
which will be incurred with respect to the Property as a result of the
occurrence of any such fire or other casualty or taking, whichever the case may
be, will be covered out of (1) the Net Proceeds, or (2) other funds of
Grantor;
(v) [reserved];
(vi) The Property and the use thereof after the Restoration will be in
compliance
with, and permitted under, all applicable zoning laws, ordinances, rules and
regulations; and
(vii)
Such fire or other casualty or taking, as applicable, does not materially impair
access to the Property or the Improvements.
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(b) The
Net Proceeds shall be held by Beneficiary and, until disbursed in accordance
with the provisions of this Subsection, shall constitute additional security for
the Secured Obligations. The Net Proceeds other than the Net Proceeds paid under
the Policy described in Paragraph 2.11.1(c) shall be disbursed by Beneficiary
to, or as directed by, Grantor from time to time during the course of the
Restoration, upon receipt of evidence satisfactory to Beneficiary that (A) all
materials installed and work and labor performed (except to the extent that they
are to be directly paid for out of the requested disbursement) in connection
with the Restoration have been paid for in full, and (B) there exist no notices
of pendency, stop orders, mechanic’s or materialman’s liens or notices of
intention to file same, or any other liens or encumbrances of any nature
whatsoever on the Property arising out of the Restoration which have not either
been fully bonded and discharged of record or in the alternative fully insured
to the satisfaction of Beneficiary by the title insurance company insuring the
lien of this Deed of Trust.
(c)
Beneficiary shall have the use of the plans and specifications and all permits,
licenses and approvals required or obtained in connection with the Restoration.
The identity of the contractors, subcontractors and materialmen engaged in the
Restoration, as well as the contracts under which they have been engaged, shall
be subject to prior review and acceptance by Beneficiary and an independent
consulting engineer selected by Beneficiary (the “Casualty Consultant”), such
acceptance not to be unreasonably withheld or delayed. All costs and expenses
incurred by Beneficiary in connection with making the Net Proceeds available for
the Restoration including, without limitation, reasonable counsel fees and
disbursements and the Casualty Consultant’s fees, shall be paid by
Grantor.
(d)
Beneficiary shall not be obligated to make disbursements of the Net Proceeds in
excess of an amount equal to the costs actually incurred from time to time for
work in place as part of the Restoration, as certified by the Casualty
Consultant.
(e)
Beneficiary shall not be obligated to make disbursements of the Net Proceeds
more frequently than once every calendar month.
(f) If at
any time the Net Proceeds or the undisbursed balance thereof shall not, in the
opinion of Beneficiary, be sufficient to pay in full the balance of the costs
which are estimated by the Casualty Consultant to be incurred in connection with
the completion of the Restoration, Grantor shall deposit the deficiency (the
“Net Proceeds Deficiency”) with Beneficiary before any further disbursement of
the Net Proceeds shall be made. The Net Proceeds Deficiency deposited with
Beneficiary shall be held by Beneficiary and shall be disbursed for costs
actually incurred in connection with the Restoration on the same conditions
applicable to the disbursement of the Net Proceeds, and until so disbursed
pursuant to this Paragraph shall constitute additional security for the Secured
Obligations.
(g) The
excess, if any, of the Net Proceeds and the remaining balance, if any, of the
Net Proceeds Deficiency deposited with Beneficiary after the Casualty Consultant
certifies to Beneficiary that the Restoration has been completed in accordance
with the provisions of this Section, and the receipt by Beneficiary of evidence
satisfactory to Beneficiary that all costs
14
incurred
in connection with the Restoration have been paid in full, shall be remitted by
Beneficiary to Grantor, provided no Event of Default shall have occurred and
shall be continuing under the Parent Indemnity and Subsidiary Guarantee Letter
Agreement, this Deed of Trust, the other Credit Documents or any of the Secured
Obligations.
2.14 Compliance with Laws. Grantor
shall observe, abide by, and comply with all statutes, ordinances,
laws, orders, requirements or decrees relating to the Property enacted,
promulgated or issued by any federal, state, county or local governmental
authority or any agency or subdivision thereof having jurisdiction over Grantor
or the Property. Grantor shall observe and comply with all conditions and
requirements necessary to preserve and extend any and all rights, licenses,
permits (including, but not limited to, zoning, variances, special exceptions
and nonconforming uses), privileges, franchises and concessions that are
applicable to the Property or that have been granted to or contracted for by
Grantor in connection with any existing, presently contemplated or future use of
the Property.
2.15 Maintenance of Permits.
Grantor shall obtain, keep, and constantly maintain in full force and effect
during the entire term of this Deed of Trust all certificates, licenses and
permits necessary to keep the Property operating as a polysilicon manufacturing
facility. Except as specifically provided for in this Deed of Trust, Grantor
shall not assign, transfer or in any manner change such certificates, licenses
or permits without first receiving the written consent of
Beneficiary.
2.16 Obligations of Grantor as
Lessor. Grantor shall perform every obligation of Grantor (as the lessor)
and enforce every obligation of the lessee in each lease or other occupancy
agreement of the Property or any part thereof under which Grantor is the lessor
or the grantor of occupancy rights (the “Occupancy Leases”), if any. Grantor
shall not modify, alter, waive, or cancel any Occupancy Lease or any part
thereof, without the prior written consent of Beneficiary, which consent shall
not be unreasonably withheld (but such consent shall not be required for such
action as to Occupancy Leases if such action is in the ordinary course of
business of owning and operating the Property in a prudent manner). Grantor,
except as provided for in this Deed of Trust, shall not assign any Occupancy
Lease or any rents to any party other than Beneficiary, without the prior
written consent of Beneficiary, which consent shall not be unreasonably
withheld. In the event of default under any Occupancy Lease by reason of failure
of the Grantor to keep or perform one or more of the covenants, agreements or
conditions thereof, Beneficiary is authorized and empowered, and may, at its
sole option, remedy, remove or cure any such default, and further, Beneficiary
may, at its sole option and in its sole discretion, but without obligation to do
so, pay any sum of money deemed necessary by it for the performance of said
covenants, agreements and conditions, or for the curing or removal of any such
default, and incur all expenses and obligations which it may consider necessary
or reasonable in connection therewith, and Grantor shall repay on demand all
such sums so paid or advanced by Beneficiary together with interest thereon
until paid at the then applicable interest rate of the Entrustment Loan Contract
plus ten (10) basis points. All such sums, if unpaid, shall be added to and
become part of the indebtedness secured hereby. All Occupancy Leases hereafter
made shall be subject to the approval of Beneficiary and (a) shall be at
competitive market rental rates then prevailing in the geographic area for
property comparable to the Property,
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and (b)
at Beneficiary’s option, shall be superior or subordinate in all respects to the
lien of this Deed of Trust. Beneficiary shall not require approval in advance of
any Occupancy Leases that conform to the Grantor’s Form Lease (as defined below)
as previously approved by Beneficiary, except as set forth below.
2.16.1 Grantor shall not,
without the prior written consent of Beneficiary, surrender or terminate,
either orally or in writing, any Occupancy Lease now existing or hereafter made
with any Major Tenant (as defined below) for all or part of the Property, permit
an assignment or sublease of any such Occupancy Lease, except as set forth in
the Occupancy Lease, or request or consent to the subordination of any Occupancy
Lease to any lien subordinate to this Deed of Trust. If requested, Grantor shall
furnish Beneficiary with copies of all executed Occupancy Leases of all or any
part of the Property now existing or hereafter made, and Grantor shall assign to
Beneficiary (which assignment shall be in form and content acceptable to
Beneficiary), as additional security for the Parent Indemnity and Subsidiary
Guarantee Letter Agreement and the Supply Agreements, all Occupancy Leases now
existing or hereafter made for all or any part of the Property. Additionally, if
any tenant lease contains a provision allowing the tenant to terminate their
lease upon payment of a lease termination fee, Grantor agrees that all such sums
shall be paid to Beneficiary so long as this Deed of Trust is in effect and held
by Beneficiary to be applied to the obligations secured by this Deed of Trust
until a new tenant is secured for the space at the same or higher rent. All
funds held by Beneficiary shall be applied to regular payments due under the
Parent Indemnity and Subsidiary Guarantee Letter Agreement and the Supply
Agreements and not for prepayment unless there is a default
hereunder.
2.16.2 Beneficiary hereby
specifically reserves the right to approve all prospective tenants
under all Occupancy Leases hereafter proposed to be made if: (i) the term
thereof, excluding options to renew the same, exceeds five (5) years; or (ii)
the net rentable area to be occupied thereunder, including expansion options,
exceeds ten percent (10%) of the net leasable area of the Improvements (the
tenants under such leases are referred to as “Major Tenants”). Grantor shall
notify Beneficiary in writing of all prospective Major Tenants and shall deliver
to Beneficiary, at Grantor’s sole cost and expense, information about the
prospective Major Tenant reasonably requested by Beneficiary.
2.17 Funds Held by Beneficiary for
Taxes, Insurance Premiums, and Other Charges. In order to more fully
protect the security of this Deed of Trust, Grantor shall, upon the request of
Beneficiary at any time following the occurrence of an Event of Default, deposit
with Beneficiary, together with and in addition to each monthly payment due on
account of the indebtedness evidenced by the Entrustment Loan Contract, an
amount equal to one twelfth (1/12) of the annual total of such taxes,
assessments, insurance premiums, and other charges (all as estimated by
Beneficiary in its sole discretion) so that, at least thirty (30) days prior to
the due date thereof, Beneficiary shall be able to pay in full all such taxes,
assessments, insurance premiums, and other charges as the same shall become due,
and Beneficiary may hold without paying interest and commingle with its general
funds the sums so deposited and apply the same to the payment of such taxes,
assessments, insurance premiums, or other charges as they become due and
payable. If at any time the funds so held by Beneficiary are insufficient to pay
such taxes, assessments, insurance premiums, or other charges as they become due
and payable,
16
Grantor
shall immediately, upon notice and demand by Beneficiary, deposit with
Beneficiary the amount of such deficiency, and the failure on the part of
Grantor to do so shall entitle Beneficiary, at its sole option, to make such
payments in accordance with its right and pursuant to the conditions elsewhere
provided in this Deed of Trust. Whenever any default exists under this Deed of
Trust, Beneficiary may, at its sole option but without an obligation so to do,
apply any funds so held by it pursuant to this Section toward the payment of the
indebtedness secured hereby, notwithstanding the fact that the amount owing
thereon may not then be due and payable or that said indebtedness may otherwise
be adequately secured in such order and manner of application as Beneficiary may
elect.
