UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
CITY NETWORK, INC.
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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CITY NETWORK, INC.
2F-1, No. 16, Jian Ba Road, Chung Ho City
Taipei County 235, Taiwan, ROC
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
to be held on April 25, 2006
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TO THE STOCKHOLDERS OF CITY NETWORK, INC.:
The Special Meeting of the stockholders of City Network, Inc., a Nevada
corporation, will be held on April 25, 2006, at 10:00 a.m. (local time), at B2F.
No. 726, Jhongjheng Rd., Jhonghe City, Taipei County 235, Taiwan, ROC [Chinese
address provided] for the following purposes:
1. To approve the issuance of Common Stock in connection with
transactions with Cornell Capital Partners, LP and its affiliates,
including shares (i) issuable upon conversion of the Company's secured
convertible notes; (ii) issuable upon the exercise of warrants issued
to the investor with the notes, as those terms are defined herein;
(iii) securing the Company's secured convertible notes; (iv) issuable
to pay for liquidated damages, in lieu of cash payments, in connection
with the Company's obligation to register conversion shares and
warrant shares with the Securities and Exchange Commission; and (v)
issued as compensation for such transactions, to the extent such
issuances require stockholder approval under The American Stock
Exchange rules; and
2. To transact any other business as may properly be presented at the
Special Meeting or any adjournment or postponement thereof.
Stockholders of record at the close of business on March 15, 2006 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment or
postponement thereof.
Your attention is directed to the Proxy Statement accompanying this Notice
for a more complete statement of matters to be considered at the Special
Meeting.
All stockholders are cordially invited to attend the Special Meeting.
Whether or not expect to attend, you are respectfully requested by the Board of
Directors to sign, date and return the enclosed proxy promptly. A return
envelope is enclosed for your convenience. Stockholders who execute proxies
retain the right to revoke them at any time prior to the voting thereof.
By Order of the Board of Directors,
/s/ Tiao-Tsan "Andy" Lai
----------------------------------------
Tiao-Tsan "Andy" Lai
Chairman, President and Chief Executive Officer
Dated: March __, 2006
CITY NETWORK, INC.
2F-1, No. 16, Jian Ba Road, Chung Ho City
Taipei County 235, Taiwan, ROC
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PROXY STATEMENT
for
Special Meeting of Stockholders
to be held on April 25, 2006
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INTRODUCTION
Your proxy is solicited by the Board of Directors of City Network, Inc., a
Nevada corporation (the "Company", "we", "us" or "our"), for use at the Special
Meeting of stockholders to be held on April 25, 2006, at 10:00 a.m. (local
time), at B2F. No. 726, Jhongjheng Rd., Jhonghe City, Taipei County 235, Taiwan,
ROC [Chinese address provided], and at any adjournment or postponement thereof
(the "Special Meeting"), for the following purposes:
1. To approve the issuance of Common Stock in connection with
transactions with Cornell Capital Partners, LP and its affiliates,
including shares (i) issuable upon conversion of the Company's secured
convertible notes; (ii) issuable upon the exercise of warrants issued
to the investor with the notes, as those terms are defined herein;
(iii) securing the Company's secured convertible notes; (iv) issuable
to pay for liquidated damages, in lieu of cash payments, in connection
with the Company's obligation to register conversion shares and
warrant shares with the Securities and Exchange Commission; and (v)
issued as compensation for such transactions, to the extent such
issuances require stockholder approval under The American Stock
Exchange rules; and
2. To transact any other business as may properly be presented at the
Special Meeting or any adjournment or postponement thereof.
The Board of Directors has set March 15, 2006 as the record date (the
"Record Date") to determine those holders of our common stock, par value $0.001
per share (the "Common Stock") who are entitled to notice of, and to vote at the
Special Meeting. The list of stockholders entitled to vote at the Special
Meeting may be examined at our office during the 10-day period preceding the
date of the Special Meeting.
The Company expects that the Notice of Special Meeting of Stockholders,
Proxy Statement and Proxy Card will first be mailed to stockholders on or about
March 30, 2006.
GENERAL INFORMATION ABOUT VOTING
WHO CAN VOTE?
