Document:

ex10-2.htm

 Exhibit 10.2

 

Pledge Agreement

 

This Pledge Agreement (hereinafter referred to as “the Agreement”) has been executed by and among the following parties on June 28, 2011:

 

1) Handan Hongri Metallurgy Co., Ltd, a corporation established and organized under the laws of The People’s Republic of China, with Liu Shenghong as the legal representative and a business license no. of 130400400001179, with its registered address at Guzhen Village, Yetao Town, Wu'an City, Hebei Province (zip code: 056304), (hereinafter referred to as “Hongri”);

 

And

 

2) Hebei New Wu’an Iron & Steel Group Drying and Melting Co., Ltd., a corporation established and organized under the laws of The People’s Republic of China, with Liu Maisheng as the legal representative and a business license no. of 130481000008485, with its registered address at Eastern Yuanbao Mountain, Gu Town, Wu'an City, Hebei Province, China (zip code:056304), (hereinafter referred to as “Hongrong”, and referred to as “the Pledger” along with Hongri, in addition, “the Pledger” referred to in this Agreement shall include both Hongri and Hongrong, or refer to either of them contextually);

 

And

 

3) Raiffeisen Bank International AG Beijing Branch, with its registered address at Room 200, Beijing International Club, No.21 Jianguomen Wai Street, Beijing, China (zip code: 100020), (hereinafter referred to as “the Pledgee”).

 

Whereas,

 

1) upon the request of the Pledger, the Pledgee agrees to provide the line of credit to Hongri (as the borrower);

 

2) as a prior condition provided in the main contract (defined as following), the Pledger agrees to execute this agreement with the Pledgee and set the Pledgee as the first place in the order of the pledge in the pledged property (defined as following) as the assurance of the secured claims.

 

NOW, THEREFORE, the parties hereto hereby have mutually agreed and made statements as follows:

 

Article 1

 

Definitions

 

Unless terms or context of this Agreement otherwise provide, each of the terms used in this Agreement (including the introduction) shall have the same meaning as specified in the Management Contract of Securities and the main contract.

 

1.1 Management Contract of Securities refers to the management contract of securities and its appendixes and supplementary agreements relevant to the main contract and the Agreement, signed by the custodian, the Pledgor and the Pledgee at any time.

 

1.2 “Date of Effectiveness” refers to the date defined in Article 17.8 to the Agreement.

 

1.3 “Pledge term” refers to the term set forth in Article 2.3 of the Agreement.

 

1.4 “Main contract” refers to the No. 20110628019980001 document: Loan Contract of RMB 180 million yuan (RMB 180,000,000 Yuan) signed by and between Hongri (as the borrower) and the Pledgee on the date of June 28, 2011 and any documents signed subsequently as changing, modification, or supplement.

 

1.5 “Goods” refer to each batch of iron concentrate powder (iron ore), medium plate and/or other goods agreed by the Pledgee at any time, kept by the Pledgee and/or representatives authorized by the Pledgee and/or any person appointed by the representatives authorized by the Pledgee and/or the custodian, and/or bought and/or produced and processed and stored in the storehouse at any time by the Pledgor of possession.

 

  

  

  

 

1.6 “Funds” refer to all the proceeds obtained from the pledged property under the Agreement by selling or otherwise.

 

1.7 “Pledge” refers to the pledge guarantees set by or in accordance with the Agreement wherever from the context.

 

1.8 “Pledge notification” refers to the notification provide in Article 3.2 to this agreement, whose format shall be referred to Appendix 1 of this Agreement.

 

1.9 “Confirm receipt of the pledge notification” refers to the receipt signed by the custodian to confirm the receiving of the pledge notification and the examining and acknowledgement of the pledged property, whose format shall be referred to Appendix 1.

 

1.10 “Pledged property” refers to the property including the goods and substitutes at present or in the future, compensations of the goods and substitutes or indemnity, and other rights (including one or more aforesaid items) and their fruits and derivative rights and interests, which can be pledged according to law.

 

1.11 “Minimum quantity/value” refers to the lowest standard of quantity/value of the total amount of quantity/value of the pledged property stored in the storehouse which should be obtained in the pledge term irrespective of whether the Pledgor take delivery of or exchange the goods or not. The said standard shall be determined by the Pledgee itself in accordance with the variation of the reference price of the pledged property determined by the Pledgee itself or the amount of the creditor’s rights guaranteed by the pledged property, and shall be confirmed in the Notice of the Lowest Requirements on the Categories and Quantity/Value of the Securities and/or Notice of the Modification on the Categories and Quantity/Value of the Securities issued to the custodian by the Pledgee.

 

1.12 “Receiver” refers to the receiver, administrator or any person else named in the Agreement to receive the profits of or implement administration of the pledged property.

 

1.13 “Secured Claims” refer to the scope of the security by pledge under the Agreement, or all the amounts or obligations due to or produced on the Pledgee by Hongri (as the borrower) under the Main Contract (including modifications from time to time) at any time presently or in the future, irrespective of whether the amount or obligations are belonging to the present time or the future, real or contingent (including any principal, interest, penal interest, fees or other amounts, irrespective of whether the payment is incurred by Hongri (as the borrower) independently or jointly or as other identities. The scope includes without limitation to the following amount:

 

a) the funds Hongri (as the borrower) shall pay but have not paid to the Pledgee, or owes the Pledgee, or could owe the Pledgee under the Main Contract, such as, but not limited to the principal and interest under the Main Contract; and

 

b) any fees, insurance premiums, general bank costs, interests, default interests, liquidated damages, compensation, damages (including liquidation or compensation), supervision expenses of the pledged property and fees incurred and/or assumed by the Pledgee to realize the obligee’s rights under the Main Contract and the pledge rights under the Agreement. Fees incurred and/or assumed by the Pledgee to realize the obligee’s rights under the Main Contract or the pledge rights under the Agreement including but not limited to collecting fees, litigation costs, disposal charge of the pledged property, transfer fee, preservation cost, charge for announcement, execution cost, attorney’s fees, travelling expenses, and other charges.

 

1.14 “Substitutes” refer to all the substitutes of the goods in relation to the sales of goods or the manufacturing of final products mixed or combined with other raw materials and products, and the rights, qualifications, interests, incomes and taxes of the said substitutes.

 

1.15 “Storehouse” refers to the storehouse and/or yard for the storage of the pledged property, assigned by the Pledgee at any time, and supervised by the custodian.

 

1.16 “Custodian” refers to the custodian appointed by the Pledgee at any time, who shall represent the Pledgee to keep and possess the pledged property.

 

  

  

  

 

1.17 “Person” means natural man, nation or the administrative agencies of the nation, government, groups, organizations, corporations, joint ventures, associations, or partnership (irrespective of whether it has an independent legal personality).

 

Article 2

 

Pledge

 

2.1 The Pledgor agrees to pledge the pledged property to the Pledgee as the security of the secured claims in accordance with the Agreement.

 

2.2 To the fullest extent permitted by law, the pledge guarantee under the Agreement has its independence, the validity of the Agreement is independent of the main contract, and shall not be affected by the invalidity of the main contract or its relevant provisions. Provided that the first pledge notification is delivered to the custodian by the Pledgor, the Agreement shall be legally valid upon all parties. Hongrong shall undertake joint liability for the returning liability or liability to pay compensation taken by Hongri (as the borrower) after the invalidity of the main contract.

 

2.3 The Pledge Term set in the Agreement (hereinafter referred to as “the pledge term”) shall be started from the date of effectiveness and ended at the day of the termination of the pledge in accordance with the Agreement.

 

Article 3

 

Pledges of Goods and/or Substitutes

 

3.1 Subject to the provisions of the Agreement, the Pledgor should deliver and store the goods in the storehouse supervised by the custodian from time to time, and the custodian shall collect and possess the goods stored in the storehouse on behalf of the Pledgee. Consequently, upon the time when the custodian receives the Pledgor’s first pledge notification of pledging the goods in the storehouse to the Pledgee, the pledge shall be effective, and all parties agree that in the duration of quota under the main contract, the goods the Pledgor delivers to and stores in the storehouse which is supervised by the custodian shall be regarded as the pledged property which is pledged by the Pledgor to the Pledgee in accordance with the Agreement, and the quantity/total amount value of all the goods stored in the storehouse shall always be not lower than the minimum quantity/value.

 

3.2 The Pledgor should deliver the pledge notification with its signature to the custodian before 9:30 a.m. of every workday, stating that the goods stored in the storehouse have been pledged to the Pledgee, and noticing the custodian to take delivery of goods in accordance with the instruction of the Pledgee, the custodian should send the pledge notification and the confirm receipt of the pledge notification to the Pledgee in forms of tested fax after the custodian examines, confirms and puts signature on the goods. The sending should not be later than 10:00 a.m. of every workday. The Pledgee are entitled to determine whether the certificate of weight and invoices related to the goods should be attached to the pledge notification as the written evidence of the valuation of the goods at that time. The pledge notification and the certificate of weight and the invoices (as requested) upon the requests of the Pledgee should be served by the Pledgor before the goods are delivered into the storehouse, not later than the time when the goods are placed into storage.

 

3.3 The Pledgor agrees that the Pledgee is entitled to issue the Notice of the Lowest Requirements on the Categories and Quantity/Value of the Securities and/or Notice of the Modification on the Categories and Quantity/Value of the Securities to the custodian at its option in accordance with the reference prices of the goods determined by itself or the changes of the amount of the creditor’s rights guaranteed by the goods, and entitled to make corresponding modifications to the minimum quantity/value at its option at any time, and notify the custodian about the minimum requirements on aspects such as the quantity or value or categories of the pledged property for this reason. The Pledgor shall have no opposition against it.

 

3.4 All parties of the Agreement agree that the Pledgor may at its option apply for the delivery of goods stored in the storehouse which belong to the part of goods exceeding the minimum quantity/value, with the prerequisite that the goods in the storehouse are in accord with the requirements stated in the Notice of the Lowest Requirements on the Categories and Quantity/Value of the Securities and/or Notice of the Modification on the Categories and Quantity/Value of the Securities which is issued by the Pledgee to the custodian. In the event of ambiguity, the goods stored in the storehouse which belong to the part of goods exceeding the minimum quantity/value but have not been actually picked up by the Pledgor shall remain to be the pledged property pledged to the Pledgee by the Pledgor, and the quantity/total amount of value of the stored goods which are under the possession and custody of the custodian after the delivery of goods at any time should always not be less than the minimum quantity/value.

