PLEDGE AGREEMENT
PLEDGE
AGREEMENT (this
"Agreement"),
dated
as of December 13, 2007, made by Zuo Xxxxx Xx, an individual with a principal
place of business at x/x Xxxxxxx Xxxxx Xxxxxxxx, Xxx., Xxxx 0000, Kun Tai
International Mansion Building, Yi No 12, Xxxx Xxxx Men Xxx Ave., Xxxx Xxxx
Xxxxxxxx, Xxxxxxx 000000, Xxxxxx'x Xxxxxxxx of China (the "Pledgor"),
in
favor of Xxxxxx Bay Fund LP, a limited partnership organized under the laws
of
the state of Delaware, in its capacity as collateral agent (in such capacity,
the "Collateral
Agent")
for
the "Buyers" (as defined below) party to the Securities Purchase Agreement,
dated as of even date herewith (as amended, restated or otherwise modified
from
time to time, the "Securities
Purchase Agreement").
W I T N E S S E T H:
WHEREAS,
General Steel Holdings, Inc., a Nevada corporation (the "Company")
and
each party listed as a "Buyer" on the Schedule of Buyers attached to the
Securities Purchase Agreement (collectively, with all successors and assigns,
the "Buyers")
are
parties to the Securities Purchase Agreement, pursuant to which the Company
has
agreed to sell, and the Buyers has agreed to purchase, the “Notes” (as defined
therein);
WHEREAS,
the Pledgor as a major shareholder of the Company has agreed to pledge the
Pledged Collateral (as defined below) to secure all of the Secured Obligations
(as defined below) ;
WHEREAS,
it is a condition precedent to the Buyers purchasing the Notes that the Pledgor
shall have executed and delivered to the Collateral Agent for the benefit of
the
Buyers this Agreement;
NOW,
THEREFORE, in consideration of the premises and the agreements herein and in
order to induce Buyers to purchase the Notes, the Pledgor agrees with the
Collateral Agent as follows:
SECTION
1. Definitions
and Rules of Interpretation.
(a) Definitions.
Reference is made to the Securities Purchase Agreement and the Notes for a
statement of terms thereof. All terms used in this Agreement which are defined
in the Securities Purchase Agreement or the Notes or in Article 8 or Article
9
of the Uniform Commercial Code as in effect from time to time in the State
of
New York (the "Code")
and
which are not otherwise defined herein shall have the same meanings herein
as
set forth therein; provided,
that
terms used herein which are defined in the Code as in effect in the State of
New
York on the date hereof shall continue to have the same meaning notwithstanding
any replacement or amendment of such statute except as the Collateral Agent
may
otherwise determine. In the event that any such term is defined in both the
Securities Purchase Agreement, the Notes and the Code, the definition of such
term in the Securities Purchase Agreement or the Notes shall
control.
(b) Rules
of Interpretation.
Except
as otherwise expressly provided in this Agreement, the following rules of
interpretation apply to this Agreement: (i) the singular includes the plural
and
the plural includes the singular; (ii) “or” and “any” are not exclusive and
“include” and “including” are not limiting; (iii) a reference to any agreement
or other contract includes permitted supplements and amendments; (iv) a
reference to a law includes any amendment or modification to such law and any
rules or regulations issued thereunder; (v) a reference to a person includes
its
permitted successors and assigns; and (vi) a reference in this Agreement to
an
Article, Section, Annex, Exhibit or Schedule is to the Article, Section, Annex,
Exhibit or Schedule of this Agreement.
SECTION
2. Pledge
and Grant of Security Interest. As collateral security for all of the
Secured Obligations (as defined in Section 3 hereof), the Pledgor hereby
pledges and assigns and grants to the Collateral Agent a continuing security
interest in, and Lien on, all of his right, title and interest in and to the
following (collectively, the "Pledged
Collateral"):
(a) The
Pledgor’s shares of common stock of the Company as set forth in Schedule
I
(as such
Schedule is amended from time to time in accordance with the terms hereof),
and
all future, issued and outstanding shares of capital stock, or other equity
or
investment securities of, or partnership, membership, or joint venture interests
in, the Company that are required to be pledged from time to time in accordance
with the terms hereof including without limitation, any Additional Pledged
Shares required to be pledged in accordance with Section 4(a) of this Agreement,
whether now owned or hereafter acquired by the Pledgor and whether or not
evidenced or represented by any stock certificate, certificated security or
other instrument, together with the certificates representing such equity
interests, all options and other rights, contractual or otherwise, in respect
thereof and all dividends, distributions, cash, instruments, investment property
and any other property (including, but not limited to, any stock dividend and
any distribution in connection with a stock split) from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all
of the foregoing and all cash and noncash proceeds thereof (collectively, the
"Pledged
Shares");
(b) all
present and future increases, profits, combinations, reclassifications, and
substitutes and replacements for all or part of the foregoing Collateral
heretofore described;
(c) all
investment property, financial assets, securities, capital stock, other equity
interests, stock options and commodity contracts of the Pledgor, all notes,
debentures, bonds, promissory notes or other evidences of indebtedness payable
or owing to the Pledgor, and all other assets now or hereafter received or
receivable with respect to the foregoing;
(d) all
securities entitlements of the Pledgor in any and all of the foregoing;
and
(e) all
proceeds (including proceeds of proceeds) of any and all of the
foregoing;
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in
each
case, whether now owned or hereafter acquired by the Pledgor and howsoever
his
interest therein may arise or appear (whether by ownership, security interest,
Lien, claim or otherwise).
