Exhibit 10.5
 
SHAREHOLDER PLEDGE AGREEMENT
 
SHAREHOLDER PLEDGE AGREEMENT (this "Agreement"), dated as of January 21, 2010,
made Excelvantage Group Limited, a company organized under the laws of the
British Virgin Islands (the "Pledgor"), Kandi Technologies Corp., a Delaware
corporation (the "Company") and the secured parties listed on the signature
pages hereof (collectively, the “Secured Parties” and each, individually, a
“Secured Party”).
 
WITNESSETH:
 
WHEREAS, the Company and each of the Secured Parties are parties to party to the
Securities Purchase Agreement, dated as of January 20, 2010 (as amended,
restated or otherwise modified from time to time, the "Securities Purchase
Agreement"), pursuant to which the Company has agreed to sell, and the Secured
Parties has agreed to purchase, the Notes (as defined in the Securities Purchase
Agreement) and the Warrants (as defined Securities Purchase Agreement); and
 
WHEREAS, in order to induce the Secured Parties to purchase, severally and not
jointly, the Notes and Warrants as provided for in the Securities Purchase
Agreement, the Pledgor has agreed to agreed to grant each Secured Party a
separate, continuing security interest in and to the Pledged Collateral (as
defined below) in order to secure the prompt and complete payment, observance
and performance of the Secured Obligations (as defined below).
 
NOW, THEREFORE, for and in consideration of the recitals made above and other
good and valuable consideration, the receipt, sufficiency and adequacy of which
are hereby acknowledged, the parties hereto agree 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 Secured Parties holding a majority of the Secured Obligations then
outstanding (the “Required Holders”) 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.

 

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(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 each Secured Party a separate,
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 shares of common stock of the Company 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 shares of capital
stock, 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 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");
 
(b)           all present and future increases, profits, combinations,
reclassifications, and substitutes and replacements for all or part of the
foregoing collateral heretofore described;
 
(c)           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;
 
(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).
 
SECTION 3.   Security for Secured Obligations.  The security interest created
hereby in the Pledged Collateral constitutes continuing collateral security for
the prompt payment and due performance and observance of all of the following
Secured Obligations (the "Secured Obligations"):

 

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(a)           all liabilities, obligations, or undertakings owing by the Company
to the Secured Parties of any kind or description arising out of or outstanding
under, advanced or issued pursuant to, or evidenced by the Securities Purchase
Agreement, the Notes, the Warrants or any of the other Transaction Documents,
and
 
(b)           all liabilities, obligations, or undertakings owing by Pledgor to
the Secured Parties under this Agreement, in each case with respect to the
foregoing liabilities, obligations or undertakings, irrespective of whether for
the payment of money, whether direct or indirect, absolute or contingent,
liquidated or unliquidated, determined or undetermined, due or to become due,
voluntary or involuntary, whether now existing or hereafter arising, and
including all interest, costs, indemnities, fees (including attorneys fees), and
expenses (including interest, costs, indemnities, fees, and expenses that, but
for the provisions of the Bankruptcy Code, would have accrued irrespective of
whether a claim therefor is allowed) and any and all other amounts which Company
or Pledgor is required to pay pursuant to any of the foregoing, by law, or
otherwise.
 
SECTION 4.   Delivery of the Pledged Collateral.
 
(a)           The Market Price (as defined in the Notes) of the Pledged Shares
held by any Secured Party, as determined by such Secured Party in its sole
discretion based on the thirty (30) day Volume Weighted Average (as defined in
the Notes) of the Common Stock for the thirty (30) Trading Days (as defined in
the Notes) immediately preceding the date of determination (the "Pledged Share
Value"), shall at all times equal or exceed the aggregate principal amount
outstanding under the Note (whether or not then due and payable) of such Secured
Party.  The Pledgor shall, within five business days following the receipt of
notice from such Secured Party that the Pledged Share Value is less than the
aggregate principal amount outstanding under the Note of such Secured Party,
deliver additional shares ("Additional Pledged Shares") to such Secured Party in
accordance with the terms of this Section 4 such that the Pledged Share Value
(taking into account the fair market value of such Additional Pledged Shares)
shall be no less than the aggregate principal amount outstanding under the Note.
 