 

  

  

  

 

3.5 The specification of the goods and/or the substitutes shall be described in detail in the pledge notification.

 

3.6 The pledge on the goods and/or the substitutes shall be automatically discharged upon the time that the goods and/or the substitutes are all released in accordance with the provisions of the Management Contract of Securities.

 

3.7 The Pledgor and the Pledgee agree that all the substitutes shall be pledged to the Pledgee by the Pledgor as the guarantee of the secured claims. The Pledgor shall sign the pledge notification separately at every time the substitutes are removed into the storehouse, to notice the fact that the substitutes have been pledged to the Pledgee by the Pledgor, and inform the custodian that the pledge of the substitutes shall be governed by the provisions of Article 3.1, Article 3.2, Article 3.3 and Article 3.4 of the article hereof.

 

Article 4

 

Differences

 

Provided that the goods and/or the substitutes (including names, quantity, quality, condition, time of placing into storage, storage limitation, etc.) actually delivered and stored in the storehouse are different from the confirm receipt of the pledge notification, the scope of the pledge and the rights and interests of the Pledgee shall be determined by the goods and/or the substitutes actually delivered, carried and stored in the storehouse.

 

Article 5

 

Statements and Warranties

 

5.1 Statements and warranties on the action of the corporation:

 

Upon the signing of the Agreement and during the Pledge Term, the Pledgor states and warrants to the Pledgee as follows:

 

(a) The Pledgor is a corporation established and existing under the laws of the People’s Republic of China, with complete rights and abilities to sign the Agreement, and has taken all necessary corporations or other actions to authorized itself to sign the Agreement;

 

(b) The Agreement shall constitute legal, valid and binding obligations upon the Pledgor, and shall be enforceable in accordance with the provisions of the Agreement;

 

(c) The signing and delivering of the Agreement and the execution of the provisions under the Agreement shall not be in breach of : (i) any provisions of the laws or regulations which are applicable to the Pledgor; (ii) any judgment, decree or order which is applicable to the Pledgor, or any agreement which is binding on the Pledgor; (iii) the provisions of the organizational files of the Pledgor;

 

(d) All the authorizations, sanctions or requirements which enable or authorize the establishment of the Pledge (including but not limited to all the necessary approval and resolution of the corporation) shall be obtained and/or complied with and shall possess full force and effect, and shall remain in full force and effect during the existing term of the Agreement;

 

(e) Provided that more than one person exist as the Pledgor under the Agreement, then the Pledgee is entitled to enforce the pledge and use the funds obtained for payment and terminate the secured claims in accordance with the Agreement and the relevant provisions of laws and regulations of the People’s Republic of China, irrespective of whether any of the Pledgor provides and enjoys the ownership of the pledged property, or whether the secured claims are finally formed as a consequence of using line of credit under the main contract or financing by Hongri solely ( as the borrower); the sum and the order of the Hongri’s debt which shall be paid and terminated will be decided by the Pledgee itself.

 

  

  

  

 

5.2 Statements and warranties on the goods and/or the substitutes

 

Upon the signing of the Agreement and during the Pledge Term, the Pledgor states and warrants to the Pledgee as follows:

 

(a) The Pledgor shall be the one and sole owner of the pledged goods and/or the substitutes under the Agreement, with every complete legal right to pledge the goods and/or the substitutes in accordance with the provisions of the Agreement, and shall guarantee that no other security interest are established on the pledged goods and/or the substitutes, and no lease, trusteeship, joint ownership or other disputes regarding the right of ownership exist;

 

(b) The ownership of the goods and the substitutes is clear without any disputes or defectives, and is not seized, distrained or supervised, without any circumstance such as dispute or litigation (arbitration) on the right of ownership and the right of disposition;

 

(c) Any right and/or interests which could be exercised by the third party shall not exist in the goods and/or the substitutes, and no other form of security interest except for the pledge shall exist;

 

(d) No cause or circumstance of the retention, prohibiting and curtailment of transfer of the ownership shall exists in the purchase of the goods and/or the substitutes and before the transferring of the goods and the substitutes to the custodian for its possession;

 

(e) The categories and total amount of quantity/value of the pledged property stored in the storehouse shall consistently comply with the requirements of the Pledgee, and the exchanging and delivering of the pledged goods should also be operated under the instructions of the Pledgee;

 

(f) The pledged property and the said pledge shall be in conformity with provision of laws, regulations and systems of the People’s Republic of China.

 

5.3 Repetition of the Statements and Warranties

 

The Pledgor shall continually reaffirm all the statements and warranties it makes in Article 5 and ensure the continual effectiveness of the said statements and warranties, from the date of effectiveness to the day of completely paying of the secured claims irrevocably, including but not limited to the dates when the pledge of the goods and/or the substitutes comes into force in accordance with the Agreement.

 

5.4 Reliance on the Statements and Warranties

 

Subject to the truth and validity of the statements and warranties made in Article 5 to the Agreement, agreed by the Pledgor, the Pledgee accepts the pledge and agrees or will agree to provide Hongri (as the borrower) with the line of credit.

 

Provided that any statement or warrant made by the Pledgor in Article 5 is proved to be false, incorrect or misleading, the Pledgor should ensure that the rights and interests of the Pledgee under the Agreement shall not be affected. On condition that the Pledgor fails to make its statements and warranties correspond with the provisions of Article 5 within a reasonable time of not more than fifteen (15) days after receiving the written notice notified by the Pledgee, requiring the Pledgor to correct the violation of the Pledgor’s statements and warranties, or that the Pledgee holds that the Pledgor will be unable to take timely remedies to the statements and warranties it violates, the Pledgee is entitled to require the Pledgor to pay damages of 1% of the total amount of the line of credit, and the Pledgor shall make compensation for the amount exceeding the breach damages provided that the damages fail to compensate the loss of the Pledgee.

 

  

  

  

 

Article 6

 

The Commitments of the Pledgor

 

6.1 General Commitments

 

Upon the signing of the Agreement and during the Pledge Term, the Pledgor shall:

 

(a) take reasonable and necessary measures to ensure the continual effectiveness of any statement and warranty of the Pledgor under the Agreement in the pledge term;

 

(b) Hongri shall pay enough secured claims on time on the request of the Pledgee, provided that the secured claims become due and payable in accordance with the provisions of the main contract; or that any event of default occurs;

 

(c) upon the requests of the Pledgee, Hongri shall pay any part of the interest on the secured claims as follows:

 

(1) part of the interest to maturity which is payable but has not been paid yet, including the payable interest and default interest (without the written consent of the Pledgee, Hongri shall have no behavior of overdraft in any account of the Pledgee;

 

(2) part of the interest Hongri is not required to pay the interest and default interest, subject to the written agreement reached between Hongri and the Pledgee;

 

The aforesaid interest and default interest shall be calculated in accordance with the provisions of the main contract;

 

(d) abide by all laws, regulations, rules, procedures and statutory or non-statutory requirements and orders of any government department, of current existence, or of becoming effective at a future time, or of potential damages of the pledged property under the pledge or the rights and interests of the Pledgee under the pledge without the compliance;

 

(e) at the same time, provided that any law or the Pledgor’s corporations’ articles of association require the Pledgor to offer any document, notice, balance sheet, or account to its investors, the Pledgor shall offer a copy of the said to the Pledgee;

 

(f) allow the Pledgee, its authorized representatives or any person appointed by its authorized representatives, at any reasonable time without any written notice in advance, to check and copy the account book of the Pledgor or all the other documents relevant to the business of the Pledgor or the pledged property;

 

(g) offer any information related to the Pledgor or the pledged property to the Pledgee, its authorized representatives or any person appointed by its authorized representatives upon the requests;

 

(h) after the delivering of pledge notification to the custodian subject to Article 3.2 of the Agreement, when the quantity/total amount of value of the pledged property in storage is equal to or less than the minimum quantity/value, without the written consent of the Pledgee separately, no instruction shall be made to instruct the custodian to dispose the pledged property;

 

(i) ensure that all the documents, materials and information offered to the Pledgee during the signing and execution of the Agreement is truthful, accurate, complete and valid, and that all the submitted copies shall corresponds with the original;

 

(j) assist the Pledgee to realize the right to the pledge and shall not erect any barrier including but not limited to signing or providing any document or evidence necessary for or related to the disposition of the pledged property.