2.18 Examination of Grantor’s Records.
Grantor shall maintain complete and accurate books and
records showing in detail the income and expenses of the Property, and shall
permit Beneficiary and its representatives to examine such books and records and
all supporting vouchers and data during normal business hours and from time to
time upon request by Beneficiary, in such place as such books and records are
customarily kept, and shall furnish to Beneficiary, within sixty (60) days after
the close of each fiscal year of Grantor, annual statements (income statements
and a balance sheet) for the Grantor and the Property in a form acceptable to
Beneficiary and shall be prepared in accordance with generally accepted
accounting principles, and shall include a rent roll, certified as true and
correct by Grantor and showing in detail all income derived from and expenses
incurred in connection with the ownership of the Property. Upon the occurrence
of an Event of Default, Beneficiary shall have the right to require that the
financial statements be audited and certified by a certified public accountant
acceptable to Beneficiary, at the sole cost and expense of Grantor.
3.
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Representations and
Warranties. Grantor represents and warrants to
Beneficiary that:
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3.1 Warranty of Title. Grantor has
good right, title and interest in and to the Property, subject to the
Ground Lease; Grantor has the right to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the same; Grantor possesses a leasehold
interest in the Real Property pursuant to the Ground Lease; and, subject to the
Ground Lease, Grantor owns the Improvements and the Property free and clear of
all liens, encumbrances and charges whatsoever except for the Ground Lease and
other matters currently of record. Subject to the Ground Lease and other matters
currently of record, Grantor shall forever warrant, defend and preserve the
title and the validity and priority of the lien of this Deed of Trust and shall
forever warrant and defend the same to Beneficiary against the claims of all
persons whomsoever.
3.2 Status
of Property.
3.2.1 Grantor has obtained all
necessary certificates, licenses and other approvals, governmental
and otherwise, necessary for the operation of the Property and the conduct of
its business and all required zoning, building code, land use, environmental and
other similar permits or approvals, all of which are in full force and effect as
of the date hereof and not subject to revocation, suspension, forfeiture or
modification.
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3.2.2 All public roads and
streets necessary for service of and access to the Property for the current
or contemplated use thereof have been completed, are serviceable and all-weather
and are physically and legally open for use by the public.
3.2.3 The Property complies
with the Americans With Disabilities Act and any regulations promulgated
thereunder.
3.2.4 No part of the Real
Property consists of or is classified as wetlands, tidelands, or swamp and
overflow lands.
3.3 Leases. With regard to
Occupancy Leases, if any, except as disclosed in the rent roll for the Property
delivered to and approved by Beneficiary, (a) Grantor is the sole owner of the
entire lessor’s interest in the Occupancy Leases; (b) the terms of all
alterations, modifications and amendments to the Occupancy Leases are reflected
in the certified rent roll delivered to and approved by Beneficiary; (c) none of
the Rents reserved in the Occupancy Leases have been assigned or otherwise
pledged or hypothecated (except to Beneficiary); (d) the premises demised under
the Occupancy Leases have been completed and the tenants under the Occupancy
Leases have accepted the same and have taken possession of the same on a
rent-paying basis; (e) the Occupancy Leases are valid and enforceable against
Grantor and the tenants set forth therein; (f) no person or entity has any
possessory interest in, or right to occupy, the Property except under and
pursuant to an Occupancy Lease; and (g) each Occupancy Lease is subordinate to
this Deed of Trust, either pursuant to its terms or a recorded subordination
agreement.
3.4 Taxes. Grantor has filed all
federal, state, county, municipal, and city income and other tax returns
required to have been filed by it and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by it. Grantor does not know of any basis for any
additional assessment in respect of any such taxes and related liabilities for
prior years.
4.
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Further
Assurances.
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4.1 Inspection by Beneficiary.
Beneficiary, and/or its agents, shall have the right and shall be permitted,
but shall not be required, at all reasonable times, to enter upon and inspect
the Property to insure compliance with the covenants, agreements, and conditions
set forth in this Deed of Trust.
4.2 Execution of Additional Documents.
Grantor shall, at the cost of Grantor, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignments, transfers, assurances and other
instruments, including security agreements and financing statements, as
Beneficiary shall from time to time require for the purpose of better assuring,
conveying, assigning, transferring and confirming unto Beneficiary the Property
and rights hereby encumbered, created, conveyed, assigned or intended now or
hereafter so to be encumbered, created, conveyed or assigned or that Grantor may
now be or may hereafter become bound to encumber, create, convey, or assign to
Beneficiary, or for the purpose of carrying out the intention or facilitating
the performance of the terms of this Deed of
18
Trust, or
for filing, registering, or recording this Deed of Trust, and to pay all filing,
registration, or recording fees and all taxes, costs and other expenses,
including Reasonable Attorneys’ Fees, incident to the preparation, execution,
acknowledgment, delivery, and recordation of any of the same.
5. Further Encumbrance Prohibited.
Grantor shall not, without the prior written consent of Beneficiary, sell,
convey, mortgage, grant, bargain, encumber, pledge, assign, or otherwise
transfer the Property or any part thereof or permit the Property or any part
thereof to be sold, conveyed, mortgaged, granted, bargained, encumbered,
pledged, assigned, or otherwise transferred. A sale, conveyance, mortgage,
grant, bargain, encumbrance, pledge, assignment, or transfer within the meaning
of this Section shall be deemed to include, but not limited to (a) an
installment sales agreement wherein Grantor agrees to sell the Property or any
part thereof for a price to be paid in installments; (b) an agreement by Grantor
leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Grantor’s right, title and interest
in and to any Leases or any Rents; (c) if Grantor or any general partner or
managing member (or if no managing member, any member) of Grantor is a
corporation, the voluntary or involuntary sale, conveyance, transfer or pledge
of such corporation’s stock (or the stock of any corporation directly or
indirectly controlling such corporation by operation of law or otherwise) or the
creation or issuance of new stock by which an aggregate of more than 49% of such
corporation’s stock shall be vested in a party or parties who are not now owners
of more than 49% of such corporation’s stock; and (d) if Grantor or any general
partner or managing member (or if no managing member, any member) of Grantor is
a limited or general partnership or joint venture, the change, removal or
resignation of a general partner or the transfer or pledge of the partnership
interest of any general partner or any profits or proceeds relating to such
partnership interest, and (e) if Grantor or any general partner or member of
Grantor is a limited liability company, the change, removal or resignation of a
managing member (or if no managing member, any member) or the transfer of the
membership interest of a managing member (or if no managing member, any member)
or any profits or proceeds relating to such membership interest. Notwithstanding
the foregoing, the following transfers shall not be deemed to be a sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment or
transfer within the meaning of this Section: (a) transfer by devise or descent
or by operation of law upon the death of a member, general partner or
stockholder of Grantor or any member or general partner thereof, and (b) a sale,
transfer or hypothecation of a membership, partnership or shareholder interest
in Grantor, whichever the case may be, by a current member, general partner or
shareholder, as applicable, to an immediate family member (i.e., parents,
spouses, siblings, children or grandchildren) of such member, general partner or
shareholder, or to a trust for the benefit of an immediate family member of such
member, general partner or shareholder.
6. Default. The occurrence of any
one or more of the following events shall constitute an “Event of
Default”:
6.1 The
occurrence of any “Event of Default” under, and as defined in the Entrstument
Loan Contract.
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6.2 A failure
by Grantor or any Guarantor to observe or perform any covenant or agreement
contained in any Credit Document, and such failure shall continue unremedied for
a period of 15 days after notice thereof from Beneficiary.
6.3 Any real
property deed of trust or security interest created under this Deed of Trust
shall cease to be, or shall be asserted by Grantor not to be, a valid and
perfected real property deed of trust and security interest in favor of
Beneficiary on the Property, with the priority required by this Deed of
Trust.
6.4 Any
representation or warranty made or deemed made by or on behalf of Grantor or any
Guarantor under or in connection with any Credit Document shall prove to have
been incoorrect in any material respect on the date made or deemed
made.
6.5 [Reserved]
6.6 [Reserved]
7.
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Rights
and Remedies.
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7.1 Remedies. Upon the occurrence
of any Event of Default, Beneficiary may take such action, without
notice or demand, as it deems advisable to protect and enforce its rights
against Grantor and in and to the Property, including, but not limited to the
following actions, each of which may, to the extent permitted by applicable law,
be pursued concurrently or otherwise, at such time and in such order as
Beneficiary may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Beneficiary:
7.1.1 Declare
the entire unpaid Secured Obligations to be immediately due and payable.
7.1.2 Institute proceedings,
judicial or otherwise, for the complete foreclosure of this Deed of Trust under
any applicable provision of law in which case the Property or any interest
therein may be sold for cash or upon credit in one or more parcels or in several
interests or portions and in any order or manner.
7.1.3 Sell for cash or upon
credit the Property or any part thereof and all estate, claim, demand, right,
title and interest of Grantor therein and rights of redemption thereof, pursuant
to power of sale or otherwise, as an entirety or in parcels, at such time and
place, upon such terms and after such notice thereof as may be required or
permitted by law.
7.1.4 Institute an action,
suit or proceeding in equity for the specific performance of any
covenant, condition or agreement contained herein, in the Parent Indemnity and
Subsidiary Guarantee Letter Agreement or in the other Credit
Documents.
7.1.5 Apply for the
appointment of a receiver, trustee, liquidator or conservator of the Property, without
notice and without regard for the adequacy of the security for the
20
Secured
Obligations and without regard for the solvency of Grantor or of any person,
firm or other entity liable for the payment of the Secured
Obligations.
