PLEDGE AGREEMENT
EXECUTION
COPY
PLEDGE AGREEMENT (this "Agreement"), dated as of June
19, 2009, made by Xxxxxxxx Xx, a natural person in his personal capacity and not
in his capacity as an officer, director, employee or agent of the Company or any
of its Subsidiaries, with a principal residence at Building No. 45, Hepan
Garden, Xx. 000, Xxxxxxxx Xxxxxx, Xxxxxx Xxxxxxxx, Xxxxxxxx, Xxxxxx'x Xxxxxxxx
of China (the "Pledgor"), in favor of Xxxxxx
Bay Fund LP, 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").
WITNESSETH:
WHEREAS,
A-Power Energy Generation Systems, Ltd., a company incorporated under the laws
of the British Virgin Islands, with headquarters located at No. 44 Jingxing
Road, Tiexi District, Shenyang, Liaoning Province, China 110021 (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 have agreed to purchase, among other things, 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 Common Shares 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 common shares, 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 share dividend and
any distribution in connection with a share 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 Pledged Shares;
(c) all
investment property, financial assets, securities, shares, other equity
interests, share 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;
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).
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SECTION
3. Security for Secured
Obligations. The security interest created hereby in the
Pledged Collateral constitutes continuing collateral security for the prompt
performance and observance of all liabilities, obligations, or undertakings
owing by Pledgor to the Collateral Agent or the Buyers under this Agreement and
the Put Agreement, including the delivery of Lu Conversion Shares, Lu Warrant
Shares and/or Lu Additional Conversion Shares and/or, at such time as the
Company has notified the Buyers of its election to deliver “Make-Whole Shares”
and “Interest Shares” (as defined in the Registration Rights Agreement) and
failed to deliver such shares, Make-Whole Shares and Interest Shares
(collectively, the "Secured
Obligations")
SECTION
4. Delivery of the Pledged
Collateral.
(a) The
Market Price (as defined in the Note) of the Pledged Shares as of each 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 on behalf of all of the Buyers, 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 shall be no less than the aggregate principal amount at
any time and from time to time outstanding under the Notes; provided that the
maximum number of Additional Pledged Shares that the Pledgor shall be required
to deliver under this Agreement and any other Transaction Document shall not
exceed 1,000,000.
(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 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 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 share transfer forms executed
in blank, all in form and substance reasonably satisfactory to the
Buyers. 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),
acting upon the written direction of the Buyers, 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.
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(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 Share, any (i) share certificate (including, without
limitation, any certificate representing a share dividend or distribution in
connection with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, share 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
share 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.
(e) The
Pledgor shall use its reasonable best efforts to procure the entry in the
register of members of the Company pursuant to section 66(8) of the BVI Business
Companies Act, 2004 (British Virgin Islands) the details of this Pledge and of
any Pledge Amendment.
SECTION
5. Taxes.
(a) All
payments made by the Pledgor hereunder or under the Put Agreement shall be made
in accordance with the terms of the Put Agreement 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 the Put Agreement:
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(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 Buyers, 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 Put Agreement (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 Put Agreement, 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.
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, restrictions on transfer imposed by the Securities Act of 1933,
as amended, (the “Securities Act”) or any Permitted Liens.
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(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 Put Agreement.
(d) Except
for the filing of an amendment to Pledgor’s Schedule 13D filed with the SEC, 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 and entry of the details
of this Pledge and of any Pledge Amendment in the register of members of the
Company.
SECTION
7. Covenants as to the Pledged
Collateral. So long as any Secured Obligations shall remain
outstanding, the Pledgor will, unless the Collateral Agent, acting pursuant to
the written direction of the Buyers, 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;
(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;
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(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 required
or permitted by the Put Agreement or this Agreement;
(f) not
create or suffer to exist any Lien, upon or with respect to any Pledged
Collateral except for the Lien created hereby, restrictions on transfer imposed
by the Securities Act or 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; and
(h) 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:
(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
hereby and by the Put 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 endorsement and/or appropriate
share transfer forms duly executed in blank, to be held by the Collateral Agent
as Pledged Collateral and as further collateral security for the Secured
Obligations; and
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(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) As
used in this Agreement, an “Event of Default” shall mean
the Pledgor’s failure to perform or comply with any covenant or agreement
contained in this Agreement or the Put Agreement in any material respect,
including, without limitation, Pledgor’s obligation to deliver Additional
Pledged Shares to the Collateral Agent in accordance with this Agreement or to
exchange any Note and/or any Warrant into Common Shares or exchange any
Additional Conversion Obligations (as defined in the Put Agreement) into Common
Shares, in each case, pursuant to the terms of the Put Agreement and the
continuation of such failure of performance or compliance for three (3) Business
Days. Upon the occurrence and during the continuance of 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 the Buyers may
determine; and
(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.