SECTION
3. Security
for Secured Obligations. The security interest created hereby in the Pledged
Collateral constitutes continuing collateral security for the prompt payment
and
due performance and observance of all of the following Secured Obligations
(the
"Secured
Obligations"):
(a) all
liabilities, obligations, or undertakings owing by the Company to the Collateral
Agent or the Buyers of any kind or description arising out of or outstanding
under, advanced or issued pursuant to, or evidenced by the Securities Purchase
Agreement, the Notes or any of the other Transaction Documents, and
(b) all
liabilities, obligations, or undertakings owing by Pledgor to the Collateral
Agreement or the Buyers under this Agreement, in each case with respect to
the
foregoing liabilities, obligations or undertakings, irrespective of whether
for
the payment of money, whether direct or indirect, absolute or contingent,
liquidated or unliquidated, determined or undetermined, due or to become due,
voluntary or involuntary, whether now existing or hereafter arising, and
including all interest, costs, indemnities, fees (including attorneys fees),
and
expenses (including interest, costs, indemnities, fees, and expenses that,
but
for the provisions of the Bankruptcy Code, would have accrued irrespective
of
whether a claim therefor is allowed) and any and all other amounts which Company
or Pledgor is required to pay pursuant to any of the foregoing, by law, or
otherwise.
SECTION
4. Delivery
of the Pledged Collateral.
(a) The
Market Price (as defined in the Notes) of the Pledged Shares, as determined
by
the Collateral Agent in its sole discretion based on the thirty (30) day Volume
Weighted Average (as defined in the Notes) of the Common Stock for the thirty
(30) Trading Days (as defined in the Notes) immediately preceding the date
of
determination (the "Pledged
Share Value"),
shall
at all times equal or exceed the aggregate principal amount outstanding under
the Notes (whether or not then due and payable). The Pledgor shall, within
five
business days following the receipt of notice from the Collateral Agent that
the
Pledged Share Value is less than the aggregate principal amount outstanding
under the Notes, deliver additional shares ("Additional
Pledged Shares")
to the
Collateral Agent in accordance with the terms of this Section
4
such
that the Pledged Share Value (taking into account the fair market value of
such
Additional Pledged Shares) shall be no less than the aggregate principal amount
outstanding under the Notes.
-3-
(b) All
certificates representing Pledged Shares on the date hereof shall be delivered
to the Collateral Agent or prior to the execution and delivery of this
Agreement. All other promissory notes, certificates and instruments constituting
Pledged Collateral from time to time or required to be pledged to the Collateral
Agent pursuant to the terms of this Agreement or the Securities Purchase
Agreement, including without limitation, any Additional Pledged Shares required
to be pledged in accordance with Section 4(a) above (collectively the
"Additional
Collateral")
shall
be delivered to the Collateral Agent promptly upon receipt thereof by or on
behalf of the Pledgor. All such promissory notes, certificates and instruments
shall be held by the Collateral Agent pursuant hereto and shall be delivered
in
suitable form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment or undated stock powers executed in blank,
all in form and substance reasonably satisfactory to the Collateral Agent.
If
any Pledged Collateral consists of uncertificated securities, unless the
immediately following sentence is applicable thereto, the Pledgor shall cause
the Collateral Agent (or its designated custodian, nominee or other designee)
to
become the registered holder thereof, or cause each issuer of such securities
to
agree that it will comply with instructions originated by the Collateral Agent
(or its designated custodian, nominee or other designee) with respect to such
securities without further consent by the Pledgor. If any Pledged Collateral
consists of securities entitlements, the Pledgor shall transfer such securities
entitlements to the Collateral Agent (or its designated custodian, nominee
or
other designee) or cause the applicable securities intermediary to agree that
it
will comply with entitlement orders by the Collateral Agent (or its designated
custodian, nominee or other designee) without further consent by the
Pledgor.
(c) Promptly
upon the receipt by the Pledgor of any Additional Collateral and
contemporaneously with any delivery of Additional Pledged Shares in accordance
with Section 4(a), a Pledge Amendment, duly executed by the Pledgor, in
substantially the form of Annex
I
hereto
(a "Pledge
Amendment"),
shall
be delivered to the Collateral Agent, in respect of the Additional Collateral
which is or are to be pledged pursuant to this Agreement and the Securities
Purchase Agreement, which Pledge Amendment shall from and after delivery thereof
constitute part of Schedule
I
hereto.
The Pledgor hereby authorizes the Collateral Agent to attach each Pledge
Amendment to this Agreement and agrees that all promissory notes, certificates
or instruments listed on any Pledge Amendment shall for all purposes hereunder
constitute Pledged Collateral and the Pledgor shall be deemed upon delivery
thereof to have made the representations and warranties set forth in
Section
6
with
respect to such Additional Collateral.
