PLEDGE AGREEMENT
PLEDGE
AGREEMENT
PLEDGE
AND SECURITY AGREEMENT dated as of May __, 2008 (this “Agreement”),
made
by
each
of the Pledgors referred to below,
in
favor of ACF CTC, L.L.C., a Delaware limited liability company, in its capacity
as agent (in such capacity, together with any successor in such capacity, the
“Agent”)
on
behalf of itself and the Lenders referred to below.
WITNESSETH:
WHEREAS,
Composite Technology Corporation, a Nevada corporation (the “Borrower”),
each
subsidiary of the Borrower listed as a “Guarantor”
on
the
signature pages thereto (together with the Borrower and each other Person that
executes a joinder agreement and becomes a “Guarantor”
thereunder or otherwise guaranties all or any part of the Obligations, each
a
“Guarantor”
and
collectively, the “Guarantors”),
the
financial institutions from time to time party thereto (each a “Lender”
and,
collectively, the “Lenders”),
and
the Agent are parties to the Financing Agreement, dated as of the date hereof
(such agreement, as amended, restated, supplemented or otherwise modified from
time to time, being hereinafter referred to as the “Financing
Agreement”),
pursuant to which the Lenders have agreed to make certain loans (collectively,
the “Loans”)
to the
Borrower;
WHEREAS,
it is a condition precedent to the making of any Loan by the Lenders pursuant
to
the Financing Agreement that
each
Pledgor shall have executed and delivered to the Agent a pledge and security
agreement providing for the pledge to the Agent, for the benefit of the Agent
and the Lenders, and the grant to the Agent, for the benefit of the Agent and
the Lenders, of a security interest in and Lien on the outstanding shares of
Capital Stock (as defined in the Financing Agreement) and indebtedness from
time
to time owned by such Pledgor of each Person now or hereafter existing and
in
which such Pledgor has any interest at any time;
WHEREAS,
the Pledgors are mutually dependent on each other in the conduct of their
respective businesses as an integrated operation, with the credit needed from
time to time by each Pledgor often being provided through financing obtained
by
the other Pledgors and the ability to obtain such financing being dependent
on
the successful operations of all of the Pledgors as a whole; and
WHEREAS,
each Pledgor has determined that the execution, delivery and performance of
this
Agreement directly benefit, and are in the best interest of, such
Pledgor;
NOW,
THEREFORE, in
consideration of the premises and the agreements herein and in order to induce
the Lenders to make and maintain the Loans pursuant to the Financing Agreement,
each Pledgor hereby jointly and severally agrees with the Agent, for the benefit
of the Agent and the Lenders, as follows:
SECTION
1. Definitions.
Reference is hereby made to the Financing Agreement for a statement of the
terms
thereof. All
terms
used in this Agreement which are defined in the Financing Agreement or in
Article 8 or Article 9 of the Uniform Commercial Code 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 Agent may otherwise
determine.
SECTION
2. Pledge
and Grant of Security Interest.
