STOCK PLEDGE AGREEMENT
STOCK
PLEDGE AGREEMENT
(this
“Agreement”),
dated
August 2, 2007 by and between Xxxx Xx Hua (“Pledgor”);
the
Lenders identified on Schedule A hereto (collectively, “Pledgee”);
and
the Collateral Agent;
WITNESSETH:
WHEREAS,
the
Pledgee will lend up to $2,000,000 to Ever-Glory International Group, Inc.,
a
Florida corporation (“Borrower”),
with
such loan to be evidenced by one or more promissory notes (“Note”);
and
WHEREAS,
Pledgor
is the President, Chief Executive Officer and Chairman of Borrower, and it
is to
his benefit and advantage that the loans be made and the Notes be issued;
and
WHEREAS,
in
order
to induce Pledgee to make the loan and accept the Note, the Pledgor has agreed
to secure all of the Borrower’s obligations under the Notes with the grant to
the Collateral Agent of a first priority security interest in 3,897 shares
of
Series A Preferred Stock (convertible into 30,000,000 shares of common stock)
of
the Borrower which is owned of record and beneficially controlled by the
Pledgor.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants herein contained, and
for
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties hereby agree as follows:
1. Definitions.
The
following terms shall have the following meanings wherever used in this
Agreement:
“Collateral
Agent”
shall
mean the person appointed pursuant to the Collateral Agent
Agreement.
“Collateral
Agent Agreement”
shall
mean the agreement dated at or about the date of this Agreement, entered into
by
the parties hereto, Borrower and the Collateral Agent pursuant to which the
Collateral Agent was appointed to act on behalf of the Pledgees.
“Event
of Default”
shall
have the meaning given thereto in the Notes.
“Obligations”
shall
mean all principal and interest and other payments which may be due and payable
under the Notes, whether upon stated maturity, by acceleration, or otherwise,
outstanding at any time and under this Agreement, and any other payment
obligation of the Borrower to the Pledgee pursuant to the “Transaction
Documents” as defined in the “Subscription Agreement” pursuant to which the
Notes are being issued.
“Pledged
Stock”
shall
mean in the aggregate, 3,897 shares of Series A Preferred Stock of the
Borrower.
“Satisfaction
Date”
shall
mean that date on which all of the Obligations have been paid or otherwise
satisfied in full.
1
2. Pledge
of the Pledged Stock/Additional Deposits.
(a) As
security for the due and timely payment and performance of all of the
Obligations, the Pledgor pledges to the Pledgees, and grants to the Pledgees
a
first priority lien and security interest in, all of the Pledged Stock (as
same
are constituted from time to time), together with all cash dividends, stock
dividends, interest, profits, premiums, redemptions, warrants, subscription
rights, options, substitutions, exchanges and other distributions now or
hereafter made on the Pledged Stock and all cash and non-cash proceeds thereof,
until the Satisfaction Date. The Pledged Stock and all property at any time
pledged to the Pledgee hereunder or in which the Pledgee is granted a security
interest (whether described herein or not) and all income therefrom and proceeds
thereof are herein included in the definition of Pledged Stock.
(b) In
furtherance of the pledge hereunder, the Pledgor is, concurrently herewith,
delivering to the Collateral Agent, the certificates representing all of the
Pledged Stock, each of which now remains in the name of the Pledgor and
accompanied by appropriate undated stock powers duly endorsed in blank by the
Pledgor bearing “medallion” signature guarantees.
(c) If,
while
this Agreement is in effect, the Pledgor becomes entitled to receive or receives
any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or issued in connection
with
any reorganization), option or rights whether as an addition to, in substitution
of, or in exchange for, any Pledged Stock or otherwise, the Pledgor agrees
to
accept the same as agent for the Collateral Agent, to hold the same in trust
on
behalf of and for the benefit of the Pledgee, and to deliver the same forthwith
to the Collateral Agent in the exact form received, with the endorsement of
the
Pledgor when necessary and/or appropriate undated “medallion” stock or other
powers duly executed in blank, to be held by the Collateral Agent, subject
to
the terms hereof, as additional collateral security for the Obligations. Any
sums paid on or in respect of the Pledged Stock on the liquidation or
dissolution of the Borrower shall be paid over to the Collateral Agent, to
be
held by the Collateral Agent, subject to the terms and conditions hereof, as
additional collateral security for the Obligations.
3. Retention
of the Pledged Stock.
(a) Except
as
otherwise provided herein, the Collateral Agent shall have no obligation with
respect to the Pledged Stock, except to use reasonable care in the custody
and
preservation thereof, to the extent required by law.
