Exhibit 10.05
GUARANTY AND PLEDGE AGREEMENT
GUARANTY AND PLEDGE AGREEMENT (this "Agreement"), dated as of June
25, 2002, among Universe2U Inc., a Nevada corporation (the "Company"), Xxxxxx
Xxxxxx (the "Pledgor"), and AJW Partners, LLC, a limited liability company, New
Millennium Capital Partners II, LLC, a limited liability company, AJW/New
Millennium Offshore, Ltd., Pegasus Capital Partners, LLC (collectively herein,
the "Pledgees").
W I T N E S S E T H:
WHEREAS, the Company and the Pledgees are parties to that certain
Securities Purchase Agreement, of even date herewith (the "Purchase Agreement"),
pursuant to which the Company (i) has issued (a) 12% secured convertible
debentures in the aggregate principal amount of $500,000 and (b) stock purchase
warrants to purchase an aggregate of 500,000 shares of the Company's common
stock, $0.00001 par value per share (the "Common Stock") and (ii) will issue,
pursuant to Section 4(l) of the Purchase Agreement, (a) 12% secured convertible
debentures in the aggregate principal amount of $1,000,000, and (b) stock
purchase warrants to purchase an aggregate of 1,000,000 shares of the Common
Stock; and
WHEREAS, as a material inducement to the Pledgees to enter into the
Purchase Agreement, the Pledgees have required and the Pledgor has agreed,
subject to Section 2 hereof, (i) to unconditionally guarantee the timely and
full satisfaction of all obligations of the Company, whether matured or
unmatured, now or hereafter existing or created and becoming due and payable
(the "Obligations") to the Pledgees, their successors, endorsees, transferees or
assigns under the Transaction Documents (as defined in the Purchase Agreement)
to the extent of the Collateral (as defined in Section 5 hereof), and (ii) to
grant to the Pledgees, their successors, endorsees, transferees or assigns a
security interest in 3,000,000 shares of Common Stock currently owned by the
Pledgor (collectively, the "Shares"), as collateral security for Obligations.
Terms used and not defined herein shall have the meaning ascribed to them in the
Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, and the
mutual covenants contained herein, the parties hereby agree as follows:
26. Guaranty. Subject to Section 2 hereof, to the extent of the Collateral,
the Pledgor hereby absolutely, unconditionally and irrevocably guarantees
to the Pledgees, their successors, endorsees, transferees and assigns the
due and punctual performance and payment of the Obligations owing to the
Pledgees, their successors, endorsees, transferees or assigns when due,
all at the time and place and in the amount and manner prescribed in, and
otherwise in accordance with, the Transaction Documents. Notwithstanding
anything to the contrary contained herein, Pledgor shall have no personal
liability under this Agreement and the Pledgees' sole recourse shall be
with respect to the Collateral.
27. Rights Against Company. Pledgees shall use reasonable efforts to pursue
all available remedies to enforce the Obligations, and Pledgees shall not
be entitled to exercise their rights under this Agreement unless Pledgees
(i) have instituted a suit, action or proceeding against the Company to
compel performance or observance or to collect all or part of any such
amount, either pursuant to the provisions of the Security Agreement of
even date herewith by and among the Company and the Pledgees (the
"Security Agreement") or at law or in equity, and (ii) have not recovered
all losses, damages, costs and expenses from the Company within thirty
(30) days of the institution of such suit, action or proceeding. In the
event of a recovery by Pledgees of a portion, but not all, of its losses,
damages, costs and expenses from the Company, such partial recovery shall
reduce Pledgees' claims against the Collateral.
28. Covenants of Pledgor. Subject to Section 2 and Section 11 hereof, the
Pledgor hereby unconditionally covenants (i) that this Agreement will not
be discharged except by complete performance of all the Obligations to the
extent of the Collateral; (ii) agrees that this Agreement shall remain in
full force and effect without regard to, and shall not be affected or
impaired, without limitation, by, any invalidity, irregularity or
unenforceability in whole or in part of the Transaction Documents or any
limitation on the liability of the Company thereunder, or any limitation
on the method or terms of payment thereunder which may now or hereafter be
caused or imposed in any manner whatsoever; and (iii) waives diligence,
presentment and protest with respect to, and notice of default in the
performance or payment of any Obligation by the Company under or in
connection with the Transaction Documents.
