EXHIBIT 10.10
PLEDGE AND ESCROW AGREEMENT
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THIS PLEDGE AND ESCROW AGREEMENT (the "Agreement") is made and entered into
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as of November ___, 2005 (the "Effective Date") by and among NS8 CORPORATION, a
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corporation organized and existing under the laws of the State of Delaware and
XXXXX XXXXXXX, XXXXXXX XXXXXX XXXXXX XXXXXXXX and XXXXXXX XXXX (collectively,
the "Pledgor"), CORNELL CAPITAL PARTNERS, LP, (the "Pledgee"), and XXXXX
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XXXXXXXX, ESQ., as escrow agent ("Escrow Agent").
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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 obligations
of NS8 Corporation (the "Obligations") to the Pledgee or any successor to the
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Pledgee under this Agreement, the Securities Purchase Agreement of even date
herewith between the Pledgor and the Pledgee (the "Securities Purchase
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Agreement"), the Convertible Debentures (the "Convertible Debentures") issued or
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to be issued by the Company to the Pledgee, either now or in the future, up to a
total of Three Million One Hundred Sixty Three Thousand Four Hundred Thirty
Dollars ($3,163,430) of principal, plus any interest, costs, fees, and other
amounts owed to the Pledgee thereunder, the Amended and Restated Security
Agreement of even date herewith between the Pledgor and the Pledgee (the
"Security Agreement"), and all other contracts entered into between the parties
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hereto (collectively, the "Transaction Documents"), the Pledgor has agreed to
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irrevocably pledge to the Pledgee 14,917,947 shares (the "Pledged Shares") of
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the Pledgor's common stock, which are owned by the Pledgor in the amounts
specified on the signature line hereto.
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.
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1.1. The Pledgor hereby grants to Pledgee a security interest in all
Pledged Shares as security for the obligations of NS8 Corporation under the
Convertible Debentures issued to the Pledgee under the Securities Purchase
Agreement of even date herewith. Simultaneously with the execution of the
Transaction Documents, 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
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shall be held by the Escrow Agent 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.
2. Rights Relating to Pledged Shares. Upon the occurrence of an Event
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of Default (as defined herein), the Pledgee 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 of all
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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 for
payment of the amounts due to the Pledgee under the Convertible Debentures, the
Escrow Agent shall return to the Pledgor the Transfer Documents and the
certificates representing the Pledged Shares, (collectively the "Pledged
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Materials"), whereupon any and all rights of Pledgee in the Pledged Materials
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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. As long as the Pledgee has not provided the
Escrow Agent a Default Notice (as defined herein), Xxxxx Xxxxxxx, Xxxxxxx Xxxxxx
Xxxxxx Xxxxxxxx, Xxxxxxx Xxxx and Xxxxx Hodendoorn shall be entitled to vote
their respective Pledged Shares, receive dividends and other distributions
thereon and enjoy all other rights and privileges incident to the ownership of
their respective Pledged Shares, except that such Pledgors shall not be entitled
to pledge or otherwise create a security interest in their respective Pledged
Shares.
4. Event of Default. An "Event of Default" shall be deemed to have
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occurred under this Agreement upon an Event of Default under the Transaction
Documents.
5. Remedies. Upon and anytime after the occurrence of an Event of
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Default, the Pledgee shall have the right to provide written notice of such
Event of Default (the "Default Notice") to the Escrow Agent, with a copy to the
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Pledgor. If within ten (10) calendar days of receiving the Default Notice, the
Pledgor does not cure the Event of Default contained in the Default Notice, as
soon as practicable thereafter, the Escrow Agent shall deliver to Pledgee the
Pledged Materials held by the Escrow Agent hereunder. Upon receipt of the
Pledged Materials, the Pledgee shall have the right to (i) sell the Pledged
Shares and to apply the proceeds of such sales, net of any selling commissions,
to the Obligations owed to the 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 Escrow Agent shall have the absolute right to disburse the
Pledged Shares to the Pledgee in batches not to exceed 9.9% of the outstanding
capital of the Pledgor (which limit may be waived by the Pledgee providing not
less than 65 days' prior written notice to the Escrow Agent). The Pledgee shall
return any Pledged Shares released to it and remaining after the Pledgee has
applied the net proceeds to all amounts owed to the Pledgee.
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5.1. 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.
5.2. Demand Registration Rights. In addition to all other remedies
available to the Pledgee, upon an Event of Default, the Pledgor shall promptly,
but in no event more than forty five (45) 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.
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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
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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
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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,
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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:
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If to the Pledgor, to: NS8 Corporation
000 Xxxxxxxxxx Xxxxxx - Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: McGuireWoods, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
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: 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
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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,
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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 pro-ceeding is
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brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresenta-tion 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 limita-tion, 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
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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 here-after 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
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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
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as a penalty upon any party to this Agreement.
13. JURY TRIAL. EACH OF THE PLEDGEE AND THE PLEDGOR HEREBY KNOWINGLY,
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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.
[SIGNATURE PAGES TO IMMEDIATELY FOLLOW]
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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
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Name: Xxxx Xxxxxx
Title: Portfolio Manager
XXXXX XXXXXXX
/s/ XXXXX XXXXXXX
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Title: Director
Number of shares pledged: 10,247,280
XXXXXXX XXXXXX XXXXXX XXXXXXXX
/s/ XXXXXXX XXXXXX XXXXXX XXXXXXXX
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Title: CFO
Number of shares pledged: 2,545,667
XXXXXXX XXXX
/s/ XXXXXXX XXXX
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Title: CEO
Number of shares pledged: 1,125,000
XXXXX XXXXXXXXXX
/s/ XXXXX XXXXXXXXXX
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Title: Consultant
Number of shares pledged: 1,000,000
Escrow Agent
By: /s/ Xxxxx Xxxxxxxx, Esq.
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Name: Xxxxx Xxxxxxxx, Esq.
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