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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Nevada
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04-3836208
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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No. 9 Dalian North Road, Haping Road Centralized Industrial Park,
Harbin Development Zone,
Heilongjiang Province, P. R. China
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150060
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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Common Stock, $0.0001
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NASDAQ Global Market
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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PART I
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2
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Item 1
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Business
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2
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Item 1A
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Risk Factors
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27
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Item 1B
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Unresolved Staff Comments
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38
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Item 2
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Properties
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38
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Item 3
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Legal Proceedings
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39
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Item 4
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Mine Safety Disclosures
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39
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PART II
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40
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Item 5
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Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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40
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Item 6
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Selected Financial Data
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41
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Item 7
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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42
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Item 7A
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Quantitative and Qualitative Disclosures About Market Risk
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54
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Item 8
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Financial Statements and Supplementary Data
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55
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Item 9
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Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
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55
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Item 9A
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Controls and Procedures
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55
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Item 9B
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Other Information
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56
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PART III
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57
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Item 10
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Directors, Executive Officers and Corporate Governance
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57
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Item 11
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Executive Compensation
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65
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Item 12
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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74
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Item 13
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Certain Relationships and Related Transactions and Director Independence
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74
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Item 14
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Principal Accountant Fees and Services
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76
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PART IV
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77
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Item 15
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Exhibits, Financial Statement Schedules
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77
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Financial Statements
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Index to Consolidated Financial Statements
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F-1
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Report of Independent Registered Public Accounting Firm
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F-2
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Consolidated Balance Sheets
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F-3
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Consolidated Statements of Comprehensive Income
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F-4
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Consolidated Statements of Changes in Equity
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F-5
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Consolidated Statements of Cash Flows
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F-6
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Notes to the Consolidated Financial Statements
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F-8
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●
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It was stated in the “Outline of China’s Twelfth Five-year Plan (2011)” that new functional materials, advanced structural materials, common base materials, fiber of high performance and its compounded material are key development directions of new material industry.
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●
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It was stated in the “Catalogue for Guidance on Adjustment of Industrial Structure (2011)” promulgated by the National Development and Reform Commission on March 27, 2011, that the country is currently promoting the development of production equipment of polycarbonate by the use of non-phosgene method, with annual output of 60000t/year and above, production of engineering plastic including liquid crystalline polymer (LCP) and development and application of bleeding modification and alloying; development and production of water – absorbed resin, conductible resin and biodegradable polymers; development and production of new polyamide including nylon 11, nylon 1414 and nylon 46, nylon with long carbon chain and heat resistant nylon.
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●
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It was stated in the “Guidance on Key Areas of Industrialization of High Technology with Current Priority in Development (2011)” jointly promulgated by the National Development and Reform Commission, the Ministry of Science and Technology, the Ministry of Commerce and the State Intellectual Property Office on June 23, 2011 that modified technologies applied to general plastics, including new engineering plastics and plastic alloy, new special engineering plastics, fire resistant modified plastics, and modified technology of general plastics, are currently prioritized areas to develop and industrialize in China’s macromolecule materials sector.
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●
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A series of modified plastics technologies have been listed in the “National Support for Key High-tech Fields” as stated in the Circular on the Issuance of the Administrative Measure for the Recognition of High-tech Enterprise jointly promulgated by the Ministry of Science and Technology, Ministry of Finance, the State Administration of Taxation in April 2008. These technologies include special engineering plastics, macromolecular compound or new synthetic modified, etc.
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Product Group
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Brand Name
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Number of Products Certified
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Characteristics
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Automotive or Other Application
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Modified PP
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COMPNIPER
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51
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High fluidity and impact resistance
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Interior parts, such as inner panels, instrument panels and box lids
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COMPWIPER
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51
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Resistance to low temperature and impact
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External parts, such as front and back bumpers and mudguards
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COMPGOPER
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44
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Resistance to high temperature and static
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Functional components, such as unit heater shells and air conditioner shells
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Modified ABS
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MOALLOLY
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17
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High gloss, high rigidity and size stability
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Functional components such as heat dissipating grids and wheel covers
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Modified PA
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POLGPAMR
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16
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High wear and heat resistance
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Parts requiring high flame and heat resistance
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Engineering Plastics
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MOAMIOLY
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41
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Heat resistance and wear resistance
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Engine hoods, intake manifold and bearings
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Alloy Plastic
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BRBSPCL
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25
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Combines two different plastics, such as PP and ABS
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Rearview mirrors, grilles, automotive electronics and other components. Products can also be used in computers, plasma TVs and mobile phones
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Environmentally friendly plastics
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POLGBSMR
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38
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Environmentally-friendly features such as low odor and low carbon emission
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Used in automobiles meeting environmental standard requirements
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Modified Plastic for Special Engineering
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PEEK
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N/A *
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Excellent mechanical and chemical resistance and temperature tolerance
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Used in communications and transport, electronics and electrical appliances, machinery, medicaland analytical equipment.
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Total
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283
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●
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Shanyi Du: Member of Chinese Academy of Engineering, Professor of Harbin Institute of Technology.
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Qingquan Lei: Member of Chinese Academy of Engineering, Post-PhD Advisor of Harbin Institute of Technology.
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Zhongwen Wu: Chief Scientist and Director of the Research Institute of Special Plastics Engineering of Jilin University.
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Kai Zheng: Secretary General of China’s Plastics Engineering Industry Association.
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Huixuan Zhang: Vice Principal of Changchun University of Technology.
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Bin Li: Vice Principal, Dean of the Science Department at Eastern Forest Industry University.
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Zhenhua Jiang: Director of the Engineering Research Center of the Special Plastics Engineering Education Department of Jilin University.
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Xiabin Jing: Post-PhD Advisor and Researcher of Changchun Institute of Applied Chemistry of the Chinese Academy of Sciences.
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Ke Li: Senior Supervisor of Volkswagen China.
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●
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Xijun Liu:Dean of Postgraduate School of Qiqihaer University
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No
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Patent Name
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Application No.
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Application Date and Status
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|
1
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A sprayed directly material used in car bumpers
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200810051570.8
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December 10, 2008
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Approved
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2
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Supercritical fluid rapid diffusion synthesis of nano calcium carbonate enhanced microcrystalline polypropylene composites
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200910073402.3
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December 11,2009
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Pending
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3
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A molding method suitable PEEK
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201010173663.5
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May 17, 2010
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Pending
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4
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A high notched impact PA / ASA alloy material and its preparation method
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201010230061.9
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July 19,2010
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Pending
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5
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A method for automotive interior matte, anti-scratch modified polypropylene composites
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201010230064.2
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July 19,2010
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Pending
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6
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A lower mold shrinkage ratio method of calcium carbonate / polypropylene nanocomposites
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201010230088.8
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July 19,2010
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Pending
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7
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Nano-ZnO filled with modified PEEK film and its preparation method
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201010258955.9
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August 20, 2010
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Pending
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8
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A high impact high flow PC / ASA alloy material and its preparation method
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201010258950.6
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August 20, 2010
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Pending
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9
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A method for automotive interior low odor, low VOC, high performance polypropylene composites
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201010258937.0
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August 20, 2010
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Pending
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10
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A preparation method of SiO2/CaCO3 nano-composite particles modified polypropylene
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201010282042.0
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September 15, 2010
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Pending
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11
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A microporous zeolite materials modified PEEK and its preparation method
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201010282022.3
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September 15, 2010
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Pending
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12
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An anti-aging, anti-yellowing, low odor polypropylene composite material and its preparation method
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201010508177.4
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October 15, 2010
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Pending
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13
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A high heat-resistant PC / ASA alloy material and its preparation method
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201010508149.2
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October 15, 2010
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Pending
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14
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A alloy material of high-impact, high-brightness ASA
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201010543439.0
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November 15, 2010
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Pending
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15
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A preparation method of the thermoplastic elastomers PP with high mobility and high resistance of deformation
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201110035725.0
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February 11, 2011
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Pending
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16
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A preparation process of high weathering colour ASA resin
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201110347336.1
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February 11, 2011
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Pending
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17
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A preparation method of polylactic acid used in auto dashboard
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201110035716.1
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February 11, 2011
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Pending
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18
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A preparation method of polymer composites with high toughness
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201110035736.9
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February 11, 2011
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Pending
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19
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A special material of cooling grille with high heat resistance and high weather resistance
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201110094466.9
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April 15, 2011
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Pending
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20
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A rapid detection method of the tensile properties of modified PP used in auto specially by non-standard situation
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201110094454.6
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April 15, 2011
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Pending
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21
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A preparation process of ABS alloy with high impact performance and high heat resistance
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201110122586.5
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May 12, 2011
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Pending
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22
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A preparation process of centralized control method used in plastic production line
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201110122566.8
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May 12, 2011
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Pending
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23
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A preparation method of easily dispersed and easily processing polyprolene composite material
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201110158511.2
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June 14, 2011
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Pending
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24
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A preparation method of high heat-resistant and high rigid PLA composite material reinforced by fully biodegradable natural fiber
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201110158512.7
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June 14, 2011
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Pending
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25
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A preparation process of the premixed screening system
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201110158488.7
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June 14, 2011
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Pending
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26
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A rapid detection method of the impact properties of modified plastics used in automobile specially
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201110158528.8
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June 14, 2011
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Pending
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27
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A high impact PA6 composite material with core-shell toughening and its preparation method
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201110196226.X
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July 13, 2011
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Pending
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28
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A high-powered aircraft tail composite material and its preparation process
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201110196209.6
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July 13, 2011
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Pending
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29
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A preparation method of polypropylene resin foam particles with supercritical CO2 act
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201110230302.4
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August 12, 2011
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Pending
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30
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A preparation method of the plastic production line with high performance and high homogeneity
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201110233488.9
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August 16, 2011
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Pending
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31
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A high toughness, low warpage and high-mobility PET/PBT/PC alloy reinforced by glass fiber and its preparation method
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201110235189.9
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August 17, 2011
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Pending
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32
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A preparation method of polylactic acid used composite material modified by hydroxyapatite with supercritical water act
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201110268687.3
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September 13,2011
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Pending
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33
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A high impact and high heat-resistant flame retardant ABS composite material reinforce by glass fiber and its preparation process
|
201110268625.2
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September 13,2011
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Pending
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54
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A flame-retardant glass fiber reinforced PA66 and its preparation method
|
201210370558.X
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September 29, 2012
|
Pending
|
55
|
The chest protected belts
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201220526299.0
|
October 15, 2012
|
Pending
|
56
|
A non-asbestos and non-metal materials brake pads composite material and its preparation method
|
201210395921.3
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October 18, 2012
|
Pending
|
57
|
A high toughness wear-resistant fiberglass /PA6 composites for rail transit fasteners
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201210396122.8
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October 18, 2012
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Pending
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58
|
A glass fiber reinforced poly (ethylene terephthalate) / polycarbonate alloy
|
201210403197.4
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October 22, 2012
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Pending
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59
|
A wear-resistant, anti-static, flame retardant ultra-high molecular weight polyethylene composite material
|
201210402814.9
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October 22, 2012
|
Pending
|
60
|
A high impact, high heat-resistant PC / PBT alloy material and its preparation process
|
201210403095.2
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October 22, 2012
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Pending
|
61
|
Graphene / polymer conductive composites
|
201210411231.2
|
October 25, 2012
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Pending
|
62
|
A production method of antimicrobial, hydrophilic polypropylene particle
|
201210411680.7
|
October 25, 2012
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Pending
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63
|
A continuous aramid fiber reinforced POM materials and preparation methods
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201210411967.X
|
October 25, 2012
|
Pending
|
64
|
A glass fiber, SiO2 enhanced toughening polyphenylene sulfide material and its preparation method
|
201210439116.6
|
November 7, 2012
|
Pending
|
65
|
An alcohol solution PA66 material special for intake manifold and its preparation method
|
201210442251.6
|
November 8, 2012
|
Pending
|
66
|
An environmentally friendly self- aromatic polypropylene material and its preparation process
|
201210457403.X
|
November 15, 2012
|
Pending
|
67
|
A mechanical strength polypropylene power lithium battery separator and its preparation method
|
201210472283.0
|
November 21, 2012
|
Pending
|
68
|
A multilayer hot pressing method for preparing hydroxyapatite / polylactide composite
|
201210474211.X
|
November 21, 2012
|
Pending
|
69
|
Preparation of a glass fiber reinforced nylon 66 / nylon 6 Composites
|
201310185041.8
|
May 20, 2013
|
Pending
|
70
|
An environmentally friendly foam polypropylene material and preparation method
|
201310185228.8
|
May 20, 2013
|
Pending
|
71
|
An ramie fiber reinforced polypropylene composite material and its preparation process
|
201310185514.4
|
May 20, 2013
|
Pending
|
72
|
A high mobility of polyvinyl alcohol / lignin WPC
|
201310203047.3
|
May 28, 2013
|
Pending
|
73
|
One kind of resistance to warpage reinforced polyamide 6 material and preparation method
|
201310250426.8
|
June 24, 2013
|
Pending
|
94
|
An environmentally friendly fire-retardant, high-performance EVA composite material and preparation method
|
201310467812.2
|
October 10, 2013
|
Pending
|
95
|
A direct line of long glass fiber reinforced thermoplastic composite material and its preparation method
|
201010471859.6
|
October 12, 2013
|
Pending
|
96
|
A toughening wear-resistant alloy material and preparation method
|
201310556261.7
|
November 12, 2013
|
Pending
|
97
|
A high resistance temperature reinforced polyamide 6 material and preparation method
|
201310556569.1
|
November 12, 2013
|
Pending
|
98
|
Preparation of an aircraft engine surrounding high temperature polyimide composites
|
201310555389.1
|
November 12, 2013
|
Pending
|
99
|
Preparation of a high strength of continuous glass fiber reinforced nylon 6 material
|
201310555451.7
|
November 12, 2013
|
Pending
|
100
|
A highly weather-resistant polypropylene self-luminous material and preparation method
|
201310555483.7
|
November 12, 2013
|
Pending
|
101
|
A polypropylene foam material and preparation method
|
201310559024.6
|
November 13, 2013
|
Pending
|
102
|
One kind of aramid fiber / polyimide composite material and preparation method
|
201310559294.7
|
November 13, 2013
|
Pending
|
103
|
An alloy NiMoB modified talc enhanced Bumper material and its preparation method
|
201310559588.X
|
November 13, 2013
|
Pending
|
104
|
Method for preparing porous polymer composite superhydrophobic films
|
201310559589.4
|
November 13, 2013
|
Pending
|
105
|
A silicone toughening polyphenylene sulfide material and its preparation method
|
201310560625.9
|
November 13, 2013
|
Pending
|
106
|
A high toughness, wear-resistant rail fasteners with glass / nylon 6 Composites
|
201310646768.1
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December 6, 2013
|
Pending
|
107
|
A high-gloss, avoid spraying PTT / PMMA rearview mirror Compound and its production process
|
201310652729.2
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December 6, 2013
|
Pending
|
108
|
A keyboard and mouse with anti-bacterial perspiration modified plastics and its preparation method
|
201310676101.6
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December 13, 2013
|
Pending
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109
|
A high-strength lightweight hollow glass microspheres toughening PP material and preparation method
|
201310721731.0
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December 13, 2013
|
Pending
|
●
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Leading Market Position with High Barrier to Entry
. We believe that we are one of the China’s leading specialized manufacturers of modified plastic for automobile parts in terms of sales volume and production capacity, with a market share of approximately 7.2% in 2012. The PRC automotive modified plastics industry is growing rapidly and is highly fragmented with the top three domestic producers occupying less than approximately 27.5% of the market shares in 2012. In 2013, our sales volume of automotive plastics was approximately 337,189 MT, representing a growth of 50.5% compared to that in 2012. As of December 31, 2013, our annual production capacity of automotive plastics was 390,000 MT. We believe our leading market position allows us to successfully compete with other foreign and domestic modified plastic manufacturers in the market. Being one of the leading specialized manufacturer of automotive modified plastics in China, we believe we are well-positioned to not only grow with the increasing market demand but increase market share by replacing smaller and less efficient modified plastic manufacturer.
In addition, as a result of our consistent research and development efforts, we have 283 product certifications from major automotive manufacturers in the PRC as of December 31, 2013, which we believe is among the largest numbers of product certifications by any domestic player in China’s automotive plastics industry. Strict certification requirements and long certification periods result in high barriers to entry. Our current or potential competitors are required to obtain relevant product certifications from automotive manufacturers in order to compete with us. Each certification normally takes over two years to complete, and as a result, automotive manufacturers are reluctant to replace suppliers like us who have already received necessary certifications and proven consistent product quality. We believe that having one of the largest portfolios of product certifications in China allows us to strengthen our competitive position.
|
●
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Long-Term Relationships with Reputable End Users
.
Our senior management has been involved in the business of modified plastics since 1985. We benefit from the industry connections and experience of our senior management, which have enabled us to establish long-term customer relationships and strong industry recognition. We are a qualified provider of high-quality automotive plastics, and have sold our products through plastic auto part manufacturers to many leading automotive manufacturers in China. Currently, our modified plastics are utilized in more than 24 automobile brands and over 80 automobile models manufactured in China, including Audi, Volkswagen, BMW, GM, Mazda, Toyota, Cherry, and Geely. We believe that our brand and our products are well recognized and respected in China’s automotive modified plastics market.
|
●
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High Quality Products with Lower Costs
. We purchase our raw materials from a small number of large suppliers who procure resins locally or internationally. By concentrating our purchases from a small group of suppliers, we are able to keep the costs of purchasing raw materials relatively low. Also, since our manufacturing facilities are located in China where labor, raw materials and operation costs are relatively lower, we are able to charge lower prices than our international competitors while maintaining comparable quality. Compared to our domestic competitors, we believe our long-standing manufacturing experience, in-depth market knowledge, significant scale of economy and strong R&D capabilities enable us to provide higher quality products at competitive prices.
Manufacturing facilities are critical to the quality of products. We have in the past invested substantial time and resources in building state-of-the-art production lines to enhance our product quality. Our facilities have maintained ISO/TS16949, a certification of quality management systems specific to the automotive industry.
|
●
|
Strong Customer-Oriented R&D Capabilities
. The modified plastics industry is characterized by rapid development and increasing demand for high quality products. We have strong R&D capabilities that allow us to have successfully passed OEM automakers’ certification processes in the past and continually introduce new and high quality products to the market. Compared to international plastic supply models, which target larger scale applications of common plastics and involve less customization and specialization, we provide customer-oriented product development through our certification process. By working closely with our customers, we are able to adjust our product features to better satisfy the specific needs of each customer. To achieve this, we have staffed our R&D team with 163 professionals, of whom 72 have Ph.D. and Master’s degrees. On average, our R&D employees have worked with us for more than three years, and some key experts have more than 10 years of experience in our industry. We have also cooperated with a number of the leading technology centers in China. Besides providing specialized research and development skills, these relationships help us formulate cutting edge research programs aimed at developing new technologies and applications in plastics engineering. We currently have 1 approved patent and 108 patent applications pending with the State Intellectual Property Office of the PRC, or SIPO.
|
●
|
Established Distribution Model
. Through eleven distributors across China, we have established distribution networks that cover northeast, north, southwest and east China, with a current focus on northeast China. We enter into distribution agreements with local distributors in areas where large automobile manufacturers are located. By leveraging the proximity of our distributors to the automobile manufacturers, we can enhance our relationships with our customers. Through the established sales channels, we can quickly respond to local market demand, address customer needs, enhance our ability to provide superior technological support and after-sales services, and lower our marketing expenses. At the same time, our distributors are responsible for the payments to us which is not contingent upon their cash collection from end customers. By actively managing our distribution network, we are also able to accelerate local market penetration and increase sales opportunities. For example, we entered the north China market in 2009 through a local distributor, one year earlier than we planned, and in 2013, we entered into the southwest China market. For the year ended December 31, 2013, northeast, north, east and southwest China account for approximately 44.1%, 20.9%, 31.2% and 3.7% of our revenues, respectively.
|
●
|
Seasoned Management Team
. Our senior management team and key personnel have extensive operating and industry experience. Mr. Han, our chief executive officer and president, founded our former affiliate Harbin Xinda Nylon Factory in 1985. With 29 years of industry experience, Mr. Han has in-depth knowledge and expertise in China’s modified plastics industry. He currently serves as executive director of the China Plastics Processing Industry Association and as a member of the Standing Committee of the Heilongjiang Association of Industry and Commerce. Our chief executive officer, chief technology officer and chief operating officer have over 50 years combined experience in the modified plastics industry and we believe their extensive expertise and knowledge can well serve our customers.
|
●
|
Continue to Increase Production Capacity
.
Over the past five years, we have consistently increased production capacity to meet the rising demands of the automotive industry in the PRC. As of December 31, 2013, we have an installed annual production capacity of 390,000 MT, and we have been operating at near full capacity since 2007. With the expected strong growth in the automotive modified plastics market of China, we expect that we will continue to experience strong demand from our customers. Therefore, we intend to continue to strategically increase our production capacity to meet customer demands from both expanded geographical locations and future downstream sector growth. In 2013, we commenced to construct our fourth production base with 300,000 MT new material production capacity and the affiliated research and development center and training center in Nanchong City of Sichuan Province (the
“
Project”). We plan to complete the Project in about two years and our annual capacity is expected to reach approximately 690,000 MT by 2015 upon completion of the Project.
|
●
|
Focus on R&D and Develop New Product Offerings
. We are currently utilizing our research and development capabilities to obtain further product certifications, develop new products, applications and technologies. Approximately 90% of our automotive plastics product certification applications are currently undergoing trial manufacturing periods to obtain the necessary certifications. In addition, we are developing new products for automotive applications to expand our product portfolio, including initiating R&D on modified plastic for use in electric vehicles. We are also developing specialty engineering plastics and bio-plastics for use in other applications, such as high-speed trains, vessel-propulsion systems, mining and oil-field equipment and aerospace equipment. We are the first non State-Owned-Enterprise awarded National Level Enterprise Technology Center, in Heilongjiang Province. In addition, we have Post-PhD and Academy Member WorkStation in Heilongjiang Province enhancing our research and development capabilities.
|
●
|
Expand Customer Base Domestically and Internationally
. The automotive plastics market in the PRC is highly fragmented with significant barriers to entry. Although we have approximately 9.0% of the market share in 2012, our customer coverage is concentrated in the northeast regions of the PRC. We seek to steadily enhance our market share in northeast China, and also expand our reach to northern and eastern China. In addition, we intend to have sales in overseas markets and export our products by 2014. We plan to implement such strategies through further expanding our distribution network by working with local distributors who have contacts and networks overseas and directly establishing strategic alliances with certain of our non-PRC customers.
|
●
|
Pursue Selective Strategic Acquisitions
. While we have experienced substantial organic growth, we plan to pursue a disciplined and targeted acquisition strategy to accelerate our growth. Our strategy will focus on strengthening presence in certain geographies, improving our penetration in attractive markets, enhancing research and development capabilities and acquiring new markets or customers.
|
●
|
Increase Efficiency by Corporate Restructuring
.