29. Release. The obligations, covenants, agreements and duties of the Pledgor
hereunder shall not be released, affected or impaired by any assignment or
transfer, in whole or in part, of the Transaction Documents or any
Obligation, although made without notice to or the consent of the Pledgor,
or any waiver by the Pledgees, or by any other person, of the performance
or observance by the Company or the Pledgor of any of the agreements,
covenants, terms or conditions contained in the Transaction Documents, or
any indulgence in or the extension of the time or renewal thereof, or the
modification or amendment (whether material or otherwise), or the
voluntary or involuntary liquidation, sale or other disposition of all or
any portion of the stock or assets of the Company or the Pledgor, or any
receivership, insolvency, bankruptcy, reorganization, or other similar
proceedings, affecting the Company or the Pledgor or any assets of the
Company or the Pledgor, or the release of any proper from any security for
any Obligation, or the impairment of any such property or security, or the
release or discharge of the Company or the Pledgor from the performance or
observance of any agreement, covenant, term or condition contained in or
arising out of the Transaction
Documents by operation of law, or the merger or consolidation of the
Company, or any other cause, whether similar or dissimilar to the
foregoing.
30. Subrogation.
A. Unless and until complete performance of all the Obligations to the
extent of the Collateral, the Pledgor shall not be entitled to exercise any
right of subrogation to any of the rights of the Pledgees against the Company or
any collateral security or guaranty held by the Pledgees for the payment or
performance of the Obligations, nor shall the Pledgor seek any reimbursement
from the Company in respect of payments made by the Pledgor hereunder.
B. In the event that the Pledgor shall become obligated to perform or pay
any sums hereunder, or in the event that for any reason the Company is now or
shall hereafter become indebted to the Pledgor for borrowed money, the amount of
such sum shall at all times be subordinate as to lien, time of payment and in
all other respects, to the amounts owing to the Pledgees under the Transaction
Documents and the Pledgor shall not enforce or receive payment thereof until all
Obligations due to the Pledgees under the Transaction have been performed or
paid. Nothing herein contained is intended or shall be construed to give to the
Pledgor any right of subrogation in or under the Transaction Documents, or any
right to participate in any way therein, or in any right, title or interest in
the assets of the Pledgees.
31. Security. As collateral security for the punctual payment and performance,
when due, by the Company of all the Obligations, the Pledgor hereby
pledges with, hypothecates, transfers and assigns to the Pledgees all of
the Shares and all proceeds, shares and other securities received,
receivable or otherwise distributed in respect of or in exchange for the
Shares, including, without limitation, any shares and other securities
into which such Shares may be convertible or exchangeable (collectively,
the "Additional Collateral" and together with the Shares, the
"Collateral"). The Collateral shall be maintained by the escrow agent
pursuant to that certain lock-up agreement dated May 8, 2002 executed by
the Pledgor (the "Escrow Agent"). In the event that the Pledgees seek to
enforce their rights against the Collateral upon a breach by the Company
of the Obligations, the Company hereby agrees, upon request of the
Pledgees, to terminate the lock-up agreement by notice to the Escrow
Agent, which notice shall state that the termination has been requested by
the Pledgees as a result of a breach by the Company of its Obligations.
Pledgor hereby irrevocably instructs the Escrow Agent to deliver the
Shares to the Pledgees upon termination of the lock-up agreement by the
Company under such circumstances.
32. Voting Power, Dividends, Etc. and other Agreements.
A. Unless and until an Event of Default (as set forth in Section 7 hereof)
has occurred, the Pledgor shall be entitled to:
1. Exercise all voting and/or consensual powers pertaining to the
Collateral, or any part thereof, for all purposes;
2. Receive and retain dividends paid with respect to the Collateral;
and
3. Receive the benefits of any income tax deductions available to
the Pledgor as a shareholder of the Company.
B. The Pledgor agrees that it will not sell, assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of the Collateral.
C. The Pledgor and the Company jointly and severally agree to pay all
costs including all reasonable attorneys' fees and disbursements incurred by the
Pledgees in enforcing this Agreement in accordance with its terms.
33. Default and Remedies.
A. For the purposes of this Agreement, "Event of Default" shall mean:
1. default in or under any of the Obligations after the expiration,
without cure, of any applicable cure period;
2. a breach in any material respect by the Company of any of its
representations or warranties in the Transaction Documents; or
3. a breach in any material respect by the Pledgor of any of its
representations or warranties in this Agreement.
