Document:

exv10w2

 

EXHIBIT 10.2

Dated                    , 2006

STONEPATH HOLDINGS (HONG KONG) LIMITED

 

INSTRUMENT

constituting the

11% SECURED NOTES

of

STONEPATH HOLDINGS (HONG KONG) LIMITED

in

an aggregate principal amount of up to US$7,200,000

 

 

 

Table of Contents

	 	 	 	 	 
	CONDITION	 	PAGE
	1.      INTERPRETATION
	 	 	1	 
	 
	 	 	 	 
	2.      AMOUNT AND ISSUE OF THE NOTES
	 	 	4	 
	 
	 	 	 	 
	3.      STATUS, FORM, DENOMINATION AND TITLE OF THE NOTES
	 	 	4	 
	 
	 	 	 	 
	4.      INTEREST
	 	 	5	 
	 
	 	 	 	 
	5.      REDEMPTION
	 	 	6	 
	 
	 	 	 	 
	6.      EXPENSES
	 	 	6	 
	 
	 	 	 	 
	7.      INDEMNITY
	 	 	6	 
	 
	 	 	 	 
	8.      REPLACEMENT OF CERTIFICATES
	 	 	6	 
	 
	 	 	 	 
	9.      RIGHTS OF THE NOTEHOLDER(S)
	 	 	7	 
	 
	 	 	 	 
	10.     RESERVED MATTERS
	 	 	7	 
	 
	 	 	 	 
	11.     UNDERTAKINGS AND COVENANTS
	 	 	7	 
	 
	 	 	 	 
	12.     EVENTS OF DEFAULT
	 	 	9	 
	 
	 	 	 	 
	13.     PAYMENTS
	 	 	12	 
	 
	 	 	 	 
	14.     TRANSFER, TRANSMISSION AND REGISTER
	 	 	12	 
	 
	 	 	 	 
	15.     VARIATIONS TO THE CONDITIONS
	 	 	13	 
	 
	 	 	 	 
	16.     NOTICES
	 	 	13	 
	 
	 	 	 	 
	17.     GOVERNING LAW
	 	 	13	 
	 
	 	 	 	 
	18.     PROCESS AGENT
	 	 	13	 
	 
	 	 	 	 
	SCHEDULE A FORM OF CERTIFICATE
	 	 	15	 
	 
	 	 	 	 
	SCHEDULE B RESERVED MATTERS
	 	 	16	 
	 
	 	 	 	 
	SCHEDULE C FORM OF INSTRUMENT OF TRANSFER
	 	 	17	 

 

 

THIS INSTRUMENT is made on                    , 2006

BY

STONEPATH HOLDINGS (HONG KONG) LIMITED, a company incorporated in Hong Kong and having its
registered office at Unit 2602, 26/F, Miramar Tower, 132 Nathan Road, Tsimshatsui, Kowloon, Hong
Kong (the “Company”).

WHEREAS:-

Pursuant to the Agreement, the Company has agreed to issue the Notes on the terms hereof.

	1.	 	INTERPRETATION
	 
	(A)	 	In this Instrument, unless the context otherwise requires, the following expressions shall
have the following meanings:-

	 	 	 	 	 
	Expression 	 	Meaning
	“Affiliates”	 	in relation to a person (or group of persons), any
other person which directly or indirectly controls,
is controlled by, or is under common control with
such person (or group of persons);
	 	 	 	 	 
	“Agreement”	 	the debt restructuring agreement made between the
Company, SBI Brightline, LLC and Hong Kong League
Central Credit Union of even date relating to the
conversion of certain indebtedness into the Notes,
as the same may be amended, modified or
supplemented from time to time;
	 	 	 	 	 
	“Annual Balance Sheet
Date”	 	in relation to the Company, 30 November or such
other date each year as at which the annual audited
financial statements of the Company are prepared;
	 	 	 	 	 
	“Business”	 	logistics services and related businesses;
	 	 	 	 	 
	“Business Day”	 	any day (other than a Saturday or Sunday or a day
on which a tropical cyclone warning signal no.8 or
above or a black rainstorm warning signal is
hoisted in Hong Kong at any time between 9:00 a.m.
and 5:00 p.m.) on which banks in Hong Kong are
generally open for business;
	 	 	 	 	 
	“Certificates”	 	the certificates (in registered forms)
substantially in the form set out in Schedule A to
be issued under the seal of the Company evidencing
the title of the Noteholder(s) to the Note(s), as
the same may be modified or amended from time to
time in accordance with the Conditions;
	 	 	 	 	 
	“Conditions”	 	the terms and conditions of the Note(s), as the
same

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	Expression 	 	Meaning
	 	 	may be modified or varied from time to time,
as set out herein, and a “Condition” refers to the
relative numbered paragraph of the Conditions;
	 	 	 	 	 
	“Deferred Interest
Payments”	 	shall have the meaning ascribed thereto under
Condition 4;
	 	 	 	 	 
	“Director(s)”	 	the director(s) of the Company for the time being;
	 	 	 	 	 
	“Events of Default”	 	such events as set out in Condition 12;
	 	 	 	 	 
	“Financial Year”	 	the financial year of the Company and the
Subsidiaries ending on the Annual Balance Sheet
Date of each year;
	 	 	 	 	 
	“Group”	 	means the Company and the Subsidiaries for the time
being and “Group Company” means any of them;
	 	 	 	 	 
	“HK dollars” or “HK$”	 	Hong Kong dollars, the lawful currency of Hong Kong;
	 	 	 	 	 
	“Hong Kong”	 	the Hong Kong Special Administrative Region of the
People’s Republic of China;
	 	 	 	 	 
	“Interest Payment Date”	 	shall have the meaning ascribed thereto under
Condition 4;
	 	 	 	 	 
	“Issue Date”	 	in respect of a Note, the date on which it was
issued pursuant to the Conditions;
	 	 	 	 	 
	“Maturity Date”	 	30 June, 2008;
	 	 	 	 	 
	“Notes”	 	the series of secured notes due on 30 June, 2008 in
the aggregate principal amount of up to
US$7,200,000 to be issued in denomination of
US$10,000 each by the Company as evidenced by the
Certificates pursuant to the terms of this
Instrument;
	 	 	 	 	 
	“Noteholder(s)”	 	the person(s) for the time being entered in the
Register of Noteholder(s) maintained pursuant to
Condition 14 as the holder or joint holders of the
Note(s);
	 	 	 	 	 
	“PRC”	 	the People’s Republic of China (which for the
purposes only of this Instrument does not include
Hong Kong);
	 	 	 	 	 
	“Redemption Date”	 	the date on which any Note is redeemed pursuant to
Condition 5(A), (B) or (C) as the case may be;
	 	 	 	 	 
	“Redemption Interest”	 	interest calculated on the principal amount of the
Notes pursuant to Condition 4;
	 	 	 	 	 
	“Register of Noteholders”	 	a register of Noteholders maintained by the Company
in accordance with Condition 14;
	 	 	 	 	 
	“Security Agent”	 	SBI Brightline, LLC, a company incorporated in
Delaware, USA, with a registered office at 610
Newport Center Drive, Suite 1205, Newport Beach,

2

 

	 	 	 	 	 
	Expression 	 	Meaning
	 	 	CA
92660, USA, or such other person for the time being
appointed by the Noteholders for this purpose;
	 	 	 	 	 
	“Security Documents”	 	the following security documents:
	 	 	 	 	 
	 	 	(a)
	 	memorandum of charge in favour of SBI
Brightline, LLC as security agent in relation to a
charge over the shares of G Link Express Logistics
(KL) Sdn. Bhd., G Link Express Logistics (Penang)
Sdn. Bhd. and G Link Express Logistics (JB) Sdn.
Bhd;
	 	 	 	 	 
	 	 	(b)
	 	share charge in favour of SBI Brightline, LLC
as security agent in relation to a charge over the
shares of Stonepath Logistics (Hong Kong) Limited,
Stonepath Freight Express (Hong Kong) Limited and
Shaanxi Sunshine Cargo Service (Hong Kong) Company
Limited;
	 	 	 	 	 
	 	 	(c)
	 	share charge in favour of SBI Brightline, LLC
as security agent in relation to a charge over the
shares of G Link Express Logistics (Singapore) Pte.
Ltd.;
	 	 	 	 	 
	 	 	(d)
	 	share charge in favour of SBI Brightline, LLC
as security agent in relation to a charge over the
shares of Stonepath Logistics (China) Limited; and
	 	 	 	 	 
	 	 	(e)
	 	share charge in favour of SBI Brightline, LLC
as security agent in relation to a charge over the
shares of the Company,
	 	 	 	 	 
	 	 	and any other documents executed in favour of the
Security Agent as collateral security of the Notes,
as such documents may from time to time be amended
or supplemented;
	 	 	 	 	 
	“Shares”	 	ordinary shares of HK$1.00 each in the capital of
the Company;
	 	 	 	 	 
	“Subsidiary” and
“Holding Company”	 	have the respective meanings ascribed to the terms
“subsidiary” and “holding company” in Section 2 of
the Companies Ordinance (Chapter 32 of the Laws of
Hong Kong);
	 	 	 	 	 
	“Transaction Documents”	 	this Instrument, the Agreement and the Security
Documents;
	 	 	 	 	 
	“US dollars” or “US$”	 	the lawful currency of the United States of America.
	 	 	 	 	 

	 	 	 	 	 
	(B)	 	Except as otherwise expressly provided, expressions defined in the Companies Ordinance (Cap.
32 of the Laws of Hong Kong) as at the date hereof have the same meanings when used in this
Instrument.

3

 

	(C)	 	A reference to a statute or statutory provision includes a reference:-

	 	(a)	 	to that statute or provision as from time to time modified or re-enacted;
	 
	 	(b)	 	to any repealed statute or statutory provision which it re-enacts (with or
without modification); and
	 
	 	(c)	 	to any orders, regulations, instruments or other subordinate legislation made
under the relevant statute or statutory provision.

	(D)	 	Unless the context otherwise requires:-

	 	(a)	 	words in the singular include the plural, and vice versa;
	 
	 	(b)	 	words importing any gender include all genders; and
	 
	 	(c)	 	a reference to a person includes a reference to a body corporate and to an
unincorporated body of persons, and vice versa.

	(E)	 	A reference to Recitals, a Condition, Sub-condition or Schedule is to the recitals, a
condition and a sub-condition of, or the schedule to, this Instrument respectively.
	 
	(F)	 	The headings are for convenience only and do not affect interpretation of this Instrument.
	 
	2.	 	AMOUNT AND ISSUE OF THE NOTES
	 
	(A)	 	The Company shall issue the Notes subject to the terms of the Conditions which shall be
binding on the Company and shall enure for the benefit of the Noteholder(s).
	 
