Document:

Exhibit 4.2

 

CERTIFICATE OF DESIGNATION

 

of

 

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

 

of

 

LONE PINE RESOURCES INC.

 

Pursuant to Section 151 of the General Corporation
 Law of the State of Delaware

 

Lone Pine Resources Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), in accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:

 

That pursuant to the authority vested in the Board of Directors of the Corporation (the “Board of Directors”) in accordance with the provisions of the Amended and Restated Certificate of Incorporation of the said Corporation (the “Certificate of Incorporation”), the said Board of Directors on May 11, 2011 adopted the following resolution creating a series of 2,000,000 shares of Preferred Stock designated as “Series A Junior Participating Preferred Stock”:

 

RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of the Certificate of Incorporation, a series of Preferred Stock, par value $0.01 per share, of the Corporation be and hereby is created, and that the designation and number of shares thereof and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series and the qualifications, limitations and restrictions thereof are as follows:

 

Series A Junior Participating Preferred Stock

 

1.             Designation and Amount.  There shall be a series of Preferred Stock that shall be designated as “Series A Junior Participating Preferred Stock,” and the number of shares constituting such series shall be 2,000,000.  Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, however, that no decrease shall reduce the number of shares of Series A Junior Participating Preferred Stock to less than the number of shares then issued and outstanding plus the number of 

 

 

shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation.

 

2.             Dividends and Distributions.

 

(a)           Subject to the prior and superior rights of the holders of any shares of any class or series of stock of the Corporation ranking prior and superior to the shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock, in preference to the holders of shares of any class or series of stock of the Corporation ranking junior to the Series A Junior Participating Preferred Stock in respect thereof, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first of March, June, September and December, in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10.00 or (b) the Adjustment Number (as defined below) times the aggregate per share amount of all cash dividends, and the Adjustment Number times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock, par value $0.01 per share, of the Corporation (the “Common Stock”), or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock.  The “Adjustment Number” shall initially be 1,000.  In the event the Corporation shall at any time after May 11, 2011 (i) declare and pay any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

(b)           The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).

 

(c)           Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date; in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the

 

 

determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear interest.  Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.  The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the date fixed for the payment thereof.

 

3.             Voting Rights.  The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights:

 

(a)           Each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to a number of votes equal to the Adjustment Number on all matters submitted to a vote of the stockholders of the Corporation.

 

(b)           Except as required by law, by Section 3(C) and by Section 10 hereof, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

 

(c)           If, at the time of any annual meeting of stockholders for the election of directors, the equivalent of six quarterly dividends (whether or not consecutive) payable on any share or shares of Series A Junior Participating Preferred Stock are in default, the number of directors constituting the Board of Directors of the Corporation shall be increased by two.  In addition to voting together with the holders of Common Stock for the election of other directors of the Corporation, the holders of record of the Series A Junior Participating Preferred Stock, voting separately as a class to the exclusion of the holders of Common Stock, shall be entitled at said meeting of stockholders (and at each subsequent annual meeting of stockholders), unless all dividends in arrears on the Series A Junior Participating Preferred Stock have been paid or declared and set apart for payment prior thereto, to vote for the election of two directors of the Corporation, the holders of any Series A Junior Participating Preferred Stock being entitled to cast a number of votes per share of Series A Junior Participating Preferred Stock as is specified in paragraph (A) of this Section 3.  Each such additional director shall not be a member of Class I, Class II or Class III of the Board of Directors of the Corporation, but shall serve until the next annual meeting of stockholders for the election of directors, or until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section 3(C).  Until the default in payments of all dividends which permitted the election of said directors shall cease to exist, any director who shall have been so elected pursuant to the provisions of this Section 3(C) may be removed at any time, without cause, only by the affirmative vote of the holders of the shares of Series A Junior Participating Preferred Stock at the

 

 

time entitled to cast a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders.  If and when such default shall cease to exist, the holders of the Series A Junior Participating Preferred Stock shall be divested of the foregoing special voting rights, subject to revesting in the event of each and every subsequent like default in payments of dividends.  Upon the termination of the foregoing special voting rights, the terms of office of all persons who may have been elected directors pursuant to said special voting rights shall forthwith terminate, and the number of directors constituting the Board of Directors shall be reduced by two.  The voting rights granted by this Section 3(C) shall be in addition to any other voting rights granted to the holders of the Series A Junior Participating Preferred Stock in this Section 3.

