Document:

cnamexloan.htm

 

 

Exhibit 10.[__]

 

[Translated from Chinese to English]

 

Loan Agreement (medium / long term)

 

 

Borrower:  Armet (Lianyungang) Renewable Resources Co., Ltd.

 

Business License Number: 320700400007412

 

Legal Representative: Kexuan Yao

 

Address: Lianyungang Development Zone                                                                           Zip code: 222047

 

Bank financial institutions and account number: Bank of China, Lianyungang Development Zone Branch43245108093001

 

Phone: 0518-2239258                                            Fax: 0518-82239257

 

Lender: Bank of China Ltd., Lianyungang Economic and Technological Development Zone Branch

 

Legal representative: Tao Pang

 

Address: 15 Kunlun Shan Road, Lianyungang Economic and Technological Development Zone, Jiangsu.    Zip Code: 222047

 

Phone: 0518 -85319767                                                      Fax: 0518-85319868

 

After consultation, the Borrower and the Lender reached an agreement regarding the Lender lending medium / long term RMB loan to the Borrower, and thus established this contract.

 

Article 1                      Loan Amount

 

Loan amount:  RMB 70,000,000

 

At the time when actual withdraw of the loan is made by the Borrower, if due to the fluctuation of the exchange rate, after conversion base on the exchange rate of the date of withdraw,  if the remaining credit balance under above Line of Credit Agreement is more than the amount agreed in the agreement, the Lender has the right to terminate the agreement or decline the Borrower’s withdraw request; If the remaining credit balance is less than the loan amount under this agreement,  the Lender has the right to adjust and reduce the loan amount under this agreement, and set up the loan amount according to the remaining credit balance. (This is an optional term, the management procedure for the limitation of credits of each industry will decide whether it’s applicable, if not applicable, please delete.)

 

  

  

  

Article 2                      Term

 

The term of the loan: 36 month. Count from the actual withdraw date, if it is withdrawn with multiple payments, then count from the first actual withdraw date.

 

The Borrower shall withdraw strictly base on the withdraw schedule, if the actual withdraw date is later than the agreed date, the Borrower shall still pay back the loan base on the agreed date in this agreement.

 

Article 3                      Purpose of the Loan

 

The purpose of the loan: the construction on the first phase (1 million ton project) of a metal recycling construction that has 2million ton annual production capacity.

 

Without the Lender’s approval in writing, the Borrower can not change the purpose of the loan, including but not limited to using the loan on investing stock and other type of securities, the loan may not use for any projects that are forbidden by any law, regulatory, government policy or projects that are not approved by the proper legal authorities, as well as any projects or usage that are forbidden to use bank loan on.

 

Article 4                      Loan Interest Calculation and Settlement

 

 1. Loan Interest

 

The loan interest is the (2) of the following:

 

(1) Fixed interest: annual interest _x_%, the interest rate does not change during this Agreement term.

 

(2) Floating rate, the floating period is 12month.

 

From the actual withdraw date ( if it is several withdraws, then from the first actual withdraw date), the interest will be reset once every 12 month. The interest reset date is the corresponding day of the actual withdraw date. If there is not a corresponding day in the current month, the last day of the month will be the interest reset date.

 

A. the initial interest rate of every withdraw will be the withdrawn day’s three-year benchmark lending rate promulgated by the People’s Bank of China with a 5% increase.

 

B. After each floating period, the interest rate will be the interest reset day’s three-year benchmark lending rate promulgated by the People’s Bank of China with a 5% increase, as the interest rate for the next floating period.

 

2.  Interest Calculation

 

The interest is calculated from the actual withdraw date, base on the actual withdraw amount and the days of loan outstanding

 

  

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Interest calculation formula:  interest = capital X actual days X daily interest rate

 

The daily interest rate is calculated base on 360 days per year,

 

Calculation formula: daily interest rate = annual interest rate / 360

 

3. Interest Settlement Method

 

The Borrower will settle interest payment with clause (1) of the following:

 

(1) Settle interest on quarter basis, the 20th of the last month in each quarter as interest settlement date, and the 21st is the due date of interest payment.

 

(2) Settle interest on monthly basis, the 20th of each month is the settlement date, and the due date is the 21st.

 

If the last payment date of loan capital is not the interest payment date, then the last payment date of the loan capital will be regard as the interest payment date, the Borrower shall pay off any unpaid interest.

 

4. Penalty

 

(1) If the Borrower does not pay back the loan according to the agreed schedule, the interest of the overdue payment will be calculated with a penalty interest rate starting from the day of late payment, until both the capital and interest have been paid.

 

The penalty interest rate will be 40% in addition to the loan interest rate in Article 1.

 

(2) If the Borrower does not use the loan for the agreed on purpose, the interest of the misappropriated part of the loan will be calculated at the penalty interest rate, until both the capital and interest have been paid.

 

The misappropriated interest rate will be 70% extra on top of the loan interest rate in Article 1.

 

(3) As for amount that is both overdue and misappropriated, the interest will be calculated based on the penalty interest rate for misappropriation.

 

(4) For the interest that was not paid on time, interest settlement method shall be based on paragraph 3 of this Article, during the term of the loan, the compounding interest shall be based on paragraph 1 of this Article, and the compounding interest of the overdue loan shall be calculated with the penalty interest rate.

 

(5) Collecting penalty interest and compound interest, adjustments will be base on the agreed loan interest rate from this agreement, calculate penalty interest and compound interest separately from the date that the adjustment has been made.

 

Article 5  Withdraw Conditions. The Borrower should fulfill the below prerequisites before making withdraw:

 

  

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1. This contract and its supplements are in effect.

 

2. The Borrower has, at the request of the Lender, provided guarantee, the guarantee contract has been in effect, with completed all legal reviews, registration and/or procedure to put into record.

 

3. The Borrower has provided and established with the Lender, all Borrower documentations, receipts, stamps, personals list, and signature samples related to this contract, and fill out any related forms.

 

4. The Borrower has, at the request of the Lender, open the account required in order to fulfill this Agreement, as instructed in this Agreement.

 

5. 15 banking days before withdraw, provide to the Lender a written application of withdraw and documentations proving the purpose of the loan, and proceed with any related procedures.

 

6. The Borrower has provided to the Lender all the board of director (or other department) meeting minuets and authorizations signed in agreement to perform to this contract; (This is optional, please confirm, before signing of this contract, regarding this contract, whether the Borrower has received the approval and authorization.)

 

7. Other legal requirements, or terms agreed by both parties regarding withdraw of funds: __N/A__.  If the terms are not fulfill, the Lender has the rights to refuse the withdraw application of the Borrower, with the exception of the consent of the Lender.

 

Article 6. Time and Method of Withdrawals

 

1. The Borrower is the follow the withdraw time and method stated in (2):

 

(1) One time withdraw of full amount made at YYYY/MM/DD

 

(2) Complete withdraw of full amount within 180 days as of 2009-09-02

 

(3) Multiple withdraws following the below schedule.

 

	
Time of withdraw

	
Withdraw amount

	
N/A

	
N/A

	
N/A

	
N/A

	
N/A

	
N/A

 

2. The Lender has the rights to refused the withdraw application for any residual amount not withdraw by the above stated time.

 

If the Lender agrees to release the funds, the Lender has the rights to receive a compensation of .05% of the residual amount, if the Lender refused the withdraw application, the Lender has the rights to receive a compensation of .05% of the residual amount.

 

  

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Article 7 Repayment of Loan

 

1. Other than if the parties had made additional agreements, the Borrower should make repayments to the loan under this contract according to (2) of the below payment schedules.

 

(1) At the expiration of the loan, return the full amount of this loan.

 

(2) Make multiple payments as accordance to the below schedule:

 

	
Time of Payment

	
Payment amount

	
2010-05-25

	
15000000.00

	
2011-08-25

	
30000000.00

	
2012-08-25

	
25000000.00

 

If the Borrower needs to make changes to the above payment schedule, the Borrower must send written application to the Lender 15 banking days prior to the payment date, a change in the payment schedule requires written consent of both parties.

 

2. Unless both parties have other arrangements, when the Borrower defaults on his interest as well as principle, the Lender has the right to decide on to the order of payments of principle and interest.  Under the situation where the Borrower has multiple debt repayments schedules, the Lender has the right to decide which payment the Borrower should pay first.

