Attached files
| file | filename |
|---|---|
| 8-K - China Energy Recovery, Inc. | v173063_8k.htm |
| EX-10.2 - China Energy Recovery, Inc. | v173063_ex10-2.htm |
| EX-99.1 - China Energy Recovery, Inc. | v173063_ex99-1.htm |
Exhibit
10.1
Lender
name:
Loan
amount: US $2,000,000
Loan
date: February 1, 2010
CER (HONG
KONG) HOLDINGS LIMITED
LOAN
AGREEMENT
THIS LOAN AGREEMENT is entered into by
and among CER (Hong Kong) Holding Limited, incorporated in the Hong Kong Special
Administrative Region (“CER Hong Kong”) with the person specified on the
signature page hereto as the lender (“Lender”), and China Energy Recovery, Inc.,
a Delaware corporation (“CER”), as of this 1st day
of February 2010.
WHEREAS, CER Hong Kong is a wholly
owned subsidiary of CER, and the parent affiliate company of CER Energy Recovery
(Shanghai) Co., Ltd., (“CER Shanghai”) a foreign investment
enterprise established under the laws of the Peoples Republic of
China (“China”).
WHEREAS, CER Hong Kong proposes to
borrow from the Lender under this secured loan agreement (the “Loan Agreement”)
the amount set forth herein as its commitment hereunder, and re-lend the
aggregate amount borrowed from the Lender and such other persons that enter into
similar agreements as the Loan Agreement (together the “Lenders”) to CER
Shanghai, under a loan agreement which will be registered with State
Administration of Foreign Exchange (“SAFE”) as to the principal and interest
payments and other payment obligations, to be evidenced by the approval of SAFE
(“SAFE Agreement”).
WHEREAS, CER Shanghai has a project
contract (the “Project Contract”) with SOPO Chemical New Development Co., Ltd
(“SOPO CND”), guaranteed as to payment by its affiliate SOPO Chemical (Group)
Co., Ltd. (“SOPO Group”), which provides for periodic payments commencing April
2010, in the amount of One Million Twenty Thousand Renminbi per month (“SOPO
Contract Payment”). CER Shanghai has agreed to place the SOPO
Contract Payment into a separate account (“CER China Account”) in China, under
the signature control of an agent (“Agent”) determined by CER Shanghai and CER
Hong Kong, as approved by the Lenders acting by majority of the principal amount
outstanding hereunder. Periodically, the SOPO Contract Payment
amounts will be transmitted from the CER China Account to an account located in
Hong Kong of CER Hong Kong (“CER Hong Kong Account”), under the signature
control of Chui and Lau, Solicitors (Hong Kong) pursuant to that certain Escrow
Agreement dated February 1, , 2010.
WHEREAS, CER Hong Kong acknowledges
that payments to it under the loan agreement between it and CER Shanghai will be
subject to certain deductions, including for taxes and payment expenses, but
those deductions will be the sole responsibility of CER Shanghai and will not in
any way affect the obligation to pay principal, interest and other obligations,
in full as if there was no deduction, when due under this Loan Agreement in
accordance with its terms.
WHEREAS, CER Shanghai has obtained an
amendment to the agreements with SOPO CND and SOPO Group to provide that the
payments under the Project Contract and related guarantee will be paid to the
CER China Account.
WHEREAS, as security for this Loan
Agreement and the other loan agreements of all the Lenders, Mr. Wu Qinghuan, the
Chief Executive Officer of CER and principal stockholder of CER Hong Kong, will
pledge 8,000,006 shares of common stock of CER, which shares will be held in
escrow under the terms of an escrow agreement (the “Share Escrow Agreement”) for
the benefit of all the Lenders. Such shares have been issued to Mr.
Wu as restricted securities as that term is defined under Rule 144 (“Rule 144”)
of the United States Securities Act of 1933, as amended (the “33 Act”), and
subject to the particular provisions of issuances by shell
companies.
NOW THEREFORE, in consideration of the
respective representations, warranties and agreements set forth herein, CER Hong
Kong, CER and the Lender, agree as follows.
1. Loan and Interest; Late
Penalty. CER Hong Kong is hereby borrowing from the Lender the
aggregate sum of USD $2,000,000 (“Loan”). The outstanding principal amount of
the Loan and any other obligations under this Loan shall bear interest at the
annual rate of 15.1%, compounded monthly, commencing the date the amount of the
Loan is remitted to CER Hong Kong, and continuing until the principal and such
other obligations of the Loan are repaid in full. If any payment is
not made when due, then the payment will bear a monthly penalty equal to 1.5% of
the amount due, compounded monthly, until repaid in full, net of tax and
fees. To the extent that CER Hong Kong makes a required payment in an
amount less than required, it will pay such amount pro rata among all the
outstanding Loan Agreements on the basis of the then outstanding
principal.