(b) The
Collateral Agent shall hold the Pledged Stock in the form in which same are
delivered herewith, unless and until there shall occur an Event of
Default.
4. Rights
of the Pledgor.
Throughout the term of this Agreement, so long as no Event of Default is uncured
and continuing, the Pledgor shall have the right to vote the Pledged Stock
in
all matters presented to the stockholders of the Borrower for vote thereon,
except in a manner inconsistent with the terms of this Agreement or detrimental
to the interests of the Pledgee.
5. Event
of Default; Power of Attorney.
(a) Upon
the
occurrence and during the continuance of any Event of Default beyond the
applicable cure period, the Collateral Agent shall have the right to: (i)
exercise all voting and corporate rights of, and all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining
to,
any Pledged Stock as if the Pledgee were the absolute owner thereof, including
(without limitation) the right to exchange, at its discretion, any and all
of
the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the Pledgor or upon the exercise
by
the Pledgor or the Collateral Agent of any right, privilege or option pertaining
to any of the Pledged Stock and, in connection therewith, to deposit and deliver
any and all of the Pledged Stock with any committee, depository, transfer agent,
registrar or other designated agency on such terms and conditions as the Pledgee
may determine, all without liability except to account for property actually
received by it; (ii) apply any funds or other property received in respect
of
the Pledged Stock to the Obligations, and receive in its own name any and all
further distributions which may be paid in respect of the Pledged Stock, all
of
which shall, upon receipt by the Collateral Agent, be applied to the
Obligations; (iii) transfer all or any portion of the Pledged Stock (as
determined by the Pledgee in its discretion) on the books of the Borrower to
and
in the name of the Collateral Agent or such other person or persons as the
Collateral Agent may designate; (iv) effect any sale, transfer or disposition
of
all or any portion of the Pledged Stock and in furtherance thereof, take
possession of and endorse any and all checks, drafts, bills of exchange, money
orders or other documents and instruments received on account of the Pledged
Stock; (v) collect, xxx for and give acquittance for any money due on account
of
any of the foregoing; and (vi) take any and all other action contemplated by
this Agreement, or as otherwise permitted by law, or as the Pledgee may
reasonably deem necessary or appropriate, in order to accomplish the purposes
of
this Agreement.
2
(b) In
furtherance of the foregoing powers of the Collateral Agent, the Pledgor hereby
authorizes and appoints the Collateral Agent, with full powers of substitution,
as the true and lawful attorney-in-fact of the Pledgor, in his name, place
and
xxxxx, to take any and all such action as the Collateral Agent, in its sole
discretion, may deem necessary or appropriate in furtherance of the exercise
of
the aforesaid powers specifically set forth in this Agreement. Such power of
attorney shall be coupled with an interest, and shall be irrevocable until
the
Satisfaction Date. Without limitation of the foregoing, such power of attorney
shall not in any manner be affected or impaired by reason of any act of the
Pledgor or by operation of law. Nothing herein contained, however, shall be
deemed to require or impose any duty upon the Collateral Agent to exercise
any
of the rights or powers granted herein.
(c) The
foregoing rights and powers granted to the Collateral Agent, and the foregoing
power of attorney, shall be fully binding upon any person who may acquire any
beneficial interest in any of the Pledged Stock or any other property held
or
received by the Collateral Agent hereunder.
6. Foreclosure;
Sale of Pledged Stock.
(a) Without
limitation of paragraph 5 above, in the event that the Collateral Agent shall
make any sale or other disposition of any or all of the Pledged Stock pursuant
to the terms of this Agreement, the Collateral Agent may also:
(i) offer
and
sell all or any portion of the Pledged Stock publicly through a registered
broker-dealer, or by means of a private placement restricting the offer or
sale
to a limited number of prospective purchasers who meet such suitability
standards as the Collateral Agent and its counsel may deem appropriate, and
who
may be required to represent that they are purchasing Pledged Stock for
investment and not with a view to distribution;
(ii) sell
any
or all of the Pledged Stock upon credit or for future delivery, without being
in
any way liable for failure of the purchaser to pay for the subject Pledged
Stock; and
(iii)
receive
and collect the net proceeds of any sale or other disposition of any Pledged
Stock, and apply same in such order and to such of the Obligations (including
the customary costs and expenses of the sale or disposition of the Pledged
Stock) as the Collateral Agent may, in its absolute discretion, deem
appropriate.