You can vote your Common Stock if our records show that you owned the
shares on the Record Date. As of the close of business on the Record Date, a
total of [30,934,366] shares of Common Stock (not including treasury shares) are
entitled to vote at the Special Meeting. Each share of Common Stock is entitled
to one vote on matters presented at the Special Meeting.
HOW DO I VOTE BY PROXY?
Follow the instructions on the enclosed proxy card to vote on each proposal
to be considered at the Special Meeting. Sign and date the proxy card and mail
it back to us in the enclosed envelope.
The enclosed proxy, when properly signed and returned to us, will be voted
by the proxy holders at the Special Meeting as specified on the form of proxy.
Proxies signed by stockholders but lacking any such specification will be voted
in favor of the proposals set forth in the Notice of Special Meeting of
Stockholders.
WHAT IF OTHER MATTERS COME UP AT THE SPECIAL MEETING?
The matters described in this proxy statement are the only matters we know
of that will be voted on at the Special Meeting. If other matters are properly
presented at the Special Meeting, the proxy holders will vote your shares as
they see fit.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. A proxy card may be revoked by a stockholder at any time before its
exercise at the Special Meeting by giving our Secretary a written notice
revoking your proxy card or a duly executed proxy bearing a later date or by
attendance at the Special Meeting and voting in person.
CAN I VOTE IN PERSON AT THE SPECIAL MEETING RATHER THAN BY COMPLETING THE PROXY
CARD?
Although we encourage you to complete and return the proxy card to ensure
that your vote is counted, you can attend the Special Meeting and vote your
shares in person.
HOW ARE VOTES COUNTED?
We will hold the Special Meeting if holders of at least one-third of the
Common Stock entitled to vote in person or by proxy either attend the Special
Meeting or sign and return their proxy cards. If you sign and return your proxy
card, your shares will be counted to determine whether we have a quorum, even if
you abstain or fail to vote on the proposal listed on the proxy card.
The proposal will be approved, if the number of votes cast in favor of the
proposal exceeds the number of votes cast against the proposal at the Special
Meeting, provided that a quorum exists. An abstention will have no effect on the
outcome of the vote. Unless otherwise stated, the enclosed proxy will be voted
in accordance with the instructions thereon.
Brokers holding Common Stock in street name, who do not receive
instructions from the beneficial owners of those shares, are entitled to vote on
"routine" proposals such as the election of directors and the ratification of
our independent auditors. Under The American Stock Exchange rules, however,
brokers who do not receive instructions from the beneficial owners of such
shares are not entitled to vote on "non-routine" proposals, including the
proposal submitted with this Proxy Statement. This is called a "broker
non-vote," which will have no legal effect on the vote on that matter.
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WHO PAYS FOR THIS PROXY SOLICITATION?
We do. In addition to sending you these materials, some of our employees
may contact you by telephone, by mail, by fax, by email, or in person. None of
these employees will receive any extra compensation for doing this.
WHY ARE WE SEEKING STOCKHOLDER APPROVAL FOR THE PROPOSAL?
In connection with transactions with Cornell Capital Partners, LP and its
affiliates, we are seeking approval of the issuance of Common Stock that could
exceed 20% of the outstanding amount. The American Stock Exchange Company Guide
requires stockholders to approve any such issuance at a price less than market
value.
The Common Stock issuable pursuant to the transactions further described
under "Proposal 1" of this Proxy Statement, which, for this purpose, we
anticipate The American Stock Exchange will consider a single transaction, will
exceed, in the aggregate, 20% of our outstanding Common Stock and include shares
to be issued below market price. Therefore, our Board of Directors seeks
stockholder approval of the issuance of Common Stock pursuant to such
transactions.
3
OUTSTANDING SHARES AND VOTING RIGHTS
Stockholders entitled to notice of, and to vote at, the Special Meeting and
any adjournment or postponement thereof, are stockholders of record at the close
of business on the Record Date. Persons who are not stockholders of record on
the Record Date will not be allowed to vote at the Special Meeting. At the close
of business on the Record Date there were [30,934,366] shares of Common Stock
outstanding and 2,032,817 shares of Common Stock held as treasury shares. We
issued no other voting securities as of the Record Date. Each share of issued
and outstanding Common Stock is entitled to one (1) vote on each matter to be
voted upon at the Special Meeting.