(d) If
the
Pledgor shall receive, by virtue of the Pledgor’s being or having been an owner
of any Pledged Collateral, any (i) stock certificate (including, without
limitation, any certificate representing a stock dividend or distribution in
connection with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock split, spin-off
or
split-off), promissory note or other instrument, (ii) option or right, whether
as an addition to, substitution for, or in exchange for, any Pledged Collateral,
or otherwise, (iii) dividends payable in cash (except such dividends
permitted to be retained by the Pledgor pursuant to Section
8
hereof)
or in securities or other property or (iv) dividends, distributions, cash,
instruments, investment property and other property in connection with a partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, the Pledgor shall receive such
stock certificate, promissory note, instrument, option, right, payment or
distribution in trust for the benefit of the Collateral Agent, shall segregate
it from the Pledgor’s other property and shall deliver it forthwith to the
Collateral Agent in the exact form received, with any necessary endorsement
and/or appropriate stock powers duly executed in blank, to be held by the
Collateral Agent as Pledged Collateral and as further collateral security for
the Secured Obligations.
-4-
SECTION
5. Taxes.
(a) All
payments made by the Pledgor hereunder or under any other Transaction Document
shall be made in accordance with the terms of the respective Transaction
Document and shall be made without set-off, counterclaim, deduction or other
defense. All such payments shall be made free and clear of and without deduction
for any present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding
taxes
imposed on the net income of any Buyer by the jurisdiction in which such Buyer
is organized or where it has its principal lending office (all such nonexcluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities,
collectively or individually, "Taxes").
If
the Pledgor shall be required to deduct or to withhold any Taxes from or in
respect of any amount payable hereunder or under any other Transaction
Document:
(i) the
amount so payable shall be increased to the extent necessary so that after
making all required deductions and withholdings (including Taxes on amounts
payable to any Buyer pursuant to this sentence) each Buyer receives an amount
equal to the sum it would have received had no such deduction or withholding
been made,
(ii) the
Pledgor shall make such deduction or withholding,
(iii) the
Pledgor shall pay the full amount deducted or withheld to the relevant taxation
authority in accordance with applicable law, and
(iv) as
promptly as possible thereafter, the Pledgor shall send the Buyers an official
receipt (or, if an official receipt is not available, such other documentation
as shall be satisfactory to the Collateral Agent, as the case may be) showing
payment. In addition, the Pledgor agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the execution,
delivery, registration or enforcement of, or otherwise with respect to, this
Agreement or any other Transaction Document (collectively, "Other
Taxes").
(b) The
Pledgor hereby indemnifies and agrees to hold the Collateral Agent and each
Buyer (each an "Indemnified
Party")
harmless from and against Taxes or Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under
this Section 5)
paid by
any Indemnified Party as a result of any payment made hereunder or from
the execution, delivery, registration or enforcement of, or otherwise with
respect to, this Agreement or any other Transaction Document, and any liability
(including penalties, interest and expenses for nonpayment, late payment or
otherwise) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. This indemnification
shall be paid within 30 days from the date on which the Collateral Agent or
such
Buyer makes written demand therefor, which demand shall identify the nature
and
amount of such Taxes or Other Taxes.
(c) If
the
Pledgor fails to perform any of its obligations under this Section 5,
the
Pledgor shall indemnify the Collateral Agent and each Buyer for any taxes,
interest or penalties that may become payable as a result of any such failure.
The obligations of the Pledgor under this Section 5
shall
survive the termination of this Pledge Agreement and the payment of the
Obligations and all other amounts payable hereunder.
-5-
SECTION
6. Representations
and Warranties. The Pledgor represents and warrants as follows:
(a) The
Pledged Shares have been duly authorized and validly issued, are fully paid
and
nonassessable and the holders thereof are not entitled to any preemptive first
refusal or other similar rights. All other shares of stock constituting Pledged
Collateral will be, when issued, duly authorized and validly issued, fully
paid
and nonassessable.
(b) The
Pledgor is and will be at all times the legal and beneficial owner of the
Pledged Collateral free and clear of any Lien, security interest, option or
other charge or encumbrance except for the security interest and Lien created
by
this Agreement or any Permitted Liens.
(c) The
exercise by the Collateral Agent of any of its rights and remedies hereunder
will not contravene any law or any contractual restriction binding on or
affecting the Pledgor or any of the properties of the Pledgor and will not
result in or require the creation of any Lien, security interest or other charge
or encumbrance upon or with respect to any of the properties of the Pledgor
other than pursuant to this Agreement and the other Transaction Documents,
as
defined in the Securities Purchase Agreement, the "Transaction
Documents").
(d) No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority is required to be obtained or made by the Pledgor
for
(i) the due execution, delivery and performance by the Pledgor of this
Agreement, (ii) the grant by the Pledgor, or the perfection, of the security
interest and Lien purported to be created hereby in the Pledged Collateral
or
(iii) the exercise by the Collateral Agent of any of its rights and remedies
hereunder, except as may be required in connection with any sale of any Pledged
Collateral by laws affecting the offering and sale of securities
generally.