 

4.             Certain Restrictions.

 

(a)           Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

 

(i)            declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock;

 

(ii)           declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; or

 

(iii)          purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of Series A Junior Participating Preferred Stock, or to such holders and holders of any such shares ranking on a parity therewith, upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

 

(b)           The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation

 

 

unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

 

5.             Reacquired Shares.  Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired promptly after the acquisition thereof.  All such shares shall upon their retirement become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to any conditions and restrictions on issuance set forth herein.

 

6.             Liquidation, Dissolution or Winding Up.  (a)  Upon any liquidation, dissolution or winding up of the Corporation, voluntary or otherwise, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received an amount per share (the “Series A Liquidation Preference”) equal to the greater of (i) $10.00 plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, or (ii) the Adjustment Number times the per share amount of all cash and other property to be distributed in respect of the Common Stock upon such liquidation, dissolution or winding up of the Corporation.

 

(b)           In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other classes and series of stock of the Corporation, if any, that rank on a parity with the Series A Junior Participating Preferred Stock in respect thereof, then the assets available for such distribution shall be distributed ratably to the holders of the Series A Junior Participating Preferred Stock and the holders of such parity shares in proportion to their respective liquidation preferences.

 

(c)           Neither the merger or consolidation of the Corporation into or with another entity nor the merger or consolidation of any other entity into or with the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6.

 

7.             Consolidation, Merger, Etc.  In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the outstanding shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share equal to the Adjustment Number times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged.

 

8.             No Redemption.  Shares of Series A Junior Participating Preferred Stock shall not be subject to redemption by the Corporation.

 

 

9.             Ranking.  The Series A Junior Participating Preferred Stock shall rank junior to all other series of Preferred Stock as to the payment of dividends and as to the distribution of assets upon liquidation, dissolution or winding up, unless the terms of any such series shall provide otherwise, and shall rank senior to the Common Stock as to such matters.

 

10.           Amendment.  At any time that any shares of Series A Junior Participating Preferred Stock are outstanding, the Certificate of Incorporation of the Corporation shall not be amended, by merger, consolidation or otherwise, which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class.

 

11.           Fractional Shares.  Series A Junior Participating Preferred Stock may be issued in fractions of a share that shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock.

 

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate this 11th day of May, 2011.

 

	
 
    	
LONE   PINE RESOURCES INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Cyrus D. Marter IV
    
	
 
    	
 
    	
Name:   
    	
Cyrus   D. Marter IV
    
	
 
    	
 
    	
Title:   
    	
Vice   President and SecretaryEXHIBIT 4.4

 

AMENDED AND RESTATED PLEDGE AGREEMENT

 

THIS PLEDGE AGREEMENT (this “Agreement”) is made on December 31, 2010 in Beijing:

 

BETWEEN

 

	
Pledgee:
    	
 
    	
Xuecheng Century (Beijing) Information   Technology Co., Ltd.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Registered Address: Room 172, Building   No. 1, 3 Xijing Road, Badachu High Technology Park, Shijingshan   District, Beijing
    
	
 
    	
 
    	
 
    
	
Pledgors:
    	
 
    	
Jin Xin
    	
 
    	
ID No.: 110105197702260013;
    
	
 
    	
 
    	
Li Rubin
    	
 
    	
ID No.:  372831197709070053;
    
	
 
    	
 
    	
Yao Jinbo
    	
 
    	
ID No.: 432321197610190959;
    
	
 
    	
 
    	
Zhu Changyong
    	
 
    	
ID No.: 342101197008140010;
    
	
 
    	
 
    	
Deng Qiang
    	
 
    	
ID No.: 110102196711032318;
    
	
 
    	
 
    	
Piao Junhong
    	
 
    	
ID No.: 220204197704073320;
    
	
 
    	
 
    	
Wang Yafei
    	
 
    	
ID No.: 610103195504123620;
    
	
 
    	
 
    	
Chai Chaoming
    	
 
    	
ID No.: 310110196911148013;
    
	
 
    	
 
    	
Song Junbo
    	
 
    	
ID No.: 140502197512043016.
    

 

WHEREAS:

 

The Pledgors collectively own 100% of the equity interest of Beijing Xueda Information Technology Co., Ltd., a limited liability company registered in Beijing, China (the “Company”), among which:

 

(1)           Jin Xin owns 27.03968%;

(2)           Li Rubin owns 23.48493%;

(3)           Yao Jinbo owns 15.66018%;

(4)           Zhu Changyong owns 2.85022%;

(5)           Deng Qiang owns 2.13499%;

(6)           Piao Junhong owns 20.03308%;

(7)           Wang Yafei owns 3.51877%;

(8)           Chai Chaoming owns 2.26258%;

 

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(9)           Song Junbo owns 3.01557%.

