Document:

ex10_2.htm

  
    Exhibit 10.2

    SECURITY
AGREEMENT

    

    This
SECURITY AGREEMENT, dated as of February 28, 2008 (this “Agreement”), is among
CHINA NORTH EAST PETEROLUM
HOLDINGS LIMITED, a Nevada corporation (the “Company” or the
“Debtor”) and the holders of the Company’s 8% Secured Debentures due February
27, 2012 and issued on February 28, 2008 in the original aggregate
principal amount of U.S. $15,000,000 (collectively, the “Debentures”) signatory hereto,
their endorsees, transferees and assigns (collectively, the “Secured Party”).

    

    W
I T N E S S E T H:

    

                  WHEREAS,
pursuant to the Securities Purchase Agreement (as defined in the
Debentures), the Secured Party has agreed to extend the loan in the principal
amount of U.S. $15,000,000.00 to the Company evidenced by the
Debentures;

    

                
WHEREAS, in order to induce the Secured Party to extend the loan, the Debtor has
agreed to execute and deliver to the Secured Party this Agreement and to grant
the Secured Party a security interest in certain property of such Debtor to
secure the prompt payment, performance and discharge in full of all of the
Company’s obligations under the Debentures.

     

     
NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Party hereto hereby agree as follows:

    

                
 1.              Certain Definitions. As used
in this Agreement, the following terms shall have the meanings set forth in this
Section 1.  Terms used but not otherwise defined in this Agreement
that are defined in Article 9 of the UCC (such as “account”, “chattel paper”,
“commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”,
“general intangibles”, “goods”, “instruments”, “inventory”, “investment
property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”)
shall have the respective meanings given such terms in Article 9 of the UCC
under the laws of the State of New York.

    

    (a)           “Collateral” means the
collateral in which the Secured Party is granted a security interest by
this Agreement and which shall include the following personal property of the
Debtor, whether presently owned or existing or hereafter acquired or coming into
existence, wherever situated, and all additions and accessions thereto and all
substitutions and replacements thereof, and all proceeds, products and accounts
thereof, including, without limitation, all proceeds from the sale or transfer
of the Collateral and of insurance covering the same and of any tort claims in
connection therewith, and all dividends, interest, cash, notes, securities,
equity interest or other property at any time and from time to time
acquired, receivable or otherwise distributed in respect of, or in exchange for,
any or all of the Pledged Securities (as defined below):

     

    
      
         

      

      
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    (i)            
All goods, including, without limitation, (A) all machinery, equipment,
computers, motor vehicles, trucks, tanks, boats, ships, appliances, furniture,
special and general tools, fixtures, test and quality control devices and other
equipment of every kind and nature and wherever situated, together with all
documents of title and documents representing the same, all additions and
accessions thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used and useful in
connection with Debtor’s businesses and all improvements thereto; and (B) all
inventory;

    

    (ii)
           All contract
rights and other general intangibles, including, without limitation, all
partnership interests, membership interests, stock or other securities, rights
under any of the Organizational Documents, agreements related to the Pledged
Securities (except with respect to the Company’s ownership of the registered
capital of Song Yuan North East Petroleum Technical Service Co. Ltd. (“Song Yuan
Technical”), which shall be subject to the terms provided in the
Onshore Share Pledge Agreement, licenses, distribution and other
agreements, computer software (whether “off-the-shelf”, licensed from any third
party or developed by Debtor), computer software development rights, leases,
franchises, customer lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade names, patents, patent
applications, copyrights, and income tax refunds;

     

    (iii)           All
accounts, together with all instruments, all documents of title representing any
of the foregoing, all rights in any merchandising, goods, equipment, motor
vehicles and trucks which any of the same may represent, and all right, title,
security and guaranties with respect to each account, including any right of
stoppage in transit;

    

    (iv)           All documents, letter-of-credit
rights, instruments and chattel paper;

    

    (v)          
 All commercial tort claims;

    

    (vi)           All
deposit accounts and all cash (whether or not deposited in such deposit
accounts);

    

    (vii)          All
investment property;

    

    (viii)         All
supporting obligations; and

    

    (ix)           All
files, records, books of account, business papers, and computer programs;
and

    
      
         

      

      
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    (x)           
The 8% Secured Debenture in the aggregate principal amount of U.S.$15,000,000.00
executed by Song Yuan Technical in favor of the Company (the “Intercompany
Debenture”) and dated of even date herewith.

    

    (xi)           
66% of the registered capital of Song Yuan Technicalbeneficially owned by the
Company, and such number of shares in thefuture so as to represent, for so long
as any principal and or interest on the Debentures remain unpaid, 66% of the
total registered capital of Song Yuan Technical owned by the Company, the terms
and provisions of such pledge being governed by the Onshore Share Pledge
Agreement executed by the Company and the Secured
Party.  

    

    (xii)          The
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(xi) above.

    

    Without
limiting the generality of the foregoing, the “Collateral” shall
include all investment property and general intangibles respecting ownership,
including, without limitation, the shares of capital stock and the other equity
interests listed on Schedule B hereto (as the same
may be modified from time to time pursuant to the terms hereof), and any other
shares of capital stock and/or other equity interests of any other direct or
indirect subsidiary of Debtor obtained in the future, and, in each case, all
certificates representing such shares and/or equity interests and, in each case,
all rights, options, warrants, stock, other securities and/or equity interests
that may hereafter be received, receivable or distributed in respect of, or
exchanged for, any of the foregoing and all rights arising under or in
connection with the Pledged Securities, including, but not limited to, all
dividends, interest and cash.

     

    Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any
asset which, in the event of an assignment, becomes void by operation of
applicable law or the assignment of which is otherwise prohibited by applicable
law (in each case to the extent that such applicable law is not overridden by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law);
provided, however, that to the
extent permitted by applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable law, this
Agreement shall create a valid security interest in the proceeds of such
asset.

     

    
      
         

      

      
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    (b)           “Intellectual
Property” means the collective reference to all rights, priorities and
privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including, without
limitation, (i) all copyrights arising under the laws of the United States, any
other country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished, all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, (ii) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof, and all applications for letters patent of the United States or any
other country and all divisions, continuations and continuations-in-part
thereof, (iii) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade dress, service marks, logos,
domain names and other source or business identifiers, and all goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common law
rights related thereto, (iv) all trade secrets arising under the laws of the
United States, any other country or any political subdivision thereof, (v) all
rights to obtain any reissues, renewals or extensions of the foregoing, (vi) all
licenses for any of the foregoing, and (vii) all causes of action for
infringement of the foregoing.

    

                  
 (c)            “Majority in
Interest” means, at any time of determination, the majority in
interest (based on then-outstanding principal amounts of Debentures at the time
of such determination) of the Secured Party.

    

                  
 (d)            “Necessary
Endorsement” means undated stock powers endorsed in blank or other
proper instruments of assignment duly executed and such other instruments or
documents as Secured Party (as that term is defined below) may reasonably
request.

    

    (e)            “Obligations” means
all of the liabilities and obligations (primary, secondary, direct,
contingent, sole, joint or several) due or to become due, or that are now or may
be hereafter contracted or acquired, or owing to, of Debtor to the Secured
Party, including, without limitation, all obligations under this Agreement, the
Debentures, and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith, in each case, whether now
or hereafter existing, voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from any of the Secured Party as a
preference, fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to
time.  Without limiting the generality of the foregoing, the term
“Obligations” shall include, without limitation: (i) principal of, and interest
on the Debentures and the loans extended pursuant thereto; (ii) any and all
other fees, indemnities, costs, obligations
and liabilities of the Debtor from time to time under or in connection with this
Agreement, the Debentures, and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith; and
(iii) all amounts (including but not limited to post-petition interest) in
respect of the foregoing that would be payable but for the fact that the
obligations to pay such amounts are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving
Debtor.

    
      
         

      

      
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    (f)       
    “Organizational
Documents” means with respect to Debtor, the documents by which such
Debtor was organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including, without
limitation, any certificates of designation for preferred stock or other forms
of preferred equity) and which relate to the internal governance of such Debtor
(such as bylaws, a partnership agreement or an operating, limited liability or
members agreement).

    

      
 (g)            “Pledged Securities”
shall have the meaning ascribed to such term in Section 4(i).

    

    (h)          
 “UCC”
means the Uniform Commercial Code of the State of New York and or any other
applicable law of any state or states which has jurisdiction with respect to
all, or any portion of, the Collateral or this Agreement, from time to
time.  It is the intent of the Party that defined terms in the UCC
should be construed in their broadest sense so that the term “Collateral” will
be construed in its broadest sense.  Accordingly if there are, from
time to time, changes to defined terms in the UCC that broaden the definitions,
they are incorporated herein and if existing definitions in the UCC are broader
than the amended definitions, the existing ones shall be
controlling.

    

               2.           Grant of Security Interest in Collateral. As an
inducement for the Secured Party to extend the loans as evidenced by the
Debentures and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, the Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to the
Secured Party a security interest in and to, a lien upon and a right of set-off
against all of their respective right, title and interest of whatsoever kind and
nature in and to, the Collateral (a “Security Interest” and,
collectively, the “Security Interests”).
Notwithstanding the foregoing, the Secured Party’s security interest with
respect to the Pledged Securities and its beneficial ownership of the registered
capital of Song Yuan North East Petroleum Technical Service Co. Ltd. shall be
governed by the terms and provisions of the Onshore Share Pledge Agreement
and Option Agreement executed by the Company and the Secured Party on the date
hereof.

    

               3.           Delivery of Certain
Collateral.  Contemporaneously or prior to the execution of
this Agreement, the Debtor shall deliver or cause to be delivered to the Secured
Party (a) any and all certificates and other instruments representing or
evidencing the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral, in each case,
together with all Necessary Endorsements.  The Debtor is,
contemporaneously with the execution hereof, delivering to Secured
Party or have previously delivered to Secured Party, a true and correct
copy of each Organizational Document governing any of the Pledged
Securities.

    
      
         

      

      
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4.             Representations, Warranties,
Covenants and Agreements of the Debtors. Except as set forth under the
corresponding section of the disclosure schedules delivered to the Secured Party
concurrently herewith (the “Disclosure
Schedules”), which Disclosure Schedules shall be deemed a part hereof,
the Debtor represents and warrants to, and covenants and agrees with, the
Secured Party as follows:

    

    (a)           
The Debtor has the requisite corporate, partnership, limited liability company
or other power and authority to enter into this Agreement and otherwise to carry
out its obligations hereunder. The execution, delivery and performance by the
Debtor of this Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and no further
action is required by such Debtor.  This Agreement has been duly
executed by the Debtor.  This Agreement constitutes the legal, valid
and binding obligation of the Debtor, enforceable against the Debtor in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors and by
general principles of equity.

     

      
 (b)           The
Debtor has no place of business or offices where their respective books of
account and records are kept (other than temporarily at the offices of its
attorneys or accountants) or places where Collateral is stored or located,
except as set forth on Schedule A attached
hereto.  Except as specifically set forth on Schedule A, the
Debtor is the record owner of the real property where such Collateral is
located, and there exist no mortgages or other liens on any such real property
except for Permitted Liens (as defined in the Debentures).  Except as
disclosed on Schedule
A, none of such Collateral is in the possession of any consignee, bailee,
warehouseman, Secured Party or processor.

    

    (c)           The
Debtor is the sole owner of the Collateral (except for non-exclusive licenses
granted by Debtor in the ordinary course of business), free and clear of any
liens, security interests, encumbrances, rights or claims, and are fully
authorized to grant the Security Interests.  There is not on file in
any governmental or regulatory authority, agency or recording office an
effective financing statement, security agreement, license or transfer or any
notice of any of the foregoing (other than those that will be filed in favor of
the Secured Party pursuant to this Agreement) covering or affecting any of the
Collateral.  Except pursuant to this Agreement, as long as this
Agreement shall be in effect, the Debtor shall not execute and shall not
knowingly permit to be on file in any such office or agency any other financing
statement or other document or instrument (except to the extent filed or
recorded in favor of the Secured Party pursuant to the terms of this
Agreement).

    
      
         

      

      
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    (d)           No
written claim has been received that any Collateral or Debtor's use of any
Collateral violates the rights of any third party. There has been no adverse
decision to Debtor's claim of ownership rights in or exclusive rights to use the
Collateral in any jurisdiction or to Debtor's right to keep and maintain such
Collateral in full force and effect, and there is no proceeding involving said
rights pending or, to the best knowledge of Debtor, threatened before any court,
judicial body, administrative or regulatory agency, arbitrator or other
governmental authority.

    

    (e)           The
Debtor shall at all times maintain its books of account and records relating to
the Collateral at its principal place of business and its Collateral at the
locations set forth on Schedule A attached
hereto and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Secured Party at least 30 days prior to
such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to perfect the
Security Interests to create in favor of the Secured Party a valid, perfected
and continuing perfected first priority lien in the Collateral.

