Document:

cwet_8k-ex0402.htm

 EXHIBIT 4.2

   

NEITHER THIS NOTE NOR ANY SHARES OF STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. NEITHER THIS NOTE NOR ANY SHARES OF STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THIS NOTE OR SHARES OF STOCK ISSUABLE UPON CONVERSION OF THIS NOTE UNDER SUCH ACT UNLESS SUCH REGISTRATION IS NOT REQUIRED PURSUANT TO A VALID EXEMPTION THEREFROM UNDER THE ACT.

 

THE ISSUE PRICE OF THIS NOTE IS $335,000.00 (THE "ISSUE PRICE").  THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS NOTE IS $33,500.00 (the "OID AMOUNT").  THE ISSUE DATE OF THIS NOTE IS FEBRUARY 29, 2012.

 

CLEAN WIND ENERGY TOWER, INC.

 

Original Issue Discount Secured Convertible Promissory Note

 

	$335,000.00	 
February 29, 2012

    

FOR VALUE RECEIVED, the undersigned Clean Wind Energy Tower, Inc., a Nevada corporation (the "Borrower"), promises to pay to the order of Hanover Holdings I, LLC, its successors or assigns (the "Lender"), the principal sum of Three Hundred Thirty Five Thousand and 00/100 Dollars ($335,000.00) (the "Face Amount") by June 23, 2012 (the "Maturity Date") in accordance with the terms hereof, together with interest, as provided on Exhibit “A” hereto.

 

Interest and any other amounts due hereunder are payable in lawful money of the United States of America to the Lender at 5 Hanover Square, New York, New York 10004. This Note is secured by that certain Pledge and Security Agreement by and between Borrower and Lender.

 

Section 1.   Maturity.  Subject to the prepayment provisions contained herein, the Face Amount, along with the interest accrued thereon, shall be repaid in the form of cash in accordance with the Amortization Schedule attached hereto as Exhibit “A” (the “Amortization Table”).

 

Section 2.   Prepayment.  At Borrower’s sole option and discretion and upon the delivery to Lender of at least three (3) prior trading days’ written notice, Borrower may repay, in cash, the aggregate principal balance of this Note outstanding as of the date of prepayment, plus any interest that remains outstanding in connection with payments that were due hereunder prior to the date of prepayment, without any penalty or premium.  Such prepayment shall satisfy Borrower’s obligations pursuant to this Note in full and this Note shall be of no further force and effect.

 

Section 3.   No Fractional Shares.  Upon a conversion hereunder, Borrower shall not be required to issue stock certificates representing fractions of shares of Common Stock, and in lieu of any fractional shares which would otherwise be issuable, Borrower shall issue the next highest whole number of shares of Common Stock, as the case may be.

    

  

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Section 4.   Transferability.  This Note and any of the rights granted hereunder are freely transferable by Lender, in its sole discretion, subject to federal and state securities law restrictions, if any.

 

Section 5.   Event of Default.  (a)  In the event that any one of the following events shall occur (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body), it shall be deemed an Event of Default:

 

(i)   Any default in the payment of the principal of, interest on or other charges in respect of this Note, as and when the same shall become due and payable;

 

(ii)   The volume-weighted average price of the Borrower’s stock shall fall below $0.08 for any given trading day after execution of this Note.

 

(iii)   Borrower shall fail to observe or perform any other material covenant, agreement or warranty contained in, or otherwise commit any breach or default of any provision of this Note or the Transaction Documents;

 

(iv)   There shall be a breach of any of the representations and warranties set forth in the Transaction Documents; or

 

(v)   Borrower, shall commence, or there shall be commenced against Borrower any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or Borrower commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to Borrower or there is commenced against Borrower any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of sixty (60) days; or Borrower is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or Borrower suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty (60) days; or Borrower makes a general assignment for the benefit of creditors; or Borrower shall fail to pay or shall state that it is unable to pay or shall be liable to pay, its debts as they become due or by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Borrower for the purpose of effecting any of the foregoing.