We are currently implementing a corporate restructuring plan with the aim of establishing a more efficient company group structure, as a result of which our subsidiaries will be more easily accessible to our end customers and our operations will be able to respond to the market changes in a more efficient manner. We aim to complete the corporate restructuring plan by the end of 2014.
|
●
|
we may be unable to find a new property with the amenities and in the location we require for our factories, which may result in a factory closure;
|
●
|
we may have to relocate to a less desirable location;
|
●
|
we may have to relocate to a location with facilities that do not meet our requirements;
|
●
|
we may incur significant costs in connection with identifying, securing and relocating to a replacement location; or
|
●
|
our factories may experience significant disruption in operations and, as a result, we may be unable to produce products during the period of disruption.
|
|
Common Stock
|
|||||||
High
|
Low
|
|||||||
Fiscal Year Ending December 31, 2013
|
||||||||
First Quarter
|
4.33
|
3.95
|
||||||
Second Quarter
|
4.26
|
3.8
|
||||||
Third Quarter
|
4.41
|
4.05
|
||||||
Fourth Quarter
|
5.60
|
4.51
|
||||||
Fiscal Year Ending December 31, 2012
|
||||||||
First Quarter
|
5.82
|
4.71
|
||||||
Second Quarter
|
5.62
|
4.40
|
||||||
Third Quarter
|
4.78
|
3.52
|
||||||
Fourth Quarter
|
4.36
|
3.70
|
Plan category
|
Number of securities to be issued upon exercise of outstanding options and nonvested shares
(a)
|
||||
Nonvested shares
|
1,090,575
|
||||
Total
|
1,090,575
|
For the Years Ended December 31,
|
||||||||||||||||
(in thousands, except percentages)
|
2013
|
2012
|
||||||||||||||
Amount
|
%
|
Amount
|
%
|
|||||||||||||
Revenues
|
$
|
1,050,816
|
100
|
%
|
$
|
599,819
|
100
|
%
|
||||||||
Cost of revenues
|
$
|
827,420
|
79
|
%
|
$
|
456,012
|
76
|
%
|
||||||||
Gross profit
|
$
|
223,396
|
21
|
%
|
$
|
143,807
|
24
|
%
|
||||||||
Total operating expenses
|
$
|
37,787
|
4
|
%
|
$
|
31,929
|
5
|
%
|
||||||||
Operating income
|
$
|
185,609
|
17
|
%
|
$
|
111,878
|
19
|
%
|
||||||||
Income before income taxes
|
$
|
180,536
|
17
|
%
|
$
|
115,384
|
19
|
%
|
||||||||
Income tax expense
|
$
|
46,697
|
4
|
%
|
$
|
29,516
|
5
|
%
|
||||||||
Net income
|
$
|
133,839
|
13
|
%
|
$
|
85,868
|
14
|
%
|
(in millions, except percentage)
|
Revenues
For the Years Ended December 31,
|
|||||||||||||
2013
|
2012
|
|||||||||||||
Amount
|
%
|
Amount
|
%
|
Change in
Amount
|
Change in
%
|
|||||||||
Modified Polypropylene (PP)
|
287.7
|
27.4%
|
|
284.3
|
47.4%
|
|
3.4
|
1.2%
|
||||||
Engineering Plastics
|
264.4
|
25.1%
|
|
124.5
|
20.8%
|
|
139.9
|
112.4%
|
||||||
Modified Polyamide (PA)
|
183.6
|
17.5%
|
|
48.9
|
8.1%
|
|
134.7
|
275.5%
|
||||||
Environment Friendly Plastics
|
155.5
|
14.8%
|
|
72.1
|
12.0%
|
|
83.4
|
115.7%
|
||||||
Alloy Plastics
|
124.6
|
11.9%
|
|
37.8
|
6.3%
|
|
86.8
|
229.6%
|
||||||
Modified Acrylonitrile Butadiene Styrene (ABS)
|
32.6
|
3.1%
|
|
24.7
|
4.1%
|
|
7.9
|
32.0%
|
||||||
Sub-total
|
1,048.4
|
99.8%
|
|
592.3
|
98.7%
|
|
456.1
|
77.0%
|
||||||
After-sales Service
|
2.0
|
0.2%
|
|
7.5
|
1.3%
|
|
(5.5)
|
(73.3)%
|
||||||
Overseas Trading
|
0.4
|
0.0%
|
|
-
|
-
|
0.4
|
0.0%
|
|||||||
Total Revenues
|
1,050.8
|
100%
|
|
599.8
|
100%
|
|
451.0
|
75.2%
|
Sales Volume
|
|||||||||||||||||||
(in MTs, except percentage)
|
For the Years Ended December 31,
|
||||||||||||||||||
2013
|
2012
|
||||||||||||||||||
MT
|
%
|
MT
|
%
|
Change in MT
|
Change in %
|
||||||||||||||
Modified Polypropylene (PP)
|
140,504
|
41.7%
|
|
136,698
|
61.0%
|
|
3,806
|
2.8%
|
|
||||||||||
Engineering Plastics
|
49,367
|
14.6%
|
|
25,284
|
11.3%
|
|
24,083
|
95.2%
|
|
||||||||||
Modified Polyamide (PA)
|
36,970
|
11.0%
|
|
10,228
|
4.6%
|
|
26,742
|
261.5%
|
|
||||||||||
Environment Friendly Plastics
|
68,160
|
20.2%
|
|
31,784
|
14.2%
|
|
36,376
|
114.4%
|
|
||||||||||
Alloy Plastics
|
30,944
|
9.2%
|
|
10,753
|
4.8%
|
|
20,191
|
187.8%
|
|
||||||||||
Modified Acrylonitrile Butadiene Styrene (ABS)
|
11,244
|
3.3%
|
|
9,235
|
4.1%
|
|
2,009
|
21.8%
|
|
||||||||||
Total sales volume
|
337,189
|
100.0%
|
|
223,982
|
100.0%
|
|
113,207
|
50.5%
|
|
For the Years Ended December 31,
|
Change
|
|||||||||||||||
(in millions, except percentage)
|
2013
|
2012
|
Amount
|
%
|
||||||||||||
Gross Profit
|
$
|
223.4
|
$
|
143.8
|
$
|
79.6
|
55.4
|
%
|
||||||||
Gross Margin
|
21.3
|
%
|
24.0
|
%
|
(2.7)
|
%
|
For the Years Ended
D
ecember 31,
|
Change
|
|||||||||||||||
(in millions, except percentage)
|
2013
|
2012
|
Amount
|
%
|
||||||||||||
General and Administrative Expenses
|
$
|
16.3
|
$
|
10.0
|
$
|
6.3
|
63.0
|
%
|
||||||||
as a percentage of revenues
|
1.6
|
%
|
1.7
|
%
|
(0.1)
|
%
|
For the Years Ended
December 31,
|
Change
|
|||||||||||||||
(in millions, except percentage)
|
2013
|
2012
|
Amount
|
%
|
||||||||||||
Research and Development Expenses
|
$
|
21.3
|
$
|
21.6
|
$
|
(0.3)
|
(1.4)
|
%
|
||||||||
as a percentage of revenues
|
2.0
|
%
|
3.6
|
%
|
(1.6)
|
%
|
For the Years Ended
December 31,
|
Change
|
|||||||||||||||
(in millions, except percentage)
|
2013
|
2012
|
Amount
|
%
|
||||||||||||
Interest Income
|
$
|
6.8
|
$
|
4.6
|
$
|
2.2
|
47.8
|
%
|
||||||||
Interest Expenses
|
(15.3
|
)
|
(4.6
|
)
|
(10.7
|
)
|
232.6
|
%
|
||||||||
Net Interest Expenses
|
$
|
(8.5
|
)
|
$
|
0.0
|
$
|
(8.5)
|
-
|
%
|
For the Years Ended
December 31,
|
Change
|
|||||||||||||||
(in millions, except percentage)
|
2013
|
2012
|
Amount
|
%
|
||||||||||||
Foreign currency exchange gains
|
$
|
2.5
|
$
|
0.6
|
$
|
1.9
|
316.7
|
%
|
||||||||
as a percentage of revenues
|
0.2
|
%
|
0.1
|
%
|
0.1
|
%
|
For the Years Ended
December 31,
|
Change
|
|||||||||||||||
(in millions, except percentage)
|
2013
|
2012
|
Amount
|
%
|
||||||||||||
Income before Income Taxes
|
$
|
180.5
|
$
|
115.4
|
$
|
65.1
|
56.4
|
%
|
||||||||
Income Tax Expense
|
(46.7)
|
(29.5)
|
(17.2)
|
58.3
|
%
|
|||||||||||
Effective income tax rate
|
25.9%
|
25.6%
|
0.3
|
%
|
Selected Balance Sheet Data
|
|||||||||||||
2013
|
2012
|
Change
|
|||||||||||
(
in millions, except percentage)
|
Amount
|
%
|
|||||||||||
Cash and cash equivalents
|
95.5
|
83.8
|
11.7
|
14.0
|
%
|
||||||||
Restricted cash
|
13.7
|
16.9
|
(3.2)
|
(18.9)
|
%
|
||||||||
Time deposits
|
281.3
|
48.0
|
233.3
|
486.0
|
%
|
||||||||
Accounts receivable, net of allowance for doubtful accounts
|
282.3
|
143.8
|
138.5
|
96.3
|
%
|
||||||||
Inventories
|
144.9
|
78.3
|
66.6
|
85.1
|
%
|
||||||||
Property, plant and equipment, net
|
233.8
|
223.8
|
10.0
|
4.5
|
%
|
||||||||
Land use rights, net
|
12.5
|
10.5
|
2.0
|
19.0
|
%
|
||||||||
Total assets
|
1,075.9
|
611.6
|
464.3
|
75.9
|
%
|
||||||||
Short-term bank loans
|
314.7
|
162.1
|
152.6
|
94.1
|
%
|
||||||||
Accounts payable
|
122.5
|
7.1
|
115.4
|
1,625.4
|
%
|
||||||||
Bills payable
|
25.6
|
15.8
|
9.8
|
62.0
|
%
|
||||||||
Income taxes payable
|
26.8
|
8.5
|
18.3
|
215.3
|
%
|
||||||||
Accrued expenses and other current liabilities
|
55.9
|
34.4
|
21.5
|
62.5
|
%
|
||||||||
Redeemable Series D convertible preferred stock
|
97.6
|
97.6
|
-
|
-
|
|||||||||
Stockholders
’
equity
|
412.3
|
264.4
|
147.9
|
55.9
|
%
|
(in millions)
|
December 31, 2013
|
||||||||||
Lines of Credit, Obtained
|
Remaining Available
|
||||||||||
Name of Financial Institution
|
Date of Approval
|
RMB
|
USD
|
USD
|
|||||||
Bank of Communications
|
January 5, 2013
|
150.0
|
24.8
|
0.0
|
|||||||
Bank of Longjiang, Heilongjiang
|
March 14, 2013
|
300.0
|
49.6
|
0.0
|
|||||||
Bank of China
|
November 18, 2013
|
500.0
|
82.6
|
12.6
|
|||||||
HSBC
|
June 25, 2013
|
152.5
|
25.2
|
0.2
|
|||||||
China Guangfa Bank
|
May 20, 2013
|
60.0
|
9.9
|
5.0
|
|||||||
Industrial and Commercial Bank of China Limited
|
July 30, 2013
|
500.0
|
82.6
|
6.9
|
|||||||
Agriculture Bank of China
|
September 10, 2013
|
280.0
|
46.2
|
13.2
|
|||||||
China Construction Bank
|
December 19, 2013
|
135.0
|
22.3
|
17.3
|
|||||||
China CITIC Bank
|
June 9, 2013
|
200.0
|
33.0
|
33.0
|
|||||||
Societe Generale
|
July 9, 2013
|
100.0
|
16.5
|
0.0
|
|||||||
China Construction Bank (Asia)
|
October 2, 2013
|
293.6
|
48.5
|
46.6
|
|||||||
Total
|
2,671.1
|
441.2
|
134.8
|
For the Years Ended
December 31,
|
||||||||
(in millions US$)
|
2013
|
2012
|
||||||
Net cash provided by (used in) operating activities
|
115.6
|
(31.5
|
)
|
|||||
Net cash used in investing activities
|
(249.9
|
)
|
(144.9
|
)
|
||||
Net cash provided by financing activities
|
143.2
|
123.9
|
||||||
Effect of foreign currency exchange rate changes on cash and cash equivalents
|
2.8
|
0.7
|
||||||
Net increase (decrease) in cash and cash equivalents
|
11.7
|
(51.7
|
)
|
|||||
Cash and cash equivalents at the beginning of year
|
83.8
|
135.5
|
||||||
Cash and cash equivalents at the end of year
|
95.5
|
83.8
|
Year ended December 31, 2013 and 2012
|
||
Customer Payment Term
|
Payment in advance/up to 90 days
|
|
Supplier Payment Term
|
Payment in advance/up to 30 days
|
Contractual obligations
|
Total
|
Payment due
less than 1 year
|
2 – 3 years
|
4-5 years
|
More than 5
years
|
|||||||||||||||
Lease commitments
|
4,643,668
|
1,091,533
|
2,024,278
|
1,527,857
|
-
|
|||||||||||||||
Plant construction
|
13,863,927
|
13,863,927
|
-
|
-
|
-
|
|||||||||||||||
Total
|
18,507,595
|
14,955,460
|
2,024,278
|
1,527,857
|
-
|
Name
|
Age
|
Title
|
Date of Initial Appointment
|
Jie Han
|
48
|
Chief Executive Officer and Chairman of the Board of Directors
|
December 31, 2008
|
Taylor Zhang
|
35
|
Chief Financial Officer and Director
|
May 14, 2009
|
Qingwei Ma
|
39
|
Chief Operating Officer and Director
|
December 31, 2008
|
Lawrence W. Leighton (1)(2)(3)
|
79
|
Independent Director
|
May 14, 2009
|
Feng Li (1)(2)(3)
|
51
|
Independent Director
|
November 14, 2012
|
Linyuan Zhai (1)(2)(3)
|
64
|
Independent Director
|
May 14, 2009
|
Homer Sun (2)(4)
|
42
|
Independent Director
|
January 1, 2012
|
Jun Xu(4)
|
38
|
Independent Director
|
September 28, 2011
|
Junjie Ma
|
38
|
Chief Technology Officer
|
May 26, 2009
|
●
|
reviewing the Audit Committee’s charter, annual report to stockholders and reports submitted to the SEC;
|
●
|
appointing the Company’s independent auditors, confirming and reviewing their independence, and approving their fees;
|
●
|
reviewing the independent auditors’ performance;
|
●
|
discussing with the independent auditor and management the independent auditor’s judgment about the quality, not just the acceptability, of the Company’s accounting principles;
|
●
|
following an audit, reviewing significant difficulties encountered during the audit; and
|
●
|
reviewing significant disagreements among management and the independent auditors in the preparation of the Company’s financial statements.
|
Name and Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock
Awards
($)
|
Option Awards
($)
|
Non-Equity Incentive Plan Compen-
sation
($)
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings
($)
|
All Other Compens-
ation
($)
|
Total
($)
|
||||||||||||||||||||||||
Jie Han,
|
2013
|
282,762
|
282,762
|
||||||||||||||||||||||||||||||
CEO
|
2012
|
485,551
|
-
|
-
|
-
|
-
|
-
|
-
|
485,551
|
||||||||||||||||||||||||
Qingwei Ma,
|
2013
|
198,990
|
67,536
|
11,149
|
277,675
|
||||||||||||||||||||||||||||
COO
|
2012
|
204,887
|
-
|
42,792
|
56,045
|
(1)
|
-
|
-
|
-
|
303,724
|
|||||||||||||||||||||||
Taylor Zhang,
|
2013
|
143,316
|
44,088
|
64,920
|
14,865
|
267,189
|
|||||||||||||||||||||||||||
CFO
|
2012
|
138,544
|
-
|
47,180
|
74,726
|
(1)
|
-
|
-
|
-
|
260,450
|
(1)
|
Stock and option awards represent the amount of stock compensation expense recognized in 2013 and 2012 in accordance with FASB ASC 718.
|
Option Awards
|
||||||||||||||||||||||||||||
Name
|
Name of securities underlying unexercised options (#) exercisable
|
Number of securities underlying unexercised options (#) unexercisable
|
Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)
|
Option exercise price ($)
|
Option expiration date
|
Number of shares or units of stock that have not vested (#)
|
Grant date fair value of stock or units of stock that have not vested ($)
|
|||||||||||||||||||||
Jie Han, CEO
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Taylor Zhang, CFO
|
Common Stock
|
-
|
-
|
8.01
|
August/7/2013
|
42,000
|
186,760
|
|||||||||||||||||||||
Qingwei Ma, COO
|
Common Stock
|
-
|
-
|
8.01
|
August/7/2013
|
42,000
|
186,760
|
|||||||||||||||||||||
Junjie Ma, CTO
|
Common Stock
|
-
|
-
|
8.01
|
August/7/2013
|
35,530
|
158,176
|
Name
|
Fees earned or paid in cash ($)
|
Stock awards ($)
|
Option awards ($)
|
Non-equity incentive plan compensation ($)
|
Nonqualified deferred compensation earnings ($)
|
All other compensation ($)
|
Total ($)
|
|||||||||||||||||||||
Lawrence Leighton
|
60,000
|
50,000
|
-
|
-
|
-
|
-
|
110,000
|
|||||||||||||||||||||
Feng Li
|
5,856
|
-
|
-
|
-
|
-
|
-
|
5,856
|
|||||||||||||||||||||
Linyuan Zhai
|
9,760
|
8,133
|
-
|
-
|
-
|
- |
17,893
|
|||||||||||||||||||||
Name and Address
|
Title of Class
|
Amount and Nature of Beneficial Ownership
(1)
|
Percent of Class
(2)
|
||||||
Jie Han
(address: c/o China XD Plastics Company Limited,
500 5th Avenue, Suite 4120, New York, New York 10110)
|
Series B Preferred Stock
|
1,000,000
|
(3)
|
100.0
|
%
|
||||
Jie Han
|
Common Stock
|
32,510,131
|
(3)
|
68.3
|
%
|
||||
Qingwei Ma
(address: c/o China XD Plastics Company Limited,
500 5th Avenue, Suite 4120, New York, New York 10110)
|
Common Stock
|
54,000
|
*
|
||||||
Junjie Ma
(address: c/o China XD Plastics Company Limited,
500 5th Avenue, Suite 4120, New York, New York 10110)
|
Common Stock
|
43,530
|
*
|
||||||
Taylor Zhang
(address: c/o China XD Plastics Company Limited,
500 5th Avenue, Suite 4120, New York, New York 10110)
|
Common Stock
|
56,000
|
*
|
||||||
Lawrence W. Leighton
(address: c/o China XD Plastics Company Limited,
500 5th Avenue, Suite 4120, New York, New York 10110)
|
Common Stock
|
56,551
|
*
|
||||||
Linyuan Zhai
(address: c/o China XD Plastics Company Limited,
500 5th Avenue, Suite 4120, New York, New York 10110)
|
Common Stock
|
8,153
|
*
|
||||||
Feng Li
(address: c/o China XD Plastics Company Limited,
500 5th Avenue, Suite 4120, New York, New York 10110)
|
Common Stock
|
-
|
*
|
||||||
XD. Engineering Plastics Company Limited
(address: Palm Grove House, P.O. Box 438, Road Town,
Tortola, British Virgin Islands)
|
Series B Preferred Stock
|
1,000,000
|
(3)
|
100.0
|
%
|
||||
XD. Engineering Plastics Company Limited
|
Common Stock
|
24,382,598
|
(3)
|
51.3
|
%
|
||||
MSPEA Modified Plastics Holding Limited
(address: c/o Walkers Corporate Services Limited, Walker House,
87 Mary Street, George Town, Grand Cayman KY1-9005, Cayman Islands)
|
Series D Preferred Stock
|
16,000,000
|
(4)
|
100.0
|
%
|
||||
Total Ownership of Common Stock by All Directors and Executive Officers as a Group
|
32,756,956
|
76.7
|
%
|
(1)
|
The amount of beneficial ownership includes the number of shares of common stock and/or Series B Preferred Stock and/or Series D Preferred Stock, plus, in the case of each of the executive officer and directors and all officers and directors as a group, all shares issuable upon the exercise of the options held by them, which were exercisable as of March 13, 2014 or within 60 days thereafter. Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended, and the rules promulgated by the SEC, every person who has or shares the power to vote or to dispose of shares of common stock are deemed to be the “beneficial owner” of all the shares of common stock over which any such sole or shared power exists.
|
(2)
|
Based upon 47,875,113 shares of Common Stock outstanding, 1,000,000 shares of Series B Preferred Stock outstanding and 16,000,000 shares of Series D Preferred Stock outstanding as of December 31, 2013
|
(3)
|
Mr. Jie Han beneficially owns (i) 32,510,131 shares of Common Stock, representing 67.9% of our total outstanding Common Stock, which includes 8,127,533 shares of Common Stock directly held by Mr. Jie Han and 24,382,598 shares of Common Stock beneficially owned by Mr. Jie Han through his sole ownership of XD Engineering Plastics, and (ii) 1,000,000 shares of Series B Preferred Stock through his sole ownership of XD Engineering Plastics, representing 100% of our total outstanding Series B Preferred Stock.
|
(4)
|
MSPEA Modified Plastics Holding Limited owns 16,000,000 shares of Series D Preferred Stock, representing 100% of our total outstanding Series D Preferred Stock.
|
Premise Leased
|
Area (M2)
|
Annual Rental Fee (US$)
|
Period of Lease
|
||||||
Plant and office building
|
20,250
|
666,901
|
Between May 1, 2012 and December 31, 2013
|
||||||
Office building
|
250
|
8,133
|
Between January 1, 2012 and December 31, 2013
|
||||||
Office building
|
3,394
|
110,415
|
Between May 1, 2012 and April 30, 2013
|
||||||
Office building
|
3,394
|
110,415
|
Between May 1, 2013 and December 31, 2013
|
||||||
Office building
|
23,894
|
|
777,316
|
Between January 1, 2014 and December 31, 2018
|
2013
|
2012
|
|||||||
Audit Fees
|
$
|
1,136,072
|
$
|
940,511
|
||||
Tax Fees
|
24,622
|
-
|
||||||
All Other Fees
|
-
|
57,066
|
||||||
Total paid to independent public audit firms
|
$
|
1,160,694
|
$
|
997,577
|
|
●
|
Service Agreement effective as of November 14, 2010 between China XD Plastics Company Limited and Linyuan Zhai
|
|
●
|
Service Agreement effective as of November 14, 2010 between China XD Plastics Company Limited and Lawrence W. Leighton
|
|
●
|
Employment Agreement dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co., Ltd and Jie Han
|
|
●
|
Employment Memorandum dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co., Ltd and Jie Han
|
|
●
|
Employment Agreement dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co., Ltd and Qingwei Ma
|
|
●
|
Employment Memorandum dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co., Ltd and Qingwei Ma
|
|
●
|
Employment Agreement dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co., Ltd and Taylor Zhang
|
|
●
|
Employment Memorandum dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co., Ltd and Taylor Zhang
|
|
●
|
Employment Agreement dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co., Ltd and Junjie Ma
|
|
●
|
Employment Memorandum dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co., Ltd and Junjie Ma
|
|
●
|
Service Agreement dated November 14, 2012 between China XD Plastics Company Limited and Feng Li
|
4.14
|
Indenture, dated February 4, 2014, constituting US$150 million 11.75% Guaranteed Senior Notes Due 2019
|
Filed herewith
|
|
10.1
|
2009 Stock Option/Stock Issuance Plan
|
Filed as an appendix to the Company’s definitive proxy statement on Schedule 14A, as filed with the Securities and Exchange Commission on November 11, 2009.
|
|
10.2
|
District Entry Agreement and Memorandum dated April 14, 2010 by and between Harbin Xinda Macromolecule Material Co., Ltd. and Harbin Economic and Technological Development Zone Administration
|
Filed as an exhibit to the Company’s quarterly report on Form 10-Q, as filed with the Securities and Exchange Commission on August 9, 2010.
|
|
10.3
|
Letter Agreement, dated October 4, 2010, between China XD Plastics Company Limited and Rodman & Renshaw, LLC
|
Filed as an exhibit to the Company’s current report on Form 8-K, as filed with the Securities and Exchange Commission on October 6, 2010.
|
|
10.4
|
Securities Purchase Agreement dated October 4, 2010, among China XD Plastics Company Limited and certain institutional investors
|
Filed as an exhibit to the Company’s current report on Form 8-K, as filed with the Securities and Exchange Commission on October 6, 2010.
|
|
10.5
|
Amendment Agreement, dated as of September 30, 2010, to the Securities Purchase Agreement dated November 27, 2009 among China XD Plastics Company Limited and the purchasers named therein
|
Filed as an exhibit to the Company’s current report on Form 8-K, as filed with the Securities and Exchange Commission on October 6, 2010.
|
|
10.6
|
Service Agreement effective as of October 4, 2010 between China XD Plastics Company Limited and Robert Brisotti
|
Filed as an exhibit to the Company’s current report on Form 8-K, as filed with the Securities and Exchange Commission on October 7, 2010.
|
10.7
|
Service Agreement dated November 14, 2010 between China XD Plastics Company Limited and Linyuan Zhai *
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2012.
|
|
10.8
|
Service Agreement dated November 14, 2010 between China XD Plastics Company Limited and Lawrence Leighton
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2012.
|
|
10.9
|
Stock Award Grant Supplemental Provisions
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2012.
|
|
10.10
|
Securities Purchase Agreement entered into by and between the Company, MSPEA Modified Plastics Holding Limited, XD. Engineering Plastics Company Limited, and Mr. Jie Han on August 15, 2011
|
Filed as an exhibit to the Company’s current report on Form 8-K, as filed with the Securities and Exchange Commission on August 15, 2011.
|
|
10.11
|
Stockholders’ Agreement entered into by and between MSPEA Modified Plastics Holding Limited, XD. Engineering Plastics Company Limited, and Mr. Jie Han on August 15, 2011
|
Filed as an exhibit to the Company’s current report on Form 8-K, as filed with the Securities and Exchange Commission on August 15, 2011.
|
|
10.12
|
Form of Pledge Agreement by and between MSPEA Modified Plastics Holding Limited and XD. Engineering Plastics Company Limited
|
Filed as an exhibit to the Company’s current report on Form 8-K, as filed with the Securities and Exchange Commission on August 15, 2011.
|
10.13
|
Form of Indemnification Agreement
|
Filed as an exhibit to the Company’s current report on Form 8-K, as filed with the Securities and Exchange Commission on August 15, 2011.
|
|
10.14
|
Employment Agreement dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co. Ltd and Jie Han *
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2012.
|
|
10.15
|
Employment Memorandum dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co. Ltd and Jie Han
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2012.
|
|
10.16
|
Employment Agreement dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co. Ltd and Qingwei Ma *
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2012.
|
|
10.17
|
Employment Memorandum dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co. Ltd and Qingwei Ma
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2012.
|
|
10.18
|
Employment Agreement dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co. Ltd and Taylor Zhang *
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2012.
|
|
10.19
|
Employment Memorandum dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co. Ltd and Taylor Zhang
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2012.
|
|
10.20
|
Employment Agreement dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co. Ltd and Junjie Ma *
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2012.
|
|
10.21
|
Employment Memorandum dated December 31, 2011 between Heilongjiang Xinda Enterprise Group Co. Ltd and Junjie Ma
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2012.
