SECURITY AGREEMENT
1. Identification.
This
Security Agreement (the "Agreement"), dated as of August 2, 2007, is entered
into by and between Ever-Glory
International Group, Inc.,
a
Florida corporation ("Parent" or “Debtor”), and Xxxxxxx Xxxx, as collateral
agent acting in the manner and to the extent described in the Collateral Agent
Agreement defined below (the "Collateral Agent"), for the benefit of the parties
identified on Schedule
A
hereto
(collectively, the "Lenders").
2. Recitals.
2.1 The
Lenders have made, are making and will be making loans to Parent (the "Loans").
2.2 The
Loans
are and will be evidenced by certain promissory notes (each a “Note”) issued by
Parent on or about the date of and after the date of this Agreement pursuant
to
subscription agreements (each a “Subscription Agreement”) to which Parent and
Lenders are parties. The Notes are further identified on Schedule A hereto
and
were and will be executed by Parent as “Borrower” or “Debtor” for the benefit of
each Lender as the “Holder” or “Lender” thereof.
2.3 In
consideration of the Loans made and to be made by Lenders to Parent and for
other good and valuable consideration, and as security for the performance
by
Parent of its obligations under the Notes and as security for the repayment
of
the Loans and all other sums due from Debtor to Lenders arising under the Notes
and Subscription Agreement (collectively, the "Obligations"), Debtor, for good
and valuable consideration, receipt of which is acknowledged, has agreed to
grant to the Collateral Agent, for the benefit of the Lenders, a security
interest in the Collateral (as such term is hereinafter defined), on the terms
and conditions hereinafter set forth. Obligations include any future advances
or
loans made by Lenders to Debtor.
2.4 The
Lenders have appointed the Collateral Agent pursuant to that certain Collateral
Agent Agreement dated at or about the date of this Agreement (“Collateral Agent
Agreement”), among the Lenders and Collateral Agent.
2.5 The
following defined terms which are defined in the Uniform Commercial Code in
effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Documents, Equipment, General Intangibles,
Instruments, Inventory and Proceeds. Other capitalized terms employed herein
shall have the meanings attributed to them in the Subscription
Agreement.
3. Grant
of General Security Interest in Collateral.
3.1 As
security for the Obligations of Debtor, Debtor hereby grants the Collateral
Agent, for the benefit of the Lenders, a security interest in the
Collateral.
3.2 “Collateral”
shall mean all of the following property of Debtor:
(A) All
now
owned and hereafter acquired right, title and interest of Debtor in, to and
in
respect of all Accounts, Goods, real or personal property, all present and
future books and records relating to the foregoing and all products and Proceeds
of the foregoing, and as set forth below:
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(i) All
now
owned and hereafter acquired right, title and interest of Debtor in, to and
in
respect of all: Accounts, interests in goods represented by Accounts, returned,
reclaimed or repossessed goods with respect thereto and rights as an unpaid
vendor; contract rights; Chattel Paper; investment property; General Intangibles
(including but not limited to, tax and duty claims and refunds, registered
and
unregistered patents (including but not limited to the patents, patents pending
and applications set forth on Schedule B hereto), trademarks, service marks,
certificates, copyrights, trade names, applications for the foregoing, trade
secrets, goodwill, processes, drawings, blueprints, customer lists, licenses,
whether as licensor or licensee, chooses in action and other claims, and
existing and future leasehold interests in equipment, real estate and fixtures);
Documents; Instruments; letters of credit, bankers’ acceptances or guaranties;
cash moneys, deposits; securities, bank accounts, deposit accounts, credits
and
other property now or hereafter owned or held in any capacity by Debtor, as
well
as agreements or property securing or relating to any of the items referred
to
above;
(ii) Goods:
All now
owned and hereafter acquired right, title and interest of Debtor in, to and
in
respect of goods, including, but not limited to:
(a) All
Inventory, wherever located, whether now owned or hereafter acquired, of
whatever kind, nature or description, including all raw materials,
work-in-process, finished goods, and materials to be used or consumed in
Debtor’s business; finished goods, timber cut or to be cut, oil, gas,
hydrocarbons, and minerals extracted or to be extracted, and all names or marks
affixed to or to be affixed thereto for purposes of selling same by the seller,
manufacturer, lessor or licensor thereof and all Inventory which may be returned
to Debtor by its customers or repossessed by Debtor and all of Debtor’s right,
title and interest in and to the foregoing (including all of a Debtor’s rights
as a seller of goods);
(b) All
Equipment and fixtures, wherever located, whether now owned or hereafter
acquired, including, without limitation, all machinery, furniture and fixtures,
and any and all additions, substitutions, replacements (including spare parts),
and accessions thereof and thereto (including, but not limited to Debtor’s
rights to acquire any of the foregoing, whether by exercise of a purchase option
or otherwise);
(iii) Property:
All now
owned and hereafter acquired right, title and interests of Debtor in, to and
in
respect of any other personal property in or upon which a Debtor has or may
hereafter have a security interest, lien or right of setoff;
(iv) Books
and Records:
All
present and future books and records relating to any of the above including,
without limitation, all computer programs, printed output and computer readable
data in the possession or control of the Debtor, any computer service bureau
or
other third party; and
(v) Products
and Proceeds:
All
products and Proceeds of the foregoing in whatever form and wherever located,
including, without limitation, all insurance proceeds and all claims against
third parties for loss or destruction of or damage to any of the
foregoing.
