Document:

Exhibit 10.45

 

	
  

  	
   

  	
  

  

 

EXECUTION COPY

 

 

DATED

 

 

SUPERPORT
LIMITED

as Chargor

 

 

in favour of

 

 

DB TRUSTEES
(HONG KONG) LIMITED

as Security Agent

 

 

 

HOLDCO
DEBENTURE

 

 

 

CONTENTS

 

	
  Clause

  	
   

  	
  Page

  
	
   

  	
   

  
	
  1.

  	
  Definitions And
  Interpretation

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Payment Of Secured
  Obligations

  	
  3

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Fixed Charges, Assignments
  And Floating Charge

  	
  4

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Crystallisation Of Floating
  Charge

  	
  5

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Perfection Of Security

  	
  6

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Further Assurance

  	
  11

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Negative Pledge And
  Disposals

  	
  12

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Investments

  	
  13

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Accounts

  	
  14

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Monetary Claims

  	
  15

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Insurances

  	
  16

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Real Property

  	
  19

  
	
   

  	
   

  	
   

  
	
  13.

  	
  General Undertakings

  	
  20

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Enforcement Of Security

  	
  21

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Powers Of Sale

  	
  21

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Appointment Of Receiver Or
  Administrator

  	
  22

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Powers Of Receiver

  	
  23

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Application Of Monies

  	
  26

  
	
   

  	
   

  	
   

  
	
  19.

  	
  Receipt And Protection Of
  Purchasers

  	
  27

  
	
   

  	
   

  	
   

  
	
  20.

  	
  Power Of Attorney

  	
  27

  
	
   

  	
   

  	
   

  
	
  21.

  	
  Representations

  	
  28

  
	
   

  	
   

  	
   

  
	
  22.

  	
  Effectiveness Of Security

  	
  30

  
	
   

  	
   

  	
   

  
	
  23.

  	
  Release Of Security

  	
  32

  
	
   

  	
   

  	
   

  
	
  24.

  	
  Subsequent Security Interests

  	
  33

  
	
   

  	
   

  	
   

  
	
  25.

  	
  Currency Conversion And
  Indemnity

  	
  33

  
	
   

  	
   

  	
   

  
	
  26.

  	
  Costs, Expenses And
  Indemnity

  	
  33

  
	
   

  	
   

  	
   

  
	
  27.

  	
  Payments Free Of Deduction

  	
  34

  
	
   

  	
   

  	
   

  
	
  28.

  	
  Discretion And Delegation

  	
  34

  
	
   

  	
   

  	
   

  
	
  29.

  	
  Set-Off

  	
  35

  
	
   

  	
   

  	
   

  
	
  30.

  	
  Changes To Parties

  	
  35

  
	
   

  	
   

  	
   

  
	
  31.

  	
  Amendments And Waivers

  	
  36

  
	
   

  	
   

  	
   

  
	
  32.

  	
  Perpetuity Period

  	
  36

  
				

 

2

 

	
  33.

  	
  Notices

  	
  36

  
	
   

  	
   

  	
   

  
	
  34.

  	
  Counterparts

  	
  36

  
	
   

  	
   

  	
   

  
	
  35.

  	
  Governing Law

  	
  36

  
	
   

  	
   

  	
   

  
	
  36.

  	
  Jurisdiction

  	
  36

  
	
   

  	
   

  	
   

  
	
  Schedule
  1 FORM OF NOTICE OF ASSIGNMENT OF INSURANCE

  	
  38

  
	
   

  	
   

  
	
  Schedule
  2 FORM OF NOTICE OF CHARGE OF ACCOUNTS

  	
  42

  
	
   

  	
   

  
	
  Schedule
  3 PARTICULARS OF THE SHARES

  	
  45

  
	
   

  	
   

  
	
  Schedule
  4 FORM OF SHARE TRANSFER

  	
  46

  
	
   

  	
   

  
	
  Schedule
  5 FORM OF ACKNOWLEDGMENT FROM NOMINEE

  	
  47

  
	
   

  	
   

  
	
  Schedule
  6 FORM OF LETTER OF RESIGNATION

  	
  49

  
	
   

  	
   

  
	
  Schedule
  7 FORM OF WRITTEN RESOLUTIONS

  	
  50

  
	
   

  	
   

  
	
  Schedule
  8 FORM OF LETTER OF UNDERTAKING AND AUTHORISATION

  	
  52

  

 

3

 

THIS DEBENTURE is made on

 

BY

 

(1)                            SUPERPORT LIMITED, a BVI Business Company  incorporated
in the British Virgin Islands (the “Chargor”) in
favour of

 

(2)                            DB TRUSTEES (HONG KONG) LIMITED  as security trustee for the Secured Parties on the terms and conditions
set out in the Security Trust Deed (the “Security Agent”,
which expression shall include its successors, assigns and transferees).

 

NOW THIS DEBENTURE WITNESSES as follows:

 

1.                                 DEFINITIONS
AND INTERPRETATION

 

1.1                           Definitions

 

Unless otherwise defined in this Debenture or
unless the context otherwise requires, terms and expressions defined in or
construed for the purposes of the Security Trust Deed shall bear the same
meanings when used herein.  In addition:

 

“Account” means
any account (including, without limitation, any subdivision or sub-account
thereof) opened or maintained by the Chargor with any bank, financial institution
or other person (and any replacement, renewal and/or re-designation thereof),
the debt or debts represented thereby together with (in each case) all Related
Rights.

 

“Charged Property”
means all the assets and/or undertaking of the Chargor which from time to time
are the subject of the security created or expressed to be created in favour of
the Security Agent by or pursuant to this Debenture.

 

“Collateral Rights”
means all rights, powers and remedies of the Security Agent provided by or
pursuant to this Debenture or by law.

 

“Company”
means International Petroleum Services Corporation Limited, a limited liability
company incorporated under the laws of Hong Kong, with registered number
1165755;

 

“Facility Agreement”
means the facility agreement dated 8 January 2010 made between, among others,
Tianjin New Highland Science and Technology Development Co., Ltd. as borrower,
the Chargor, the Company, Deutsche Bank AG, Hong Kong Branch as arranger,
calculation agent and facility agent and DB Trustees (Hong Kong) Limited as
security agent, as amended and restated by an amendment agreement dated     
           
              made
between, among others, Tianjin New Highland Science and Technology Development
Co., Ltd. as borrower and Deutsche Bank AG, Hong Kong Branch as facility agent.

 

“Fixed Charge
Property” has the meaning ascribed thereto in Clause 7.2 (No Disposal of Interests).

 

“Insurance Policy”
means any policy of insurance in which the Chargor may from time to time have
an interest.

 

1

 

“Intellectual Property”
means any patents, trade marks, service marks, designs, business names,
copyrights, design rights, moral rights, inventions, confidential information,
knowhow and other intellectual property rights and interests, whether
registered or unregistered, the benefit of all applications and rights to use
such assets and all Related Rights.

 

“Investments”
means:

 

(a)                                      any stocks, shares, debentures, securities and/or other investments;

 

(b)                                     all interests in collective investment schemes;

 

(c)                                      all warrants, options and/or other rights to subscribe for or acquire
any Investments; and/or

 

(d)                                     all other Equity Interests in any person,

 

(in each case) whether held directly by or to
the order of the Chargor or by any trustee, nominee, fiduciary or clearance
system on its behalf (including, without limitation, the Shares) and all
Related Rights (including without limitation all rights against any such
trustee, nominee, fiduciary or clearance system).

 

“Monetary Claims”
means any book and/or other debts and/or monetary claims owing to the Chargor
and any proceeds thereof (including without limitation any claims or sums of
money deriving from or in relation to any Intellectual Property, any
Investment, the proceeds of any Insurance Policy, any court order or judgment,
any other contract or agreement to which the Chargor is a party and any other
assets, property, rights or undertaking of the Chargor).

 

“Real Property”
means:

 

(a)                                      any real or immovable property (whether freehold, leasehold or
otherwise); and/or

 

(b)                                     any buildings, fixtures, fittings, fixed plant or machinery from time to
time situated on or forming part of such real or immovable property,

 

and includes all Related Rights.

 

“Receiver” means
a receiver or receiver and manager or an administrative receiver of the whole
or any part of the Charged Property and that term will include any appointee
made under a joint and/or several appointment.

 

“Related Rights”
means, in relation to any asset:

 

(a)                                      the proceeds of sale of any part of that asset;

 

(b)                                     all rights under any licence, agreement for sale, lease or other
disposal in respect of that asset;

 

(c)                                      all rights, powers, benefits, claims, contracts, warranties, remedies,
Security, guarantees, indemnities and/or covenants for title in respect of that
asset;

 

2

 

(d)                                     any moneys and proceeds paid or payable in respect of that asset; and/or

 

(e)                                      (in the case where such asset comprises any share, equity interest or
other security) all dividends, distributions, interest and monies payable in
respect thereof and any rights, assets, shares and/or securities deriving
therefrom or accruing thereto whether by way of redemption, bonus, preference,
option, substitution, conversion or otherwise.

 

“Secured Obligations” has the meaning given to it in the
Security Trust Deed.

 

“Security Trust Deed” means the security
trust deed dated          
         
        between, among others, Tianjin New
Highland Science and Technology Development Co., Ltd., Deutsche Bank AG, Hong
Kong Branch as Facility Agent and DB Trustees (Hong Kong) Limited as Security
Agent.

 

“Shares”
means all of the shares in the share capital of the Company held by, to the
order or on behalf of the Chargor at any time, including without limitation
those set out in Schedule 3 (Particulars of
the Shares).

 

“Tangible Moveable Property”
means any plant, machinery, office equipment, computers, vehicles and other
chattels (excluding any for the time being forming part of the Chargor’s stock
in trade or work in progress) and all Related Rights.

 

1.2                           Construction

 

In this Debenture:

 

1.2.1                            the rules of construction set out in clauses 1.3 (Construction) of the Security Trust Deed
shall apply to this Debenture mutatis
mutandis;

 

1.2.2                            any reference to the Chargor, the Facility Agent, the
Security Agent or any or all of the Secured Parties shall be construed so as to
include its or their (and any subsequent) successors and any permitted assigns
and transferees in accordance with their respective interests;

 

1.2.3                            any reference to the Security Trust Deed or any other
agreement or instrument shall be a reference to the Security Trust Deed or that
other agreement or instrument as amended or novated from time to time; and

 

1.2.4                            save where the context otherwise requires, references
in this Debenture to any Clause or Schedule shall be to a clause or schedule
contained in this Debenture.

 

1.3                           Designation

 

This is the Holdco Debenture as defined in the
Security Trust Deed.

 

2.                                 PAYMENT
OF SECURED OBLIGATIONS

 

2.1                           Covenant
to Pay

 

The Chargor covenants with the Security Agent
that it shall pay, discharge and satisfy each of the Secured Obligations on
their due date in accordance with their respective terms provided that neither
such covenant nor the Security constituted by this Debenture 

 

3

 

shall extend to or include any liability or sum
which would, but for this proviso, cause such covenant or Security to be
unlawful or prohibited by any applicable law.

 

2.2                           Interest
on Demands

 

If the Chargor fails to pay any sum on the due
date for payment of that sum the Chargor shall pay interest on such sum (before
and after any judgment and to the extent interest at a default rate is not
otherwise being paid on such sum) from the date of demand until the date of
payment of such sum in full by the Chargor, calculated on a daily basis at the
rate determined in accordance with the provisions of clause 9.3 (Default Interest) of the Facility Agreement (for such purpose
only, in the form subsisting as at the date of this Debenture).

 

3.                                 FIXED
CHARGES, ASSIGNMENTS AND FLOATING CHARGE

 

3.1                           Fixed
Charges

 

The Chargor hereby charges as beneficial owner
with full title guarantee in favour of the Security Agent as trustee for the
Secured Parties, as security for the payment and discharge of the Secured
Obligations, by way of first fixed charge (which so far as it relates to land
in Hong Kong shall be and take effect as a charge by way of legal charge to the
extent that the Chargor’s interest therein constitutes a legal estate) all the
Chargor’s right, title and interest from time to time in and to each of the
following assets:

 

3.1.1                            the Real Property;

 

3.1.2                            the Tangible Moveable Property;

 

3.1.3                            the Accounts;

 

3.1.4                            any and all goodwill of the Chargor and rights in
relation to the uncalled capital of the Chargor;

 

3.1.5                            the Intellectual Property;

 

3.1.6                            the Investments and all Related Rights (excluding any
equity interest in any entity established in the PRC but including, to the
extent permitted under applicable PRC laws and regulations, Related Rights
relating to such equity interest); and

 

3.1.7                            all Monetary Claims and all Related Rights other than
those which are otherwise subject to a valid assignment (at law or in equity)
pursuant to this Debenture.

 

3.2                           Assignments

 

The Chargor hereby assigns and agrees to assign
absolutely as beneficial owner with full title guarantee to the Security Agent
as trustee for the Secured Parties as security for the payment and discharge of
the Secured Obligations, by way of security with first ranking priority, all
the Chargor’s right, title and interest from time to time in and to the
Insurance Policies and all Monetary Claims and Related Rights in relation
thereto.

 

4

 

3.3                           Floating
Charge

 

3.3.1                            The Chargor hereby charges as beneficial owner with
full title guarantee in favour of the Security Agent as trustee for the Secured
Parties, as security for the payment and discharge of the Secured Obligations,
by way of first floating charge, all present and future assets and undertaking
of the Chargor.

 

3.3.2                            The floating charge created by Clause 3.3.1 above
shall be deferred in point of priority to all fixed Security (whether by way of
charge or assignment) validly and effectively created by the Chargor under the
Transaction Finance Documents in favour of the Security Agent as trustee for
the Secured Parties as security for the Secured Obligations.

 

4.                                 CRYSTALLISATION
OF FLOATING CHARGE

 

4.1                           Crystallisation:  By Notice

 

The Security Agent may at any time by notice in
writing to the Chargor convert any floating charge created under this Debenture
with immediate effect into a fixed charge as regards any property or assets
specified in the notice if:

 

4.1.1                            an Event of Default has occurred and is continuing; or

 

4.1.2                            the Security Agent considers that any of the Charged
Property may be in jeopardy or in danger of being seized or sold pursuant to
any form of legal process; or

 

4.1.3                            the Security Agent considers that it is desirable in
order to protect the priority of the Security constituted by this Debenture.

 

4.2                           Crystallisation:  Automatic

 

Notwithstanding Clause 4.1 (Crystallisation: 
By Notice) and without prejudice to any law which may have a
similar effect, any floating charge created by this Debenture will
automatically be converted (without notice) with immediate effect into a fixed
charge as regards all the assets subject to the floating charge if:

 

4.2.1                            the Chargor creates or attempts to create any Security
(other than Security that is permitted under this Debenture and that is
permitted under the Facility Agreement), over any of the Charged Property; or

 

4.2.2                            any person levies or attempts to levy any distress,
execution or other process against any of the Charged Property; or

 

4.2.3                            a petition is presented for the compulsory winding-up
of the Chargor; or

 

4.2.4                            a meeting is convened for the passing of a resolution
for the voluntary winding-up of the Chargor; or

 

4.2.5                            an application is presented or made for a warrant of
execution, writ of fieri facias,
garnishee order or charging order in respect of any of the assets of the
Chargor; or

 

5

 

4.2.6                            a resolution is passed or an order is made for the winding-up,
dissolution, administration or re-organisation of the Chargor; or

 

4.2.7                            any event occurs under the laws of any jurisdiction
having a similar or analogous effect to any of those events referred to in
sub-clauses 4.2.3 to 4.2.6.

 

5.                                 PERFECTION
OF SECURITY

 

5.1                           Perfection

 

5.1.1                            The Chargor shall:

 

(a)                     immediately
after the execution of this Debenture, instruct its registered agent to create
and maintain a Register of Charges for the Chargor in accordance with Section
162 of the Business Companies Act 2004 of the British Virgin Islands (the “Register of Charges”) and to enter particulars of the
security interests created pursuant to this Debenture in the Register of
Charges, and the Chargor shall instruct its registered agent to effect
registration of this Debenture at the Registry of Corporate Affairs pursuant to
Section 163 of the Business Companies Act 2004 of the British Virgin Islands;
and

 

(b)                    immediately
after becoming available, deliver or procure to be delivered to the Security
Agent the certificate of registration of charge issued by the Registry of
Corporate Affairs and the filed and stamped copy of the Register of Charges.

 

5.1.2                            If at any time after the date of this Debenture, the
Chargor applies to have itself registered as a non-Hong Kong company under Part
XI of the Companies Ordinance (Cap. 32), it shall forthwith notify the Security
Agent.  Without prejudice to the
foregoing, upon its being registered as a non-Hong Kong company under Part XI
of the Companies Ordinance (Cap. 32), it shall (a) forthwith notify the
Security Agent and provide the Security Agent with the details of such
registration and (b) promptly (and in any case within five weeks after the date
of such registration) take all steps to comply with the requirements under section
91(5) of the Companies Ordinance (Cap. 32) in respect of this Debenture and the
security created hereby.

 

5.2                           Notices
of Assignment

 

The Chargor shall deliver to the Security Agent
(or procure the delivery to the Security Agent of):

 

5.2.1                             (in respect of each Insurance Policy subsisting at
the date of this Debenture) on or prior to the Initial Utilisation Date:

 

(a)                     a
notice of assignment to the insurer(s) under such Insurance Policy
substantially in the form of Schedule 1 (Form
Of Notice Of Assignment Of Insurance) (or otherwise in form and
substance satisfactory to the Security Agent) duly executed by, or on behalf
of, the Chargor and each other insured party under such Insurance Policy; and

 

6

 

(b)                    an
acknowledgment to such notice of assignment, duly executed by or behalf of each
such insurer, in the form of the acknowledgment attached to such notice of
assignment;

 

5.2.2                            (in respect of each Insurance Policy effected or
coming into existence after the date of this Debenture) forthwith upon the
effecting or coming to existence of such Insurance Policy:

 

(a)                     a
notice of assignment to the insurer(s) under such Insurance Policy
substantially in the form of Schedule 1 (Form Of
Notice Of Assignment Of Insurance) (or otherwise in form and
substance satisfactory to the Security Agent) duly executed by, or on behalf
of, the Chargor and each other insured party under such Insurance Policy; and

 

(b)                    an
acknowledgment to such notice of assignment, duly executed by or behalf of each
such insurer, in the form of the acknowledgment attached to such notice of
assignment; and

 

5.2.3                            in respect of any other asset which is the subject of
an assignment pursuant to Clause 3.2 (Assignments)
promptly upon the request of the Security Agent from time to time, a notice of
assignment in respect of such asset in such form as the Security Agent may
require, and the Chargor shall procure that such notice is promptly
acknowledged (in accordance with the terms of such notice) by each person to
whom such notice is expressed to be given and promptly deliver such executed
acknowledgment to the Security Agent.

 

5.3                           Notices
of Charge

 

5.3.1                            The Chargor shall deliver to the Security Agent (or
procure the delivery to the Security Agent of):

 

(a)                     in
respect of each Account that has already been established on or before the
Initial Utilisation Date (other than any Account opened or maintained by the
Chargor with the Security Agent), a notice of charge substantially in the form
of Schedule 2 (Form Of Notice Of charge
of Accounts) (or otherwise in form and substance satisfactory to the
Security Agent) on or prior to the Initial Utilisation Date, duly executed by
or on behalf of the Chargor, and the acknowledgement thereto (in accordance
with the terms of such notice) duly executed by or on behalf of each of the
banks, financial institutions and/or persons with which such Account is opened
or maintained; and

 

(b)                    in
respect of each Account that is established after the Initial Utilisation Date,
a notice of charge substantially in the form of Schedule 2 (Form Of Notice Of charge of Accounts)
(or otherwise in form and substance satisfactory to the Security Agent)
promptly upon such establishment, duly executed by or on behalf of the Chargor,
and the Chargor shall ensure that such notice is promptly duly acknowledged (in
accordance with the terms of such notice) by or on behalf of each of the banks,
financial institutions and/or persons with which such Account is opened or 

 

7

 

maintained and promptly deliver a copy of such acknowledgement to the
Security Agent.

 

5.3.2                            The execution of this Debenture by the Chargor and the
Security Agent shall constitute notice to the Security Agent of the charge
created over any Account opened or maintained with the Security Agent from time
to time.