(e) This
Agreement creates a valid security interest and Lien in favor of the Collateral
Agent in the Pledged Collateral, as security for the Secured Obligations. The
Collateral Agent’s having possession of the certificates representing the
Pledged Shares and all other certificates, instruments and cash constituting
Pledged Collateral from time to time results in the perfection of such security
interest and Lien. Such security interest and Lien is, or in the case of Pledged
Collateral in which the Pledgor obtains rights after the date hereof, will
be, a
perfected Lien, subject only to the Permitted Liens. All action necessary or
desirable to perfect and protect such security interest and Lien has been duly
taken, except for the Collateral Agent’s having possession of certificates,
instruments and cash constituting Pledged Collateral after the date
hereof.
SECTION
7. Covenants
as to the Pledged Collateral. So long as any Secured Obligations shall
remain outstanding, the Pledgor will, unless the Collateral Agent shall
otherwise consent in writing:
(a) keep
adequate records concerning the Pledged Collateral and permit the Collateral
Agent, or any designees or representatives thereof at any time or from time
to
time during reasonable hours after prior written notice to examine and make
copies of and abstracts from such records;
-6-
(b) at
the
Pledgor’s expense, promptly deliver to the Collateral Agent a copy of each
material notice or other material communication received by the Pledgor in
respect of the Pledged Collateral;
(c) at
the
Pledgor’s expense, defend the Collateral Agent’s right, title and security
interest in and to the Pledged Collateral against the claims of any
Person;
(d) at
the
Pledgor’s expense, at any time and from time to time, promptly execute and
deliver all further instruments and documents and take all further action that
may be necessary or desirable or that the Collateral Agent may reasonably
request in order to (i) perfect and protect, or maintain the perfection of,
the security interest and Lien purported to be created hereby, (ii) enable
the
Collateral Agent to exercise and enforce its rights and remedies hereunder
in
respect of the Pledged Collateral or (iii) otherwise effect the purposes of
this
Agreement, including, without limitation, delivering to the Collateral Agent
irrevocable proxies in respect of the Pledged Collateral;
(e) not
sell,
assign (by operation of law or otherwise), exchange or otherwise dispose of
any
Pledged Collateral or any interest therein except as expressly permitted by
the
Securities Purchase Agreement or the Notes;
(f) not
create or suffer to exist any Lien, upon or with respect to any Pledged
Collateral except for the Lien created hereby or for any Permitted
Lien;
(g) not
make
or consent to any amendment or other modification or waiver with respect to
any
Pledged Collateral or enter into any agreement or permit to exist any
restriction with respect to any Pledged Collateral;
(h) except
as
expressly permitted by the Securities Purchase Agreement, not permit the
issuance of (i) any additional shares of any class of capital stock, partnership
interests, member interests or other equity of the Company, (ii) any
securities convertible voluntarily by the holder thereof or automatically upon
the occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such shares of capital stock or (iii) any warrants, options, contracts
or other commitments entitling any Person to purchase or otherwise acquire
any
such shares of capital stock;
(i) not
issue
any stock certificate, certificated security or other instrument to evidence
or
represent any shares of capital stock, any partnership interest or membership
interest described in Schedule
I
hereto;
and
(j) not
take
or fail to take any action which would in any manner impair the validity or
enforceability of the Collateral Agent’s security interest in and Lien on any
Pledged Collateral.
SECTION
8. Voting
Rights, Dividends, Etc. in Respect of the Pledged Collateral.
(a) So
long
as no Event of Default shall have occurred and be continuing:
-7-
(i) the
Pledgor may exercise any and all voting and other consensual rights pertaining
to any Pledged Collateral for any purpose not inconsistent with the terms of
this Agreement, the Securities Purchase Agreement or the Notes;
(ii) the
Pledgor may receive and retain any and all dividends, interest or other
distributions paid in respect of the Pledged Collateral to the extent permitted
by the Securities Purchase Agreement; provided,
however,
that
any and all (A) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or otherwise
distributed in respect of or in exchange for, any Pledged Collateral, (B)
dividends and other distributions paid or payable in cash in respect of any
Pledged Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in surplus, and (C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral, together with any
dividend, distribution, interest or other payment which at the time of such
dividend, distribution, interest or other payment was not permitted by the
Securities Purchase Agreement, shall be, and shall forthwith be delivered to
the
Collateral Agent to hold as, Pledged Collateral and shall, if received by the
Pledgor, be received in trust for the benefit of the Collateral Agent, shall
be
segregated from the other property or funds of the Pledgor, and shall be
forthwith delivered to the Collateral Agent in the exact form received with
any
necessary indorsement and/or appropriate stock powers duly executed in blank,
to
be held by the Collateral Agent as Pledged Collateral and as further collateral
security for the Secured Obligations; and
(iii) the
Collateral Agent will execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies and other instruments as the Pledgor
may reasonably request for the purpose of enabling the Pledgor to exercise
the
voting and other rights which it is entitled to exercise pursuant to paragraph
(i) of this Section
8(a)
and to
receive the dividends, distributions, interest and other payments which it
is
authorized to receive and retain pursuant to paragraph (ii) of this Section
8(a),
in each
case, to the extent that the Collateral Agent has possession of such Pledged
Collateral.