 

3. Unless both parties have other arrangements, the Borrower can repay ahead of schedule.  However, the Borrower needs to provide written notification to the Lender 15 bank business days prior.  The repayment is applied to the last scheduled payment first.

 

The Lender has the right to charge 5% fee on the prepayment amount as early prepayment compensation.

 

 4. Borrower follows the following type of repayment arrangement:

 

1.  Borrower has to establish a banking account and put in such account the amount of scheduled interest 15 banking days prior to the payment date.  The Lender has the right to automatically take the scheduled payment out of this account on the due date.

 

Repayment account name: Armet (Lianyungang) Renewable Resources Co., Ltd..

 

Account #: 43245108093001

 

2. Both parties decide to have other repayment arrangements: ___x______

 

  

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Article 8 Guarantee (note: fill in where it applies and ignore the others)

 

	
1.  

	
The arrangements of the guarantee for the liability under this contract are:

 

__This contract belongs to the guarantor ___x___ and the Lender signed number is__x___{the highest value guarantee contract}/__{the highest value collateral contract}/ ___{the highest value pledge contract}

 

__ This contract belongs to the guarantor ___x___ and the Lender signed number is__x___{the highest value guarantee contract}/__{the highest value collateral contract}/ ___{the highest value pledge contract}  In addition, provide____x____guarantee , and sign guarantee contract accordingly.

 

__Henan Caoyang Steel Ltd.Co. to provide unlimited joint responsibility guarantee and sign the 2009 LianZhong Bank’s KaiBao Zi 21-1’s Guarantee contract.

 

__ Henan Armco & Metawise Trading Co., Ltd. to provide unlimited joint responsibility guarantee and sign the 2009 LianZhong bank’s KaiBao Zi 21-2’s Guarantee contract.

 

__YaoKeXuan to provide unlimited joint responsibility guarantee and sign the 2009 LianZhong Bank’s KaiBaoZi 21-3’s Guarantee contract.

 

__ ZhuLi to provide unlimited joint responsibility guarantee and sign the 2009 LianZhong Bank’s KaiBaoZi 21-4’s Guarantee contract.

 

__Armet (Lianyungang) Renewable Resources Co., Ltd. to provide collateral guarantee and sign the 2009 LianZhong Bank’s kaiBaoZi 21-5’s Guarantee contract.

 

__other guarantee arrangements

 

	
2.  

	
If the Borrower or the guarantor are involved in situations that could compromise their ability to perform under the contract terms, or if the guarantee contract becomes invalid,  canceled, or the Borrower/ guarantor’s financial conditions deteriorate or are involve in law suits, or any other conditions that can compromise their ability to performs the terms of the contracts, or if the guarantor and the Borrower defaults on other contracts, or that the collateral depreciates in value, is destroyed, or seized, causing the collateral’s value to deteriorate,  then the Lender has the right to request the Borrower provide additional guarantors/collaterals.

 

 

Article 9 Insurance

 

The Borrower has to buy insurance on the equipment, construction, transportation and other business related functions during the time that the business is in operation from an insurance company that the Lender approves.  The terms should be based on Lender’s requirement and the insured amount should not be less than the borrowed amount.

 

  

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The Borrower should submit the original insurance agreement to the Lender within 5 days after this contract takes effect.  Unless the interest, principal, and fees under this contract have been fully paid off, the Borrower cannot stop the insurance.  If the Borrower terminates the insurance, then the Lender has the right to buy insurance and have the Borrower pay for the fees.  The Borrower will be responsible for any losses caused to the Lender during the period without insurance.

 

The Borrower has to submit written notification to the Lender within 3 days of filing a claim with the insurance company.  Losses or fees caused by not submitting a claim or not notifying the Lender in time will be the responsibility of the Borrower.

 

 

Article 10 Declaration and Commitment

 

	
1.  

	
Borrower’s declaration is as follows:

 

	
1.  

	
Borrower will follow the rules and regulations to execute the signed terms and conditions to the best of their ability

 

	
2.  

	
The signed contract represents Borrower’s true intention to borrow and the willingness to repay under the terms.  The Borrower has or will obtain the necessary authorizations and registrations for the contract.

 

	
3.  

	
The supporting documents provided to the Lender including financial reports, business agreements, licenses, etc. are all real, complete, accurate, and valid.

 

	
4.  

	
Borrower’s statements to the Lender on the business transactions and activities are real, and legal.  Borrower is not engaged in money laundering or any other illegal activities.

 

	
5.  

	
Borrower did not lie or hide adverse material events that may cause the inability to perform under this Agreement

 

	
6.  

	
Borrower’s other declaration: __________

 

	
2.  

	
Borrower’s commitment is as follows:

 

	
1.  

	
Based on Lender’s requirement, will provide financial reports (including but not limited to monthly, quarterly, and annual reports) and other related reports in a timely fashion.

 

	
2.  

	
If the Borrower have or will sign with the guarantor of this contract a counter-guarantee or related agreements, such agreement will not harm the Lender’s interests under this contract.

 

	
3.  

	
Will allow Lender to inspect and monitor credit and will provide support and coordination.

 

	
4.  

	
If there are situations that will cause the inability for Borrower as well as the guarantor to unable to perform the terms of this contract, including but not limited to spin offs, mergers, joint ventures, reorganizations, reforms, going public, etc. that will cause the reduction in registered capital, asset or stock transfer, increased liability, or new debt on the collateral, mortgage be confiscated, dissolved, repealed, or bankrupted, etc. or involved in the case of the law suit, or business trouble and financial difficulty, or Borrower broke this Agreement in other case, the Borrower should inform the Lender in time.

 

  

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If any actions the Borrower takes would be harmful to his capability of payment, the Borrower must receive agreement from the Lender:

 

(5)  The payment of the loan from the Borrower to the Lender should have higher priority than payment to its shareholder loans, but not against similar loans from other creditors. :

 

(6) In the case that the annual net profit after tax is zero or negative, or net profit after tax is not enough to cover the accumulated lost of the previous years, or profit before tax was not used to cover the principal, interest and cost he should pay back, or profit before tax is not enough to cover the principal, interest and cost of the next term, the Borrower should not distribute any share interest, dividend in any way.

 

(7) The Borrower should not dispose the property in any way to lower his capability of paying back, and promise that the total amount to be vouched for others cannot exceed the 0.5 times of the its net assets, and the total amount and single value be vouched for others cannot be more than the allowed limit by the company rule.

 

(8)  The Borrower should promise:  when the permanent assets built in “ first phase (1 million ton project) of a metal recycling construction that has 2million ton annual production capacity” and the main facility can be used as mortgage, should be guaranteed to the Lender as additional collateral in time, and promise not to guaranty to the third party before the equipment is guaranteed to the Lender as mortgage.

 

(9) The Borrower should promise:  before the remaining registered funds are made available, the loan withdrawn will not exceed $40000000.

 

(10) The other items the Borrower should promised: __________________________

 

Article 11. The internal disclosure of the relevant transaction in the Borrower’s group (optional, may delete if not applicable)

 

The Borrower is classified as the group client according to the < Risk management guide of authorized trust by commercial bank group >.  The Borrower should report the relevant transaction, transaction relating to more than 10% of the net assets, to the Lender in time. Include the various relevant relationships, transaction items and transaction nature, transaction monetary value or relevant percentage, price policy (include nonmonetary transaction or symbolic value transaction).

 

The Lender has the right to stop paying the unused loan to the Borrower, and ask back all or part of the loan interest under the following cases: false contract with the relevant party, using falsified documentations or certifications as bases or collaterals to receive cash or credit from the bank.  In the case of the important merger, purchasing, recombining, when the Lender think it may possibly affect the loan security. Intent to escape the bank claims through relevant transactions. The other cases provided by Article 18.

 

  

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Article 12.  Violation of agreement and measures to take

 

One of the followings is constituted or taken as the violation of an agreement by the Borrower under this Agreement:

 

	
1.  

	
The Borrower does not fulfill the obligation of the payment and settlement according to the provision of this Agreement.

 

	
2.  

	
The Borrower does not use the acquired money to the provided purpose according to the provision of this Agreement.

 

	
3.  

