EXHIBIT 10.20
PLEDGE AND ESCROW AGREEMENT
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THIS PLEDGE AND ESCROW AGREEMENT (the "Agreement") is made and entered
into as of March 27, 2006 (the "Effective Date") by and among IVI
COMMUNICATIONS, INC., a corporation organized and existing under the laws of the
State of Nevada (the "Pledgor"), CORNELL CAPITAL PARTNERS, LP, (the "Pledgee"),
and XXXXX XXXXXXXX, ESQ., as escrow agent ("Escrow Agent").
RECITALS:
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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 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, either now or in the future, up to a total of Six Hundred
Thousand Dollars ($600,000) 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 15,000,000 shares (the "Pledged Shares") of the Pledgor's common
stock; and
WHEREAS, subject to the terms of the Convertible Debentures, the
Pledgee has the right to convert the Convertible Debentures into shares of the
Pledgor's common stock (the "Conversion Shares").
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
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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 to the Pledgee (the
"Obligations") under the Convertible Debentures. Simultaneously with the
execution of this Agreement, 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 pursuant to this Agreement 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.
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1.2. RETURN OF PLEDGED SHARES. Upon each conversion by the Pledgee into
an excess of 2,000,000 Conversion Shares, the number of Pledged Shares pursuant
to this Agreement shall be reduced by the number of Conversion Shares issued to
the Pledgee. The Pledgor and Pledgee shall provide joint written notice to the
Escrow Agent of such conversions instructing the Escrow Agent to return to the
Pledgor the Pledged Shares being reduced pursuant to this Section 1.2.
2. RIGHTS RELATING TO PLEDGED SHARES. Prior to the occurrence of an Event
of Default (as defined herein) and the issuance of Pledged Shares to the Pledgee
(in accordance with Section 5.1), the Pledged Shares shall not be, or be deemed
to be, issued or outstanding shares of the Pledgor and neither the Pledgee nor
any other person shall be entitled to vote the Pledged Shares, to receive
dividends and other distributions thereon, or to enjoy any 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 Note, 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 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 Convertible Debentures, 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.
5.1. Upon and anytime after the occurrence of an Event of Default, the
Pledgee shall have the right acquire the Pledged Shares in accordance with the
following procedure: (a) the Pledgee shall provide written notice of such Event
of Default (the "Default Notice") to the Escrow Agent, with a copy to the
Pledgor; (b) in a Default Notice the Pledgee shall specify the number of Pledged
Shares to be issued to the Plegdee, provided however, that the Pledgee shall not
have the right to acquire such number of Pledged Shares which would cause the
Pledgee, together with its affiliates, to beneficially own in excess of 9.99% of
the outstanding capital of the Pledgor (unless the Pledgee 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 Pledgor's Transfer Agent with instructions to issue such
Pledged Shares to the Pledgee in accordance with the Irrevocable Transfer Agent
Instructions of even date herewith, among the Pledgee, the Pledgor, the Escrow
Agent, and the Transfer Agent.
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5.2. Upon receipt of the Pledged Shares issued to the Pledgee, 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 Pledgor shall remain liable for shortfalls, if any, that may exist
after the Pledgee has exhausted all remedies hereunder. The Pledgee shall return
any Pledged Shares issued to it and instruct the Escrow Agent to return any
Pledged Shares it is holding in escrow after the all amounts owed to the Pledgee
under the Convertible Debentures have been satisfied.
5.3. 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.
5.4. DEMAND REGISTRATION RIGHTS. In addition to all other remedies
available to the Pledgee, upon the issuance of Pledged Shares to the Pledgee,
the Pledgor 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 the
Pledgee. The Pledgor shall cause the registration statement to remain in effect
until all of the Pledged Shares have been sold by the Pledgee.
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.
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6.3. 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.
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 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.
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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:
If to the Pledgor, to: IVI Communications, Inc.
0000 X. Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (310)
With a copy to: Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Pledgee: 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
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 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
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.
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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.
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.
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Portfolio Manager
IVI COMMUNICATIONS, INC.
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Chief Executive Officer
ESCROW AGENT
By: /s/ Xxxxx Xxxxxxxx, Esq.
Name: Xxxxx Xxxxxxxx, Esq.
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