3
(b) Upon
any
sale of any of the Pledged Stock in accordance with this Agreement, the
Collateral Agent shall have the right to assign, transfer and deliver the
subject Pledged Stock to the purchaser(s) thereof, and each such purchaser
shall
be entitled to hold such Pledged Stock absolutely free from any right or claim
of the Pledgor and/or any other person claiming any beneficial interest in
the
Pledged Stock, including any equity of redemption (which right and all other
such rights are hereby waived by the Pledgor to the fullest extent permitted
by
law).
(c) Following
the occurrence and during the existence of an Event of Default that has
continued beyond that applicable cure period, Pledgor and Borrower will
cooperate and provide such certificate, resolutions, representations, legal
opinions and all other matters necessary to facilitate a transfer or sale of
any
part of the Pledged Stock pursuant to Rule 144. Pledgor and Borrower are unaware
of any impediment to the resale of the Pledged Stock in reliance on Rule 144
by
the Pledgee upon an Event of Default. Pledgor and Borrower will not take any
action that would impede or limit the Collateral Agent’s ability to sell all the
Pledged Stock upon an Event of Default, pursuant to Rule 144. For so long as
any
Pledged Stock is subject to this Agreement, the Pledgor will not sell any
security of Borrower which sale would or could be aggregated with sales by
the
Collateral Agent or Pledgee pursuant to Rule 144. Borrower shall issue
instructions to its transfer agent to comply with the foregoing sentence.
Borrower will not permit the transfer of any security of Borrower if such
transfer would or could aggregate for purposes of Rule 144 with sales of the
Pledged Stock by the Pledgor or any sales of the Pledged Stock. Pledgor
represents and warrants that he has not sold any security of Borrower during
the
ninety (90) days prior to the date of this Agreement. Borrower acknowledges
that
upon transfer of the Pledged Stock to the Collateral Agent or other transferee,
the Collateral Agent’s holding period under subsections (d) and (k) of Rule 144
may be “tacked” with the Pledgor’s holding period. Pledgor and Borrower further
represent that the Notes were issued in a bona fide
loan
transaction. Schedule A hereto sets forth the holding periods of the components
of the Pledged Stock as calculated pursuant to Rule 144.
(d) Nothing
herein contained shall be deemed to require the Collateral Agent to effect
any
sale or disposition of any Pledged Stock at any time, or to consummate any
proposed public or private sale at the time and place at which same was
initially called. It is the intention of the parties hereto that the Collateral
Agent shall, subject to any further conditions imposed by this Agreement, at
all
times following the occurrence of an Event of Default, have the right to use
or
deal with the Pledged Stock as if the Collateral Agent were the outright owner
thereof, and to exercise any and all rights and remedies, as a secured party
in
possession of collateral or otherwise, under any and all provisions of
law.
(e) The
Collateral Agent may take action and exercise rights in connection with any
portion of the Pledged Stock regardless of the existence of any other security
for the Obligations.
7. Covenants,
Representations and Warranties.
In
connection with the transactions contemplated by this Agreement, and knowing
that the Pledgee and Collateral Agent are and shall be relying hereon, the
Pledgor hereby covenants, represents and warrants that:
(a) the
Pledged Stock has been and will be duly and validly issued, is and will be
fully
paid and non-assessable, and is and will be owned by the Pledgor free and clear
of any and all restrictions, pledges, liens, encumbrances or other security
interests of any kind, save and except for the pledge to the Collateral Agent
pursuant to this Agreement;
4
(b) there
are
and will be no options, warrants or other rights in respect of the sale,
transfer or other disposition of any of the Pledged Stock by the Pledgor, and
the Pledgor has the absolute right to pledge the Pledged Stock hereunder without
the necessity of any consent of any Person;
(c) neither
the execution or delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor the compliance with or performance of
this
Agreement by the Pledgor, conflicts with or will result in the breach or
violation of or a default under the terms, conditions or provisions of (i)
any
mortgage, security agreement, indenture, evidence of indebtedness, loan or
financing agreement, or other agreement or instrument to which the Pledgor
is a
party or by which the Pledgor is bound, or (ii) any provision of law, any order
of any court or administrative agency, or any rule or regulation applicable
to
the Pledgor;
(d) this
Agreement has been duly executed and delivered by the Pledgor, and constitutes
the legal, valid and binding obligation of the Pledgor, enforceable against
the
Pledgor in accordance with its terms;
(e) there
are
no actions, suits or proceedings pending or threatened against or affecting
the
Pledgor that involve or relate to the Pledged Stock; and
(f) upon
execution and performance of this Agreement by Pledgor, the Pledgee shall have
the senior security interest in the Pledged Stock.
8. UCC
Filings.
Pledgor
hereby grants to Collateral Agent the right and authority to file UCC Financing
Statements in Florida and any other jurisdiction in the sole discretion of
Pledgee to memorialize the security interest herein granted.