	
The statements the Borrower signed in this Agreement is not true, or Borrower does not keep the promise made in this Agreement.

 

	
4.  

	
In the situation provided in paragraph 0.2.4 of this Agreement, the Lender think it possibly affect the financial situation or the capability to fulfill the obligation of the Borrower or guarantor, and the Borrower does not provide the new guaranty, change the guarantor according to the current contract.

 

	
5.  

	
The Borrower violates the other agreements according to the provisions and obligations of the current contract.

 

	
6.  

	
The Borrower violates the agreements in other provisions of this Agreement with the Lender or other constitutions of the Chinese bank limited.

 

	
7.  

	
The guarantor violates the agreements of the guaranty contract, or violates the agreements in other provisions of this Agreement with the Lender or other constitutions of the Chinese bank limited.

 

	
8.  

	
The Borrower closes the business or the dissolution, revocation or bankrupt.

 

	
9.  

	
The progress of the project is serious delayed, or the cost of the project exceeds the budget proportion approved by the Lender.

 

	
10.  

	
The quality of the project is not satisfied the national standard or the business standard (optional)

 

	
11.  

	
During the credit period authorized by the Lender, the Borrower lends the funds to relevant business.

 

When the violations mentioned above happen, the Lender has the right to take the following measures separately or simultaneously according to the specific situation.

 

	
1.  

	
Request the Borrower or the guarantor to correct their violation in certain given time.

 

  

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2.  

	
Totally or partly decrease, suspend or terminate the amount of credit line to the Borrower,

 

	
3.  

	
Totally or partly decrease, suspend or terminate the withdrawing or other application from the Borrower under the provision of current contract or other contract between the Borrower and the Lender. Totally or partly suspend or terminate the further release and process of the unreleased loan and the unprocessed trading finance.

 

	
4.  

	
Declare that all or part of the outstanding loans / principal and interest from the trading financing and other payables under the other contract between the Borrower and the Lender is due immediately.

 

	
5.  

	
Terminate or cancel the current contract, totally or partly terminate or cancel the other contracts between the Borrower and the Lender.

 

	
6.  

	
Require the Borrower to compensate the loss absorbed by the Lender due to the violation of the agreement.

 

	
7.  

	
Retain the money balance from the Borrower’s account opened in the Lender or other constitutions of the Chinese bank limited to make the settlement of the total or partial of the debt that the Borrower owes to the Lender under the current contract. Take the outstanding debt as the due debt. If the currency of the account is different from the Lender’s account currency, conversion should be made according to the market rate applicable to the Lender when settling the account. The notification can be made either before or after the above action is taken.

 

	
8.  

	
Perform security interests

 

	
9.  

	
Require the guarantor to take the guaranty responsibility.

 

	
10.  

	
Any other measures the Lender thinks it is necessary and possible to take.

 

Article 13.  Rights reserved

 

If one party does not perform part or all of the rights under the provision of the current contract, or does not require another party to perform, take part or total of the obligations, responsibilities. It will not mean that the party gives up the rights or waive the obligations and the responsibilities.

 

Any tolerance, extension or delay that one party allows another party to exercise the rights under the provision of the current contract, will not affect any entitled rights under the current contract,  the law and rule, neither take it as giving up of the rights.

 

  

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Article 14.  Change, modification and termination

 

The contract is may be take change or modification in written under the negotiation and agreement of both sides, any change or modification will become the Indivisible, component part of this Agreement.

 

The invalidity of any clauses shall not impair the legal force of other clauses of this Agreement unless they are amended as required by laws or agreed by parties involved.

 

Article 15 Applied Laws and Disputes Resolve

 

This contract is subject to the laws of People’s Republic of China.

 

After this Agreement takes effect, any disputes during and/or related to the execution of this Agreement shall be resolved through negotiation. If negotiation can’t resolve the issues, either party can file complaint to the court in the residence of the Lender or other subsidiaries controlled by Bank of China that exercises right in accordance with this contract.

 

Under the circumstance that the dispute does not impact the execution of other clauses, the parties shall continue the execution of other clauses.

 

Article 16 Expenses

 

Except the items specifically indicated by the parties involved, the Borrower shall pay the expenses (including but not limited to legal fees) occurred during the signing and execution of this contract and disputes resolve.

 

Article 17 Attachment

 

The following and other potential attachments approved by both parties are integral parts of this contract and have the same legal force:

 

	
1.  

	
Withdrawal Form (Format)

	
2.  

	
Receipt of Loan.

 

Article 18 Others

 

	
1.  

	
Without written consent from the Lender, the Borrower shall not transfer any rights or obligations under this contract to third parties.

	
2.  

	
If business needs occur, the Borrower agrees the Lender to entrust other institutions under   Bank of China with rights and obligations stipulated in this contrast or transfer the loan to other institutions under Bank of China. Under these circumstances, the institutions of Bank of China have the right to file complaint, arbitration, or request for compulsory enforcement on any disputes related to this contract.

  

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3.  

	
If not conflicting with other clauses, this Agreement has legal bindings on both parties and their perspective heirs and assignees.

	
4.  

	
Except for the circumstances specified additionally, both parties shall designate the residence address in this contract as the mailing/contact address, and ensure to update the counterpart promptly if the address has changed.

	
5.  

	
The transactions under this contract serve independent interests of each party. In accordance with laws and regulations, the related parties of Lender shall not impair the fairness of the transactions by taking advantage of their relationships with Lender.

	
6.  

	
The headings and business terms in this contract are used for representation purpose, having no explanatory force to the nature of the clauses and mutual rights and obligations of parties involved.

 

Article 19 Effect

 

This contract shall take effect upon signatures with official seal by the authorized representatives of Lender and Borrower.

 

There are seven original copies, one for the Lender, one for the Borrower, and five for warrantors. Each copy has the same legal force.

 

Borrower: Armet (Lianyungang) Renewable Resources Co., Ltd.

 

Authorized Representative: /s/ Kexuan Yao (with company seal)

 

Date: 9-4-2009

 

 

Lender: Bank of China

 

                  Lianyungang Sub-branch in Economic Technology Development Zone

 

 

Authorized Representative /s/ (signed with sub-branch seal)

 

Date: 9-4-2009cnamexdbs.htm

 

 

DBS Bank

Date: 22 April 2009

Our ref: P/HBHBC/00020/09

Armco & Metawise (H.K.) Limited

Room 1407

China Resources Building

26 Harbour Road

Wanchai, Hong Kong

BANKING FACILITIES

Dear Sirs,

DBS Bank (Hong Kong) Limited (the “Bank”, which expression shall include its successors and assigns) is pleased to advise that it is prepared to consider making available or continuing to make available the banking facilities detailed below (the “Facilities”) to the Borrower described below, subject to the provisions of this facility letter and the attached “Terms and Conditions Governing Banking Facilities and Services”.

A. BORROWER:

Armco & Metawise (H.K.) Limited

B. FACILITY LIMITS:

Type(s) of Facility                                                                           Facility Limit(s)

Back to Back Letter of Credit                                                                                     USD 12,000,000.-

C. PRICING AND CONDITIONS:

Unless otherwise provided herein, interest and commission(s) on the Facilities will be charged at the Bank’s standard rate that may be varied from time to time at the Bank’s discretion.

Back to Back Letter of Credit (“Back to Back L/C”)                                                                                                Maximum Validity: 6 months.

Issue documentary sight/usance L/C on back-to-back basis Conditions:

1)Lodgement of original Master L/C issued by acceptable bank in form & substance acceptable to the Bank. Terms and conditions of the master letter of credit must be acceptable to the Bank, must be strictly complied with and not varied or waived without the Bank's prior written consent.

	
2)  

	
The Bank to retain control over goods / title documents (refer Notes Item (i) mentioned below) under each L/C (refer Notes Item (ii) mentioned below).

	
3)  

	
Evidence of applicable cargo insurance cover.

	
4)  

	
5% cash margin (or pledged deposit) for each outstanding of L/C issuing. The Bank reserves the right to ask for top-up of cash margin in case of adverse market condition.

	
5)  

	
Usance Master L/C within 90 davs tenor.