 

6.2 Commitments on the Pledged Property

 

Upon the signing of the Agreement and during the Pledge Term, the Pledgor shall:

 

(a) pay on time all the amounts relevant to the pledged property, expired or about to expire, supposed to be paid but not paid yet (including taxes);

 

(b) perform and observe all the matters under or related to the pledged property which shall be performed by the Pledgor;

 

  

  

  

 

(c) comply with and fulfill all the matters prescribed in or relevant to the Management Contract of Securities which shall be performed by the Pledgor, including paying all the payable fees and expenses to the custodian on time;

 

(d) comply with all the procedures and demands in relation to the disposal of the pledged property provided in the Management Contract of Securities;

 

(e) store the pledged property separately without being mixed with other goods, and offer Chinese labels of “financed by Raiffeisen Bank International AG Beijing Branch and pledged to the aforesaid bank” on the pledged property;

 

(f) not remove any part of the pledged property out of the storehouse without the written consent of the Pledgee in advance;

 

(g) warrant that without obtaining the written permission of the Pledgee in advance:

 

	
  

	
(1) no change which will reduce the value of the pledged property shall be made onto any part of the pledged property;

 

	
  

	
(2) no change, waiver, transfer, abolition, denial, termination or modification which may affect the rights and interests of the Pledgee under the Agreement shall be made onto the commitments contained in or related to the pledged property;

 

(h) insure the pledged property and ensure the continual effectiveness of the insurance at any time before the termination of the pledge upon the requests of the Pledgee, the insurance conditions including but not limited to:

 

(1) the sum insured shall cover all insurable value of the pledged property;

 

(2) the duration of insurance shall be not less than the time of performance of the debt under the main conduct;

 

(3) the insurance shall be applied to insurance companies of a good reputation

 

(4) the Pledgee shall be designated as the only beneficiary of the insurance, and the insurance policy shall include “ all of the indemnity of or related to this insurance policy shall be directly paid to the Raiffeisen Bank International AG Beijing Branch” ;

 

(5) the insurance shall be often applied in a way that the Pledgee could accept, and the copies of all the insurance policies and evidences of paying the premium which are proved to be true shall be offered to the Pledgee upon the request of the Pledgee;

 

(i) allow the Pledgee to obtain, execute, settle accounts, mediate and collect any compensation relevant to the pledged property under the insurance policies as it determines to be appropriate, despite that the said policies refer to properties not belonged to the pledged property (if applicable);

 

(j) ensure that the Pledgee is entitled to decide to use any income obtained from insurance policy claims and transferred to the Pledgor immediately by the Pledgee, to repair, restore, or replace the pledged property; or allow the Pledgee to use the income from the insurance claim to pay off the secured claims (including undue payable amounts) (if applicable);

 

(k) the following circumstances should be notified to the Pledgee immediately in not more than 24 hours after the occurrence of following circumstances:

 

(1) damage, stolen, seal, loss, expropriation on any part of the pledged property;

 

(2) disputes regarding the ownership of the pledged property;

 

(3) custody of property or execution measures such as sealing up or seizing of the pledged property during the pledge term;

 

(4) infringement or possible infringement on the pledge right from any third party;

 

  

  

  

 

(5) termination, dissolution, suspended operation for rectification, rescinded the business license, disbanded, applying or applied to declare bankruptcy of the Pledgor;

 

(6) repairs of damage of any part of the pledged property which are regarded as infeasible or uneconomical, in accordance with the opinions of the underwriter;

 

(l) take actions including but not limited to the followings upon the request of the Pledgee: notifying the assignments of any insurance policy related to the pledged property to relevant insurance companies or insurance agents; and notifying the assignments of quality assurance of the pledged property to relevant manufacturers;

 

(m) provide the original and/or copies of all the supply contracts relevant to the pledged property and documents of quality assurance of the manufacturers to the Pledgee within the term provided by the Pledgee.

 

(n) do any things necessary or reasonably requested by the Pledgee immediately, and shall not omit any necessary things, for the purpose of:

 

(1) keeping and protecting the value of the pledged property;

 

(2) protecting and executing the Pledgor’s right to the ownership as the owner of the pledged property and protecting the Pledgee’s real rights for security as the Pledgee of the pledged property;

 

(o) obtain or defend against legal actions to protect or recover the pledged property or protect any rights of the Pledgee related to the pledged property upon the requests of the Pledgee;

 

(p) take any reasonable actions on any person to protect and exercise the Pledgee’s  rights to the pledged property upon the requests of the Pledgee;

 

(q) accept all the relevant expenses incurred by the realization of matters such as the creditor’s right to the main contract, established pledge, and realization of the pledge.

 

6.3 Without the prior consent in writing by the Pledgee, the Pledgor shall not:

 

(a) establish, or agree to establish, or intend to establish any security interests prior to, equivalent to or subordinate to the said pledge in order over the pledged property;

 

(b) take any actions which may impair the value of the pledged property;

 

(c) dispose the pledged property in the way of selling or otherwise, or establish or allow to establish any interest over the pledged property.

 

Article 7

 

Remedies by the Pledgee for the Default of the Pledgor

 

If the Pledgor fails to fulfill the acceptances or agreements express or implied in this Agreement, without affecting other rights and interests of the Pledgee subject to this Agreement, the Pledgee may (but not obliged to) take any measure, including but not limited to paying all the money that is considered essential by the Pledgor, to remedy the default. In this way the Pledgee indemnify the money paid due to default, or the payment should be at the Pledgor’s expense.

 

Article 8

 

Additional Warranties

 

Provided that the pledged property is damaged or may be damaged to the extent that the Pledgee’s rights under the Agreement are endangered, or the Pledgee considers it necessary, the Pledgee is entitled to demand the Pledgor to provide appending warranties corresponding with the value. If the Pledgor fails to provide the appending warranties, the Pledgee is entitled to take measures of enforcement subject to this Agreement, and to require the Pledgor to undertake all the losses incurred.

 

  

  

  

 

Article 9

 

Execution

 

9.1 Execution Event

 

Whether the secured claims should be paid instantly without additional requirement or notice shall be independently decided by the Pledgee (in spite of any delay or prior statement to waive the right).

 

If any termination event or default (hereinafter referred to as the “execution event”) occurs under agreements between the Pledgor and/or Hongri (as the borrower) and the Pledgee or other creditors (including but not limited to main contract, the Management Contract of Securities and the Agreement) and/or items of other guarantee files in the main contract, the Pledgor shall notify the Pledgee of the execution event in writing immediately (in not less than 24 hours after the occurrence of the event). The pledge is to be independently decided and instantly enforced by the Pledgee at any time.

 

9.2 Execution not affected by the Prior Payment

 

Neither the Pledgee’s acceptation of interest of payment or any other money after the occurrence of execution event, nor failure to investigate any other prior default of the Pledgor is not to affect the enforceability of this pledge. To the fullest extent permitted by law, the Pledgee can enforce this pledge without any notification, permission or acknowledgement of the Pledgor or any other person.

 

9.3 Rights of the Pledgee in Enforcement

 

When this pledge becomes enforceable, without regard to be permitted by the Pledgor, at any time the Pledgee shall have the full right to enforce and execute all its rights and relieves as the Pledgee in the time and way that it considers to be appropriate (whether in the name of itself or of the Pledgor), including but not limited to some or all the following measures:

 

(a) to execute and realize all the pledge rights on the pledged property, including but not limited to selling or discounting or auctioning the pledged property in accordance with the agreement with the Pledgor to acquire money herefrom so as to pay off the secured claims, without proceedings of litigation or arbitration;

 

(b) To actually control, collect or obtain all or part of the pledged property which have not be possessed by the Pledgee, including (but not limited to) all the documents or other evidences of rights, and the execution of all the rights of the Pledgor in regard of the pledged property for this purpose, including but not limited to filing the lawsuit and taking measures in the name of the Pledgor and taking corresponding action in the name of the Pledgor;

 

(c) The execution of all relevant rights of the pledged property, or some or all of the rights, power, authorization and adoptable measures of remedy that are to be executed by the Pledgee in accordance with the pledge, including but not limited to:

 

(i) to undertake in the mode considered appropriate all by the Pledgee, or to handle all proceedings or any proceeding of lawsuit relevant to the pledged property, and make disposal, reconciliation, waiver or concession on all pledged property or on relevant rights and proposals;

 

(ii) to make reconciliation on any account, right and proposal, problem or dispute, etc. relevant to the pledged property and likely to be led to, or relevant to the Agreement in any way, to make arrangements for the debt, to make concession or submit it for arbitration, and sign any relevant duty-rescinded agreement;

 

(iii) to file, employ, defend for, make a concession of, submit for arbitration or waive any legal action, lawsuit, proceedings etc. (civil or criminal) on issues of the pledged property;

 

(iv) to execute any right or power relevant to the pledged property and/or the right of pledge in accordance with legal documents relevant to the pledged property;

 

(v) to sign and handle all actions, deeds and other issues that are considered reasonable, essential and appropriate by the Pledgee, or are relevant to any purpose aforesaid;

 

  

  

  

 

(d) selling or agreeing to sell, exchanging or disposing all or any part of the pledged property unconditionally or conditionally in other ways, irrespective of through public auctions or non-public contract promises, through advertisements or notifying the Pledgor, through cash payments or other forms of payment, wholly or separately, in relation to the special conditions or rules in relation to the aspects of ownership, time, trade value, or forms of payment; and being entitled to place all or part of the bargain price in escrow , or to establish securities for all or part of the bargain price in other forms, or all or part of the bargain price shall become the payable funds to the Pledgee under the circumstance that no warranty exists; or the disposal of all or part of the pledged property in accordance with the appropriate and reasonable consideration, other provisions and conditions considered by the Pledgee, who shall not be liable to any loss or insufficiency incurred by the said consideration, provisions or conditions;

 

(e) To the fullest extent permitted by law, the Pledgee can assign or transfer all or any part of the pledged property in the name of the Pledgee or some person else, and can take any actions which the Pledgee considers to be necessary to accomplish the aforesaid assignment and transfer.

 

(f) to insure all or any part of the pledged property in a way which the Pledgee considers appropriate;

 

(g) in the terms of executing the rights in accordance with the Agreement, the Pledgor shall provide legal and valid financial evidences to all the funds and other properties obtained by the Pledgee, within the deadline provided in the written requirements of the Pledgee, and relieve any person paying or delivering the aforesaid funds or other properties from liabilities of being responsible for the use of the financial evidences, inquiring whether the secured claims have been paid or are payable, or inquiring whether the relevant rights of the Pledgee provided by the Agreement are due or appropriate;

 

(h) to adopt all the money and/or other property relevant to the pledged property, due to pay, or payable to the Pledgor;

 

(i) to execute or cause any event or action considered by the Pledgee as of advantage to the rights and interests under the Agreement without any limitation;

 

(j) to transfer the rights of the Pledgee provided in Article 9.3 to any person.

 

9.4 when the execution of the Agreement begins, the Pledgee or its authorized agent may appoint any purchaser or other transferee as its beneficiary, and represent the Pledgor to complete blank transfer documents or receipts of any quality and type that are reserved at the Pledgor’s as the pledged security.

 

9.5 When the Pledgee executes the rights of pledge subject to this Agreement, the Pledgee shall execute its pledge right under the Agreement directly, dispensed with initiating payment requisitions, or starting a lawsuit or applying for arbitration to the Pledgor or any other third person, or taking any action to realize its rights. under no condition is the Pledgor permitted to require the Pledgee to firstly execute its rights or interests under other items of security, if the secured claims has other assurance, mortgage, pledge, or other forms of guarantee. Limited in conditions permitted by law, the Pledgor shall waive all its rights of defense.