|
|
10.22
|
Service Agreement dated November 14, 2012 between China XD Plastics Company Limited and Feng Li *
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 25, 2013.
|
|
14.1
|
Code of Business Conduct
|
Filed as an exhibit to the Company’s current report on Form 10-K, as filed with the Securities and Exchange Commission on March 26, 2012.
|
16.1
|
Letter, dated December 31, 2008, from Robison, Hill & Co. to the Securities and Exchange Commission
|
Filed as an exhibit to the Company’s current report on Form 8-K, as filed with the Securities and Exchange Commission on December 31, 2008, and incorporated herein by this reference.
|
|
16.2
|
Letter, dated November 4, 2009 from Bagell Josephs Levine & Company, LLC, to the Securities and Exchange Commission
|
Filed as an exhibit to the Company’s current report on Form 8-K, as filed with the Securities and Exchange Commission on November 6, 2009.
|
|
16.3
|
Letter, dated August 15, 2011, from Moore Stephens Hong Kong, to the Securities and Exchange Commission
|
Filed as an exhibit to the Company’s current report on Form 8-K, as filed with the Securities and Exchange Commission on August 15, 2011.
|
|
21.1
|
Subsidiaries of Registrant
|
Filed herewith
|
|
23.1
|
Consent of KPMG
|
Filed herewith
|
|
31.1
|
Certification of Principal Executive Officer Required Under Section 302 of Sarbanes-Oxley Act of 2002
|
Filed herewith
|
|
31.2
|
Certification of Principal Financial Officer Required Under Section 302 of Sarbanes-Oxley Act of 2002
|
Filed herewith
|
|
32.1
|
Certification of Principal Executive Officer and Principal Financial Officer Required Under Section 906 of Sarbanes-Oxley Act of 2002
|
Filed herewith
|
|
101.
|
Interactive Data Files
|
Filed herewith
|
CHINA XD PLASTICS COMPANY LIMITED
|
|||
By:
|
/s/ Jie Han
|
||
Jie Han
|
|||
Chief Executive Officer
|
|||
(Principal Executive Officer)
|
By:
|
/s/ Taylor Zhang
|
||
Taylor Zhang
|
|||
Chief Financial Officer
|
|||
(Principal Financial Officer)
|
Name
|
Title
|
Date
|
|
/s/ Jie Han
|
Chairman and Chief Executive Officer
|
March 26, 2014
|
|
Jie Han
|
(Principal Executive Officer)
|
||
/s/ Taylor Zhang
|
Chief Financial Officer
|
March 26, 2014
|
|
Taylor Zhang
|
(Principal Financial and Accounting Officer)
|
||
/s/ Qingwei Ma
|
Director
|
March 26, 2014
|
|
Qingwei Ma
|
|||
/s/ Lawrence Leighton
|
Director
|
March 26, 2014
|
|
Lawrence Leighton
|
|||
/s/ Feng Li
|
Director
|
March 26, 2014
|
|
Feng Li
|
|||
/s/ Linyuan Zhai
|
Director
|
March 26, 2014
|
|
Linyuan Zhai
|
|||
/s/ Homer Sun
|
Director
|
March 26, 2014
|
|
Homer Sun
|
|||
/s/ Jun Xu
|
Director
|
March 26, 2014
|
|
Jun Xu
|
Page
|
||||
Report of Independent Registered Public Accounting Firm
|
F-2
|
|||
Consolidated Financial Statements:
|
||||
Consolidated Balance Sheets as of December 31, 2013 and 2012
|
F-3
|
|||
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2013 and 2012
|
F-4
|
|||
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2013 and 2012
|
F-5
|
|||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013 and 2012
|
F-6
|
|||
Notes to the Consolidated Financial Statements
|
F-8
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
95,545,904
|
83,822,602
|
||||||
Restricted cash
|
13,708,971
|
16,915,359
|
||||||
Time deposits
|
281,343,641
|
47,955,923
|
||||||
Accounts receivable, net of allowance for doubtful accounts
|
282,320,819
|
143,843,764
|
||||||
Amounts due from a related party
|
225,752
|
219,360
|
||||||
Inventories
|
144,885,688
|
78,263,071
|
||||||
Prepaid expenses and other current assets
|
8,418,143
|
6,090,232
|
||||||
Total current assets
|
826,448,918
|
377,110,311
|
||||||
Property, plant and equipment, net
|
233,841,735
|
223,780,133
|
||||||
Land use rights, net
|
12,457,001
|
10,524,451
|
||||||
Other non-current assets
|
3,158,974
|
169,414
|
||||||
Total assets
|
1,075,906,628
|
611,584,309
|
||||||
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCKS AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Short-term loans
|
314,682,620
|
162,076,050
|
||||||
Bills payable
|
25,604,176
|
15,810,340
|
||||||
Accounts payable
|
122,457,396
|
7,061,259
|
||||||
Income taxes payable
|
18,631,698
|
8,511,679
|
||||||
Accrued expenses and other current liabilities
|
55,893,004
|
34,442,983
|
||||||
Total current liabilities
|
537,268,894
|
227,902,311
|
||||||
Income taxes payable
|
8,224,057
|
-
|
||||||
Deferred income tax liabilities
|
19,428,706
|
20,733,959
|
||||||
Warrants liability
|
1,063,401
|
1,008,750
|
||||||
Total liabilities
|
565,985,058
|
249,645,020
|
||||||
Redeemable Series D convertible preferred stock
|
97,576,465
|
97,576,465
|
||||||
Stockholders’ equity:
|
||||||||
Series B preferred stock
|
100
|
100
|
||||||
Common stock, US$0.0001 par value, 500,000,000 shares authorized, 47,896,133 shares and 47,584,772 shares issued, 47,875,133 shares and 47,563,772 shares outstanding as of December 31, 2013 and 2012, respectively
|
4,789
|
4,758
|
||||||
Treasury stock, 21,000 shares at cost
|
(92,694
|
)
|
(92,694
|
)
|
||||
Additional paid-in capital
|
76,341,659
|
72,583,910
|
||||||
Retained earnings
|
311,047,337
|
177,208,492
|
||||||
Accumulated other comprehensive income
|
25,043,914
|
14,658,258
|
||||||
Total stockholders’ equity
|
412,345,105
|
264,362,824
|
||||||
Commitments and contingencies
|
||||||||
Total liabilities, redeemable convertible preferred stocks and stockholders’ equity
|
1,075,906,628
|
611,584,309
|
Year Ended
December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
Revenues
|
1,050,816,364
|
599,818,968
|
||||||
Cost of revenues
|
(827,419,861
|
)
|
(456,011,715
|
)
|
||||
Gross profit
|
223,396,503
|
143,807,253
|
||||||
Selling expenses
|
(243,975
|
)
|
(273,289
|
)
|
||||
General and administrative expenses
|
(16,284,528
|
)
|
(10,069,273
|
)
|
||||
Research and development expenses
|
(21,258,549
|
)
|
(21,586,074
|
)
|
||||
Total operating expenses
|
(37,787,052
|
)
|
(31,928,636
|
)
|
||||
Operating income
|
185,609,451
|
111,878,617
|
||||||
Interest income
|
6,788,243
|
4,601,336
|
||||||
Interest expense
|
(15,250,780
|
)
|
(4,627,014
|
)
|
||||
Foreign currency exchange gains
|
2,519,486
|
561,829
|
||||||
Government grant
|
924,216
|
114,385
|
||||||
Change in fair value of embedded derivative liability
|
-
|
610
|
||||||
Change in fair value of warrants liability
|
(54,651
|
)
|
2,854,177
|
|||||
Total non-operating income (expenses), net
|
(5,073,486
|
)
|
3,505,323
|
|||||
Income before income taxes
|
180,535,965
|
115,383,940
|
||||||
Income tax expense
|
(46,697,120
|
)
|
(29,516,193
|
)
|
||||
Net income
|
133,838,845
|
85,867,747
|
||||||
Earnings per share of common stock:
|
||||||||
Basic and diluted
|
2.08
|
1.35
|
||||||
Net Income
|
133,838,845
|
85,867,747
|
||||||
Other comprehensive income
|
||||||||
Foreign currency translation adjustment, net of nil income taxes
|
10,385,656
|
3,180,381
|
||||||
Comprehensive income
|
144,224,501
|
89,048,128
|
Series B Preferred Stock
|
Common Stock
|
Accumulated Other
|
Total
|
|||||||||||||||||
Number of Shares
|
Amount
|
Number of Shares
|
Amount
|
Treasury Stock
|
Additional Paid-in Capital
|
Retained Earnings
|
Comprehensive Income
|
Stockholders’ Equity
|
||||||||||||
US$
|
US$
|
US$
|
US$
|
US$
|
US$
|
US$
|
||||||||||||||
Balance at
January 1, 2012
|
1,000,000
|
100
|
47,527,367
|
4,754
|
(92,694
|
)
|
71,190,659
|
91,340,855
|
11,477,877
|
173,921,551
|
||||||||||
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
85,867,747
|
-
|
85,867,747
|
|||||||||||
Other comprehensive income - Foreign currency translation adjustment, net of nil income taxes
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
3,180,381
|
3,180,381
|
|||||||||||
Stock based compensation
|
-
|
-
|
-
|
-
|
-
|
1,393,255
|
-
|
-
|
1,393,255
|
|||||||||||
Dividends to redeemable Series C Convertible preferred stockholders
|
-
|
-
|
-
|
-
|
-
|
-
|
(110)
|
-
|
(110
|
)
|
||||||||||
Issuance of common stock upon vesting of unvested shares
|
-
|
-
|
36,405
|
4
|
-
|
(4
|
)
|
-
|
-
|
-
|
||||||||||
Balance as of
December 31, 2012
|
1,000,000
|
100
|
47,563,772
|
4,758
|
(92,694
|
)
|
72,583,910
|
177,208,492
|
14,658,258
|
264,362,824
|
||||||||||
Net income
|
-
|
-
|
-
|
-
|
-
|
133,838,845
|
-
|
133,838,845
|
||||||||||||
Other comprehensive income - Foreign currency translation adjustment, net of nil income taxes
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
10,385,656
|
10,385,656
|
|||||||||||
Stock based compensation
|
-
|
-
|
-
|
-
|
3,757,780
|
-
|
-
|
3,757,780
|
||||||||||||
Issuance of common stock upon vesting of unvested shares
|
-
|
-
|
311,361
|
31
|
-
|
(31
|
)
|
-
|
-
|
-
|
||||||||||
Balance as of
December 31, 2013
|
1,000,000
|
100
|
47,875,133
|
4,789
|
(92,694
|
)
|
76,341,659
|
311,047,337
|
25,043,914
|
412,345,105
|
Year Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
133,838,845
|
85,867,747
|
||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
Net provision (reversal) for doubtful accounts
|
(2,293)
|
34,491
|
||||||
Depreciation and amortization
|
21,420,723
|
10,705,037
|
||||||
Stock-based compensation
|
3,757,780
|
1,393,255
|
||||||
Change in fair value of embedded derivative liability
|
-
|
(610)
|
||||||
Change in fair value of warrants liability
|
54,651
|
(2,854,177)
|
||||||
Foreign currency exchange gains
|
(2,519,486)
|
(561,829)
|
||||||
Losses on disposals of property, plant and equipment
|
4,817
|
-
|
||||||
Deferred income tax benefit
|
(1,880,228)
|
(1,574,995
|
)
|
|||||
Change in operating assets and liabilities:
|
||||||||
Restricted cash
|
6,082,662
|
(827,585)
|
||||||
Accounts receivable
|
(132,230,006)
|
(97,157,176)
|
||||||
Amounts due from a related party
|
6,534
|
(137,904)
|
||||||
Inventories
|
(63,358,285)
|
(32,494,523)
|
||||||
Prepaid expenses and other current assets
|
(2,134,119)
|
6,830,122
|
||||||
Other non-current assets
|
1,435
|
96,741
|
||||||
Bills payable
|
15,676,880
|
(12,998,869)
|
||||||
Accounts payable
|
113,429,086
|
6,576,382
|
||||||
Income taxes payable
|
17,835,057
|
2,604,368
|
||||||
Accrued expenses and other current liabilities
|
5,662,472
|
3,044,530
|
||||||
Net cash provided by (used in) operating activities
|
115,646,525
|
(31,454,995)
|
||||||
Cash flows from investing activities:
|
||||||||
Purchase of time deposits
|
(460,292,902)
|
(374,481,497)
|
||||||
Proceeds from maturity of time deposits
|
231,849,776
|
327,121,555
|
||||||
Purchases of and deposits for property, plant and equipment and land use rights
|
(21,461,391)
|
(97,492,169
|
)
|
|||||
Net cash used in investing activities
|
(249,904,517)
|
(144,852,111
|
)
|
|||||
Cash flows from financing activities:
|
||||||||
Proceeds from bank borrowings
|
503,843,151
|
243,045,097
|
||||||
Repayment of bank borrowings
|
(358,190,868)
|
(114,369,501
|
)
|
|||||
Redemption of redeemable Series C convertible preferred stock
|
-
|
(1,829
|
)
|
|||||
Dividends paid to Series C convertible preferred stockholders
|
-
|
(110
|
)
|
|||||
Release of restricted cash as collateral for bank borrowings
|
5,733,852
|
-
|
||||||
Placement of restricted cash as collateral for bank borrowings
|
(8,173,789)
|
(4,775,204)
|
||||||
Net cash provided by financing activities
|
143,212,346
|
123,898,453
|
||||||
Effect of foreign currency exchange rate changes on cash and cash equivalents
|
2,768,948
|
748,869
|
||||||
Net increase (decrease) in cash and cash equivalents
|
11,723,302
|
(51,659,784)
|
||||||
Cash and cash equivalents at beginning of year
|
83,822,602
|
135,482,386
|
||||||
Cash and cash equivalents at end of year
|
95,545,904
|
83,822,602
|
Supplemental disclosure of cash flow information:
|
||||||||
Interest paid
|
15,413,648
|
3,618,679
|
||||||
Income taxes paid
|
30,742,291
|
28,486,820
|
||||||
Non-cash investing and financing activities:
|
||||||||
Accrual for purchase of equipment
|
21,398,595
|
36,450,344
|
December 31,
|
||||||||
2013 | 2012 | |||||||
US$
|
US$
|
|||||||
RMB denominated bank deposits with:
|
||||||||
Financial Institutions in the PRC
|
389,522,815
|
140,788,222
|
||||||
U.S. dollar denominated bank deposits with:
|
||||||||
Financial Institution in the U.S.
|
84,011
|
18,391
|
||||||
Financial Institutions in the PRC
|
-
|
7,828,156
|
||||||
Financial Institution in Hong Kong SAR
|
847,559
|
11,287
|
||||||
Euro denominated bank deposits with a financial institution in Hong Kong SAR
|
143,890
|
-
|
Estimated
Useful Life
|
|
Workshops and buildings
|
39 years
|
Machinery, equipment and furniture
|
5-10 years
|
Motor vehicles
|
5 years
|
-
|
Level 1
Inputs:
Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
|
-
|
Level 2
Inputs
: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
|
-
|
Level 3
Inputs
: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
|
-
|
The fair value of restricted cash and time deposits as of December 31, 2013 and 2012 are categorized as Level 2 measurement.
|
-
|
The fair value of the warrants liability and the embedded derivative liability as of December 31, 2013 and 2012 are categorized as Level 3 measurement.
|
-
|
Short-term financial instruments, including cash and cash equivalents, restricted cash, time deposits, accounts receivable, amounts due from a related party, short-term bank loans, bills payable, accounts payable and accrued expenses and other current liabilities- carrying amounts approximate fair values because of the short maturity of these instruments.
|
-
|
Derivative liabilities- fair values are determined using an option-pricing model which considers the following significant
inputs: the Company’s stock price, risk-free interest rate and expected volatility of the Company’s stock price over the term of
the derivative liabilities.
|
December 31,
|
||||||||
2013 | 2012 | |||||||
US$
|
US$
|
|||||||
Accounts receivable
|
282,466,580
|
143,991,818
|
||||||
Allowance for doubtful accounts
|
(145,761
|
)
|
(148,054
|
)
|
||||
Accounts receivable, net
|
282,320,819
|
143,843,764
|
Year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
Balance at the beginning of the year
|
(148,054
|
)
|
(113,824
|
)
|
||||
Additions charged to bad debt expense
|
-
|
(34,491
|
)
|
|||||
Reversal of bad debt allowance
|
2,293
|
-
|
||||||
Write off of accounts receivable
|
-
|
261
|
||||||
Balance at the end of the year
|
(145,761
|
)
|
(148,054
|
)
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
Raw materials
|
135,120,514
|
70,672,300
|
||||||
Work in progress
|
2,551,621
|
110,964
|
||||||
Finished goods
|
7,213,553
|
7,479,807
|
||||||
Total inventories
|
144,885,688
|
78,263,071
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
Advances to suppliers
|
920,277
|
4,355,607
|
||||||
Value added taxes receivables
|
3,924,767
|
311,793
|
||||||
Interest receivable
|
2,405,666
|
1,145,244
|
||||||
Other
|
1,167,433
|
277,588
|
||||||
Total prepaid expenses and other current assets
|
8,418,143
|
6,090,232
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
Machinery, equipment and furniture
|
209,921,805
|
193,999,396
|
||||||
Motor vehicles
|
1,580,877
|
1,438,596
|
||||||
Workshops and buildings
|
62,217,256
|
40,357,145
|
||||||
Construction in progress
|
4,807,666
|
10,471,463
|
||||||
Total property, plant and equipment
|
278,527,604
|
246,266,600
|
||||||
Less: accumulated depreciation
|
(44,685,869
|
)
|
(22,486,467
|
)
|
||||
Property, plant and equipment, net
|
233,841,735
|
223,780,133
|
Year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
Cost of revenues
|
18,578,088
|
9,363,351
|
||||||
General and administrative expenses
|
958,976
|
232,576
|
||||||
Research and development expenses
|
1,659,072
|
1,029,706
|
||||||
Total depreciation expense
|
21,196,136
|
10,625,633
|
December 31,
|
|||||||||
2013
|
2012
|
||||||||
US$
|
US$
|
||||||||
Unsecured loans
|
169,027,897
|
65,970,048
|
|||||||
Loans secured by accounts receivable
|
100,434,445
|
72,229,981
|
|||||||
Loans secured by bank deposits
|
36,960,867
|
23,876,021
|
|||||||
Total short-term bank loans
|
(a)
|
306,423,209
|
162,076,050
|
||||||
Interest-free loan secured by land use rights
|
(b)
|
8,259,411
|
-
|
||||||
Total short-term loans
|
314,682,620
|
162,076,050
|
(a)
|
As of December 31, 2013 and December 31, 2012, the Company’s short-term bank loans bear a weighted average interest rate of 5.9% and 6.1% per annum, respectively. All short-term bank loans mature at various times within one year and contain no renewal terms.
As of December 31, 2013, the Company had total lines of credit with remaining terms less than 12 months of RMB2,671 million (US$441.2 million), of which RMB816.1million (US$134.8 million) was unused. Other than US$48.5 million line of credit from a bank in Hong Kong SAR, the remaining lines of credit are from PRC banks in Harbin, Heilongjiang province. Certain lines of credit contain financial covenants such as total stockholders’ equity, debt asset ratio, current ratio, contingent liability ratio and net profit. As of December 31, 2013, the Company has met these financial covenants.
|
(b)
|
On April 11, 2013, the Company obtained a one-year interest-free loan in the amount of RMB50 million (equivalent to US$8 million) from a company affiliated with the People’s Government of Shunqing District, Nanchong City, Sichuan Province (“Shunqing Government
”
). The loan was issued to support the Company’s construction of a production plant in Sichuan. The loan will be secured by a land use right to be granted to the Company in connection with the construction.
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
$ |
US
|
$ |
US
|
|||||
Payables for purchase of property, plant and equipment
|
44,510,678
|
30,029,901
|
||||||
Accrued freight expenses
|
5,010,341
|
499,607
|
||||||
Others
|
6,371,985
|
3,913,475
|
||||||
Total accrued expenses and other current liabilities
|
55,893,004
|
34,442,983
|
Year Ended December 31,
|
|||||||
2013
|
2012
|
||||||
US$
|
US$
|
||||||
Costs and expenses resulting from transactions with related parties:
|
|||||||
Rental expenses for plant and office space
|
(a)
|
801,715
|
634,457
|
December 31,
|
|||||||||
2013
|
2012
|
||||||||
US$
|
US$
|
||||||||
Amounts due from a related party:
|
|||||||||
Prepaid rent expenses to Xinda High-Tech
|
(a)
|
225,752
|
219,360
|
(a)
|
The Company rents the following plant and office buildings in Harbin, Heilongjiang province from Xinda High-Tech:
|
Premise Leased
|
Area (M2)
|
Annual Rental Fee (US$)
|
Period of Lease
|
||||||
Plant and office building
|
20,250
|
666,901
|
Between May 1, 2012 and December 31, 2013
|
||||||
Office building
|
250
|
8,133
|
Between January 1, 2012 and December 31, 2013
|
||||||
Office building
|
3,394
|
110,415
|
Between May 1, 2012 and April 30, 2013
|
||||||
Office building
|
3,394
|
110,415
|
Between May 1, 2013 and December 31, 2013
|
||||||
Office building
|
23,894
|
|
777,316
|
Between January 1, 2014 and December 31, 2018
|
Year Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
U.S.
