Exhibit 10.15
INVESTOR REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of March
13, 2006, by and among CITY NETWORK, INC, a Nevada corporation (the "COMPANY"),
and the undersigned buyers listed on Schedule I attached hereto (each, a "BUYER"
and collectively, the "BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers secured
convertible debentures (the "CONVERTIBLE DEBENTURES") which shall be convertible
into that number of shares of the Company's common stock, par value $0.001 per
share (the "COMMON STOCK"), pursuant to the terms of the Securities Purchase
Agreement for an aggregate purchase price of up to Six Hundred Fifty Thousand
Dollars ($650,000). Capitalized terms not defined herein shall have the meaning
ascribed to them in the Securities Purchase Agreement.
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations there
under, or any similar successor statute (collectively, the "SECURITIES ACT"),
and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyers hereby
agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
(b) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing one or more Registration Statements (as defined
below) in compliance with the Securities Act and pursuant to Rule 415 under the
Securities Act or any successor rule providing for offering securities on a
continuous or delayed basis ("RULE 415"), and the declaration or ordering of
effectiveness of such Registration Statement(s) by the United States Securities
and Exchange Commission (the "SEC").
(c) "REGISTRABLE SECURITIES" means the shares of Common Stock issuable to
the Buyers upon conversion of the Convertible Debentures issued pursuant to the
Securities Purchase Agreement and the Warrant Shares as defined in the
Securities Purchase Agreement.
(d) "REGISTRATION STATEMENT" means a registration statement under the
Securities Act which covers the Registrable Securities.
2. REGISTRATION.
(a) Subject to the terms and conditions of this Agreement, the Company
shall use reasonable commercial efforts to prepare and file, no later than
thirty (30) days after the date the Convertible Debentures are issued (the
"SCHEDULED FILING DEADLINE"), with the SEC a registration statement on Form S-1
or SB-2 (or, if the Company is then eligible, on Form S-3) under the Securities
Act (the "INITIAL REGISTRATION STATEMENT") for the resale by the Buyers of the
Registrable Securities the numbers of shares of Common Stock listed next to each
Buyer on SCHEDULE II attached hereto. The Company shall use reasonable
commercial efforts to cause the Registration Statement to remain effective until
all of the Registrable Securities have been sold or until each Buyer will be
able to sell all of its Registrable Securities in a three-month period pursuant
to Rule 144 (as defined below). Prior to the filing of the Registration
Statement with the SEC, the Company shall furnish a copy of the Initial
Registration Statement to the Buyers for their review and comment. The Buyers
shall furnish comments on the Initial Registration Statement to the Company
within twenty-four (24) hours of the receipt thereof from the Company.
(b) EFFECTIVENESS OF THE INITIAL REGISTRATION STATEMENT. The Company shall
use commercially reasonable efforts (i) to have the Initial Registration
Statement declared effective by the SEC no later than ninety (90) days after the
date the Initial Registration Statement is filed with the SEC (the "SCHEDULED
EFFECTIVE DEADLINE") and (ii) to insure that the Initial Registration Statement
and any subsequent Registration Statement remains in effect until all of the
Registrable Securities have been sold, subject to the terms and conditions of
this Agreement.
(c) FAILURE TO FILE OR OBTAIN EFFECTIVENESS OF THE REGISTRATION STATEMENT.