(b)           In accordance with the terms and conditions set forth in the
Securities Purchase Agreement, the Pledgor shall deliver to each of the Secured
Parties as of date hereof a certificate with respect to the Pledged Shares to be
initially held by such Security Party in such amounts as set forth on Schedule I
attached hereto.  As of any given date, with respect to all other promissory
notes, certificates and instruments constituting Pledged Collateral from time to
time or required to be pledged to the Secured Parties 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") such amount
equal to a fraction (i) the numerator of which is the principal amount of such
Secured Party’s Note on such given date and (ii) the denominator of which is the
aggregate principal amount of all Notes outstanding as of such given date (the
“Secured Party Pro Rata Amount”) of such Additional Collateral shall be
delivered to each Secured Party promptly upon receipt thereof by or on behalf of
the Pledgor.  All such promissory notes, certificates and instruments shall be
held by each Secured Party 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 Secured Parties.  If
any Pledged Collateral consists of uncertificated securities, unless the
immediately following sentence is applicable thereto, the Pledgor shall cause
the applicable Secured Party (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
applicable Secured Party (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 the applicable Secured Party Pro Rata Amount of such
securities entitlements to each Secured Party (or its designated custodian,
nominee or other designee) or cause the applicable securities intermediary to
agree that it will comply with entitlement orders by such Secured Party (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 each Secured Party, 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 each Secured Party 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 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 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 (collectively,
the “Distribution Collateral”), the Pledgor shall hold such Distribution
Collateral in trust for the benefit of the Secured Parties, shall segregate it
from the Pledgor’s other property and shall deliver the applicable Secured Party
Pro Rata Amount of such Distribution Collateral forthwith to each Secured Party
in the exact form received, with any necessary endorsement and/or appropriate
stock powers duly executed in blank, to be held by the each Secured Party as
Pledged Collateral and as further collateral security for the Secured
Obligations.
 
 

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(e)           So long as no Event of Default (as defined in the Notes) has
occurred or is continuing, on the later to occur of (i) the final Adjustment
Date (as defined in the Notes) and (ii) the last business day of each fiscal
quarter of the Company beginning with the fiscal quarter ended March 31, 2010,
if both (x) the number of shares of Common Stock issuable pursuant to the Notes
and Warrants then outstanding of a Secured Party is less than the number of
Pledge Shares then held by such Secured Party and (y) the Pledged Share Value of
the Pledged Shares held by such Secured Party exceeds 110% of the Secured
Obligations of such Secured Party then outstanding (whether or not then due and
payable), then no later than the tenth (10th) Trading Day following receipt of
written notice from the Pledgor, such Secured Party shall release such number of
Pledge Shares to the Pledgor equal to the difference of (A) the number of Pledge
Shares then held by such Secured Party and (B) the number of shares of Common
Stock issuable pursuant to the Notes and Warrants then outstanding of such
Secured Party.
 
SECTION 5.   Taxes.
 
(a)           All payments made by the Pledgor hereunder or under any other
Transaction Document shall be made in accordance with the terms of the
respective Transaction Document 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 Secured Party by the
jurisdiction in which such Secured Party  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 any other
Transaction Document:
 
(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 Secured Party pursuant to this sentence) each Secured
Party 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
Secured Parties an official receipt (or, if an official receipt is not
available, such other documentation as shall be satisfactory to the Secured
Parties, 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 any other Transaction Document
(collectively, "Other Taxes").

 

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(b)           The Pledgor hereby indemnifies and agrees to hold each Secured
Party (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 any other Transaction Document, 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 such Secured Party 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 each Secured Party 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 Pledgor has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement.  This Agreement has
been duly executed and delivered by the Pledgor and constitutes a legal, valid
and binding obligation of the Pledgor, enforceable against the Pledgor in
accordance with its terms, except (a) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws now or hereafter in effect relating to, or affecting
generally, the enforcement of creditors’ and other obligees’ rights and (b)
where the remedy of specific performance or other forms of equitable relief may
be subject to certain equitable defenses and principles and to the discretion of
the court before which the proceeding may be brought.
 