|
(4,768,725)
|
625,840
|
||||||
BVI
|
(7,685)
|
(4,208)
|
||||||
Hong Kong
|
(815,408)
|
(568,268)
|
||||||
PRC, excluding Hong Kong
|
186,127,783
|
115,330,576
|
||||||
Total income before income taxes
|
180,535,965
|
115,383,940
|
Year Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
Current income tax expense - PRC
|
47,559,763
|
31,091,188
|
||||||
Current income tax expense - US
|
1,017,585
|
-
|
||||||
Deferred income tax benefit - PRC
|
(1,880,228)
|
(1,574,995)
|
||||||
Total income tax expense
|
46,697,120
|
29,516,193
|
Year Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
(in percentage to income before income taxes)
|
||||||||
PRC statutory income tax rate
|
25
|
%
|
25
|
%
|
||||
Increase (decrease) in effective income tax rate resulting from:
|
||||||||
Tax rate differential on entities not subject to PRC income tax
|
(0.1
|
)%
|
0.2
|
%
|
||||
Non-deductible expenses (non-taxable income):
|
||||||||
Change in fair value of warrants liability
|
0.0 | % | (0.8 | )% | ||||
Entertainment expenses exceeding allowable limit
|
0.1
|
%
|
0.0
|
%
|
||||
Share-based compensation
|
0.7
|
%
|
0.4
|
%
|
||||
Preferential tax rate
|
(0.7
|
)%
|
(0.0
|
)%
|
||||
Change in valuation allowance
|
(0.0
|
)%
|
(0.4
|
)%
|
||||
Others
|
0.9
|
%
|
1.2
|
%
|
||||
Effective income tax rate
|
25.9
|
%
|
25.6
|
%
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
Deferred income tax assets:
|
||||||||
Tax loss carryforwards
|
73,182
|
556,677
|
||||||
Less: valuation allowance
|
(73,182)
|
(556,677)
|
||||||
Deferred income tax assets, net
|
-
|
-
|
||||||
Deferred income tax liabilities:
|
||||||||
Net assets of Research Institute granted to Research Center
|
3,134,131
|
3,588,868
|
||||||
Property, plant and equipment
|
16,294,575
|
17,145,091
|
||||||
Total deferred income tax liabilities
|
19,428,706
|
20,733,959
|
Year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
Balance at the beginning of the year
|
556,677 | 1,005,361 | ||||||
Expiration due to liquidation
|
(437,762 | ) | - | |||||
Additions of valuation allowance
|
72,305 | 41,110 | ||||||
Reduction of valuation allowance
|
(118,038 | ) | (489,794 | ) | ||||
Balance at the end of the year
|
73,182 | 556,677 |
Year ended December 31, 2013
|
||||
US$
|
||||
Balance at beginning of year
|
- | |||
Increase related to current year tax positions
|
8,807,490 | |||
Balance at end of year
|
8,807,490 |
Warrants
|
Exercise Price
|
Number of Warrants
Outstanding
|
Remaining
Contractual Life
|
|||||||||
US$
|
Years
|
|||||||||||
Series A investor warrants
|
4.9 | 1,320,696 | 0.92 | |||||||||
Series A placement agent warrants
|
5.5 | 117,261 | 0.92 | |||||||||
Total
|
1,437,957 |
Issuance Date
|
Exercise Price
|
Number of Warrants Outstanding
|
Remaining Contractual Life
|
|||||||||
Years
|
||||||||||||
Series A investor warrants
|
4.9
|
1,320,696
|
1.92
|
|||||||||
Series A placement agent warrants
|
5.5
|
117,261
|
1.92
|
|||||||||
Series C placement agent warrants
|
7.5
|
166,667
|
0.52
|
|||||||||
1,604,624
|
Series A Investor
Warrants
|
Series A Placement
Agent Warrants
|
||||
Volatility
|
28.9%
|
28.9%
|
|||
Expected dividends yield
|
0%
|
0%
|
|||
Fair value of underlying common stock (per share)
|
5.26
|
5.26
|
|||
Risk-free interest rate (per annum)
|
0.16%
|
0.16%
|
Series A investor warrants
|
Series A placement agent warrants
|
Series C placement agent warrants
|
|||||||
Volatility
|
48.8%
|
48.8%
|
77.4%
|
||||||
Expected dividends yield
|
0%
|
0%
|
0%
|
||||||
Fair value of underlying common stock (per share)
|
3.82
|
3.82
|
3.82
|
||||||
Risk-free interest rate (per annum)
|
0.26%
|
0.26%
|
0.12%
|
Series A investor
warrants
|
Series A placement agent warrants
|
Series C placement agent warrants
|
Total
|
|||||||||||||
US$
|
US$
|
US$
|
US$
|
|||||||||||||
As of January 1, 2012
|
3,437,899
|
285,727
|
139,301
|
3,862,927
|
||||||||||||
Change in fair value
|
(2,522,710)
|
(219,650)
|
(111,817)
|
(2,854,177
|
)
|
|||||||||||
As of December 31, 2012
|
915,189
|
66,077
|
27,484
|
1,008,750
|
||||||||||||
Change in fair value
|
89,721
|
(7,586)
|
(27,484)
|
54,651
|
||||||||||||
As of December 31, 2013
|
1,004,910
|
58,491
|
-
|
1,063,401
|
Number of Nonvested
Shares
|
Weighted Average
Grant date Fair Value
|
|||||||
US$
|
||||||||
Outstanding as of December 31, 2011
|
106,405
|
6.03
|
||||||
Granted
|
465,000
|
4.41
|
||||||
Vested
|
(36,405)
|
4.39
|
||||||
Forfeited
|
(22,000)
|
6.37
|
||||||
Outstanding as of December 31, 2012
|
513,000
|
4.66
|
||||||
Granted
|
892,936
|
4.52
|
||||||
Vested
|
(311,361)
|
4.74
|
||||||
Forfeited
|
(4,000)
|
4.37
|
||||||
Outstanding as of December 31, 2013
|
1,090,575
|
4.89
|
||||||
Expected to vest as of December 31, 2013
|
1,090,575
|
4.89
|
Number of
Options
Outstanding
|
Weighted Average
Exercise Price
US$
|
||||||||
Outstanding as of December 31, 2011
|
297,000
|
8.01
|
|||||||
Expired
|
(148,500)
|
8.01
|
|||||||
Outstanding as of December 31, 2012
|
148,500
|
8.01
|
|
||||||
Expired
|
(148,500)
|
8.01
|
|
||||||
Outstanding as of December 31, 2013
|
-
|
-
|
Year Ended
December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
Numerator:
|
||||||||
Net income
|
133,838,845
|
85,867,747
|
||||||
Less: Dividends to Series C convertible preferred stockholders
|
-
|
(110
|
)
|
|||||
Net income available to the Company
’
s stockholders
|
133,838,845
|
85,867,637
|
||||||
Less:
|
||||||||
Earnings allocated to participating Series C convertible preferred stock
|
-
|
(478
|
)
|
|||||
Earnings allocated to participating Series D convertible preferred stock
|
(33,229,887)
|
(21,527,155
|
)
|
|||||
Earnings allocated to participating nonvested shares
|
(1,347,073)
|
(364,965
|
)
|
|||||
Net income for basic and diluted earnings per share
|
99,261,885
|
63,975,039
|
||||||
Denominator:
|
||||||||
Denominator for basic and diluted earnings per share
|
47,794,028
|
47,549,275
|
||||||
Earnings per share:
|
||||||||
Basic and diluted
|
2.08
|
1.35
|
Year ended
December 31,
|
||||||||
2013
|
2012
|
|||||||
Shares issuable upon conversion of Series D convertible preferred stocks
|
16,000,000
|
16,000,000
|
||||||
Shares issuable upon exercise of Series A investor warrant
|
1,320,696
|
1,320,696
|
||||||
Shares issuable upon exercise of Series A placement agent warrant
|
117,261
|
117,261
|
||||||
Shares issuable upon exercise of Series C placement agent warrant
|
-
|
166,667
|
||||||
Shares issuable upon exercise of stock options
|
-
|
148,500
|
(1)
|
Lease commitments
|
US$
|
||||
Years ending December 31,
|
||||
2014
|
1,091,533
|
|||
2015
|
1,076,662
|
|||
2016
|
947,616
|
|||
2017
|
795,001
|
|||
2018 and thereafter
|
732,856
|
(2)
|
Plant construction
|
Year Ended December 31,
|
||||||||
2013
|
2012
|
|||||||
US$
|
US$
|
|||||||
Product sales
|
||||||||
PP
|
287,629,793
|
284,290,650
|
||||||
PA
|
183,640,747
|
48,944,960
|
||||||
Alloy plastics
|
124,645,192
|
37,762,512
|
||||||
Engineering plastics
|
264,428,369
|
124,502,433
|
||||||
ABS
|
32,595,809
|
24,701,785
|
||||||
Environment friendly plastics
|
155,470,335
|
72,077,731
|
||||||
Service revenue
|
1,981,156
|
7,538,897
|
||||||
Others
|
424,963
|
-
|
||||||
Total revenues
|
1,050,816,364
|
599,818,968
|
|
(i). The consolidated financial statements included in each of the General Disclosure Package and the Final Offering Circular, together with related notes as set forth therein, present fairly the financial position of the Parent Guarantor and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and such financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”), consistently applied throughout the periods involved;
|
|
(ii). the other financial data contained in each of the General Disclosure Package and the Final Offering Circular are accurately and fairly presented in all material respects and prepared on a basis consistent with the financial statements and books and records of the Parent Guarantor and in a manner consistent with the accounting policies of the Parent Guarantor. The Parent Guarantor and the Subsidiaries do not have any material liabilities or obligations, direct or contingent (including any off- balance sheet obligations) not described in each of the General Disclosure Package and the Final Offering Circular; and
|
|
(iii). the non-US GAAP financial information contained in each of the General Disclosure Package and the Final Offering Circular are accurately and fairly presented in all material respects.
|
(i)
|
The Parent Guarantor, each Subsidiary and the Parent Guarantor’s board of directors (the “Board”) as well as the Audit Committee (“Audit Committee”), Compensation Committee and Nominating Committee of the Board are in compliance with the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), except as disclosed in each of the General Disclosure Package and the Final Offering Circular, and all applicable rules of The NASDAQ Global Market (the “Exchange Rules”). Except as disclosed in each of the General Disclosure Package and the Final Offering Circular, the Parent Guarantor and its Subsidiaries, taken as a whole, maintain a system of internal controls, including, but not limited to, disclosure controls and procedures, internal controls over accounting matters and financial reporting, an internal audit function and legal and regulatory compliance controls (collectively, the “Internal Controls”) that comply with the Securities Act, the Exchange Act, Sarbanes-Oxley, all rules and regulations promulgated under each of the foregoing, the auditing principles, rules, standards and practices applicable to auditors of “issuers” (as defined in Sarbanes-Oxley) promulgated or approved by the PCAOB, and as applicable, the Exchange Rules (collectively, the “Securities
|
(ii)
|
Except as disclosed in each of the General Disclosure Package and the Final Offering Circular, the Parent Guarantor has established and maintains and evaluates a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that complies with the requirements of the Exchange Act and has been designed by the Parent Guarantor’s principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP; Except as disclosed in each of the General Disclosure Package and the Final Offering Circular, there are no material weaknesses or significant deficiencies in its internal control over financial reporting; all material weaknesses or significant deficiencies, if any, in the Parent Guarantor’s internal control over financial reporting have been identified to the Parent Guarantor’s independent auditors; since the date of the latest audited financial statements included in the General Disclosure Package and the Final Offering Circular there has been no change in the Parent Guarantor’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Parent Guarantor’s internal control over financial reporting, including any corrective actions with regard to significant deficiencies and material weaknesses and, except as described in the General Disclosure Package and the Final Offering Circular, the Parent Guarantor’s independent auditors have not notified the Parent Guarantor of any material weakness or significant deficiency in the Parent Guarantor’s internal control over financial reporting.
|
(iii)
|
Except as disclosed in each of the General Disclosure Package and the Final Offering Circular, the Parent Guarantor has established and maintains and evaluates disclosure controls and procedures (as such term is defined in Rule 13a- 15(e) under the Exchange Act) that comply with the requirements of the Exchange Act, such disclosure controls and procedures have been designed to ensure that material information relating to the Parent Guarantor and its Subsidiaries is made known to the Parent Guarantor’s principal executive officer and principal financial
|
(i)
|
Neither the Parent Guarantor nor any of its Subsidiaries or Affiliates, nor any director, officer, or employee, nor, to the knowledge of the Parent Guarantor after due and careful enquiry, any agent or representative of the Parent Guarantor or of any of its Subsidiaries or Affiliates, is aware of or has taken any action in furtherance of (a) an offer, payment, promise to pay, or authorization or approval of the payment or giving of money, property, gifts or anything else of value, directly or indirectly, to any “government official” (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) to influence official action or secure an improper advantage or otherwise where either the
|
(ii)
|
The operations of the Parent Guarantor and its Subsidiaries and, to the knowledge of the Parent Guarantor, the operations of its Affiliates are and have been conducted at all times in compliance with all applicable financial recordkeeping and reporting requirements, including those of the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), and the applicable anti-money laundering statutes of jurisdictions where the Parent Guarantor and its Subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries or, to the knowledge of the Parent Guarantor, its Affiliates with respect to the Anti-Money Laundering Laws is pending or, to the best knowledge of the Parent Guarantor after due and careful enquiry, threatened.
|
(iii)
|
(a) Neither the Parent Guarantor nor any of its Subsidiaries (collectively, the “Entity”) nor any director, officer, employee, agent, nor, to the knowledge of the Entity, any Affiliate or representative of the Entity, is an individual or entity (“Person”) that is, or is owned or controlled by a Person that is:
|
4.
|
Representations by Initial Purchasers; Resale by Initial Purchasers.
|
(d)
|
Each of the Initial Purchasers severally represents and agrees that
|
Very truly yours,
FAVOR SEA LIMITED
|
|||
|
By:
|
/s/ JIE HAN | |
Title | |||
CHINA XD PLASTIC COMPANY LIMITED
|
|||
|
By:
|
/s/ JIE HAN | |
Title | |||
MORGAN STANLEY
&
CO. INTERNATIONAL PLC
|
||
By:
|
/s/ Paul Olivera | |
Name: Paul Olivera | ||
Title: Executive Director |
UBS AG, HONG KONG BRANCH
|
||
By:
|
/s/ Conan Tam | |
Name: Conan Tam | ||
Title: Managing Director |
|
||
By:
|
/s/ Jason Wang | |
Name: Jason Wang | ||
Title: Director |
|
||||
/s/ Kyson Ho
|
/s/ Tracy Kung
|
|||
Name: Kyson Ho
|
Tracy Kung
|
|||
Title:
Head
of
Structured Finance, Asia-Pacific
Global
Capital Financing Acting on behalf of itself
and
as the Representative
of the several Initial Purchasers
|
Director, Transaction Management Global Capital Financing
|
|
||
By:
|
/s/ Lin Zhihong | (SEAL) |
Name: Lin Zhihong | ||
Title:
Acting on behalf of itself and as the Representative
of the several Initial Purchasers
|
Name | Country of Incorporation / Establishment |
China XD Plastic Company Limited | State of Nevada, the United States |
Xinda Holding (HK) Company Limited | Hong Kong |
1.
|
Issuer Free Writing Communications (included in the General Disclosure Package) None
|
2.
|
Other Information Included in the General Disclosure Package
|
1.
|
Term Sheet
|
2.
|
The net roadshow presentation available on www.netroadshow.com
|
1.
|
Wall–Crossing Offering Circular
|
2.
|
Wall–Crossing Roadshow Slides
|
Subsidiary
|
Country of Incorporation / Establishment
|
Favor Sea Limited
|
British Virgin Islands
|
Xinda Holding (HK) Company Limited
|
Hong Kong
|
Xinda (HK) International Trade Company Limited
|
Hong Kong
|
Xinda Holding (HK) US Sub Inc
|
New York
|
Heilongjiang Xinda Enterprise Group Company Limited
|
PRC
|
Harbin Xinda Plastics New Material Company Limited
|
PRC
|
Sichuan Xinda Enterprise Group Company Limited
|
PRC
|
Heilongjiang Xinda Software Development Company Limited
|
PRC
|
Heilongjiang Xinda Enterprise Group Macromolecule Materials R&D Center Company
|
PRC
|
Sichuan Xinda Enterprise Group Meiyuan Training Center Company Limited
|
PRC
|
Sichuan Xinda Enterprise Group Software Development Company Limited
|
PRC
|
Sichuan Xinda Enterprise Group Sales Company Limited
|
PRC
|
PRICING SUPPLEMENT | STRICTLY CONFIDENTIAL |
1
|
Documents Reviewed
|
1.1
|
The public records of the Company on file and available for public inspection at the Registry of Corporate Affairs in the British Virgin Islands (the "
Registry
of
Corporate
Affairs
") on [●] 2014, including the Company's Certificate of Incorporation and its Memorandum and Articles of Association as registered on 2 May 2008 and as amended on [●] 2014 (the "
Memorandum
and
Articles
").
|
1.2
|
The records of proceedings on file with and available for inspection on [●] 2014 at the British Virgin Islands High Court Registry (the "
High
Court
Registry
").
|
1.3
|
The written resolutions of the directors of the Company dated [●] 2014 (the "
Resolutions
").
|
1.4
|
A registered agent certificate dated [●] 2014 issued by TMF B.V.I. Ltd., the Company's registered agent (a copy of which is attached as Annexure A) (the "
Registered
Agent's
Certificate
").
|
1.5
|
A certificate from a Director of the Company (a copy of which is annexed hereto as Annexure B) (the "
Director's Certificate
").
|
1.6
|
The certified register of members of the Company (a copy of which is attached as Annexure C) (the "
Register
of
Members
").
|
1.7
|
The equitable mortgage over shares in the Company to be executed by the Guarantor in favour of Citicorp International Limited as security trustee (the "
BVI
Share
Charge
").
|
1.8
|
The transaction documents listed in the Second Schedule (the "
Transaction
Documents
").
|
2
|
Assumptions
|
2.1
|
The Transaction Documents have been or will be authorised and duly executed and unconditionally delivered by or on behalf of all relevant parties in accordance with all relevant laws (other than, with respect to the Company, the laws of the British Virgin Islands).
|
2.2
|
The Transaction Documents are, or will be, legal, valid, binding and enforceable against all relevant parties in accordance with their respective terms under the laws of the State of New York (in respect of the Purchase Agreement, the Indenture and the Notes) and the laws of Hong Kong (in respect of the Hong Kong Share Charge) (the "
Relevant
Law
") and all other relevant laws (other than, with respect to the Company, the laws of the British Virgin Islands).
|
2.3
|
The choice of the Relevant Law as the governing law of the Transaction Documents has been made in good faith and would be regarded as a valid and binding selection which will be upheld by the United States federal courts and New York state courts located in the Borough of Manhattan, in The City of New York, New York, U.S.A. (in respect of the Purchase Agreement, the Indenture and the Notes) and the Hong Kong courts (in respect of the Hong Kong Share Charge) (the "
Relevant
Jurisdiction
") and any other relevant jurisdiction (other than the British Virgin Islands) as a matter of New York law and all other relevant laws (other than the laws of the British Virgin Islands).
|
2.4
|
Where a Transaction Document has been provided to us in draft or undated form, it will be duly executed, dated and unconditionally delivered by all parties thereto in materially the same form as the last version provided to us and, where we have been provided with successive drafts of a Transaction Document marked to show changes to a previous draft, all such changes have been accurately marked.
|
2.5
|
Copies of documents, conformed copies or drafts of documents provided to us are true and complete copies of, or in the final forms of, the originals, and translations of documents provided to us are complete and accurate.
|
2.6
|
All signatures, initials and seals are genuine.
|
2.7
|
That the Company is not conducting a "regulated activity" under a "financial services enactment" (as defined under the Regulatory Code, 2009 (as amended)).
|
2.8
|
That neither the Company nor any of its subsidiaries (if any) has an interest in any land in the British Virgin Islands.
|
2.9
|
The accuracy and completeness of all factual representations expressed in or implied by the documents we have examined.
|
2.10
|
That all public records of the Company which we have examined are accurate and that the information disclosed by the searches which we conducted against the Company at the Registry
of Corporate Affairs and the High Court Registry is true and complete and that such information has not since then been altered and that such searches did not fail to disclose any information which had been delivered for registration but did not appear on the public records at the date of our searches.
|
2.11
|
The capacity, power, authority and legal right of all parties under all relevant laws and regulations (other than, with respect to the Company, the laws of the British Virgin Islands) to enter into, execute, unconditionally deliver and perform their respective obligations under the Transaction Documents.
|
2.12
|
There is no contractual or other prohibition or restriction (other than as arising under British Virgin Islands law) binding on the Company prohibiting or restricting it from entering into and performing its obligations under the Transaction Documents.
|
2.13
|
The Resolutions remain in full force and effect.
|
2.14
|
The Notes will be issued and authenticated in accordance with the provisions of the Indenture.
|
2.15
|
None of the parties to the Transaction Documents (other than the Company) is a company incorporated, or a partnership or foreign company registered, under applicable British Virgin Islands law and all the activities of such parties in relation to the Transaction Documents and any transactions entered into thereunder have not been and will not be carried on through a place of business in the British Virgin Islands.
|
2.16
|
The completeness and accuracy of the Register of Members.
|
2.17
|
The shares (the "
Secured
Shares
") which are the subject of the security interest created by the BVI Share Charge are not subject to any liens or rights of forfeiture under the articles of association in force of the Company and service of a stop notice in respect of the Secured Shares has not transpired in accordance with Part 49 of the Eastern Caribbean Supreme Court Civil Procedure Rules 2000.
|
2.18
|
Under the Relevant Law and all other relevant laws (other than the laws of the British Virgin Islands) including, without prejudice to the generality of the foregoing, the governing law and law of situs of the property (the "
Foreign
Law
Secured
Property
") subject to the security interests created pursuant to the Hong Kong Share Charge, the Hong Kong Share Charge creates a valid and binding first priority security interest over the Foreign Law Secured Property, any steps required as a matter of the Relevant Law or other relevant laws (other than the laws of the British Virgin Islands) to perfect such security interest or to regulate its ranking in point of priority have been taken and there are no prior encumbrances or interests over the Foreign Law Secured Property.
|
2.19
|
The existence of the Secured Shares, and immediately prior to the creation of the first priority security pursuant to the BVI Share Charge the grantor of the security was the legal and beneficial owner of the Secured Shares and that no encumbrances or equities exist in respect of the Secured Shares (other than arising by virtue of the laws of the British Virgin Islands) and that there is no contractual or other prohibition (other than arising by virtue of the laws of the British Virgin Islands) binding on the grantor of the security preventing such grantor from creating the first priority security interest over the Secured Shares pursuant to the BVI Share Charge.
|
2.20
|
None of the Foreign Law Secured Property is situated in the British Virgin Islands or governed by British Virgin Islands law.
|
2.21
|
No invitation has been or will be made by or on behalf of the Company to the public in the British Virgin Islands to subscribe for any of the Notes.
|
2.22
|
There is nothing under any law (other than the law of the British Virgin Islands) which would or might affect the opinions hereinafter appearing. Specifically, we have made no independent investigation of the Relevant Law.
|
2.23
|
Payment obligations of the Company under the Transaction Documents are unsubordinated and undeferred as a contractual matter under the Relevant Law and the parties to the Transaction Documents do not subsequently agree to subordinate or defer their claims.
|
2.24
|
The Company is not a sovereign entity of any state and is not a subsidiary, direct or indirect of any sovereign entity or state.
|
3
|
Opinions
|
3.1
|
The Company is a company limited by shares registered under the BVI Business Companies Act, 2004 (as amended) the "
Act
"), is in good standing at the Registry of Corporate Affairs, is validly existing under the laws of the British Virgin Islands and possesses the capacity to sue and be sued in its own name.
|
3.2
|
The Company has all requisite power and authority under the Memorandum and Articles to enter into, execute and perform its obligations under the Transaction Documents.
|
3.3
|
The execution and delivery of the Transaction Documents do not, and the performance by the Company of its obligations under the Transaction Documents will not conflict with or result in a breach of any of the terms or provisions of the Memorandum and Articles or any law, public rule or regulation applicable to the Company currently in force in the British Virgin Islands.
|
3.4
|
The execution, delivery and performance by the Company of the Transaction Documents to which it is a party have been authorised by and on behalf of the Company and, assuming the Transaction Documents have been executed in accordance with the Resolutions and unconditionally delivered, such Transaction Documents have been duly executed and delivered by or on behalf of the Company, and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms.
|
3.5
|
Assuming that the BVI Share Charge has been or will be authorised and duly executed and unconditionally delivered by or on behalf of all relevant parties in accordance with all relevant laws, the BVI Share Charge constitutes the legal, valid and binding obligations of the Guarantor enforceable in accordance with its terms.
|
3.6
|
No authorisations, consents, approvals, licences, validations or exemptions are required by law from any governmental authorities or agencies or other official bodies in the British Virgin Islands in connection with:
|
(a)
|
the execution, creation or delivery of the Transaction Documents by the Company or the BVI Share Charge by the Guarantor;
|
(b)
|
the enforcement of the Transaction Documents against the Company or the BVI Share Charge against the Guarantor; or
|
(c)
|
the performance by the Company of its obligations under the Transaction Documents or by the Guarantor of its obligations under the BVI Share Charge.
|
3.7
|
With the exception of filing fees charged by the Registry of Corporate Affairs in respect of any optional filings made at the Registry of Corporate Affairs, no taxes, fees or charges (including stamp duty) are payable (either by direct assessment or withholding) to the government or other taxing authority in the British Virgin Islands under the laws of the British Virgin Islands in respect of:
|
(a)
|
the execution or delivery of the Transaction Documents or the BVI Share Charge;
|
(b)
|
the enforcement of the Transaction Documents or the BVI Share Charge; or
|
(c)
|
payments made under, or pursuant to, the Transaction Documents or the BVI Share Charge.
|
3.8
|
In relation to the Hong Kong Share Charge:
|
(a)
|
the courts of the British Virgin Islands will recognise the security interest created by the Hong Kong Share Charge;
|
(b)
|
no steps are required as a matter of British Virgin Islands law to perfect such security interest. However it is a requirement of the Act that the Company keep a register of all relevant charges created by the Company (the "
Register
of
Charges
"), either at the Company's registered office, or at the office of the Company's registered agent. Details of the Hong Kong Share Charge should therefore be entered into the Register. Furthermore, for the purposes of priority, an application should be made to the British Virgin Islands Registrar of Corporate Affairs to register the charges created by the Hong Kong Share Charge at the Registry of Corporate Affairs;[and
|
(c)
|
subject to registration as detailed in paragraph 3.8(b) above, the security interest created by the Hong Kong Share Charge will, as a matter of British Virgin Islands law have priority over any claims by third parties (other than those preferred by law) including any liquidator or a creditor of the Company, subject in the case of a winding up of the Company in a jurisdiction other than the British Virgin Islands to any provisions of the laws of that jurisdiction as to priority of claims in a winding up, save that a floating charge will rank behind a subsequently registered fixed charge unless the floating charge contains a prohibition or restriction on the power of the Company to create any future security interest ranking ahead in priority to or equally with the floating charge.
|
3.9
|
In relation to the BVI Share Charge:
|
(a)
|
the BVI Share Charge creates a valid first equitable mortgage over the Secured Shares;
|
(b)
|
no steps are required as a matter of British Virgin Islands law to perfect such security interest; and
|
(c)
|
subject to the insolvency laws applicable to the Guarantor, the security interest created by the BVI Share Charge will have priority over any claims by third parties (other than those preferred by law).
|
3.10
|
To protect the interest of the holder of security over the Secured Shares, there may be entered in the register of members of the Company:
|
(a)
|
a statement that the Secured Shares are the subject of security;
|
(b)
|
the name of the holder of the security; and
|
(c)
|
the date on which the statement and name are entered in the register of members. A copy of the register of members may be filed at the Registry of Corporate Affairs.
|
3.11
|
Based solely upon our review of the Registered Agent's Certificate and the Register of Members, the following shares with a par value of US$1.00 in the capital of the Company are registered in the name of the following shareholder of the Company and are validly issued, fully paid up and non-assessable:
|
Name of shareholder
|
Number of shares
|
China XD Plastics Company Limited
|
40,000
|
3.12
|
On the basis of our searches conducted at the Registry of Corporate Affairs and at the High Court Registry on [●] 2014, no currently valid order or resolution for the winding-up of the Company and no current notice of appointment of a receiver over the Company, or any of its assets, appears on the records maintained in respect of the Company. It is a requirement that notice of appointment of a receiver made under section 118 of the Insolvency Act 2003 be registered with the Registry of Corporate Affairs under section 118 of the Insolvency Act 2003. However, it should be noted that there is no mechanism to file with the Registry of Corporate Affairs notice of an appointment of a receiver made under foreign legislation.
|
3.13
|
Based solely on our inspection of the High Court Registry from the date of incorporation of the Company, there were no actions or petitions pending against the Company in the High Court of the British Virgin Islands as at the time of our searches on [●] 2014.
