EXH. 10.5 PLEDGE AGREEMENT
EXH.
10.5
PLEDGE
AGREEMENT (this
"Agreement"),
dated
as of February 12, 2007, made by Lotus Pharmaceutical International, Inc.,
a
Nevada corporation (the "Pledgor"),
in
favor of S. Xxxxxxx Xxxxxxx, in his capacity as collateral agent (in such
capacity, the "Collateral
Agent")
for
the "Buyers" (as defined below) party to the Subscription Agreement, dated
as of
February 12, 2007 (as amended, restated or otherwise modified from time to
time,
the "Subscription
Agreement").
WITNESSETH:
WHEREAS,
the Pledgor is the wholly subsidiary of Lotus Pharmaceuticals, Inc., a Nevada
corporation, (the “Parent”)
and
the
Parent and each party listed as a "Buyer" on the Schedule of Buyers attached
thereto (collectively, the "Buyers")
are
parties to a Subscription Agreement pursuant to which the Parent shall be
required to sell, and the Buyers shall purchase or have the right to purchase
the “Notes” (as defined therein);
WHEREAS,
it is a condition precedent to the Buyers entering into the Subscription
Agreement that the Pledgor shall have executed and delivered to the Collateral
Agent for the benefit of itself and the Buyers this Agreement to secure all
of
the Parent’s obligations under the Subscription Agreement, the “Notes” (as
defined therein) issued pursuant thereto (as such Notes may be amended,
restated, replaced or otherwise modified from time to time in accordance
ith the
terms thereof, collectively, the "Notes"),
and
the other “Transaction Documents” (as defined in the Subscription Agreement, the
"Transaction
Documents");
WHEREAS,
the Pledgor has executed a Security Agreement granting the Collateral Agent
a
first priority perfected lien in all its personal property (the "Security
Agreement");
WHEREAS,
the Pledgor is a party to certain agreements consisting of a Consulting Services
Agreement, an Operating Agreement, an Equity Pledge Agreement, an Option
Agreement and a Proxy Agreement (collectively, the “Management
Agreements”)
by and
among the Pledgor and Beijing Xxxxx Xxxx Pharmaceutical Co., Ltd. (“Xxxxx Xxxx”)
and the shareholders of Xxxxx Xxxx, and Beijing En Ze Xxx Xxx Pharmaceutical
Co., Ltd. (“En Ze Xxx Xxx”) and the shareholders of En Ze Xxx Xxx (collectively,
the “Beijing Companies”), whereby Pledgor exerts primary control over the
operations of and is the primary beneficiary of all of the assets of the
Beijing
Companies;
WHEREAS,
the Pledgor has determined that the execution, delivery and performance of
this
Agreement directly benefits, and is in its best interest.
NOW,
THEREFORE, in consideration of the premises and the agreements herein and
in
order to induce the Collateral Agent to perform under the Subscription
Agreement, the Pledgor agrees with the Collateral Agent as follows:
SECTION
1. Definitions
and Rules of Interpretation.
(a) Definitions.
Reference is made to the Subscription Agreement, and for a statement of terms
thereof. All terms used in this Agreement which are defined in the Subscription
Agreement or in Article 8 or Article 9 of the Uniform Commercial Code (the
"Code")
as in
effect from time to time in the State of New York 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
Subscription Agreement and the Code, the definition of such term in the
Subscription Agreement 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 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 the Pledgor’s right, title
and interest in and to the following (collectively, the "Pledged
Collateral"):
(a) the
assets and equity interests contemplated by the Management Agreements with
the
Beijing Companies;
(b) all
present, and all future, issued and outstanding shares of capital stock,
or
other equity or investment securities of, or partnership, membership, or
joint
venture interests in, the Beijing Companies, whether now owned or hereafter
acquired by the Pledgor and whether or not evidenced or represented by any
stock
certificate, certificated security or other instrument, together with the
certificates representing such equity interests, all options and other rights,
contractual or otherwise, in respect thereof and all dividends, distributions,
cash, instruments, investment property and any other property (including,
but
not limited to, any stock dividend and any distribution in connection with
a
stock split) from time to time received, receivable or otherwise distributed
in
respect of or in exchange for any or all of the foregoing and all cash and
noncash proceeds thereof (collectively, the "Pledged
Shares");
(c) all
present and future increases, profits, combinations, reclassifications, and
substitutes and replacements for all or part of the foregoing Collateral
heretofore described;
(d) all
investment property, financial assets, securities, capital stock, other equity
interests, stock options and commodity contracts of the Pledgor, all notes,
debentures, bonds, promissory notes or other evidences of indebtedness payable
or owing to the Pledgor, and all other assets now or hereafter received or
receivable with respect to the foregoing;
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(e) all
securities entitlements of the Pledgor in any and all of the foregoing;
and
(f) 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
its
interest therein may arise or appear (whether by ownership, security interest,
Lien, claim or otherwise).