    

    (f)           This
Agreement creates in favor of the Secured Party a valid security interest
in the Collateral, subject only to Permitted Liens (as defined in the
Debentures) securing the payment and performance of the
Obligations.  Upon making the filings described in the immediately
following paragraph, all security interests created hereunder in any Collateral
which may be perfected by filing Uniform Commercial Code financing statements
shall have been duly perfected.  Except for the filing of the Uniform
Commercial Code financing statements referred to in the immediately following
paragraph, the recordation of the Intellectual Property Security Agreement (as
defined below) with respect to copyrights and copyright applications in the
United States Copyright Office referred to in paragraph (m), the execution and
delivery of deposit account control agreements satisfying the requirements of
Section 9-104(a)(2) of the UCC with respect to each deposit account of the
Debtors, and the delivery of the certificates and other instruments provided in
Section 3, no action is necessary to create, perfect or protect the security
interests created hereunder.  Without limiting the generality of the
foregoing, except for the filing of said financing statements, the recordation
of said Intellectual Property Security Agreement, and the execution and delivery
of said deposit account control agreements, no consent of any third Party and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for (i) the execution,
delivery and performance of this Agreement, (ii) the creation or perfection of
the Security Interests created hereunder in the Collateral or (iii) the
enforcement of the rights of Secured Party and the Secured Party
hereunder.

    
      
         

      

      
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     (g)         The
Debtor hereby authorizes Secured Party to file one or more financing statements
under the UCC, with respect to the Security Interests, with the proper filing
and recording agencies in any jurisdiction deemed proper by it.

    

     (h)         The
execution, delivery and performance of this Agreement by the Debtors does not
(i) violate any of the provisions of any Organizational Documents of Debtor or
any judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation applicable to Debtor or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing Debtor's debt or otherwise) or other understanding to
which Debtor is a party or by which any property or asset of Debtor is bound or
affected. If any, all required consents (including, without limitation, from
stockholders or creditors of Debtor) necessary for Debtor to enter into and
perform its obligations hereunder have been obtained.

    

     (i)          The
capital stock and other equity interests listed on Schedule B hereto (the “Pledged Securities”)
represent such capital stock and other equity interests and registered capital
owned, directly or indirectly, by the Company.  All of the Pledged
Securities are validly issued, fully paid and nonassessable, and the Company is
the legal and beneficial owner of the Pledged Securities, free and clear of any
lien, security interest or other encumbrance except for the security interests
created by this Agreement and other Permitted Liens (as defined in the
Debentures).  The registered capital of Song Yuan North East Petroleum
Technical Service Co. Ltd. has been duly recorded as being owned by the Company
in an amount equal to 90% of the total registered capital.  For
purposes hereof, the term Pledged Securities shall also include any share
capital, capital stock or registered capital of which the Company becomes an
owner after the date hereof.

    

    (j)           The
ownership and other equity interests in partnerships and limited liability
companies (if any) included in the Collateral (the “Pledged Interests”)
by their express terms do not provide that they are securities governed by
Article 8 of the UCC and are not held in a securities account or by any
financial intermediary.

    

    (k)          Except
for Permitted Liens (as defined in the Debentures), the Debtor shall at all
times maintain the liens and Security Interests provided for hereunder as valid
and perfected first priority liens and security interests in the Collateral in
favor of the Secured Party until this Agreement and the Security Interest
hereunder shall be terminated pursuant to Section 11 hereof.  The
Debtor hereby agrees to defend the same against the claims of any and all
persons and entities. The Debtor shall safeguard and protect all Collateral for
the account of the Secured Party.  At the request of Secured Party,
the Debtor will sign and deliver to Secured Party on behalf of the Secured Party
at any time or from time to time one or more financing statements pursuant to
the UCC in form reasonably satisfactory to Secured Party and will pay the cost
of filing the same in all public offices wherever filing is, or is deemed by
Secured Party to be, necessary or desirable to effect the rights and obligations
provided for herein. Without limiting the generality of the foregoing, the
Debtor shall pay all fees, taxes and other amounts necessary to maintain the
Collateral and the Security Interests hereunder, and the Debtor shall obtain and
furnish to Secured Party from time to time, upon demand, such releases and/or
subordinations of claims and liens which may be required to maintain the
priority of the Security Interests hereunder.

    
      
         

      

      
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    (l)          
No Debtor will transfer, pledge, hypothecate, encumber, license, sell or
otherwise dispose of any of the Collateral (except for non-exclusive licenses
granted by a Debtor in its ordinary course of business and sales of inventory by
a Debtor in its ordinary course of business) without the prior written consent
of a Majority in Interest.

    

    (m)         The
Debtor shall keep and preserve its equipment, inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.

    

    (n)          The
Debtor shall use its reasonable efforts to obtain, if available,
through  financially sound and reputable insurers, insurance with
respect to the Collateral, including Collateral hereafter acquired, against loss
or damage of the kinds and in the amounts customarily insured against by
entities of established reputation having similar properties similarly situated
and in such amounts as are customarily carried under similar circumstances by
other such entities and otherwise as is prudent for entities engaged in similar
businesses but in any event sufficient to cover the full replacement cost
thereof. 

    

    (o)          The
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Party promptly, in sufficient detail, of any material adverse change in
the Collateral, and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on the Secured Party’ security
interest, through Secured Party, therein.

    

     (p)         The
Debtor shall promptly execute and deliver to Secured Party such further deeds,
mortgages, assignments, security agreements, financing statements or other
instruments, documents, certificates and assurances and take such further action
as Secured Party may from time to time request and may in its sole discretion
deem necessary to perfect, protect or enforce the Secured Party’ security
interest in the Collateral including, without limitation, if applicable, the
execution and delivery of a separate security agreement with respect to the
Debtor’s Intellectual Property (“Intellectual Property
Security Agreement”) in which the Secured Party have been granted a
security interest hereunder, substantially in a form reasonably acceptable to
Secured Party, which Intellectual Property Security Agreement, other than as
stated therein, shall be subject to all of the terms and conditions
hereof.

    
      
         

      

      
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    (q)          The
Debtor shall permit Secured Party and its representatives to inspect the
Collateral during normal business hours and upon reasonable prior notice, and to
make copies of records pertaining to the Collateral as may be reasonably
requested by Secured Party from time to time.

    

    (r)           The
Debtor shall take all steps reasonably necessary to diligently pursue and seek
to preserve, enforce and collect any rights, claims, causes of action and
accounts receivable in respect of the Collateral.

    

    (s)          The
Debtor shall promptly notify the Secured Party in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal process
levied against any Collateral and of any other information received by such
Debtor that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Party hereunder.

    

    (t)           All
information heretofore, herein or hereafter supplied to the Secured Party by or
on behalf of Debtor with respect to the Collateral is accurate and complete in
all material respects as of the date furnished.

    

    (u)          The
Debtors shall at all times preserve and keep in full force and effect their
respective valid existence and good standing and any rights and franchises
material to its business.

    

    (v)         No
Debtor will change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate
structure, or identity, or add any new fictitious name unless it provides at
least 30 days prior written notice to the Secured Party of such change and, at
the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this Agreement.

    

    (w)         Except
in the ordinary course of business, no Debtor may consign any of its inventory
or sell any of its inventory on bill and hold, sale or return, sale on approval,
or other conditional terms of sale without the consent of Secured Party which
shall not be unreasonably withheld.

    

    (x)          Debtor
may not relocate its chief executive office to a new location without providing
30 days prior written notification thereof to the Secured Party and so long as,
at the time of such written notification, Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection
of the Security Interests granted and evidenced by this
Agreement.

    
      
         

      

      
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 (y)          The Debtor
was organized and remains organized solely under the laws of the state of
Nevada.

    

    (z)           
(i) The actual name of the Debtor is the name set forth in Schedule C attached hereto;
(ii) no Debtor has any trade names except as set forth on Schedule C attached hereto;
(iii) no Debtor has used any name other than that stated in the preamble hereto
or as set forth on Schedule C for the preceding
five years; and (iv) no entity has merged into Debtor or been acquired by Debtor
within the past five years except as set forth on Schedule C.

    

    (aa)          At
any time and from time to time that any Collateral consists of instruments,
certificated securities or other items that require or permit possession by the
secured party to perfect the security interest created hereby, the applicable
Debtor shall deliver such Collateral to Secured Party.

    

            
   (bb)         The
Debtor, in its capacity as issuer, hereby agrees to comply with any and all
orders and instructions of Secured Party regarding the Pledged Interests
consistent with the terms of this Agreement without the further consent of
Debtor as contemplated by Section 8-106 (or any successor section) of the
UCC.  Further, the Debtor agrees that it shall not enter into a
similar agreement (or one that would confer “control” within the meaning of
Article 8 of the UCC) with any other person or entity.

     

    (cc)          The
Debtor shall cause all tangible chattel paper constituting Collateral to be
delivered to Secured Party, or, if such delivery is not possible, then to cause
such tangible chattel paper to contain a legend noting that it is subject to the
security interest created by this Agreement.  To the extent that any
Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).

    

    (dd)         If
there is any investment property or deposit account included as Collateral that
can be perfected by “control” through an account control agreement, the
applicable Debtor shall cause such an account control agreement, in form and
substance in each case satisfactory to Secured Party, to be entered into and
delivered to Secured Party .

    

    (ee)          To
the extent that any Collateral consists of letter-of-credit rights, the
applicable Debtor shall cause the issuer of each underlying letter of credit to
consent to an assignment of the proceeds thereof to the Secured
Party.

    

    (ff)           To
the extent that any Collateral is in the possession of any third party, the
applicable Debtor shall join with Secured Party in notifying such third party of
the Secured Party’ security interest in such Collateral and shall use its best
efforts to obtain an acknowledgement and agreement from such third party with
respect to the Collateral, in form and substance reasonably satisfactory to
Secured Party.

    
      
         

      

      
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    (gg)         If
Debtor shall at any time hold or acquire a commercial tort claim, such Debtor
shall promptly notify the Secured Party in a writing signed by such Debtor of
the particulars thereof and grant to the Secured Party in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
Secured Party.

    

    (hh)         The
Debtor shall immediately provide written notice to the Secured Party of any and
all accounts which arise out of contracts with any governmental authority and,
to the extent necessary to perfect or continue the perfected status of the
Security Interests in such accounts and proceeds thereof, shall execute and
deliver to Secured Party an assignment of claims for such accounts and cooperate
with Secured Party in taking any other steps required, in its judgment, under
the Federal Assignment of Claims Act or any similar federal, state or local
statute or rule to perfect or continue the perfected status of the Security
Interests in such accounts and proceeds thereof.

    

     (ii)           The
Debtor shall vote the Pledged Securities to comply with the covenants and
agreements set forth herein, the Securities Purchase Agreement  and in
the Debenture.

    

     (jj)           The
Debtor shall register the pledge of the applicable Pledged Securities on the
books of such Debtor and, when applicable, with the appropriate governmental
authority.  The Debtor shall notify each issuer of Pledged Securities
to register the pledge of the applicable Pledged Securities in the name of the
Secured Party on the books of such issuer.  Further, except with
respect to certificated securities delivered to Secured Party, the applicable
Debtor shall deliver to Secured Party an acknowledgement of pledge (which, where
appropriate, shall comply with the requirements of the relevant UCC with respect
to perfection by registration) signed by the issuer of the applicable Pledged
Securities, which acknowledgement shall confirm that: (a) it has registered the
pledge on its books and records; and (b) at any time directed by Secured Party
during the continuation of an Event of Default, such issuer will transfer the
record ownership of such Pledged Securities into the name of any designee of
Secured Party, will take such steps as may be necessary to effect the transfer,
and will comply with all other instructions of Secured Party regarding such
Pledged Securities without the further consent of the applicable
Debtor.

    

    (kk)         
In the event that, upon an occurrence of an Event of Default, Secured Party
shall sell all or any of the Pledged Securities to another party or Party
(herein called the “Transferee”) or shall
purchase or retain all or any of the Pledged Securities, the Debtor shall, to
the extent applicable: (i) deliver to Secured Party or the Transferee, as the
case may be, the articles of incorporation, bylaws, minute books, stock
certificate books, corporate seals, deeds, leases, indentures, agreements,
evidences of indebtedness, books of account, financial records and all other
Organizational Documents and records of the Debtors and their direct and
indirect subsidiaries; (ii) use its best efforts to obtain resignations of the
persons then serving as officers and directors of the Debtors and their direct
and indirect subsidiaries, if so requested; and (iii) use its best
efforts to obtain any approvals that are required by any governmental or
regulatory body in order to permit the sale of the Pledged Securities to the
Transferee or the purchase or retention of the Pledged Securities by Secured
Party and allow the Transferee or Secured Party to continue the business of the
Debtors and their direct and indirect subsidiaries.

     

    
      
         

      

      
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    (ll)            Without
limiting the generality of the other obligations of the Debtors hereunder, the
Debtor shall promptly (i) cause to be registered at the United States Copyright
Office all of its material copyrights, (ii) cause the security interest
contemplated hereby with respect to all Intellectual Property registered at the
United States Copyright Office or United States Patent and Trademark Office to
be duly recorded at the applicable office, and (iii) give Secured Party notice
whenever it acquires (whether absolutely or by license) or creates any
additional material Intellectual Property.