DBS Bank (Hong Kong) Limited

Enterprise Banking

16 Floor, The Center

99 Quee’s Road Central

Central, Hong Kong

Tel 852 3668 5533

Fax 852 2169 0350

www.dbs.com

  

  

  

Armco & Metawise (H.K.) Limited                                                                                                                     Our ref: P/HBHBC/00020/09

Notes:

 

	
  

	
(i) "control over goods / title documents" means: Any L/C issued by the Bank to call for full set original marine bills of lading "issued to order of the Bank" or "to order + blank endorsed by shipper", Charter party bill of lading is allowed if covered by Master L/C.

 

	
  

	
(ii) Bill of lading indicating any clause relating to "delivery of goods without surrender of original bill of lading" or similar wordings is not acceptable.

	
Pricing/ Commission of Trade

	
Export Bills Collection Commission

	
Facilities:

	
1st USD50,000.-

	
1/8%

	  	
Balance

	
1/16%

	  	
L/C Opening Commission/ Commission in Lieu of Exchange

	  	
1st USD50,000.-

	
1/4%

	  	
Balance

	
1/8%

	  	
Commission in Lieu on Import Bills for Back to Back Deal

	  	
Waive

	  
	  	
Interest

	  
	  	
Export L/C bill transit interest: 2.75% per annum over LIBOR or

	  	
Bank's Cost of Fund on the outstanding amount from drawdown

	  	
until repayment in full, as conclusively calculated by the Bank.

	
Set Up Fee of Facilities:

	
USD10,000.-

	  

D. SECURITY AND CONDITIONS PRECEDENT:

Unless otherwise approved by the Bank, the Facilities will be made available or continue to be made available to the Borrower provided that the Bank has received each of the following, in a form and substance satisfactory to the Bank:

1 . This letter duly executed by the Borrower.

2.           General Commercial Agreement duly executed by the Borrower.

3.         (i) All monies Charge on Cash Deposit(s) duly executed by the Borrower in favour of the Bank;

(ii) the pledged deposit or cash margin in a principal amount of not less than 5% of the outstanding of Back to Back L/C Facility at any time, together with all interest accrued thereon. (The Bank has the right to require a margin on top of the amount specified above as pledged deposits)

4.           Letter of Comfort duly executed by China Armco Metals, Inc.

  

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Armco & Metawise (H.K.) Limited                                                                                                                                Our ref: P/HBHBC/O0020/09

5.         Guarantee and Indemnity for an unlimited amount duly executed by Yao Kexuan.

 

	
6.  

	
Guarantee Agreement ~ to secure all indebtedness owed by the Borrower to the Bank duly executed by Yao Kexuan

 

	
7.  

	
Evidence on acceptance of appointment as process agent for Yao Kexuan in respect of service of legal process under the documents to which it is a party.

 

	
8.  

	
All documents and/or other requirements for complying with Customer Acceptance Policies or similar requirements imposed by governing authorities and/or the Bank.

	
9.  

	
Original or Certified copies of all necessary consents, approvals and other authorizations (including but not limited to those required by relevant governing authorities and/or the resolutions of the directors and shareholders of the Borrower and/or any security provider(s) in connection with the execution, delivery, performance and enforcement of this letter and all other documents mentioned above, if applicable.

	
  

	
10.

	
Original or Certified copies of all necessary registrations and filings as may be required by relevant governing authorities in connection with the execution, delivery, performance and enforcement of this letter and all other documents mentioned above, if applicable.

	
11.

	
Such other documents, items or evidence that the Bank may request from time to time.

E. FACILITY ADJUSTMENT AND TOP-UP REQUIREMENT

The Borrower shall comply with (and procure any security provider to comply with) at all times the security coverage ratio(s) specified in this letter or as may be determined by the Bank from time to time. If any of the security coverage ratio(s) shall at any time fall below the level required by the Bank, the Borrower shall provide additional security acceptable to the Bank and/or reduce the outstanding of the Facilities designated by the Bank, in order to comply with the relevant requirements within the time limit imposed by the Bank from time to time. Without prejudice to the rights of the Bank under this letter, the Bank is authorized, from time to time, to uplift, realize, collect or sell as the Bank may think fit and without being liable for any loss to the Borrower or any security provider, if applicable, all or any part of the securities pledged to the Bank without any prior notice to the Borrower or any security provider, if applicable, and to apply the proceeds in or towards satisfaction of the Borrower's indebtedness owing to the Bank.

F. COVENANTS AND UNDERTAKINGS:

The Borrower undertakes to the Bank that it will:

	
·  

	
ensure that all consents, licences, approvals, registrations and filings (as appropriate) in connection with the Facilities, guarantee or securities as may be provided in relation to the Facilities granted hereunder are duly obtained, completed and will remain in fun effect throughout the period when there is outstanding under the Facilities .

	
·  

	
promptly submit to the Bank:

	
a)  

	
a certified copy of the audited (and, as appropriate, consolidated) financial statements of the Borrower and all corporate security provider(s), if applicable, as soon as they are available, but in any event within 10 months after the end of the financial year end and at any other time requested by the Bank;

ENT/SYS/0426(09/08)

  

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Armco & Metawise (H.K.) Limited                                                                                                                                Our ref: P/HBHBC/O0020/09

	
b)  

	
with reasonable promptness, details of any litigation, arbitration or administrative proceeding current or, to its knowledge, threatened or commenced against it; and

 

	
c)  

	
other information that the Bank may request from time to time .

	
·  

	
immediately inform the Bank of:

 

	
a)  

	
any change of the Borrower's directors or beneficial shareholders (except where the Borrower is a listed company) or amendment to its memorandum or articles of association or equivalent constitutional documents.

 

	
b)  

	
any substantial change to the general nature of the Borrowers existing business.

 

	
c)  

	
any factor which may inhibit, impair or delay performance by the Borrower or the security provider(s), if any, of the obligations under any loan and security documents to which they are a party.

 

	
d)  

	
the failure to continue to obtain consents, licenses, approvals, registrations and filings (as appropriate) in connection with the granting of the Facilities and/or the provision of securities (including without limitation guarantee(s) in relation to the Facilities granted hereunder throughout the period when there is outstanding under the Facilities.

G. OTHER TERMS AND CONDITIONS

The Facilities are available at the sole discretion of the Bank and are in all respects uncommitted. The Bank may at any time immediately modify, terminate, cancel or suspend the Facilities or any part of it, or otherwise vary the Facilities or any part of it, without the consent of the Borrower or any other person. Unless the changes are not within the Bank's control, the Bank shall give reasonable notice to the Borrower for any variation to the Facilities affecting the interest, fees and charges and the liabilities or obligations of the Borrower, and such variation shall take effect after the expiration of such notice which may be given by the Bank by such means as the Bank may at its discretion see fit.

Notwithstanding any provisions stated in this letter, the Facilities are repayable on demand by the Bank. The Bank has the overriding right at any time to require immediate payment of all principal, interest, fees and other amounts outstanding under this letter or any part thereof and/or to require cash col1ateralisation of all or any sums actually or contingently owing to it under the Facilities.

The "Terms and Conditions Governing Banking Facilities and Services" attached and/or referred to in this letter form an integral part of this letter and the Borrower agrees to observe and be bound by them.

This letter and the Facilities shall be governed by the laws of the Hong Kong Special Administrative Region and the parties hereto hereby submit to the non-exclusive jurisdiction of the Hong Kong Courts.

Please signify your understanding and acceptance of this offer by signing and returning to us the duplicate copy of this letter and provide each of the items under the section headed "Security And Conditions Precedent" above, for the attention of Mr. Alex Wong ("Designated Relationship Manager"), within one month from the date of this letter, otherwise the offer will lapse at the discretion of the Bank.

We enclose a set of documents which should also be completed and returned to us. If you have any queries, please contact the Designated Relationship Manager at telephone number 3668-5555.

  

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Armco & Metawise (H.K.) Limited                                                                                                                                Our ref: P/HBHBC/O0020/09

We are pleased to be of service to you

Yours faithfully,

For and on behalf of

DBS Bank (Hong Kong) Limited

/s/ ________________________

Authorized Signature

FN/mh Encl.

We hereby confirm our understanding and acceptance of all the terms and conditions set out in (i) this letter and (ii) the "Terms and Conditions Governing Banking Facilities and Services" attached to this letter and our agreement to be bound by all of them.

