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SHARE
PLEDGE AGREEMENT
THIS SHARE
PLEDGE AGREEMENT (this “ Agreement ”) dated
as of this 16th day of November, 2007 is made between Hanqiao
Zheng (the “ Pledgor ”) and Carlyle Asia
Growth Partners III, L.P., a limited partnership organized under
the laws of the Cayman Islands (“ CAGP ”),
and CAGP III Co-Investment, L.P., a limited partnership
organized under the laws of the Cayman Islands (together with
CAGP, the “ Secured Party ”).
RECITALS
WHEREAS,
pursuant to that certain Stock and Notes Purchase Agreement,
dated as of November 16, 2007, by and among the of China
Recycling Energy Corporation, a Nevada corporation (the “
Company ”), and the Secured Party, among others
(the “ Purchase Agreement ”), it is
anticipated that the Secured Party shall purchase a 10% Senior
Secured Convertible Promissory Note in the principal amount of
US$5,000,000 (the “ First Note ”), and
subsequently, a 5% Senior Secured Convertible Promissory Note in
the principal amount of US$15,000,000 (the “ Second
Note ” and together with the First Note, the “
Notes ”) of the Company;
WHEREAS,
it is a condition to the obligations of the Secured Party under
the Purchase Agreement and a condition precedent of the Secured
Party purchasing the Notes that the Pledgor pledge the
Collateral and deliver this Agreement as security for the full
and punctual observance and performance of the covenants and
agreements contained herein and in the Notes; and
WHEREAS,
the Pledgor is the owner of the number Common Shares set forth
Exhibit A beside Pledgor’s name in the column
titled “Pledgor Shareholdings” (“ Pledgor
Shares ”).
NOW,
THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, hereby agree as
follows:
AGREEMENT
Section 1.
Definitions .
Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to them in the Notes. As
used herein, the following words and phrases shall have the
following meanings:
“Additional Collateral” has the meaning
provided in Section 4 hereto.
“Agreement” has the meaning provided in
the preamble hereto.
“Collateral” means (i) the Pledged
Shares; (ii) all additions to and substitutions for such
Pledged Shares (including, without limitation, any securities,
cash or instruments or other property delivered or pledged
pursuant to Section 2(b)); (iii) all income, proceeds
and collections received or to be received, or derived or to be
derived, now or any time hereafter (whether before or after the
commencement of any proceeding under applicable bankruptcy,
insolvency or similar law, by or against the Pledgor, with
respect to the Pledgor) from or in connection with the Pledged
Shares (including, without limitation, any capital shares issued
by the Company in respect of any Common Shares constituting
Collateral or any cash, securities or other property distributed
in respect of or exchanged for any Common Shares constituting
Collateral, or into which any such Common Shares is converted,
in connection with any Fundamental Transaction, and any security
entitlements in respect of any of the foregoing); and
(iv) all powers and rights now owned or hereafter acquired
under or with respect to the Pledged Shares, as provided
herein.
“Common Shares” means the common shares,
par value $0.001 per share, of the Company.
“Company” has the meaning provided in the
recitals hereto.
“Event of Default” has the meaning
provided in the Notes.
“Federal Bankruptcy Code” means Title 11
of the United States Code (11 U.S.C. § 101 -
1330).
“Federal Securities Laws” has the meaning
provided in Section 7 hereto.
“First Note” has the meaning provided in
the recitals hereto.
“Fundamental Transaction” has the meaning
provided in the Notes.
“Investment Company Act” has the meaning
provided in Section 5(c) hereto.
“Location” means, with respect to any
party, the place such party is “deemed located”
within the meaning of Section 9-307(b)(1) of the
UCC.
“Notes” has the meaning provided in the
recitals hereto.
“Obligations” has the meaning provided in
Section 2 hereto.