	(B)	 	The Company shall pay all duties or stamp duties (if any) on the issue of the Notes and the
initial delivery of the Notes (including penalties, if any).
	 
	3.	 	STATUS, FORM, DENOMINATION AND TITLE OF THE NOTES
	 
	(A)	 	Each Note constitutes a direct unconditional obligation of the Company and ranks pari passu
and rateably without preference amongst other Notes and is secured on the security constituted
by the Security Documents.
	 
	(B)	 	The Notes are in registered form in the denomination of US$10,000 each without coupons. A
Certificate will be issued to each Noteholder in respect of its registered holding of Notes.
Each Certificate will have an identifying number which will be recorded on the relevant
Certificate and in the Register of Noteholders.
	 
	(C)	 	Title to each Note passes by transfer and registration in the Register of Noteholders as
described in Condition 14. The registered holder of any Note will (except as otherwise
required by law) be treated as the absolute owner of the Note for all purposes (whether or not
it is overdue and regardless of any notice of ownership, trust or any interest or any writing
on, or the theft or loss of, the Certificates issued in respect of it) and no person will be
liable for so treating such holder.
	 
	(D)	 	The Certificate for each Note, if held jointly, shall be delivered to that one of the joint
Noteholders whose name stands first in the Register of Noteholders in respect of the joint
holding.

4

 

	4.	 	INTEREST
	 
	(A)	 	The Notes bear interest from the Issue Date at 11 per cent per annum. Interest will be paid
monthly in cash in arrears on the last Business Day of each month (each an “Interest Payment
Date”), commencing on 30 November, 2006, subject as provided herein.
	 
	(B)	 	Notwithstanding Condition 4(A), for the first four months from the Issue Date, the monthly
payment due to be made each month in respect of the interest on each Note shall be restricted
to an amount equal to 5.5 per cent per annum with the remainder interest of 5.5 per cent per
annum to be deferred (“Deferred Interest Payments”). The Deferred Interest Payments shall
become due and payable immediately in cash in one lump sum on the fourth Interest Payment
Date. In view of this, it is agreed that the following payments shall be made by the Company
on the dates indicated:-

	 	 	 
	Interest Payment Date	 	Payment under Condition 4(B)
	30 November, 2006

	 	US$32,221
	29 December, 2006

	 	US$32,221
	31 January, 2007

	 	US$32,221
	28 February, 2007

	 	US$191,404

 

			
	*	 	Note: The amount includes Deferred Interest Payments and an additional amount agreed
between the Company and the Noteholders.

	(C)	 	Whenever it is necessary to compute an amount of interest in respect of any Note for a period
of other than a full year, such interest will be calculated on the basis of a 360-day year
consisting of 12 months of 30 days each and, in the case of an incomplete month, the number of
days elapsed.
	 
	(D)	 	Each Note will cease to bear interest from the due date for redemption thereof unless payment
of the principal or interest (if any) is improperly withheld or refused or unless default is
otherwise made in respect of any such payment. In any such event, interest (where applicable,
at the higher rate provided in Condition 4(E)) will continue to accrue (after as well as
before any judgment) up to but excluding the date on which payment in full of the principal or
interest (if any) thereof is made.
	 
	(E)	 	If the date for redemption of any Notes is not an Interest Payment Date or if payment of
principal or interest (if any) is improperly withheld or refused in respect of any Notes or if
default is otherwise made in respect of any such payment or if the Notes have become due and
payable pursuant to Condition 12, interest accrued and unpaid in respect of any such Notes
from and including the Issue Date or, as the case may be, the Interest Payment Date being the
last one preceding such due date for redemption on which interest accrued up to such date was
paid or, if later, the date up to which interest in respect of such Notes accrued and was
paid, shall be paid in accordance with Condition 13.
	 
	(F)	 	In the event that an Event of Default occurs, interest on the Notes will accrue at a rate per
annum equal to two per cent above the rate set out in Condition 4(A), payable on demand. Such
interest will accrue from the day that the Event of Default occurs.

5

 

	5.	 	REDEMPTION
	 
	(A)	 	No Noteholder shall be entitled to redeem its Notes prior to the Maturity Date, except on the
occurrence of an Event of Default.
	 
	(B)	 	The Company shall, on the Maturity Date, redeem each outstanding Note at a value equal to the
aggregate of (i) the principal amount outstanding under the Note; and (ii) all interest
accrued but unpaid in respect of the Note up to (but excluding) the Maturity Date.
	 
	(C)	 	The Company shall have the right at any time prior to the Maturity Date to redeem any or all
of the outstanding Notes by delivering a one (1)-month redemption notice in writing to any one
or more of the Noteholders (as the case may be) at a value equal to the aggregate of (i) the
principal amount outstanding under such outstanding Notes; and (ii) all interest accrued but
unpaid in respect of such outstanding Notes up to (but excluding) the Redemption Date.
	 
	(D)	 	The relevant Noteholders shall surrender the relevant Certificates for cancellation against
the full payment to be made by the Company upon such redemption. Such Notes, once redeemed,
shall be cancelled forthwith by the Company.
	 
	6.	 	EXPENSES
	 
	(A)	 	The Company will pay all reasonable costs and expenses properly incurred by the Noteholders
pursuant to any stamp or other duties or taxes on or in connection with the issue of the Notes
and delivery of any of Transaction Documents or the consummation of the transactions
contemplated thereby.
	 
	(B)	 	The Company shall pay all Noteholders for, and to hold such persons harmless against
liability for, the payment of: (i) all losses (including reasonable fees and expenses properly
incurred) arising in connection with a breach by the Company of any Transaction Document, and
(ii) reasonable fees and expenses properly incurred in connection with the investigation of
any breach by the Company of any Transaction Document.
	 
	7.	 	INDEMNITY
	 
	 	 	The Company hereby unconditionally and irrevocably agrees to indemnify each Noteholder
against any loss that such Noteholder suffers due to:-

	 	(i)	 	the Company’s liability to pay any amounts hereunder being unenforceable in
whole or in part for any reason whatsoever; or
	 
	 	(ii)	 	any sum which is due and payable under the Notes not being paid in accordance
with the terms of the Notes through any act or omission of the Company.

	8.	 	REPLACEMENT OF CERTIFICATES
	 
	 	 	If any Certificate is mutilated, defaced, destroyed, stolen or lost, it may be replaced by
the Company upon delivery of a duly executed declaration of loss and indemnity from the
Noteholder in such form as may be reasonably required by the Company and payment of US$1.00
per Certificate. Any mutilated or defaced Certificate must be surrendered before
replacements will be issued.

6

 

	9.	 	RIGHTS OF THE NOTEHOLDER(S)
	 
	(A)	 	As regards voting
	 
	 	 	Neither the Notes nor the Certificates shall confer on the Noteholder(s) the right to vote
at a general meeting of the Company or any rights of a shareholder in the Company.
	 
	(B)	 	As regards taxation
	 
	 	 	Save and except any tax on the overall income of any Noteholder(s), all payments in respect
of the Notes will be made without withholding or deduction of or on account of any present
or future taxes, duties, assessments or governmental charges of whatever nature imposed or
levied by or on behalf of the government of Hong Kong or any other authorities therein or
thereof having power to tax unless the withholding or deduction of such taxes, duties,
assessments or governmental charges is required by law. In that event, the Company will pay
such additional amounts, save and except any tax on the overall income of any Noteholder(s),
as may be necessary in order that the net amounts received by the Noteholder(s) after such
withholding or deduction shall be equal to the respective amounts receivable in respect of
the Note(s) in the absence of such withholding or deduction.
	 
	10.	 	RESERVED MATTERS
	 
	 	 	Except as specifically and fairly disclosed in Schedule 8 of the Agreement, the
Company undertakes to the Noteholders that it shall not, and shall procure that none of the
Group Companies shall, do any of the things listed in Schedule B unless the same has
been approved in writing by each of the Noteholders.
	 
	11.	 	UNDERTAKINGS AND COVENANTS
	 
	 	 	Save and except with the prior approval in writing from all the Noteholders (such approval
not to be unreasonably withheld or delayed), the Company agrees and undertakes with the
Noteholders that:
	 
	(A)	 	Duration
	 
	 	 	The undertakings in this Condition shall remain in full force from and after the date of
this Instrument and so long as any Note remains outstanding.
	 
	(B)	 	Holding company
	 
	 	 	The Company will remain as the holding company of the Group for so long as any Note remains
outstanding.
	 
	(C)	 	Board meetings
	 
	 	 	The Company shall either procure that meetings of the directors of the Company are held at
least once a year to review the management accounts, sales plans and analyses, expenditures
accounts and projections and any other businesses as may be deemed necessary by the
director(s) nominated by the Noteholders, or address such issues and matters at the meetings
of the directors of the Company’s parent, as appropriate.

7

 

	(D)	 	Financial statements
	 
	 	 	The Company shall provide the Noteholders with:-

	 	(i)	 	monthly accounts of each Group Company and consolidated accounts of the Group
within 61 days after the end of each month which shall include profit and loss
accounts, balance sheets and cashflow statements;
	 
	 	(ii)	 	accounts of each Group Company and audited consolidated accounts of the Group
(to the extent that such Group Company is required by applicable law in its place of
incorporation or the places that it operates to prepare audited accounts) within 10
months after the end of each Financial Year; and
	 
	 	(iii)	 	such further information as the Noteholders may from time to time reasonably
require as to all matters relating to the businesses or affairs or the financial
position of the Group.

	(E)	 	Dividend and payments
	 
	 	 	Save in the ordinary course of business or where the person receiving the relevant payment
is itself a Group Company, none of the Group Companies may (i) declare, make or pay any
dividend or other distribution to any of its shareholder(s) or (ii) advance any loans or
repay, cancel or otherwise extinguish any loans or amounts due and owing by any Group
Company or otherwise make any payment in any form and of any nature to one another, or to
any director or shareholder of any Group Company or their respective Affiliates, or to a
person who, if such Group Company had been a listed issuer (within the meaning of the
Listing Rules) would have fallen within the definition of a “connected person” in relation
to the Company for the purposes of the Listing Rules.
	 
	(F)	 	Accounts and management accounts
	 
	 	 	The Company hereby covenants and undertakes with the Noteholder(s) that each of the
financial statements and accounts referred to in paragraphs (i) to (ii) of Condition 11(D):-

	 	(i)	 	will be prepared in accordance with the requirements of all relevant statutes
and on a basis consistent with the books of account of the Group (including, in
particular, accounting policies in respect of amortisation on royalty costs) in respect
of which they are prepared and are/will be true and accurate in all material respects;
	 
	 	(ii)	 	contain/will contain full and adequate provision or reserve for bad and
doubtful debts and for depreciation of fixed assets; and
	 
	 	(iii)	 	have made/will make full provision for all established liabilities, have
made/will make provision for (or contain a note in accordance with good accounting
practice respectively) all deferred or contingent liabilities whether liquidated or
unliquidated at the dates thereof.

