Document:

cogo_8k-ex1003.htm

 

Exhibit 10.3

 

Summary Translation of

Credit Facility Agreement

No.: 102061100317

Note:  This is not a comprehensive translation.

 

The Lender (Party A): Guangdong Development Bank Holdings Co., Ltd., Shenzhen Branch

Legal Representative:  YANG Xiaozhou

Title: Branch Manager

The Borrower (Party B): Comtech Communications Technology (Shenzhen) Co., Ltd.

Legal Representative:  CHEN Jianxiong

Title: General Manager

 

Part I  Basic Terms of Credit Facility

Article 1.  Definitions

1. Comprehensive Credit Line: the credit line Party A extends to Party B, including one or several types of the following: a loan, issuance of banker’s acceptance bill, commercial draft discount, trade finance, guarantee letter, funding business and other types of credit lines.

2. Comprehensive Credit Line Amount: the maximum outstanding balance of the credit line that Party A extends to Party B under this agreement.

3. Maximum Credit Exposure Amount: the amount equal to the maximum outstanding balance of the credit line that Party A extends to Party B, less the outstanding balance of the guarantee deposit.

4. Valid Term of Credit Line: the actual term of the credit line under this agreement.

  

 

  

Article 2.  Amount and Type of Comprehensive Credit Line

1. The Comprehensive Credit Line Amount is stipulated in Article 13 of this agreement.

 

2. The specific type, amount and corresponding terms of the credit line under this agreement are stipulated in Article 22 of this agreement.

3. If the total outstanding balance of the credit line is within the aforesaid maximum credit amount, it is not necessary for Party B to provide the guarantee one at a time.

4. Party A is not obligated to issue the full amount of the aforementioned maximum credit amount. The actual issuance amount shall be based on the amount stipulated in the borrowing certificate or other credit/debt certificates.

Article 3.  Valid Term of Comprehensive Credit Line Amount

The valid term of the Comprehensive Credit Line under this agreement is stipulated in Article 14 of this agreement.

Article 4.  Conditions to Drawdown of Credit Line

In the event all of the conditions set forth below are fulfilled concurrently, Party B may apply to draw down the aforesaid credit line:

1. This Contract, guarantee contracts (if any) and other relevant attachments have become effective.

2. Party B has provided to Party A all the documents, notes, seals and list of personnel and signature samples in connection with the execution and performance of this contract and has filled out necessary forms;

  

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3.        Party B has submitted loan drawdown application and documents evidencing the purpose of the loan and processed relevant drawdown procedures 3 business days in advance.   The purpose of the loan and the term comply with the terms of this agreement.

[4. through 6.]

 7. Other conditions required by Party A.

Article 5.  Interest Rate

 

1. The interest rate of the loan under this agreement is stipulated in Article 15 of this agreement.

2. In the event the interest rate set forth in Article 15 is inconsistent to the interest rate of specific type of credit line, the interest rate of such type of the credit line shall prevail.

Article 6.  Other Expense, Interest Rate and Exchange Rate

The expenses that Party A shall receive under the banker’s acceptance bill, banker’s guarantee letter, international trade finance and other types of credit lines, the discount rate of the draft discount, interest rate and the exchange rate under the import and export negotiation shall be agreed by Party A and Party B in the specific business.

Part II  Guarantee

Article 7.  Guarantee

1. A guarantor shall provide guarantees for the debts that Party B shall repay under this agreement. The specific guarantee is stipulated in Article 19 under this agreement.

2. In the event Party A believes that adverse changes to the guarantee under this agreement occurred or is going to occur, Party A is entitled to request the guarantor to cease such activities. In case the value of collateral decreases, upon the notice of Party A, the guarantor shall restore the value of the collateral, or provide a collateral with the corresponding decreased value. In the event the guarantor neither restores the value of the collateral, nor provides additional guarantee, Party A is entitled to request Party B to repay the debt prior to its maturity.

  

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Part III Representations and Warranties of Party B

Article 8.

1. Party B hereby makes the following representations:

 (1) It is legally incorporated and has right and ability to execute and perform this agreement;

(2) The execution and performance of this agreement are based on the true intent of Party B, and do not violate any agreement, contract or other legal document binding Party B. Party B obtained legal and valid approvals in accordance with its articles of association and other managing documents. Party B obtained or is going to obtain all necessary permissions, approvals, filings or registrations for executing and performing the agreement;

(3) All of the documents, financials, certificates and other information provided by Party B to Party A under this agreement are true, accurate, legal and valid;

(4) The background information of transactions for specific types of credit line that Party B applied is true, legal and not for illegal purposes such as money laundering;

 

(5) Party B did not conceal any events that could affect its or the guarantors’ financial condition and ability to perform the agreement.