|
3.14
|
On the basis of our search conducted at the Registry of Corporate Affairs, no charge created by the Company has been registered pursuant to section 163 of the Act. [OR: Our search at the Registry of Corporate Affairs revealed the existence of a filed register of charges in respect of the Company, a copy of which is attached as Annexure D.] [
to
be
confirmed
]
|
3.15
|
None of the parties to the Transaction Documents (other than the Company) or the BVI Share Charge is or will be deemed to be resident, domiciled or carrying on business in the British Virgin Islands by reason only of the negotiation, preparation, execution, performance and/or
|
3.16
|
The Initial Purchasers and the Trustee each has standing to bring an action or proceedings before the appropriate courts in the British Virgin Islands for the enforcement of the Transaction Documents and the BVI Share Charge. None of the Initial Purchasers, the Trustee or any holder of a Note is required to be licensed, qualified or otherwise entitled to carry on business in the British Virgin Islands in order to enforce its rights under the Transaction Documents or the BVI Share Charge in the British Virgin Islands, or as a consequence of the execution, delivery or performance of the Transaction Documents or the BVI Share Charge.
|
3.17
|
The obligations of the Company under the Transaction Documents will rank at least pari passu in priority of payment with all other unsecured unsubordinated obligations of the Company, other than those preferred by the laws of the British Virgin Islands.
|
3.18
|
The Company is not entitled to any immunity under the laws of the British Virgin Islands whether characterised as sovereign immunity or otherwise for any legal proceedings in the British Virgin Islands to enforce or to collect upon the Transaction Documents.
|
3.19
|
Each of the Transaction Documents and the BVI Share Charge is in such legal form that it may be enforced under the laws of the British Virgin Islands.
|
3.20
|
It is not necessary in order to ensure the legality, validity, enforceability or admissibility in evidence in the British Virgin Islands of the Transaction Documents, or subject to paragraph 3.9 above the BVI Share Charge, that any document be filed, recorded or enrolled with any governmental authority or agency or any official body in the British Virgin Islands.
|
3.21
|
There is no exchange control legislation under British Virgin Islands law and accordingly there are no exchange control regulations imposed under British Virgin Islands law. The Company, acting as principal, is free to acquire, hold and sell foreign currency and securities without restriction.
|
3.22
|
Any monetary judgment in the courts of the British Virgin Islands in respect of a claim brought in connection with the Transaction Documents or the BVI Share Charge is likely to be expressed in the currency in which such sum is made, because such courts have power to grant a monetary judgment expressed otherwise than in the currency of the British Virgin Islands, but they may not necessarily do so.
|
3.23
|
There are no usury or interest limitation laws in the British Virgin Islands which would restrict the recovery of payments from the Company in accordance with the Transaction Documents or from the Guarantor in accordance with the BVI Share Charge.
|
3.24
|
The courts of the British Virgin Islands will observe and give effect to the choice of New York law or Hong Kong law (as the case may be) as the governing law of the Transaction Documents. The submission by the Company in the Transaction Documents to the non-exclusive jurisdiction of the courts of New York or Hong Kong (as the case may be) is legal, valid and binding upon the Company assuming that the same is true under New York law or Hong Kong law (as the case may be) and under the laws, rules and procedures applying in the courts of New York or Hong Kong (as the case may be).
|
3.25
|
Service of process in the British Virgin Islands on the Company may be effected by leaving at the registered office of the Company the relevant document to be served. On the basis of our search at the Registry of Corporate Affairs, the registered office of the Company is at TMF B.V.I. Ltd.,
P.O. Box 438, Road Town, Tortola, British Virgin Islands.
|
3.26
|
The appointment by the Company in the Transaction Documents of an agent to accept service of process in New York is legal, valid and binding on the Company assuming the same is true under the governing law of the Transaction Documents and does not conflict with or result in a breach of any law, public rule or regulation applicable to the Company currently in force in the British Virgin Islands.
|
3.27
|
Any final and conclusive judgment obtained against the Company in (i) the courts of New York in respect of the Transaction Documents (other than the Hong Kong Share Charge), or (ii) the courts of Hong Kong in respect of the Hong Kong Share Charge, in each case for a definite sum, may be treated by the courts of the British Virgin Islands as a cause of action in itself so that no retrial of the issues would be necessary provided that in respect of the foreign judgment:
|
(a)
|
the foreign court issuing the judgment had jurisdiction in the matter and the Company either submitted to such jurisdiction or was resident or carrying on business within such jurisdiction and was duly served with process;
|
(b)
|
the judgment given by the foreign court was not in respect of penalties, taxes, fines or similar fiscal or revenue obligations of the Company;
|
(c)
|
in obtaining judgment there was no fraud on the part of the person in whose favour judgment was given or on the part of the court;
|
(d)
|
recognition or enforcement of the judgment in the British Virgin Islands would not be contrary to public policy; and
|
(e)
|
the proceedings pursuant to which judgment was obtained were not contrary to natural justice.
|
3.28
|
The statements in the Preliminary Offering Circular and the Final Offering Circular (as such terms are defined in the Purchase Agreement) under the captions "Risk Factors", "Enforcement of Civil Liabilities", "Plan of Distribution" and “Taxation” are accurate insofar as they are summaries of the laws and regulations of the British Virgin Islands.
|
4
|
Qualifications
|
4.1
|
The obligations assumed by the Company under the Transaction Documents will not necessarily be enforceable in all circumstances in accordance with its terms. In particular:
|
(a)
|
enforcement may be limited by bankruptcy, insolvency, liquidation, reorganisation, readjustment of debts or moratorium or other laws of general application relating to or affecting the rights of creditors;
|
(b)
|
enforcement may be limited by general principles of equity. For example, equitable remedies such as specific performance may not be available, inter alia, where damages are considered to be an adequate remedy;
|
(c)
|
some claims may become barred under relevant statutes of limitation or may be or become subject to defences of set off, counterclaim, estoppel and similar defences;
|
(d)
|
where obligations are to be performed in a jurisdiction outside the British Virgin Islands, they may not be enforceable in the British Virgin Islands to the extent that performance would be illegal under the laws of that jurisdiction;
|
(e)
|
the courts of the British Virgin Islands have jurisdiction to give judgment in the currency of the relevant obligation and statutory rates of interest payable upon judgments will vary according to the currency of the judgment;
|
(f)
|
arrangements that constitute penalties will not be enforceable;
|
(g)
|
enforcement may be prevented by reason of fraud, coercion, duress, undue influence, misrepresentation, public policy or mistake or limited by the doctrine of frustration of contracts;
|
(h)
|
provisions imposing confidentiality obligations may be overridden by compulsion of applicable law or the requirements of legal and/or regulatory process;
|
(i)
|
the courts of the British Virgin Islands may decline to exercise jurisdiction in relation to substantive proceedings brought under or in relation to the Transaction Documents in matters where they determine that such proceedings may be tried in a more appropriate forum;
|
(j)
|
we reserve our opinion as to the enforceability of the relevant provisions of a Transaction Document to the extent that it purports to grant exclusive jurisdiction as there may be circumstances in which the courts of the British Virgin Islands would accept jurisdiction notwithstanding such provisions; and
|
(k)
|
a company cannot, by agreement or in its articles of association, restrict the exercise of a statutory power and there is doubt as to the enforceability of any provision in the Transaction Documents whereby the Company covenants to restrict the exercise of powers specifically given to it under the Act including, without limitation, the power to increase its maximum number of shares, amend its memorandum and articles of association or present a petition to a British Virgin Islands court for an order to wind up the Company.
|
4.2
|
Applicable court fees will be payable in respect of the enforcement of the Transaction Documents and the Notes.
|
4.3
|
To maintain the Company in good standing under the laws of the British Virgin Islands, annual filing fees must be paid to the Registry of Corporate Affairs.
|
4.4
|
The obligations of the Company may be subject to restrictions pursuant to United Nations sanctions as implemented under the laws of the British Virgin Islands and/or restrictive measures adopted by the European Union Council for Common Foreign and Security Policy extended to the British Virgin Islands by the Order of Her Majesty in Council.
|
4.5
|
A certificate, determination, calculation or designation of any party to the Transaction Documents as to any matter provided therein might be held by a British Virgin Islands court not to be
|
4.6
|
We reserve our opinion as to the extent to which the courts of the British Virgin Islands would, in the event of any relevant illegality or invalidity, sever the relevant provisions of the Transaction Documents and enforce the remainder of the Transaction Documents or the transaction of which such provisions form a part, notwithstanding any express provisions in the Transaction Documents in this regard.
|
4.7
|
We are not qualified to opine as to the meaning, validity or effect of any references to foreign (i.e. non-British Virgin Islands) statutes, rules, regulations, codes, judicial authority or any other promulgations and any references to them in a Transaction Document.
|
4.8
|
Preferred creditors under British Virgin Islands law will rank ahead of unsecured creditors of the Company. Furthermore, all costs, charges and expenses properly incurred in the voluntary winding up of a company, including the remuneration of the liquidators, are payable out of the assets of the company in priority to all other unsecured claims.
|
4.9
|
Under section 166(1) of the Act, once the Hong Kong Share Charge is registered in accordance with section 163 of the Act it shall, as a matter of British Virgin Islands law, have priority over:
|
(a)
|
any other security created over the Foreign Law Secured Property that is subsequently registered in accordance with section 163 of the Act; and
|
(b)
|
any other security created over the Foreign Law Secured Property that is not registered in accordance with section 163 of the Act.
|
4.10
|
Under section 166(2) of the Act, charges created on or after the commencement date which are not registered shall rank among themselves in the order in which they would have ranked had section 166 of the Act not come into force. Therefore, if the registration recommended at paragraph 3.8.(b) above is not made, the security created pursuant to the Hong Kong Share Charge will rank after any later legal interest in the Foreign Law Secured Property which is registered in accordance with section 163 of the Act and will, if it is equitable security, rank after any later unregistered legal interest in the Foreign Law Secured Property created in favour of a bona fide purchaser or mortgagee for value without notice of the equitable security interests (if any) created pursuant to the Hong Kong Share Charge.
|
4.11
|
The courts of the British Virgin Islands would not recognise or enforce foreclosure (meaning the assumption by the mortgagee of beneficial ownership of the Secured Shares and the extinction of the mortgagor's equity of redemption therein) against the Secured Shares pursuant to any provision in the BVI Share Charge in the absence of foreclosure proceedings against the relevant mortgagor in the courts of the British Virgin Islands, or a judgment in respect of foreclosure proceedings against the mortgagor in the courts of another jurisdiction which the courts of the British Virgin Islands are prepared to enforce in accordance with the usual principles applicable to the enforcement of foreign judgments in the British Virgin Islands.
|
4.12
|
This opinion is given only as to, and based on, circumstances and matters of fact existing and known to us on the date of this opinion. This opinion only relates to the laws of the British Virgin Islands which are in force on the date of this opinion.
|
4.13
|
We express no view as to the commercial terms of the Transaction Documents or whether such terms represent the intentions of the parties and make no comment with regard to the representations that may be made by the Company.
|
1.
|
Morgan Stanley &Co. International plc
|
2.
|
UBS AG, Hong Kong Branch
|
3.
|
The Hongkong and Shanghai Banking Corporation Limited
|
4.
|
Citicorp International Limited as Trustee, [Security Trustee] [and Collateral Agent]
|
1.
|
A purchase agreement dated [●] 2014 entered into by the Company, China XD Plastics Company Limited, Xinda Holding (HK) Company Limited, Xinda Holding (HK) US Sub Inc., Favor Sea (US) Inc., UBS AG, Hong Kong Branch ("
UBS
"), The Hongkong and Shanghai Banking Corporation Limited ("
HSBC
"), and Morgan Stanley & Co. International plc ("
Morgan
Stanley
") as initial purchasers (the “
Purchase
Agreement
”).
|
2.
|
An indenture relating to the Notes dated [●] 2014 entered into by the Company, Citicorp International Limited ("
Citicorp
") as trustee (the “
Trustee
”) [and the Collateral Agent (as defined therein)] (the “
Indenture
”).
|
3.
|
The Notes
|
4.
|
The Share Charge dated [●] 2014, relating to a charge over the shares in Xinda Holding (HK) Company Limited, entered into by the Company in favour of Citicorp International Limited as security trustee (the "
Hong
Kong Share
Charge
").
|
(a)
|
the Purchase Agreement;
|
(b)
|
the Indenture;
|
(c)
|
forms of certificates representing the Notes delivered today; and
|
(d)
|
forms of the Guarantees.
|
(1)
|
As to whether the Parent Guarantor may guarantee or otherwise become liable for, or pledge any assets to secure, indebtedness incurred by its subsidiary except to the extent the Parent Guarantor may be determined to have benefited from the incurrence of such indebtedness by its parent, or whether such benefit may be measured other than by the extent to which the proceeds of the indebtedness incurred by the subsidiary are directly or indirectly made available to the Parent Guarantor for its corporate purposes; or
|
(2)
|
The exercise of fiduciary duties in authorizing the execution, delivery and performance of the Transaction Documents on behalf of the Parent Guarantor.
|
i.
|
All signatures, seals and chops are genuine, each signature on behalf of a party thereto is that of a person duly authorized by such party to execute the same
,
all Documents submitted to us as originals are authentic, and all Documents submitted to us as certified or photostatic copies conform to the originals; each of the Company and the PRC Entities has valid and legitimate title and ownership to their properties, assets and revenues outside China;
|
ii.
|
Each of the parties to the Documents other than the PRC Entities is duly organized and is validly existing in good standing under the laws of its jurisdiction of organization and/or incorporation (where applicable); each of them, other than the PRC Entities, has full power and authority or legal capacity to execute, deliver and perform its obligations under the Documents to which it is a party in accordance with the laws of its jurisdiction of organization;
|
iii.
|
The Documents that were presented to us remain in full force and effect on the date of this opinion and have not been revoked, amended or supplemented, and no amendments, revisions, supplements, modifications or other changes have been made, and no revocation or termination has occurred, with respect to any of the Documents after they were submitted to us for the purposes of this legal opinion;
|
iv.
|
The laws of any country or region other than China which may be applicable to the execution, delivery, performance or enforcement of any of the Documents are complied with;
|
v.
|
All the Documents and the factual statements provided to us by the Company and the PRC Entities, including but not limited to those set forth in the Documents, are complete, true and correct. Where important facts were not independently established to us, we have relied upon certificates issued by the government agencies with proper authority which are available to us; and
|
vi.
|
All the explanations and interpretations provided by the government officers duly reflect the official position of the relevant governmental authorities.
|
1.
|
The WFOE was duly incorporated on December 9, 2011 and is validly existing as a wholly - foreign owned enterprise with the status of a Chinese legal person under PRC Laws, with the legal and necessary corporate power and authority, as duly authorized by the PRC government, to own, use, lease and operate its assets and conduct its business as
|
2.
|
Each of the PRC Subsidiaries is duly incorporated and validly existing as a limited liability company with the status of a Chinese legal person under the laws and regulations of the PRC, with the legal and necessary corporate power and authority, as duly authorized by the PRC government, to own, use, lease its assets and conduct its business as described in its business license. Each of the PRC Subsidiaries has the legal right to enjoy civil rights and assume civil liabilities to sue and be sued in PRC court proceedings.
|
3.
|
The articles of association(as amended, if applicable), the business license and, if applicable, the approval certificate (the “
Constitutional
Documents
”) of each of the PRC Entities have been duly approved and issued by the relevant government authorities of PRC. The Constitutional Documents of each of the PRC Entities are in compliance with the requirements of applicable PRC Laws and are in full force and effect. To the best of our knowledge after due inquiry, the business carried out by each of the PRC Entities complies with its articles of association in effect and is within the business scope described in its current business license.
|
4.
|
The registered capital of the WFOE is RMB50,000,000, all of which has been fully and timely contributed in accordance with the verification report issued by Heilongjiang Jinyuda Accounting Firm Co., Ltd. (
黑
龙
江
金
誉
达
会
计
师
事
务
所
有
限
公
司
) on December 21, 2011, and such capital contribution is not in violation of the Constitutional Documents of the WFOE or PRC Laws. Xinda Holding (HK) Company Limited is the owner of 100% of the paid-in registered capital of the WFOE. To the best of our knowledge after due inquiry, all of the above equity interests are free and clear of all liens, encumbrances, security interest, mortgage, pledge, equities or claims or any third-party rights.
|
5.
|
The registered capital of Xinda Software is RMB 2,000,000, all of which has been fully and timely contributed in accordance with the verification report issued by Heilongjiang Li Xin Accounting Firm Co., Ltd. (
黑龙江立信会计师事务所有限责任公司
) on October 11, 2010, and such capital contribution is not in violation of the Constitutional Documents of Xinda Software or PRC Laws. WFOE is the owner of 100% of the registered capital of
|
6.
|
The registered capital of Xinda Plastics is RMB 5,000,000, all of which has been fully and timely contributed in accordance with the verification report issued by Heilongjiang Li Xin Accounting Firm Co., Ltd. (
黑龙江立信会计师事务所有限责任公司
) on January 16, 2012, and such capital contribution is not in violation of the Constitutional Documents
of Xinda Plastics or PRC Laws. WFOE is the owner of 100% of the registered capital of Xinda Plastics. To the best of our knowledge after due inquiry, all of the above equity interests are free and clear of all liens, encumbrances, security interest, mortgage, pledge, equities or claims or any third-party rights.
|
7.
|
The registered capital of Xinda Group Material Research is RMB 4,000,000, all of which has been fully and timely contributed in accordance with the verification report issued by Heilongjiang Li Xin Accounting Firm Co., Ltd.(
黑龙江立信会计师事务所有限责任公
司
) on December 13, 2012, and such capital contribution is not in violation of the Constitutional Documents of Xinda Group Material Research or PRC Laws. WFOE is the owner of 100% of the registered capital of Xinda Group Material Research. To the best of our knowledge after due inquiry, all of the above equity interests are free and clear of
|
8.
|
The registered capital of Meiyuan Training Center is RMB 500,000, all of which has been fully and timely contributed in accordance with the verification report issued by Heilongjiang Li Xin Accounting Firm Co., Ltd. (
黑龙江立信会计师事务所有限责任公
司
) on July 22, 2011, and such capital contribution is not in violation of the Constitutional Documents of Meiyuan Training Center or PRC Laws. WFOE is the owner of 100% of the registered capital of Meiyuan Training Center. To the best of our knowledge after
due inquiry, all of the above equity interests are free and clear of all liens, encumbrances, security interest, mortgage, pledge, equities or claims or any third-party rights.
|
9.
|
The registered capital of Sichuan Xinda Group is RMB 250,000,000, of which RMB 50,000,000 has been timely contributed in accordance with the verification report issued by Sichuan Debang Certified Public Accountants Co., Ltd. (
四川德邦会计师事务所有限
责任公司
) on March 20, 2013, and such capital contribution is not in violation of the Constitutional Documents of Sichuan Xinda Group or PRC Laws. WFOE is the owner of 100% of the registered capital of Sichuan Xinda Group. To the best of our knowledge after due inquiry, all of the above equity interests are free and clear of all liens, encumbrances, security interest, mortgage, pledge, equities or claims or any third-party rights.
|
10.
|
The registered capital of Sichuan Meiyuan Training Center is RMB 80,000,000, of which RMB 16,000,000 has been timely contributed in accordance with the verification report issued by Sichuan Debang Certified Public Accountants Co., Ltd. (
四川德邦会计师事务
所有限责任公司
)on March 25, 2013, and such capital contribution is not in violation of the Constitutional Documents of Sichuan Meiyuan Training Center or PRC Laws. Sichuan Xinda Group is the owner of 100% of the registered capital of Sichuan Meiyuan
Training Center. To the best of our knowledge after due inquiry, all of the above equity interests are free and clear of all liens, encumbrances, security interest, mortgage, pledge, equities or claims or any third-party rights.
|
11.
|
The registered capital of Sichuan Xinda Software is RMB 5,000,000, of which RMB 1,000,000 has been timely contributed in accordance with the verification report issued by Sichuan Debang Certified Public Accountants Co., Ltd. (
四川德邦会计师事务所有限责
任公司
)on March 25, 2013, and such capital contribution is not in violation of the Constitutional Documents of Sichuan Xinda Software or PRC Laws. Sichuan Xinda Group is the owner of 100% of the registered capital of Sichuan Xinda Software. To the best of our knowledge after due inquiry, all of the above equity interests are free and clear of all liens, encumbrances, security interest, mortgage, pledge, equities or claims or any third-party rights.
|
12.
|
The registered capital of Sichuan Xinda Sales is RMB 15,000,000, of which RMB 3,000,000 has been timely contributed in accordance with the verification report issued by Sichuan Debang Certified Public Accountants Co., Ltd. (
四川德邦会计师事务所有限责
任公司
) on March 25, 2013, and such capital contribution is not in violation of the Constitutional Documents of Sichuan Xinda Sales or PRC Laws. Sichuan Xinda Group is the owner of 100% of the registered capital of Sichuan Xinda Sales. To the best of our knowledge after due inquiry, all of the above equity interests are free and clear of all liens, encumbrances, security interest, mortgage, pledge, equities or claims or any third-party rights.
|
13.
|
To the best of our knowledge after due inquiry, except for the PRC Entities, the Company
|
14.
|
To the best of our knowledge after due inquiry, except as disclosed in the Preliminary Offering Circular dated [●], 2014 and the Final Offering Circular dated [●], 2014, respectively (collectively, the “Offering Circulars”), none of the PRC Entities is in breach or violation of or in default, as the case may be, under (A) its articles of association, business license or other Constitutional Documents, (B) any material obligation, indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness governed by the PRC Laws to which any of the PRC Entities is a party (nor has any event occurred which with notice, lapse of time, or both would result in any breach of, or constitute default under or give the holder of any indebtedness the right to require the repurchase, redemption or repayment of all or part of such indebtedness), (C) the terms or provisions of any Material Loan Agreements or Material Business Agreements as set out in Schedule A, (D) any law, regulation or rule of the PRC, or any decree, judgment or order of any court in the PRC applicable to the PRC Entities, (E) any license, lease, contract or other agreement or instrument governed by the PRC Laws to which any of the PRC Entities is a party or by which any of them may be bound or affected, except for, in the case of (D) and (E), such breach orviolation or default that, as the case may be, would not reasonably be expected to have, individually or in aggregate, a material adverse effect (“Material Adverse Effect”), meaning any event, circumstance, condition, occurrence or situation or any combination of the foregoing that has or could be reasonably expected to have a material and adverse effect upon the conditions (financial or otherwise), business, properties or results of operations or prospects of the Parent Guarantor and its PRC Subsidiaries taken as a whole, or an adverse effect on the ability of any of the Company and the Guarantors to perform their respective obligations under the Securities or the other Transaction Documents or to consummate the transactions contemplated by the Transaction Documents on a timely basis.
|
15.
|
To the best of our knowledge after due inquiry, there are no material outstanding guarantees or contingent payment obligations of any of the PRC Entities in respect of the indebtedness of third parties.
|
16.
|
The (A) execution, delivery and performance of the Transaction Documents, (B) offering, sale and delivery and initial resale of the Securities and the listing of the Securities on the SGX-ST, (C) the compliance by each of the Company and Guarantors with all of the provisions of the Transaction Documents, as applicable, and (D) consummation of the transactions contemplated by the Transaction Documents, as applicable, do not (i) result in any violation of the business license, articles of association or other Constitutional Documents of any of the PRC Entities, (ii) contravene any Material Loan Agreements or Material Business Agreements as set out in
Schedule
A
, (iii) result in any violation of, or penalty under, any PRC Laws, any judgment, order or decree of any PRC government authority or court applicable to the PRC Entities, or (iv) conflict with or constitute a breach of, or default under or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the PRC Entities pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument, which is governed by the PRC Laws to which any of the PRC Entities is a party, or to which any of the property or assets of the PRC Entities is subject, except as otherwise permitted under the Transaction Documents and except for such conflict, breach, default, lien, charge or encumbrance under clause (iv) which do not have a Material Adverse Effect.
|
17.
|
Each of Material Loan Agreements and Material Business Agreements listed in
Schedule
|
18.
|
The execution and delivery by each of the PRC Entities of, and the performance by each of the PRC Entities of its obligations under, each of the Material Loan Agreements and Material Business Agreements to which it is a party and the consummation by each of the PRC Entities of the transactions contemplated therein do not: (i) result in any violation of the business license and the articles of association of the PRC Entities, (ii) result in any violation of any applicable PRC Laws or (iii) result in a breach or violation of or constitute a default under arbitration award or judgment, order or decree of any court of the PRC applicable to the PRC Entities, as the case may be, any agreement or instrument governed by the PRC Laws, to which any of them is a party or which is binding on any of their assets, except where, in respect of (iii) above, such violation, breach or default which, individually or in the aggregate, would not have a Material Adverse Effect.
|
19.
|
To the best of our knowledge after due inquiry, no consent from or waiver by creditors of any of the PRC Entities is required under the Material Loan Agreements and Material Business Agreements in connection with the issuance of the Securities and the consummation of the transactions contemplated under the Transaction Documents.
|
20.
|
Except as described in the Offering Circulars, each of the PRC Entities has full power and authority to declare and effect dividend payments. All dividends declared and payable upon the equity interest of the WFOE in accordance with the PRC Laws may under the current PRC Laws be paid in Renminbi, which may be converted into U.S. dollars and freely transferred out of the PRC,
provided
however
, that necessary foreign exchange procedures shall be completed in accordance with the relevant PRC Laws on foreign exchange regulations on a timely basis. Such dividends paid by the WFOE may be subject to a withholding tax at the rate of 10% (subject to reduction as provided by any applicable taxation treaty) as described in the Offering Circulars. Such dividends are not subject to any other taxes under the PRC Laws.
|
21.
|
Under applicable PRC Laws, there is no stamp duty if the Transaction Documents are not executed within China, and therefore, there is no tax or duty (including any issuance or transfer tax or duty and any tax or duty on capital gains or income, whether chargeable on a withholding basis or otherwise) payable by or on behalf of the Initial Purchasers to any governmental authorities in connection with the issuance, sale or delivery of the Securities, the execution, delivery and performance of the Transaction Documents or the consummation of any other transactions contemplated in the Transaction Documents.
|
22.
|
The entering into and performance or enforcement of the Transaction Documents in accordance with its terms do not subject the Initial Purchasers to a requirement to be licensed or otherwise qualified to do business in the PRC, nor shall the Initial Purchasers
|
23.
|
Each of the PRC Entities has the corporate powers and authority to, and has obtained all necessary licenses, consents, authorizations, permissions, approvals, orders, registrations, certificates and permits from and filings with PRC governmental authorities or any other PRC regulatory body having jurisdiction over it (collectively, “
Authorizations
”) for it to own, lease, license, use and operate its properties and assets and to conduct its business as described in its business license, and such Authorizations are in full force and effect. We are not aware of any notice of revocation, suspension, modification of any Authorization issued by any PRC governmental authorities, and nothing has come to our attention that any governmental authority in the PRC is considering modifying, suspending or revoking any of such Authorizations.
|
24.
|
To the best of our knowledge after due inquiry, none of the PRC Entities is in breach or violation of (i) any provision of its Constitutional Documents; (ii) any provision of PRC Laws; (iii) any agreement governed by PRC Laws by which any of the PRC Entities is a party or to which any of the properties or assets of any of the PRC Entities is subject; or
(iv) Authorizations, any order, decree or regulation of any governmental authority in the PRC having jurisdiction over the PRC Entities or over any of the properties or assets of the PRC Entities.
|
25.
|
To the best of our knowledge after due inquiry, there are no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, any equity interest in any of the PRC Entities, and there is no security interest, mortgage, pledge, lien, encumbrance, claim or any third party right, the exercise of which may lead to the change of shareholdings or the amount of the registered capital of the PRC Entities.
|
26.
|
The lease agreement listed in
Schedule
B
to which the WFOE is a party is legally binding and enforceable in accordance with its respective terms under the PRC Laws. To our best knowledge after due inquiry, each of the PRC Entities have valid title to all of its material movable assets located in China, free and clear of all claims, liens, mortgage, guarantee, pledge, security interests or other encumbrances.
|
27.
|
Schedule
C
lists all the intellectual properties used by the PRC Entities (the “
Intellectual
Property
”).