Signed for and on behalf of

Armco & Metawise (H.K.) Limited

/s/ Kexuan Yao

Authorized signor(s)

Signature of Witness

/s/__________________________

Name of Witness:

Hong Kong Identification / Passport No:

  

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Terms and Conditions Governing Banking Facilities and Services

These Terms and Conditions form an integral part of the banking facility letter ("Banking Facility Letter") from DBS Bank (Hong Kong) Limited to the Borrower to which they are attached.

	
1.      Definitions and Interpretation

1. 1 The terms below used in these Terms and Conditions shall have the corresponding

meanings:

"Agreement" the Banking Facility Letter together with these Terms and Conditions (including any supplement) and any other terms and conditions and/or agreement referred to In the Banking Facility Letter

 

"Assets" includes present and future properties, revenues and rights of every description.

 

"Bank" DBS Bank (Hong Kong) Limited which includes all its branches and offices wherever situated and its successors, assigns and any other person with which the Bank mergers or consolidates.

"Banking Facility Letter" the banking facility letter(s) (including all its attachments, schedules, appendices, amendments and supplements issued by the Bank in relation to facilities extended by the Bank to the Borrower, to which these Terms and Conditions are attached.

"Bank's Cost of Funds" the cost of funding of the Bank as may be determined by the Bank from l~TT1e lO time

"Borrower" the Borrower specified " the Banking Facility letter, and where there is more than one Borrower, all references to the Borrower" shall mean all such persons or anyone or more of them.

"Business Day" a day on which commercial banks in Hong Kong and, if applicable, the principal financial center of the relevant currency are open for business (other than a Saturday)

"Exchange Rate" the rate for converting one currency into another currency that the Bank determines to be prevailing in the relevant foreign exchange market at the relevant time, such determination to be conclusive and billing on the Borrower

"Facilities" the banking facilities (or any pan of It/ specified in the Banking Facility Letter and such other facilities, loans, overdrafts, advances, etc. from time to time made available by the Bank.

"Fixed Deposit Rate" the deposit interest rate for fixed deposits pledged to the Bank as security for Its corresponding Banking Facility.

 

"HIBOR" the Hong Kong Interbank Offered Rate quoted by the Bank for the relevant period.

 

 "LIBOR" the London Interbank Offered Rate quoted by the Bank for the relevant period.

 

 "Prime Rate" the rate which the Bank announces or applies from time to time as its prime rates for lending Hong Kong Dollars, or where applicable, for lending United States Dollars.

 

"Services" any banking services provided by the Bank.

1.2           Unless a contrary ,indication appears, a reference in the Agreement to:

 

a) a person Includes an individual, a company, sole proprietorship, partnership or body unincorporated and its successors and assigns.

 

b) any document includes a reference to that document 2S amended, varied, supplemented, replaced or restated from time to time: and

c) a provision of law is a reference to that provisions as amended or re-enacted

I .3           Unless the context otherwise requires, words importing the singular include the plural

and vice versa and the neuter gender includes the other genders.

1 4           Any matter required to be done on a particular date which is not a business day shall be

done on the next following business day.

1.5           Headings are for convenience only and are to be Ignored in construing these Terms and

Conditions.

 

2. Application

2.1 These Terms and Conditions shall apply to any Facilities and Services which the Bank in its sole discretion, may agree to make available and provide to such extent and in such manner as the Bank thinks fit.

2.2 These Terms and Conditions shall be subject to such other terms and conditions which may be specified by the Bank from time to time In the Banking Facility Letter, other documents, agreements or applications.

2.3 In the event of any conflict or inconsistency between these Terms and Conditions and the provisions of the Banking Facility Letter, the latter shall prevail.

3.Payments

3.1 Unless otherwise agreed In writing by the Bank, all payments made under the Agreement shall be made in immediately available funds to the Bank before noon on the due date.

3.2 All payments by the Borrower to the Bank shall be made without any set-off, counterclaim, deduction, withholding or condition of any kind, If the Borrower is compelled by law to make any withholding or deduction, the sum payable by the Borrower shall be Increased so that the amount actually received by the Bank is the amount it would have received if there had been no such withholding or deduction.

3.3 Payment by the Borrower to the Bank shall be in the currency of the relevant liability or, If the Bank so agrees in writing, In a different currency, in which case the conversion to that different currency shall be made at the Exchange Rate'. The borrower shall be liable for any shortfall if the converted currency is less than the outstanding liability.

3.4 Any monies paid to the Bank in respect of the Borrower's obligations may be applied in or towards satisfaction of the same or placed to the credit of a suspense account with a view to preserving the Bank's rights to prove for the whole of the Borrower's outstanding obligations.

3.5 If any payments paid to the Bank in respect of the Borrower's obligations are required to be repaid by virtue of any law relating to insolvency, bankruptcy or liquidation or for any other reason the Bank shall be entitled to recover such sums from the Borrower as If such monies had not been paid.

4.Drawings Against Unlearned Amounts

In the event the Bank permits the Borrower to draw against funds to be collected or transferred from any account(s), the Borrower shall on demand reimburse the Bank In full the amount so drawn If the Bank does not receive the funds in full at the time the Bank ought to have received the same or if, after the Bank has accepted the transfer, the Bank is prevented from collecting or freely dealing with the funds In accordance with its usual banking practice.

5. Letter of Credit

For facility relating to Letters of credit calling for cargo receipt, If so agreed to be granted by the Bank, the beneficiaries and each of the individual limits are .subject to the Bank's approval on a case-by-case basis. The Bank may from time to time carry out at the Borrower's expense updated searches of the said beneficiaries and all related (costs and fees may be debited 10 the borrowers) account.

6. Account Payable Financing

Payment under the Facility shall be made directly to the relevant supplier. The suppliers and each of the individual facility limits are subject to the Bank's approval on a case-by-case basis The Bank may from time to time carry out at the Borrower's expense updated searches of the said suppliers and all related costs and fees may be debited to the Borrower's account

	
7. Negotiation under Documentary Credit

If a discrepancy is found in the underlying letter of credit documents, then notwithstanding anything contained in the Agreement, (the Bank may at its absolute discretion refuse to negotiate any such documentary credit and/or bill(s)).

 

8. Documents against Acceptance Bills Purchased and Documents against Payment Bills purchased with Insurance Cover

8.1 The Bank has or may from time to time take out and do all things as appropriate or necessary to effect and maintain an insurance policy with such reputable insurance

company or companies on such terms and in such value to cover such risk(s) related to the Facility as the Bank may deem fit, and the Borrower agrees to reimburse the Bank, without deduction, for all monies expended including but not limited to insurance premium In relation thereon.

8.2 The Borrower is required to comply with all the terms and conditions of such policies as shall from time to time be entered into between the Bank and any insurance company as the Bank may deem fit and the Borrower undertakes and warrants not to do or omit to do or permit or cause or suffer to be done any act, matter or thing whatsoever whereby any such policy of insurance may be rendered void or voidable or whereby any premium may be increased.

8.3 Such arrangement shall not extinguish the Borrower's obligations under the Facility, and the Borrower agrees to render such co-operation and assistance as the Bank may require to connection with any claim or other matter arising in connection with any such insurance policy.

9. Treasury Facilities

9.1 For any foreign exchange, options, futures, swaps or other structured or derivative products, applications will only be considered by the Bank subject to its receipt of the documentation that the Bank may require from time to time. Any treasury related contract will be entered into by the Borrower at the rate(s) quoted by the Bank at its absolute discretion.

9.2. The terms included or referred to in the relevant confirmation issued by the Bank shall apply to all treasury related transactions between the Borrower and the Bank.

9.3 The Borrower warrants that it will enter into any transaction with the Bank solely in reliance upon Its own judgment and at its own risk, and the Bank shall not be responsible for any loss or other consequences suffered or incurred by the Borrower, whether or not acting on advise received from the Bank.

9.4 The treasury related contract amounts shall be subject to the relevant facility limit(s) (if any) stipulated in the Banking Facility letter and the risk exposure limits set (either advised or otherwise) by the Bank from time to lime.

9.5 The Bank may from time to time mark the Borrower's outstanding treasury related contracts to market by reference to the prevailing market rate or quotation in order to calculate the Borrower's gain or loss under the contracts. If the Bank determines that the Borrower has incurred a loss under any such contracts by the then prevailing mark­-to-market calculation, the Borrower shall forthwith pay such sum or deliver such collateral as required by the Bank to cover such loss.

