Exhibit 10.8

 

INSIDER PLEDGE AND ESCROW AGREEMENT

 

THIS INSIDER PLEDGE AND ESCROW AGREEMENT (the “Agreement”) is made and entered
into as of January 9, 2006 (the “Effective Date”) by and among PAUL ARENA (the
“Pledgor”), CORNELL CAPITAL PARTNERS, LP (the “Pledgee”), i2 TELECOM
INTERNATIONAL, INC., a Washington corporation (the “Company”), and DAVID
GONZALEZ, ESQ., as escrow agent (“Escrow Agent”).

 

RECITALS:

 

WHEREAS, the Company shall issue and sell to the Pledgee, as provided in the
Securities Purchase Agreement of even date herewith between the Company and the
Pledgee (the “Securities Purchase Agreement”), and the Pledgee shall purchase up
to One Million Seven Hundred Fifty Thousand Dollars ($1,750,000) of secured
convertible debentures (the “Convertible Debentures”), which shall be
convertible into shares of the Company’s common stock, no par value per share
(the “Common Stock”) (as converted, the “Conversion Shares”);

 

WHEREAS, to induce the Pledgee to enter into the transaction contemplated by the
Securities Purchase Agreement, the Convertible Debentures, the Investor
Registration Rights Agreement of even date herewith between the Company and the
Pledgee (the “Investor Registration Rights Agreement”), the Pledge and Escrow
Agreement of even date herewith among the Company, the Pledgee and the Escrow
Agent (the “Pledge Agreement”), the Escrow Agreement of even date herewith among
the Company, the Pledgee, and the Escrow Agent (the “Escrow Agreement”), and the
Irrevocable Transfer Agent Instructions among the Company, the Pledgee, the
Transfer Agent, and the Escrow Agent (the “Transfer Agent Instructions”)
(collectively referred to as the “Transaction Documents”), the Pledgor has
agreed to irrevocably pledge to the Pledgee three million one hundred twelve
thousand three hundred thirty three (3,112,333) shares (the “Pledged Shares”) of
Common Stock beneficially owned by the Pledgor in accordance with this
Agreement.

 

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. Obligations Secured. The obligations secured hereby are any and all
obligations of the Company now existing or hereinafter incurred to the Pledgee,
whether oral or written and whether arising before, on or after the date hereof
including, without limitation, those obligations of the Company to the Pledgee
under the Transaction Documents and any other amounts now or hereafter owed to
the Pledgee by the Company thereunder (collectively, the “Obligations”).

 

2. Pledge and Transfer of Pledged Shares. The Pledgor hereby grants to Pledgee
an irrevocable, first priority security interest in all Pledged Shares as
security for the Company’s Obligations. Simultaneously with the execution of the
Transaction Documents, the Pledgor shall deliver to the Escrow Agent stock
certificates made out in favor of the Pledgor representing the

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Pledged Shares, together with duly executed stock powers or other appropriate
transfer documents with medallion bank guarantees and 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
Obligations due to the Pledgee, including the repayment of all amounts owed by
the Company to the Pledgee under the Convertible Debentures (whether outstanding
principal, interest, legal fees, or any other amounts owed to the Pledgee by the
Company).

 

3. 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,
receive dividends and other distributions thereon, and enjoy all other rights
and privileges incident to the ownership of the number of Pledged Shares
actually released from escrow in accordance with Section 6.1 hereof.

 

4. Release of Pledged Shares from Pledge. Upon the Company’s increase of its
authorized shares of common stock to two hundred fifty million (250,000,000) and
the delivery of one hundred million (100,000,000) shares of Common Stock by the
Company to the Escrow Agent pursuant to that certain Pledge and Escrow Agreement
dated January 9, 2006 by an among the Company, the Pledgee and the Escrow Agent,
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 the Pledgee in the Pledged
Materials shall terminate.

 

5. Event of Default. An “Event of Default” shall be deemed to have occurred
under this Agreement upon an Event of Default under the Convertible Debentures.

