Exhibit 99.14
PLEDGE AND ESCROW AGREEMENT
THIS PLEDGE AND ESCROW AGREEMENT (the "Agreement") is made and entered
into as of July 25, 2005 (the "Effective Date") by and among CORNELL CAPITAL
PARTNERS, LP and HIGHGATE HOUSE FUNDS, LTD. (collectively, the "Pledgees"),
AEROTELESIS, INC., a corporation organized and existing under the laws of the
State of Delaware (the "Pledgor"), and DAVID GONZALEZ, ESQ., as escrow agent
("Escrow Agent").
RECITALS:
WHEREAS, in order to secure the full and prompt payment when due (whether
at the stated maturity, by acceleration or otherwise) of all of the Company's
obligations (the "Obligations") to the Pledgees or any successor to the Pledgees
under this Agreement, the Securities Purchase Agreement of even date herewith
between the Pledgor and the Pledgees (the "Securities Purchase Agreement"), the
Convertible Debentures (the "Convertible Debentures") issued or to be issued by
the Company to the Pledgees, either now or in the future, up to a total of Three
Million Dollars ($3,000,000) of principal, plus any interest, costs, fees, and
other amounts owed to the Pledgees thereunder, the Security Agreement of even
date herewith between the Pledgor and the Pledgees (the "Security Agreement"),
and all other contracts entered into between the parties hereto (collectively,
the "Transaction Documents"), the Pledgor has agreed to irrevocably pledge to
the Pledgees six million seven hundred thirteen thousand two hundred twelve
(6,713,212) shares of the Pledgor's Common Stock on the date hereof and on the
Second Closing (as this term is defined in the Securities Purchase Agreement
dated the date hereof) shares of the Company's Common Stock in an amount equal
to One Million Five Hundred Thousand Dollars ($1,500,000) divided by the
Conversion Price of the convertible debenture issued for the Second Closing
multiplied by five (5) (the "Pledged Shares").
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
warranties, and representations herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
TERMS AND CONDITIONS
1. Pledge and Transfer of Pledged Shares.
1.1. The Pledgor hereby grants to Pledgees a security interest in
all Pledged Shares as security for Pledgor's obligations under the Convertible
Debentures. Simultaneously with the execution of the Transaction Documents, the
Pledgor shall deliver to the Escrow Agent stock certificates representing the
Pledged Shares, together with duly executed stock powers or other appropriate
transfer documents executed in blank by the Pledgor (the "Transfer Documents"),
and such stock certificates and Transfer Documents shall be held by the Escrow
Agent until the full payment of all amounts due to the Pledgees under the
Convertible Debentures and through repayment in accordance with the terms of the
Convertible Debentures, or the termination or expiration of this Agreement.
2. Rights Relating to Pledged Shares. Upon the occurrence of an Event of
Default (as defined herein), the Pledgees shall be entitled to vote the Pledged
Shares, to receive dividends and other distributions thereon, and to enjoy all
other rights and privileges incident to the ownership of the Pledged Shares.
3. Release of Pledged Shares from Pledge. Upon the payment of all amounts
due to the Pledgees under the Convertible Debentures by repayment in accordance
with the terms of the Note, the parties hereto shall notify the Escrow Agent to
such effect in writing. Upon receipt of such written notice for payment of the
amounts due to the Pledgees under the Convertible Debentures, the Escrow Agent
shall return to the Pledgor the Transfer Documents and the certificates
representing the Pledged Shares, (collectively the "Pledged Materials"),
whereupon any and all rights of Pledgees in the Pledged Materials shall be
terminated. Notwithstanding anything to the contrary contained herein, upon full
payment of all amounts due to the Pledgees under the Convertible Debentures, by
repayment in accordance with the terms of the Note, this Agreement and
Pledgees's security interest and rights in and to the Pledged Shares shall
terminate.
4. Event of Default. An "Event of Default" shall be deemed to have
occurred under this Agreement upon an Event of Default under the Transaction
Documents.
5. Remedies. Upon and anytime after the occurrence of an Event of Default,
the Pledgees shall have the right to provide written notice of such Event of
Default (the "Default Notice") to the Escrow Agent, with a copy to the Pledgor.
As soon as practicable after receipt of the Default Notice, the Escrow Agent
shall deliver to Pledgees the Pledged Materials held by the Escrow Agent
hereunder. Upon receipt of the Pledged Materials, the Pledgees shall have the
right to (i) sell the Pledged Shares and to apply the proceeds of such sales,
net of any selling commissions, to the Obligations owed to the Pledgees by the
Pledgor under the Transaction Documents, including, without limitation,
outstanding principal, interest, legal fees, and any other amounts owed to the
Pledgees, and exercise all other rights and (ii) any and all remedies of a
secured party with respect to such property as may be available under the
Uniform Commercial Code as in effect in the State of New Jersey. To the extent
that the net proceeds received by the Pledgees are insufficient to satisfy the
Obligations in full, the Pledgees shall be entitled to a deficiency judgment
against the Pledgor for such amount. The Pledgees shall have the absolute right
to sell or dispose of the Pledged Shares in any manner it sees fit and shall
have no liability to the Pledgor or any other party for selling or disposing of
such Pledged Shares even if other methods of sales or dispositions would or
allegedly would result in greater proceeds than the method actually used. The
Escrow Agent shall have the absolute right to disburse the Pledged Shares to the
Pledgees in batches not to exceed 9.9% of the outstanding capital of the Pledgor
(which limit may be waived by the Pledgees providing not less than 65 days'
prior written notice to the Escrow Agent).