 

5.3.3                            The Chargor shall deliver to the Security Agent (or
procure the delivery to the Security Agent of), in respect of any other asset
which is the subject of a charge pursuant to Clause 3.3 (Floating Charge) or any fixed charge
arising from conversion (whether automatic or by notice) of any floating charge
created hereunder a notice of charge in respect of such asset in such form as
the Security Agent may require from time to time promptly upon demand of the
Security Agent, and procure that such notice is promptly duly acknowledged (in
accordance with the terms of such notice) by or on behalf of each person to
whom such notice is expressed to be given, and shall promptly deliver such
executed acknowledgment to the Security Agent.

 

5.4                           Real
Property:  Delivery of Documents of Title

 

The Chargor shall:

 

5.4.1                            on or prior to the Initial Utilisation Date, deliver
to the Security Agent (or procure the delivery to the Security Agent of) all
deeds, certificates and other documents of title relating to all Real Property
held by or on behalf of the Chargor at the date of this Debenture; and

 

5.4.2                            forthwith upon the acquisition by the Chargor of any
interest in any Real Property, deliver to the Security Agent (or procure the
delivery to the Security Agent of) all deeds, certificates and other documents
of title relating to such interest and execute in favour of the Security Agent
such charge or Security over such Real Property in such form as the Security
Agent may require as security for the Secured Obligations (in addition to this
Debenture).

 

The Security Agent shall be entitled to hold
and retain all such deeds, certificates and other documents of title delivered
pursuant to this Clause 5.4 (Real
Property:  Delivery of Documents of Title)
during the subsistence of this Debenture.

 

5.5                           Further
Advances

 

Subject
to the terms of the Facility Agreement each Lender is under an obligation to
make further advances to the Borrower in accordance with the provisions of the
Facility Agreement and that obligation will be deemed to be incorporated into
this Debenture as if set out in this Debenture.

 

5.6                           Insurance:  Delivery of Insurance Policies

 

The Chargor shall, promptly upon the request of
the Security Agent, deposit or procure the deposit of all Insurance Policies
with the Security Agent.

 

8

 

5.7                           Investments:  Delivery of Documents of Title

 

The Chargor shall:

 

5.7.1                            on or prior to the Initial Utilisation Date, deposit
with the Security Agent (or procure the deposit with the Security Agent of) the
following in respect of the Investments existing as at the date of this
Debenture (including without limitation, for the avoidance of doubt, the Shares
but excluding any Investment in the form of equity interest in any entity
established in the PRC):

 

(a)                     all
certificates or other documents of title to such Investments;

 

(b)                    undated
share transfer forms or, as the case may be, other appropriate instruments of
transfer in respect of such Investments executed in blank by or on behalf of
the Chargor:

 

(i)                       (in the case of any of the Shares) substantially in
the form set out in Schedule 4 (Form of
Share Transfer); and

 

(ii)                    (in the case of other Investments) in such form as the
Security Agent may request;

 

(c)                     (in
the case of any Investments constituting any shares in any company incorporated
in Hong Kong (including without limitation the Shares)) undated sold notes in
respect of such Investments executed in blank by or on behalf of the Chargor;

 

(d)                    an
acknowledgment from each person (if any) holding any of the Investments as its
nominee:

 

(i)                       (in the case of any of the Shares) substantially the
form set out in Schedule 5 (Form of
acknowledgment from nominee); and

 

(ii)                    (in the case of other Investments) in such form as the
Security Agent may request;

 

(e)                     (in
the case of any Investments constituting any shares in any company incorporated
in Hong Kong (including without limitation the Shares)) an undated letter of
resignation executed by each director of the Company in substantially the form
set out in Schedule 6 (Form of letter
of resignation);

 

(f)                       (in
the case of any Investments constituting any shares in any company incorporated
in Hong Kong (including without limitation the Shares)) undated written
resolutions of the board of directors of the Company executed by all of the
directors of the Company in substantially the form set out in Schedule 7 (Form of written resolutions); and

 

(g)                   (in
the case of any Investments constituting any shares in any company incorporated
in Hong Kong (including without limitation the Shares)) a letter of undertaking
and authorisation executed by each director of the 

 

9

 

Company in substantially the form set out in Schedule 8 (Form of letter of undertaking and authorisation);

 

5.7.2                            promptly upon any acquisition of any Investments
and/or the accrual, offer or issue of any stocks, shares, warrants or other
securities in respect of or derived from any Investments (excluding any such
items in the form of equity interest in any entity established in the PRC),
notify the Security Agent of that occurrence and procure the delivery to the
Security Agent of:

 

(a)                     all
certificates and other documents of title representing such items;

 

(b)                    undated
share transfer forms or, as the case may be, other appropriate instruments of
transfer in respect of such items executed in blank by or on behalf of the
Chargor, in each case in such form as the Security Agent shall request;

 

(c)                     (in
the case of any shares in any company incorporated in Hong Kong) undated sold
notes in respect of such shares executed in blank by or on behalf of the
Chargor; and

 

(d)                    an
acknowledgment from each person (if any) holding such items as its nominee in
such form as the Security Agent shall request;

 

5.7.3                            promptly upon any change in any director of the
Company after the date of this Debenture, procure the delivery to the Security
Agent of:

 

(a)                     (in
the case of a new director) an undated letter of resignation executed by such
director of such Company in substantially the form set out in Schedule 6 (Form of letter of resignation);

 

(b)                    undated
written resolutions of the board of directors of the Company executed by all of
the directors of such Company in substantially the form set out in Schedule 7 (Form of written resolutions); and

 

(c)                     (in
the case of a new director) a letter of undertaking and authorisation executed
by such director of the Company in substantially the form set out in Schedule 8
(Form of letter of undertaking and
authorisation); and

 

5.7.4                            procure that, where any nominee holding any Investment
(excluding any equity interest in any entity established in the PRC) ceases to
be or act as such, the successor nominee (or, if more than one, each successor
nominee) shall forthwith execute and deliver to the Security Agent an
acknowledgment in respect of such Investment in substantially the form set out
in Schedule 5 (Form of acknowledgment
from nominee).

 

5.8                           Intellectual
Property

 

The
Chargor shall, if requested by the Security Agent, execute all such documents
and do all acts that the Security Agent may require to record the interest of
the Security Agent in any registers relating to any registered Intellectual
Property.

 

10

 

6.                                 FURTHER
ASSURANCE

 

6.1                           Further
Assurance:  General

 

6.1.1                            The Chargor shall promptly at its own cost do all such
acts and/or execute all such documents (including without limitation
assignments, transfers, mortgages, charges, notices and instructions) as the
Security Agent may specify (and in such form as the Security Agent may require
in favour of the Security Agent or its nominee(s)):

 

(a)                     to
perfect the Security created or intended to be created in respect of the
Charged Property (which may include, without limitation, the execution by the
Chargor of a mortgage, charge or assignment over all or any of the assets
constituting, or intended to constitute, any part of Charged Property) or for
the exercise of the Collateral Rights;

 

(b)                    to
confer on the Security Agent Security over any property and assets of the
Chargor located in any jurisdiction outside Hong Kong equivalent or similar to
the Security intended to be conferred by or pursuant to this Debenture;

 

(c)                     to
confer on the Security Agent the Security contemplated herein over any Real
Property (or any interest therein) acquired after the date hereof; and/or

 

(d)                    to
facilitate the realisation of the Charged Property.

 

6.2                           Necessary
Action

 

The Chargor shall from time to time take all
such action (whether or not requested to do so by the Security Agent) as is or
shall be available to it (including without limitation obtaining and/or
effecting all Authorisations) as may be necessary for the purpose of the creation,
perfection, protection or maintenance of any Security conferred or intended to
be conferred on the Security Agent by or pursuant to this Debenture.

 

6.3                           Consents

 

The Chargor shall:

 

6.3.1                            deliver to the Security Agent promptly upon execution
of this Debenture, all consents necessary to enable the assets (which are in
existence at the date of this Debenture and expressed to be subject to a fixed
charge or an assignment pursuant to Clause 3 (Fixed
Charges, Assignments and Floating Charge)  to be the subject of an effective fixed
charge or, as the case may be, assignment pursuant to Clause 3 (Fixed Charges, Assignments and Floating Charge);
and

 

6.3.2                            obtain and deliver to the Security Agent, promptly
upon acquisition of any assets or the coming into existence of any assets of
the Chargor after the date of this Debenture (which assets, in either case, are
expressed to be subject to a fixed charge or an assignment pursuant to Clause 3
(Fixed Charges, Assignments and Floating
Charge), all consents necessary to enable such assets to be the
subject of an effective fixed charge or, as the case may be, assignment
pursuant to Clause  3 (Fixed Charges, Assignments and Floating Charge).

 

11

 

6.4                           Implied
Covenants for Title

 

The obligations of the Chargor under this
Debenture shall be in addition to any covenants for title deemed to be included
in this Debenture under the Conveyancing and Property Ordinance (Cap. 219)
and/or general law.

 

7.                                 NEGATIVE
PLEDGE AND DISPOSALS

 

7.1                           Negative
Pledge

 

The Chargor undertakes that it shall not, at
any time during the subsistence of this Debenture, create or permit to subsist
any Security or Quasi-Security over all or any part of the Charged Property,
except (only in the case of any asset that does not constitute Fixed Charge
Property or any part thereof) Permitted Security.

 

7.2                           No
Disposal of Interests

 

The Chargor undertakes that, save as permitted
under the Facility Agreement, it shall not and shall not agree to at any time during
the subsistence of this Debenture:

 

7.2.1                            execute or enter into any conveyance, transfer, lease,
assignment or disposal of, or other right to use or occupy, all or any part of
the Charged Property which is expressed to be subject to any fixed charge or
assignment pursuant to Clause 3.1 (Fixed
Charges) or 3.2 (Assignments)
or any fixed charge arising upon any crystallisation of any floating charge
created hereunder (collectively the “Fixed
Charge Property”) or any agreement for any of the foregoing;

 

7.2.2                            create any legal or equitable estate or other interest
in, or over, or otherwise relating to, all or any part of the Fixed Charge
Property;

 

7.2.3                            grant or vary, or accept any surrender, or
cancellation or disposal of, any lease, tenancy, licence, consent or other
right to occupy in relation to all or any part of the Fixed Charge Property;

 

7.2.4                            allow any person any right to use or occupy or to
become entitled to assert any proprietary interest in, or right over, all or
any of the Fixed Charge Property;

 

7.2.5                            sell, transfer or otherwise dispose of any Charged
Property (other than any Fixed Charge Property) other than as permitted under
the Facility Agreement (in the form subsisting as at the date of this
Debenture); or

 

7.2.6                            assign or otherwise dispose of any interest in any
Account (and, without prejudice to the foregoing, no right, title or interest
in relation to any Account maintained with the Security Agent, or the credit
balance standing to any such Account shall be capable of assignment or other
disposal).

 

7.3                           Other
adverse actions

 

The Chargor undertakes that it shall not, at
any time during the subsistence of this Debenture:

 

7.3.1                            create, grant or permit to subsist any restriction on
the ability of the Security Agent to transfer or realise, all or any of his
right, title and interest in the Charged Property or any part thereof; or

 

12

 

7.3.2                            do or permit to be done any act or thing which could
reasonably be expected to jeopardise the rights of the Security Agent in the
Charged Property or any part thereof or which could reasonably be expected to
adversely and affect or diminish the value of the Charged Property or any part
thereof.

 

8.                                 INVESTMENTS

 

8.1                           Investments:
dividends

 

8.1.1                            Any and all dividends and/or distributions received,
recovered, paid or delivered to the order of the Chargor in respect of any or
all of the Investments (including, without limitation, any equity interest in
any entity established in the PRC) at any time on or after the occurrence of an
Event of Default (as long as any Event of Default is continuing) shall be
promptly paid and delivered to (and the Chargor shall promptly deliver such
dividends and/or distributions to) the Security Agent for application in
accordance with this Debenture.

 

8.1.2                            Without prejudice to the foregoing, the Chargor shall
promptly inform the Security Agent of the receipt of any dividend or
distribution (whether or not in cash) in respect of any or all of the
Investments (including, without limitation, any equity interest in any entity
established in the PRC).

 

8.2                           Investments:  Before Event of Default

 

Prior to the occurrence of an Event of Default
which is continuing the Chargor shall be entitled to exercise all voting rights
in relation to any or all of the Investments (excluding any equity interest in
any entity established in the PRC) provided that
the Chargor shall not exercise such voting rights in any manner, or otherwise
permit or agree to any (a) variation of the rights attaching to or conferred
by any of the Investments or (b) increase in the issued share capital,
registered capital or equity interest of any company, corporation or entity
whose shares/securities/equity interests are charged or subject to security
under this Debenture, except (in the case of such increase) where such increase
is permitted under the Facility Agreement and any and all such additional
shares, registered capital or equity interests are paid for in full and
immediately made subject to the security constituted under this Debenture upon
their issuance.

 

8.3                           Investments:  After Event of Default

 

The Security Agent may, upon and/or after the
occurrence of an Event of Default (as long as any Event of Default is
continuing), at its discretion (in the name of the Chargor or otherwise and
without any further consent or authority from the Chargor):

 

8.3.1                            exercise (or refrain from exercising) any voting
rights in respect of the Investments (excluding any Investment in the form of
any equity interest in any entity established in the PRC);

 

8.3.2                            apply all dividends, distributions, interest and other
monies arising from all or any of the Investments (including without
limitation, any Investment in the form of any equity interest in any entity
established in the PRC to the extent permitted under applicable laws and
regulations of the PRC) in accordance with Clause 18 (Application of Monies);

 

13

 

8.3.3                            transfer all or any of the Investments (excluding any
Investment in the form of any equity interest in any entity established in the
PRC) into the name of such nominee(s) of the Security Agent as it shall
think fit; and

 

8.3.4                            exercise (or refrain from exercising) the powers and
rights conferred on or exercisable by the legal or beneficial owner of the
Investments, including without limitation the right, in relation to any
company, corporation or entity whose shares, equity interests or other
securities are included in the Charged Property or any part thereof, to concur
or participate in:

 

(a)                     the
reconstruction, amalgamation, sale or other disposal of such company,
corporation or entity or any of its assets or undertaking (including without
limitation the exchange, conversion or reissue of any shares, equity interests
or securities as a consequence thereof);

 

(b)                    the
release, modification or variation of any rights or liabilities attaching to
such shares, equity interests or securities; and

 

(c)                     the
exercise, renunciation or assignment of any right to subscribe for any shares,
equity interests or securities,

 

in
each case in such manner and on such terms as the Security Agent may think fit,
and the proceeds of any such action shall form part of the Charged Property and
may be applied by the Security Agent in accordance with Clause 18 (Application of Monies).

 

8.4                           Investments:  Payment of Calls

 

The Chargor shall pay when due all calls or
other payments which may be or become due in respect of any of the Investments,
and in any case of default by the Chargor in such payment, the Security Agent
may, if it thinks fit, make such payment on behalf of the Chargor in which case
any sums paid by the Security Agent shall be reimbursed by the Chargor to the
Security Agent on demand and shall carry interest from the date of payment by
the Security Agent until reimbursed in full at the rate and in accordance with
Clause 2.2 (Interest on Demands).

 

8.5                           Investments:  Exercise of Rights

 

The Chargor shall not exercise any of its
rights and powers in relation to any of the Investments in any manner which, in
the opinion of the Security Agent, would prejudice the value of, or the ability
of the Security Agent to realise, the Security created by this Debenture.

 

9.                                 ACCOUNTS

 

9.1                           Accounts:  Notification and Variation

 

The Chargor, during the subsistence of this
Debenture:

 

9.1.1                            shall deliver to the Security Agent on the date of
this Debenture (and, if any change occurs thereafter, on the date of such
change), details of each Account maintained by it with any bank, financial
institution or entity (other than those maintained with the Security Agent);
and

 

14

 

9.1.2                            shall not, without the Security Agent’s prior written
consent, permit or agree to any variation of the rights attaching to any
Account or close any Account.

 

9.2                           Accounts:  Operation Before Default

 

Without prejudice to the Collateral Rights, as
long as no Default is continuing, the Chargor may from time to time withdraw
amounts from any Account subject to the terms of the Finance Documents.

 

9.3                           Accounts:  Operation After Default

 

9.3.1                            At any time while any Default is continuing, the
Chargor may not withdraw or transfer any amount from any Account except with
the prior written consent of the Security Agent.

 

9.3.2                            Without prejudice to any other Collateral Rights, the
Security Agent shall, as long as any Default is continuing, be entitled without
notice or further demand, immediately to exercise all the rights, powers and
remedies possessed by it according to law as legal and beneficial owner of any
and all amounts standing to the credit of the Accounts (and as assignee and/or
chargee of the Chargor’s right, title and interest therein and thereto) and to:

 

(a)                     demand
and receive all and any monies standing to the credit of any or all of the
Accounts; and/or

 

(b)                    apply,
transfer or set-off any or all of the credit balances from time to time on any
or all of the Accounts in or towards the payment or other satisfaction of all
or part of the Secured Obligations in accordance with Clause 18 (Application of Monies).

 

9.4                           Accounts:
set-off

 

Without prejudice to any other Collateral
Rights, the Security Agent shall from time to time be entitled, without notice
or demand to or on the Chargor, to set-off, apply or transfer any or all of the
amounts standing to the credit of any or all of the Accounts (held or
maintained by the Chargor with the Security Agent) against, or in or towards
the satisfaction of all or any part of the Secured Obligations when such
Secured Obligations are due and payable but unpaid.

 

10.                           MONETARY
CLAIMS

 

The Chargor shall not at any time during the
subsistence of the Debenture, without the prior written consent of the Security
Agent:

 

(a)                                      deal with any Monetary Claims except that the Chargor may (subject to
the other provisions of the Finance Documents) get in and realise any Monetary
Claims in a prudent manner and pay the proceeds of those Monetary Claims into
an Account or as the Security Agent may require (and such proceeds shall be
held upon trust by the Chargor for the Security Agent on behalf of the Secured
Parties prior to such payment in); or

 

(b)                                     factor or discount any of the Monetary Claims or enter into any
agreement for such factoring or discounting.

 

15

 

11.                           INSURANCES

 

11.1                     Insurance:
Insurances Required to be Effected

 

The Chargor shall at all times during the
subsistence of this Debenture effect and maintain insurance in accordance with
the provisions of the Facility Agreement.

 

11.2                     Insurance:
Terms of Insurance

 

The Chargor undertakes with the Security Agent
(for and on behalf of the Secured Parties) that it shall ensure that each of
the insurances required to be effected and maintained pursuant to Clause 11.1 (Insurance: Insurances Required to be Effected)
and/or any other provision of the Transaction Documents shall be:

 

11.2.1                      effected in the name of the Chargor or, if required by
the Security Agent, in the joint names of the Chargor and the Security Agent
(and/or such other person(s) as the Security Agent may nominate), provided
that (in each case) the interest of the Security Agent shall be duly noted on
such insurance;

 

11.2.2                      endorsed with appropriate “loss-payee” clauses to the
effect that the proceeds of such insurance shall be paid in accordance with
Clause 11.3 (Insurance: 
Payment of Proceeds);

 

11.2.3                      on terms that the relevant insurer undertakes to
notify the Security Agent of:

 

(a)                     any
amendment, variation, cancellation, suspension, termination or expiry of such
insurance at least fourteen (14) days before such amendment, variation,
cancellation, suspension, termination or expiry (as the case may be) is due to
take effect;

 

(b)                    without
prejudice to sub-Clause 11.2.3(a), any default by any insured party in the
payment of any premium or other sum payable by it under such insurance as soon
as reasonably practicable after such default; and

 

(c)                     any
failure by any insured party to renew such insurance due to expire at least
fourteen (14) days prior to such expiry;

 

11.2.4                      on terms that none of the Security Agent or any other
Secured Party shall be liable for the payment of any premium or other sum
payable in connection with, or for any obligation of the Chargor under or in
connection with, such insurance;

 

11.2.5                      on terms that such insurance shall not be invalidated
or prejudiced as against a mortgagee or security holder by any
misrepresentation, act, omission, neglect or failure to make disclosure on the
part of any insured person or its agents or any tenant, lessee, licensee or
occupier of any of the Charged Property or by any circumstances beyond the
control of any insured party;

 

11.2.6                      on terms that each relevant insurer waives any and all
rights of subrogation which it may otherwise have against any or all of the
Security Agent (as loss payee or otherwise), the insured parties and/or their
respective subsidiaries, affiliates, officers and employees; and

 

16

 

11.2.7                      on terms that (other than any unpaid premium) each
relevant insurer waives any and all rights of set-off, deduction and/or
counterclaim which it may otherwise have in respect of any insurance proceeds
payable (or payable but for such right of set-off, deduction and/or
counterclaim) to any insured party and/or the Security Agent (as loss-payee or
otherwise).