2. Party B hereby makes warranties as below:

(1) It shall provide Party A with financial reports (including but not limited to annual reports, quarterly reports and monthly reports) and other relevant information periodically or in time as requested by Party A;

(2) It shall comply with the requests of Party A to provide relevant documents in connection with the loan and cooperate with Party A in regard to the inspection and supervision of the performance, the use of credit lines and funds, the production operations and financial activities. Party B shall promise to cooperate with Party A in connection with the management of loans in accordance with the loan management guideline of China Banking Regulatory Commission or other competent authorities;

  

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(3) Party B promises to pay loan proceeds in accordance with the provisions herein.

(4) Party B promises that, at the time of loan drawdown pursuant to this contract, Party B will promptly and accurately provide all documents in connection with the payment of the loan proceeds as requested by Party A;

(5) If Party B entered into or is going to enter into a guarantee agreement with the guarantor of this agreement to provide the guarantor with the corresponding guarantee, Party B shall warrant such guarantee shall not affect any right of Party A under this agreement

(6) Party B shall obtain the prior consent of Party A, in the event the financial conditions or abilities of performance of Party B and the guarantor under this agreement might be affected. The aforesaid events are including but not limited to the split, merger, co-operating, joint venture, cooperation, outsource, lease, reorganization, reform, plan of going public, transfer of material assets, share transfer, shareholding reform, foreign investment, material debt assumption, debt/ equity financing through the primary market, or attach material debts on the collateral;

(7) Party B shall promptly notify Party A in writing, in the event the financial conditions or abilities of performance of Party B and the guarantor under this agreement might be affected.  The aforementioned events are including but not limited to the foreclosure of the collateral, suspension of business, cessation of operations, dissolution, bankruptcy application, involvement in material litigation or arbitration proceedings, management’s possible engagement in criminal activities, the adverse change of its business operation or financial condition, or Party B’s default under other contracts;

 (8) Party B warrants that its operation and relevant activities comply with the industry policy, tax policy, market standards, environmental evaluations, energy saving, pollution control, land and urban plan, labor protection and relevant regulations. In the event the aforesaid are or might be violated, Party A is entitled to cease issuing loans, accelerate the repayment, dispose the pledged/ mortgaged properties prior to the maturity of loans, and to request Party B to increase the relevant liability insurance in connection with the energy exhaust and pollution;

 

(9) Debts owed to Party A are superior to funds borrowed from shareholders of Party B, and are not subordinated to the similar debts of other creditors;

(10) In the event that the net profit after tax of this fiscal year is zero or negative, or the net profit after tax of this fiscal year is not adequate to compensate the cumulative losses of past years, or the profit before tax is not used to repay the principal, interest or expense that shall be repaid in this fiscal year, or the profit before tax is not adequate to repay the principal, interest and expense of the next installation, Party B shall not distribute dividends;

  

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(11) Party B shall not dispose its own assets to the extent that it would affect its ability to repay the loan, and shall promise its total guarantee amount and each guarantee amount shall comply with the limitation set forth in its articles of association;

(12) Party B warrants to repay the principal and interest of loans on schedule, and bear all expenses and fees under this agreement, including but not limited to the notary fees, legal expenses, attorney fees, or appraisal fees.

3. Authorization of Party B:

(1) Party B authorizes that Party A may submit all of credit information during the term of loan to the Credit Reference Center of the People’s Bank of China or other competent authorities, and that Party A may look up the aforesaid information submitted to such institutions.

(2) Party B authorizes Party A to withdraw the principal, interest, punitive interest, compound interest, penalties and other relevant expenses that should be repaid in accordance with the agreement from the accounts Party B opened with Party A or affiliates of Party A, without the prior consent of Party B.

Part IV Event of Default

Article 9.  Default

1. Anticipating Default

Prior to the issuance of the Facility, the Lender may cease performing its obligations under the agreement in the event of any of the following:

(1) The business operations of Party B severely worsen;

(2) Party B transfers its assets or funds so as to avoid debts;

  

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(3) Damage to the business reputation of Party B;

(4) Party B becomes or appears to become insolvent.

Party A may terminate the agreement if Party B does not regain its ability to perform its obligations and cannot provide guarantees acceptable to Party A within thirty (30) days after Party A ceases performing it obligations.