    

    (mm)        The
Debtor will from time to time, at the joint and several expense of the Debtors,
promptly execute and deliver all such further instruments and documents, and
take all such further action as may be necessary or desirable, or as Secured
Party may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce their rights and remedies hereunder and with
respect to any Collateral or to otherwise carry out the purposes of this
Agreement.

    

    (nn)          Schedule D attached hereto
lists all of the patents, patent applications, trademarks, trademark
applications, registered copyrights, and domain names owned by any of the Debtor
as of the date hereof.  Schedule D lists all material
licenses in favor of Debtor for the use of any patents, trademarks, copyrights
and domain names as of the date hereof.  All material patents and
trademarks of the Debtors have been duly recorded at the United States Patent
and Trademark Office and all material copyrights of the Debtors have been duly
recorded at the United States Copyright Office.

    

    (oo)          None
of the account debtors or other persons or entities obligated on any of the
Collateral is a governmental authority covered by the Federal Assignment of
Claims Act or any similar federal, state or local statute or rule in respect of
such Collateral.

    

               5.          
 Effect of Pledge on
Certain Rights. If any of the Collateral
subject to this Agreement consists of nonvoting equity or ownership interests
(regardless of class, designation, preference or rights) that may be converted
into voting equity or ownership interests upon the occurrence of certain events
(including, without limitation, upon the transfer of all or any of the other
stock or assets of the issuer), it is agreed that the pledge of such equity or
ownership interests pursuant to this Agreement or the enforcement of any of
Secured Party’s rights hereunder shall not be deemed to be the type of event
which would trigger such conversion rights notwithstanding any provisions in the
Organizational Documents or agreements to which Debtor is subject or to which
Debtor is party.

    
      
         

      

      
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               6.
             Defaults. The following events
shall be “Events of
Default”:

    

    (a)   The
occurrence of an Event of Default (as defined in the Debentures) under the
Debentures or under the Securities Purchase Agreement between the Company and
Secured Party dated of even date herewith;

    

    (b)   Any
representation or warranty of Debtor in this Agreement or the Securities
Purchase Agreement shall prove to have been incorrect in any material respect
when made;

    

    (c)   The
failure by Debtor to observe or perform any of its obligations hereunder for
five (5) business days after delivery to such Debtor of notice of such failure
by or on behalf of a Secured Party unless such default is capable of cure but
cannot be cured within such time frame and such Debtor is using best efforts to
cure same in a timely fashion;

    

    (d)   If
any provision of this Agreement shall at any time for any reason be declared to
be null and void, or the validity or enforceability thereof shall be contested
by Debtor, or a proceeding shall be commenced by Debtor, or by any governmental
authority having jurisdiction over Debtor, seeking to establish the invalidity
or unenforceability thereof, or Debtor shall deny that Debtor has any liability
or obligation purported to be created under this Agreement; or

    

    (e)  If
Debtor shall sell any securities (including any debt or equity securities)
representing capital stock of Song Yuan Technical, or grant or issue or sell any
securities or options to acquire any ownership interest in Song Yuan Technical,
such that the Debtor ceases to be the legal and beneficial owner of 90% of the
capital stock (or registered capital) of Song Yuan Technical.

    

               7.           
  Duty To Hold In
Trust.

    

    (a)           Upon
the occurrence of any Event of Default and at any time thereafter, the Debtor
shall, upon receipt of any revenue, income, dividend, interest or other sums
subject to the Security Interests, whether payable pursuant to the Debentures or
otherwise, or of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such sum, hold the same in trust for the
Secured Party and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Secured Party, pro-rata in proportion to their
respective
then-currently outstanding principal amount of Debentures for application to the
satisfaction of the Obligations (and if any Debenture is not outstanding,
pro-rata in proportion to the initial purchases of the remaining
Debentures).

    
      
         

      

      
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    (b)           If
Debtor shall become entitled to receive or shall receive any securities or other
property (including, without limitation, shares of Pledged Securities or
instruments representing Pledged Securities acquired after the date hereof, or
any options, warrants, rights or other similar property or certificates
representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its
direct or indirect subsidiaries) in respect of the Pledged Securities (whether
as an addition to, in substitution of, or in exchange for, such Pledged
Securities or otherwise), such Debtor agrees to (i) accept the same as Secured
Party of the Secured Party; (ii) hold the same in trust on behalf of and ; and
(iii) to deliver any and all certificates or instruments evidencing the same to
Secured Party on or before the close of business on the fifth business day
following the receipt thereof by such Debtor, in the exact form received
together with the Necessary Endorsements, to be held by Secured Party subject to
the terms of this Agreement as Collateral.

    

               8.           
  Rights and Remedies
Upon Default.

    

               (a)         
  Upon the occurrence of any Event of Default and at any time
thereafter, the Secured Party, acting through Secured Party, shall have the
right to exercise all of the remedies conferred hereunder and under the
Debentures, and the Secured Party shall have all the rights and remedies of a
secured party under the UCC.  Without limitation, Secured Party, shall
have the following rights and powers:

    

    (i)            
Secured Party shall have the right to take possession of the Collateral and, for
that purpose, enter, with the aid and assistance of any person, any premises
where the Collateral, or any part thereof, is or may be placed and remove the
same, and the Debtor shall assemble the Collateral and make it available to
Secured Party at places which Secured Party shall reasonably select, whether at
such Debtor's premises or elsewhere, and make available to Secured Party,
without rent, all of such Debtor’s respective premises and facilities for the
purpose of Secured Party taking possession of, removing or putting the
Collateral in saleable or disposable form.

    

    (ii)            
Upon notice to the Debtor by Secured Party, all rights of the Debtor to exercise
the voting and other consensual rights which it would otherwise be entitled to
exercise and all rights of the Debtor to receive the dividends and interest
which it would otherwise be authorized to receive and retain, shall
cease.  Upon such notice, Secured Party shall have the right to
receive, any interest, cash dividends or other payments on the Collateral and,
at the option of Secured Party, to exercise in  Secured Party’s
discretion all voting rights pertaining thereto.  Without limiting the
generality of the foregoing, Secured Party shall have the right (but not the
obligation) to exercise all rights with respect to the Collateral as it were the
sole and absolute owner thereof, including, without limitation, to vote and/or
to exchange, at its sole discretion, any or all of the Collateral in connection
with a merger, reorganization, consolidation, recapitalization or other
readjustment concerning or involving the Collateral or Debtor or any of its
direct or indirect subsidiaries.

    
      
         

      

      
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    (iii)         
 Subject to applicable law, including any limitations under the law’s of
the People’s Republic of China,  Secured Party shall have the right to
operate the business of the Debtor using the Collateral and shall have the right
to assign, sell, lease or otherwise dispose of and deliver all or any part of
the Collateral, at public or private sale or otherwise, either with or without
special conditions or stipulations, for cash or on credit or for future
delivery, in such parcel or parcels and at such time or times and at such place
or places, and upon such terms and conditions as Secured Party may deem
commercially reasonable, all without (except as shall be required by applicable
statute and cannot be waived) advertisement or demand upon or notice to Debtor
or right of redemption of a Debtor, which are hereby expressly
waived.  Upon each such sale, lease, assignment or other transfer of
Collateral, Secured Party may, unless prohibited by applicable law which cannot
be waived, purchase all or any part of the Collateral being sold, free from and
discharged of all trusts, claims, right of redemption and equities of Debtor,
which are hereby waived and released.

    

    (iv)           Secured
Party shall have the right (but not the obligation) to notify any account
debtors and any obligors under instruments or accounts to make payments directly
to Secured Party, on behalf of the Secured Party, and to enforce the Debtors’
rights against such account debtors and obligors.

    

    (v)            Secured
Party, may (but is not obligated to) direct any financial intermediary or any
other person or entity holding any investment property to transfer the same to
Secured Party or its designee.

    

    (vi)           Secured
Party may (but is not obligated to) transfer any or all Intellectual
Property registered in the name of Debtor at the United States Patent and
Trademark Office and/or Copyright Office into the name of the Secured Party or
any designee or any purchaser of any Collateral.

    

               (b)         
  Secured Party shall comply with any applicable law in connection
with a disposition of Collateral and such compliance will not be considered
adversely to affect the commercial reasonableness of any sale of the
Collateral.  Secured Party may sell the Collateral without giving any
warranties and may specifically disclaim such warranties.  If Secured
Party sells any of the Collateral on credit, the Debtor will only be credited
with payments actually made by the purchaser.  In addition, the Debtor
waives any and all rights that it may have to a judicial hearing in advance of
the enforcement of any of Secured Party’s rights and remedies hereunder,
including, without limitation, Secured Party's right following an Event
of Default to take immediate possession of the Collateral and to exercise its
rights and remedies with respect thereto. The Debtor hereby agrees that Secured
Party shall have the right to sell the Pledged Securities to any third party
willing to purchase the Pledged Securities at Fair Market Value (for purposes
of this Section 8, “FMV”).  FMV shall mean the purchase price
that a willing buyer would be willing to pay and a willing seller would be
willing to accept in an arm's length transaction, provided that neither party is
under any compulsion to buy or sell, as the case may be.  The FMV
shall be evidenced by a written offer or purchase agreement, a copy of which
shall be made available to the Debtor. In the event of the sale of the Pledged
Securities in accordance with this section 8, the sale of such Pledged
Securities and be deemed commercially reasonable.

     

    
      
         

      

      
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    (c)      
     For the purpose of enabling Secured Party to
further exercise rights and remedies under this Section 8 or elsewhere provided
by agreement or applicable law, the Debtor hereby grants to Secured Party, for
the benefit of Secured Party and the Secured Party, an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to such
Debtor) to use, license or sublicense following an Event of Default, any
Intellectual Property now owned or hereafter acquired by such Debtor, and
wherever the same may be located, and including in such license access to all
media in which any of the licensed items may be recorded or stored and to all
computer software and programs used for the compilation or printout
thereof.

    

    (d)          
Notwithstanding anything to the contrary in this Agreement, the parties
acknowledge and agree that the rights of Secured Party with respect to the
capital stock (or registered capital) of Song Yuan  shall be subject
to and governed by the Onshore Pledge Agreement and the Option Agreement
executed by the Company and the Secured Party. 

    

               9.            Applications of Proceeds. The
proceeds of any such sale, lease or other disposition of the Collateral
hereunder or from payments made on account of any insurance policy insuring any
portion of the Collateral shall be applied first, to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including, without limitation, any taxes, fees and other costs incurred in
connection therewith) of the Collateral, to the reasonable attorneys’ fees and
expenses incurred by Secured Party in enforcing the Secured Party’ rights
hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Party (based on then-outstanding principal amounts of Debentures at the
time of any such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Party shall pay to the
applicable Debtor any surplus proceeds. If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Party is legally entitled, the Debtors will be
liable for the deficiency, together with interest thereon, at the rate of 18%
per annum or the lesser amount permitted by applicable law (the “Default Rate”),
and the reasonable fees of any attorneys employed by the Secured Party to
collect such deficiency.  To the extent permitted by applicable law,
the Debtor waives all claims, damages and demands against the Secured Party
arising out of the repossession, removal, retention or sale of the Collateral,
unless due solely to the gross negligence or willful misconduct of the Secured
Party as determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.

    
      
         

      

      
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              10.           Securities Law
Provision.  The Debtor recognizes that Secured Party may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
“Securities
Laws”), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof.  The Debtor agrees that sales so
made may be at prices and on terms less favorable than if the Pledged Securities
were sold to the public, and that Secured Party has no obligation to delay the
sale of any Pledged Securities for the period of time necessary to register the
Pledged Securities for sale to the public under the Securities
Laws.  The Debtor shall cooperate with Secured Party in its attempt to
satisfy any requirements under the Securities Laws (including, without
limitation, registration thereunder if requested by Secured Party) applicable to
the sale of the Pledged Securities by Secured Party.

     

              11.           Costs and Expenses. The Debtor
agrees to pay all reasonable out-of-pocket fees, costs and expenses incurred in
connection with any filing required hereunder, including without limitation, any
financing statements pursuant to the UCC, continuation statements, partial
releases and/or termination statements related thereto or any expenses of any
searches reasonably required by Secured Party.  The Debtors shall also
pay all other claims and charges which in the reasonable opinion of Secured
Party is reasonably likely to prejudice, imperil or otherwise affect the
Collateral or the Security Interests therein.  The Debtors will also,
upon demand, pay to Secured Party the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts,
which Secured Party, may incur in connection with (i) the enforcement of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, or (iii) the exercise or
enforcement of any of the rights of the Secured Party under the Debentures.
Until so paid, any fees payable hereunder shall be added to the principal amount
of the Debentures and shall bear interest at the Default Rate.