As
collateral security for all of the Obligations (as defined in Section 3 hereof),
each Pledgor hereby pledges and assigns to the Agent, for the benefit of the
Agent and the Lenders, a continuing security interest in and Lien on such
Pledgor’s right, title and interest in and to the following (the “Pledged
Collateral”):
(a) the
indebtedness described in Schedule I hereto and all indebtedness from time
to
time required to be pledged to the Agent pursuant to the terms of the Financing
Agreement (the “Pledged
Debt”),
the
promissory notes and other instruments evidencing the Pledged Debt and all
interest, cash, instruments, investment property and other property from time
to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Debt;
(b) the
shares of stock, partnership interests, membership interests and other equity
interests described in Schedule II hereto (the “Pledged
Shares”),
whether or not evidenced or represented by any stock certificate, certificated
security or other instrument, issued by the Persons described in such Schedule
II (the “Existing
Issuers”),
the
certificates representing the Pledged Shares, all options and other rights,
contractual or otherwise, in respect thereof and all dividends, distributions,
cash, instruments, investment property and 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 Pledged Shares;
(c) the
shares of stock, partnership interests, membership interests or other equity
interests at any time and from time to time acquired by such Pledgor of any
and
all Persons now or hereafter existing (such Persons, together with the Existing
Issuers, being hereinafter referred to collectively as the “Pledged
Issuers”
and
individually as a “Pledged
Issuer”),
the
certificates representing such shares of stock, partnership interests,
membership interests or other equity interests, all options and other rights,
contractual or otherwise, in respect thereof and all dividends, distributions,
cash, instruments, investment property (including but not limited to, any stock
dividend and any distribution in connection with a stock split) and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the foregoing;
(d) all
additional shares of stock, partnership interests, membership interests or
other
equity interests from time to time acquired by such Pledgor, of any Pledged
Issuer, the certificates representing such additional shares, all options and
other rights, contractual or otherwise, in respect thereof and all dividends,
distributions, cash, instruments, investment property and 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;
(e) all
investment property, financial assets, securities, Capital Stock, other equity
interests, stock options and commodity contracts of such Pledgor, all notes,
debentures, bonds, promissory notes or other evidences of indebtedness of such
Pledgor, and all other assets now or hereafter received or receivable with
respect to the foregoing;
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(f) all
security entitlements of such Pledgor in any and all of the foregoing;
and
(g) all
proceeds (including proceeds of proceeds) of any and all of the foregoing;
in
each
case, whether now owned or hereafter acquired by such Pledgor and howsoever
its
interest therein may arise or appear (whether by ownership, security interest,
Lien, claim or otherwise).
Notwithstanding
the foregoing, if any Pledged Issuer is organized or formed under the laws
of a
jurisdiction other than the District of Columbia or any State or territory
of
the United States of America (a “Foreign
Jurisdiction”),
and
if a pledge of 100% of the voting Capital Stock thereof would cause adverse
U.S.
tax consequences, such Pledgor shall pledge not more than 66-2/3% of the voting
Capital Stock of such Pledged Issuer (but shall pledge 100% of the non-voting
Capital Stock of such Pledged Issuer). The Pledgors and Agent agree that the
pledge of shares of Capital Stock of any Pledged Issuer who is organized or
formed under the laws of a Foreign Jurisdiction in favor of the Agent hereunder
may be supplemented by one or more separate pledge agreements, deeds of pledge,
share charges, or other similar agreements or instruments, executed and
delivered by the relevant Pledgors in favor of the Agent, which pledge
agreements will provide for the pledge of such shares of Capital Stock in
accordance with the laws of such Foreign Jurisdiction. With respect to such
shares of Capital Stock, the Agent may, at any time and from time to time,
in
its sole discretion, take actions in such Foreign Jurisdictions that will result
in the perfection of the Lien created in such shares of Capital Stock and shall
provide written notice of actions so taken to the Pledgor within a reasonable
time thereafter.
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
prompt payment by the Pledgors, as and when due and payable (by scheduled
maturity, required prepayment, acceleration, demand or otherwise), of all
amounts from time to time owing by the Pledgors to the Agent or the Lenders
in
respect of the Financing Agreement and all other Loan Documents, including,
without limitation, (i) the Obligations (as defined in the Financing Agreement),
(ii) principal of and interest on the Loans (including, without limitation,
all
interest that accrues after the commencement of any Insolvency Proceeding of
any
Pledgor whether or not the payment of such interest is unenforceable or is
not
allowable due to the existence of such Insolvency Proceeding), (iii) in the
case
of a Guarantor, all amounts from time to time owing by such Pledgor in respect
of its guaranty made pursuant to Article XI of the Financing Agreement or under
and other Guaranty to which it is a party, including all obligations guaranteed
by such Pledgor, and (iv) all fees, commissions, charges, expense
reimbursements, indemnifications and all other amounts due or to become due
under the Financing Agreement and any other Loan Document; and
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(b) the
due
performance and observance by each of the Pledgors of all of their other
obligations from time to time existing in respect of the Financing Agreement
and
all other Loan Documents.
