Exhibit 10.5

 

STOCK PLEDGE AGREEMENT

 

This STOCK PLEDGE AGREEMENT (this “Stock Pledge Agreement”), dated as of June
26, 2002, is entered into by and among ELGAR HOLDINGS, INC., a Delaware
corporation (“Parent”), and ELGAR ELECTRONICS CORPORATION, a California
corporation (“Borrower”; Parent and Borrower are referred to hereinafter each
individually as a “Pledgor”, and collectively, as the “Pledgors”), and ABLECO
FINANCE LLC, a Delaware limited liability company, as collateral agent for the
Lenders (defined below) (“Secured Party”), with reference to the following:

 

WHEREAS, each Pledgor beneficially owns the specified Equity Interests
identified as Pledged Interests in the Persons identified as Issuers on Schedule
A attached hereto (or any addendum thereto);

 

WHEREAS, Pledgors, the Lenders, Ableco Finance LLC, a Delaware limited liability
company, as administrative agent for the Lenders (“Administrative Agent”), and
the Secured Party, as the collateral agent (Secured Party, Administrative Agent,
and the Lenders are collectively referred to as the “Lender Group”), are
contemporaneously herewith entering into that certain Financing Agreement dated
as of the date hereof (as amended, restated, modified, renewed or extended from
time to time, the “Financing Agreement”), pursuant to which (i) the Lender Group
has agreed to make certain financial accommodations to Borrower, and (ii) Parent
has agreed to guarantee the obligations of Borrower to the Lender Group; and

 

WHEREAS, to induce the Lender Group to enter into the Financing Agreement and as
one of the conditions thereof, each Pledgor desires to pledge, grant, transfer,
and assign to Secured Party a security interest in the Pledged Collateral (as
hereinafter defined) to secure the Secured Obligations (as hereinafter defined),
as provided herein.

 

NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations, and warranties set forth herein and for other good and valuable
consideration, the parties hereto agree as follows:

 

(a)   Definitions.

 

All initially capitalized terms used herein and not otherwise defined herein
shall have the meaning ascribed thereto in the Financing Agreement.  As used in
this Stock Pledge Agreement:

 

“Administrative Agent” shall have the meaning set forth in the recitals to this
Stock Pledge Agreement.

 

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“Chief Executive Office” shall mean where a Pledgor is deemed located pursuant
to the Code.

 

“Equity Interests” shall mean all shares, units, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company, or equivalent entity,
whether voting or nonvoting, including general partner partnership interests,
limited partner partnership interests, common stock, preferred stock, or any
other “equity security” (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the SEC under the Exchange Act).

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
any successor statute.

 

“Financing Agreement” shall have the meaning ascribed thereto in the recitals to
this Stock Pledge Agreement.

 

“Future Rights” shall mean:  (a) all Equity Interests (other than Pledged
Interests) of such Issuer, and all securities convertible or exchangeable into,
and all warrants, options, or other rights to purchase, Equity Interests of such
Issuer; (b) to the extent of a Pledgor’s interest therein, all shares of, all
securities convertible or exchangeable into, and all warrants, options, or other
rights of such Issuer to purchase Equity Interests of any Person in which a
Pledgor, after the date of this Agreement, acquires a direct equity interest,
irrespective of whether such Person is or becomes a Subsidiary of such Pledgor;
and (c) the certificates or instruments representing such additional Equity
Interests, convertible or exchangeable securities, warrants, and other rights
and all dividends, cash, options, warrants, rights, instruments, and other
property or proceeds from time to time received, receivable, or otherwise
distributed in respect of or in exchange for any or all of such Equity
Interests.

 

“Holder” and “Holders” shall have the meanings ascribed thereto in Section 3 of
this Stock Pledge Agreement.

 

“Issuers” shall mean each of the Persons identified as an Issuer on Schedule A
attached hereto (or any addendum thereto), and any successors thereto, whether
by merger or otherwise.

 

“Lender Group” shall have the meaning set forth in the recitals to this Stock
Pledge Agreement.

 

“Lenders” means, individually and collectively, each of the financial
institutions listed on the signature pages of the Financing Agreement and any
other Person made a party thereto in accordance with the provisions of Section
12.07 thereof (together with their respective successors and assigns).

 

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“Pledged Collateral” shall mean the Pledged Interests, the Future Rights, and
the Proceeds, collectively.

 

“Pledged Interests” shall mean all of the Equity Interests identified as Pledged
Interests of an Issuer on Schedule A attached hereto (or any addendum thereto).

 

“Pledgor” and “Pledgors” shall have the respective meanings set forth in the
preamble to this Stock Pledge Agreement.

 

“Proceeds” shall mean all proceeds (including proceeds of proceeds) of the
Pledged Interests and Future Rights including all: (a) rights, benefits,
distributions, premiums, profits, dividends, interest, cash, instruments,
documents of title, accounts, contract rights, inventory, equipment, general
intangibles, deposit accounts, chattel paper, and other property from time to
time received, receivable, or otherwise distributed in respect of or in exchange
for, or as a replacement of or a substitution for, any of the Pledged Interests,
Future Rights, or proceeds thereof (including any cash, Equity Interests, or
other securities or instruments issued after any recapitalization, readjustment,
reclassification, merger or consolidation with respect to the Issuers and any
security entitlements, as defined in §8102(a)(17) of the Code, with respect
thereto); (b) ”proceeds,” as such term is defined in the Code; (c) proceeds of
any insurance, indemnity, warranty, or guaranty (including guaranties of
delivery) payable from time to time with respect to any of the Pledged
Interests, Future Rights, or proceeds thereof; (d) payments (in any form
whatsoever) made or due and payable to a Pledgor from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Pledged Interests, Future Rights, or proceeds thereof; and
(e) other amounts from time to time paid or payable under or in connection with
any of the Pledged Interests, Future Rights, or proceeds thereof.

 

“SEC” shall mean the United States Securities and Exchange Commission and any
successor thereto.

 

“Secured Obligations” shall mean, with respect to each Pledgor, all liabilities,
obligations, or undertakings owing by such Pledgor to the Lender Group of any
kind or description arising out of or outstanding under, advanced or issued
pursuant to, or evidenced by the Financing Agreement, this Stock Pledge
Agreement, or any of the other Loan Documents, irrespective of whether for the
payment of money, whether direct or indirect, absolute or contingent, due or to
become due, voluntary or involuntary, whether now existing or hereafter arising,
and including all interest (including interest that accrues after the filing of
a case under the Bankruptcy Code) and any and all costs, fees (including
attorneys fees), and expenses which such Pledgor is required to pay pursuant to
any of the foregoing.

 

“Secured Party” shall have the meaning ascribed thereto in the preamble to this
Stock Pledge Agreement, together with its successors or assigns.

 

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“Securities Act” shall have the meaning ascribed thereto in Section 9(c) of this
Stock Pledge Agreement.

 

“Stock Pledge Agreement” shall have the meaning set forth in the preamble to
this Stock Pledge Agreement.

 

(B)   CONSTRUCTION.