 

(b)   Except for the occurrence of an Event of Default described in Section 6(a)(iv) hereof which shall cause an automatic acceleration of all amounts due hereunder, upon the occurrence of an Event of Default: i) Lender may declare the entire then outstanding Face Amount of this Note together with any unpaid interest immediately due and payable or any other payment due hereunder, and ii) the Borrower shall be liable to pay 125 percent times the sum of (x) the outstanding Face Amount plus (y) accrued but unpaid interest.

   

  

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(c)   At Lender’s sole discretion, at any time from the occurrence of an Event of Default, Lender may convert the principal balance of this Note then outstanding and any interest accrued thereon, in whole or in part, into restricted shares of Common Stock (the “Conversion Shares”), at a conversion price equal to forty five percent (45%) of the lowest trading price for the Common Stock at any time during the prior ten (10) trading days immediately preceding the date of the Notice of Conversion (the “Conversion Price”).

 

(d)   Lender may convert this Note at the then applicable Conversion Price by the surrender of this Note (properly endorsed) to Borrower at the principal office of the Borrower, together with the form of Notice of Conversion attached hereto as Exhibit “B” (a "Notice of Conversion") duly completed, dated and executed, specifying therein the principal balance and/or interest to be converted

 

(e)   As soon as practicable, but not in excess of five (5) business days, after the valid conversion of any portion of this Note, Borrower will cause to be issued in the name of and delivered to the Lender (and/or such other person(s) identified in the Notice of Conversion with respect to such conversion), certificates evidencing the number of duly authorized, validly issued, fully paid and non-assessable Conversion Shares to which the Lender (and/or such other person(s) identified in such Notice of Conversion) shall be entitled to receive upon the conversion.

 

(f)   If less than the entire Face Amount of this Note and all interest accrued thereon is being converted, Borrower shall execute and deliver to Lender a new replacement Note (dated as of the date hereof) evidencing a face amount which is the then outstanding amount, plus any unpaid interest thereon, that has not been so converted.

 

(g)   The failure of Lender to exercise any of its rights hereunder in any particular instance shall not constitute a waiver of the same or of any other right in that or any subsequent instance with respect to Lender or any subsequent holder.  Lender need not provide and Borrower hereby waives any presentment, demand, protest or other notice of any kind, and Lender may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.  The remedies available to the Lender upon the occurrence of an Event of Default shall be cumulative.

 

Section 6.   Intentionally left blank.

 

Section 7.   Notices.  Any and all notices or other communications or deliveries required or permitted to be given or made pursuant to any of the provisions of this note shall be deemed to have been duly given or made for all purposes when hand delivered or sent by certified or registered mail, return receipt requested and postage prepaid, overnight mail or courier as follows:

   

  

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If to Lender, at:

 

5 Hanover Square

New York, New York 10004

 

With a copy to:

 

Gersten Savage LLP

600 Lexington Ave., 9th Floor

New York, NY 10022

Attention:  David E. Danovitch, Esq.

 

If to Borrower, at:

1997 Annapolis Exchange Pkwy., Suite 300

Annapolis, Maryland 21401

With a copy to:

Fleming PLLC

49 Front Street, Suite 206

Rockville Centre, New York  11570

Attention: Stephen M. Fleming, Esq.

Section 8.   Usury.  This Note is hereby expressly limited so that in no event whatsoever, whether by reason of acceleration of maturity of the loan evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the Lender hereunder for the loan, use, forbearance or detention of money exceed that permissible under applicable law. If at any time the performance of any provision of this Note or of any other agreement or instrument entered into in connection with this Note involves a payment exceeding the limit of the interest that may be validly charged for the loan, use, forbearance or detention of money under applicable law, then automatically and retroactively, ipso facto, the obligation to be performed shall be reduced to such limit, it being the specific intent of the Borrower and the Lender that all payments under this Note are to be credited first to interest as permitted by law, but not in excess of (i) the agreed rate of interest set forth herein or therein or (ii) that permitted by law, whichever is the lesser, and the balance toward the reduction of principal. The provision of this Section 9 shall never be superseded or waived and shall control every other provision of this Note and all other agreements and instruments between the Borrower and the Lender entered into in connection with this Note. To the extent permitted by applicable law, Borrower waives any right to assert the defense of usury.