7.1.6 Subject to any
applicable law, the license granted to Grantor under Subsection 1.2 shall
automatically be revoked and Beneficiary may enter into or upon the Property,
either personally or by its agents, nominees or attorneys and dispossess Grantor
and its agents and servants therefrom, without liability for trespass, damages
or otherwise and exclude Grantor and its agents or servants wholly therefrom,
and take possession of all books, records and accounts relating thereto and
Grantor agrees to surrender possession of the Property and of such books,
records and accounts to Beneficiary upon demand, and thereupon Beneficiary may
(i) use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal with all and every part of the Property and conduct the business
thereat; (ii) complete any construction on the Property in such manner and form
as Beneficiary deems advisable; (iii) make alterations, additions, renewals,
replacements and improvements to or on the Property; (iv) exercise all rights
and powers of Grantor with respect to the Property, whether in the name of
Grantor or otherwise, including without limitation, the right to make, cancel,
enforce or modify Leases, obtain and evict tenants, and demand, xxx for,
collect, and receive all Rents of the Property and every part thereof; (v)
require Grantor to pay monthly in advance to Beneficiary, or any receiver
appointed to collect the Rents, the fair and reasonable rental value for the use
and occupation of such part of the Property as may be occupied by Grantor; (vi)
require Grantor to vacate and surrender possession of the Property to
Beneficiary or to such receiver and, in default thereof, Grantor may be evicted
by summary proceedings or otherwise; and (vii) apply the receipts from the
Property to the payment of the Secured Obligations, in such order, priority and
proportions as Beneficiary shall deem appropriate in its sole discretion after
deducting therefrom all expenses (including reasonable attorneys’ fees) incurred
in connection with the aforesaid operations and all amounts necessary to pay the
taxes, insurance and other expenses in connection with the Property, as well as
just and reasonable compensation for the services of Beneficiary, its counsel,
agents and employees.
7.1.7 Exercise any and all
rights and remedies granted to a secured party upon default under the
Uniform Commercial Code, including, without limiting the generality of the
foregoing: (i) the right to take possession of the Personal Property or any part
thereof, and to take such other measures as Beneficiary may deem necessary for
the care, protection and preservation of the Personal Property, and (ii) request
Grantor at its expense to assemble the Personal Property and make it available
to Beneficiary at a convenient place acceptable to Beneficiary. Any notice of
sale, disposition or other intended action by Beneficiary with respect to the
Personal Property sent to Grantor in accordance with the provisions hereof at
least ten days prior to such action, shall constitute commercially reasonable
notice to Grantor.
7.1.8 Apply the undisbursed
balance of any Net Proceeds or any Net Proceeds Deficiency deposit,
together with interest thereon, to the payment of the Secured Obligations in
such order, priority and proportions as Beneficiary shall deem to be appropriate
in its discretion.
7.1.9 Pursue
such other remedies as Beneficiary may have under applicable law.
21
Notwithstanding
the provisions of this Section to the contrary, if any Event of Default as
described in Subsection 6.4 (i) or (ii) shall occur, the entire unpaid Secured
Obligations shall be automatically due and payable, without any further notice,
demand or other action by Beneficiary.
7.2 Foreclosure by Power of Sale.
If Beneficiary elects to foreclose by exercise of the power of sale herein
contained, Beneficiary shall notify Trustee and shall deposit with the Trustee
this Deed of Trust, the Parent Indemnity and Subsidiary Guarantee Letter
Agreement and such receipts and evidence of expenditures made and secured hereby
as Trustee may require. Upon receipt of such notice from Beneficiary, Trustee
shall cause to be recorded and given all notices required by law. Trustee shall,
without demand on Grantor, after lapse of such time as may then be required by
law and after recordation of such Notice of Default and after Notice of Sale
having been given as required by law, sell the Property at the time and place of
sale fixed by it in said Notice of Sale either as a whole, or in separate lots
or parcels as Trustee shall deem expedient, unless Beneficiary specifies certain
terms and conditions that are permitted by applicable law, and in such order as
it may determine, at public auction to the highest bidder for cash in lawful
money of the United States payable at the time of sale. The Trustee may postpone
any sale by public announcement at the time and place noticed for the sale.
Trustee shall deliver to such purchaser or purchasers thereof its good and
sufficient deed or deeds conveying the property so sold, but without any
covenant or warranty, express or implied. The recitals in such deed of any
matters or facts shall be conclusive proof of the truthfulness thereof. Any
person, including without limitation, Grantor, Trustee or Beneficiary, may
purchase at such sale. At any judicial or trustee sale of the Property,
Beneficiary may credit bid (as determined by Beneficiary in its sole and
absolute discretion) all or any portion of the Secured Obligations.
7.3 Application of Proceeds. The
purchase money, proceeds and avails of any disposition of the
Property, or any part thereof, or any other sums collected by Beneficiary
pursuant to the Parent Indemnity and Subsidiary Guarantee Letter Agreement, this
Deed of Trust or the other Credit Documents, may be applied by Beneficiary to
the payment of the Secured Obligations in such priority and proportions as
Beneficiary in its discretion shall deem proper, subject to any applicable
law.
7.4 Right to Cure Defaults. Upon
the occurrence of any Event of Default, Beneficiary may, but
without any obligation to do so and without notice to or demand on Grantor and
without releasing Grantor from any obligation hereunder, cure the same in such
manner and to such extent as Beneficiary may deem necessary to protect the
security hereof. Beneficiary is authorized to enter upon the Property for such
purposes, or appear in, defend, or bring any action or proceeding to protect its
interest in the Property or to foreclose this Deed of Trust or collect the
Secured Obligations, and the cost and expense thereof (including reasonable
attorneys’ fees to the extent permitted by law), with interest as provided in
this Section, shall constitute a portion of the Secured Obligations and shall be
due and payable to Beneficiary upon demand. All such costs and expenses incurred
by Beneficiary in remedying such Event of Default or in appearing in, defending,
or bringing any such action or proceeding shall bear interest at the default
rate specified in the Entrustment Loan Contract (the “Default Rate”), for the
period after notice from Beneficiary that such cost or expense was incurred to
the date of payment to Beneficiary. All
22
such
costs and expenses incurred by Beneficiary together with interest thereon
calculated at the Default Rate shall be deemed to constitute a portion of the
Secured Obligations and be secured by this Deed of Trust and the other Credit
Documents and shall be immediately due and payable upon demand by Beneficiary
therefor.
7.5 Examination of Books and Records.
Beneficiary, its agents, accountants and attorneys shall have the
right upon prior written notice to examine the records, books, management and
other papers of Grantor and its affiliates that reflect upon their financial
condition, at the Property or at any office regularly maintained by Grantor, its
affiliates or any Guarantor where the books and records are located. Beneficiary
and its agents shall have the right upon notice to make copies and extracts from
the foregoing records and other papers. In addition, Beneficiary, its agents,
accountants and attorneys shall have the right to examine and audit the books
and records of Grantor and its affiliates or of any Guarantor pertaining to the
income, expenses and operation of the Property during reasonable business hours
at any office of Grantor, its affiliates or any Guarantor where the books and
records are located.
7.6 Other
Rights.
7.6.1 The failure of
Beneficiary to insist upon strict performance of any term hereof shall not be
deemed to be a waiver of any term of this Deed of Trust. Grantor shall not be
relieved of Grantor’s obligations hereunder by reason of (i) the failure of
Beneficiary to comply with any request of Grantor to take any action to
foreclose this Deed of Trust or otherwise enforce any of the provisions hereof
or of the Parent Indemnity and Subsidiary Guarantee Letter Agreement, the other
Credit Documents or the Secured Obligations, (ii) the release, regardless of
consideration, of the whole or any part of the Property, or of any person liable
for the Secured Obligations or any portion thereof, or (iii) any agreement or
stipulation by Beneficiary extending the time of payment or otherwise modifying
or supplementing the terms of the Parent Indemnity and Subsidiary Guarantee
Letter Agreement, this Deed of Trust, the other Credit Documents or the Secured
Obligations.
7.6.2 The risk of loss or
damage to the Property is on Grantor, and Beneficiary shall have no liability
whatsoever for decline in value of the Property, for failure to maintain the
Policies, or for failure to determine whether insurance in force is adequate as
to the amount of risks insured. Possession by Beneficiary shall not be deemed an
election of judicial relief, if any such possession is requested or obtained,
with respect to any Property or collateral not in Beneficiary’s
possession.
7.6.3 Beneficiary may resort
for the payment and/or performance of the Secured Obligations to any other
security held by Beneficiary in such order and manner as Beneficiary, in its
discretion, may elect. Beneficiary may take action to recover the Secured
Obligations, or any portion thereof, or to enforce any covenant hereof without
prejudice to the right of Beneficiary thereafter to foreclose this Deed of
Trust. The rights of Beneficiary under this Deed of Trust shall be separate,
distinct and cumulative and none shall be given effect to the exclusion of the
others. No act of Beneficiary shall be construed as an election to proceed under
any one provision herein to the exclusion of any other provision. Beneficiary
shall not be limited exclusively
to the rights and remedies herein stated but shall be entitled to every right
and remedy now or hereafter afforded at law or in equity.
23
7.7 Beneficiary’s Power.
Beneficiary may release or reconvey any portion of the Property for such
consideration as Beneficiary may require without, as to the remainder of the
Property, in any way impairing or affecting the lien or priority of this Deed of
Trust, or improving the position of any subordinate lienholder with respect
thereto, except to the extent that the obligations hereunder shall have been
reduced by the actual monetary consideration, if any, received by Beneficiary
for such release or reconveyance, and may accept by assignment, pledge or
otherwise any other property in place thereof as Beneficiary may require without
being accountable for so doing to any other lienholder. This Deed of Trust shall
continue as a lien and security interest in the remaining portion of the
Property. Without affecting the liability of any other person liable for the
payment and/or performance of the Obligations and without in any way impairing
or affecting the lien or priority of this Deed of Trust, Beneficiary may, from
time to time and without notice (i) release any person so liable; (ii) extend
the maturity or alter any of the terms of any Secured Obligation; (iii) grant
other indulgences; or (iv) make compositions or other arrangements with debtors
in relation thereto.