SECTION
3. Security
for Obligations.
The
security interest created hereby in the Pledged Collateral constitutes
continuing collateral security for all of the following obligations, whether
now
existing or hereafter incurred (the "Obligations"):
(a) the
payment by the Pledgor, as and when due and payable (by scheduled maturity,
required prepayment, acceleration, demand or otherwise), of all amounts from
time to time owing by it in respect of the Subscription Agreement, the Notes
and
the other Transaction Documents, including, without limitation, (A) all
principal of and interest on the Notes (including, without limitation, all
interest that accrues after the commencement of any bankruptcy proceeding
of the
Pledgor, whether or not the payment of such interest is unenforceable or
is not
allowable due to the existence of such bankruptcy proceeding), and (B) all
fees,
commissions, expense reimbursements, indemnifications and all other amounts
due
or to become due under any of the Transaction Documents; and
(b) the
due
performance and observance by the Pledgor of all of its other obligations
from
time to time existing in respect of any of the Transaction Documents for
so long
as the Notes are outstanding.
SECTION
4. Delivery
of the Pledged Collateral.
(a) All
certificates currently representing the Pledged Shares shall be delivered
to the
Collateral Agent on or prior to the execution and delivery of this Agreement.
All other promissory notes, certificates and instruments constituting Pledged
Collateral from time to time or required to be pledged to the Collateral
Agent
pursuant to the terms of this Agreement or the Subscription Agreement (the
"Additional
Collateral")
shall
be delivered to the Collateral Agent promptly upon receipt thereof by or
on
behalf of the Pledgor. All such promissory notes, certificates and instruments
shall be held by the Collateral Agent pursuant hereto and shall be delivered
in
suitable form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment or undated stock powers executed in
blank,
all in form and substance reasonably satisfactory to the Collateral Agent.
If
any Pledged Collateral consists of uncertificated securities, unless the
immediately following sentence is applicable thereto, the Pledgor shall cause
the Collateral Agent (or its designated custodian, nominee or other designee) to
become the registered holder thereof, or cause each issuer of such securities
to
agree that it will comply with instructions originated by the Collateral
Agent
(or its designated custodian, nominee or other designee) with respect to
such
securities without further consent by the Pledgor. If any Pledged Collateral
consists of securities entitlements, the Pledgor shall transfer such securities
entitlements to the Collateral Agent (or its designated custodian, nominee
or
other designee) or cause the applicable securities intermediary to agree
that it
will comply with entitlement orders by the Collateral Agent (or its designated
custodian, nominee or other designee) without further consent by the
Pledgor.
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(b) Promptly
upon the receipt by the Pledgor of any Additional Collateral, 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 Subscription
Agreement, which Pledge Amendment shall from and after delivery thereof
constitute part of Schedules
I
and
II
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
5
with
respect to such Additional Collateral.
