Document:

EXHIBIT 10.37

______________________________________

Equity Pledge Agreement

______________________________________

by and between

Heze Cablecom Network Technology Co., Ltd.    

and

Pu Yue

July 2007

 

 

Page 1

 

CONTENTS

 

	
                        Article
 	
                         
 	
                         
 	
                        Page
 
	
                        I.
 	
                        Definitions and Interpretations
 	
                         
 	
                        3
 
	
                        II.
 	
                        Pledge and Assignment
 	
                         
 	
                        4
 
	
                        III.
 	
                        Scope of Pledge and Term of Pledge
 	
                         
 	
                        5
 
	
                        IV.
 	
                        Physical Possession of Documents
 	
                         
 	
                        6
 
	
                        V.
 	
                        Pledgor’s Representations and Warranties
 	
                         
 	
                        6
 
	
                        VI.
 	
                        Pledgor’s Covenants
 	
                         
 	
                        7
 
	
                        VII.
 	
                        Event of Default
 	
                         
 	
                        9
 
	
                        VIII.
 	
                        Exercise of the Rights of the Pledge
 	
                         
 	
                        10
 
	
                        IX.
 	
                        Transfer or Assignment
 	
                         
 	
                        11
 
	
                        X.
 	
                        Termination
 	
                         
 	
                        11
 
	
                        XI.
 	
                        Fees and Other Charges
 	
                         
 	
                        11
 
	
                        XII.
 	
                        Confidentiality
 	
                         
 	
                        12
 
	
                        XIII.
 	
                        Notice and Effective Delivery
 	
                         
 	
                        13
 
	
                        XIV.
 	
                        Governing Law
 	
                         
 	
                        14
 
	
                        XV.
 	
                        Dispute Resolution
 	
                         
 	
                        14
 
	
                        XVI.
 	
                        Miscellaneous
 	
                         
 	
                        15
 

Exhibits

	
                        1.
 	
                        Exclusive Services Agreement
 

	
                        2.
 	
                        Loan Agreement
 

	
                        3.
 	
                        Equity Option Agreement
 

	
                        4.
 	
                        Power of Attorney
 

	
                        5.
 	
                        Trustee Arrangement Letter
 

 

 

Equity Pledge Agreement

 

Page 2 

 

This Equity Pledge Agreement (Agreement) is entered into on this July 20, 2007 in Heze, People’s Republic of China (PRC)

by and between 

	
                        (1)
 	
                        Heze Cablecom Network Technology Co., Ltd., a wholly foreign-owned enterprise legally established and validly existing under PRC law, with its registered address at West of Heping Road, Changjiang Road East, Heze, Shandong Province, PRC (Pledgee) ;
 

and

	
                        (2)
 	
                        Pu Yue, a PRC citizen, holder of identification card number 330104197209251011, whose residential address is at Room 334, Building No.7, Zhongguanchun, Haidian District, Beijing PR China (Pledgor).
 

WHEREAS:

	
                        A.
 	
                        The Pledgor intends to establish a company, with its name as  (Jinan Youxiantong Network Technology Co., Ltd.) (Jinan Youxiantong), engaged in technical services related to the Internet, computer software and hardware in the PRC, according to PRC law. The Pledgor will hold a 95% equity interest (as defined below) in Jinan Youxiantong after its establishment. 
 

	
                        B.
 	
                        The Pledgee and Jinan Youxiantong have entered into an Exclusive Services Agreement, dated July 16th, 2007, (Service Agreement). The Pledgor and the Pledgee’s affiliate China Cablecom Co., Ltd Hong Kong (Hong Kong Cablecom), a limited liability company incorporated under the laws of Hong Kong, have entered into a Loan Agreement, dated June 30th, 2007 (Loan Agreement) under which China Cablecom Co. Ltd. extends a loan of RMB 484,500 to the Pledgor for the Pledgor’s acquisition of the Equity Interest (Loan).
 

	
                        C.
 	
                        China Cablecom Company Limited (Hong Kong) designates the Pledgee to receive the benefits of the Pledge hereunder in connection with the Pledgor’s obligation to repay the Loan.
 

	
                        D.
 	
                        The Pledgor hereby agrees to pledge its Equity Interest to the Pledgee as security for the obligation of Jinan Youxiantong to pay the fees payable under the Service Agreement (Service Fees) and the obligation of the Pledgor to repay the Loan.
 

 

 

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NOW, THEREFORE, the parties agree as follows: 

I. DEFINITIONS AND INTERPRETATIONS

	
                        1.1
 	
                        Unless otherwise indicated, the following terms in this Agreement shall have the following meanings: 
 

 

	
                        Affiliate
 	
                        means, as applied to any person, any other person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified person, provided, however, that Jinan Youxiantong and its subsidiaries shall in no event be considered an Affiliate of the Pledgee for purposes of this Agreement;
 
	
                        Business Day
 	
                        means a day other than a Saturday, a Sunday, a statutory holiday designated by the PRC State Council (subject to any annual adjustment by the PRC State Council designating working and non-working days before and after a statutory holiday) or a day on which the commercial banks in the PRC are authorized or obligated by applicable law to close;
 
	
                        Control
 	
                        means (including its correlative meanings, “Controlling”, “Controlled by” and “under common Control with”) possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise) of a person, and without limiting the generality of the foregoing, such ability shall be deemed to exist (i) when any person holds at least 50% of the outstanding voting securities or other ownership interests of such third person or (ii) over such person’s
spouse, parent, child, sibling, mother-in-law and father-in-law, son- and daughter-in-law, brother- or sister-in-law, aunt, uncle, cousin, grandparent, grandchild and any person (other than employees) who shares such person’s accommodations;
 
	
                        Event of Default 
 	
                        means any of the events specified in Article 7.1;
 
	
                        Equity Interest 
 	
                        means the entire 50% of the registered capital of 
 

 

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                        Jinan Youxiantong legally held by the Pledgor and any additional equity interest in Jinan Youxiantong acquired by the Pledgor subsequent to the date hereof;
 
	
                        Notice of Default 
 	
                        means the notice of default issued by the Pledgee in accordance with this Agreement;
 
	
                        Obligation
 	
                        shall have the meaning set forth in Article 5.5;
 
	
                        Pledge 
 	
                        shall have the meaning set forth in Article 2.1;
 
	
                        Pledged Collateral
 	
                        shall have the meaning set forth in Article 2.1;
 
	
                        PRC
 	
                        means the People’s Republic of China, which for purposes of this Equity Pledge Agreement, shall not include the Hong Special Administrative Region, Macau Special Administrative Region or Taiwan;
 
	
                        Secured Obligations
 	
                        means (i) any obligation of the Pledgor to make a payment for Service Fees and interest accrued thereon to the Pledgee pursuant to any of the Service Agreements, (ii) all other debts, monetary liabilities or payment obligations of the Pledgor arising under or in relation to any of the Service Agreements that are owed to the Pledgee or any of its Affiliates, including, but not limited to, any obligation to pay damages for a breach of any obligation of the Pledgor under any of the Service Agreements, and (iii) the Pledgor’s obligation under the Loan Agreement, including the loan amount payable by the Pledgor thereunder;
 
	
                        Service Agreements 
 	
                        shall have the meaning set forth in the Recitals to this Agreement
 
	
                        Term of the Pledge 
 	
                        shall have the meaning set forth in Article III.
 

 

	
                        1.2
 	
                        Interpretations  A reference to a day herein is to a calendar day. Unless otherwise specified, a reference herein to an Article or Appendix is to an article or appendix of this Agreement.  The use of one gender shall include the use of all genders.  The use of the singular shall include the plural, and vice versa.  The headings of the Articles and Appendices are for convenience only and shall not affect the meaning or construction of any of the provisions of this Agreement.  The phrase “including” shall mean “including without limitation”.
 

 

 

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II. PLEDGE AND ASSIGNMENT

	
                        2.1
 	
                        The Pledgor hereby pledges and, if required, transfers and assigns all of his right, title and interest in the Equity Interest in Jinan Youxiantong to the Pledgee as security for all of the Secured Obligations (Pledge), and the performance of the Pledgor’s other obligations under the Equity Option Agreement between the Pledgor and the Pledgee, dated the date hereof (Equity Option Agreement), and grants a first priority security interest in, all right, title and interest which it has or may at any time hereafter acquire in and to the Equity Interest, together with all equity or other ownership interests representing a dividend on the Equity Interest, a distribution or return of capital upon or
in respect of such Equity Interest, any subscription, first refusal, pre-emptive or other purchase rights with respect to or arising from such Equity Interest, any voting rights with respect to such Equity Interest or any other interest in Jinan Youxiantong which, by reason of notice or lapse of time or the occurrence of other events, may be converted into a direct equity interest in Jinan Youxiantong, and all proceeds of the foregoing (collectively, Pledged Collateral). 
 