SECTION
4. Delivery
of the Pledged Collateral.
(a)
(i) All
promissory notes currently evidencing the Pledged Debt and all certificates
currently representing the Pledged Shares shall be delivered to the 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 required to be pledged to the Agent pursuant to the terms hereof (the
“Additional
Collateral”)
shall
be delivered to the Agent promptly upon receipt thereof by or on behalf of any
of the Pledgors. All such promissory notes, certificates and instruments shall
be held by or on behalf of the 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 Agent. If any Pledged
Collateral consists of uncertificated securities, unless the immediately
following sentence is applicable thereto, such Pledgor shall cause the Agent
(or
its custodian, nominee or other designee) to become the registered holder
thereof, or cause each issuer of such securities to agree that it will comply
with instructions originated by the Agent with respect to such securities
without further consent by such Pledgor. If any Pledged Collateral consists
of
security entitlements, such Pledgor shall transfer such security entitlements
to
the Agent (or its custodian, nominee or other designee) or cause the applicable
securities intermediary to agree that it will comply with entitlement orders
by
the Agent without further consent by such Pledgor.
(ii) Within
5
days of the receipt by a Pledgor of any Additional Collateral, a Pledge
Amendment, duly executed by such Pledgor, in substantially the form of Annex
I
hereto (a “Pledge
Amendment”),
shall
be delivered to the Agent in respect of the Additional Collateral to be pledged
pursuant to this Agreement and the Financing Agreement. The Pledge Amendment
shall from and after delivery thereof constitute part of Schedules I and II
hereto. Each Pledgor hereby authorizes the Agent to attach each Pledge Amendment
to this Agreement and agrees that all promissory notes, certificates or
instruments listed on any Pledge Amendment delivered to the Agent shall for
all
purposes hereunder constitute Pledged Collateral and such 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.
(b) If
any
Pledgor shall receive, by virtue of such 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 such Pledgor pursuant to Section 7 hereof) or in
securities or other property or (iv) dividends or other 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, such Pledgor shall receive such
stock certificate, promissory note, instrument, option, right, payment or
distribution in trust for the benefit of the Agent, shall segregate it from
such
Pledgor’s other property and shall deliver it forthwith to the Agent, in the
exact form received, with any necessary endorsement and/or appropriate stock
powers duly executed in blank, to be held by the Agent as Pledged Collateral
and
as further collateral security for the Obligations.
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SECTION
5. Representations
and Warranties.
Each
Pledgor jointly and severally represents and warrants as follows:
(a) Each
Pledgor (i) is a corporation, limited liability company or limited partnership
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 each 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.
(c) The
Existing Issuers set forth in Schedule II hereto are the Pledgors’ only
Subsidiaries existing on the date hereof. The Pledged Shares have been duly
authorized and validly issued and are fully paid and nonassessable and the
holders thereof are not entitled to any preemptive, first refusal or other
similar rights. Except as noted in Schedule II hereto, the Pledged Shares
constitute 100% of the issued shares of Capital Stock, partnership interests,
membership interests or other equity interests, as applicable, of the Existing
Issuers as of the date hereof. All other shares of stock constituting Pledged
Collateral will be duly authorized and validly issued, fully paid and
nonassessable.
(d) The
promissory notes currently evidencing the Pledged Debt have been, and all other
promissory notes from time to time evidencing Pledged Debt, when executed and
delivered, will have been, duly authorized, executed and delivered by the
respective makers thereof, and all such promissory notes are or will be, as
the
case may be, legal, valid and binding obligations of such makers, enforceable
against such makers in accordance with their respective terms, except as may
be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors rights generally and by general equitable
principles.
