CUSTODIAL AND STOCK PLEDGE AGREEMENT
THIS CUSTODIAL AND STOCK PLEDGE AGREEMENT ("Agreement"), dated as of
December 30, 2004, is by and among ADVANCED COMMUNICATIONS TECHNOLOGIES, INC.
(referred to as the "Pledgor"), XXXXXXXX X. XX and HUI XXXXXXX XXX (together,
the "Pledgees") and XXXXXXX & XXXXX XXXXXXX XXXX LLP ("Custodian").
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Background.
Pledgor and Pledgees are parties to that certain Stock Purchase Agreement,
dated December 10, 2004 (the "Purchase Agreement"), pursuant to which Pledgees
agreed to sell to Pledgor, and Pledgor agreed to purchase from Pledgees, all of
the outstanding shares of common stock of Pacific Magtron International Corp.
(the "Company") owned by Pledgees (the "Pledged Shares"). In exchange for the
Pledged Shares, Pledgor issued to Sellers promissory notes in aggregate
principal amount of $500,000 (each a "Note" and together the "Notes"). To secure
the payment obligations of Pledgor under the Notes (the "Obligations"), Pledgor
has agreed to grant to Pledgees a security interest in and to the Pledged
Shares. Pledgor and Pledgees agree that until such time all amounts due and
owing under the Notes are paid in full or until their earlier release in
accordance with the terms hereof, as the case may be, the certificates
representing the Pledged Shares shall be held in escrow by Custodian in
accordance with the terms hereof.
2. Pledge of Pledged Shares.
2.1 As security for the full and prompt payment of the Notes, Pledgor
hereby pledges to Pledgees all of the Pledged Shares and grants to Pledgees a
lien upon and a continuing security interest in the Pledged Shares, subject to
the terms and conditions of this Agreement. Such security interest will be a
first priority lien provided there are no Encumbrances on the Shares on the
Closing Date. Pledgor will execute and file a UCC-1 Financing Statements
respecting the Shares. Upon payment of each Note the applicable Pledgee hereby
authorizes the Pldgor to file a UCC-3 Financing Statement terminating the
applicable UCC-1 Financing Statement.
2.2 If Pledgor shall become entitled to receive or shall receive with
respect to the Pledged Shares (i) any additional shares of capital stock of the
Company; or (ii) any stock certificate, including without limitation, any
certificate representing a stock dividend or in connection with any increase or
reduction of capital, reclassification, merger, consolidation, sale of assets,
combination of shares, stock split or other recapitalization; or (iii) any
option, warrant or right, whether as an addition to, in substitution of or in
exchange for any of the Pledged Shares, or otherwise; or (iv) any dividend or
other distribution payable in property, or securities issued by a person other
than the Company; then, in any such event, Pledgor shall receive and accept the
same, in trust, as trustee for Pledgees, and shall deliver them immediately to
Custodian, together with all necessary or appropriate endorsements of Pledgor.
Any cash distributions received by Pledgor in respect of the Pledged Shares may
be applied to reduce such of the Obligations as Pledgor may determine in its
sole discretion.
3. Delivery of Shares to Custodian.
Concurrently with the execution and delivery of this Agreement, Pledgor
hereby authorizes Pledgees to deliver, on behalf of Pledgor, to Custodian for
the account of Sellers, the certificates representing all of the Pledged Shares,
together with duly executed Stock Powers to Pledgees, in the form attached
hereto as Exhibit "A", with signature guaranteed, permitting transfer of the
Pledged Shares to Pledgees or its assignee, receipt of which is hereby
acknowledged by the Custodian, to be held and released in accordance with the
terms of this Agreement. Concurrently with the execution and delivery of this
Agreement, Pledgor is also delivering to Pledgees letters addressed to the
transfer agent of the Company (the "Transfer Agent"), informing the Transfer
Agent of the pledge of the Pledged Shares, instructing the Transfer Agent to
honor the Stock Powers delivered to Pledgees, and informing the Transfer Agent
that Pledgor's address on the records of the transfer agent, during the term of
this Agreement, shall be c/o Quarles & Xxxxx Xxxxxxx Xxxx LLP. Pledgor shall
thereafter deliver to Custodian (a) any other certificates for the Pledged
Shares as required by the terms of this Agreement, together with duly executed
stock powers relating to such certificates, with signatures guaranteed; and (b)
any documents or other evidence received of Pledgor's interest in any securities
issued as a dividend, stock split or otherwise because of or with respect to the
Pledged Shares or in exchange for the Pledged Shares, promptly after receiving
such evidence, accompanied by duly executed stock powers or other appropriate
instrument of transfer, with signatures guaranteed covering the same.