 

The Pledgee is a wholly foreign-owned company registered in Beijing, China. The Pledgee has entered into the Exclusive Technology Consulting and Management Service Agreement (the “Service Agreement”) with the Company on August 28, 2009.

 

In order to ensure that the Pledgee will be able to collect the consulting service fees normally from the Company pursuant to the Service Agreement, the Pledgors hereby pledge all their equity interest in the Company as security for the consulting service fees under the Service Agreement.

 

For purposes of complying with the provisions of the Service Agreement, the Plegors and the Pledgee have entered into the Pledge Agreement on August 28, 2009 (“Original Pledge Agreement”);

 

The Pledgors have made additional capital contribution to the Company on December 31, 2010 (“Capital Increase” and “Capital Increase Date”), increasing the registered capital of the Company from RMB10,000,000 to RMB14,000,000, and the shareholding ratio of the Pledgors in the Company shall remain unchanged after the Capital Increase.

 

In accordance with the Measures for the Registration of Equity Pledge with the Administrative Authority for Industry and Commerce promulgated by the State Administration for Industry and Commerce, the Pledgors shall enter into an amendment or supplemental contract to the Pledge Agreement with respect to the change in the amount of the pledged equity interest, and register the amendment to the pledged equity interest.

 

NOW THEREFORE, in consideration of the premises, the Pledgors and the Pledgee hereby enter into this Agreement to replace the Original Pledge Agreement as follows:

 

1.             DEFINITIONS

 

Unless otherwise provided herein, the following terms shall have the following meanings:

 

1.1           “Pledge” refers to the full content of Section 2 hereof.

 

1.2           “Pledged Equity Interest” refers to the capital contribution made by the Pledgors in connection with this Capital Increase as follows:

 

Jin Xin, RMB1,081,587 in the aggregate; the amount of pledged equity interest shall be RMB1,081,587, and the amount of the secured creditor’s right shall be RMB1,081,587;

 

Li Rubin, RMB939,396 in the aggregate; the amount of pledged equity interest shall be RMB939,396, and the amount of the secured creditor’s right shall be RMB939,396;

 

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Yao Jinbo, RMB626,407 in the aggregate; the amount of pledged equity interest shall be RMB626,407, and the amount of the secured creditor’s right shall be RMB626,407;

 

Zhu Changyong, RMB114,009 in the aggregate; the amount of pledged equity interest shall be RMB114,009, and the amount of the secured creditor’s right shall be RMB114,009;

 

Deng Qiang, RMB85,400 in the aggregate; the amount of pledged equity interest shall be RMB85,400, and the amount of the secured creditor’s right shall be RMB85,400;

 

Piao Junhong, RMB801,323 in the aggregate; the amount of pledged equity interest shall be RMB801,323, and the amount of the secured creditor’s right shall be RMB801,323;

 

Wang Yafei,  RMB140,751 in the aggregate; the amount of pledged equity interest shall be RMB140,751, and the amount of the secured creditor’s right shall be RMB140,751;

 

Chai Chaoming, RMB90,504 in the aggregate; the amount of pledged equity interest shall be RMB90,504, and the amount of the secured creditor’s right shall be RMB90,504;

 

Song Junbo, RMB120,623 in the aggregate; the amount of pledged equity interest shall be RMB120,623, and the amount of the secured creditor’s right shall be RMB120,623;

 

totaling RMB4,000,000 of the contribution made by the Pledgors to the Company in connection with this Capital Increase.

 

1.3           “Term of Pledge” refers to the period set forth in Section 3 hereof.

 

1.4           “Service Agreement” refers to the Exclusive Technology Consulting and Management Service Agreement entered into by the Company and the Pledgee on August 28, 2009.

 

1.5           “Event of Default” refers to any event set forth in Section 7 hereof.

 

1.6           “Notice of Default” refers to the notice of default issued by the Pledgee in accordance with this Agreement.

 

2.             Pledge

 

2.1           The Pledgors hereby pledge all their equity Interest in the Company to the Pledgee as security for the collection of the consulting service fees by the Pledgee under the Service Agreement.

 

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2.2           The Pledge hereunder refers to the rights owned by the Pledgee, who shall be entitled to a priority in receiving payment by the evaluation or proceeds from the auction or sale of the equity interest pledged by the Pledgors to the Pledgee.