7.8 Right of Entry. Beneficiary
and its agents shall have the right upon prior written notice to enter and
inspect the Property at all reasonable times upon notice to
Grantor.
7.9 Acceptance of Trust; Powers and
Duties of Trustee. Trustee accepts this trust when this Deed of Trust
is recorded. From time to time upon written request of Beneficiary and
presentation of this Deed of Trust, or a certified copy thereof, for
endorsement, and without affecting the personal liability of any person for
payment of any indebtedness or performance of any other Obligation, Trustee may,
without liability therefor and without notice: (a) reconvey all or any part of
the Property; (b) consent to the making of any map or plat of the Property; (c)
join in granting any easement on the Property; (d) join in any declaration of
covenants and restrictions; or (e) join in any extension agreement or any
agreement subordinating the lien or charge of this Deed of Trust. Nothing
contained in the immediately preceding sentence shall be construed to limit,
impair or otherwise affect the rights of Trustee in any respect. Trustee is not
obligated to notify any party hereto of pending sale under any other deed of
trust or of any action or proceeding in which Grantor, Beneficiary, or Trustee
shall be a party unless brought by Trustee.
7.10 Substitution of Trustee.
Beneficiary may at any time, and from time to time, and without notice,
replace and substitute a new trustee in place of the existing Trustee under this
Deed of Trust, in the manner provided for under, and as allowed by, current
Idaho law.
7.11 Reconveyance by Trustee. Upon
written request of Beneficiary stating that all sums secured hereby have
been paid and upon surrender of this Deed of Trust to Trustee for cancellation
and retention and upon payment by Grantor of Trustee’s fees, Trustee shall
reconvey to Grantor, or the person or persons legally entitled thereto, without
warranty, any portion of the Property then held hereunder. The recitals in such
reconveyance of any matters or facts shall be conclusive proof of the
truthfulness thereof.
24
8. Indemnification. If
Beneficiary shall become a party either as plaintiff or as defendant, in any action, suit,
appeal or legal proceeding (including, without limitation, foreclosure,
condemnation, bankruptcy, administrative proceedings or any proceeding wherein
proof of claim is by law required to be filed), hearing, motion or application
before any court or administrative body in relation to the Property or the lien
and security interest granted or created hereby or herein, or for the recovery
or protection of said indebtedness or the Property, or for the foreclosure of
this Deed of Trust, Grantor shall save and hold Beneficiary harmless from and
against any and all costs and expenses incurred by Beneficiary on account
thereof, including, but not limited to, Reasonable Attorneys’ Fees, title
searches and abstract and survey charges, at all trial and appellate levels, and
Grantor shall repay, on demand, all such costs and expenses, together with
interest thereon until paid at the then applicable rate of interest of the
Entrustment Loan Contract plus ten (10) basis points; all of which sums, if
unpaid, shall be added to and become a part of the indebtedness secured
hereby.
9. Usury Savings Clause.
Notwithstanding any provisions in the Parent Indemnity and Subsidiary Guarantee
Letter Agreement or in this Deed of Trust to the contrary, the total liability
for payments in the nature of interest including but not limited to default
interest and late payment charges shall not exceed the limits imposed by the
laws of the State of Idaho or, if controlling, the United States relating to
maximum allowable charges of interest. Beneficiary shall not be entitled to
receive, collect or apply, as interest on the obligations evidenced by the
Parent Indemnity and Subsidiary Guarantee Letter Agreement or the Supply
Agreements, any amount in excess of the maximum lawful rate of interest
permitted to be charged by applicable law. If Beneficiary ever receives,
collects or applies as interest any such excess, such amount that would be
excessive interest shall be applied to reduce the unpaid principal balance of
the obligations evidenced by the Parent Indemnity and Subsidiary Guarantee
Letter Agreement and the Supply Agreements. If the unpaid principal balance of
such obligations has been paid in full, any remaining excess shall be paid to
Grantor.
10. Notices. All notices or other
written communications hereunder shall be deemed to have been properly given (a)
upon delivery, if delivered in person or by facsimile transmission with receipt
acknowledged by the recipient thereof, (b) one (1) business day after having
been deposited for overnight delivery with any reputable overnight courier
service, or (c) three (3) business days after having been deposited in any post
office or mail depository regularly maintained by the U.S. Postal Service and
sent by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to
Grantor:
|
HOKU MATERIALS,
INC.
|
0000 Xxx
Xxxxx Xxxx., Xxxxx 000
Xxxxxxxx,
Xxxxxx 00000
Attention:
Chief Executive Officer
Facsimile
No.: + 0 000-000-0000
With a copy
to:
|
STOEL RIVES
LLP
|
000 X.
Xxxxxxx Xxxx., Xxxxx 0000
Xxxxx,
Xxxxx 00000
25
Attention:
Xxxx X. Boy
Facsimile
No.: x0 000-000-0000
If
to Beneficiary:
|
TIANWEI
NEW ENERGY HOLDINGS CO., LTD
|
Xx 0,
Xxxxxxx Xxxx
Xxxxxxxxx
Airport Economic Development Xxxx
Xxxxxxx,
Xxxxx 000000
Attention:
Xxx Xxx
Facsimile
No.: x00-00-0000-0000
With a copy
to:
|
Xxxxx Xxxx & Xxxxxxxx
LLP
|
00/X,
Xxxx Xxxxxx Xxxx,
X00, Xxxx
Xxx Men Wai Avenue,
Xxxx Xxxx
Xxxxxxxx, Xxxxxxx, X.X.X. 000000
Attention:
Xxxxxx Xxxxx
Facsimile
No.: + 00-00-0000-0000
or
addressed as such party may from time to time designate by written notice to the
other parties. Either party by notice to the other may designate additional or
different addresses for subsequent notices or communications.
11. Governing Law. This Deed of
Trust is to be governed by and construed in accordance with the laws of the
state of Idaho where the Property is located and, if controlling, by the laws of
the United States and shall be binding upon Grantor, its heirs, personal
representatives, successors and assigns and shall inure to the benefit of
Beneficiary, its successors and assigns.
12.
|
Miscellaneous.
|
12.1 Successors and Assigns: Terminology.
The provisions hereof shall be binding upon Grantor and the
heirs, personal representatives, successors and assigns of Grantor, and shall
inure to the benefit of Beneficiary, its successors and assigns. Where more than
one Grantor is named herein, the obligations and liabilities of said Grantor
shall be joint and several. Wherever used in this Deed of Trust, unless the
context clearly indicates a contrary intent or unless otherwise specifically
provided herein, the word “Grantor” shall mean Grantor and/or any subsequent
owner or owners of the Property, the word “Beneficiary” shall mean Beneficiary
or any subsequent holder or holders of this Deed of Trust, and the word “person”
shall mean an individual, trustee, trust, corporation, partnership or
unincorporated association. As used herein, the phrase “Reasonable Attorneys’
Fees” shall mean fees charged by attorneys selected by Beneficiary based upon
such attorneys’ then prevailing hourly rates as opposed to any statutory
presumption specified by any statute then in effect in the State of
Idaho.
12.2 Provisions Subject to Applicable Law.
All rights, powers and remedies provided in this
Security Instrument may be exercised only to the extent that the exercise
thereof does not violate any applicable provisions of law and are intended to be
limited to the extent
26
necessary
so that they will not render this Security Instrument invalid, unenforceable or
not entitled to be recorded, registered or filed under the provisions of any
Applicable Law.
12.3 Inapplicable Provision. If any
term of this Security Instrument or any application thereof
shall be invalid or unenforceable, the remainder of this Security Instrument and
any other application of the term shall not be affected thereby.
12.4 Attorney’s Fees for Enforcement.
Grantor shall pay to Beneficiary on demand any and all expenses,
including legal expenses and attorney’s fees, incurred or paid by Beneficiary in
protecting its interest in the Property or Personal Property or in collecting
any amount payable hereunder or in enforcing its rights hereunder with respect
to the Property or Personal Property, whether or not any legal proceeding is
commenced hereunder or thereunder and whether or not any default or Event of
Default shall have occurred and is continuing, together with interest thereon at
the Default Rate from the date paid or incurred by Beneficiary until such
expenses are paid by Grantor.
12.5 Modifications. This Deed of
Trust cannot be changed, altered, amended or modified except by an
agreement in writing and in recordable form, executed by both Grantor and
Beneficiary.
12.6 Captions. The captions set forth at the beginning of
the various sections of this Deed of Trust are for
convenience only and shall not be used to interpret or construe the provisions
of this Deed of Trust.
12.7 Liability. If Grantor consists
of more than one person, the obligations and liabilities of each such
person hereunder shall be joint and several.
12.8 Duplicate Originals; Counterparts.
This Deed of Trust may be executed in any number of duplicate
originals and each duplicate original shall be deemed to be an original. This
Deed of Trust may be executed in several counterparts, each of which
counterparts shall be deemed an original instrument and all of which together
shall constitute a single Deed of Trust. The failure of any party hereto to
execute this Deed of Trust, or any counterpart hereof, shall not relieve the
other signatories from their obligations hereunder.
12.9 Entire Agreement. The Parent
Indemnity and Subsidiary Guarantee Letter Agreement, this Deed of
Trust and the other Credit Documents constitute the entire understanding and
agreement between Grantor and Beneficiary with respect to the transactions
arising in connection with the Secured Obligations and supersede all prior
written or oral understandings and agreements between Grantor and Beneficiary
with respect thereto.
[Signature
pages follow]
27
GRANTOR
|
|||
HOKU
MATERIALS, INC., a Delaware corporation
|
|||
By | |||
Name: | |||
Title: |
[Guarantor’s signature page to
Mortgage]
28
STATE
OF __________
|
) |
|
)
ss.
|
County of
___________
|
) |
On this _____ day of __________, 20___, before me __________________________,
personally
appeared ________________________, known or identified to me (or proved to me on
the oath of ______________________________) to be the president, or
vice-president, or secretary or assistant secretary, of HOKU MATERIALS, INC., a Delaware
corporation, the corporation that executed the instrument or the person
who executed the instrument on behalf of said corporation, and acknowledged to
me that such corporation executed the same.