(b)           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.
 
(c)           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.
 
(d)           The exercise by any Secured Party 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, as defined in the Securities Purchase Agreement, the "Transaction
Documents").
 
(e)           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 any Secured Party 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.

 

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(f)           This Agreement creates a valid security interest and Lien in favor
of the Secured Parties in the Pledged Collateral, as security for the Secured
Obligations.  Each Secured Party 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 such Secured Party’s having possession of
certificates, instruments and cash constituting Pledged Collateral after the
date hereof.
 
SECTION 7.   Covenants as to the Pledged Collateral.  So long as any Secured
Obligations shall remain outstanding, the Pledgor will, unless the Required
Holders, shall otherwise consent in writing:
 
(a)           keep adequate records concerning the Pledged Collateral and permit
the Secured Parties, 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 each Secured Party 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 each Secured Party’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 any Secured Party 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 such Secured Party 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 such
Secured Party 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 Securities Purchase Agreement or the Notes;
 
(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;

 

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(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;
 
(h)           except as expressly permitted by the Securities Purchase
Agreement, not permit the issuance of (i) any additional shares of any class of
capital stock, partnership interests, member interests or other equity of the
Company, (ii) any securities convertible voluntarily by the holder thereof or
automatically upon the occurrence or non-occurrence of any event or condition
into, or exchangeable for, any such shares of capital stock or (iii) any
warrants, options, contracts or other commitments entitling any Person to
purchase or otherwise acquire any such shares of capital stock;
 
(i)            not issue any 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
 
(j)            not take or fail to take any action which would in any manner
impair the validity or enforceability of each Secured Party’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 by the Securities Purchase 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 each Secured Party in proportion to their
Secured Party Pro Rata Amount to hold as, Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the benefit of such Secured
Party, shall be segregated from the other property or funds of the Pledgor, and
shall be forthwith delivered to such Secured Party in the exact form received
with any necessary indorsement and/or appropriate stock powers duly executed in
blank, to be held by such Secured Party as Pledged Collateral and as further
collateral security for the Secured Obligations; and

 

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(iii)         each Secured Party 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 such Secured Party has possession of such Pledged Collateral.
 
(b)          Upon the occurrence and during the continuance of an Event of
Default (as defined in the Notes) (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 each Secured Party 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, each Secured
Party 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 Secured Parties 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 Secured Parties,
shall be segregated from other funds of the Pledgor, and shall be forthwith paid
over to the Secured Parties in proportion to the applicable Secured Party Pro
Rata Amount 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 such Secured Party as Pledged Collateral and as further collateral security
for the Secured Obligations.
 
SECTION 9.   Additional Provisions Concerning the Pledged Collateral.
 
(a)           The Pledgor hereby (i) authorizes the Secured Parties 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 Secured Parties
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 each Secured Party 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 each
Secured Party 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, no Secured Party shall have any responsibility for the
preparing, recording, filing, re-recording, or re-filing of any financing
statement, continuation statement or other instrument in any public office.
 
 

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(b)           The Pledgor hereby irrevocably appoints each Secured Party as his
attorney-in-fact and proxy, with full authority in the place and stead and in
his name or otherwise, from time to time in the Secured Parties’ discretion to
take any action and to execute any instrument which the Secured Parties 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, each Secured Party may perform, or cause performance of, such
agreement or obligation, and the expenses of such Secured Party 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, no Secured Party shall
have any 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.  Each Secured Party 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 such Secured Party accords its own
property, it being understood that no Secured Party shall 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 such Secured Party 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.  Each Secured Party agrees
that, with respect to any Pledged Collateral at any time or times in its
possession and in which any other Secured Party has a Lien, the Secured Party in
possession of any such Pledged Collateral shall be the bailee of each other
Secured Party solely for purposes of perfecting (to the extent not otherwise
perfected) each other Secured Party’s Lien in such Pledged Collateral, provided
that no Secured Party shall be obligated to obtain or retain possession of any
such Pledged Collateral.  Without limiting the generality of the foregoing,
Secured Parties and Pledgor hereby agree that any Secured Party that is in
possession of any Pledged Collateral at such time as the Secured Obligations
owing to such Secured Party have been paid in full may deliver such Pledged
Collateral to the Company or, if requested by any Secured Party prior to such
delivery, may deliver such Pledged Collateral (unless otherwise restricted by
applicable law or court order and subject in all events to the receipt of an
indemnification of all liabilities arising from such delivery) to the requesting
Secured Party, without recourse to or representation or warranty by the Secured
Party in such possession.  No later than the third business day after the
Company’s receipt of such Pledged Collateral, the Company shall deliver to each
Secured Party with Secured Obligations then outstanding the applicable Secured
Party Pro Rata Amount of such Pledged Collateral.