(B) All
now
owned and hereafter acquired right, title and interest of Debtors in, to and
in
respect of the following:
(i) all
security entitlements of Debtors in, and all Proceeds of any and all of the
foregoing in each case, whether now owned or hereafter acquired by a Debtor
and
howsoever its interest therein may arise or appear (whether by ownership,
security interest, lien, claim or otherwise).
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3.3 The
stock
representing ownership of Perfect Dream Limited, a British Virgin Islands
corporation, Goldenway Nanjing Garments Company Limited, a People’s Republic of
China corporation, Nanjing New-Tailum Garments Company Limited, a People’s
Republic of China corporation, is excluded from the definition of Collateral.
3.4 The
Collateral Agent is hereby specifically authorized, after the Maturity Date
(defined in the Notes) accelerated or otherwise, or after the occurrence of
an
Event of Default (as defined herein) that is uncured after expiration of any
applicable cure period, to transfer any Collateral into the name of the
Collateral Agent and to take any and all action deemed advisable to the
Collateral Agent to remove any transfer restrictions affecting the
Collateral.
4. Perfection
of Security Interest.
4.1 Debtor
shall prepare, execute and deliver to the Collateral Agent UCC-1 Financing
Statements. The Collateral Agent is instructed to prepare and file at Debtor’s
cost and expense, financing statements in such jurisdictions deemed advisable
to
the Collateral Agent, including but not limited to the State of Florida. The
Financing Statements are deemed to have been filed for the benefit of the
Collateral Agent and Lenders identified on Schedule
A
hereto.
4.2 All
other
certificates and instruments constituting Collateral from time to time required
to be pledged to Collateral Agent pursuant to the terms hereof (the "Additional
Collateral") shall be delivered to Collateral Agent promptly upon receipt
thereof by or on behalf of Debtors. All such certificates and instruments shall
be held by or on behalf of 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 satisfactory to Collateral Agent.
If any Collateral consists of uncertificated securities, unless the immediately
following sentence is applicable thereto, Debtors shall cause Collateral Agent
(or its 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 Collateral Agent with respect to such securities
without further consent by Debtors. If any Collateral consists of security
entitlements, Debtors shall transfer such security entitlements to Collateral
Agent (or its custodian, nominee or other designee) or cause the applicable
securities intermediary to agree that it will comply with entitlement orders
by
Collateral Agent without further consent by Debtors.
4.3 Within
five (5) days after the receipt by a Debtor of any Additional Collateral, a
Pledge Amendment, duly executed by such Debtor, in substantially the form of
Annex I hereto (a "Pledge Amendment"), shall be delivered to Collateral Agent
in
respect of the Additional Collateral to be pledged pursuant to this Agreement.
Each Debtor hereby authorizes Collateral Agent to attach each Pledge Amendment
to this Agreement and agrees that all certificates or instruments listed on
any
Pledge Amendment delivered to Collateral Agent shall for all purposes hereunder
constitute Collateral.
