EQUITY PLEDGE AGREEMENT (English Translation)
Exhibit
10.3
(English
Translation)
This
Equity Pledge Agreement (hereinafter this “Agreement”)
is
dated August 17, 2007 and effective as of March 8, 2006, and is entered into
between Shaanxi
Xilan Natural Gas Equipment Co.,Ltd.,
a
company incorporated under the laws of the PRC (“Pledgee”),
and
each of the shareholders of XXNG listed on Appendix 3 and the signature pages
hereto (collectively, the “Pledgors”),
and
Xi'an
Xilan Natural Gas Co.,Ltd.,
(hereinafter “XXNG”),
a
company with joint stock limited liability registered in Xi’an,
China.
RECITALS
I.
The
Pledgee, a joint stock limited liability company registered in Xi’an, Shaanxi
Province, the People’s Republic of China (hereinafter “PRC”),
has
been licensed by the PRC relevant government authority to carry on the business
of natural gas equipment purchase and sale (except the items not obtained the
specified approval).
II. Each
Pledgor is a citizen of PRC. The Pledgors collectively own over 50% of the
outstanding Equity Interest of XXNG.
III.
Pledgee
and XXNG executed a Consulting Services Agreement (hereinafter “Consulting
Services Agreement”
or
“Services
Agreement”)
concurrently herewith, and such agreement has a term of 10 years. Based on
this
agreement, XXNG shall pay technical consulting and service fees (hereinafter
the
“Consulting
Services Fees”
or
“Services
Fees”)
to
Pledgee for offering consulting and related services.
IV.
In
order
to ensure that XXNG will perform its obligations under the Consulting Services
Agreement, and the Pledgee can normally collect the Consulting Services Fees
from XXNG, the Pledgors agree to pledge all their Equity Interest in XXNG as
security for the performance of the obligations of XXNG under the Consulting
Services Agreement and the payment of Consulting Services Fees under such
agreement.
NOW
THEREFORE,
the
Pledgee, XXNG and the Pledgors through mutual negotiations hereby enter into
this Agreement based upon the following terms:
1.
Definitions
and Interpretation.
Unless
otherwise provided in this Agreement, the following terms shall have the
following meanings:
1.1 “Pledge”
refers
to the full content of Section 2 hereunder.
1.2 “Equity
Interest”
refers
to all the equity interest in XXNG legally held by the Pledgors.
1.3 “Term
of Pledge”
refers
to the period provided for under Section 3.2 hereunder.
1.4 “Event
of Default”
refers
to any event in accordance with Section 7.1 hereunder.
1.5 “Notice
of Default”
refers
to the notice of default issued by the Pledgee in accordance with this
Agreement.
2.
Pledge.
The
Pledgors agree to pledge their Equity Interest in XXNG to the Pledgee
(“Pledged
Collateral”)
as a
security for the obligations of XXNG under the Consulting Services Agreement.
Pledge under this Agreement refers to the rights owned by the Pledgee, who
shall
be entitled to a priority in receiving payment by the evaluation or proceeds
from the auction or sale of the Equity Interest pledged by the Pledgors to
the
Pledgee.
3.
Term
of Pledge.
3.1
The
Pledge shall take effect as of the date when the Equity Interest under this
Agreement is recorded in the Register of Shareholder of XXNG. The term of the
Pledge shall be for two (2) years after the obligations under the Consulting
Services Agreement will have been fulfilled. The parties agree that, if
situations allow, they will use their best efforts to register the Pledge with
the competent Administration for Industry and Commerce at the registration
venue
of XXNG.
3.2
During
the term of the Pledge, the Pledgee shall be entitled to vote, control, sell,
or
dispose of the Pledged Collateral in accordance with this Agreement in the
event
that Pledgors do not perform their obligation under the Consulting Services
Agreement and XXNG fails to pay exclusive technology consulting service fee
in
accordance with the Consulting Services Agreement.
4. Physical
Possession of Documents.
4.1 During
the term of Pledge under this Agreement, the Pledgors shall deliver the physical
possession of their certificates representing shares of capital stock of XXNG
(“Share
Certificates”)
to the
Pledgee within one (1) week as of the date of conclusion of this
Agreement.
4.2 The
Pledgee shall be entitled to collect the dividends for the Equity
Interest.
4.3 The
Pledge under this Agreement will be recorded in the Register of Shareholders
of
XXNG.
5.
Representation
and Warranties of Pledgors.