DESCRIPTION OF COMMON STOCK
Our current authorized capital stock consists of 100,000,000 shares of
Common Stock, of which [30,934,366] shares were outstanding and 2,032,817 shares
were held as treasury shares as of March 10, 2006, and 50,000,000 shares of
preferred stock, par value $.001 per share, none of which were issued and
outstanding as of March 10, 2006.
Each holder of our Common Stock is entitled to one vote for each share held
of record on all matters to be voted on by the stockholders. Subject to the
preferential rights of the preferred stock, the holders of our Common Stock
shall be entitled to receive dividends, when and if declared by our board of
directors, out of our assets which are by law available therefor. In the event
of our liquidation, dissolution or winding up, after distribution in full of the
preferential amounts, if any, to be distributed to the holders of shares of our
preferred stock, our Common Stock holders shall be entitled to received all of
our remaining assets of whatever kind available for distribution to stockholders
ratably in proportion to the amount of Common Stock held by them respectively.
Our Common Stock holders, as such, have no preemptive, or preferential right or
subscription right to any Common Stock or to any obligations convertible into
Common Stock, or to any warrant or option for the purchase thereof, except to
the extent, if any, provided by our written agreement. All of the outstanding
Common Stock are validly issued, fully-paid and nonassessable.
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SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth as of March 10, 2006 the Common Stock
beneficially owned by (i) each person who is known by us to be the beneficial
owner of more than five percent of the Common Stock; (ii) each of our directors;
(iii) each of our executive officers; and (iv) all directors and executive
officers as a group. Unless otherwise indicated, the stockholders listed in the
table have sole voting and investment power with respect to the shares
indicated.
Number of Shares Percent of Common
Beneficially Stock Beneficially
Name and Address (1) Owned (2) Owned (3)
-------------------- --------- ---------
Tiao-Tsan "Andy" Lai 2,000,000 6.5%
Yun-Yi "Stella" Tseng 844,000 2.7%
Alice Chen 66,000 *
I-Min Ou 25,000 *
Chin-Yuan Liao 50,000 *
Mei-Chu Lai 648,000 2.1%
Kao-Yu Hung 1,161,000 3.8%
Chung-Chieh "Kevin" Lin 0 *
Yong Su 0 *
Pi-Liang Liu 0 *
All officers and directors
as a group (10 persons) 4,794,000 15.5%
----------
* Indicates less than one percent.
(1) The address of each holder is c/o City Network, Inc., 2F-1, No. 16, Jian Ba
Road, Chung Ho City, Taipei County 235, Taiwan, ROC.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC") and generally includes
voting or investment power with respect to the shares shown. Subject to
community property laws where applicable, to our knowledge, the
stockholders named in the table have sole voting and investment power with
respect to all Common Stock shown as beneficially owned by them. A person
is deemed to be the beneficial owner of securities that can be acquired by
such person within 60 days upon the exercise of options, warrants or
convertible securities (in any case, the "Currently Exercisable Options").
Each beneficial owner's percentage ownership is determined by assuming that
the Currently Exercisable Options that are held by such person (but not
those held by any other person) have been exercised and converted.
(3) Based on 30,934,366 shares of Common Stock issued and outstanding as of
March 10, 2006.
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PROPOSAL 1
TO APPROVE THE ISSUANCE OF COMMON STOCK IN CONNECTION WITH TRANSACTIONS WITH
CORNELL CAPITAL PARTNERS, LP AND ITS AFFILIATES, INCLUDING SHARES (I) ISSUABLE
UPON CONVERSION OF THE COMPANY'S SECURED CONVERTIBLE NOTES; (II) ISSUABLE UPON
THE EXERCISE OF WARRANTS ISSUED TO THE INVESTOR WITH THE NOTES; (III) SECURING
THE COMPANY'S SECURED CONVERTIBLE NOTES; (IV) ISSUABLE TO PAY FOR LIQUIDATED
DAMAGES, IN LIEU OF CASH PAYMENTS, IN CONNECTION WITH THE COMPANY'S OBLIGATION
TO REGISTER CONVERSION SHARES AND WARRANT SHARES WITH THE SECURITIES AND
EXCHANGE COMMISSION; AND (V) ISSUED AS COMPENSATION FOR SUCH TRANSACTIONS, TO
THE EXTENT SUCH ISSUANCES REQUIRE STOCKHOLDER APPROVAL UNDER THE AMERICAN STOCK
EXCHANGE RULES.
