EXECUTION VERSION
GUARANTY
New York, New York August 31, 2004
FOR VALUE RECEIVED, and in consideration of loans made or to be made or
credit otherwise extended or to be extended by Laurus Master Fund, Ltd.
("Lender") to or for the account of Pipeline Data Inc. (the "Borrower") from
time to time and at any time , and in consideration for the repayment by the
Borrower of the Obligations (as defined below) and for other good and valuable
consideration, and to induce Lender, in its discretion, to make such loans or
extensions of credit and to make or grant such renewals, extensions, releases of
collateral or relinquishments of legal rights as Lender may deem advisable,
Pipeline Data Processing, Inc. (referred to herein as the "Guarantors")
unconditionally guarantees to Lender, and its successors, endorsees and assigns,
the prompt payment when due (whether by acceleration or otherwise) of all
present and future obligations and liabilities of any and all kinds of Borrower
to Lender and of all instruments of any nature evidencing or relating to any
such obligations and liabilities upon which Borrower is or may become liable to
Lender, whether incurred by Borrower as maker, endorser, drawer, acceptor,
guarantor, accommodation party or otherwise, and whether due or to become due,
secured or unsecured, absolute or contingent, joint or several, and however or
whenever acquired by Lender, whether arising under, out of, or in connection
with (a) that certain Secured Convertible Term Note in the original principal
amount of $3,000,000 dated as of the date hereof made by Borrower in favor of
Lender, that certain Secured Convertible Term Note in the original principal
amount of $2,000,000 dated as of February 27, 2004 made by Xxxxxxxx in favor of
Xxxxxx and that certain Secured Convertible Term Note in the original principal
amount of $1,000,000 dated as of June 16, 2004 made by Borrower in favor of
Lender (each, as amended, modified, restated or supplemented from time to time,
collectively, the "Term Notes"), and (b) each warrant dated as of the date
hereof made by the undersigned in favor of Lender in connection with the Term
Notes (each, as amended, modified, restated or supplemented from time to time,
collectively, the "Term Note Warrant" and together with the Term Notes, the
"Notes") or (c) any documents, instruments or agreements relating to or executed
in connection with the Notes or any documents, instruments or agreements
referred to therein (as each may be amended, modified, restated or supplemented
from time to time, the "Documents"), or otherwise ((a)-(c) collectively referred
to as the "Obligations"), and irrespective of the genuineness, validity,
regularity or enforceability of such Obligations, or of any instrument
evidencing any of the Obligations or of any collateral therefor or of the
existence or extent of such collateral, and irrespective of the allowability,
allowance or disallowance of any or all of the Obligations in any case commenced
by or against Borrower under Title 11, United States Code, including, without
limitation, obligations or indebtedness of Borrower for post-petition interest,
fees, costs and charges that would have accrued or been added to the Obligations
but for the commencement of such case. In furtherance of the foregoing, the
undersigned xxxxxx agrees as follows:
1. No Impairment. Lender may at any time and from time to time, either
before or after the maturity thereof, without notice to or further consent of
the undersigned, extend the time of payment of, exchange or surrender any
collateral for, renew or extend any of the Obligations or decrease the interest
rate thereon, and may also make any agreement with Borrower or with any other
party to or person liable on any of the Obligations, or interested therein, for
the extension, renewal, payment, compromise, discharge or release thereof, in
whole or in part, or for any modification of the terms thereof or of any
agreement between Lender and Borrower or any such other party or person, or make
any election of rights Lender may deem desirable under the United States
Bankruptcy Code, as amended, or any other federal or state bankruptcy,
reorganization, moratorium or insolvency law relating to or affecting the
enforcement of creditors' rights generally (any of the foregoing, an "Insolvency
Law") without in any way impairing or affecting this Guaranty. So long as the
Obligations are outstanding, this instrument shall be effective regardless of
the subsequent incorporation, merger or consolidation of Borrower, or any change
in the composition, nature, personnel or location of Borrower and shall extend
to any successor entity to Borrower, including a debtor in possession or the
like under any Insolvency Law.
2. Guaranty Absolute. The undersigned guarantees that the Obligations will
be paid strictly in accordance with the terms of the Notes and/or any other
document, instrument or agreement creating or evidencing the Obligations,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of Borrower with respect
thereto. Guarantor hereby knowingly accepts the full range of risk encompassed
within a contract of "continuing guaranty" which risk includes the possibility
that Borrower will contract additional indebtedness for which Guarantor may be
liable hereunder after Xxxxxxxx's financial condition or ability to pay its
lawful debts when they become due has deteriorated, whether or not Borrower has
properly authorized incurring such additional indebtedness. The undersigned
acknowledges that no oral representations, including any representations to
extend credit or provide other financial accommodations to Borrower, have been
made by Lender to induce the undersigned to enter into this Guaranty. The
liability of the undersigned under this Guaranty shall be absolute and
unconditional, in accordance with its terms, and, so long as the Obligations are
outstanding, shall remain in full force and effect without regard to, and shall
not be released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever, including, without limitation: (a) any
waiver, indulgence, renewal, extension, amendment or modification of or
addition, consent or supplement to or deletion from or any other action or
inaction under or in respect of the Documents or any other instruments or
agreements relating to the Obligations or any assignment or transfer of any
thereof, (b) any lack of validity or enforceability of the Notes or other
documents, instruments or agreements relating to the Obligations or any
assignment or transfer of any thereof, (c) any furnishing of any additional
security to Lender or its assignees or any acceptance thereof or any release of
any security by Lender or its assignees, (d) any limitation on any party's
liability or obligation under the Documents or any other documents, instruments
or agreements relating to the Obligations or any assignment or transfer of any
thereof or any invalidity or unenforceability, in whole or in part, of any such
document, instrument or agreement or any term thereof, (e) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceeding relating to Borrower, or any action taken with respect to
this Guaranty by any trustee or receiver, or by any court, in any such
proceeding, whether or not the undersigned shall have notice or knowledge of any
of the foregoing, (f) any exchange, release or nonperfection of any collateral,
or any release, or amendment or waiver of or consent to departure from any
guaranty or security, for all or any of the Obligations or (g) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the undersigned. Any amounts due from the undersigned to Lender
shall bear interest until such amounts are paid in full at the highest rate then
applicable to the Obligations. Obligations include post-petition interest
whether or not allowed or allowable.