5.1 The
Pledgors own, beneficially and of record, good and marketable title to the
Equity Interest free and clear of all security interests, liens, adverse claims,
encumbrances, equities, proxies, options or stockholders’ agreements. Each of
the Pledgor represents that such Pledgor has no right or claims whatsoever
to
any shares of XXNG capital stock other than the Equity Interest, and does not
have any options, warrants or any other instruments or rights entitling such
Pledgor to purchase or otherwise acquire shares of XXNG capital
stock.
5.2 The
Pledgors have not pledged the Equity Interest to any other party, and the Equity
Interest is not encumbered to any other person except for the Pledgees.
6.
Covenants
of Pledgors.
6.1 During
the effective term of this Agreement, the Pledgors promise to the Pledgee for
its benefit that the Pledgors shall:
6.1.1 Not
transfer or assign the Equity Interest, create or permit to create any pledges
which may have an adverse effect on the rights or benefits of the Pledgee
without prior written consent from the Pledgee;
6.1.2 Comply
with and implement laws and regulations with respect to the pledge of rights;
present to the Pledgee the notices, orders or suggestions with respect to the
Pledge issued or made by the competent authority within five (5) days upon
receiving such notices, orders or suggestions; and comply with such notices,
orders or suggestions; or object to the foregoing matters at the reasonable
request of the Pledgee or with consent from the Pledgee;
6.1.3 Timely
notify the Pledgee of any events or any received notices which may affect the
Pledgor’s Equity Interest or any part of its right, and any events or any
received notices which may change the Pledgor’s any warranty and obligation
under this Agreement or affect the Pledgor’s performance of its obligations
under this Agreement.
6.2 The
Pledgors agree that the Pledgee’s right to the Pledge obtained from this
Agreement shall not be suspended or inhibited by any legal procedure launched
by
the Pledgor or any successors of the Pledgor or any person authorized by the
Pledgor or any such other person.
6.3 The
Pledgors promise to the Pledgee that in order to protect or perfect the security
for the payment of the Services Fees, the Pledgors shall execute in good faith
and cause other parties who have interests in the pledge to execute all the
title certificates, contracts, and perform actions and cause other parties
who
have interests to take action, as required by the Pledgee; and make access
to
exercise the rights and authorization vested in the Pledgee under this
Agreement.
6.4 The
Pledgors promise to the Pledgee that they will execute all amendment documents
(if applicable and necessary) in connection with any transfer of the Share
Certificates with the Pledgee or its designated person (natural person or a
legal entity), and provide the notice, order and decision to the Pledgee by
who
considers to be necessary within reasonable time.
6.5 The
Pledgors promise to the Pledgee that they will comply with and perform all
the
guarantees, covenants, warranties, representations and conditions for the
benefits of the Pledgee. The Pledgors shall compensate all the losses suffered
by the Pledgee for the reasons that the Pledgors do not perform or fully perform
their guarantees, covenants, warranties, representations and
conditions.
7. Events
Of Default.
7.1 The
following events shall be regarded as the events of default:
7.1.1 This
Agreement is deemed illegal by a governing authority in the PRC, or the Pledgor
is not capable of continuing to perform the obligations herein due to any reason
except force majeure;
7.1.2 XXNG
fails to make full payment of the Services Fees as scheduled under the Service
Agreement;
7.1.3 A
Pledgor
makes any material misleading or mistaken representations or warranties under
Section 5 herein, and/or the Pledgor breaches any warranties under Section
5
herein;
7.1.4 A
Pledgor
breaches the covenants under Section 6 herein;
7.1.5 A
Pledgor
breaches the term or condition herein;
7.1.6 A
Pledgor
waives the pledged Equity Interest or transfers or assigns the pledged Equity
Interest without prior written consent from the Pledgee;
7.1.7 XXNG
is
incapable of repaying the general debt or other debt;
7.1.8 The
property of the Pledgor is adversely affected causing the Pledgee to believe
that the capability of the Pledgor to perform the obligations herein is
adversely affected;
7.1.9 The
successors or agents of the XXNG are only able to perform a portion of or refuse
to perform the payment obligations under the Service Agreement;
7.1.10 The
breach of the other terms by action or inaction under this agreement by the
Pledgor.
7.2 The
Pledgor shall immediately give a written notice to the Pledgee if the Pledgor
is
aware of or discovers that any event under Section 7.1 herein or any event
that
may result in the foregoing events has occurred or is likely to
occur.
7.3 Unless
the event of default under Section 7.1 herein has been solved to the Pledgee’s
satisfaction, the Pledgee, at any time when the event of default occurs or
thereafter, may give a written notice of default to the Pledgor and require
the
Pledgor to immediately make full payment of the outstanding Service Fees under
the Service Agreement and other payables or exercise other rights in accordance
with Section 8 herein.