	
                        2.2
 	
                        Immediately upon the occurrence of an Event of Default, the Pledgee shall be entitled, at the election of the Pledgee, to:
 

	
                         
 	
                        2.2.1
 	
                        freely sell or receive payment of the proceeds from the auction or sale of the Equity Interest; or
 

	
                         
 	
                        2.2.2
 	
                        exercise any and all other rights of a secured party with respect to the Pledged Collateral to the extent permitted under the laws of the PRC.
 

	
                        2.3
 	
                        The Pledgee is entitled to collect dividends or other distributions, if any, arising from the Equity Interest.
 

	
                        2.4
 	
                        The Pledgor shall take all action requested by the Pledgee in connection with the enforcement of the Pledge pursuant to Article 2.2, including, but not limited to:
 

	
                         
 	
                        2.4.1
 	
                        executing all transfers, conveyances, assignments and assurances of any of the Pledged Collateral;
 

	
                         
 	
                        2.4.2
 	
                        performing or causing the performance of all things necessary or desirable under the laws of the PRC to assist the Pledgee in enforcing the Pledge; and
 

	
                         
 	
                        2.4.3
 	
                        giving all notices, orders, directions and consents which the Pledgee reasonably requests in connection with the enforcement of the Pledge.
 

III. SCOPE AND TERM OF THE PLEDGE

The Pledge of the Pledged Collateral shall secure all of the Secured Obligations.  The Term of the Pledge shall commence on the date when the Pledge is recorded in the 

 

 

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Register of Shareholders of Jinan Youxiantong.  The Term of the Pledge shall expire on the later of (1) the date on which the last surviving of the Service Agreements, the Loan Agreement and the Equity Option Agreement terminates and (2) the date on which all outstanding Secured Obligations are paid in full or otherwise satisfied.

IV. PHYSICAL POSSESSION OF DOCUMENTS

The Pledgor shall deliver the Certificate of Capital Contribution with respect to his interest in Jinan Youxiantong and the List of Shareholders of Jinan Youxiantong to the Pledgee within 7 days of the date of the execution of this Agreement and promptly following receipt thereof, shall deliver to the Pledgee any certificates or other documentation representing any new portion of the Equity Interest received after the date hereof or any other interests described in Article 2.1 acquired before or after the date of this Agreement.

V. PLEDGOR’S REPRESENTATIONS AND WARRANTIES

The Pledgor represents and warrants, as follows:

	
                        5.1
 	
                        it is the legal owner of the Equity Interest; 
 

	
                        5.2
 	
                        it fully understands the contents of the Service Agreement and has entered into this Agreement voluntarily;
 

	
                        5.3
 	
                        all documents, materials and certificates provided by the Pledgor to the Pledgee hereunder are correct, true, complete and valid;
 

	
                        5.4
 	
                        no consent, approval, or authorization of, or declaration, filing, or registration with, any foreign, national, state, provincial, regional, local, municipal, county or other governmental, quasi-governmental, administrative, judicial, regulatory or self-regulatory authority, body, agency, court, tribunal, commission, organization or other similar entity (including any branch, department, section or official thereof) (Governmental Entity) or any third party will be required to be made or obtained by the Pledgor in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby;
 

	
                      5.5
 	
                        the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not (i) result in a violation or breach of, or constitute (with or without due notice or lapse of time) a default (or give rise to any right of termination, cancellation, vesting, payment, exercise, acceleration, suspension or revocation) under any note, bond, mortgage, deed of trust, security interest, indenture, license, contract, agreement, plan or other instrument or obligation (each, an Obligation and collectively, Obligations) to which the Pledgor is a party or by which its property or assets 
 

 

 

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may be bound or affected, or (ii) violate any law or order applicable to the Pledgor;

	
                        5.6
 	
                        when the Pledgee exercises its rights hereunder in accordance with the terms and conditions set forth in this Agreement, there shall be no intervention from any other parties;
 

	
                        5.7
 	
                        it has not created any pledge, lien, charge, mortgage, encumbrance, option, security or other interest in or over the Equity Interest other than the Pledge created hereunder and the option granted under the Equity Option Agreement; 
 

	
                        5.8
 	
                        the Pledgee is entitled to dispose of or assign its rights under the Pledge in accordance with this Agreement; and
 

	
                        5.9
 	
                        the Agreement has been duly and validly executed and delivered by the Pledgor, and constitutes a legally valid and binding obligation of the Pledgor, enforceable against the Pledgor in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors’ rights generally from time to time in effect and to general equitable principles.
 

VI. PLEDGEE’S REPRESENTATIONS AND WARRANTIES

The Pledgee hereby represents and warrants, as follows:

	
                        6.1
 	
                        it has the right and the capability to execute and perform this Agreement;
 

	
                        6.2
 	
                        it has obtained or will use reasonable efforts to obtain all necessary and appropriate approvals and authorizations in accordance with the requirements under applicable laws or regulations, to execute and perform this Agreement; and
 

	
                        6.3
 	
                        to its knowledge, without having performed any inquiry, its execution and performance of this Agreement are not against any law or regulation, or any governmental approval, authorization or notice or other governmental document, which is binding upon it, nor are such execution and performance against any agreement to which it is a party, or any covenant made by it to any third party.
 

VII. PLEDGOR’S COVENANTS

	
                        7.1
 	
                        General Covenants.  During the term of this Agreement, the Pledgor covenants that it shall: 
 

	
                         
 	
                        7.1.1
 	
                        not transfer or assign the Pledged Collateral, or create or permit the creation of any pledge, lien, charge, mortgage, encumbrance, option, security or other interest in or over the Pledged Collateral, or cause at a shareholders’ meeting of Jinan Youxiantong, the adoption of any 
 

 

 

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resolution for the sale, transfer, pledge or any other manner of disposal of the Pledged Collateral or the approval or creation of any other security interest on the Pledged Collateral without the prior written consent of the Pledgee, except as otherwise provided in the Equity Option Agreement;

	
                         
 	
                        7.1.2
 	
                        comply with and implement all laws and regulations with respect to the Pledge, deliver to the Pledgee all notices, orders or recommendations with respect to the Pledge and the Pledged Collateral issued or promulgated by competent government authorities within 5 days of receiving such notices, orders or recommendations and comply with such notices, orders or recommendations, or object to the foregoing at the reasonable request of the Pledgee or with the consent of the Pledgee; and
 

	
                         
 	
                        7.1.3
 	
                        notify the Pledgee in a timely manner of any events or notices received by the Pledgor which may affect the Pledged Collateral or any portion of the Pledgee’s rights therein, and any events or notices which may change or effect any warranty, covenant or obligation of the Pledgor under this Agreement or which may affect the Pledgor’s performance of its obligations under this Agreement.
 

	
                        7.2
 	
                        Filings and Notices The Pledgor agrees to promptly make or cause to be made any filings or recordations, give or cause to be given any notices and take or cause to be taken any other actions as may be necessary under the laws of the PRC to perfect the Pledge of the Pledged Collateral, including recording such Pledge in Jinan Youxiantong's shareholder register.
 

	
                        7.3
 	
                        Enforcement  The Pledgor covenants that the exercise by the Pledgee of its rights under this Agreement shall not be suspended, affected or impaired through legal procedures by the Pledgor or any successors of the Pledgor or any other parties.
 

	
                        7.4
 	
                        Other Agreements  The Pledgor covenants that in order to protect and perfect the Secured Obligations, the Pledgor shall execute in good faith, and cause other parties who have an interest in the rights granted under the Pledge to execute, all title certificates, contracts or other agreements and perform and cause other parties who have an interest in the rights granted under the Pledge to take any action as requested by the Pledgee, and facilitate the exercise by the Pledgee of its rights and authority provided in this Agreement.
 

	
                        7.5
 	
                        Compensation  The Pledgor covenants to comply with and perform all the warranties, covenants, guarantees, agreements, representations and conditions for the benefit of the Pledgee.  The Pledgor shall compensate the Pledgee for any and all losses suffered as a result of the Pledgor’s failure to comply with or fully perform her warranties, covenants, guarantees, agreements, representations and conditions. 
 

