EXHIBIT 10.17
PLEDGE AND ESCROW AGREEMENT
THIS PLEDGE AND ESCROW AGREEMENT (the "Agreement") is made and entered
into as of March 23, 2006 (the "Effective Date") by and among DIRECTVIEW, INC.,
a corporation organized and existing under the laws of the State of Nevada (the
"Pledgor"), CORNELL CAPITAL PARTNERS, LP ("Cornell"), HIGHGATE HOUSE FUNDS, LTD.
("Highgate"), (Cornell and Highgate collectively, the "Pledgee"), and XXXXX
XXXXXXXX, ESQ., as escrow agent ("Escrow Agent").
RECITALS:
WHEREAS, in order to secure the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all of the
Company's obligations 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 $1,212,329 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 250,000,000 shares (the
"Pledged Shares") of the Pledgor's common stock.
WHEREAS, subject to the terms of the Convertible Debentures, the
Pledgee has the right to convert at any time until payment in full, 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
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.
1.2. Return of Pledged Shares. Upon each conversion by the Pledgee into
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.
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.
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.
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: DirectView, Inc.
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxxx, Xxxxxxxxxx & Beilly, LLP
0000 Xxxxxxxxx Xxxx., XX, Xxxxx 000
Xxxx Xxxxx, XX 00000-0000
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
Highgate House Funds, Ltd.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copy to: Xxxxx Xxxxxxxx, 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.
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.
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
HIGHGATE HOUSE FUNDS, LTD
By: /s/ Xxxx Xxxxxx
--------------------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
DIRECTVIEW, INC.
By: /s/ Xxxxxxx Xxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President
ESCROW AGENT
By: /s/ Xxxxx Xxxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxxx, Esq.