	(G)	 	Authorisations, approvals, consents etc.
	 
	 	 	The Company will obtain and promptly renew (if appropriate) from time to time, and will
promptly furnish certified copies to the Noteholder(s) of, all such authorisations,
approvals, consents, licences and exemptions as may be required under any applicable law or
regulation

8

 

	 	 	to enable it to perform its obligations under the Notes or required for the validity or
enforceability of the Notes.
	 
	(H)	 	Tax returns, disputes and records
	 
	 	 	Each Group Company will make all proper returns required to be made under the applicable law
and regulations to which such Group Company is subject, and will supply all notices,
accounts and information required to be supplied, to all relevant inland revenue or any
other fiscal authority under the applicable law and regulations to which such Group Company
is subject.
	 
	(I)	 	Non-arm’s length transactions
	 
	 	 	No Group Company may be a party to any transaction or arrangement (including, but not
limited to, sharing of services, overheads or administrative charges) under which it may be
required to pay for any services or facilities of any kind an amount which is in excess of
the market value of that asset, services or facilities in any material respect or will
receive any payment for any asset, services or facilities of any kind that it has supplied
or provided or is liable to supply or provide which is less than the market value of that
asset, services or facilities in any material respect.
	 
	(J)	 	Compliance
	 
	 	 	For so long as any part of the principal amount of any Note remains outstanding, the Company
will comply in full with the terms and conditions of the Notes and will not take any action
which will cause a breach or default thereof.
	 
	(K)	 	Business
	 
	 	 	The Group will not be engaged in any business activities other than the Business.
	 
	(L)	 	Credit insurance policy

	 	(i)	 	Upon the request in writing from all the Noteholders, the Company shall use its
best efforts to maintain or procure the relevant Subsidiary to maintain a credit
insurance policy on the accounts receivable of such Subsidiary in PRC which are on
commercial terms reasonably satisfactory to the Security Agent.
	 
	 	(ii)	 	The Company shall pay all premiums as they fall due under such policy from time
to time, provided that the monthly payment(s) of interest on the Notes falling due on
the Interest Payment Date(s) immediately following the payment of any such premium from
time to time by the Company shall be reduced by an amount (prorated, as between the
Notes, on the basis of their respective principal amounts) equal to the premium so
paid.

	12.	 	EVENTS OF DEFAULT
	 
	(A)	 	Without prejudice to the other provisions of the Conditions, the principal amount outstanding
on any Notes together with all interest accrued thereon up to and including the date of
repayment shall become immediately repayable on the occurrence of any of the following events
and the Noteholder(s) or any one of them has/have by notice in writing to the Company demanded
immediate repayment of the relevant Note(s) (as the case may be):-

	 	(i)	 	if the Company fails to make a payment of principal in respect of the relevant
Notes

9

 

	 	 	 	on the due date for payment thereof and such payment has not been made within 14
days thereafter;
	 
	 	(ii)	 	if the Company fails to make a payment of any interest in respect of the
relevant Notes on the due date for payment thereof and such payment has not been made
within 14 days thereafter;
	 
	 	(iii)	 	if there is a material default in the performance or observance of any of the
obligations of the Company or any other Group Company (including, without limitation,
its undertakings) under the Transaction Documents and (only where such failure is in
the reasonable opinion of the Security Agent capable of remedy and which is not failure
to pay money when due) such default is not remedied to the reasonable satisfaction of
the Security Agent within 14 days after the Company has received notice from any of the
Noteholders of the relevant Note(s) to remedy or procure to remedy such default;
	 
	 	(iv)	 	any Group Company defaults or receives notice of default under any agreement or
obligation relating to borrowing or any indebtedness of any Group Company becomes
payable or capable of being declared payable before its stated maturity or is not paid
when due or any encumbrance, guarantee or other security now or hereafter created by
any Group Company becomes enforceable;
	 
	 	(v)	 	if the holder of any encumbrance takes possession or a receiver is appointed of
the whole or any substantial part of the assets or undertaking of a Group Company,
which would materially and adversely affect the financial or business position of the
Group as a whole;
	 
	 	(vi)	 	if any of the Group Companies ceases or threatens to cease to carry on its
business or a substantial part of its business, the cessation of which would materially
and adversely affect the financial or business position of the Group as a whole;
	 
	 	(vii)	 	if it shall become unlawful for the Company or any Group Company to perform
all or any of its obligations under this Instrument, the relevant Notes or the
Transaction Documents (as the case may be), or this Instrument or the relevant Notes or
the Transaction Documents shall for any reason cease to be in full force or effect or
shall be declared to be void or illegal by a court of competent jurisdiction or be
repudiated by the Company or any Group Company (as the case may be) or the legality,
validity, priority, admissibility in evidence or enforceability thereof shall be
contested by the Company or any Group Company (as the case may be) or the Company or
any Group Company shall deny that it has any, or any further, liability or obligation
under or in respect of the same (as the case may be);
	 
	 	(viii)	 	if any of the Group Companies becomes insolvent or unable to pay its debts when due
or commits or permits any act of bankruptcy, which term shall include (a) the filing of
a petition in any bankruptcy, reorganisation, winding-up or liquidation proceeding or
other proceedings analogous in purpose or effect and the failure by any of the Group
Companies to have any such petition discharged within 14 days, (b) the appointment of a
receiver or trustee for the bankruptcy, reorganisation, winding-up or liquidation of
any assets or properties of any of the Group Companies and such appointment is not
discharged within 14 days, (c) the making by any of the Group Companies of an
assignment or an arrangement or composition with or for the benefit of its respective
creditors generally, (d) the entry of any court order or judgement confirming the
bankruptcy or insolvency of any of the Group Companies, or (e) if any order is made or
an effective resolution is passed for the winding up, liquidation or dissolution of any
of the Group Companies or the taking of any corporate action to authorise or give

10

 

	 	 	 	effect to any of the foregoing otherwise than for the purpose of a solvent
reconstruction or amalgamation, which, in each of the above cases, would in the
reasonable opinion of the Security Agent materially and adversely affect the
financial or business position of the Group as a whole;
	 
	 	(ix)	 	if a moratorium is agreed or declared in respect of any present or future
indebtedness of any of the Group Companies or any governmental agency or authority
confiscates or seizes or compulsorily purchases or expropriates any asset or capital of
any of the Group Companies, which would in the reasonable opinion of the Security Agent
materially and adversely affect the financial or business position of the Group as a
whole;
	 
	 	(x)	 	if a distress, attachment or execution or other legal process is levied or
enforced upon or sued against any part of the assets of any of the Group Companies and
is not discharged or stayed within 14 days thereof (or such longer period as the
Noteholder(s) may consider appropriate in relation to the jurisdiction concerned)
which, in each of the above cases, would in the reasonable opinion of the Security
Agent materially and adversely affect the financial or business position of the Group
as a whole;
	 
	 	(xi)	 	any event occurs which has an analogous effect to any of the events referred to
in paragraphs (vii) to (ix) above;
	 
	 	(xii)	 	if any certificate, representation, warranty or statement given or made by the
Company, or by any of the parties to the Security Documents, whether in this
Instrument, the Agreement or any of the Security Documents, or in any notice,
certificate, instrument, document or statement contemplated hereby or thereby or made
or delivered pursuant hereto or thereto is or proves to be or have been untrue or
inaccurate in any material respect;
	 
	 	(xiii)	 	if in respect of any Group Company, (a) any loan, guarantee, indemnity or other
indebtedness or any other obligation for borrowed money shall become or be declared or
become capable (all grace periods, if any, having expired) of being declared due
prematurely by reason of a default of its obligations in respect of the same or (b) it
shall, save and except in connection with indebtedness due to another Group Company,
fail to make any payment in respect of such loan, guarantee, indemnity or other
indebtedness or obligation for borrowed money on the due date for such payment, or (c)
the security for any such loan, guarantee, indemnity or other indebtedness or
obligation for borrowed money shall become enforceable, save and except in connection
with indebtedness due to another Group Company;
	 
	 	(xiv)	 	the Holding Company of the Company defaults or receives notice of default
under any agreement or obligation relating to borrowing to which it is a party or any
indebtedness becomes payable or capable of being declared payable before its stated
maturity or is not paid when due or any encumbrance, guarantee or other security now or
hereafter created by the Holding Company becomes enforceable;
	 
	 	(xv)	 	if there is a material default in the performance or observance by the Holding
Company of the Company of any of its obligations under any agreement or contract to
which it is a party and such default (i) does not relate to failure to pay money when
due and (ii) is not remedied to the reasonable satisfaction of the Security Agent and
shall continue for not less than twenty-one (21) days after the Company has received
notice from any of the Noteholders of the relevant Note(s) to remedy or procure to
remedy such default.

11

 

	(B)	 	The Company will forthwith on becoming aware of any such Event of Default give notice in
writing thereof to each of the Noteholder(s).
	 
	(C)	 	At any time after the relevant Note(s) have become immediately payable pursuant to Sub-
condition (A) above, the Noteholder(s) of the relevant Note(s) may without further notice
institute such proceedings as it may think fit to enforce payment of the monies due.
	 
	(D)	 	Upon notice being given to the Company by a Noteholder pursuant to Sub-condition (A) above,
the relevant Note(s) in respect of which such notice has been given shall immediately become
due and repayable at a sum equivalent to the aggregate of (a) the principal amount outstanding
under the relevant Note(s); and (b) all interest accrued but unpaid in respect of the relevant
Note(s) pursuant to Condition 4 up to (but excluding) the date of repayment; and (c) the
Redemption Interest calculated from the date of issue of the relevant Note(s) to (but
excluding) the date of repayment.
	 
	(E)	 	The Company will fully indemnify each Noteholder of the relevant Note(s) in respect of the
liability of the Company hereunder upon the occurrence of an Event of Default with respect to
the relevant Note(s) and from and against any costs, expenses, liabilities and losses
(including all reasonable legal fees and costs properly incurred) which such Noteholders would
suffer or incur as a result of or in connection with enforcing repayment of the relevant
Note(s) and/or any obligation of the Company under the relevant Note(s).
	 
	13.	 	PAYMENTS
	 
	 	 	All payments to be made by the Company to the Noteholder(s) hereunder shall be made by the
Company by remitting the amount to be paid in US dollars and not later than 11:00 a.m. (Hong
Kong time) on the due date in funds which are for same date settlement to the Noteholder(s)’
account with a bank in Hong Kong as may be notified by the Noteholder(s) from time to time
or, upon the request of the Noteholder(s), by delivery of bank draft issued by a bank(s) in
Hong Kong to the Noteholder(s) at their addresses as specified in the Register of
Noteholder(s).
	 