 

 

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VIII. EVENT OF DEFAULT

	
                        8.1
 	
                        Events of Default  Each of the following shall constitute an Event of Default:
 

	
                         
 	
                        8.1.1
 	
                        Jinan Youxiantong or the Pledgor fails to make full and timely payment of any amounts due under the Secured Obligations as scheduled under the Service Agreements or Loan Agreement, respectively or an Event of Default has occurred and is continuing pursuant to the Loan Agreement;
 

	
                         
 	
                        8.1.2
 	
                        the Pledgor makes any misleading or untrue representations or warranties under Article V, or is in violation or breach of any of the representations and warranties under Article V; 
 

	
                         
 	
                        8.1.3
 	
                        the Pledgor breaches any of the covenants under Article VI;
 

	
                         
 	
                        8.1.4
 	
                        the Pledgor breaches any other covenant, undertaking or obligation of the Pledgor set forth herein;
 

	
                         
 	
                        8.1.5
 	
                        the Pledgor is unable to perform his obligations under this Agreement because of his death, emigration, change of citizenship, loss of capacity to act or any other reason;
 

	
                         
 	
                        8.1.6
 	
                        the Pledgor relinquishes all or any part of the Pledged Collateral or transfers or assigns all or any part of the Pledged Collateral without the prior written consent of the Pledgee (except the transfers or assigns permitted hereunder); 
 

	
                         
 	
                        8.1.7
 	
                        any indebtedness, guarantee or other Obligation of the Pledgor, whether pursuant to a contract or otherwise, (i) is accelerated as a result of a default thereunder and is required to be repaid or performed prior to the scheduled date; or (ii) has become due and is not repaid or performed as scheduled and thereby causes the Pledgee to regard the Pledgor’s capacity to perform the obligations specified herein as having been adversely affected;
 

	
                         
 	
                        8.1.8
 	
                        the Pledgor is incapable of repaying his debts as they become due; 
 

	
                         
 	
                        8.1.9
 	
                        this Agreement is illegal as a result of any applicable laws or the Pledgor is restricted from continuing to perform its obligations as specified herein;
 

	
                         
 	
                        8.1.10
 	
                        any approval, permit, license or authorization from any applicable Governmental Entity (and registration or filing procedure) required for Jinan Youxiantong to provide cable services, or any other license, permit, approval or authorization required for provision of information services  via the Internet in the PRC is withdrawn, suspended, invalidated or materially amended;
 

 

 

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                        8.1.11
 	
                        any approval, permit, license or authorization from any applicable government authority required to perform this Agreement or make this Agreement enforceable, legal and valid is withdrawn, suspended, invalidated or materially amended; or
 

	
                         
 	
                        8.1.12
 	
                        any property owned by the Pledgor is altered or damaged and thereby causes the Pledgee to deem that the capability of the Pledgor to perform the obligations stated herein have been adversely affected.
 

	
                        8.2
 	
                        Written Notice  The Pledgor shall immediately provide written notice to the Pledgee if the Pledgor becomes aware of, or finds that, any event under Article 7.1 or any events that may result in the foregoing events have happened or are occurring. 
 

	
                        8.3
 	
                        Notice of Default  Unless the Event of Default has been resolved to the Pledgee’s satisfaction within 5 Business Days of Pledgee’s discovery of the default, or receipt from the Pledgor of written notice of default, whichever is earlier, the Pledgee may, at any time thereafter, provide a written Notice of Default to the Pledgor and exercise its rights under the Pledge in accordance with Article IX. 
 

IX. EXERCISE OF THE RIGHTS OF THE PLEDGEE

	
                        9.1
 	
                        Pledgee’s Approval.  Except as otherwise provided in the Equity Option Agreement, the Pledgor shall not transfer, assign or dispose of in any manner the Pledged Collateral without the prior written approval of the Pledgee prior to the full repayment of all amounts due under the Secured Obligations and the full satisfaction and discharge of all outstanding Secured Obligations. 
 

	
                        9.2
 	
                        Notice of Default  The Pledgee shall deliver a Notice of Default to the Pledgor when the Pledgee exercises its rights under the Pledge. 
 

	
                        9.3
 	
                        Time of Exercise  Subject to Article 8.3, the Pledgee may exercise its rights under the Pledge concurrently with or at any time after the issuance of a Notice of Default in accordance with Article 8.3.
 

	
                        9.4
 	
                        Priority  In an Event of Default, the Pledgee shall have the right in its sole discretion to dispose of the Pledged Collateral in whole or in part in accordance with legal procedures (including negotiated transfer, auction or sale of the Pledged Collateral) and shall have absolute priority in receiving payment from the proceeds of the Pledged Collateral in accordance with Article 2.2 until all of the Secured Obligations have been satisfied in full.  The Pledgee shall have the right to bid in any auction or sale of the Pledged Collateral.
 

	
                        9.5
 	
                        Assistance  The Pledgor shall not hinder the Pledgee in exercising any of its rights under the Pledge in accordance with this Agreement and shall give all necessary assistance to enable the Pledgee to affect its rights under the Pledge.
 

 

 

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X. TRANSFER OR ASSIGNMENT

	
                        10.1
 	
                        Pledgee’s Consent.  The Pledgor may not transfer or assign his rights and obligations herein without prior written consent from the Pledgee except to the extent otherwise provided in the Equity Option Agreement. 
 

	
                        10.2
 	
                        Successors and Assigns  This Agreement shall be valid and binding upon the Pledgor and his successors and assigns and shall be enforceable by the Pledgee and its successors and assigns.
 

	
                        10.3
 	
                        Assignment by the Pledgee  The Pledgee may transfer or assign at any time any and all of its rights and obligations under this Agreement to its designated person(s) (legal or natural), in which case the assignees shall have the rights and obligations of the Pledgee under this Agreement, as if it were a party to this Agreement.  If the Pledgee changes as the result of a transfer or assignment, the new parties to the Pledge shall execute a new pledge contract. 
 

XI. TERMINATION

This Agreement shall not terminate until the Term of the Pledge expires pursuant to Article III herein.  In such circumstances, the Pledgee shall cancel or terminate this Agreement within a reasonable time.

XII. FEES AND OTHER CHARGES

	
                        12.1
 	
                        Fees of this Agreement  The Pledgee shall be responsible for all fees and expenditures in relation to this Agreement including but not limited to legal fees, costs of preparation, stamp tax and any other taxes and charges.  If the Pledgor pays the relevant taxes or fees in accordance with the law, the Pledgee shall fully indemnify the Pledgor for the payment of such taxes and fees, provided that the Pledgors provide Pledgee with receipts and invoices, satisfactory to Pledge’s sole discretion of the payments of such taxes and fees.
 

	
                        12.2
 	
                        Fees for the Pledge  The Pledgee shall be responsible for all the fees (including but not limited to any taxes, management fees, litigation fees, attorney’s fees, and various insurance premiums) in connection with the disposition of the Pledge incurred by the Pledgee.  If the Pledgor pays the relevant taxes or fees in accordance with the law, the Pledgee shall fully indemnify the Pledgor for the payment of such taxes and fees, provided that the Pledgors provide Pledgee with receipts and invoices, satisfactory to Pledgee’s sole discretion, of the payments of such taxes and fees.
 

 

 

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XIII. CONFIDENTIALITY

	
                        13.1
 	
                        Confidential Information  Each party (Receiving Party) shall keep confidential and not disclose to any third party in any manner whatsoever, in whole or in part, any information, including any information obtained by any of its directors, officers, employees, agents, consultants advisors or other representative, including legal counsel, accountants, tax specialists and financial advisors (collectively, the Representatives) in connection with the exercise of such party’s rights under this Agreement, information developed and relating to new products, product plans, product designs, customers, technology, computer codes, trade secrets, pricing,
know-how, inventions, techniques, programs, algorithms, schematics, documentation, business opportunities, processes, and practices, and information about the other party’s assets and operations that such party has acquired through the negotiations or due diligence or other investigations in connection with this Agreement and the transactions contemplated hereby (collectively, Confidential Information), and Confidential Information may not be used by any party other than in connection with the transactions contemplated by this Agreement.  Notwithstanding the foregoing, each party may disclose or use information which:
 

	
                         
 	
                        13.1.1
 	
                        is proven by reasonable objective evidence to have been already in the Receiving Party’s possession before such disclosure, provided that such information is not known by the Receiving Party to be subject to another confidentiality agreement with, or other obligation of confidentiality to, a party to this Agreement;
 

	
                         
 	
                        13.1.2
 	
                        becomes generally available to the public other than as a result of a disclosure by the disclosing or Receiving Party;
 

	
                         
 	
                        13.1.3
 	
                        becomes available to the Receiving Party on a non-confidential basis from a source which is not known by the Receiving Party to be bound by a confidentiality agreement with, or other obligation of confidentiality to, a party to this Agreement; or
 

	
                         
 	
                        13.1.4
 	
                        is required to be disclosed in connection with compliance with any applicable law or the rules of any governmental entity, provided that the Receiving Party shall cooperate with the disclosing party to minimize the disclosure to the extent practicable, and provided further, that the Pledgee must give prior written consent to any disclosure required of the Pledgor, and the Pledgor will make its best efforts not to comply with any such request for information from any governmental entity in any case in which the Pledgor is notified by the Pledgee that the Pledgee has a good faith belief that such disclosure is not required by PRC law. 
 