(c) If
the
Pledgor shall receive, by virtue of the Pledgor’s being or having been an owner
of any Pledged Collateral, any (i) stock certificate (including, without
limitation, any certificate representing a stock dividend or distribution
in
connection with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock split, spin-off
or
split-off), promissory note or other instrument, (ii) option or right, whether
as an addition to, substitution for, or in exchange for, any Pledged Collateral,
or otherwise, (iii) dividends payable in cash (except such dividends
permitted to be retained by the Pledgor pursuant to Section
7
hereof)
or in securities or other property or (iv) dividends, distributions, cash,
instruments, investment property and other property in connection with a
partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, the Pledgor shall receive such
stock certificate, promissory note, instrument, option, right, payment or
distribution in trust for the benefit of the Collateral Agent, shall segregate
it from the Pledgor’s other property and shall deliver it forthwith to the
Collateral Agent in the exact form received, with any necessary endorsement
and/or appropriate stock powers duly executed in blank, to be held by the
Collateral Agent as Pledged Collateral and as further collateral security
for
the Obligations.
SECTION
5. Representations
and Warranties.
The
Pledgor represents and warrants as follows:
(a) The
Pledgor (i) is a corporation duly organized, validly existing and in good
standing under the laws of the state or jurisdiction of its organization,
and
(ii) has all requisite power and authority to execute, deliver and perform
this
Agreement.
(b) The
execution, delivery and performance by the Pledgor of this Agreement (i)
have
been duly authorized by all necessary action, (ii) do not and will not
contravene its charter or bylaws, its limited liability company or operating
agreement or its certificate of partnership or partnership agreement, as
applicable, or any applicable law or any contractual restriction binding
on or
affecting it or any of its properties, and (iii) do not and will not result
in
or require the creation of any Lien upon or with respect to any of its
properties other than pursuant to this Agreement.
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(c) The
issuer of the Pledged Shares set forth in Schedule
I
hereto
are the Pledgor’s only Subsidiary existing on the date hereof. The Pledged
Shares have been duly authorized and validly issued, are fully paid and
nonassessable and the holder thereof is not entitled to any preemptive first
refusal or other similar rights. Except as noted in Schedule
I
hereto,
the Pledged Shares constitute 100% of the issued shares of capital stock,
partnership interests or membership or other equity interests, as applicable,
of
the Subsidiary. All other shares of stock constituting Pledged Collateral
will
be, when issued, duly authorized and validly issued, fully paid and
nonassessable.
(d) The
Pledgor is and will be at all times the legal and beneficial owner of the
Pledged Collateral free and clear of any Lien, security interest, option
or
other charge or encumbrance except for the security interest and Lien created
by
this Agreement or any Permitted Liens.
(e) The
exercise by the Collateral Agent of any of its rights and remedies hereunder
will not contravene any law or any contractual restriction binding on or
affecting the Pledgor or any of the properties of the Pledgor and will not
result in or require the creation of any Lien, security interest or other
charge
or encumbrance upon or with respect to any of the properties of the Pledgor
other than pursuant to this Agreement and the other Transaction
Documents.
(f) 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.
(g) This
Agreement creates a valid security interest and Lien in favor of the Collateral
Agent in the Pledged Collateral, as security for the Obligations. The Collateral
Agent’s having possession of the promissory notes evidencing the Pledged Debt,
the certificates representing the Pledged Shares and all other certificates,
instruments and cash constituting Pledged Collateral from time to time results
in the perfection of such security interest and Lien. Such security interest
and
Lien is, or in the case of Pledged Collateral in which the Pledgor obtains
rights after the date hereof, will be, a perfected Lien, subject only to
the
Permitted Liens. All action necessary or desirable to perfect and protect
such
security interest and Lien has been duly taken, except for the Collateral
Agent’s having possession of certificates, instruments and cash constituting
Pledged Collateral after the date hereof.
SECTION
6. Covenants
as to the Pledged Collateral.