9. Return
of the Pledged Stock.
(a) So
long
as an Event of Default has not occured, at such time as (i) all amounts payable
on the Notes and pursuant to the Transaction Documents have been reduced to
$1,000,000 or less; and (ii) the average daily closing price of the Pledged
Stock as reported by Bloomberg LP for the principal market, for the 30 trading
days prior to the Request Date is higher than $0.29, then the Pledgor may
request of the Collateral Agent and the Pledgee that the Collateral Agent return
to Pledgor and irrevocably release from collateral, 1,948 shares of Series
A
Preferred Stock (or the proportionate shares resulting from the conversion
thereof). The day on which the Pledgor makes such request is the Request
Date.
Upon
confirmation by the Pledgee to the Collateral Agent that the above two
conditions have been met, Collateral Agent will then return the collateral
to be
released pursuant to this Section 9(a) to the Pledgor.
(b)
To
the
extent that the Collateral Agent shall not previously have taken, acquired,
sold, transferred, disposed of or otherwise realized value on the Pledged Stock
in accordance with this Agreement, on the date on which the Obligations have
been indefeasibly discharged (by payment in cash or conversion of Notes to
common stock, as applicable) (the “Satisfaction Date”), any remaining security
interest in the Pledged Stock shall automatically terminate, cease to exist
and
be released, and the Collateral Agent shall forthwith return any remaining
Pledged Stock and irrevocably release such shares from collateral.
10. Expenses
of the Pledgee.
All
expenses incurred by the Collateral Agent (including but not limited to
reasonable attorneys’ fees) in connection with any actual or attempted sale or
other disposition of Pledged Stock hereunder shall be reimbursed to the
Collateral Agent by the Pledgor and Borrower (jointly and severally) on demand,
or, at the Pledgee’s option, such expenses may be added to the Obligations and
shall be payable on demand.
5
11. Further
Assurances.
From
time to time hereafter, each party shall take any and all such further action,
and shall execute and deliver any and all such further documents and/or
instruments, as any other party may request in order to accomplish the purposes
of and fulfill the parties’ obligations under this Agreement, in order to enable
the Collateral Agent to exercise any of its rights hereunder, and/or in order
to
secure more fully the Collateral Agent’s interest in the Pledged
Stock.
12.
Termination.
This
Agreement shall terminate on the Satisfaction Date, except that the parties’
obligations under Section 9 shall survive until performed.
13. Miscellaneous.
(a) All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery
by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
| To Pledgor: | Xx. Xxxx Xx Xxx
000
X. Xxxxxxxx Xxx # 000
Xxxx
Xxxxxx, XX 00000,
Attn:
Xxxxxx Xxxx
Fax:
(000)000-0000
|
| With a copy by fax to: |
Xxxxx
X. Xxxx, Esq.
Xxxxxxxxxx
& Xxxxx LLP
00000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx
Xxxxxxx, XX 00000
Fax:
(000) 000-0000
|
| To Pledgees: |
To
the addresses and fax numbers set forth
on
Schedule A
|
| To the Collateral Agent: | Xxxxxxx Xxxx
000
Xxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxx, XX 00000
Fax
(000) 000-0000
|
6
| With a copy by fax to: | Grushko & Xxxxxxx, P.C.
000
Xxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxx, Xxx Xxxx 00000
Fax:
(000) 000-0000
|
(b) If
any
notice to Pledgor of the sale or other disposition of Pledged Stock is required
by then applicable law, five (5) business days prior written notice (which
Pledgor agrees is reasonable notice within the meaning of Section 9-504(3)
of
the Uniform Commercial Code) to Pledgor of the time and place of any sale of
Pledged Stock which Pledgor agrees may be by private sale. The rights granted
in
this Section are in addition to any and all rights available to Pledgee under
the Uniform Commercial Code.
(c) The
laws
of the State of New York including but not limited to Article 9 of the Uniform
Commercial Code as in effect from time to time, shall govern the construction
and enforcement of this Agreement and the rights and remedies of the parties
hereto. The parties hereby consent to the exclusive jurisdiction of all courts
sitting in the State and County of New York, in connection with any action
or
proceeding under or relating to this Agreement, and waive trial by jury in
any
such action or proceeding.
(d) This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns. The Pledgor shall not,
however, assign any of its or his rights or obligations hereunder without the
prior written consent of the Pledgee, and the Pledgee and Collateral Agent
shall
not assign its rights hereunder without simultaneously assigning thier
obligations hereunder to the subject assignee. Except as otherwise referred
to
herein, this Agreement, and the documents executed and delivered pursuant
hereto, constitute the entire agreement between the parties relating to the
specific subject matter hereof.
