HARBIN ELECTRIC, INC. A US Public Company. Stock Symbol: HRBN
Gentlemen:
Reference is hereby made to (i) the
Purchase Agreement dated August 29, 2006 (the “Purchase Agreement”) by and
among Citadel Equity Fund Ltd (“Citadel”)., Xxxxxxx
Xxxxx International (“Xxxxxxx”) and Harbin
Electric, Inc., a Nevada corporation (the “Company”);
(ii) the Indenture dated as of August 30, 2006, as supplemented (the “Indenture”) by and
among the Company, the Subsidiary Guarantors named therein and The Bank of New
York, as trustee (the “Trustee”) with respect to the Company’s Guaranteed Senior
Secured Floating Rate Notes due 2012 (the “2012 Notes”) and the
Company’s Guaranteed Senior Secured Floating Rate Notes due 2010 (the “2010 Notes”); and
(iii) the Shares Pledge Agreement dated as of August 30, 2006 (the “Pledge Agreement”) by
and among the Company and the Trustee, in its capacity as collateral
agent. Capitalized terms used herein without definition shall have
the meanings ascribed to such terms in the Purchase Agreement, the Indenture or
the Pledge Agreement, in each case, as indicated below.
Section 8.02 of the Indenture provides,
among other things, that (i) except for certain amendments or waivers specified
in Section 8.02 as being amendments or waivers that may not be implemented
without the consent of each Holder whose Notes are to be affected, the Company
and the Trustee may amend or supplement the Indenture, the Security Documents
and the Notes, as to a single maturity or as to all of the Notes, with the
consent of the Holders of a majority in aggregate principal amount of the Notes
then outstanding to be affected thereby voting as a single class or waive
compliance with any provision of the Indenture or such Notes with the consent of
Holders of at least a majority in aggregate principal amount of the Notes then
outstanding to be affected thereby voting as a single class and (ii) without the
consent of each Holder, an amendment or waiver may not (with respect to any
Notes held by a non-consenting Holder) reduce the interest or principal of any
Note or impair the right of any Holder to receive payment of principal of,
premium, if any, and interest, if any, on such Holder’s Notes
Section 8 of the Pledge Agreement
provides that no consent shall be given or action taken, which would have the
effect of impairing the position or interest of any Secured Party in respect of
the Pledged Collateral (unless and to the extent expressly permitted by the
Indenture).
Each of the undersigned Holders owns
the aggregate principal amount of the 2010 Notes or the 2012 Notes, as
applicable, set forth next to such Holder’s name on the signature page
hereto.
Each of the undersigned Holders hereby
(i) waives each and every applicable provision of the Indenture (including
without limitation Article 3 (except for Section 3.08 Mandatory Redemption) and
Sections 4.09, 4.10 and 4.11 thereof) to the fullest extent necessary solely to
permit the Company or an Affiliate of the Company to purchase or repurchase, at
its option, all (but not part) of the 2012 Notes held by Citadel at any time at
the Citadel Repurchase Price (defined below) (the “Proposed 2012 Note
Repurchase”) and to repurchase, at its option all (but not part) of the
2010 Notes at any time at the Xxxxxxx Repurchase Price (defined below), (the
“Proposed 2010 Note
Repurchase”), (ii) consents to the Proposed 2012 Note Repurchase and
the Proposed 2010 Note Repurchase, (iii) waives each and every provision of the
Indenture (including without limitation Article 3 (except for Section 3.08
Mandatory Redemption) and Sections 4.09, 4.10 and 4.11 thereof) and waives each
and every provision of the Pledge Agreement (including without limitation
Section 8 thereof) to the fullest extent necessary solely to permit the Company
or an Affiliate of the Company to Incur up to $50 million in Debt (the “New Debt”); provided
that the Company shall use up to $32 million of the proceeds of such New Debt
for the Proposed 2012 Note Repurchase and the Proposed 2010 Note Repurchase (the
“First Proposed Debt
Incurrence”), (iv) consents to the First Proposed Debt Incurrence, (v)
subsequent to the consummation of the Proposed 2012 Note Repurchase and the
Proposed 2010 Note Repurchase, waives each and every applicable provision of the
Indenture (including without limitation Article 3 (except for Section 3.08
Mandatory Redemption) and Sections 4.09, 4.10 and 4.11 thereof) to the fullest
extent necessary solely to permit the Company or an Affiliate of the Company to
purchase or repurchase, at its option, all (but not part) of the remaining
outstanding 2012 Notes (the “Additional 2012 Note
Repurchase”), (vi) consents to the Additional 2012 Note Repurchase,
(vii) subsequent to the consummation of the First Proposed Debt Incurrence,
waives each and every provision of the Indenture (including without limitation
Article 3 (except for Section 3.08 Mandatory Redemption) and Sections 4.09, 4.10
and 4.11 thereof) and waives each and every provision of the Pledge Agreement
(including without limitation Section 8 thereof) to the fullest extent necessary
solely to permit the Company or an Affiliate of the Company to Incur up to $60
million in Debt (the “Refinancing Debt”);
provided that the Company shall use up to $32 million of the proceeds of such
Refinancing Debt for the repayment of the New Debt incurred in the First
Proposed Debt Incurrence and up to $8 million of the proceeds of such
Refinancing Debt for the Additional 2012 Note Repurchase (the “Second Proposed Debt
Incurrence”) and (vi) consents to the Second Proposed Debt
Incurrence.