2. Events of Default

(1) The occurrence of any of the following events shall be deemed a default under the Facility:

(i) Party B does not perform the obligations of payment and repayment under this agreement;

(ii) Party B does not use the funds obtained under the agreement in accordance with the agreed purpose;

(iii) Party B fails to repay the loan in accordance with the provisions herein or tries to avoid Party A's entrusted payment by breaking the whole sum into smaller amounts;

(iv) The representations Party B made under the agreement are not true or Party B violates the promises made under the agreement;

(v) In the event the conditions set forth herein occur, Party A believes that the financial condition and ability of performance of guarantor are affected, and Party B does not change guarantors or provide new guarantees;

(vi) Party B or the guarantor breaches other contracts by and between Party B/the guarantor and Party A or other entities of Party A;

(vii) Party B fails to provide written explanation of the abnormal fund flow in the relevant accounts under this contract within a specified time;

(viii) Party B fails to truthfully provide documents in connection with the loan and the payment of loan proceeds ;

(ix) Party B ceases business operation, dissolves or a bankruptcy event occurs;

(x) Party B and the guarantor breaches other provisions of this contract or the guarantee contract;

  

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Party B violates other covenants related to the rights and obligations under this agreement

(2) If any of events of default occurs, Party A is entitled to take any or all of the following actions:

(i) To change the loan principal payment method;

(ii) To request Party B and the guarantor cure the default within the certain period;

(iii) To decrease, cease or terminate the credit line extended to Party B in whole or in part;

(iv) To cease or terminate the drawdown applications of Party B under this agreement or under other agreements by and between Party A and Party B in whole or in part; to cease or terminate the issuance of loans that have not been issued, or the trade finance that has not been handled in whole or in part;

(v) To accelerate the payment of all principal and interest outstanding under the agreement and under other agreements by and between Party A and Party B, and such sums shall become immediately due;

(vi) To terminate or cancel the agreement and other agreements by and between Party A and Part B in whole or in part;

(vii) To request Party B to indemnify Party A’s loss incurred caused by the default;

(viii) Upon the prior or later notice to Party B, to withdraw the deposits in Party B’s accounts opened with Party A or with other entities of Party A to repay the whole or a part of debts under the agreement;

(ix) To exercise the rights under the mortgage/ pledge;

(x) To request the guarantor to perform the guarantee obligations;

(xi) To adopt more stringent payment management or methods; to monitor the payments of affiliates of Party B; to submit Party B as one on the blacklist to the regulatory authorities and credit reference institutions;

(xii) Other methods that Party A considers to be necessary and feasible.

   (3) In the event Party A is unable to perform its obligations under the agreement due to the changes of the credit policy of the State after the agreement is executed, Party A shall not be deemed to breach the agreement.

  

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Part V Other Covenants

Article 10.  Effectiveness, Change, Cancellation and Termination

1. The agreement become effective as of the date each party signs off and seals the agreement (any mortgage and pledge become effective as of the date the registrations of such mortgage and pledge are completed), and is terminated upon the date that all of the principal, interest, compound interest, punitive interest and other related expenses are repaid.

Article 11.  Notarization

Article 12.  Special Reminder

Party A has reminded Party B with regard to all of waivers or limitation of obligations, and fully explained the provisions of this agreement to Party B.

Part VI  Terms of Specific Type of Credit Line

Article 13.  Credit Line

1. The Maximum Credit Amount (including guarantee deposits) is USD 30 Million even.

2. Under the specific type of the credit line, Party B may use other currencies. If the other currency is used, the credit line shall be calculated based on the mid price of exchange rate published by Party A as of the occurrence of the specific type.

  

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3. The Comprehensive Credit Line is revolving.

Article 14.  Valid Term of Credit Line

The valid term of the Comprehensive Credit Line under this agreement is twelve (12) months commencing November 9, 2010 through November 8, 2011.

Article 15.  Interest Rate of Calculation of Interest

1. The interest rate of loan is a floating rate. The interest rate of the initial installation is the benchmark rate of the People’s Bank of China with the corresponding term of the specific loan under the agreement.

2. The interest rate shall be stipulated in the borrowing certificate.

3. Formula of Calculation of Interest:

4. Interest Rate=Principal x Actual Days of The Loan x Daily Interest Rate

5. Daily Interest Rate=Yearly Interest Rate/ 360

6. The interest is calculated monthly, the interest settlement date is the 20th day of every month, the 21st day of every is the interest payment date.

7. In the event Party B does not repay on schedule, Party A shall receive the daily punitive interest for the deferral portion commencing the deferral date till the principal and interest are repaid. The punitive interest rate for deferral is the interest rate set forth in Article 1 plus 50%.

8. In case the loan is not used in compliance with its purpose, Party A shall receive the punitive interest commencing the misuse date, till the principal and interest are repaid. The punitive interest rate for misuse is the interest rate set forth in Article 1 plus 100%.