 

Article 10

 

Appointment of the Receiver

 

10.1 Appointment

 

At any time after this pledge becomes enforceable, the Pledgee or its authorized agent may:

 

(a) appoint any qualified person or two or more qualified persons as the receiver or the receiver and administrator (or additional receiver or additional receiver and administrator) of part or the whole of the pledged property jointly or severally;

 

(b) dispose of the receiver, or appoint another receiver as a substitute when the receiver is dismissed, retired, deceased or incapable of fulfilling the obligation.

 

  

  

  

 

Subject to Article 10.2, unless or until the Pledgee notifies the Pledgor and the receiver in written form that the receiver should act as the agent of the Pledgee, any receiver who is appointed to exercise the rights provided in Article 10.1 should act as the agent of the Pledgor and the Pledgor itself shall be responsible for its behaviors, violation of the agreement and reward independently.

 

10.2 If this pledge has taken effect, or if the appointment of the receiver has been made, the Pledgee’s right to appoint a receiver subject to Article 10 still can be executed, even when the resolution or the decision on the liquidation by the Pledgor has been made.

 

10.3 The receiver has the full authority to execute the following rights without permission of the Pledgor:

 

(a) fulfill all or one or some actions or behaviors provided in Article 9.3 and Article 9.4;

 

(b) entrust any of its rights subject to this pledge to any person in the time or under the condition that are permitted by the Pledgee.

 

Article 11

 

Protection for the Pledgee and Others

 

11.1 Protection for the Pledgee and the Receiver

 

The Pledgee shall not be liable to do the following items: to notify this pledge to any creditor or investor of the Pledgor or any others, or to enforce any repayment of the arrears of the Pledgor, or to take any action for this aim such as litigation, unless the Pledgee considers it necessary. The Pledgee, or its authorized representatives, or the receiver shall not assume the liability arising from the omission, delay or any unintentional loss or default occurring when the Pledgee, its authorized representative or the receiver fulfill or fail to fulfill the rights, powers and remedies of this pledge.

 

11.2 When the rights of sale, disposal, deal or attempt to disposal under this pledge are exercised, referring to the aforesaid sale, disposal and deal, any purchasers or other parties:

 

(a) shall not be liable to investigate whether any default occurs, or whether the receiver is validly authorized, or whether this sale, disposal or deal is appropriate, legal or not;

 

(b) shall not be affected by the unnecessary or improper notices referring to this sale, disposal or deal.

 

Even when there is any impropriety or violation in the sale, disposal or deal, in order to protect the purchasers or other parties of this sale, disposal or deal, the said sale, disposal or deal shall be deemed as sufficiently authorized, legal and valid.

 

Article 12

 

Use of Funds

 

12.1 All funds received by the Pledgee or any receiver subject to or via this pledge shall be used in accordance with the following way and order:

 

(a) Firstly, the funds shall be used to pay off all the fees of the receiver and administrator, and all the expenses occurred in the responsibility scale of the receiver and administrator;

 

(b) Secondly, all the costs, fees, expenses incurred or incidentally accompanied when the Pledgee is paid or any receiver exercises, fulfills or tries to exercise or fulfill any rights or obligations relevant to the said pledge.

 

(c) Thirdly, the funds shall be used to repay the secured claims of the Pledgee;

 

(d) Fourthly, all the fees and expenses incurred by the custodian shall be paid subject to the Management Contract of Securities;

 

  

  

  

 

Remaining funds (provided that there is) shall belong to the Pledgor and other person who are entitled, however:

 

(e) The interests shall not be included in the remaining funds; and

 

(f) The receiver or the Pledgee may calculate the remaining funds in the named accounts of Hongri or other persons who are entitled, and then shall not assume any further obligations.

 

12.2 Only when the funds used to repay the secured claims have been authentically received by the Pledgee and recorded in the account of Hongri (namely the borrower), the funds can be regarded as the repayment of the secured claims; the calculation of the aforesaid funds shall begin on the receipt date.

 

12.3 Any compensations in connection with the pledged property which become the payable funds shall be used to pay off the secured claims. The Pledgee is entitled to exercise the resource for the aforesaid compensations, and to agree or make agreements, compromises or mediations in relation to the aforesaid right claim independently, and to make any necessary warranties or dissolution in the name of the Pledgor and the Pledgee. In case any compensation is controlled by or defrayed to the Pledgor prior to the dissolution of pledge, the Pledgor shall defray it to the Pledgee.

 

Article 13

 

Continuing Guarantees

 

13.1 This pledge shall be a continuing pledge to the secured claims with the Pledgee as its claim shall be the first compensated beneficiary of priority in order; the obligation of the Pledgor shall not be affected, weakened or dissolved as a consequence of the dissolution, merger, recombination of the Pledgor’s corporation, or the acquisition of other corporations or management, or nationalization. This pledge shall be dissolved in case the secured claims is totally irrevocably settled without any conditions and the Pledgee finally confirms the dissolution to the Pledgor, and is applicable to any balance of the guaranteed claim in present and future.

 

13.2 After the Pledgee has offset the secured claims with any funds, and considered that the funds shall be defrayed to others pursuant to the laws related to bankruptcy, liquidation and the protection for the creditor, then:

 

(a) The rights of the Pledgee shall be reverted and be equivalent to the funds or its relevant part, just as the situation before the use, defrayment or deal; and

 

(b) The Pledgor shall complete any matters (including signing the documents) required by the Pledgee immediately, to ensure that the security interests of the Pledgee can come back to the situation before the use, defrayment or deal of the funds.

 

Article 14

 

Obligations of the Pledgor

 

14.1 In spite of the pledge created under this Agreement, the Pledgor shall obey and fulfill all the obligations in relation to the pledged property, including but not limited to all the obligations in the purchase contract of the pledged goods and/or substitutes, the subsequent complementary agreements, the relevant insurance policies of the pledged goods/substitutes and Management Contract of Securities.

 

14.2 The Pledgor shall ensure that under any circumstances the Pledgee shall not assume any liability due to the fault of the custodian or any person in relation to the sale or disposal of the goods and/or the substitutes. Provided that the Pledgee’s rights and interests are infringed by reason of the lien, loss or damage of the goods and/or the substitutes, the Pledgor shall assume the compensation liability to the Pledgee.

 

Article 15

 

Discharge

 

When the Pledgee considers that all secured claims are all totally and irrevocably settled without any conditions in satisfaction, or that all the provisions of the Agreement have been completely totally fulfilled, and all the costs, fees and expenses which are incurred by the Pledgee or should be paid have been defrayed or retained, under the condition that the Pledgor requires and bear the costs, the Pledgee should return, transfer or dissolve (depending upon the circumstances) all or part of the pledged property (discharge it from the pledge) whose beneficiary remains to be the Pledgee to the Pledgor or under the instruction of the Pledgor.

 

  

  

  

 

Article 16

 

Notifications and Service

 

16.1 Any notice, requirement, instruction or other documents sent by each party herein shall be sent in written form to the following address or number. Any modification of the address or number of one party shall be noticed to other parties by the said party at least five (5) working days beforehand:

 

To Pledgor: Handan Hongri Metallurgy Co., Ltd

 

Contact: Liu Yanjun

 

Address: Guzhen Village, Yetao Town, Wu'an City, Hebei Province, China

 

Zip code: 056304

 

Telephone number: 0310 5919 295 (land line) 1373 0067 693(mobile phone)

 

Fax number: 0310 5919 074

 

 

To Pledgor: Hebei New Wu’an Iron & Steel Group Drying and Melting Co., Ltd.

 

Contact: Liu Weiru

 

Address: Guzhen Village, Yetao Town, Wu'an City, Hebei Province, China

 

Zip code: 056304

 

Telephone number: 0310 5919 498

 

Fax number: 0310 5919 074

 

 

To Pledgee: Raiffeisen Bank International AG, Beijing Branch

 

Contact: Fan Xin/ Bian Huiping

 

Address: Room 200, Beijing International Club, No.21, JianGuoMen Wai Street, Chaoyang District, Beijing, China.

 

Zip code: 100020

 

Telephone number: 010 8531 9052/ 8531 9053

 

Fax number: 010 6532 5926/ 8532 5096

 

 

16.2 Any notice, requirement, instruction, or other documents that Pledgee sent to the Pledgor shall be regarded as having been delivered in the following circumstances: (1) if it is sent by a special messenger or EMS, the day after the correspondence has been sent to the address provided by the Pledgor, and the Pledgee has handed it over to the special messenger or EMS company; or (2) if it is sent by fax, it is regarded as having been delivered after being sent to the fax number provided by the Pledgor and the confirmation signal has been received; or (3) if it is sent by letters, then it is regarded as having been delivered at the third (3) bank working day after it is sent to the address provided by the Pledgor and in the form of prepaid post. But any notice or document that the Pledgor sent to the Pledgee is regarded as being delivered after the actual receipt of the Pledgee.

 

  

  

  

 

Article 17

 

Miscellaneous Provisions

 

17.1 The invalidity or unenforceability of any provision of the Agreement shall not affect the validity or enforceability of the remaining provisions hereof. Any invalid or unenforceable provision shall be replaced by the most applicable provision of law, with the consideration of both parties’ economical benefits.

 

17.2 This Agreement shall be governed by laws of the People’s Republic of China.

 

17.3 Dispute Resolution

 

(1) Where any dispute or claim arises in the execution of the Agreement, or in connection with the interpretation, the termination or the failure of obligation performance of any party of this Agreement, or otherwise, any party shall file an action with the People’s Court of the place where the Pledgee is domiciled, with no need to have any consultation or prior notification.

 

(2) The losing party shall defray all the costs of the prevailing party due to the case (including but not limited to the litigation cost, attorney fee etc.)

 

(3) This Article 17.3 shall be beyond the limitation of agreement termination stated in the Agreement.