 

(I)            UNLESS THE CONTEXT OF THIS STOCK PLEDGE AGREEMENT CLEARLY
REQUIRES OTHERWISE, REFERENCES TO THE PLURAL INCLUDE THE SINGULAR AND TO THE
SINGULAR INCLUDE THE PLURAL, THE PART INCLUDES THE WHOLE, THE TERM “INCLUDING”
IS NOT LIMITING, AND THE TERM “OR” HAS, EXCEPT WHERE OTHERWISE INDICATED, THE
INCLUSIVE MEANING REPRESENTED BY THE PHRASE “AND/OR.”  THE WORDS “HEREOF,”
“HEREIN,” “HEREBY,” “HEREUNDER,” AND OTHER SIMILAR TERMS IN THIS STOCK PLEDGE
AGREEMENT REFER TO THIS STOCK PLEDGE AGREEMENT AS A WHOLE AND NOT EXCLUSIVELY TO
ANY PARTICULAR PROVISION OF THIS STOCK PLEDGE AGREEMENT.  ARTICLE, SECTION,
SUBSECTION, EXHIBIT, AND SCHEDULE REFERENCES ARE TO THIS STOCK PLEDGE AGREEMENT
UNLESS OTHERWISE SPECIFIED.  ALL OF THE EXHIBITS OR SCHEDULES ATTACHED TO THIS
STOCK PLEDGE AGREEMENT SHALL BE DEEMED INCORPORATED HEREIN BY REFERENCE.  ANY
REFERENCE TO ANY OF THE FOLLOWING DOCUMENTS INCLUDES ANY AND ALL ALTERATIONS,
AMENDMENTS, RESTATEMENTS, EXTENSIONS, MODIFICATIONS, RENEWALS, OR SUPPLEMENTS
THERETO OR THEREOF, AS APPLICABLE: THIS STOCK PLEDGE AGREEMENT, THE FINANCING
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.

 

(II)           NEITHER THIS STOCK PLEDGE AGREEMENT NOR ANY UNCERTAINTY OR
AMBIGUITY HEREIN SHALL BE CONSTRUED OR RESOLVED AGAINST SECURED PARTY OR A
PLEDGOR, WHETHER UNDER ANY RULE OF CONSTRUCTION OR OTHERWISE.  ON THE CONTRARY,
THIS STOCK PLEDGE AGREEMENT HAS BEEN REVIEWED BY BOTH OF THE PARTIES AND THEIR
RESPECTIVE COUNSEL AND SHALL BE CONSTRUED AND INTERPRETED ACCORDING TO THE
ORDINARY MEANING OF THE WORDS USED SO AS TO FAIRLY ACCOMPLISH THE PURPOSES AND
INTENTIONS OF THE PARTIES HERETO.

 

(III)          IN THE EVENT OF ANY DIRECT CONFLICT BETWEEN THE EXPRESS TERMS AND
PROVISIONS OF THIS STOCK PLEDGE AGREEMENT AND OF THE FINANCING AGREEMENT, THE
TERMS AND PROVISIONS OF THE FINANCING AGREEMENT SHALL CONTROL.

 

2.     Pledge.  As security for the prompt payment and performance of the
Secured Obligations when due, whether at stated maturity, by acceleration or
otherwise (including amounts that would become due but for the operation of the
provisions of the Bankruptcy Code), each Pledgor hereby pledges, grants,
transfers, and assigns to Secured Party, for the benefit of the Lender Group, a
security interest in all of Pledgor’s right, title, and interest in and to the
Pledged Collateral.

 

3.     DELIVERY AND REGISTRATION OF PLEDGED COLLATERAL.

 

(A)   ALL CERTIFICATES OR INSTRUMENTS REPRESENTING OR EVIDENCING THE PLEDGED
COLLATERAL SHALL BE PROMPTLY DELIVERED BY THE PLEDGORS TO SECURED PARTY, FOR THE
BENEFIT OF THE

 

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LENDER GROUP, OR SECURED PARTY’S DESIGNEE PURSUANT HERETO AT A LOCATION
DESIGNATED BY SECURED PARTY AND SHALL BE HELD BY OR ON BEHALF OF SECURED PARTY
PURSUANT HERETO, AND SHALL BE IN SUITABLE FORM FOR TRANSFER BY DELIVERY, OR
SHALL BE ACCOMPANIED BY DULY EXECUTED INSTRUMENTS OF TRANSFER OR ASSIGNMENT IN
BLANK, ALL IN FORM AND SUBSTANCE SATISFACTORY TO SECURED PARTY.

 

(B)   UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT,
SECURED PARTY SHALL HAVE THE RIGHT, AT ANY TIME IN ITS DISCRETION AND WITHOUT
NOTICE TO A PLEDGOR, TO TRANSFER TO OR TO REGISTER ON THE BOOKS OF THE ISSUERS
(OR OF ANY OTHER PERSON MAINTAINING RECORDS WITH RESPECT TO THE PLEDGED
COLLATERAL) IN THE NAME OF SECURED PARTY OR ANY OF ITS NOMINEES ANY OR ALL OF
THE PLEDGED COLLATERAL.  IN ADDITION, SECURED PARTY SHALL HAVE THE RIGHT AT ANY
TIME TO EXCHANGE CERTIFICATES OR INSTRUMENTS REPRESENTING OR EVIDENCING PLEDGED
COLLATERAL FOR CERTIFICATES OR INSTRUMENTS OF SMALLER OR LARGER DENOMINATIONS.

 

(C)   IF, AT ANY TIME AND FROM TIME TO TIME, ANY PLEDGED COLLATERAL (INCLUDING
ANY CERTIFICATE OR INSTRUMENT REPRESENTING OR EVIDENCING ANY PLEDGED COLLATERAL)
IS IN THE POSSESSION OF A PERSON OTHER THAN SECURED PARTY OR THE APPLICABLE
PLEDGOR (A “HOLDER”), THEN SUCH PLEDGOR SHALL IMMEDIATELY, AT SECURED PARTY’S
OPTION, EITHER CAUSE SUCH PLEDGED COLLATERAL TO BE DELIVERED INTO SECURED
PARTY’S POSSESSION, OR, PROVIDED SUCH OTHER PERSON IS NOT A PLEDGOR OR AN AGENT
OR REPRESENTATIVE THEREOF, EXECUTE AND DELIVER TO SUCH HOLDER A WRITTEN
NOTIFICATION/INSTRUCTION, AND TAKE ALL OTHER STEPS NECESSARY TO PERFECT THE
SECURITY INTEREST OF SECURED PARTY IN SUCH PLEDGED COLLATERAL, INCLUDING
OBTAINING FROM SUCH HOLDER A WRITTEN ACKNOWLEDGEMENT THAT SUCH HOLDER HOLDS SUCH
PLEDGED COLLATERAL FOR SECURED PARTY, ALL PURSUANT TO THE CODE OR OTHER
APPLICABLE LAW GOVERNING THE PERFECTION OF SECURED PARTY’S SECURITY INTEREST IN
THE PLEDGED COLLATERAL IN THE POSSESSION OF SUCH HOLDER.  EACH SUCH
NOTIFICATION/INSTRUCTION AND ACKNOWLEDGEMENT SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO SECURED PARTY.