In the event the Registration Statement is not filed by the Scheduled Filing
Deadline or is not declared effective by the SEC on or before the Scheduled
Effective Date, or if after the Registration Statement has been declared
effective by the SEC, sales cannot be made pursuant to the Registration
Statement (whether because of a failure to keep the Registration Statement
effective, failure to disclose such information as is necessary for sales to be
made pursuant to the Registration Statement, failure to register sufficient
shares of Common Stock or otherwise) then as partial relief for the damages to
any holder of Registrable Securities by reason of any such delay in or reduction
of its ability to sell the underlying shares of Common Stock (which remedy shall
not be exclusive of any other remedies at law or in equity), the Company will
pay as liquidated damages (the "LIQUIDATED DAMAGES") to the holder, at the
holder's option, either a cash amount or shares of the Company's Common Stock in
an amount equal to two percent (2%) of the liquidated value of the Convertible
Debentures held by such holder for each thirty (30) day period after the
Scheduled Filing Deadline, the Scheduled Effective Date, or the first date that
sales cannot be made pursuant to the Registration Statement, as the case may be,
which shall be paid within three (3) business days after the expiration of each
thirty (30) day period; PROVIDED that (i) in no event shall the Liquidated
Damages exceed 20% of the aggregate face amount of the Convertible Debentures
and (ii) no Liquidated Damages shall be payable in the form of Common Stock to
the extent that the Total Transaction Shares issued shall be equal to or greater
2
than 5,500,000 shares, until the holders of Common Stock approve the issuance of
the Total Transaction Shares. "TOTAL TRANSACTION SHARES" shall mean, in the
aggregate, any shares of Common Stock issuable under the Convertible Debentures;
the Pledge and Escrow Agreement, dated the date hereof, by and among the
Company, the Buyers and Xxxxx Xxxxxxxx, as escrow agent; the Placement Agent
Agreement, dated August 10, 2005, by and among the Company and Monitor Capital,
Inc.; the warrants to be issued to the Buyers by the Company pursuant to the
Securities Purchase Agreement; the warrant, dated August 17, 2005, issued by the
Company in favor of Cornell Capital Partners, LP; and as Liquidated Damages (as
defined herein).
(d) LIQUIDATED DAMAGES. The Company and the Buyers hereto acknowledge and
agree that the sums payable under subsection 2(c) above shall constitute
liquidated damages and not penalties and are in addition to all other rights of
the Buyers, including the right to call a default. The parties further
acknowledge that (i) the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, (ii) the amounts specified in
such subsections bear a reasonable relationship to, and are not plainly or
grossly disproportionate to, the probable loss likely to be incurred in
connection with any failure by the Company to obtain or maintain the
effectiveness of a Registration Statement, (iii) one of the reasons for the
Company and the Buyers reaching an agreement as to such amounts was the
uncertainty and cost of litigation regarding the question of actual damages, and
(iv) the Company and the Buyers are sophisticated business parties and have been
represented by sophisticated and able legal counsel and negotiated this
Agreement at arm's length.
3. RELATED OBLIGATIONS.
(a) The Company shall keep the Registration Statement effective pursuant to
Rule 415 at all times until the date on which the Buyers shall have sold all the
Registrable Securities covered by such Registration Statement or until each
Buyer will be able to sell all of its Registrable Securities free of restriction
pursuant to Rule 144(k) (the "REGISTRATION PERIOD"), which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading. Each holder of Registrable Securities shall promptly and
accurately respond to the Company's request at reasonable intervals regarding
the amount of Registrable Securities held by such holder.
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the Securities Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company's filing a report on Form 10-KSB,
Form 10-QSB or Form 8-K or any analogous report under the Securities Exchange
3
Act of 1934, as amended (the "EXCHANGE ACT"), the Company shall incorporate such
report by reference into the Registration Statement, if applicable, or shall
file such amendments or supplements in compliance with Section 10(a)(3) and Rule
424 of the Securities Act and relevant undertakings in the Registration
Statement.
(c) The Company shall furnish to each Buyer whose Registrable Securities
are included in any Registration Statement, without charge, (i) at least one (1)
copy of such Registration Statement as declared effective by the SEC and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, all exhibits and each preliminary
prospectus, (ii) ten (10) copies of the final prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Buyer may reasonably request) or a Microsoft Word
version thereof and (iii) such other documents as such Buyer may reasonably
request from time to time in order to facilitate the disposition of the
Registrable Securities owned by such Buyer.