	
                        13.2
 	
                        Duty to Protect  Each party shall deal with Confidential Information so as to protect it from disclosure with a degree of care not less than that used by it in dealing with its own information intended to remain exclusively within its knowledge (and in no event shall it exercise less than reasonable care) and shall take reasonable steps to minimize the risk of disclosure of such Confidential 
 

 

 

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Information and information concerning this Agreement by ensuring that only its officers, directors and employees and the officers, directors and employees of its professional advisers (and no other persons) who have a bona fide “need to know” such Confidential Information for purposes permitted or contemplated hereby (Authorized Persons), shall have access thereto, and shall cause such Authorized Persons to treat such Confidential Information in confidence as provided herein.  All Confidential Information remains the property of the disclosing party. Upon expiry or termination for any reason of this Agreement, the Receiving Party shall promptly return to the disclosing party all originals and copies of any material in any form containing or representing Confidential Information, including
all computer codes, discs, drawings, specifications, manuals and other printed or reproduced material (including information stored on machine readable media), or shall destroy, to the extent practicable, the same at the request of the disclosing party.

	
                        13.3
 	
                        Permitted Disclosure  This Agreement or its contents may be disclosed as required by law or the rules of any securities exchange or any governmental entity to which the disclosing party is subject, as contemplated by Article 12.1.4, or submits or as necessary for confirming the application of such law or rules, provided that the disclosing party shall use its reasonable efforts to secure that its contents be held confidential and will only disclose such information after notice to, and consultation with, the other party, to the extent practicable.
 

	
                        13.4
 	
                        Survival of Confidentiality  The undertakings in connection with Confidential Information set forth in this Article 12 shall survive for 5 years after the termination or expiration of this Agreement.
 

XIV. NOTICE AND EFFECTIVE DELIVERY

	
                        14.1
 	
                        Notice  All notices or other communications required or permitted to be given under this Agreement shall be in writing in English and shall be deemed to have been duly given and received on the date delivered by hand or by courier service such as Federal Express, or by other messenger (or, if delivery is refused, upon presentment) or upon receipt by facsimile transmission (provided, that a copy of such facsimile and transmission confirmation is delivered by means other than facsimile within 5 days of the delivery of the facsimile), or upon delivery by registered or certified mail (return receipt requested), postage prepaid, to the parties as follows:
 

If to the Pledgee:

 

	
                        Address:
 	
                        [•]
 
	
                        Tel:
 	
                        [•]
 
	
                        Fax:
 	
                        [•]
 
	
                        Attn:
 	
                        [•]
 
	 	 
	If to the Pledgor:

 

 

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                        Address:
 	
                        [•]
 
	
                        Tel:
 	
                        [•]
 
	
                        Fax:
 	
                        [•]
 
	
                        Attn:
 	
                        [•]
 

or, as to each party, at such other address or number as shall be designated by such party in a notice to the other party containing the new information in the same format as the information set out above.

XV. GOVERNING LAW

This Agreement shall be deemed to be made, and in all respects shall be interpreted, construed and governed by, and in accordance with PRC laws.

XVI. DISPUTE RESOLUTION

	
                         
 	
                        16.1
 	
                        If any dispute arises out of or in connection with this Agreement, the parties shall attempt in the first instance to resolve such dispute through friendly consultation or mediation.
 

	
                         
 	
                        16.2
 	
                        If the dispute cannot be resolved in the above manner within 30 days after the commencement of consultations, either party may submit the dispute to arbitration as follows:
 

	
                         
 	
                        16.2.1
 	
                        All disputes arising out of, or in regard to this Agreement shall be submitted to China International Economic and Trade Arbitration Commission which shall be conducted by three (3) arbitrators in Beijing in accordance with the Commission’s arbitration rules;
 

	
                         
 	
                        16.2.2 
 	
                        The arbitration shall be conducted in the Chinese language, with the arbitral award being final and binding upon the Parties. The cost of arbitration shall be allocated upon the determination of the arbitrators. 
 

	
                         
 	
                        16.3
 	
                        When any dispute is submitted to arbitration, the parties shall continue to perform their obligations under this Agreement, unless the disputes are related to the effectiveness or the termination of the Agreement.
 

 

 

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XVII. MISCELLANEOUS

	
                        17.1
 	
                        Amendment or Supplement  This Agreement shall be amended or supplemented only by a written instrument signed by each of the parties hereto.  The parties shall each obtain all requisite authorizations and approvals to give effect to the amendment or supplement.
 

	
                        17.2
 	
                        No Waiver.  Unless otherwise agreed upon by the parties in writing, any failure or delay on the part of either party to exercise any right, authority or privilege under this Agreement, or under any other agreement relating hereto, shall not operate as a waiver thereof; nor shall any single or partial exercise of any right, authority or privilege preclude any other future exercise thereof.
 

	
                        17.3
 	
                        Severability  The provisions of this Agreement are severable from each other.  The invalidity of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.  No breach, default or threatened breach of this Agreement by either party shall relieve the other party of its obligations or liabilities under this Agreement with respect to the protection of the property or proprietary nature of any property which is the subject of this Agreement.
 

	
                        17.4
 	
                        Successors  This Agreement shall be valid and binding on the parties hereto, their successors and permitted assigns.  
 

	
                        17.5
 	
                        Third Party Rights  Nothing in this Agreement, express or implied, is intended to confer upon any person other than the Pledgor, the Pledgee and the Pledgee’s Affiliates, any rights or remedies of any nature whatsoever under or by reason of this Agreement or any provision of this Agreement.  This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the Pledgor, the Pledgee and the Pledgee’s Affiliates and their successors and permitted assigns.
 

	
                        17.6
 	
                        Entire Agreement  This Agreement and its exhibits, the Exclusive Services Agreements, the Loan Agreement, the Equity Option Agreement, the Power of Attorney from the Pledgor in favor of About International’s Designee, and the Trustee Arrangement Letter shall constitute the entire agreement between the parties in respect of the subject matter hereof and shall supersede any previous discussions, negotiations and agreements related thereto.
 

	
                        17.7
 	
                        Counterparts  For the convenience of the parties, this Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute 1 and the same agreement.
 

	
                        17.8
 	
                        Language  This Agreement is prepared in 2 sets of originals in English.  Each party will retain 1 set of originals. 
 

 

 

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IN WITNESS WHEREOF, each of the parties hereto has duly executed or has caused this Agreement to be duly executed in its name and on its behalf by an officer or representative duly authorized, on the day and year first above written.

 

	
      Pledgee:
 	
                        Heze Cablecom Network Technology Co., Ltd.
 	
                         
 	
      Pledgor:
 	
                         
 
	
                        By:
 	
                        
 /s/ Clive Ng
 	
                         
 	
                        By:
 	
                        
 /s/ Pu Yue
 
	
                        Name:
 	
                        Clive Ng
 	
                         
 	
                        Name:
 	
                        Pu Yue
 
	
                        Title:
 	
                        Chairman
 	
                         
 	
                        PRC ID No:
 
	
                        Corporate Seal:
 	
                         
 	
   
 

 

 

Equity Pledge AgreementEXHIBIT 10.38

______________________________________

Loan Agreement

______________________________________

by and between

China Cablecom Co. Ltd, (Hong Kong)

and

Liang Yue Jing

June 2007

 

 

CONTENTS

 

	
      Article
 	
                         
 	
                        Page
 
	
                        1.
 	
                        Definition and Interpretation
 	
                        1
 
	
                        2.
 	
                        Loan Amount and Repayment
 	
                        3
 
	
                        3.
 	
                        Conditions Precedent
 	
                        3
 
	
                        4.
 	