 

11.3                     Insurance:  Payment of Proceeds

 

In relation to each Insurance Policy, the
Chargor shall procure that, subject to the provisions of the Facility
Agreement:

 

11.3.1                      at all times prior to the service of a notice by or on
behalf of the Security Agent on the relevant insurer to the effect that an
Event of Default has occurred and is continuing or this Debenture has become
enforceable, the proceeds of:

 

(a)                     any
third party liability insurance which provides for direct payment of the
relevant proceeds to the relevant third party shall be paid to such third
party, unless the Chargor shall have otherwise discharged its liability to such
third party in which case such proceeds shall be paid to the Chargor for its
reimbursement; and

 

(b)                    any
other insurance shall be paid:

 

(i)                       to the Chargor (subject to the provisions of the
Facility Agreement) for application towards the repair, replacement, rebuilding
and/or reinstatement of the Charged Property and/or making good the loss or
damage in respect of which such insurance has been effected within 3 Months of
its receipt of such proceeds; or

 

(ii)                    if so directed by the Security Agent, to the Security
Agent; and

 

11.3.2                      at all times after the service of a notice by or on
behalf of the Security Agent on the relevant insurer to the effect that an
Event of Default has occurred and is continuing or this Debenture has become
enforceable, the proceeds of:

 

(a)                     any
third party liability insurance which provides for direct payment of the
relevant proceeds to the relevant third party shall be paid to such third
party, unless the Chargor shall have otherwise discharged its liability to such
third party in which case such proceeds shall be paid to the Security Agent;
and

 

(b)                    any
other insurance shall be paid to the Security Agent.

 

11.4                     Insurance:  General Undertakings

 

At all times during the subsistence of this
Debenture, the Chargor shall:

 

11.4.1                      promptly pay all premiums and other moneys payable
under all Insurance Policies and promptly upon request, produce to the Security
Agent a copy of each Insurance Policy and evidence (acceptable to the Security
Agent) of the payment of such premiums and monies;

 

17

 

11.4.2                      do all such things and take such steps as may be
necessary to ensure that all insurances required to be effected pursuant to any
or all of the Transaction Documents (including without limitation this Debenture)
are so effected and remain in full force and effect;

 

11.4.3                      not at any time do or omit to do anything whereby any
Insurance Policy would be likely to be rendered invalid, void, voidable,
unenforceable, suspended, impaired or liable to forfeiture, cancellation or
termination or render any sum paid out thereunder repayable in whole or in part
or otherwise prejudice or materially adversely affect the Security Agent’s
rights in connection therewith;

 

11.4.4                      procure that no material amendment or variation to the
terms of any insurance required to be effected pursuant to the Transaction
Documents (including without limitation this Debenture) shall be made without
the prior written consent of the Security Agent and that, without prejudice to
the foregoing, no reduction in limit or coverage or increase in deductibles or
excesses in relation to any such insurance shall be made without the prior
written consent of the Security Agent;

 

11.4.5                      notify the Security Agent of any circumstance of which
the Chargor has knowledge (giving full details thereof) which give rise or may
give rise to a claim under any Insurance Policy which exceeds or is likely to
exceed USD1,000,000 (or the equivalent thereof) and thereafter from time to
time inform the Security Agent as to the conduct and progress of each such
claim; and

 

11.4.6                      upon the request of the Security Agent, provide such
information as the Security Agent may require in connection with any Insurance
Policy.

 

11.5                     Application
of Insurance Proceeds

 

Where the Chargor shall have received any
proceeds of any Insurance Policy which ought to have been paid to the Security
Agent pursuant to Clause 11.3 (Insurance:  Payment of Proceeds), the Chargor
shall promptly pay over such proceeds to the Security Agent and shall at all
times prior to such payment hold the same on trust for the Security Agent.

 

11.6                     Insurance:
Handling of Claims

 

The Chargor shall, at all times prior to the
occurrence of an Event of Default which is continuing, be entitled to make and
deal with all claims in respect of any or all of the Insurance Policies except
for any settlement, waiver, discontinuance of compromise of any claim in an
amount of not less than USD1,000,000 (or the equivalent thereof) which shall
require the prior written consent of the Security Agent.  After the occurrence of an Event of Default
(as long as any Event of Default is continuing), the Chargor shall cease to be
entitled to make or deal with any claim in respect of any Insurance Policy and
the Security Agent shall be entitled to (but shall not be obliged to) make or
deal with any such claim at its discretion to the exclusion of the Chargor.

 

18

 

11.7                     Insurance:
Default

 

If the Chargor defaults in complying with any
of the foregoing provisions of this Clause 11 (Insurances),
the Security Agent may effect or renew any relevant insurance on such terms, in
such name(s) and in such amount(s) and/or take any steps to remedy
such default as it considers appropriate, and all moneys expended by the
Security Agent in doing so shall be reimbursed by the Chargor to the Security
Agent on demand and shall carry interest from the date of payment by the
Security Agent until reimbursed in full at the rate specified in
Clause 2.2 (Interest on Demands).

 

12.                           REAL
PROPERTY

 

12.1                     General
Property Undertaking

 

The Chargor shall:

 

12.1.1                      repair and keep in good and substantial repair and
condition to the satisfaction of the Security Agent all the Real Property at
any time forming part of the Charged Property;

 

12.1.2                      not at any time without the prior written consent of
the Security Agent sever or remove any of the fixtures forming part of such
Real Property or any fitting, plant or machinery (other than work in progress)
on or in the Charged Property (except for the purpose of any necessary repairs
or replacement thereof);

 

12.1.3                      not, except with the prior written consent of the
Security Agent, use or permit the use of such Real Property or any part thereof
for purposes other than those for which it may be lawfully used;

 

12.1.4                      comply with and observe and perform (i) all
applicable laws and all applicable requirements of all planning and
environmental legislation, regulations and bye-laws relating to such Real
Property or any part thereof, (ii) any conditions attaching to any
planning permissions and/or consents relating to or affecting such Real
Property or any part thereof, (iii) any notices, orders and/or directives
orders made or issued by any planning, environmental or other public body in
respect of such Real Property or any part thereof and (iv) all restrictive
and other covenants, stipulations and obligations now or at any time affecting
such Real Property or any part thereof insofar as they are subsisting and
capable of being enforced; and

 

12.1.5                      within fourteen days after the receipt by the Chargor
of any material application, requirement, demand, order, directive or notice
served or given by any government department or any other competent authority
with respect to such Real Property or any part thereof give notice of and
deliver a copy of the same to the Security Agent, and thereafter keep the
Security Agent informed from time to time of the steps/actions taken in
relation to the same.

 

19

 

12.2                     Lease
Covenants

 

The Chargor shall, in relation to any lease,
agreement for lease or other right to occupy to which all or any part of the
Charged Property is at any time subject:

 

12.2.1                      pay the rents (if the Chargor is the lessee or the
beneficiary of such right to occupy) and observe and perform in all material
respects the covenants, conditions and obligations imposed (if the Chargor is
the lessor or the grantor of such right to occupy) on the lessor or, (if the
Chargor is lessee or the beneficiary of such right to occupy) on the lessee;

 

12.2.2                      (where the Chargor is the lessor or the grantor of
such right to occupy) duly and efficiently enforce all of its rights and
remedies against any tenant, lessee, licensee or occupier of all of any part of
such Charged Property; and

 

12.2.3                      (where the Chargor is the lessee or the beneficiary of
such right to occupy) not do any act or thing whereby any lease or other
document which gives any right to occupy any part of the Charged Property
becomes or may become subject to determination or any right of re-entry or
forfeiture prior to the expiration of its term.

 

12.3                     Entitlement
to Remedy

 

If the Chargor fails to comply with any of the
undertakings contained in this Clause 12 (Real
Property), the Security Agent shall be entitled (with such agents,
contractors and others as it sees fit), without becoming a mortgagee in
possession, to do such things as may in the opinion of the Security Agent be
required to remedy such failure and all monies spent by the Security Agent in
doing so shall be reimbursed by the Chargor on demand with interest from the
date of payment by the Security Agent until reimbursed in full in accordance
with Clause 2.2 (Interest on Demands).

 

13.                           GENERAL
UNDERTAKINGS

 

13.1                     Intellectual
Property

 

The Chargor shall during the subsistence of
this Debenture in respect of any and all Intellectual Property (including,
including without limitation, the Relevant Trademarks):

 

13.1.1                      take all such steps and do all such acts as may be
necessary to preserve and maintain the subsistence and the validity of any such
Intellectual Property;

 

13.1.2                      use reasonable endeavours to prevent any infringement
in any material respect of such Intellectual Property;

 

13.1.3                      make registrations and pay all registration fees and
taxes necessary to maintain such Intellectual Property in full force and effect
and record its interest in such Intellectual Property;

 

13.1.4                      not use or permit any such Intellectual Property to be
used in any way or take any step or omit to take any step in respect of such
Intellectual Property which could reasonably be expected to materially and
adversely affect the existence or value of such Intellectual Property or
imperil the right of any member of the Group to use such Intellectual Property;

 

20

 

13.1.5                      not discontinue the use of such Intellectual Property;
and

 

13.1.6                      not sell, lease, license or otherwise dispose of any
its rights in respect of such Intellectual Property.

 

13.2                     Information
and Access

 

The Chargor shall from time to time on request
of the Security Agent, furnish the Security Agent with such information as the
Security Agent may require about the Chargor’s business and affairs, the
Charged Property and/or the Chargor’s compliance with the terms of this Debenture
and the Chargor shall permit the Security Agent, its representatives,
professional advisers and contractors, free access at all reasonable times and
on reasonable notice to (a) inspect and take copies and extracts from the
books, accounts and records of the Chargor and (b) to view the Charged
Property or any part thereof (without becoming liable as mortgagee in
possession).

 

14.                           ENFORCEMENT
OF SECURITY

 

14.1                     Enforcement

 

Upon and after the occurrence of an Event of
Default (as long as any Event of Default is continuing) or if the Chargor
requests the Security Agent to exercise any of its powers under this Debenture,
the Security created by or pursuant to this Debenture is immediately
enforceable and the Security Agent may, without notice to the Chargor or prior
authorisation from any court, in its absolute discretion:

 

14.1.1                      enforce all or any part of such Security (at the
times, in the manner and on the terms it thinks fit) and take possession of and
hold or dispose of all or any part of the Charged Property; and

 

14.1.2                      whether or not it has appointed a Receiver, exercise
all or any of the powers, authorities and discretions conferred by the
Conveyancing and Property Ordinance (Cap. 219) (as varied or extended by this
Debenture) on mortgagees and by this Debenture on any Receiver or otherwise
conferred by law on mortgagees and/or Receivers.

 

14.2                     No
Liability as Mortgagee in Possession

 

Neither the Security Agent nor any Receiver
shall be liable to account as a mortgagee in possession in respect of all or
any part of the Charged Property or be liable for any loss upon realisation or
for any neglect, default or omission in connection with the Charged Property to
which a mortgagee or a mortgagee in possession might otherwise be liable.

 

15.                           POWERS
OF SALE

 

15.1                     Extension
of Powers

 

The power of sale or other disposal conferred
on the Security Agent and on any Receiver by this Debenture shall operate as a
variation and extension of the statutory power of sale under Sections 51 and 53
of the Conveyancing and Property Ordinance (Cap. 219) and such power shall
arise (and the Secured Obligations shall be deemed due and payable for that
purpose) on execution of this Debenture.

 

21

 

15.2                     Restrictions

 

The restrictions contained in paragraph 11 of
the Fourth Schedule to the Conveyancing and Property Ordinance (Cap. 219) shall
not apply to this Debenture or to the exercise by the Security Agent of its
right to consolidate all or any of the Security created by or pursuant to this
Debenture with any other Security in existence at any time or to its power of
sale, which powers may be exercised by the Security Agent without notice to the
Chargor on or at any time after the occurrence of an Event of Default (as long
as any Event of Default is continuing). Any restrictions on the consolidation
of Security shall be excluded to the fullest extent permitted by law.

 

15.3                     Power
of Leasing

 

The statutory powers of leasing, surrendering
leases and accepting surrenders of leases conferred by the Fourth Schedule to
the Conveyancing and Property Ordinance (Cap. 219) may be exercised by the
Security Agent at any time on or after the occurrence of an Event of Default
(as long as any Event of Default is continuing) and, without prejudice to the
foregoing, the Security Agent and/or any Receiver may, whether or not the
Security Agent and/or such Receiver shall then be in possession of the relevant
property proposed to be leased/let/made subject to the relevant option, make
any lease or agreement for lease, accept surrenders of leases and/or grant
options on such terms (including without limitation as to premium and length of
term) as it shall think fit, without the need to comply with any
requirements/restrictions imposed by the Fourth Schedule to the Conveyancing
and Property Ordinance (Cap. 219).

 

16.                           APPOINTMENT
OF RECEIVER OR ADMINISTRATOR

 

16.1                     Appointment
and Removal

 

Upon and after the occurrence of an Event of
Default (as long as any Event of Default is continuing) or if requested to do
so by the Chargor, the Security Agent may by deed or otherwise (acting through
an authorised officer of the Security Agent), without prior notice to the
Chargor:

 

16.1.1                      appoint one or more persons to be a Receiver of the
whole or any part of the Charged Property;

 

16.1.2                      appoint two or more Receivers of separate parts of the
Charged Property;

 

16.1.3                      remove (so far as it is lawfully able) any Receiver so
appointed; and/or

 

16.1.4                      appoint another person(s) as an additional or
replacement Receiver(s).

 

16.2                     Capacity
of Receivers

 

Each person appointed to be a Receiver pursuant
to Clause 16.1 (Appointment and Removal)
shall be:

 

16.2.1                      entitled to act individually or together with any
other person appointed or substituted as Receiver;

 

16.2.2                      for all purposes deemed to be the agent of the Chargor
which shall be solely responsible for his acts, defaults and liabilities and
for the payment of his 

 

22

 

remuneration and no Receiver shall at any time
act as agent for the Security Agent; and

 

16.2.3                       entitled to remuneration for his services at a rate to
be fixed by the Security Agent from time to time.

 

16.3                     Statutory
Powers of Appointment

 

The powers of appointment of a Receiver herein
contained shall be in addition to all statutory and other powers of appointment
of the Security Agent under the Conveyancing and Property Ordinance (Cap. 219)
(as varied and extended by this Debenture) or otherwise and such powers shall
remain exercisable from time to time by the Security Agent in respect of all or
any part of the Charged Property.

 

17.                           POWERS
OF RECEIVER

 

17.1                     Powers
of Receiver

 

Every Receiver shall (subject to any
restrictions in the instrument appointing him but notwithstanding any
winding-up or dissolution of the Chargor) have and be entitled to exercise, in
relation to the Charged Property (and any assets of the Chargor which, when got
in, would be Charged Property) or that thereof in respect of which he was
appointed, and as varied and extended by the provisions of this Debenture (in
the name of or on behalf of the Chargor or in his own name and, in each case,
at the cost of the Chargor):

 

17.1.1                      all the powers conferred by the Conveyancing and
Property Ordinance (Cap. 219) on mortgagors and on mortgagees in possession
and on receivers appointed under that Ordinance;

 

17.1.2                      all the powers and rights of an absolute owner and
power to do or omit to do anything which the Chargor itself could do or omit to
do; and

 

17.1.3                      the power to do all things (including without limitation
bringing or defending proceedings in the name or on behalf of the Chargor)
which seem to the Receiver to be incidental or conducive to (a) any of the
functions, powers, authorities or discretions conferred on or vested in him or (b) the
exercise of any Collateral Rights (including without limitation realisation of
all or any part of the Charged Property) or (c) bringing to his hands any
assets of the Chargor forming, or which when got in would be, part of the
Charged Property.

 

17.2                     Additional
Powers of Receiver

 

In addition to and without prejudice to the
generality of the foregoing, every Receiver shall (subject to any limitations
or restrictions expressed in the instrument appointing him but notwithstanding
any winding-up or dissolution of the Chargor) have the following powers in
relation to the Charged Property (and any assets of the Chargor which, when got
in, would be part of the Charged Property), in respect of which he was
appointed (and every reference in this Clause 17.2 to the “Charged Property”
shall be read as a reference to that part of the Charged Property in respect of
which such Receiver was appointed):

 

23

 

17.2.1                      Take Possession

 

power to enter upon, take immediate possession
of, collect and get in the Charged Property including without limitation rents
and other income whether accrued before or after the date of his appointment
and for that purpose to make, or to require the directors of the Chargor to
make, calls conditionally or unconditionally upon the holders of the Chargor’s
share capital in respect of any such capital of the Chargor which remains
uncalled and to enforce payment of calls so made and any previous unpaid calls
by taking proceedings in the name of the Chargor or in his own name;

 

17.2.2                      Proceedings and Claims

 

power to bring, prosecute, enforce, defend and
abandon applications, claims, disputes, actions, suits and proceedings in
connection with the business of the Chargor or all or any part of the Charged
Property or the Debenture in the name of the Chargor or in his own name and to
submit to arbitration, negotiate, compromise and settle any such applications,
claims, disputes, actions, suits or proceedings and in addition to take or
defend proceedings for the compulsory winding-up of the Chargor and proceedings
for directions under Section 255 of the Companies Ordinance (Cap. 32);

 

17.2.3                      Carry on Business

 

power to carry on and manage, or concur in the
carrying on and management of or to appoint a manager of, the whole or any part
of the Chargor’s business in such manner as he shall in his absolute discretion
think fit including without limitation the power to enter into any contract or
arrangement and to perform, repudiate, rescind or vary any contract to which
the Chargor is a party and power to supervise, control and finance any
subsidiary of the Chargor or any other body corporate (including without
limitation any referred to in Clause 17.2.6 below) and its business and the
conduct thereof and to change the situation of the registered office of the
Chargor or any such subsidiary or other body corporate;

 

17.2.4                      Deal with Charged Property

 

without the need to observe the restrictions
imposed by paragraph 11 of the Fourth Schedule to the Conveyancing and Property
Ordinance (Cap. 219), power, in relation to the Charged Property and each and
every part thereof, to sell, transfer, convey, grant or accept surrenders of
leases, vary, terminate or surrender leases, grant, vary or terminate licences
or rights of user (in each case with or without consideration) or concur in any
of the foregoing by the Chargor or any other receiver or manager of the Chargor
(including without limitation to or in relation to the Security Agent or any of
the other Secured Parties) in such manner and generally on such terms as he
thinks fit including without limitation, without the consent of the Chargor,
the severing and separate disposal from the premises to which they were affixed
of fixtures and plant and machinery;

 

24

 

17.2.5                      Acquisitions

 

power to purchase, lease, hire or otherwise
acquire any assets or rights of any description which he shall in his absolute
discretion consider necessary or desirable for the carrying on, improvement or
realisation of the whole or any part of the Charged Property or the business of
the Chargor or otherwise for the benefit of the whole or any part of the
Charged Property;

 

17.2.6                      New Subsidiary

 

power to promote, procure the formation or
otherwise acquire the share capital of, any body corporate with a view to such
body corporate becoming a subsidiary of the Chargor or otherwise and
purchasing, leasing or otherwise acquiring an interest in the whole or any part
of the Charged Property or carrying on any business in succession to the
Chargor or any subsidiary of the Chargor;

 

17.2.7                      Landlord and Tenant

 

power to make allowances to and re-arrangements
with any lessees, tenants or other persons from whom any rents and profits may
be receivable (including granting any licences and operating any rent reviews)
and to exercise any powers and discretions conferred on a landlord or a tenant
by any statutory provision or by general law from time to time in force in
relation to all or any part of the Charged Property;

 

17.2.8                      Repairs etc

 

power to undertake, effect or complete any work
of repair, refurbishment, decoration, modification, building, improvement or
development of all or any part of the Charged Property as he may think
expedient and to apply for and obtain any planning permissions, building
regulation approvals and any other permissions, consents or licences in each
case as he may in his absolute discretion think fit and to acquire (or acquire
an interest in) any such property as he may think expedient;

 

17.2.9                      Insurance

 

power to effect, maintain or renew indemnity
and other insurances and to obtain bonds and performance guarantees;

 

17.2.10                Employment

 

power to employ, engage, dismiss or vary the
terms of employment or engagement of such employees, workmen, servants, officers,
managers, agents and advisers on such terms as to remuneration and otherwise as
he shall think fit including without limitation power to engage his own firm in
the conduct of the receivership;

 

25

 

17.2.11    Borrowing

 

power to raise or borrow money from the
Security Agent or any of the other Secured Parties or any other person to rank
either in priority to the Security constituted by this Debenture or any part of
it or otherwise and with or without a mortgage or charge on the Charged
Property or any part of it on such terms as he shall in his absolute discretion
think fit (and no person lending such money shall be concerned to see or
enquire as to the propriety or purpose of the exercise of such power or the
application of money so raised or borrowed);

 

17.2.12    Redemption
of Security

 

power to redeem, discharge or compromise any
Security whether or not having priority to the Security constituted by this
Debenture or any part of it;

 

17.2.13    Covenants,
Guarantees and Indemnities

 

power to enter into bonds, covenants,
guarantees, commitments, indemnities and other obligations or liabilities as he
shall think fit, to make all payments needed to effect, maintain or satisfy
such obligations or liabilities and to use the company seal of the Chargor; and

 

17.2.14    Exercise
of Powers in the Chargor’s Name

 

power to exercise any or all of the above
powers on behalf of and in the name of the Chargor (notwithstanding any
winding-up or dissolution of the Chargor) or on his own behalf.