Each of the PRC Entities has the exclusive right to the Intellectual Property, free and clear of any Encumbrance. To our best knowledge after due inquiry, none of the Intellectual Property is subject to any outstanding decree, order, injunction, judgment or ruling of any PRC governmental authority or court restricting the use of such Intellectual Property in the PRC that would impair the validity or enforceability of such Intellectual Property, nor has any of the PRC Entities received any notice of any claim of infringement or conflict with any intellectual property rights of others in the PRC.
|
28.
|
To our best knowledge after due inquiry, there are no pending or threatened legal, arbitration or governmental proceedings or disputes in the PRC to which the Company or any of the PRC Entities is a party or to which any property of the PRC Entities is the subject.
|
29.
|
To the best of our knowledge after due inquiry, none of the PRC Entities is subject to any winding up or liquidation proceedings, and nor has any proceedings been commenced or expressly threatened in the PRC which might render the PRC Entities liquidated or insolvent.
|
30.
|
To the best of our knowledge after due inquiry and except as described in the Offering
|
31.
|
To the best of our knowledge after due inquiry, no labor dispute, legal proceedings or other conflict with the employees of any of the PRC Entities exists or is imminent or threatened, except such non-compliances, disputes, legal proceedings or conflicts which, if determined adversely to the PRC Entities would not, individually or in the aggregate, have a Material Adverse Effect.
|
32.
|
There are no applicable PRC Laws requiring any insurance to be obtained in respect of the business or operations of the PRC Entities or ownership of any of their assets as disclosed in the Offering Circulars which is not so obtained, except for which the failure to obtain would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
|
33.
|
The SAFE registration forms listed in
Schedule
D
, as provided by the Company, are valid and legitimate under the
Circular
of
the
State
Administration
of
Foreign
Exchange
on
Relevant
Issues
concerning
Foreign
Exchange
Administration
of
Financing
and
Inbound
Investment
through
Offshore
Special
Purpose
Companies
by
PRC
Residents
, effective as of November 1, 2005
(《关于境内居民通过境外特殊目的公司境外融资及返程投资外
汇管理
有
关问
题
的通
知
》
)
(“
SAFE Rules
”
)
and Han Jie (
韩
杰
)has duly completed the registrations required under the SAFE Rules
.
|
34.
|
To the best of our knowledge after due inquiry, the preferential tax listed in
Schedule
E
granted by the relevant PRC tax authority to the WFOE is not in violation of the applicable laws, regulations, decrees or rules of the PRC; all returns, reports or filings which ought to have been made from January 1, 2011 until September 30, 2013 in respect of the PRC Entities for taxation purposes as required by the PRC Laws have been made and are not the subject of any dispute with any PRC governmental authority; none of the PRC entities has been investigated, claimed or penalized for any material PRC tax incompliance and none of the PRC Entities have violated any PRC tax law, regulation, decrees or rules, except for the violations which do not, individually or in the aggregate, be expected to have a Material Adverse Effect on any of the PRC Entities.
|
35.
|
Under applicable PRC Laws, no stamp (if the Transaction Documents are not executed within China), registration, documentary or other issuance or transfer taxes or duties and no capital gains, income, withholding or other taxes are payable by or on behalf of the Company, Guarantors or any of the PRC Entities to the relevant PRC tax authority in connection with the execution and delivery by the Company and Guarantors of, and performance by the Company and Guarantors of, their respective obligations under (including the issue of the Securities) or the consummation of other transactions contemplated by, each of the Transaction Documents and the Securities.
|
36.
|
The application of the net proceeds to be received by the Company from the sale of the Securities as contemplated in the Offering Circulars does not (i) contravene any provision of the PRC Laws, subject to the approvals, registration or filings that may be required by the PRC governmental authority if applicable, or the articles of association or business
|
37.
|
On August 8, 2006, six PRC government authorities, namely, Ministry of Commerce (the “
MOFCOM
”), State Administration for Industry and Commerce, China Securities Regulatory Commission (the “
CSRC
”), State Administration of Foreign Exchange, the State Assets Supervision and Administration Commission, and the State Administration for Taxation, jointly issued the
Regulations
on
Mergers
and
Acquisitions
of
Domestic
Enterprises
by
Foreign
Investors
(the “
New
M&A
Rules
”), which became effective on September 8, 2006. The New M&A Rules purport, among other things, to require offshore “special purpose vehicles”, that are (1) formed for the purpose of overseas listing of the equity interests of PRC companies via acquisition and (2) are controlled directly or indirectly by PRC companies and/or PRC individuals, to obtain the approval of the CSRC prior to the listing and trading of their securities on overseas stock exchanges. On September 21, 2006, pursuant to the New M&A Rules and other PRC Laws, the CSRC published on its official website relevant guidance with respect to the listing and trading of PRC domestic enterprises’ securities on overseas stock exchanges (the “
Related
Clarifications
”), including a list of application materials regarding the listing on overseas stock exchange by special purpose vehicles. Based on our understanding of current PRC Laws, the Parent Guarantor is not required to obtain the approval of CSRC and MOFCOM under the New M&A Rules and the Related Clarifications in connection with the transactions contemplated by the Plan of Merger (the “
Merger
Agreement
”) by and among NB Telecom, Inc, the Parent Guarantor, the stockholders of the Parent Guarantor, dated as of December 24, 2008, or the Incentive Option Agreement (the “
Option
Agreement
”), made on May 16, 2008, between Ms. Ellie Qiuyao Piao and Mr. Han Jie, although Mr. Han Jie and other Chinese citizens did not obtain necessary registration from local branch of State Administration of Foreign Exchange in Heilongjiang Province before completion of the transactions contemplated by the Merger Agreement and the Option Agreement (collectively, the “
Reverse
Merger
”). We are not aware of any precedent that either CSRC or MOFCOM required any PRC-based NASDAQ listed company to obtain necessary approvals under the New M&A Rules and the Related Clarifications in connection with their previous reverse merger, reorganization, listing or offering arrangement.
|
38.
|
None of the PRC Entities or their properties, assets or revenues has any right of immunity, on the ground of sovereignty, from any legal action, suit or proceeding, from the giving of any relief in any such legal action, suit or proceeding, from setoff or counterclaim, from the jurisdiction of any court in the PRC.
|
39.
|
To the best of our knowledge after due inquiry, the execution, delivery and performance of the Transaction Documents by the Company and the Guarantors and the consummation of the transactions contemplated therein and the compliance by the Company and the Guarantors with their obligations thereunder do not, whether with or without the giving of notice or lapse of time or both, conflict with or constitute a breach of, or default under or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of any of the PRC Entities pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other instrument or agreement governed by the PRC Laws, to which any of the PRC Entities is a party, or as to which any of the property or assets of the PRC Entities is subject, nor does such action result in any violation of the provision of articles of association, business license or certificate of approval (if applicable) of any of the PRC Entities, or any Authorizations or PRC Laws. No consent, approval, authorization or order of any PRC governmental authority,
|
40.
|
The choices of law provisions in the Transaction Documents do not contravene in any way any applicable PRC Laws. The submission by the parties to the non-exclusive jurisdiction of the New York Courts, the waiver by the Company and Guarantors of any objection to the venue of a proceeding in a New York Court, the waiver and agreement of the Company not to plead an inconvenient forum, and the agreement of the Company and Guarantors that the Transaction Documents be construed in accordance with and governed by the laws of the State of New York in each case does not contravene in any way any applicable PRC Laws. Any judgment obtained in a foreign court arising out of or in relation to the obligations of the Company and Guarantors under the Transaction Documents would be recognized in PRC courts subject to applicable provisions of the Civil Procedure Law and the General Principles of Civil Law of the PRC relating to the enforceability of judgments rendered by foreign courts as set forth in the Offering Circulars; service of process effected in the manner set forth in the Transaction Documents, insofar as the PRC Laws are concerned, is effective to confer jurisdiction over the Company and Guarantors in the PRC, subject to compliance with relevant civil procedural requirements under the PRC Laws if the service of process is conducted in the PRC.
|
41.
|
The indemnification and contribution provisions set forth in the Purchase Agreement do not contravene the PRC Laws. Subject to compliance with relevant civil procedural requirements under the PRC Laws, (i) assuming due authorization, execution and delivery by each party thereto, and insofar as matters of the PRC Laws are concerned, the Purchase Agreement is in proper legal form under the PRC Laws for the enforcement thereof against the Company and Guarantors, and (ii) to ensure the legality, validity, enforceability or admissibility in evidence of the Purchase Agreement in the PRC, it is not necessary that any such document he filed or recorded with any PRC governmental authorities or that any stamp or similar tax be paid on or in respect of any such document.
|
42.
|
Under the EIT Law and its implementation rules, the holders of the Securities who are non-PRC resident enterprises and who do not have an establishment or place of business in the PRC to which relevant income is effectively connected, are not subject to withholding tax, income tax or duties imposed by any governmental authorities in the PRC in respect of (i) any payments, dividends or other distributions made on the Securities from the Company, or (ii) gains made on sale of Securities, unless the Company is recognized by the relevant PRC taxation authorities as a PRC resident enterprise as defined in the EIT Law or relevant income is considered to be income derived from the sources within the PRC.
|
43.
|
There are no reporting obligations to any PRC governmental authorities under PRC Laws on the holders of the Securities who are not PRC residents.
|
44.
|
The statements in the General Disclosure Package and the Offering Circulars under “Summary”, “Risk Factors”, “Our Business” “Our Corporate Structure”, “Management’s Discussion and Analysis of Financial Condition and Results”, “Enforcement of Civil Liabilities”, “Taxation” and “Regulation” in each case insofar as such statements purport to constitute summaries of the matters of PRC Laws, fairly reflect the matters purported to be summarized and are true and correct in all material respects
;
and such statements did
|
45.
|
Nothing has come to our attention that leads us to reasonably believe that the General Disclosure Package at the Applicable Time, and as of its issue date and the date hereof, contained or contains, in so far as the PRC Laws are concerned, an untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading (it being understood that we have not been requested to and do not make any comment with respect to the financial statements, their footnotes or other financial data contained in the General Disclosure Package or the Offering Circulars).
|
i.
|
Our opinion is subject to the restrictions of (i) any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally (including without limitation all laws relating to fraudulent transfers) and (ii) any judicial or administrative actions affecting creditors’ rights generally.
|
ii.
|
Our opinion is subject to the effects of (i) certain legal or statutory principles affecting the enforceability of contractual rights generally under the concepts of public interest, social ethics, national security, good faith, fair dealing, and applicable statutes of limitation; (ii) any circumstance in connection with formulation, execution or performance of any legal documents that would be deemed materially mistaken, clearly unconscionable, fraudulent or coercionary; (iii) judicial discretion with respect to the availability of specific performance, injunctive relief, remedies or defenses, or calculation of damages; and (iv) the discretion of any competent PRC legislative, administrative or judicial bodies in exercising their authority in the PRC.
|
iii.
|
No independent search, investigation or other verification action has been conducted by us with any governmental authorities for the purpose of issuing our opinion.
|
iv.
|
Our opinion is limited to the PRC laws and regulations of general application on the date hereof. We have made no investigation of, and do not express or imply any views on, the laws of any country other than the PRC.
|
v.
|
The PRC laws and regulations referred to herein are laws and regulations publicly available and currently in force on the date hereof and there is no guarantee that any of such laws and regulations, or the interpretation or enforcement thereof, will not be changed, amended or revoked in the future with or without retrospective effect.
|
vi.
|
This opinion is issued based on our understanding of the current PRC laws and regulations. For matters not explicitly provided under the current PRC laws and regulations, the interpretation, implementation and application of the specific requirements under the PRC laws and regulations are subject to the final discretion of competent PRC legislative, administrative and judicial authorities, which may be different from our opinion.
|
vii.
|
We may rely, as to matters of fact (but not as to legal conclusions), to the extent reasonable, on certificates and confirmations of PRC government authorities or
|
viii.
|
This opinion is intended to be used in the context which is specifically referred to herein.
|
ix.
|
As used in this opinion, the expression “to our knowledge” or similar language with reference to matters of fact refers to the current actual knowledge of the attorneys of this firm who have worked on matters for the Company and the PRC Entities in connection with the Securities. Except to the extent expressly set forth herein or as we otherwise believe to be necessary to our opinion, we have not undertaken any independent investigation to determine the existence or absence of any fact, and no inference as to our knowledge of the existence or absence of any fact should be drawn from our representation of the Company and the PRC Entities or the rendering of this opinion.
|
1.
采购合同、产品买卖合同
|
||
合同名称
|
合同方
|
合同订立日期
|
产品买卖合
|
供应方:哈尔滨天成塑料经销有限公司
|
2012
年
12
月
25
日
|
同
|
采购方:黑龙江鑫达企业集团有限公司
|
|
产品买卖合
|
供应方:长春金恒汽车工业塑料有限公司
|
2012
年
12
月
25
日
|
同
|
采购方:黑龙江鑫达企业集团有限公司
|
|
产品买卖合
|
供应方:吉林省凤翼科技有限责任公司
|
2012
年
12
月
25
日
|
同
|
采购方:黑龙江鑫达企业集团有限公司
|
|
产品买卖合
|
供应方:长春晟涵汽车材料有限责任公司
|
2012
年
12
月
25
日
|
同
|
采购方:黑龙江鑫达企业集团有限公司
|
|
产品买卖合
|
供应方:沈阳恒益盛塑料有限责任公司
|
2012
年
12
月
25
日
|
同
|
采购方:黑龙江鑫达企业集团有限公司
|
|
产品买卖合
|
供应方:北京享诺塑料有限责任公司
|
2012
年
12
月
25
日
|
同
|
采购方:黑龙江鑫达企业集团有限公司
|
|
产品买卖合
|
供应方:天津港保税区华浦国际贸易有限责任
|
2012
年
12
月
25
日
|
同
|
公司
|
|
采购方:黑龙江鑫达企业集团有限公司
|
||
产品买卖合
|
供应方:宁波市科技园区华鼎新材料科技有限
|
2012
年
12
月
25
日
|
同
|
公司
|
|
采购方:黑龙江鑫达企业集团有限公司
|
||
产品买卖合
|
供应方:宁波君辉塑胶材料有限公司
|
2012
年
12
月
25
日
|
同
|
采购方:黑龙江鑫达企业集团有限公司
|
|
产品买卖合
|
供应方:无锡普莱斯化工材料有限公司
|
2012
年
12
月
25
日
|
同
|
采购方:黑龙江鑫达企业集团有限公司
|
|
产品买卖合
|
供应方:黑龙江绥嘉铖塑胶经贸有限公司
|
2012
年
12
月
25
日
|
同
|
采购方:黑龙江鑫达企业集团有限公司
|
授信额度协议
|
被授信人:黑龙江鑫达企业集团有限公司
授信人:中国银行股份有限公司哈尔滨平 房支行
|
2012
年
06
月
26
日
|
流动资金借款
|
贷款人:中国银行股份有限公司哈尔滨平
|
2013
年
04
月
16
日
|
合同
|
房支行
|
|
借款人:黑龙江鑫达企业集团有限公司
|
||
融易达业务申
|
申请人:黑龙江鑫达企业集团有限公司
|
2013
年
01
月
14
日
|
请
|
被申请银行:中国银行股份有限公司哈尔
|
|
滨平房支行
|
||
融易达业务申
|
申请人:黑龙江鑫达企业集团有限公司
|
2013
年
02
月
05
日
|
请
|
被申请银行:中国银行股份有限公司哈尔
|
|
滨平房支行
|
||
融易达业务合
|
申请人:黑龙江鑫达企业集团有限公司
|
2012
年
12
月
13
日
|
同
|
被申请银行:中国银行股份有限公司哈尔
|
|
滨平房支行
|
||
商业汇票承兑
|
承兑申请人:黑龙江鑫达企业集团有限公
|
2013
年
01
月
31
日
|
协议
|
司
|
|
承兑人:中国银行股份有限公司哈尔滨平
|
||
房支行
|
||
流动资金借款
|
贷款人:中国银行股份有限公司哈尔滨平
|
2013
年
03
月
19
日
|
合同
|
房支行
|
|
借款人:黑龙江鑫达企业集团有限公司
|
||
流动资金借款
|
贷款人:中国农业银行哈尔滨西桥支行
|
2012
年
12
月
24
日
|
合同
|
借款人:黑龙江鑫达企业集团有限公司
|
|
流动资金借款
|
贷款人:中国农业银行哈尔滨西桥支行
|
2013
年
1
月
24
日
|
合同
|
借款人:黑龙江鑫达企业集团有限公司
|
|
流动资金借款
|
贷款人:中国农业银行哈尔滨西桥支行
|
2013
年
2
月
7
日
|
合同
|
借款人:黑龙江鑫达企业集团有限公司
|
|
流动资金最高
|
贷款人:交通银行股份有限公司哈尔滨花
|
2013
年
01
月
5
日
|
额借款合同
|
园支行
|
|
借款人:黑龙江鑫达企业集团有限公司
|
||
国内保理业务
|
保理银行:中国工商银行股份有限公司哈
|
2012
年
11
月
23
日
|
合同
|
尔滨顾乡支行
|
|
销货方:黑龙江鑫达企业集团有限公司
|
国内保理业务
|
保理银行:中国工商银行股份有限公司哈
|
2012
|
年
12
|
月
17
日
|
合同
|
尔滨顾乡支行
|
|||
销货方:黑龙江鑫达企业集团有限公司
|
||||
国内保理业务
|
保理银行:中国工商银行股份有限公司哈
|
2013
|
年
03
|
月
18
日
|
合同
|
尔滨顾乡支行
|
|||
销货方:黑龙江鑫达企业集团有限公司
|
||||
国内保理业务
|
保理银行:中国工商银行股份有限公司哈
|
2013
|
年
03
|
月
22
日
|
合同
|
尔滨顾乡支行
|
|||
销货方:黑龙江鑫达企业集团有限公司
|
||||
国内保理业务
|
保理银行:中国工商银行股份有限公司哈
|
2013
|
年
04
|
月
10
日
|
合同
|
尔滨顾乡支行
|
|||
销货方:黑龙江鑫达企业集团有限公司
|
||||
国内保理业务
|
保理银行:中国工商银行股份有限公司哈
|
2013
|
年
04
|
月
19
日
|
合同
|
尔滨顾乡支行
|
|||
销货方:黑龙江鑫达企业集团有限公司
|
||||
国内保理业务
|
保理银行:中国工商银行股份有限公司哈
|
2013
|
年
04
|
月
26
日
|
合同
|
尔滨顾乡支行
|
|||
销货方:黑龙江鑫达企业集团有限公司
|
||||
流动资金贷款
|
贷款人:龙江银行股份有限公司平房支行
|
2013
|
年
03
|
月
19
日
|
协议
|
借款人:黑龙江鑫达企业集团有限公司
|
|||
保理业务协议
|
保理银行:龙江银行股份有限公司平房支 行
销货方:黑龙江鑫达企业集团有限公司
|
2013
|
年
03
|
月
19
日
|
保理业务协议
|
保理银行:龙江银行股份有限公司平房支 行
销货方:黑龙江鑫达企业集团有限公司
|
2013
|
年
03
|
月
19
日
|
保理业务协议
|
保理银行:龙江银行股份有限公司平房支 行
销货方:黑龙江鑫达企业集团有限公司
|
2013
|
年
03
|
月
19
日
|
保理业务协议
|
保理银行:龙江银行股份有限公司平房支 行
销货方:黑龙江鑫达企业集团有限公司
|
2013
|
年
03
|
月
19
日
|
保理业务协议
|
保理银行:龙江银行股份有限公司平房支 行
销货方:黑龙江鑫达企业集团有限公司
|
2013
|
年
03
|
月
19
日
|
流动资金贷款
|
贷款人:中国建设银行股份有限公司哈尔
|
2012
年
12
月
20
日
|
合同
|
滨香坊支行
|
|
借款人:黑龙江鑫达企业集团有限公司
|
||
流动资金贷款
|
贷款人:中国建设银行股份有限公司哈尔
|
2013
年
|
合同
|
滨香坊支行
|
|
借款人:黑龙江鑫达企业集团有限公司
|
||
银行承兑协议
|
承兑人:中国建设银行股份有限公司哈尔 滨香坊支行
出票人:黑龙江鑫达企业集团有限公司
|
2013
年
|
保证金质押合
|
质权人:中国建设银行股份有限公司哈尔
|
2013
年
01
月
25
日
|
同
|
滨香坊支行
|
|
出质人:黑龙江鑫达企业集团有限公司
|
合同名称
|
租赁标的
|
合同方
|
订立日期
|
房屋租赁合同
|
中国黑龙江哈尔滨市开发
|
出租方:哈尔滨鑫达高科
|
2012
年
04
月
20
日
|
有限公司
|
|||
区哈平路集中区大连北路
|
|||
承租方:黑龙江鑫达企业
|
|||
9
号的房屋
(20499.53
㎡
)
|
集团有限公司
|
登记号
/
申请号
|
专利名称
|
权利人
|
专利类型
|
申请阶段
|
200910073402.3
|
超临界流体快速扩散法合成纳米碳酸钙增强的微 晶聚丙烯复合材料
|
黑龙江鑫达企 业集团有限公 司
|
发明
|
实质审查生效
|
201010173663.5
|
一种适合
PEEK
的成型方法
|
黑龙江鑫达企 业集团有限公 司
|
发明
|
实质审查生效
|
201010508149.2
|
一种高耐热
PC/ASA
合金材料及其制备方法
|
黑龙江鑫达企 业集团有限公 司
|
发明
|
实质审查生效
|
201010508177.4
|
一种抗老化、耐黄变、低气味聚丙烯复合材料及其 制备方法
|
黑龙江鑫达企 业集团有限公 司
|
发明
|
实质审查生效
|
201110094454.6
|
汽车专用改性聚丙烯非标准情况下的拉伸性能快 速检测方法
|
黑龙江鑫达企 业集团有限公 司
|
发明
|
公开
|
201110122566.8
|
一种塑料生产线中央集中控制方法制备工艺
|
黑龙江鑫达企 业集团有限公 司
|
发明
|
公开
|
201110158488.7
|
一种预混筛分系统制备工艺方法
|
黑龙江鑫达企 业集团有限公 司
|
发明
|
公开
|
201110158528.8
|
一种汽车专用改性塑料冲击性能快速检测方法
|
黑龙江鑫达企 业集团有限公 司
|
发明
|
公开
|
201110233488.9
|
塑料生产线高性能均化制备工艺
|
黑龙江鑫达企 业集团有限公 司
|
发明
|
公开
|
201110319832.6
|
一种高韧性聚碳酸酯共混材料及其制备方法
|
黑龙江鑫达企 业集团有限公 司
|
发明
|
公开
|
201110399890.4
|
一种高强度、高耐热玻纤增强聚醚醚酮复合材料及 制备方法
|
黑龙江鑫达企 业集团有限公
|
发明
|
已受理
|
登记号
/
申请号
|
专利名称
|
权利人
|
专利类型
|
申请阶段
|
司
|
||||
201210114931.5
|
一种高强度碳纤维增强聚醚醚酮复合材料及其制 备方法
|
黑龙江鑫达企
|
发明
|
已受理
|
业集团企业技 术中心有限公
|
||||
司
|
||||
201210147444.9
|
一种耐热易加工的天然纤维增强聚乳酸复合材料 制备方法
|
黑龙江鑫达企
|
发明
|
已受理
|
业集团企业技 术中心有限公
|
||||
司
|
||||
201210201826.5
|
高性能无卤阻燃
PC/ABS
复合材料及其制备方法
|
黑龙江鑫达企 业集团企业技 术中心有限公 司
|
发明
|
已受理
|
201210295154.9
|
高包封率、释药稳定的聚乳酸溶菌酶药物微球制备 方法
|
黑龙江鑫达企
|
发明
|
已受理
|
业集团企业技 术中心有限公
|
||||
司
|
||||
201210358122.9
|
一种超疏水微孔高分子薄膜材料的制备方法
|
黑龙江鑫达企 业集团企业技 术中心有限公 司
|
发明
|
已受理
|
201210411231.2
|
石墨烯
/
聚合物导电复合材料
|
黑龙江鑫达企 业集团企业技 术中心有限公 司
|
发明
|
已受理
|
201210472283.0
|
一种力学强度增强的聚丙烯动力锂电池隔膜及其 制备方法
|
黑龙江鑫达企
|
发明
|
已受理
|
业集团企业技 术中心有限公
|
||||
司
|
||||
201210474211.X
|
一种多层热压法制备羟基磷灰石
/
聚乳酸复合材料 的方法
|
黑龙江鑫达企
|
发明
|
已受理
|
业集团企业技 术中心有限公
|
||||
司
|
著作权
|
登记号
|
类型
|
著作权人
|
开发完成日期
|
首次发表日期
|
鑫达产品应用分析服务软 件
V1.0
|
2011SR015889
|
软件
|
黑龙江鑫达软件 开发有限责任公 司
|
2010
年
12
月
20
日
|
2011
|
年
|
02
|
月
|
20
|
日
|
登记人
|
登记日期
|
韩杰
|
2011
年
3
月
31
日
|
韩杰
|
2011
年
7
月
21
日
|
韩杰
|
2011
年
11
月
14
日
|
纳税人
|
减免税种类
|
减免后税率
|
减免期
|
黑龙江鑫达企业集团有限 公司
|
企业所得税
|
15%
|
2012
年
1
月
1
日
– 2012
年
12
月
31
日
|
PARTNERS
Matthew D. Bersani
Sidharth Bhasin
Lorna Xin Chen
Peter C.M. Chen
|
Colin Law
Kyungwon Lee
Paul Strecker
Shuang Zhao
|
1.