So long
as any Obligations shall remain outstanding and the Subscription Agreement
and
the other Transaction Documents shall not have been terminated, the Pledgor
will, unless the Collateral Agent shall otherwise consent in
writing:
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(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 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;
(d) at
the
Pledgor’s expense, at any time and from time to time, promptly execute and
deliver all further instruments and documents and take all further action
that
may be necessary or desirable or that the Collateral Agent may reasonably
request in order to (i) perfect and protect, or maintain the perfection of,
the security interest and Lien purported to be created hereby, (ii) enable
the
Collateral Agent to exercise and enforce its rights and remedies hereunder
in
respect of the Pledged Collateral or (iii) otherwise effect the purposes
of this
Agreement, including, without limitation, delivering to the Collateral Agent
irrevocable proxies in respect of the Pledged Collateral;
(e) not
sell,
assign (by operation of law or otherwise), exchange or otherwise dispose
of any
Pledged Collateral or any interest therein except as expressly permitted
by the
Subscription Agreement;
(f) not
create or suffer to exist any Lien, upon or with respect to any Pledged
Collateral except for the Lien created hereby or for any Permitted
Lien;
(g) not
make
or consent to any amendment or other modification or waiver with respect
to any
Pledged Collateral or enter into any agreement or permit to exist any
restriction with respect to any Pledged Collateral other than pursuant to
the
Transaction Documents;
(h) not
issue
any additional stock certificate, certificated security or other instrument
to
evidence or represent any shares of capital stock, any partnership interest
or
membership interest described in Schedule
I
hereto;
and
(i) 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
7. Voting
Rights, Dividends, Etc. in Respect of the Pledged Collateral.
(a) So
long
as no Event of Default (as defined in the Notes) (an "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 Subscription Agreement or the other Transaction Documents;
provided,
however,
that
(A) Pledgor will not exercise nor refrain from exercising any such right,
as the case may be, if the Collateral Agent gives it notice that, in the
Collateral Agent’s judgment, such action (or inaction) is reasonably likely to
have a Material Adverse Effect and (B) the Pledgor will give the Collateral
Agent at least five (5) Business Days’ notice of the manner in which it intends
to exercise, or the reasons for refraining from exercising, any such right
which
is reasonably likely to have a Material Adverse Effect;
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(ii) the
Pledgor may receive and retain any and all dividends, interest or other
distributions paid in respect of the Pledged Collateral to the extent permitted
by the Subscription 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
Subscription Agreement, shall be, and shall forthwith be delivered to the
Collateral Agent to hold as, Pledged Collateral and shall, if received by
the
Pledgor, be received in trust for the benefit of the Collateral Agent, shall
be
segregated from the other property or funds of the Pledgor, and shall be
forthwith delivered to the Collateral Agent in the exact form received with
any
necessary indorsement and/or appropriate stock powers duly executed in blank,
to
be held by the Collateral Agent as Pledged Collateral and as further collateral
security for the Obligations; and
(iii) the
Collateral Agent will execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies and other instruments as the Pledgor
may reasonably request for the purpose of enabling the Pledgor to exercise
the
voting and other rights which it is entitled to exercise pursuant to paragraph
(i) of this Section
7(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
7(a),
in each
case, to the extent that the Collateral Agent has possession of such Pledged
Collateral.
(b) Upon
the
occurrence and during the continuance of an Event of Default:
(i) all
rights of the Pledgor to exercise the voting and other consensual rights
which
it would otherwise be entitled to exercise pursuant to paragraph (i) of
subsection (a) of this Section
7,
and to
receive the dividends, distributions, interest and other payments which it
would
otherwise be authorized to receive and retain pursuant to paragraph (ii) of
subsection (a) of this Section 7,
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;
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(ii) without
limiting the generality of the foregoing, the Collateral Agent may at its
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 Collateral
Agent, registrar or other designated Collateral Agent upon such terms and
conditions as it 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
7(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 Obligations.
SECTION
8. Additional
Provisions Concerning the Pledged Collateral.