SUMMARY OF CURRENT TRANSACTIONS
On March 16, 2006, we entered a Securities Purchase Agreement (the
"Purchase Agreement") with Cornell Capital Partners, LP ("Cornell Capital" or
the "Investor") and Highgate House Funds, Ltd. ("Highgate"), an affiliate of
Cornell Capital for us to issue up to $650,000 in the aggregate principal amount
of secured convertible notes (the "New Notes") to the Investor. We plan to close
this transaction as soon as practicable, once we obtain stockholder approval of
the issuance of Common Stock pursuant to the transactions.
The New Notes become due on the three-year anniversary of their issuance
date (the "Maturity Date") and accrue interest at 7% annually. The New Notes are
convertible into Common Stock at a per share conversion price equal to the lower
of (a) $0.268, as adjusted for anti-dilution (the "Fixed Conversion Price"), and
(b) 95% of the lowest volume weighted average price of the Common Stock, as
reported by Bloomberg, LP, for the 30 trading days immediately before the date
on which the Investor converts (such price, the "Market Conversion Price" and,
with the Fixed Conversion Price and the Market Conversion Price, the "Conversion
Price").
We may, in our sole discretion at any time, redeem any or all of the New
Notes by paying the principal amount being redeemed with accrued interest, and a
20% premium on the principal, if the closing bid price of the Common Stock is
less than the Fixed Conversion Price at the time we give the redemption notice.
The New Notes will be secured by (a) substantially all of our assets and
the assets of our direct and indirect wholly-owned subsidiaries, City Network
Technology, Inc., City Network, Inc. - Taiwan, and City Construction Co., Ltd.,
(b) 4,445,455 shares of Common Stock held in escrow and securing our Original
Notes, as further described below under "Summary of Prior Transactions", and (c)
if we issue over $275,000 in aggregate principal amount of the New Notes
pursuant to the Purchase Agreement, a pledge of 2,000,000 additional shares of
Common Stock to be issued by us and held in escrow (all such pledged shares, the
"Pledged Shares"). Any Pledged Shares released to the Investor will be subject
to demand registration rights.
Upon closing the transactions completed by the Purchase Agreement, we will
issue five-year warrants (the "New Warrants") to the Investor to purchase up to
1,000,000 shares of Common Stock at $0.001 per share.
We entered a Registration Rights Agreement with the Investor pursuant to
which we are required to file a registration statement with the SEC (the
"Registration Statement") registering the Common Stock issuable upon conversion
of the New Notes and exercise of the New Warrants, in full. If the Registration
Statement is not filed within 30 days after the date we issue the New Notes (the
"Filing Date"), or is not declared effective by the SEC within 90 days of the
6
Filing Date, we must pay liquidated damages, in cash or Common Stock, at the
Investor's option, in an amount equal to 2% of the value of the New Notes for
each 30 day delay. The liquidated damages are capped at 20% of the aggregate
face value of the New Notes.
The Investor may not convert any principal amount under the New Notes or
exercise the New Warrant if, upon such conversion or exercise, the Investor
would beneficially own more than 4.99% of the outstanding Common Stock following
such conversion or exercise. Until 18 months after the date of the Purchase
Agreement, the Investor will have a right of first refusal on any transaction in
which we issue capital stock.
We paid Yorkville Advisors LLC, an affiliate of Cornell Capital, a
structuring fee equal to $10,000, upon signing the definitive documents for the
transactions, and are required to pay a commitment fee out of the gross proceeds
of the New Notes of up to $40,000, or 10% of the principal amount greater than
$250,000, upon the issuance of the New Notes.
The net proceeds will be used to repay the currently outstanding principal
amount of the Original Notes, plus accrued interest, with the remainder, if any,
to be used for working capital purposes, such as payment of listing fees to The
American Stock Exchange, legal fees, and filing fees to the SEC for the
Registration Statement. Upon the issuance of the entire $650,000 in New Notes,
we anticipate that substantially all proceeds will be used for such purposes and
that any balance available for working capital purposes will be insignificant.