 

(D)   ANY AND ALL PLEDGED COLLATERAL (INCLUDING DIVIDENDS, INTEREST, AND OTHER
CASH DISTRIBUTIONS) AT ANY TIME RECEIVED OR HELD BY A PLEDGOR SHALL BE SO
RECEIVED OR HELD IN TRUST FOR SECURED PARTY, SHALL BE SEGREGATED FROM OTHER
FUNDS AND PROPERTY OF THE APPLICABLE PLEDGOR AND SHALL BE FORTHWITH DELIVERED TO
SECURED PARTY IN THE SAME FORM AS SO RECEIVED OR HELD, WITH ANY NECESSARY
ENDORSEMENTS, PROVIDED THAT CASH DIVIDENDS OR DISTRIBUTIONS RECEIVED BY A
PLEDGOR, IF AND TO THE EXTENT THEY ARE NOT PROHIBITED BY THE FINANCING
AGREEMENT, MAY BE RETAINED BY THE APPLICABLE PLEDGOR IN ACCORDANCE WITH SECTION
4 AND USED IN THE ORDINARY COURSE OF SUCH PLEDGOR’S BUSINESS.

 

(E)   IF AT ANY TIME AND FROM TIME TO TIME ANY PLEDGED COLLATERAL CONSISTS OF AN
UNCERTIFICATED SECURITY OR A SECURITY IN BOOK ENTRY FORM, THEN THE APPLICABLE
PLEDGOR SHALL IMMEDIATELY CAUSE SUCH PLEDGED COLLATERAL TO BE REGISTERED OR
ENTERED, AS THE CASE MAY BE, IN THE NAME OF SECURED PARTY, FOR THE BENEFIT OF
THE LENDERS, OR OTHERWISE CAUSE THE SECURITY INTEREST HELD BY SECURED PARTY, FOR
THE BENEFIT OF THE LENDERS, TO BE PERFECTED IN ACCORDANCE WITH APPLICABLE LAW.

 

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4.     VOTING RIGHTS AND DIVIDENDS.

 

(A)   EXCEPT AS OTHERWISE PROVIDED IN SECTION 4(B), EACH PLEDGOR SHALL BE
ENTITLED TO EXERCISE ANY AND ALL VOTING, MANAGEMENT AND OTHER CONSENSUAL RIGHTS
PERTAINING TO THE PLEDGED COLLATERAL OR ANY PART THEREOF FOR ANY PURPOSE NOT
INCONSISTENT WITH THE TERMS OF THE LOAN DOCUMENTS AND SHALL BE ENTITLED TO
RECEIVE AND RETAIN ANY CASH DIVIDENDS OR DISTRIBUTIONS PAID IN RESPECT OF THE
PLEDGED COLLATERAL, IF AND TO THE EXTENT THEY ARE NOT PROHIBITED BY THE
FINANCING AGREEMENT.

 

(B)   IF AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING AND SECURED PARTY
HAS NOTIFIED IN WRITING ANY PLEDGOR OF ITS ELECTION TO DIVEST SUCH PLEDGOR OF
THE RIGHTS DESCRIBED IN SECTION 4(A), ALL RIGHTS OF EACH SUCH PLEDGOR TO
EXERCISE THE VOTING AND OTHER CONSENSUAL RIGHTS OR RECEIVE AND RETAIN CASH
DIVIDENDS OR DISTRIBUTIONS THAT IT WOULD OTHERWISE BE ENTITLED TO EXERCISE OR
RECEIVE AND RETAIN, AS APPLICABLE PURSUANT TO SECTION 4(A), SHALL CEASE, AND ALL
SUCH RIGHTS SHALL THEREUPON BECOME VESTED IN SECURED PARTY, FOR THE BENEFIT OF
THE LENDER GROUP, WHO SHALL THEREUPON HAVE THE SOLE RIGHT TO EXERCISE SUCH
VOTING OR OTHER CONSENSUAL RIGHTS AND TO RECEIVE AND RETAIN SUCH CASH DIVIDENDS
AND DISTRIBUTIONS WITH RESPECT TO SUCH PLEDGOR.  UPON THE RECEIPT OF SUCH
WRITTEN NOTICE, EACH SUCH PLEDGOR SHALL EXECUTE AND DELIVER (OR CAUSE TO BE
EXECUTED AND DELIVERED) TO SECURED PARTY ALL SUCH PROXIES AND OTHER INSTRUMENTS
AS SECURED PARTY MAY REASONABLY REQUEST FOR THE PURPOSE OF ENABLING SECURED
PARTY TO EXERCISE THE VOTING AND OTHER RIGHTS WHICH IT IS ENTITLED TO EXERCISE
AND TO RECEIVE THE DIVIDENDS AND DISTRIBUTIONS THAT IT IS ENTITLED TO RECEIVE
AND RETAIN PURSUANT TO THE PRECEDING SENTENCE.

 

5.     Representations and Warranties.  Each Pledgor represents, warrants, and
covenants as follows:

 

(A)   SUCH PLEDGOR HAS TAKEN ALL STEPS IT DEEMS NECESSARY OR APPROPRIATE TO BE
INFORMED ON A CONTINUING BASIS OF CHANGES OR POTENTIAL CHANGES AFFECTING THE
PLEDGED COLLATERAL (INCLUDING RIGHTS OF CONVERSION AND EXCHANGE, RIGHTS TO
SUBSCRIBE, PAYMENT OF DIVIDENDS, REORGANIZATIONS OR RECAPITALIZATION, TENDER
OFFERS AND VOTING RIGHTS), AND EACH PLEDGOR AGREES THAT NO MEMBER OF THE LENDER
GROUP SHALL HAVE ANY RESPONSIBILITY OR LIABILITY FOR INFORMING ANY PLEDGOR OF
ANY SUCH CHANGES OR POTENTIAL CHANGES OR FOR TAKING ANY ACTION OR OMITTING TO
TAKE ANY ACTION WITH RESPECT THERETO;

 

(B)   ALL INFORMATION HEREIN OR HEREAFTER SUPPLIED TO SECURED PARTY OR ANY OTHER
MEMBER OF THE LENDER GROUP BY OR ON BEHALF OF SUCH PLEDGOR IN WRITING WITH
RESPECT TO THE PLEDGED COLLATERAL IS, OR IN THE CASE OF INFORMATION HEREAFTER
SUPPLIED WILL BE, ACCURATE AND COMPLETE IN ALL MATERIAL RESPECTS;

 