  

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9. For a loan that is misused and deferred, the punitive interest rate shall be based on the interest rate of the punitive interest rate for misuse of the loan.

10. In the event Party B does not pay the interest on schedule, Party A shall receive compound interest on such interest.

Article 16.  Payment and Management of Loan Proceeds

Article 17.  Capital Return Management

Article 18.  Repayment

Article 19.  Guarantee

Under the maximum guarantee amount, Party A and the guarantors enter into the guarantee contracts as below:

1. Maximum Rights Pledge Contract 102061100317-1, by and between Party A and Comtech Communication Technology (Shenzhen) Co., Ltd., dated November 9, 2010.

Article 20.  Extension of Credit Line

Article 21.  Disclosure of Related Party Transaction

Article 22.  Governing Law and Dispute Resolution

    1. Governing Law: the laws of the People’s Republic of China

  

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2. Dispute Resolution: any dispute shall be submitted to the People’s Court.

Article 23.  Miscellaneous

Article 24.  Other Covenants

The term of each Letter of Guarantee shall not exceed one year.

Article 25.  Specific Type of Credit Line and Terms

Amount of Letter of Guarantee/Standby Letter of Credit

1. Party B will provide relevant documents to Party A and Party A, upon reviewing such documents and approval, agrees to issue Letter of Guarantee/Standby Letter of Credit.  The Letter of Guarantee/Standby Letter of Credit includes but is not limited to compliance, tender, payment, advances, quality/asset preservation and loan.

2. The maximum amount granted of the Letter of Guarantee/Standby Letter of Credit is: US$ 40 million (including security deposit) and the amount can be used on a revolving basis.

3. If the Letter of Guarantee/Standby Letter of Credit specified herein is inconsistent with the Letter of Guarantee/Standby Letter of Credit actually issued, the Letter of Guarantee/Standby Letter of Credit actually issued shall prevail.  Party B shall not refuse to perform, or delay the performance of, its obligations hereunder on the grounds of such inconsistency between Guarantee/Standby Letter of Credit specified herein and the Letter of Guarantee/Standby Letter of Credit actually issued.  The actual beneficiary, amount, valid period and terms of such Letter of Guarantee shall be based on such Letter of Guarantee actually issued by Party A to the outside party.

4. Fees for the issuance of  Letter of Guarantee/Standby Letter of Credit:

Party B shall pay a one-time processing fee at the rate of 0.175% of the amount of the Letter of Guarantee.

Party B authorizes Party A to deduct the said fee directly from the account it set up with Party A (Account number: 102061517010003685)

  

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5. Security Deposit

6. External Compensation and Interest

 

(1) If the beneficiary of the Letter of Guarantee/Standby Letter of Credit raises claims for compensation during the effective period of such Letter of Guarantee/Standby Letter of Credit, Party A has the sole right to review and determine if the claim and the amount claimed are comply with the terms of the Letter of Guarantee/Standby Letter of Credit.

 

The compensation by Party A to the outside party does not require Party B's prior consent.  Party B promises that Party B will not raise any objection to Party A's determination and the compensation made by Party A, will unconditionally repay the amount of compensation made by Party A to the outside party and will assume all loss thus incurred by Party A.

(2) During the course of performing its obligation for guarantee, Party A has the right to deduct the corresponding amount from Party B's security deposit account or other bank accounts; if the amount deducted is insufficient, Party A will make advances for the balance.  The amount of such advance constitutes Party B's debt obligation to Party A and Party B must pay it off promptly.  Party A has the right to charge interest at the past-due interest rate specified below starting on the day when such advance is made:

(a) If the advance is made in RMB, such advance will be converted into past due loan starting on the day when such advance is made, and Party A has the right to charge interest on the advance starting on the day when such advance is made at the daily rate of 0.05% and to charge a daily compound rate on the interest not paid on time.

(b) If the advance is made in a foreign currency, such advance will be converted into past due loan starting on the day when such advance is made, and Party A has the right to charge interest on the advance starting on the day when such advance is made at the daily rate of 0.05% and to charge a daily compound rate on the interest not paid on time.

(3) During the course of performing its obligation for guarantee toward the beneficiary, Party A is only responsible for processing the documents of proof or notes specified in the Letter of Guarantee and shall bear no responsibility for any base contract involved and the authenticity of the documents of proof or notes provided by the beneficiary.  The Letter of Guarantee and the base contract based on which such Letter of Guarantee is issued are independent transactions; even if there are any references to such contract in the Letter of Guarantee, Party A has no relation to such contract.  Party A's promise to fulfill its obligation under the Letter of Guarantee shall not be affect by any claim arising from the relationship between Party B and the beneficiary nor by any defense of act of performance.