4.4 If
Debtor
shall receive, by virtue of Debtor being or having been an owner of any
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 Collateral, or otherwise,
(iii) dividends payable in cash (except such dividends permitted to be retained
by Debtor pursuant to Section 5.2 hereof) or in securities or other property
or
(iv) dividends or other distributions in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, Debtor shall receive such stock certificate,
promissory note, instrument, option, right, payment or distribution in trust
for
the benefit of Collateral Agent, shall segregate it from Debtor's other property
and shall deliver it forthwith to Collateral Agent, in the exact form received,
with any necessary endorsement and/or appropriate stock powers duly executed
in
blank, to be held by Collateral Agent as Collateral and as further collateral
security for the Obligations.
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5. Distribution.
5.1 So
long
as an Event of Default does not exist, Debtor shall be entitled to exercise
all
voting power pertaining to any of the Collateral, provided such exercise is
not
contrary to the interests of the Lenders and does not impair the
Collateral.
5.2. At
any
time an Event of Default exists or has occurred, all rights of Debtor, upon
notice given by Collateral Agent, to exercise the voting power and receive
payments, which it would otherwise be entitled to pursuant to Section 5.1,
shall
cease and all such rights shall thereupon become vested in Collateral Agent,
which shall thereupon have the sole right to exercise such voting power and
receive such payments.
5.3 All
dividends, distributions, interest and other payments which are received by
Debtor contrary to the provisions of Section 5.2 shall be received in trust
for
the benefit of Collateral Agent as security and Collateral for payment of the
Obligations shall be segregated from other funds of Debtor
and
shall be forthwith paid over to Collateral Agent as Collateral in the exact
form
received with any necessary endorsement and/or appropriate stock powers duly
executed in blank, to be held by Collateral Agent as Collateral and as further
collateral security for the Obligations.
6. Further
Action By Debtor; Covenants and Warranties.
6.1 Except
for as disclosed on Schedule
6.1
hereto,
Collateral Agent at all times shall have a perfected security interest in the
Collateral. Each Debtor represents that it has and will continue to have full
title to the Collateral free from any liens, leases, encumbrances, judgments
or
other claims. The Collateral Agent's security interest in the Collateral
constitutes and will continue to constitute a first, prior and indefeasible
security interest, except as disclosed on Schedule
6.1,
in
favor of Collateral Agent. Each Debtor will do all acts and things, and will
execute and file all instruments (including, but not limited to, security
agreements, financing statements, continuation statements, etc.) reasonably
requested by Collateral Agent to establish, maintain and continue the perfected
security interest of Collateral Agent in the perfected Collateral, promptly
on
demand, pay all costs and expenses of filing and recording and will pay all
claims and charges that, in the opinion of Collateral Agent, exercised in good
faith, are reasonably likely to materially prejudice, imperil or otherwise
affect the Collateral or Collateral Agent’s or Lenders’ security interests
therein.
6.2 Except
in
connection with sales of Collateral in the ordinary course of business for
fair
value and except for Collateral which is substituted by assets of identical
or
greater value (with the consent of the Collateral Agent) or which is
inconsequential in value, Debtor will not sell, transfer, assign or pledge
those
items of Collateral (or allow any such items to be sold, transferred, assigned
or pledged), without the prior written consent of Collateral Agent, and provided
the Collateral remains subject to the security interest herein described.
Although Proceeds of Collateral are covered by this Agreement, this shall not
be
construed to mean that Collateral Agent consents to any sale of the Collateral,
except as provided herein. Sales of Collateral in the ordinary course of
business shall be free of the security interest of Lenders and Collateral Agent
and Lenders and Collateral Agent shall promptly execute such documents
(including without limitation releases and termination statements) as may be
required by Debtor to evidence or effectuate the same.
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6.3 Debtor
will, at all reasonable times during regular business hours and upon reasonable
notice, allow Collateral Agent or its representatives free and complete access
to the Collateral and all of such Debtor's records which in any way relate
to
the Collateral, for such inspection and examination as Collateral Agent
reasonably deems necessary.
6.4 Debtor,
at its sole cost and expense, will protect and defend this Security Agreement,
all of the rights of Collateral Agent and Lenders hereunder, and the Collateral
against the claims and demands of all other persons.