 

17.4 Assignment

 

(1) Where the lender assigns the rights of the main contract in accordance with the aforesaid main contract, the pledge created by this Agreement shall be simultaneously assigned with no need to obtain any consent from the Pledgor;

 

(2) Without the Pledgee’s written consent in advance, the Pledgor shall not assign, transfer, replace or dispose any rights or obligations under the Agreement.

 

17.5 All parties agree that any hand-written and printed characters in the Agreement and all documents related to the Agreement are of equal effectiveness. The facsimiles and copies of the Agreement and all documents related to the Agreement delivered to the Pledgee by the Pledgor (especially the pledge notification) shall be deemed as the original documents.

 

17.6 The Pledgor has completely read and understood every provision of the Agreement; the Pledgee has made corresponding detailed interpretation upon the requests of the Pledgor, and the Pledgor has no opposition to the all the content of this Agreement. All parties agree that after the signing of the Agreement, provided that there is any inconsistency of any article, the interpretation shall be on behalf of the Pledgee.

 

17.7 There shall be three (3) original copies of the Agreement. The Pledgor and the Pledgee shall each hold one copy. All copies are of equal legal effectiveness.

 

17.8 The Agreement shall be signed by all parties and become effective on the date (hereinafter referred to as the effective date) stated at the head of the Agreement.

 

(The following is intentionally left blank)

 

  

  

  

Signature Page

 

 

Handan Hongri Metallurgy Co., Ltd (Seal)

 

 

Legal Representative or Authorized Representative (Seal/Signature)

 

 

Hebei New Wu’an Iron & Steel Group Drying and Melting Co., Ltd.

 

 

Legal Representative or Authorized Representative (Seal/Signature)

 

 

 

Raiffeisen Bank International AG Beijing Branch (Seal)

 

 

Authorized Representative (Signature)ex10-3.htm

Exhibit 10.3

 

Contract of Chattel Mortgage

 

This Contract of Chattel Mortgage (hereinafter referred to as “the Contract”) is hereby made and entered into on this day of June 28, 2011 by and between:

 

1) Handan Hongri Metallurgy Co., Ltd, a corporation established and organized under the laws of The People’s Republic of China, with Liu Shenghong as the legal representative and a business license no. of 130400400001179, with its registered address at Guzhen Village, Yetao Town, Wu'an City, Hebei Province (zip code: 056304), (hereinafter referred to as “the Hongri”); and,

 

2) Hebei New Wu’an Iron & Steel Group Drying and Melting Co., Ltd. , a corporation established and organized under the laws of the People’s Republic of China, with Liu Maisheng as the legal representative and a business license no. of 130481000008485, with its registered address at East Yuan Baoshan, Gu Town, Wu’an City, Hebei Province, China. Zip code: 056304 (Refers to “Hongrong”; Hongrong and Hongri, in collectively, refers to Mortgagor. And, the Mortgagor in this agreement should represents for the Hongri and the Hongrong, or either of them.); and,

 

2) Raiffeisen Bank International AG Beijing Branch, with its registered address at Room 200, Beijing International Club, No.21 Jianguomen Wai Street, Beijing, China (zip code: 100020), (hereinafter referred to as “the Mortgagee”).

 

Whereas,

 

1) upon the request of the Mortgagor, the Mortgagee agrees to provide the line of credit under the main contract (defined as following);

 

2) as a prior condition provided in the main contract, the Mortgagor agrees to execute this contract and set the Mortgagee as the first place in the order of the mortgage interest in the mortgaged property (defined as following) as the assurance of the secured claims.

 

NOW, THEREFORE, the parties hereto hereby agree and make statements as follows:

 

Article 1 Definitions

 

1.1 Unless terms or context of this Contract otherwise provide, each of the terms used in this Contract (including the introduction) shall have the same meaning as specified in the main contract.

 

“Execution event” refers to any execution event mentioned in Article 7.1 to the Contract;

 

“Date of Effectiveness” refers to the date defined in Article 16.6 to the Contract;

 

“Mortgage Term” refers to the term defined in Article 2.3 to the Contract;

 

  

  

  

 

“Registration Authority” refers to the relevant authorities for the administration of industry and commerce wherein to file mortgage registration of the mortgage property under the Contract;

 

“Insurance” refers to the insurance the Mortgagor shall obtain or maintain under the mortgage;

 

“Mortgage” refers to the guarantees set by or in accordance with the Contract wherever from the context;

 

“Goods” refers to the purchased and/or manufactured fine iron powder, medium board or other goods as the Mortgagee agreed to be stored or will be stored at the warehouse;

 

“Replacement” refers to the received right, identification, benefit, revenue and tax income of replacement goods caused by selling goods, mixed goods with raw materials and products, or, the goods related to the final product.

 

“The mortgage property” refers to all the rights, real rights and interests of or arising from the Equipments at present and in the future;

 

“Receiver” refers to the receiver, administrator or anybody named in the Contract to receive the profits of or implement administration of the mortgage property;

 

“Ownership” refers to the rights of the Mortgagor to possess, use, seek profits from and dispose of the mortgage property under the Contract;

 

“Main contract” refers to the No. 20110628019980001 document: Loan Contract of RMB 180 million Yuan (RMB 180,000,000 Yuan) signed by and between the Mortgagor and the Mortgagee on the date of June 28, 2011 and any documents signed subsequently as changing, modification, or supplement;

 

“Fund” refers to all the proceeds obtained from the mortgage property under the Contract by selling or otherwise;

 

“Secured Claims” refer to the scope of the security by mortgage, or all the amounts or obligations due to or produced on the Mortgagee by the Hongri under the Main Contract (including modifications from time to time) at any time presently or in the future, irrespective of whether the amount or obligations are belonging to the present time or the future, real or contingent (including any principal, interest, penal interest, fees or other amounts, irrespective of whether the payment is incurred by the Hongri(as the Borrower) independently or jointly or as other identities). The scope includes without limitation to the following amount:

 

  

  

  

 

a) the funds the hongri (as the Borrower) shall but have not pay to the Mortgagee, or owes the Mortgagee, or could owe the Mortgagee under the Main Contract, such as, but not limited to the principal and interest under the Main Contract; and

 

b) any fees, insurance premiums, general bank costs, default interests, liquidated damages, compensation, damages (including liquidation or compensation), and fees incurred and/or assumed by the Mortgagor to realize the obligee’s rights under the Main Contract or the mortgagee’s rights under the Contract. Fees incurred and/or assumed by the Mortgagor to realize the obligee’s rights under the Main Contract or the mortgagee’s rights under the Contract including but not limited to collecting fees, litigation costs (or arbitration fee), supervision fee of the mortgage property, disposal charge of the mortgage property, transfer fee, preservation cost, charge for announcement, execution cost, attorney’s fees, travelling expenses, and other charges;

 

“Depository” refers to the person who appointed by the Mortgagee and act as its representative to supervises the Mortgagee properties from time to time;

 

“Warehouse” refers to the place appointed by the Mortgagee and supervised by the Depository for storage, including but limit to (1) Yuan Baoshan industrial zone No.1 material field, Guzhen village, Yetao county, Wu'an city, Hebei province, China; (2) The second period medium board finished product warehouse, Guzhen village, Yitao county, Wu'an city, Hebei province, China.; and, (3)Other places from time to time the Mortgagee appointed;

 

“Person” means natural man, nation or the administrative agencies of the nation, government, groups, organizations, corporations, joint ventures, associations, or partnership (irrespective of whether it has an independent legal personality.

 

Article 2 Security

 

2.1 Mortgage

 

To ensure the timely and complete execution of the secured claims, the Mortgagor agrees to mortgage the Goods and the Replacement located at the Warehouse to the Mortgagee and confirms all the equipments as the mortgage property.

 

The effectiveness of the right to mortgage governs the mortgage property and its accessory property, accessory rights, attached objects, things connected, processed things, fruits and subrogating objects.

 

  

  

  

 

2.2 The registration of mortgage

 

The Mortgagor shall deliver the document of title of the mortgage property and other documents in connection with the mortgage property required for the registration of mortgage to the Mortgagee or a person appointed by the Mortgagee; and shall go through the mortgage registration formalities of the mortgage property under the Contract at the registration authority in less than five (5) days after the signing of the Contract, and shall deposit the Chattel Mortgage Registration Statement and/or other original document of mortgage registration certification with the Mortgagee in less than three (3) days after the completion of registration formalities. Yet due to the reasons of the registration authority, the chattel mortgage can not be registered after the signing of the Contract, then the Mortgagor shall go through the mortgage registration formalities of the mortgage property under the Contract at the registration authority in less than five (5) days after the registration authority reopen or resume the registration activities, and shall deposit the Chattel Mortgage Registration Certificate and/or other original document of mortgage registration certification with the Mortgagee in less than three (3) days after the completion of registration formalities.

 

In the mortgage term, if the mortgage property under the Contract or the right to mortgage set in the Contract is changed, then the related party subject to this change shall urge the relevant parties to register the modifications as soon as possible or register the modifications itself, and will be liable for all the expenses incurred. The Modification of Chattel Mortgage Registration Certificate after the modification registration and/or other original document of mortgage modification registration certification shall be deposited with the Mortgagee immediately (in not more than 24 hours after the registration).

 

2.3 Mortgage Term

 

The Mortgage Term set in the Contract (hereinafter referred to as “the Mortgage Term”) shall be started from the date of effectiveness and ended at the day of the termination of the mortgage under Article 13.1.

 

2.4 Independent Guarantee

 

To the fullest extent permitted by law, the Parties hereto the Contract specifically agree as follows: the validity of the Contract is independent of the main contract, and shall not be affected by the invalidity of the main contract or its relevant provisions. Provided that the Chattel Mortgage Registration Certificate and/or other original document of mortgage registration certification of the mortgage property under the Contract is delivered to the Mortgagee and/or the person appointed by the Mortgagee, the Contract shall be legally valid upon both parties. The Hongri (as the Borrower) shall take returning responsibility or compensate responsibility if the Main contract becomes invalid, whereas the Hongrong shall take the joint liability.