                        Representations and Warranties of Party B
 	
                        4
 
	
                        5.
 	
                        Undertakings
 	
                        5
 
	
                        6.
 	
                        Event of Default
 	
                        7
 
	
                        7.
 	
                        Enforcement
 	
                        9
 
	
                        8.
 	
                        Indemnity
 	
                        9
 
	
                        9.
 	
                        Confidentiality
 	
                        9
 
	
                        10.
 	
                        Supplementary Provisions
 	
                        11
 

Appendices

	
                        A
 	
                        Form of Equity Transfer Agreement
 

	
                        B
 	
                        Form of Waiver of Right of First Refusal
 

 

 

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Page 1

This Loan Agreement (Agreement) is entered into on June 30, 2007 in Jinan, People’s Republic of China (PRC)

by and between 

	
                        (1)
 	
                        China Cablecom Co., Ltd, a liability limited company incorporated under the laws of Hong Kong with its registered address at 12/F RUTTONJEE HSE 11 DUDDLLST CENTRAL HK (Party A)
 

and

	
                        (2)
 	
                        Liang Yue Jing, a PRC citizen, holder of identification card number, 512925196403280023, whose residential address is at Room 334, Building No.7, Zhongguanchun, Haidian District, Beijing, PR China (Party B).
 

WHEREAS:

	
                        (A)
 	
                        Party B intends to establish a company, with its name as  (Jinan Youxiantong Network Technology Co., Ltd.) (Jinan Youxiantong), engaged in technical services relate
d to the Internet, computer software and hardware in the PRC, according to PRC law. Party B intends to obtain a loan in the amount of RMB 25,500(Loan) from Party A for the purpose of constituting the registered capital of Jinan Youxiantong.
 

	
                        (B)
 	
                        Party B will hold a 5% equity interest (Equity Interest) in Jinan Youxiantong after its establishment.
 

	
                        (C)
 	
                        Party A agrees to extend the Loan to Party B directly or through one of its Affiliates. 
 

NOW, THEREFORE, the parties agree as follows:

1. DEFINITION AND INTERPRETATION

	
                        1.1
 	
                        Definition
 

Unless provided otherwise in this Agreement, the following terms shall have the meanings set out below:

“Affiliate” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with such Person. For the purposes of this definition, “Person” means any individual, partnership, joint venture, trust, unincorporated organization, association, corporation, company or similar entity; and “Control” (including its correlative meanings, “Controlling”, “Controlled
by” and “under common Control with”) means possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through ownership of voting securities, by contract or otherwise, and without 

 

 

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limiting the generality of the foregoing, such ability shall be deemed to exist (a) when any Person holds at least fifty percent (50%) of the outstanding voting securities or other ownership interests of such third Person or (b) over other members of a Person’s immediate family. Immediate family members shall mean a Person’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone (other than employees) who shares such Person’s home.

“Ancillary Documents” has the meaning ascribed to it in Article 5.1.2.1.

“Authorized Persons” has the meaning ascribed to it in Article 9.2.

“Business Day” means a day other than a Saturday, a Sunday, a statutory holiday designated by the PRC State Council (subject to any annual adjustment by the PRC State Council designating working and non-working days before and after a statutory holiday) or a day on which the commercial banks in the PRC are authorized or obligated by applicable law to close.

“Confidential Information” has the meaning ascribed to it in Article 9.1.

“Designated Party” means any Affiliate, individual, company or any other appropriate entity designated by Party A to accept the transfer of the Equity Interest.

“Equity Option Agreement” has the meaning ascribed to it in Article 3.1.

“Equity Pledge Agreement” has the meaning ascribed to it in Article 4.4.

“Equity Transfer” has the meaning ascribed to it in Article 5.1.2.1.

“Equity Transfer Agreement” has the meaning ascribed to it in Article 5.1.2.1.

“Event of Default” has the meaning ascribed to it in Article 6.

“Loan” has the meaning ascribed to it in the Whereas.

“PRC” means the People’s Republic of China, which, for purposes of this Loan Agreement shall not include the Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan.

“PRC Laws” means all valid and publicly announced laws and regulations of the PRC.

“Receiving Party” has the meaning ascribed to it in Article 9.1.

“Repayment Date” has the meaning ascribed to it in Article 2.2.

“Repayment Notice” has the meaning ascribed to it in Article 7.1.

 

 

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“RMB” means the legal currency of the PRC.

“USD” means the legal currency of the United States.

	
                        1.2
 	
                        Interpretation
 

A reference to a day herein is to a calendar day. Unless otherwise specified, a reference herein to an Article or Appendix is to an article or appendix of this Agreement. The use of one gender shall include the use of all genders. The use of the singular shall include the plural, and vice versa. The headings of the Articles and Appendices are for convenience only and shall not affect the meaning or construction of any of the provisions of this Agreement. The phrase “including” shall mean “including without limitation”. 

2. LOAN AMOUNT AND REPAYMENT

	
                        2.1
 	
                        Loan Amount
 

Party A agrees to provide to Party B within 3 days after the signing of this Agreement an interest-free loan, either directly or through one of its Affiliates, in the amount of RMB 25,500 (approximately USD 3,400, of which USD 3,400 will be wired from Party A’s account and USD 0 wired from Party A’s designees’ account) in accordance with the terms and conditions set forth in this Agreement. Such Loan shall be paid into the account that has been designated by Party B within 10 days after the date hereof.

	
                        2.2
 	
                        Repayment Date
 

Unless otherwise agreed by Party A in writing, the Loan borrowed by Party B, any portion of the Loan and any other payment in arrears, if applicable, under this Agreement shall become due and payable five Business Days after Party A gives written notice to Party B demanding repayment in accordance with Article 7.1 (Repayment Date)

Without Party A’s express prior written consent, the Loan shall not be repaid and shall continue indefinitely until the Repayment Date.

	
                        2.3
 	
                        Form of Repayment 
 

Unless agreed by the parties in writing, the Loan may only be repaid in the form specified in Article 7.

	
                        2.4
 	
                        Purpose of Loan
 

Party B agrees to accept the Loan provided by Party A and hereby agrees and covenants that the Loan shall be used only to constitute the registered capital of Jinan Youxiantong. Without Party A’s prior written consent, Party B shall not use the Loan for any other purpose, or sell, assign, transfer, pledge or otherwise dispose of any legal rights or benefits in connection with, or create any security interest over, the Equity Interest to any third party.

 

 

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3. CONDITIONS PRECEDENT

Party A’s obligation to extend the Loan to Party B pursuant to Article 2.1 shall be conditional upon the fulfillment of all of the following conditions except those specifically waived by Party A in writing:

	
                        3.1
 	
                        Simultaneously with this Agreement, the parties have executed an equity option agreement, dated the date hereof (Equity Option Agreement), pursuant to which Party B grants to Party A or its designated person (legal or natural) an exclusive option to purchase all of Party B’s Equity Interest, to the extent permitted under PRC Laws;
 

	
                        3.2
 	
                        The Equity Option Agreement is in full effect and there is no default thereunder and all relevant filing procedures, approvals, authorizations, registrations and governmental proceedings have been obtained or completed;
 

	
                        3.3
 	
                        All the representations and warranties provided by Party B in Article 4 are true, complete and correct, and shall remain true, complete and correct on the date of the transfer of the Loan, as if they are provided on such date; and
 

	
                        3.4
 	
                        Party B shall not have breached any of its undertakings provided in Article 5, and no event which may affect the performance of Party B’s obligations hereunder shall have occurred or is likely to occur.
 