8. Exercise
of Remedies.
8.1 Authorized
Action by Secured Party.
The
Pledgors hereby irrevocably appoint Pledgee the attorney-in-fact of the Pledgors
for the purpose of carrying out the security provisions of this Agreement and
taking any action and executing any instrument that the Pledgee may deem
necessary or advisable to accomplish the purposes of this Agreement. If an
event
of default occurs, or is continuing, Pledgee shall have the right to exercise
the following rights and powers:
(a) Collect
by legal proceedings or otherwise and endorse, receive and receipt for all
payments, proceeds and other sums and property now or hereafter payable on
or on
account of the Pledged Collateral;
(b) Enter
into any extension, reorganization, deposit, merger, consolidation or other
agreement pertaining to, or deposit, surrender, accept, hold or apply other
property in exchange for the Pledged Collateral;
(c) Transfer
the Pledged Collateral to its own or its nominee’s name;
(d) Make
any
compromise or settlement, and take any action it deems advisable, with respect
to the Pledged Collateral;
(e) Notify
any obligor with respect to any Pledged Collateral to make payment directly
to
the Pledgee;
(f) All
rights of the Pledgors to exercise the voting and other consensual rights it
would otherwise be entitled to exercise without any action or the giving of
any
notice shall cease, and all such rights shall thereupon become vested in the
Pledgee;
(g) All
rights of the Pledgors to receive distributions with respect to the Pledged
Collateral which it would otherwise be authorized to receive and retain shall
cease and all such rights shall thereupon become vested in the Pledgee;
and
(h) The
Pledgors shall execute and deliver to the Pledgee appropriate instruments as
the
Pledgee may request in order to permit the Pledgee to exercise the voting and
other rights which it may be entitled to exercise and to receive all
distributions which it may be entitled to receive.
The
Pledgors hereby grant to Pledgee an exclusive, irrevocable power of attorney,
with full power and authority in the place and stead of the Pledgors to take
all
such action permitted under this Section
8.1.
Such
power of attorney shall be effective, automatically and without the necessity
of
any action (including any transfer of any Pledged Collateral) by any person,
upon the occurrence and continuance of an event of default. Pledgee shall not
have any duty to exercise any such right or to preserve the same and shall
not
be liable for any failure to do so or for any delay in doing so.
8.2 Event
of default; Remedies.
Upon
the occurrence of an event of default, Pledgee may, without notice to or demand
on the Pledgors and in addition to all rights and remedies available to Pledgee,
at law, in equity or otherwise, do any of the following:
(a) Require
the Pledgors to immediately pay all outstanding unpaid amounts due under the
Consulting Services Agreement;
(b) Foreclose
or otherwise enforce Pledgee’s security interest in any manner permitted by law
or provided for in this Agreement;
(c)
Sell
or
transfer the rights or otherwise dispose of any Pledged Collateral at one or
more public or private sales at Pledgee’s place of business or any other place
or places, whether or not such Pledged Collateral is present at the place of
sale, for cash or credit or future delivery, on such terms and in such manner
as
Pledgee may determine;
(d)
Personally,
or by agents or attorneys, immediately take possession of the Pledged Collateral
or any part thereof, from the Pledgors or any other person who then has
possession of any part thereof with or without notice or process of
law;
(e)
Demand,
xxx for, collect or receive any money or property at any time payable or
receivable in respect of the Pledged Collateral;
(f)
Sell
or
otherwise liquidate, or direct the Pledgors to sell, assign, transfer or
otherwise liquidate the Pledged Collateral or any part thereof, and take
possession of the proceeds of any such sale or liquidation;
(g)
Exercise
any and all rights as beneficial and legal owner of the Pledged Collateral,
including, without limitation, perfecting assignment of and exercising any
and
all voting, consensual and other rights and powers with respect to any Pledged
Collateral; and
(i)
All
the rights and remedies of a secured party upon default under applicable
law.
8.3 The
Pledgee shall give a notice of default to the Pledgors when the Pledgee
exercises its remedies under this Agreement.
8.4 Subject
to Section 7.3, the Pledgee may exercise its remedies under this Agreement
at
any time after the Pledgee gives a notice of default in accordance with Section
7.3 or thereafter.
8.5 The
Pledgee is entitled to a priority in receiving payment by the evaluation or
proceeds from the auction or sale of whole or part of the Equity Interest
pledged herein in accordance with legal procedure until the unpaid Services
Fees
under the Services Agreement are repaid.
