PLEDGE AND ESCROW AGREEMENT
EXHIBIT
10.4
THIS
PLEDGE AND ESCROW AGREEMENT
(the
“Agreement”)
is
made and entered into as of June 1, 2007 (the “Effective
Date”)
by and
among HOMELAND
SECURITY CAPITAL CORPORATION, and
existing under the laws of the State of Delaware (the “Pledgor”),
CORNELL
CAPITAL PARTNERS, L.P.,
(the
“Pledgee”),
and
XXXXX
XXXXXXXX,
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
Pledgee or any successor to the Pledgee under this
Agreement, the Securities Purchase Agreement of even date herewith between
the
Pledgor and the Pledgee (the “Securities
Purchase Agreement”),
the
Convertible Debentures (the “Convertible
Debentures”)
issued
or to be issued by the Company to the Pledgee, a total of Two Million Seven
Hundred Fifty Thousand Dollars ($2,750,000) of principal, plus any interest,
costs, fees, and other amounts owed to the Pledgee thereunder, the Security
Agreement of even date herewith between the Pledgor and the Pledgee (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 Pledgee all of the shares of
capital stock or equity interests owned by Pledgor (the “Pledged
Shares”)
of
Security Holding Corp., a Delaware corporation, Nexus Technologies Group, Inc.,
a Delaware corporation, Polimatrix, Inc., a Delaware corporation and Fortress
America Acquisition Corporation II, a Delaware corporation (“Fortress”)
(subject to the conditions set forth herein).
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 Pledgee a security interest in all Pledged Shares
as
security for Pledgor’s obligations under the Convertible Debentures; provided,
however, that until the shares of capital stock of Fortress owned by the Company
are distributed to the Company pursuant to a Founder Share Distribution (as
such
term is defined in the Operating Agreement of Fortress America Acquisition
Holdings, LLC) a security interest will not be granted in the capital stock
of
Fortress and such shares will not be delivered to the Pledgee pursuant to the
following sentence. 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 Pledgee 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 Pledgee 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 Pledgee under the Convertible Debentures
by repayment in accordance with the terms of the Convertible Debentures, 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 Pledgee
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 Pledgee in the Pledged Materials shall be
terminated. Notwithstanding anything to the contrary contained herein, upon
full
payment of all amounts due to the Pledgee under the Convertible Debentures,
by
repayment in accordance with the terms of the Note, this Agreement and Pledgee’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 Pledgee 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 Pledgee the Pledged
Materials held by the Escrow Agent hereunder. Upon receipt of the Pledged
Materials, the Pledgee 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 Pledgee by the Pledgor under the Transaction Documents,
including, without limitation, outstanding principal, interest, legal fees,
and
any other amounts owed to the Pledgee, 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 Pledgee are
insufficient to satisfy the Obligations in full, the Pledgee shall be entitled
to a deficiency judgment against the Pledgor for such amount. The Pledgee 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 Pledgee shall return any Pledged Shares released to it and
remaining after the Pledgee has applied the net proceeds to all amounts owed
to
the Pledgee.
5.1. Each
right, power and remedy of the Pledgee 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 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.
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. The Pledgee shall have the full power
to
enforce or to assign or contract is rights under this Agreement to a third
party.
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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. The
Pledgee 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 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 Pledgee 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.
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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 the Pledgee) 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
Pledgee, a partner in the general partner of the Pledgee, and counsel to the
Pledgee 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 Pledgee 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:
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0000
Xxxxx Xxxxxxx Xxxxx, Xxxxx 0000
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Xxxxxxxxx,
Xxxxxxxx 00000
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Attention: C.
Xxxxxx XxXxxxxx
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Telephone: (000)
000-0000
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Facsimile: (000)
000 0000
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With
a copy to:
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Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP
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000
Xxxxx Xxxxxxxx Xxxxxxxxx - Xxxxx 0000
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Xxxxx,
XX 00000-0000
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Attention: Xxxxxxx
X. Xxxxxx, Esq.
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Telephone: (000)
000-0000
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Facsimile: (000)
000-0000
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If
to the Pledgee:
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Cornell
Capital Partners, L.P.
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000
Xxxxxx Xxxxxx, Xxxxx 0000
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Xxxxxx
Xxxx, XX 00000
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Attention:
Xxxx
X. Xxxxxx
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Telephone: (000)
000-0000
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Facsimile:
(000)
000-0000
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With
copy to:
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Xxxxx
Xxxxxxxx, Esq.
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000
Xxxxxx Xxxxxx, Xxxxx 0000
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Xxxxxx
Xxxx, XX 00000
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Telephone: (000)
000-0000
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Facsimile: (000)
000-0000
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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.
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 Xxxxxx 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.
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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 PLEDGEE 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 PLEDGEE 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.
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CORNELL
CAPITAL
PARTNERS,
L.P.
By:
Yorkville
Advisors, LLC
Its: Investment
Manager
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| By: | /s/ Xxxx Xxxxxx | |
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Name: Xxxx
Xxxxxx
Title: Portfolio
Manager
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| By: | /s/ C. Xxxxxx XxXxxxxx | |
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Name: C.
Xxxxxx XxXxxxxx
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Title: Chief
Executive Officer
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ESCROW
AGENT
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| By: | /s/ Xxxxx Xxxxxxxx | |
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Name: Xxxxx Xxxxxxxx, Esq. |
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