(C)   SUCH PLEDGOR IS AND WILL BE THE SOLE LEGAL AND BENEFICIAL OWNER OF THE
PLEDGED COLLATERAL (INCLUDING THE PLEDGED INTERESTS AND ALL OTHER PLEDGED
COLLATERAL ACQUIRED BY SUCH PLEDGOR AFTER THE DATE HEREOF) FREE AND CLEAR OF ANY
ADVERSE CLAIM, LIEN, OR OTHER RIGHT, TITLE, OR INTEREST OF ANY PARTY, OTHER THAN
(I) THE LIENS IN FAVOR OF SECURED PARTY, FOR THE

 

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BENEFIT OF THE LENDER GROUP OR (II) ANY LIEN (OTHER THAN A UNITED STATES FEDERAL
TAX LIEN WITH RESPECT TO WHICH A NOTICE OF LIEN HAS BEEN FILED) PERMITTED UNDER
CLAUSE (B) OF THE DEFINITION OF PERMITTED LIENS IN THE FINANCING AGREEMENT THAT
ARE JUNIOR AND SUBORDINATE TO THE LIENS IN FAVOR OF SECURED PARTY;

 

(D)   THIS STOCK PLEDGE AGREEMENT, AND THE DELIVERY TO SECURED PARTY OF THE
PLEDGED INTERESTS REPRESENTING PLEDGED COLLATERAL (OR THE DELIVERY TO ALL
HOLDERS OF THE PLEDGED INTERESTS REPRESENTING PLEDGED COLLATERAL OF THE
NOTIFICATION/INSTRUCTION REFERRED TO IN SECTION 3 OF THIS STOCK PLEDGE
AGREEMENT), CREATES A VALID, PERFECTED, AND FIRST PRIORITY SECURITY INTEREST IN
ONE HUNDRED PERCENT (100%) OF THE PLEDGED INTERESTS WHICH ARE IN CERTIFICATED
FORM IN FAVOR OF SECURED PARTY, FOR THE BENEFIT OF THE LENDER GROUP, SECURING
PAYMENT OF THE SECURED OBLIGATIONS, AND ALL ACTIONS NECESSARY TO ACHIEVE SUCH
PERFECTION HAVE BEEN DULY TAKEN;

 

(E)   THE INFORMATION RELATED TO EACH PLEDGOR SET FORTH ON SCHEDULE A TO THIS
STOCK PLEDGE AGREEMENT IS TRUE AND CORRECT AND COMPLETE IN ALL MATERIAL
RESPECTS; WITHOUT LIMITING THE GENERALITY OF THE FOREGOING: (I) EXCEPT AS SET
FORTH ON SCHEDULE A, ALL THE PLEDGED INTERESTS ARE IN CERTIFICATED FORM, AND,
EXCEPT TO THE EXTENT REGISTERED IN THE NAME OF SECURED PARTY OR ITS NOMINEE
PURSUANT TO THE PROVISIONS OF THIS STOCK PLEDGE AGREEMENT, ARE REGISTERED IN THE
NAME OF THE APPLICABLE PLEDGOR; AND (II) THE PLEDGED INTERESTS AS TO EACH OF THE
ISSUERS CONSTITUTE AT LEAST THE PERCENTAGE OF ALL THE FULLY DILUTED ISSUED AND
OUTSTANDING EQUITY INTERESTS OF SUCH ISSUER AS SET FORTH IN SCHEDULE A TO THIS
STOCK PLEDGE AGREEMENT;

 

(F)    THE PLEDGED INTERESTS THAT ARE INTERESTS IN GENERAL PARTNERSHIPS, LIMITED
PARTNERSHIPS OR LIMITED LIABILITY COMPANIES (I) ARE NOT DEALT IN OR TRADED ON
SECURITIES EXCHANGES OR IN SECURITIES MARKETS, (II) DO NOT HAVE TERMS EXPRESSLY
PROVIDING THAT THEY ARE SECURITIES GOVERNED BY ARTICLE 8 OF THE CODE, AND (III)
ARE NOT INVESTMENT COMPANY SECURITIES, AND ARE NOT, THEREFORE, “SECURITIES”
GOVERNED BY ARTICLE 8 OF THE CODE;

 

(G)   ON THE CLOSING DATE, THERE ARE NO PRESENTLY EXISTING FUTURE RIGHTS OR
PROCEEDS OWNED BY ANY PLEDGOR;

 

(H)   THE PLEDGED INTERESTS HAVE BEEN DULY AUTHORIZED AND VALIDLY ISSUED AND ARE
FULLY PAID AND NONASSESSABLE; AND

 

(I)    NEITHER THE PLEDGE OF THE PLEDGED COLLATERAL PURSUANT TO THIS STOCK
PLEDGE AGREEMENT NOR THE EXTENSIONS OF CREDIT REPRESENTED BY THE SECURED
OBLIGATIONS VIOLATES REGULATION T, U OR X OF THE BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM.

 

6.     FURTHER ASSURANCES.

 

(A)   EACH PLEDGOR AGREES THAT FROM TIME TO TIME, AT THE EXPENSE OF SUCH
PLEDGOR, IT WILL PROMPTLY EXECUTE AND DELIVER ALL FURTHER INSTRUMENTS AND
DOCUMENTS, AND TAKE ALL FURTHER ACTION THAT MAY BE NECESSARY OR REASONABLY
DESIRABLE, OR THAT SECURED PARTY, ON BEHALF

 

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OF THE LENDER GROUP, MAY REQUEST, IN ORDER TO PERFECT AND PROTECT ANY SECURITY
INTEREST GRANTED OR PURPORTED TO BE GRANTED HEREBY OR TO ENABLE SECURED PARTY,
ON BEHALF OF THE LENDER GROUP, TO EXERCISE AND ENFORCE ITS RIGHTS AND REMEDIES
HEREUNDER WITH RESPECT TO ANY PLEDGED COLLATERAL.  WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, EACH PLEDGOR WILL: (I) AT THE REQUEST OF SECURED
PARTY, MARK CONSPICUOUSLY EACH OF ITS RECORDS PERTAINING TO THE PLEDGED
COLLATERAL WITH A LEGEND, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
SECURED PARTY, INDICATING THAT SUCH PLEDGED COLLATERAL IS SUBJECT TO THE
SECURITY INTEREST GRANTED HEREBY; (II) AUTHORIZE SUCH FINANCING OR CONTINUATION
STATEMENTS, OR AMENDMENTS THERETO, AND SUCH OTHER INSTRUMENTS OR NOTICES, AS MAY
BE NECESSARY OR REASONABLY DESIRABLE, OR AS SECURED PARTY MAY REQUEST, IN ORDER
TO PERFECT AND PRESERVE THE SECURITY INTERESTS GRANTED OR PURPORTED TO BE
GRANTED HEREBY; (III) ALLOW INSPECTION OF THE PLEDGED COLLATERAL BY SECURED
PARTY OR PERSONS DESIGNATED BY SECURED PARTY; AND (IV) APPEAR IN AND DEFEND ANY
ACTION OR PROCEEDING THAT MAY AFFECT SUCH PLEDGOR’S TITLE TO OR SECURED PARTY’S
SECURITY INTEREST IN THE PLEDGED COLLATERAL.