4. Rights of Pledgor in the Pledged Shares.
Unless and until an Event of Default (as that term is defined herein)
shall have occurred, Pledgor shall be entitled to exercise all voting and other
corporate rights in respect of the Pledged Shares (except for the right to
receive dividends and distributions payable in kind, which shall be delivered to
the Custodian), including, without limitation, all rights and privileges of
conversion, exchange and subscription, as though Pledgor were the absolute owner
of the Pledged Shares, subject to the pledge herein contained. Notwithstanding
the foregoing, Pledgor covenants and agrees that it shall not vote any of the
Pledged Shares in any way inconsistent with the provisions or intent of this
Agreement. All rights of Pledgor to vote and give consents, waivers and
ratifications, and to convert, exchange or subscribe (collectively referred to
as the "Corporate Rights"), shall cease if an Event of Default hereunder shall
occur. If an Event of Default shall occur, whether or not the Pledged Shares
shall have been registered in Pledgees' name, Pledgee then shall have the right
to exercise all Corporate Rights with respect to the Pledged Shares.
5. Representations and Warranties.
Pledgor represents and warrants to Pledgees that:
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(a) this Agreement has been duly authorized, executed and delivered by
Pledgor;
(b) the execution, delivery and performance by Pledgor of Pledgor's
obligations under this Agreement does not and will not violate any provision of
law or any judgment, order or regulation of any court or of any public or
governmental agency or authority applicable to Pledgor or of the Articles of
Incorporation or Bylaws of the Pledgor;
(c) the execution, delivery and performance by Pledgor of Pledgor's
obligations under this Agreement does not and will not conflict with or
constitute a breach of or a default under any agreement, indenture or instrument
to which Pledgor is a party or by which Pledgor or any of Pledgor's property is
bound; and
(d) this Agreement constitutes the legal, valid and binding obligation of
Pledgor enforceable in accordance with its terms.
6. Covenants.
Pledgor covenants that until all of the Obligations have been satisfied in
full it shall not sell, convey or otherwise dispose of any of the Pledged Shares
or any interest in the Pledged Shares, or create, incur or permit to exist any
pledge, mortgage, lien, charge or encumbrance or any security interest
whatsoever in or with respect to any of the Pledged Shares, other than that
created by this Agreement, nor attempt to do any of the foregoing.
7. Release of Pledged Shares.
7.1 Custodian shall disburse the Pledged Shares at any time pursuant to
the joint written instructions of Pledgees and Pledgor (which may be executed
and/or transmitted in counterparts).
7.2 If, within ten (10) business days after a Maturity Date (as defined in
the respective Notes), Custodian shall not have received a notice from the
applicable Pledgee(s) that the Obligations to such Pledgee(s) have not been
satisfied in full and that such Pledgee(s) disputes Pledgor's right to receive
any Pledged Shares, Custodian shall deliver to Pledgor the Pro Rata Shares (as
defined below) of the Pledgee(s) to which the Maturity Date relates. In the
event Custodian receives such notice from the applicable Pledgee(s), Custodian
shall release the Pledged Shares solely in accordance with Section 9.2 below.
7.3 Upon delivery of all Pledged Shares by Custodian in accordance with
the terms hereof, this Agreement shall terminate and be of no further force or
effect.
8. Events of Default.
Any Event of Default under the Note shall be deemed an Event of Default
hereunder.
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9. Pledgees' Remedies Upon Default.
9.1 At any time after the occurrence of an Event of Default, any Pledgee
may, at its option, deliver a certificate to the Custodian and Pledgor
specifying the nature of the Event of Default. If, within ten business days (10)
after its receipt of such certificate, the Custodian shall not have received
written notice from Pledgor that it disputes the occurrence of such Event of
Default then the Custodian shall release to such Pledgee(s) a certificate or
certificates representing a percentage of the Pledged Shares equal to the ratio
of the original principal amount of such Pledgee's Note to the aggregate
original principal amount of all the Notes (with respect to any Pledgee, the
"Pro Rata Shares"). In the event that Pledgor does deliver a timely notice to
the Custodian that it disputes such determination, then Custodian shall release
the Pledged Shares solely in accordance with Section 9.2 below.