(d) The Company shall use commercially reasonable efforts to (i) register
and qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as any Buyer reasonably requests, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (w) make any change to its articles of incorporation or by-laws, (x)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify each Buyer
who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threat of any proceeding for such purpose.
(e) As promptly as practicable after becoming aware of such event or
development, the Company shall notify each Buyer in writing of the happening of
any event as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and promptly prepare a supplement or amendment
to such Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such supplement or amendment or a Microsoft Word
version thereof to each Buyer. The Company shall also promptly notify each Buyer
in writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to each Buyer by facsimile on the same day of
such effectiveness), (ii) of any request by the SEC for amendments or
4
supplements to a Registration Statement or related prospectus or related
information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(f) The Company shall use commercially reasonable efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction within the United States of
America and, if such an order or suspension is issued, to obtain the withdrawal
of such order or suspension at the earliest possible moment and to notify each
Buyer who holds Registrable Securities being sold of the issuance of such order
and the resolution thereof or its receipt of actual notice of the initiation or
threat of any proceeding for such purpose.
(g) At the reasonable request of any Buyer, the Company shall furnish to
such Buyer, on the date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as a Buyer may reasonably request (i)
a letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
and (ii) an opinion, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the Buyers.
(h) The Company shall make available for inspection by (i) any Buyer and
(ii) one (1) firm of accountants or other agents retained by the Buyers
(collectively, the "INSPECTORS") all pertinent financial and other records, and
pertinent corporate documents and properties of the Company (collectively, the
"RECORDS"), as shall be reasonably deemed necessary by each Inspector, and cause
the Company's officers, directors and employees to supply all information which
any Inspector may reasonably request; provided, however, that each Inspector
shall agree, and each Buyer hereby agrees, to hold in strict confidence and
shall not make any disclosure (except to a Buyer) or use any Record or other
information that the Company determines in good faith to be confidential, and of
which determination the Inspectors are so notified, unless (a) the disclosure of
such Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the Securities Act, (b)
the release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent jurisdiction, or
(c) the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement of
which the Inspector and the Buyer has knowledge. Each Buyer agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential.
(i) The Company shall hold in confidence and not make any disclosure of
information concerning a Buyer provided to the Company unless (i) disclosure of
such information is necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
5
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning a Buyer is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Buyer and allow such Buyer, at the Buyer's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
(j) The Company shall use its best efforts either to cause all the
Registrable Securities covered by a Registration Statement (i) to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (ii) the
inclusion for quotation on the National Association of Securities Dealers, Inc.
OTC Bulletin Board for such Registrable Securities. The Company shall pay all
fees and expenses in connection with satisfying its obligation under this
Section 3(j).
(k) The Company shall cooperate with the Buyers who hold Registrable
Securities being offered and, to the extent applicable, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the Buyers may reasonably request and registered in such
names as the Buyers may request.
(l) The Company shall use commercially reasonable efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
(m) The Company shall make generally available to its security holders as
soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve (12) month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
(n) The Company shall otherwise use commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC in connection with
any registration hereunder.
(o) Within two (2) business days after a Registration Statement covering
Registrable Securities is declared effective, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent for
such Registrable Securities (with copies to the Buyers whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as EXHIBIT A.
6
(p) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Buyers of Registrable Securities
pursuant to a Registration Statement.
4. OBLIGATIONS OF THE BUYERS.
Each Buyer agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), such Buyer will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Buyer's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or receipt of
notice that no supplement or amendment is required. Notwithstanding anything to
the contrary, the Company shall cause its transfer agent to deliver unlegended
certificates for shares of Common Stock to a transferee of a Buyer in accordance
with the terms of the Securities Purchase Agreement in connection with any sale
of Registrable Securities with respect to which a Buyer has entered into a
contract for sale prior to the Buyer's receipt of a notice from the Company of
the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e) and for which the Buyer has not yet settled.