This Loan Agreement, is one of a
series of Secured Loan Agreements of CER Hong Kong (collectively, the “Loan
Agreements”), aggregating USD $4,000,000 in principal amount, all of which are
secured by 8,000,006 shares of common stock of CER, owned by Mr. Wu
(“Collateral”). All the Loan Agreements are identical in all respects
except for the principal amount, payee and the date of issue thereof, and all of
which are also secured by the Collateral. The Loan Agreements shall
rank pari passu with
each other in all respects and shall be considered a single series for all
purposes, including, but not limited to, making a demand for payment, electing
to accelerate payment, amending the Loan Agreements, and foreclosing or
otherwise pursuing remedies against the Collateral securing the Loan Agreements,
except that each Loan Agreement shall be considered separate with respect to the
date from which interest shall accrue.
2. Repayment of the
Loan. The maturity date of the Loan will be January 15, 2013
(the “Maturity Date”). CER Hong Kong will pay the sum of USD$
283,011.37 at the end of every four calendar months, commencing May 15, 2010,
and the Maturity Date, which shall have a 15 day grace period, which amount
represents the principal on an amortizing basis and interest due under this Loan
Agreement shall be due and owing in full. Such amounts as may be due under this
Loan Agreement may be paid from an escrow account established by CER Hong Kong
for the benefit of the holders of the Loan Agreements.
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3. Prepayment. CER
Hong Kong may prepay the principal under this Loan Agreement in whole or in
part, at any time or from time to time, upon 30 days advance written notice to
the Lender, with a premium 1.25% on the amount of the principal amount prepaid
through the date of payment, net of tax and fees; provided that all other Loan
amounts shall then be prepaid pro rata among all the
outstanding Loan Agreements on the basis of the then outstanding
principal. Each prepayment shall be accompanied by accrued interest
on the amount to be prepaid through the date of payment.
4. Exchange Rate Differential
Payment. As an additional inducement to the Lender to make the
Loan, which payment will not be considered interest hereunder, CER will issue to
the Lender or its designee, on each date that an amount of principal of the Loan
is paid, shares of common stock of CER, on a restricted basis, without
registration rights, as follows: If the RMB exchange rate between the
RMB and United States Dollar (“USD”) is less than RMB 6.8271(the agreed upon
exchange rate on the date of the making of the Loan), such that the value of the
RMB is greater than the USD, then the difference in the principal installment
calculated at the rate of RMB and calculated at the rate of RMB to USD on such
repayment date will be converted into a US dollar amount and divided by the
closing price of one share of common stock of CER on the OTC or stock exchange,
the result of which will represent that number of shares to be issued to the
Lender as of such date, in restricted stock.
The above
formula is as follows:
{[(A
x B) – (A x C)] divided by C} divided by D = G
A = US
dollar amount of principal payment.
B = The
RMB to US$ exchange rate on date of Loan (RMB 6.8271).
C = The
RMB to US$ exchange rate on the principal installment repayment date, determined
by the Bank of China.
D =
Closing price of one share of common stock on principal installment repayment
date.
G= Number
of shares due to investor, in restricted stock.
3
5.
Appointment of Escrow
Agent. CER Hong Kong shall have the right to appoint an escrow
agent for the purposes of facilitating the payment of the principal, interest
and other obligations due to the holders of the Loan
Agreements. Notwithstanding the foregoing, the holders of the Loan
Agreements, acting by majority of the principal amount outstanding, may require
CER Hong Kong to change the escrow agent, for any reason at any
time. Additionally, the holders of the Loan Agreements, acting by
majority of the principal amount outstanding, may indicate to CER Hong Kong, at
any time, the person or entity that they desire to act as an escrow agent for
the receipt of payment from CER Shanghai and disbursal of the amounts due under
the Loan Agreements.
6.
Obligation to Fund
Loan. The Lender will have no obligation to fund the principal
of the Loan to CER Hong Kong until it has been provided fully executed copies of
the following:
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a.
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The
Loan Agreement between the Lender and CER Hong
Kong;
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b.
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Loan
Agreement between CER Hong Kong and CER
Shanghai;
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c.
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SAFE
final approval documentation evidencing the right of CER Shanghai to make
the payments of principal, interest and other payment obligations when due
under its loan agreement with CER Hong Kong, together with any other
documents that CER Hong Kong reasonably requests in respect of the SAFE
approval or upon the request of the
Lenders;
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d.
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Escrow
Agreement among Mr. Wu, CER Hong Kong for the benefit of the Lenders and
Golenbock Eiseman Assor Bell and Peskoe
LLC;
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e.
