EXHIBIT 10.05
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement"), dated as of June 29, 2006, among Kiwa
Bio-Tech Products Group Corporation, a Delaware corporation (the "Company"), Xxx
Xx and certain other undersigned Company shareholders (the "Pledgor"), and the
pledgees signatory hereto and their respective endorsees, transferees and
assigns (collectively, the "Pledgees").
WITNESSETH:
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WHEREAS, pursuant to a Securities Purchase Agreement, dated the date
hereof, between Company and the Pledgees (the "Purchase Agreement"), Company has
agreed to issue to the Pledgees and the Pledgees have agreed to purchase from
Company certain of Company's 6% Callable Secured Convertible Notes, due three
years from the date of issuance (the "Notes"), which are convertible into shares
of Company's Common Stock, par value $.001 per share (the "Common Stock"). In
connection therewith, Company shall issue the Pledgees certain Common Stock
purchase warrants (the "Warrants"); and
WHEREAS, as a material inducement to the Pledgees to enter into the
Purchase Agreement, the Pledgees have required and the Pledgor has agreed (i) to
grant to the Pledgees, their successors, endorsees, transferees or assigns a
security interest in the number of shares of Common Stock currently owned by the
Pledgor as set forth below the Pledgor's signature on the signature page hereto
(collectively, the "Shares"), as collateral security for Obligations; provided
that such guarantee and security interest shall automatically terminate as set
forth in this Agreement. Terms used and not defined herein shall have the
meaning ascribed to them in the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, and the mutual
covenants contained herein, the parties hereby agree as follows:
1. Marshalling Provisions. The Pledgees shall be required, in the event of
a breach of the Obligations, first to make demand upon, or seek to enforce
remedies against, the Company or any other person before demanding payment or
enforcement hereunder. The Pledgor shall have no obligation to satisfy the
Obligations until the Pledgees have sought satisfaction and enforced their
remedies against the Company. The Pledgees shall also be required to provide
notice of default in the performance or payment of any Obligation by the Company
under or in connection with the Transaction Documents prior to enforcing any
rights under this Agreement.
2. Pledgor Covenants. Pledgor covenants that this Agreement will not be
discharged except by complete performance of all the Obligations to the extent
of the Collateral except as otherwise provided in Section 12.
3. Release. The obligations, covenants, agreements and duties of the
Pledgor hereunder shall not be released, affected or impaired by any assignment
or transfer, in whole or in part, of the Transaction Documents or any
Obligation, provided such assignment or transfer is made with five (5) days
prior written notice to the Pledgor, or any waiver by the Pledgees, or by any
other person, of the performance or observance by the Company or the Pledgor of
any of the agreements, covenants, terms or conditions contained in the
Transaction Documents (provided that the Pledgees shall not enforce this
Agreement against the Pledgor in the event performance or observance by the
Company of any of the agreements, covenants, terms or conditions contained in
the Transaction Documents is waived by the Pledgees), or any indulgence in or
the extension of the time or renewal thereof, or the modification or amendment
(whether material or otherwise), or the voluntary or involuntary liquidation,
sale or other disposition of all or any portion of the stock or assets of the
Company or the Pledgor, or any receivership, insolvency, bankruptcy,
reorganization, or other similar proceedings, affecting the Company or the
Pledgor or any assets of the Company or the Pledgor, or the release of any
property from any security for any Obligation, or the impairment of any such
property or security, or the release or discharge of the Company or the Pledgor
from the performance or observance of any agreement, covenant, term or condition
contained in or arising out of the Transaction Documents by operation of law
(provided that the Pledgees shall not enforce this Agreement against the Pledgor
in the event performance or observance by the Company of any of the agreements,
covenants, terms or conditions contained in the Transaction Documents is
released or discharged by operation of law), or the merger or consolidation of
the Company (provided that the Pledgees shall not enforce this Agreement against
Pledgor in the event the Transaction Documents are assumed by the surviving
entity of a merger or consolidation), or any other cause, whether similar or
dissimilar to the foregoing.
