STOCK PLEDGE AGREEMENT
EXECUTION
COPY
THIS
STOCK PLEDGE AGREEMENT
(this
“Agreement”),
dated
as of December 11, 2007 is made between Song Jinan, an individual, with his
principal business address located at No.
999
Ningqiao Road, Jinqiao Export Processing Zone, Pudong, Shanghai 201206, People’s
Republic of China (the “Pledgor”)
and
Xxxx Investments II LLC, a Delaware limited liability company, with its
principal executive offices located at 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxxx 00000 (“Pledgee”).
WHEREAS,
China-Biotics, Inc, a
Delaware company (“Issuer”),
and
Pledgee have entered into that certain Investment Agreement dated as of even
date herewith (as amended, supplemented or modified from time to time, the
“Investment
Agreement”),
and
Issuer has issued to Pledgee its 4% Senior Convertible Notes Due 2010 in the
aggregate principal amount of Twenty Five Million U.S. Dollars (US$25,000,000)
(the “Notes”);
WHEREAS,
Pledgor, as an inducement for Pledgee’s entering into the Agreement and
purchasing the Notes, offered and agreed to personally guaranty, pursuant to
a
guaranty dated as of even date herewith (the “Guaranty”),
the
performance of and full and prompt payment of the Notes in full, with all
accrued but unpaid interest and any other payments which may be due thereunder,
and to secure his guaranty with a pledge or deposit of Four Million (4,000,000)
shares of Common Stock of the Issuer;
WHEREAS,
it is a
condition precedent to Pledgee’s obligation to consummate the transactions
contemplated by the Agreement, including the purchase of the Notes that Pledgor
execute and deliver this Agreement.
NOW, THEREFORE,
in
consideration of the foregoing and of the covenants and agreements hereinafter
set forth, the receipt and sufficiency of which are hereby acknowledged, and
as
an inducement for Pledgee to enter into the Notes, Pledgor, intending to be
legally bound hereby, agrees as follows:
AGREEMENT
1. Defined
Terms.
As
used in this Agreement, the following terms have the following
meanings:
“Event
of Default”
has the meaning given in Section 8 hereof.
“Lien”
means, for any person, any security interest, pledge, mortgage, charge,
assignment, hypothecation, encumbrance, attachment, garnishment, execution
or
other voluntary or involuntary lien upon or affecting the revenues of such
person or any real or personal property in which such person has or hereafter
acquires any interest.
“Pledged
Stock”
means 4 Million (4,000,000) shares of the Common Stock of the
Issuer.
2. Grant
of Security Interest.
Pledgor hereby pledges, assigns and grants to Pledgee a security interest in
all
of his right, title and interest in and to the following personal property,
whether now owned or hereafter acquired (collectively, the “Collateral”):
a. Shares
of Stock.
The Pledged Stock;
b. Additional
Shares of Stock.
Such additional shares of common stock of the Issuer as may be issued from
time
to time hereafter to Pledgor with respect to such pledged shares, whether by
stock split, stock dividend, or otherwise;
and
c. Proceeds
and Products.
All cash and non-cash proceeds and products of all of the foregoing
Collateral.
3. Transfer
of Instruments, Etc.
Pledgor agrees to deliver to Pledgee all instruments and stock certificates
pertaining to the Collateral now
owned
upon execution of this Agreement and to deliver to Pledgee promptly upon receipt
thereof all instruments and stock certificates pertaining to the Collateral
hereafter acquired. Without limiting the foregoing, if Pledgor shall become
entitled to receive or shall receive, in connection with any of the Collateral,
any: (i) stock certificate, including without limitation any certificate
representing a stock dividend or in connection with any increase or reduction
of
capital, reclassification, merger, consolidation, sale of assets, combination
of
shares, stock split, spin-off, split-off, split-up or liquidation; (ii) option,
warrant, or right, whether as an addition to or in substitution or in exchange
for any of its securities, or otherwise; or (iii) dividend (provided that
Pledgor shall be entitled to retain any cash dividend declared and paid) or
distribution payable in properties; then Pledgor shall accept the same as
Pledgee’s agent, in trust for Pledgee, and shall deliver them forthwith to
Pledgee in the exact form received, with, as applicable, such Pledgor’s
endorsement when necessary, or appropriate stock powers duly executed in blank,
to be held by Pledgee, subject to the terms hereof, as part of the Collateral.
This Agreement does not grant Pledgee power to control the voting or disposition
of the securities prior to the occurrence of an Event of Default.
4. Obligations
Secured.
