GUARANTY AND PLEDGE AGREEMENT
GUARANTY AND PLEDGE AGREEMENT (this "Agreement"), dated as of February 6,
2003, among iDial Networks, Inc., Inc., a Nevada corporation (the "Company"),
Xxxx X. Xxxx (the "Pledgor"), AJW Partners, LLC, a limited liability company
("AJW"), AJW Offshore, Ltd., a limited liability company ("Offshore"), and AJW
Qualified Partners, LLC, a limited liability company ("Qualified" and, together
with AJW and Offshore, 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 $250,000 and (b) stock purchase
warrants to purchase an aggregate of 750,000 shares of the Company's common
stock, $0.005 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 $500,000, and (b) stock purchase
warrants to purchase an aggregate of 1,500,000 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 (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 the number
of shares of Common Stock currently owned by the Pledgor as set forth below the
Pledgor's signature on the signature page hereto (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:
1. Guaranty. 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, regardless of any defense or
set-off counterclaim which the Company or any other person may have or
assert, and regardless of whether or not the Pledgees or anyone on behalf
of the Pledgees shall have instituted any suit, action or proceeding or
exhausted its remedies or taken any steps to enforce any rights against the
Company or any other person to compel any such performance or observance or
to collect all or part of any such amount, either pursuant to the
provisions of the Transaction Documents or at law or in equity, and
regardless of any other condition or contingency. The Pledgor shall have no
obligation whatsoever to the Pledgees beyond the Collateral pledged for the
Obligations set forth herein.
2. Waiver of Demand. The Pledgor hereby unconditionally: (i) waives any
requirement that the Pledgees, in the event of a breach in any material
respect by the Company of any of its representations or warranties in the
Transaction Documents, first make demand upon, or seek to enforce remedies
against, the Company or any other person before demanding payment of
enforcement hereunder; (ii) covenants that this Agreement will not be
discharged except by complete performance of all the Obligations to the
extent of the Collateral; (iii) 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 (iv) 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.
3. 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.
4. 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 extent 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, 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.
5. 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").
Simultaneously herewith, the Pledgor shall deliver to the Pledgees the
certificate(s) representing the Shares, stamped with a bank medallion
guarantee, along with a stock transfer power duly executed in blank by the
Pledgor, to be held by the Pledgees as security. Any Collateral received by
the Pledgor on or after the date hereof shall be immediately delivered to
the Pledgees together with any executed stock powers or other transfer
documents requested by the Pledgees, which request may be made at any time
prior to the date when the Obligations shall have been paid and otherwise
satisfied in full.
6. 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:
(i) Exercise all voting and/or consensual powers pertaining to the
Collateral, or any part thereof, for all purposes;
(ii) Receive and retain dividends paid with respect to the Collateral;
and
(iii)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.
7. Default and Remedies.
(a) For the purposes of this Agreement, "Event of Default" shall mean:
(i) default in or under any of the Obligations after the expiration,
without cure, of any applicable cure period;
(ii) a breach in any material respect by the Company of any of its
representations or warranties in the Transaction Documents; or
(iii)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:
(i) 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);
(ii) the right to receive and retain all dividends, payments and other
distributions of any kind upon any or all of the Collateral;
(iii)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
(iv) 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 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.
8. 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.
9. Representations and Warranties.
(a) The Pledgor hereby represents and warrants to the Pledgees that:
(i) 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.
(ii) 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.
(iii)the Pledgor is the sole record and beneficial owner of all of
the Shares; and
(iv) the Pledgor owns the Collateral free and clear of all Liens.
(b) The Company represents and warrants to the Pledgees that:
(i) it has no knowledge that any of the representations or warranties
of the Pledgor herein are incorrect or false in any material
respect;
(ii) all of the Shares were validly issued, fully paid and
non-assessable; and
(iii) the Pledgor is the record holder of the Shares.
10. 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.
11. Termination. This Agreement shall terminate on the date on which all
Obligations have been performed, satisfied, paid or discharged in full.
12. 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.
The Pledgees acknowledge that they are aware that Pledgor shall have no
obligations whatsoever to the Pledgees beyond the Collateral pledged for
the Obligations set forth herein, and no request for further assurance may
or shall increase such Obligations.
13. 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 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: iDial Networks, Inc.
00000 Xxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Executive Officer
With copies to: Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
If to the Pledgor: Xxxx X. Xxxx
c/o iDial Networks, Inc.
00000 Xxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
If to the Pledgees: AJW Partners, LLC
0000 Xxxxxxxx Xxxx.
Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
and
AJW Offshore, Ltd.
P.O. Box 32021 SNB
Grand Cayman, Cayman Island, B.W.I.
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx
and
AJW Qualified Partners, LLC
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx
With copies to: Xxxxxxx Xxxxx Xxxxxxx & Ingersoll, 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 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.
IDIAL NETWORKS, INC.
By:
---------------------------------
Xxxx X. Xxxx
Chief Executive Officer
Pledgees:
AJW PARTNERS, LLC
By: SMS Group, LLC
By:
---------------------------
Xxxxx X. Xxxxxxxx
Manager
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
By:
---------------------------
Xxxxx X. Xxxxxxxx
Manager
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, LLC
By:
---------------------------
Xxxxx X. Xxxxxxxx
Manager
[Signatures Continued on Following Page]
Pledgor:
Xxxx X. Xxxx
Number of Shares subject to this pledge: 3,000,000
Date such Shares were acquired: 500,000 Shares
acquired on
November 7, 2000
2,500,000 Shares
acquired on
February 28, 2002