	14.	 	TRANSFER, TRANSMISSION AND REGISTER
	 
	(A)	 	The Company shall at all times maintain in Hong Kong a transfer office for the Notes which
shall, unless the Company shall otherwise notify the Noteholder(s), be the registered office
of the Company in Hong Kong.
	 
	(B)	 	A Register of the Noteholder(s) shall be kept by the Company at the aforementioned transfer
office and there shall be entered in such Register of Noteholders the names and addresses of
the holder(s) for the time being and the amount of the Notes held by such Noteholder(s). Any
change of the legal name or address of a Noteholder shall forthwith be notified to the Company
in writing and thereupon the Register of Noteholders shall be altered accordingly.
	 
	(C)	 	Except as required by law or as provided by the Conditions, the Company shall recognise the
registered holder of any Note as the absolute owner thereof and the Company shall not be bound
by or be required to recognise any trust to which any Note may be subject.
	 
	(D)	 	Every Noteholder will be recognised by the Company as entitled to its Note free from any
equity, set-off or counter-claim on the part of the Company against the original or any
intermediate holder of the Note.
	 
	(E)	 	The Notes may be transferred by the holder thereof without
requiring the consent of the Company.

12

 

	(F)	 	Every instrument of transfer for the transfer of any Note shall be in the form set out in
Schedule C and signed by or on behalf of both the transferor and the transferee thereof and
must be delivered to the aforementioned transfer office of the Company for registration
accompanied by the Certificate(s) for the Note(s) to be transferred.
	 
	(G)	 	Any Noteholder(s), and any person authorised in writing by any Noteholder(s), shall be at
liberty at all reasonable times during office hours upon prior appointment with the Company to
inspect the Register of Noteholders and take copies thereof or any part thereof.
	 
	15.	 	VARIATIONS TO THE CONDITIONS
	 
	 	 	The terms of this Instrument and the Certificate may only be varied by agreement in writing
between the Company and all Noteholder(s).
	 
	16.	 	NOTICES
	 
	 	 	Any notices to be given to the Noteholder(s) or to the Company shall be given in writing and
by sending the notice by hand or in a prepaid envelope by registered post (by registered
airmail if to an overseas address), in the case of Noteholder(s), to their respective
addresses as specified in the Register of Noteholders or, in the case of the Company, to its
registered office in Hong Kong for the time being (for the attention of: the Company
Secretary), or to such other address in Hong Kong as the Noteholder(s) or, as the case may
be, the Company shall have notified to the others by not less than 5 Business Days’ prior
notice from time to time; and any such notice, if delivered by hand, shall be deemed to be
served at the time of delivery, or (as the case may be) if delivered by registered post,
shall be deemed to be served 48 hours (3 Business Days if posted by registered airmail from
or to an overseas address) after posting, or if sooner upon acknowledgement of receipt by or
on behalf of the party to which it is addressed.
	 
	17.	 	GOVERNING LAW
	 
	 	 	The Notes, including the Conditions and the Certificates, shall be governed by and construed
in accordance with the laws of Hong Kong and the Noteholders and the Company hereby
irrevocably submit to the non-exclusive jurisdiction of the Hong Kong courts in connection
therewith.
	 
	18.	 	PROCESS AGENT
	 
	 	 	Each of the following parties hereby irrevocably appoints the person set opposite its name
below as its agent to receive on its behalf service of proceedings issued out of the courts
of Hong Kong in any action or proceedings arising out of or in connection with this
Instrument, the Notes, the Conditions and/or the Certificates. In the event of such agent
ceasing to act, the relevant parties shall immediately appoint another person as its agent
for such purpose and give notice in writing of such appointment to all the other parties:

13

 

	 	 	 
	Parties	 	Names & addresses of agents
	 
	 	 
	SBI Brightline, LLC

	 	Bedrock China Futures, Limited
	 

	 	Room 4301 — 09
	 

	 	Jardine House
	 

	 	One Connaught Place
	 

	 	Central
	 

	 	Hong Kong
	 
	 	 
	Hong Kong League Central

	 	Bedrock China Futures, Limited
	Credit Union

	 	Room 4301 — 09
	 

	 	Jardine House
	 

	 	One Connaught Place
	 

	 	Central
	 

	 	Hong Kong

14

 

SCHEDULE A

FORM OF CERTIFICATE

US$[•]

Certificate no.: [•]

STONEPATH HOLDINGS (HONG KONG) LIMITED

(Incorporated in Hong Kong with limited liability)

UP TO US$7,200,000 11% SECURED NOTES DUE 30 JUNE, 2008

STONEPATH HOLDINGS (HONG KONG) LIMITED (the “Company”) hereby certifies that [•] of [•]
is, at the date hereof, entered in the Register of Noteholders as the registered holder of the note
in the principal amount of US$[•] (the “Note”). The Note is constituted by the Instrument of
the Company dated [•] and is subject to, and has the benefit of, the terms and conditions
(the “Conditions”) set out in such Instrument. For value received, the Company promises to pay the
person who appears at the relevant time on the Register of Noteholders as Noteholder of the Note in
respect of which this Certificate is issued such amount or amounts as shall become due in respect
of such Note and otherwise to comply with the terms and conditions of the Instrument.

This Certificate is evidence of entitlement only. Title to the Note passes only on due
registration on the Register of Noteholders and only the duly registered Noteholder is entitled to
payments on the Note in respect of which this Certificate is issued.

This Certificate is governed by, and shall be construed in accordance with, the laws of the Hong
Kong Special Administrative Region of the People’s Republic of China.

	 	 	 	 	 	 	 	 	 
	Issued on [•]
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	THE COMMON SEAL OF

	 	 	)	 	 	 	 	 
	STONEPATH HOLDINGS

	 	 	)	 	 	 	 	 
	(HONG KONG) LIMITED

	 	 	)	 	 	 	 	 
	was hereunto affixed

	 	 	)	 	 	 	 	 
	in the presence of :-

	 	 	)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

Director

	 	 	 	 	 	 

Director/Secretary
	 	 

15

 

SCHEDULE B

RESERVED MATTERS

	1.	 	The entry by the Company or any of the other Group Companies into any agreement, commitment
or understanding or transaction (including, for instance, payments of remuneration or
declaration of dividends) with one another, or with any director or shareholder of any Group
Company or their respective Affiliates other than in the ordinary course of business.
	 
	2.	 	The borrowing by any Group Companies of any new borrowing facilities except in the ordinary
course of business of the Group or inter-company borrowings within the Group.
	 
	3.	 	The giving of any guarantee by any Group Company in respect of indebtedness of any person,
other than any other Group Company, and other than in the ordinary course of business.
	 
	4.	 	The giving of any loan to any of the shareholders of the Company or shareholders of the Group
Company exceeding the sum of US$40,000.
	 
	5.	 	The sale, purchase, transfer, leasing, licensing or disposal by any Group Company of all or
any part of its business, undertaking or assets whether by a single transaction or series of
transactions exceeding the sum of US$100,000, other than in the ordinary course of business.
	 
	6.	 	Any variation in the authorized or issued share capital (or the rights attaching to it or any
class of it) of any Group Company or the creation of any options or other rights to subscribe
for or to convert into shares in such a company or the purchase (by any Group Company) of any
shares in the capital of such a company.
	 
	7.	 	Any redemption or repurchase of the issued share capital or other securities of any Group
Company (save for the Notes).
	 
	8.	 	Any amendment to the memorandum or articles of association or equivalent constitutional
documents of any Group Company other than any amendments that do not affect the rights of the
Noteholders under the Notes.
	 
	9.	 	Any alteration of the accounting reference date, except insofar as is necessary to comply
with the accounting policies and practices of the Company.
	 
	10.	 	Any material alteration (including cessation) to the general nature of the business of any
Group Company.
	 
	11.	 	The entry into merger, liquidation, dissolution, winding-up, bankruptcy, insolvency or
recapitalising by any Group Company.
	 
	12.	 	Any individual acquisition, capital expenditure or expenditure in excess of an aggregate of
US$100,000, other than in the ordinary course of business.

16

 

SCHEDULE C

FORM OF INSTRUMENT OF TRANSFER

UP TO US$7,200,000 11% SECURED NOTES DUE 30 JUNE, 2008

(Being the registered noteholder of the enclosed Note(s) forming part of the secured notes of an
aggregate principal amount of up to US$7,200,000 (the “Notes”) issued by Stonepath Holdings (Hong
Kong) Limited (the “Issuer”) pursuant to a resolution of the board of directors of the Issuer
passed on [•], 2006.)

Terms defined in the enclosed Note(s) (as it may be amended from time to time) shall bear the same
meaning in this Form of Transfer.

FOR VALUE RECEIVED the undersigned hereby transfers to the transferee (the “Transferee”) whose
particulars are set out below the enclosed Note(s), and all rights in respect thereof, and
irrevocably requests the Issuer to register and to issue new Note(s) in accordance with the terms
of the Notes (as it may be amended from time to time).

Particulars of the Transferee are as follows:-

(PLEASE PRINT OR TYPE IN THE RELEVANT INFORMATION)

	 	 	 
	Name of Transferee:
	 	 
	 
	 	 
	Registered Address:
	 	 
	 
	 	 
	Correspondence
	 	 
	Address:
	 	 
	 
	 	 
	Facsimile:
	 	 
	 
	 	 
	US dollar registered account for the purposes of
payments under the Notes:

	 	•     Name of Account

•     Account No.

•     Sort Code:

•     Name of Bank:

•     Address of Bank:

	 	 	 	 	 
	Dated:
	 	 	 	 
	 
	 	 	 	 
	Transferor’s Name:

	 	Transferee’s Name:	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Transferor’s authorised signature:

	 	Transferee’s authorised signature:	 	 
	 
	 	 	 	 
	 

	 	 

	 	 

17

 

	 	 	 	 	 
	Witness to Transferor’s signature:

	 	Witness to Transferee’s signature:	 	 
	 
	 	 	 	 
	[signature]

	 	[signature]	 	 
	 
	 	 	 	 
	 

name

	 	 

name
	 	 

Notes:

	1.	 	A representative of the Noteholder should state the capacity in which he signs (e.g.
director).
	 
	2.	 	In the case of joint holders, all joint holders must sign this transfer form.
	 
	3.	 	The signature of the person effecting a transfer shall conform to any list of duly authorised
specimen signatures supplied by the registered holder or be certified by a recognised bank,
notary public or in such other manner as the Agent or the Registrar may require.

