Exhibit 10.20
AMENDED AND RESTATED PLEDGE AND ESCROW AGREEMENT
THIS AMENDED AND RESTATED PLEDGE AND ESCROW AGREEMENT (the "Agreement") is
made and entered into as of June 30, 2006 (the "EFFECTIVE DATE") by and among
HIGHGATE HOUSE FUNDS, LTD. ("Highgate"), CORNELL CAPITAL PARTNERS, LP ("CORNELL
CAPITAL"), CITY NETWORK, INC., a corporation organized and existing under the
laws of the State of Nevada (the "COMPANY"), and XXXXX XXXXXXXX, ESQ., as escrow
agent ("ESCROW AGENT").
RECITALS:
WHEREAS, the Company and Highgate entered the Securities Purchase
Agreement, dated August 10, 2005 (the "PRIOR SECURITIES PURCHASE AGREEMENT"),
pursuant to which the Company issued the Amended and Restated Secured
Convertible Debenture, dated August 17, 2005, in favor of Highgate, and the
Secured Convertible Debenture, dated as of December 16, 2005, in favor of
Highgate, for an aggregate principal amount of $250,000 (the "ORIGINAL Notes");
WHEREAS, in connection with the Prior Securities Purchase Agreement, the
Company, Highgate and the Escrow Agent entered into the Pledge and Escrow
Agreement, dated August 10, 2005 (the "PRIOR PLEDGE AGREEMENT"), pursuant to
which the Company pledged to Highgate Four Million Four Hundred Forty Five
Thousand Four Hundred Fifty Five (4,445,455) shares of the Company's common
stock, par value $0.001 per share (the "COMMON STOCK," and such shares of
pledged Common Stock, the "PRIOR PLEDGED SHARES"), to secure the Company's
obligations under the Original Notes, the Prior Securities Purchase Agreement
and certain related agreements;
WHEREAS, the Company, Cornell Capital, Highgate, and the Escrow Agent
entered a Securities Purchase Agreement, dated March 13, 2006 (the "SECURITIES
PURCHASE AGREEMENT"), pursuant to which the Company shall issue secured
convertible debentures to Cornell for an aggregate principal amount of Four
Hundred Thousand Dollars ($400,000) (the "CONVERTIBLE DEBENTURES");
WHEREAS, as a condition to the closing of the transactions contemplated by
the Securities Purchase Agreement, the Company, Highgate and the Escrow Agent
desire to amend and restate, and Cornell Capital desires to become party to, the
Prior Pledge Agreement in order to secure any and all obligations of the Company
now existing or hereinafter incurred to Cornell Capital and Highgate under the
Convertible Debentures and the Original Notes (the "OBLIGATIONS");
WHEREAS, the Company has agreed to irrevocably pledge to Cornell Capital
and Highagte Six Million Four Hundred Forty Five Thousand Four Hundred Fifty
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1. Of this amount, the Company's pledge of 2,000,000 shares of Common Stock is
subject to over $275,000 in aggregate principal amount of Convertible
Debentures being funded pursuant to the Securities Purchase Agreement.
Five (6,445,455) shares of Common Stock (the "PLEDGED Shares") to secure the
Obligations, which shares shall include all Prior Pledged Shares; and
WHEREAS, subject to the terms of the Convertible Debentures and the
Original Notes, Cornell Capital and Highgate have the right to convert any or
all of the Convertible Debentures or the Original Notes into shares of Common
Stock (the "CONVERSION SHARES") in accordance with the Convertible Debentures
and the Original Notes.
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 Company hereby grants to Cornell Capital a security interest in
all Pledged Shares as security for the Obligations. Simultaneously with the
execution of this Agreement, the Company 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 Company
(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
Cornell Capital under the Convertible Debentures and through repayment in
accordance with the terms of the Convertible Debentures, or the termination or
expiration of this Agreement.
1.2. Upon each conversion by Cornell Capital or Highgate into Conversion
Shares, the Company shall provide written notice to the Escrow Agent, with a
copy to Cornell Capital and Highgate, of the number of Conversion Shares issued
to Cornell Capital or Highgate pursuant to such conversion and the number of
Pledged Shares pursuant to this Agreement shall be reduced, share for share, by
the number of Conversion Shares issued.
2. RIGHTS RELATING TO PLEDGED SHARES. Upon the occurrence of an Event of
Default (as defined herein), Cornell Capital 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 or conversion of
all the Obligations, the parties hereto shall notify the Escrow Agent to such
effect in writing. Upon receipt of such written notice, the Escrow Agent shall
return to the Company all certificates representing the Pledged Shares and
Transfer Documents delivered to the Escrow Agent pursuant to this Agreement
(collectively the "PLEDGED MATERIALS"), whereupon any and all rights of Cornell
Capital and Highgate in the Pledged Materials shall be terminated.
Notwithstanding anything to the contrary contained herein, upon full payment or
conversion of all amounts due to Cornell Capital under the Convertible
Debentures and Highgate under the Original Notes, in accordance with the terms
thereof, this Agreement and Cornell Capital's and Highgate's security interest
and rights in and to the Pledged Shares shall terminate.
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4. 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.
