STOCK PLEDGE AGREEMENT
This
Stock Pledge Agreement (this "
Pledge Agreement ")
is made as of May 6, 2008 by and between Agile Opportunity Fund,
LLC, a Delaware limited liability company (the "
Lender "),
and the parties indicated on Schedule I hereto (each, a
“
Pledgor ").
WITNESSETH
WHEREAS,
Lender has entered into a Securities Purchase Agreement, dated
as of the date hereof (the “
Securities Purchase Agreement ”),
with Compliance Systems Corporation, a Nevada corporation (the
“
Borrower ”),
pursuant to which Lender purchased the Initial Debenture identified
therein and may purchase the Additional Debenture identified
therein; and
WHEREAS,
each of the Pledgors has executed a Limited Non-Recourse
Guaranty Agreement and has agreed to secure the
Pledgor’s obligations therein by a pledge of shares of
preferred stock of the Company as set forth on Schedule I
hereto (the “
Pledgor Shares ”);
and
WHEREAS,
capitalize terms not otherwise defined in this Pledge
Agreement shall have the meanings assigned to such terms in
the Securities Purchase Agreement.
NOW,
THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as
follows:
1.
Pledge. As
collateral security for the full and timely payment of the
obligations under the Debentures issued pursuant to the Securities
Purchase Agreement and the Limited Non-Recourse Guaranty Agreement
of even date herewith executed by Pledgors in connection therewith
(the “
Debenture Obligations ”),
each of the Pledgors hereby delivers, deposits, pledges, transfers
and assigns to the Lender and grants to the Lender a security
interest in all of the Pledged Shares and all certificates
evidencing the Pledged Shares owned by Pledgor and identified as
such on Schedule I hereto and all other instruments or documents
evidencing the same now owned by the Pledgor and all dividends,
cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange
for any or all of such Pledged Shares.
The
Pledgors herewith deliver to the Lender the certificates
evidencing the Pledged Shares together with appropriate
undated security transfer powers duly executed in blank. The
Pledgors agree that all certificates evidencing the Pledged
Shares shall be marked with the following legend:
THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A STOCK PLEDGE AGREEMENT DATED AS OF MAY 6, 2008
BY AND BETWEEN AGILE OPPORTUNITY FUND, LLC, A DELAWARE LIMITED
LIABILITY COMPANY (THE "LENDER"), AND THE PLEDGORS NAMED
THEREIN, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE
CORPORATION.
2.
Administration of Security. The
following provisions shall govern the administration of the Pledged
Shares:
2.1.
So
long as the Pledgors are not in default in respect of any
payment or any other Debenture Obligation (an “
Event of Default ”),
the Pledgors shall be entitled to act with respect to the Pledged
Shares in any manner not inconsistent with this Pledge Agreement,
the Securities Purchase Agreement, the Debentures or any document
or instrument delivered or to be delivered pursuant to or in
connection with any of the foregoing, including, without
limitation, transferring the Pledged Shares to a nominee for
purposes of voting the Pledged Shares and receiving all cash
distributions thereon and giving consents, waivers and
ratifications in respect thereof.
2.2.
If,
while this Pledge Agreement is in effect, any of the Pledgors
shall become entitled to receive or shall receive any debt or
equity security certificate (including, without limitation,
any certificate representing shares of stock received in
connection with the exercise of any option, any certificate
representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital,
or any certificate issued in connection with any
reorganization), option or right, whether as a dividend or
distribution in respect of, in substitution of, or in exchange
for any Pledged Shares, the Pledgors agree to accept the same
as the Lender's agent and to hold the same in trust on behalf
of and for the benefit of the Lender and to deliver the same
forthwith to the Lender in the exact form received, with the
endorsement of such Pledgor when necessary and/or appropriate
undated security transfer powers duly executed in blank, to be
held by the Lender, subject to the terms of this Pledge
Agreement, as additional collateral security for the Debenture
Obligations. Notwithstanding the foregoing, it is agreed that
each of the Pledgors may exercise any option or right received
as contemplated in the preceding sentence, and the Lender will
exercise any such option or right upon receipt of written
instructions to that effect and any required payments or
documents from the Pledgor, and the securities received upon
such exercise of any such option or right shall thereafter be
held by the Pledgor or the Lender as contemplated by the
preceding sentence.
2.3.
Each
of the Pledgors shall immediately upon request by the Lender
and in confirmation of the security interests hereby created,
execute and deliver to the Lender such further instruments,
deeds, transfers, assurances and agreements, in form and
substance as the Lender shall reasonably request, including
any financing statements and amendments thereto, or any other
documents, as required under New York law and any other
applicable law to protect the security interests created
hereunder.
2.4.
Subject
to any sale by the Lender or other disposition by the Lender
of the Pledged Shares or other property pursuant to this
Pledge Agreement and subject to Sections 5 and 6 herein, the
Pledged Shares shall be returned to the Pledgors upon payment
in full of the Debenture Obligations or the conversion in full
of the Initial Debenture and, if issued, the Additional
Debenture into Common Stock.
3.
Remedies in Case of an Event of Default.
3.1.
In
case an Event of Default shall have occurred and be
continuing, the Lender shall have in each case all of the
remedies of a secured party under the Nevada Uniform
Commercial Code, and, without limiting the foregoing, shall
have the right, in its sole discretion, to sell, resell,
assign and deliver all or, from time to time, any part of the
Pledged Shares, or any interest in or option or right to
purchase any part thereof, on any securities exchange on which
the Pledged Shares may be listed, at any private sale or at
public auction, with or without demand of performance or other
demand, advertisement or
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