18

 

	 	 	 
	THE COMMON SEAL OF
	 	)
	STONEPATH HOLDINGS
	 	)
	(HONG KONG) LIMITED
	 	)
	was hereunto affixed
	 	)
	in the presence of :-
	 	)

19exv10w3

 

EXHIBIT 10.3

DATED 2006

STONEPATH GROUP, INC.

as Chargor

- and -

SBI BRIGHTLINE, LLC.

as Security Agent

 

SHARE CHARGE

(Stonepath Holdings (Hong Kong) Limited)

 

41st Floor

Edinburgh Tower

The Landmark

15 Queen’s Road Central

Hong Kong

Tel: (852) 2585 0888

Fax: (852) 2585 0800

 

CONTENTS

	 	 	 	 	 	 	 
	Number	 	Clause Heading	 	Page
	1.	 	Interpretation
	 	 	1	 
	2.	 	Mortgage of Shares
	 	 	2	 
	3.	 	Continuing Security
	 	 	3	 
	4.	 	Representations and Warranties
	 	 	3	 
	5.	 	Undertakings
	 	 	4	 
	6.	 	Power of Sale
	 	 	5	 
	7.	 	Dividends and Voting Rights
	 	 	6	 
	8.	 	Taxes and Other Deductions
	 	 	7	 
	9.	 	Costs, Charges and Expenses
	 	 	7	 
	10.	 	Indemnity
	 	 	7	 
	11.	 	Further Assurance
	 	 	8	 
	12.	 	Appointment and Rights of Receivers
	 	 	8	 
	13.	 	Security Agent’s Rights
	 	 	9	 
	14.	 	Order of Distributions
	 	 	10	 
	15.	 	Liability of Security Agent and Receivers
	 	 	10	 
	16.	 	Protection of Third Parties
	 	 	11	 
	17.	 	Power of Attorney
	 	 	11	 
	18.	 	Waiver and Severability
	 	 	11	 
	19.	 	Miscellaneous
	 	 	12	 
	20.	 	Assignment
	 	 	13	 
	21.	 	Discretion
	 	 	13	 
	22.	 	Notices
	 	 	14	 
	23.	 	Governing Law and Jurisdiction
	 	 	14	 
	24.	 	Process Agent
	 	 	15	 

Schedules

	 	 	 	 	 	 	 
	Schedule 1	 	Particulars of Shares
	 	 	16	 
	Schedule 2	 	Form of Letter of Resignation
	 	 	17	 
	Schedule 3	 	Form of Notice Board Resolutions of Charged Company
	 	 	18	 
	 
	 	 	 	 	 	 
	Execution	 	 
	 	 	20	 

 

 

THIS DEED is made on the      day of                     2006

BETWEEN:

	(1)	 	STONEPATH GROUP, INC., a company incorporated in Delaware, USA having its principal office at
World Trade Center, 2200 Alaskan Way, Suite 200, Seattle, WA 98121, USA (the “Chargor”); and

	(2)	 	SBI BRIGHTLINE, LLC., a company incorporated in Delaware, USA, with a registered address at
610 Newport Center Drive, Suite 1205, Newport Beach, CA 92660, USA, in its capacity as
security agent (the “Security Agent”) for the Noteholders (defined below).

WHEREAS:

In consideration of SBI Brightline, LLC and Hong Kong League Central Credit Union entering into a
debt restructuring agreement of even date with the Charged Company (a wholly owned subsidiary of
the Chargor) (the “Relevant Agreement”), the Chargor as beneficial owner of all the Shares, has
agreed to grant the Security Agent (on behalf of the Noteholders) a charge in respect of the Shares
subject to the terms and conditions of this Deed.

NOW THIS DEED WITNESSES as follows:

	1.	 	INTERPRETATION
	 
	1.1	 	Definitions and Construction. In this Deed, unless the context requires otherwise:

	 	(a)	 	terms and expressions defined in or construed for the purposes of the
Relevant Agreement shall have the same meanings or be construed in the same manner
when used in this Deed;
	 
	 	(b)	 	“Charged Company” means Stonepath Holdings (Hong Kong) Limited, a
wholly-owned subsidiary of the Chargor, further details of which are set out in
Schedule 1;
	 
	 	(c)	 	“Dividends” means all dividends, interest and other sums which are or may
become payable to the Chargor or its nominee in its capacity as holder of the Shares
and includes:

	 	(i)	 	the right to receive any and all such sums and all claims
in respect of any default in paying such sums; and
	 
	 	(ii)	 	all forms of remittance of such sums and any bank or other
account to which such sums may be paid or credited;

	 	(d)	 	“Encumbrance” means any mortgage, charge, pledge, lien, encumbrance,
hypothecation or other security interest or security arrangement of any kind, any
arrangement whereby any rights are subordinated to any rights of any third party and
any contractual right of set-off;

1

 

	 	(e)	 	“Receiver” means a receiver and manager or other receiver for the time
being appointed in respect of all or any of the Shares;
	 
	 	(f)	 	“Secured Indebtedness” means all and any sums (whether principal, interest,
fees or otherwise) which are now or at any time may become payable by the Charged
Company to the Noteholders and all other monies hereby secured; and
	 
	 	(g)	 	“Shares” means all those shares particulars of which are set out in
Schedule 1 and, where the context permits, includes the Dividends and those stocks,
shares, rights, monies and other property referred to in Clause 2.4.

	1.2	 	Successors and Assigns. The expressions “Chargor” and “Security Agent” shall where
the context permits include their respective successors and permitted assigns and any persons
deriving title under them.
	 
	1.3	 	Miscellaneous. In this Deed, unless the context requires otherwise, references to
provisions of any law or regulation shall be construed as references to those provisions as
replaced, amended, modified or re-enacted from time to time; words importing the singular
include the plural and vice versa and words importing a gender include every gender;
references to this Deed shall be construed as references to this Deed as may be amended,
supplemented or novated from time to time; unless otherwise stated, references to Clauses and
Schedules are to clauses of and schedules to this Deed and references to this Deed include its
Schedules. Clause headings are inserted for reference only and shall be ignored in construing
this Deed.
	 
	2.	 	MORTGAGE OF SHARES
	 
	2.1	 	Mortgage. In consideration of the Noteholders entering into the Relevant Agreement
with the Charged Company referred to in the Recital, the Chargor as beneficial owner
mortgages, charges and assigns by way of first legal mortgage the Shares to the Security Agent
as agent for the Noteholders as a continuing security for the due and punctual payment of the
Secured Indebtedness.
	 
	2.2	 	Deposit of Documents and Notice to Nominee. For the purpose of enabling the Security
Agent to exercise its rights under this Deed, the Chargor undertakes forthwith upon the
execution of this Deed to deposit, or procure that there be deposited with the Security Agent:

	 	(a)	 	the certificates in respect of the Shares together with instruments of
transfer and contract notes in respect thereof, duly executed by the Chargor or the
registered holder thereof (as the case may be) as transferor/seller in blank;
	 
	 	(b)	 	signed undated letters of resignation from each director of the Charged
Company in the form set out in Schedule 2; and
	 
	 	(c)	 	board resolutions in writing in the form set out in Schedule 3 signed by
each director of the Charged Company.

2

 

	2.3	 	Registration in Name of Security Agent. The Chargor agrees that at any time after an
Event of Default has occurred and the security created by or pursuant to this Deed has become
enforceable, the Security Agent may, at the cost of the Chargor, register the Shares in the
name of the Security Agent or its nominee.
	 
	2.4	 	Dividends and Accretions. The first legal mortgage created under Clause 2.1 shall,
subject as provided in Clause 7, extend to and include all Dividends and all stocks, shares
(and the Dividends in respect thereof), rights, monies or other property accruing or offered
at any time by way of redemption, substitution, bonus, preference, option or otherwise to or
in respect of any of the Shares and all allotments, accretions, offers, rights, benefits and
advantages whatsoever at any time accruing, made, offered or arising in respect of any of the
same. If the Chargor shall acquire any such other stocks or shares as aforesaid, it shall
forthwith deliver or procure that there be delivered to the Security Agent the certificates in
respect thereof together with instruments of transfer and contract notes in respect thereof
duly executed in blank to enable the same to be registered in the name of the Security Agent
or its nominee pursuant to Clause 2.3.
	 
	2.5	 	No Liability for Calls. Nothing in this Deed shall be construed as placing on the
Security Agent any liability whatsoever in respect of any calls, instalments or other payments
relating to any of the Shares or any rights, shares or other securities accruing, offered or
arising as aforesaid, and the Chargor shall indemnify the Security Agent in respect of all
calls, instalments or other payments relating to any of the Shares and to any rights, shares
and other securities accruing, offered or arising as aforesaid in respect of any of the
Shares.
	 
	2.6	 	Discharge. Upon payment in full of all the Secured Indebtedness to the Security
Agent, the Security Agent as agent for the Noteholders shall, at the request and cost of the
Chargor, and in such form as the Security Agent shall approve (such approval not to be
unreasonably withheld or delayed), discharge the security created by this Deed.
	 
	3.	 	CONTINUING SECURITY
	 
	 	 	This Deed shall be a continuing security and shall remain in full force and effect until the
Secured Indebtedness has been paid in full, notwithstanding the insolvency or liquidation or
any incapacity or change in the constitution or status of the Chargor or any other person or
any intermediate settlement of account or other matter whatsoever. This Deed is in addition
to, and independent of, any Encumbrance, guarantee or other security or right or remedy now
or at any time hereafter held by or available to the Security Agent and/or the Noteholders
in relation to the Secured Indebtedness or any part thereof.
	 
	4.	 	REPRESENTATIONS AND WARRANTIES
	 
	4.1	 	Representations and Warranties. The Chargor represents and warrants to the Security
Agent as agent for the Noteholders that:

	 	(a)	 	the particulars of the Shares set out in Schedule 1 are accurate in all
material respects and all the Shares have been validly issued and are fully paid up;

3

 

	 	(b)	 	subject to this Deed and the transactions contemplated herein, the Chargor
is the sole beneficial owner of the Shares and the Chargor has good and marketable
title thereto;
	 
	 	(c)	 	no Encumbrance exists over all or any part of the Shares (except as created
under or pursuant to this Deed and the transactions contemplated herein);
	 
	 	(d)	 	the Chargor has not granted in favour of any other person any interest in
or any option or other rights in respect of any of the Shares (except as created
under or pursuant to this Deed and the transactions contemplated herein);
	 
	 	(e)	 	to the best of the knowledge and belief of the Chargor, the Charged Company
has not issued or resolved or agreed to issue or granted any option or other right to
acquire any additional shares to any person;
	 
	 	(f)	 	to the best of the knowledge and belief of the Chargor, the Charged Company
has not issued any duplicate copies of the certificates in respect of the Shares or
other certificates representing the Shares.

	4.2	 	Continuing Representation and Warranty. The Chargor also represents and warrants to
and undertakes with the Security Agent as agent for the Noteholders that the foregoing
representations and warranties will be true and accurate throughout the continuance of this
Deed with reference to the facts and circumstances subsisting from time to time.
	 