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Payment
Agreement relating to the CER China
Account;
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f.
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Escrow
Agreement relating to the CER Hong Kong
Account;
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g.
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Project
Contract and related payment guarantee agreement of SOPO
Group;
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h.
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Amendments
to the Project Contract and related payment guarantee agreement of SOPO
Group;
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i.
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Opinion
of Global Law Office, relating to the enforceability of the Project
Contract, the payment guarantee agreement of SOPO Group, each as amended,
the loan agreement between CER Shanghai and CER Hong Kong;
and
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j.
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Waiver
of Hold & Opt Limited.
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Upon receipt of the above referenced
documents, and any other documents reasonably requested by the Lenders, the
Lender will be obligated to fund the Loan within three days but not before
February 1, 2010. Funding will be by wire transfer to the CER Hong
Kong Account, the reference for which is Standard Chartered Bank (Hong Kong)
Limited, Standard Chartered Bank Building 4-4A Des Voeux Road, Central, Hong
Kong, SWIFT CODE SCBLHKHHXXX, USD Account Number
368-0-074135-4.
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7.
Use of
Proceeds. The proceeds of the Loan Agreements will be used by
CER Hong Kong to fund its loan to CER Shanghai.
8.
Security
Interest. As an inducement to the Lender to make this Loan,
Mr. Wu has entered into a Security and Pledge Agreement for the benefit of all
the Lenders, which provides for the pledge of the Collateral to secure the
payment and performance obligations of all the Loan Agreements, pari passu.
9.
Events of
Default. If any of the following events (“Events of Default”)
shall occur:
9.1 if
CER Hong Kong shall default in the payment of any part of the principal of or
interest on this or any other similar Loan Agreement after the same shall have
become due and payable, whether at an installment date, maturity or at a date
fixed for prepayment or by declaration or otherwise; or if CER Hong Kong shall
default in any performance or payment obligation or compliance with any term
contained herein; or
9.2 or
if CER Hong Kong shall default in any performance or payment obligation or
compliance with any term contained in this or any other similar Loan Agreement;
or
9.3 if
there shall be a default in the performance of or compliance with any term
contained in (a) the loan agreement between CER Hong Kong and CER Shanghai, (b)
SAFE Agreement, (c) Paying Agreement relating to the CER China Account, (d)
Escrow Agent Agreement relating to the CER Hong Kong Account, or (e) the Project
Contract or related payment guarantee, as amended.
9.4 if
CER or any subsidiary or affiliate shall default (as principal or guarantor or
other surety) in the payment of any principal of or premium, if any, or interest
on any indebtedness for borrowed money (other than the Loan Agreements) or with
respect to any of the terms of any evidence of such indebtedness or of any
mortgage, indenture or other agreement relating thereto which default
accelerates the maturity of such indebtedness, and such default shall continue
for more than the period of grace, if any, provided therein without being
consented to or waived by such lender; or
9.5 if
CER or any subsidiary or affiliate shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due, or shall file a voluntary petition in bankruptcy, or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, or shall file any answer admitting or not contesting the
material allegations of a petition filed against CER or any subsidiary or
affiliate in any such proceeding, or shall seek or consent to or acquiesce in
the appointment of any trustee, receiver or liquidator of CER or any subsidiary
or affiliate or of all or any substantial part of the properties of CER or any
subsidiary or affiliate, or CER or any subsidiary or affiliate shall take any
corporate action looking to the dissolution or liquidation; or
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9.6 if,
within 30 days after the commencement of an action against CER or any subsidiary
or affiliate seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such action shall not have been dismissed or all orders or
proceedings thereunder affecting the operations or the business of CER or any
subsidiary or affiliate stayed, or if the stay of any such order or proceeding
shall thereafter be set aside, or if, within 30 days after the appointment
without the consent or acquiescence of CER or any subsidiary or affiliate or any
trustee, receiver or liquidator of CER or any subsidiary or affiliate or of all
or any substantial part of the properties of CER or any subsidiary or affiliate,
such appointment shall not have been vacated;
9.7 if
any material portion of CER’s or any subsidiary’s or affiliate’s assets is
attached, seized, subjected to a writ or distress warrant, levied upon, or comes
into the possession of any third person;
9.8 if
CER or any subsidiary or affiliate is enjoined, restrained, or in any way
prevented by court or regulatory agency order from continuing to conduct all or
any material part of its business affairs;
9.9 if
one or more final judgments in excess of the amount covered by insurance,
becomes a lien or encumbrance upon any of CER’s or any subsidiary’s or
affiliate’s assets;
9.10 if
any document or instrument that purports to create a lien on or with respect to
the Collateral shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority lien on and security interest in the Collateral covered thereby;
or
9.11 any
provision of a Loan Agreement or any document or instrument relating to or
securing a Loan Agreement shall at any time for any reason be declared to be
null and void, or the validity or enforceability thereof shall be contested by
CER or any subsidiary of CER, or Mr. Wu or a proceeding shall be commenced by
CER or any subsidiary of CER, or by Mr. Wu or by any governmental authority
having jurisdiction over CER or any subsidiary or Mr. Wu, seeking to establish
the invalidity or unenforceability thereof, or CER or any subsidiary of CER or
Mr. Wu shall deny that it has any liability or obligation purported to be
created thereunder;
then and
in any such event any holder or holders of a majority in principal amount of the
Loan Agreements at any time outstanding, voting or consenting together on the
basis of the outstanding principal, may at any time (unless all defaults shall
have theretofore been remedied) at its or their option, (i) by written notice or
notices to CER Hong Kong, declare all the Loan Agreements to be due and payable,
whereupon the same shall forthwith mature and become due and payable together
with interest accrued thereon, without presentment, demand, protest or notice,
all of which are hereby waived; and (ii) exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein, or otherwise
available to it or them, all the rights and remedies of a secured party on
default under the Uniform Commercial Code or any other applicable
law.