7. After Party A issues the Letter of Guarantee/Standby Letter of Credit based on Party B's application, Party B agrees to compensate and indemnify Party A for any risk, responsibility or loss to which Party A may consequently be exposed; the cause of such risk, responsibility or loss includes but is not limited to the Letter of Guarantee/Standby Letter of Credit itself and the exchange of business information in connection therewith.

 

 

  

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8. if any amendment to, or the performance of, the base contract based on which the Letter of Guarantee/Standby Letter of Credit is issued affects Party A's performance of its obligation for guarantee in any way, Party B must immediately notify Party A in advance.  If Party A believes that the amended base contract has increased, or will potentially increase, Party A's obligation for guarantee, Party A has the right to demand Party B to increase counter-guarantee approved by Party A; as long as Party A makes any compensation to the outside party under the Letter of Guarantee/Standby Letter of Credit, Party B shall have the obligation to compensate Party A in full, even if there is fraud on the part of the beneficiary or the base transaction under the base contract fails to be executed or become effective, is invalid or partially invalid or is dissolved.

9. If the payment of interest, taxes, the fluctuation of foreign currency rate, the provisions of the law (including foreign laws), judgment of the court or arbitration cause the amount of compensation made by Party A to the outside party under the Letter of Guarantee/Standby Letter of Credit to exceed the amount of such Letter of Guarantee/Standby Letter of Credit or cause such payment of compensation to be made after the expiration of such Letter of Guarantee/Standby Letter of Credit, Party B shall still compensate Party A in full.

10. Party B shall bear all responsibility for any loss of documents, information delay or change or other errors arising from the course of postal mail or communication.  If the Letter of Credit is to be issued in English, Party B must provide the application to Party A in English and Party A shall bear no responsibility for any error or inconsistencies arising from the translation thereof.

11. During the course of performing its obligation for guarantee toward the beneficiary, Party A is only responsible for processing the documents of proof or notes specified in the Letter of Guarantee and shall bear no responsibility for any base contract involved and the authenticity of the documents of proof or notes provided by the beneficiary.  The Letter of Guarantee and the base contract based on which such Letter of Guarantee is issued are independent transactions; even if there are any references to such contract in the Letter of Guarantee, Party A has no relation to such contract.  Party A's promise to fulfill its obligation under the Letter of Guarantee shall not be affect by any claim arising from the relationship between Party B and the beneficiary nor by any defense of act of performance.

12. At the time of issuing an international Letter of Guarantee, Party A has the right to determine in its sole discretion whether to make, or to refuse to make, the payment with regard to the beneficiary's claim in accordance with the applicable international customs or law without the need to obtain prior written or oral consent from Party B nor the need to consider if whether Party may cite any defense available to Party B under the base contract toward the beneficiary or other claimant.  Party B shall not refuse to perform its obligations for compensation under the Letter of Guarantee on the grounds of any circumstances in the performance of the base contract or of the authenticity of the documents and notes provided by the beneficiary.

  

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Party A: /seal/ Guangdong Development Bank Holdings Co., Ltd., Shenzhen Branch

Legal Representative: /personal seal/ YANG Xiaozhou

Date:December 7, 2010

Party B: /seal/ Comtech Communications Technology (Shenzhen) Co., Ltd.

Legal Representative:  /s/ CHEN Jianxiong

Date:December 7, 2010

 

 

 

 

 

15cogo_8k-ex1004.htm

 

Exhibit 10.4

 

 

 

Summary Translation of

Maximum Rights Pledge Contract

No.: 102061100317-1

 

Note:  This is only a summary translation.

 

Pledgee (Party A):  Guangdong Development Bank Holdings Co., Ltd., Shenzhen Branch

Legal Representative:  YANG Xiaozhou

Title: Branch Manager

 

Pledgor (Party B):  Comtech Communication Technology (Shenzhen) Co., Ltd.

Legal Representative:  ZHAO Bingfu

Title: Chief Financial Officer

 

To assure the fulfillment of the debt obligation under the principal contract stipulated in Article 1 of this contract, Party B is willing to provide guarantee to Party A.  Unless otherwise provided in this contract, the interpretation of the terms used herein follows the definitions in the principal contract.

 

	
Article 1.

	
Principal Contract

 

Credit Facility Agreement (No. 102061100317) by and between the debtor of the principal contract and Party A of this guarantee contract, dated November 9, 2010

 

	
Article 2.

	
Maximum Guaranteed Amount

 

The maximum guaranteed amount under this contract is the sum of the following two items:

 

	
  

	
1.