	5.	 	UNDERTAKINGS
	 
	 	 	The Chargor undertakes and agrees with the Security Agent as agent for the Noteholders
throughout the continuance of this Deed and so long as the Secured Indebtedness or any part
thereof remains owing that the Chargor will, unless the Security Agent as agent for the
Noteholders otherwise agrees in writing:

	 	(a)	 	not create or attempt or agree to create or permit to arise or exist any
Encumbrance over all or any part of the Shares or any interest therein or otherwise
assign, deal with or dispose of all or any part of the Shares (except under or
pursuant to this Deed and the transactions contemplated herein);
	 
	 	(b)	 	not grant in favour of any other person any interest in or any option or
other rights in respect of any of the Shares (except under or pursuant to this Deed
and the transactions contemplated herein);
	 
	 	(c)	 	ensure that no person holding any of the Shares as its nominee for the time
being does any of the acts prohibited in paragraphs (a) and (b) above (except under
or pursuant to this Deed and the transactions contemplated herein);
	 
	 	(d)	 	procure that the Charged Company will not issue or resolve or agree to
issue any further shares in its capital or grant any option or other right to
subscription for or otherwise acquire shares to any person other than the Chargor
(and subject always to this Deed);

4

 

	 	(e)	 	at all times remain the beneficial owner and requested holder of the Shares
(except under or pursuant to this Deed and the transactions contemplated herein);
	 
	 	(f)	 	procure that no amendment or supplement is made to the memorandum or
articles of association of the Charged Company other than any amendments or
supplements that do not affect the rights of the Noteholders or the security created
by or pursuant to this Deed, the Relevant Agreement or any other security
document;
	 
	 	(g)	 	there shall be no change in the constitution of the board of directors of
the Charged Company without the prior agreement of the Security Agent (such agreement
not to be unreasonably withheld or delayed); and subject to such agreement in writing
of the Security Agent being obtained, immediately upon the appointment of any new
director of the Charged Company, deposit or procure that there be deposited with the
Security Agent a signed undated letter of resignation by such director and the signed
board resolutions of that Charged Company in the respective forms set out in Schedule
2 and Schedule 3;
	 
	 	(h)	 	punctually pay all calls or other payments due in respect of all or any
part of the Shares;
	 
	 	(i)	 	do or permit to be done every act or thing which the Security Agent may
from time to time reasonably require for the purpose of enforcing the rights of the
Security Agent hereunder in accordance with the provisions of this Deed; and
	 
	 	(j)	 	not do or cause or permit to be done anything which may in any way
depreciate, jeopardise or otherwise prejudice the value of the Security Agent’s
security hereunder.

	6.	 	POWER OF SALE
	 
	6.1	 	Enforceability. Upon the occurrence of an Event of Default and the security created
by or pursuant to this Deed having become enforceable, the Security Agent or its nominee may,
without further notice or authority, sell or dispose of all or any part of the Shares and may
apply the proceeds of any such sale or disposition in or towards the discharge of the
reasonable costs thereby properly incurred and of the Secured Indebtedness in such manner as
it in its absolute discretion thinks fit.
	 
	6.2	 	Sale of Shares. The Security Agent shall be entitled to exercise such power of sale
in such manner and at such time or times and for such consideration (whether payable
immediately or by instalments) as it shall in its absolute discretion think fit (whether by
private sale, public auction or otherwise) and so that the Shares (or any relevant part
thereof) may be sold (i) subject to any conditions which the Security Agent may think fit to
impose, (ii) to any person (including any person connected with the Chargor, the Charged
Company or the Security Agent) and (iii) at any price which the Security Agent, in its
absolute discretion, considers to be the best obtainable in the circumstances taking into
account the nature of the Charged Company as a private
company.

5

 

	6.3	 	Dividends. At any time after the power of sale has arisen, any Dividends which have
been or may be received or receivable by the Security Agent or any nominee of the Security
Agent shall be paid forthwith upon receipt to the Security Agent and may be applied by the
Security Agent as though they were proceeds of sale hereunder.
	 
	6.4	 	Purchaser Not Bound to Enquire. The Security Agent is authorised to give a good
discharge for any moneys received by it pursuant to the exercise of its power of sale and a
purchaser shall not be bound to enquire whether the power of sale has arisen as herein
provided nor be concerned with the manner of application of the proceeds of sale.
	 
	6.5	 	No Liability for Losses. The Chargor shall not have any claim against the Security
Agent or the Noteholders in respect of any loss arising out of any such sale or any
postponement thereof howsoever caused and whether or not a better price could or might have
been obtained upon the sale of the Shares or any of them by deferring or advancing the date of
such sale or otherwise howsoever.
	 
	6.6	 	Waiver of Pre-Emption Rights. The Chargor waives and hereby undertakes to use all
reasonable endeavours to procure the other shareholders of the Charged Company to waive any
right it may have under the articles of association of the Charged Company or otherwise to
purchase the Shares or any of them in the event that they are sold or otherwise disposed of
pursuant to the power of sale contained in this Clause.
	 
	6.7	 	Statutory power of sale. The statutory power of sale, of appointing a Receiver and
the other statutory powers conferred on mortgagees by Section 53 of the Conveyancing and
Property Ordinance and any similar provisions of any equivalent law as varied and extended by
this Deed shall arise on the date of this Deed and may be exercised by the Security Agent free
from the restrictions imposed by any statutory provisions in relating to the exercise of any
power of sale.
	 
	7.	 	DIVIDENDS AND VOTING RIGHTS
	 
	7.1	 	Dividends and Voting Rights. If the Shares or any of them are registered in the name
of the Security Agent or its nominee in accordance with the provisions of this Deed, the
Security Agent shall have complete discretion to retain the Dividends received by the Security
Agent and to exercise or abstain from exercising all voting and other rights and powers
attaching to the Shares as the Security Agent in its absolute discretion thinks fit without
being liable for any losses which the Chargor may suffer as a result thereof.
	 
	7.2	 	Authority to Sign Proxies. If an Event of Default occurs and the security created by
or pursuant to this Deed has become enforceable, the Chargor irrevocably authorises the
Security Agent to sign on its behalf any proxies or other documents which the Security Agent
may require to enable the Security Agent to exercise such voting and other rights and powers
attaching to the Shares.

6

 

	8.	 	TAXES AND OTHER DEDUCTIONS
	 
	 	 	All sums payable by the Chargor under this Deed shall be paid in full without set-off or
counterclaim or any restriction or condition and free and clear of any tax (save and except
any tax on the overall income of the Security Agent or any Noteholder as the case may be) or
other deductions or withholdings of any nature. If the Chargor or any other person is
required by any law or regulation to make any deduction or withholding (on account of tax or
otherwise) from any payment, the Chargor shall (save and except any tax on the overall
income of the Security Agent or any Noteholder as the case may be), together with such
payment, pay such additional amount as will ensure that the Security Agent receives (free
and clear of any tax or other deductions or withholdings) the full amount which it would
have received if no such deduction or withholding had been required. The Chargor shall
promptly forward to the Security Agent copies of official receipts or other evidence showing
that the full amount of any such deduction or withholding has been paid over to the relevant
taxation or other authority.
	 
	9.	 	COSTS, CHARGES AND EXPENSES
	 
	 	 	The Chargor shall from time to time forthwith on demand pay to or reimburse the Security
Agent for:

	 	(a)	 	all reasonable costs, charges and expenses (including legal and other fees
and all other out-of-pocket expenses) properly incurred by the Security Agent in
connection with the preparation, execution and registration of this Deed, any other
documents required in connection herewith and any amendment to or extension of, or
the giving of any consent or waiver in connection with, this Deed; and
	 
	 	(b)	 	all reasonable costs, charges and expenses (including legal and other fees
and all other out-of-pocket expenses) properly incurred by the Security Agent in
investigating any event which it reasonably believes is an event of default or in
exercising any of its rights or powers hereunder or in suing for or seeking to
recover any sums due hereunder or otherwise preserving or enforcing its rights
hereunder or in defending any claims brought against it in respect of this Deed
(other than claims brought by the Chargor) or in releasing or re-assigning this Deed
upon payment of all monies hereby secured,

	 	 	and, until payment of the same in full, all such costs, charges and expenses shall be
secured by this Deed.
	 
	10.	 	INDEMNITY
	 
	10.1	 	General Indemnity. The Chargor shall indemnify the Security Agent against all
losses, liabilities, damages, costs and expenses incurred by it in the execution or
performance of the terms and conditions hereof and against all actions, proceedings, claims,
demands, costs, charges and expenses which may be incurred, sustained or arise in respect of
the non-performance or non-observance of any of the undertakings and agreements on the part of
the Chargor herein contained or in respect of any matter or thing done or omitted relating in
any way whatsoever to the Shares.

7

 

	10.2	 	Payment and Security. The Security Agent may retain and pay out of any money in the
Security Agent’s hands all sums necessary to effect the indemnity contained in this Clause and
all sums payable by the Chargor under this Clause shall form part of the monies hereby
secured.
	 
	11.	 	FURTHER ASSURANCE 
	 
	11.1	 	Further Assurance. The Chargor shall at any time and from time to time (whether
before or after the security hereby created shall have become enforceable) execute such
further legal or other mortgages, charges or assignments and do all such transfers,
assurances, acts and things as the Security Agent may reasonably require over or in respect of
the Shares to secure all monies, obligations and liabilities hereby covenanted to be paid or
hereby secured or for the purposes of perfecting and completing any assignment of the Security
Agent’s rights, benefits or obligations hereunder and the Chargor shall also give all notices,
orders and directions which the Security Agent may reasonably require.
	 
	11.2	 	Agreement to Execute Further Documents. Without limiting the foregoing, the Chargor
agrees from time to time to execute and sign or to procure that the person for the time being
holding any of the Shares as the Chargor’s nominee executes and signs all transfers, powers of
attorney, proxies and other documents which the Security Agent may reasonably require for
perfecting the Security Agent’s title to any of the Shares or for vesting or enabling it to
vest the same in itself, its nominee or in any purchaser in accordance with the provisions of
this Deed including, without limitation, using all reasonable endeavours to procure to be duly
passed such resolutions by the directors of the Charged Company and such resolutions by the
Chargor or the person holding any of the Shares as the Chargor’s nominee in an extraordinary
general meeting of the Charged Company as the Security Agent shall reasonably require for the
purposes of approving and passing for registration any transfers of any of the Shares,
altering the Charged Company’s memorandum or articles of association, removing any directors
of the Charged Company, appointing new directors of the Charged Company nominated by the
Security Agent or for such other purposes as the Security Agent shall from time to time
reasonably require in accordance with the provisions of this Deed.
	 
	11.3	 	Enforcement of Security Agent’s Rights. The Chargor will do or permit to be done
everything which the Security Agent may from time to time reasonably require to be done for
the purpose of enforcing the Security Agent’s rights hereunder and will allow the name of the
Chargor to be used as and when reasonably required by the Security Agent for that purpose.
	 