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In case any one or more Events of
Default shall occur and be continuing, the holders of the Loan Agreements may
proceed to protect and enforce the rights of such holders by an action at law,
suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein, or for an injunction against a
violation of any of the terms hereof, or in aid of the exercise of any power
granted hereby or by law. In case of a default in the payment of any
principal of or interest under any Loan Agreement, CER Hong Kong or CER will pay
to the holder thereof such further amount as shall be sufficient to cover the
cost and expenses of collection, including (without limitation) reasonable
attorneys' fees, expenses and disbursements. No course of dealing and
no delay on the part of the holder of this Loan Agreement in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers and remedies. No right, power or remedy
conferred hereby upon any holder hereof shall be exclusive of any other right,
power or remedy referred to herein or now or hereafter available at law, in
equity, by statute or otherwise.
10. Guarantee.
10.1
Shares as Limited
Guarantee. As an inducement to the holder of this Loan Agreement, Mr.
Qinghuan Wu, the Chief Executive Officer of CER (“Guarantor”) has deposited an
aggregate of 8,000,006 shares of common stock of CER, including distributions in
respect of the shares (together the “Shares”) as a guarantee for the repayment
of the principal, and only the principal, due under this Loan
Agreement. The escrow agent will be Golenbock Eiseman Assor Bell
& Peskoe LLC (“Golenbock”). The guarantee is in respect of all the Loan
Agreements of similar tenor, and is to be pro rated among all the Loan
Agreements as to principal. CER Hong Kong shall have the right on
behalf of the holders of this and the other Loan Agreements to obtain the Shares
from the escrow and to sell the Shares and distribute the proceeds, or at the
written election of the holder of this Loan Agreement, to distribute the pro
rata portion of the Shares obtained by CER Hong Kong to the holder of this Loan
Agreement. This guarantee is a limited guarantee, and to the extent
any of the Shares are distributed from the escrow to CER Hong Kong or to the
holder of this Loan Agreement, the guarantee shall be discharged by the
Guarantor. The Guarantor and his heirs, executors and administrators
have no additional obligation under this guarantee other than to surrender the
Shares as provided in the escrow agreement for the Shares. The
Guarantor, in certain circumstances, additionally has the right to request the
return of Shares and reduce its liability under the terms of the
guarantee.
10.2 Conflicts
Waiver. Guarantor, CER, CER Shanghai, CER Hong Kong and the
holder of this Loan Agreement are aware or have been informed and acknowledge
that Golenbock is one of several counsel for CER and its affiliated and
subsidiary corporations and agree that Golenbock may continue to represent CER
Delaware and its affiliated and subsidiary corporations after date hereof in all
matters notwithstanding the performance of its duties and obligations hereunder,
including, without limitation, representation with respect to the escrow
agreement, this Loan Agreement and the transactions contemplated
thereunder. Guarantor, CER, CER Shanghai, CER Hong Kong and the
holder of this Loan Agreement each hereby waive any claim of conflict of
interest relating to Golenbock’s duties, obligations and acts hereunder and
waive any right or claim to object to such continued legal representation by
Golenbock of CER and its affiliated and subsidiary corporations on or after the
date hereof.
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11. Representations of the
Holder.
11.1 Access. The
holder of this Loan Agreement has conducted its own independent review and
analysis of the business, operations, technology, assets, liabilities, results
of operations, financial condition and prospects of CER and its subsidiaries and
affiliates, and acknowledges that CER has provided the holder of this Loan
Agreement access to the personnel, properties, premises and books and records of
CER and its subsidiaries and affiliates for this purpose, and the holder of this
Loan Agreement has had an opportunity to ask questions of and receive responses
from management of CER and its subsidiaries and affiliates.