(a) The
Pledgor hereby (i) authorizes the Collateral Agent to file one or more financing
or continuation statements, and amendments thereto, relating to the Pledged
Collateral, without the signature of the Pledgor where permitted by law,
(ii)
ratifies such authorization to the extent that the Collateral Agent has filed
any such financing or continuation statements, or amendments thereto, without
the signature of the Pledgor prior to the date hereof and (iii) authorizes
the
Collateral Agent to execute any agreements, instruments or other documents
in
the Pledgor’s name and to file such agreements, instruments or other documents
that are related to the security interest and Lien of the Collageral Agent
in
the Pledged Collateral or as provided under Article 8 or Article 9 of the
UCC in
any appropriate filing office.
(b) The
Pledgor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact
and proxy, with full authority in the place and stead and in its name or
otherwise, from time to time in the Collateral Agent’s discretion to take any
action and to execute any instrument which the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement (subject
to
the rights of the Pledgor under Section
7(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 in accordance with Section 13(e)
hereof.
(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
10
hereof
and shall be secured by the Pledged Collateral.
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(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 the Pledgor. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equal to that which the Collateral Agent accords its own property,
it being understood that the Collateral Agent shall not have responsibility
for
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Pledged Collateral,
whether
or not the Collateral Agent has or is deemed to have knowledge of such matters,
or (ii) taking any necessary steps to preserve rights against any parties
with
respect to any Pledged Collateral.
(e) The
powers conferred on the Collateral Agent hereunder are solely to protect
its
interest in the Pledged Collateral and shall not impose any duty upon it
to
exercise any such powers. Except for the safe custody of any Pledged Collateral
in its possession and the accounting for monies actually received by it
hereunder, the Collateral Agent shall have no duty as to any Pledged Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Pledged Collateral.
(f) Upon
the
occurrence and during the continuation of any Default or Event of Default,
the
Collateral Agent may at any time in its discretion (i) without notice to
the
Pledgor, transfer or register in the name of the Collateral Agent or any
of its
nominees any or all of the Pledged Collateral, subject only to the revocable
rights of the Pledgor under Section
7(a)
hereof,
and (ii) exchange certificates or instruments constituting Pledged Collateral
for certificates or instruments of smaller or larger denominations.
SECTION
9. Remedies
Upon Default.
If any
Event of Default shall have occurred and be continuing:
(a) The
Collateral Agent may exercise in respect of the Pledged Collateral, in addition
to other rights and remedies provided for herein or otherwise available to
it,
all of the rights and remedies of a secured party on default under the Code
then
in effect in the State of New York; and without limiting the generality of
the
foregoing and without notice except as specified below, sell the Pledged
Collateral or any part thereof in one or more parcels at public or private
sale,
at any exchange or broker’s board or elsewhere, at such price or prices and on
such other terms as the Collateral Agent may deem commercially reasonable.
The
Pledgor agrees that, to the extent notice of sale shall be required by law,
at
least ten (10) days’ notice to 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.
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(b) The
Pledgor recognizes that it may be impracticable to effect a public sale of
all
or any part of the Pledged Shares or any other securities constituting Pledged
Collateral and that the Collateral Agent may, therefore, determine to make
one
or more private sales of any such securities to a restricted group of purchasers
who will be obligated to agree, among other things, to acquire such securities
for its own account, for investment and not with a view to the distribution
or
resale thereof. The Pledgor acknowledges that any such private sale may be
at
prices and on terms less favorable to the seller than the prices and other
terms
which might have been obtained at a public sale and, notwithstanding the
foregoing, agrees that such private sales shall be deemed to have been made
in a
commercially reasonable manner and that the Collateral Agent shall have no
obligation to delay sale of any such securities for the period of time necessary
to permit the issuer of such securities to register such securities for public
sale under the Securities Act of 1933, as amended (the "Securities
Act").