Section 9.   Governing Law; Waiver of Jury Trial.  This Note and the provisions hereof are to be construed according to and are governed by the laws of the State of New York, without regard to principles of conflicts of laws thereof.  Borrower agrees that the New York State Supreme Court located in the County of New York, State of New York shall have exclusive jurisdiction in connection with any dispute concerning or arising out of this Note or otherwise relating to the parties relationship.  In any action, lawsuit or proceeding brought to enforce or interpret the provisions of this Note and/or arising out of or relating to any dispute between the parties, Lender shall be entitled to recover all of its costs and expenses relating collection and enforcement of this Note (including without limitation, reasonable attorney’s fees and disbursements) in addition to any other relief to which Lender may be entitled.

  

  

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BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS NOTE.

 

Section 10.   Successors and Assigns.  Subject to applicable securities laws, this Note and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of Borrower and the successors and assigns of Lender.  Nothing shall prevent the assignment of this Note by the Lender.

 

Section 11.   Amendment.  This Note may be modified or amended or the provisions hereof waived only with the written consent of Lender and Borrower.

 

Section 12.   Severability.  Wherever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Note.

 

[Remainder of Page Intentionally Left Blank]

 

   

  

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IN WITNESS WHEREOF, Borrower has caused this Original Issue Discount Secured Convertible Promissory Note to be duly executed by a duly authorized officer as of the date first above indicated.

 

	  	
CLEAN WIND ENERGY TOWER, INC.

 

By: /s/ Ronald W. Pickett

Name: Ronald W. Pickett

Title: CEO, President and Chairman

 

   

  

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EXHIBIT A

 

AMORTIZATION SCHEDULE

 

	
Payment Date

	
Principal Due

	
Interest Due

	
Total Due

	 	 	 	 
	
30 days from the date hereof

	
$35,000

	
$12,562.50

	
$47,562.50

	 	 	 	 
	
60 days from the date hereof

	
$50,000

	
$12,562.50

	
$62,562.50

	 	 	 	 
	
90 days from the date hereof

	
$100,000

	
$12,562.50

	
$112,562.50

	 	 	 	 
	
120 days from the date hereof

	
$150,000

	
$12,562.50

	
$162,562.50

   

Notwithstanding any other provision of this Schedule or the Note to which this Schedule forms an integral part, the guaranteed Interest due on this Note shall be no less than 15%.

 

 

 

  

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EXHIBIT B

 

NOTICE OF CONVERSION

To Be Executed by Lender

in Order to Convert Promissory Note

 

The undersigned Lender hereby elects to convert $__________ principal and $_____ interest currently outstanding and owed under the Original Issue Discount Secured Convertible Promissory Note issued to Hanover Holdings I, LLC at a Conversion Price of $___ (equal to Forty Five Percent (45%) of the lowest closing price for the Common Stock during the ___ (___) trading days immediately preceding the date of this Notice of Conversion) and to purchase ___________ shares of Common Stock issuable upon conversion of such Note, and requests that certificates for such securities shall be issued in the name of:

 

______________________________________________

(please print or type name and address)

 

______________________________________________

(please insert social security or other identifying number)

and be delivered as follows:

 

______________________________________________

(please print or type name and address)

 

______________________________________________

(please insert social security or other identifying number)

 

 

Lender Name: ____________________________________

 

By: ____________________________________________

Name:

Title:

 

Conversion Date: _________________________________                                          

 

 

 

Page 8 of 8cwet_8k-ex0403.htm

 EXHIBIT 4.3

     

PLEDGE AND SECURITY AGREEMENT

 

THIS PLEDGE AND SECURITY AGREEMENT, dated as of February 29, 2012 (this “Agreement”), made by and between Clean Wind Energy Tower, Inc. a Nevada Corporation (the “Company”), and Mr. A. Hugo Decesaris, (the “Pledgor”), in favor of Hanover Holdings I, LLC, a New York limited liability company (the “Pledgee”). Except as otherwise defined herein, terms used herein and defined in the Note Purchase Agreement shall be used herein as therein defined.