 

(B)   EACH PLEDGOR HEREBY AUTHORIZES SECURED PARTY, ON BEHALF OF THE LENDER
GROUP, TO FILE ONE OR MORE FINANCING OR CONTINUATION STATEMENTS, AND AMENDMENTS
THERETO, RELATIVE TO ALL OR ANY PART OF THE PLEDGED COLLATERAL WITHOUT THE
SIGNATURE OF SUCH PLEDGOR WHERE PERMITTED BY LAW.  A CARBON, PHOTOGRAPHIC, OR
OTHER REPRODUCTION OF THIS STOCK PLEDGE AGREEMENT OR ANY FINANCING STATEMENT
COVERING THE PLEDGED COLLATERAL OR ANY PART THEREOF SHALL BE SUFFICIENT AS A
FINANCING STATEMENT WHERE PERMITTED BY LAW.

 

(C)   EACH PLEDGOR WILL FURNISH TO SECURED PARTY, UPON THE REQUEST OF SECURED
PARTY: (I) A CERTIFICATE EXECUTED BY AN AUTHORIZED OFFICER OF SUCH PLEDGOR, AND
DATED AS OF THE DATE OF DELIVERY TO SECURED PARTY, ITEMIZING IN SUCH DETAIL AS
SECURED PARTY MAY REQUEST, THE PLEDGED COLLATERAL WHICH, AS OF THE DATE OF SUCH
CERTIFICATE, HAS BEEN DELIVERED TO SECURED PARTY BY SUCH PLEDGOR PURSUANT TO THE
PROVISIONS OF THIS STOCK PLEDGE AGREEMENT; AND (II) SUCH STATEMENTS AND
SCHEDULES FURTHER IDENTIFYING AND DESCRIBING THE PLEDGED COLLATERAL AS SECURED
PARTY MAY REQUEST.

 

7.     Covenants of Each Pledgor.  Each Pledgor shall:

 

(A)   PERFORM EACH AND EVERY COVENANT IN ANY OF THE LOAN DOCUMENTS APPLICABLE TO
SUCH PLEDGOR;

 

(B)   AT ALL TIMES KEEP AT LEAST ONE COMPLETE SET OF ITS RECORDS CONCERNING
SUBSTANTIALLY ALL OF THE PLEDGED COLLATERAL AT ITS CHIEF EXECUTIVE OFFICE AS SET
FORTH IN SCHEDULE 6.01(DD) TO THE FINANCING AGREEMENT;

 

(C)   TO THE EXTENT IT MAY LAWFULLY DO SO, USE ITS REASONABLE BEST EFFORTS TO
PREVENT THE ISSUERS FROM ISSUING FUTURE RIGHTS OR PROCEEDS, EXCEPT FOR CASH
DIVIDENDS AND OTHER DISTRIBUTIONS, IF ANY, THAT ARE NOT PROHIBITED BY THE TERMS
OF THE FINANCING AGREEMENT TO BE PAID BY ANY ISSUER TO SUCH PLEDGOR; AND

 

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(D)   UPON RECEIPT BY SUCH PLEDGOR OF ANY MATERIAL NOTICE OR REPORT FROM ANY OF
THE ISSUERS OR ANY HOLDER RELATING TO ALL OR ANY PART OF THE PLEDGED COLLATERAL,
DELIVER SUCH NOTICE OR REPORT TO SECURED PARTY AS SOON AS POSSIBLE, BUT IN NO
EVENT LATER THAN FIVE (5) DAYS FOLLOWING THE RECEIPT THEREOF BY SUCH PLEDGOR

 

(E)   NOT PERMIT ANY OF THE ISSUERS TO:  (I) AUTHORIZE THE AMENDMENT OF OR AMEND
THE GOVERNING DOCUMENTS OF SUCH ISSUER THAT IS A GENERAL PARTNERSHIP, LIMITED
PARTNERSHIP OR LIMITED LIABILITY COMPANY TO PROVIDE THAT THE STOCK OF SUCH
ISSUER IS GOVERNED BY ARTICLE 8 OF THE CODE, OR (II) AUTHORIZE THE ISSUANCE OF
OR ISSUE CERTIFICATES EVIDENCING THE STOCK OF SUCH ISSUER THAT IS A GENERAL
PARTNERSHIP, LIMITED PARTNERSHIP OR LIMITED LIABILITY COMPANY.

 

8.     SECURED PARTY AS EACH PLEDGOR’S ATTORNEY-IN-FACT.

 

(A)   UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT,
EACH PLEDGOR HEREBY IRREVOCABLY APPOINTS SECURED PARTY, FOR THE BENEFIT OF THE
LENDER GROUP, AS SUCH PLEDGOR’S ATTORNEY-IN-FACT, WITH FULL AUTHORITY IN THE
PLACE AND STEAD OF SUCH PLEDGOR AND IN THE NAME OF SUCH PLEDGOR, SECURED PARTY
OR OTHERWISE, FROM TIME TO TIME AT SECURED PARTY’S DISCRETION, TO TAKE ANY
ACTION AND TO EXECUTE ANY INSTRUMENT THAT SECURED PARTY, ON BEHALF OF THE LENDER
GROUP, MAY REASONABLY DEEM NECESSARY OR ADVISABLE TO ACCOMPLISH THE PURPOSES OF
THIS STOCK PLEDGE AGREEMENT, INCLUDING: (I) TO RECEIVE, ENDORSE, AND COLLECT ALL
INSTRUMENTS MADE PAYABLE TO SUCH PLEDGOR REPRESENTING ANY DIVIDEND, INTEREST
PAYMENT OR OTHER DISTRIBUTION IN RESPECT OF THE PLEDGED COLLATERAL OR ANY PART
THEREOF TO THE EXTENT PERMITTED HEREUNDER AND TO GIVE FULL DISCHARGE FOR THE
SAME AND TO EXECUTE AND FILE GOVERNMENTAL NOTIFICATIONS AND REPORTING FORMS;
(II) TO ISSUE ANY NOTIFICATIONS/INSTRUCTIONS SECURED PARTY DEEMS NECESSARY
PURSUANT TO SECTION 3 OF THIS STOCK PLEDGE AGREEMENT; OR (III) TO ARRANGE FOR
THE TRANSFER OF THE PLEDGED COLLATERAL ON THE BOOKS OF ANY OF THE ISSUERS OR ANY
OTHER PERSON TO THE NAME OF SECURED PARTY OR TO THE NAME OF SECURED PARTY’S
NOMINEE.

 

(B)   IN ADDITION TO THE DESIGNATION OF SECURED PARTY AS PLEDGOR’S
ATTORNEY-IN-FACT IN SUBSECTION (A), UPON THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT, EACH PLEDGOR HEREBY IRREVOCABLY APPOINTS
SECURED PARTY, ON BEHALF OF THE LENDER GROUP, AS SUCH PLEDGOR’S AGENT AND
ATTORNEY-IN-FACT TO MAKE, EXECUTE AND DELIVER ANY AND ALL DOCUMENTS AND WRITINGS
WHICH MAY BE NECESSARY OR APPROPRIATE FOR APPROVAL OF, OR BE REQUIRED BY, ANY
REGULATORY AUTHORITY LOCATED IN ANY CITY, COUNTY, STATE OR COUNTRY WHERE SUCH
PLEDGOR OR ANY OF THE ISSUERS ENGAGE IN BUSINESS, IN ORDER TO TRANSFER OR TO
MORE EFFECTIVELY TRANSFER ANY OF THE PLEDGED INTERESTS OR OTHERWISE ENFORCE
SECURED PARTY’S RIGHTS HEREUNDER.