IN
WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year in this certificate first above written.
Type
or print name:
|
|
Notary
Public, State of Hawaii
|
|
My
Commission Expires ________________________________
|
[Notary page to
Mortgage]
29
IN WITNESS WHEREOF, Trustee has executed this Deed of Trust as of
the day and year first written above.
[Trustee’s signature page to
Mortgage]
30
IN WITNESS WHEREOF, Beneficiary has executed this Deed of Trust as
of the day and year first written above.
[Beneficiary’s signature page to
Mortgage]
31
LOAN IMPLEMENTATION
AGREEMENT
__________
__, 2009
Tianwei
New Energy Holdings Co., Ltd.
No 0,
Xxxxxxx Xxxx,
Xxxxxxxxx
Airport Economic Development Zone,
Chengdu,
China 610200
Attention:
Xxx Xxx
Re: Parent
Indemnity and Subsidiary Guarantee
Ladies
and Gentlemen:
Reference
is made to the letter agreement (the “Loan Implementation Agreement”) dated as of
December 22, 2009 among Tianwei New Energy Holdings Co., Ltd., a
corporation organized under the laws of the People’s Republic of China (“Tianwei”), Hoku Scientific,
Inc., a Delaware corporation (the “Company”) and Hoku Materials,
Inc., a Delaware corporation and a wholly-owned subsidiary of the Company
(“Hoku Materials”).
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to them in the Loan Implementation Agreement.
1. The
Company shall indemnify and hold harmless Tianwei, its Affiliates (as defined
below), and their respective directors, officers, employees, counsel, agents and
attorneys-in-fact (collectively the “Indemnitees”) from and against
any and all liabilities, obligations, losses, damages, penalties, claims,
demands, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever which may at any time be imposed on, incurred by or
asserted against any such Indemnitee in any way relating to or arising out of or
in connection with (a) the execution, delivery, enforcement, performance or
administration of the Loan Contracts or any other agreement, letter or
instrument delivered in connection with the transactions contemplated thereby or
the consummation of the transactions contemplated thereby, (b) the Tranche 1
Loan or the Tranche 2 Loan or the use or proposed use of the proceeds therefrom
or (c) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory (including any investigation of, preparation for, or defense of any
pending or threatened claim, investigation, litigation or proceeding) and
regardless of whether any Indemnitee is a party thereto (all the foregoing,
collectively, the “Indemnified
Liabilities”), in all cases, whether or not caused by or arising,
in
2. As a
condition of and inducement to the willingness of Tianwei and the Bank to enter
into the Loan Contracts, Hoku Materials hereby irrevocably and unconditionally,
as primary obligor, undertakes and guarantees the full, prompt and complete
performance by the Company of all its obligations under the Indemnity, and the
due and punctual payment of all sums then or subsequently payable by the Company
to Tianwei or the Bank under the Indemnity (including any interest that accrues
after the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Company (or would accrue but for
the operation of applicable bankruptcy or insolvency laws)) when the same shall
become due (whether at stated maturity, upon acceleration or otherwise) (the
“Subsidiary Guarantee”).
The Subsidiary Guarantee is a guaranty of payment and not of
collection.
3. The
obligations of Hoku Materials under the Indemnity shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
2
(i) any
extension, renewal, settlement, compromise, waiver or release in respect of any
obligation of the Company or any other guarantor or any other person or entity
under the Indemnity or the Loan Contracts or any other agreement or instrument
entered into or delivered in connection therewith, by operation of law or
otherwise;
(ii) any
modification or amendment of or supplement to the Indemnity or the Loan
Contracts or any other agreement or instrument entered into or delivered in
connection therewith;
(iii) any
release, impairment, non-perfection or invalidity of any direct or indirect
security for any obligation of the Company or any other guarantor or any other
person or entity under the Indemnity or the Loan Contracts or any other
agreement or instrument entered into or delivered in connection
therewith;
(iv) any
change in the corporate or other existence, structure or ownership of the
Company or any other guarantor or any other person or entity, or any insolvency,
bankruptcy, suspension of payments, reorganization or other similar proceeding
affecting the Company or any other guarantor or any other person or entity or
any of their assets or any resulting release or discharge of any obligation of
the Company or any other guarantor or any other person or entity contained in
the Indemnity or the Loan Contracts or any other agreement or instrument entered
into or delivered in connection therewith;
(v) the
existence of any claim, set-off or other rights that Hoku Materials may have at
any time against the Company or any other guarantor, Tianwei, the Bank or any
other person or entity, whether in connection with the Indemnity or the Loan
Contracts or any other agreement or instrument entered into or delivered in
connection therewith or any unrelated transactions, provided that nothing
contained in this letter agreement shall prevent the assertion of any such claim
by separate suit or compulsory counterclaim;
(vi) any
invalidity or unenforceability relating to or against Hoku Scientific or any
other guarantor or any other person or entity for any reason of the Indemnity or
the Loan Contracts or any other agreement or instrument entered into or
delivered in connection therewith, or any provision of applicable law or
regulation purporting to prohibit the payment of any amount payable pursuant to
the Indemnity or the Loan Contracts or any other agreement or instrument entered
into or delivered in
3
(vii) any other
act or omission to act or delay of any kind by Hoku Scientific or any other
guarantor, any other party to the Indemnity or the Loan Contracts or any other
agreement or instrument entered into or delivered in connection therewith,
Tianwei or the Bank or any other person or entity, or any other circumstance
whatsoever which might, but for the provisions of this clause (vii), constitute
a legal or equitable discharge of or defense to any obligation of Hoku Materials
hereunder.
4. Hoku
Materials shall be liable under the Indemnity and the Subsidiary Guarantee only
for amounts aggregating up to the largest amount that would not render its
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provision of any other applicable
law.
5. The
obligations of Hoku Materials hereunder shall remain in full force and effect
until all amounts payable by the Company under the Indemnity shall have been
paid in full. If at any time any payment of any obligation hereunder is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Company or otherwise, Hoku Materials’
obligations hereunder with respect to such payment shall be reinstated as though
such payment had been due but not made at such time.
6. Hoku
Materials irrevocably waives:
(i) acceptance
hereof, presentment, demand, protest and any notice not provided for hereunder,
as well as any requirement that at any time any action be taken by any person or
entity against the Company or any other guarantor or any other person or
entity;
(ii) any right
to which it may be entitled in connection with any obligation of Tianwei or the
Bank to xxx or initiate any action and/or complete an action against the Company
or any other guarantor or any other person or entity prior to a claim being made
against Hoku Materials pursuant hereto;
(iii) any right
to which it may be entitled to have the assets of the Company or any other
guarantor or any other person or entity first be used and/or applied in full
and/or depleted as payment of the Company’s or any such other guarantor’s
obligations hereunder, prior to any amounts being claimed from or paid by Hoku
Materials pursuant hereto; and
4
7. If Hoku
Materials makes a payment with respect to any obligation hereunder, it shall be
subrogated to the rights of the payee against the Company with respect to such
payment; provided that Hoku Materials shall not enforce any payment by way of
subrogation against the Company, or by reason of contribution against any other
guarantor of such obligation, until the principal of and interest on the Tranche
1 Loan and the Tranche 2 Loan and all fees payable thereunder have been paid in
full.
8. If any
provision contained in this letter agreement shall for any reason be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this letter agreement,
but this letter agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
9. This
letter agreement shall be binding upon and shall inure to the benefit of and be
enforceable by each of the parties hereto and their respective successors and
permitted assigns (but no other persons). Any assignment by Hoku Materials of
any of its rights or obligations under this letter agreement shall be subject to
the prior written consent of Tianwei.
10. No
amendment or waiver of any provision of this letter agreement shall be binding
unless executed in writing by each of the parties hereto. No oral amendments or
modifications of this letter agreement shall be binding between the
parties.
11. This
letter agreement will become effective upon the execution and delivery hereof.
This letter agreement constitutes the entire agreement between the parties with
respect to the subject matter of hereof and supersedes the Original Parent
Guarantee.
12. This
letter agreement shall be governed by and construed in accordance with the law
of the State of New York, without regard to the conflicts of law rules of such
state.
[Remainder of page is intentionally
blank]
5
Very
truly yours,
Agreed
and accepted:
EXHIBIT E
TO
LOAN IMPLEMENTATION
AGREEMENT
among
HOKU
SCIENTIFIC, INC.
as
Borrower
TIANWEI
NEW ENERGY HOLDINGS CO., LTD.
as
Entrusting Lender
and
CHINA
CONSTRUCTION BANK CORPORATION SHUANGLIU SUB-BRANCH
as
Agent
ENTRUSTMENT
LOAN CONTRACT
BY
AND BETWEEN
HOKU SCIENTIFIC, INC. as
borrower, a corporation formed under the laws of the State of Delaware and located at
0000 Xxx Xxxxx Xxxx., Xxxxx 000, Xxxxxxxx, Xxxxxx 00000, the United States of
America, its fax number being + 0 000-000-0000 and its telephone number being +
0 000-000-0000 (“Party
A”);
TIANWEI NEW ENERGY HOLDINGS CO., LTD.
as entrusting lender, located at No 0, Xxxxxxx Xxxx, Xxxxxxxxx
Airport Economic Development Zone, Chengdu, China 610200 with Xxxxx Xxxx as its
legal representative (or principal officer), its fax number being x00-
00-0000-0000 and its telephone number being x00-00-0000-0000 (“Party B”); and
CHINA CONSTRUCTION BANK CORPORATION
SHUANGLIU SUB-BRANCH as agent, located at
[address, post code] with [•] as its principal officer, its fax number being [•]
and its telephone number being [•] (“Party C”);
Party A,
Party B and Party C hereinafter are collectively referred to as the “Parties” and individually as a
“Party”.
WHEREAS
Upon the
request of Party A, Party B hereby entrusts Party C to release an entrustment
loan to Party A.