	12.	 	APPOINTMENT AND RIGHTS OF RECEIVERS
	 
	12.1	 	If (a) requested by the Chargor, (b) any corporate action, legal proceedings or other
procedure or step is taken in relation to the administration of the Chargor, or (c) any other
Event of Default has occurred (whether or not the Security Agent has taken possession of the
Shares) and the security created by or pursuant to this Deed has become enforceable, then
without any notice or further notice, the Security Agent may, by deed, or otherwise in writing
signed by any officer or manager of the

8

 

	 	 	Security Agent or any person authorised for this purpose by the Security Agent, appoint one
or more persons to be a Receiver. Subject to the provisions of the Companies Ordinance, the
Security Agent may similarly remove (so far as it is lawfully able) any Receiver and appoint
any person instead of any Receiver from time to time. If the Security Agent appoints more
than one person as Receiver, the Security Agent may give those persons power to act either
jointly or severally. Any Receiver for the time being appointed by the Security Agent may
enjoy the benefit or enforce the terms of this Clause. The provisions of Section 53 of the
Conveyancing and Property Ordinance and any similar provision of any equivalent law (as
varied and/or extended by this Deed) shall apply to any appointment made pursuant to this
Deed.
	 
	12.2	 	Scope of appointment. Any Receiver may be appointed Receiver of all of the Shares or
Receiver of a part of the Shares specified in the appointment.
	 
	12.3	 	Rights of Receivers. Any Receiver for the time being appointed pursuant to this
Clause 12 shall have the rights, powers, privileges and immunities conferred by the
Conveyancing and Property Ordinance on (a) mortgagees, (b) mortgagees in possession and (c)
Receivers duly appointed under the Conveyancing and Property Ordinance. The Receiver for the
time being appointed pursuant to this Clause 12 shall in exercise of the Receiver’s powers,
authorities and discretions conform to the directions and regulations from time to time given
or made by the Security Agent.
	 
	12.4	 	Agent of Chargor. Any Receiver for the time being appointed pursuant to this Clause
12 shall be the agent of the Chargor for all purposes. The Chargor alone shall be responsible
for the Receiver’s contracts, engagements, acts, omissions, defaults and losses and for
liabilities incurred by the Receiver.
	 
	12.5	 	Remuneration. The Security Agent may determine the reasonable remuneration of any
Receiver and direct payment of that remuneration out of moneys he receives as Receiver. The
Chargor alone shall be liable for the reasonable remuneration and all other reasonable costs,
losses, liabilities and expenses properly incurred of the Receiver.
	 
	12.6	 	No liability for exercise of powers. Neither the Security Agent nor the Receiver
shall be liable for any losses, involuntary or otherwise, which arise in the exercise by the
Security Agent or the Receiver of their respective powers in accordance with the provisions of
this Deed except for their own gross negligence or willful default (as the case may be). Any
Receiver appointed under this Deed may enjoy the benefit of or enforce the terms of this
Clause.
	 
	13.	 	SECURITY AGENT’S RIGHTS
	 
	13.1	 	Same rights as Receiver. Any rights conferred by the Relevant Agreement upon a
Receiver may be exercised by the Security Agent, after the security created by or pursuant to
this Deed has become enforceable, whether or not the Security Agent shall have appointed a
Receiver of the Shares.
	 
	13.2	 	Delegation. The Security Agent may delegate in any manner to any person, provided
that the Security Agent exercised reasonable care in selecting such delegate, any

9

 

	 	 	rights exercisable by the Security Agent under this Deed, the Relevant Agreement and any
other security document. Any such delegation may be made upon such terms and conditions
(including power to sub-delegate) as the Security Agent thinks fit.
	 
	13.3	 	Realisation.

	 	(a)	 	If the Security Agent or any Receiver exercises the rights conferred on it the
same shall not be treated as an absolute appropriation of or foreclosure on the Shares
to the exclusion of the Chargor and in extinguishment of its interests therein, unless
the Security Agent or the Receiver shall otherwise notify the Chargor (whether before
or after the relevant appropriation or foreclosure has been effected), in which latter
event any such appropriation or foreclosure shall be treated as a sale of the Shares at
a fair market value and the Secured Indebtedness shall be reduced by an equivalent
amount.
	 
	 	(b)	 	In any disposal of the Shares in accordance with the provisions of this Deed,
the Security Agent may, provided that it shall first have used reasonable efforts to
dispose of the relevant Shares or rights to third parties subject to compliance with
any rules or regulations laid down by any governmental or other agency or authority,
themselves purchase at a fair market value the whole or any part of the Shares or
rights disposed of free from any rights of redemption on the part of the Chargor which
are hereby waived and released.

	14.	 	ORDER OF DISTRIBUTIONS
	 
	14.1	 	Application of proceeds. All amounts received or recovered by the Security Agent or
any Receiver in exercise of their rights in accordance with the provisions of this Deed shall,
subject to the rights of any creditors having priority, be applied in the order provided in
Clause 14.2.
	 
	14.2	 	Order of distribution. The order referred to in Clause 14.1 is (subject to any
claims having priority under Section 54 of the Conveyancing and Property Ordinance and any
similar provision of any equivalent law):

	 	(a)	 	in or towards the payment of all reasonable costs, losses, liabilities,
expenses and remuneration of and incidental to the appointment of any Receiver and the
exercise of any of his rights, including his remuneration and all outgoings properly
incurred, paid by him;
	 
	 	(b)	 	in or towards the payment of the Secured Indebtedness; and
	 
	 	(c)	 	in payment of any surplus to the Chargor or other person entitled to it.

	15.	 	LIABILITY OF SECURITY AGENT AND RECEIVERS
	 
	 	 	Neither the Security Agent nor any Receiver shall (either by reason of taking possession of
the Shares or for any other reason) be liable to the Chargor or any other person for any
costs, losses, liabilities or expenses relating to the realisation of any Shares or from any
act, default, omission or misconduct of the Security Agent, any Receiver or their respective
officers, employees or agents in relation to the Shares or

10

 

	 	 	in connection with this Deed, the Relevant Agreement or any security document except to the
extent caused by its or his own gross negligence or wilful misconduct. Any third party
referred to in this Clause 15 may enjoy the benefit or enforce the terms of this Clause.
	 
	16.	 	PROTECTION OF THIRD PARTIES
	 
	16.1	 	No duty to enquire
	 
	 	 	No person dealing with the Security Agent or any Receiver shall be concerned to enquire:

	 	(a)	 	whether the rights conferred by or pursuant to the Relevant Agreement are
exercisable;
	 
	 	(b)	 	whether any consents, regulations, restrictions or directions relating to such
rights have been obtained or complied with;
	 
	 	(c)	 	as to the propriety or regularity of acts purporting or intended to be in
exercise of any such rights (including whether or not any delegation shall have lapsed
for any reason or has been revoked); or
	 
	 	(d)	 	as to the application of any money paid to the Security Agent or the Receiver
(as the case may be).

	16.2	 	Protection to purchasers. Subject to the provisions of this Deed, all the protection
to purchasers contained in Section 52 of the Conveyancing and Property Ordinance or in any
similar provision of any equivalent law shall apply to any person purchasing from or dealing
with the Security Agent or any Receiver (as the case may be).
	 
	17.	 	POWER OF ATTORNEY
	 
	 	 	The Chargor irrevocably appoints the Security Agent by way of security to be its attorney
(with full power of substitution) and in its name or otherwise on its behalf and as its act
and deed to sign, seal, execute, deliver, perfect and do all deeds, instruments, acts and
things which may be reasonably required or which the Security Agent shall think proper or
expedient for carrying out any obligations imposed on the Chargor hereunder or for
exercising any of the powers hereby conferred or for giving to the Security Agent the full
benefit of this security and so that the appointment hereby made shall operate to confer on
the Security Agent authority to do on behalf of the Chargor anything which it can lawfully
do by an attorney in accordance with the provisions of this Deed. The Chargor ratifies and
confirms and agrees to ratify and confirm any deed, instrument, act or thing which such
attorney or substitute may execute or do pursuant to this Clause.
	 
	18.	 	WAIVER AND SEVERABILITY
	 
	 	 	No failure or delay by the Security Agent in exercising any right, power or remedy hereunder
shall impair such right, power or remedy or operate as a waiver thereof, nor shall any
single or partial exercise of the same preclude any further exercise thereof or

11

 

	 	 	the exercise of any other right, power or remedy. The rights, powers and remedies herein
provided are cumulative and do not exclude any other rights, powers and remedies provided by
law. If at any time any provision of this Deed is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, the legality, validity and
enforceability of such provision under the law of any other jurisdiction, and of the
remaining provisions of this Deed, shall not be affected or impaired thereby.
	 
	19.	 	MISCELLANEOUS
	 
	19.1	 	Continuing Obligations. The liabilities and obligations of the Chargor under this
Deed shall remain in force notwithstanding any act, omission, event or circumstance
whatsoever, until full, proper and valid payment of the Secured Indebtedness.
	 
	19.2	 	Protective Clauses. Without limiting Clause 19.1, neither the liability of the
Chargor nor the validity or enforceability of this Deed shall be prejudiced, affected or
discharged by:

	 	(a)	 	any other Encumbrance, guarantee or other security or right or remedy being
or becoming held by or available to the Security Agent or by any of the same being or
becoming wholly or partly void, voidable, unenforceable or impaired or by the
Security Agent at any time releasing, refraining from enforcing, varying or in any
other way dealing with any of the same or any power, right or remedy the Security
Agent may now or hereafter have from or against the Chargor or any other person or
the granting of any time or indulgence to the Chargor or any other person;
	 
	 	(b)	 	any variation or modification of the Relevant Agreement or any other
security document referred to therein;
	 
	 	(c)	 	any invalidity or irregularity in the execution of this Deed or any
deficiency in the powers of the Chargor to enter into or perform any of its
obligations hereunder; or
	 
	 	(d)	 	any act, omission, event or circumstance which would or may but for this
provision operate to prejudice, affect or discharge this Deed or the liability of the
Chargor hereunder.

	19.3	 	Unrestricted Right of Enforcement. This Deed may be enforced without the Security
Agent first having recourse to any other security or rights or taking any other steps or
proceedings against the Chargor or any other person or may be enforced for any balance due
after resorting to any one or more other means of obtaining payment or discharge of the
monies, obligations and liabilities hereby secured.
	 
	19.4	 	Application of Receipts. All monies received by the Security Agent from the Chargor
or any other person may be applied by the Security Agent to such account or liability hereby
secured as the Security Agent in its absolute discretion may from time to time conclusively
determine to settle any outstanding payment for the time being due by the Chargor and whether
or not the security created by this Deed shall have become enforceable and any surplus for the
time being may be retained by the Security Agent

12

 

	 	 	and held in a suspense account pending application as aforesaid.
	 