 

9.     Remedies upon Default.  Upon the occurrence and during the continuance of
an Event of Default:

 

(A)   SECURED PARTY, ON BEHALF OF THE LENDER GROUP, MAY EXERCISE IN RESPECT OF
THE PLEDGED COLLATERAL, IN ADDITION TO OTHER RIGHTS AND REMEDIES PROVIDED FOR
HEREIN OR OTHERWISE AVAILABLE TO IT, ALL THE RIGHTS AND REMEDIES OF A SECURED
PARTY ON DEFAULT UNDER THE CODE (IRRESPECTIVE OF WHETHER THE CODE APPLIES TO THE
AFFECTED ITEMS OF PLEDGED COLLATERAL),

 

9

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AND SECURED PARTY MAY ALSO 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, BROKER’S BOARD OR AT ANY OF SECURED PARTY’S
OFFICES OR ELSEWHERE, FOR CASH, ON CREDIT OR FOR FUTURE DELIVERY, AT SUCH TIME
OR TIMES AND AT SUCH PRICE OR PRICES AND UPON SUCH OTHER TERMS AS SECURED PARTY
MAY DEEM COMMERCIALLY REASONABLE, IRRESPECTIVE OF THE IMPACT OF ANY SUCH SALES
ON THE MARKET PRICE OF THE PLEDGED COLLATERAL.  TO THE MAXIMUM EXTENT PERMITTED
BY APPLICABLE LAW, SECURED PARTY MAY BE THE PURCHASER OF ANY OR ALL OF THE
PLEDGED COLLATERAL AT ANY SUCH SALE AND SHALL BE ENTITLED, FOR THE PURPOSE OF
BIDDING AND MAKING SETTLEMENT OR PAYMENT OF THE PURCHASE PRICE FOR ALL OR ANY
PORTION OF THE PLEDGED COLLATERAL SOLD AT ANY SUCH PUBLIC SALE, TO USE AND APPLY
ALL OR ANY PART OF THE SECURED OBLIGATIONS AS A CREDIT ON ACCOUNT OF THE
PURCHASE PRICE OF ANY PLEDGED COLLATERAL PAYABLE AT SUCH SALE.  EACH PURCHASER
AT ANY SUCH SALE SHALL HOLD THE PROPERTY SOLD ABSOLUTELY FREE FROM ANY CLAIM OR
RIGHT ON THE PART OF THE APPLICABLE PLEDGOR, AND EACH PLEDGOR HEREBY WAIVES (TO
THE EXTENT PERMITTED BY LAW) ALL RIGHTS OF REDEMPTION, STAY, OR APPRAISAL THAT
IT NOW HAS OR MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR
STATUTE NOW EXISTING OR HEREAFTER ENACTED.  EACH PLEDGOR AGREES THAT, TO THE
EXTENT NOTICE OF SALE SHALL BE REQUIRED BY LAW, AT LEAST TEN (10) CALENDAR DAYS
NOTICE TO SUCH PLEDGOR OF THE TIME AND PLACE OF ANY PUBLIC SALE OR THE TIME
AFTER WHICH A PRIVATE SALE IS TO BE MADE SHALL CONSTITUTE REASONABLE
NOTIFICATION.  SECURED PARTY SHALL NOT BE OBLIGATED TO MAKE ANY SALE OF PLEDGED
COLLATERAL REGARDLESS OF NOTICE OF SALE HAVING BEEN GIVEN.  SECURED PARTY 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.  TO THE MAXIMUM EXTENT
PERMITTED BY LAW, EACH PLEDGOR HEREBY WAIVES ANY CLAIMS AGAINST SECURED PARTY
ARISING BECAUSE THE PRICE AT WHICH ANY PLEDGED COLLATERAL MAY HAVE BEEN SOLD AT
SUCH A PRIVATE SALE WAS LESS THAN THE PRICE THAT MIGHT HAVE BEEN OBTAINED AT A
PUBLIC SALE, EVEN IF SECURED PARTY ACCEPTS THE FIRST OFFER RECEIVED AND DOES NOT
OFFER SUCH PLEDGED COLLATERAL TO MORE THAN ONE OFFEREE.

 

(B)   EACH PLEDGOR HEREBY AGREES THAT ANY SALE OR OTHER DISPOSITION OF THE
PLEDGED COLLATERAL CONDUCTED IN CONFORMITY WITH REASONABLE COMMERCIAL PRACTICES
OF BANKS, INSURANCE COMPANIES, OR OTHER FINANCIAL INSTITUTIONS IN THE BOROUGH OF
MANHATTAN, NEW YORK IN DISPOSING OF PROPERTY SIMILAR TO THE PLEDGED COLLATERAL
SHALL BE DEEMED TO BE COMMERCIALLY REASONABLE.

 

(C)   EACH PLEDGOR HEREBY ACKNOWLEDGES THAT THE SALE BY SECURED PARTY OF ANY
PLEDGED COLLATERAL PURSUANT TO THE TERMS HEREOF IN COMPLIANCE WITH THE
SECURITIES ACT OF 1933 AS NOW IN EFFECT OR AS HEREAFTER AMENDED, OR ANY SIMILAR
STATUTE HEREAFTER ADOPTED WITH SIMILAR PURPOSE OR EFFECT (THE “SECURITIES ACT”),
AS WELL AS APPLICABLE “BLUE SKY” OR OTHER STATE SECURITIES LAWS, MAY REQUIRE
STRICT LIMITATIONS AS TO THE MANNER IN WHICH SECURED PARTY OR ANY SUBSEQUENT
TRANSFEREE OF THE PLEDGED COLLATERAL MAY DISPOSE THEREOF.  EACH PLEDGOR
ACKNOWLEDGES AND AGREES THAT IN ORDER TO PROTECT SECURED PARTY’S INTEREST IT MAY
BE NECESSARY TO SELL THE PLEDGED COLLATERAL AT A PRICE LESS THAN THE MAXIMUM
PRICE ATTAINABLE IF A SALE WERE DELAYED OR WERE MADE IN ANOTHER MANNER, SUCH AS
A PUBLIC OFFERING UNDER THE SECURITIES ACT.