4. REPRESENTATIONS AND WARRANTIES OF PARTY B

Party B hereby represents and warrants to Party A as follows:

	
                        4.1
 	
                        Party B has the power to enter into this Agreement and perform this Agreement. Party B has duly obtained all the necessary approvals or authorizations for the execution and performance of this Agreement;
 

	
                        4.2
 	
                        the execution and performance of this Agreement by Party B will not result in (i) a breach of any laws or regulations or any governmental approval, authorization, notice or other government documents binding or affecting Party B; (ii) a breach of any agreement entered into with any third party or any undertaking provided to any third party by Party B; or (iii) constitute (with or without due notice or lapse of time) a default (or give rise to any right of termination, cancellation, vesting, payment, exercise, acceleration, suspension or revocation) under any note, bond, mortgage, deed of trust, security interest, indenture, licence, contract, agreement, plan or other instrument or obligation (each, an Obligation and collectively, Obligations) to which Party B is a party or by which its property or assets may be bound or affected;
 

	
                        4.3
 	
                        this Agreement, when executed and delivered by Party A, constitutes the legal, valid and binding obligation of Party B, which is enforceable against Party B in accordance with its terms;
 

	
                        4.4
 	
                        except for the Equity Pledge Agreement, dated July 20th, 2007, between Heze Cablecom Network Technology Co., Ltd(WFOE) and Party B (Equity Pledge Agreement) and the Equity Option Agreement, Party B has not (i) created any pledge, charge or any other security over Party B’s Equity Interest; (ii) offered to
 

 

 

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transfer Party B’s Equity Interest to any third party; (iii) issued an undertaking to any third party regarding any offer to purchase Party B’s Equity Interest; or (iv) entered into any agreement to transfer Party B’s Equity Interest with any third party;

	
                        4.5
 	
                        no dispute, action, arbitration, administrative procedure or other legal proceeding regarding Party B and/or Party B’s Equity Interest is in existence, and no potential dispute, action, arbitration, administrative procedure or other legal proceeding regarding Party B and/or Party B’s Equity Interest is pending; 
 

	
                        4.6
 	
                        there is no contractual agreement that is binding on Party B or may affect Party B’s assets, and no enforceable court judgment or order that may prevent him from executing or performing this Agreement or may have any material adverse effect on the execution or performance of this Agreement;
 

	
                        4.7
 	
                        the execution and performance of this Agreement, and realization of any right by Party A under this Agreement will not contravene any lien, contract, judgment, order or law which is binding on Party B or Party B’s assets in a manner that would have a material adverse effect upon the ability of Party A to perform its obligations hereunder; and
 

	
                        4.8
 	
                        all documents, materials and certificates provided by Party B to Party A hereunder are correct, true, complete and valid.
 

5. UNDERTAKINGS

	
                        5.1
 	
                        Affirmative Undertakings
 

Party B hereby undertakes:

	
                         
 	
                        5.1.1
 	
                        that if, according to PRC Laws, the said Equity Interest is deemed to be common property, he shall obtain a written statement from his spouse indicating that the Equity Interest is not common property between himself and his spouse but his own personal property;  
 

	
                         
 	
                        5.1.2
 	
                        after the execution of this Agreement, to promptly:
 

	
                         
 	
                        5.1.2.1
 	
                        provide to Party A the following ancillary documents (Ancillary Documents): (i) signed (but undated) equity transfer agreement substantially in the form of Appendix A (Equity Transfer Agreement) and (ii) all other necessary signed (but undated) documents for the Equity Interest to be effectively transferred to Party A or the Designated Party (Equity Transfer), including the waiver letter in the form of Appendix B; and 
 

	
                         
 	
                        5.1.2.2
 	
                        provide all information relating to Jinan Youxiantong’s operations and financial affairs to Party A upon the request of Party A.
 

 

 

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                        5.1.3
 	
                        at any time to defend claims and assertion regarding the Equity Interest made by any third party who claims interest in the same, provided that Party B shall not be obligated to defend any such claim or assertion unless it is at Party A’s cost;
 

	
                         
 	
                        5.1.4
 	
                        to take or procure to take all necessary actions to execute or procure to execute all necessary documents, carry out necessary registrations and make all necessary or appropriate defenses to ensure that the repayment of the Loan, the Equity Transfer and all transactions to be carried out under the Agreement (including but not limited to the undertaking in the aforesaid Article 5.1.2.2) can be legally and effectively carried out and to maintain Party B’s proprietary interest in Jinan Youxiantong;
 

	
                         
 	
                        5.1.5
 	
                        to cooperate with Party A at its request by consenting to or adopting in his capacity as a shareholder of Jinan Youxiantong, Party A’s instructions or requests relating to the operation of Jinan Youxiantong;
 

	
                         
 	
                        5.1.6
 	
                        to treat as Confidential Information the existence of the Agreement and its provisions, and any correspondence, resolutions, attached agreements and other documents in connection with this Agreement;
 

	
                         
 	
                        5.1.7
 	
                        to immediately carry out the Equity Transfer strictly in accordance with Party A’s instruction; 
 

	
                         
 	
                        5.1.8
 	
                        to immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceeding relating to Jinan Youxiantong’s assets, business operation or revenues of which Party B may become aware;
 

	
                         
 	
                        5.1.9
 	
                        to immediately notify Party A in writing of the occurrence of any event which may materially affect Jinan Youxiantong’s assets, liabilities, financial condition or results of operations;
 

	
                         
 	
                        5.1.10
 	
                        that, at Party A’s written request, Party B will, as a shareholder of Jinan Youxiantong, approve any action of Jinan Youxiantong that is not in violation of applicable laws;
 

	
                         
 	
                        5.1.11
 	
                        upon the exercise of the right to purchase the Equity Interest under Article 7.1.3 by Party A, unconditionally and forthwith to transfer the entire Equity Interest owned by Party B in Jinan Youxiantong to Party A or its designated representative (legal or natural). Party B shall also make his best efforts to ensure that the other shareholders of Jinan Youxiantong waive their right to first refusal over the said interest to be transferred to Party A; and
 

	
                         
 	
                        5.1.12
 	
                        in the event that Party A purchases Party B’s Equity Interest pursuant to the Equity Option Agreement, Party B shall first apply any proceeds therefrom to repay the Loan to Party A.
 

 

 

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                        5.2
 	
                        Negative Undertakings
 

Party B hereby undertakes not to engage in any activities related to Jinan Youxiantong and will not approve, in Party B’s capacity as a shareholder, the engagement by Jinan Youxiantong in any activities in the period commencing from the date of this Agreement to the date on which the Loan is fully repaid, unless the prior written instruction of Party A is obtained, and will not in Party B’s capacity as shareholder, approve Jinan Youxiantong’s acquisition of investment in, or merger or consolidation with any party, or any material disposal of assets, without the prior written consent of Party A. 

 

	
                        5.3
 	
                        Appointment of Directors and Senior Management Personnel
 

After the execution of this Agreement, Party B shall nominate persons to be appointed as directors and senior management personnel of Jinan Youxiantong as instructed by Party A. Party B shall, to the extent allowed by applicable PRC Laws, vote its Equity Interest to cause the appointment of the persons nominated by Party B upon the instructions of Party A to hold the positions of directors and senior management of Jinan Youxiantong.

6. EVENT OF DEFAULT

The following matters shall constitute an Event of Default regarding Party B’s Loan under this Agreement: 

	
                        6.1
 	
                        Party B fails to repay the Loan and any other arrears, if applicable, within 10 days after Party A has issued a Repayment Notice in accordance with Article 7.1; 
 

	
                        6.2
 	
                        Party B breaches any of its covenants or other obligations under this Agreement, and such breach has not been remedied within 10 days after receiving Party A’s written notice requiring remedy;
 

	
                        6.3
 	
                        The representations and warranties made by Party B prove to be false or misleading in any material respect;
 

	
                        6.4
 	
                        Party B is unable to perform his obligations under this Agreement because of his death, emigration, change of citizenship, loss of capacity to act, or any other reason; 
 

	
                        6.5
 	
                        A judgment is entered against Party B according to applicable law involving an amount over 1 million USD, and such judgment could have an adverse effect on the performance of Party B’s obligations under this Agreement;
 

	
                        6.6
 	
                        Party B is charged with a criminal offence;
 

	
                        6.7
 	
                        Any third party threatens or institutes a court action against Party B claiming an amount more than 1 million USD;
 

	
                        6.8
 	
                        Foreign investors are permitted to invest in the business of value-added telecommunications and the relevant authorities approve the establishment of such businesses in accordance with PRC Laws; 
 

 

 

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                        6.9
 	
                        The commencement of a proceeding against Party B under any applicable bankruptcy, insolvency, reorganization, court mediation or other similar law; 
 

	
                        6.10
 	
                        Party B makes or attempts to make any fraudulent transfer of the Equity Interest;
 

	
                        6.11
 	
                        Party B relinquishes all or any part of the Equity Interest or transfers or assigns all or any part of the Equity Interest without the prior written consent of Party A (except the transfers or assigns permitted hereunder and under the Equity Option Agreement);
 

	
                        6.12
 	
                        any indebtedness, guarantee or other obligation of Party B, whether pursuant to a contract or otherwise, (i) is accelerated as a result of a default thereunder and is required to be repaid or performed prior to the scheduled date; or (ii) has become due and is not repaid or performed as scheduled and thereby causes Party A to regard Party B’s capacity to perform the obligations specified herein as having been adversely affected;
 

	
                        6.13
 	
                        Party B is incapable of repaying his debts as they become due; 
 

	
                        6.14
 	
                        The Agreement is illegal as a result of any applicable laws or Party B is restricted from continuing to perform its obligations as specified herein; 
 

	
                        6.15
 	
                        any approval, permits, licenses or authorization from any applicable governmental entity (and registration or filing procedure) required for Jinan Youxiantong to provide value added telecommunications services in respect of its information services business  via the Internet in the PRC are withdrawn, suspended, invalidated or materially amended; 
 

	
                        6.16
 	
                        Any approval, permits, licenses or authorization from any applicable government authority required to perform this Agreement or make this Agreement enforceable, legal and valid are withdrawn, suspended, invalidated or materially amended;
 

	
                        6.17
 	
                        Any property owned by Party B is altered or damaged and thereby causes Party A to deem that the capability of Party B to perform the obligations stated herein have been adversely affected; or
 

	
                        6.18
 	
                        Party B defaults under either of the Equity Pledge Agreement or the Equity Option Agreement.
 