    

              12.           Responsibility for Collateral.
The Debtors assume all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or diminished by
reason of the loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason.  Without limiting the generality of the
foregoing, (a) neither Secured Party nor any Secured Party (i) has any duty
(either before or after an Event of Default) to collect any amounts in respect
of the Collateral or to preserve any rights relating to the Collateral, or (ii)
has any obligation to clean-up or otherwise prepare the Collateral for sale, and
(b) the Debtor shall remain obligated and liable under each contract or
agreement included in the Collateral to be observed or performed by such Debtor
thereunder.  Neither Secured Party nor any Secured Party shall have
any obligation or liability under any such contract or agreement by reason of or
arising out of this Agreement or the receipt by Secured Party or any Secured
Party of any payment relating to any of the Collateral, nor shall Secured Party
or any Secured Party be obligated in any manner to perform any of the
obligations of Debtor under or pursuant to any such contract or agreement, to
make inquiry as to the nature or sufficiency of any payment received by Secured
Party or any Secured Party in respect of the Collateral or as to the sufficiency
of any performance by any party under any such contract or agreement, to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to Secured Party or to
which Secured Party or any Secured Party may be entitled at any time or
times.

    
      
         

      

      
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              13.           Security Interests Absolute. All rights of the
Secured Party and all obligations of the Debtors hereunder, shall be absolute
and unconditional, irrespective of: (a) any lack of validity or enforceability
of this Agreement, the Debentures or any agreement entered into in connection
with the foregoing, or any portion hereof or thereof; (b) any change in the
time, manner or place of payment or performance of, or in any other term of, all
or any of the Obligations, or any other amendment or waiver of or any consent to
any departure from the Debentures or any other agreement entered into in
connection with the foregoing; (c) any exchange, release or nonperfection of any
of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guarantee, or any other
security, for all or any of the Obligations; (d) any action by the Secured Party
to obtain, adjust, settle and cancel in its sole discretion any insurance claims
or matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or equitable defense
available to a Debtor, or a discharge of all or any part of the Security
Interests granted hereby.  Until the Obligations shall have been paid
and performed in full, the rights of the Secured Party shall continue even if
the Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy.  The Debtor
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance. In the event that at any time any
transfer of any Collateral or any payment received by the Secured Party
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Party, then, in any such event, the Debtor’s
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof.  The Debtor waives
all right to require the Secured Party to proceed against any other person or
entity or to apply any Collateral which the Secured Party may hold at any time,
or to marshal assets, or to pursue any other remedy. The Debtor waives any
defense arising by reason of the application of the statute of limitations to
any obligation secured hereby.

    
      
         

      

      
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              14.           Term of Agreement. This
Agreement and the Security Interests shall terminate on the date on which all
payments under the Debentures have been indefeasibly paid in full and all other
Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtors contained in Section 4.11 of the Securities Purchase
Agreement shall be deemed incorporated herein and shall survive and remain
operative and in full force and effect regardless of the termination of this
Agreement.

    

     
15.           Power of Attorney; Further
Assurances.

     

    (a)           The
Debtor authorizes Secured Party, and does hereby make, constitute and appoint
Secured Party and its officers, Secured Party, successors or assigns with
full power of substitution, as such Debtor’s true and lawful attorney-in-fact,
with power, in the name of Secured Party or such Debtor, to, after the
occurrence and during the continuance of an Event of Default, (i) endorse any
note, checks, drafts, money orders or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in respect of
the Collateral that may come into possession of Secured Party; (ii) to sign and
endorse any financing statement pursuant to the UCC or any invoice, freight or
express bill, bill of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with accounts, and
other documents relating to the Collateral; (iii) to pay or discharge taxes,
liens, security interests or other encumbrances at any time levied or placed on
or threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and sue for monies due in respect of the Collateral; (v) to
transfer any Intellectual Property or provide licenses respecting any
Intellectual Property; and (vi) generally, at the option of Secured Party, and
at the expense of the Debtors, at any time, or from time to time, to execute and
deliver any and all documents and instruments and to do all acts and things
which Secured Party deems necessary to protect, preserve and realize upon the
Collateral and the Security Interests granted therein in order to effect the
intent of this Agreement and the Debentures all as fully and effectually as the
Debtors might or could do; and the Debtor hereby ratifies all that said attorney
shall lawfully do or cause to be done by virtue hereof.  This power of
attorney is coupled with an interest and shall be irrevocable for the term of
this Agreement and thereafter as long as any of the Obligations shall be
outstanding.  The designation set forth herein shall be deemed to
amend and supersede any inconsistent provision in the Organizational Documents
or other documents or agreements to which Debtor is subject or to which Debtor
is a party.  Without limiting the generality of the foregoing, after
the occurrence and during the continuance of an Event of Default, Secured Party
is specifically authorized to execute and file any applications for or
instruments of transfer and assignment of any patents, trademarks, copyrights or
other Intellectual Property with the United States Patent and Trademark Office
and the United States Copyright Office.

    
      
         

      

      
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     (b)           On
a continuing basis, the Debtor will make, execute, acknowledge, deliver, file
and record, as the case may be, with the proper filing and recording agencies in
any jurisdiction, including, without limitation, the jurisdictions indicated on
Schedule C
attached hereto, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably requested by
Secured Party, to perfect the Security Interests granted hereunder and otherwise
to carry out the intent and purposes of this Agreement, or for assuring and
confirming to Secured Party the grant or perfection of a perfected security
interest in all the Collateral under the UCC.

    

    (c)           The
Debtor hereby irrevocably appoints Secured Party as such Debtor’s
attorney-in-fact, with full authority in the place and instead of such Debtor
and in the name of such Debtor, from time to time in Secured Party’s discretion,
to take any action and to execute any instrument which Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement, including
the filing, in its sole discretion, of one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral without the
signature of such Debtor where permitted by law, which financing statements may
(but need not) describe the Collateral as “all assets” or “all personal
property” or words of like import, and ratifies all such actions taken by
Secured Party.  This power of attorney is coupled with an interest and
shall be irrevocable for the term of this Agreement and thereafter as long as
any of the Obligations shall be outstanding.

    

        
         16.           Notices. All notices,
requests, demands and other communications hereunder shall be subject to the
notice provision of the Purchase Agreement (as such term is defined in the
Debentures).

    

                 
17.           Other Security. To the extent
that the Obligations are now or hereafter secured by property other than the
Collateral, endorsement or property of any other person, firm, corporation or
other entity, then Secured Party shall have the right, in its sole discretion,
to pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Secured Party’
rights and remedies hereunder.

    

              18.           Miscellaneous.

     

    (a)           No
course of dealing between the Debtor and the Secured Party, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder or under the Debentures shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.

    

    (b)           All
of the rights and remedies of the Secured Party with respect to the Collateral,
whether established hereby or by the Debentures or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    (c)           This
Agreement, together with the exhibits and schedules hereto, contain the entire
understanding of the Party with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the Party acknowledge have been merged into this
Agreement and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Debtor and the Secured
Party or, in the case of a waiver, by the party against whom enforcement of any
such waived provision is sought.

    

    (d)           If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the Party hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the Party that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

    

    (e)           No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such
right.

    

    (f)
           This Agreement
shall be binding upon and inure to the benefit of the Party and their successors
and permitted assigns.  The Company may not assign this Agreement or
any rights or obligations hereunder without the prior written consent of each
Secured Party (other than by merger).  Any Secured Party may assign
any or all of its rights under this Agreement to any Person to whom such Secured
Party assigns or transfers any Securities, provided such transferee agrees in
writing to be bound, with respect to the transferred Securities, by the
provisions of this Agreement that apply to the “Secured Party.”

    

    (g)           Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    (h)         
All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof.  The Debtor agrees that
all proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Debentures in law or in
equity (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, partners, members, employees or Secured
Partys) shall be commenced exclusively before the International Chamber of
Commerce to be held in the City of New York, Borough of Manhattan, United States
of America and shall be determined by three arbitrators, and otherwise held
in accordance with its rules.  Each party shall choose one arbitrator
and the two arbitrators shall choose the third.  The third arbitrator
so chosen shall have a background in either corporate finance or banking law.
The arbitration shall be conducted in the English language and the arbitration
award shall include the allocation of costs and expenses among the parties. The
arbitration ruling shall be final and binding.  Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. 

    

    (i)            This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.

    

    (j)            The
Debtor shall indemnify, reimburse and hold harmless Secured Party and the
Secured Party and their respective partners, members, shareholders, officers,
directors, employees and Secured Party (and any other persons with other
titles that have similar functions) (collectively, “Indemnitees”) from
and against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the cost
of investigating and defending any of the foregoing) imposed on, incurred by or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined
by a final, nonappealable decision of a court of competent
jurisdiction.  This indemnification provision is in addition to, and
not in limitation of, any other indemnification provision in the Debentures, the
Purchase Agreement (as such term is defined in the Debentures) or any other
agreement, instrument or other document executed or delivered in connection
herewith or therewith.

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    (l)           
Nothing in this Agreement shall be construed to subject Secured Party or any
Secured Party to liability as a partner in Debtor or any if its direct or
indirect subsidiaries that is a partnership or as a member in Debtor or any of
its direct or indirect subsidiaries that is a limited liability company, nor
shall Secured Party or any Secured Party be deemed to have assumed any
obligations under any partnership agreement or limited liability company
agreement, as applicable, of  Debtor or any if its direct or indirect
subsidiaries or otherwise, unless and until any such Secured Party exercises its
right to be substituted for Debtor as a partner or member, as applicable,
pursuant hereto.

    

    (m)         
To the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of any
partner or member, as applicable, of Debtor or any direct or indirect subsidiary
of Debtor or compliance with any provisions of any of the Organizational
Documents, the Debtor hereby grant such consent and approval and waive any such
noncompliance with the terms of said documents.

    

    [SIGNATURE
PAGES FOLLOW]

     

     

     

     

     

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    

    

                IN
WITNESS WHEREOF, the Parties hereto have caused this Security Agreement to
be duly executed on the day and year first above written.

    
 

    

    
      	 
      CHINA
      NORTH EAST PETROLEUM HOLDINGS, INC.  
	 	 
	 By:	
               /s/ Wang Hongjun

            
	 	Name:
      Wang Hongjun
	 	Title:
      Chairman and President
	 	 
	 	 
	 	 
      
	 
      LOTUSBOX
      INVESTMENTS LIMITED  
	 	 
	 By:	
              /s/ Diana The Hui Ling

            
	 	Name:
      Diana The Hui Ling
	 	Title:
      General Counsel, signing authority pursuant to Lotusbox Investments
      Limited’s Board of Directors’ Resolutions dated 25 February
  2008

    

     

     

     

     

     

    
 

    25ex10_3.htm

  
    Exhibit 10.3

     

     

    
      	
               

               

               

              DATED:February 28
      2008

              日期:2008年2月28日

               

              CHINA
      NORTH EAST PETROLEUM HOLDINGS LIMITED

              中国东北石油控股有限公司

              as
      the Pledgor

              出质人

               

              And/及

               

              LOTUSBOX
      INVESTMENTS LIMITED

              as
      the pledgee

              质权人

               

               

            
	
               

                
      

              AGREEMENT
      OF PLEDGE OVER SHARES IN

              SONG
      YUAN NORTHEAST PETRO-TECHNOLOGY SERVICE CO.,LTD.

              (松原市东北石油技术服务有限公司)

              (股权质押协议)

              
                
       

               

               

            
	 
      

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    THIS AGREEMENT is dated February
28, 2008 and is by and between:

     

    本协议由以下双方于2008年2月28日在新加坡订立:

    

    
      	
              (1)

            	
              CHINA NORTH EAST PETROLEUM
      HOLDINGS LIMITED, a corporation
      incorporated and established under the laws of the state of Nevada, as the
      pledgor (the Pledgor);

            

    

     

    中国东北石油控股有限公司,一家依据内华达州法律设立的公司,作为出质人(“出质人”);

     

    
      	
              (2)

            	
              LOTUSBOX INVESTMENTS LIMITED
      (with its successors in such capacity), a corporation
      incorporated and established under the laws of the British Virgin Islands,
      as the Pledgee (the Pledgee),

            

    

     

    LOTUSBOX
INVESTMENTS LIMITED(及其有相应权限的继受者),一家依据英属维尔京群岛法律设立的公司,作为质权人(“质权人”)。

     

    each a
Party and collectively,
the Parties.

    以上双方单称“一方”,合称“双方”。

     

    WHEREAS,

     

    鉴于

     

    
      	
              (A)

            	
              The
      Pledgor is entering into this Agreement to provide security for the
      performance of the obligations under the Transaction Documents as defined
      under the Securities Purchase Agreement (the SPA)dated February 28,
      2008. The Pledgee is going to subscribe for Debentures and Warrants (as
      defined in the SPA) (the Subscription Amount) in
      aggregate of US$15,000,000 in accordance with the Transaction
      Documents.