 

W I T N E S S E T H:

 

WHEREAS, the Company and the Pledgee have entered into the Note Purchase Agreement, dated as of February [__], 2012 (the “Note Purchase Agreement”), pursuant to which the Pledgee has purchased the Note;

WHEREAS, it is a condition precedent to the entering into the Note Purchase Agreement that the Pledgor shall have executed and delivered to the Pledgee this Agreement;

WHEREAS, the Pledgor desires to execute this Agreement to satisfy the conditions described in the preceding paragraph;

NOW, THEREFORE, in consideration of the benefits accruing to the Company and Pledgor, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby makes the following representations and warranties to the Pledgee and hereby covenants and agrees with the Pledgee as follows:

1.   Security for Obligations. This Agreement is made by the Pledgor for the benefit of the Pledgee to secure:

(a)   the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all the obligations and liabilities of the Company, now existing or hereafter incurred under this Agreement, the Note Purchase Agreement and the Note (collectively, the “Transaction Documents”) to which the Company is a party, and the due performance of and compliance by the Company with the terms of the Transaction Documents (all such obligations and liabilities under this clause (a) being herein collectively called the “Transaction Document Obligations”); and

(b)    in the event of any proceeding for the collection of the Transaction Document Obligations or the enforcement of this Agreement, after an Event of Default (such term, as used in this Agreement, shall mean any Event of Default under the Note Purchase Agreement or the Note after the expiration of any applicable grace period) shall have occurred and be continuing, or of any exercise by the Pledgee of their rights hereunder, together with reasonable attorneys' fees and court costs; all such obligations, liabilities, sums and expenses set forth in clauses (a) and (b) of this Section 1 being herein collectively called the “Obligations.”

 

 2.   Pledged Securities.

 

The Pledgor represents and warrants that on the date hereof (i) the equity securities being pledged to the Pledgee hereunder consist of a total of 10,000,000 shares of the Pledgor as set forth in Schedule A hereto (“Pledged Shares”); (ii) the Pledgor is the holder of record and sole beneficial owner of the Pledged Shares and there exist no options or preemptive rights in respect of any of the Pledged Shares; (iii) the Pledgor is not and has not been an affiliate of the Company as defined in Rule 405 of the regulations promulgated under the Securities Act of 1933, as amended during the ninety (90) day period prior to the execution of this Agreement nor did he acquire the Pledged Shares from an affiliate during the ninety (90) day period prior to the execution of this Agreement.

   

  

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3.   Pledge of Shares.  To secure the prompt and complete payment and performance when due of all of the Obligations and for the purposes set forth in Section 1, the Pledgor hereby: (i) grants to the Pledgee, a continuing security interest of first priority in all the Pledged Shares, wherever located; (ii) pledges and deposits as security with Gersten Savage LLP (the “Escrow Agent”), pursuant to that certain Escrow Agreement dated as of February 29, 2012, for the benefit of the Pledgee, the Pledged Shares on the date hereof, and delivers to the Escrow Agent certificates or instruments therefor; duly endorsed in blank and accompanied by undated stock powers duly executed in blank by the Pledgor or such other instruments of transfer as are acceptable to the Pledgee; and (iii) assigns, transfers, hypothecates, mortgages, charges and sets over to the Escrow Agent, for the benefit of the Pledgee, all of the Pledgor’s right, title and interest in and to such Pledged Shares (and in and to the certificates or instruments evidencing such Pledged Shares), to be held by the Escrow Agent, upon the terms and conditions set forth in this Agreement.

 

4.   Voting while No Event of Default. Unless and until an Event of Default shall have occurred and be continuing, the Pledgor shall be entitled to exercise all voting rights and other consensual rights attaching to any and all Pledged Shares owned by it, and to give consents, waivers or ratification in respect thereof; provided that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate, result in a breach of any covenant contained in this Agreement, the Note Purchase Agreement or the Note, or which would have the effect of materially impairing the value of the Pledged Shares or any part thereof or the position or interests of the Pledgee. All such rights of the Pledgor to vote and to give consents, waivers and ratification shall cease in case an Event of Default shall occur and be continuing and Section 6 hereof shall become applicable.

 

5.   Distributions. Unless and until an Event of Default shall have occurred and be continuing, all amounts payable in respect of the Pledged Shares shall be paid to the Pledgor. All distributions or other payments which are received by the Pledgor contrary to the provisions of this Section 5 or Section 6 shall be received in trust for the benefit of the Pledgee and shall be forthwith paid over to the Pledgee as Collateral in the same form as so received (with any necessary endorsement).