9.2 In the event any dispute arises between Pledgor and any Pledgee,
Custodian shall release such Pledgee's Pro Rata Shares solely (i) upon its
receipt of the joint written instructions of the applicable Pledgee(s) and
Pledgor (which may be executed and/or transmitted in counterparts) or (ii) in
accordance with a final judgment or final court order from a court of competent
jurisdiction directing disposition of the applicable Pledged Shares (a "Court
Order"). A judgment or order under any provision of this Agreement shall not be
deemed to be final until the time within which an appeal may be taken therefrom
has expired and no appeal has been taken, or until the entry of a judgment or
order from which no appeal may be taken. Custodian shall be entitled to receive
and may conclusively rely on an opinion of counsel to the presenting party to
the effect that a Court Order as referred to in this Section is final and
nonappealable and from a court of competent jurisdiction.
10. Custodian
10.1 Custodian undertakes to perform only such duties as are expressly set
forth herein.
10.2 Custodian may rely and shall be protected in acting or refraining
from acting upon any notice, instruction or request furnished to it in writing
hereunder and reasonably believed by it to be genuine and to have been signed or
presented by the proper party or parties.
10.3 Custodian shall not be liable for any action taken by it in good
faith without gross negligence, and may consult with counsel of its own choice
and shall have full and complete authorization and protection for any reasonable
action taken or suffered by it hereunder in good faith and in accordance with
the written opinion of such counsel.
10.4 Custodian may resign and be discharged from its duties or obligations
hereunder by giving notice in writing of such resignation specifying a date (not
less than thirty (30) days after the giving of such notice) when such
resignation shall take effect, and by transferring all funds then held by it
pursuant to this Agreement to the successor custodian. Promptly after such
notice, Pledgor and Pledgees shall by mutual agreement appoint a successor
custodian, such custodian to hold the Pledged Shares upon the resignation date
specified in such notice. If a successor custodian is not appointed within
thirty (30) days, Custodian shall have the right to petition any court of
competent jurisdiction for the appointment of a successor custodian. Pledgor and
Pledgees may by mutual agreement at any time substitute a new custodian by
giving fifteen (15) days' notice thereof to the Custodian then acting. Custodian
shall continue to serve until its successor accepts the responsibility of
Custodian and receives delivery of the Pledged Shares.
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10.5 Pledgor and Pledgees agree, jointly and severally, to indemnify
Custodian for, and to hold it harmless against, any loss, liability or expense
incurred by it, arising out of or in connection with its entering into this
Agreement and carrying out its duties hereunder, including the costs and
expenses of defending itself against any claim of liability in the premises,
other than as incurred by reason of its willful or reckless misconduct or bad
faith. The provisions of this section shall survive the resignation or removal
of Custodian and the termination of this Agreement.
10.6 Custodian's duties hereunder may be altered, amended, modified or
revoked only by a writing signed by Pledgor, Pledgees and Custodians.
10.7 Custodian is hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case Custodian obeys or complies with any such order, judgment or
decree, Custodian shall not be liable to any of the parties hereto or to any
other person, firm or corporation by reason of such decree being subsequently
reversed, modified, annulled, set aside, vacated or found to have been entered
without jurisdiction.
10.8 Custodian has acted as legal counsel for Pledgees, and may continue
to act as legal counsel for Pledgees, from time to time, notwithstanding its
duties as Custodian hereunder. Pledgor consents to Custodian acting in such
capacity as legal counsel for Pledgees and waives any claim that such
representation represents a conflict of interest on the part of Custodian.
Pledgor understands that Pledgees and Custodian are relying explicitly on the
foregoing provision in entering into this Agreement. Notwithstanding the
foregoing, Custodian shall not represent Pledgees in any proceeding resulting
from Custodian delivery of the Pledged Securities into court as contemplated in
Section 9.2 hereof.
10.9 Pledgees shall pay the fees and costs of the Custodian under this
Agreement.