	19.5	 	Discharges and Releases. Notwithstanding any discharge, release or settlement from
time to time between the Security Agent and the Chargor, if any security, disposition or
payment granted or made to the Security Agent in respect of the Secured Indebtedness by the
Chargor or any other person is avoided or set aside or ordered to be surrendered, paid away,
refunded or reduced by virtue of any provision, law or enactment relating to bankruptcy,
insolvency, liquidation, winding-up, composition or arrangement for the time being in force or
for any other reason, the Security Agent shall be entitled hereafter to enforce this Deed as
if no such discharge, release or settlement had occurred.
	 
	19.6	 	Amendment. Any amendment of any provision of this Deed shall only be effective if
made in writing and signed by the Chargor and the Security Agent.
	 
	19.7	 	Counterparts. This Deed may be executed in any number of counterparts and by the
different parties to this Deed on separate counterparts, each of which when executed and
delivered shall be an original but all the counterparts shall together constitute one and the
same instrument.
	 
	20.	 	ASSIGNMENT
	 
	20.1	 	The Chargor. The Chargor shall not assign and/or transfer any of its rights or
obligations hereunder.
	 
	20.2	 	The Security Agent. The Security Agent may at any time assign to any one or more
persons (an “assignee Security Agent”) all or any part of its rights, benefits and obligations
under or arising out of this Deed. Upon any such assignment taking effect (i) the Security
Agent shall be released from such obligations and the Chargor shall look only to the assignee
Security Agent in respect of such obligations and (ii) references in this Deed to the Security
Agent shall be construed accordingly as references to the assignee Security Agent or the
Security Agent, as relevant. All agreements, representations and warranties made herein shall
survive any assignments made pursuant to this Clause and shall inure to the benefit of all
assignee Security Agents as well as the Security Agent.
	 
	21.	 	DISCRETION
	 
	21.1	 	Discretion. If the Security Agent is under the provisions of this Deed, the Relevant
Agreement or any other security document bound to act at the request or discretion of the
Noteholders, the Security Agent shall nevertheless not be so bound unless indemnified and/or
secured to its satisfaction against all liabilities, actions, proceedings, claims and demands
to which it may render itself liable and all losses, costs, charges, damages, expenses and
liabilities which it may incur by so doing. As between the Security Agent and the
Noteholders, the exercise of such discretion shall be conclusive and binding.
	 
	21.2	 	Determinations Conclusive. As between the Security Agent and the Noteholders, the
Security Agent may determine all questions and doubts arising in relation to any of the
provisions of this Deed. Any such determination, whether made upon such a

13

 

	 	 	question actually raised or implied in the acts or proceedings of the Security Agent, will
be conclusive and shall bind the Noteholders.
	 
	21.3	 	Currency Conversion. Where it is necessary or desirable to convert any sum from one
currency to another, it will (unless otherwise provided hereby or required by law) be
converted at such rate or rates, in accordance with such method and as at such date as may
reasonably be specified by the Security Agent but having regard to current rates of exchange,
if available. Any rate, method and date so specified will be binding on the Noteholders.
	 
	21.4	 	Powers conferred by this deed shall be additional. The powers conferred by this Deed
in relation to the Secured Indebtedness on the Security Agent shall be in addition to those
conferred on mortgagees under the general common and statutory laws of Hong Kong relating to
such matters. If there is any ambiguity or conflict between the powers contained under those
general laws of Hong Kong and those conferred by this Deed, the terms of this Deed shall
prevail.
	 
	22.	 	NOTICES
	 
	22.1	 	Delivery. Each notice, demand or other communication to be given or made under this
Deed shall be in writing and delivered or sent to the relevant party at its address or fax
number set out below (or such other address or fax number as the addressee has by five (5)
days’ prior written notice specified to the other party):

	 	 	 	 	 	 	 	 	 
	 	 	To the Chargor:	 	Stonepath Group, Inc.
	 	 	 	 	World Trade Center, 2200 Alaskan Way, Suite 200, Seattle, WA
98121, USA
	 

	 	 	 	Fax Number
	 	:
	 	206-336-5401
	 

	 	 	 	Attention
	 	:
	 	Ms. Virginia Wei
	 
	 	 	 	 	 	 	 	 
	 	 	To the Security Agent:	 	SBI Brightline, LLC.
	 	 	 	 	610 Newport Center Drive, Suite 1205, Newport Beach, CA 92660,
USA
	 

	 	 	 	Fax Number
	 	:
	 	949-679-7280
	 

	 	 	 	Attention
	 	:
	 	Mr. David Wang

	22.2	 	Deemed Delivery. Any notice, demand or other communication so addressed to the
relevant party shall be deemed to have been delivered (a) if given or made by letter, when
actually delivered to the relevant address, and (b) if given or made by fax, when despatched
with electronic confirmation of complete and error-free transmission, provided that, if such
day is not a working day in the place to which it is sent, such notice, demand or other
communication shall be deemed delivered on the next following working day at such place.
	 
	23.	 	GOVERNING LAW AND JURISDICTION
	 
	23.1	 	This Deed and the rights and obligations of the parties hereunder shall be governed by and
construed in accordance with the laws of Hong Kong and the parties irrevocably submit to the
non-exclusive jurisdiction of the courts of Hong Kong.

14

 

	23.2	 	No Limitation on Right of Action. Nothing herein shall limit the right of either
party to commence any legal action against the other party and/or its property in any other
jurisdiction or to serve process in any manner permitted by law, and the taking of proceedings
in any jurisdiction shall not preclude the taking of proceedings in any other jurisdiction
whether concurrently or not.
	 
	23.3	 	Waiver; Final Judgment Conclusive. Each party irrevocably and unconditionally waives
any objection which it may now or hereafter have to the choice of Hong Kong as the venue of
any legal action arising out of or relating to this Deed. Each party also agrees that a final
judgment against it in any such legal action shall be final and conclusive and may be enforced
in any other jurisdiction, and that a certified or otherwise duly authenticated copy of the
judgment shall be conclusive evidence of the fact and amount of its indebtedness as
appropriate.
	 
	23.4	 	Waiver of Immunity. Each party irrevocably waives any immunity to which it or its
property may at any time be or become entitled, whether characterised as sovereign immunity or
otherwise, from any set-off or legal action in Hong Kong or elsewhere, including immunity from
service of process, immunity from jurisdiction of any court or tribunal, and immunity of any
of its property from attachment prior to judgment or from execution of a judgment.
	 
	24.	 	PROCESS AGENT
	 
	 	 	Each of the following parties hereby irrevocably appoints the person set opposite its name
below as its agent to receive on its behalf service of proceedings issued out of the courts
of Hong Kong in any action or proceedings arising out of or in connection with this Deed. In
the event of such agent ceasing to act, the relevant parties shall appoint another person as
its agent for such purpose and give notice in writing of such appointment to all the other
parties:

	 	 	 	 	 
	 

	 	Parties
	 	Names & addresses of agents
	 
	 	 	 	 
	 

	 	SBI Brightline, LLC
	 	Bedrock China Futures, Limited
	 

	 	 	 	Room 4301-09, Jardine House
	 

	 	 	 	One Connaught Place, Central
	 

	 	 	 	Hong Kong

IN WITNESS whereof this Deed has been executed by the parties hereto as a deed and is intended to
be and is hereby delivered on the day and year first above written.

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Schedule 1

Particulars of Shares

	 	 	 	 	 
	 	 	 	 	% of total issued share
	 	 	Description and	 	capital of the Charged
	Name of Charged Company	 	No. of Shares	 	Company
	 
	 	 	 	 	 	 
	Stonepath Holdings (Hong Kong) Limited

	 	100 ordinary shares
of HK$1.00 each
	 	 100% 

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Schedule 2

Form of Letter of Resignation

			
	To:	 	The Board of Directors of

[Company] (the “Company”)

     I,            , hereby resign my position as a director of the Company with
effect from                                          200   and waive all claims to fees or compensation in connection
with my resignation.

Dated this            day of            200

	 	 	 	 	 	 	 
	SIGNED, SEALED AND DELIVERED

	 	 	)	 	 	 
	[as a Deed] by [

	 	 	)	 	 	 
	]          

	 	 	)	 	 	 
	in the presence of:

	 	 	)	 	 	 

[On duplicate]

I certify that the original of this notice was posted to the registered office of the Company on
                     200

 

17

 

Schedule 3

Form of Board Resolutions of Charged Company

[insert company name]

(a limited company incorporated in Hong Kong)

Written Resolutions of the Directors of [insert company name] (the “Company”) Passed Pursuant
to Article [insert article number] of the Articles of Association Of the Company

DECLARATION OF INTEREST

IT IS NOTED that each member of the Board of Directors of the Company has declared his respective
interests, if any, in relation to the matters of this written resolution pursuant to the Articles
of Association of the Company.

APPROVAL OF SHARE TRANSFER

IT IS NOTED that the Company has received the relevant instrument of transfers with respect to the
following shares transfer(s) (the “Share Transfer(s)”):

	 	 	 	 	 
	Transferor	 	Transferee	 	No. of Shares
	 
	 	 	 	 

IT IS RESOLVED that:

     (a) the Share Transfer(s) be and is/are hereby approved and the name(s) of the Transferee be
entered into the Register of Members of the Company subject to the duly executed and stamped
instrument of transfers being presented to the Company; and

     (b) any director of the Company be and is hereby authorized to sign, seal and issue the share
certificates in respect of the foregoing transfer(s) in accordance with the Articles of Association
of the Company and that the Register of Members of the Company be updated accordingly.

RESIGNATION AND APPOINTMENT OF DIRECTORS

IT IS RESOLVED that, subject to the forms of consent to act being executed,

                                                                      , be and is/are hereby
appointed as director/directors of the Company with effect from the date of this resolution.

18

 

IT IS NOTED that the Company had received letter/letters of resignation from
                                                                      , resigning as the
Director of the Company.

IT IS RESOLVED that the above resignation/resignations be and is/are hereby accepted and recorded
with effect from the date of this resolution.

IT IS FURTHER RESOLVED that the Director or the Secretary be and is hereby authorised to effect all
necessary filings in respect of the above resignation and appointment to the Companies Registry in
Hong Kong and update the Company’s Registers of Directors accordingly.

Dated this           day of                     2006

[Signature of Directors]

19

 

This is the signature page of the Share Charge dated                                         .

THE CHARGOR

	 	 	 	 	 	 	 
	THE COMMON SEAL of

	 	 	)	 	 	 
	STONEPATH GROUP, INC.

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	was affixed to this Deed

	 	 	)	 	 	 
	in the presence of

	 	 	)	 	 	 
	 
	 	 	 	 	 	 
	THE SECURITY AGENT
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	SIGNED for and on behalf of

	 	 	)	 	 	 
	SBI BRIGHTLINE, LLC

	 	 	)	 	 	 
	by

	 	 	)	 	 	 

20

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