“Person” means an individual, a
corporation, a partnership, an association, a trust or any other
entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
“Pledged Shares” means the number of
Common Shares set beside the Pledgor’s name in the column
titled “Number of Pledged Shares” on Exhibit
A hereto and any Additional Collateral pledged pursuant to
Section 3 hereto, to be pledged to the Secured Party in
respect of this Agreement as set forth in Section 2
hereto.
“Pledgor” has the meaning provided in the
preamble hereto.
“Pledgor Shares” has the meaning provided
in the recitals hereto.
“Purchase Agreement” has the meaning
provided in the recitals hereto.
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“Second Note” has the meaning provided in
the recitals hereto.
“Secured Party” has the meaning provided
in the preamble hereto.
“Securities Act” has the meaning provided
in Section 7 hereto.
“Security Interests” means the security
interests in the Collateral created hereby.
“UCC” means the Uniform Commercial Code
as in effect in the State of New York.
Section
2.
Pledge . In order to secure to the
Secured Party the full and punctual payment and performance of
all of the obligations (the “ Obligations ”)
contained herein and in the Notes (including the payment of
principal and interest thereunder), the Pledgor hereby
transfers, grants, bargains, hypothecates, conveys, pledges,
sets over, delivers and confirms unto the Secured Party, and
grants to the Secured Party a first priority lien on, a security
interest in and to, and a right of setoff against (a) any and
all interest the Pledgor has in Pledged Shares and (b) any and
all future proceeds of the Pledged Shares, including all cash,
securities or other property at any time and from time to time
receivable or otherwise distributed on, with respect to, or in
exchange for any of or all the Pledged Shares TO HAVE AND TO
HOLD the Collateral, together with all rights, titles,
interests, powers, privileges and preferences pertaining or
incidental thereto, unto the Secured Party, its successors and
assigns, for security purposes only, until payment in full of
the Obligations.
Section
3.
Distributions . Any future distributions (other
than a distribution in respect of any tax permitted under the
Notes) with respect to the Pledged Shares, or any portion
thereof, whether paid or payable in cash or otherwise, whether
resulting from a reclassification of the Pledged Shares or
received in exchange for the Pledged Shares or any part thereof,
shall be applied by the Secured Party in accordance with the
terms of the Notes and used to reduce any and all outstanding
Obligations. If any distributions are received by the
Pledgor, except as may be permitted under the Notes, such
distributions shall not be commingled by the Pledgor with any of
his other funds or property but shall be held separate and apart
therefrom, in trust for the benefit of the Secured Party, and
shall be forthwith delivered to the Secured Party as Collateral,
in the same form as received but with any necessary
endorsements, to be applied by the Secured Party to the
Obligations in accordance with the first sentence of this
Section 3 .
Section
4.
Additional Collateral . If the Pledgor acquires
any additional Common Shares after the date of this Agreement,
the Pledgor shall pledge fifty-percent (50%) of such additional
shares of Common Shares (“ Additional Collateral
”) to the same extent as if such shares were held by the
Pledgor as of the date hereof and subject to Section 2
(with any fractional shares rounded up to the nearest shares).
If any Additional Collateral is required to be delivered
pursuant to this Section 4 , the Pledgor shall
deliver such Additional Collateral to the Secured Party within
five (5) business days of receipt by the Pledgor of such
Additional Collateral. Concurrently with the delivery of
any Additional Collateral, the Pledgor shall deliver to the
Secured Party a certificate substantially in the form of
Exhibit B hereto and dated the date of such delivery, (A)
identifying the additional items of the Additional Collateral
being pledged and (B) certifying that with respect to such items
of Additional Collateral the applicable representations and
warranties contained in Section 12 (as specified in
Exhibit B ) are true and correct with respect to such
Additional Collateral and otherwise on and as of the date
thereof.
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Section
5.