	
The maximum outstanding balance of the principal of the guaranteed debts:

 

US$ 21,350,000.00

 

	
  

	
2.

	
All of the amount, fees and expenses stipulated in Article 4 of this contract

 

	
Article 3.

	
Pledged Rights

 

	
  

	
1.

	
See “List of Pledged Rights” provided by Party B.

 

	
  

	
2.

	
The yields on the pledge hereunder and pledged rights listed in “List of Pledged Rights” (including but not limited to interests, dividends, bonus, share allotment, share distribution, licensing fees of patents and trademarks and copy right use fees) and all subordinated rights.  Party A has the right to receive the yields on the pledged rights mentioned above and the subordinate rights.

 

	
  

	
3.

	
Subrogation for the pledge hereunder and pledged rights, including but not limited to insurance, compensation or reimbursement or sales consideration of the pledged rights.

  

 

  

 

	
  

	
4.

	
The value of the pledged rights specified in “List of Pledged Rights” is not the basis on which Party A shall use to dispose the pledged rights pursuant to the provisions herein nor does it constitute any restriction on Party A’s exercise of its pledgee’s rights.

 

	
Article 4.

	
Scope of Pledge Guarantee

 

The scope of pledge guarantee include the principal, interest, compound interest, punitive interest, penalties, indemnifications, all fees associated with exercising a claim (including but not limited to litigation fees, arbitration fees, attorneys fees, travel expenses, execution fees, security fees, appraisal fees, auction or sales fees, transfer fees, advertising fees, etc) and any other fees due under the principal contract.

 

	
Article 5.

	
Delivery and Safekeeping of the Certificates of the Pledged Rights

 

	
  

	
1.

	
Upon the execution of this contract, Party B must deliver certificates of the pledged rights and other relevant documents to Party A for safekeeping.

 

	
  

	
2.

	
Party A must properly maintain such certificates of the pledged rights.

 

	
  

	
3.

	
Upon the occurrence of any event, for any reason not attributable to Party A, that may significantly reduce the value of the pledged rights, so much that it will harm Party A’s rights, Party A has the right to demand Party B to provide corresponding guarantee.

 

	
Article 6.

	
Registration of the Pledged Rights

 

	
Article 7.

	
Insurance

 

	
Article 8.

	
Realization of the Pledgee’s Rights

 

	
  

	
1.

	
After obtaining Party A’s written approval, Party B may transfer to a third party, or license to a third party, the pledged rights hereunder; however, all proceeds of the transfer consideration or licensing fees shall be first used to repay the claims under the guarantee or be put in an escrow with a thirty party that Party A approves.

 

	
  

	
2.

	
Party A can use the amount of acceptance fulfillment or the goods received (if such rights are pledged) to repay the debts under the guarantee, or deposit them with a third party approved by Party A with PB bearing all the associated fees.

 

	
  

	
3.

	
If, after the maturity of the debts obligation, the debtor fails to repay debts, thus causing the pledged rights to be sealed or retained by the people's court, Party A has the right to charge the natural yields or statutory yields on such pledged rights starting from the date of such seal or retention.

 

	
  

	
4.

	
Party A has the right to dispose of the pledged rights and use the proceeds from such disposal to be repaid first upon the occurrence of any of the following: dissolution of the principal contract pursuant to the provisions therein or to the law; the debt obligation have been accelerated due to the circumstances set forth in the principal contract.

  

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5.

	
If the claims under the guarantee are guarantee by both property security and by personal guarantee, and the debtor fails to repay the matured debts or any of the circumstances stipulated between the parties hereto occurs that triggers the exercise of its right to realize its claims, Party A has the right to choose the exercise of the right to the property security or to demand the guarantor to assume its responsibility for guarantee.

 

 

	
Article 9.

	
Representations and Warranties

 

Party B hereby makes representations and warranties as below:

 

	
  

	
1.

	
If Party B is a legal entity or an organization, it is legally incorporated and registered and has right and ability to execute and perform this contract;

 

	
  

	
2.

	
Party B guarantees that there are no joint owners of the pledged rights or, if there are, that Party B has already obtained the written consent from such joint owner.  Party B promises to provide such consent to Party A for safekeeping prior to the execution of this contract;

 

	
  

	
3.

	
Party B comprehends completely the content of the principal contract and the execution and fulfillment of this contract is based on Party B’s bono fide expression of intent and on the legitimate and valid authorization secured in accordance with the requirements of its articles of association or other internal management documents.

In case the guarantor is a company, the guarantee provided has been approved by the board of directors, or shareholders in accordance with its articles of association.  If its articles of association has limit on the maximum total amount of the guarantee or the amount of each guarantee, Party B warrants that the guarantee under this contract does not exceed such limit set forth in the articles of associations.