|
We have acted as Hong Kong legal advisers to China XD Plastics Company Limited (as the parent guarantor) (“
China
XD
”), Xinda Holding (HK) Company Limited (as the subsidiary guarantor) (“
Xinda
HK
”, together with China XD, the “
Guarantors
”), and Favor Sea Limited (as the issuer) (“
F
avor
Se
a”)
in connection with the issue of US$
[●]
[●]
% senior notes due
[●]
(the “
Notes
”) issued by Favor Sea and unconditionally and irrevocably guaranteed by the Guarantors. The Notes are to be sold to the initial purchasers (the “
Initial
Purchasers
”) listed on Schedule A to the Purchase Agreement (as defined below) pursuant to a purchase agreement, dated
[●]
, 2014, (the “
Purchase
Agreement
”) entered into by and among Favor Sea, the Guarantors, Morgan Stanley & Co. International plc (“
Morgan
Stanley
”), UBS AG, Hong Kong Branch (“
UBS
”) and The Hongkong and Shanghai Banking Corporation Limited (“
HSBC
” and together with Morgan Stanley and UBS, the “
Joint
Global
Coordinators
” and the “
Representatives
,” acting as Representatives of the Initial Purchasers). We are providing this opinion to you pursuant to Section 8(g) of the
|
|
ABU DHABI | BEIJING | BRUSSELS | DÜSSELDORF | FRANKFURT | HONG KONG | LONDON | MILAN | MUNICH | NEW YORK
PALO ALTO | PARIS | ROME | SAN FRANCISCO | SÃO PAULO | SHANGHAI | SINGAPORE | TOKYO | TORONTO | WASHINGTON, DC
|
2.
|
Except as otherwise indicated, capitalized terms used but not otherwise defined in this opinion shall have the same meanings as defined in the Purchase Agreement.
|
3.
|
For the purposes of giving this opinion, we have examined and relied upon copies, photocopies or copies received by fax or by electronic means, or originals if so expressly stated, of the following documents:
|
(a)
|
the certificate of incorporation of Xinda HK dated May 27, 2008;
|
(b)
|
the executed Purchase Agreement;
|
(c)
|
an indenture (the “
Indenture
”), dated
[●]
, 2014, entered into by and among the Guarantors, Favor Sea (as issuer), [Citicorp International Limited (as trustee), Citicorp International Limited (as collateral agent) (in such capacity, the “
Collateral
Agent
”), Citibank, N.A., London Branch (as paying agent) and Citigroup Global Markets Deutschland AG (as registrar)] in relation to the Notes;
|
(d)
|
the global notes representing the Notes;
|
(e)
|
the guarantee (the “
Guarantee
”) annexed to the global notes which terms are set forth in the Indenture;
|
(f)
|
the share pledge agreement given by Favor Sea in favor of the Collateral Agent dated [●] (the “
Share
Pledge
”);
|
(g)
|
the memorandum and articles of association of Xinda HK dated May 21, 2008 (the “
Memorandum
and
Articles
of
Association
”);
|
(h)
|
the board minutes of Xinda HK dated
[●]
, 2014 (the “
Board
Minutes
”), approving and authorizing, among other things, the execution, delivery of the Relevant Documents (as defined below) to which it is a party and the performance by it of the transactions contemplated therein;
|
(i)
|
the shareholders’ resolutions of Xinda HK dated
[●]
, 2014 (the “
Shareholders’
Resolutions
”) approving and authorizing, among other things, the execution, delivery of the Relevant Documents to which it is a party and the performance by it of the transactions contemplated therein;
|
(j)
|
the results of a search conducted by Target On-Line Financial Limited on
[●]
, 2014 of the public records of Xinda HK on file and available for inspection by the public at the Hong Kong Companies Registry (the “
Companies
Registry
”);
|
(k)
|
the results of a search conducted by Target On-Line Financial Limited on
[●]
, 2014 on the cause book of the Registry of the High Court of Hong Kong (in respect of all matters which Xinda HK is a party);
|
(l)
|
the results of a search conducted by Target On-Line Financial Limited on
[●]
, 2014 on the cause book of the Registry of the District Court of Hong Kong (in respect of all matters which Xinda HK is a party);
|
(m)
|
the results of a search conducted by Target On-Line Financial Limited on
[●]
, 2014 at the Official Receiver’s Office in Hong Kong (in respect of all matters against Xinda HK); and
|
(n)
|
the preliminary offering memorandum dated November 14, 2014, together with a pricing term sheet dated
[●]
, 2014, and a final offering memorandum dated
[●]
, 2014 (collectively the “
Offering
Memoranda
”) in relation to the issuance of the Notes
|
4.
|
Except for the above documents listed in paragraph 3 above, we have not, for the purposes of this opinion, examined any contracts or other documents entered into by or affecting any party to the Relevant Documents or any corporate records of any party. We have not made any other enquiries or searches concerning any party (whether within Shearman & Sterling or otherwise), except as expressly mentioned in this opinion.
|
5.
|
This opinion is confined solely to matters of the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (“
Hong
Kong
”) as at the date of this opinion. For the purposes of this opinion, we have made no independent investigation of, and express or imply no opinion with respect to, the laws of any other jurisdiction, or the statutes, administrative decisions, rules, regulations or requirements of any county, municipality, subdivision or local authority of any jurisdiction.
|
6.
|
This opinion is to be governed by and construed in accordance with Hong Kong law as at the date of this opinion. We assume no obligation to update or supplement this
|
7.
|
The opinions given in this opinion are strictly limited to the matters stated in paragraph 9 (Opinion) and do not extend to any other matters. Furthermore, we express no opinion as to whether a foreign court (applying its own conflicts rules) will act in accordance with parties’ agreement as to jurisdiction and/or choice of law.
|
8.
|
In rendering this opinion, we have assumed (without making any investigation or further enquiry) that:
|
(a)
|
all documents delivered to us (whether as originals or copies) are authentic, complete and up-to-date, and all signatures, seals and markings on them are genuine;
|
(b)
|
no amendments (manuscript or otherwise) have been or will be made to the Relevant Documents and the Offering Memoranda;
|
(c)
|
the Memorandum and Articles of Association which we examined are those now in force;
|
(d)
|
the Board Minutes and the Shareholders’ Resolutions which we examined have not been amended or rescinded and remain valid and each director of the parties to the Relevant Documents has disclosed any interest which he or she may have in the transactions contemplated by or in the Relevant Documents and no such director has any such interest except to the extent permitted under applicable laws and the board meeting and the shareholders’ meeting of Xinda HK are properly constituted in accordance with the Memorandum and Articles of Association;
|
(e)
|
each of the parties to the Relevant Documents (other than Xinda HK, on which we specifically express an opinion) has been duly incorporated, and is validly existing, if applicable, under its respective applicable laws;
|
(f)
|
each of the parties to the Relevant Documents (other than Xinda HK, on which we specifically express an opinion solely based on the Searches) has not passed a resolution for its voluntary winding up and no petition has been presented, nor order made by any court, for the winding-up or bankruptcy of any such party; no receiver, manager, administrative receiver, administrator or similar officer has been appointed (nor any notice of intention to appoint any such person been given to or filed with any person or court) in relation to such party or any of its assets; such party has not entered into any voluntary
|
(g)
|
each of the Parties to the Relevant Documents (other than Xinda HK, on which we specifically express an opinion) has the capacity, power, authority and legal right to enter into, execute and deliver the Relevant Documents and perform its obligations therein;
|
(h)
|
each of the parties to the Relevant Documents (other than Xinda HK, on which we specifically express an opinion) has the capacity, power and authority to execute, deliver and perform their respective obligations under the Relevant Documents, and has taken all necessary actions to authorize the execution and delivery of the Relevant Documents and the performance of its obligations therein, and such authorization has not been amended or revoked and remains valid;
|
(i)
|
each of the Relevant Documents has been executed and delivered by each of the parties (other than Xinda HK in relation to its due authorization, execution and delivery of the Relevant Documents to which it is a party under Hong Kong law on which we specifically express an opinion) to it in accordance with all applicable laws;
|
(j)
|
each of the Relevant Documents constitutes legal, valid and binding obligations of each of the parties thereto, which will be enforceable under all applicable laws (other than Hong Kong law, on which we specifically express an opinion);
|
(k)
|
there is no bad faith, or intention to use bad faith, fraud, undue influence, coercion or duress on the part of any party to the Relevant Documents or its respective directors, employees, agents or advisors;
|
(l)
|
each of the Relevant Documents has been entered into for
bona
fide
reasons on arm’s length and commercial terms, and none of the parties is or will be seeking to achieve any purposes which are not apparent from the Relevant Documents and may render such documents illegal or void;
|
(m)
|
the execution and delivery of each of the Relevant Documents by the parties to it and the performance of their obligations therein are sufficiently to the benefit and in the interests of such parties;
|
(n)
|
the opinion that there is no contravention of the provisions of Section 103 of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “
SFO
”) by the issue and possession for the purpose of issue of the
|
(o)
|
the choice of New York law to govern the Relevant Documents was freely made in good faith by the respective parties thereto and for bona fide reasons and there is no reason for avoiding the same on the grounds of public policy. For a choice to be bona fide, it must be genuine, not capricious and not a mere pretence;
|
(p)
|
all statements of fact (including all relevant representations and warranties) contained in the Relevant Documents are, when made or repeated or deemed to be made or repeated, true, accurate and complete and that any representation or warranty made by any party to the Relevant Documents that it is not aware of or has no notice or knowledge of any act, matter, thing or circumstance means that the same does not exist or has not occurred;
|
(q)
|
there are no dealings or arrangements between any of the parties to the Relevant Documents which affect any of the terms of the Relevant Documents but were not disclosed to us;
|
(r)
|
apart from the Relevant Documents, there are no contractual or other similar restrictions (including restrictions under the Memorandum and Articles of Association or equivalent document of each of the parties (other than Xinda HK, on which we specifically express an opinion) to the Relevant Documents) which would affect the opinions herein;
|
(s)
|
there are no laws, rules, regulations or requirements of any jurisdiction outside Hong Kong which will render the execution, delivery or performance of the Relevant Documents illegal or ineffective and that, insofar as any obligation under the Relevant Documents is performed in, or is otherwise subject to, any jurisdiction other than Hong Kong, its performance will not be illegal or ineffective by virtue of the laws of that jurisdiction;
|
(t)
|
none of the opinions expressed in this opinion will be affected by any laws (including those relating to public policy) of any jurisdiction outside Hong Kong;
|
(u)
|
none of the parties to the Relevant Documents is entitled to any sovereign immunity from the jurisdiction of the courts of Hong Kong;
|
(v)
|
Xinda HK or any of its respective properties, assets or revenues are not entitled to any right of immunity on the grounds of sovereignty from any legal action or proceeding, set-off or counterclaim or from the jurisdiction of any court, or the service of process or from attachment prior to or in aid of execution of judgment or from any other legal process or proceeding for the giving of any relief or the enforcement of any judgment under the laws of the PRC;
|
(w)
|
the completeness and accuracy in all respects of the information disclosed in the Searches relating to Xinda HK and the information entered or contained in or on the relevant registers and/or cause books has not, since the date on which the results of such Searches were obtained, been altered or added to and such Searches did not fail to disclose any information which has been delivered for filing but which did not appear on the public file and was not disclosed at the time of the relevant Searches; and
|
(x)
|
Favor Sea is not a non-Hong Kong company that is required to be registered with the Hong Kong Companies Registry under Part XI of the Companies Ordinance (Cap 32 of Laws of Hong Kong) (the “
Companies
Ordinance
”).
|
9.
|
On the basis of the above assumptions and subject to the qualifications and observations set out in this opinion, we are of the opinion that, as a matter of Hong Kong law in force as at the date of this opinion:
|
(a)
|
Xinda HK is a company limited by shares duly incorporated, registered and validly existing under Hong Kong law and is not in liquidation and has legal capacity to sue and be sued in a court of law in Hong Kong;
|
(b)
|
Xinda HK has the power under the Memorandum and Articles of Association to own assets and conduct its business as described in each of the Offering Memoranda;
|
(c)
|
Xinda HK has (i) the capacity, power, authority and legal right to enter into, execute and deliver the Relevant Documents and perform its obligations therein (including the issuance of the Guarantee), and (ii) taken all necessary actions to authorize such execution, delivery and performance;
|
(d)
|
each of the Relevant Documents to which Xinda HK is a party has been duly authorized, executed and delivered by Xinda HK under Hong Kong law;
|
(e)
|
the execution and delivery of the Relevant Documents by Xinda HK and the performance by Xinda HK of its obligations therein will not conflict with or
|
(f)
|
the execution and delivery of the Share Pledge by Favor Sea and the performance by Favor Sea of its obligations therein will not conflict with or result in a violation of any Hong Kong law or regulation or any order or decree known to us of any governmental authority or agency or any official body in Hong Kong;
|
(g)
|
under Hong Kong law, there are no consents, licenses, approvals, authorizations, filing or registration with or orders required by Xinda HK from any court, governmental or other regulatory authorities or agencies in Hong Kong in connection with the Guarantee or its execution, delivery and performance of the Relevant Documents to which Xinda HK is a party (including the issuance of the Guarantee), and no filing or registration of the Relevant Documents or the Offering Memoranda with any court, governmental or other regulatory authority or agency in Hong Kong is required under Hong Kong law to ensure their validity, enforceability or admissibility into evidence (other than court filings in the ordinary course of proceedings);
|
(h)
|
under Hong Kong law, there are no consents, licenses, approvals, authorizations, filing or registration with or orders required by Favor Sea from any court, governmental or other regulatory authorities or agencies in Hong Kong in connection with its execution, delivery and performance of the Share Pledge, and no filing or registration of the Share Pledge with any court, governmental or other regulatory authority or agency in Hong Kong is required under Hong Kong law to ensure its validity, enforceability or admissibility into evidence (other than court filings in the ordinary course of proceedings);
|
(i)
|
based on the Searches, Xinda HK was not, since May 27, 2008 (being its date of incorporation) and as at
[●]
, 2014, a party to any High Court action and District Court action commenced in Hong Kong, and there are no records of any petition for winding-up of Xinda HK, no record or any order or resolution for the winding up of Xinda HK or any notice or petition for the appointment of a receiver of Xinda HK or its assets or properties in Hong Kong;
|
(j)
|
based on the Searches, there are no charges over assets of Xinda HK [other than the
[●]
charges dated
[●]
which were registered with the Companies Registry and were released on
[●]
];
|
(k)
|
the obligations of Xinda HK under the Relevant Documents to which it is a
|
(l)
|
the Share Pledge will constitute valid, legally binding and enforceable obligations of Favor Sea under the laws of Hong Kong;
|
(m)
|
the Share Pledge creates a valid security interest under the laws of Hong Kong in favor of the Collateral Agent over the assets expressed in the Share Charge to be subject to a security interest;
|
(n)
|
the choice of Hong Kong law as the governing law of the Share Pledge is a valid choice of law and would be recognized and applied by a Hong Kong court of competent jurisdiction;
|
(o)
|
save for any stamp duty as may be payable in respect of any transfer of shares in Xinda HK under the Share Pledge, no stamp duty or similar tax is payable in Hong Kong in connection with the giving of the Guarantee by Xinda HK, the issue of the Notes or the execution and delivery of, or performance by or enforcement by, any of the parties to the Relevant Documents or to ensure the legality, validity, binding effect and admissibility into evidence in Hong Kong of the Relevant Documents;
|
(p)
|
all payments by each of Xinda HK and Favor Sea under the Relevant Documents to which it is a party may be made free and clear of and without withholding or deduction for or on account of any taxes imposed by or on behalf of any relevant authority in Hong Kong;
|
(q)
|
the issue, or possession for the purposes of issue, whether in Hong Kong or elsewhere, of an advertisement, invitation or document relating to the Notes will not contravene the provisions of Section 103 of the SFO provided that (i) such advertisement, invitation or document is not, or does not contain, an invitation to the public or (ii) such issue or possession for the purposes of issue, is made by or on behalf of an intermediary licensed or registered for Type 1, Type 4 or Type 6 regulated activity (as such terms are defined in the SFO) (whether acting as principal or as agent) or (iii) the Notes are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the SFO and any rules made thereunder or (iv) such issue or possession for the purposes of issue, is otherwise permitted under the securities laws of Hong Kong;
|
(r)
|
neither the Offering Memoranda nor other documents in respect of the issue of
|
(s)
|
the statements in the Offering Memoranda (set out in Schedule B of this opinion) under the captions “Plan of Distribution – Selling Restrictions – Hong Kong,” “Enforcement of Civil Liabilities” and “Limitations on Validity and Enforceability of the Guarantees and the Collateral” insofar as such statements constitute a summary of Hong Kong legal matters are true and accurate in all material respects;
|
(t)
|
the courts of Hong Kong will recognize and give effect to the choice of New York law as the governing law of the Relevant Documents (other than the Share Pledge) and the provisions for the submission by Xinda HK to the jurisdiction of the courts of New York in the Relevant Documents to which it is a party are valid and binding and do not contravene any laws of Hong Kong;
|
(u)
|
as the United States of America is not a country within the scope of the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319 of the Laws of Hong Kong), a judgment obtained in the State of New York cannot be enforced by registration for enforcement within Hong Kong. A judgment obtained in a court in the State of New York may form the basis of a cause of action within the jurisdiction of the High Court of Hong Kong by an action or counterclaim for the amount due under it;
|
(v)
|
under the laws of Hong Kong, Xinda HK (including its respective properties, assets or reserves to the extent located in Hong Kong) is not entitled to any immunity on the grounds of sovereignty from any Hong Kong legal action, suit or proceeding, from set-off or counterclaim being claimed in proceedings in Hong Kong, from the jurisdiction of the Hong Kong courts, from services of process, from attachment prior to or in aid of execution of judgment in Hong Kong, or from other legal process or proceeding for the giving of any relief or for the enforcement of any judgment in Hong Kong. [ The irrevocable and unconditional waiver and agreement of Xinda HK Section
[●]
of the Indenture not to plead or claim any such immunity in any legal action, suit or proceeding against them under the Purchase Agreement or the Notes, is valid and binding under the laws of Hong Kong;]
|
(w)
|
no deduction or withholding for or on account of Hong Kong taxes will be required to be made by the Initial Purchasers to any tax authority in Hong Kong from any payment due from them in connection with (i) the issue, sale and delivery by Xinda HK of the Notes to, or for the account of, such Initial Purchasers; or (ii) the sale and delivery by such Initial Purchasers of the Notes to any subsequent purchasers thereof;
|
10.