B. the Pledgees shall have the following rights upon any Event of Default:
1. the rights and remedies provided by the Uniform Commercial Code
as adopted by the State of New York (the "UCC") (as said law may at any time be
amended);
2. the right to receive and retain all dividends, payments and other
distributions of any kind upon any or all of the Collateral;
3. the right to cause any or all of the Collateral to be transferred
to its own name or to the name of its designee and have such transfer recorded
in any place or places deemed appropriate by the Pledgees; and
4. the right to sell, at a public or private sale, the Collateral or
any part thereof for cash, upon credit or for future delivery, and at such price
or prices in accordance with the UCC (as such law may be amended from time to
time). Upon any such sale the Pledgees shall have the right to deliver, assign
and transfer to the purchaser thereof the Collateral so sold. The Pledgees shall
give the Pledgor not less than ten (10) days' written notice of its intention to
make any such sale. Any such sale, shall be held at such time or times during
ordinary business hours and at such place or places as the Pledgees may fix in
the notice of such sale. The Pledgees may adjourn or cancel any sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral upon terms calling for payments in the future, any Collateral so sold
may be retained by the Pledgees until the selling price is paid by the purchaser
thereof, but the Pledgees shall
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incur no liability in the case of the failure of such purchaser to take up and
pay for the Collateral so sold and, in the case of such failure, such Collateral
may again be sold upon like notice. The Pledgees, however, instead of exercising
the power of sale herein conferred upon them, may proceed by a suit or suits at
law or in equity to foreclose the security interest and sell the Collateral, or
any portion thereof, under a judgment or decree of a court or courts of
competent jurisdiction, the Pledgor having been given due notice of all such
action. The Pledgees shall incur no liability as a result of a sale of the
Collateral or any part thereof. All proceeds of any such sale, after deducting
the reasonable expenses and reasonable attorneys' fees incurred in connection
with such sale, shall be applied in reduction of the Obligations, and the
remainder, if any, shall be paid to the Pledgor.
34. Application of Proceeds; Release. The proceeds of any sale or enforcement
of or against all or any part of the Collateral, and any other cash or
collateral at the time held by the Pledgees hereunder, shall be applied by
the Pledgees first to the payment of the reasonable costs of any such sale
or enforcement, then to reimburse the Pledgees for any damages, costs or
expenses incurred by the Pledgees as a result of an Event of Default, then
to the payment of the principal amount or stated valued (as applicable)
of, and interest or dividends (as applicable) and any other payments due
in respect of, the Obligations. The remainder, if any, shall be paid to
the Pledgor. As used in this Agreement, "proceeds" shall mean cash,
securities and other property realized in respect of, and distributions in
kind of, the Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of any issuer of
securities included in the Collateral.
35. Representations and Warranties.
A. The Pledgor hereby represents and warrants to the Pledgees that:
1. the Pledgor has full power and authority and legal right to
pledge the Collateral to the Pledgees pursuant to this Agreement and this
Agreement constitutes a legal, valid and binding obligation of the Pledgor,
enforceable in accordance with its terms.
2. the execution, delivery and performance of this Agreement and
other instruments contemplated herein will not violate any provision of any
order or decree of any court or governmental instrumentality or of any mortgage,
indenture, contract or other agreement to which the Pledgor is a party or by
which the Pledgor and the Collateral may be bound, and will not result in the
creation or imposition of any lien, charge or encumbrance on, or security
interest in, any of the Pledgor's properties pursuant to the provisions of such
mortgage, indenture, contract or other agreement.
3. the Pledgor is the sole record and beneficial owner of all of the
Shares; and
4. the Pledgor owns the Collateral free and clear of all Liens.
B. The Company represents and warrants to the Pledgees that:
1. it has no knowledge that any of the representations or warranties
of the Pledgor herein are incorrect or false in any material respect;
2. all of the Shares were validly issued, fully paid and
non-assessable; and
3. the Pledgor is the record holder of the Shares.
36. No Waiver; No Election of Remedies. No failure on the part of the Pledgees
to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by the Pledgees of any right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right,
power or remedy. The remedies herein provided are cumulative and are not
exclusive of any remedies provided by law. In addition, the exercise of
any right or remedy of the Pledgees at law or equity or under this
Agreement or any of the documents shall not be deemed to be an election of
Pledgee's rights or remedies under such documents or at law or equity.