11.2 Investment
Intent. The holder of this Loan Agreement is making the loan
evidenced hereby solely for the purpose of investment and not with a view to, or
for resale in connection with, any distribution thereof in violation of the
Securities Act of 1933, as amended.
11.3 Accredited
Investor. The holder of this Loan Agreement has the financial
ability to bear the economic risk of such holder’s investment, has adequate
means for providing for such holder’s current needs and personal contingencies
and has no need for liquidity with respect to such holder’s investment in CER
Hong Kong and its subsidiaries and affiliates. The holder of this
Loan Agreement has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the prospective
investment. If other than an individual, the holder of this Loan
Agreement also represents (A) it has not been organized for the purpose of
acquiring the Loan Agreement or (B) it is an entity in which each of the equity
owners is an accredited investor as defined in Rule 501(a) promulgated under the
Securities Act of 1933, as amended. If the holder of this Loan
Agreement is an individual, such holder represents he or she is an accredited
investor as defined in such Rule 501(a).
12. Representation of
CER. As an inducement to the Lenders to make the Loans under
the Loan Agreements, CER makes the following representation to each of the
Lenders:
12.1 SEC
Reports. CER has filed all reports required to be filed by it
under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the 18 months preceding the date hereof on a timely basis or has received a
valid extension of such time of filing and has filed any such SEC Reports prior
to the expiration of any such extension. Such reports required to be
filed by CER under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, together with any materials filed or furnished by CER under the
Exchange Act, whether or not any such reports were required being collectively
referred to herein as the “SEC Reports” and, together with this Loan Agreement,
the “Disclosure Materials”. As of their respective dates, the SEC
Reports filed by CER complied in all material respects with the requirements of
the Securities Act and the Exchange Act and the rules and regulations of the SEC
promulgated thereunder, and none of the SEC Reports, when filed by CER,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The consolidated financial statements of CER and its
consolidated subsidiaries and affiliated controlled companies included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing. Such financial statements were prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”), except as
may be otherwise specified in such financial statements, the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP or may be condensed or summary statements, and fairly present
in all material respects the consolidated financial position of CER and its
consolidated subsidiaries and affiliated controlled companies as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, year-end audit
adjustments. All material agreements to which CER or any Subsidiary
is a party or to which the property or assets of CER or any Subsidiary are
subject are included as part of or identified in the SEC Reports, to the extent
such agreements are required to be included or identified pursuant to the rules
and regulations of the SEC.
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12.2 Financial
Statements. Since the date of the latest audited financial
statements included within the SEC Reports (i) there has been no event,
occurrence or development that, individually or in the aggregate, has had or
that would result in a material adverse effect on the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of CER, (ii) CER, on a consolidated basis,
has not incurred any material liabilities other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in CER’s
consolidated financial statements pursuant to GAAP or required to be disclosed
in filings made with the SEC, (iii) CER has not altered its method of accounting
or the changed its auditors, (iv) CER has not declared or made any dividend or
distribution of cash or other property to its stockholders, in their capacities
as such, or purchased, redeemed or made any agreements to purchase or redeem any
shares of its capital stock (except for repurchases by CER of shares of capital
stock held by employees, officers, directors, or consultants pursuant to an
option of CER to repurchase such shares upon the termination of employment or
services), and (v) CER has not issued any equity securities to any officer,
director or affiliate, except pursuant to existing CER stock-based
plans. CER and its subsidiaries and affiliates (including controlled
companies) have not taken any steps to seek protection pursuant to any
bankruptcy law nor does CER have any knowledge or reason to believe that its or
its subsidiaries’’ or affiliates’ creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. CER and none of its subsidiaries
or affiliates, including CER Hong Kong, as of the date hereof, and after giving
effect to the transactions contemplated hereby to occur, is not and will not be
Insolvent (as defined below). For purposes of this section,
“Insolvent” means (i) the present fair saleable value of CER Hong Kong assets is
less than the amount required to pay CER Hong Kong’s total indebtedness, (ii)
CER Hong Kong is unable to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured, (iii) CER Hong Kong intends to incur or believes that it will incur
debts that would be beyond its ability to pay as such debts mature, or (iv) CER
Hong Kong has unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is proposed to be
conducted.
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13. Covenants.