(e) Neither
any course of dealing between the Pledgor and the Collateral Agent and/or
Pledgee nor any failure to exercise, or any delay in exercising, on the part
of
the Collateral Agent and/or Pledgee, any right, power or privilege hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise
of
any right, power or privilege operate as a waiver of any other exercise of
such
right, power or privilege or any other right, power or privilege.
(f) The
Collateral Agent and Pledgee’s rights and remedies, whether hereunder or
pursuant to any other agreements or by law or in equity, shall be cumulative
and
may be exercised singly or concurrently.
(g) No
change, amendment, modification, waiver, assignment of rights or obligations,
cancellation or discharge hereof, or of any part hereof, shall be valid unless
the Pledgee shall have consented thereto in writing.
(h) The
captions and paragraph headings in this Agreement are for convenience of
reference only, and shall not in any way define, limit or describe the
construction, terms or provisions of this Agreement.
(i) If
any
provision of this Agreement is held invalid or unenforceable, either in its
entirety or by virtue of its scope or application to given circumstances, such
provision shall thereupon be deemed modified only to the extent necessary to
render same valid, or not applicable to given circumstances, or excised from
this Agreement, as the situation may require, and this Agreement shall be
construed and enforced as if such provision had been included herein as so
modified in scope or application, or had not been included herein, as the case
may be.
7
(j) All
of
the rights granted to the Pledge hereunder will be exercised by the Collateral
Agent on behalf of Pledgee, pursuant to the Collateral Agent
Agreement.
(k) This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but
one
and the same instrument. This Agreement may be executed by facsimile signature
and delivered by facsimile transmission.
[Remainder
of Page Left Blank Intentionally]
8
IN
WITNESS WHEREOF,
the
parties hereto have executed this Stock Pledge Agreement on and as of the date
first set forth above.
PLEDGOR:
______________________________________
Yi
Xxx
Xxxx
PLEDGEE:
|
CHESTNUT RIDGE PARTNERS L.P.
____________________________
By:
Its:
|
ALPHA CAPITAL ANSTALT
____________________________
By:
Its:
|
|
WHALEHAVEN CAPITAL FUND LIMITED
____________________________
By:
Its:
|
XXXXXX X. XXXXXXXXX
____________________________
By:
Its:
|
|
XXXXXXXX XXXXXXXXX
____________________________
By:
Its:
|
XXXXX XXXX
____________________________
By:
Its:
|
|
COLLATERAL AGENT:
____________________________
|
|
ACKNOWLEDGEMENT:
Ever-Glory
International Group, Inc. acknowledge
and agrees to be bound by the terms of Section 5(d) of this Stock Pledge
Agreement and will not take or allow any action contrary to the terms of this
Stock Pledge Agreement that would impair the value of the Pledged Stock or
Pledgees’ interests therein.
| |
|
|
| By: | ||
|
Xxx Xxx |
||
| Chief Financial Officer | ||
9
SCHEDULE
A
|
Lender
|
Note
Principle
|
Warrants
|
|||||
|
Chestnut
Ridge Partners L.P.
00
Xxxx Xxxx.
Xxxxxxxxx
Xxxx , X. J. 07677
Attn:
Xxxxxxx Xxxx CFO
Fax:
(000) 000-0000
|
$
|
1,300,000
|
5,909,091
|
||||
|
Alpha
Capital Anstalt
Pradafant
7
9490
Furstentums
Vaduz,
Lichtenstein
Fax:
000-00-00000000
|
$
|
250,000
|
1,136,364
|
||||
|
Whalehaven
Capital Fund Limited
c/o
FWS Capital Ltd.
0xx
Xxxxx, 00 Xxx-Xxxxxxx Xxxx
Xxxxxxxx,
Xxxxxxx XX00
Fax:
(000) 000-0000
|
$
|
250,000
|
1,136,364
|
||||
|
Xxxxxx
X. Xxxxxxxxx
000
Xxxxxx Xxx.
Xxxxxxxx
, Xxx Xxxxxx 00000
Fax:
(000) 000-0000
|
$
|
100,000
|
454,545
|
||||
|
Xxxxxxxx
Xxxxxxxxx
000
Xxxxxx Xxxxxx
Xxx
Xxxxxxx , XX 00000
Fax:
(000) 000-0000
|
$
|
50,000
|
227,273
|
||||
|
Xxxxx
Xxxx
000
Xxxxxx Xx
Xxxxxxxxx,
XX 00000
Fax:
(000)000-0000
|
$
|
50,000
|
227,273
|
||||
10