 

10

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EACH PLEDGOR HAS NO OBJECTION TO SALE IN SUCH A MANNER AND AGREES THAT SECURED
PARTY SHALL HAVE NO OBLIGATION TO OBTAIN THE MAXIMUM POSSIBLE PRICE FOR THE
PLEDGED COLLATERAL.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH
PLEDGOR AGREES THAT, UPON THE OCCURRENCE AND DURING THE CONTINUATION OF AN EVENT
OF DEFAULT, SECURED PARTY MAY, SUBJECT TO APPLICABLE LAW, FROM TIME TO TIME
ATTEMPT TO SELL ALL OR ANY PART OF THE PLEDGED COLLATERAL BY A PRIVATE
PLACEMENT, RESTRICTING THE BIDDERS AND PROSPECTIVE PURCHASERS TO THOSE WHO WILL
REPRESENT AND AGREE THAT THEY ARE PURCHASING FOR INVESTMENT ONLY AND NOT FOR
DISTRIBUTION.  IN SO DOING, SECURED PARTY MAY SOLICIT OFFERS TO BUY THE PLEDGED
COLLATERAL OR ANY PART THEREOF FOR CASH, FROM A LIMITED NUMBER OF INVESTORS
DEEMED BY SECURED PARTY, IN ITS REASONABLE JUDGMENT, TO BE INSTITUTIONAL
INVESTORS OR OTHER RESPONSIBLE PARTIES WHO MIGHT BE INTERESTED IN PURCHASING THE
PLEDGED COLLATERAL.  IF SECURED PARTY SHALL SOLICIT SUCH OFFERS, THEN THE
ACCEPTANCE BY SECURED PARTY OF ONE OF THE OFFERS SHALL BE DEEMED TO BE A
COMMERCIALLY REASONABLE METHOD OF DISPOSITION OF THE PLEDGED COLLATERAL.

 

(D)   IF SECURED PARTY SHALL DETERMINE TO EXERCISE ITS RIGHT TO SELL ALL OR ANY
PORTION OF THE PLEDGED COLLATERAL PURSUANT TO THIS SECTION, EACH PLEDGOR AGREES
THAT, UPON REQUEST OF SECURED PARTY, SUCH PLEDGOR WILL, AT ITS OWN EXPENSE:

 

(I)            USE ITS REASONABLE BEST EFFORTS TO EXECUTE AND DELIVER, AND CAUSE
THE ISSUERS AND THE DIRECTORS AND OFFICERS THEREOF TO EXECUTE AND DELIVER, ALL
SUCH INSTRUMENTS AND DOCUMENTS, AND TO DO OR CAUSE TO BE DONE ALL SUCH OTHER
ACTS AND THINGS, AS MAY BE NECESSARY OR, IN THE OPINION OF SECURED PARTY,
ADVISABLE TO REGISTER SUCH PLEDGED COLLATERAL UNDER THE PROVISIONS OF 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 PROSPECTUSES WHICH, IN THE OPINION OF SECURED PARTY,
ARE NECESSARY OR ADVISABLE, ALL IN CONFORMITY WITH THE REQUIREMENTS OF THE
SECURITIES ACT AND THE RULES AND REGULATIONS OF THE SEC APPLICABLE THERETO;

 

(II)           USE ITS REASONABLE BEST EFFORTS TO QUALIFY THE PLEDGED COLLATERAL
UNDER THE STATE SECURITIES LAWS OR “BLUE SKY” LAWS AND TO OBTAIN ALL NECESSARY
GOVERNMENTAL APPROVALS FOR THE SALE OF THE PLEDGED COLLATERAL, AS REASONABLY
REQUESTED BY SECURED PARTY;

 

(III)          CAUSE THE ISSUERS TO MAKE AVAILABLE TO THEIR RESPECTIVE SECURITY
HOLDERS, AS SOON AS PRACTICABLE, AN EARNINGS STATEMENT WHICH WILL SATISFY THE
PROVISIONS OF SECTION 11(A) OF THE SECURITIES ACT;

 

(IV)          EXECUTE AND DELIVER, OR CAUSE THE OFFICERS AND DIRECTORS OF THE
ISSUERS TO EXECUTE AND DELIVER, TO ANY PERSON, ENTITY OR GOVERNMENTAL AUTHORITY
AS SECURED PARTY MAY CHOOSE, ANY AND ALL DOCUMENTS AND WRITINGS WHICH, IN
SECURED PARTY’S REASONABLE JUDGMENT, MAY BE NECESSARY OR APPROPRIATE FOR
APPROVAL, OR BE REQUIRED BY, ANY REGULATORY AUTHORITY LOCATED IN ANY CITY,
COUNTY, STATE, OR COUNTRY WHERE SUCH PLEDGOR OR THE ISSUERS

 

11

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ENGAGE IN BUSINESS, IN ORDER TO TRANSFER OR TO MORE EFFECTIVELY TRANSFER THE
PLEDGED INTERESTS OR OTHERWISE ENFORCE SECURED PARTY’S RIGHTS HEREUNDER; AND

 

(V)           DO OR CAUSE TO BE DONE ALL SUCH OTHER ACTS AND THINGS AS MAY BE
NECESSARY TO MAKE SUCH SALE OF THE PLEDGED COLLATERAL OR ANY PART THEREOF VALID
AND BINDING AND IN COMPLIANCE WITH APPLICABLE LAW.

 

Each Pledgor acknowledges that there is no adequate remedy at law for failure by
it to comply with the provisions of this Section and that such failure would not
be adequately compensable in damages, and therefore agrees that its agreements
contained in this Section may be specifically enforced.

 

(E)   EACH PLEDGOR EXPRESSLY WAIVES TO THE MAXIMUM EXTENT PERMITTED BY LAW: (I)
ANY CONSTITUTIONAL OR OTHER RIGHT TO A JUDICIAL HEARING PRIOR TO THE TIME
SECURED PARTY DISPOSES OF ALL OR ANY PART OF THE COLLATERAL AS PROVIDED IN THIS
SECTION; (II) ALL RIGHTS OF REDEMPTION, STAY, OR APPRAISAL THAT IT NOW HAS OR
MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR STATUTE NOW EXISTING
OR HEREAFTER ENACTED; AND (III) EXCEPT AS SET FORTH IN SUBSECTION (A) OF THIS
SECTION, ANY REQUIREMENT OF NOTICE, DEMAND, OR ADVERTISEMENT FOR SALE.

 

10.  Application of Proceeds.  Upon the occurrence and during the continuance of
an Event of Default, any cash held by Secured Party as Pledged Collateral and
all cash proceeds received by Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral pursuant to the exercise by Secured Party of its remedies as a
secured creditor as provided in Section 9 shall be applied from time to time by
Secured Party as provided in the Financing Agreement.

 

11.  Duties of Secured Party.  The powers conferred on Secured Party hereunder
are solely to protect its interests in the Pledged Collateral and shall not
impose on it any duty to exercise such powers.  Except as provided in the Code,
Secured Party shall have no duty with respect to the Pledged Collateral or any
responsibility for taking any necessary steps to preserve rights against any
Persons with respect to any Pledged Collateral.

