STOCK PLEDGE AGREEMENT
Exhibit
10.5
STOCK
PLEDGE AGREEMENT (this “Agreement”), dated as
of June 30, 2009, between Composite Technology Corporation (the “Borrower”) and
Northlight Financial LLC, individually and as Collateral Agent (the
“Secured
Party”).
WITNESSETH:
WHEREAS, the Borrower and the
Secured Party have entered into a Loan Agreement (the “Loan Agreement”),
dated as of the date hereof, to set forth the terms of the loan that the Secured
Party is making available to the Borrower, in the sum of $5,000,000 (the “Loan”), to be
evidenced by a Promissory Note (the “Promissory Note”) in
the principal amount of $5,000,000 delivered to the Secured Party,
WHEREAS, the Borrower holds
(a) 100 shares of common stock of CTC Cable Corporation and (b) 100 shares of
common stock of XxXxxx, Inc. (“XxXxxx,” and such
shares together, the “Stock”);
and
WHEREAS, in order to induce
the Secured Party to make the Loan and as security therefor, the Borrower has
agreed to enter into this Agreement;
NOW, THEREFORE, in
consideration of the mutual covenants herein contained, the parties hereto,
intending to be legally bound, do hereby agree as follows:
ARTICLE
1
DEFINITIONS
As used
in this Agreement, the following terms shall have the following
meanings:
“Obligations” shall
mean all obligations (monetary or otherwise) of the Borrower arising under or in
connection with the Financing Documents (as such term is defined in the Loan
Agreement).
“Shares” shall mean
the Stock, all certificates, options, rights, dividends, cash or other
distributions issued as an addition to, in substitution or exchange for, or on
account of, the Stock, any and all documents and agreements pertaining thereto,
and all proceeds of any of the foregoing.
All other
capitalized terms used but not otherwise defined herein shall have the
respective meanings given to such terms in the Loan Agreement.
ARTICLE
2
SECURITY AND
PLEDGE
2.1 As
security for the prompt and full satisfaction and payment of the Obligations,
the Borrower hereby pledges and assigns the Shares to the Secured Party and
grants the Secured Party a security interest therein.
2.2 The
Borrower shall deliver, upon the execution of this Agreement, certificate(s)
representing the Shares, endorsed in blank or with appropriate stock powers duly
executed in blank, to be held by the Secured Party subject to the terms
hereof.
2.3 Simultaneously
with the delivery of the Shares pursuant to this Agreement, the Secured Party
shall direct the issuers thereof (the “Issuers”) to record
the pledge and transfer of the Shares to the Secured Party on the Issuer’s
corporate records.
2.4 The
Lender shall be entitled to receive and hold in pledge hereunder in connection
with any of the Shares, any:
(a) stock
certificate representing a stock dividend or in connection with any increase or
reduction of capital, reclassification, merger, consolidation, or sale of
assets, combination of shares or stock splits; and
(b) option,
warrant, or right, whether as an addition to or in substitution or in exchange
for any of the Shares, or otherwise.
2.5 Unless
and until an Event of Default shall have occurred, the Borrower shall be
entitled to vote the Shares (provided, that upon a XxXxxx Default, the Borrower
shall not be entitled to vote the Shares of XxXxxx). The Borrower
shall not sell, assign or otherwise encumber the Shares until the Obligations
are satisfied and this Agreement is terminated.
2.6 The
Borrower acknowledges that any exercise by the Secured Party of the Secured
Party’s rights upon an Event of Default are subject to compliance by the Secured
Party with all applicable laws including, without limitation, any laws which may
restrict the sale or other disposition of the Shares. The Lender in
its sole discretion in any such sale or other disposition may restrict the
prospective purchasers based on a requirement that such purchasers represent
that they are purchasing the Shares for their own account, for investment and
not with the intent of the sale or other disposition thereof, or that they
otherwise fall within some lawful exemption of registration of applicable
securities laws. The Borrower further acknowledges that because the
Shares may not be freely tradable, the value realized therefrom by the Borrower
may be substantially less than if they were.