 

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(e)           The powers conferred on each Secured Party 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, no Secured Party shall have any 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, each Secured Party may at any time in its discretion (i)
without notice to the Pledgor, transfer or register in the name of such Secured
Party 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)           Each Secured Party 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 such Secured Party 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 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.  No Secured Party
shall be obligated to make any sale of Pledged Collateral regardless of notice
of sale having been given.  Each Secured Party may adjourn any public or private
sale by such Secured Party 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 each Secured Party 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
no Secured Party shall have any 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 any Secured Party may, in such event, bid for the purchase of such
securities.

 

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(c)           Any cash held by any Secured Party as Pledged Collateral and all
cash proceeds received by such Secured Party 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 such
Secured Party pursuant to Section 11 hereof) by such Secured Party against, all
or any part of the Secured Obligations in such order as such Secured Party shall
elect consistent with the provisions of the Securities Purchase Agreement.
 
(d)           In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which any Secured Party is
legally entitled, the Pledgor shall be jointly and severally 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 such Secured
Party to collect such deficiency.
 
SECTION 11.   Indemnity and Expenses.
 
(a)           The Pledgor hereby agrees to indemnify and hold each Secured Party
(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
each Secured Party the reasonable amount of any and all out-of-pocket costs and
expenses, including the reasonable fees and disbursements of such Secured
Party’s counsel and of any experts which such Secured Party 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 such
Secured Party hereunder, or (iv) the failure by the Pledgor to perform or
observe any of the provisions hereof.

 

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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 Securities Purchase
Agreement or if to the Secured Parties, 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 Secured Parties,
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 or complete conversion to equity securities of the Company of all
indebtedness obligations owed by the Company to the Secured Parties under the
Notes (including, without limitation, all principal, interest and fees related
to the Notes)).  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.  Each Secured Party shall not have the right
to exercise its rights under this Agreement, to the extent that after giving
effect to such exercise, any Secured Party (together with such Secured Party'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.  To the extent the above limitation applies, the determination of
whether a Secured Party has any rights to acquired Common Stock pursuant to this
Agreement shall, subject to such Maximum Percentage limitation, be determined on
the basis of the first exercise of rights by such Secured Party.  No prior
inability to exercise rights pursuant to this Agreement due to this paragraph
shall have any effect on the applicability of the provisions of this
paragraph with respect to any subsequent determination of exercisability. For
purposes of this paragraph, beneficial ownership and all determinations and
calculations (including, without limitation, with respect to calculations of
percentage ownership) shall be determined in accordance with Section 13(d) of
the 1934 Act (as defined in the Securities Purchase Agreement) and the rules and
regulations promulgated thereunder. The provisions of this paragraph shall be
implemented in a manner otherwise than in strict conformity with the terms of
this paragraph to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Maximum Percentage beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage
limitation.  The limitations contained in this paragraph shall apply to a
successor of the Secured Party.  The holders of Common Stock shall be third
party beneficiaries of this paragraph and the Company may not waive this
paragraph without the consent of holders of a majority of its Common Stock.  For
any reason at any time, upon the written or oral request of such Secured Party,
the Company shall within one (1) Business Day confirm orally and in writing to
such Secured Party the number of shares of Common Stock then outstanding,
including by virtue of any exercise of rights of such Secured party hereunder,
including, without limitation, pursuant to any securities issued pursuant to the
Securities Purchase Agreement.  By written notice to the Company, any Secured
Party may increase or decrease the Maximum Percentage of such Secured Party, to
any other percentage not in excess of 9.99% specified in such notice; provided
that (i) any such increase will not be effective until the 61st day after such
notice is delivered to the Company, and (ii) any such increase or decrease will
apply only to such Secured Party sending such notice and not to any other
Secured Party. .
 