13.1 Reports. (a) So
long as this Loan Agreement remains outstanding, CER shall have its annual
consolidated financial statements audited and its interim consolidated financial
statements reviewed by a firm of independent registered accountants in
accordance with Statement on Auditing Standards 101 issued by the American
Institute of Certified Public Accountants (or any similar replacement
standard). In addition, so long as this Loan Agreement is
outstanding, CER and CER Hong Kong shall furnish to the holder of this Loan
Agreement all annual and quarterly reports of CER on Forms 10-K and 10-Q,
respectively, and all current reports on Form 8-K, in each case filed by it with
the Securities and Exchange Commission (“SEC”). If CER shall not be
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), it shall nevertheless
furnish the holder of this Loan Agreement with (a) the financial information
that would be required to be contained in a filing on such annual or quarterly
report, including a “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and (b) all information that would be required to be
contained in filings with the SEC on Form 8-K. All such annual
reports shall be furnished within 190 days after the end of the fiscal year to
which they relate, and all such quarterly reports shall be furnished within 45
days after the end of the fiscal quarter to which they relate. All
such current reports shall be furnished within the time periods specified in the
SEC’s rules and regulations for reporting companies under the Exchange
Act.
(b) At
CER’s or CER Hong Kong’s option, CER or CER Hong Kong shall either (i)
distribute such information and such reports (as well as the details regarding
the conference call described below) electronically to the holder of this Loan
Agreement, and/or (ii) make available such information to such holder by posting
such information on the Internet (which may be its own or CER’s site, IntraLinks
or any comparable password protected online data system which will require a
confidentiality acknowledgement or otherwise, and CER and CER Hong Kong shall
provide such password thereto to the holder of this Loan Agreement and make such
information readily available to such holder, who agrees to treat such
information as confidential).
13.2 Taxes. CER
shall, and shall cause each of its subsidiaries and affiliates to, pay prior to
delinquency all material taxes, assessments, and governmental levies except as
contested in good faith and by appropriate proceedings.
13.3 Limitations on
Liens. CER and its subsidiaries and affiliates shall not
create, incur, assume or permit or suffer to exist any lien, claim or
encumbrance of any nature whatsoever against any of the Collateral, unless
contemporaneously therewith, such lien is subordinated in right of payment to
the Loan Agreements to the extent reasonably acceptable to holders of a majority
in principal amount of the Loan Agreements.
13.4 Conduct of
Business. CER shall not, and shall not permit any subsidiary
or affiliate to, engage in any business other than the business of designing,
manufacturing, installing and selling boilers and heat recovery systems, and
related items.
13.5 Maintenance
of Properties; Insurance; Compliance with Law.
(a) CER
shall, and shall cause each of its subsidiaries and affiliates to, at all times
cause all properties used or useful in the conduct of their business to be
maintained and kept in good condition, repair and working order (reasonable wear
and tear excepted) and supplied with all necessary equipment, and shall cause to
be made all necessary repairs, renewals, replacements, necessary betterments and
necessary improvements thereto.
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(b) CER
shall maintain, and shall cause to be maintained for each of its subsidiaries
and affiliates, insurance covering such risks as are usually and customarily
insured against by corporations similarly situated in the markets where CER its
subsidiaries and affiliates conduct their respective operations, in such amounts
as shall be customary for corporations similarly situated and with such
deductibles and by such methods as shall be customary and reasonably consistent
with past practice.
(c) CER
shall, and shall cause each of its subsidiaries and affiliates to, comply with
all statutes, laws, ordinances or government rules and regulations to which they
are subject, non compliance with which would materially adversely affect the
business, earnings, properties, assets or financial condition of the CER its
subsidiaries and affiliates taken as a whole.
13.6 Legal
Existence. CER for itself, and shall cause each of its
subsidiaries and affiliates for each respective entity, shall do or shall cause
to be done all things necessary to preserve and keep in full force and effect
its legal existence, in accordance with its organizational documents (as the
same may be amended from time to time). CER and its subsidiaries and
affiliates shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
subsidiaries and affiliates if the respective board of directors and the board of
directors of CER shall determine that the preservation thereof is no longer
desirable in the conduct of the business of CER and its subsidiaries and
affiliates, taken as a
whole, and that the loss thereof is not adverse in any material respect
to the holders of the Loan Agreements.
13.7 Assets. CER and its
subsidiaries and affiliates each has good and marketable title in all personal
property owned by it that is material to their respective businesses, including
the Project Contract and related payment guarantee of SOPO Group, in each case
free and clear of all liens and encumbrances. The real property owned
or leased by CER and its subsidiaries and affiliates are held by them under
valid, subsisting and enforceable purchase contracts or leases of which CER and
its subsidiaries and affiliates are in material compliance. CER
and its subsidiaries and affiliates will take all action necessary, at its sole
expense, to maintain the marketable title in all its personal property and real
property, whether owned or leased.