 

17.3       Terms of
Disposition

 

In making any sale or other disposal of all or
any part of the Charged Property or any acquisition in the exercise of their
respective powers (including without limitation a disposal by a Receiver to any
subsidiary of the Chargor or other body corporate as is referred to in Clause
17.2.6) a Receiver or the Security Agent may accept or dispose of as, and by
way of consideration for, such sale or other disposal or acquisition, cash,
shares, loan capital or other obligations, including without limitation
consideration fluctuating according to or dependent upon profit or turnover and
consideration the amount whereof is to be determined by a third party.  Any such consideration may, if thought
expedient by the Receiver or the Security Agent, be nil or may be payable or
receivable in a lump sum or by instalments. 
Any contract for any such sale, disposal or acquisition by the Receiver
or the Security Agent may contain conditions excluding or restricting the
personal liability of the Receiver or the Security Agent.

 

18.         APPLICATION
OF MONIES

 

18.1       Order of
Application

 

Save as otherwise expressly provided in this
Debenture, all moneys received or recovered by the Security Agent or any
Receiver pursuant to this Debenture or the powers conferred by it shall
(subject to the claims of any person having prior rights thereto and subject to
Clause 18.2 (Suspense Account), and by way of
variation of the 

 

26

 

Conveyance and Property Ordinance (Cap. 219))
be applied in accordance with clause 6 (Application of Proceeds)
of the Security Trust Deed.

 

18.2       Suspense
Account

 

All monies received, recovered or realised
under this Debenture by the Security Agent or any Receiver or the powers
conferred by it (including the proceeds of any conversion of currency) may in
its discretion be credited to and held in any suspense or impersonal account
pending their application from time to time in or towards the discharge of any
of the Secured Obligations in accordance with Clause 18.1 (Order of Application).

 

18.3       Application
by the Chargor

 

Any application under this Clause 18 shall
override any application by the Chargor.

 

19.         RECEIPT
AND PROTECTION OF PURCHASERS

 

19.1       Receipt
and Consideration

 

The receipt of the Security Agent or any
Receiver shall be conclusive discharge to a purchaser of any part of the
Charged Property from the Security Agent or such Receiver and in making any
sale or disposal of any part of the Charged Property or making any acquisition,
the Security Agent or any Receiver may do so for such consideration, in such
manner and on such terms as it thinks fit.

 

19.2       Protection
of Purchasers

 

No purchaser or other person dealing with the
Security Agent or any Receiver shall be bound to inquire whether the right of
the Security Agent or such Receiver to exercise any of its powers has arisen or
become exercisable or be concerned with any propriety or regularity on the part
of the Security Agent or such Receiver in such dealings.  The protection given to purchasers from a
mortgagee in Sections 52 and 55 of the Conveyancing and Property Ordinance
(Cap. 219) shall apply equally to purchaser(s) and other person(s) dealing
with the Security Agent or any Receiver.

 

20.         POWER OF
ATTORNEY

 

20.1       Appointment
and Powers

 

The Chargor by way of security irrevocably
(within the meaning of Section 4 of the Powers of Attorney Ordinance (Cap.
31)) appoints the Security Agent and any Receiver severally, upon or after the
occurrence of an Event of Default (as long as any Event of Default is
continuing), to be its attorney and in its name, on its behalf and as its act
and deed to execute, deliver and perfect all documents and do all things which
the Security Agent or such Receiver may consider to be necessary for:

 

20.1.1       carrying out any
obligation imposed on the Chargor by this Debenture or any other agreement
binding on the Chargor to which the Security Agent is party (including without
limitation the execution and delivery of any deeds, charges, assignments or
other Security and any transfers of the Charged Property or any part thereof);
and

 

20.1.2       enabling the Security
Agent and any Receiver to exercise, or delegate the exercise of, any of the
rights, powers and authorities conferred on them by or pursuant to this
Debenture or by law (including, without limitation, upon or 

 

27

 

after the occurrence of an Event of Default (as long as any Event of
Default is continuing), the exercise of any right of a legal or beneficial
owner of the Charged Property or any part thereof).

 

20.2       Ratification

 

The Chargor shall ratify and confirm all things
done and all documents executed by any attorney in the exercise or purported
exercise of all or any of his powers.

 

21.         REPRESENTATIONS

 

21.1       Representations

 

The Chargor represents and warrants to the
Security Agent that:

 

21.1.1       it is a limited liability company incorporated and validly existing
under the laws of the British Virgin Islands; and

 

21.1.2       subject to any general principles of law as at the date of this
Debenture limiting its obligations which are specifically referred to in any
legal opinion delivered pursuant to Clause 5 (Conditions
of Utilisation) of the Facility
Agreement:

 

(a)       each of the
obligations expressed to be assumed by it in this Debenture  are legal, valid, binding and enforceable
obligations; and

 

(b)       (without limiting the
generality of Clause 21.1.2(a) above), this Debenture creates the security
interests which it purports to create and such security interests are valid and
effective;

 

21.1.3       the entry into and performance by it of, and the transactions
contemplated by, this Debenture do not and will not:

 

(a)       conflict with any law
or regulation applicable to it;

 

(b)       conflict with its
constitutional documents;

 

(c)       conflict with any
agreement or instrument binding upon it or any of its assets; or

 

(d)       result in the
existence of or oblige it to create any Security over all or any of its assets
(other than the Security constituted pursuant to this Debenture);

 

21.1.4       it has the power to enter into, perform and deliver, and has taken all
necessary action to authorise its entry into, performance and delivery of, this
Debenture;

 

21.1.5       no limit on its powers will be exceeded as a result of the grant of Security
contemplated by this Debenture;

 

21.1.6       all Authorisations required or desirable:

 

(a)       to enable it lawfully
to enter into, exercise its rights and comply with its obligations in this
Debenture;

 

28

 

(b)       to make this
Debenture admissible in evidence in its jurisdiction of incorporation and/or
Hong Kong; and/or

 

(c)       to enable it to
create the Security expressed to be created by it pursuant to this Debenture
and to ensure that such Security has the priority and ranking it is expressed
to have,

 

have been obtained or effected and are in full
force and effect;

 

21.1.7       the choice of the laws of Hong Kong as the governing law of this
Debenture will be recognised and enforced in its jurisdiction of incorporation
and in the Hong Kong courts;

 

21.1.8       any judgment obtained in the Hong Kong courts in relation to this
Debenture will, subject to the legal qualifications specifically referred to in
any legal opinion delivered pursuant to Clause 5 (Conditions of Utilisation) of the Facility Agreement, be
recognised and enforced in its jurisdiction of incorporation and/or Hong Kong;

 

21.1.9       under the law of its jurisdiction of incorporation it is not necessary
that this Debenture be filed, recorded or enrolled with any court or other
authority in that jurisdiction or that any stamp, registration or similar tax
be paid on or in relation to this Debenture;

 

21.1.10     there are no restrictions on the Chargor’s ability to assign all or any
of its rights under any Insurance Policy, whether contained in any Insurance
Policy or in any other document (except any Finance Document, and except for
any consent of any counterparty to any Insurance Policy which has already been
obtained);

 

21.1.11     all consents necessary to enable any asset that is expressed to be
subject to any fixed charge or assignment under Clause 3 (Fixed Charges, Assignments and Floating Charge)
to be the subject of an effective fixed charge or, as the case may be,
assignment pursuant to Clause 3 (Fixed
Charges, Assignments and Floating Charge) have been obtained and are
in full force and effect;

 

21.1.12     it has obtained all consents necessary to ensure that no other party to
any agreement or arrangement entered into by the Chargor becomes or shall
become entitled to terminate or rescind such agreement or arrangement as a
consequence of the Chargor entering into this Debenture;

 

21.1.13     it is, and will be, the sole legal and beneficial owner of the Charged
Property (subject to the Security constituted pursuant to this Debenture);

 

21.1.14     it has not sold or otherwise disposed of, or created, granted or
permitted to subsist any Security over, all or any of its right, title and
interest in the Charged Property (other than the Security constituted pursuant
to this Debenture and other than as expressly permitted under this Debenture);

 

21.1.15     the particulars of the Shares as at the date of this Debenture as set
out in Schedule 3 (Particulars of the Shares)
are accurate in all respects;

 

29

 

21.1.16     the Shares have been validly issued by the Company and are fully paid up
and there are no monies or liabilities payable or outstanding in relation to
any of the Shares;

 

21.1.17     the Chargor legally and beneficially owns all of the Shares, free and
clear of all Security, except for any Security constituted hereby, and
exercises management control over the Company; and

 

21.1.18     as at the date of this Debenture, the Chargor is not registered as a
non-Hong Kong company under Part XI of the Companies Ordinance (Cap. 32)
nor has it made any application to be so registered.

 

21.2       Repetition

 

All of the representations and warranties in
Clause 21.1 (Representations) are
made by the Chargor to the Security Agent on the date of this Debenture and
each of the representations and warranties set out in sub-Clauses 21.1.1 to
21.1.18 (except sub-Clauses 21.1.15 and 21.1.18) above shall be deemed to be
repeated by the Chargor on the date of each Utilisation Request, on each
Utilisation Date and on the first day of each Interest Period relating to each
Loan and (for so long as the Release Date has not occurred) on each date
falling on the last day of each successive period of three Months from and
including the Facility Release Date, in each case by reference to the facts and
circumstances existing at the date on which such representation or warranty is
deemed to be made or repeated.

 

22.         EFFECTIVENESS
OF SECURITY

 

22.1       Continuing
Security

 

The Security created by or pursuant to this
Debenture shall remain in full force and effect as a continuing security for
the Secured Obligations unless and until discharged by the Security Agent.  No part of the Security from time to time
intended to be constituted by this Debenture will be considered satisfied or
discharged by any intermediate payment, discharge or satisfaction of the whole
or any part of the Secured Obligations.

 

22.2       Cumulative
Rights

 

The Security created by this Debenture and the
Collateral Rights shall be cumulative, in addition to and independent of every
other Security which any or all of the Secured Parties may at any time hold for
any or all of the Secured Obligations or any rights, powers and remedies
provided by law.  No prior Security held
by any Secured Party over the whole or any part of the Charged Property shall
merge into the Security constituted by this Debenture.

 

22.3       Chargor’s
Obligations

 

None of the obligations of the Chargor under
this Debenture or the Collateral Rights shall be affected by an act, omission,
matter, thing or event which, but for this Clause 22.3, would reduce, release
or prejudice any of its obligations under this Debenture (without limitation
and whether or not known to it or any Secured Party) including:

 

22.3.1       any time, waiver or consent granted to, or composition with, any Obligor
or other person;

 

30

 

22.3.2       the release of any Obligor or any other person under the terms of any
composition or arrangement with any creditor of any member of the Group;

 

22.3.3       the taking, variation, compromise, exchange, renewal or release of, or
refusal or neglect to perfect, take up or enforce, any rights against, or
Security over assets of, any Obligor or other person or any non-presentation or
non-observance of any formality or other requirement in respect of any
instrument or any failure to realise the full value of any Security;

 

22.3.4       any incapacity or lack of power, authority or legal personality of or
dissolution or change in the members or status of any Obligor or any other person;

 

22.3.5       any amendment (however fundamental) or replacement of a Transaction
Document or any other document or Security or of the Secured Obligations;

 

22.3.6       any variation of the terms of the trust upon which the Security Agent
holds any Transaction Security;

 

22.3.7       any unenforceability, illegality or invalidity of any obligation of any
person under any Transaction Document or any other document or Security;

 

22.3.8       any insolvency or similar proceedings;

 

22.3.9       any claims or set-off right that the Chargor may have; or

 

22.3.10     any law, regulation or decree or order of any jurisdiction affecting any
Obligor.

 

22.4       Remedies
and Waivers

 

No failure on the part of the Security Agent to
exercise, or any delay on its part in exercising, any Collateral Right shall
operate as a waiver thereof, nor shall any single or partial exercise of any
Collateral Right preclude any further or other exercise of that or any other
Collateral Right.

 

22.5       No
Liability

 

None of the Security Agent, its nominee(s) or
any Receiver shall be liable by reason of (a) taking any action permitted
by this Debenture or (b) any neglect or default in connection with all or
any part of the Charged Property or (c) taking possession of or realising
all or any part of the Charged Property, except in the case of gross negligence
or wilful default upon its part (as finally judicially determined).

 

22.6       Partial
Invalidity

 

If, at any time, any provision of this
Debenture is or becomes illegal, invalid or unenforceable in any respect under
the law of any jurisdiction, neither the legality, validity or enforceability
of the remaining provisions of this Debenture under such laws nor of such
provision under the laws of any other jurisdiction shall in any way be affected
or impaired thereby and, if any part of the Security intended to be created by
or pursuant to this Debenture is invalid, unenforceable or ineffective for any
reason, that shall not affect or impair any other part of that Security.

 

31

 

22.7       No Prior
Demand

 

The Security Agent shall not be obliged to make
any demand of or enforce any rights or claim against any Obligor or any other
person, to take any action or obtain judgment in any court against any Obligor
or any other person or to make or file any proof or claim in a liquidation,
bankruptcy or insolvency of any Obligor or any other person or to enforce or
seek to enforce any other Security in respect of any or all of the Secured
Obligations before exercising any Collateral Right.

 

22.8       Deferral
of rights

 

Until the occurrence of the Release Date, the
Chargor will not (unless the Security Agent otherwise directs) exercise any
rights which it may have by reason of performance by it of its obligations
under this Debenture:

 

22.8.1       to be indemnified by any Obligor;

 

22.8.2       to claim any contribution from any guarantor of any Obligor’s
obligations under any or all of the Transaction Documents; and/or

 

22.8.3       to take the benefit (in whole or in part and whether by way of
subrogation or otherwise) of any rights of the Secured Parties under the
Transaction Documents or of any other guarantee or Security taken pursuant to,
or in connection with, the Transaction Documents by any Secured Party.

 

22.9       Settlement
conditional

 

Any settlement, discharge or release hereunder
in relation to the Chargor or all or any part of the Charged Property shall be
conditional upon no Security or payment by any or all of the Obligors to, or
recovery from any or all of the Obligors by, any or all of the Secured Parties
being avoided or reduced by virtue of any bankruptcy, insolvency, liquidation
or similar laws of general application or any similar event or for any other
reason and shall in those circumstances be void.

 

23.         RELEASE
OF SECURITY

 

23.1       Redemption
of Security

 

After the occurrence of the Release Date, the
Security Agent shall, at the request (with reasonable notice) and cost of the
Chargor, release and cancel the Security constituted by this Debenture and
procure the reassignment to the Chargor of the property and assets assigned to
the Security Agent pursuant to this Debenture (to the extent not otherwise
sold, assigned or otherwise disposed of or applied in accordance with this
Debenture), in each case subject to Clauses 23.2 (Avoidance of Payments) and 22.9 (Settlement conditional) and without recourse to, or any
representation or warranty by, the Security Agent or any of its nominees.

 

23.2       Avoidance
of Payments

 

If the Security Agent considers that any amount
paid or credited to or recovered by any Secured Party by or from any Obligor is
capable of being avoided or reduced by virtue of any bankruptcy, insolvency,
liquidation or similar laws, the liability of the Chargor under this Debenture
and the Security constituted by this Debenture shall continue and such amount
shall not be considered to have been irrevocably paid.

 

32

 

24.         SUBSEQUENT
SECURITY INTERESTS

 

If the Security Agent (acting in its capacity
as security agent or trustee or otherwise) or any of the other Secured Parties
at any time receives or is deemed to have received notice of any subsequent
Security or other interest affecting all or any part of the Charged Property or
any assignment or transfer of the Charged Property which is prohibited by the terms
of this Debenture or any Transaction Document, all payments thereafter by or on
behalf of any or all of the Obligors to the Security Agent (whether in its
capacity as security agent or trustee or otherwise) or any of the other Secured
Parties shall be treated as having been credited to a new account of the
Security Agent or, as the case may be, that other Secured Party and not as
having been applied in reduction of the Secured Obligations as at the time when
(or at any time after) the Security Agent or any other Secured Party received
such notice of such subsequent Security or other interest or such assignment or
transfer.

 

25.         CURRENCY
CONVERSION AND INDEMNITY

 

25.1       Currency
Conversion

 

For the purpose of or pending the discharge of
any of the Secured Obligations the Security Agent may convert any money
received, recovered or realised or subject to application by it under this
Debenture from one currency to another, as the Security Agent may think fit,
and any such conversion shall be effected at the Security Agent’s spot rate of
exchange (or, if so such spot of exchange is quoted by the Security Agent, such
other rate of exchange as may be available to the Security Agent) for the time
being for obtaining such other currency with such first-mentioned currency.

 

25.2       Currency
Indemnity

 

If any sum (a “Sum”)
owing by the Chargor under this Debenture or any order or judgment given or
made in relation to this Debenture has to be converted from the currency (the “First Currency”) in which such Sum is payable into another
currency (the “Second Currency”) for the purpose
of:

 

25.2.1       making or filing a claim or proof against the Chargor;

 

25.2.2       obtaining an order or judgment in any court or other tribunal;

 

25.2.3       enforcing any order or judgment given or made in relation to this
Debenture; or

 

25.2.4       applying the Sum in satisfaction of any of the Secured Obligations,

 

the Chargor shall indemnify the Security Agent
from and against any loss suffered or incurred as a result of any discrepancy
between (a) the rate of exchange used for such purpose to convert such Sum
from the First Currency into the Second Currency and (b) the rate or rates
of exchange available to the Security Agent at the time of such receipt or
recovery of such Sum.

 

26.         COSTS,
EXPENSES AND INDEMNITY

 

26.1       Costs and
expenses

 

The Chargor shall, on demand of the Security
Agent, reimburse the Security Agent on a full indemnity basis for all costs and
expenses (including legal fees and any value added 

 

33

 

tax) incurred by the Security Agent in
connection with (a) the execution of this Debenture or otherwise in
relation to this Debenture, (b) the perfection or enforcement of the
Security constituted by this Debenture and/or (c) the exercise of any
Collateral Right, together with interest from the date such costs and expenses
were incurred to the date of reimbursement of the same by the Chargor,
calculated in accordance with the provisions of the Facility Agreement
(applying mutatis mutandis as if
the same were an Unpaid Sum thereunder).

 

26.2       Stamp
taxes

 

The Chargor shall pay all stamp, registration
and other Taxes to which this Debenture, the Security contemplated in this
Debenture and/or any judgment given in connection with this Debenture is, or at
any time may be, subject and shall, from time to time, indemnify the Security
Agent on demand against any liabilities, costs, claims and/or expenses
resulting from any failure to pay or delay in paying any such Tax.