The legal representative or authorized agent who executed this contract on behalf of Party B has legitimate and valid authorization from the company; the execution and fulfillment of this contract will not constitute a violation of any contract, agreement or other legal documents that are binding to Party B;

 

	
  

	
4.

	
All the documents and materials provided by Party B to Party A are accurate, authentic, complete and valid.

 

	
  

	
5.

	
As of the date of execution of this contract, Party B has not concealed any existing security interest on the pledged rights;

  

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6.

	
If any security interest is established on the pledged rights or the pledged rights are involved in major litigation or arbitration, Party B must notify Party A promptly.

 

	
Article 10.

	
Contracting Negligence

 

After the contract is executed, if Party B refuses to process, or delays, the procedures of registration of the pledged rights or for any other reason on the part of Party B, the contract cannot take effect, it shall be contracting negligence of Party B, and Party B shall assume liability to compensate Party A for any consequent loss.

 

	
Article 11.

	
Disclosure of Related Party Transaction

 

 

	
Article 12.

	
Rights and Obligations of Party A

 

	
  

	
1.

	
Has the right to dispose the pledged rights hereunder if, upon the expiration of the principal contract, the debtor fails to repay debt principal, interests and other corresponding fees pursuant to the provisions therein.

 

	
  

	
2.

	
Has the right to demand Party B to take actions to prevent the pledged rights from being harmed by any third party.

 

	
  

	
3.

	
If equity rights are pledged, Party A has the right to know and enquire about Party B’s corporate operation activities and attend relevant board meetings or shareholder meetings.

 

4.           Has the obligation to properly maintain the certificates of the pledged rights.

 

	
  

	
5.

	
Within the effective period of this contract, Party A shall issue written notification promptly to Party B if Party A transfers, in accordance to the law, the principal claim of debt to a third party.

 

	
  

	
6.

	
If the debtor under the principal contract repay the debts according to the schedule specified or in advance, Party A must return certificates of the pledged rights and other relevant documents to Party B.

 

	
  

	
7.

	
Other rights or obligations pursuant to the law or the provisions herein.

 

 

	
Article 13.

	
Rights and Obligations of Party B

 

	
  

	
1.

	
Party B shall still bear joint and several liability within the original scope of guarantee stipulated in this contract if Party A transfers its claim of debt under the principal contract to a third party this contract becomes effective.

  

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2.

	
The agreement to amend the principal contract between Party A and the debtor under the principal contract does not require Party B’s consent, unless such amendment increases Party B’s liability under guarantee (with the exception of interest adjustment already provided), and Party B shall still bear guarantee liability within the scope of guarantee stipulated in this contract.

 

	
  

	
3.

	
The damage compensation and reimbursement received by Party B from a third party or from the State for appropriation must first be subrogated to the pledged rights to be used to pay off Party A or be escrowed.

 

	
  

	
4.

	
No drafts, checks, promissory notes, debentures, deposit slips, warehouse notes and delivery bill that are used as records of acceptance or delivery date shall be reported missing or lost during the effective period of the guarantee; and Party B must issue written documents to notify the relevant issuing bank or individual, lender and escrow agents.

 

	
  

	
5.

	
Party B shall not transfer or allow others to use the pledged rights hereunder without Party A's approval.

 

	
  

	
6.

	
After this contract has become effective, Party B must make proper arrangements for its pledge obligations hereunder if Party B undergoes spin-off, merger or equity restructuring.

 

	
  

	
7.

	
If Party A's pledgee's rights are or are likely to be harmed by a third party, Party B has the obligation to notify Party A and prevent Party A's rights from being harmed.

 

	
  

	
8.

	
Party B must notify Party A promptly in writing upon the occurrence of any of the following: changes in the operation structure, such as contracting operation, lease, joint operation, merger, spin-off, equity restructuring, joint venture with foreign enterprises; increase/decrease of registered capital or changes in the scope of operations; involvement in major economic disputes or litigation; disputes about the pledged rights; bankruptcy, going out of business, dissolution, forced shutdown, revocation of business license; change of address, telephone number and legal representative and others.

 

	
  

	
9.

	
Party B agrees that, if Party B fails to notify Party A of any change of contact information, all documents will be considered received if they are sent to the address specified herein.

 

	
  

	
10.

	
Party B has the right to demand the return of all certificates of the pledged rights after the debtor under the principal contract has repaid all the debts.

 

	
  

	
11.

	
Other rights or obligations pursuant to the law or the provisions herein.

  

5

  

 

	
Article 14.