8.6 The
Pledgor shall not hinder the Pledgee from exercising its rights in accordance
with this Agreement and shall give necessary assistance so that the Pledgee
may
exercise its rights in full.
9. Indemnification.
9.1. The
Pledgors hereby indemnifies, saves and holds harmless XXNG, Xilan Equipment,
Xilan Liquefied Natural Gas Co., Ltd., China Natural Gas, Inc., and each of
their present and former stockholders, directors, officers, employees, agents,
affiliates and representatives (each an “Indemnitee”) from and against any and
all manner of action or actions, cause or causes of action, in law or in equity,
suits, debts, liens, contracts, agreements, promises, liability, claims,
demands, damages, loss, cost or expense, of any nature whatsoever, known or
unknown, fixed or contingent, (hereinafter called “Claims”), arising out of,
based upon, or relating to the representations and warranties made by the
Pledgor in Section
5
above.
9.2 Expenses
incurred by Indemnitee in connection with any Claims shall be paid by the
Pledgors in advance upon request of Indemnitee that the Pledgors pay such
Expenses. Indemnitee hereby undertakes to repay to the Pledgors the amount
of
any Expenses theretofore paid by the Pledgors to the extent that it is
ultimately determined that such Expenses were not reasonable or that Indemnitee
is not entitled to indemnification. The term “Expenses” shall mean all
reasonable expenses incurred by the Indemnitee in connection with the Claims
which shall include, without limitation, damages, judgments, fines, penalties,
settlements, costs, attorneys’ fees, disbursements and costs of attachment or
similar bonds, investigations, and any such expenses of establishing a right
to
indemnification under this Agreement.
10.
Assignment.
10.1 The
Pledgors shall not donate or transfer rights and obligations herein without
prior consent from the Pledgee.
10.2 This
Agreement shall be binding upon each of the Pledgors and his, her or its
successors and be binding on the Pledgee and his each successor and
assignee.
10.3 The
Pledgee may transfer or assign his all or any rights and obligations under
the
Service Agreement to any individual specified by it (natural person or legal
entity) at any time. In this case, the assignee shall enjoy and undertake the
same rights and obligations herein of the Pledgee as if the assignee is a party
hereto. When the Pledgee transfers or assigns the rights and obligations under
the Service Agreement, and such transfer shall only be subject to a written
notice serviced to Pledgors, and at the request of the Pledgee, the Pledgors
shall execute the relevant agreements and/or documents with respect to such
transfer or assignment.
10.4 After
the
Pledgee’s change resulting from the transfer or assignment, the new parties to
the Pledge shall execute a new pledge contract.
11. Effectiveness
and Term.
The
agreement is effective as of the date first set forth above and from the date
when the Pledge is recorded on the Register of Shareholders of XXNG.
12. Formalities,
Fees and Other Charges.
12.1 The
Pledgors shall be responsible for all the fees and actual expenses in relation
to this Agreement including but not limited to legal fees, cost of production,
stamp tax and any other taxes and charges. If the Pledgee pays the relevant
taxes in accordance with the laws, the Pledgors shall fully indemnify the
Pledgee such taxes paid by the Pledgee.
12.2 The
Pledgors shall be responsible for all the fees (including but not limited to
any
taxes, formalities fees, management fees, litigation fees, attorney’s fees, and
various insurance premiums in connection with disposition of Pledge) incurred
by
the Pledgors for the reason that the Pledgors fail to pay any payable taxes,
fees or charges for other reasons which cause the Pledgee to recourse by any
means or ways.
13. Force
Majeure.
13.1 “Force
Majeure,”
shall
include but not be limited to acts of governments, acts of nature, fire,
explosion, typhoon, flood, earthquake, tide, lightning, war, refers to any
unforeseen events beyond the party’s reasonable control and cannot be prevented
with reasonable care. However, any shortage of credit, capital or finance shall
not be regarded as an event beyond a Party’s reasonable control. The affected
party by Force Majeure shall notify the other party of such event resulting
in
exemption promptly.
13.2 In
the
event that the affected party is delayed in or prevented from performing its
obligations under this Agreement by Force Majeure, only within the scope of
such
delay or prevention, the affected party will not be responsible for any damage
by reason of such a failure or delay of performance. The affected party shall
take appropriate means to minimize or remove the effects of Force Majeure and
attempt to resume performance of the obligations delayed or prevented by the
event of Force Majeure. After occurrence of an event of Force Majeure, when
such
event or condition ceases to exist, both parties agree to resume the performance
of this Agreement with their best efforts.