6.5 Debtor
will promptly notify Collateral Agent of any levy, distraint or other seizure
by
legal process or otherwise of any part of the Collateral, and of any threatened
or filed claims or proceedings that are reasonably likely to affect or impair
the Collateral or the security interests of the Lenders and Collateral Agent
under this Security Agreement in any material respect.
6.6 Debtor,
at its own expense, will obtain and maintain in force insurance policies
covering losses or damage to those items of Collateral which constitute physical
personal property, which insurance shall be of the types customarily insured
against by companies in the same or similar business, similarly situated, in
such amounts (with such deductible amounts) as is customary for such companies
under the same or similar circumstances, similarly situated. Debtor shall make
the Collateral Agent a loss payee thereon to the extent of its interest in
the
Collateral. Collateral Agent is hereby irrevocably (until the Obligations are
paid in full) appointed Debtor’s attorney-in-fact to endorse any check or draft
that may be payable to such Debtor so that Collateral Agent may collect the
proceeds payable for any loss under such insurance as necessary to exercise
the
Collateral Agent’s rights hereunder. The proceeds of such insurance, less any
costs and expenses incurred or paid by Collateral Agent in the collection
thereof, shall be applied either toward the cost of the repair or replacement
of
the items damaged or destroyed, or on account of any sums secured hereby,
whether or not then due or payable.
6.7 Collateral
Agent, at its option and, to the extent practicable, upon prior written notice
to the Debtor, may but without any obligation to do so, pay, perform and
discharge any and all amounts, costs, expenses and liabilities herein agreed
to
be paid or performed by Debtor upon
Debtor’s
failure
to do
so. All
amounts expended by Collateral Agent in so doing shall become part of the
Obligations secured hereby, and shall be immediately due and payable by Debtor
to Collateral Agent upon demand
and
shall
bear interest at the lesser of 12% per annum or the highest legal amount from
the dates of such expenditures until paid.
6.8 Upon
the
request of Collateral Agent, Debtor will furnish to Collateral Agent within
five
(5) business days thereafter, or to any proposed assignee of this Security
Agreement, a written statement in form reasonably satisfactory to Collateral
Agent, duly acknowledged, certifying the amount of the principal and interest
and any other sum then owing under the Obligations, whether to its knowledge
any
claims, offsets or defenses exist against the Obligations or against this
Security Agreement, or any of the terms and provisions of any other agreement
of
Debtor securing the Obligations. In connection with any assignment by Collateral
Agent of this Security Agreement, Debtor hereby agrees to cause the insurance
policies required hereby to be carried by Debtor, if any, to be endorsed in
form
reasonably satisfactory to Collateral Agent or to such assignee, with loss
payable clauses in favor of such assignee, and to cause such endorsements to
be
delivered to Collateral Agent within ten (10) calendar days after request
therefor by Collateral Agent.
6.9 Debtor
will, at its own expense, make, execute, endorse, acknowledge, file and/or
deliver to the Collateral Agent from time to time such vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, reports and other reasonable
assurances or instruments and take further steps relating to the Collateral
and
other property or rights covered by the security interest hereby granted, as
the
Collateral Agent may reasonably require to perfect its security interest
hereunder.
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6.10 Debtor
represents and warrants that it is the true and lawful exclusive owner of the
Collateral, free and clear of any liens and encumbrances.
6.11 Debtor
hereby agrees not to divest itself of any right under the Collateral except
as
permitted herein absent prior written approval of the Collateral Agent, except
to a subsidiary organized and located in the United States on prior notice
to
Collateral Agent provided the Collateral remains subject to the security
interest herein described.
7. Power
of Attorney.
At
any
time an Event of Default has occurred and continued beyond applicable cure
periods, Debtor hereby irrevocably constitutes and appoints the Collateral
Agent
as the true and lawful attorney of such Debtor, with full power of substitution,
in the place and stead of such Debtor and in the name of such Debtor or
otherwise, at any time or times, in the discretion of the Collateral Agent,
to
take any action and to execute any instrument or document which the Collateral
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement. This power of attorney is coupled with an interest and is irrevocable
until the Obligations are satisfied.
8. Performance
By The Collateral Agent.