9.6 The Bank has the right to close out and/or terminate any or all outstanding treasury

a)   the Borrower fails to perform any terms of the Agreement including its default In

payment;

 

b) the outstanding contracts amounts exceed the facility Iimit(s) (if any) or the Bank's risk exposure limit(s);

 

c) the Borrower shall become insolvent or suspends payment of any debt when due or subject to any bankruptcy or winding-up petition; or

d) any circumstances have arisen or continued which, in the Bank's opinion, might

adversely affect the Bank's position under the relevant contracts

Upon closing-out or termination of the treasury related (Contracts, the Borrower shall pay to the Bank any loss incurred under those contracts. Such loss shall be determined by the Bank (acting in good faith) based on the replacement market value of the contract, so closed-out or terminated, which determination shall be binding and conclusive on the Borrower.

10,           Application of Proceeds

 

10.1 The Bank may apply the net proceeds of any sale, disposition or dealing of the security of the Borrower towards discharge of the Borrower's obligations to the Bank In whatever priority that the Bank may determine.

10.2 The Borrower shall, upon demand by the Bank:

 

a) Provide such further security in form and value as maybe, required in the opinion of the Bank sufficient to secure any of the Borrower's obligations to the Bank; and

 

b) execute and deliver to the Bank any documents in form and substance satisfactory to the Bank over any of the Borrower's assets as the Bank specifies in any such demand

10.3 Save for negligence or willful default. The Bank shall not be liable for any loss or damages or depreciation in value of any security granted in favour of any Bank due to the Bank's exercise of any of its rights over of any security

11. Interest

11.1 The Bank shall charge interest on any sum(s) outstanding or owing by the Borrower from time to time. Unless otherwise specified, interest will accrue on a daily basis and shall be calculated, compound and payable on such basis and in such manner as the Bank may determine at its absolute discretion.

11.2 Save as otherwise specified, interest will be calculated by reference to the actual number of days elapsed and a 365-day year if the Facility is in HK Dollars, Pounds Sterling, Singapore Dollars or Malaysia Ringgit or a 360-day year if the Facility is in any other approved foreign Currencies

11.3 If the interest rate in respect of any Facility is expressed to be a margin over the Prime Rate, the Bank shall be entitled, in its reasonable discretion, at any time to substitute the Bank's Cost of Funds in place of the Prime Rate in calculating the interest payable under such Facility. If the Interest rate in respect of any Facility’s expressed to be a percentage less than the Prime Rate, the Bank shall be entitled, in its reasonable discretion, at any time to replace such interest rate by the Bank's Cost of Funds as the applicable interest fate in respect of such facility,

11.4 If any amount under the Banking Facility Letter is unpaid on due date or exceeds the permitted facility limit, such overdue or excess sum will be subject to the Bank's then prevailing overdue or over limit interest rate, and may be compounded monthly or at such other intervals as the Bank may determine. The Bank may without prejudice to Its other rights, increase the interest rate on the entire amount outstanding under the Banking Facility letter if any amount becomes overdue.

 

  

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LETTER OF COMFORT

To: DBS Bank. (Hong Kong) Limited

Date 15/5/2009

Letter of Comfort

Dear Sirs,

We hereby acknowledge that DBS Bank. (Hong Kong) Limited (the "Bank") at our request or at its discretion has granted or will from time to time grant credit facilities to our Subsidiary Armco & Metawise (H.K.) Limited (the "Subsidiary").

We confirm that the aforesaid credit facilities are beneficial to our group comprising ourselves and our subsidiaries, and irrevocably undertake that as long as any credit facility is in effect and/or any obligations or liabilities of the Subsidiary to the Bank whether actual or contingent are outstanding:

1.           We shall not and shall not enter into any agreement or arrangement to dispose of, reduce or create any security interest in or grant any option over our shareholding or interest in the Subsidiary without giving one month's prior written notice to the Bank. In the event of any such disposal, reduction or creation of any security interest in or option over our shareholding or interest in the Subsidiary, we will forthwith on demand by the Bank deposit with the Bank by way of security prior to such disposal, reduction or creation, such securities which in the sale judgment of the Bank are satisfactory and sufficient to secure the obligations of the Subsidiary towards the Bank.

2.           We will ensure that the Subsidiary will operate at all times as a going concern. We will further keep and maintain the Subsidiary in a sound financial position which will enable the Subsidiary to meet all its obligations and if necessary we will make funds available to the Subsidiary to discharge its obligations and liabilities to the Bank and undertake not to take or permit any action which could result in the Subsidiary being unable to carry on its business or otherwise defaulting under the credit facilities.

Yours Faithfully

/s/ Kexuan Yao________________________

signed by Kexuan Yao

Director 

duly authorized for and on behalf of

China Armco Metals, Inc.

  

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Guarantee Agreement (Translation)

Yao Kexuan

(Guarantor)

And

Armco & Metawise (H.K.) Limited

(Borrower)

And

DBS (H.K.) Limited

(Lender)

Guarantee Agreement

2009-05-15

This <Guarantee Agreement> (The “Contract”) is signed by the below parties on 2009-05-15:

1.           Guarantor:

Yao Kexuan

Address:

ID Number:

2.           Borrower:

Armco & Metawise (H.K.) Limited

Address:

3.           Lender:

DBS (H.K.) Limited

Address:

Based on:

 

1. On April 22, 2009, the Lender of this Contract issue to the borrower of this contract <Bank Credit Facilities: Armco & Metawise (H.K.) Limited>, the borrower had, on __________,  accepted and signed agreeing to all terms with in the letter of the Bank Credit Facilities( the above grant letter includes all following addendums, amendments, and changes, the “Grant Letter” ); The Grant Letter states: after the fulfillment of all its terms and conditions, the lender will provide to the borrower a loan or credit facilities of USD 12,000,000.00.

2. According to the Grant Letter and/or the request of the lender, the borrower must obtain Yao Kexuan (the Guarantor of the Contract)’s consent to be responsible for guarantee for the full loan. This requirement is a prerequisite for the Borrower to receive or continue the loan and or credit facilities.

According to the Grant Letter and/or the Lender’s above arrangement and requests, the Guarantor voluntarily provide the guarantee for the borrower; Through the negotiation of all the parties, have come to the conclusion of the below terms for all parties to follow.

1. Guarantee of loan amount

Under this Contract, the loan amount guaranteed by the Guarantor is the full amount owed by the Borrower under the Grant Letter, including principle, interest, penalty interests, penalties, compensation for loss, fees, expenses, related arbitration and court fees, legal fees etc.

  

- 8 -

  

2. Period of Guarantee

The period of Guarantee is in effect as of the date of signing, till two years after the expiration of all the loads under the Grant Letter. During the period of Guarantee, the Lender has the rights to ask the Guarantor to take responsibility of the guarantee.

3. Range of Guarantee

 

The Guarantor agrees: Once requested by the Lender, immediately repay all remaining loan amounts owned by the Borrower under the Grant Letter, including but not limited to principle, interest, penalty interests, penalties, compensation for loss, fees, expenses, related arbitration and court fees, lawyer’s fees etc.

4. Nature of Guarantee

4.1 Basic nature of this guarantee

 

Under this contract, the Guarantor carries a non-condition, non-revocable joint and several responsibility.

4.2 Other attached nature of the Guarantee

 

(1) This Guarantee is a independent guarantee, its validity is not effected or limited by any contract and agreements or nullification agreements relating to the loan.

 

(2) The right given to the Lender under this Contract is not affected or limited by other contracts or agreements. Under any circumstances, as long as the Borrower does not pay back the loan when due, the Lender has the right to request for the Guarantor to carry out his responsibility to the loan, without having to claim the rights of any other parties( including but not limited to the Borrower, other Guarantor, provider of collateral, etc. )or arbitration or any other action.

 

(3)This Guarantee is a continuous guarantee, and will be affective in the duration of the guarantee, till the loan is paid in full.

 

(4) As long as the Guarantor takes responsibility to the Lender for any current, future, existing or potential loans under the Grant Letter, the Guarantor will be responsible for guaranteeing these loans; this responsibility will not be affected by any unforeseen element.