(e) Each
Pledgor is and will be at all times the legal and beneficial owner of its
Pledged Collateral free and clear of all Liens, except for the Lien created
by
this Agreement and Permitted Liens.
(f) The
exercise by the Agent of any of its rights and remedies in accordance with
the
terms of this Agreement will not contravene any law or any contractual
restriction binding on or affecting any Pledgor or any of the properties of
any
Pledgor and will not result in or require the creation of any Lien upon or
with
respect to any of the properties of such Pledgor other than pursuant to this
Agreement or the other Loan Documents.
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(g) 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 any Pledgor
for
(i) the due execution, delivery and performance by any Pledgor of this
Agreement, (ii) the grant by any Pledgor, or the perfection, of the Lien created
hereby in the Pledged Collateral or (iii) the exercise by the 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.
(h) This
Agreement creates a valid Lien in favor of the Agent in the Pledged Collateral
as security for the Obligations. The 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 Lien. Such Lien
is, or in the case of Pledged Collateral in which any of the Pledgors obtains
rights after the date hereof, will be, a perfected, first priority Lien, subject
only to Permitted Liens. All action necessary or desirable to perfect and
protect such Lien has been duly taken, except for the 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 Obligation shall remain outstanding, each Pledgor will, unless the Agent
shall otherwise consent in writing:
(a) keep
adequate records concerning the Pledged Collateral and permit the Agent or
any
agents, designees or representatives thereof at any time or from time to time
to
examine and make copies of and abstracts from such records pursuant to the
terms
of the Financing Agreement;
(b) at
the
Pledgors’ joint and several expense, promptly deliver to the Agent a copy of
each notice or other communication received by it in respect of the Pledged
Collateral;
(c) at
the
Pledgors’ joint and several expense, defend the Agent’s right, title and
security interest in and to the Pledged Collateral against the claims of any
Person;
(d) at
the
Pledgors’ joint and several 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 Agent may reasonably
request in order to (i) perfect and protect, or maintain the perfection of,
the
security interest and Lien created hereby, (ii) enable the 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 Agent, after the occurrence and during the
continuation of an Event of Default, 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
Section 7.02(c) of the Financing Agreement;
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(f) not
create or suffer to exist any Lien upon or with respect to any Pledged
Collateral, except for the Lien created hereby and any Permitted
Liens;
(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
Loan Documents;
(h) not
permit the issuance of (i) any additional shares of any class of Capital Stock
of any Pledged Issuer, (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; and
(i) not
take
or fail to take any action which would in any manner impair the validly or
enforceability of the 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 shall have occurred and be continuing:
(i) each
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 Financing Agreement or the other Loan Documents;
provided,
however,
that
(A) none of the Pledgors will exercise or refrain from exercising any such
right, as the case may be, if the Agent gives it notice that, in the Agent’s
judgment, such action (or inaction) could reasonably be expected to have a
Material Adverse Effect and (B) each Pledgor will give the Agent at least 5
Business Days’ notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any such right which could reasonably
be
expected to have a Material Adverse Effect;
(ii) each
of
the Pledgors may receive and retain any and all dividends, interest payments
or
other distributions paid in respect of the Pledged Collateral to the extent
permitted by the Financing 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, interest payment or other distribution which at the time of such
dividend, interest payment or other distribution was not permitted by the
Financing Agreement, shall be, and shall forthwith be delivered to the Agent
to
hold as, Pledged Collateral and shall, if received by any of the Pledgors,
be
received in trust for the benefit of the Agent, shall be segregated from the
other property or funds of the Pledgors, and shall be forthwith delivered to
the
Agent in the exact form received with any necessary endorsement and/or
appropriate stock powers duly executed in blank, to be held by the Agent as
Pledged Collateral and as further collateral security for the Obligations;
and
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(iii) the
Agent
will execute and deliver (or cause to be executed and delivered) to a Pledgor
all such proxies and other instruments as such Pledgor may reasonably request
for the purpose of enabling such Pledgor to exercise the voting and other rights
which it is entitled to exercise pursuant to Section 7(a)(i) hereof and to
receive the dividends, interest and/or other distributions which it is
authorized to receive and retain pursuant to Section 7(a)(ii)
hereof.