 

26.3       Indemnity

 

The Chargor shall, notwithstanding any release
or discharge of all or any part of the Security constituted by this Debenture,
indemnify the Security Agent and each other Secured Party (through the Security
Agent), their respective agents, attorneys and any Receiver against any action,
proceeding, claims, losses, liabilities and costs which it may sustain as a
consequence of any breach by the Chargor of the provisions of this Debenture,
the exercise or purported exercise of any of the rights and powers conferred on
any of them by this Debenture or otherwise relating to the Charged Property or
any part thereof.

 

27.         PAYMENTS
FREE OF DEDUCTION

 

All payments to be made to the Security Agent
under this Debenture shall be made free and clear of and without deduction for
or on account of Tax unless the Chargor is required to make such payment
subject to the deduction or withholding of Tax, in which case the sum payable
by the Chargor in respect of which such deduction or withholding is required to
be made shall be increased to the extent necessary to ensure that, after the
making of such deduction or withholding, the person on account of whose
liability to Tax such deduction or withholding has been made receives and
retains (free from any liability in respect of any such deduction or withholding)
a net sum equal to the sum which it would have received and so retained had no
such deduction or withholding been made or required to be made.

 

28.         DISCRETION
AND DELEGATION

 

28.1       Discretion

 

Any liberty or power which may be exercised or
any determination which may be made under this Debenture by the Security Agent
or any Receiver may, subject to the terms and conditions of the Facility
Agreement, be exercised or made in its absolute and unfettered discretion
without any obligation to give reasons.

 

28.2       Delegation

 

Each of the Security Agent and any Receiver
shall have full power to delegate (either generally or specifically) the
powers, authorities and discretions conferred on it by this 

 

34

 

Debenture (including without limitation the
power of attorney under Clause 20 (Power of
Attorney)) on such terms and conditions as it shall see fit which
delegation shall not preclude any subsequent exercise, any subsequent
delegation or any revocation of such power, authority or discretion by the
Security Agent or any Receiver.

 

29.         SET-OFF

 

The Security Agent may set off any matured
obligation due from the Chargor under any or all of the Transaction Documents
(to the extent beneficially owned by the Security Agent) against any matured
obligation owed by the Security Agent to the Chargor, regardless of the place
of payment, booking branch or currency of either obligation.  If such obligations are in different
currencies, the Security Agent may convert either obligation at a market rate
of exchange in its usual course of business for the purpose of such set-off.

 

30.         CHANGES
TO PARTIES

 

30.1       Successors

 

This Debenture shall be binding upon and enure
to the benefit of each party hereto and its and/or any subsequent successors
and permitted assigns and transferees. 
Without prejudice to the foregoing, this Debenture shall remain in
effect despite any amalgamation or merger (however effected) relating to the
Security Agent; and references to the Security Agent herein shall be deemed to
include any person who, under the laws of its jurisdiction of incorporation or
domicile, has assumed the rights and obligations of the Security Agent under
this Debenture or to which, under such laws, those rights and obligations have
been transferred.

 

30.2       No
Assignment or Transfer by the Chargor

 

The Chargor may not assign or transfer any or
all of its rights (if any) and/or obligations under this Debenture.

 

30.3       Assignment
and Transfer by Security Agent to Successor

 

The Security Agent may:

 

30.3.1       assign all or any of its rights under this Debenture; and

 

30.3.2       transfer all or any of its obligations (if any) under this Debenture,

 

to any successor Security Agent in accordance
with the provisions of the Security Trust Deed provided that it is acknowledged
that such transfer shall not in any way prejudice the priority of the Security
constituted by this Debenture (which shall be assigned to such successor
Security Agent pursuant to the terms of the Security Trust Deed).  Upon such assignment and transfer taking
effect, the successor Security Agent shall be and be deemed to be acting as
security agent and trustee for the Secured Parties for the purposes of this
Debenture and in place of the former Security Agent.

 

30.4       Assignment
by other Secured Parties

 

Each Secured Party (other than the Security
Agent) may assign all or any of its rights under this Debenture (whether direct
or indirect).  The Chargor irrevocably
and unconditionally confirms that:

 

35

 

30.4.1       it consents to any assignment or transfer by any Secured Party of its
rights and/or obligations made in accordance with the provisions of the
applicable Transaction Documents;

 

30.4.2       it shall continue to be bound by the terms of this Debenture, notwithstanding
any such assignment or transfer; and

 

30.4.3       the assignee or transferee of such Secured Party shall acquire an
interest in this Debenture upon such assignment or transfer taking effect.

 

30.5       Disclosure

 

The Chargor agrees to any disclosure of any
information made in accordance with clause 23.9 (Disclosure of information) of the Facility Agreement.

 

31.         AMENDMENTS AND WAIVERS

 

Any provision of this Debenture may be amended or
waived only by agreement in writing between the Chargor and the Security Agent.

 

32.         PERPETUITY
PERIOD

 

The perpetuity period under the rule against
perpetuities, if applicable to this Debenture, shall be the period of eighty
years from the date of the Facility Agreement.

 

33.         NOTICES

 

The provisions of Clause 30 (Notices) of the Facility Agreement (in the
form subsisting as at the date of this Debenture) shall apply to this Debenture
mutatis mutandis.

 

34.         COUNTERPARTS

 

This Debenture may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.

 

35.         GOVERNING
LAW

 

This Debenture is governed by the laws of Hong
Kong.

 

36.         JURISDICTION

 

36.1       Hong Kong
Courts

 

The courts of Hong Kong have exclusive
jurisdiction to settle any dispute (a “Dispute”)
arising out of, or connected with this Debenture (including a dispute regarding
the existence, validity or termination of this Debenture or the consequences of
its nullity).

 

36.2       Convenient
Forum

 

The parties hereto agree that the courts of
Hong Kong are the most appropriate and convenient courts to settle Disputes
between them and, accordingly, that they will not argue to the contrary.

 

36.3       Exclusive
Jurisdiction

 

This Clause 36 (Jurisdiction) is for the benefit of the Security Agent
only.  As a result and notwithstanding Clause
36.1 (Hong Kong Courts), nothing
herein shall prevent the 

 

36

 

Security Agent from taking proceedings relating
to a Dispute in any other courts with jurisdiction.  To the extent allowed by law the Security
Agent may take concurrent proceedings in any number of jurisdictions.

 

36.4       Service
of process

 

Without prejudice to any other mode of service
allowed under any relevant law, the Chargor:

 

36.4.1       irrevocably appoints International Petroleum Services Corporation
Limited of 1/F., Sunning Plaza, 10 Hysan Avenue, Causeway Bay, Hong Kong as its
agent for service of process in relation to any proceedings before the Hong
Kong courts in connection with this Debenture; and

 

36.4.2       agrees that failure by a process agent to notify the Chargor of any
process will not invalidate the proceedings concerned.

 

36.5       Waiver of
immunity

 

The Chargor waives generally all immunity it or
its assets or revenues may otherwise have in any jurisdiction, including
immunity in respect of:

 

36.5.1       the giving of any relief by way of injunction or order for specific
performance or for the recovery of assets or revenues; and/or

 

36.5.2       the issue of any process against its assets or revenues for the
enforcement of a judgment or, in an action in
rem, for the arrest, detention or sale of any of its assets and
revenues.

 

IN WITNESS WHEREOF this Debenture has been signed on behalf of the Security Agent and executed as a deed
by the Chargor and is intended to be and is hereby delivered by it as a deed on
the date specified above.

 

37

 

SCHEDULE 1

FORM OF NOTICE OF ASSIGNMENT OF INSURANCE

 

To:          [name of insurer under relevant Insurance Policy]

 

Date: [            ]

 

Dear Sirs,

 

We hereby give you notice that [name of Chargor] (the “Chargor”) has assigned, absolutely and by way of security
with first-ranking priority, to [name of
Security Agent] in its capacity as security trustee for and on
behalf of certain creditors (the “Security Agent”,
which expression shall include its subsequent successors, assigns and
transferees) pursuant to a debenture entered into by the Chargor in favour of
the Security Agent dated                      (as amended from time to
time, the “Debenture”) all of the
Chargor’s rights, title and interests under, in and to [insert
details of relevant insurance policy] and all renewals and/or
extensions thereof (collectively the “Policy of Insurance”),
including without limitation all proceeds thereof or thereunder.

 

With effect from your receipt of this notice we
irrevocably and unconditionally instruct you to:

 

1.           note
the interest of the Security Agent on the Policy of Insurance;

 

2.           notify
the Security Agent of:

 

(a)             any
amendment, variation, cancellation, suspension, termination or expiry of the
Policy of Insurance at least fourteen (14) days before such amendment,
variation, cancellation, suspension, termination or expiry (as the case may be)
is due to take effect;

 

(b)            without
prejudice to paragraph 2(a), any default by any insured party under the Policy
of Insurance in the payment of any premium or other sum payable by any insured
party under the Policy of Insurance as soon as reasonably practicable after
such default; and

 

(c)             any
failure by any insured party under the Policy of Insurance to renew the Policy
of Insurance at least fourteen (14) days prior to the expiry thereof;

 

3.           pay
all proceeds of the Insurance Policy as follows (and that the Policy of
Insurance shall contain appropriate endorsements and loss-payable clauses to
such effect):

 

(a)             at
all times prior to the service of a notice by or on behalf of the Security
Agent on you to the effect that an “Event of Default” for the purposes of the
Debenture has occurred or the Debenture has become enforceable (an “Enforcement Notice”), the proceeds of the Policy of
Insurance shall:

 

(i)        (in the case where
the Policy of Insurance is a third party liability insurance which provides for
direct payment of the relevant proceeds to the relevant third party) be paid to
such third party, unless the Chargor shall have otherwise discharged its
liability to such third party in which 

 

38

 

case such proceeds shall be paid to the Chargor
at the following account of the Chargor (which has been charged by the Chargor
in favour of the Security Agent):  [insert details of the relevant Account] (the “Chargor Account”); or

 

(ii)       (in any other case)
be paid to:

 

(1)       the Chargor at the
above-mentioned account of the Chargor Account; or

 

(2)       if so directed by the
Security Agent, the Security Agent; and

 

(b)                                     at all times after the service of an Enforcement
Notice by or on behalf of the Security Agent on you, the proceeds of the Policy
of Insurance shall:

 

(i)        (in the case where
the Policy of Insurance is a third party liability insurance which provides for
direct payment of the relevant proceeds to the relevant third party) be paid to
such third party, unless we shall have otherwise discharged our liability to
such third party in which case such proceeds shall be paid to the Security
Agent; or

 

(ii)       (in any other case)
be paid to the Security Agent;

 

4.           treat:

 

(a)             us
as being entitled to make and deal with all claims in respect of the Policy of
Insurance at all times prior to the service of an Enforcement Notice by or on
behalf of the Security Agent on you, except that any settlement, waiver,
discontinuance of compromise of any claim in an amount of not less than
USD1,000,000 (or the equivalent thereof) shall require the prior written
consent of the Security Agent; and

 

(b)            the
Security Agent as the sole person being entitled to make and deal with any
claim in respect of the Policy of Insurance (to the exclusion of us) at all
times after the service of an Enforcement Notice by or on behalf of the
Security Agent on you;

 

5.           treat
us as being solely liable to perform any or all of our obligations (including
without limitation the payment of any premium) under the Policy of Insurance
and that the Security Agent shall not in any way be responsible or liable in
respect of any such obligation or any failure by us to perform any such
obligation; and

 

6.           disclose
to the Security Agent, without further approval from us, such information
regarding the Policy of Insurance as the Security Agent may from time to time
request and to send it copies of all notices issued by you under the Policy of
Insurance.

 

Neither this notice nor any of the instructions
contained herein may be revoked or varied without the prior written consent of
the Security Agent.

 

39

 

Please acknowledge receipt of this notice and
your agreement to the terms hereof by signing the acknowledgement on a copy of
this notice and returning it to the Security Agent at
[       ] marked for the attention of [    ].

 

This notice and/or the acknowledgment hereto
may be executed in any number of counterparts, and this has the same effect as
if signatures on such counterparts were on a single copy of this letter and the
acknowledgment hereto.

 

This notice is governed by the laws of Hong
Kong.

 

Yours faithfully,

 

 

	
   

  	
   

  
	
   

  	
   

  
	
  For and on behalf of

  	
   

  
	
  [Chargor]

  	
   

  

 

 

Acknowledgment

 

To:          [insert name of Security Agent] as Security Agent

 

[name of
Chargor] (the “Chargor”)

 

We acknowledge receipt of a notice (the “Notice”) in the terms set out above from the Chargor and
confirm that we have not received notice of any previous assignments or charges
of or over any of the rights, title and interests and benefits under, in or to
the Policy of Insurance or any proceeds thereof or thereunder and that we
consent to the assignment referred to in the Notice and that we will comply
with the terms of the Notice.  Unless
otherwise defined herein, terms and expressions defined in the Notice shall
have the same meaning herein.

 

Without prejudice to the foregoing, we further
confirm and agree that:

 

1.           no
amendment, variation, cancellation, suspension, termination or expiry of the
Policy of Insurance (as defined in the Notice) shall be effective unless we
have given the Security Agent at least fourteen (14) days prior written notice
thereof;

 

2.           the
Policy of Insurance has been endorsed with appropriate endorsements and
loss-payee clauses to the effect of paragraph 3 of the Notice;

 

3.           the
Security Agent shall not be liable for the payment of any premium or other sum
payable in connection with, or for any obligation of any insured party under or
in connection with, the Policy of Insurance;

 

4.           the
Policy of Insurance shall not be invalidated or prejudiced as against a
mortgagee or security holder (including without limitation the Security Agent)
by any misrepresentation, act, omission, neglect or failure to make disclosure
on the part of any 

 

40

 

insured
person or its agents or any tenant, lessee, licensee or occupier of any
property the subject of the Policy of Insurance or by any circumstances beyond
the control of any insured party;

 

5.           we
hereby waive any and all rights of subrogation which we may otherwise have
against any or all of the Security Agent (as loss payee or otherwise), the
insured parties under the Policy of Insurance and/or their respective
subsidiaries, affiliates, officers and employees; and

 

6.           (other
than any unpaid premium) we hereby waive any and all rights of set-off,
deduction and/or counterclaim which we may otherwise have in respect of any
insurance proceeds payable (or payable but for such right of set-off, deduction
and/or counterclaim) to any insured party and/or the Security Agent (as
loss-payee or otherwise) in respect of the Policy of Insurance.

 

This acknowledgement is governed by the laws of
Hong Kong.  The Notice and this
acknowledgment may be executed in any number of counterparts, and this has the
same effect as if signatures on such counterparts were on a single copy of the
Notice and this acknowledgment.

 

For and on behalf of

[insert name of relevant
insurer]

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  

 

41

 

SCHEDULE 2

FORM OF NOTICE OF CHARGE OF ACCOUNTS

 

To:          [bank, financial
institution or person with whom the relevant Account(s) are maintained]

 

Date: [                                        ]

 

Dear Sirs,

 

We hereby give you notice that by a debenture
(as amended from time to time, the “Debenture”)
dated                               between
(1) [name of Chargor] (the “Chargor”) and (2) [name of Security Agent] as security
trustee (the “Security Agent” which expression
shall include its successors, assigns and transferees), the Chargor has charged
to the Security Agent all of the Chargor’s right, title and interest in and to
each of the accounts maintained with you listed below (including any
replacement, renewal or re-designation thereof) and all monies standing to the
credit of such account(s) from time to time (the “Charged
Account(s)”).

 

	
  NAME OF ACCOUNT

  	
   

  	
  ACCOUNT NUMBER

  	
   

  
	
  [   ·   ]

  	
   

  	
  [   ·   ]

  	
   

  

 

With effect from the date of your receipt of
this notice, the terms and conditions of any or all of the Charged Account(s) (and
the rights of the Chargor relating thereto) may not be varied or waived without
the Security Agent’s consent.

 

With effect from the time when you receive a
notice from the Security Agent to the effect that a “Default” for the purposes
of the Debenture has occurred and is continuing or the security created by the
Debenture has become enforceable (an “Enforcement
Notice”):

 

(a)         any
existing payment instructions affecting any or all of the Charged Account(s) are
to be terminated and all payments and communications in respect of any or all
of the Charged Account(s) should be made, or sent, to the Security Agent
or as it shall direct; and

 

(b)         all
rights, interests and benefits whatsoever accruing to or for the benefit of the
Chargor arising from any or all of the Charged Account(s) belong to the
Security Agent.

 

The Chargor hereby irrevocably authorises and
instructs you, with effect from your receipt of an Enforcement Notice from the
Security Agent:

 

(i)          to
hold all sums from time to time standing to the credit in the Charged Account(s) to
the order of the Security Agent;

 

(ii)         to
pay, transfer or release all or any part of the sums from time to time standing
to the credit of the Charged Account(s) in accordance with (and only in
accordance with) the written instructions of the Security Agent at any time or
times (to the exclusion of the Chargor);

 

42

 

(iii)        to comply with the
terms of any written notice or instructions in any way relating to, or
purporting to relate to, the Debenture, the sums standing to the credit of the
Charged Account(s) from time to time or the debts represented thereby
which you receive at any time from the Security Agent without any reference to
or further authority from the Chargor and without any enquiry by you as to the
justification for or validity of such notice or instruction; and

 

(iv)        not to comply with
the terms at any written notice or instructions in any way relating to, or
purporting to relate to, the Debenture, the sums standing to the credit of the
Charged Account(s) from time to time or the debts represented thereby
which you receive from any other person (including the Chargor) other than the
Security Agent.

 

We also hereby irrevocably authorise and
instruct you to disclose to the Security Agent without any reference to or
further authority from us and without any enquiry by you as to the
justification of such disclosure, such information relating to any or all of
the Charged Account(s) and the sums therein as the Security Agent may at
any time and from time to time request.

 

Neither this notice nor any of the instructions
herein may be revoked or varied without the prior written consent of the
Security Agent.

 

Without prejudice to the validity of this
notice and the instructions contained herein, please acknowledge receipt of
this notice and your agreement to the terms hereof by signing the
acknowledgement on a copy of this notice and returning it to the Security Agent
at [       ] marked for the attention of
[    ].

 

This notice and/or the acknowledgment hereto
may be executed in any number of counterparts, and this has the same effect as
if signatures on such counterparts were on a single copy of this letter and the
acknowledgment hereto.

 

This notice is governed by the laws of Hong
Kong.

 

	
  Yours faithfully

  
	
   

  
	
   

  
	
   

  	
   

  
	
  for and on behalf of

  	
   

  
	
  [Chargor]

  	
   

  

 

 

Acknowledgment

 

To:          [name of Security Agent] as Security Agent

 

[name of
Chargor] (the “Chargor’)

 

Date:       [           ]

 

43

 

At the request of the Chargor we acknowledge
receipt of the notice of charge from the Chargor dated [·] (the “Notice”) in respect
of the Charged Account(s).  Unless
otherwise defined herein, terms and expressions herein shall have the meaning
ascribed to them in the Notice.

 

We confirm that:

 

(i)          we
consent to the charge over the Charged Account(s) referred to in the
Notice.  We accept the instructions and
authorisations contained in the Notice and we undertake to act in accordance
with the terms of the Notice;

 

(ii)         the
balance standing to each of the Charged Account(s) at today’s date is as
follows [   ·   ];

 

(iii)        no fees or periodic
charges are payable in respect of any of the Charged Account(s) and there
are no restrictions on (a) the payment of the credit balance on any of the
Charged Account(s) (except, in the case of a time deposit, the expiry of the
relevant period) or (b) the assignment or charge of the Charged Account(s) to
the Security Agent or any third party;

 

(iv)        we have not received
notice of any previous assignments of, charges over or trusts in respect of,
any of the Charged Account(s) and we will not, without the Security Agent’s
prior written consent (a) exercise any right of combination, consolidation
or set-off which we may have in respect of any of the Charged Account(s) or
(b) amend or vary any rights attaching to any of the Charged Account(s);

 

(v)         with
effect from our receipt of an Enforcement Notice from the Security Agent, we
will act only in accordance with the instructions given by persons authorised
by the Security Agent in respect of any or all of the Charged Account(s);

 

(vi)        we shall send all
statements and other notices given by us relating to the Charged Account(s) to
the Security Agent as well as to the Chargor; and

 

(vii)       at all times after we
receive an Enforcement Notice from the Security Agent, we shall not permit any amount
to be withdrawn from any of the Charged Account(s) without the prior
written consent of the Security Agent.