37. Termination. This Agreement shall terminate on the earlier of the date on
which (i) the Company grants the Pledgees a security interest in all of
the assets of the Company as set forth in the Security Agreement
subordinate to the rights of no other parties except the rights of
Laurentian Bank of Canada in funds held for the benefit of the Company or
its subsidiaries at such bank and in certain contract receivables as may
exist from time to time or (ii) all Obligations have been performed,
satisfied, paid or discharged in full.
38. Further Assurances. The parties hereto agree that, from time to time upon
the written request of any party hereto, they will execute and deliver
such further documents and do such other acts and things as such party may
reasonably request in order fully to effect the purposes of this
Agreement.
39. Miscellaneous.
A. Modification. This Agreement contains the entire understanding between
the parties with respect to the subject matter hereof and specifically
incorporates all prior oral and written agreements relating to the subject
matter hereof. No portion or provision of this Agreement may be changed,
modified, amended, waived, supplemented, discharged, canceled or terminated
orally or by any course of dealing, or in any manner other than by an agreement
in writing, signed by the party to be charged.
B. Notice. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day (as defined in the Purchase Agreement), (ii) the
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified
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in this Agreement later than 6:30 p.m. (New York City time) on any date and
earlier than 11:59 p.m. (New York City time) on such date, (iii) the Business
Day following the date of mailing, if sent by nationally recognized overnight
courier services, or (iv) upon actual receipt by the party to whom such notice
is required to be given. The address for such notices and communications shall
be as follows:
If to the Company: Universe2U Inc.
00 Xxxx Xxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxx X0X 0X0
Facsimile No.: 000-000-0000
Attn: Xxx Xxxxx
With copies to: Xxxxxxxxxx Xxxxxxxxx & Xxxxxx LLP
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: 212-986-2399
Attn: Xxxxx Xxxxxxxxx, Esq.
If to the Pledgor: Xxxxxx Xxxxxx
c/o Universe2U Inc.
00 Xxxx Xxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxx X0X 0X0
Facsimile No.: 000-000-0000
With copies to: Xxxxxx Xxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Facsimile No.: (000) 000-0000
Attn: Xxxx Xxxxxx
If to the Pledgees: AJW Partners, LLC
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
New Millennium Capital Partners II, LLC
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
AJW/New Millennium Offshore, Ltd.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
Pegasus Capital Partners, LLC
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
With copies to: Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xx.
Xxxxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
C. Invalidity. If any part of this Agreement is contrary to, prohibited
by, or deemed invalid under applicable laws or regulations, such provision shall
be inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.
D. Benefit of Agreement. This Agreement shall be binding upon and inure to
the parties hereto and their respective successors and assigns.
E. Mutual Agreement. This Agreement embodies the arm's length negotiation
and mutual agreement between the parties hereto and shall not be construed
against either party as having been drafted by it.
F. New York Law to Govern. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principals of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
Federal courts sitting in the city of New York, borough of Manhattan, 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
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that it is not personally subject to the jurisdiction of any such court or that
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 in effect for 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Guaranty and
Pledge Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
UNIVERSE2U INC.
By: /s/ Xxx Xxxxx
------------------------------------
Xxx Xxxxx
Chief Executive Officer
Pledgees:
AJW PARTNERS, LLC
By: First Street Manager II, LLC
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx
Manager
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx
Manager
AJW/NEW MILLENNIUM OFFSHORE, LTD.
By: First Street Manager II, LLC
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx
Manager
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PEGASUS CAPITAL PARTNERS, LLC
By: Pegasus Manager, LLC
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx
Manager
Pledgor:
/s/ Xxxxxx Xxxxxx
----------------------------------------
Xxxxxx Xxxxxx
Number of Shares subject to this pledge:
3,000,000
Date such Shares were acquired:
May 17, 2000
Acknowledgement by Escrow Agent:
By execution hereof, Escrow Agent acknowledges that it holds the Collateral
pursuant to the terms of the lock-up agreement referred to in Section 6 of this
Agreement, as well as for the benefit of Pledgees under this Agreement, and
agrees to deliver the Collateral to Pledgees upon termination of the lock-up
agreement under the circumstances described in Paragraph 6 of this Agreement.
Escrow Agent:
/s/ Xxxxxxx X. Xxxxxxxxx
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