NOW,
THEREFORE upon consultation, the Parties hereto agree as follows:
1.
|
LOAN
AMOUNT
|
The
amount of the loan that Party B entrusts Party C to release to Party A hereunder
shall be U.S. Dollar THIRTY MILLION (the “Loan”).
2.
|
PURPOSE
OF THE LOAN
|
Party A
shall utilize the Loan for the purpose of satisfying vendor payables outstanding
as of the date hereof, payables relating to pilot testing and achieving at least
40 metric tons of solar-grade polysilicon that meet customer specifications at
the polysilicon plant currently being constructed by Hoku Materials, Inc., a
wholly- owned subsidiary of Party A (“Hoku Materials”), in
Pocatello, Idaho, and other uses approved by the board of directors of Party A.
Party A hereby guarantees that such purpose shall comply with applicable laws,
regulations, rules, and policies of PRC and of the country where Party A is
located. Party A may not utilize any part of the Loan for any other purpose
without consent of Party B and a written notice of such consent to Party
C.
3.
|
TERM
OF THE LOAN
|
The term
of the Loan shall be two years, commencing from the effective date hereof and expiring on the second anniversary of the effective date hereof
(the “Term”).
Where the
above commencement date is inconsistent with the date set forth on the Loan-to
Deposit Certificate (“LDC”, or Loan Receipt), the
date set forth on the LDC for the first advance of the Loan shall be the
commencement date of the Term and the expiry date of the Term shall be adjusted
accordingly. The LDC shall constitute an integral part of this Contract and have
the equal legal force as this Contract.
4.
|
INTEREST
RATE ON THE LOAN, INTEREST CALCULATION AND
SETTLEMENT
|
The
interest rate on the Loan shall be 5.94% per annum (such interest shall be
calculated on a daily basis and the daily interest rate shall equal to the
annual interest rate divided by 360 days).
The
interest on the Loan shall be calculated and settled by the following
methods:
The
interest on the Loan shall be calculated on the basis of the actual number of
days elapsed in a year of 365 days and settled quarterly in arrears at the end
of each quarter of the bank (each, an “interest settlement
date”).
5.
|
DELIVERY
OF THE ENTRUSTMENT FUNDS AND RELEASE OF THE
LOAN
|
5.1
|
Party
B shall deliver a sufficient amount of the entrustment funds to Party C
prior to the release date set forth on the Notification to Release
Entrustment Loan.
|
The
entrustment loan fund account hereunder is not and shall not be construed as
Party B’s deposit account with Party C and the balance therein is not and shall
not be construed as Party B’s deposit balance with Party C. Such account is
established only for the purpose of Party C’s internal account treatment and no
interest shall accrue on the balance in such account.
5.2
|
Conditions
precedent to advance the Loan:
|
(1)
|
Party
C has received the entrustment funds, and such funds are free of seizure,
freezing or mandatory transfer by any competent
authority;
|
(2)
|
Party
C has received the Notification to Release Entrustment Loan from Party
B;
|
(3)
|
Party
A has opened a special foreign exchange deposit account, where the Loan is
in a foreign currency;
|
(4)
|
neither
Party A nor Party B has breached any provision
herein.
|
5.3
|
Where
the amount of the entrustment funds actually delivered by Party B to Party
C is less than the amount of the advance agreed to be released, Party C
may refuse the release. If Party B has expressly instructed Party C in the
Notification to Release Entrustment Loan to release the loan in the amount
of the entrustment funds
actually delivered, Party C may release the loan to Party A in such amount
as actually delivered, and Party A shall not raise any objection
thereto.
|
2
5.4
|
The
Loan shall be advanced in accordance with the schedule specified
below:
|
The
advance schedule shall be as follows:
Advance
Date(d/m/y)
|
Amount
|
|
1
|
effective
date of this
|
US$30
million
|
Contract
|
5.5
|
Where
Party C fails to release the Loan in accordance with this Contract due to
any reason attributable to Party B, Party B shall be solely liable to
Party A for such failure and Party C shall not be liable in any
way.
|
6.
|
SECURITY
FOR THE LOAN
|
6.1
|
The
Loan shall be secured in the form of items (1) and (2)
below
|
(1)
|
a
security agreement to be executed by Party A, Party B and Hoku Materials;
and
|
(2)
|
a
mortgage to be executed by Party B, Hoku Materials and Alliance Title
& Escrow Corp.
|
6.2
|
Where
registration is required for the security to be effective or enforceable,
Party B shall be solely responsible for such
registration.
|
6.3
|
Both
the security provider and the security shall be supervised by Party B
alone, unless otherwise agreed between Party B and Party C in
writing.
|
7.
|
REPAYMENT
|
7.1
|
General
Principles of Repayment
|
Unless
Party A and Party B have agreed otherwise in writing and notified Party C of
such agreement in writing, Party A’s repayment hereunder shall be in the order
of interest first and principal second adhering to the principle that the
interest shall be fully repaid concurrently with the repayment in full of all
the principal amounts.
7.2
|
Interest
Payment
|
Party A
shall pay Party B through Party C any due interest on each interest settlement
date. The first interest payment date shall be the first interest settlement
date after advance of the Loan. All the interest and principal amounts
outstanding shall be paid in full on the date the Term expires.
3
7.3
|
Principal
Payment
|
Party A
shall repay the principal of the Loan in accordance with the following
schedule:
Repayment
Date(d/m/y)
|
Amount
|
|
1
|
second
anniversary of the
|
US$30
million
|
effective
date of this
|
||
Contract
|
In case
of any adjustment to the above schedule, Party A and Party B shall enter into a
written agreement and notify Party C in writing of such agreement.
7.4
|
Repayment
Method
|
Party A
shall deposit a sufficient amount into its bank account at Party C before the
repayment date and each interest settlement date and transfer such amount to
repay the Loan (Party C may also debit such amount from such account to repay
the Loan), or transfer such amount from another bank account of Party A to repay
the Loan.
7.5
|
Prepayment
|
Subject
to the consent between Party A and Party B and a written notice of such consent
being sent to Party C, Party A may prepay all or any part of the principal of
and the interest on the Loan.
The
interest on any principal so prepaid shall be calculated on the basis of the
number of days actually lapsed and the interest rate specified
herein.
If Party
A is required to repay the Loan in installments and prepays part of the
principal, the prepaid amount shall be applied in the reverse order of the
repayment schedule. After partial prepayment, the outstanding Loan shall still
be subject to the interest rate provided herein.
With
respect to any prepaid loan, Party C is not obligated to return any handling
charges that it has previously received.
7.6
|
Repayment
through Party C
|
(1)
|
Party
A shall make all repayments through Party C and may not make any repayment
directly to Party B. Party C shall promptly notify Party B upon its
receipt of any repayment from Party
A.
|
Upon its
receipt of any repayment directly from Party A, Party B shall promptly notify
Party C thereof and deliver such repayment to Party C for Party C to complete
appropriate account treatment in accordance with the normal repayment
procedures.
4
(2)
|
In
case of any breach of this Contract by Party A or Party B that renders
Party C unable to complete appropriate account treatment in a timely and
accurate manner or unable to perform its tax withholding obligations,
Party A and Party B shall be jointly and severally liable for any and all
consequences arising therefrom and for any and all losses suffered by
Party C.
|
7.7
|
Principles
of Repayment upon Multiple Loans Due
Simultaneously
|
Where any
proprietary loan provided by Party C to Party A matures concurrently with any
entrustment loan provided by Party C to Party A at the request of Party B, Party
C may apply Party A's repayment to first repay such proprietary loan if Party A
does not designate the order of such repayment, Party C may also debit any of
Party A's accounts with Party C for the purpose of repaying first such
proprietary loan.
Where
there are multiple entrustment loans by Party C to Party A at the request of
Party B and such loans mature concurrently, Party A shall designate the order of
such repayment, failing which Party C may at its sole discretion determine the
order of the repayment.
8.
|
WITHHOLDING
OF BUSINESS TAX AND OTHER TAXES
|
8.1
|
Party
C may withhold in accordance with applicable laws any business tax and
other taxes payable by Party B in connection with the entrustment loan
hereunder.
|
8.2
|
Party
A and Party B shall not agree between them that Party A pays the interest
on the Loan directly to Party B. In case Party A pays any interest
directly to Party B, Party C may debit any of Party A’s or Party B’s
accounts in any currency with Party C for a corresponding amount to fully
satisfy its tax withholding
obligations.
|
8.3
|
Where
Party C fails to perform its withholding obligations due to any reason
attributable to Party A or Party B, which results in Party C suffering
penalties by the tax authority, or advancing any tax payment, or incurring
any other liabilities, Party A and Party B shall be jointly and severally
liable for full compensation.
|
9.
|
HANDLING
CHARGES AND OTHER FEES AND EXPENSES
|
9.1
|
The
handling charges under this Contract shall be paid in accordance with Item
(3) below:
|
(1)
|
by
Party A.
|
(2)
|
by
Party B.
|
(3)
|
50%
by Party A and 50% by Party B.
|
5
9.2
|
The
party obligated to pay the handling charges (the “Payer”) shall punctually
and fully pay to Party C the handling charges in connection with the Loan
in accordance with this Section 9, regardless of whether or not Party A
has repaid the principal, or interest or has committed any other breach
hereunder. In case the lender-borrower relationship between Party A and
Party B or the entrustment relationship between Party B and Party C is
void, any handling charges received by Party C will not be returned. The
Payer shall remain obligated to pay any payable and outstanding handling
charges.
|
9.3
|
The
rate, schedule and methods of payment of the handling charges shall be as
follows:
|
The
handling charges for the Loan shall be 0.2% of the entrusting amount (which
means the amount released under this Contract) per annum and shall be payable in
advance in U.S. dollars for the full Term (two years) upon the advance of the
Loan. If the Loan is overdue or the Term is extended, additional handling
charges shall be payable pursuant to the then applicable standard rate for
handling charges for entrustment loan. The handling charges for the Loan shall
be payable regardless of whether the principal and interest of the Loan are
repaid or paid on time.