            
	 	 

    

    
      	
              (A)

            	
              出质人订立本协议作为其履行于2008年2月28日签订的债券认购合同(“购债合同”)下相关购债交易文件(“购债交易文件“)的担保。质权人将根据购债交易文件购买总计为1500万美元的公司债券(见购债合同的定义)(“购债金额“)。

            
	 	 

    

    
      	
              (B)

            	
              The
      Pledgor is the registered and beneficial owner of 90% of issued and paid
      up ordinary shares in the capital of Song Yuan Northeast Petro-Technology
      Service Co., Ltd. (the
      SY), a contractual sino foreign joint venture. The registration
      number of SY as stated in its business license is Qi Zuo Ji Zong Zi
      Numbered 000182(企作吉总字第000182号). The
      registered address of SY is Comprehensive Office Building, Zhan Jiang
      Road, Youth Street, Economic and Technology Development District, Song
      Yuan, Jilin Province, the People’s Republic of China (the PRC).

            
	 	 

    

    
      	
              (B)

            	
              出质人为松原市东北石油技术服务有限公司(“松原公司”),一中外合作经营企业,的已发行并缴付出资和登记的90%普通股所有人。松原公司营业执照的注册号为“企作吉

            

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              字第000182号”,其注册地址为中华人民共和国(“中国”)松原市经济技术开发区青年大街湛江路综合写字楼。

            
	 	 

    

    
      	
              (C)

            	
              The
      Parties agree that the Pledgor Pledges its 66% shares in SY as security
      for the Subscription Amount provided by the Pledgee in accordance with the
      Transaction Documents.

            
	 	 

    

    
      	
              (C)

            	
              双方同意出质人将其持有的松原公司66%股权作为质权人根据购债交易文件认购债券金额的担保。

            

    

    

    IT IS AGREED as
follows:

     

    双方兹同意如下:

     

    
      	
              1. 

            	
              DEFINITIONS
      AND INTERPRETATION/定义与解释

            

    

    
      	 	 
	
              1.1 
    

            	
              Definitions/定义

            

    

     

    Unless
otherwise defined herein, any words or expressions defined or construed in the
SPA, shall have the same definition or construction when used
herein.

     

    除非本协议另有界定,购债合同中的相关用词或表述的定义或解释,在本协议中使用时应当有相同的定义或解释。

    

    In this
Agreement, except so far as the context otherwise requires:

     

    本协议中,除非上下文另外规定:

     

    Directors mean the directors
for the time being of SY.

     

    董事指松原公司目前的董事。

     

    Enforcement Event
means:

     

    
      	
               
      

            	
              (i)

            	
              any
      failure of the due and full payment or repayment of part or all of Secured
      Total Indebtedness by the Pledgor to the Pledgee in accordance with the
      SPA and the Transaction Documents;

            
	 	 	 

    

    
      	
               
      

            	
              (1)

            	
              质押权实现事件指出质人未能根据购债合同及购债交易文件向质权人按时足额支付或偿付全部或部分担保债务总额的任何情形;

            
	 	 	 

    

    
      	
               
      

            	
              (ii)

            	
              any
      procedures of dissolution, winding up or bankruptcy or appointment of
      receiver against the Pledgor is initiated;

            
	 	 	 

    

    
      	
               
      

            	
              (2)

            	
              出质人有任何解散、清算或者破产的程序启动或者破产管理人被任命;

            
	 	 	 

    

    
      	
               
      

            	
              (iii)

            	
              any
      occurrence of events as agreed in the Transaction Documents or this
      Agreement that causes the enforcement of the Pledged
    Shares;

            
	 	 	 

    

    
      	
               
      

            	
              (3)

            	
              任何购债交易文件或本协议规定的导致出质股权被执行的事件发生;

            

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (iv)

            	
              any
      other legally provided event that causes the enforcement of the Pledged
      Shares.

            

    

    
      	 	 	 
	
               
      

            	
              (4)

            	
              任何其他法定的导致出质股权被执行的事件。

            

    

     

    Final Release Date means the
date on which the Pledgee is satisfied that all obligations of the Pledgor under
the Transaction Documents has been fully and irrevocably performed or duly
discharged by the Pledgee and no further obligation shall be performed and the
Pledge is released as a result.

     

    质押解除日指某日期,在该日出质人于购债交易文件项下的所有义务均以令质权人滿意的方式全部并且不可撤销地履行完毕或已被质权人以适当方式解除,并且出质人没有需要继续履行的其他义务,从而质押被解除。

     

    Future Shares
means:

    将来可获股权指:

     

    
      	
               
      

            	
              (i)

            	
              any
      further shares (whether ordinary, preference or otherwise) from time to
      time allotted by SY to the Pledgor (whether by way of rights, bonus or in
      any other manner whatsoever); and

            

    

    
      	 	 	 
	
               
      

            	
              1.

            	
              松原公司不时分配(无论是通过行权权、红利股或其他任何方式)给出质人的任何进一步的股权(无论是普通股、优先股或其他);以及

            

    

    
      	 	 	 
	
               
      

            	
              (ii)

            	
              any
      shares (whether ordinary, preference or otherwise) in any other company
      from time to time acquired by or allotted to the Pledgor in respect of the
      Pledged Shares and the further shares described in paragraphs (i) above as
      a result of the reconstruction or amalgamation of SY or its successor in
      title.

            

    

    
      	 	 	 
	
               
      

            	
              2.

            	
              由于松原公司或其权利继受者重组或合并,出质人从任何其他公司不时地认购或获得分配的与出质股权和上述第1项获得的进一步股权相对应的任何股权(无论是普通股、优先股或其他)。

            

    

     

    The
Future Shares (if any) shall be regarded as part of the Pledged Shares and be
pledged and enforced in the manner as agreed in this Agreement no matter whether
the relevant clauses of this Agreement mention the Future Shares or
not.

     

    将来可获股权(如有)应视为出质股权的一部分,并且按照本协议约定的方式进行质押和执行,而不管本协议相关条款是否提到将来可获股权。

     

    Pledge means all or any of the
security created over the Pledged Shares and Related Rights by or pursuant to
this Agreement for the full and due performance of the Transaction
Documents.

     

    质押指根据本协议为担保购债交易文件的按时完全履行而根据本协议在出质股权和其相关权益上设立的全部或任何担保。

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    Pledged Shares means the duly
registered and fully paid up shares in the registered capital of SY,
constituting 66% of the registered capital of SY now legally and beneficially
owned by the Pledgor.

     

    出质股权指目前由出质人合法持有和受益的、经有效登记并全额出资的、占松原公司66%注冊资本的股权。

     

    Related Rights means all
dividends, interest, income and other distributions or payable on the Pledged
Shares and all stocks, warrants, securities, rights, money or property accruing
or offered at any time and from time to time by way of conversion, redemption,
bonus, preference, option or otherwise to or in respect of the Pledged Shares or
derived from all or any of the Pledged Shares or any derivatives thereof and all
allotments, offers and benefits whatsoever accruing, offered or arising in
respect of the same including the proceeds of any sale of any of the Pledged
Shares.

     

    相关权益指与出质股权相关的应付红利、股息、收入以及其他分配,或在任何时候通过转股、赎回、红利、优先股、期权或其他形式不时产生或获供的与出质股权相关或自出质股权衍生的所有股票、权证、证券、行权权利、现金或财产,或相关衍生金融工具以及所有与出质股权相关的任何分配、要约和收益,包括出质股权出售所获得的转让款。

     

    Secured Total Indebtedness
means all amounts outstanding pursuant to the terms of the Transaction
Documents ,secured with the security as provided in this Agreement, and the
interest accrued, punitive interests, liquidated damages, indemnities, cost for
the realization of the right over the Pledge and other expenses and losses that
is payable or repayable to the Pledgee in accordance with the Transaction
Documents.

     

    担保债务总额是指由本协议提供担保的购债交易文件下所有到期未支付的金额,以及应计利息、罚息、违约金、损害赔偿金、实现质押权的费用和根据购债交易文件应向质权人支付或偿付的其他费用和损失。

     

    
      	
              1.2 
    

            	
              Interpretation/解释

            

    

    
      	 	 
	
              (a)

            	
              Except
      to the extent that the context otherwise requires, any reference to this Agreement includes
      its recitals, any document which is supplemental hereto or which is
      expressed to be collateral herewith or which is entered into pursuant to
      or in accordance with the terms hereof.

            
	 	 

    

    
      	
              (a)

            	
              除非在上下文另有约定,对本协议的任何提及包括其陈述部分、任何附于此的补充文件或宣称附属于本协议的文件或依据本协议内容而签订的文件。

            

    

    
      	 	 
	
              (b)

            	
              Save
      where otherwise indicated, references to Clauses and Schedules are to be
      construed as references to clauses of, and the schedules to, this
      Agreement.

            
	 	 

    

    
      	
              (b)

            	
              除本协议中另外约定,对条款和附件的提及应被解释为本协议的条款和附件。

            

    

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    
      	
              2. 

            	
              Undertaking by THE PLEDGOR/出质人的保证

            

    

     

    The
Pledgor undertakes to the Pledgee that it shall strictly and completely perform
all obligations as agreed in the Transaction Documents and this Agreement and
all supplements, instruments, letters etc. that are related or supplemental to
the Transaction Documents and this Agreement.

     

    出质人向质权人保证,出质人将严格及完全履行其在购债交易文件和本协议项下以及与购债交易文件和本协议下有关或补充的所有附录、文书、信函等约定的所有义务。

    
      	 	 
	
              3. 

            	
              SECURITY/担保

            

    

    
      	 	 
	
              3.1 

            	
              Secured
      Creditor’s Rights

            

    

    
      	 	 
	
              (a)

            	
              The
      secured creditor’s rights by this Agreement is the Subscription Amount in
      aggregate of US$15,000,000 as provided by the Pledgee to the Pledgor in
      accordance with the Purchase Agreement. The interest rate applicable to
      the Subscription Amount is 8%. The term of the Debenture is for four (4)
      years from the date the Debentures were first issued. The security
      coverage is the Secured Total Indebtedness as defined in this
      Agreement.

            

    

     

    
      	
              (a)

            	
              本协议所担保的债权为质权人根据购债交易文件向出质人认购的总金额为1500万美元的购债金额,购债金额的年利率为8%。 债券期限为四年,从债券首次发行之日起算。担保范围是本协议界定的担保债务总额。

            

    

     

    
      	
              3.2  

            	
              Pledge/质押

            

    

    
      	 	 
	
              (a)

            	
              In
      consideration of the Pledgee agreeing to subscribe from the Pledgor the
      Subscription Amount, and as a continuing security for the due and complete
      performance of all obligations as agreed in the Transaction Documents, the
      Pledgor, as legal and beneficial owner, hereby Pledges to the Pledgee,
      free from any other security and encumbrance, all the:

            
	 	 

    

    
      	
              (a)

            	
              鉴于质权人同意向出质人认购购债金额,出质人作为出质股权的合法权益持有人,在此将其目前拥有之以下权利(没有用于其他任何担保或有其他权利限制)质押给质权人,作为其按时和完全履行购债交易文件所有义务的持续担保:

            

    

     

    
      	
               
      

            	
              (i)

            	
              the
      Pledged Shares; and

            
	 	 	 

    

    
      	
               
      

            	
              1.

            	
              出质股权;和

            
	 	 	 

    

    
      	
               
      

            	
              (ii)

            	
              the
      Related Rights.

            
	 	 	 

    

    
      	
               
      

            	
              2.

            	
              相关权益。

            
	 	 	 

    

    
      	
              3.3  

            	
              Pledgor as pledgor remains
      responsible/出质人仍承担出质人的责任:

            

    

     

    Nothing
in this Agreement shall impose on the Pledgee any obligation in respect of the
Pledged Shares.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    本协议中任何內容不应强加给质权人任何与出质股权相关的义务。

     

    
      	
              4.

            	
              PLEDGOR’S
      RESTRICTIONS/出质人的限制

            

    

    
      	 	 
	
              4.1 

            	
              Negative
      pledge/负面质押

            
	 	 

    

    
      	
              (a)

            	
              Except
      as provided in this Agreement or as permitted by the Transaction
      Documents, the Pledgor shall not do, or permit to be done, anything which
      could prejudice the Pledge nor create or permit to subsist any other
      security over the Pledged Shares.

            
	 	 

    

    
      	
              (a)

            	
              除本协议另有约定或购债交易文件许可外,出质人不得做或允许他人做任何损害质押的事宜,也不得在出质股权上创设任何其他质押或允许其他质押的存在。

            

    

     

    
      	
              4.2

            	
              Disposal/处置

            
	 	 

    

    
      	
              (a)

            	
              Except
      with the prior written consent of the Pledgee, the Pledgor shall not (nor
      agree to) enter into a single transaction or a series of transactions
      (whether related or not and whether voluntary or involuntary) to exchange,
      set off, transfer, sell or otherwise deal with or dispose of any of the
      Pledged Shares before the Final Release Date.

            
	 	 

    

    
      	
              (a)

            	
              在质押解除日前,除非质权人事先书面同意,出质人不得(也不得同意)从事单一交易或一系列交易(不论是否相关、也不论是否出于自愿)以交换、抵消、转让、出售或其他方式处理或处置任何出质股权。

            
	 	 

    

    
      	
              (b)

            	
              Except
      with the prior written consent of the Pledgee, the Pledgor shall also not
      (nor agree to) cause any of its subsidiaries to enter into a single
      transaction or a series of transactions (whether related or not and
      whether voluntary or involuntary) to exchange, set off, transfer, sell or
      otherwise deal with or dispose of any of the shares held by such
      subsidiaries.