 

(5) Under this Contract, the guarantee responsibility taken by the Guarantor is unconditional, and will not be excused or lessen due to any of the following reasons:

 

(a) Any correction, addition, or removal to the terms and conditions of the Grant Letter;

 

(b) Any relief of time or other conditions or any discounts given to any other party by the Lender;

 

(c) Any agreements made by the Lender with any other party or the Lender waiving or changing any of his rights to any other party;

 

(d) Any party’s change in legal position or composition, including stock exchange, bankruptcy, liquidation, merger, takeover, reorganizing, death, incapacitated, or other conditions of other limitations, or the change of any party’s name or business scope;

 

(e) Any party, for any loan, providing any other guarantee, mortgage, collateral or any other assurance.

 

(6) If there is more than one Guarantor under this contract, the responsibility each Guarantor carry is individual and jointly, the Lender has the rights to demand the amount of the loan from multiple or one Guarantor.

5. Guarantee of payment of loan

5.1 At the expiration of terms of any of the Borrowers loans, including the advanced expiration due to any legal, statutory circumstances, or terms on agreements or contracts between the Lender and the Borrower, due to any reason if the Borrower is unable to at its due date payback the capital, interest, or any other required payments, within 7 days of receiving the payment notice from the Lender, the Guarantor is to pay back in full the amount on the payment notice in its indicated amount, currency, method, date, location and any other  payment instruction, unconditionally as the primary borrower to the lender.

5.2 Other than if there is any major error, the payment notice issued by the Lender has obsolete rights, and it’s contain has restricting rights to the Guarantor.

6. Rights to claim

6.1 Before all loan amount is paid off, the Guarantor cannot received or exercise any rights to claim, or demand any payment of loan from the Borrower before the Lender.

  

- 9 -

  

6.2 Before the loan is paid in full, the Guarantor cannot, without written consent of the Lender, take the Lender’s place and demand payment of the loan or accept any other party’s other guarantee or assurance. If the Guarantor violates these terms and receives guarantee, such guarantee should be regards as the Guarantor receiving on behalf of the Lender. The Guarantor is to transfer all related documents, collaterals, and terms and conditions to the Lender.

7. Objection rights

The Guarantor under this contract, within the allowance of the law, agrees to forgo all rights to objection.

8. Declaration and Commitment

8.1 The Guarantor declares the followings:

 

(1) The Guarantor is a legal entity in accordance with all use of the law with full capacity for civil conduct.

 

(2) The Guarantor signed this Contract voluntarily, and willingly, without the coercion of any party. The Guarantor’s responsibility under this contract is legal, binding, and enforceable according to its terms and conditions.

 

(3) The Guarantor will obtain and maintain all authorization, approval, records, and registrations applicable and legally required relating to this contract, and comply with all the terms and conditions, and take any other required actions, to ensure the Guarantor has the legal rights to sign this contract and to perform the contractual obligations, and to ensure this contract is legal, valid, binding, can be used as evidence in arbitrations and can be enforced.

 

(4) From time to time, at the request of the Lender, the Guarantor will sign any documents or contracts or perform any actions and arrangements to ensure the rights of the Lender under this contract.

 

(5) At the request of the Lender, the Guarantor will pay to the Lender all fees and expenses to the negotiation, drafting, printing, signing, enforcement, or any other action, relating to this contract, including legal fees, and arbitration fees.

 

(6) At the request of the Lender, the Guarantor will pay to the Lender all fees and expenses relating to stamp-duty, notary fee, registration fee, and any other similar tax and duty relating to this contract, and at the request of the Lender compensate for any liabilities due to the delayed or missing payments of the above tax and duties.

 

(7) If the Guarantor fails to pay all the items as stated in (5) and (6), at requested by the Lender, the Guarantor should immediately pay to the Lender all related items, and pay to the Lender an interest aroused from the amount from the date of payment due till the date when it is paid in full at a rate the Lender sees fit.

9. Tax

All the items paid by the Guarantor within the limit of this contract, cannot deduct any tax of any nature, and cannot for the reasons of offsetting any allowances, or any other reason deduct or reduce. If any deduction or reduction of the above tax items is required by law, the Guarantor should pay to the Lender an additional sum in the amount and as compensation to the Lender for the difference.

10. Currency

10.1 The Guarantor under this contract shall guarantee to the Lender the currency of the loan specified on the Grant Letter, or any other currency with the written consent of the Lender.

10.2 If the Lender receives, with this contract as the basis, from the Guarantor any sum that is in a currency different from the currency stated in 10.1, the Lender has the rights to convert the received sum into the above discusses currency as soon as its procedural processing time, the Guarantor shall make up the difference in payment amount to the Lender. Under any circumstances, the Guarantor will pay in full to the Lender any fees and expenses resulting from the exchanging of currencies.

10.3 The responsibility under this term is an independent responsibility, in addition to the Guarantor’s responsibilities under this contract. This term may be taken as an independent agreement for the purpose of legal action and enforcement.

11. Certification and Basis

11.1 The certifications and basis for the notice of payment by the Lender, with in its scope of business, in the case the Borrower has not made the loan payments to the Lender, other than if there is major errors, its contents is binding to the Guarantor.

 

11.2 Any documentation or certifications signed by the Lender’s management, employee, or legal representative, regarding the amount of this loan, other than if there is major errors, its contents are binding to the Guarantor.

  

- 10 -

  

12 Lien and Direct Deduction

Guarantor agrees that when the Borrower has breached the contract, besides all the other rights conferred by law, the Lender is entitled to the lien on the properties owned or controlled by Lender and appointee at any time, no matter it is for property preservation or other purpose. In addition, regardless of the place where the bank accounts were opened or paid, the Lender has the right to withdraw the funds from any account opened by the guarantor (if the account is certificate of deposit, the Lender has the right to withdraw the fund when the deposit matures), to offset the due debts owed by the Borrower to the Lender under this contract.

 

13 Transfer

 

13.1 Without written consent by the Lender, the guarantor shall not transfer all or any rights or obligations under this contract to any third party.

 

13.2 When the Lender follows the legal procedure to transfer all or any rights under the Credit Extension Letter to any third party, the Lender can transfer the corresponding rights under this contract to the transferee without necessity to obtain consent from the guarantor in advance. After the transfer is completed, the guarantor shall continue to take liabilities on guaranties as previously.

 

14 Waiver of Immunity

 

The signing and execution of this contract is a pure business activity. The guarantor has not any immunity, and irrevocably agrees to waive any potential immunity that may be applicable in the future.

15 Notice

 

15.1 The notices or other communications related to the contract shall be in written, via telex, fax, or letters.

 

15.2 If the recipient is the guarantor and/or Borrower, the notices shall be delivered to the legal or office address or the latest telex or fax number known to the Lender. If the notices are delivered via telex or fax, they shall be regarded as being delivered as soon as they are sent. If the notices are mailed out, under the condition that the address is correct and postage is paid, the notices shall be regarded delivered seven days later, no matter whether the mail is returned eventually. But the notices or communications that are from the guarantor to the Lender take effect only when the Lender has actually received the notices.

16 Rights Reservation

 

That the Lender delays or fails to, or partially exercise the rights conferred by this contract at any time shall neither be regarded as the action to give up the right nor impact the capability of the Lender to further exercise this or any other rights under this contract. That the Lender does not pursue the liabilities of the guarantee under this contract at any time shall not hinder the Lender from pursuing the related or unrelated liabilities under this contract in the future. The rights conferred by this contract to the Lender do not hinder the obgliee from being entitled to other legal rights.

 

Clause 17 Clause Severability

 

Under the circumstance that any clause of this contract is regarded illegal, invalid or inappropriate for compulsory enforcement subject to any law, the legal force of other clauses of this contract remains unimpaired (the aforementioned clause that is illegal, invalid or inappropriate for compulsory enforcement shall no longer be a component of this contract), and the validity, effect, and capability for compulsory enforcement of other  clauses shall not be impaired.

 

18 Applicable Laws

 

This contract is subject to the laws of People’s Republic of China.