9.4
|
In
case the Payer defaults on payment of any handling charges in accordance
with the above provisions, Party C is entitled to charge a default fee on
such unpaid handling charges at a rate of 0.1% per day commencing from the
date of such default, and may also debit any of such Payer’s accounts with
Party C in any currency for payment of such charges and
fees.
|
9.5
|
The
costs and expenses in association with the legal service, insurance,
valuation/appraisal, registration, custody, authentication and
notarization arising in connection with this Contract or the security
related thereto shall be borne by Party A and Party B in equal
portions.
|
Party C
shall not bear any costs and expenses hereunder. Where Party C advances any
costs and expenses, including without limitation, any legal, attorney fees,
registration fees, notarization fees and public announcement fees, Party A and
Party B shall each reimburse Party C half of such advances within 10 working
days after the issuance by Party C of a written notice, or Party C may debit any
of Party A’s or Party B’s accounts with Party C for such
reimbursement.
9.6
|
Party
A and Party B shall be jointly and severally liable to Party C in
connection with obligations as specified in this Section
9.
|
10.
|
PARTY
A’S RIGHTS AND OBLIGATIONS
|
10.1
|
Party
A’s Rights
Party
A has the right to:
|
6
(2)
|
utilize
the Loan for the purpose agreed
herein;
|
(3)
|
subject
to the requirements of Party B, apply to Party B for an extension of the
Term and execute an extension agreement with Party B and Party C after its
application is accepted by both Party B and Party
C;
|
(4)
|
require
both Party B and Party C to keep confidential the relevant information
furnished by Party A except provided otherwise by law, regulations, rules
or this Contract; and
|
(5)
|
reject
Party B or Party C or any of their employees asking for bribe, and lodge a
complaint with the competent authority about such misconduct and any other
act of Party B or Party C that may violate any PRC laws and
regulations.
|
10.2
|
Party
A’s Obligations
|
|
(1)
|
Party
A shall utilize the Loan in accordance with the purpose as provided
herein, and shall not misappropriate any Loan proceeds. Party A shall
support and cooperate with Party B in its inspection of Party A’s
utilization of the Loan proceeds hereunder. Party A shall furnish Party B
with its financial and accounting information as well as manufacturing and
operating information as requested by Party B and shall ensure the
accuracy, completeness and validity of any information it
provides.
|
|
(2)
|
Party
A shall promptly notify Party B upon the occurrence of any of the
following events to Party A:
|
|
(i)
|
contracting,
trustee (receiver) being appointed, lease, shareholding restructuring,
investment, joint operation, mergers and
acquisitions, acquisition and restructuring, division, joint venture,
applying for temporary cessation of operation or dissolution, revocation,
applying for (or subject to an application for) bankruptcy, change of
controlling shareholders/actual controllers, transfer of material assets,
suspension of production or operation, significant penalty imposed by
regulatory authorities, cancellation of registration, revocation of
business license, involvement in material legal proceedings, severe
deterioration in operation and financial condition, legal
representative/principal officer being unable to perform their duties;
or
|
(ii)
|
any
change to Party A’s name, legal representative (or principal officer),
registered address, business scope, registered capital, or
articles of association or any other registration with industrial and
commercial authority;
|
7
(3)
|
Party
A shall perform any other obligation of Party A as provided
herein.
|
11.
|
PARTY
B’S RIGHTS AND OBLIGATIONS
|
11.1
|
As
the lender hereunder, Party B shall enjoy all the rights and interests as
a lender and assume all the obligations, responsibilities and risks as a
lender.
|
11.2
|
Party
B shall conduct an independent review of the feasibility and legality of
the project related to the Loan hereunder, and of the creditworthiness,
repayment ability, and performance ability of Party A and/or the security
provider, and shall make an independent judgment and assume any risks that
may arise from the failure of the recovery of the Loan on time and in
full.
|
11.3
|
After
the release of the Loan, Party B shall continuously supervise Party A’s
utilization of the Loan and pay close attention to Party A’s operating and
financial condition and repayment ability, and shall promptly take
appropriate measures upon the occurrence of any event to Party A that may
adversely affect the realization of Party B’s creditor’s rights. Party B
understands and agrees that Party C has no obligation in this
respect.
|
11.4
|
Party
B’s obligations to Party C hereunder shall not be affected by the failure
of Party A to repay the principal or interest, nor by any breach of this
Contract or any violation of law, nor by the invalidity of the
lender-borrower relationship
hereunder.
|
11.5
|
Party
B has the right to inspect and supervise Party A’s utilization of the Loan
and to request Party A to provide Party A’s financial and accounting
information as well as manufacturing and operating information and shall
keep the above information confidential, unless otherwise provided by
applicable laws, regulations or rules or otherwise required by competent
authorities.
|
11.6
|
Upon
the maturity of the Loan, Party B shall promptly demand payment, bring
lawsuits against Party A and/or the security provider, apply for
enforcement, declare creditor’s rights in bankruptcy proceedings, and/or
take any other remedies permitted by law, as the case may be. Party C
shall not be held liable in any way even though it is obligated to assist
Party B in the recovery of the
Loan.
|
11.7
|
Any
instruction issued by Party B to Party C shall be timely, clear, complete,
consistent and in compliance with laws and this Contract, otherwise, Party
C may refuse to follow such instruction. In the case of such refusal,
Party B shall be liable for any and all consequences arising therefrom.
Party B shall be liable for any and all legal consequences arising from
any act by Party C pursuant to instructions of Party
B.
|
11.8
|
Party
B shall not request Party C to issue any deposit certificate
with respect
|
8
to any
entrustment funds. Even if Party C issues a deposit certificate in any form with
respect to any entrustment funds, Party B shall not transfer, pledge or
otherwise dispose of such deposit certificate and shall return it to Party C
prior to Party C’s release to Party A of the Loan. Party B shall not request
Party C to make any payment or hold Party C liable by invoking such deposit
certificate.
11.9
|
Other
rights and obligations of Party B agreed
herein.
|
12.
|
PARTY
C’S RIGHTS AND OBLIGATIONS
|
12.1
|
Party
C shall assist Party B in the supervision of the use by Party A of the
Loan for the agreed purposes.
|
“Party C
shall assist Party B in the supervision” shall mean that, in respect of each
loan advance, Party C shall provide to Party B with the statements of Party A’s
deposit account with Party C to which such advance has been credited for the
period commencing from the date of such advance being credited to the date that
falls twenty-four months thereafter.
12.2
|
Party
C has the right to provide to Party B any information about Party A
relating to the Loan or to Party A’s deposits, loans and settlement
practices with Party C.
|
12.3
|
Party
C shall not be liable for any dispute between Party B and Party A or for
any act of Party A or Party B that violates law or
regulations.
|
12.4
|
Where
Party A fails to punctually repay the Loan in full and Party C compensates
Party B in accordance with a court judgment or arbitral award, any and all
the rights of Party B against Party A and/or the security provider shall
be promptly assigned to Party C. In such case, Party A shall not raise any
objection to such assignment and shall perform the obligations and
liabilities to Party C immediately after receipt of a written notice from
Party B.
|
12.5
|
Party
C shall assist Party B in the recovery of the Loan in accordance with the
following provisions:
|
(1)
|
prior
to the maturity of the principal of the Loan (including the principal
payable in installments)
|
Party C
shall calculate and settle the interest on the Loan in accordance with the
relevant provisions herein. After each installment repayment by Party A, Party C
shall complete appropriate account treatment and report to Party B about the
amount and time of such repayment and the amount of the outstanding principal
and interest. Following its receipt of the above financial information reported
by Party C, Party B shall promptly check such information and raise any question
about or disagreement to such information, if any, to Party C within 5 working
days. Party C shall not be liable for any loss suffered by Party A
or
9
Party B
arising from the failure of Party B to raise such question or disagreement as
required above. If on any interest settlement date Party A fails to pay the
relevant interest on the Loan, Party C shall notify Party B thereof in
writing.
|
(2)
|
after
the maturity of the principal of the
Loan
|
(i)
|
If
Party A repays punctually and in full upon the maturity of the principal
of the Loan, Party C shall credit the appropriate account following normal
procedures and notify Party B thereof in a timely manner. If Party A fails
to repay punctually and in full, Party C shall notify Party B in writing
of such failure and shall, within one month thereafter, make demand, once
and only once, for repayment by Party A . Party C shall be deemed to have
fulfilled its obligation of assistance in the recovery of the Loan as long
as Party C has issued a written demand
in accordance with the name, address and telephone fax) number provided by
Party A or Party B, or there is proof that Party C has demanded Party A
for repayment by any other
means.
|
(ii)
|
If
Party B desires to entrust Party C to continue the assistance in the Loan
recovery after all the principal matures, it shall execute a separate
written entrustment agreement with Party C in respect thereof. Where Party
B and Party C fail to reach such agreement within one month after such
maturity date, all the obligations of Party C hereunder shall
automatically terminate forthwith and Party C has the right to write off
the accounts relating to the Loan.
|
(3)
|
Party
C’s obligations to assist Party B in the recovery of the Loan shall be
limited to those specified in this
Section.
|
12.6
|
Party
C shall have no obligation to participate in any litigation, arbitration,
bankruptcy proceedings relating to the Loan and the security related
thereto, nor shall it have any obligation towards Party B to dispose of
any debt- offsetting assets.
|
13.
|
EVENT
OF DEFAULT AND LIABILITIES
|
13.1
|
Party
A’s Events of Default and
Liabilities
|
(1)
|
Any
of the following events shall constitute an event of default of Party
A:
|
(i)
|
any
breach by Party A of any provision of this Contract, and in the case of
any breach other than breach of any of Sections 2, 4, 7.2 and 7.3, Party A
fails to cure such breach within fifteen (15) working days of receipt of
written notice from Party B or Party C;
and
|
10
(ii)
|
any
event that in the reasonable opinion of Party B may adversely affect the
realization of its creditor’s rights
hereunder.