            
	 	 

    

    
      	
              (b)

            	
              除非质权人事先书面同意,出质人不得(也不得同意)促使其任何子公司从事单一交易或一系列交易(不论是否相关、也不论是否出于自愿)以交换、抵消、转让、出售或其他方式处理或处置该等子公司持有的任何股权。

            

    

    
      	 	 
	
              5.

            	
              GENERAL
      UNDERTAKINGS/总体承诺

            

    

     

    The
undertakings in this Clause 5 remain in force from the effective date of this
Agreement until the Final Release Date.

     

    本第5条的承诺自本协议生效之日起至质押解除日止保持有效。

    
      	 	 
	
              5.1

            	
              Transaction
      authorisations/交易授权

            
	 	 

    

    
      	
              (a)

            	
              The
      Pledgor shall and cause its subsidiaries to promptly obtain, comply with
      and do all that is necessary to maintain in full force and effect this
      Agreement; and supply certified copies or originals to the Pledgee on the
      signing date of this Agreement of, any authorisation required under any
      law or regulation to enable it to perform its obligations
      under this Agreement and to ensure the legality, validity, enforceability
      or admissibility in evidence in its jurisdiction of incorporation of this
      Agreement, which include but not limited
  to:

            

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    
    

    
      	
              (a)

            	
              出质人应并促使其子公司在本协议签订之日立即获得、遵守并采取所有使本协议保持完全效力的相关工作;并向质权人提供任何法律法规要求的任何授权的经确证的副本或原件,使其能够履行其于本协议项下的义务并确保本协议的构成在其管辖法律下的合法、有效、可执行或可作为证据,包括但不限于:

            
	 	 

    

    
      	
               
      

            	
              (i)

            	
              Original
      of the resolution of board of directors of SY approving the
      Pledge;

            

    

     

    
      	
               
      

            	
              1.

            	
              松原公司董事会决议批准质押原件;

            
	 	 	 

    

    
      	
               
      

            	
              (ii)

            	
              Original
      of the consent of the other shareholder of SY, Ju Gui Zhi (鞠桂芝), on the
      Pledge.

            

    

     

    
      	
               
      

            	
              2.

            	
              松原公司其他股东(鞠桂芝)同意质押原件;

            
	 	 	 

    

    
      	
               
      

            	
              (iii)

            	
              Certified
      true copy of the record of the Pledge over the Pledged Shares in the
      shareholders register of SY;

            

    

     

    
      	
               
      

            	
              3.

            	
              股权质押情况记载于松原公司的股东名册中经确证的副本。

            

    

    
      	 	 
	
              5.2 

            	
              Approvals, consents and
      registrations for pledge and enforcement/质押和质押权实现的批准、同意与登记

            
	 	 

    

    
      	
              (a)

            	
              The
      Pledgor shall obtain all approvals and consents from, and complete the
      necessary filing and registration requirements from, all authorities
      necessary for the creation of the Pledge hereunder within 90 days after
      the signing of this Agreement, including but limited
to:

            
	 	 

    

    
      	
              (a)

            	
              出质人应在签订本协议后90日内取得设立质押所必需的所有部门的批准和同意,并完成必需的备案及登记手续,包括但不限于:

            
	 	 

    

    
      	
               
      

            	
              (i)

            	
              the
      approval of Jilin Province Department of Commerce (吉林省商务厅) or
      the competent foreign investment examination and approval
      authority;

            
	 	 	 

    

    1.           吉林省商务厅或有权的外商投资审批部门的批准;

    
      	 	 	 
	
               
      

            	
              (ii)

            	
              filing
      at Jilin Province Administration of Industry and Commerce (吉林省工商行政管理局)
      or the competent administration of industry and commerce;
    and

            

    

    
      	 	 	 
	
               
      

            	
              2.

            	
              在吉林省工商行政管理局或有权的工商管理部门办理备案;及

            

    

    
      	 	 
	
              (b)

            	
              Upon
      the enforcement of the Pledge under this Agreement, the Pledgor shall
      forthwith obtain or procure to obtain the necessary approvals and consents
      from all authorities where
      required, pertaining to the transfer of Pledged Shares under this
      Agreement, including:

            

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    
    

    
      	
              (b)

            	
              执行本协议项下的质押权时,出质人就立即从所有相关部门取得或促使取得出质股权转让所必需的批准和同意,包括:

            
	 	 

    

    
      	
               
      

            	
              (i)

            	
              the
      approval of Jilin Province Department of Commerce (吉林省商务厅) or
      the competent foreign investment examination and approval authority;
      and

            
	 	 	 

    

    1.           吉林省商务厅或有权的外商投资审批部门的批准;及

    
      	 	 	 
	
               
      

            	
              (ii)

            	
              filing
      at Jilin Province Administration of Industry and Commerce or the competent
      administration of industry and commerce.

            
	 	 	 

    

    2.           在吉林省工商行政管理局或有权的工商管理部门办理备案。

    
      	 	 
	
              (c)

            	
              All
      originals of any approval, registration certificate or filing confirmation
      obtained from the relevant authorities pursuant to this Clause 5.2 shall
      be delivered to and kept by the Pledgee.

            
	 	 

    

    
      	
              (c)

            	
              依据本5.2条自相关部门取得的任何批准、登记证或备案确认的所有原件应交付给质权人并由其保管。

            

    

    
      	 	 
	
              5.3

            	
              Documents of Title/所有权凭证

            
	 	 

    

    
      	
              (a)

            	
              The
      Pledgor shall deposit with the Pledgee on the signing date of this
      Agreement and permit the Pledgee during the continuance of this Agreement
      to hold and retain:

            
	 	 

    

    (a)           出质人应在签订本协议之日将下列文件交存予质权人,并允许质权人在本协议持续期间持有下列文件:

    
      	 	 	 
	
               
      

            	
              (i)

            	
              upon
      the execution of this Agreement (in respect of the Pledged Shares) and
      from time to time during the continuance of this Agreement (whether upon
      the allotment and issue or acquisition of the Future Shares) (A) certified
      true copy of all capital verification reports issued by an accounting firm
      verifying that the Pledgor has fully paid the registered capital of SY;
      (B) a certified true copy of the certificate of approving the
      establishment of foreign invested enterprise and the Business License of
      SY indicating that there has been full injection of registered capital;
      (C) original of investment certificate (出资证明书) issued
      by SY to the Pledgor; and

            
	 	 	 

    

    
      	
               
      

            	
              1.

            	
              在签署本协议(与出质股权有关的)后并且在本协议持续期间不时的(无论通过分配、发行或认购方式获得将来可获股权)(A)
      由会计师事务所出具的证明出质人已全额繳付松原公司注冊资本的经确证的验资报告的复印件;(B)
      表明注冊资本全部缴付到位的经确证的松原公司外商投资企业批准证书和营业执照的复印件;(C)
      松原公司颁发给出质人的出资证明书原件;及

            

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (ii)

            	
              from
      time to time and at all relevant times such other documents as the Pledgee
      may require in connection with perfecting its pledge rights in the Pledged
      Shares or the disposal of the Pledged Shares by the Pledgee in accordance
      with Clause 8.

            

    

    
      	 	 	 
	
               
      

            	
              2.

            	
              质权人不时及于所有相关时间所要求的、与完善其于出质股权上的质押权益相关或与其根据第8条对出质股权进行处置相关的其他文件。

            

    

    
      	 	 
	
              5.4

            	
              Further Documents /其他文件

            
	 	 

    

    Upon
first written demand by the Pledgee, the Pledgor will forthwith sign, seal,
deliver and complete all share transfer documents, renunciations, proxies,
mandates, assignments, deeds and documents and do all acts and things which the
Pledgee may, in its absolute discretion, at any time and from time to time
specify:

     

    一经质权人书面要求,出质人将立即签署、盖章、交付及完成所有与股权转让、弃权、代理授权、委托、委任、文书等相关文件,并完成质权人自行决定不时要求的所有行为或事项:

    
      	 	 	 
	
               
      

            	
              (i)

            	
              for
      enabling or assisting the Pledgee to perfect or improve its security
      interest over the Pledged Shares;

            
	 	 	 

    

    1.           使质权人能够或协助质权人完善或改进其于出质股权上的担保权益;

    
      	 	 	 
	
               
      

            	
              (ii)

            	
              subject
      to Clause 8 (Enforcement
      of the Pledge), to transfer the Pledged Shares to (as the case may
      be)  the Pledgee or its nominee(s) or other purchasers and to
      obtain approvals of and register the transfer in accordance with the laws
      and regulations of the People’s Republic of China;

            
	 	 	 

    

    
      	
               
      

            	
              2.

            	
              依据第8条(质押权的实现)将出质股权转让予(视情况而定)质权人或其指定方或其他购买方,并根据中华人民共和国法律法规规定取得批准和登记;

            
	 	 	 

    

    
      	
               
      

            	
              (iii)

            	
              subject
      to Clause 7 (Dividends
      and Voting), to exercise (or enable its nominee(s) to exercise) any
      rights or powers attaching to the Pledged Shares;

            
	 	 	 

    

    
      	
               
      

            	
              3.

            	
              依据第7条(红利和表决权)行使(或使其指定方能够行使)依附于出质股权的所有权利和权力;

            
	 	 	 

    

    
      	
               
      

            	
              (iv)

            	
              subject
      to Clause 8 (Enforcement
      of the Pledge), to dispose of the Pledged Shares;
  or

            
	 	 	 

    

    
      	
               
      

            	
              4.

            	
              依据第8条(质押权的实现)处置出质股权;或

            
	 	 	 

    

    
      	
               
      

            	
              (v)

            	
              otherwise
      to enforce any of the rights of the Pledgee under or in connection with
      this Agreement.

            
	 	 	 

    

    
      	
               
      

            	
              5.

            	
              或者行使本协议项下或与本协议有关的质权人的任何权利。

            

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    
      	
              5.5

            	
              Amalgamation etc. /合并等相关情形

            
	 	 

    

    If at any
time whether by reason of amalgamation, merger, takeover, reorganisation, bonus,
preference, options or warrants issue, investment certificate separation or for
any reason whatsoever whereby any of the Pledged Shares are represented by other
investment certificates, share certificate, securities, Pledged Shares or stock,
the Pledgor shall forthwith upon its receipt thereof pledge and deposit the same
with the Pledgee in accordance with this Agreement.

     

    如果任何时间无论何种原因的合并、吸收合并、接管、重组、额外红利、优先权、期权或权证发行、投资证书分割或由于任何其他原因出质股权的任何部分以其他投资证书、股票、有价证券、出质股权或股票表示,出质人应按本协议约定,在收到上述相应权益后,立即将该等权益交给质权人作为质押。

    
      	 	 
	
              5.6

            	
              New Shares/新股权

            
	 	 

    

    The
Pledgor shall not suffer or permit SY to cancel, increase, create or issue or
agree to issue any shares or obligation now or hereafter convertible into shares
in SY, unless with the written consent of the Pledgee.

     

    出质人不得容忍或允行松原公司取消、增加、新设或发行或同意发行任何股权或现时或之后可转换为松原公司股权的债务,但质权人书面同意除外。

    
      	 	 
	
              5.7

            	
              Alteration of
      Rights/权益的变动

            
	 	 

    

    The
Pledgor shall not suffer or permit SY to make any alteration to, grant any
rights in relation to or otherwise reorganise or purchase or reduce the
registered capital or reserves of SY in any way or enter into any composition or
arrangement with its creditors or any class of creditors of SY, unless with the
written consent of the Pledgee acting on behalf of all the Lenders.

     

    出质人不得容忍或允行松原公司以任何形式改变、授予权利或另外重新组织或购买或減少松原公司的注冊资本或资金存量或与其债权人或任何一类债权人达成任何和解或调解,但质权人代表所有出借方书面同意的除外。

    
      	 	 
	
              5.8

            	
              Articles of
      Association/章程

            

    

     

    The
Pledgor shall not convene any meeting with a view either to the alteration of
any of the provisions of SY's Articles of Association or to passing a resolution
that SY be wound up, unless with the written consent of the
Pledgee.

     

    出质人不得召集任何会议以变更松原公司章程的任何条款或者通过决议清算松原公司,除非由质权人事先书面同意。

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    
      	
              5.9

            	
              Owners of the Pledged
      Shares/出质股权的所有人

            
	 	 

    

    Unless as
provided for under this Agreement, the Pledgor shall not suffer or permit SY to
permit any person other than  the Pledgor to be registered as owners
of the Pledged Shares or any part thereof.

     

    除非本协议另有约定,出质人不得容忍或允许松原公司或者允许松原公司同意非出质人的任何人登记为出质股权全部或任何部分的所有人。

     

    
      	
              5.10

            	
              Value of Security/担保价值

            

    

     

    
      	
              (a)

            	
              The
      Pledgor shall not do or cause or permit to be done anything which may
      directly or indirectly in any way depreciate, jeopardise or otherwise
      prejudice the value to the Pledgee of the security hereby
      created.