SUMMARY OF PRIOR TRANSACTIONS
On August 10, 2005, we entered a Securities Purchase Agreement (the
"Original Purchase Agreement"), with Highgate and, pursuant thereto, in August
2005 and December 2005, issued two secured convertible notes, in aggregate
principle amount of $250,000 (the "Original Notes"). We will use approximately
$275,000 in net proceeds from the New Notes to repay the Original Notes. We will
not pay a redemption premium upon our repayment of the Original Notes.
In connection with the Original Purchase Agreement, Highgate received a
warrant to purchase up to 25,000 shares of Common Stock (the "Original
Warrant"), and we entered a Standby Equity Distribution Agreement (the "SEDA")
with Cornell Capital. Monitor Capital, Inc. received 44,455 shares of Common
Stock to act as a placement agent for us in connection with the SEDA. Cornell
Capital received 977,273 shares of Common Stock as compensation for entering the
SEDA. Upon the issuance of the New Notes, Cornell Capital and we will terminate
the SEDA and Cornell Capital will return its 977,273 shares it received for
entering the SEDA to us for cancellation.
WHY WE NEED STOCKHOLDER APPROVAL - THE AMERICAN STOCK EXCHANGE COMPANY GUIDE
RULE 713
In connection with the transactions with Cornell Capital, we are seeking
approval of the issuance of Common Stock that could exceed 20% of the
outstanding amount. The American Stock Exchange Company Guide requires
stockholders to approve any such issuance at a price less than market value.
The Common Stock issued or issuable pursuant to the foregoing transactions
or convertible notes or warrants issued pursuant thereto (collectively, the
"Transaction Shares"), which, for this purpose, we anticipate The American Stock
Exchange will consider a single transaction, will exceed, in the aggregate, 20%
of our outstanding Common Stock and include shares to be issued below market
price. Therefore, our Board of Directors seeks stockholder approval of the
issuance of such Transaction Shares.
CONSEQUENCES OF THE FAILURE TO OBTAIN STOCKHOLDER APPROVAL
Without such stockholder approval, we would be unable to issue more than
5,500,000 Transaction Shares, and accordingly, Cornell Capital may elect to fund
only convertible debt in the principal amount of only $275,000. We will use all
of such proceeds from such issuance to repay the currently outstanding principal
amount of the Original Notes, plus accrued interest and would not have access to
the remaining funds for working capital purposes, as described further herein.
However, we would not be required to issue an additional 2,000,000 shares of
Common Stock to secure the New Notes.
7
FACTORS AFFECTING CURRENT STOCKHOLDERS - POTENTIAL DILUTION AND MARKET
CONSEQUENCES
While the Board of Directors unanimously approved the issuance of all of
the Transaction Shares and resolved that these transactions are in its and its
stockholders' best interests, our stockholders should consider the following
possible factors as well as other information contained in the Proxy Statement
in evaluating this Proposal.
The issuance of the Transaction Shares could substantially dilute the
interests of our other stockholders, but sales of the Transaction Shares could
encourage short sales by the stockholders and others, placing further downward
pressure on our stock price. Moreover, the holders of the New Notes, the New
Warrants, and the Original Warrant, subject to applicable laws, may hedge their
positions, which could further adversely affect the stock price. The effect on
our stock price could increase the number of shares required to be issued upon
conversion of the New Notes or upon exercise of the New Warrants or Original
Warrant.
The Investor may not convert any principal amount under the New Notes or
exercise the New Warrants if, upon such conversion or exercise, the Investor,
together with its affiliates, would beneficially own at any time more than 4.99%
of the outstanding Common Stock following such conversion or exercise. This
restriction does not prevent the Investor from selling a substantial number of
shares in the market. By periodically selling Common Stock into the market, an
individual holder could eventually sell more than 4.99% of Common Stock while
never holding more than 4.99% at any specific time.
REQUIRED VOTE
Ratification and approval of issuance of the Transaction Shares under The
American Stock Exchange rules, requires that the number of votes cast in favor
of the proposal exceeds the number of votes cast against the proposal at the
Special Meeting, provided that a quorum exists.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ABOVE PROPOSAL.