5. EXPENSES OF REGISTRATION.
All expenses incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers, legal and accounting
fees shall be paid by the Company.
6. INDEMNIFICATION.
With respect to Registrable Securities which are included in a Registration
Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Buyer, the directors, officers,
partners, employees, agents, representatives of, and each Person, if any, who
controls any Buyer within the meaning of the Securities Act or the Exchange Act
(each, an "INDEMNIFIED PERSON"), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys'
fees, amounts paid in settlement or expenses, joint or several (collectively,
"CLAIMS") incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("BLUE SKY FILING"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; (ii) any untrue statement or alleged untrue statement of
7
a material fact contained in any final prospectus (as amended or supplemented,
if the Company files any amendment thereof or supplement thereto with the SEC)
or the omission or alleged omission to state therein any material fact necessary
to make the statements made therein, in light of the circumstances under which
the statements therein were made, not misleading; or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
other law, including, without limitation, any state securities law, or any rule
or regulation there under relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "VIOLATIONS"). The Company shall
reimburse the Buyers and each such controlling person promptly as such expenses
are incurred and are due and payable, for any legal fees or disbursements or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (x) shall
not apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (y) shall not be available to the
extent such Claim is based on a failure of the Buyer to deliver or to cause to
be delivered the prospectus made available by the Company, if such prospectus
was timely made available by the Company pursuant to Section 3(c); and (z) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Buyers pursuant to Section 9 hereof.
(b) In connection with a Registration Statement, each Buyer agrees to
severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Company, each
of its directors, each of its officers, employees, representatives, or agents
and each Person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act (each an "INDEMNIFIED PARTY"), against any
Claim or Indemnified Damages to which any of them may become subject, under the
Securities Act, the Exchange Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or is based upon any Violation, in each case to
the extent, and only to the extent, that such Violation arises (a) in reliance
upon and in conformity with written information furnished to the Company by such
Buyer expressly for use in connection with such Registration Statement; and,
subject to Section 6(d), such Buyer will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; (b) from such Buyer's failure to deliver a prospectus timely made
available to such Buyer; or (c) from such Buyer's use of a prospectus in
violation hereof; provided, however, that the indemnity agreement contained in
this Section 6(b) and the agreement with respect to contribution contained in
Section 7 shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Buyer, which
consent shall not be unreasonably withheld; provided, further, however, that the
Buyer shall be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Buyer as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
8
survive the transfer of the Registrable Securities by the Buyers pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the prospectus was corrected
and such new prospectus was delivered to each Buyer prior to such Buyer's use of
the prospectus to which the Claim relates.
(c) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one (1) counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding;. The Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent; provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
(d) The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
9
(e) The indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Buyers the benefits of Rule 144
promulgated under the Securities Act or any similar rule or regulation of the
SEC that may at any time permit the Buyers to sell securities of the Company to
the public without registration ("RULE 144") the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents as are required by the applicable provisions of Rule 144; and
(c) furnish to each Buyer so long as such Buyer owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested to permit the Buyers
to sell such securities pursuant to Rule 144 without registration.
9. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and Buyers who
then hold at least two-thirds (2/3) of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 9 shall be binding upon each
Buyer and the Company. No such amendment shall be effective to the extent that
10
it applies to fewer than all of the holders of the Registrable Securities. No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.