4. Subrogation.
(a) Unless and until complete performance of all the Obligations to
the extent of the Collateral except as otherwise set forth in Section 12, the
Pledgor shall not be entitled to exercise any right of subrogation to any of the
rights of the Pledgees against the Company or any collateral security or
guaranty held by the Pledgees for the payment or performance of the Obligations,
nor shall the Pledgor seek any reimbursement from the Company in respect of
payments made by the Pledgor hereunder.
(b) In the extent that the Pledgor shall become obligated to perform
or pay any sums hereunder, or in the event that for any reason the Company is
now or shall hereafter become indebted to the Pledgor, the amount of such sum
shall at all times be subordinate as to lien, time of payment and in all other
respects, to the amounts owing to the Pledgees under the Transaction Documents
and the Pledgor shall not enforce or receive payment thereof until all
Obligations due to the Pledgees under the Transaction have been performed or
paid. Nothing herein contained is intended or shall be construed to give to the
Pledgor any right of subrogation in or under the Transaction Documents, or any
right to participate in any way therein, or in any right, title or interest in
the assets of the Pledgees.
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5. Security.
(a) Pursuant to the terms of this Agreement, as collateral security
for the punctual payment and performance, when due, by the Company of all the
Obligations, the Pledgor hereby pledges with, hypothecates, transfers and
assigns to the Pledgees all of the Shares and all proceeds, shares and other
securities received, receivable or otherwise distributed in respect of or in
exchange for the Shares, including, without limitation, any shares and other
securities into which such Shares may be convertible or exchangeable
(collectively, the "Additional Collateral" and together with the Shares, the
"Collateral"). Simultaneously herewith or as soon as certificates are available,
the Pledgor shall deliver to the Pledgees the certificate(s) representing the
Shares, , along with a stock transfer power duly executed in blank by the
Pledgor, to be held by the Pledgees as security. Any Collateral received by the
Pledgor on or after the date hereof shall be immediately delivered to the
Pledgees together with any executed stock powers or other transfer documents
requested by the Pledgees, which request may be made at any time prior to the
date when the Obligations shall have been paid and otherwise satisfied in full.
(b) The Collateral shall be proportionate to the amount owed by the
Company to the Pledgees under the Notes. Therefore, if the amount owed is
reduced by payment or by conversion of debt into equity under the terms of the
Notes, the Collateral shall be proportionately reduced and a corresponding pro
rata amount of Collateral shall be released and returned to the Pledgor. For
example, Four Million (4,000,000) Shares are to be held as Collateral for Two
Million Dollars ($2,000,000) in Notes, however, if the amount owed under the
Notes is reduced to One Million Dollars ($1,000,000) then the Collateral will be
reduced to Two Million (2,000,000) Shares.
6. Voting Power, Dividends, Etc. and other Agreements.
(a) Until an Event of Default (as set forth in Section 7 hereof) has
occurred that remains uncured, the Pledgor shall be entitled to:
(i) Exercise all voting and/or consensual powers pertaining to the
Collateral, or any part thereof, for all purposes;
(ii) Receive and retain dividends paid with respect to the
Collateral; and
(iii) Receive the benefits of any income tax deductions available to
the Pledgor as a shareholder of the Company, which to the extent permitted
by law, Pledgor shall also be entitled to receive during the occurrence
and continuation of any Event of Default.
(b) The Pledgor agrees that it will not sell, assign, transfer,
pledge, hypothecate, encumber or otherwise dispose of the Collateral.
(c) The Pledgor and the Company jointly and severally agree to pay
all costs including all reasonable attorneys' fees and disbursements incurred by
the Pledgees in enforcing this Agreement in accordance with its terms. However,
in the event of litigation to interpret or enforce this Agreement, the
prevailing party shall be entitled to receive its reasonable attorney fees
whether incurred before trial, at trial, on appeal or in any bankruptcy
proceeding.
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7. Default and Remedies.
(a) For the purposes of this Agreement, "Event of Default" shall
mean default in or under any of the Obligations after the expiration, without
cure, of any applicable cure period.