14. Confidentiality.
The
parties of this agreement acknowledge and make sure that all the oral and
written materials exchanged relating to this contract are confidential. All
the
parties have to keep them confidential and can not disclose them to any other
third party without other parties’ prior written approval, unless: (a) the
public know and will know the materials (not because of the disclosure by any
contractual party); (b) the disclosed materials are required by laws or stock
exchange rules; or (c) materials relating to this transaction are disclosed
to
parties’ legal consultants or financial advisors, however, who have to keep them
confidential as well. Disclosure of confidential information by employees or
hired institutions of the parties is deemed as the act by the parties,
therefore, subjecting them to liability.
15. Dispute
Resolution.
15.2 This
Agreement shall be governed by and construed in accordance with the PRC
law.
15.3 The
parties shall strive to settle any dispute arising from the interpretation
or
performance, or in connection with this Agreement through friendly consultation.
In case no settlement can be reached through consultation, each party can submit
such matter to China International Economic and Trade Arbitration Commission
(“CIETAC”)
for
arbitration. The arbitration shall follow the current rules of CIETAC, and
the
arbitration proceedings shall be conducted in Chinese and shall take place
in
Beijing. Any resulting arbitration award shall be final and binding upon the
parties.
16. Notices.
Any
notice which is given by the parties hereto for the purpose of performing the
rights and obligations hereunder shall be in writing. Where such notice is
delivered personally, the time of notice is the time when such notice actually
reaches the addressee; where such notice is transmitted by facsimile, the notice
time is the time when such notice is transmitted. If such notice does not reach
the addressee on business date or reaches the addressee after the business
time,
the next business day following such day is the date of notice. The delivery
place is the address first written above of the parties hereto or the address
advised in writing including via facsimile from time to time.
17. Entire
Contract.
All
Parties agree that this Agreement constitute the entire agreement of the Parties
with respect to the subject matter therein upon its effectiveness and supersedes
and replaces all prior oral and/or written agreements and understandings
relating to this Agreement.
18. Severability.
Any
provision of this Agreement which is invalid or unenforceable because of
inconsistent with the relevant laws shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability, without
affecting in any way the remaining provisions hereof.
19. Appendices.
The
appendices to this Agreement are entire and integral part of this
Agreement.
20. Amendment
or Supplement.
20.1 Parties
may amend and supply this Agreement with a written agreement, provided that
such
amendment shall be duly executed and signed by the Pledgee, XXNG, and holders
of
a majority of the shares of XXNG held by the Pledgors, and such amendment shall
thereupon become a part of this Agreement and shall have the same legal effect
as this Agreement.
20.2 This
agreement and any amendments, modification, supplements, additions or changes
hereto shall be in writing and come into effect upon being executed and sealed
by the parties hereto.
21. Copies
of the Agreement.
This
Agreement is executed by the Parties in counterparts, each Party holds one
counterpart, and each original has the same legal effect.
22. Language
and Counterparts.
This
Agreement is written in both Chinese and English language in two copies, each
party having one copy with equal legal validity, in case there is any conflict
between the Chinese version and the English version, the English version shall
prevail.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF
each
party hereto has caused this Agreement duly executed by itself or a duly
authorized representative on its behalf as of the date first written
above.
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PLEDGEE:
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Shaanxi
Xilan Natural Gas Equipment Co.,Ltd.
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By:
/s/
Qinan Ji
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Xi'an
Xilan Natural Gas Co.,Ltd
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By: /s/
Qinan Ji
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Qinan
Ji, Chairman
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PLEDGORS:
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By:
/s/ Qinan Ji
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Name:
QINAN JI
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By:
/s/ Xxxxxxxx Xxx
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Name:
XXXXXXXX XXX
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By:
/s/ Xxxxxx Xxx
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Name:
XXXXXX XXX
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By:
/s/ Yuai She
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Name:
YUAI SHE
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By:
/s/ Xiang Ji
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Name:
XIANG JI
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By:
/s/ Jiaoyin Shi
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Name:
JIAOYIN SHI
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By:
/s/ Shaohu Jia
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Name:
SHAOHU JIA
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By:
/s/ Xingiao Han
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Name:
XINGIAO HAN
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By:
/s/ Shengming Li
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Name:
SHENGMING LI
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By:
/s/ Xxxxxxxx Xxx
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Name:
XXXXXXXX XXX
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By:
/s/ Liyin Shi
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Name:
LIYIN SHI
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