 

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SECTION 15.   Acknowledgment.
 
(a)           Each Secured Party hereby agrees and acknowledges that no other
Secured Party has agreed to act for it as an administrative or collateral agent,
and each Secured Party is and shall remain solely responsible for the
attachment, perfection and priority of all Liens created by this Agreement or
any other Security Document in favor of such Secured Party.  No Secured Party
shall have by reason of this Agreement or any other Transaction Document an
agency or fiduciary relationship with any other Secured Party.  No Secured Party
(which term, as used in this sentence, shall include reference to each Secured
Party’s officers, directors, employees, attorneys, agents and affiliates and to
the officers, directors, employees, attorneys and agents of such Secured Party’s
affiliates) shall: (i) have any duties or responsibilities except those
expressly set forth in this Agreement and the other Security Documents or
(ii) be required to take, initiate or conduct any enforcement action (including
any litigation, foreclosure or collection proceedings hereunder or under any of
the other Security Documents).  Without limiting the foregoing, no Secured Party
shall have any right of action whatsoever against any other Secured Party as a
result of such Secured Party acting or refraining from acting hereunder or under
any of the Security Documents except as a result and to the extent of losses
caused by such Secured Party’s actual gross negligence or
willful misconduct.  No Secured Party assumes any responsibility for any failure
or delay in performance or breach by the Pledgor or any Secured Party of its
obligations under this Agreement or any other Transaction Document.  No Secured
Party makes to any other Secured Party any express or implied warranty,
representation or guarantee with respect to any Secured Obligations, Pledged
Collateral, Transaction Document or the Pledgor.  No Secured Party nor any of
its officers, directors, employees, attorneys or agents shall be responsible to
any other Secured Party or any of its officers, directors, employees, attorneys
or agents for: (i) any recitals, statements, information, representations or
warranties contained in any of the Transaction Documents or in any certificate
or other document furnished pursuant to the terms hereof; (ii) the execution,
validity, genuineness, effectiveness or enforceability of any of the Transaction
Documents; (iii) the validity, genuineness, enforceability, collectability,
value, sufficiency or existence of any Pledged Collateral, or the attachment,
perfection or priority of any Lien therein; or (iv) the assets, liabilities,
financial condition, results of operations, business, creditworthiness or legal
status of the Pledgor.  No Secured Party nor any of its officers, directors,
employees, attorneys or agents shall have any obligation to any other Secured
Party to ascertain or inquire into the existence of any default or Event of
Default, the observance or performance by the Pledgor of any of the duties or
agreements of the Pledgor under any of the Transaction Documents or the
satisfaction of any conditions precedent contained in any of the Transaction
Documents.
 
 

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(b)           Each Secured Party hereby acknowledges and represents that it has,
independently and without reliance upon any other Secured Party, and based upon
such documents, information and analyses as it has deemed appropriate, made its
own credit analysis of the Pledgor and the Company and its own decision to enter
into the Transaction Documents and to purchase the Notes and Warrants, and
each Secured Party has made such inquiries concerning the Transaction Documents,
the Pledged Collateral, the Company and the Pledgor as such Secured Party feels
necessary and appropriate, and has taken such care on its own behalf as would
have been the case had it entered into the Transaction Documents without any
other Secured Party.  Each Secured Party hereby further acknowledges and
represents that the other Secured Parties have not made any representations or
warranties to it concerning the Pledgor, any of the Pledged Collateral or the
legality, validity, sufficiency or enforceability of any of the Transaction
Documents.  Each Secured Party also hereby acknowledges that it will,
independently and without reliance upon the other Secured Parties, and based
upon such financial statements, documents and information as it deems
appropriate at the time, continue to make and rely upon its own credit decisions
in taking or refraining to take any other action under this Agreement or the
Transaction Documents.  No Secured Party shall have any duty or responsibility
to provide any other Secured Party with any notices, reports or certificates
furnished to such Secured Party by the Pledgor or any credit or other
information concerning the affairs, financial condition, business or assets of
the Company (or any of its affiliates) or any Pledgor which may come into
possession of such Secured Party
 
SECTION 16.   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 Required Holders, 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 Required Holders, 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 any Secured Party 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 Secured Parties 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
each Secured Party under any Transaction Document against any party thereto are
not conditional or contingent on any attempt by such Secured Party 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.
 