10. MISCELLANEOUS.
(a) A Person is deemed to be a holder of Registrable Securities whenever
such Person owns or is deemed to own of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two (2)
or more Persons with respect to the same Registrable Securities, the Company
shall act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
(b) 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 receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one (1) business day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
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
Telephone: 000-0-0000-0000
Facsimile: 886-2-8226-8585
With Copy to: Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to a Buyer, to its address and facsimile number on the Schedule of Buyers
attached hereto, with copies to such Buyer's representatives as set forth on the
Schedule of Buyers or to such other address and/or facsimile number and/or to
the attention of such other person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
11
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) The laws of the State of New Jersey shall govern all issues concerning
the relative rights of the Company and the Buyers as its stockholders. All other
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
Jersey, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New Jersey or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of New Jersey. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the Superior Courts of the State of New Jersey, sitting in
Xxxxxx County, New Jersey and federal courts for the District of New Jersey
sitting Newark, New Jersey, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
(e) This Agreement, the Irrevocable Transfer Agent Instructions, the
Securities Purchase Agreement and related documents including the Convertible
Debenture and the Escrow Agreement dated the date hereof by and among the
Company, the Buyers set forth on the Schedule of Buyers attached hereto, and
Xxxxx Xxxxxxxx, Esq. (the "ESCROW AGREEMENT") and the Security Agreement dated
the date hereof (the "SECURITY AGREEMENT") constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof. There
are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement, the Irrevocable
Transfer Agent Instructions, the Securities Purchase Agreement and related
documents including the Convertible Debenture, the Escrow Agreement and the
Security Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.
(f) This Agreement shall inure to the benefit of and be binding upon the
permitted successors and assigns of each of the parties hereto.
12
(g) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in identical counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
(i) Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent and no rules of strict
construction will be applied against any party.
(j) This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
IN WITNESS WHEREOF, the parties have caused this Investor Registration
Rights Agreement to be duly executed as of day and year first above written.
COMPANY:
CITY NETWORK, INC
By: /s/ Tiao-Xxxx Xxx
---------------------------
Name: Xx Xxxx-Xxxx Xxx
Title:Chief Executive Officer
14
SCHEDULE I
SCHEDULE OF BUYERS
Address/Facsimile
Name Signature Number of Buyers
---- --------- ----------------
Cornell Capital Partners, LP By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxx: General Partner Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
By:
Name: Xxxx Xxxxxx
Its: Portfolio Manager
With a copy to: Xxxxx Xxxxxxxx, Esq. 000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
15
SCHEDULE II
REGISTRABLE SECURITIES
Number of Shares of Common Stock
Selling Stockholder Description to be Registered Initially
------------------- ----------- --------------------------
Highgate House Funds, Ltd. Shares of Common Stock 25,000
underlying warrants issued on
August 10, 2005
Cornell Capital Partners, LP Shares of Common Stock underlying Such number of shares equal to five
Convertible Debentures to be issued in (5) times the total principal balance
connection with the Securities of the Convertible Debenture remaining
Purchase Agreement at the time of filing divided by the
conversion price in effect at the time
of filing.
Cornell Capital Partners, LP Shares of Common Stock underlying 1,000,000
warrants to be issued in connection
with the Securities Purchase Agreement
16
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Attention:
Re: CITY NETWORK, INC.
Ladies and Gentlemen:
We are counsel to City Network, Inc, a Nevada corporation (the "COMPANY"),
and have represented the Company in connection with that certain Securities
Purchase Agreement (the "SECURITIES PURCHASE AGREEMENT") entered into by and
among the Company and the buyers named therein (collectively, the "BUYERS")
pursuant to which the Company issued to the Buyers shares of its Common Stock,
par value $0.001 per share (the "COMMON STOCK"). Pursuant to the Purchase
Agreement, the Company also has entered into the Investor Registration Rights
Agreement, dated _____ (the "REGISTRATION RIGHTS AGREEMENT"), with the Buyers
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement) under
the Securities Act of 1933, as amended (the "SECURITIES ACT"). In connection
with the Company's obligations under the Registration Rights Agreement, on
____________ ____, the Company filed a Registration Statement on Form ________
(File No. 333-_____________) (the "REGISTRATION STATEMENT") with the Securities
and Exchange Commission (the "SEC") relating to the Registrable Securities which
names each of the Buyers as a selling stockholder there under.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the Securities Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the Securities Act pursuant to the
Registration Statement.
Very truly yours,
[Law Firm]
By:
---------------------------------------------
cc: [LIST NAMES OF BUYERS]
17