            

    

     

    
      	
              (a)

            	
              出质人不得从事或者导致或者允许采取任何方式的、贬低、危及或者以其他方式直接或间接损害本协议下所设担保价值的行为。

            

    

     

    
      	
              (b)

            	
              Forthwith
      upon receipt, the Pledgor shall forward to the Pledgee copies of all
      reports, accounts, circulars, notices, documents or other communications
      received by it in respect of the Pledged
Shares.

            

    

     

    
      	
              (b)

            	
              在收到任何的与出质股权有关的所有报告、帐目、函件、通知、文件或者其他通信后,出质人将立即转寄给质权人其收到的该等报告、帐目、函件、通知、文件或者其他通信复印件。

            

    

     

    
      	
              5.11

            	
              Pledge over Future
      Shares/在将来可获股权上的质押

            

    

     

    
      	
               
      

            	
              (a)

            	
              The
      Pledgor undertakes to pledge to the Pledgee, free from any security all
      its present rights, title and interest in and
  to:

            

    

     

    
      	
               
      

            	
              (a)

            	
              如果并且当出质人已经获得将来可获股权时,出质人承诺将该等股权上目前所有权利和利益出质给质权人,并且该等股权上没有设定任何其他担保:

            

    

     

    
      	
               
      

            	
              (i)

            	
              the
      Future Shares; and

            

    

     

    
      	
               
      

            	
              1.

            	
              将来可获股权;和

            

    

     

    
      	
               
      

            	
              (ii)

            	
              the
      Related Rights of the Future
Shares,

            

    

     

    
      	
               
      

            	
              2.

            	
              将来可获股权的相关权利

            

    

     

    if and
when the Pledgor has obtained the Future Shares.

     

    
      	
               
      

            	
              (b)

            	
              The
      other provision of this Agreement shall apply to the pledge of the Pledged
      Future Shares and future Related Right, mutatis
      mutandis;

            

    

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (b)

            	
              本协议的其他条款将适用于将来可获股权及其相关权利的质押,并作相应的改变;

            

    

     

    
      	
               
      

            	
              (c)

            	
              The
      Pledgor shall execute all necessary documents, obtain all approvals,
      complete all registrations within 30 working days upon the request from
      the Pledgee and such other acts or procedures to give full effect to the
      pledge of the Pledged Future
Shares.

            

    

     

    
      	
               
      

            	
              (c)

            	
              在质权人要求后的30个工作日内,出质人将签订所有的必要的文件、获得所有的批准、完成所有的登记和该等其他行为、程序以使在将来可获股权上的质押生效。

            

    

     

    
      	
              6.

            	
              REPRESENTATIONS
      AND WARRANTIES/陈述和保证

            

    

     

    The
Pledgor makes the representations and warranties set out in this Clause 6 to the
Pledgee on the date of this Agreement.

     

    出质人于本协议签订之日作出本第六条下的陈述和保证。

     

    
      	
              6.1

            	
              The Pledged Shares/出质股权

            

    

     

    
      	
              (a)

            	
              The
      Pledged Shares are fully paid and not subject to any option to purchase or
      similar rights and there are and will be no debts, obligations or
      liabilities owing by the Pledgor to
SY.

            

    

     

    
      	
              (a)

            	
              出质股权已经完全出资到位并且不受制于任何的购买或者类似的期权,并且出质人没有并且也将不会有应对松原公司偿还的任何债务、履行任何的义务或者责任。

            

    

     

    
      	
              (b)

            	
              The
      Pledged Shares have been duly authorised and validly issued and will at
      all times be free from any rights of
  pre-emption.

            

    

     

    
      	
              (b)

            	
              出质股权已经被适当地授权并且有效地签发,并且在任何时候都不存在优先购买权。

            

    

     

    
      	
              (c)

            	
              The
      constitutional documents of SY do not and will not restrict or inhibit any
      transfer of the Pledged Shares on creation or enforcement of the security
      pursuant to this Agreement.

            

    

     

    
      	
              (c)

            	
              松原公司的章程性文件不会并且将不会在依据本协议设立或者实现担保时,限制或者约束任何出质股权的转让。

            

    

     

    
      	
              (d)

            	
              The
      Pledge has been legally and validly approved by all the competent internal
      organs of the Pledgor and SY.

            

    

     

    
      	
              (d)

            	
              股权质押已经获得了出质人以及松原公司所有有权内部机构的合法和有效批准。

            

    

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    
      	
              (e)

            	
              The
      Pledged Shares represents sixty six percent (66%) of the total paid-up
      registered capital and shareholder’s benefit of
  SY.

            

    

     

    
      	
              (e)

            	
              出质股权代表松原公司总的已缴付的注册资金和股权权益的66%。

            

    

     

    
      	
              6.2

            	
              Ownership/所有权

            

    

     

    
      	
              (a)

            	
              The
      Pledgor has not assigned, transferred or otherwise disposed of the Pledged
      Shares (or its right and interest to or in the Pledged Shares), either in
      whole or in part, nor agreed to do so, and will not at any time do so or
      agree to do so except in accordance with the Transaction Documents or this
      Agreement.

            

    

     

    
      	
              (a)

            	
              出质人没有,全部地或者部分地,转移、转让或者其他的处置出质股权的行为(或者其在出质股权上的权利和利益),也没有同意上述处置地行为,并且除非依据购债交易文件或者本协议,其将在任何时候都没有上述的处置或者同意上述处置的行为。

            

    

     

    
      	
              (b)

            	
              The
      Pledgor is and will at all times be the sole legal and beneficial owner of
      the Pledged Shares. The Pledged Shares shall not be subject to any other
      forms of pre-emptions or judicial, administrative or arbitrative measures,
      nor shall they be subject to any other guarantees, Pledge, encumbrances or
      third party’s claims.

            

    

     

    
      	
              (b)

            	
              出质人在任何时候应是并且将是出质股权的唯一合法的所有者。出质股权应不受制于任何其他形式的优先购买权或者司法的、行政的或者仲裁措施,并且他们也将不受制于任何其他的担保、质押或者其他第三方权利。

            

    

     

    
      	
              6.3

            	
              No Existing
      Security/目前没有担保

            

    

     

    Except
for the Pledge, no Security exists on or over the Pledged Shares and the Pledgor
is not a party to, nor is the Pledgor or any of the Pledged Shares bound by, any
order, agreement or instrument under which the Pledgor is, or in certain events
may be, required to create, assume or permit to arise any security or third
party’s rights over the Pledged Shares.

     

    除了本协议约定的质押,在出质股权上没有任何的担保存在,并且出质人不是其被要求在出质股权上设立、承担或者同意设立任何担保的命令、合同或者文件的一方,并且出质人或者任何的出质股权不应该受该等命令、合同或者文件的约束。

     

    
      	
              6.4

            	
               No Further Security to be
      created/不得再设担保

            

    

     

    
      	
              (a)

            	
              Without
      prior written consent of the Pledgee, the Pledgor shall not further pledge
      to any third party the Pledged Shares, nor create any third party’s rights
      on the same.

            

    

     

    
      	
              (a)

            	
              在没有质权人的事先书面同意时,出质人不应将出质股权再出质给任何第三方,也不会在其上设定任何第三方的权利。

            

    

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    
      	
              (b)

            	
              Without
      prior written consent of the Pledgee and subject to Clause 7.1 (Dividends), the Pledgor
      shall not transfer the account proceeds under Clause 7.1 (Dividends).

            

    

     

    
      	
              (b)

            	
              在没有质权人的事先书面同意时并且受制于第7.1条(分红)的约定,出质人将不会转移第7.1条(分红)下产生的收益。

            

    

     

    
      	
              6.5

            	
              Repetition/持续有效

            

    

     

    Each of
the representations and warranties in this Clause 6 are deemed to be made by the
Pledgor by reference to the facts then existing at all times during the
continuance of this security.

     

    本第6条中的称述和保证应视为由出质人在本保证持续期间对于届时存在的所有的事实所作出的称述和保证。

     

    
      	
              7.

            	
              DIVIDENDS
      AND VOTING/分红和投票

            

    

     

    
      	
              7.1

            	
              Dividends/分红

            

    

     

    All
dividends and other distributions and benefits accruing on or deriving from the
Pledged Shares and the Pledged Future Shares after the Pledge created hereunder
coming into effect shall be held on trust and forthwith paid and transferred to
the Pledgee as a security for the Secured Total Indebtedness.

     

    在本协议设立的质押生效后,所有的在出质股权以及质押的将来可获股权上产生的或者来自于该等股权的分红和其他分配和收益应由质权人代持并立即支付并且转移给质权人,作为担保债务总额的担保。

     

    
      	
              7.2

            	
              Voting Rights /投票权

            

    

     

    The
rights and powers attached to the Pledged Shares shall be exercised as
follows:

     

    出质股权上的权利应该按照如下约定行使:

     

    
      	
               
      

            	
              (i)

            	
              prior
      to an Enforcement Event: until an Enforcement Event, and without prejudice
      to the Pledgee’s right to indemnities according to this Agreement and/or
      the laws and regulations, the Pledgor may exercise all voting and other
      rights and powers attached to the Pledged Shares provided that the Pledgor
      may not exercise the same in a manner which is prejudicial to the security
      hereby created or conflicts with any provision of the Transaction
      Documents and this Agreement; and

            

    

     

    
      	
               
      

            	
              1.

            	
              在质押权实现事件发生前直到实现事件时这一段期间,并且在不影响质权人依据本协议和/或者法律、法规获得赔偿的权利的情况下,出质人可以行使出质股权
      的所有的投票权,但不得在行使投票权时影响本协议设定的质押或者与本协议或者购债交易文件条款相冲突;

            

    

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    
      	
               
      

            	
               

            

    

     

    
      	
               
      

            	
              (ii)

            	
              upon
      an Enforcement Event: at any time after the security created by this
      Agreement is or has become enforceable, and without prejudice to the
      Pledgee’s right to indemnities according to this Agreement and/or the laws
      and regulations, the Pledgee may from time to time direct the exercise of
      all voting and other rights and powers (by statute or otherwise) attached
      to or conferred on the Pledged Shares in such manner as the Pledgee (in
      its absolute discretion) thinks fit and the Pledgor shall, and shall
      procure that any nominee(s) of the Pledgor shall, comply with any such
      directions of the Pledgee.

            

    

     

    
      	
               
      

            	
              2.

            	
              在发生质押权实现事件时:在本协议设定的担保已经可以执行,并且不影响质权人依据本协议和/或者法律、法规获得赔偿的权利的情况下,质权人可以不时以质权人认为(以其绝对的判断)合适的方式指示所有的(法定的或者其他的)在出质股权上的或者出质股权授予的投票权和权利的行使,并且出质人应,并且促使出质人的任何指定人应,遵守质权人的该等指示。

            

    

     

    
      	
              8.

            	
              ENFORCEMENT
      OF THE PLEDGE/质押权的实现

            

    

     

    
      	
              8.1

            	
              When Enforceable/在质押权实现时

            

    

     

    
      	
              (a)

            	
              The
      security created by this Agreement shall become immediately enforceable
      and all the other powers conferred on the Pledgee by this Agreement in
      connection with enforcement shall be immediately exercisable upon an
      Enforcement Event.

            

    

     

    
      	
              (a)

            	
              本协议下的担保在质押权实现事件发生时应可立即执行,并且本协议授予质权人的、与执行有关的其他权利应该在该等事件发生时立即可以行使。

            

    

     

    
      	
              (b)

            	
              Upon
      an Enforcement Event, the Pledgee may exercise all the powers and rights
      of a pledgee conferred by any law, regulation or otherwise. The Pledgee
      has the right to dispose the Pledged Shares in such manner as the Pledgee
      may, in its sole and absolute discretion, think fit in accordance with the
      PRC Real Rights Law, PRC
      Guarantee Law and other relevant rules, regulations and judicial
      interpretation.

            

    

     

    
      	
              (b)

            	
              在质押权实现事件发生时,质权人可以行使法律、法规或其他形式授予其作为质权人的一切权利和权力。质权人有权以其自行决定认为恰当的方式,根据中华人民共和国物权法、担保法和其他相关法规、规定和司法解释来处置出质股权。

            

    

     

    
      	
              (c)

            	
              Upon
      an Enforcement Event, the Pledgor shall and cause SY, legal representative
      of SY and directors of SY to duly seal or execute and provide all the
      necessary documents as
      legally required to complete and effect the disposal of Pledged Shares by
      the Pledgee.

            

    

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    
    

    
      	
              (c)

            	
              在质押权实现事件发生时,出质人应当并且促使松原公司、松原公司的法定代表人和松原公司的董事适当的盖章或签署并且提供所有必要的、法律要求的文件以使质权人对出质股权的处置完成和生效。

            

    

     

    
      	
              9.

            	
              DISCHARGE
      OF SECURITY/担保的解除

            

    

     

    Upon the
Final Release Date, the Pledgee shall at the request and cost of the Pledgor
discharge (as appropriate) the Pledged Shares from the Pledge.