(b) Upon
the
occurrence and during the continuance of an Event of Default (as defined in
the
Notes) (an "Event
of Default"),
:
(i) all
rights of the Pledgor to exercise the voting and other consensual rights which
he would otherwise be entitled to exercise pursuant to paragraph (i) of
subsection (a) of this Section
8,
and to
receive the dividends, distributions, interest and other payments which he
would
otherwise be authorized to receive and retain pursuant to paragraph (ii) of
subsection (a) of this Section 8,
shall
cease, and all such rights shall thereupon become vested in the Collateral
Agent
which shall thereupon have the sole right to exercise such voting and other
consensual rights and to receive and hold as Pledged Collateral such dividends,
distributions, interest and other payments;
(ii) without
limiting the generality of the foregoing, the Collateral Agent may at his option
exercise any and all rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to any of the Pledged Collateral as
if
it were the absolute owner thereof, including, without limitation, the right
to
exchange, in its discretion, any and all of the Pledged Collateral upon the
merger, consolidation, reorganization, recapitalization or other adjustment
of
any issuer of the Pledged Collateral or upon the exercise by any issuer of
the
Pledged Collateral of any right, privilege or option pertaining to any Pledged
Collateral, and, in connection therewith, to deposit and deliver any and all
of
the Pledged Collateral with any committee, depository, transfer agent, registrar
or other designated agent upon such terms and conditions as it may determine;
and
-8-
(iii) all
dividends, distributions, interest and other payments which are received by
the
Pledgor contrary to the provisions of paragraph (i) of this Section
8(b)
shall be
received in trust for the benefit of the Collateral Agent, shall be segregated
from other funds of the Pledgor, and shall be forthwith paid over to the
Collateral Agent as Pledged Collateral in the exact form received with any
necessary indorsement and/or appropriate stock powers duly executed in blank,
to
be held by the Collateral Agent as Pledged Collateral and as further collateral
security for the Secured Obligations.
SECTION
9. Additional
Provisions Concerning the Pledged Collateral.
(a) The
Pledgor hereby (i) authorizes the Collateral Agent to file one or more financing
or continuation statements, and amendments thereto, relating to the Pledged
Collateral, without the signature of the Pledgor where permitted by law, (ii)
ratifies such authorization to the extent that the Collateral Agent has filed
any such financing or continuation statements, or amendments thereto, without
the signature of the Pledgor prior to the date hereof and (iii) authorizes
the
Collateral Agent to execute any agreements, instruments or other documents
in
the Pledgor’s name and to file such agreements, instruments or other documents
that are related to the security interest and Lien of the Collateral Agent
in
the Pledged Collateral or as provided under Article 8 or Article 9 of the Code
or any other applicable uniform commercial code or other law in any appropriate
filing office.
(b) The
Pledgor hereby irrevocably appoints the Collateral Agent as his attorney-in-fact
and proxy, with full authority in the place and xxxxx and in his name or
otherwise, from time to time in the Collateral Agent’s discretion to take any
action and to execute any instrument which the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement (subject
to
the rights of the Pledgor under Section
8(a)
hereof),
including, without limitation, to receive, indorse and collect all instruments
made payable to the Pledgor representing any dividend, interest payment or
other
distribution in respect of any Pledged Collateral and to give full discharge
for
the same. This power is coupled with an interest and is irrevocable until the
termination of this Agreement.
(c) If
the
Pledgor fails to perform any agreement or obligation contained herein, the
Collateral Agent itself may perform, or cause performance of, such agreement
or
obligation, and the expenses of the Collateral Agent incurred in connection
therewith shall be payable by the Pledgor pursuant to Section
11
hereof
and shall be secured by the Pledged Collateral.
-9-
(d) Other
than the exercise of reasonable care to assure the safe custody of the Pledged
Collateral while held hereunder, the Collateral Agent shall have no duty or
liability to preserve rights pertaining thereto and shall be relieved of all
responsibility for the Pledged Collateral upon surrendering it or tendering
surrender of it to any of the Pledgor. The Collateral Agent shall be deemed
to
have exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equal to that which the Collateral Agent accords its own property,
it being understood that the Collateral Agent shall not have responsibility
for
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Pledged Collateral, whether
or not the Collateral Agent has or is deemed to have knowledge of such matters,
or (ii) taking any necessary steps to preserve rights against any parties with
respect to any Pledged Collateral.
(e) The
powers conferred on the Collateral Agent hereunder are solely to protect its
interest in the Pledged Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Pledged Collateral
in its possession and the accounting for monies actually received by it
hereunder, the Collateral Agent shall have no duty as to any Pledged Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Pledged Collateral.
(f) Upon
the
occurrence and during the continuation of any Default or Event of Default,
the
Collateral Agent may at any time in its discretion (i) without notice to the
Pledgor, transfer or register in the name of the Collateral Agent or any of
its
nominees any or all of the Pledged Collateral, subject only to the revocable
rights of the Pledgor under Section
8(a)
hereof,
and (ii) exchange certificates or instruments constituting Pledged Collateral
for certificates or instruments of smaller or larger denominations.