Voting
Rights in Collateral . Subject to Section 7(b)
, the Pledgor shall have the right, from time to time, to vote
and to give consents, ratifications and waivers with respect to
the Collateral, and the Secured Party shall, upon receiving a
written request from the Pledgor, accompanied by a certificate
of the Company stating that no Event of Default has occurred and
is continuing, deliver to the Pledgor, or as specified in such
request, such proxies, powers of attorney, consents,
ratifications and waivers in respect of any of the Collateral
that is registered, or held through a securities intermediary,
in the name of the Secured Party or its nominee, as shall be
specified in such request, and shall be in form and substance
satisfactory to the Secured Party.
Section
6.
Rights
and Remedies Upon Default .
(a)
Generally . If an Event of Default shall have
occurred and be continuing, the Secured Party may exercise all
rights of a secured party under the UCC, and, in addition, the
Secured Party shall have all of the rights and remedies provided
for in this Agreement.
(b)
Registration in Nominee Name; Denominations .
If an Event of Default shall have occurred and be
continuing, the Secured Party shall have the right (in its sole
and absolute discretion and without notice to the Pledgor) to
transfer to, or to register the Pledged Shares in, its own name
or the name of its nominee.
(c)
Sale of
the Collateral .
(i)
If an
Event of Default shall have occurred and be continuing, the
Secured Party may sell the Collateral, or any part thereof, at
any public or private sale or at any broker’s board or on
any securities exchange, for cash, upon credit or for future
delivery as the Secured Party shall deem appropriate. The
Secured Party shall be authorized at any such sale (if it deems
it advisable to do so) to restrict the prospective bidders or
purchasers to Persons who will represent and agree that they are
purchasing the Collateral for their own account for investment
and not with a view to the distribution or sale thereof, and
investors who are “accredited investors” or
“qualified purchasers” pursuant to Sections 3(c)(1)
or 3(c)(7) of the Investment Company Act of 1940 (the “
Investment Company Act ”) and upon consummation of
any such sale the Secured Party shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale
shall hold the property sold absolutely free from any claim or
right on the part of the Pledgor, and the Pledgor hereby waives
(to the full extent permitted by applicable law) all rights of
redemption, stay and appraisal which the Pledgor now has, or may
have at any time in the future, under any applicable
law.
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(ii)
The
Secured Party shall give the Pledgor ten (10) business
days’ written notice (which the Pledgor irrevocably agrees
is reasonable notice within the meaning of the applicable
provisions of the UCC) of the Secured Party’s intention to
make any sale of Collateral. Such notice shall state the
time and place for such sale and, in the case of sale at a
broker’s board or on a securities exchange, shall state
the board or exchange at which such sale is to be made and the
day on which the Collateral, or any portion thereof, will first
be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Secured Party
may fix and state in the notice of such sale. At any such
sale, the Collateral, or portion thereof, to be sold may be sold
in one lot as an entirety or in separate parcels as the Secured
Party may (in its sole and absolute discretion) determine.
The Secured Party shall not be obligated to make any sale
of any Collateral if it shall determine not to do so, regardless
of the fact that notice of sale of such Collateral shall have
been given. The Secured Party may, without notice or
publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may be made at the
time and place to which the same was so adjourned. If any
sale of all or any part of the Collateral is made on credit or
for future delivery, the Collateral so sold may be retained by
the Secured Party until the sale price is paid by the purchaser
or purchasers thereof, but the Secured Party shall not incur any
liability in case any such purchaser or purchasers shall fail to
take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like
notice. Any sale of the Collateral conducted in conformity
with reasonable commercial practices of banks, commercial
finance companies, insurance companies or other financial
institutions disposing of property similar to the Collateral
shall be deemed to be commercially reasonable.
(iii)
At any
public sale, the Secured Party may bid for or purchase, free
from any right of redemption, stay or appraisal on the part of
the Pledgor (all said rights being also hereby waived and
released to the full extent permitted by applicable law), the
Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and
payable to the Secured Party from the Pledgor as a credit
against the purchase price, and the Secured Part
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