(b) the Pledgees shall have the following rights upon the occurrence
and continuation of any Event of Default provided that Pledgees have acted in
accordance with the terms of this Agreement:
(i) the rights and remedies provided by the Uniform Commercial Code
as adopted by the State of New York (the "UCC") (as said law may at any
time be amended);
(ii) the right to receive and retain all dividends, payments and
other distributions of any kind upon any or all of the Collateral;
(iii) the right to cause any or all of the Collateral to be
transferred to its own name or to the name of its designee and have such
transfer recorded in any place or places deemed appropriate by the
Pledgees; and
(iv) the right to sell, at a public or private sale, the Collateral
or any part thereof for cash, upon credit or for future delivery, and at
such price or prices in accordance with the UCC (as such law may be
amended from time to time). Upon any such sale the Pledgees shall have the
right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. The Pledgees shall give the Pledgor not less than ten
(10) days' written notice of its intention to make any such sale. Any such
sale, shall be held at such time or times during ordinary business hours
and at such place or places as the Pledgees may fix in the notice of such
sale. The Pledgees may adjourn or cancel any sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed
for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral upon terms calling for payments in the future, any Collateral
so sold may be retained by the Pledgees until the selling price is paid by
the purchaser thereof, but the Pledgees shall incur no liability in the
case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in the case of such failure, such Collateral may
again be sold upon like notice. The Pledgees, however, instead of
exercising the power of sale herein conferred upon them, may proceed by a
suit or suits at law or in equity to foreclose the security interest and
sell the Collateral, or any portion thereof, under a judgment or decree of
a court or courts of competent jurisdiction, the Pledgor having been given
due notice of all such action. The Pledgees shall incur no liability as a
result of a sale of the Collateral or any part thereof pursuant to this
Agreement and the UCC. All proceeds of any such sale, after deducting the
reasonable expenses and reasonable attorneys' fees incurred in connection
with such sale, shall be applied in reduction of the Obligations, and the
remainder, if any, shall be paid to the Pledgor.
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8. Application of Proceeds; Release. The proceeds of any sale or
enforcement of or against all or any part of the Collateral, and any other cash
or collateral at the time held by the Pledgees hereunder, shall be applied by
the Pledgees first to the payment of the reasonable costs of any such sale or
enforcement, then to reimburse the Pledgees for any damages, costs or expenses
incurred by the Pledgees as a result of an Event of Default, then to the payment
of the principal amount of, and interest )and any other payments due in respect
of, the Obligations. The remainder, if any, shall be paid to the Pledgor. As
used in this Agreement, "proceeds" shall mean cash, securities and other
property realized in respect of, and distributions in kind of, the Collateral,
including any thereof received under any reorganization, liquidation or
adjustment of debt of any issuer of securities included in the Collateral.
9. Representations and Warranties.
(a) The Pledgor hereby represents and warrants to the Pledgees that:
(i) the Pledgor has full power and authority and legal right to
pledge the Collateral to the Pledgees pursuant to this Agreement and this
Agreement constitutes a legal, valid and binding obligation of the
Pledgor, enforceable in accordance with its terms. subject to the effect
of bankruptcy, insolvency and other similar laws affecting creditor's
rights generally and, subject to general principles of equity.
(ii) the execution, delivery and performance of this Agreement and
other instruments contemplated herein will not violate any provision of
any order or decree of any court or governmental instrumentality or of any
mortgage, indenture, contract or other agreement to which the Pledgor is a
party or by which the Pledgor and the Collateral may be bound, and will
not result in the creation or imposition of any lien, charge or
encumbrance on, or security interest in, any of the Pledgor's properties
pursuant to the provisions of such mortgage, indenture, contract or other
agreement.
(iii) the Pledgor is the sole record and beneficial owner of all of
the Shares; and
(iv) the Pledgor owns the Collateral free and clear of all Liens.
(b) The Company represents and warrants to the Pledgees that:
(i) it has no knowledge that any of the representations or
warranties of the Pledgor herein are incorrect or false in any material
respect;
(ii) all of the Shares were validly issued, fully paid and
non-assessable; and
(iii) the Pledgor is the record holder of the Shares.
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10. No Waiver; No Election of Remedies. No failure on the part of the
Pledgees to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise by the Pledgees of any right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein provided are cumulative and are not exclusive of any
remedies provided by law. In addition, the exercise of any right or remedy of
the Pledgees at law or equity or under this Agreement or any of the documents
shall not be deemed to be an election of Pledgee's rights or remedies under such
documents or at law or equity.