 

6.   Remedies in the Case of an Event of Default.  In case an Event of Default shall have occurred and be continuing and after the running of any applicable grace period, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement or any Transaction Document or by law) for the protection and enforcement of their rights in respect of the Pledged Shares, including, without limitation, all the rights and remedies of a secured party upon default under the Uniform Commercial Code of the State of New York, and the Pledgee, subject to compliance with the applicable provisions of the federal and state securities laws, shall be entitled, without limitation, to exercise any or all of the following rights, which the Pledgor hereby agrees to be commercially reasonable:

 

(i)    to receive all amounts payable in respect of the Pledged Shares otherwise payable under Section 5 to the Pledgor;

   

  

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(ii)    to transfer all or any part of the Pledged Shares into the Pledgees’ names or the name of its nominee or nominees;

 

(iii)    to accelerate any Note which may be accelerated in accordance with its terms, and take any other lawful action to collect upon any Note (including, without limitation, to make any demand for payment thereon);

 

(iv)    to vote all or any part of the Pledged Shares (in each case whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratification in respect of the Pledged Shares and otherwise act with respect thereto as though it were the outright owner thereof (the Pledgor hereby irrevocably constituting and appointing the Pledgee the proxy and attorney-in-fact of the Pledgor, with full power of substitution to do so); and

 

(v)    at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Pledged Shares, or any interest therein, at any public or private sale, without demand of performance or advertisement or to redeem or otherwise (all of which are hereby waived by the Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its reasonable discretion may determine, provided that at least 30 days' notice of the time and place of any such sale shall be given to the Pledgor. The Pledgee shall not be obligated to make such sale of Pledged Shares regardless of whether any such notice of sale has theretofore been given. Each purchaser at any such sale shall hold the property so sold absolutely free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Pledged Shares, whether before or after sale hereunder, and all rights, if any, of marshalling the Pledged Shares and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Pledgee may bid for and purchase all or any part of the Pledged Shares so sold free from any such right or equity of redemption. The Pledgee shall not be liable for failure to collect or realize upon any or all of the Pledged Shares or for any delay in so doing nor shall it be under any obligation to take any action whatsoever with regard thereto.

Notwithstanding any other provision in this Section 6, the Pledgee hereby agrees and acknowledges that in case of an Event of Default, the Pledgee shall have a right of recourse solely against the Pledged Shares and/or the Company and not against the Pledgor.

 

7.   Remedies, etc., Cumulative. Each right, power and remedy of the Pledgee provided for in this Agreement or any other Transaction Document, or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy.  The exercise or beginning of the exercise by the Pledgee of any one or more of the rights, powers or remedies provided for in this Agreement or any other Transaction Document or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee to exercise any such right, power or remedy shall operate as a waiver thereof. Unless otherwise required by the Transaction Documents, no notice to or demand on the Pledgor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Pledgee to any other further action in any circumstances without demand or notice.

   

  

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8.   Application of Proceeds.

(a)    All moneys collected by the Pledgee upon any sale or other disposition of the Pledged Shares pursuant to the terms of this Agreement, together with all other moneys received by the Pledgee hereunder shall be disbursed as follows: (i) first, to cover the costs incurred by the Pledgee in connection with any sale or other disposition of the Pledged Shares, and (ii) second, to satisfy the Obligations, and (iii) third, any excess shall promptly be paid over to the Pledgor in proportion to their pledged amounts.

(b)    It is understood and agreed that the Company shall remain liable to the extent of any deficiency between (i) the amount of the Obligations that are satisfied with proceeds of the Pledged Shares and (ii) the aggregate outstanding amount of such Obligations.

9.   Purchase of Pledged Shares. Upon any sale of the Pledged Shares by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Pledged Shares so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof.

10.   Indemnification.  The Company agrees to indemnify and hold harmless the Pledgee in accordance with Article VI of the Note Purchase Agreement, which provisions are incorporated herein by this reference.