(b) Upon
the
occurrence and during the continuance of an Event of Default:
(i) all
rights of each Pledgor to exercise the voting and other consensual rights which
it would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof,
and to receive the dividends, distributions, interest and other payments which
it would otherwise be authorized to receive and retain pursuant to Section
7(a)(ii) hereof, shall cease, and all such rights shall thereupon become vested
in the 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 and interest payments;
(ii) the
Agent
is authorized to notify each debtor with respect to the Pledged Debt to make
payment directly to the Agent (or its designee) and may collect any and all
moneys due or to become due to any Pledgor in respect of the Pledged Debt,
and
each of the Pledgors hereby authorizes each such debtor to make such payment
directly to the Agent (or its designee) without any duty of
inquiry;
(iii) without
limiting the generality of the foregoing, the 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 Pledged Issuer, or upon the exercise by any Pledged Issuer 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 it may determine; and
(iv) all
dividends, distributions, interest and other payments which are received by
any
of the Pledgors contrary to the provisions of Section 7(b)(i) hereof shall
be
received in trust for the benefit of the Agent, shall be segregated from other
funds of the Pledgors, and shall be forthwith paid over to the Agent as Pledged
Collateral in the exact form received with any necessary endorsement and/or
appropriate stock powers duly executed in blank, to be held by the Agent as
Pledged Collateral and as further collateral security for the
Obligations.
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SECTION
8. Additional
Provisions Concerning the Pledged Collateral.
(a) To
the
maximum extent permitted by applicable law, and for the purpose of taking any
action that the Agent may deem necessary or admissible to accomplish the terms
of this Agreement, each Pledgor (i) authorizes the Agent to execute any
such agreements, instruments or other documents in such Pledgor’s name and to
file such agreements, instruments or other documents in such Pledgor’s name in
any appropriate filing office, (ii) authorizes the Agent to file any
financing statements required hereunder or under any other Loan Document, and
any continuation statements or amendments with respect thereto, in any
appropriate filing office without the signature of such Pledgor and
(iii) ratifies the filing of any financing statement, and any continuation
statement or amendment with respect thereto, filed without the signature of
such
Pledgor prior to the date hereof. A photocopy or other reproduction of this
Agreement or any financing statement covering the Pledge Collateral or any
part
thereof shall be sufficient as a financing statement where permitted by
law.
(b) Each
Pledgor hereby irrevocably appoints the Agent as such Pledgor’s attorney-in-fact
and proxy, with full authority in the place and stead of such Pledgor and in
the
name of such Pledgor or otherwise, from time to time in the Agent’s discretion,
to take any action and to execute any instrument which the Agent may deem
necessary or advisable to accomplish the purposes of this Agreement (subject
to
the rights of such Pledgor under Section 7(a) hereof), including, without
limitation, to receive, endorse and collect all instruments made payable to
such
Pledgor representing any dividend, distribution, interest or other payment
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 all of the
Obligations are paid in full after the termination of all of the
Commitments.
(c) If
any
Pledgor fails to perform any agreement or obligation contained herein, the
Agent
itself may perform, or cause performance of, such agreement or obligation,
and
the expenses of the Agent incurred in connection therewith shall be jointly
and
severally payable by the Pledgors pursuant to Section 10 hereof and shall be
secured by the Pledged Collateral.
(d) The
powers conferred on the 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
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 and shall be relieved of all responsibility
for the Pledged Collateral upon surrendering it or tendering surrender of it
to
any Pledgor. The 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
Agent accords its own property, it being understood that the 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 Agent has or is deemed to have knowledge
of such matters or (ii) taking any necessary steps to preserve rights against
any parties with respect to any Pledged Collateral.