19 Jurisdiction

 

19.1 All parties involved in this contract agree that the disputes related to the contract shall be under the non-exclusive jurisdiction of Chinese courts. The complaints filed to Chinese court or the compulsory enforcements requested by the Lender to the guarantor per the terms of the contract are under the jurisdiction of the court where the Lender resides. If the property of the guarantor is located in other places, the Lender has the right to choose the jurisdiction of either court where the Lender resides or the property is located. No matter which jurisdiction the Lender chooses, the guarantor shall give the consent.

 

19.2 The above clause shall not hinder the Lender from filing complaint or requesting compulsory enforcement to any court that has jurisdiction or pursue in one or multiple jurisdiction areas simultaneously or at different times.

20 Legal Binding

 

This contract has legal bindings on the guarantor, Lender and their corresponding heirs.

  

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21 Come into Force

 

This contract shall come into force upon being signed off by the guarantor, Borrower, and Lender. If government approval and registration are required by Chinese laws and regulations for the contract to take effect, the Guarantor shall follow the legal procedure to apply for approval and registration.

22. Notarization

After the signing of this contract, if deem necessary by the Lender, at the request of the Lender, the Guarantor, and Borrower should act in full cooperation with the Lender to apply for a notarized loan agreement at the Shenzhen city Notarization Facilities. If the Guarantor fails to comply with the terms of the contract after the above procedure, the Lender may, without prior notice to the Guarantor, directly ask the governing court to enforce the contract.

23. Other

23.1 The titles of this terms and conditions is just for the reasons of reference, it does not affect the definition of the terms.

23.2 This Contract is the accessory contract to the Grant Letter, and has the same legal rights as the Grant Letter.

This Contract shall have four copies of the same format; each party will hold one copy. The Lender shall hold the extra copy, for use of notarization.

Guarantor: /s/ Yao Kexuan

Signaure

Borrower: Armco & Metawise (H.K.) Limited)

Stamp and signature: /s/ Yao Kexuan

Lender: DBS Bank (Hong Kong) Limited

Stamp and signature: /s/ ____________________

  

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Mortgage or Change Details

(Companies Ordinance ss.80 (1), 81(1), 82(1), 91(1), & 91 (5))

Companies Registry

Form M1

Important Notes:

Please read the accompanying notes before completing this form.

Please print in black ink

Company number

0763031

1. Company Name

Armco & Metawise (H.K.) Limited (“the Company”)

2. Instrument Creating or Evidencing the Mortgage or Charge.

*note 10

Description of Instrument

Charge on Cash Deposit(s) to secure Liabilities of the Deposit(s) (“Charge”)

Date of Creation

DD/MM/YYYY

3. Amount Secured

Use Continuation Sheet A is space is insufficient

Please refer to Continuation Sheet A

4. Particulars of Mortgagee or Chargee

*Note 11

Name

DBS Bank (Hong Kong) Limited (“Bank”)

*Note 12

Address

11th Floor, the Center, 99 Queen’s Road Central, Hong Kong

*Note 5

Presentor’s Reference

Name: DBS Bank (Hong Kong) Limited

Code:

Address: 11th Floor the Center

99 Queen’s Road Central

Hong Kong

Tel:

Fax:

E-mail Address:

Reference:

M1 COD (Own) (12/07)

Specification No. 3/2007 (Revision) (Dec. 2007)

  

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Form M1

Company number

0763031

5. Commission, Discount or Allowance payable to the Subscriber of the Debenture

*Note 13

Amount/ Percentage

N/A

6. Short Particulars of the Property Mortgaged or Charged

Use Continuation Sheet B if space is Insufficient

a. Landed Property

1st property

2nd property

b. Other Types of Property

Please refer to Continuation Sheet B and the Definition in Continuation Sheet A

7. Date of Acquisition of Property

N/A

This Form includes 1 Continuation Sheet(s) A and 1 Continuation Sheet(s) B

Signed: /s/ Kexuan Yao

Name:

*Note 7

Company/Mortgagee/Chargee*

(Director/Secretary/Authorized Representative)

Date:15/05/2009

Delete whichever does not apply

  

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Form M1

 

	
Continuation Sheet A

Company number

0763031

Amount Secured (Section 3)

All sums of money and liabilities whether actual or contingent, as at the date of the Charge or in the future owing or incurred to the Bank on any account whatsoever by the Company whether as principal or surety and whether from the Company solely or from the Company jointly with any other person or persons or from any firm in which the Company may be a partner and in whatever style, name or form, and including (without limitation):

	
  

	
(i)

	
the amount of (01) any loans, acceptances or other credits or advances made to or for the accommodation or at the request of the Company, (02) any notes or bills, made, accepted, endorsed, discounted or paid by the Bank, (03) any liability under guarantees, indemnities, foreign exchange contracts (spot, forward or otherwise), documentary or other credits or any other instruments whatsoever assumed or given or entered into by the Bank for or at the request of the Company and (04) any liability under all hire purchase agreements and financial, equipment, motor vehicle and other leases entered into between the Bank and the Company; and

	
(ii)

	
(01) interest to the date of payment (notwithstanding any demand, judgment, death, dissolution, insolvency or other incapacity of the Company or any other person) at such rates and upon such terms as may from time to time be payable, (02) all commissions, discounts, fees and other charges payable to the Bank and (03) all sums, disbursements and other expenses paid or incurred by the Bank, in relation to the Bank's provision of banking or credit facilities or other financial accommodation (including, without limitation, pursuant to hire purchase agreements and financial, equipment, motor vehicle and other leases) to the Company, the implementation of the provisions of, or exercise of rights under, the Charge or the perfection or enforcement (or attempted perfection or enforcement) of the security or any other guarantees or encumbrances for any indebtedness of the Company to the Bank, including all reasonable legal costs and all other costs and expenses and any exchange control premiums, penalties or expenditure on a full indemnity basis (collectively "Liabilities").

Definitions: (Applies both for Continuation Sheet A and B)

"Bank" shall include its successors and assigns and any of its branches and persons deriving title under the Bank;

"Deposit" means all deposits, credit balances and monies as at the date of the Charge or in the future deposited by the Company in accounts maintained with or held by the Bank, whether such accounts are opened in the name of the Company individually or jointly with any other person or persons or whether such deposits, credit balances and monies are represented or evidenced by instruments having specifications or dates different from the original instruments representing or evidencing them or held in different accounts, as the same may from time to time be increased or decreased, and including, for the avoidance of doubt, all interest (compounded or otherwise) accrued thereon and other amounts of principal added thereto or otherwise, and the expression "Deposit" shall also include, for the avoidance of doubt, any currency into which such sums may from time to time be converted and all renewals and/or replacements of such sum(s);

"dissolution" means, in relation to any person, the supervision, winding-up, liquidation or bankruptcy of that person, and any equivalent or analogous procedure under the law of any jurisdiction and "dissolved" shall be construed accordingly;

"encumbrance" means any mortgage, charge, pledge, lien or other encumbrance, priority or security interest whatsoever over or in any property, assets or rights or interests of whatsoever nature and includes any agreement for any of the same and "encumber" shall be construed accordingly;

"the security" means the Charge and the security constituted by it.

Specification No. 3/2007 (Revision)(Dec. 2007)

  

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Form M1

 

	
Continuation Sheet B

Company number

0763031

Short Particulars of the Property Mortgaged or Charged (Section 6)

Description of Property Mortgaged or Charged

(1)           By way of first fixed charge and agreement to charge :

 

 

the Deposit and all right, title and interest of the Company whatsoever, present and future, thereto and therein, together with any certificates of deposit or other instruments or securities evidencing title, or otherwise relating, thereto and any account to which the same is credited (Clause 3 of the Charge).

(2)           By way of set-off:

any sum standing to the credit of anyone or more of the accounts of the Company with the Bank (whether current, deposit, loan or of any other nature whatsoever and whether subject to notice or not and whether such sum or sums is/are unmatured deposits and including, without limitation, the account to which the Deposit is credited) wheresoever situate (Clause 5.5 of the Charge).

Notes

By Clauses 4.2 (a) and (b) of the Charge, the Company undertakes and agrees that, during the continuance of the security, the Company shall not:

(i)           Withdraw the Deposit or any part thereof or any other amounts for the time being subject to the Charge

except with the Bank's prior consent;

(ii)           Encumber, assign, transfer or otherwise deal with or grant or suffer to arise any third party rights over

or against the whole or any part of the Deposit or any other amounts for the time being subject to the security, or purport so to do.

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