ARTICLE
3
PROXY AND EVENTS OF
DEFAULT
3.1 Proxy. The
Borrower shall, concurrently with the execution hereof (and upon its subsequent
acquisition of any additional Shares as provided in Section 2.4), execute and
deliver to the Secured Party a proxy in the form of Schedule A hereto
designating the Secured Party as its proxy and attorney-in-fact with full
authority to vote the Shares at any annual or special meeting of the
stockholders of the respective Issuers in proxy upon occurrence of an Event of
Default (the “Proxy”); provided, that upon
an Event of Default which is only a XxXxxx Default, the Proxy shall only apply
to the Shares of XxXxxx.
ARTICLE
4
RIGHTS AND
REMEDIES
4.1 Acceleration of
Obligations. Upon the occurrence of an Event of Default (as
such term is defined in the Loan Agreement) other than a XxXxxx Default (as such
term is defined in the Loan Agreement), the Obligations shall automatically be
immediately due and payable.
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4.2 Rights Under Uniform
Commercial Code. In addition to all of its other rights and
remedies under each of the Financing Documents, the Secured Party shall have all
of the rights and remedies of a secured party under the Uniform Commercial Code
of the State of New York (the “UCC”) from time to
time and shall comply with all procedures thereunder for sale or other
disposition of the Shares.
4.3 Disposition of
Shares. (a) Upon the occurrence of an Event of Default, the
Secured Party shall have the right to sell or otherwise dispose of the Shares;
provided, however, that if an
Event of Default is only a XxXxxx Default, the Secured Party may exercise the
rights and remedies provided in this Section 4.3 only with respect to the Shares
of XxXxxx. Such sales may be adjourned and continued from time to
time, with or without notice. To enable the Secured Party to effect
any such sale or other disposition to take any action and to execute any
instrument which the Secured Party may deem necessary or advisable to accomplish
the purposes of this Agreement, the Borrower hereby makes, constitutes and
appoints the Secured Party as its true and lawful attorney, in its name, place
and stead, and for its account, to make, execute and deliver any and all
assignments or other instruments which the Secured Party may deem necessary or
proper to carry out the authority hereby conferred by signing the Borrower’s
name or by signing the same as its attorney-in-fact. The foregoing
power of attorney is coupled with an interest and shall be a continuing one and
irrevocable so long as any portion of the Obligations remains
unpaid.
(b) The
Lender may purchase all or any part of the Shares at public sale or private
sale, and in lieu of actual payment of the purchase price, may set off the
amount of such price against the Obligations. If any deficiency shall
arise, the Borrower shall remain liable to the Secured Party
therefor.
4.4 The
proceeds of any sale or other disposition shall be applied as
follows:
(a) first,
to the costs and expenses incurred in connection therewith or incidental thereto
or to the care or safekeeping of any of the Shares or in any way relating to the
rights of the Secured Party hereunder, including reasonable attorneys’ fees and
expenses,
(b) second,
notwithstanding anything to the contrary in Section 4.1, to the payment of the
Loan and the satisfaction of the other Obligations,
(c) third,
to the payment of any other amounts required by applicable law, and
(d) fourth,
to the Borrower to the extent of any surplus proceeds.
4.5
Remedies
Cumulative. All rights and remedies of the Secured Party
arising under any Financing Document or by operation of law shall be cumulative
and non-exclusive, to the fullest extent permitted by law.
4.6 No
Forfeiture. The Lender may at its sole option incur reasonable
expenses including attorneys’ fees and expenses to protect its interest in the
Shares and the Borrower shall immediately reimburse the Secured Party for any
such fees and expenses.
4.7 Share Owner
Rights. Upon the occurrence of an Event of Default,
immediately and without further notice, the Secured Party or its nominee shall
have, with respect to the Shares, all rights, privileges, options or other
rights pertaining thereto as if it were the absolute owner thereof, including,
without limitation, the right to vote the Shares at any annual or special
meeting of the stockholders and to give consents, waivers and ratifications with
respect thereto, to sell, redeem or exchange any or all of the Shares upon the
merger, consolidation, reorganization, recapitalization or other readjustment of
the Issuer thereof, or upon the exercise by such Issuer of any right, pledge, or
option pertaining to any of the Shares, and, in connection therewith, to deliver
any of the Shares to any depository, transfer agent, registrar or other
designated agency upon such terms and conditions as it may determine, all
without liability except to account for property actually received by it; provided, however, that if an
Event of Default is only a XxXxxx Default, the Secured Party may exercise the
rights provided in this Section 4.7 only with respect to the Shares of XxXxxx
.. The Lender shall have no duty to exercise any of the aforesaid
rights, privileges or options and shall not be responsible for any failure to do
so or delay in so doing.