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(e) The
Agent
may in its discretion at any time after the occurrence and during the
continuation of an Event of Default (i) without notice to any Pledgor, transfer
or register in the name of the Agent or any of its nominees any or all of the
Pledged Collateral, subject only to the revocable rights of such 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
Agent
may exercise in respect of the Pledged Collateral, in addition to any 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 Agent may deem commercially reasonable. Each Pledgor agrees that, to
the
extent notice of sale shall be required by law, at least 10 days’ notice to such
Pledgor of the time and place of any public sale of Pledged Collateral owned
by
such Pledgor or the time after which any private sale is to be made shall
constitute reasonable notification. The Agent shall not be obligated to make
any
sale of Pledged Collateral regardless of whether or not notice of sale has
been
given. The Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so
adjourned.
(b) In
the
event that the Agent
determines
to exercise its right to sell all or any part of the Pledged Collateral pursuant
to Section 9(a) hereof, each Pledgor will, at such Pledgor’s expense and upon
request by the Agent: (i) execute and deliver, and cause each issuer of such
Pledged Collateral and the directors and officers thereof to execute and
deliver, all such instruments and documents, and do or cause to be done all
such
other acts and things, as may be necessary or, in the opinion of the Agent,
advisable to register such Pledged Collateral under the provisions of the
Securities Act of 1933, as amended (the “Securities
Act”),
and
to cause the registration statement relating thereto to become effective and
to
remain effective for such period as prospectuses are required by law to be
furnished, and to make all amendments and supplements thereto and to the related
prospectus which, in the opinion of the Agent, are necessary or advisable,
all
in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto, (ii)
cause each issuer of such Pledged Collateral to qualify such Pledged Collateral
under the state securities or “Blue Sky” laws of each jurisdiction, and to
obtain all necessary governmental approvals for the sale of the Pledged
Collateral, as requested by the Agent, (iii) cause each Pledged Issuer to make
available to its securityholders, as soon as practicable, an earnings statement
which will satisfy the provisions of Section 11(a) of the Securities Act, and
(iv) do or cause to be done all such other acts and things as may be necessary
to make such sale of such Pledged Collateral valid and binding and in compliance
with applicable law. Each Pledgor acknowledges the impossibility of ascertaining
the amount of damages which would be suffered by the Agent by reason of the
failure by any Pledgor to perform any of the covenants contained in this Section
9(b) and, consequently, agrees that, if any Pledgor fails to perform any of
such
covenants, it shall pay, as liquidated damages and not as a penalty, an amount
equal to 25% of the value of the Pledged Collateral on the date the Agent
demands compliance with this Section 9(b); provided,
however,
that
the payment of such amount shall not release any Pledgor from any of its
obligations under any of the other Loan Documents.
-
10 -
(c) Notwithstanding
the provisions of Section 9(b) hereof, each Pledgor recognizes
that the
Agent may deem it 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 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 their own account,
for
investment and not with a view to the distribution or resale thereof. Each
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 Agent shall have no obligation to delay the
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. Each 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 bona fide
offerees
shall be deemed to involve a “public disposition” for the purposes of Section
9-610(c) 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 Agent may, in such event, bid for the purchase of such
securities.
(d) Any
cash
held by the Agent as Pledged Collateral and all cash proceeds received by the
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 Agent,
be
held by the Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Agent pursuant to Section
10 hereof) in whole or in part by the Agent against, all or any part of the
Obligations in such order as the Agent shall elect consistent with the
provisions of the Financing Agreement. Any surplus of such cash or cash proceeds
held by the Agent and remaining after payment in full of all of the Obligations
after all Commitments have been terminated shall be paid over to the Pledgors
or
to such Person as may be lawfully entitled to receive such surplus.