11. Notices.
Notices, requests, instructions or other documents to be in given under
this Agreement shall be in writing and shall be deemed given and received, (i)
when sent if sent by facsimile, provided that the fax is promptly confirmed by
telephone confirmation thereof, (ii) when delivered, if delivered personally to
the intended recipient, and (iii) one business day later, if sent by overnight
delivery via a national courier service, and in each case, addressed to a party
at the following address for such party:
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if to Pledgor:
Advanced Communications Technologies, Inc.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx, Chief Executive Officer
Facsimile: 646.227.1666
With a copy to:
Xxxxxx Xxxxxxx Xxxxxx & Xxxxxxx, LLC
0000 Xxxxxx Xxxxxx - 0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esquire
Facsimile: 215.851.8383
if to any Pledgee:
to the address set forth below such Pledgee's
name on the signature pages hereto
with copies to:
Xxxxxxx & Xxxxx Xxxxxxx Xxxx LLP
Renaissance Xxx
Xxx X. Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxxxx X. Xxxxxxxx, III, Esquire
Fax: 000-000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
12. Miscellaneous.
12.1 No course of dealing between Pledgor and Pledgees, nor any failure or
delay in exercising any right, power or privilege hereunder shall operate as a
waiver of such right, power or privileges.
12.2 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK, AND THE PARTIES AGREE AND CONSENT TO
THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN NEW YORK
COUNTY, NEW YORK IN ANY ACTION OR PROCEEDING HEREUNDER, AND TO SERVICE OF
PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED (WHICH SHALL CONSTITUTE
"PERSONAL SERVICE"). The parties hereto hereby irrevocably waive, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this agreement.
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12.3 This Agreement shall inure to the benefit of the successors and
assigns of each Pledgee. This Agreement shall be binding upon each of the
successors and assigns of Pledgor.
12.4 This Agreement contains or refers to the entire agreement of the
parties with respect to its subject matter, and supersedes any prior
arrangements or understandings between the parties with respect thereto. Any
waiver, modification, discharge or termination of this Agreement must be in
writing and signed by the parties necessary to the enforcement thereof.
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IN WITNESS WHEREOF, and intending to be legally bound by this Agreement,
each of the parties hereto has caused this Agreement to be executed and
delivered as of December 30, 2005. PLEDGOR:
ATTEST: ADVANCED COMMUNICATIONS
TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------- ------------------------
(Authorized Signature)
Name: Xxxxx X. Xxxxxx
----------------------
(Printed or Typed)
Title: President
---------------------
Date: December 30, 2004
----------------------
State of _____________________ :
ss
County of ___________________ :
On this _____ day of ______________2005, before me the subscriber, a
Notary Public in and for the State and County aforesaid personally appeared
___________________________, known or satisfactory identified to me, who
acknowledged that he/she was the ______________[title of office] of Advanced
Communications Technologies, Inc. and had executed the foregoing instrument in
such capacity in the name of and on behalf of such corporation for/ the purposes
stated therein.
Witness my hand and seal the day and year aforesaid.
[Notarial Seal]
----------------------
Notary Public
Signatures continue on next page
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PLEDGEES:
ATTEST:
/s/ Xxxxxxxx X. Xx
-------------------------------------------- ---------------------------
Xxxxxxxx X. Xx
Address:
/s/ Hui Xxxxxxx Xxx
---------------------------
Hui Xxxxxxx Xxx
Address:
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State of _____________________ :
ss
County of ___________________ :
On this _____ day of ____________2005, before me the subscriber, a Notary
Public in and for the State and County aforesaid personally appeared Xxxxxxxx X.
Xx known or satisfactory identified to me, who acknowledged that he had executed
the foregoing instrument for the purposes stated therein.
Witness my hand and seal the day and year aforesaid.
[Notarial Seal]
------------------------
Notary Public
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State of _____________________ :
ss
County of ___________________ :
On this _____ day of ____________2005, before me the subscriber, a Notary
Public in and for the State and County aforesaid personally appeared Hui Xxxxxxx
Xxx known or satisfactory identified to me, who acknowledged that she had
executed the foregoing instrument for the purposes stated therein.
Witness my hand and seal the day and year aforesaid.
[Notarial Seal]
Notary Public
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IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. does hereby
sell, assign and transfer to , shares of the common stock of PACIFIC MAGTRON
INTERNATIONAL CORP., a _____________corporation, represented by Certificate(s)
No(s) _________________ inclusive, standing in the name of ADVANCED
COMMUNICATIONS TECHNOLOGIES, INC. on the books of PACIFIC MAGTRON INTERNATIONAL
CORP. ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. does hereby irrevocably
constitute and appoint _______________________ attorney to transfer the said
stock or bond(s) as the case may be, on the books of PACIFIC MAGTRON
INTERNATIONAL CORP., with full power of substitution in the premises.
ADVANCED COMMUNICATIONS
TECHNOLOGIES, INC.
By: (SEAL)
--------------------------------------
Dated: , 200__
-----------------------------------
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