 

 

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7. ENFORCEMENT

	
                        7.1
 	
                        Repayment of Loan
 

	
                         
 	
                        7.1.1
 	
                        Upon the occurrence of either an Event of Default or a decision by Party A, in its sole discretion, to demand repayment of the Loan or any portion of the Loan, Party A may at its discretion issue a notice (Repayment Notice) to Party B requiring repayment of the Loan or any portion of the Loan and any other payment in arrears under this Agreement. 
 

Party B shall repay the Loan by transferring the Equity Interest to Party A or Party A’s designee(s), as directed by Party A, by signing and delivering an agreement for the transfer of the Equity Interest substantially in the form set out in Appendix A (Equity Transfer Agreement).

	
                         
 	
                        7.1.2
 	
                        If Party B fails to comply with its repayment obligations under this Agreement, late payment interest shall be assessed at the rate of 0.05% per day upon the outstanding amount of the Loan and shall be payable from the Repayment Date until the date on which the total amount of the overdue loan, overdue interest and other monies payable to Party A are fully settled.
 

	
                        7.2
 	
                        Notification
 

Party B shall immediately notify Party A in writing of the occurrence of any event set forth in Article 6 or any circumstance which may lead to the occurrence of any such event as soon as Party B knows or is aware of such event or circumstance. 

8. INDEMNITY

	
                        8.1
 	
                        Indemnification
 

Party A agrees to indemnify and hold harmless Party B for any direct damages, fines or penalties incurred solely in his capacity as a shareholder directly as a result of the operation of the Jinan Youxiantong business in contravention of applicable laws; provided, however, that in no instance will Party A provide indemnification if Party B has engaged in fraud or willful misconduct or has breached or is in breach of this Agreement.

9. CONFIDENTIALITY

	
                        9.1
 	
                        Confidential Information  Each party (Receiving Party) shall keep confidential and not disclose to any third party in any manner whatsoever, in whole or in part, any information, including any information obtained by any of its directors, officers, employees, agents, consultants, advisors or other representatives, including legal counsel, accountants, tax specialists and financial advisors in connection with the exercise of such party’s rights under this Agreement, information developed and relating to new products, product plans, product designs, customers, technology, computer codes, trade secrets, pricing, know-how, inventions, techniques, programs, algorithms, schematics,
 

 

 

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documentation, business opportunities, processes, and practices, and information about the other party’s assets and operations that such party has acquired through the negotiations or due diligence or other investigations in connection with this Agreement and the transactions contemplated hereby (collectively, Confidential Information), and Confidential Information may not be used by any party other than in connection with the transactions contemplated by this Agreement. Notwithstanding the foregoing, each party may disclose or use information which:

	
                         
 	
                        9.1.1
 	
                        is proven by reasonable objective evidence to have been already in the Receiving Party’s possession before such disclosure, provided that such information is not known by the Receiving Party to be subject to another confidentiality agreement with, or other obligation of confidentiality to, a party to this Agreement;
 

	
                         
 	
                        9.1.2
 	
                        becomes generally available to the public other than as a result of a disclosure by the disclosing or Receiving Party;
 

	
                         
 	
                        9.1.3
 	
                        becomes available to the Receiving Party on a non-confidential basis from a source which is not known by the Receiving Party to be bound by a confidentiality agreement with, or other obligation of confidentiality to, a party to this Agreement; or
 

	
                         
 	
                        9.1.4
 	
                        is required to be disclosed in connection with compliance with any applicable law or the rules of any governmental entity, provided that the Receiving Party shall cooperate with the disclosing party to minimize the disclosure to the extent practicable, and provided further, that Party A must give prior written consent to any disclosure required of Party B, and Party B will make its best efforts not to comply with any such request for information from any governmental entity in any case in which Party B is notified by Party A that Party A has a good faith belief that such disclosure is not required by PRC law.
 

 

	
                        9.2
 	
                        Duty to Protect. Each party shall deal with Confidential Information so as to protect it from disclosure with a degree of care not less than that used by it in dealing with its own information intended to remain exclusively within its knowledge (and in no event shall it exercise less than reasonable care) and shall take reasonable steps to minimize the risk of disclosure of such Confidential Information and information concerning this Agreement by ensuring that only its officers, directors and employees and the officers, directors and employees of its professional advisers (and no other persons) who have a bona fide “need to know” such Confidential Information for purposes permitted or contemplated hereby (Authorized Persons), shall have access thereto, and shall cause such Authorized Persons to treat such Confidential Information in confidence as provided herein. All Confidential Information remains the property of the disclosing party. Upon expiry or termination for any reason of this Agreement, the Receiving Party shall promptly return to the disclosing party all originals and copies of any material in any form containing or representing the Confidential Information, including all computer codes, discs, drawings, specifications, manuals and other printed or reproduced material (including information stored 
 

 

 

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on machine readable media), or shall destroy, to the extent practicable, the same at the request of the disclosing party.

	
                        9.3
 	
                        Permitted Disclosure  This Agreement or its contents may be disclosed as required by law or the rules of any securities exchange or any governmental entity to which the disclosing party is subject, as contemplated by Article 9.1.4, or submits or as necessary for confirming the application of such law or rules, provided that the disclosing party shall use its reasonable efforts to secure that its contents be held confidential and will only disclose such information after notice to, and consultation with, the other party, to the extent practicable.
 

	
                        9.4
 	
                        Survival of Confidentiality  The undertakings in connection with Confidential Information set forth in this Article 9 shall survive for 5 years after the termination or expiration of this Agreement.
 

10. SUPPLEMENTARY PROVISIONS

	
                        10.1
 	
                        Notice  All notices or other communications required or permitted to be given under this Agreement shall be in writing in English and shall be deemed to have been duly given and received on the date delivered by hand or by courier service such as Federal Express, or by other messenger (or, if delivery is refused, upon presentment) or upon receipt by facsimile transmission (provided, that a copy of such facsimile and transmission confirmation is delivered by means other than facsimile within 5 days of the delivery of the facsimile), or upon delivery by registered or certified mail (return receipt requested), postage prepaid, to the parties as follows:
 

	
                         
 	
                        If to Party A:
 

	
                        Address:
 	
                        [•]
 
	
                        Tel:
 	
                        [•]
 
	
                        Fax:
 	
                        [•]
 
	
                        Attn:
 	
                        [•]
 

If to Party B:

	
                        Address:
 	
                        [•]
 
	
                        Tel:
 	
                        [•]
 
	
                        Fax:
 	
                        [•]
 
	
                        Attn:
 	
                        [•]
 

or, as to each party, at such other address or number as shall be designated by such party in a notice to the other party containing the new information in the same format as the information set out above.

 

	
                        10.2
 	
                        Governing Law
 

This Agreement shall be interpreted, construed and enforced in accordance with the law of the PRC, without reference to or inclusion of the principles of choice of law or conflicts of law of that jurisdiction. It is the intent of the parties that the substantive law of the PRC governs this Agreement and not the law of any other jurisdiction incorporated through choice of law or conflicts of law principles.

 

 

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                        10.3
 	
                        Dispute Resolution
 

	
                         
 	
                        10.3.1
 	
                        If any dispute arises out of or in connection with this Agreement, the parties shall attempt in the first instance to resolve such dispute through friendly consultation or mediation.
 

