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;
(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
(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.
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.
(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
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