 

  

  

  

 

Article 3 Statements and Warranties

 

3.1 Upon the signing of the Contract and during the Mortgage Term, the Mortgagor states and warrants to the Mortgagee as follows:

 

a) The Mortgagor is a corporation established and existing under the laws of the People’s Republic of China, with complete rights and abilities to sign the Contract, and has taken all necessary corporations or other actions to authorized itself to sign the Contract;

 

b) The Contract shall constitute legal, valid and binding obligations upon the Mortgagor, and shall be enforceable in accordance with the provisions of the Contract;

 

c) The signing and delivering of the Contract and the execution of the provisions under the Contract shall not be in breach of : (i) any provisions of the laws or regulations which are applicable to the Mortgagor; (ii) any judgment, decree or order which is applicable to the Mortgagor, or any agreement which is binding on the Mortgagor; (iii) the provisions of the organizational files of the Mortgagor;

 

d) All the authorizations, sanctions or requirements which enable or authorize the establishment of the Mortgage (including but not limited to all the necessary approval and resolution of the corporation) shall be obtained and/or complied with and shall possess full force and effect, and shall remain in full force and effect during the existing term of the Contract;

 

e) The Mortgagor is the one and sole owner of the mortgage property under the Contract, possessing the ownership and/or the right certification of sale permission of the mortgage property, with every complete legal right to make mortgage of the mortgage property in accordance with the provisions of the Contract, and shall guarantee that no cause of the retention, prohibiting and curtailment of transfer of the ownership exists in the mortgage property under the Contract. Any approval, consent or authorization of someone else shall be required to make mortgage of the mortgage property;

 

f) The ownership of the mortgage property is clear without any defectives, and the mortgage property is not seized, distrained or supervised, without any circumstance such as dispute or litigation (arbitration) on the right of ownership and the right of disposition;

 

g) Any right which could be exercised by the third party and thus affects the mortgage under the Contract shall not exist in the mortgage property;

 

h) Any other form of security interest, lease, trusteeship, joint ownership or other  disputes regarding the right of ownership except for the mortgage shall not exist in the mortgage property;

 

i) If the Mortgagee requires the Mortgagor to have the mortgage property insured, then in accordance with the insurance clauses, the insurance shall be enforceable to the underwriter instead of being invalid or avoidable. Further, no lodged claims, outstanding claims or evidences for lodging claims acknowledged by the Mortgagor shall exist under the insurance;

 

  

  

  

 

j) The types, specification and amount/total value of the Mortgage properties should from time to time to satisfy the requirement by the Mortgagee, and the price of a mortgage property shall be referred to the reference’s price of the related mortgage property which appointed by the Mortgagee;

 

k) Provided that more than one person exist as the Mortgagor under the Contract, then the Mortgagee is entitled to enforce the mortgage and deposits the obtained amount into the account under the name of any Mortgagor for the use of payment and termination of the secured claims in accordance with the relevant provisions of laws and regulations of the People’s Republic of China, irrespective of whether any of the Mortgagors provides and enjoys the ownership of the mortgage property, or whether the secured claims are finally formed as a consequence of using line of credit under the main contract by any of the Mortgagors or financing; the sum and liquidated the Hongri’s (as the Borrower) debt which shall be paid and terminated will be decided by the Mortgagee itself;

 

l) The mortgage property and the said mortgage shall be in conformity with provision of laws, regulations and systems of the People’s Republic of China.

 

3.2 Reliance on the Statements and Warranties

 

Subject to the truth and validity of the statements and warranties made in Article 3 to the Contract, assured by the Mortgagor, the Mortgagee accepts the mortgage and agrees or will agree to provide the Hongri (as the Borrower) with the line of credit under the Contract in accordance with the said provision.

 

Provided that any statement or warrant made by the Mortgagor in Article 3 is proved to be false, incorrect or misleading, the Mortgagor should ensure that the rights and interests of the Mortgagee under the Contract shall not be affected. On condition that the Mortgagor fails to make its statements and warranties correspond with the provisions of Article 3 within a reasonable time of not more than fifteen (15) days after receiving the written notice notified by the Mortgagee, requiring the Mortgagor to correct the violation of the Mortgagor’s statements and warranties, or that the Mortgagee holds that the Mortgagor will be unable to take timely remedies to the statements and warranties it violates, the Mortgagee is entitled to require the Mortgagor to pay damages of 1% of the total amount of the line of credit under the main contract, and the Mortgagor shall make compensation for the amount exceeding the breach of contract damages provided that the damages fail to compensate the loss of the Mortgagee.

 

  

  

  

 

Article 4 The Commitments of the Mortgagor

 

4.1 General Commitments

 

Upon the signing of the Contract and during the Mortgage Term, the Mortgagor shall:

 

(a) take reasonable and necessary measures to ensure the continual effectiveness of any statement and warranty of the Mortgagor under the Contract in the mortgage term;

 

(b) The Hongri (as the Borrower) shall pay enough secured claims on time on the request of the Mortgagee, provided that the secured claims become due and payable in accordance with the provisions of the main contract; or that any event occurs to cause the loss of the Mortgagor’s ownership to the mortgage property or to affect the enforcement of the ownership to the mortgage property; or that any execution event occurs;

 

(c) abide by all laws, regulations, rules, procedures and statutory or non-statutory requirements and orders of any government department, of current existence, or of becoming effective at a future time, or of potential damages of the mortgage property under the mortgage or the rights and interests of the Mortgagee under the mortgage without the compliance;

 

(d) go through the registration of mortgage or submit for the record of the Contract, and accept all the fees such as evaluation, registration, notarization, authentication, insurance, safekeeping, maintenance, and preservation of the mortgage property under the Contract, and all relevant expenses incurred by events such as the realization of the creditor’s right of the main contract, or the establishment of the mortgage, or the realization of the mortgage, in accordance with the provisions of the Contract and/or the requirement of the Mortgagee at any time;

 

(e) at the same time, provided that any law or the corporations’ articles of association require the Mortgagor to offer any document, notice, balance sheet, or account, the Mortgagor shall offer a copy of the said to the Mortgagee;

 

(f) allow the Mortgagee, its authorized representatives or any person appointed by its authorized representatives, at any reasonable time without any written notice in advance, to check and copy the account book of the Mortgagor or all the other documents relevant to the business of the Mortgagor or the mortgage property;

 

(g) offer any information related to the business of the Mortgagor or the mortgage property to the Mortgagee, its authorized representatives or any person appointed by its authorized representatives;

 

(h) ensure that all the documents, materials and information offered to the Mortgagee during the signing and execution of the Contract is truthful, accurate, complete and valid, and that all the submitted copies shall corresponds with the original;

 

  

  

  

 

(i) assist the Mortgagee to realize the right to the mortgage and shall not erect any barrier including but not limited to signing or providing any document or evidence necessary for or related to the disposition of the mortgage property;

 

(j) keep and use the mortgage property with due care, and accept all the expenses incurred by the safekeeping and maintenance of the mortgage property.

 

4.2 Commitments in connection with the mortgage property

 

Upon the signing of the Contract and during the Mortgage Term, the Mortgagor shall:

 

(a) pay on time all the amounts relevant to the mortgage property, expired or about to expire, supposed to be paid but not paid yet (including taxes);

 

(b) perform and observe all matters under the mortgage property or all matters which shall be performed by the Mortgagor and are related to the mortgage property;

 

(c) The Mortgager shall irrevocable agree with the appointed candidate of Depository by the Mortgagee to supervise the mortgage properties on behalf of the Mortgagee, the Mortgagor shall be responsible for all obligations located in relevant documents or other terms and conditions, and shall be independently responsible for timely paying the expenses caused by the Mortgagee and the Depository supervising the Mortgage properties, including but not limit to the Depository fees and Warehousing fees for the Mortgage properties.

 

d) Any default or termination, caused by the Mortgagor, of any contract and/or any term or condition in a contract between the Mortgagor and the Mortgagee, all Mortgaged property shall remain at the warehouse as no allowance approved by the Mortgagee, the Mortgagor shall not change or transfer any part or in all of the Mortgaged property, any person, except the Mortgagee, has the right to act on the Mortgaged property;

 

(e) allow the Mortgagee, its authorized representatives or any person appointed by its authorized representatives, at any reasonable time without any written notice in advance, to enter the location of the factory or other locations possessed by the Mortgagor for checking and testing any part of the mortgage property. As for the suggestions addressed by the Mortgagee in the process of checking and testing for the purpose of ensuring the completeness of the mortgage property, the Mortgagor shall take the corresponding measures on time and accept all the expenses incurred;

 

 (f) Warrant that without the written permission of the Mortgagee:

 

	
  

	
(i) no change to reduce the value of the mortgage property shall be made onto any part of the mortgage property;

 

	
  

	
(ii) no change, waiver, transfer, abolition, denial, termination or modification which may affect the rights and interests of the Mortgagee under the Contract shall be made onto the agreements or commitments containing or related to the mortgage property;

 

  

  

  

 

(g) insure the mortgage property and ensure the continual effectiveness of the insurance at any time before the termination of the mortgage in accordance with the requirements of the Mortgagee, the insurance conditions including but not limited to:

 

(i) the sum insured shall cover all insurable value of the mortgage property;

 

(ii) the duration of insurance shall be not less than the time of performance of the debt under the main conduct;

 

(iii) the Mortgagee shall be designated as the only beneficiary of the insurance.

 

(iv) the insurance shall be often applied to insurance companies of a good reputation in a way that the Mortgagee could accept, and

 

(v) all the original insurance policies, Insurance term confirmation letter and the evidence of paying the premium proved to be true shall be offered to the Mortgagee upon the request of the Mortgagee;

 

(h) allow the Mortgagee to obtain, execute, settle accounts, mediate and collect any compensation under the insurance policies of the Mortgagor as it determines to be appropriate, despite that the said policies refer to properties not belonged to the mortgage property (if applicable);

 

(i) allow the Mortgagee to pay the secured claim with the insurance indemnity (including overdue or payable terms)(if applicable);

 

(j) notify the Mortgagee immediately in not more than 24 hours after the occurrence of following circumstances:

 

(i) any damage, stolen, total loss, confiscation, levy, expropriation of the mortgage property;

 

(ii) disputes regarding the ownership of the mortgage property;

 

(iii) custody of property and its execution such as sealing up or seizing of the mortgage proper during the mortgage term;

 

(iv) infringement or possible infringement on the right to mortgage from any third party;

 

  

  

  

 

(v) termination, dissolution, suspended operation for rectification, rescinded the business license, disbanded, applying or applied to declare bankruptcy of the Mortgagor;

 

(k) take actions including but not limited to the followings upon the request of the Mortgagee: offering the assignments of any insurance policy related to the mortgage property to relevant insurers or underwriters; offering the assignments of quality assurance to relevant manufacturers;

 

(l) upon the request of the Mortgagee, offer all the supply contracts relevant to the mortgage property and documents of quality assurance of the manufacturers to the Mortgagee within the term provided by it.