11. Termination. This Agreement shall terminate on (a) the date on which
all Obligations have been performed, satisfied, paid or discharged in full or
(b) the date on which the Company's Common Stock is trading above $5.00 for five
(5) consecutive trading days.
12. Further Assurances. The parties hereto agree that, from time to time
upon the written request of any party hereto, they will execute and deliver such
further documents and do such other acts and things as such party may reasonably
request in order fully to effect the purposes of this Agreement. The Pledgees
acknowledge that they are aware that Pledgor shall have no obligations
whatsoever to the Pledgees beyond the Collateral pledged for the Obligations set
forth herein, and no request for further assurance may or shall increase such
Obligations.
13. Miscellaneous.
(a) Modification. This Agreement contains the entire understanding
between the parties with respect to the subject matter hereof and specifically
incorporates all prior oral and written agreements relating to the subject
matter hereof. No portion or provision of this Agreement may be changed,
modified, amended, waived, supplemented, discharged, canceled or terminated
orally or by any course of dealing, or in any manner other than by an agreement
in writing, signed by the party to be charged.
(b) Notice. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:30 p.m. (New
York City time) on a Business Day (as defined in the Purchase Agreement), (ii)
the Business Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Agreement later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the Business Day following
the date of mailing, if sent by nationally recognized overnight courier
services, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
If to the Company: Kiwa Bio-Tech Products Group Corporation
X000 Xxxxxx Xxxxx, X0# Xxx Xxxx Xxx Xxx,
Andingmen Wai
Xxxxxxxx Xxxxxxxx,
Xxxxxxx, Xxxxx 000000
Attention: Chief Executive Officer
Telephone: (8610) 0000-0000
Facsimile: (8610) 8528-6176
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With copies to: Xxxxxxx Xxxxx & Xxxxx LLP
000 0xx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Pledgor: Xxx Xx
c/o Kiwa Bio-Tech Products Group Corporation
000 Xxxx Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (909) 000- 0000
Facsimile: (000) 000-0000
If to the Pledgees: AJW Partners, LLC
AJW Offshore, Ltd.
AJW Qualified Partners, LLC
New Millennium Capital Partners II, LLC
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
Double U Master Fund LP
Harbour House, Waterfront Drive,
P.O. Box 972, Road Town, Tortola
British Virgin Islands
Nite Capital LP
000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
With the exception of Double U Master Fund LP and Nite Capital LP, copies to:
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xx.
Xxxxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esquire
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(c) Invalidity. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
(d) Benefit of Agreement. This Agreement shall be binding upon and
inure to the parties hereto and their respective successors and assigns.
(e) Mutual Agreement. This Agreement embodies the arm's length
negotiation and mutual agreement between the parties hereto and shall not be
construed against either party as having been drafted by it.
(f) New York Law to Govern. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principals of conflicts of law thereof. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
Federal courts sitting in the city of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court or that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement
to be duly executed by their respective authorized persons as of the date first
indicated above.
KIWA BIO-TECH PRODUCTS GROUP CORPORATION
By:
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Xxx Xx
Chief Executive Officer
PLEDGEES:
AJW PARTNERS, LLC
By: SMS Group, LLC
By:
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Xxxxx X. Xxxxxxxx
Manager
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
By:
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Xxxxx X. Xxxxxxxx
Manager
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
By:
------------------------------------
Xxxxx X. Xxxxxxxx
Manager
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By:
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Xxxxx X. Xxxxxxxx
Manager
[Signatures Continued on Following Page]
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- SIGNATURE PAGE TO PLEDGE AGREEMENT -
(CONTINUED)
DOUBLE U MASTER FUND LP
By: ________________________
Xxxxx Xxxxxx
Navigator Management Ltd Authorized Signator
NITE CAPITAL LP
By: ________________________
Xxxxx Xxxxxxx
Manager of the General Partner
PLEDGOR:
Xxx Xx
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Number of Shares subject to this pledge:_______
Date such Shares were acquired:________________