(e) In
the
event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Agent is legally entitled, the
Pledgors shall be liable, jointly and severally, for the deficiency, together
with interest thereon at the highest rate specified in the Financing 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 Agent to collect
such
deficiency.
-
11 -
SECTION
10. Indemnity
and Expenses.
(a) Each
Pledgor jointly and severally agrees to defend, protect, indemnify and hold
harmless the Agent (and all of its respective officers, directors, employees,
attorneys, consultants and agents) from and against any and all claims, damages,
losses, liabilities, obligations, penalties, reasonable costs and expenses
(including, without limitation, reasonable legal fees, costs, expenses 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, as to any such indemnified Person, claims, losses or
liabilities to the extent resulting from such Person’s gross negligence or
willful misconduct as determined by a final judgment of a court of competent
jurisdiction.
(b) Each
Pledgor jointly and severally agrees to pay to the Agent upon demand the amount
of any and all reasonable costs and expenses, including the reasonable fees
and
disbursements of the Agent’s counsel and of any experts and agents, which the
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 Agent hereunder, or (iv) the failure by any 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), telecopied or delivered by hand, Federal Express or other reputable
overnight courier, if to a Pledgor, to it in care of the Borrower at its address
specified in the Financing Agreement and if to the Agent, to it at its address
specified in the Financing Agreement; or as to any 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, (a) if mailed (certified
mail, postage prepaid and return receipt requested), when received or 3 days
after deposited in the mails, whichever occurs first, (b) if telecopied, when
transmitted and confirmation received, or (c) if delivered by hand, Federal
Express or other reputable overnight courier, upon delivery.
SECTION
12. Security
Interest Absolute.
All
rights of the Agent and the Lenders, all Liens and all obligations of each
of
the Pledgors hereunder shall be absolute and unconditional irrespective of:
(i)
any lack of validity or enforceability of the Financing 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 Financing Agreement or any other Loan 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, any of the Pledgors in
respect 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.
-
12 -
SECTION
13. Miscellaneous.
(a) No
amendment of any provision of this Agreement shall be effective unless it is
in
writing and signed by each Pledgor and the Agent, and no waiver of any provision
of this Agreement, and no consent to any departure by any Person therefrom,
shall be effective unless it is in writing and signed by the waiving or
consenting Person, 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 Agent or the Lenders to exercise, and no delay in
exercising, any right hereunder or under any Loan 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 Agent and the Lenders provided herein
and
in the Loan Documents are cumulative and are in addition to, and not exclusive
of, any other rights or remedies provided by law. The rights of the Agent and
the Lenders under the applicable Loan Document against any party thereto are
not
conditional or contingent on any attempt by the Agent or the Lenders to exercise
any of their rights under any other 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 thereof 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 payment
in
full or release of the Obligations after the termination of all of the
Commitments and (ii) be binding on each Pledgor and, by its acceptance hereof,
the Agent, and its respective successors and assigns, and shall inure, together
with all rights and remedies of the Agent and the Lenders hereunder, to the
benefit of the Agent and the Lenders and their respective successors,
transferees and assigns. Without limiting the generality of clause (ii) of
the
immediately preceding sentence, the Agent and the Lenders may assign or
otherwise transfer their respective rights and obligations under this Agreement
and any other Loan Document to any other Person, and such other Person shall
thereupon become vested with all of the benefits in respect thereof granted
to
the Agent and the Lenders herein or otherwise. Upon any such assignment or
transfer, all references in this Agreement to the Agent or any such Lender
shall
mean the assignee of the Agent or such Lender. None of the rights or obligations
of any of the Pledgors hereunder may be assigned or otherwise transferred
without the prior written consent of the Agent, and any such assignment or
transfer shall be null and void.