If
a
Debtor fails to perform any material covenant, agreement, duty or obligation
of
such Debtor under this Agreement, the Collateral Agent may, after any applicable
cure period, at any time or times in its discretion, take action to effect
performance of such obligation. All reasonable expenses of the Collateral Agent
incurred in connection with the foregoing authorization shall be payable by
Debtor as provided in Paragraph 12.1 hereof. No discretionary right, remedy
or
power granted to the Collateral Agent under any part of this Agreement shall
be
deemed to impose any obligation whatsoever on the Collateral Agent with respect
thereto, such rights, remedies and powers being solely for the protection of
the
Collateral Agent.
9. Event
of Default.
An
event
of default ("Event of Default") shall be deemed to have occurred hereunder
upon
the occurrence of any event of default as defined and described in the Notes.
Upon and after any Event of Default, after the applicable cure period, if any,
any or all of the Obligations shall become immediately due and payable at the
option of the Collateral Agent, for the benefit of the Lenders, and the
Collateral Agent may dispose of Collateral as provided below. A default by
Debtor of any of its material obligations pursuant to this Agreement and any
of
the Transaction Documents (as defined in the Subscription Agreement) shall
be an
Event of Default hereunder and an “Event of Default” as defined in the Notes,
and Subscription Agreement.
10. Disposition
of Collateral.
Upon
and
after any Event of Default which is then continuing,
10.1 The
Collateral Agent may exercise its rights with respect to each and every
component of the Collateral, without regard to the existence of any other
security or source of payment for the Obligations. In addition to other rights
and remedies provided for herein or otherwise available to it, the Collateral
Agent shall have all of the rights and remedies of a lender on default under
the
Uniform Commercial Code then in effect in the State of New York.
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10.2 If
any
notice to Debtor of the sale or other disposition of Collateral is required
by
then applicable law, ten (10) business days prior written notice (which Debtor
agrees is reasonable notice within the meaning of Section 9.612(a) of the
Uniform Commercial Code) shall be given to Debtor of the time and place of
any
sale of Collateral which Debtor hereby agree may be by private sale. The rights
granted in this Section are in addition to any and all rights available to
Collateral Agent under the Uniform Commercial Code.
10.3 The
Collateral Agent is authorized, at any such sale, if the Collateral Agent deems
it advisable to do so, in order to comply with any applicable securities laws,
to restrict the prospective bidders or purchasers to persons who will represent
and agree, among other things, that they are purchasing the Collateral for
their
own account for investment, and not with a view to the distribution or resale
thereof, or otherwise to restrict such sale in such other manner as the
Collateral Agent deems advisable to ensure such compliance. Sales made subject
to such restrictions shall be deemed to have been made in a commercially
reasonable manner.
10.4 All
proceeds received by the Collateral Agent for the benefit of the Lenders in
respect of any sale, collection or other enforcement or disposition of
Collateral, shall be applied (after deduction of any amounts payable to the
Collateral Agent pursuant to Paragraph 12.1 hereof) against the Obligations
pro
rata among the Lenders in proportion to their interests in the Obligations.
Upon
payment in full of all Obligations, Debtor shall be entitled to the return
of
all Collateral, including cash, which has not been used or applied toward the
payment of Obligations or used or applied to any and all costs or expenses
of
the Collateral Agent incurred in connection with the liquidation of the
Collateral (unless another person is legally entitled thereto). Any assignment
of Collateral by the Collateral Agent to Debtor shall be without representation
or warranty of any nature whatsoever and wholly without recourse. To the extent
allowed by law, each Lender may purchase the Collateral and pay for such
purchase by offsetting up to such Lender’s pro rata portion of the purchase
price with sums owed to such Lender by Debtor arising under the Obligations
or
any other source.
11. Waiver
of Automatic Stay.