SECTION
10. Remedies
Upon Default. If any Event of Default shall have occurred and be
continuing:
(a) The
Collateral Agent may exercise in respect of the Pledged Collateral, in addition
to other rights and remedies provided for herein or otherwise available to
it,
all of the rights and remedies of a secured party on default under the Code
then
in effect in the State of New York; and without limiting the generality of
the
foregoing and without notice except as specified below, sell the Pledged
Collateral or any part thereof in one or more parcels at public or private
sale,
at any exchange or broker’s board or elsewhere, at such price or prices and on
such other terms as the Collateral Agent may deem commercially reasonable.
The
Pledgor agrees that, to the extent notice of sale shall be required by law,
at
least ten (10) days’ notice to any of the Pledgor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent shall not be obligated
to make any sale of Pledged Collateral regardless of notice of sale having
been
given. The Collateral Agent may adjourn any public or private sale from time
to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
-10-
(b) The
Pledgor recognizes that it may be impracticable to effect a public sale of
all
or any part of the Pledged Shares or any other securities constituting Pledged
Collateral and that the Collateral Agent may, therefore, determine to make
one
or more private sales of any such securities to a restricted group of purchasers
who will be obligated to agree, among other things, to acquire such securities
for its own account, for investment and not with a view to the distribution
or
resale thereof. The Pledgor acknowledges that any such private sale may be
at
prices and on terms less favorable to the seller than the prices and other
terms
which might have been obtained at a public sale and, notwithstanding the
foregoing, agrees that such private sales shall be deemed to have been made
in a
commercially reasonable manner and that the Collateral Agent shall have no
obligation to delay sale of any such securities for the period of time necessary
to permit the issuer of such securities to register such securities for public
sale under the Securities Act of 1933, as amended (the "Securities
Act").
The
Pledgor further acknowledges and agrees that any offer to sell such securities
which has been (i) publicly advertised on a bona fide basis in a newspaper
or
other publication of general circulation in the financial community of New
York,
New York (to the extent that such an offer may be so advertised without prior
registration under the Securities Act) or (ii) made privately in the manner
described above to not less than fifteen (15) bona fide
offerees
shall be deemed to involve a “public disposition” for the purposes of Section
9-610 of the Code (or any successor or similar, applicable statutory provision)
as then in effect in the State of New York, notwithstanding that such sale
may
not constitute a “public offering” under the Securities Act, and that the
Collateral Agent may, in such event, bid for the purchase of such
securities.
(c) Any
cash
held by the Collateral Agent as Pledged Collateral and all cash proceeds
received by the Collateral Agent in respect of any sale of, collection from,
or
other realization upon, all or any part of the Pledged Collateral shall be
applied (after payment of any amounts payable to the Collateral Agent pursuant
to Section
11
hereof)
by the Collateral Agent against, all or any part of the Secured Obligations
in
such order as the Collateral Agent shall elect consistent with the provisions
of
the Securities Purchase Agreement.
(d) In
the
event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Collateral Agent is legally
entitled, the Pledgor shall be jointly and severally liable for the deficiency,
together with interest thereon at the highest rate specified in the Notes for
interest on overdue principal thereof or such other rate as shall be fixed
by
applicable law, together with the costs of collection and the reasonable fees,
costs and expenses of any attorneys employed by the Collateral Agent to collect
such deficiency.
SECTION
11. Indemnity
and Expenses.
(a) The
Pledgor hereby agrees to indemnify and hold the Collateral Agent (and all of
its
officers, directors, employees, attorneys, consultants) harmless from and
against any and all claims, damages, losses, liabilities, obligations,
penalties, fees, costs and expenses (including, without limitation, reasonable
legal fees and disbursements of counsel) to the extent that they arise out
of or
otherwise result from this Agreement (including, without limitation, enforcement
of this Agreement), except claims, losses or liabilities arising or resulting
directly from such Person’s gross negligence or willful misconduct as determined
by a court of competent jurisdiction.
(b) The
Pledgor shall be obligated for, and will upon demand pay to the Collateral
Agent
the reasonable amount of any and all out-of-pocket costs and expenses, including
the reasonable fees and disbursements of the Collateral Agent’s counsel and of
any experts which the Collateral Agent may incur in connection with (i) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection
from,
or other realization upon, any Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent hereunder, or (iv)
the
failure by the Pledgor to perform or observe any of the provisions
hereof.
-11-
SECTION
12. Notices,
Etc. All notices and other communications provided for hereunder shall be
in
writing and shall be mailed (by certified mail, postage prepaid and return
receipt requested), sent by Federal Express or other recognized courier service
(return receipt requested), telecopied or delivered, if to the Pledgor, to
him
at the address specified in the Securities Purchase Agreement or if to the
Collateral Agent, to it at the address specified in the Securities Purchase
Agreement; or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying
as
to delivery with the terms of this Section 12. All such notices and other
communications shall be effective (i) if sent by certified mail, postage
prepaid, return receipt requested, when received or three (3) Business Days
after mailing, whichever first occurs, (ii) if telecopied, when transmitted
and
confirmation is received, provided same is on a Business Day and, if not,
on the next Business Day or (iii) if delivered or sent by Federal Express or
other recognized courier service (return receipt requested), upon delivery,
provided same is on a Business Day and, if not, on the next Business Day.