 

3.             Term of Pledge

 

3.1           The Pledge shall be created upon registration with the relevant administration for industry and commerce. The Pledgors and the Pledgee shall, in accordance with the Property Law of the People’s Republic of China, the Measures for the Registration of Equity Pledge with the Administrative Authority for Industry and Commerce and the relevant laws and regulations of the People’s Republic of China (the “PRC”), submit the pledge registration application to the relevant administration for industry and commerce within ten (10) days from the date on which this Agreement has been executed. The Term of Pledge shall be ten (10) years. In the event of any extension of the term of the master contract secured by the Pledge, the effective term of the Pledge hereunder shall be extended accordingly.

 

3.2           During the Term of Pledge, the Pledgee shall be entitled to dispose of the Pledge pursuant to this Agreement and the relevant laws and regulations of the PRC in the event that the Company fails to pay the consulting service fees in accordance with the Service Agreement.

 

4.             Maintenance of the Pledge Certificates

 

4.1           During the Term of Pledge provided herein, the Pledgors shall execute, or cause the Company to execute, the Capital Contribution Certificate and Shareholder Register attached hereto, and deliver such formally executed documents to the Pledgee for it to maintain such documents during the Term of Pledge provided herein.

 

4.2           The Pledgee shall be entitled to collect all cash income and non-cash income, such as all dividends, generated by the Pledged Equity Interest from the execution date of this Agreement.

 

5.             Representations and Warranties of the Pledgors

 

5.1           Pledgors are the legal owners of the Pledged Equity Interest.

 

5.2           Any exercise by the Pledgee of its rights under this Agreement shall not be interfered by any other party at any time.

 

5.3           The Pledgee shall have the right to dispose of and transfer the Pledge in any manner set forth in this Agreement.

 

5.4           The Pledgors have not created any other pledge on the equity interest or encumbered the equity interest to any third party except for the Pledge.

 

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6.             Covenants of the Pledgors

 

6.1           The Pledgors hereby covenant to the Pledgee that, during the term of this Agreement, the Pledgors shall:

 

6.1.1        not transfer the equity interest, create or permit the existence of any pledge or other form of security thereon that may have an impact on the rights or interests of the Pledgee, without the prior written consent of the Pledgee, except for the transfer of equity interest to the Pledgee or a person designated by the Pledgee pursuant to the Exclusive Purchase Right Contract entered into by the Pledgors, Pledgee and the Company on August 28, 2009;

 

6.1.2        comply with and implement the provisions of all laws and regulations applicable to the pledge of rights, and within five (5) days of receipt of any notice, order or recommendation issued or prepared by the relevant competent authorities regarding the Pledge, present such notice, order or recommendation to the Pledgee, and shall comply with such notice, order or recommendation or submit objections and representations with respect to the aforementioned matters upon the Pledgee’s reasonable request or with the consent of the Pledgee;

 

6.1.3        promptly notify the Pledgee of any event or notice received thereby that may have an impact on the Pledgors’ equity interest or any portion thereof, as well as any event or notice received thereby that may change any warranty or obligation of the Pledgors hereunder or affect the Pledgors’ performance of their obligations hereunder.

 

6.2           The Pledgors agree that,  any exercise by the Pledgee of the rights acquired thereby in accordance with this Agreement with respect to the Pledge shall not be interrupted or harmed by the Pledgors or any successors thereof or any person authorized thereby or any other person through any legal proceeding.

 

6.3           To protect or perfect the security hereunder for payment of the consulting service fees under the Service Agreement, the Pledgors hereby undertake to the Pledgee that the Pledgors shall execute in good faith and cause other parties who have an interest in the Pledge to execute all title certificates and deeds and/or take and cause other parties who have an interest in the Pledge to  take action as required by the Pledgee, facilitate the exercise by the Pledgee of the rights and authority granted thereto by this Agreement, enter into all relevant documents regarding ownership of equity interest with the Pledgee or its designee(s) (natural person/legal person), and provide the Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge as deemed necessary by the Pledgee.

 

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6.4           The Pledgors hereby undertake to the Pledgee that the Pledgors shall comply with and perform all warranties, covenants, agreements, representations and conditions for the benefit of the Pledgee. In the event of any failure to perform or any partial performance of such warranties, covenants, agreements, representations and conditions by the Pledgors, the Pledgors shall indemnify for all losses suffered by the Pledgee resulting therefrom.

 

6.5           The Pledgors hereby undertake to the Pledgee that the Pledgors shall be jointly and severally liable for the obligations hereunder.