The
Pledgor further acknowledges and agrees that any offer to sell such securities
which has been (i) publicly advertised on a bona fide basis in a newspaper
or
other publication of general circulation in the financial community of New
York,
New York (to the extent that such an offer may be so advertised without prior
registration under the Securities Act) or (ii) made privately in the manner
described above to not less than fifteen (15) bona fide
offerees
shall be deemed to involve a “public disposition” for the purposes of Section
9-610 of the Code (or any successor or similar, applicable statutory provision)
as then in effect in the State of New York, notwithstanding that such sale
may
not constitute a “public offering” under the Securities Act, and that the
Collateral Agent may, in such event, bid for the purchase of such
securities.
(c) Any
cash
held by the Collateral Agent as Pledged Collateral and all cash proceeds
received by the Collateral Agent in respect of any sale of, collection from,
or
other realization upon, all or any part of the Pledged Collateral may, in
the
discretion of the Collateral Agent, be held by the Collateral Agent as
collateral for, and/or then or at any time thereafter applied (after payment
of
any amounts payable to the Collateral Agent pursuant to Section
10
hereof)
in whole or in part by the Collateral Agent against, all or any part of the
Obligations in such order as the Collateral Agent shall elect consistent
with
the provisions of the Subscription 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 Subscription Agreement 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.
-10-
SECTION
10. 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.
SECTION
11. 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 it at
the
address specified the Subscription Agreement or if to the Collateral Agent,
to
it at the address specified in the Subscription 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
11.
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
12. 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 Subscription Agreement or any other agreement
or instrument relating thereto, (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 Obligations,
or any other amendment or waiver of or consent to any departure from the
Subscription Agreement 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 Obligations, or (iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Pledgor in respect
of
the Obligations (other than the payment in full of the Obligations). All
authorizations and agencies contained herein with respect to any of the Pledged
Collateral are irrevocable and powers coupled with an interest.
-11-
SECTION
13. Miscellaneous.
(a) No
amendment of any provision of this Agreement shall be effective unless it
is in
writing and signed by the Pledgor and the Collateral Agent, and no waiver
of any
provision of this Agreement, and no consent to any departure by the Pledgor
therefrom, shall be effective unless it is in writing and signed by the
Collateral Agent, and then such waiver or consent shall be effective only
in the
specific instance and for the specific purpose for which given.
(b) No
failure on the part of the Collateral Agent to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof; nor shall any single or partial exercise of
any
such right preclude any other or further exercise thereof or the exercise
of any
other right. The rights and remedies of the Collateral Agent provided herein
and
in the other Transaction Documents are cumulative and are in addition to,
and
not exclusive of, any rights or remedies provided by law. The rights of the
Collateral Agent under any Transaction Document against any party thereto
are
not conditional or contingent on any attempt by the Collateral Agent to exercise
any of its rights under any other Transaction Document against such party
or
against any other Person.
(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 Section 13 (e) hereof and (ii) be
binding on the Pledgor and their its successors and assigns and shall inure,
together with all rights and remedies of the Collateral Agent, to the benefit
of
the Collateral Agent and its successors, transferees and assigns. Without
limiting the generality of clause (ii) of the immediately preceding sentence,
the Collateral Agent may assign or otherwise transfer its rights and obligations
under this Agreement and any other Transaction Document to any other Person
pursuant to the terms of the Subscription 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 shall
be
null and void.
(e) Notwithstanding
anything to the contrary in this Agreement, (i) this Agreement (along with
all
powers of attorney granted hereunder) and the security interests and Lien
created hereby shall terminate and all rights to the Pledged Collateral shall
revert to the Pledgor upon the repayment in full and/or complete conversion
to
equity securities of the Pledgor of all indebtedness obligations owed by
the
Pledgor to the Collateral Agent under the Notes (including, without limitation,
all principal, interest and fees related to the Notes), and (ii) the Collateral
Agent will, upon the Pledgor’s request and at the Pledgor’s expense, (A) return
to the Pledgor such of the Pledged Collateral (to the extent delivered to
the
Collateral Agent) as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof, and (B) execute and deliver to the
Pledgor, without recourse, representation or warranty, such documents as
the
Pledgor shall reasonably request to evidence such termination.