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SECTION
9. Additional Provisions
Concerning the Pledged Collateral.
(a) The
Pledgor hereby (i) authorizes the Buyers or 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 Buyers or 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. Not
withstanding anything to the contrary contained herein, the Collateral Agent
shall have no responsibility for the preparing, recording, filing, re-recording,
or re-filing of any financing statement, continuation statement or other
instrument in any public 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 Buyers’ discretion to take any action and to
execute any instrument which the Buyers 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.
(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.
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(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, or
deliver Pledged Collateral to the Holders of the Notes and the Holders of the
Warrants in accordance with the Put Agreement. 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.
(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 unless a registration statement is
in effect with respect to the resale of the Pledged Shares, 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. 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.
-10-
(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 Put 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 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 Put 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). All authorizations and agencies contained herein with
respect to any of the Pledged Collateral are irrevocable and powers coupled with
an interest.
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 4.99% (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 Buyers may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company's most recent
Form 20-F, Form 6-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.
-12-
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 the Put Agreement 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 Put Agreement 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 the Put Agreement against any party thereto are not
conditional or contingent on any attempt by the Collateral Agent to exercise any
of its rights under the Put Agreement against such party or against any other
Person.
(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 the Put Agreement 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.
-13-
(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 expiration or termination of the Put Agreement, 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 or delivered pursuant to the
Put Agreement, 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.
(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
Pledgor hereby appoints C T Corporation System, with offices at 000 Xxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 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.
-14-
(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) Notwithstanding
anything to the contrary contained in this Agreement or in the Transaction
Documents (i) except as expressly provided in the Put Agreement and this
Agreement, no recourse may be taken pursuant to this Agreement or the Put
Agreement or pursuant to any other Transaction Document to the extent arising
from the provisions of this Agreement or the Put Agreement, directly or
indirectly, against Pledgor (solely in its capacity as a holder of Common
Shares) or against any assets of the Pledgor for the payment of principal
of, interest on, or any amount due under, the Notes or for any claim with
respect to the obligations of the Company under or based on any Transaction
Document or any failure by the Company to perform or observe any of the terms
and conditions of the Transaction Documents, and (ii) the recourse of the
Collateral Agent for the Secured Obligations under the Put Agreement and under
this Agreement (including, without limitation, Secured Obligations under Section
5, Taxes, Section 10, Remedies Upon Default and Section 11, Indemnity and
Expenses, of this Agreement), shall be limited solely to the Pledgor’s equity
interests in the Pledged Collateral and any Additional
Collateral.
(k) 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.
(l) 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.
(m) 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.
|
By:
|
/s/ Xxxxxxxx Xx
|
|
|
Name:
|
Xxxxxxxx
Xx
|
ACCEPTED
BY:
XXXXXX
BAY FUND LP,
as
Collateral Agent
|
By:
|
/s/ Xxxx Xxxx
|
|
|
Name: XXXXXX
BAY CAPITAL MANAGEMENT LP / BY: XXXX XXXX
|
||
|
Title: INVESTMENT
MANAGER / AUTHORIZED SIGNATORY
|
||
or
|
By:
|
/s/ Xxxxxxxx Xx
|
|
|
Name: Xxxxxxxx
Xx
|
||
|
Title: Chief
Executive Officer
|
||
SCHEDULE I TO PLEDGE
AGREEMENT
Pledged
Shares
|
Pledgor
|
Name of Issuer
|
Number of Shares
|
% of Shares
|
Class
|
Certificate
No.(s)
|
||||||||
|
Xxxxxxxx
Xx
|
4,000,000 | 11.87 |
Common
Stock
|
AP
22
|
|||||||||
|
Xxxxxxxx
Xx
|
1,000,000 | 2.97 | % |
Common
Stock
|
AP
23
|
||||||||
|
Xxxxxxxx
Xx
|
1,000,000 | 2.97 | % |
Common
Stock
|
AP
24
|
||||||||
ANNEX
I
TO
PLEDGE
AMENDMENT
This
Pledge Amendment, dated June 19, 2009, 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
June 19, 2009, 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 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
|
Pledgor
|
Name of Issuer
|
Number of Shares or Other
Equity Interests
|
Class
|
Certificate No(s)
|
||||
|
[PLEDGOR]
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|||
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By:
|
|
||
|
[SHAREHOLDER]
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|||