|
(2)
|
Party
A’s liabilities for default:
|
Upon the
occurrence of any of the above events, Party B may adopt any one or more of the
following remedial measures:
(i)
|
request
Party A to remedy its default within a specified time
limit;
|
(ii)
|
notify
Party C to suspend the part of the Loan yet to be
released;
|
(iii)
|
charge
default interest (if any) as provided
herein;
|
(iv)
|
accelerate
the maturity of all principal and interests and demand immediate payment
by Party A; and
|
(v)
|
any
other remedial measures permitted by
law.
|
13.2
|
Party
B’s Events of Default and Liabilities for
Default
|
|
(1)
|
Any
of the following events shall constitute an event of default of Party
B:
|
(i)
|
failure
of Party B to deliver sufficient entrustment funds to Party C in a timely
manner, or failure of release of the Loan as provided herein for any other
reason attributable to Party B;
|
(ii)
|
the
source of entrustment funds being in violation of law or regulations, or
any representation or warranty of Party B being false, inaccurate or
incomplete;
|
(iii)
|
failure
of Party B to pay Party C punctually and fully any Loan handling charges;
and
|
(iv)
|
any
breach by Party B of any other provision
herein.
|
(2)
|
Party
B’s liabilities for default:
|
(i)
|
Upon
the occurrence of an event of default of Party B, Party A has the right to
request Party B to remedy such default within a specified time limit and
to compensate losses and/or take any other remedial
measures.
|
(ii)
|
Party
C has the right to adopt any one or more of the following remedial
measures upon the occurrence of any event of default of Party
B:
|
11
(A)
|
request
Party B to remedy its default within a specified time
limit;
|
(B)
|
refuse
to provide entrustment loan services for Party
B;
|
(C)
|
directly
debit any account of Party B for handling
charges;
|
(D)
|
request
Party B to compensate losses;
|
(E)
|
terminate
the entrustment relationship between Party B and Party C;
and
|
(F)
|
any
other measures permitted by law.
|
13.3
|
Party
C’s Events of Default and Liabilities for
Default:
|
(1)
|
If
Party C delays without any justifiable reason in releasing the Loan to
Party A after Party B delivers sufficient entrustment funds to Party C in
accordance with this Contract, Party B has the right to request Party C to
release the Loan immediately.
|
(2)
|
If
Party C fails to perform its obligations to assist Party B in the recovery
of the Loan in accordance with this Contract, which results in Party B
being unable to punctually recover the principal and the interest on the
Loan, and Party B is not at fault, Party C shall to the extent of and in
proportion to Party C’s fault be liable for direct losses suffered by
Party B.
|
14.
|
REPRESENTATIONS
AND WARRANTIES
|
14.1
|
Party
A hereby represents and warrants as
follows:
|
(1)
|
it
has read all the provisions in this Contract and fully knows and
understands the meaning and legal consequences
thereof;
|
(2)
|
the
execution and performance of this Contract by Party A is in compliance
with laws of the country in which Party A is located, administrative
regulations, rules and Party A’s certificate of incorporation and bylaws
and has been approved by its board of directors and, if necessary, the
competent government authorities of the country where Party A is located;
and
|
(3)
|
the
purpose of the Loan is in compliance with laws and regulations, and the
project relating to which the Loan is to be used has been approved by the
competent authorities if necessary.
|
14.2
|
Party
B hereby represents and warrants as
follows:
|
12
(2)
|
the
entrustment fund comes from legal sources and not from bank financing, nor
from corporate or public funds deposited in the name of an individual, nor
from any fund that is prohibited from being used for entrustment loan
purposes under applicable laws, regulations or
rules;
|
(3)
|
it
has the lawful right and has been approved by competent authorities to
dispose of the entrustment funds;
and
|
(4)
|
grant
of the Loan is not for the purpose of violation or evasion of any PRC
laws, regulations, rules or regulatory measures, and does not cause any
damage to any lawful interests of the State, any collective organization
or any third party.
|
15.
|
MISCELLANEOUS
|
15.1
|
Direct
Debit Right
|
Party C
is entitled to debit, without prior notice to either Party A or Party B, any
account of Party A or Party B at China Construction Bank in RMB or other
currencies to pay all amounts payable to Party C by Party A or Party B under
this Contract. Party A or Party B shall assist Party C to complete any
procedures for foreign exchange settlement or sale, and Party A or Party B shall
bear the risk of exchange rate fluctuation.
15.2
|
Party
C’s Records as Evidence
|
Unless
there is any reliable and definitive evidence to the contrary, Party C’s
internal records of principal, interest, expenses and repayment, receipts,
vouchers made or retained by Party C during the course of drawdown, repayment,
interest payment, and records and vouchers relating to collections by Party C
shall constitute valid evidence of the creditor-debtor relationship between
Party A and Party B and the performance of obligations by Party C. Party A and
Party B hereby agree that they shall not raise any objection
thereto.
15.3
|
Assignment
and Succession
|
(1)
|
Any
assignment by Party A of any of its rights or obligations hereunder shall
be subject to the written consent of both Party B and Party
C.
|
(2)
|
Any
assignment by Party B of any of its rights or obligations hereunder shall
be subject to the written consent of Party
C.
|
(3)
|
Any
assignment by Party C of any of its rights or obligations hereunder shall
be subject to the written consent of Party B; provided however that, in
case of any merger, division, setting up subsidiaries or organizational or
business function restructuring of China Construction Bank, Party C’s
rights and obligations hereunder may be assigned to
or
|
13
succeeded
by a third party with legal qualification to operate entrustment loan business
as long as Party C issues a notice to Party A and Party B through
correspondence, telephone or press release.
15.4
|
Consequences
of Invalidity or Rescission
|
In case
the entrustment relationship and/or lender-borrower relationship hereunder
are/or is invalid or rescinded pursuant to any law,
(1)
|
If
the entrustment relationship between Party B and Party C is valid while
the lender-borrower relationship between Party A and Party B is invalid or
rescinded, Party C shall not be held liable,
and
|
(i)
|
where
Party C has not delivered the entrustment funds to Party A, it shall
return the entrustment funds to Party B without any
interest;
|
(ii)
|
where
Party C has delivered the entrustment funds to Party A, Party B shall
directly request Party A to return the entrustment funds and Party C shall
not be liable for any losses suffered by Party B arising therefrom;
and
|
(iii)
|
where
any third party has suffered losses as a result of such invalidity or
rescission, Party A and Party B shall be liable in proportion to their
respective fault and Party C shall not be
liable.
|
(2)
|
If
the entrustment relationship is held invalid or rescinded while the
lender-borrower relationship is
valid,
|
(i)
|
where
Party C has not delivered the entrustment funds to Party A, it shall
return the entrustment funds to Party B without any interest;
and
|
(ii)
|
where
Party C has delivered the entrustment funds to Party A, Party A and Party
B shall resolve the issues relating to the entrustment funds through
consultations in accordance with applicable laws and Party C shall not be
liable in any way.
|
(3)
|
If
both the entrustment relationship and the lender-borrower relationship are
invalid or rescinded,
|
(i)
|
where
Party C has not delivered the entrustment funds to Party A, it shall
return the entrustment funds to Party B without any
interest;
|
(ii)
|
where
Party C has delivered the entrustment funds to Party A, Party B shall
directly request Party A to return the entrustment funds and Party C shall
not be liable for any losses suffered by Party B;
and
|
14
(iii)
|
where
any third party has suffered losses as a result of such invalidity or
rescission, Party A and Party B shall be liable in proportion to their
respective fault and Party C shall not be
liable.
|
15.5
|
Party
B shall supervise and inspect Party A, and obtain information about Party
A through other channels and shall not rely on Party C in this respect.
Party C may at its sole discretion, report to Party B the information it
possesses; provided however that, Party C shall not be liable for the
promptness, truthfulness, completeness, accuracy and validity of any such
information.
|
15.6
|
In
the event of any change to the address or other contact information of any
Party set forth herein, such Party shall promptly notify the other Parties
of such change in writing. Such Party shall be liable for any loss caused
by its failure of giving prompt notice of such
change.
|
15.7
|
Any
rights that Party C has under law or this Contract shall not be
interpreted as the obligations of Party C. In case Party C fails to
exercise or waives any of such rights, neither Party A nor Party B may
hold Party C legally liable on this
ground.
|
15.8
|
Notification
to Release Entrustment Loan, conformations, acknowledgements, certificates
and other documents relating to this Contract shall constitute integral
parts of this Contract.
|
15.9
|
This
Contract shall be executed in six (6)
counterparts.
|
15.10
|
Governing
Law
|
This
Contract shall be governed by the laws of the People’s Republic of China
(excluding the Hong Kong Special Administrative Region, the Macau Special
Administrative Region and Taiwan for the purposes of this Contract
only).
15.11
|
Dispute
Resolution
|
Any
dispute arising from the performance of this Contract may be settled by
consultation. If the dispute cannot be resolved through consultation, such
dispute shall be resolved pursuant to clause (ii) below:
(i)
|
the
People’s court within the jurisdiction where Party C is located;
or
|
(ii)
|
arbitration
at the local branch of the China International Economic and Trade
Arbitration Commission in the principal place of business of Party B. The
arbitration award shall be final and binding on the Parties
hereto.
|
The
provisions hereunder not subject to the dispute shall remain enforceable during
the process of litigation or arbitration.
15
15.12
|
This
Contract shall become effective
upon:
|
(i)
|
signing
by the legal representative/(principal officer) or authorized
representative of Party A and Party B and being affixed with the company
chop of Party B; and
|
(ii)
|
signing
by the principal officer or authorized representative of Party C and being
affixed with the company chop of Party
C.
|
[Signature
Page Follows]
16
HOKU
SCIENTIFIC, INC.
By the
legal representative (principal officer) or authorized
representative:
Signature:
|
||
Date: |
Party B (company
chop)
TIANWEI
NEW ENERGY HOLDINGS CO., LTD.
By the
legal representative (principal officer) or authorized
representative:
Signature:
|
||
Date: |
Party C (company
chop)
CHINA
CONSTRUCTION BANK CORPORATION SHUANGLIU SUB-BRANCH
By the
principal officer or authorized representative:
Signature:
|
||
Date: |