The
“Citadel Repurchase Price” shall, in the sole discretion of Citadel, be either
(a) cash equal to 85% of the aggregate principal amount of the 2012 Notes held
by Citadel plus accrued and unpaid interest thereon to but excluding the
Repurchase Date (defined below) or (b) the sum of (x) any securities being
issued in the Proposed Debt Incurrence in an aggregate principal amount at par
up to 50% of the principal amount of the 2012 Notes held by Citadel and (y) cash
equal to 85% of the aggregate remaining principal amount of the 2012 Notes held
by Citadel plus any accrued and unpaid interest thereon to but excluding the
Repurchase Date. The Xxxxxxx Repurchase Price shall be cash equal to
97% of the aggregate principal amount of the 2010 Notes plus accrued and unpaid
interest thereon to but excluding the Repurchase Date.
The “Repurchase Date” shall mean a
business day on which the Proposed 2012 Note Repurchase and the Proposed 2010
Note Repurchase are consummated; provided that, if the First Proposed Debt
Incurrence is consummated, the Repurchase Date shall be no later than one
business day following the date on which the First Proposed Debt Incurrence is
consummated. If the Proposed 2012 Note Repurchase and the Proposed 2010 Note
Repurchase are not completed by August 31, 2009 then any and all waivers granted
by the Noteholders set forth herein shall expire on the close of business (Hong
Kong) on August 31, 2009.
In the event that the Proposed 2012
Note Repurchase and the Proposed 2010 Note Repurchase are completed by August
31, 2009, each of the undersigned Holders hereby waives and agrees not to
exercise, on behalf of itself, any and all rights that it may otherwise have
under Section 5A (Right to Future Stock Issuance) of the Purchase Agreement,
from the date of this letter up to and including xxx xxxxx xx xxxxxxxx (Xxxx
Xxxx) on December 31, 2009.
Any and
all waivers granted by the Noteholders set forth herein shall expire on xxx
xxxxx xx xxxxxxxx (Xxxx Xxxx) on December 31, 2009 and to the extent the Company
is in breach of any provision of the Indenture or the Notes after such date, the
Noteholders reserve their rights to take any and all actions allowable under the
Indenture, the Notes or according to law.
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Except as expressly waived or otherwise
specifically provided herein, all of the terms of each of the 2010 Notes, 2012
Notes, the Indenture, the Purchase Agreement and the Pledge Agreement shall
remain unamended and unwaived and shall continue to be and shall remain in full
force and effect in accordance with their respective terms.
This letter is governed by the laws of
the State of New York without giving effect to the conflict of laws rules of any
jurisdiction. This letter may be signed in one or more counterparts, each of
which shall be deemed an original and all of which, taken together, shall
constitute one and the same agreement. Any signature delivered by a
party via telecopier shall be deemed to be an original signature
hereto.
Kindly acknowledge receipt of this
letter and agreement to the foregoing by executing the enclosed copy of this
letter where indicated and returning it to the Company, whereupon it shall
become a binding agreement among us as of the date hereof.
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AGREED
AND ACKNOWLEDGED:
Abax Jade
Ltd.
By:________________________________
Name:
Xxxxxx Xxxx
Title:
President
Aggregate
Principal Amount of 2012 Notes Owned and For Which Waiver and Consent are
Given:$ 2.525 million
Abax Nai
Xin A Ltd.
By:________________________________
Name:
Xxxxxx Xxxx
Title:
President
Aggregate
Principal Amount of 2012 Notes Owned and For Which Waiver and Consent are
Given:$ 8.975 million
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