13.8 Limitations on Mergers,
Consolidations, etc. (a) CER shall not, directly or
indirectly, in a single transaction or a series of related transactions, (i)
consolidate or merge with or into another person, or sell, lease, transfer,
convey or otherwise dispose of or assign all or substantially all of the assets
of CER and its subsidiaries or affiliates (taken individually or as a
whole) or (ii) adopt a plan of liquidation for either of the entities or
of any of the subsidiaries or affiliates unless, in either case:
(A) CER
will be the surviving or continuing person; or
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(B) the
person or entity formed by or surviving such consolidation or merger or to which
such sale, lease, conveyance or other disposition shall be made (or, in the case
of a plan of liquidation, any person to which assets are transferred)
(collectively, the “Successor”) is a corporation, limited liability company or
limited partnership, and the Successor expressly assumes, by agreements in form
and substance reasonably satisfactory to the holders of a majority in principal
amount of the Loan Agreements, all of the obligations of CER, CER Hong Kong and
CER Shanghai under this Loan Agreement and the other Loan Agreements and all the
related agreements.
(b) Upon
any consolidation, combination or merger of CER or CER Hong Kong or any transfer
of all or substantially all of the assets of CER or CER Hong Kong, respectively,
in accordance with the foregoing, in which CER or CER Hong Kong is
not the continuing obligor under the Loan Agreements, the surviving entity
formed by such consolidation or into which CER or CER Hong Kong is merged or the
person to which the conveyance, lease or transfer is made will succeed to, and
be substituted for, and may exercise every right and power of, CER and CER Hong
Kong under the Loan Agreements, with the same effect as if such surviving entity
had been named therein and, except in the case of a lease, CER and/or CER Hong
Kong will be released from the obligation to pay the principal of and interest
under the Loan Agreements and all of CER’s or CER Hong Kong’s other respective
obligations and covenants under the Loan Agreements.
(c) Notwithstanding
the foregoing, any subsidiary or affiliate may consolidate with, merge with or
into or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to CER or CER Hong Kong or
another subsidiary.
14. Miscellaneous.
14.1 Savings
Clause. In no event shall the interest rate or rates payable
under this Loan Agreement, plus any other amounts paid
in connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. CER Hong Kong, in executing and delivering this Loan
Agreement, and the holder of this Loan Agreement in accepting it, intend legally
to agree upon the rate or rates of interest and manner of payment stated herein;
provided, however,
that, anything contained herein to the contrary notwithstanding, if said rate or
rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto, as of the date of this
Loan Agreement, CER Hong Kong is and shall be liable only for the payment of
such maximum as allowed by law, and payment received from CER Hong Kong in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of this Loan Agreement to the extent of such
excess.
14.2 Governing
Law. This Loan Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware. This law has been
selected because it relates to the law governing CER, the public corporation and
parent company of CER Hong Kong. Each of the parties hereto recognize
the applicability of such law.
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14.3 Arbitration. Any
dispute, controversy or claim arising out of or relating to this contract, or
the breach, termination or invalidity thereof, shall be settled by arbitration
in Hong Kong under the Hong Kong International Arbitration Centre Administered
Arbitration Rules in force when the Notice of Arbitration is submitted in
accordance with these rules. The number of arbitrators shall be three, one of
whom shall be a national of China, and the other two will not be nationals of
China, but may be nationals of the Special Administrative Zone of Hong Kong. The
arbitration proceedings shall be conducted in English.
14.4 Attorney-in-Fact. CER
Hong Kong hereby irrevocably appoints each of the Lenders its attorney-in-fact,
with full authority in the place and stead of CER Hong Kong and in the name of
CER Hong Kong or otherwise, at such time as an Event of Default has occurred and
is continuing under this Loan Agreement to take any action and to execute any
instrument which the Lenders may reasonably deem necessary or advisable to
accomplish the purposes of this Loan Agreement and the other Loan Agreements
including:
(a) to
ask, demand, collect, sue for, recover, compromise, receive and give acquittance
and receipts for moneys due and to become due under or in connection with the
Loan Agreements, in connection with the loan agreement between CER Hong Kong and
CER Shanghai, and in connection with the Project Contract or the
payment guarantee agreement of SOPO Group;
(b) to
file any claims or take any action or institute any proceedings which the
holders of the Loan Agreements may deem necessary or desirable for the
collection of any of the Loan Agreements, the loan agreement between CER Hong
Kong and CER Shanghai, or the Project Contract or payment guarantee agreement of
SOPO Group or otherwise to enforce the rights of holders of the Loan Agreements
with respect to any of the Loan Agreements, the loan agreement between CER Hong
Kong and CER Shanghai, or the Project Contract or the payment guarantee
agreement of SOPO Group; and
(c) to
bring suit in its own name to enforce the loan agreement between CER Hong Kong
and CER Shanghai, the Project Contract or the payment guarantee agreement of
SOPO Group and, if the holders of the Loan Agreements shall commence any such
suit, CER Hong Kong shall, at the request of the holders of the Loan Agreements,
do any and all lawful acts and execute any and all proper documents reasonably
required by the holders of the Loan Agreements in aid of such
enforcement.