	
                         
 	
                        10.3.2
 	
                        If the dispute cannot be resolved in the above manner within 30 days after the commencement of consultations, either party may submit the dispute to arbitration as follows:
 

	
                         
 	
      10.3.2.1
 	
                        All disputes arising out of, or in regard to this Agreement shall be submitted to China International Economic and Trade Arbitration Commission which shall be conducted by three (3) arbitrators in Beijing in accordance with the Commission’s arbitration rules;
 

	
                         
 	
      10.3.2.2
 	
                        The arbitration shall be conducted in the Chinese language, with the arbitral award being final and binding upon the Parties. The cost of arbitration shall be allocated upon the determination of the arbitrators. 
 

	
                         
 	
                        10.3.3
 	
                        When any dispute is submitted to arbitration, the parties shall continue to perform their obligations under this Agreement, unless the disputes are related to the effectiveness or the termination of the Agreement.
 

 

	
                        10.4
 	
                        Amendment or Supplement
 

This Agreement shall be amended or supplemented only by a written instrument signed by each of the parties. The parties shall each obtain all requisite authorizations and approvals from the relevant authorities to give effect to the amendment or supplement.

	
                        10.5
 	
                        No Waiver
 

Unless otherwise agreed upon by the parties in writing, any failure or delay on the part of either party to exercise any right, authority or privilege under this Agreement, or under any other agreement relating hereto, shall not operate as a waiver thereof; nor shall any single or partial exercise of any right, authority or privilege preclude any other future exercise thereof.

	
                        10.6
 	
                        Severability
 

The provisions of this Agreement are severable from each other. The invalidity of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. No breach, default or threatened breach of this Agreement by either party shall relieve the other party of its obligations or liabilities under this Agreement with respect to the protection of 

 

 

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Page 13

the property or proprietary nature of any property which is the subject of this Agreement.

	
                        10.7
 	
                        Successors
 

This Agreement shall be valid and binding on the parties hereto, their successors and permitted assigns. 

	
                        10.8
 	
                        Assignment
 

Party A may transfer or assign any or all of its rights and obligations under this Agreement to any of its Designated Parties (natural person or legal entity) at any time. In such circumstances, the transferee or assignee shall enjoy and undertake the same rights and obligations herein of Party A as if the transferee or assignee is Party A hereunder. When Party A transfers or assigns the rights and obligations under this Agreement, at the request of Party A, Party B shall execute the relevant agreements and/or documents with respect to such transfer or assignment.

	
                        10.9
 	
                        Entire Agreement
 

This Agreement, the Exclusive Services Agreement, dated July 20th, 2007 between Jinan Youxiantong and WFOE,  the Equity Pledge Agreement, dated July 20th, 2007 between WFOE and Party B, the Equity Option Agreement, dated July 20th, 2007 between WFOE and Party B, the Power of Attorney from Party B in favor of an executive officer of Party A, and the Trustee Arrangement Letter, dated June 30th, 2007 between Party A and Party B shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede any previous discussions, negotiations and agreements related thereto.

 

	
                        10.10
 	
                        Counterparts
 

For the convenience of the parties, this Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute one and the same agreement.

	
                        10.11
 	
                        Language 
 

This Agreement is prepared in 2 sets of originals in English. Each party will retain one set of originals. 

 

 

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IN WITNESS THEREOF, this Agreement shall be executed by the duly authorized representatives of both parties on the date first written above.

Party A: China Cablecom Co., Ltd (Hong Kong)  

 

	
                        Signature:
 	
                        
 /s/ Clive Ng
 	
                         
 	
                         
 	
                          
 
	
                        Name:
 	
                        Clive Ng
 	
                         
 	
                         
 	
                         
 
	
                        Position:
 	
                        Chairman & CEO
 	
                         
 	
                         
 	
                         
 
	
                        Date:
 	
                        June 30, 2007
 	
                         
 	
                         
 	
                         
 

 

Party B:  Liang Yue Jing

 

	
                        Signature:
 	
                        
 /s/ Liang Yue Jing
 	
                         
 	
                         
 	
                          
 
	
                        PRC ID No.:
 	
                         
 	
                         
 	
                         
 

 

 

 

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Appendix A

FORM OF EQUITY TRANSFER AGREEMENT

Capital Contribution Transfer Agreement

[AIC standard form]

 

	
      Transferor: 
 	
                         
 	
                        Liang Yue Jing
 
	
                         
 	
                         
 	
                         
 
	
                        Transferee:
 	
                         
 	
                        China Cablecom Company Limited (Hong Kong)
 

With respect to the Transferor’s capital contribution in Jinan Youxiantong, the Transferor and Transferee enter into the following capital contribution transfer agreement:

	
                        1.
 	
                        The Transferor has agreed to transfer its equity interest in the Jinan Youxiantong, representing a capital contribution of RMB 25,500, to the Transferee;
 

	
                        2.
 	
                        The Transferee has agreed to accept the said equity interest from the Transferor;
 

	
                        3.
 	
                        The equity transfer shall be completed on July 17th. Upon the completion of the equity transfer, the Transferor shall no longer enjoy any rights in or bear any obligations with respect to the transferred equity interest in the Jinan Youxiantong, and the Transferee shall enjoy all such rights in and shall bear all obligations corresponding to the said equity interest. 
 

This agreement shall enter into effect upon the date of its signing by the parties.

 

	
                        Transferor:
 	
                         
 	
                         
 	
                         
 	
                          
 

Date: July 17, 2007

 

	
                        Transferee:
 	
                         
 	
                         
 	
                         
 	
                          
 

Date: July 17, 2007

 

 

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Annex 1

FORM OF UNANIMOUS RESOLUTION OF SHAREHOLDERS’ MEETING

JINAN YOUXIANTONG NETWORK TECHNOLOGY CO., LTD.

(COMPANY)

This written resolution of the shareholders’ meeting of the Company is formally adopted at Jinan on July 17th, 2007 

_________________________________________________________

	
                        1.
 	
                        Attending shareholders:
 

	
                        2.
 	
                        The matters related to the transfer of equity interest provided in the equity transfer agreement entered into between Liang Yue Jing (Transferring Shareholder) and China Cablecom Co., Ltd (Hong Kong) or its Designee (Equity Transfer Agreement) were discussed at the shareholders’ meeting on July 17th, 2007. 
 

	
                        3.
 	
                        The shareholders’ meeting unanimously agrees to make the following resolutions: 
 

	
                         
 	
                        (i)
 	
                        confirm and approve the Equity Transfer Agreement; 
 

	
                         
 	
                        (ii)
 	
                        approve Pu Yue to transfer all or a portion of its equity interest in the Company  in one or more transfer transactions to China Cablecom Co. Ltd. Hong Kong or its Designee pursuant to the provisions of an Equity Transfer Agreement in the form attached; and 
 

	
                         
 	
                        (iii)
 	
                        the shareholders other than the Transferring Shareholder hereby waive their respective right of first refusal under PRC laws regarding the equity interest to be transferred by the Transferring Shareholder of the Company pursuant to the Equity Transfer Agreement.
 

	
                        Signed by:
 	
                         
 	
                         
 	
                         
 	
                          
 
	
                                  Pu Yue
 	
                         
 	
                         
 	
                         
 

 

	
                        Date:
 	
                         
 	
                         
 	
                         
 	
                          
 

 

	
                        Signed by:
 	
                         
 	
                         
 	
                         
 	
                          
 
	
                                  Liang Yue Jing
 	
                         
 	
                         
 	
                         
 

 

	
                        Date:
 	
                         
 	
                         
 	
                         
 	
                          
 

 

 

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Appendix B

FORM OF WAIVER OF RIGHT OF FIRST REFUSAL

WAIVER OF RIGHT OF FIRST REFUSAL

[Statement Provides for Partial Transfers]

	
                        To:
 	
                        China Cablecom Co. Ltd. (Hong Kong)
 

Dear Sir,

I refer to the proposed transfer of 100% of your entire interest in the registered capital of Jinan Youxiantong to China Cablecom Co., Ltd (Hong Kong) or its Designee (Transferee).

I hereby waive any pre-emptive right I may have under PRC laws to acquire the equity interest you propose to transfer to the Transferee and consent to the proposed transfer of the equity interest to the Transferee.

 

Yours faithfully,

 

	
                        Signed by:
 	
                         
 	
                         
 	
                         
 	
                          
 
	
                                  Liang Yue Jing
 	
                         
 	
                         
 	
                         
 

 

	
                        Date:
 	
                         
 	
                         
 	
                         
 	
                          
 
	
              July 17, 2007
 	
                         
 	
                         
 	
                         
 

 

 

Loan Agreement

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