8
MISCELLANEOUS
2006 STOCKHOLDER PROPOSALS
Rule 14a-4 of the SEC proxy rules allows us to use discretionary voting
authority to vote on matters coming before an annual meeting of stockholders if
we do not have notice of the matter at least 45 days before the date
corresponding to the date on which we first mailed its proxy materials for the
prior year's annual meeting of stockholders or the date specified by an
overriding advance notice provision in our bylaws. Our bylaws do not contain
such an advance notice provision.
The Annual Meeting of Stockholders for the fiscal year ending December 31,
2006 is expected to be held in December 2006. The Proxy Statement and Proxy Card
will be sent to stockholders in an initial mailing on or about December 5, 2006.
Proposals of stockholders pursuant to Rule 14a-8 of the Exchange Act intended to
be presented at our 2006 Annual Meeting of Stockholders must be received by us
no later than August 4, 2006. Such proposals must comply with the requirements
as to form and substance established by the SEC for such proposals in order to
be included in the proxy statement.
A stockholder who wishes to make a proposal at our 2006 Annual Meeting of
Stockholders without including the proposal in our proxy statement and proxy
card for such meeting must notify us no later than October 20, 2006. Under our
current bylaws, for our 2006 Annual Meeting of Stockholders, stockholders must
submit such written notice to our Secretary, on or before October 20, 2006 and
include as to each matter the stockholder wishes to be brought before the Annual
Meeting: (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of the stockholder proposing such
business, (iii) the class and number of our shares which are beneficially owned
by the stockholder, and (iv) any material interest of the stockholder in such
business. Such proposals must also meet the other requirements of the rules of
the SEC relating to stockholder proposals.
9
OTHER BUSINESS
Management is not aware of any matters to be presented for action at the
Special Meeting, except matters discussed in the Proxy Statement. If any other
matters properly come before the meeting, it is intended that the shares
represented by proxies will be voted in accordance with the judgment of the
persons voting the proxies.
By Order of the Board of Directors
/s/ Tiao-Tsan "Andy" Lai
----------------------------------
Tiao-Tsan "Andy" Lai
Chairman, President and Chief Executive Officer
March ___, 2006
10
CITY NETWORK, INC.
PROXY FOR SPECIAL MEETING
TO BE HELD ON APRIL 25, 2006
The undersigned stockholder of City Network, Inc., a Nevada corporation
(the "Company"), hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and Proxy Statement and hereby appoints Tiao-Tsan "Andy" Lai,
Yun-Yi "Stella" Tseng and Alice Chen, or any of them, proxies and
attorneys-in-fact, with full power to each of substitution and revocation, on
behalf and in the name of the undersigned, to represent the undersigned at the
Special Meeting of Stockholders of the Company to be held at 10:00 a.m. (local
time) at B2F. No. 726, Jhongjheng Rd., Jhonghe City, Taipei County 235, Taiwan,
ROC [Chinese address provided] on April 25, 2006, or at any adjournment or
postponement thereof, and to vote, as designated below, all common stock of the
Company which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 1.
1. To approve the issuance of Common Stock in connection with transactions
with Cornell Capital Partners, LP and its affiliates, including shares (i)
issuable upon conversion of the Company's secured convertible notes; (ii)
issuable upon the exercise of warrants issued to the investor with the
notes; (iii) securing the Company's secured convertible notes; (iv)
issuable to pay for liquidated damages, in lieu of cash payments, in
connection with the Company's obligation to register conversion shares and
warrant shares with the SEC; and (v) issued as compensation for such
transactions, to the extent such issuances require stockholder approval
under The American Stock Exchange rules.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In his or her discretion, the proxies are authorized to vote upon any
matters, which may properly come before the Meeting, or any adjournment or
postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED "FOR" EACH PROPOSAL SPECIFICALLY IDENTIFIED ABOVE.
Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Date: _____________, 2006 ___________________________________
___________________________________
PLEASE DATE AND SIGN ABOVE exactly as name
appears at the left, indicating, where
proper, official position or representative
capacity. For stock held in joint tenancy,
each joint owner should sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.