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4.8 Release; Termination of
Agreement.
(a)
If a XxXxxx Sale (as defined in the Loan Agreement) occurs
which constitutes a sale of stock of XxXxxx, the Net Proceeds (as so defined)
thereof shall be applied to prepay the Loan pursuant to Section 2.3(a) of the
Loan Agreement, and concurrently with such prepayment, the Secured Party shall
release such sold shares from this Agreement.
(b) This
Agreement shall terminate upon the receipt by the Secured Party of payment in
full of the Obligations. At such time, the Secured Party shall, at
the request and expense of the Borrower promptly reassign and
redeliver to the Borrower the Shares and any money, instruments or property
received in respect thereof, which has not been sold, disposed of, retained or
applied by the Secured Party in accordance with the terms
hereof. Such reassignment and redelivery shall be without warranty by
or recourse to the Secured Party, except as to the absence of any prior
assignments by the Secured Party of its interest in the Shares or Imposition by
the Secured Party of any Lien (as defined in the Loan Agreement) on any of the
Shares.
ARTICLE
5
REPRESENTATIONS AND
WARRANTIES OF THE BORROWER
The Borrower hereby represents to the
Secured Party that:
5.1 Owner of the
Shares. The Borrower is the legal and beneficial owner of the
Shares, and except for the lien granted hereunder, the Shares
are free and clear of any pledge, mortgage, hypothecation,
lien, charge, security interest or other encumbrance. The Shares constitute all
of the issued and outstanding shares of capital stock of each of the
Issuers.
5.2 Valid Security
Interest. The pledge of the Shares pursuant to this Agreement
creates a valid security interest therein as security for the prompt and full
satisfaction of the Obligations.
5.3 No Authorization,
Consent. No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required (i) for the pledge by the Borrower of the Shares pursuant to this
Agreement, or (ii) for the exercise by the Secured Party of the voting or other
rights provided for in this Agreement.
ARTICLE
6
THE LENDER’S EXPENSES AND
ATTORNEYS’ FEES
6.1 The Borrower’s Liability for
the Secured Party’s Expenses. The Borrower shall be liable to
the Secured Party for any and all reasonable sums, costs and expenses which the
Borrower may pay or incur pursuant to the provisions of this Agreement or in
defending, protecting or enforcing the security interest granted by the Borrower
herein or in enforcing payment of the Obligations or otherwise in connection
with the provisions hereof.
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ARTICLE
7
MISCELLANEOUS
7.1 Waivers. Any failure
or delay by the Secured Party to require strict performance by the Borrower of
any of the terms or conditions contained herein shall not affect the Secured
Party’s right to demand strict compliance therewith and performance thereof, and
any waiver of any default shall not waive or affect any other default, whether
prior or subsequent thereto, and whether of the same or of a different
type. None of the terms or conditions contained herein shall be
deemed to have been waived by any act or knowledge of the Secured Party or its
agents, but only by an instrument in writing, signed by the Secured Party and
directed to the Borrower, specifying such waiver.
7.2 Notices.
(i) Any
and all notices or other communications provided for herein shall be in writing
and hand delivered against receipted copy; mailed by registered or certified
mail, postage prepaid, return receipt requested; telecopied (with hard copy sent
by United States mail within one (1) business day after the facsimile notice is
transmitted); or delivered by Fed Ex or other similar overnight courier, to the
following addresses:
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(a)
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Any
notice to the Borrower shall be addressed its address set forth on the
signature page of this Agreement, with a copy
to:
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Xxxxxxxxxx
& Xxxxx LLP
00000
Xxxxxxxx Xxxx., Xxxxx 000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxx X. Hong, Esq.
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(b)
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Any
notice to the Secured Party shall be addressed at its address set forth on
the signature page of this Agreement, with a copy
to:
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Xxxxxx
Xxxxxx Xxxxxxxx LLP
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000
Xxxxxxx Xxx.
XX, XX
00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxx X. Xxxxxx, Esq.