 

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

 

This acknowledgment is governed by the laws of
Hong Kong.

 

For and on behalf of

[                                    ]

 

44

 

SCHEDULE 3

PARTICULARS OF THE SHARES

 

 

	
  Beneficial owner

  	
   

  	
  Shares
  (ordinary shares of HK$1.00 each in 

  the issued capital of the Company)

  	
   

  	
  Registered
  holder

  	
   

  
	
  Superport Limited

  	
   

  	
  250,000

  	
   

  	
  Superport Limited

  	
   

  

 

45

 

SCHEDULE 4

FORM OF SHARE TRANSFER

 

[                    ]
(the “Company”)

 

SHARE
TRANSFER FORM

 

We, [          ]
(the “Transferor”), for good and valuable
consideration received by us from

[leave blank]

 

(the “Transferee”),
do hereby:

 

1.                                       transfer to the Transferee [leave blank]

 

share(s) (the “Shares”) standing in our name in the register of the Company
to hold unto the Transferee, his executors, administrators and assigns, subject
to the several conditions on which we held the same at the time of execution of
this Share Transfer Form; and

 

2.                                       consent that our name remains on the register of the
Company until such time as the Company enters the Transferee’s name in the
register of the Company.

 

And we, as Transferee, do hereby agree to take
the Shares subject to the same conditions.

 

 

As Witness Our Hands

 

	
  Signed by the Transferor on 

  	
  )

  
	
  in the presence of:

  	
  )

  
	
   

  	
   

  
	
   

  	
   

  
	
  Witness

  	
   

  

 

 

	
  Signed by the Transferee on 

  	
  )

  
	
  in the presence of:

  	
  )

  
	
   

  	
   

  
	
   

  	
   

  
	
  Witness

  	
   

  

 

46

 

SCHEDULE 5

FORM OF ACKNOWLEDGMENT FROM NOMINEE

 

To:                              [the Security Agent]
(the “Security Agent”, which
expression shall include its successors, assigns and transferees)

 

 

Dear Sirs,

 

At the request of [              ]
(the “Chargor”), I/we hereby:

 

1.                             warrant and confirm that I am/we are the registered
holder(s) of [insert number and
description of relevant Investments] in [                  ]
(the “Share[s]”) and am/are holding the
Share[s] as nominee for and on behalf of the Chargor;

 

2.                             acknowledge that the Chargor has, pursuant to a
debenture (as amended from time to time, the “Debenture”)
dated                      by
the Chargor in favour of the Security Agent, charged the Share[s] in favour of
you as security upon the terms and conditions specified therein;

 

3.                             undertake that I/we shall, upon and at all times after
the security constituted by the Debenture in respect of the Share[s] becomes
enforceable, hold the Share[s] on trust for you (or any other person whom you
may nominate);

 

4.                             undertake that I/we shall, upon and at all times after
the security constituted by the Debenture in respect of the Share[s] becomes
enforceable, transfer the legal title in the Share[s] to you (or any other
person whom you may nominate) and do all acts and execute all documents as may
be necessary and/or as you may require for such purpose; and

 

5.                             irrevocably and unconditionally appoint each of you
and any Receiver (as defined in the Debenture) severally, upon and after the
occurrence of an Event of Default (as long as any Event of Default is
continuing) to be my/our attorney on the terms of Clause 20 (Power of Attorney) of the Debenture
(applying mutatis mutandis) as if I was/we were
the Chargor, and undertake to execute such further powers of attorney in such
form as you may reasonably require from time to time.

 

This acknowledgment is governed by and shall be
construed in accordance with the laws of Hong Kong.

 

Dated:

 

IN WITNESS WHEREOF this deed has been executed
the day and year above written.

 

[in the case where the relevant
nominee is a company incorporated in Hong Kong or that has a seal]

 

	
  THE COMMON SEAL of  

  	
  )

  
	
  [relevant nominee]  

  	
  )

  
	
  was hereunto affixed in the presence of:

  	
  )

  

 

47

 

	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
  Name

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
  Name

  

 

[in the case where the
relevant nominee is a company incorporated outside Hong Kong without a seal]

 

	
  SIGNED, SEALED and DELIVERED by 

  	
  )

  	
   

  
	
  [insert name of relevant signatory]

  	
  )

  	
   

  
	
  for
  and on behalf of

  	
  )

  	
  L.S.

  
	
  [insert name of relevant nominee]

  	
  )

  	
   

  
	
  in the presence of:

  	
  )

  	
   

  

 

 

	
   

  	
   

  	
  Signature of witness

  
	
   

  	
   

  	
  Name of witness

  
	
   

  	
   

  	
  Address of witness

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Occupation of witness

  

 

 

[in the case where the
relevant nominee is an individual]

 

	
  SIGNED, SEALED and DELIVERED by 

  	
  )

  	
   

  
	
  [insert name of relevant nominee] in the 

  	
  )

  	
  L.S.

  
	
  presence
  of:

  	
  )

  	
   

  

 

 

	
   

  	
   

  	
  Signature of witness

  
	
   

  	
   

  	
  Name of witness

  
	
   

  	
   

  	
  Address of witness

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Occupation of witness

  

 

48

 

SCHEDULE 6

FORM OF LETTER OF RESIGNATION

 

	
  To:

  	
  The Board of Directors

  
	
   

  	
  [                  ]
  (the “Company”)

  
	
   

  	
  [insert address of
  registered office of the Company]

  
	
   

  	
   

  
	
  Date:

  	
  [to be left blank]

  

 

 

Dear Sirs,

 

Resignation

 

I hereby tender my unconditional and
irrevocable resignation as a director of the Company with effect from the date
of this letter.  I confirm that:

 

1.                             I have no claims whatsoever against the Company or any
of its subsidiaries or associated companies (if any) on any account (whether
for loss of office, for accrued remuneration or for fees or otherwise
howsoever); and

 

2.                             there is no outstanding agreement or arrangement with
the Company or any of its subsidiaries or associated companies (if any) under
which the Company or any of such subsidiaries or associated companies has or
would have any obligation to me whether now or in the future or under which I
would derive any benefit.

 

This
letter is governed by and shall be construed in accordance with the laws of
Hong Kong.

 

IN WITNESS WHEREOF this deed has been executed
the day and year above written.

 

	
  SIGNED, SEALED and DELIVERED by 

  	
  )

  	
   

  
	
  [insert name of relevant director] in the 

  	
  )

  	
  L.S.

  
	
  presence
  of:

  	
  )

  	
   

  

 

 

	
   

  	
   

  	
  Signature of witness

  
	
   

  	
   

  	
  Name of witness

  
	
   

  	
   

  	
  Address of witness

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Occupation of witness

  

 

49

 

SCHEDULE 7

FORM OF WRITTEN RESOLUTIONS

 

[                      ]
(the “Company”)

 

WRITTEN
RESOLUTIONS OF THE BOARD OF DIRECTORS OF [        ]

 

Dated:   [to be left blank]

 

IT IS RESOLVED THAT:

 

1.                             each of the following transfers of the shares in the
Company be approved and that, upon the delivery to any director of the Company
of a duly completed instrument of transfer in respect of any of the following
transfers, the name of the relevant transferee be entered forthwith in the
register of members of the Company in respect of the relevant shares so
transferred and that new share certificates in respect of such shares be issued
forthwith to such transferee in accordance with the Articles of Association
of  the Company:

 

[to be left
blank]

 

2.                             each of the following persons be appointed as an
additional director of the Company with immediate effect:

 

[to be left blank]

 

3.                             the resignation of the following persons as directors
of the Company be accepted with immediate effect:

 

[to be left blank]

 

50

 

4.                             the above changes in directorships of the Company be
notified to [each relevant registry] as soon
as shall be practicable and that any director or the secretary of the Company
be authorised to sign and deliver any relevant return in connection therewith.

 

[all the
directors of the Company to
state their names and sign]

 

51

 

SCHEDULE 8

FORM OF LETTER OF UNDERTAKING AND AUTHORISATION

 

To:                                       [the Security Agent]
as Security Agent (including its successors, assigns and transferees)

 

 

Dear Sirs,

 

Debenture dated
                                
by [         ] in favour of DB
Trustees (Hong Kong) Limited as Security Agent (as amended from time to time,
the “Debenture”)

 

I hereby unconditionally and irrevocably:

 

1.                             undertake to procure, to the extent of my powers as a
director of [           ]
(the “Company”), that any or all
of the shares in the Company which are charged to you pursuant to the Debenture
shall upon your request at any time after the security constituted by the
Debenture shall have become enforceable in accordance with its terms be
promptly registered in the name of yourself or (at your request) any person(s) whom
you may nominate;

 

2.                             authorise each of you and any other person(s) authorised
by you severally to complete, date and put into effect:

 

(a)                        the attached letter of resignation signed by me;

 

(b)                       the attached written resolutions of the board of
directors of the Company signed by me[; and

 

(c)                        any other document signed by me and delivered pursuant
to Clause 5.7 (Investments:  Delivery of Documents of Title) of
the Debenture,

 

at any time after the
security constituted by the Debenture shall have become enforceable in
accordance with its terms.

 

This letter is governed by and shall be
construed in accordance with the laws of Hong Kong.

 

Dated:

 

IN WITNESS WHEREOF this deed has been executed
the day and year above written.

 

	
  SIGNED, SEALED and DELIVERED by 

  	
  )

  	
   

  
	
  [insert name of relevant director] in the 

  	
  )

  	
  L.S.

  
	
  presence
  of:

  	
  )

  	
   

  

 

 

	
   

  	
   

  	
  Signature of witness

  
	
   

  	
   

  	
  Name of witness

  
	
   

  	
   

  	
  Address of witness

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Occupation of witness

  

 

52

 

EXECUTION

 

THE CHARGOR

 

	
  SIGNED, SEALED AND DELIVERED

  	
  )

  	
   

  
	
  as a DEED for
  and on behalf of

  	
  )

  	
   

  
	
  and EXECUTED AS A DEED
  by

  	
  )

  	
  L.S

  
	
  SUPERPORT LIMITED

  	
  )

  	
   

  
	
  by

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  in the presence of:

  	
  )

  	
   

  

 

 

	
   

  	
   

  
	
  Signature of witness

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  
	
   

  	
   

  
	
  Address:

  	
   

  

 

 

	
  Address:

  	
  

  
	
   

  	
   

  
	
  Telephone:

  	
  +86-22-6635-1185

  
	
   

  	
   

  
	
  Fax:

  	
  +86-22-6635-1181

  
	
   

  	
   

  
	
  Attention:

  	
  Mr
  Liu Qingzeng

  

 

SIGNATURE PAGE TO THE HOLDCO DEBENTURE

 

 

The Security Agent

 

	
  SIGNED for and on behalf of

  	
  )

  
	
  DB TRUSTEES (HONG KONG)
  LIMITED

  	
  )

  
	
  By:

  	
  )

  
	
   

  	
  )

  

 

 

	
  Address:

  	
  48/F, Cheung Kong Center, 2 Queen’s Road
  Central, Hong Kong

  
	
   

  	
   

  
	
  Fax:

  	
  +852 2203 7320/7323

  
	
   

  	
   

  
	
  Attention:

  	
  Managing
  Director

  

 

 

SIGNATURE PAGE TO THE HOLDCO DEBENTUREExhibit 10.46

 

Executed
version

 

 

Machine Equipment Pledge Agreement

 

 

Between

 

Tianjin New Highland Science Development Co., Ltd.

 

(as Pledgor)

 

and

 

DB TRUSTEES (HONG KONG) LIMITED

(as the Security Agent
and the Pledgee)

 

 

 

 

Table of contents

 

	
  CLAUSES

  	
   

  	
  PAGE NO.

  
	
   

  	
   

  	
   

  	
   

  
	
  1

  	
  DEFINITION AND EXPLANATION

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  2

  	
  PLEDGE

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  3

  	
  PERFECTION OF THE PLEDGE

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  4

  	
  INSURANCE

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  5

  	
  CLAIMS AGAINST THIRD PARTIES

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  6

  	
  DOCUMENTS TO BE DELIVERED BY THE PLEDGOR

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  7

  	
  REPRESENTATION AND WARRANTY

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  8

  	
  COMMITMENT

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  9

  	
  CONTINUING SECURITY INTEREST

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  10

  	
  ENFORCEMENT OF THE PLEDGE

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  11

  	
  DESIGNATION OF ACCOUNTS

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  12

  	
  USE OF ENFORCEMENT PROCEEDS

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  13

  	
  THE SECURITY AGENT AND ITS
  AGENT

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  14

  	
  POWER OF ATTORNEY

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  15

  	
  COSTS AND EXPENSES

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  16

  	
  COMPENSATIONS

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  17

  	
  RELEASE

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  18

  	
  NOTIFICATION

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  19

  	
  APPLICABLE LAWS AND JURISDICTION

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  20

  	
  OTHERS

  	
   

  	
  21

  
	
   

  	
   

  	
   

  
	
  ATTACHMENT 1:

  	
  SPECIFICS OF SECURED
  EQUIPMENT

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  ATTACHMENT 2:

  	
  THE FORMAT OF ADDITIONAL PLEDGE COMMITMENTS

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNATURE PAGE

  	
   

  	
   

  	
  26

  
					

 

1

 

The Machine Equipment Pledge Agreement (hereinafter
referred to as “the Agreement”) is
entered into on 11 January 2010 by:

 

A.                                   Tianjin New Highland Science Development Co., Ltd.
, the pledgor (hereinafter referred to as the Pledgor),
a company (registration number: 120109000004324) incorporated under the laws of
the People’s Republic of China (hereinafter referred to as China),
with its registered address at Dagang Economic Development Area (DEDA),
Tianjin, China; and

 

 

Whereas:

 

1                                On 8 January 2010, the Pledgor, as the Borrower, and among others, Deutsche
Bank AG, Hong Kong Branch, as the Arranger, Facility Agent and Calculation Agent,
and DB Trustees (Hong Kong) Limited, as
the Security Agent, have entered
into a Facility Agreement (including amendments and restatements of the
Facility Agreement through an Amendment
Agreement, and other modifications, revisions, extensions, additions,
updates and restatements of the Facility Agreement from time to time)
(hereinafter collectively referred to as the “Loan
Contract”), under which, the Lenders
have agreed, as per the terms and conditions of the Loan Contract, to provide a loan to the Borrower of no more than USD65,000,000;

 

2                                The Borrower may enter into a Hedging Agreement with a Hedging
Counterparty;

 

3                                The Borrower
and among others, Deutsche Bank AG, Hong Kong Branch, as the Facility Agent, and DB
Trustees (Hong Kong) Limited, as the Security
Agent, have entered into a Security
Trust Deed on 11 January 2010; and

 

4                                As a prerequisite for the Lenders to
extend the loan to the Borrower, the Pledgor agrees to, under the terms and conditions of the Agreement, provide its machine equipment to the Facility Agent, Security Agent,
Calculation Agent, Arranger,
Lenders and Hedging
Counterparty as pledge that the Borrower shall
settle in full and on time its obligations under the Transaction
Finance Documents.

 

2

 

The two parties have herein reached agreement as
follows:

 

1                                         Definition and Explanation

 

1.1                                 Definition

 

The Agreement constitutes the Mortgage over
LHD Units as defined in the Security Trust
Deed. Unless otherwise specifically stated, the terms used in this Agreement shall have the same meaning as
defined in the Security Trust Deed
(and the same applies to the Chinese translation). The Agreement defines the following terms as
follows:

 

The Secured Obligations
refer to obligations specified under Clause 2.5 (Scope of the
pledge) of the Agreement.

 

The Pledged Equipment refers to the Lateral
Hydraulic Drilling Units (the LHD Units), including the existing LHD Units
described in details in Attachment 1 (Pledge Specifics)
and any New Equipment described in details in
every attachment for Additional Pledge
Commitments.

 

New Equipment refers to the Financed LHD Units and Upcoming LHD Units purchased by the
Pledgor.

 

Additional Pledge refers to the pledge provided by the Pledgor
on the New Equipment as per Clause 2.4 (Additional Pledge) of the Agreement.

 

Additional Pledge Commitment refers to a letter of commitment or document over the Additional Pledge signed by the Pledgor
as per the format and contents of Attachment 2 (The Format
of Additional Pledge Commitments).

 

The Pledge Registration
Authority refers to Tianjin Industrial and Commercial Administrative
Bureau or other competent government bodies responsible for the registration of
movable properties.

 

The Security Registration
Authority refers to the Tianjin Bureau of the State Administration
of Foreign Exchange or other relevant governmental bodies responsible for the
registration of the provision of security for the pledge established under the Agreement.

 

The Security Certificate
refers to the security registration certificate or documents of similar status,
with the Security Agent as the obligee, issued
by the Security Registration Authority for the
pledge established under the Agreement.

 

The Approving Authority
refers to Tianjin Municipal Commission of Commerce or other relevant
governmental bodies responsible for approving issues in connection with the
pledge under the Agreement.

 

3

 

The Pledge Certificate
refers to the document bearing witness to the registration of pledge with the Security Agent as the obligee issued by the Pledge Registration Authority for the purpose of the Secured Equipment.

 

China refers to the People’s Republic of China and for the purpose of this Agreement, does not cover the Hong Kong Special
Administrative Region, Macao Special Administrative Region and Taiwan.

 

1.2                                 Explanation

 

(a)               The Clause 1.3 (Rule of
explanation) (as adjusted where necessary) of the Security Trust Deed should apply to this Agreement.

 

(b)              The use of Security
Agent, Borrower, Pledgor and Secured Parties, unless the context specifically indicates
otherwise, shall include their respective successors and assignees and any and
all those who have acquired rights from the aforementioned.

 

2                                         Pledge

 

2.1                                 The establishment of pledge

 

(a)               As a means of security for payment and
settlement on time and in full of the Secured
Obligations by the Borrower,
the Pledgor establishes herein the
first right of pledge for the Security Agent on
the Secured Equipment and all the
(existing and future) rights, benefits and interests from the Secured Equipment.

 

(b)              In spite of the above provision, the Pledgor should perform all of its
obligations in connection with the Secured
Equipment, and the Security Agent
shall not be obligated to perform such obligations, or be liable to any party
for any consequences as a result of the failure to perform such obligations.

 

2.2                                 Use of the Secured Equipment

 

The Secured Equipment
shall be in the control of the Pledgor and
used by the Pledgor until the execution of the
security interest under the Agreement by
the Security Agent in accordance with
Clause 10 (Execution of the Pledge), but the Pledgor’s use of the Secured Equipment
should not in any way be harmful to all or any of the rights and interests of
the Security Agent under the Agreement.

 

2.3                                 Value of the Secured Equipment

 

The Pledgor and the
Security Agent (following the
instruction of the Instructing Group)
agree and confirm that the value stated in Attachment I (Pledge
Specifics) shall be the assessed value of the Secured
Equipment on the date of signing of the Agreement.

 

4

 

2.4                                 Additional pledge

 

(a)               After acquiring the ownership of any New Equipment, the Pledgor should pledge the New Equipment and all the (existing and
future) rights, benefits and interests from the New Equipment to the Security
Agent as security for the obligations under the Transaction Finance Document.

 

(b)              The Pledgor
should ensure that the Security Agent,
within 30 days upon completion of customs clearance for the New Equipment, receives the Additional Pledge Commitment signed by the Pledgor in substantially the same format as
the Attachment II (The Format of Additional
Pledge Commitments), and ensure that the Security Agent, within 60 days upon completion of the customs
clearance for the New Equipment,
receives the Pledge Certificate for the purpose of the pledge of the New Equipment and within 90 days upon
completion of the customs clearance for the New
Equipment, the Security Certificate and the approval and
registration documents from the Approving Authority or certificates for the
unavailability of the relevant approval document or registration document.