-12-
(f) The
internal laws, and not the laws of conflicts, 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 Central 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 the
transaction documents, the conversion shares, or the transactions contemplated
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 the transaction
documents, the shares or the conversion shares in any New York court sitting
in
the county of New York or any federal court sitting in the southern district
of
New York. Each party to this agreement hereby consents to the service of
process
in any such suit, action or proceeding by notice in the manner specified
in
Section
11.
(h) The
Pledgor irrevocably consents to the service of process of any of the aforesaid
courts in any such action, suit or proceeding by the mailing of copies thereof
by registered or certified mail (or any substantially similar form of mail),
postage prepaid, to the Pledgor at its address provided herein, such service
to
become effective when received or 10 days after such mailing, whichever first
occurs.
(i) 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.
-13-
(j) The
Pledgor irrevocably and unconditionally waives any right it 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.
(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]
-14-
In
Witness Whereof,
the
Pledgor has caused this Agreement to be executed and delivered by its officer
thereunto duly authorized, as of the date first above written.
|
LOTUS
PHARMACEUTICAL INTERNATIONAL, INC.
By: /s/
Liu Xxxxx
Xx
Name:
Liu Xxxxx Xx
Title: Chief
Executive Officer
|
|
|
ACCEPTED
BY:
S.
XXXXXXX XXXXXXX,
as
Collateral Agent
/s/
S. Xxxxxxx
Xxxxxxx
Address:
|
|
|
APPROVED
BY:
BEIJING
XXXXX XXXX
PHARMACEUTICAL
CO., LTD.
By: /s/
Liu Xxxxx
Xx
Name:
Liu Xxxxx Xx
Title: Chief
Executive Officer
|
BEIJING
EN ZE XXX XXX
PHARMACEUTICAL
CO., LTD.
By: /s/
Liu Xxxxx
Xx
Name:
Liu Xxxxx Xx
Title: Chief
Executive Officer
|
|
SHAREHOLDERS
OF BEIJING XXXXX XXXX PHARMACEUTICAL CO., LTD.
/s/
Xxx Xxxxx
Xx
Xxx
Xxxxx Xx
/s/
Song
Zhenghong
Song
Zhenghong
/s/
Xian Xxx
Xx
Xian
Xxx Xx
|
SHAREHOLDERS
OF BEIJING EN ZE XXX XXX PHARMACEUTICAL CO., LTD.
/s/
Liu Xxxxx
X
Xxx
Xxxxx Xx
/s/
Song
Zhenghong
Song
Zhenghong
|
SCHEDULE
I TO PLEDGE AGREEMENT
Pledged
Shares
|
Pledgor
|
Name
of Issuer
|
Number
of
Shares
|
%
of Shares
|
Certificate
No.(s)
|
|
Lotus
Pharmaceutical
International,
Inc.
|
Beijing
Xxxxx Xxxx
Pharmaceutical
Co., Ltd.
|
|||
|
Lotus
Pharmaceutical
International,
Inc.
|
Beijing
En Ze Xxx Xxx
Pharmaceutical
Co., Ltd.
|
ANNEX
I
TO
PLEDGE
AMENDMENT
This
Pledge Amendment, dated ●, 20●, 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 January
12, 2007, made by Lotus Pharmaceutical International, Inc. in favor of S.
Xxxxxxx Xxxxxxx, as Collateral Agent for the Buyers, (the "Collateral
Agent")
as it
may heretofore have been or hereafter may be amended or otherwise modified
or
supplemented from time to time and that the promissory notes [and/or] shares
or
other equity interests listed on this Pledge Amendment shall be hereby pledged
and assigned to the Collateral Agent and become part of the Pledged Collateral
referred to in such Pledge Agreement and shall secure all of the obligations
referred to in such Pledge Agreement.
Pledged
Shares
|
Pledgor
|
Name
of Issuer
|
Number
of Shares or
Other
Equity Interests
|
Class
|
Certificate
No(s)
|
|
LOTUS
PHARMACEUTICAL INTERNATIONAL, INC.
By:
Name:
Title:
|