  

11.   Further Assurances; Power of Attorney.

(a)    The Pledgor agrees that they will join with the Pledgee in executing and, at the Company’s expense, file and refile under the Uniform Commercial Code such financing statements, continuation statements and other documents in such offices as the Pledgee may reasonably deem necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee’s security interest in the Pledged Shares hereunder and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Pledged Shares without the signature of the Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or reasonably deem advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee their rights, powers and remedies hereunder or thereunder.

(b)    The Pledgor hereby appoints the Pledgee the Pledgor’s attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, to act from time to time after the occurrence and during the continuance of an Event of Default in the Pledgee’s reasonable discretion to take any action and to execute any instrument which the Pledgee may reasonably deem necessary or advisable to accomplish the purposes of this Agreement.

    

  

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12.   The Escrow Agent. Th Escrow Agent will hold in accordance with this Agreement all items of the Pledged Shares at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Escrow Agent as holder of the Pledged Shares and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement.

13.   Transfer by the Pledgor. The Pledgor will not sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Pledged Shares or any interest therein except in accordance with the terms of this Agreement and the Note Purchase Agreement.

14.   Representations, Warranties, and Covenants of the Pledgor.

(a)    The Pledgor represents, warrants, and covenants that:

	 	
(i) 

	
he is, or at the time when pledged hereunder will be, the legal, beneficial and record owner of, and has (or will have) good and valid title to, all Pledged Shares, subject to no pledge, lien, mortgage, hypothecation, security interest, charge, option or other encumbrance whatsoever;

	 	
(ii) 

	
he has full power, capacity and legal right to pledge all the Pledged Shares pledged by them pursuant to this Agreement;

	 	
(iii) 

	
all of the Pledged Shares have been duly and validly issued, are fully paid and non-assessable and are subject to no options to purchase or similar rights; and

	 	
(iv) 

	
he is not and has not been an affiliate of the Company during the ninety (90) day period prior to the execution of this Agreement nor did they acquire the Pledged Shares from an affiliate during the ninety (90) day period prior to the execution of this Agreement.

(b)    The Pledgor covenants and agrees that he will take all reasonable steps to defend the Pledgee’s right, title and security interest in and to the Pledged Shares and the proceeds thereof against the claims and demands of all persons whomsoever.

(c)    The Pledgor covenants and agrees that he takes no action which would violate or be inconsistent with any of the terms of any Transaction Document, or which would have the effect of materially impairing the position or interests of the Pledgee under any Transaction Document except as permitted by the Note Purchase Agreement or any other Transaction Document.

15.   Representations, Warranties, and Covenants of the Pledgee. The Pledgee has been advised by the Pledgor that the Pledged Shares are not control securities under the Securities Act.

16.   Termination of Security Interests; Release of Pledged Shares.  Upon payment and performance in full of all Obligations, the security interests granted herein shall automatically terminate and all rights to Pledged Shares shall revert to Pledgor.  Upon such termination of the security interests or release of any Pledged Shares, the Escrow Agent will, at the expense of the Company, return to the Pledgor all Pledged Shares then in the Escrow Agent’s possession and execute and deliver to the Pledgor such documents as the Pledgor shall reasonably request to evidence the termination of the security interests of the release of such Pledged Shares which has not yet theretofore been sold or otherwise applied or released.  Such release shall be without recourse or warranty to the Escrow Agent.

    

[Signatures follow on next page]

  

  

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

  

PLEDGOR:

A HUGO DECESARIS

   

/s/ A Hugo Decesaris

 

 

 

CLEAN WIND ENERGY TOWER, INC.

By: /s/Ronald W. Pickett

Name: Ronald W. Pickett

Title: CEO, President and Chairman

ACKNOWLEDGED AND AGREED:

THE ESCROW AGENT:

By: /s/ David Danovitch, Esq., Partner

Name:   Gersten Savage LLP

    

  

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SCHEDULE A

to the

PLEDGE AGREEMENT FOR

CLEAN WIND ENERGY TOWER, INC.

	
Pledgor

	
Stock Certificate Number/s

	
Number and Class of Pledged Shares

	
A HUGO DECESARIS

	
9999

	
10,000,000

 

 

 

 

 

Page 7 of 7

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