 

2.5                                 Scope of the pledge

 

The debts covered by the
pledge of the Pledgor under the Agreement include the following:

 

(a)               The principals, interests (including interests, interests on overdue
debts and interests on late payment fines), costs, commitment fees, arranging
fees, agent fees, other fees, expenditures, compensations, default fines,
damages and expenses incurred to enforce the creditor’s rights (including but
not limited to litigation fees, lawyers’ fees, notary fees, enforcement
expenses, etc.) that the Borrower should
settle with or pay to the Secured Parties
under the Transaction Finance Documents and any other
amounts payable by the Borrower (no
matter whether the settlement or payment is due upon maturity of the loans or
becomes due under other conditions); and

 

(b)              All expenses incurred by the Secured Parties to enforce their secured
rights and interests under the Agreement
(including but not limited to litigation fees, lawyers’ fees, notary fees and
enforcement expenses, etc) and any other amounts payable by the Pledgor.

 

3                                         Perfection of the Pledge

 

3.1                                 Approval and registration

 

The Pledgor should,
at its own expense and as soon as possible, obtain approval from the Approval
Authority for the pledge under the Agreement,
complete the security registration with Security Registration Authority, and 

 

5

 

complete registration with the Pledge Registration
Authority.

 

3.2                                 Delivery and possession of the registration documents

 

(a)               The Pledgor commits to the Security Agent that immediately upon completion of the
registration required under Clause 3.1 (Approval and registration),
the Pledgor shall deliver to the Security Agent the approval from the Approving
Authority, Security Certificate issued  by the Security Registration Authority,
Pledge Certificate issued by the Pledge Registration Authority, and any other
approval and registration documents that the Security
Agent deems necessary for the perfection of the security interests
under the Agreement.

 

(b)              The Pledgor confirms that any time
when the Security has not obtained, is not in possession and/or in custody of the
approval documents, security certificates and/or pledge certificates issued by
the Approving Authorities, the Security Certificates and/or Pledge Certificates
should be deemed to have been obtained, be in possession and/or in custody by
the holder of these approval documents and/or certificates for the benefits of
the Security Agent on behalf of the Security Agent. The Pledgor is
obligated to, as soon as possible, deliver the approval documents, Security
Certificates and Pledge Certificates to the Security
Agent or cause others to deliver these approval documents and/or
certificates to the Security Agent,
and shall compensate the Security Agent
for any losses thereby incurred.

 

3.3                                 Further warranties

 

Before the irrevocable
settlement of the Secured Obligations
in full in a manner satisfactory to the Secured
Parties and the termination of the Agreement
in accordance with Clause 17 (Release of the Agreement),
upon reasonable request of the Security Agent,
the Pledgor shall, at any time and
at its own expenses, take any actions that the Security Agent may reasonably require for the following
purposes (including but not limited to signing of documents, obtaining
approvals and completion of registration, filing or documentation):

 

(a)               Establishment and perfection of the pledge
under the Agreement;

 

(b)              For the interests of the Security Agent, perform the registration,
alteration and extension of the pledge under the Agreement with the Approving
Authority, Security Registration
Authority and/or Pledge
Registration Authority; and

 

(c)               Implement the Agreement in accordance with the terms and conditions of the Agreement, or exercise any rights, powers
or discretion in respect of the pledge under the Agreement.

 

6

 

3.4                                 Additional security

 

Should the value of the Secured
Equipment decreases due to any  action of the Pledgor, the Security Agent
has the right to require the Pledgor to stop
such action and require the Pledgor to take
remedial measures to restore the value of the Secured
Equipment, or require the Pledgor to
provide additional security acceptable to the Security
Agent.

 

3.5                                 No impairment of value

 

During the terms of the Agreement, the Security Agent has the right to engage, at any time it deems
appropriate, a qualified valuation agency to assess the Secured Equipment. If the assessed value of
the Secured Equipment is lower
than the value specified in Clause 2.3 (Value of the Secured Equipment), the Pledgor should take measures to restore the
value of the Secured Equipment or
provide additional security acceptable to the Security
Agent, and any costs thus incurred (including but not limited to the
assessment fees) shall be assumed by the Pledgor.

 

4                                         Insurance

 

4.1                                 Purchase of insurance

 

The Pledgor should, at its own expense, buy
insurance in accordance with the requirements of the Loan Contract from an insurer approved by the Security Agent (following the instructions
from the Instructing Group) for (i) the
Secured Equipment (other than the New Equipment) before the initial
utilization date under the Loan Contract
and (ii) the New Equipment
within a commercially reasonable period of time upon completion of customs
clearance, and the insurance should cover fire, earthquake, other risks
generally included under all risk insurance and other insurance required by the
Security Agent. If the existing insurance
policies and/or insurance contracts for the Secured
Equipment do not cover the scope of insurance described in this
clause, the Pledgor has the obligation
to expand the scope of insurance to comply with this clause.

 

4.2                                 Amount of insurance

 

The amount of insurance
for the Secured Equipment should
not be lower than the value of the Secured
Equipment specified in Attachment I (Pledge
Specifics) and Attachment II (The Format of Additional
Pledge Commitment).

 

4.3                                 Modification of the insurance clauses

 

The insurance policies
and/or insurance contracts covering the Secured
Equipment should not contain any terms or conditions that will or
may jeopardize or compromise the rights and interests of the Security Agent under the Agreement. If the existing insurance
policies and/or insurance contracts covering the Secured Equipment are not satisfactory to the 

 

7

 

Security Agent, the Pledgor
should modify the insurance policies and/or insurance contracts to the
satisfaction of the Security Agent
(acting in accordance with the instructions of the Instructing Group). During the life of the Agreement, without the prior written
consent of the Security Agent
(acting in accordance with the instructions of the Instructing Group), the Pledgor
must not modify, amend, transfer, cancel or terminate relevant insurance
policies and/or insurance contracts.

 

4.4                                 Assignment of insurance benefits

 

In securing insurance for
the Secured Equipment, the Pledgor should take all necessary measures and
sign all necessary documents to assign all or any of its benefits under the
insurance purchased to the Security Agent.
For the purpose of assignment of the insurance benefits, the Pledgor should cause the insurer(s) to
sign all necessary documents and designate the Security Agent as the first beneficiary to the relevant
insurance policies and/or insurance contracts. In the event of an insured
event, the Pledgor should
immediately notify the Security Agent,
proceed with the claim issues, and notify the Security
Agent of the status of the claims in a timely manner. The Pledgor should, as per requirement of the insurance
contracts, require the insurer(s) to carbon copy all its correspondences
with the Pledgor to the Security Agent. When the insurer accepts a
claim and agrees to pay relevant insurance proceeds, the Security Agent should notify the insurer of
the account into which the insurance proceeds should be paid.

 

4.5                                 Continuing validity of insurance

 

(a)               The Pledgor
should take all necessary measures (including but not limited to paying
premiums or renewing the policies) to ensure the continuing validity of insurance
before the complete settlement of the Secured Obligations and the termination
of the Agreement in accordance
with Clause 17 (Release of the Agreement). Should
the Pledgor fail to perform this
obligation, the Security Agent has
the right but is not obligated to buy or renew policies on behalf of the Pledgor, with any expenses thus incurred to
be assumed by the Pledgor. The Pledgor should compensate the Security Agent for all the losses, costs
and expenses incurred as a result of the Pledgor’s
failure to comply with this clause.

 

(b)              After the complete settlement of the Secured
Obligations and termination of the Agreement
in accordance with Clause 17 (Release of the Agreement),
the beneficiary under the relevant insurance policies/contracts for the Secured Equipment shall be changed back to
the Pledgor.

 

4.6                                 The maintenance of the insurance documents

 

After the Pledgor has purchased insurance policies in
accordance with Clause 4 (Insurance) of
the Agreement, the Pledgor should deliver the

 

8

 

originals of the policies
(including any modifications or additions), insurance contracts (including any
modifications or additions), receipts for premium payment or invoices or any
other relevant documents to the Security
Agent for keeping.

 

4.7                                 Use of insurance proceeds

 

Before complete
settlement of the Secured Obligations and the termination of the Agreement in accordance with Clause 17 (Release of the Agreement), the Pledgor agrees that the Security
Agent (acting in accordance with the instructions of the Instructing Group) has the right to select,
at its own discretion, either of the following methods for the use of insurance
proceeds, and the Pledgor should
provide assistance as required:

 

(a)               Upon payment of insurance proceeds by the
insurer(s), if the Security Agent
(acting in accordance with the instruction of the Instructing
Group) believes that a default event as specified in the Loan Contract has occurred, the Security
Agent shall instruct the insurer(s) to pay the insurance
proceeds to an account or accounts designated by the Security
Agent as payment or prepayment of the Secured Obligations.

 

(b)              Upon payment of insurance proceeds by
the insurer(s), if the Security Agent
(acting in accordance with the instruction of the Instructing
Group) believes that there is no default event as specified in the Loan Contract, the Security Agent
shall instruct the insurer(s) to pay the proceeds to the Pledgor’s Onshore Controlled Account
as required under the Loan Contract
for repairing the Secured Equipment
to restore its value.

 

5                                         Claims against Third Parties

 

5.1                                 Third-party actions

 

During the term of the Agreement, if the value of the Secured Equipment decreases due to any
actions or inaction of a third party, the damages from the third party should
be deposited into the account(s) designated by the Security Agent. The Pledgor agrees that the Security Agent has the right to use the
damages in accordance with Clause 17 (Use of  insurance proceeds), and should provide necessary assistance
as required.

 

5.2                                 Expropriation

 

During the term of the Agreement, if, for any reason, the Secured Equipment is requisitioned or
expropriated, the Pledgor should
deposit the indemnities it has received from the requisition or expropriation
into the account(s) designated by the Security
Agent. The Pledgor
agrees that the Security Agent has
the right to use these indemnities for the 

 

9

 

settlement or payment of
the Secured Obligations, or deposit these indemnities into the account(s) designated
by the Security Agent as security
for the settlement of the Secured Obligations, and should provide necessary
assistance as required.

 

6                                         Documents to be delivered by the Pledgor

 

6.1                                 Without prejudice to the provisions of other
Clauses of the Agreement, unless
expressly waived by the Security Agent,
the Pledgor should ensure that the
Security Agent receives, no later
than the Initial Utilisation Date as
specified in the Loan Contract and
in a manner that is satisfactory to the Security
Agent in terms of format and content, the originals or authenticated
copies of following documents:

 

(a)               Documents to be provided by the Borrower as specified in Section 1(a)(iii) of
the Attachment 2 (Preconditions) to the Loan Contract (as per its format and contents
on the date of Agreement);

 

(b)              Indebtedness registration certificates for the
purpose of the Loan Contract;

 

(c)               The originals of the Pledgor’s board meeting resolutions for
approving the signing and performance of the Agreement,
the Registration Agreement and
relevant Additional Pledge Commitments
and for authorizing the signer(s), and the signature specimens of the
authorized signer(s);

 

(d)              Properly signed Loan Contract and Agreement;

 

(e)               Supporting  documents
giving testimony to the Borrower’s
submission of materials for approval, registration and filing purposes to the Approving Authority and the Security Registration Authority;

 

(f)                 Purchase agreements or other documents
supporting the rights of the Pledgor
over any Secured Equipment (other
than the New Equipment), including
but not limited to any purchase agreements, bills of lading, transportation
contract, commercial invoices and other supporting documents issued by relevant
counterparties or government bodies that bear witness to the rights of the Pledgor over the Secured Equipment (other than the New Equipment);

 

(g)              The insurance policies, insurance contracts,
receipts of premiums paid or invoices or any other supporting documents for
insurance purchased or to be purchased by the Pledgor
for the Secured Equipment (other
than the New Equipment); and

 

(h)              Other documents reasonably required by the Security Agent from time to time.

 

10

 

6.2                                 The Pledgor
should ensure that the Security Agent
receives the Pledge Certificates in
a satisfactory manner in terms of the format and contents within 30 days from
the Initial Utilisation Date, and make its best efforts to enable the Security Agent to receive, within 90 days
from the Initial Utilisation Date and in a satisfactory manner in terms of
format and contents, the approval from the Approving
Authority, the Security
Certificate and other approval and registration documents, or
supporting documents testifying that relevant approval or registration documents
cannot be obtained.

 

6.3                                 Other documents to be delivered by the Pledgor as per reasonable requests of the Security Agent from time to time.

 

7                                         Representation and Warranty

 

7.1                                 Representations and warranties

 

The Pledgor herein makes the following representations
and warranties to the Security Agent:

 

(a)               It is a wholly foreign owned enterprise
properly incorporated and validly existing under the laws of China, with the right to own property and
carry out its current business activities;

 

(b)              It has full rights to sign the Agreement, , exercise its rights under the Agreement, perform its obligations under
the Agreement, and has taken all
necessary internal actions within the Company and other actions to obtain
authorization or has obtained such authorization to sign and perform the Agreement;

 

(c)               Other than the registration required under
Clause 3.1 (Approval and registration) of the Agreement, it has obtained all
authorizations, approvals, consent, registration and filing from all government
bodies and other organizations required for the signing and performance of the Agreement and ensuring the validity of the Agreement;

 

(d)              Its signing of the Agreement and its performance of the obligations under the Agreement do not violate: (i) its
organizing documents; or (ii) any documents that are binding on the
Company, or the Secured Equipment
or other properties owned by the Company; or (iii) any applicable laws;

 

(e)               There is no litigation, arbitration or
administrative proceedings against it or the Secured
Equipment that are taking place, pending, or to its knowledge,
threatened, and which, once unfavorable decisions are made, may have adverse
impact on its performance of obligations under the Agreement;

 

(f)                 It has full ownership over the Secured Equipment, there is no dispute over
its rights with respect to the Secured
Equipment, there 

 

11

 

is no other pledge
of the Secured Equipment (other
than the pledge under the Agreement),
and the Secured Equipment has not been
seized, confiscated or subject to other restrictions;

 

(g)              The Secured
Equipment is in good repair in all material aspects, and the Secured Equipment does not have structural
or other material deficiencies or damages (whether potential or others);

 

(h)              It complies with all applicable laws governing
the ownership, possession and/or use of the Secured
Equipment;

 

(i)                  All due payments and taxes in connection with
the Secured Equipment have been
paid in full, and there is no outstanding debt or default in connection with
the Secured Equipment; and

 

(j)                  All information, documents and materials it
has provided to the Security Agent
in connection with the Agreement
and the Secured Equipment are, in
all respects, true and accurate as of the date such information, documents and
materials are provided or representations on them are made, and all documents
provided in photocopies conform to their originals.

 

7.2                                 Repetition of representations and warranties

 

The Pledgor further represents and warrants to
the Security Agent that the above
representations and warranties shall remain true and accurate at any time
during the effective term of the Agreement
on the basis of the facts and circumstances of the time.

 

8                                         Commitment

 

8.1                                 Positive commitment

 

The Pledgor commits
to the Security Agent that within the valid
term of the Agreement, the Pledgor shall:

 

(a)               Ensure that the whole or any part of the Secured Equipment shall not be confiscated,
seized, placed in custody or subject to any litigation, judicial or administrative
enforcements or restrictions;

 

(b)              Immediately notify the Security Agent of any events that may have
impact on the Security Agent’s
rights under the Agreement,
including but not limited to Events of
Default under the Transaction
Finance Document, or any litigation, arbitrary and administrative
proceedings involving the Pledgor,
the Secured Equipment or other
assets of the Pledgor;

 

(c)               Take actions as soon as practicably possible
to remedy any damages to the Secured
Equipment or contest any claims or disputes over the Secured Equipment, and notify the Security Agent of any such 

 

12

 

claims or disputes
involving amounts of over RMB7 million (RMB seven million)(or an equivalent
amount);

 

(d)              Should the Security
Agent enforce the pledge under the Agreement,
provide the Security Agent with
all assistance required and support and carry out all procedures in connection with
the enforcement;

 

(e)                Fully observe and
perform all its obligations under any contracts or agreements in connection
with the Secured Equipment;

 

(f)                 Strictly comply with the laws and regulations
of China applicable to the Secured Equipment,
and obtain all authorization, approval and consent from and complete all
registration and filing procedures with government bodies or other
organizations (including but not limited to the approval and registration
specified in Clause 3.1 (Approval and registration)
of the Agreement) required for the
signing, validity and enforcement of the Agreement;

 

(g)              Fully comply with all the regulatory
requirements of the China customs for the Secured
Equipment;

 

(h)              Apply due care in the use of the Secured Equipment in compliance with the
designed purpose and maintenance manuals and maintain the Secured Equipment in good conditions in all
respects;

 

(i)                  Purchase and maintain appropriate insurance
for the Secured Equipment as
required under the Agreement;

 

(j)                  Pay on time all expenses it is obligated to
pay in connection with the Secured Equipment,
including but not limited to purchase consideration, possible taxes, insurance
premiums and other relevant costs and expenses that become due from time to
time;

 

(k)               Given proper notification in advance by the Security Agent, allow the Security Agent or any individual designated
by the Security Agent to examine
the Secured Equipment or its any
parts;

 

(l)                  Without the need of obtaining prior consent of
the Pledgor, the Secured Parties may assign their obligee’s
right under the Agreement in
accordance with the requirements of the Transaction
Finance Document, with their right of the pledge under the Agreement transferred to the third party
(parties) at the same time, and the Pledgor
should complete relevant legal procedures for this purpose; and

 

(m)            Upon request of the Security Agent, immediately provide to the Security Agent any other information on the
Agreement or Secured Equipment.

 

13

 

8.2                                 Negative commitment

 

The Pledgor commits
to the Security Agent that during the life of
the Agreement, unless otherwise agreed by
the Security Agent, the Pledgor shall not:

 

(a)               Establish pledge or other security rights (other
than the pledge established under the Agreement)
over the whole or any part of the Secured
Equipment;

 

(b)              Dispose the whole or any part of the Secured Equipment via sale, grant,
transfer, lease, exchange or other means;

 

(c)               Take actions or fail to take any actions that
compromise any rights and interests of the Security
Agent under relevant insurance policies and/or insurance contracts
for the Secured Equipment,
including but not limited to terminating the insurance policies and/or
insurance contracts for whatever reasons;

 

(d)              Take actions or allow any other parties or
individuals to take actions that may reduce the value of the Secured Equipment in any respect; or

 

(e)               Commit, cause or allow the commission of any
events that may be harmful to the rights and interests of the Security Agent under the Agreement.

 

9                                         Continuing security interest

 

9.1                                 Continuing security interest

 

The pledge under the Agreement is a continuous security
interest, and shall remain in full force until all Secured Obligations have been settled in full, each and every Lender is no longer bound by any
obligations under the Loan Contract
and all transactions under the Swap Agreement
have been completed, without regard to whether there have been any settlements
or release in whole or in part in the interim.

 

9.2                                 Restitution

 

If, in reliance on
certain payments, security interests or other dispositions, the Secured Parties have released the
obligations in whole or in part or have made arrangements for these
obligations, but the payments, security interests or dispositions have become
void or must be restored due to insolvency, liquidation, judicial administration
or other causes, the obligations of the Pledgor
under the Agreement shall continue
to exist or be restored, as if there had not been any such release or
arrangements.

 

14

 

9.3                                 Non-diminishment

 

The pledge under the Agreement or the relevant right of remedy
of the Security Agent shall not be
diminished as a result of the following:

 

(a)               Any other security interests, warranties or
compensations assumed currently by the Security
Agent or any other parties or assumed after the signing of the Agreement in relation to the Secured Obligations or any other debts;

 

(b)              Waiver, release, enforcement or
non-enforcement of any other security interests, warranties or compensations;

 

(c)               Perfection or non-perfection of rights in any
other security interests, warranties or arrangements, or full or partial
realization of the value of the security interests in security arrangements;

 

(d)              Any revisions to any other security interests,
warranties or compensations or any revisions to any Transaction Finance Documents;

 

(e)               Grace extended to the Pledgor or any other parties in term of
time or other respects;

 

(f)                 Any debts that any other parties require or do
not require the Pledgor or others
to meet;

 

(g)              Situations where any party becomes incapable,
disempowered, unauthorized, disqualified as a legal entity or is dissolved, or
there is change to the members or legal status of any party;

 

(h)              Any bankruptcy or similar proceedings;

 

(i)                  Situations where, to the extent allowed by applicable
laws, any obligation of any party under the Transaction
Finance Document or any other documents or the security interests
has become unenforceable, illegal, void or unverifiable;

 

(j)                  Release of the obligations of any party in
accordance with settlement agreements or arrangements; or

 

(k)               Any action, event or situation that would have
diminished or released the rights of the Security
Agent under the Agreement
without the provisions of this clause,

 

9.4                                 Execution of the security interests

 

To the extent permissible
under applicable laws, the Pledgor
waives its rights to require the Security
Agent to claim or execute any other rights, security interests or
rights to demand payments before the Security

 

15

 

Agent can exercise any of its rights under the Agreement.