The pledge, assignment and grant of security interest made pursuant to this
Agreement secures the full and timely payment and performance of the following
indebtedness, liabilities and obligations (collectively, the “Obligations”):
a. The
indebtedness and obligations of the Issuer to Pledgee pursuant to the
Notes;
b. All
indebtedness, liabilities and obligations of Pledgor now or hereafter existing
under this Agreement and those under the Guaranty; and
c. All
accrued interest on any of the foregoing indebtedness, liabilities and
obligations, whether accruing prior to or subsequent to the commencement of
a
bankruptcy or similar proceeding.
5. Representations
and Warranties Regarding Collateral.
Pledgor represents and warrants that:
a. Pledgor
is the legal and beneficial owner of the Pledged Stock;
b. The
Pledged Stock is free and clear of all Liens other than Liens created hereunder
in favor of Pledgee;
and
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c. No
governmental approval or filing or registration is required for the making
and
performance by Pledgor of this Agreement.
6. Pledgor’s
Voting Rights.
So long as no Event of Default has occurred and is continuing, Pledgor shall
be
entitled to exercise, or permit others to exercise, any voting rights incident
to the Collateral. Upon the occurrence and continuation of an Event of Default,
at the option of Pledgee and upon notice to Pledgors, Pledgors’ right to
exercise, or permit others to exercise, such voting rights shall immediately
cease and terminate and all voting rights with respect to the Collateral shall
thereupon rest solely and exclusively in Pledgee. The foregoing sentence shall
constitute and grant to Pledgee an irrevocable proxy coupled with an interest
to
vote the Collateral upon the occurrence and continuation of such an Event of
Default, and any officer of any corporation whose voting stock constitutes
Collateral, including without limitation any inspectors of elections or tellers,
may rely hereon and on any written notice from Pledgee as to the existence
of an
Event of Default and Pledgee’s right to vote such Collateral.
7. Receipt
of Cash Dividends.
So long as no Event of Default has occurred and is continuing, each Pledgor
shall be entitled to receive and retain for its own account all cash dividends
paid by any Company in respect of the Collateral.
8. Events
of Default.
The occurrence of any of the following events shall constitute an “Event
of Default”:
a. An
Event of Default as defined in the Notes;
or
b. Pledgor
shall have failed to comply with this Agreement
or the Guaranty.
9. Remedies
Upon Default.
If an Event of Default shall occur and remain uncured, Pledgee shall have all
remedies provided by law and, without limiting the generality of the foregoing
or the remedies provided in any other section hereof, shall have the following
remedies:
a. The
remedies of a secured party under applicable law;
b. The
right to exercise all voting rights incident to the Collateral as provided
in
Section 6 above;
c. The
right to receive all dividends and all other distributions of any kind on all
or
any of the Collateral; and
d. The
right to exercise any and all rights of collection, conversion or exchange,
and
any and all other rights, privileges, options or powers of Pledgor pertaining
or
relating to the Collateral (the Pledgor hereby irrevocably constituting and
appointing Pledgee its proxy and attorney-in-fact with full power of
substitution so to do), although Pledgee shall not have any duty to exercise
any
such rights, privileges, options or powers or to sell or to otherwise realize
upon any of the Collateral, as hereinafter authorized, or to preserve the same,
and Pledgee shall not be responsible for any failure to do so or delay in so
doing.
10. Release.
Upon satisfaction of the full amount of all indebtedness and obligations under
the Notes through payment in cash or conversion into shares of the Issuer’s
Common Stock or some combination thereof, subject to the provisions of the
Notes, Pledgee shall immediately return to Pledgor the Collateral.
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11. No
Waiver.
No
waiver
by the Pledgee of any default shall operate as a waiver of any other default
or
of the same default on a future occasion. No delay or omission on the part
of
the Pledgee in exercising any right or remedy shall operate as a waiver thereof,
and no single or partial exercise by the Pledgee of any right or remedy shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy. Time is of the essence of this Agreement.
12. Successors
and Assigns.
All rights of the Pledgee hereunder shall inure to the benefit of its successors
and assigns, and all Obligations of the Pledgor shall bind the permitted
successors and assigns of the Pledgor.
13. Governing
Law.
This
Agreement shall be governed by and construed and enforced in accor-dance with,
and all questions concerning the construction, validity, interpretation and
performance of this Note shall be governed by, the internal laws of the State
of
New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than
the
State of New York.
14. Severability.
If any
of the provisions of this Agreement shall contravene or be held invalid under
the laws of any jurisdiction, the Agreement shall be construed as if not
containing such provision and the remainder of this Agreement shall be construed
and enforced accordingly.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, this Agreement has been executed as of the date first written
above.
| PLEDGOR: | ||
| SONG JINAN | ||
| /s/ Song Jinan | ||
| PLEDGEE: | ||
| XXXX INVESTMENTS
II LLC By:
Xxxx Asset Management, LLC
Its:
Manager
|
||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxx | |
| Name: | Xxxxxxx X. Xxxxx | |
| Title: | Manager | |
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