 

(m) do any things necessary or reasonably requested by the Mortgagee, and shall not omit any necessary things, for the purpose of:

 

(i) keeping and protecting the value of the mortgage property;

 

(ii) protecting and executing the Mortgagor’s right to the ownership of the mortgage property and the Mortgagee’s real rights for security of the mortgage property;

 

(n) obtain or defend against legal actions to protect or recover the Mortgagor’s rights and interests of or under the mortgage property upon the requests of the Mortgagee;

 

(o) take any reasonable actions on any person to protect and exercise the Mortgagee’s rights to the mortgage property upon the requests of the Mortgagee;

 

4.3 Without the prior consent in writing by the Mortgagee, the Mortgagor shall not:

 

(a) establish, or agree to establish, or intend to establish any mortgage prior to, equivalent to or subordinate to the said mortgage in order over the mortgage property;

 

(b) take any actions which may impair the value of the mortgage property;

 

(c) dispose the mortgage property in any form such as transfer, bestowal, lease, establishing a real right for security.

 

Article 5 Remedies by the Mortgagee for the Default of the Mortgagor

 

5.1 If the mortgagor breaches any provision of this contract, without affecting other rights and interests of the Mortgagee subject to this contract, the Mortgagee may (but not obliged to) take any measure, including but not limited to paying all the money that is considered essential by the Mortgagor, to remedy the default. In this way the Mortgagee indemnify the money paid due to default, or the payment should be fully complemented by the Mortgagor.

 

  

  

  

 

6 Additional Warranties

 

6.1 If the value of the mortgaged property decreases, the Mortgagor shall append other warranties subject to provisions of main contract. If the Mortgagor is unable to provide appended warranties, the Mortgagee is entitled to take measures of enforcement subject to this contract, and to require the Mortgagor to undertake all the losses resulted from this.

 

Article 7 Execution

 

7.1 Execution Event

 

Whether the secured claims should be paid instantly without additional requirement or notice decided shall be independently decided by the Mortgagee. (The exercising of the rights by the Mortgagee shall not be affected by any delay or prior statement to waive the right)

 

If any termination event or default (hereinafter referred to as  “execution event”) occurs under agreements (including but not limited to main contract and this Contract) reached by the Mortgagor/the Hongri (as the Borrower) and the Mortgagee or other debtees and/or items of other guarantee files in main contract, the mortgagor shall notify the mortgagee of the enforcement default in writing immediately (in not less than 24 hours after the occurrence of the event). The mortgage is to be independently decided and instantly enforced by the Mortgagee.

 

7.2 Execution not affected by the Payment

 

Neither the Mortgagee’s acceptation of interest the of payment or any other money after the occurrence of execution event, nor failure to investigate any other prior default of the Mortgagor is not to affect the enforceability of this mortgage. In the broadest limit permitted by law, the Mortgagee can enforce this mortgage without any notification, permission or acknowledgement of the Mortgagor or any other person.

 

7.3 Rights of the Mortgagee in Enforcement

 

When this mortgage becomes enforceable, without regard to be permitted by the Mortgagor, at any time the Mortgagee shall have the full right to enforce and execute all its rights and relieves as the Mortgagee in the time and way that it considers to be appropriate (whether in the name of himself or of the Mortgagor), including but not limited to some or all the following measures:

 

(a) In accordance with provisions of laws and regulations in the People’s Republic of China, to execute all rights on the mortgage property (no matter it belongs to which mortgagor) includes but is not limited to selling the mortgage property and acquiring money herefrom so as to pay off the secured claims without proceedings of litigation or arbitration.

 

  

  

  

 

(b) To obtain the right of control includes but is not limited to all the documents or other evidences of rights, and the execution of all the rights of the Mortgagor in regard of the mortgage property for this purpose includes but is not limited to file the lawsuit and take measures in the name of the Mortgagor and take corresponding action in the name of the Mortgagor.

 

(c) The execution of all relevant rights of the mortgage property, or some or all of the rights, power, authorization and adoptable measures of remedy that are to be executed by the Mortgagee in accordance with the mortgage includes but is not limited to:

 

(i) to undertake in the mode considered appropriate all by the Mortgagee, or to handle all proceedings or any proceeding of lawsuit relevant to the mortgage property, and make disposal, reconciliation, waiver or concession on all mortgage property or on relevant rights and proposals;

 

(ii) to make reconciliation on any account, right and proposal, problem or dispute, etc. relevant to the mortgage property and likely to be led to, or relevant to the Contract in any way, to make arrangements for the debt, to make concession or submit it for arbitration, and sign any relevant duty-rescinded agreement;

 

(iii) to file, employ, defend for, make a concession of, submit for arbitration or waive any legal action, lawsuit, proceedings etc. (civil or criminal) on issues of the mortgage property;

 

(iv) to execute any right or power relevant to the mortgaged property and/or the right of mortgage in accordance with legal documents relevant to the mortgaged property;

 

(v) to sign and handle all actions, deeds and other issues that are considered reasonable, essential and appropriate by the Mortgagee, or are relevant to any purpose aforesaid;

 

(d) selling or agreeing to sell, exchanging or disposing all or any part of the mortgage property unconditionally or conditionally in other ways, irrespective of through public auctions or non-public contract promises, through advertisements or notifying the Mortgagor, through cash payments or other forms of payment, wholly or separately, in relation to the special conditions or rules in relation to the aspects of ownership, time, trade value, or forms of payment; and being entitled to place all or part of the bargain price in escrow , or to establish securities for all or part of the bargain price in other forms, or all or part of the bargain price shall become the payable funds to the Mortgagee under the circumstance that no warranty exists; or the disposal of all or part of the mortgage property in accordance with the appropriate and reasonable consideration, other provisions and conditions considered by the Mortgagee, who shall not be liable to any loss or insufficiency incurred by the said consideration, provisions or conditions;

 

  

  

  

 

(e) To the fullest extent permitted by law, the Mortgagee can assign or transfer all or any part of the mortgage property in the name of and as the representative of the Mortgagor, and can take any actions which the mortgagee considers to be necessary to accomplish the aforesaid assignment and transfer.

 

(f) to insure all or any part of the mortgage property in a way which the Mortgagee considers appropriate;

 

(gh) in the terms of executing the rights in accordance with the Contract, the Mortgagor shall provide legal and valid financial evidences to all the funds and other properties obtained by the Mortgagee, within the deadline provided in the written requirements of the Mortgagee, and relieve any person paying or delivering the aforesaid funds or other properties from liabilities of being responsible for the use of the financial evidences, inquiring whether the secured claims have been paid or are payable, or inquiring whether the relevant rights of the Mortgagee provided by the Contract are due or appropriate;

 

(h) to adopt all the money and/or other property relevant to the mortgage property, due to pay, or payable to the Mortgagor;

 

(i) to take any action considered by the Mortgagee relevant to rights and interests under the Contract, or to take actions relevant to any other right;

 

(j) to transfer the rights of the Mortgagee provided in Article 7.3 to any person.

 

7.4 after this agreement becomes effective, the Mortgagee or its authorized agent has the right to dispose of the mortgaged property through public auction, private contract or agreement, or any other ways, and to represent the Mortgagor to sign blank transfer documents or receipts of any quality and type that are reserved at the Mortgagee’s as the mortgage security of the Contract.

 

7.5 When the Mortgagee executes the rights of mortgage subject to this contract, under no condition is the Mortgagor permitted to require the Mortgagee to firstly execute its rights or interests under other items of security, if the secured claims has other assurance, mortgage, pledge, or other forms of guarantee. Limited in conditions permitted by law, the Mortgagor shall waive all his rights of defense.

 

  

  

  

 

8. Appointment of the Receiver

 

8.1 Appointment

 

Anytime after this mortgage takes effect, whether the Mortgagee has obtained part or the whole of the ownership of the mortgaged property, the Mortgagee or its authorized agent may:

 

(a)           appoint any qualified person or two or more qualified persons as the receiver of part or the whole of the mortgage property;

 

(b)           dispose of the receiver, or appoint another receiver as a substitute when the receiver is dismissed, retired, deceased or incapable of fulfilling the obligation.

 

Subject to Article 8.2, unless or until the Mortgagee notifies the Mortgagor and the receiver in written form that the receiver should act as the agent of the Mortgagee, any receiver who is appointed to exercise the rights provided in Article 8.1 should act as the agent of the Mortgagor and the Mortgagor shall be responsible for his behaviors, violation of the agreement and reward.

 

8.2 The Receiver Apart from the Agent of the Mortgagor

 

If this mortgage has taken effect, or if the appointment of the receiver has been made, the right to appoint a receiver subject to Article 8 still can be executed, even when the resolution or the decision on the liquidation by the mortgagor has been made.8.3 Rights of the Receiver

 

The receiver has the full authority to execute the following rights without permission of the Mortgagee:

 

(a) fulfill all or one or some actions or behaviors provided in Article 7.3 and Article 7.4;

 

(b) entrust any of his rights subject to this mortgage to any person in the time or under the condition that are permitted by the Mortgagee.