|
Our opinion is subject to the following qualifications:
|
(a)
|
save as expressed in paragraphs 9(j) and 9(t) we express no opinion on the provisions of the Relevant Documents as well as any non-contractual obligations arising out of or in connection therewith which are governed under New York law;
|
(b)
|
the opinion that Xinda HK is a company limited by shares duly incorporated under Hong Kong law, that it is not subject to any High Court action and District Court action commenced in Hong Kong between
[●]
and
[●]
, 2014 and is not in liquidation is based on the assumptions set out in this opinion and otherwise solely upon our examination of the results of the Searches. It should be noted that (i) forms and notifications submitted to the Companies Registry do not immediately appear in the public records which are available for inspection at the Companies Registry, (ii) a search at the Companies Registry alone is not capable of revealing whether or not a winding-up petition or a petition for the making of an administration order has been presented, (iii) filings and submissions submitted to the Registry of the High Court and District Court of Hong Kong do not immediately appear in the cause book of the Registry of the High Court of Hong Kong and the Registry of the District Court of Hong Kong, and (iv) forms and notifications, in particular, notice of a winding-up order or resolution, notice of an administration order and notice of the appointment of a receiver may not be filed at the Official Receiver’s Office in Hong Kong immediately and there may be a delay in the relevant notice appearing on the file of the company concerned;
|
(c)
|
any guarantee and/or indemnity provisions of the Relevant Documents (i) are subject to principles of Hong Kong laws that may operate to exonerate, discharge, reduce or extinguish the liabilities of a guarantor or indemnifying party notwithstanding the express terms of such guarantees or indemnities; and (ii) intended to prevent Xinda HK from being exonerated or discharged from its obligations thereunder, or its liabilities being reduced or extinguished, by reason of the occurrence of events or the conduct or action of any parties, may not be enforceable in all instances, as the Hong Kong courts construe guarantees and indemnities strictly and the ability to rely on protective
|
(d)
|
the term “enforceable” as used in this opinion means that the obligations assumed by Xinda HK under the Relevant Documents are of a type and form that the Hong Kong courts would ordinarily enforce. This opinion is not to be taken to imply that any obligation under the Relevant Documents would necessarily be capable of enforcement in all circumstances in accordance with its terms or that the Hong Kong courts would necessarily grant any remedy. It does not address the extent to which a judgment obtained in a court outside Hong Kong will be enforceable in Hong Kong;
|
(e)
|
the enforceability of the Relevant Documents may be subject to (i) statues of limitation, lapses of time and laws relating to bankruptcy, insolvency, liquidation, administration, arrangement, moratorium or re-organization or other laws relating to or affecting generally the enforcement of the rights of creditors, (ii) the fact that claims may be time-barred or subject to defences of set-off or counterclaim, and (iii) public policy considerations, statutes or court decisions that may limit the rights of a party to obtain indemnification against such party’s own negligence, willful misconduct, unlawful conduct or violations of laws, rules or regulations or to exculpate any persons for breaches of any statutory duty or intentional harm;
|
(f)
|
the enforceability of the Relevant Documents may be limited by general principles of equity, including, without limitations, concepts of materiality, reasonableness, good faith and fair dealing and by possible judicial action giving effect to governmental actions or foreign laws affecting creditors’ rights; in addition, equitable remedies, such as injunction and specific performance, are discretionary and may not be awarded by the Hong Kong courts, particularly in situations where damages are considered to be an adequate and appropriate remedy. This is so regardless of whether the case is considered in a proceeding in equity or law;
|
(g)
|
if each of China XD, Xinda HK and Favor Sea is not a separate legal and independent entity undertaking commercial activities independent from the PRC Government and as such, each of China XD, Xinda HK and Favor Sea does not enjoy powers of independent management and freedom from interference, with ownership of assets and the capacity independently to assume civil liabilities, then China XD, Xinda HK and Favor Sea and their assets may be entitled to sovereign or other immunity in the courts of Hong Kong. In such circumstances, Hong Kong courts will not have jurisdiction, and prosecution or enforcement may not be taken in the Hong Kong courts against any of China XD, Xinda HK and Favor Sea and any of their assets. In addition, any representation or undertaking given by them in the Relevant
|
(h)
|
the obligations to make any payments of default or additional interest and other default or additional amounts under the Relevant Documents may not be enforceable if the Hong Kong courts holds that such a payment constitutes a penalty and not a genuine and reasonable pre-estimate of the loss likely to be suffered as a result of the default in such payments. We express no opinion on whether any such payments constitute a genuine and reasonable pre-estimate;
|
(i)
|
the Hong Kong courts may decline to accept jurisdiction under the Relevant Documents if concurrent proceedings are pending elsewhere or if it decides that another jurisdiction is a more appropriate forum;
|
(j)
|
the Hong Kong courts may decline to give effect to any of the undertakings to pay costs made by each of the parties under the Relevant Documents, and may not award, by way of costs, all of the expenditure incurred by a successful litigant in proceedings brought before such courts;
|
(k)
|
the Hong Kong courts may decline to give effect to any provision of the Relevant Documents which provides that in the event of any invalidity, illegality or unenforceability of any provision of any such document, the remaining provisions thereof shall not be affected or impaired, particularly if doing so would (i) be contrary to public policy, or (ii) involve the making of a new contract for the parties;
|
(l)
|
the Hong Kong courts may give a judgment in a currency other than Hong Kong dollars if, subject to the terms of the contract, it is the currency which most fairly expresses the plaintiff’s loss, but such judgments may be required to be converted into Hong Kong dollars or any other currencies for enforcement purposes;
|
(m)
|
where the sum payable under a judgment, which is to be registered in Hong Kong, is expressed in a currency other than Hong Kong dollars, the judgment will be registered as if it were a judgment for such sum expressed in Hong Kong dollars converted at the rate of exchange prevailing at the date of registration;
|
(n)
|
notwithstanding the provisions of the Relevant Documents, a determination, designation, calculation or certificate of any party as to any matter provided for in the Relevant Documents might, in certain circumstances, be held by the Hong Kong courts not to be final, conclusive and binding;
|
(o)
|
under the rules of procedure applicable to proceedings in a Hong Kong court, a Hong Kong court may, at its discretion, order a plaintiff in an action, being (i) a party who is not ordinarily resident in Hong Kong, or (ii) a limited company to whom it appears may not be able to pay an award of costs against it, to provide security for costs;
|
(p)
|
we express no opinion on the accuracy or completeness of any representations, warranties, conditions or statements of fact set out in the Relevant Documents and the Offering Memoranda, which representations, warranties, conditions or statements we have not independently verified; and
|
(q)
|
the choice of New York law in the Relevant Documents would not be recognized or upheld if there were reasons for avoiding the choice of law on the grounds that its application would be contrary to public policy or it was not made freely for
bona
fide
reasons. The choice of New York law would not be upheld, for example, if it were made with the intention of evading the law of the jurisdiction with which the contract had its most substantial connection and which, in the absence of New York law, would have invalidated the contract or been inconsistent with it and the Hong Kong court’s enforcement of any judgment from the New York court is subject to common law principles, specifically, the conditions that such judgment be final and conclusive and be for a definite monetary sum.
|
11.
|
We would like to make the following observations:
|
(a)
|
on July 1, 1997, Hong Kong became the Hong Kong Special Administrative Region of the People’s Republic of China. On April 4, 1990, the National People’s Congress of the People’s Republic of China (the “
NPC
”) adopted the Basic Law. Under Article 8 of the Basic Law, the laws of Hong Kong in force at June 30, 1997 (that is, the common law, rules of equity, ordinances, subsidiary legislation and customary law) shall be maintained, except for any that contravene the Basic Law and subject to any amendment by the legislature of Hong Kong. Under Article 160 of the Basic Law, the laws of Hong Kong in force at June 30, 1997 are to be adopted as laws of Hong Kong unless they are declared by the Standing Committee of the NPC (the “
Standing
Committee
”) to be in contravention of the Basic Law and, if any laws are later discovered to be in contravention of the Basic Law, they shall be amended or cease to have force in accordance with the procedures prescribed by the Basic Law; and
|
(b)
|
under paragraph 1 of the Decision of the Standing Committee of the National People’s Congress on the Treatment of the Laws Previously in Force in Hong
|
12.
|
This opinion is addressed to you and may be relied upon by you only in connection with the Relevant Documents. It may not be used, disclosed or relied upon by you for any other purpose or by any other person, nor may copies be delivered to any other person, nor is it to be quoted or referred to in any public document or filed with any government agency or other person without in each instance our prior written consent. This opinion may, however, with our further written consent, be used and, if necessary, furnished, where it is reasonable to do so and without prior notice to us (to the extent notice is impracticable) (i) for the purpose of responding to requests to review the opinion by governmental, regulatory or judicial authorities having competent jurisdiction over the Joint Global Coordinators, the Representatives or the Initial Purchasers and (ii) in connection with the defense of any legal or regulatory proceeding or investigation arising out of the offer and sale of the Notes. This opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters.
|
UBS AG, Hong Kong Branch
|
|
Morgan Stanley & Co. International plc
|
|
The Hongkong and Shanghai Banking Corporation Limited
|
1.
|
The Certificate of Incorporation of the Company;
|
2.
|
The certificate dated as of the date hereof executed by or on behalf of the Company (the “
Opinion
Certificate
”); and
|
3.
|
The Certificate of Good Standing of the Company dated as of November [ ], 2013 issued by the Secretary of State of the State of New York (the “
Good
Standing
Certificate
”).
|
Page | |||
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE | 1 | ||
SECTION 1.01 | Definitions | 1 | |
SECTION 1.02 | Rules of Construction | 30 | |
ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF NOTES | 30 | ||
SECTION 2.01 | Authentication and Delivery of Notes | 30 | |
SECTION 2.02 | Execution of Notes and Endorsement of Subsidiary Guarantees | 31 | |
SECTION 2.03 | Certificate of Authentication | 31 | |
SECTION 2.04 | Form, Denomination and Date of Notes; Payments | 31 | |
SECTION 2.05 | Registration, Transfer and Exchange | 35 | |
SECTION 2.06 | Book-entry Provisions for Global Notes | 36 | |
SECTION 2.07 | Special Transfer Provisions | 37 | |
SECTION 2.08 | Mutilated, Defaced, Destroyed, Stolen and Lost Notes | 40 | |
SECTION 2.09 | Further Issues | 41 | |
SECTION 2.10 | Cancellation of Notes; Disposition Thereof | 41 | |
SECTION 2.11 | CUSIP Numbers | 42 | |
ARTICLE III REDEMPTION | 42 | ||
SECTION 3.01 | Redemption for Tax Reasons | 42 | |
SECTION 3.02 | Optional Redemption | 43 | |
SECTION 3.03 | Method and Effect of Redemption | 44 | |
ARTICLE IV COVENANTS | 45 | ||
SECTION 4.01 | Maintenance of O ffice or Agency | 45 | |
SECTION 4.02 | Payment of Notes | 47 | |
SECTION 4.03 | Governmental Approvals and Licenses; Compliance with Law | 47 | |
SECTION 4.04 | Payment of Taxes and other Claims | 48 | |
SECTION 4.05 | Intentionally Omitted. | 48 | |
SECTION 4.06 | Limitation on Indebtedness | 48 | |
SECTION 4.07 | Limitation on Restricted Payments | 52 | |
SECTION 4.08 | Limitation on Liens | 55 | |
SECTION 4.09 | Limitation on Sale and Leaseback Transactions | 55 | |
SECTION 4.10 | Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries | 56 | |
SECTION 4.11
|
Limitations on Sales and Issuances of Capital Stock in Restricted Subsidiaries | 58 | |
SECTION 4.12 |
Limitation on Issuances of Guarantees by Restricted Subsidiaries
|
58 | |
SECTION 4.13 | Repurchase of Notes Upon a Change of Control Triggering Event | 59 | |
SECTION 4.14 | Limitation on Asset Sales | 59 | |
SECTION 4.15 | Limitation on Transactions With Shareholders and Affiliates | 61 |
SECTION 4.16 | Limitation on Business Activities | 63 | |
SECTION 4.17 | Use of Proceeds | 63 | |
SECTION 4.18 | Designation of Restricted and Unrestricted Subsidiaries | 63 | |
SECTION 4.19 | Anti- Layering | 64 | |
SECTION 4.20 | Provision of Financial Statements and Reports | 64 | |
SECTION 4.21 | Additional Amounts | 66 | |
SECTION 4.22 | Maintenance of Insurance | 68 | |
SECTION 4.23 | No Payments For Consents | 68 | |
SECTION 4.24 | Suspensions of Certain Covenants | 69 | |
ARTICLE V CONSOLIDATION, MERGER AND SALE OF ASSETS | 70 | ||
SECTION 5.01 | Consolidation, Merger and Sale of Assets | 70 | |
ARTICLE VI DEFAULT AND REMEDIES | 72 | ||
SECTION 6.01 | Events of Default | 72 | |
SECTION 6.02 | Acceleration | 74 | |
SECTION 6.03 | Other Remedies | 74 | |
SECTION 6.04 | Waiver of Past Defaults | 74 | |
SECTION 6.05 | Control by Majority | 75 | |
SECTION 6.06 | Limitation on Suits | 75 | |
SECTION 6.07 | Rights of Holders to Receive Payment | 75 | |
SECTION 6.08 | Compliance Certificate | 75 | |
SECTION 6.09 | Collection Suit by Trustee | 76 | |
SECTION 6.10 | Trustee May File Proofs of Claim | 76 | |
SECTION 6.11 | Restoration of Rights and Remedies | 76 | |
SECTION 6.12 | Undertaking for Costs | 76 | |
SECTION 6.13 | Rights and Remedies Cumulative | 77 | |
SECTION 6.14 | Delay or Omission Not Waiver | 77 | |
SECTION 6.15 | Waiver of Stay, Extension or Usury Laws | 77 | |
ARTICLE VII THE TRUSTEE | 77 | ||
SECTION 7.01 | General | 77 | |
SECTION 7.02 | Certain Rights of Trustee | 78 | |
SECTION 7.03 | Individual Rights of Trustee | 81 | |
SECTION 7.04 | Trustee’s Disclaimer | 81 | |
SECTION 7.05 | Notice of Default | 81 | |
SECTION 7.06 | Compensation and Indemnity | 82 | |
SECTION 7.07 | Replacement of Trustee | 82 | |
SECTION 7.08 | Successor Trustee by Consolidation, Merger, Conversion or Transfer | 83 | |
SECTION 7.09 | Money Held in Trust | 83 | |
SECTION 7.10 | Appointment of Co-Trustee | 83 | |
ARTICLE VIII DEFEASANCE AND DISCHARGE | 84 | ||
SECTION 8.01 | Defeasance and Discharge of Indenture | 84 |
SECTION 8.02 | Covenant Defeasance | 85 | |
SECTION 8.03 | Use of Proceeds | 86 | |
SECTION 8.04 | Repayment to Company | 87 | |
SECTION 8.05 | Reinstatement | 87 | |
ARTICLE IX AMENDMEN TS, SUPPLEMEN TS AND WAIVERS | 87 | ||
SECTION 9.01 | Amendments Without Consent of Holders | 87 | |
SECTION 9.02 | Amendments With Consent of Holders | 88 | |
SECTION 9.03 | Effect of Consent | 90 | |
SECTION 9.04 | Trustee’s Rights and Obligations | 90 | |
ARTICLE X SUBSIDIARY GUARANTEES | 90 | ||
SECTION 10.01 | The Subsidiary Guarantees | 90 | |
SECTION 10.02 | Guarantee Unconditional | 91 | |
SECTION 10.03 | Discharge; Reinstatement | 91 | |
SECTION 10.04 | Waiver by the Subsidiary Guarantors | 91 | |
SECTION 10.05 | Subrogation and Contribution | 92 | |
SECTION 10.06 | Stay of Acceleration | 92 | |
SECTION 10.07 | Limitation on Amount of Subsidiary Guarantee | 92 | |
SECTION 10.08 | Ranking of Subsidiary Guarantees | 92 | |
SECTION 10.09 | Further Subsidiary Guarantors | 92 | |
SECTION 10.10 | Execution and Delivery of Guarantee | 93 | |
SECTION 10.11 | Release of the Subsidiary Guarantees | 93 | |
ARTICLE XI PARENT GUARANTEE | 94 | ||
SECTION 11.01 | The Parent Guarantee | 94 | |
SECTION 11.02 | Guarantee Unconditional | 94 | |
SECTION 11.03 | Discharge; Reinstatement | 94 | |
SECTION 11.04 | Waiver by the Parent Guarantor | 95 | |
SECTION 11.05 | Subrogation and Contribution | 95 | |
SECTION 11.06 | Stay of Acceleration | 95 | |
SECTION 11.07 | Ranking of Parent Guarantee | 95 | |
SECTION 11.08 | Execution and Delivery of Guarantee | 95 | |
SECTION 11.09 | Release of the Parent Guarantee | 95 | |
ARTICLE XII SECURITY | 96 | ||
SECTION 12.01 | Security | 96 | |
SECTION 12.02 | Security Granted After Issue Date | 96 | |
SECTION 12.03 | Intercreditor Agreement | 97 | |
SECTION 12.04 | Collateral Agent and Intercreditor Agent | 97 | |
SECTION 12.05 |
Resignation and Removal of Collateral Agent; Appointment of Successor Collateral Agent
|
98 | |
SECTION 12.06 | Authorization of Actions to Be Taken | 99 | |
SECTION 12.07 | Release of Collateral | 100 | |
SECTION 12.08 | Payment | 100 | |
ARTICLE XIII MISCELLANEOUS | 101 | ||
SECTION 13.01 | Ranking | 101 |
SECTION 13.02 | [Reserved] | 101 | |
SECTION 13.03 | Notices | 101 | |
SECTION 13.04 | Certificate and Opinion as to Conditions Precedent | 102 | |
SECTION 13.05 | Statements Required in Certificate or Opinion | 103 | |
SECTION 13.06 | Payment Date Other Than a Business Day | 103 | |
SECTION 13.07 | Governing Law, Consent to Jurisdiction; Waiver of Immunities | 103 | |
SECTION 13.08 | No Adverse Interpretation of Other Agreements | 104 | |
SECTION 13.09 | Successors | 104 | |
SECTION 13.10 | Duplicate Originals | 104 | |
SECTION 13.11 | Separability | 104 | |
SECTION 13.12 | Table of Contents and Headings | 105 | |
SECTION 13.13 |
No Personal Liability of Incorporators, Stockholders, Members, Officers, Directors, or Employees
|
105 |
EXHIBITS | ||
EXHIBIT A | Form of Note | |
EXHIBIT A |
Form
of
Transfer
Certificate
for
transfer
from
Restricted
Global
Note
to
Regulation
S
Global
Note
|
|
EXHIBIT C
|
Form
of
Transfer
Certificate
for
transfer
from
Regulation
S
Global
Note
to
Restricted
Global
Note
|
|
EXHIBIT D
|
Form
of
Exchange
Certificate
for
exchange
of
Regulation
S
Global
Note
for
Restricted
Global
Note
|
|
EXHIBIT E
|
Form
of
Transfer
Certificate
for
transfer
from
Certificated
Note
to
Certificated
Note
|
|
EXHIBIT F | Form of Authorization Certificate | |
EXHIBIT G | Form of Supplemental Indenture | |
EXHIBIT H | Trustee, Paying Agent and Transfer Agent and Registrar | |
SCHEDULE I | Guarantors | |
SCHEDULE II | Certain Terms of the Intercreditor Agreement |
(a)
|
subject to the exclusion contained in clause (5) below, the Parent Guarantor’s equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Parent Guarantor or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (3) below); and
|
(b)
|
the Parent Guarantor’s equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income to the extent funded with cash or other assets of the Parent Guarantor or Restricted Subsidiaries;
|
(1)
|
any direct or indirect advance, loan or other extension of credit to another Person;
|
(2)
|
any capital contribution to another Person (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others);
|
(3)
|
any purchase or acquisition of Capital Stock (or options, warrants or other rights to acquire such Capital Stock), Indebtedness, bonds, notes, debentures or other similar instruments or securities issued by another Person; or
|
(4)
|
any guarantee of any obligation of another Person.
|
(1)
|
Mr. Jie Han;
|
(2)
|
any Affiliate (other than an Affiliate as defined in clause (2) of the definition of Affiliate) of the Person specified in clause (1) of this definition;
|
(3)
|
the estate or trust of the Person specified in clause (1) of this definition or the legal representative thereof; and
|
(4)
|
any Person both the Capital Stock and the Voting Stock of which (or in the case of a trust, the beneficial interests in which) are owned 80% or more by one or more of the Persons specified in clauses (1), (2) and (3) of this definition.
|
Year
|
Redemption
Price
|
2017
|
105.875%
|
2018
|
102.938%
|
(1)
|
Section 4.06;
|
(2)
|
Section 4.07;
|
(3)
|
Section 4.09;
|
(4)
|
Section 4.10;
|
(5)
|
Section 4.11;
|
(6)
|
Section 4.12;
|
(7)
|
Section 4.14; and
|
(8)
|
Section 4.16.
|
(vii)
|
no Rating Decline shall have occurred.
|
FAVOR
SEA LIMITED
as Issuer
|
|||
|
By:
|
/s/ JIE HAN | |
Name: JIE HAN | |||
Title: Chairman and CEO | |||
CHINA XD PLASTICS COMPAY LIMITED
as Parent Guarantor
|
|||
|
By:
|
/s/ JIE HAN | |
Name: JIE HAN | |||
Title: Chairman and CEO | |||
XINDA HOLDING (HK) COMPANY LIMITED
as Subsidiary Guarantor
|
|||
|
By:
|
/s/ JIE HAN | |
Name: JIE HAN | |||
Title: Chairman and CEO | |||
*
|
Insert for Global Notes.
|
FAVOR SEA LIMITED
|
||
By: ________________________________
|
||
Name:
Title:
|
CITICORP INTERNATIONAL LIMITED, AS TRUSTEE
|
||
By: ________________________________
|
||
Authorized Officer
|
2.
|
Indenture; Guarantee.
|
3.
|
Optional Redemption.
|
Period
|
Re
de
mption
Price
|
2017
|
105.875%
|
2018
|
102.938%
|
4.
|
Registered Form; Denominations; Transfer; Exchange.
|
5.
|
Defaults and Remedies.
|
6.
|
Amendment and Waiver.
|
7.
|
Authentication.
|
8.
|
Governing Law.
|
9.
|
Abbreviations.
|
Please print or typewrite name and address including zip code of assignee
|
the within Note and all rights thereunder, hereby irrevocably constituting and appointing |
|
attorney to transfer said Note on the books of the Company with full power of substitution in the premises. |
o |
(a)
|
this Note is being transferred to the Company or a subsidiary thereof;
|
o |
(b)
|
this Note is being transferred pursuant to and in accordance with Rule 144A under the U.S. Securities Act of 1933, as amended (the “
Securities
Act
”) and, accordingly, the undersigned does hereby further certify that this Note is being transferred to a Person that the undersigned reasonably believes is purchasing this Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States. Upon consummation of the proposed transfer, the Note will continue to be subject to the restrictions on transfer enumerated in the Restricted Notes Legend, the Indenture and the Securities Act;
|
o |
(c)
|
this Note is being transferred pursuant to and in accordance with Regulation S (and if the transfer is being made prior to the expiration of the Distribution Compliance Period, the Notes shall be held immediately thereafter through Euroclear or Clearstream) and:
|
(A)
|
the offer of this Note was not made to a Person in the United States;
|
(B)
|
either:
|
(i)
|
at the time the buy order was originated, the transferee was outside the United States or the undersigned and any person acting on its behalf reasonably believed that the transferee was outside the United States, or
|
(ii)
|
the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the undersigned nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States;
|
(C)
|
no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;
|
(D)
|
the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and
|
(E)
|
upon consummation of the proposed transfer, the Note will continue to be subject to the restrictions on transfer enumerated in the Regulation S Legend, the Indenture and the Securities Act.
|
o |
(d)
|
this Note is being transferred in a transaction permitted by Rule 144 under the Securities Act
|
o |
(e)
|
this Note is being transferred pursuant to an effective registration statement under the Securities Act; or
|
o |
(f)
|
the undersigned did not purchase this Note as part of the initial distribution thereof and the transfer is being effected pursuant to and in accordance with an applicable exemption (other than (a) through (d) above) from the registration requirements under the Securities Act and the undersigned has delivered to the Trustee such additional evidence that the Company or the Trustee may require as to compliance with such available exemption.
|
|
3
|
Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Trustee, which requirements include membership or participation in the Securities Transfer Association Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the United States Se curities Exchange Act of 1934, as amended.
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Date |
Amount of decrease in aggregate principal
amount of Notes
|
Amount of increase in aggregate principal
amount of Notes
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Outstanding Balance | Signature |
CHINA XD PLASTICS COMPANY LIMITED as Parent Guarantor
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By: ________________________________
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Name:
Title:
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By:
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Name:
Title:
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By:
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|
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Name:
Title:
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|
o
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it is not a dealer (as defined in the Securities Act) and is a non-U.S. person (within the meaning of Regulation S under the Securities Act of 1933); or
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o
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it is not a dealer (as defined in the Securities Act) and is a U.S. person (within the meaning of Regulation S under the Securities Act of 1933) who purchased interests in the Notes pursuant to an exemption from, or in a transaction not subject to, the registration requirements under the Securities Act of 1933; or
|
o
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it is a dealer (as defined in the Securities Act) and its interest in this Note does not constitute the whole or a part of an unsold allotment to or subscription by it for the Notes.
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By:
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|
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Name:
Title:
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Re:
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Favor Sea Limited
11.75
% Guaranteed Senior Notes due 2019
|
(1)
|
the Surrendered Notes are being transferred to the Issuer;
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(2)
|
the Surrendered Notes are being transferred pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the “Securities Act”) and, accordingly, the Transferor does hereby further certify that the Surrendered Notes are being transferred to a person that the Transferor reasonably believes is purchasing the Surrendered Notes for its own account, or for one or more accounts with respect to which such person exercises sole investment discretion, and such person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act, in each case in a transaction meeting the requirements of Rule 144A under the Securities Act and in accordance with any applicable securities laws of any state of the United States;
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(3)
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the Surrendered Notes are being transferred pursuant to and in accordance with Regulation S under the Securities Act (“
R
e
g
u
l
a
t
i
on
S
”) and:
|
(A)
|
the offer of the Surrendered Notes was not made to a person in the United States;
|
(B)
|
either:
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(i)
|
at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed that the transferee was outside the United States, or
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(ii)
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the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on its behalf knows that the transaction was prearranged with a buyer in the United States;
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(C)
|
no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and
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(D)
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the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act;
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(4)
|
the Surrendered Notes are being transferred in a transaction permitted by Rule 144 under the Securities Act;
|
(5)
|
the Transferor is not the Initial Purchaser of the Surrendered Notes and the transfer is being effected pursuant to and in accordance with an applicable exemption (other than (1) through (4) above) from the registration requirements under the Securities Act and the Transferor has delivered to the Trustee such additional evidence that the Issuer or the Trustee may require as to compliance with such available exemption.
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By:
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Name:
Title:
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Name | Company | Title | Signature | |||
[FAVOR SEA LIMITED
for
itself
and
on
behalf
of
all
the
Guarantors
*
|
||
By: ________________________________
|
||
Name:
Title:
|
CITICORP INTERNATIONAL LIMITED,
as Trustee
|
||
By: ________________________________
|
||
Name:
Title:
|
CITICORP INTERNATIONAL LIMITED,
as Collateral Agent
|
||
By: ________________________________
|
||
Name:
Title:
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[New Guarantor]
|
||
By: ________________________________
|
||
Name:
Title:
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(1)
|
I have reviewed this Annual Report on Form 10-K of China XD Plastics Company Limited, for the year ended December 31, 2013.
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(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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(4)
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
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d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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(5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Jie Han
|
||
Name:
|
Jie Han
|
|
Title:
|
Chief Executive Officer
(Principal Executive Officer)
|
|
(1)
|
I have reviewed this Annual Report on Form 10-K of China XD Plastics Company Limited, for the year ended December 31, 2013.
|
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Taylor Zhang
|
||
Name:
|
Taylor Zhang
|
|
Title:
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
(1)
|
the Report fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Jie Han
|
||
Name:
|
Jie Han
|
|
Title:
|
Chief Executive Officer
(Principal Executive Officer)
|
|
/s/ Taylor Zhang
|
||
Name:
|
Taylor Zhang
|
|
Title:
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|