 

6.6           The Pledgors hereby irrevocably agree to waive any right of first refusal to any transfer of equity interest resulting from the Pledgee’s exercise of the Pledge with respect to the equity interest pledged as security by any other shareholders of the Company to the Pledgee.

 

7.             Events of Default

 

7.1           The following events shall be deemed as the events of default:

 

7.1.1        The Company fails to make full payment of the consulting service fees as scheduled under the Service Agreement;

 

7.1.2        The Pledgors make any materially false or misleading representations or warranties under Section 5 hereof, and/or the Pledgors breach the representations or warranties under Section 5 hereof;

 

7.1.3        The Pledgors breach the covenants under Section 6 hereof;

 

7.1.4        The Pledgors breach any provision hereof;

 

7.1.5        The Pledgors waive the pledged equity interest or transfer the pledged equity interest without the prior written consent of the Pledgee, except as provided in Section 6.1.1 hereof;

 

7.1.6        Any borrowing, guarantee, indemnification, commitment or other debt service liability of the Pledgors (i) has been required to be payable or performed prior to maturity as a result of any breach; or (ii) has become due but cannot be paid or performed in a timely manner, causing the Pledgee to believe that the ability of the Pledgors to perform the obligations hereunder has been affected;

 

7.1.7        The Pledgors are incapable of repaying the general debt or other debt;

 

7.1.8        Due to the promulgation of the relevant laws, this Agreement becomes illegal, or the Pledgors are not capable of continuing to perform the obligations hereof;

 

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7.1.9        All government consents, permits, approvals or authorizations necessary for the enforcement, legality or effectiveness of this Agreement have been revoked, suspended, invalidated or materially changed;

 

7.1.10      The property of the Pledgors is adversely affected, causing the Pledgee to believe that the ability of the Pledgors to perform the obligations hereof has been adversely affected;

 

7.1.11      The successors or agents of the Pledgors are only able to perform a portion of or refuse to perform the payment obligations under the Service Agreement;

 

7.1.12      Any other circumstance in which the Pledgee cannot exercise its right of disposal with respect to the Pledge as required by the relevant laws.

 

7.2           The Pledgors shall immediately give a written notice to the Pledgee if the Pledgors are aware of or discover that any event described in Section 7.1 hereof or any event that may result in the foregoing events has occurred.

 

7.3           Unless the event of default under Section 7.1 hereof has been solved to the Pledgee’s satisfaction, the Pledgee, at any time when the event of default by the Pledgors occurs or thereafter, may give a written notice of default to the Pledgors and require the Pledgors to immediately make full payment of the outstanding fees under the Service Agreement and other payables or dispose of the Pledge in accordance with Section 8 hereof.

 

8.             Exercise of Pledge

 

8.1           Prior to full payment of the consulting service fees under the Service Agreement, the Pledgors shall not transfer the Pledge without the prior written consent of the Pledgee.

 

8.2           Upon exercise of the Pledge, the Pledgee shall give a notice of default to the Pledgors.

 

8.3           Subject to Section 7.3, the Pledgee, at any time when or after giving a notice of default pursuant to Section 7.3, may exercise its right of disposal with respect to the Pledge.

 

8.4           The Pledgee shall be entitled to priority in receiving payment by the evaluation or proceeds from the auction or sale of whole or part of the equity interest set forth herein in accordance with legal procedure, until the outstanding consulting service fees under the Service Agreement and other payables are repaid.

 

8.5           The Pledgors shall not hinder the Pledgee from disposing of the Pledge hereunder, and shall provide necessary assistance so that the Pledgee may realize its Pledge.

 

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9.             Assignment

 

9.1           The Pledgors shall not donate or transfer its rights and obligations hereunder without the prior consent of the Pledgee.

 

9.2           This Agreement shall be binding upon the Pledgors and their successors and be binding on the Pledgee and each of its successors and assignees.

 

9.3           The Pledgee may transfer any or all of its rights and obligations under the Service Agreement to its designee(s) (natural person or legal entity) at any time. In this case, the assignee shall enjoy and undertake the same rights and obligations of the Pledgee hereunder, as if the assignee is a party hereto. When the Pledgee transfers the rights and obligations under the Service Agreement, at the request of the Pledgee, the Pledgors shall execute the relevant agreements and/or documents with respect to such transfer.

 

9.4           In the event of a change of the Pledgee resulting from the transfer, the successor parties to the pledge shall execute a new pledge contract.