5.1. Each right, power and remedy of the Pledgees provided for in
this Agreement or any other Transaction Document 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 Pledgees 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
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statute or otherwise shall not preclude the simultaneous or later exercise by
the Pledgees of all such other rights, powers or remedies, and no failure or
delay on the part of the Pledgees to exercise any such right, power or remedy
shall operate as a waiver thereof. 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 Pledgees
to any other further action in any circumstances without demand or notice. The
Pledgees shall have the full power to enforce or to assign or contract is rights
under this Agreement to a third party.
5.2. Demand Registration Rights. In addition to all other remedies
available to the Pledgees, upon an Event of Default, the Pledgor shall promptly,
but in no event more than thirty (30) days after the date of the Default Notice,
file a registration statement to register with the Securities and Exchange
Commission the Pledged Shares for the resale by the Pledgees. The Pledgor shall
cause the registration statement to remain in effect until all of the Pledged
Shares have been sold by the Pledgees.
6. Concerning the Escrow Agent.
6.1. The Escrow Agent undertakes to perform only such duties as are
expressly set forth herein and no implied duties or obligations shall be read
into this Agreement against the Escrow Agent.
6.2. The Escrow Agent may act in reliance upon any writing or
instrument or signature which it, in good faith, believes to be genuine, may
assume the validity and accuracy of any statement or assertion contained in such
a writing or instrument, and may assume that any person purporting to give any
writing, notice, advice or instructions in connection with the provisions hereof
has been duly authorized to do so. The Escrow Agent shall not be liable in any
manner for the sufficiency or correctness as to form, manner, and execution, or
validity of any instrument deposited in this escrow, nor as to the identity,
authority, or right of any person executing the same; and its duties hereunder
shall be limited to the safekeeping of such certificates, monies, instruments,
or other document received by it as such escrow holder, and for the disposition
of the same in accordance with the written instruments accepted by it in the
escrow.
6.3. Pledgees and the Pledgor hereby agree, to defend and indemnify
the Escrow Agent and hold it harmless from any and all claims, liabilities,
losses, actions, suits, or proceedings at law or in equity, or any other
expenses, fees, or charges of any character or nature which it may incur or with
which it may be threatened by reason of its acting as Escrow Agent under this
Agreement; and in connection therewith, to indemnify the Escrow Agent against
any and all expenses, including attorneys' fees and costs of defending any
action, suit, or proceeding or resisting any claim (and any costs incurred by
the Escrow Agent pursuant to Sections 6.4 or 6.5 hereof). The Escrow Agent shall
be vested with a lien on all property deposited hereunder, for indemnification
of attorneys' fees and court costs regarding any suit, proceeding or otherwise,
or any other expenses, fees, or charges of any character or nature, which may be
incurred by the Escrow Agent by reason of disputes arising between the makers of
this escrow as to the correct interpretation of this Agreement and instructions
given to the Escrow Agent hereunder, or otherwise, with the right of the Escrow
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Agent, regardless of the instructions aforesaid, to hold said property until and
unless said additional expenses, fees, and charges shall be fully paid. Any fees
and costs charged by the Escrow Agent for serving hereunder shall be paid by the
Pledgor.
6.4. If any of the parties shall be in disagreement about the
interpretation of this Agreement, or about the rights and obligations, or the
propriety of any action contemplated by the Escrow Agent hereunder, the Escrow
Agent may, at its sole discretion deposit the Pledged Materials with the Clerk
of the United States District Court of New Jersey, sitting in Newark, New
Jersey, and, upon notifying all parties concerned of such action, all liability
on the part of the Escrow Agent shall fully cease and terminate. The Escrow
Agent shall be indemnified by the Pledgor, the Company and Pledgees for all
costs, including reasonable attorneys' fees in connection with the aforesaid
proceeding, and shall be fully protected in suspending all or a part of its
activities under this Agreement until a final decision or other settlement in
the proceeding is received.
6.5. The Escrow Agent may consult with counsel of its own choice
(and the costs of such counsel shall be paid by the Pledgor and Pledgees) and
shall have full and complete authorization and protection for any action taken
or suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. The Escrow Agent shall not be liable for any mistakes of fact or
error of judgment, or for any actions or omissions of any kind, unless caused by
its willful misconduct or gross negligence.
6.6. The Escrow Agent may resign upon ten (10) days' written notice
to the parties in this Agreement. If a successor Escrow Agent is not appointed
within this ten (10) day period, the Escrow Agent may petition a court of
competent jurisdiction to name a successor.