Debtor
acknowledges and agrees that should a proceeding under any bankruptcy or
insolvency law be commenced by or against Debtor, or if any of the Collateral
should become the subject of any bankruptcy or insolvency proceeding, then
the
Collateral Agent should be entitled to, among other relief to which the
Collateral Agent or Lenders may be entitled under the Note, Subscription
Agreement and any other agreement to which the Debtor, Lenders or Collateral
Agent are parties, (collectively "Loan Documents") and/or applicable law, an
order from the court granting immediate relief from the automatic stay pursuant
to 11 U.S.C. Section 362 to permit the Collateral Agent to exercise all of
its
rights and remedies pursuant to the Loan Documents and/or applicable law. Debtor
EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION
362. FURTHERMORE, Debtor EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11
U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE
OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY,
INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE COLLATERAL
AGENT TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR
APPLICABLE LAW. Debtor hereby consents to any motion for relief from stay which
may be filed by the Collateral Agent in any bankruptcy or insolvency proceeding
initiated by or against Debtor, and further agrees not to file any opposition
to
any motion for relief from stay filed by the Collateral Agent. Debtor
represents, acknowledges and agrees that this provision is a specific and
material aspect of this Agreement, and that the Collateral Agent would not
agree
to the terms of this Agreement if this waiver were not a part of this Agreement.
Debtor further represents, acknowledges and agrees that this waiver is
knowingly, intelligently and voluntarily made, that neither the Collateral
Agent
nor any person acting on behalf of the Collateral Agent has made any
representations to induce this waiver, that Debtor has been represented (or
has
had the opportunity to be represented) in the signing of this Agreement and
in
the making of this waiver by independent legal counsel selected by Debtor and
that Debtor has had the opportunity to discuss this waiver with counsel. Debtor
further agrees that any bankruptcy or insolvency proceeding initiated by Debtor
will only be brought in the Federal Court within the Southern District of New
York.
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12. Miscellaneous.
12.1 Expenses.
Debtor
shall pay to the Collateral Agent, on demand, the amount of any and all
reasonable expenses, including, without limitation, attorneys' fees, legal
expenses and brokers' fees, which the Collateral Agent may incur in connection
with (a) sale, collection or other enforcement or disposition of Collateral;
(b)
exercise or enforcement of any the rights, remedies or powers of the Collateral
Agent hereunder or with respect to any or all of the Obligations upon breach;
or
(c) failure by Debtor to perform and observe any agreements of Debtor contained
herein which are performed by the Collateral Agent.
12.2 Waivers,
Amendment and Remedies.
No
course of dealing by the Collateral Agent and no failure by the Collateral
Agent
to exercise, or delay by the Collateral Agent in exercising, any right, remedy
or power hereunder shall operate as a waiver thereof, and no single or partial
exercise thereof shall preclude any other or further exercise thereof or the
exercise of any other right, remedy or power of the Collateral Agent. No
amendment, modification or waiver of any provision of this Agreement and no
consent to any departure by Debtor therefrom, shall, in any event, be effective
unless contained in a writing 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. The rights, remedies and powers of the
Collateral Agent, not only hereunder, but also under any instruments and
agreements evidencing or securing the Obligations and under applicable law
are
cumulative, and may be exercised by the Collateral Agent from time to time
in
such order as the Collateral Agent may elect.
12.3 Notices.
All
notices or other communications given or made hereunder shall be in writing
and
shall be personally delivered or deemed delivered the first business day after
being faxed (provided that a copy is delivered by first class mail) to the
party
to receive the same at its address set forth below or to such other address
as
either party shall hereafter give to the other by notice duly made under this
Section:
| To Debtor: | Ever-Glory International Group, Inc.,
000
X. Xxxxxxxx Xxx # 000
Xxxx
Xxxxxx, XX 00000,
Attn:
Xxxxxx Xxxx
telecopier:
(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
|
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| To Lenders: | To the addresses and telecopier
numbers set
forth
on
Schedule A
|
| To the Collateral Agent: | Xxxxxxx Xxxx
000
Xxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxx, Xxx Xxxx 00000
Fax:
(000) 000-0000
|
| With a copy by fax to: | Grushko & Xxxxxxx, P.C.
000
Xxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxx, Xxx Xxxx 00000
Fax:
(000)
000-0000
|
Any
party
may change its address by written notice in accordance with this
paragraph.
12.4 Term;
Binding Effect.
This
Agreement shall (a) remain in full force and effect until payment and
satisfaction in full of all of the Obligations; (b) be binding upon Debtor,
and
its successors and permitted assigns; and (c) inure to the benefit of the
Collateral Agent, for the benefit of the Lenders and their respective successors
and assigns.