To the extent permitted by law, CER
Hong Kong hereby ratifies all that such attorney-in-fact shall lawfully do or
cause to be done by virtue hereof. This power of attorney is coupled with an
interest and shall be irrevocable until this Loan Agreement is paid in
full.
14.5 Remedies
Cumulative. The rights and remedies of holders of the Loan
Agreements under the Loan Agreements, shall be cumulative. The
holders of the Loan Agreements shall have all other rights and remedies not
inconsistent herewith as provided under the law, or in equity. No
exercise by the holders of the Loan Agreements of one right or remedy shall be
deemed an election, and no waiver by the holders of the Loan Agreements of any
Event of Default shall be deemed a continuing waiver. No delay by the
holders of the Loan Agreements shall constitute a waiver, election, or
acquiescence by it.
14.6 Amendment. This
Loan Agreement and its terms may be changed, waived or amended only by the
written consent of CER Hong Kong and the holders of a majority in principal
amount of the Loan Agreements outstanding, voting or consenting together for
purposes of such determination.
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14.7 Severability. In
case any provision contained herein (or part thereof) shall for any reason be
held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or other unenforceability shall not affect any other provision (or
the remaining part of the affected provision) hereof, but this Loan Agreement
shall be construed as if such invalid, illegal, or unenforceable provision (or
part thereof) had never been contained herein, but only to the extent that such
provision is invalid, illegal, or unenforceable.
14.8 Assignment. The
holders of the this Loan Agreement may assign to one or more assignees (each an
“Assignee”) all, or any ratable part of all, of this Loan Agreement and the
other rights and obligations of such holder hereunder; provided, that CER Hong Kong
may continue to deal solely and directly with the holder of this Loan Agreement
in connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses, and
related information with respect to the Assignee, have been given to CER Hong
Kong by the holders and the Assignee, and (ii) the holder and its Assignee have
delivered to CER Hong Kong a document reflecting such assignment and acceptance
reasonably acceptable to CER Hong Kong.
14.9 Payment Set
Aside. To the extent that CER Hong Kong makes a payment or
payments to any Lender hereunder or any Lender enforces or exercises its rights
hereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to CER Hong Kong by a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, other law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
14.10 Independent Nature of
Lender’ Obligations and Rights. The obligations of each Lender
under the Loan Agreement and related agreements (together, the “Transaction
Documents”) are several and not joint with the obligations of any other Lender,
and no Lender shall be responsible in any way for the performance of the
obligations of any other Lender under any Transaction Documents, except were
actions are taken jointly as provided in the Transaction
Documents. The decision of each Lender to make their respective Loan
pursuant to this Loan Agreement has been made by such Lender independently of
any other Lender and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of CER and its subsidiaries and affiliates, taken as a whole. which
may have been made or given by any other Lender or by any agent or employee of
any other Lender, and no Lender or any of its agents or employees shall have any
liability to any other Lender (or any other person) relating to or arising from
any such information, materials, statements or opinions. Nothing
contained herein or in any Transaction Document, and no action taken by any
Lender pursuant thereto, shall be deemed to constitute the Lenders as a
partnership, an association, a joint venture or any other kind of
entity. Each Lender acknowledges that no other Lender has acted as
agent for such Lender in connection with making its Loan under this Loan
Agreement and that no other Lender will be acting as agent of such Lender in
connection with monitoring its investment hereunder.
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14.11 Survival. The
representations and warranties, agreements and covenants contained herein shall
survive the making of the Loan or advance of funds and the repayment of the Loan
or advance of funds, as herein contemplated.
14.12 Execution. This
agreement and all related agreements, instruments and documents may each be
executed in two or more counterparts, all of which when taken together shall be
considered one and the same agreement, instrument, or document and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that all parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission or email attachment, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such facsimile or
email-attached signature page were an original thereof.
14.13 Headings. Headings
and numbers have been set forth herein for convenience only. Unless
the contrary is compelled by the context, everything contained in each section
applies equally to this entire Loan Agreement.
[signature
on next page]
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IN WITNESS WHEREOF, the parties has
caused this Loan Agreement to be signed in its name as of the date above
written.
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CER
(Hong Kong) Holdings Limited
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By:
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Name:
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Title:
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China
Energy Recovery, Inc.
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By:
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Name:
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Title:
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Lender
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By:
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Name:
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Title:
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