     

    在质押解除日,质权人将应出质人的要求并且由出质人承担相应费用,将出质股权解除质押。

     

    
      	
              10. 

            	
              BENEFIT
      OF SECURITY/担保利益

            

    

     

    
      	
              10.1

            	
              Benefit and Burden/利益和负担

            

    

     

    This
Agreement shall be legally binding upon each party to this Agreement and its
successors in title and permitted assigns.

     

    本协议应对本协议各方、其继承者或者合法受让人具有法律约束力。

     

    
      	
              10.2

            	
              The Pledgor/出质人

            

    

     

    The
Pledgor shall not assign and/or transfer any rights or obligations under this
Agreement.

     

    出质人不应转移和/或者转让其在本协议下的任何权利和义务。

     

    
      	
              10.3

            	
              The Pledgee/质权人

            

    

     

    The
Pledgee may assign and/or transfer all or any parts of its rights and/or
obligations under or in respect of this Agreement to any person from time to
time and the Pledgor agrees to execute all documents and take all action that
may be required by that Pledgee in respect of any assignment or transfer, or
proposed assignment or transfer. Any such assignee or transferee shall be
treated as a party for all purposes of this Agreement and shall be entitled to
the full benefit of this Agreement to the same extent as if it were an original
party in respect of the rights or obligations assigned or transferred to
it.

     

    质权人可以不时地转移和/或者转让其在本协议下的或者与本协议有关的所有或者任何部分的权利和/或者义务给任何人,并且出质人同意签订所有的文件和采取与任何转移或者转让、或者提议的转移或者转让有关的可能需要的所有的措施。为了本协议之目的,何该等受转移人或者受让人应被视作合同一方,并享有本协议所有权益,就好比其是本协议下被转移或者转让的权利或者义务的最初的合同方。

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    
      	
              11.

            	
              COUNTERPARTS/副本

            

    

     

    This
Agreement may be executed in any number of counterparts, and this has the same
effect as if the signatures on the counterparts were on a single copy of this
Agreement.

     

    本协议可以签订任何数量的副本,并且应有相同的效力就像在副本上的签字是本协议原件上的签字一样。

     

    
      	
              12.

            	
              DEFAULT/违约责任

            

    

     

    
      	
              12.1

            	
              The
      Parties shall perform their respective obligations in this Agreement duly
      and fully. Any failure of performance or complete performance of the
      obligations under this Agreement by any Party shall be regarded as a
      default, the defaulting Party shall be liable to compensate any loss
      suffered by the non defaulting
Party.

            

    

     

    
      	
              12.1

            	
              协议双方应当按时、完全履行其各自在本协议下的义务。任何一方不履行或不完全履行本协议下的义务应视为违约,违约方应向赔偿非违约方由此遭受的任何损失。

            

    

     

    
      	
              12.2

            	
              If
      any default of the Pledgor affects the validity of the Pledge, the
      security value or the enforceability of the Pledged Shares, the Pledgee
      has the right to decide whether to declare the immediate repayment of the
      Subscription Amount and ask for compensation of any loss suffered. The
      Pledged Shares shall become immediately enforceable if the Pledgee
      declares the immediate repayment of the Subscription
    Amounts.

            

    

     

    
      	
              12.2

            	
              如出质人的违约影响了质押的有效性、担保价值或者处置股权可执行性,质权人有权决定是否宣布购债金额立即到期应归还,并要求赔偿由此遭受的损失。如质权人宣布购债金额立即到期应归还,则出质股权应当立即可以执行。

            

    

     

    
      	
              13.

            	
              GOVERNING
      LAW/管辖法律

            

    

     

    This
Agreement shall be governed by and construed in accordance with the laws of the
PRC.

     

    本协议受中国法律的管辖和解释。

     

    
      	
              14.

            	
              JURISDICTION
      /司法管辖

            

    

     

    Any
dispute, controversy or claim arising out of or in connection with this
Agreement shall be settled through negotiations between the Parties; if the
Parties fail to resolve such dispute within sixty (60) days after the date such
negotiation was first requested in writing by either party, it shall be settled
by arbitration at Shanghai Sub-commission of the China International Economic
and Trade Arbitration Commission (“CIETAC”)
in accordance with the Arbitration Rules of CIETAC (as amended from time to
time). The arbitral tribunal shall consist of three arbitrators. Any arbitration
award made shall be final and binding on the Parties and may be entered and
enforced in any court of competent jurisdiction.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    任何与本协议有关的争议、争论或者权利主张应通过各方协商解决;如果各方未能在任何一方书面要求该等协商后的60天内解决的,其应提交中国国际经济贸易委员会上海分会(“贸仲会”)依据贸仲会现时有效的仲裁规则(不时修改的)解决。仲裁庭应由3名仲裁员组成。任何仲裁裁决都是终局的并且各方应受该仲裁裁决的约束并且可以在任何合适的法庭执行。

     

    
      	
              15.

            	
              COMMUNICATIONS/通讯联络

            

    

     

    Communications
under this Agreement shall be made in writing and, unless otherwise stated, may
be made by fax or letter or by email, and shall be sent to the address, fax
number and (if applicable) email address of each Party as set out
below:

     

    
      	 	THE PLEDGOR
	 	 	 
	 	China North East
      Petroleum Holdings Limited
	 	 	 
	 	ADDRESS:    	No. 1717, Zhan Jiang
      Road, Youth Avenue, Song Yuan City, Ji Lin Province, the PRC
	 	 	 
	 	FAX
    NO: 	86-438-2161212
	 	 	 
	 	ATTENTION:  	Wang Hong
    Jun
	 	 	 
	 	EMAIL:   	cnehmail@gmail.com
	 	 	 
	 	The
      Pledgee
	 	 	 
	 	LOTUSBOX INVESTMENTS
      LIMITED
	 	 	 
	 	ADDRESS:  	c/o 137, Telok Ayer
      Street, #04-04/05, Singapore 068602
	 	 	 
	 	FAX
      NO.:   	+65 6720
    1688
	 	 	 
	 	ATTENTION:   	Diana The/ Irene
      Phua
	 	 	 
	 	EMAIL:	diana.the@harmonycapital.com.sg;
	 	 	 
	 	 	irene.phua@harmonycapital.com.sg

    

     

    本协议项下的通讯应当以书面形式以及,除非另行说明,传真、信函或者电子邮件方式进行,并且应当发送到以下明确的各方地址、传真号码和(如适用)电子邮件地址:

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    
      	
            	出质人
	 	 	 
	 	中国东北石油控股有限公司
	 	 	 
	 	地址:  	中国吉林省松原市青年大街湛江路1717号
	 	 	 
	 	传真: 	86-438-2161212
	 	 	 
	 	联系人: 	王洪军
	 	 	 
	 	电邮:   	cnehmail@gmail.com
	 	 	 
	 	质权人
	 	 	 
	 	LOTUSBOX INVESTMENTS
      LIMITED
	 	 	 
	 	地址:  	C/O 137, TELOK AYER
      STREET, #04-04/05, SINGAPORE 068602
	 	 	 
	 	传真:	+65 6720
    1688
	 	 	 
	 	联系人: 	DIANA THE/ IRENE
      PHUA
	 	 	 
	 	电邮:  	diana.the@harmonycapital.com.sg;
	 	 	 
	 	 	irene.phua@harmonycapital.com.sg

    

     

    
      	
              16.

            	
              MISCELLANEOUS/其他

            

    

     

    
      	
              16.1

            	
              Effectiveness of this
      Agreement/协议生效

            

    

     

    This
Agreement shall take effect upon the satisfaction of the following conditions
and shall continue to be effective until the Final Release Date:

     

    本协议在满足以下条件后生效,并且在质押解除日前持续保持有效:

     

    
      	
              (a)

            	
              the
      execution of this Agreement by the duly authorized representative of the
      Pledgor and the Pledgee;

            

    

     

    
      	
              (a)

            	
              出质人和质权人有适当权限的代表签署本协议;

            

    

     

    
      	
              (b)

            	
              the
      approval of the Pledge by Jilin Province Department of
      Commerce;

            

    

     

    
      	
              (b)

            	
              吉林省商务厅批准股权质押;

            

    

     

    
      	
              (c)

            	
              the
      filing with the Jilin Province Administration of Industry and
      Commence;

            

    

     

    
      	
              (c)

            	
              向吉林省工商行政管理局完成股权质押登记;

            

    

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    
      	 	 
	
              (d)

            	
              the
      record of the Pledge over the Pledged Shares in the shareholders register
      of SY.

            

    

     

    
      	
              (d)

            	
              股权质押情况记载于松原公司的股东名册中。

            

    

     

    
      	
              16.2

            	
              Language/语言

            

    

     

    
      	
              (a)

            	
              This
      Agreement is made both in the languages of English and Chinese. Both
      English version and Chinese version shall have the same legal effect. In
      the event of inconsistency or discrepancy between the English version and
      Chinese version, the English language version shall
    prevail.

            

    

     

    
      	
              (a)

            	
              本协议以中文和英文同时书就。中文版本和英文版本有同样的法律效力。若英文版本和中文版本有出入,以英文为准。

            

    

     

    
      	
              16.3

            	
              Amendment, termination and
      waiver/变更,终止和弃权

            

    

     

    
      	
              (a)

            	
              Upon
      this Agreement taking legal effect, neither Party shall ask for amendment
      to this Agreement without any justifiable reasons. The amendment of this
      Agreement shall be unanimously agreed by the Parties in writing after
      negotiations.

            

    

     

    
      	
              (a)

            	
              在本协议生效后,任何一方无正当理由不得要求对本协议做出修改。本协议的修改应当以双方磋商后的书面一致意见为准。

            

    

     

    
      	
              (b)

            	
              This
      Agreement shall be terminated upon occurrence of any of the following
      events:

            

    

     

    
      	
               
      

            	
              (b)

            	
              本协议在发生下列任何事项时将终止:

            

    

     

    
      	
               
      

            	
              (i)

            	
              The
      full and complete performance of all obligations under the Transaction
      Documents by the Pledgor and there is no obligation outstanding for
      performance;

            

    

     

    
      	
               
      

            	
              1.

            	
              出质人充分、完全地履行了购债交易文件;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              Unanimous
      consent by the Parties to terminate this
  Agreement;

            

    

     

    
      	
               
      

            	
              2.

            	
              双方一致同意解除本协议;

            

    

     

    
      	
               
      

            	
              (iii)

            	
              The
      security provided under this Agreement is enforced and there is no
      outstanding obligation of the Pledgor under this Agreement for
      performance; and

            

    

     

    
      	
               
      

            	
              3.

            	
              本协议下提供的担保被执行,本协议项下没有需要进一步履行的义务;和

            

    

     

    
      	
               
      

            	
              (iv)

            	
              Other
      events legally required.

            

    

     

    
      	
               
      

            	
              4.

            	
              其他法律或法规要求的事项。

            

    

     

    
      	
              (c)

            	
              No
      failure or delay in the exercise of any right or remedy by any Party under
      this Agreement shall be deemed to be or interpreted as a waiver
      thereof.

            

    

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    
      	
              (c)

            	
              任何一方没有或者延迟行使本协议项下的权利或补偿不得被视为或解释为该等权益的放弃。

            

    

     

    
      	
              16.4

            	
              Severability/条款可分性

            

    

     

    If any
provision in this Agreement shall be, or at any time shall become invalid,
illegal or unenforceable in any respect under any law, such invalidity,
illegality or unenforceability shall not in any way affect or impair any other
provisions of this Agreement, but this Agreement be construed as if such invalid
or illegal or unenforceable provision had never been contained
herein.

     

    如本协议的任何条款是或者在相关时间根据相关法律变成无效、非法或者不可执行,该等无效、非法或者不可执行性将在任何方面都不影响或者损害本协议其他条款,好比上述被认为无效、无法或被视为不可执行的条款从来没有包括在本协议中一样。

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF the Parties
hereto have entered into this Agreement.

     

    作为见证,双方于此签订本协议。

     

    

     

    The Pledgor/出质人

     

    CHINA
NORTH EAST PETROLEUM HOLDINGS LIMITED

     

    The
Company Stamp/公司印章                                                                                               )

     

    

     

    

     

    /s/ Wang
Hongjun

     

    Authorised
Representative/授权代表

     

    Name/姓名: Wang
Hongjun

     

    For and
on behalf of CHINA NORTH EAST
PETROLEUM HOLDINGS LIMITED

     

    为及代表中国东北石油控股有限公司

     

    

     

    

     

    

     

    The Pledgee/质权人

     

    LOTUSBOX
INVESTMENTS LIMITED

     

    

     

    The
Company Stamp/公司印章                                                                                               )

     

    

     

    

     

    /s/ Diana
The Hui Ling

     

    Authorised
Representative/授权代表

     

    Name/姓名: Diana The Hui
Ling, General Counsel, signing authority pursuant to Lotusbox Investments
Limited’s Board of Directors’ Resolutions dated 25 February 2008

     

    For and
on behalf of LOTUSBOX
INVESTMENTS LIMITED

     

    为及代表LOTUSBOX INVESTMENTS
LIMITED

     

     

    23

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