 

12.  Amendments; Etc.  No amendment or waiver of any provision of this Stock
Pledge Agreement nor consent to any departure by any Pledgor herefrom shall in
any event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.  No failure on the part
of Secured Party to exercise, and no delay in exercising any right under this
Stock Pledge Agreement, any other Loan Document, or otherwise with respect to
any of the Secured Obligations, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under this Stock Pledge Agreement, any
other Loan Document, or otherwise with respect to any of the Secured Obligations
preclude

 

12

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any other or further exercise thereof or the exercise of any other right.  The
remedies provided for in this Stock Pledge Agreement or otherwise with respect
to any of the Secured Obligations are cumulative and not exclusive of any
remedies provided by law.

 

13.  Notices.  Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and shall be delivered in the manner set forth in the Financing Agreement.

 

14.  Continuing Security Interest.  This Stock Pledge Agreement shall create a
continuing security interest in the Pledged Collateral and shall: (i) remain in
full force and effect until the payment in full in cash of the Secured
Obligations, including the cash collateralization, expiration, or cancellation
of all Secured Obligations, if any, consisting of letters of credit, and the
full and final termination of any commitment to extend any financial
accommodations under the Financing Agreement; (ii) be binding upon each Pledgor
and its successors and assigns; and (iii) inure to the benefit of Secured Party
and its successors, transferees, and assigns.  Upon the payment in full in cash
of the Secured Obligations, including the cash collateralization, expiration, or
cancellation of all Secured Obligations, if any, consisting of letters of
credit, and the full and final termination of any commitment to extend any
financial accommodations under the Financing Agreement, the security interests
granted herein shall automatically terminate and all rights to the Pledged
Collateral shall revert to Pledgor.  Upon any such termination, Secured Party
will, at the Pledgors’ expense, execute and deliver to the applicable Pledgor
such documents as Pledgor shall reasonably request to evidence such termination
and will duly assign, transfer and deliver to such Pledgor such of the Pledged
Collateral as has not theretofore been sold or otherwise applied or released
pursuant to this Stock Pledge Agreement.  Such documents shall be prepared by
the Pledgors and shall be in form and substance reasonably satisfactory to
Secured Party.

 

15.  Security Interest Absolute.  To the maximum extent permitted by law, all
rights of Secured Party, all security interests hereunder, and all obligations
of the Pledgors hereunder, shall be absolute and unconditional irrespective of:

 

(A)   ANY LACK OF VALIDITY OR ENFORCEABILITY OF ANY OF THE SECURED OBLIGATIONS
OR ANY OTHER AGREEMENT OR INSTRUMENT RELATING THERETO, INCLUDING ANY OF THE LOAN
DOCUMENTS;

 

(B)   ANY CHANGE IN THE TIME, MANNER, OR PLACE OF PAYMENT OF, OR IN ANY OTHER
TERM OF, ALL OR ANY OF THE SECURED OBLIGATIONS, OR ANY OTHER AMENDMENT OR WAIVER
OF OR ANY CONSENT TO ANY DEPARTURE FROM ANY OF THE LOAN DOCUMENTS, OR ANY OTHER
AGREEMENT OR INSTRUMENT RELATING THERETO;

 

(C)   ANY EXCHANGE, RELEASE, OR NON-PERFECTION OF ANY OTHER COLLATERAL, OR ANY
RELEASE OR AMENDMENT OR WAIVER OF OR CONSENT TO DEPARTURE FROM ANY GUARANTY FOR
ALL OR ANY OF THE SECURED OBLIGATIONS; OR

 

13

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(D)   ANY OTHER CIRCUMSTANCES THAT MIGHT OTHERWISE CONSTITUTE A DEFENSE
AVAILABLE TO, OR A DISCHARGE OF, A PLEDGOR.

 

To the maximum extent permitted by law, each Pledgor hereby waives any right to
require Secured Party to: (A) proceed against or exhaust any security held from
such Pledgor; or (B) pursue any other remedy in Secured Party’s power
whatsoever.

 

16.  Headings.  Section and subsection headings in this Stock Pledge Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Stock Pledge Agreement or be given any substantive effect.

 

17.  Severability.  In case any provision in or obligation under this Stock
Pledge Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.

 

18.  Counterparts; Telefacsimile Execution.  This Stock Pledge Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same Stock Pledge
Agreement.  Delivery of an executed counterpart of this Stock Pledge Agreement
by telefacsimile shall be equally as effective as delivery of an original
executed counterpart of this Stock Pledge Agreement.  Any party delivering an
executed counterpart of this Stock Pledge Agreement by telefacsimile also shall
deliver an original executed counterpart of this Stock Pledge Agreement but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability, or binding effect hereof.

 

19.  Waiver of Marshaling.  Each of Pledgor and Secured Party acknowledges and
agrees that in exercising any rights under or with respect to the Pledged
Collateral: (i) Secured Party is under no obligation to marshal any Pledged
Collateral; (ii) may, in its absolute discretion, realize upon the Pledged
Collateral in any order and in any manner it so elects; and (iii) may, in its
absolute discretion, apply the proceeds of any or all of the Pledged Collateral
to the Secured Obligations in any order and in any manner it so elects.  Each
Pledgor and Secured Party waive any right to require the marshaling of any of
the Pledged Collateral.

 

20.  CHOICE OF LAW.

 

THE VALIDITY OF THIS STOCK PLEDGE AGREEMENT, ITS CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

[Signature page to follow.]

 

14

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IN WITNESS WHEREOF, each Pledgor and Secured Party have caused this Stock Pledge
Agreement to be duly executed and delivered by their officers thereunto duly
authorized as of the date first written above.

 

 

ELGAR ELECTRONICS CORPORATION,

 

a California corporation

 

 

 

 

 

By:

/s/ Joseph A. Stroud

 

 

Name:  Joseph A. Stroud

 

Title:    Chief Financial Officer

 

 

 

ELGAR HOLDINGS, INC.,

 

a Delaware corporation 

 

 

 

 

 

By:

/s/ Joseph A. Stroud

 

 

Name:  Joseph A. Stroud

 

Title:    Chief Financial Officer

 

S-1

--------------------------------------------------------------------------------

 

 

ABLECO FINANCE LLC,

 

a Delaware limited liability company, as Secured Party

 

 

 

 

 

 

 

By:

/s/ Kevin Genda

 

 

Name:

Kevin Genda

 

Title:

Senior Vice President

 

S-2

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SCHEDULE A

 

TO

STOCK PLEDGE AGREEMENT

 

Pledgor:  ELGAR HOLDINGS, INC.

 

Pledged Interests

 

Issuer

 

Number of
Shares

 

Class

 

Certificate
Number(s)

 

Pledgor’s
Percentage
Ownership

 

Jurisdiction of
Formation of
Issuer

 

Elgar Electronics Corporation

 

200

 

Common

 

5

 

100

%

California

 

 

Pledgor:  ELGAR ELECTRONICS CORPORATION

 

Pledged Interests

 

Issuer

 

Number of
Shares

 

Class

 

Certificate
Number(s)

 

Pledgor’s
Percentage

Ownership

 

Jurisdiction of
Formation

 

NONE.

 

 

 

 

 

 

 

 

 

 

 

 

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