SECTION
13. Security
Interest Absolute. All rights of the Collateral Agent, all Liens and all
obligations of the Pledgor hereunder shall be absolute and unconditional
irrespective of: (i) any lack of validity or enforceability of the Securities
Purchase Agreement, the Notes or any other Transaction Document, (ii) any change
in the time, manner or place of payment of, or in any other term in respect
of,
all or any of the Secured Obligations, or any other amendment or waiver of
or
consent to any departure from the Securities Purchase Agreement, the Notes
or
any other Transaction Document, (iii) any exchange or release of, or
non-perfection of any Lien on any Collateral, or any release or amendment or
waiver of or consent to departure from any guaranty, for all or any of the
Secured Obligations, or (iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Pledgor in respect
of
the Secured Obligations (other than the payment in full of the Secured
Obligations or complete conversion to equity securities of the Company of all
indebtedness obligations owed by the Company to the Buyers under the Notes
(including, without limitation, all principal, interest and fees related to
the
Notes)). All authorizations and agencies contained herein with respect to any
of
the Pledged Collateral are irrevocable and powers coupled with an
interest.
-12-
SECTION
14. Beneficial
Ownership. The Collateral Agent shall not have the right to exercise its
rights under this Agreement, to the extent that after giving effect to such
exercise, any Buyer (together with such Buyer's affiliates) would beneficially
own in excess of 9.99% (the "Maximum
Percentage")
of the
shares of Common Stock outstanding immediately after giving effect to such
exercise. In connection herewith, the Collateral Agent shall have the right
to
inquire as to the beneficial ownership of any Buyer, before exercising any
rights hereunder with respect to such Buyer. For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned
by
any Buyer and its affiliates shall include the number of shares of Common Stock
subject to the exercise of the rights under this Agreement, but shall exclude
shares of Common Stock which would be issuable upon exercise or conversion
of
the unexercised or unconverted portion of any securities of the Company
beneficially owned by such Buyer and its affiliates (including, without
limitation, any convertible notes or convertible preferred stock or warrants)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein. Except as set forth in the preceding sentence, for purposes
of
this paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes
of this Agreement, in determining the number of outstanding shares of Common
Stock, the Collateral Agent and the Buyers may rely on the number of outstanding
shares of Common Stock as reflected in (1) the Company's most recent Form 10-K,
Form 10-Q, Current Report on Form 8-K or other public filing with the Securities
and Exchange Commission, as the case may be, (2) a more recent public
announcement by the Company or (3) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common Stock outstanding.
For any reason at any time, upon the written or oral request of the Collateral
Agent or the Buyers, the Company shall within two (2) Business Days confirm
orally and in writing to such Person the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock
shall
be determined after giving effect to the conversion or exercise of securities
of
the Company by the Buyers and its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. By written notice
to
the Company and the Collateral Agent, the Buyers may from time to time increase
or decrease the Maximum Percentage to any other percentage not in excess of
9.99% specified in such notice; provided that any such increase will not be
effective until the sixty-first (61st)
day
after such notice is delivered to the Company and the Collateral Agent. The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 14 to correct
this paragraph (or any portion hereof) which may be defective or inconsistent
with the intended beneficial ownership limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such
limitation.
SECTION
15. Miscellaneous.
(a) No
amendment of any provision of this Agreement shall be effective unless it is
in
writing and signed by the Pledgor and the Collateral Agent, and no waiver of
any
provision of this Agreement, and no consent to any departure by the Pledgor
therefrom, shall be effective unless it is in writing and signed by the
Collateral Agent, and then such waiver or consent shall be effective only in
the
specific instance and for the specific purpose for which given.
(b) No
failure on the part of the Collateral Agent to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of
any
other right. The rights and remedies of the Collateral Agent provided herein
and
in the other Transaction Documents are cumulative and are in addition to, and
not exclusive of, any rights or remedies provided by law. The rights of the
Collateral Agent under any Transaction Document against any party thereto are
not conditional or contingent on any attempt by the Collateral Agent to exercise
any of its rights under any other Transaction Document against such party or
against any other Person.
-13-
(c) Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
(d) This
Agreement shall create a continuing security interest in and Lien on the Pledged
Collateral and shall (i) remain in full force and effect until the termination
of this Agreement in accordance with the terms hereof and (ii) be binding
on the Pledgor and his heirs and assigns and shall inure, together with all
rights and remedies of the Collateral Agent, to the benefit of the Collateral
Agent and its successors, transferees and assigns. Without limiting the
generality of clause (ii) of the immediately preceding sentence, the Collateral
Agent may assign or otherwise transfer its rights and obligations under this
Agreement and any other Transaction Document to any other Person pursuant to
the
terms of the Securities Purchase Agreement, and such other Person shall
thereupon become vested with all of the benefits in respect thereof granted
to
the Collateral Agent herein or otherwise. Upon any such assignment or transfer,
all references in this Agreement to the Collateral Agent shall mean the assignee
of the Collateral Agent. None of the rights or obligations of the Pledgor
hereunder may be assigned or otherwise transferred without the prior written
consent of the Collateral Agent, and any such assignment or transfer without
such consent shall be null and void.