5. REMEDIES.
5.1. Upon and anytime after the occurrence of an Event of Default, Cornell
Capital shall have the right to acquire the Pledged Shares in accordance with
the following procedure: (a) Cornell Capital shall provide written notice of
such Event of Default (the "DEFAULT NOTICE") to the Escrow Agent, with a copy to
the Company; (b) in a Default Notice, Cornell Capital shall specify the number
of Pledged Shares to be issued to Cornell Capital, subject to any adjustments in
Pledged Shares pursuant to Section 1,2 hereof, PROVIDED HOWEVER, that Cornell
Capital shall not have the right to acquire such number of Pledged Shares which
would cause Cornell Capital, together with its affiliates (including Highgate),
to beneficially own in excess of 9.99% of the outstanding capital of the Company
(unless Cornell Capital waives such limitation by providing 65 days' advance
written notice); and (c) as soon as practicable after receipt of a Default
Notice, the Escrow Agent shall deliver the specified number of Pledged Shares
along with the applicable Transfer Documents to the Company's Transfer Agent
with instructions to issue such Pledged Shares to Cornell Capital in accordance
with the Irrevocable Transfer Agent Instructions of even date herewith, among
Company, Cornell Capital, Highgate, the Escrow Agent, and the Pacific Stock
Transfer.
5.2. Upon receipt of the Pledged Shares issued to Cornell Capital, Cornell
Capital shall have the right to (i) sell the Pledged Shares and to apply the
proceeds of such sales (pro rata), net of any selling commissions, to the
Obligations owed to Cornell Capital and Highgate by the Company, including,
without limitation, outstanding principal, interest, legal fees, and any other
amounts owed to Cornell Capital, 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 Cornell Capital are
insufficient to satisfy the Obligations in full, Cornell Capital shall be
entitled to a deficiency judgment against the Company for such amount. Cornell
Capital 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 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 Company shall remain liable for
shortfalls, if any, that may exist after Cornell Capital has exhausted all
remedies hereunder. Cornell Capital shall be entitled to keep any Pledged Shares
released to it and remaining after Cornell Capital has applied the net proceeds
to all amounts owed to Cornell Capital.
5.3. Each right, power and remedy of Cornell Capital and Highgate provided
for in this Agreement, the Securities Purchase Agreement and any other
Transaction Documents (as defined in the Securities Purchase Agreement) 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 Cornell Capital of
any one or more of the rights, powers or remedies provided for in this
Agreement, the Securities Purchase 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 Cornell Capital of all
such other rights, powers or remedies, and no failure or delay on the part of
Cornell Capital to exercise any such right, power or remedy shall operate as a
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waiver thereof. No notice to or demand on the Company 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 Cornell Capital or Highgate to any
other further action in any circumstances without demand or notice. Cornell
Capital shall have the full power to enforce or to assign or contract is rights
under this Agreement to a third party.
6. DEMAND REGISTRATION RIGHTS. In addition to all other remedies available
to Cornell Capital, upon an Event of Default, the Company 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 Cornell Capital. The Company shall cause
the registration statement to remain in effect until all of the Pledged Shares
have been sold by Cornell Capital.
7. CONCERNING THE ESCROW AGENT.
7.1. 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.
7.2. 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.
7.3. Cornell Capital and the Company 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 7.4 or 7.5 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
Company.
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7.4. 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 Company and Cornell Capital 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.
7.5. The Escrow Agent may consult with counsel of its own choice (and the
costs of such counsel shall be paid by the Company and Cornell Capital) 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.
7.6. 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.
8. CONFLICT WAIVER. The Company hereby acknowledges that the Escrow Agent
is general counsel to Cornell Capital, a partner in the general partner of
Cornell Capital, and counsel to Cornell Capital in connection with the
transactions contemplated and referred herein. The Company 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 Cornell Capital and
the Company will not seek to disqualify such counsel and waives any objection
Company might have with respect to the Escrow Agent acting as the Escrow Agent
pursuant to this Agreement.
9. NOTICES. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon confirmation of receipt, when sent by facsimile;
(iii) ten (10) business days after being sent by U.S. certified mail, return
receipt requested, or (iv) two (2) business days after deposit with a nationally
recognized overnight delivery service or worldwide courier service, in each case
properly addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
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If to the Company, to: City Network, Inc.
0X-0, Xx.00, Xxxx Xx Xxxx
Xxxxxxx Xxxx, Xxxxxx Xxxxxx, 235
Taiwan, ROC F5 235
Attention: Xx Xxxx-Xxxx Xxx
With a copy to: Xxxxx Xxxxxxxx, Esq.
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Cornell Capital: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copy to: Xxxx Xxxxx, Esq.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Escrow Agent: Xxxxx Xxxxxxxx, Esq.
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Each party shall provide five (5) days' prior written notice to the other
party of any change in address or facsimile number.
10. 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.
11. 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 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
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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 9 hereto.
12. 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.
13. 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.
14. 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.
15. NO PENALTIES. No provision of this Agreement is to be interpreted as a
penalty upon any party to this Agreement.
16. AMENDMENT AND RESTATEMENT. This Agreement amends and restates, and is
given in substitution for but not satisfaction of, the Pledge and Escrow
Agreement dated August 10, 2005 among the Company, Highgate, and the Escrow
Agent.
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 Amended and
Restated Pledge and Escrow Agreement as of the date first above written.
CITY NETWORK, INC.
By: /s/ Xxxxx Xxxx
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Name: Xxxxx Xxxx
Title: Chairman, President and Chief
Executive Officer
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HIGHGATE HOUSE FUNDS, LTD
By: /s/ Xxxx Xxxxxx
--------------------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxx
--------------------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
"ESCROW AGENT"
/s/ Xxxxx Xxxxxxxx
-----------------------------------
Xxxxx Xxxxxxxx, Esq.
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