 

Article 9 Protection for the Mortgagee and Others

 

9.1 Protection for the Mortgagee and the Receiver

 

The Mortgagee shall not be liable to do the following items: to notify this mortgage to any creditor or investor of the Mortgagor or any others, or to enforce any repayment of the arrears of the Mortgagor, or to take any action for this aim, unless the Mortgagee considers it necessary. The Mortgagee, or its authorized representatives, or the receiver shall not assume the liability arising from the omission, delay or any unintentional loss or default occurring when the Mortgagee, its authorized representative or the receiver fulfill or fail to fulfill the rights, powers and remedies of this mortgage.

 

  

  

  

 

9.2 Protection for the Third Party

 

When the rights of sale, disposal and deal under this mortgage are exercised, referring to the aforesaid sale, disposal and deal, any purchasers or other parties:

 

(a) shall not be liable to investigate whether any default occurs, or whether the receiver is validly authorized, or whether this sale, disposal or deal is appropriate, legal or not;

 

(b) shall not be affected by the unnecessary or improper notices referring to this sale, disposal or deal.

 

Even when there is any impropriety or violation in the sale, disposal or deal, in order to protect the purchasers or other parties of this sale, disposal or deal, the said sale, disposal or deal shall be deemed as sufficiently authorized, legal and valid.

 

Article 10 Use of Funds

 

10.1 Manner and Order

 

All funds received by the Mortgagee or any receiver subject to or via this mortgage shall be used in accordance with the following way and order:

 

(a) Firstly, the funds shall be used to pay off all the costs, fees, expenses occurred or incidentally accompanied when the Mortgagee or any receiver exercises, fulfills or tries to fulfill the relative rights or obligations, and all the expenses occurring in the responsibility scale.

 

(b) Secondly, the funds shall be used to repay the secured claims of the Mortgagee, including but not limit to the expense caused by supervising the Mortgage properties which paid by the Mortgagee or the Depository;

 

Provided that there is remaining funds, then they shall belong to the Mortgagor and other person who are entitled, however:

 

(c) The interests shall not be included in the remaining funds; and

 

(d) The receiver and the Mortgagee may calculate the remaining funds in the named accounts of the Hongri or other right owners, and then shall not assume any relevant obligations.

 

10.2 Only when the funds used to repay the secured claims have been authentically received by the Mortgagee and recorded in the account of the Hongri (as the Borrower) for the lender, the funds can be regarded as the repayment of the secured claims; the calculation of the aforesaid funds shall begin on the receipt date.

 

10.3 Any compensations in connection with the mortgage property which become the payable funds shall be used to pay off the secured claims. The Mortgagee is entitled to exercise the resource for the aforesaid compensations, and to agree independently or make agreements, compromises or mediations in relation to the aforesaid right claim, and to make any necessary warranties or dissolution on behalf of the Mortgagor and Mortgagee. In case any compensation is defrayed to the Mortgagor prior to the dissolution of mortgage, the Mortgagor shall defray it to the Mortgagee.

 

  

  

  

 

Article 11 Continuing Mortgage

 

11.1 Continuing Mortgage

 

This mortgage shall be a continuing mortgage to guaranty the claim of the Mortgagee whose claim shall be firstly settled; the obligation of the Mortgagor shall not be affected, weakened or dissolved as a consequence of the dissolution, merger, recombination of the Mortgagor’s corporation, or the acquisition of other corporations or management, or nationalitization. This mortgage shall be dissolved in case the secured claims is totally irrevocably settled without any conditions and the Mortgagee finally confirms the dissolution to the Mortgagor. The aforesaid provision is enforceable to any balance of the guaranteed claim in present and future.

 

11.2 Priority

 

After the Mortgagee has offset the secured claims with any funds, in case the funds shall be defrayed to others pursuant to the provisions of bankrupt, liquidation and the protection for creditor, the mortgagee,

 

(a) The rights of the Mortgagee shall be reverted and the Mortgagee’s right referring to the aforesaid funds or the relative part shall not be changed, just as the situation before the use, defrayment or deal; and

 

(b) The Mortgagor shall complete any requirements (including signing the documents) from the Mortgagee immediately, to ensure that the security interests of the Mortgagee can come back to the situation before the use, defrayment or deal of the funds.

 

Article 12 Obligations of the Mortgagor

 

12.1 Besides the mortgage created in this contract, the Mortgagor shall obey and fulfill all the obligations in relation to the mortgage property, including but not limited to the obligations in the purchase contract of the mortgage property, the subsequent complementary agreements and the insurance policy in relation to the mortgage property.

 

12.2 The Mortgagor shall ensure that in any case the Mortgagee need not assume any liability due to the fault of the depository or any people in relation to the sale or dispose of the Goods. In case the Mortgagee’s rights and interests are infringed by reason of the lien, loss or damage of the Goods, the Mortgagor shall assume the compensation liability to the Mortgagee.

 

  

  

  

 

Article 13 Discharge of Obligation

 

13.1 In case the conditions stated in Article 10.2 are satisfied, when the Mortgagee considers that all secured claims are all totally irrevocably settled without any conditions, or totally defrayed or satisfied in accordance with the Contract, and all costs, benefits, fees and funds which shall be paid to the Mortgagee have totally defrayed, it shall, after the assumption of fees by the Mortgagor, according to the requirements of the Mortgagor, return, transfer or dissolve (any of the three) the mortgage totally or partly and dissolve the obligation of the Mortgagor;

 

13.2 In case the guaranteed claim decreases by reason that the Hongri (as the Borrower) repays the loan or fulfills the obligations in the main contract, the Mortgagee promises that it shall check the mortgage proportion and exempt the obligation of partial mortgage property which exceeds the secured claims according to its independent judgment.

 

Article 14 Notifications and Service

 

14.1 Any delivery and service of the notification, demands, directions or other documents between the parties shall be provided by written documents and sent to the following address or numbers subject to related party. All parties shall notice others by 5 working days before any change of address or number.

 

	To the Mortgagor: 	Handan Hongri Metallurgy Co., Ltd.
	Contact person: 	Yanjun Liu
	Address:  	Guzhen village, Yetao county, Wu'an city, Hebei province, China
	Zip code:   	056304
	Tel: 	0310 5919 295(base unit) 1373 0067 693(mobile)
	Fax:  	0310 5919 074
	 	 
	To the Mortgagor:	Hebei New Wu’an Iron & Steel Group Drying and Melting Co., Ltd.
	Contact person: 	Weiru Liu
	Address:	Guzhen village, Yetao county, Wu'an city, Hebei province, China
	Zip code:	056304
	Tel:	0310 5919 498
	Fax:	0310 5919 074
	 	 
	To the Mortgagoree:	Raiffeisen Bank International AG Beijing Branch
	Contact person:	Xin Fan/Huiping Bian
	Address:  	#200 Beijing International Club, No.21, JianguoMenWai Auenue Beijing, China
	Zip code:  	100020
	Tel:  	010 8531 9052/8531 9053
	Fax: 	010 6532 5926/8532 5096

                                                                                                         

  

  

  

14.2 All notice, requirement inform or other document which satisfied the following condition and is send by the Mortgagee to the Mortgagor will be considered as arrival: (1) The next day after the Mortgagee pass the document to the specific person or express mail service in accordance with the Mortgagor’s address; or (2) The document is send through fax machine with the provided above fax number and is confirmed with receiving single by the Mortgagor’s fax machine; or (3) The third(3) banking day after the postage prepaid mail is send to the Mortgagor in accordance with the provided address above. All notice or documents the Mortgagee send to the Mortgagor shall be considered as arrival only by the Mortgagor practically received the files.

Article 15 Applicable Laws and Jurisdiction

 

15.1 The invalidity or unenforceability of any provision of this contract shall not affect the validity or enforceability of the remaining provisions hereof. Any invalid or unenforceable provision shall be replaced by the most applicable provision of law, with the consideration of both parties’ economical benefits.

 

15.2 This Contract shall be governed by laws of the People’s Republic of China.

 

15.3 Dispute Resolution

 

(a) Where any disputes, controversies or claims (“Disputes”) arise between the parties hereto out of, connected with or in relation to the interpretation, the termination or the failure of obligation performance of this contract, any party shall file an action with the People’s Court of the place where the mortgagee is domiciled.

 

(b) The losing party shall defray all the costs of the prevailing party due to the case (including but not limited to the litigation cost, attorney fee etc.)

 

(c) This Article 15.3 is beyond the limitation of contract termination stated in this contract.

 

Article 16 Miscellaneous Provisions

 

16.1 The Mortgagor has read the main contract with serious attention, with fully acknowledgment and understanding of all the articles.

 

16.2 Both parties agree that any hand-written and printed characters in this contract and all related documents are of equal effectiveness. The facsimiles of this contract and all relevant documents (especially the ones faxed by the mortgagee to the mortgagor) shall be deemed as the original documents.

 

  

  

  

 

16.3 Assignment

 

(a) Where the Mortgagee assigns the rights of the main contract in accordance with the aforesaid contract, the mortgage created by this contract shall be simultaneously assigned without any content from the Mortgagor;

 

(b) Without the Mortgagee’s written content in advance, the Mortgagor shall not assign, transfer, replace or dispose any rights or obligations in this contract.

 

16.4 The Mortgagor has completely read and understood every provisions of this contract; the Mortgagee has made detailed interpretation referring to the requirement of the Mortgagor, and the Mortgagor has no opposition to the all the content of this contract. Both parties agree that after the signature of this contract in case there is any inconsistency of any article, the interpretation shall be on behalf of the Mortgagee.

 

16.5 There shall be three (3) original copies of this contract. The Mortgagor and the Mortgagee shall each hold one copy; and the third copy shall be filed to the registration administration.All copies are of equal legal effectiveness.

 

16.6 This contract shall be signed by both parties and become effective on the date (hereinafter referred to as the effective date) stated at the head of the Contract.

 

 

(No text below.)

 

  

  

  

 

Signature Page

 

 

Handan Hongri Metallurgical Co., Ltd (Seal)

 

Legal Representative or Authorized Representative (Seal/Signature)

 

 

Hebei New Wu’an Iron & Steel Group Drying and Melting Co., Ltd. (“New Wu’an”)

 

Legal Representative or Authorized Representative (Seal/Signature)

 

 

Raiffeisen Bank International AG Beijing Branch

 

Authorized Representative (Signature)

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