(e) Upon
the
satisfaction in full of the Obligations after the termination of all of the
Commitments (i) this Agreement and the security interest and Lien created hereby
shall terminate and all rights to the Pledged Collateral shall revert to the
Pledgors and (ii) the Agent will, upon the Pledgors’ request and at the
Pledgors’ expense, (A) return to the Pledgors such of the Pledged Collateral as
shall not have been sold or otherwise disposed of or applied pursuant to the
terms hereof and (B) execute and deliver to the Pledgors, without recourse,
representation or warranty, such documents as the Pledgors shall reasonably
request to evidence such termination.
-
13 -
(f) This
Agreement shall be governed by and construed in accordance with the law of
the
State of New York, 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) This
Agreement may be executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which shall be deemed an
original, but all such counterparts shall constitute one and the same
agreement.
(h) All
of
the Obligations of the Pledgors hereunder are joint and several. The Agent
may,
in its
sole and absolute discretion, enforce the provisions hereof against any of
the
Pledgors and shall not be required to proceed against all Pledgors jointly
or
seek payment from the Pledgors ratably. In addition, the Agent may, in its
sole
and absolute discretion, select the Pledged Collateral of any one or more of
the
Pledgors for sale or application to the Obligations, without regard to the
ownership of such Pledged Collateral, and shall not be required to make such
selection ratably from the Pledged Collateral owned by all of the Pledgors.
The
release or discharge of any Pledgor by the Agent shall not release or discharge
any other Pledgor from the obligations of such Person hereunder.
-
14 -
IN
WITNESS WHEREOF, the Pledgors have caused this Agreement to be executed and
delivered by their officer thereunto duly authorized, as of the date first
above
written.
|
PLEDGORS:
|
||
|
COMPOSITE
TECHNOLOGY CORPORATION
|
||
|
By:
|
|
|
|
Name:
|
||
|
Title:
|
||
|
CTC
CABLE CORPORATION
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
|
TRANSMISSION
TECHNOLOGY CORPORATION
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
|
CTC
TOWERS & POLES CORPORATION
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
|
XXXXXX,
INC.
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
|
EU
ENERGY INC.
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
|
EU
ENERGY NORTH AMERICA, INC.
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
SCHEDULE
I
TO
Pledged
Debt
|
Pledgor
|
Name
of Payee
|
Description
|
Principal
Amount
Outstanding
as of
|
SCHEDULE
II
TO
Pledged
Shares
|
Pledgor
|
Name
of Issuer
|
Number
of Shares
|
Class
|
Certificate
Number
|
|
Composite
Technology Corporation
|
CTC
Cable Corporation
|
100
|
Common
|
1
|
|
Composite
Technology Corporation
|
Transmission
Technology Corporation
|
100
|
Common
|
1
|
|
Composite
Technology Corporation
|
CTC
Towers & Poles Corporation
|
100
|
Common
|
1
|
|
Composite
Technology Corporation
|
XxXxxx,
Inc.
|
100
|
Common
|
1
|
|
Composite
Technology Corporation
|
EU
Energy, Inc.
|
100
|
Common
|
1
|
|
Composite
Technology Corporation
|
EU
Energy North America, Inc.
|
100
|
Common
|
1
|
ANNEX
I
TO
PLEDGE
AMENDMENT
This
Pledge Amendment, dated _______________, is delivered pursuant to Section 4
of
the Pledge and Security Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to the Pledge and Security
Agreement, dated as of May __, 2008, 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 or shares listed on this Pledge Amendment shall be hereby
pledged and assigned to the Agent and become part of the Pledged Collateral
referred to in such Pledge and Security Agreement and shall secure all of the
Obligations referred to in such Pledge and Security Agreement.
|
Pledged
Debt
|
|||
|
Pledgor
|
Name
of Payee
|
Description
|
Principal
Amount
Outstanding
as of
|
|
Pledged
Shares
|
||||
|
Pledgor
|
Name
of Issuer
|
Number
of
Shares
|
Class
|
Certificate
Number(s)
|
|
;
|
[PLEDGOR]
|
||
|
By:
|
|
||
|
Name:
|
|||
|
Title:
|
|||