12.5 Captions.
The
captions of Paragraphs, Articles and Sections in this Agreement have been
included for convenience of reference only, and shall not define or limit the
provisions hereof and have no legal or other significance
whatsoever.
12.6 Governing
Law; Venue; Severability.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without
regard to conflicts
of laws principles
that
would result in the application of the substantive laws of another
jurisdiction,
except
to the extent that the perfection of the security interest granted hereby in
respect of any item of Collateral may be governed by the law of another
jurisdiction. Any legal action or proceeding against a Debtor with respect
to
this Agreement may be brought in the courts in the State of New York or of
the
United
States for the Southern District of New York, and, by execution and delivery
of
this Agreement, Debtor hereby irrevocably accepts for itself and in respect
of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each Debtor hereby irrevocably waives any objection which they may
now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in
the
aforesaid courts and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum. If any provision of this
Agreement, or the application thereof to any person or circumstance, is held
invalid, such invalidity shall not affect any other provisions which can be
given effect without the invalid provision or application, and to this end
the
provisions hereof shall be severable and the remaining, valid provisions shall
remain of full force and effect.
12.7 Entire
Agreement.
This
Agreement contains the entire agreement of the parties and supersedes all other
agreements and understandings, oral or written, with respect to the matters
contained herein.
9
12.8 Counterparts/Execution.
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.
13. Intercreditor
Terms.
As
between the Lenders, any distribution under paragraph 10.4 shall be made
proportionately based upon the remaining principal amount (plus accrued and
unpaid interest) to each as to the total amount then owed to the Lenders as
a
whole. The rights of each Lender hereunder are pari
passu
to the
rights of the other Lenders hereunder. Any recovery hereunder shall be shared
ratably among the Lenders according to the then remaining principal amount
owed
to each (plus accrued and unpaid interest) as to the total amount then owed
to
the Lenders as a whole.
14. Termination;
Release.
When
the Obligations have been indefeasibly paid and performed in full or
all
outstanding Convertible Notes have been converted to common stock pursuant
to
the terms of the Convertible Notes and the Subscription Agreements,
this
Agreement and the security interests created hereunder shall be terminated,
and
the Collateral Agent, at the request and sole expense of the Debtor, will
execute and deliver to the Debtor the proper instruments (including UCC
termination statements) terminating the Security Agreement and such security
interests, and duly assign, transfer and deliver to the Debtor, without
recourse, representation or warranty of any kind whatsoever, the Collateral,
including, without limitation, any Additional Collateral, as may be in the
possession of the Collateral Agent.
15. Collateral
Agent.
15.1 Collateral
Agent Powers.
The
powers conferred on the Collateral Agent hereunder are solely to protect its
interest (on behalf of the Lenders) in the Collateral and shall not impose
any
duty on it to exercise any such powers.
15.2 Reasonable
Care.
The
Collateral Agent is required to exercise reasonable care in the custody and
preservation of any Collateral in its possession; provided, however, that the
Collateral Agent shall be deemed to have exercised reasonable care in the
custody and preservation of any of the Collateral if it takes such action for
that purposes as any owner thereof reasonably requests in writing at times
other
than upon the occurrence and during the continuance of any Event of Default,
but
failure of the Collateral Agent, to comply with any such request at any time
shall not in itself be deemed a failure to exercise reasonable
care.
[THIS
SPACE INTENTIONALLY LEFT BLANK]
10
IN
WITNESS WHEREOF, the
undersigned have executed and delivered this Security Agreement, as of the
date
first written above.
|
"DEBTOR"
a Florida corporation
_____________________________________
Yi
Xxx Xxxx
Chief
Executive Officer
|
"THE COLLATERAL AGENT"
_____________________________________
|
APPROVED
BY “LENDERS”:
|
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:
|
This
Security Agreement may be signed by facsimile signature
and
delivered
by confirmed facsimile transmission.
11
SCHEDULE
A TO SECURITY AGREEMENT
|
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
|
||||
12
SCHEDULE
B TO SECURITY AGREEMENT
PATENTS,
PATENTS PENDING, APPLICATIONS
None.
SCHEDULE
6.1 TO SECURITY AGREEMENT
None.
13