 

9.5                                 Additional security interests

 

The Agreement and the pledge under the Agreement constitute the supplement to any
other security interests currently held or to be held by the Security Agent, and shall not, in any way,
be affected by other such security interests.

 

10                                  Enforcement of the pledge

 

10.1                           Enforceability of the pledge

 

(a)               Upon enforcement notification of the Security Agent, the security interests
under the Agreement become immediately
enforceable.

 

(b)              Upon request of the Security Agent after the issue of the execution notification,
the Pledgor shall, in accordance
with the requirements of the Security Agent,
take all legal and appropriate actions to enable the Security Agent to execute the security interests under the Agreement. In order for the Security Agent to forcibly execute the
security interests, the Pledgor
shall sign all necessary agreements, transfer, notification, authorization,
decisions, commitments and other relevant documents reasonably required by the Security Agent.

 

10.2                           Validity of the enforceability of the Security
Interests

 

When the security
interests established under the Agreement
become enforceable in accordance with Clause 10.1 (Enforceability
of the Pledge), unless otherwise specified under the Agreement or otherwise agreed by the Security Agent, the Pledgor shall not have the right to
exercise and execute the rights, discretion and remedy vested in the Pledgor over the Secured Equipment, and the Security
Agent shall have the right to exercise or execute the security
interests in any manner it deems appropriate.

 

10.3                           Verification of the amounts of Secured Obligations

 

The verifications issued
by the Secured Parties with
respect to the amounts of Secured Obligations,
unless there are obvious mistakes, shall be binding on the Pledgor.

 

10.4                           Rights of the Security Agent

 

When the pledge under the
Agreement becomes executable, the Security Agent has the right to, pursuant
to the instructions of the Instructing Group,
immediately execute and exercise all powers and remedial measures available to
it as the Pledgee of the Secured Equipment, including but not
limited to the following (and the Security
Agent shall notify the Pledgor
when it adopts any such measures):

 

16

 

(a)               Exercising all or part of the powers vested by
the laws of China in this respect
through public auction or sale to sell and realize all or any part of the Secured Equipment;

 

(b)              Instituting (or instructing the Pledgor to institute as per its
requirements) all litigation, arbitration or legal proceedings in connection
with all or any Secured Equipment,
and proceeding with, settling or releasing any claims in connection with the Secured Equipment;

 

(c)               Exercising any rights of the Pledgor over the Secured Equipment  for
the purpose of the pledge under the Agreement;
and/or

 

(d)              For the above purposes, adopting and signing
all relevant actions, contracts and items that the Security Agent deems reasonably necessary or appropriate.

 

11                                  Designation of Accounts

 

The Security Agent
should, acting in accordance with the instructions of the Instructing
Group, instruct the Pledgor to pay
relevant amounts to the designated accounts.

 

12                                  Use of Enforcement Proceeds

 

All proceeds (whether or not they exceed the value
of the Secured Equipment as specified in
Clause 2.3 (Value of the Secured Equipment)
or Attachment I (Pledge Specifics)) received from
time to time or recovered by the Security Agent
under the Agreement should be used and
distributed in the order as specified under Clause 7 (Application
of Proceeds) of the Security Trust Deed.

 

13                                  The Security Agent and its Agent

 

13.1                           Agents

 

(a)               The Security
Agent may, at any time it deemed appropriate, delegate all or any of
its rights, powers, authority and decision-making right vested in the Security Agent under the Agreement to any agent through a power of
attorney or other means. The delegation may be done in terms and conditions
deemed appropriate by the Security Agent
in the interests of the Secured Parties,
but the terms and conditions must not be inconsistent with any provisions of
the Agreement; and

 

(b)              Without prejudice to Clause 13.3 (The responsibilities of the Security
Agent and its Agents), the Security Agent does not need to supervise litigation
proceedings involving any of its agents, and shall not be liable for any loss
incurred by any of its agents, unless by law, 

 

17

 

the agent(s) should
be responsible for its material negligence or intentional misconducts.

 

13.2                           The rights of the Security Agent and its Agents

 

To the extent specified
in Clause 13.3, the Pledgor and
the Security Agent herein make
express representations as follows:

 

(a)               The Security
Agent and any of its designated agents may carry out conducts in
connection with the Agreement
based on the recommendations and opinions of and information obtained from any
lawyers, valuers, accountants, bankers, brokers or other professionals, without
regard to whether such recommendations, opinions or information have been
obtained by the Pledgor, any Secured Parties or any other parties, and
shall not be liable for any loss as a result of such conducts;

 

(b)              The Security
Agent and any of its designated agents have the right to accept the
certificate documents signed by any authorized representatives of the Pledgor and affixed with the stamp of the Pledgor, and use these certificates as
sufficient evidence for any transaction or the facts, substance or interests of
anything. In this case, the Security Agent
or any of its designated agents do not need further evidence and shall not be
held liable for any loss as a result of conducts based on the certificate
documents;

 

(c)               The Security
Agent or any of its designated agents do not need to take any
measures to determine whether any event has occurred that may cause the pledge
established under the Agreement to
become enforceable. Unless the Security Agent
or any of its designated agents have become aware or there is express notice to
the contrary, the Security Agent
and any of its agents shall have the right to assume nothing of the sort has
happened, and that the Pledgor is
observing and performing all its obligations under the Agreement and Transaction Finance Document; and

 

(d)              The Security
Agent or any of its designated agents shall not be liable for the
invalidity, flaw or insufficiency of the Agreement
or the pledge under the Agreement
or the ownership of any Secured Equipment.

 

13.3                           The responsibilities of the Security Agent and its
Agents

 

The Security Agent and any of its designated
agents, or the directors of the board, management or employees of the Security Agent, shall in no event, be
liable for any costs, expenses, losses, debts or expenditures as a result of
the pledge under the Agreement or
any enforcement of the pledge, or any action or inaction of the Security Agent or its agents, directors,
management or employees in connection of the Secured
Equipment, or the exercise or non-exercise of any exercisable rights

 

18

 

under
the Agreement by the Security Agent or its agents, directors,
management or employees, unless the above costs, expenses, losses, debts or
expenditures have been incurred as a result of the material negligence or
intentional misconduct of the Security Agent
or its agent, directors, management or employees.

 

14           Power of Attorney

 

14.1         Designation

 

The Pledgor
herein irrevocably designates the Security Agent
(and the Security Agent’s agents) as its agents
(via power of attorney) to, on its behalf, in its name or through other means,
and in a manner and at the time deemed appropriate by the Security
Agent (and the Security Agent’s
agents), within the scope permissible under the laws of China:

 

(a)   Perform anything that the Pledgor is obligated to perform under the Agreement but has not properly performed, including
but not limited to signing documents necessary for the perfection, protection
and (after the issue of enforcement notice,) realization of the security
interests under the Agreement; and

 

(b)   Exercise any rights vested in the Security Agent under the Agreement.

 

14.2         Acknowledgement and notification

 

The Pledgor
herein acknowledges and confirms anything done by the Security
Agent (and its agents) for the exercise of its rights in the power
of attorney under Clause 14.1 (Designation). Anyone
who takes any action or signs any document as per the above power of attorney
should notify the Pledgor, and
should, subsequently when appropriate and as soon as reasonably possible,
provide the copies of any such documents to the Pledgor.

 

15           Costs and Expenses

 

Upon request, the Pledgor
shall, from time to time, pay to or compensate the Security
Agent for:

 

(a)   All costs and expenses incurred by the Security Agent as a result of preparing,
signing, performing and perfecting the Agreement
and any other relevant documents, and any revision or extension of the Agreement, or any consent or waiver under
the Agreement; and

 

(b)   All costs, expenses ad expenditures (including
legal fees and all other actual expenditures) incurred by the Security Agent as a result of exercising
any of its rights or powers under the Agreement,
instituting legal proceedings in connection with and recovering overdue
payments under the Agreement,
preserving or enforcing its

 

19

 

rights under the Agreements
in other means, contesting any claims against it in connection with the Agreement, or releasing the Agreement and the pledge under the Agreement upon full settlement of all
amounts secured under the Agreement.

 

16           Compensations

 

16.1         The Pledgor
shall make compensations to the Security
Agent, its agents, directors, management and employees for all
verifiable losses, liabilities, damages, taxes (if any), costs and expenses
incurred by the Security Agent as
a result of signing or performing the Agreement,
and for all litigations, legal proceedings, claims, requests, costs, expenses and
expenditures that may be caused by, suffered or incurred from the failure of
the Pledgor to perform or observe
any of its commitments and agreements as stated under Agreement, except those incurred as a
result of frauds, intentional misconducts or material negligence of the Security Agent, its agents, directors,
management or employees.

 

16.2         All amounts payable by the Pledgor under the Agreement when they fall due shall be paid
in full without imposing set-off, counter-claim or any other restrictions or
conditions, and should be exempt from taxes, deductions or withholding. If as
per laws or regulations that the Pledgor
or any other parties should deduct or withhold any amounts from any payments to
the Security Agent (for tax or
other purposes), the Pledgor shall
make an additional payment on top of the above payments so as to ensure that
the total amounts (not subject to further taxes or deductions or withholding)
actually received by the Security Agent
should be the same as the Security Agent
would have received without the deductions or withholding. The Pledgor shall, after making the payments,
immediately hand over the official documentations or the photocopies of other
documentations to prove that it has already paid the deducted or withheld
amounts to relevant tax authorities or other competent authorities.

 

17           Release

 

The
obligations of the Pledgor under
the Agreement shall terminate on
the date the Secured Obligations
have been irrevocably and unconditionally paid and settled in full, the Lenders are no longer bound by any
obligations under the Loan Contract
and all transactions under the Swap
Agreements have been completed, and at the same time:

 

(a)   All rights of the Security Agent under the Agreement
shall terminate, and the security interests arising from the Agreement or established under Agreement shall be released;

 

(b)   The Pledgor
shall, as soon as practically possible and at its own expense, cancel the Agreement and the approval and/or
registration of the pledge established under the Agreement at relevant authorities in accordance with the laws and
regulations of China; and

 

20

 

(c)   Upon written request of the Pledgor, the Security Agent shall, as soon as practically possible, take
actions or allow the taking of actions that may be required by the Pledgor for the purpose of the release of the
security interests arising from the Agreement
or established under the Agreement,
and shall, at the expense of the Pledgor,
sign and deliver or cause the signing and delivery of any and all of the
additional papers and documents that may be required by the Pledgor for the purpose of the release of the
security interests arising from the Agreement
or established under the Agreement.

 

18           Notification

 

18.1         Unless specified otherwise, any notifications
or other documents in connection with the Agreement
should be prepared in writing and may be delivered by facsimile or postal mail.
If by facsimile, the delivery is deemed done upon the receipt by the addressee
of clearly readable documents sent through facsimile; and if by postal mail,
the delivery is deemed done upon the notification being placed at the relevant
address or 5 Business Days after
the notification is deposited into the mailbox in a pre-paid envelope with
clearly marked address.

 

18.2         The contact information of the Pledgor and the Security Agent is listed on the signing page of the Agreement.

 

18.3         Any party may change its contact information
by issuing notification to the other party 5 Business
Days in advance.

 

19           Applicable laws and jurisdiction

 

The
Agreement is governed and construed
under the laws of China. In case
of any dispute under the Agreement or
any dispute in connection with the Agreement, both
parties agree to refer the disputes to China International Economic and Trade
Arbitration Commission and resolve the disputes in Beijing in accordance with the
prevailing arbitration rules.

 

20           Others

 

20.1         Severability

 

If
any provisions of the Agreement
are or have become illegal, void or unenforceable in any jurisdiction, the
validity or enforceability of other provisions of the Agreement in that jurisdiction and the
validity or enforceability of those provisions and other provisions of the Agreement in other jurisdictions shall not
be impaired.

 

20.2         Waiver

 

The
Security Agent’s failure to
exercise or delay in exercising any right, power or remedy under the Agreement shall not diminish such rights,
powers or remedies, or constitute a waiver of such rights, powers or

 

21

 

remedies;
single or partial exercise by the Security
Agent of such rights, powers or remedies shall not prevent it from
further exercising such rights, powers or remedies or exercising any other
rights, powers or remedies. All rights, powers and remedies under the Agreement are cumulative, and not exclusive
of any other rights, powers or remedies provided by law.

 

20.3         Amendments

 

Any
revisions to the Agreement can
only be made in writing by the Security Agent
and the Pledgor.

 

20.4         Languages

 

The
Agreement is drafted and signed in
Chinese, with an English version translated from Chinese at the expense of the Pledgor.

 

Notifications
in connection with the Agreement
between the Pledgor and the Security Agent should be drafted and
prepared in English.

 

Documents
provided by the Pledgor under the Agreement to the Security Agent or other document provided in connection with the
Agreement should be drafted and
prepared in English, or if drafted and prepared in languages other than
English, such documents should attach an English translation that has been
verified by the Pledgor to be
truthful, accurate and complete and such that the Security Agent may act in accordance with the English
translation.

 

20.5         Entry into force

 

The
Agreement enters into force upon
signing by the Security Agent and the
Pledgor, but if according to the
laws and regulations of China, the Agreement
(for parties or any party to the Agreement)
may not enter into force before completion of any approval and or registration
procedures, the Agreement (for
parties or any party to the Agreement)
shall enter into force upon the date such approval and/or registration
procedures are completed.

 

In witness whereof, the Agreement
has been executed by both parties on the date stated at the beginning of the Agreement,

 

22

 

Attachment 1:      Specifics
of Secured Equipment

 

1.     Pledgor:  Tianjin New
Highland Science Development Co., Ltd.

 

2.     Security
Agent: DB Trustees (Hong Kong) Limited

 

3.     
Specifics of the Secured Equipment

 

	
  No.

  	
   

  	
  Description

  	
   

  	
  Price

  	
   

  	
  Supplier

  	
   

  	
  Invoice Numbers

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  One suit of Jet-Drill Semi-Enclosed Skid Shallow
  (2000 meters) Well Units

  	
   

  	
  RMB72,38 million

  	
   

  	
  Dongying Luda Petrochemical Equipment Co., Ltd.

  	
   

  	
  00514753, 00514754, 00514755, 00514756, 00514757,
  00514758, 00514759, 00514760

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  One suit of Jet-Drill Semi-Enclosed Skid Shallow
  (3000 meters) Well Units

  	
   

  	
  RMB79.62 million

  	
   

  	
  Dongying Luda Petrochemical Equipment Co., Ltd.

  	
   

  	
  00514761, 00514762, 00514763, 00514764, 00514765,
  00514766, 00514767, 00514768, 00514769

  

 

4.     Assessed
value of the Secured Equipment: as per the
Assessment Report (Jin ZTC Ping Zi [2010] No.2) issued on 5 January 2010
by Tianjin Zhong Tian Cheng Real Estate and Land Assessment Co., Ltd., as
at 30 November 2009 and based on the current use of the Secured Equipment, its market value is RMB135.6969 million.

 

5.     Loan
amount: no more than USD65 million

 

6.     Use
of loan: purchase of Secured Equipment
and working capital

 

7.     Term
of pledge: until the termination of the Agreement in
accordance with Clause 17 (Release)

 

8.     The
Secured Parties: Facility Agent, Security Agent, Calculation Agent,
Arranger, Lenders
and Swap Counterparty.

 

23

 

Attachment
2:      The
Format of Additional Pledge Commitments

 

The Format of Additional Pledge
Commitments

 

To: [DB Trustees
(Hong Kong) Limited] as the Security Agent

 

[date]

 

Dear sir or madam:

 

We refer to the machine equipment pledge agreement
dated [date]
between Tianjin New Highland Science
Development Co., Ltd. (the Pledgor) and DB
Trustees (Hong Kong) Limited (the Security Agent),
including their revisions and additions from time to time (the Pledge Agreement). This document is the Additional
Pledge Commitments referred to in Clause 2.4 (Additional
pledge) of the Pledge Agreement.
The terms used in the Additional Pledge
Commitments shall have the same meanings as defined in the Pledge Agreement.

 

With respect to the New
Equipment that hasn’t been effectively pledged under the Pledge Agreement and which will be used as the consideration
for the Secured Parties to continue to provide or
maintain the loan limits or sign or maintain various related agreements and
arrangements and as the security interests for securing the payment of all Secured Obligations by the Pledgor
on time and its performance of all its other obligations under the Transaction Finance Document, in accordance with the Real
Right Law of the People’s Republic of China , the
Guarantee Law of the People’s Republic of China and other laws and regulations
of China, the Pledgor, as the rightful owner of
the New Equipment (with details listed in the
following attachment), pledge the New Equipment to
the Security Agent who acts in the
interests of and represents the Secured Parties,
which are the beneficiaries of the pledge interests and rights under the Additional Pledge Commitments.

 

The Pledgor should ensure the Security Agent receives this Additional Pledge Commitment within 30 days
upon completion of the customs clearance procedures for the New Equipment, ensure the Security Agent receives the Pledge
Certificate for the pledge of the New
Equipment within 60 days upon completion of the customs clearance
procedures for the New Equipment,
and ensure the Security Agent
receives, within 90 days upon completion of the customs clearance procedures
for

 

24

 

the New Equipment and for the purpose of the
pledge of the New Equipment, the
Security Certificate and the Approving
Authorities’ approval and registration documents or documents
testifying that the relevant approval, registration or filing documents cannot
be obtained. Within a commercially reasonable period of time upon completion of
the customers clearance procedures for the New
Equipment, the Pledgor
should purchase insurance for the New
Equipment in accordance with Clause 4 (Insurance),
and immediately hand over the originals of the relevant insurance policies,
insurance contracts, premium payment receipts, invoices or any other relevant
documents to the Security Agent
for keeping.

 

All terms and conditions
included in the Pledge Agreement
apply to the Additional Pledge Commitments,
as if the Additional Pledge Commitments
had provided all the above terms and conditions (including all necessary
contextual modifications).

 

The Additional Pledge
Commitments are governed and construed by the Laws of China.

 

Pledgor: Tianjin New Highland Science Development Co., Ltd.
(company seal)

 

	
  Authorized
  signatory

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Position:

  	
   

  	
   

  

 

 

Attachment to the Additional
Pledge Commitments

Specifics of New Equipment:

 

	
  No.

  	
   

  	
  Description

  	
   

  	
  Price

  	
   

  	
  Supplier

  	
   

  	
  Invoice Numbers

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

25

 

Signature page

 

Pledgor: Tianjin New Highland Science Development Co., Ltd.

 

	
  Address:

  	
  Bldg 21-B4, Binhai
  Chuangxin Venture Park, No. 4668, Xinbei Road, Tanggu District, Tianjin

  
	
  Facsimile:

  	
  +86-22-6635-1181

  
	
  Telephone:

  	
  +86-22-6636-1185

  
	
  Addressee:

  	
  Mr Liu Qingzeng

  

 

 

	
  /s/ Liu Qingzeng

  	
   

  
	
   

  	
   

  
	
  (Name of
  Authorized Signatory)

  	
   

  
	
   

  	
   

  
	
  Name: Liu Qingzeng

  	
   

  

 

Signature page for the Machine Equipment Pledge
Agreement

 

 

Security Agent: DB Trustees (Hong Kong) Limited

 

	
  Address:

  	
  48/F, Cheung Kong
  Center, 2 Queen’s Road Central, Hong Kong

  
	
  Facsimile:

  	
  +852 2203 7320/7323

  
	
  Telephone:

  	
  +852 2203 8888

  
	
  Addressee:

  	
  Managing Director

  

 

 

	
  /s/ Chiu Kin Wing Edward

  	
  /s/ Choi Siu Ling

  	
   

  
	
   

  	
   

  	
   

  
	
  (Name of
  Authorized Signatory)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: Chiu Kin Wing Edward

  	
  Choi Siu Ling

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Position: Authorized
  Signatory

  	
  Director

  	
   

  

 

Signature page for the Machine Equipment
Pledge Agreement

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