 

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(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 each Secured Party and its successors,
transferees and assigns.  Without limiting the generality of clause (ii) of the
immediately preceding sentence, each Secured party 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 Securities
Purchase Agreement, and such other Person shall thereupon become vested with all
of the benefits in respect thereof granted to such Secured Party herein or
otherwise.  Upon any such assignment or transfer, all references in this
Agreement to such Secured Party shall mean the assignee of such Secured
Party.  None of the rights or obligations of the Pledgor hereunder may be
assigned or otherwise transferred without the prior written consent of the
Required Holders, and any such assignment or transfer without such consent 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 Company of all indebtedness
obligations owed by the Company to the Secured Parties under the Notes
(including, without limitation, all principal, interest and fees related to the
Notes), and (ii) the Secured Parties 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 such Secured Party) 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.
 
(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.
 
 

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(h)           The Company hereby appoints CT Corporation System, with offices at
111 Eighth Avenue, New York, New York 10011, as its agent for service of process
in New York.  Nothing contained herein shall affect the right of each Secured
Party 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.
 
(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)           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.
 
(k)           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.
 
(l)           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]
 
 

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In Witness Whereof, the Pledgor, the Company and the Secured Parties have
executed and delivered this Agreement as of the date first above written.
 
PLEDGOR:
 
EXCELVANTAGE GROUP LIMITED
   
By:
 
 
Name:
 
Title:

 
 

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In Witness Whereof, the Pledgor, the Company and the Secured Parties have
executed and delivered this Agreement as of the date first above written.
 
SECURED PARTY:
 
HUDSON BAY FUND, LP
   
By:
 
 
Name:
 
Title:

 
 

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In Witness Whereof, the Pledgor, the Company and the Secured Parties have
executed and delivered this Agreement as of the date first above written.
 
SECURED PARTY:
 
HUDSON BAY OVERSEAS FUND, LTD.
   
By:
 
 
Name:
 
Title:

 
 

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In Witness Whereof, the Pledgor, the Company and the Secured Parties have
executed and delivered this Agreement as of the date first above written.
 
SECURED PARTY:
 
CAPITAL VENTURES INTERNATIONAL
   
By:
 
 
Name:
 
Title:

 
 

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In Witness Whereof, the Pledgor, the Company and the Secured Parties have
executed and delivered this Agreement as of the date first above written.
 
KANDI TECHNOLOGIES, CORP.
   
By:
 
 
Name:
 
Title:

 
 

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SCHEDULE I TO PLEDGE AGREEMENT
 
Pledged Shares
 
Pledgor
 
Name of Issuer
 
Number
of Shares
   

% of
Shares
 
 
Class
 
Secured Party
 to Initially 
Hold Certificate
with respect to such
 Pledged Shares
Excelvantage Group Limited
 
Kandi
Technologies,
Corp
    574,000       2.876 %
Common Stock
 
Hudson Bay Fund, LP
Excelvantage Group Limited
 
Kandi
Technologies,
Corp
    826,000       4.138 %
Common Stock
 
Hudson Bay Overseas Fund, Ltd.
Excelvantage Group Limited
 
Kandi
Technologies,
Corp
    1,400,000       7.014 %
Common Stock
 
Capital Ventures International

 

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ANNEX I
 
TO
 
PLEDGE AGREEMENT
 
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 Amended and Restated Pledge Agreement,
dated as of July __, 2010, made by ___________ in favor of the secured parties
signatory thereto (the "Secured Parties") 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 Secured
Parties 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]
   
By:
   
[SHAREHOLDER]

 
 

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