6.7 Conflict Waiver. The Pledgor hereby acknowledges that the Escrow
Agent is general counsel to the Pledgees, a partner in the general partner of
the Pledgees, and counsel to the Pledgees in connection with the transactions
contemplated and referred herein. The Pledgor agrees that in the event of any
dispute arising in connection with this Agreement or otherwise in connection
with any transaction or agreement contemplated and referred herein, the Escrow
Agent shall be permitted to continue to represent the Pledgees and the Pledgor
will not seek to disqualify such counsel and waives any objection Pledgor might
have with respect to the Escrow Agent acting as the Escrow Agent pursuant to
this Agreement.
6.8 Notices. Unless otherwise provided herein, all demands, notices,
consents, service of process, requests and other communications hereunder shall
be in writing and shall be delivered in person or by overnight courier service,
or mailed by certified mail, return receipt requested, addressed:
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If to the Pledgor, to: AeroTelesis, Inc.
1554 S. Sepulveda Blvd. - Suite 118
Los Angeles, CA 90025
Attention: Joseph Gutierrez
Telephone: (310) 235-1727
Facsimile: (310) 231-9800
With a copy to: Kirkpatrick & Lockhart Nicholson Graham LLP
201 South Biscayne Boulevard - Suite 2000
Miami, FL 33131-2399
Attention: Clayton E. Parker, Esq.
Telephone: (305) 539-3300
Facsimile: (305) 358-7095
If to the Cornell: Cornell Capital Partners, LP
101 Hudson Street, Suite 3700
Jersey City, NJ 07302
Attention: Mark A. Angelo
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
With copy to: David Gonzalez, Esq.
101 Hudson Street, Suite 3700
Jersey City, NJ 07302
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
If to the Highgate: Highgate House Funds, Ltd.
488 Madison Ave. - 12th Floor
New York, NY 10022
Attention: Adam Gottbetter
Telephone: (212) 400-6900
Facsimile: (212) 400-6901
With copy to: David Gonzalez, Esq.
101 Hudson Street, Suite 3700
Jersey City, NJ 07302
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
Any such notice shall be effective (a) when delivered, if delivered by hand
delivery or overnight courier service, or (b) five (5) days after deposit in the
United States mail, as applicable.
7. Binding Effect. All of the covenants and obligations contained herein
shall be binding upon and shall inure to the benefit of the respective parties,
their successors and assigns.
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8. Governing Law; Venue; Service of Process. The validity, interpretation
and performance of this Agreement shall be determined in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
wholly within that state except to the extent that Federal law applies. The
parties hereto agree that any disputes, claims, disagreements, lawsuits, actions
or controversies of any type or nature whatsoever that, directly or indirectly,
arise from or relate to this Agreement, including, without limitation, claims
relating to the inducement, construction, performance or termination of this
Agreement, shall be brought in the state superior courts located in Hudson
County, New Jersey or Federal district courts located in Newark, New Jersey, and
the parties hereto agree not to challenge the selection of that venue in any
such proceeding for any reason, including, without limitation, on the grounds
that such venue is an inconvenient forum. The parties hereto specifically agree
that service of process may be made, and such service of process shall be
effective if made, pursuant to Section 8 hereto.
9. Enforcement Costs. If any legal action or other proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any provisions of this
Agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees, court costs and all expenses even if not
taxable as court costs (including, without limitation, all such fees, costs and
expenses incident to appeals), incurred in that action or proceeding, in
addition to any other relief to which such party or parties may be entitled.
10. Remedies Cumulative. No remedy herein conferred upon any party is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law, in equity, by statute, or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same instrument.
12. No Penalties. No provision of this Agreement is to be interpreted as a
penalty upon any party to this Agreement.
13. JURY TRIAL. EACH OF THE PLEDGEES AND THE PLEDGOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT WHICH IT MAY HAVE TO A TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED HEREON, OR ARISING
OUT OF, UNDER OR IN ANY WAY CONNECTED WITH THE DEALINGS BETWEEN PLEDGEES AND
PLEDGOR, THIS PLEDGE AND ESCROW AGREEMENT OR ANY DOCUMENT EXECUTED IN CONNECTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR THERETO IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Pledge and
Escrow Agreement as of the date first above written.
AEROTELESIS, INC.
By:______________________________
Name: Joseph Gutierrez
Title: President
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By:______________________________
Name: Mark Angelo
Title: Portfolio Manager
HIGHGATE HOUSE FUNDS, LTD.
By: Yorkville Advisors, LLC
Its: General Partner
By:______________________________
Name: Adam Gottbetter
Title: Co-Portfolio Manager
By: ______________________________
Name: David Gonzalez
FOR VALUE RECEIVED, the Pledgor hereby unconditionally and absolutely guarantees
the Obligations (as defined above). This Agreement is made with recourse.
By: ______________________________
Name:_____________________________
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