	
Assumption of Fees

 

Party B shall be responsible for all the fees in connection with the execution and performance of this contract and with the resolution of disputes arising from this contract, unless otherwise stipulated.

 

	
Article 15.

	
Event of Default

 

	
  

	
1.

	
Party B violates the provisions herein and transfers without authorization or disposes in any means, either in whole or in part, the pledged rights;

 

	
  

	
2.

	
Party B impedes by any means Party A's disposal of the pledged rights pursuant to this contract or law;

 

	
  

	
3.

	
When the value of the pledged rights hereunder is reduced or damaged, Party B refuses to provide additional corresponding guarantee as requested by Party A;

 

	
  

	
4.

	
The representation made by Party B in this contract is not authentic or Party B violates the warranties made under this contract;            Party B’s cessation of operation or its dissolution, dismantlement or bankruptcy; The occurrence of any event described in Section 6 of Article 7 that adversely affects Party B’s financial situation and its ability to perform this contract

 

	
  

	
5.

	
Violation by Party B of other provisions of this contract;

 

	
  

	
6.

	
Party B terminates its operations or is dissolved, its business license revoked or is bankrupt;

 

	
  

	
7.

	
The occurrence of events of default under by Party B under other contracts by and between Party B and Party A or other entities of Party A;

 

If any of events of default occurs, Party A is entitled to take any or all of the following actions:

 

	
  

	
1.

	
To request Party B to cure the default, and perform its guarantee obligations in time;

 

	
  

	
2.

	
To decrease, cease or terminate the credit line extended to Party B in whole or in part;

 

	
  

	
3.

	
To cease or terminate the business applications of Party B under this contract or under other contracts by and between Party A and Party B in whole or in part; to cease or terminate the issuance of loans that have not been issued, or the trade finance that has not been handled in whole or in part;

 

	
  

	
4.

	
To accelerate the payment of all principal and interest outstanding under other contracts by and between Party A and Party B, and such sums shall become immediately due;

  

6

  

 

	
  

	
5.

	
To terminate or cancel this contract and other contracts by and between Party A and Part B in whole or in part;

 

	
  

	
6.

	
To request Party B to indemnify Party A’s loss caused by the default;

 

	
  

	
7.

	
Exercise Party A's pledgee's rights;

 

	
  

	
8.

	
Other methods that Party A considers to be necessary.

 

 

	
Article 16.

	
Effectiveness, Change, Cancellation and Termination

 

	
  

	
1.

	
The contract becomes effective upon execution of the two parties and the contract ends after the repayment of all the principal under the principal contract and its associated interest, punitive interest, compound interest, penalties, indemnifications, fees for realizing claims and all other fees due.

 

	
  

	
2.

	
The contract, upon effectuation, is legally binding to each party’s legal successors and assigns.

 

	
  

	
3.

	
This guarantee contract is independent from the principal contract, and shall not become void in the event the principal contract becomes null.

 

 

	
Article 17.

	
Notarization

 

	
Article 18.

	
The Status of This Contract

 

This contract is independent of the principal contract and its effectiveness shall not be affected by the determination of invalidity, in whole or in part, of the principal contract.

 

	
Article 19.

	
Governing Law and Dispute Resolution

 

	
  

	
1.

	
Governing Law: the laws of the People’s Republic of China

 

	
  

	
2.

	
Dispute Resolution: through negotiations. In the event the both parties fail to reach agreements through negotiation, both parties hereby agree to use the same dispute resolution set forth in the principal contract.

 

	
Article 20.

	
Special Statement

 

	
  

	
1.

	
Party B acknowledges that all the provisions under this contract have been  thoroughly negotiated among all parties; that it understands all of the contents of the contract; that the contract does not contain circumstances that limit or waive its liabilities and that it has not disputes with any of the provisions.

  

7

  

 

	
  

	
2.

	
Party B authorizes that Party A may submit all of credit information during the term of loans (or credit lines) to the Credit Reference Center of the People’s Bank of China or other competent authorities, and that Party A may look up the aforesaid information submitted to such institutions.

 

	
Article 21.

	
Miscellaneous

 

 

	
Article 22.

	
Other Covenants

 

Party A:  Guangdong Development Bank Holdings Co., Ltd., Shenzhen Branch

Legal Representative/ Authorized Person:  /personal seal/ YANG Xiaozhou

Date: December 7, 2010

 

Party B:  Comtech Communication Technology (Shenzhen) Co., Ltd.

Legal Representative/ Authorized Person:  /s/ ZHAO Bingfu

Date: December 7, 2010

 

Attachment 1: "List of Pledged Rights"

 

 

 

 

 

 

 

 

 

 

 

 

8

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