(ii) or
to such other place as the parties may designate in writing. If
mailed as aforesaid, notice shall be deemed given three (3) business days after
being deposited in the United States mail; if hand delivered or telecopied,
notice shall be deemed given when delivered or telecopied on a business day and
such hand delivery or telecopy is received before 5:00 p.m. by the addressee
thereof; otherwise, such notice by hand delivery or telecopy shall be deemed
given on the next succeeding business day; and if sent by overnight courier,
notice shall be deemed given on the next business day after being deposited with
the overnight courier service.
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7.3 Severability. Wherever
possible, each provision of this Agreement shall be interpreted in a manner so
as to be valid under applicable law. If any provision of this
Agreement shall be held to be invalid under applicable law, such provision shall
be valid only to the extent of such provision and the remaining provisions of
this Agreement shall remain unaffected and in full force and
effect.
7.4 Successors and
Assigns. This Agreement shall be binding upon and for the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Borrower shall not assign this Agreement to any
person.
7.5 Further
Assurance. The Borrower shall provide the Secured Party such
documentation in order to perfect the Secured Party’s security interest in the
Shares as the Secured Party shall require.
7.6 Modifications. Any
provision of this Agreement may be amended only in a writing signed by the
Borrower and the Secured Party.
7.7 Governing
Law. This Agreement shall be governed by the laws of the State
of New York applicable to contracts entered into and to be performed entirely
within such state.
7.8 Articles and Section
Titles. The titles of articles contained in this Agreement are
merely for convenience and shall be without substantive meaning or
content.
7.9 Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
considered an original but all of which shall constitute one and the same
Agreement.
[Signature page to
follow]
6
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement or have caused the same to be executed by their
duly authorized representatives, and delivered, as of the date set forth
above.
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BORROWER:
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COMPOSITE
TECHNOLOGY CORPORATION
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By:
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Name:
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Title:
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Notice
Address:
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0000
XxXxxx Xxxxxx
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Xxxxxx,
XX 00000
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Attention: X.X.
Xxxxxx, Chief Financial Officer
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Facsimile: _____________
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SECURED
PARTY:
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NORTHLIGHT
FINANCIAL LLC
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By:
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Name:
Xxxx X. Xxxxxxxxxx
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Title:
Managing Member
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Notice
Address:
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00
Xxxx 00xx Xxxxxx, 00 Xxxxx
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Xxx
Xxxx, XX 00000
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Attention: Xxxxxx
X. Xxxxx
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Facsimile: (000)
000-0000
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[Signature
Page to Stock Pledge Agreement]
SCHEDULE
A
IRREVOCABLE
PROXY
KNOW ALL
MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint
Northlight Financial LLC (“NF”), with full power
of substitution, as the undersigned’s attorney-in-fact and proxy and in the
undersigned’s name, place and stead, to vote at any regular, annual, or special
meeting of the stockholders of
[ ]
(the “Company”), held
during the term of that certain Stock Pledge Agreement (the “Agreement”) dated as
of June 30, 2009, between the undersigned and NF, that
[ ] shares of common stock of the
Company as set forth opposite the undersigned’s name below, with all the powers
the undersigned would possess if personally present at such
meeting.
This
Proxy shall be effective only upon the occurrence of an Event of Default as
defined in the Agreement (provided, that upon
an Event of Default which is only a XxXxxx Default, this Proxy shall be
effective only with respect to Shares of XxXxxx).
The
undersigned acknowledges that this Proxy is coupled with an interest, and was
granted for the consideration stated in the Agreement and cannot be lawfully
revoked or limited in any respect whatsoever. This Proxy shall be
binding upon any transferee or assignee of any stock of the Company standing in
the name of the undersigned at any time prior to the expiration date of this
Proxy and constituting “Shares” as defined in the Agreement; and the sale,
assignment, pledge, transfer or other disposition of such stock standing in the
name of the undersigned shall not revoke or in any way limit the authority
herein granted to said attorney and proxy.
The
undersigned hereby revokes all proxies heretofore granted by it with respect to
any of the Shares (as defined in the Agreement) owned by it.
The
undersigned hereby ratifies and confirms all that said attorney and proxy or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof and in accordance with the provisions of the Agreement.
Dated: _____________,
20___
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COMPOSITE TECHNOLOGY
CORPORATION
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By:
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Name:
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Title:
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No.
of Shares:
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