(e) Notwithstanding
anything to the contrary in this Agreement, (i) this Agreement (along with
all
powers of attorney granted hereunder) and the security interests and Lien
created hereby shall terminate and all rights to the Pledged Collateral shall
revert to the Pledgor upon the repayment in full and/or complete conversion
to
equity securities of the Company of all indebtedness obligations owed by the
Company to the Buyers under the Notes (including, without limitation, all
principal, interest and fees related to the Notes), and (ii) the Collateral
Agent will, upon the Pledgor’s request and at the Pledgor’s expense, (A) return
to the Pledgor such of the Pledged Collateral (to the extent delivered to the
Collateral Agent) as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof, and (B) execute and deliver to the
Pledgor, without recourse, representation or warranty, such documents as the
Pledgor shall reasonably request to evidence such termination.
(f) The
internal laws, and not the laws of conflicts, of the State of New York shall
govern the enforceability and validity of this Agreement, the construction
of
its terms and the interpretation of the rights and duties of the parties, except
as required by mandatory provisions of law and except to the extent that the
validity and perfection or the perfection and the effect of perfection or
non-perfection of the security interest and Lien created hereby, or remedies
hereunder, in respect of any particular Pledged Collateral are governed by
the
law of a jurisdiction other than the State of New York.
-14-
(g) Each
party to this Agreement hereby irrevocably and unconditionally submits, for
itself and its property, to the exclusive jurisdiction of the United States
District Court for the Southern District of New York sitting in Manhattan or
the
Commercial Division, Civil Branch of the Supreme Court of the State of New
York
sitting in New York County in connection with any suit, action or proceeding
directly or indirectly arising out of, under or in connection with this
Agreement or the other Transaction Documents or the transactions contemplated
hereby or thereby. No party to this Agreement may move to (i) transfer any
such
suit, action or proceeding brought in such New York court or federal court
to
another jurisdiction, (ii) consolidate any such suit, action or proceeding
brought in such New York court or federal court with a suit, action or
proceeding in another jurisdiction or (iii) dismiss any such suit, action or
proceeding brought in such New York court or federal court for the purpose
of
bringing the same in another jurisdiction. Each party to this Agreement agrees
that a final judgment in any such suit, action or proceeding shall be conclusive
and may be enforced in any other jurisdiction by suit on the judgment or in
any
other manner provided by law. Each party to this Agreement hereby irrevocably
and unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this Agreement,
or the other Transaction Documents in any New York court sitting in New York
County or any federal court sitting in the Southern District of New
York.
(h) The
Company hereby appoints Incorp Services Inc., with offices at 0000 Xxxx Xxxxxxx
Xxxx, Xxxxx 0, Xxx Xxxxx, Xxxxxx, 00000, as its agent for service of process
in
New York. Nothing
contained herein shall affect the right of the Collateral Agent to serve process
in any other manner permitted by law or commence legal proceedings or otherwise
proceed against the Pledgor or
any
property of the Pledgor in
any
other jurisdiction.
(i) The
Pledgor irrevocably and unconditionally waives any right he may have to claim
or
recover in any legal action, suit or proceeding referred to in this Section
any
special, exemplary, punitive or consequential damages.
(j) EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR OTHER TRANSACTION DOCUMENTS.
(k) The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
(l) This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which taken together shall constitute one and the same
agreement.
[Signature
Page Follows]
-15-
In
Witness Whereof,
the
Pledgor has executed and delivered this Agreement as of the date first above
written.
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By:
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SHAREHOLDER
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ACCEPTED
BY:
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XXXXXX
BAY FUND LP,
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as
Collateral Agent
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By:
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Name:
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Title:
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ACKNOWLEDGED
AND AGREED:
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GENERAL
STEEL HOLDINGS, INC.
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By:
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Name:
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Title:
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SCHEDULE
I TO PLEDGE AGREEMENT
Pledged
Shares
|
Pledgor
|
Name of Issuer
|
Number of
Shares
|
% of Shares
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Class
|
Certificate
No.(s)
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|||||
|
Zuo Xxxxx Xx
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General Steel Holdings,
Inc.
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Not
less than 3,849,856
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11.12%
|
Common
Stock
|
1403
|
ANNEX
I
TO
PLEDGE
AMENDMENT
This
Pledge Amendment, dated l, 20l,
is delivered pursuant to Section
4
of the
Pledge Agreement referred to below. The undersigned hereby agrees that this
Pledge Amendment may be attached to the Pledge Agreement, dated as of December
13, 2007, made by ___________ in favor of Xxxxxx Bay Fund LP, as Collateral
Agent for the Buyers, (the "Collateral
Agent")
as it
may heretofore have been or hereafter may be amended or otherwise modified
or
supplemented from time to time and that the promissory notes [and/or] shares
or
other equity interests listed on this Pledge Amendment shall be hereby pledged
and assigned to the Collateral Agent and become part of the Pledged Collateral
referred to in such Pledge Agreement and shall secure all of the obligations
referred to in such Pledge Agreement.
Pledged
Shares
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Pledgor
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Name of Issuer
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Number of Shares or
Other Equity Interests
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Class
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Certificate No(s)
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||||
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By:
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[SHAREHOLDER]
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