 

10.          Termination

 

Upon payment of the consulting service fees under the Service Agreement and release of the Company’s obligations thereunder, this Agreement shall terminate, and the Pledgee shall, as soon as reasonably practicable, cancel or discharge this Agreement.

 

11.          Formality Fees and Other Expenses

 

11.1         The Pledgors shall be responsible for all fees and actual expenses in relation to this Agreement, including, but not limited to, legal fees, cost of production, stamp tax and any other taxes and expenses. If the Pledgee pays the relevant taxes as required by law, the Pledgors shall fully indemnify the Pledgee for the taxes and expenses paid by the Pledgee.

 

11.2         The Pledgors shall be responsible for all fees (including, but not limited to, any taxes, formality fees, administration fees, litigation fees, attorney’s fees and various insurance premiums in connection with the disposal of the Pledge) incurred in connection with any failure by the Pledgors to pay any taxes or expenses payable hereunder or any other reason causing the Pledgee to recourse by any means or ways.

 

12.          Force Majeure

 

12.1         If the performance of this Agreement is delayed or prevented by any “force majeure event”, the party affected by such force majeure event shall be relieved from any liability hereunder only to the extent of such delay or prevention. A “force majeure” event means any event which is beyond the reasonable control of a party and which remains unavoidable despite reasonable care on the part of such affected party, including without limitation acts of government, acts of God, fire,

 

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explosion, geographic change, storm, flood, earthquake, tide, lightening or war. Any inadequacy in creditworthiness, capital or financing shall not be deemed an event beyond the reasonable control of a party. The party affected by a force majeure event seeking to be excused from performance of its obligations under this Agreement or any provision hereof shall notify the other party of such excusing event as well as the steps to be taken by it for the purpose of performance of such obligations.

 

12.2         The party affected by a force majeure event shall be relieved from any liability hereunder with respect thereto, provided that the party seeking to be excused from performance of obligations shall only be relieved from such liability to the extent that such affected party use its reasonable and practicable efforts to perform the Agreement and only within the scope of such delay or prevention. The parties agree to use their best efforts to resume the performance hereunder immediately after the event resulting in such excuse from liability has been cured and remedied.

 

13.          Dispute Resolution

 

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

 

13.2         Any dispute between the parties hereto in connection with the interpretation or performance of the provisions hereof shall be resolved in good faith by the parties through consultations. If the parties fail to resolve any dispute within thirty (30) days of receipt of a written notice served by one party on the other party requesting such consultations, either party may submit the dispute to China International Economic and Trade Arbitration Commission for arbitration in accordance with the then effective arbitration rules of such commission. The place of arbitration shall be Beijing. The language of arbitration shall be Chinese. The arbitration award shall be final and shall be binding upon both parties.

 

14.          Exhibits

 

The Exhibits attached to this Agreement shall constitute an integral part of this Agreement.

 

15.          Severability

 

If any provision hereof is found invalid or unenforceable due to any inconsistency with relevant laws, such provision shall be invalid or unenforceable only to the extent of the scope of application of such laws and shall not affect the legal validity of any other provision of this Agreement.

 

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16.          Effectiveness

 

16.1         This Agreement and any amendments, supplements or changes hereto shall be in writing and come into effect after being executed and sealed by the parties.

 

16.2         This Agreement is made in Chinese in eleven (11) originals with equal legal validity.

 

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Pledgee:
    	
Xuecheng Century (Beijing) Information   Technology Co., Ltd. (Seal)
    

 

 

	
Authorized Representative:
    	
/s/ Hsu William Shang Wi
    	
 
    

 

	
Name:
    	
HSU WILLIAM SHANG WI
    

 

 

Pledgors:

 

 

	
Xin Jin
    	
 
    	
 
    	
Rubin Li
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Signature:
    	
/s/ Xin Jin
    	
 
    	
Signature:
    	
/s/ Rubin Li
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Jinbo Yao
    	
 
    	
Changyong Zhu
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Signature:
    	
/s/ Jinbo Yao
    	
 
    	
Signature:
    	
/s/ Changyong Zhu
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Qiang Deng
    	
 
    	
Junhong Piao
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Signature:
    	
/s/ Qiang Deng
    	
 
    	
Signature:
    	
/s/ Junhong Piao
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Yafei Wang
    	
 
    	
Chaoming Chai
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Signature:
    	
/s/ Yafei Wang
    	
 
    	
Signature:
    	
/s/ Chaoming Chai
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Junbo Song
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Signature:
    	
/s/ Junbo Song
    	
 
    	
 
    	
 
    

 

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