 

6. Remedies.

 

a. 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 Pledgor by the Company 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 or the Company
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, the Company 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 Pledgee in batches
not to exceed 9.9% of the outstanding capital of the Company (which limit may be
waived by the Pledgee providing not less than 65

 

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days’ prior written notice to the Escrow Agent). 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.

 

b. 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.

 

7. Representations, Warranties and Covenants.

 

a. The Pledgor represents, warrants and covenants that:

 

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

 

(ii) Pledgor has full power, authority and legal right to pledge all the Pledged
Shares pledged pursuant to this Agreement; and

 

(iii) all 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.

 

b. The Pledgor covenants and agrees to 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
(other than the Pledgee and the Escrow Agent); and the Pledgor covenants and
agrees that it will have like title to and right to pledge any other property at
any time hereafter pledged to the Pledgee as Collateral hereunder and will
likewise take all reasonable steps to defend the right thereto and security
interest therein of the Pledgee.

 

c. The Pledgor covenants and agrees to take no action which would violate or be
inconsistent with any of the terms of any Transaction Document, or which would
have the effect of impairing the position or interests of the Pledgee under any
Transaction Document.

 

d. The Pledgor represents, warrants and covenants that (i) the Pledgor has been
the beneficial owner of the Pledged Shares since February 28, 2004 and (ii) this
Agreement is made with recourse. Upon an Event of Default, the Pledgee shall be
deemed to have acquired the Pledged Shares on the date they were acquired by the
Pledgor. The Pledgor is an “affiliate” of the Company, as such term is defined
in Rule 144(a) promulgated under the Securities Act of 1933, as amended.

 

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8. Concerning the Escrow Agent.

 

a. 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.

 

b. 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.

 

c. 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.

 

d. 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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e. The Escrow Agent may consult with counsel of its own choice (and the costs of
such counsel shall be paid by the Pledgor and 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.

 

f. 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.

 

9. 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.

 

10. 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:

 

If to the Company, to:    i2 Telecom International, Inc.      1200 Abernathy
Road, Suite 1800      Atlanta, Georgia 30328      Attention: Paul Arena     
Telephone: (770) 512-7174      Facsimile:  (770) 844-9427 With a copy to:   
Richardson & Patel, LLP      10900 Wilshire Boulevard, Suite 500      Los
Angeles, California 90024      Attention: Peter Hogan      Telephone: (310)
208-1182      Facsimile:  (310) 208-1154 If to the Pledgee:    Cornell Capital
Partners, LP      101 Hudson Street, Suite 3700      Jersey City, NJ 07302     
Attention: Mark A. Angelo      Telephone: (201) 985-8300      Facsimile:  (201)
985-8744

 

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With copy to:    David Gonzalez, Esq.      101 Hudson Street, Suite 3700     
Jersey City, NJ 07302      Telephone: (201) 985-8300      Facsimile:  (201)
985-1964 If to the Pledgee, to:    Paul Arena      1200 Abernathy Road, Suite
1800      Atlanta, GA 30328      Telephone: (770) 512-7174      Facsimile:
 (770) 512-7199

 

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.

 

11. 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.

 

12. 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 New Jersey 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.

 

13. 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.

 

14. 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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15. 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.

 

16. No Penalties. No provision of this Agreement is to be interpreted as a
penalty upon any party to this Agreement.

 

17. 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 Insider Pledge
and Escrow Agreement as of the date first above written.

 

CORNELL CAPITAL PARTNERS, LP By:   Yorkville Advisors, LLC Its:   General
Partner By:  

 

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Name:   Mark Angelo Title:   Portfolio Manager INSIDER By:  

 

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Name:   Paul Arena I2 TELECOM INTERNATIONAL, INC. By:  

 

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Name:   Paul Arena Title:   Chief Executive Officer ESCROW AGENT By:  

 

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Name:   David Gonzalez, Esq.

 

FOR VALUE RECEIVED, the Pledgor hereby unconditionally and absolutely guarantees
the Company’s Obligations (as defined above). This Agreement is made with
recourse.

 

    By:  

 

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    Name:   Paul Arena

 

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