3. Waivers.
(a) This Guaranty is a guaranty of payment and not of collection.
Lender shall be under no obligation to institute suit, exercise rights or
remedies or take any other action against Borrower or any other person
liable with respect to any of the Obligations or resort to any collateral
security held by it to secure any of the Obligations as a condition
precedent to the undersigned being obligated to perform as agreed herein
and Guarantor hereby waives any and all rights which it may have by statute
or otherwise which would require Lender to do any of the foregoing.
Guarantor further consents and agrees that Xxxxxx shall be under no
obligation to marshal any assets in favor of Guarantor, or against or in
payment of any or all of the Obligations. The undersigned hereby waives all
suretyship defenses and any rights to interpose any defense, counterclaim
or offset of any nature and description which the undersigned may have or
which may exist between and among Lender, Borrower and/or the undersigned
with respect to the undersigned's obligations under this Guaranty, or which
Borrower may assert on the underlying debt, including but not limited to
failure of consideration, breach of warranty, fraud, payment (other than
cash payment in full of the Obligations), statute of frauds, bankruptcy,
infancy, statute of limitations, accord and satisfaction, and usury, except
for payment in full of the Obligations pursuant to this Guaranty.
(b) The undersigned waives (i) notice of the acceptance of this
Guaranty, and of all notices and demands of any kind to which the
undersigned may be entitled, including, without limitation, notice of
adverse change in Borrower's financial condition or of any other fact which
might materially increase the risk of the undersigned and (ii) presentment
to or demand of payment from anyone whomsoever liable upon any of the
Obligations, protest, notices of presentment, non-payment or protest and
notice of any sale of collateral security or any default of any sort.
(c) Notwithstanding any payment or payments made by the undersigned
hereunder, or any setoff or application of funds of the undersigned by
Xxxxxx, the undersigned shall not be entitled to be subrogated to any of
the rights of Lender against Borrower or against any collateral or
guarantee or right of offset held by Lender for the payment of the
Obligations, nor shall the undersigned seek or be entitled to seek any
contribution or reimbursement from Borrower in respect of payments made by
the undersigned hereunder, until all amounts owing to Lender by Borrower on
account of the Obligations are paid in full. If an Event of Default (as
such term is defined in either of the Notes) has occurred and is
continuing, and any amount shall be paid to the undersigned on account of
such subrogation rights at any time when all of the Obligations shall not
have been paid in full, such amount shall be held by the undersigned in
trust for Lender, segregated from other funds of the undersigned, and shall
forthwith upon, and in any event within two (2) business days of, receipt
by the undersigned, be turned over to Lender in the exact form received by
the undersigned (duly endorsed by the undersigned to Lender, if required),
to be applied against the Obligations, whether matured or unmatured, in
such order as Lender may determine, subject to the provisions of the Notes.
Any and all present and future debts and obligations of Borrower to any of
the undersigned are hereby waived and postponed in favor of, and
subordinated to the full payment and performance of, all present and future
debts and obligations of Borrower to Lender.
4. Security. All sums at any time to the credit of the undersigned and any
property of the undersigned in Lender's possession or in the possession of any
bank, financial institution or other entity that directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, Lender (each such entity, an "Affiliate") shall be deemed held by
Lender or such Affiliate, as the case may be, as security for any and all of the
undersigned's obligations to Lender and to any Affiliate of Lender, no matter
how or when arising and whether under this or any other instrument, agreement or
otherwise.
5. Representations and Warranties. The undersigned each hereby represents
and warrants (all of which representations and warranties shall survive until
all Obligations are indefeasibly satisfied in full), that:
(a) Corporate Status. XxxxxxXxx.xxx, Inc. ("SecurePay") is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Northern Merchant Services, Inc.
("Northern") is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York. Each of SecurePay and
Northern has full power, authority and legal right to own its property and
assets and to transact the business in which it is engaged.
(b) Authority and Execution. The undersigned has full power, authority
and legal right to execute and deliver, and to perform its obligations
under, this Guaranty and has taken all necessary corporate and legal action
to authorize the execution, delivery and performance of this Guaranty.
(c) Legal, Xxxxx and Binding Character. This Guaranty constitutes the
legal, valid and binding obligation of the undersigned enforceable in
accordance with its terms, except as enforceability may be limited by
applicable Insolvency Law.
(d) Violations. The execution, delivery and performance of this
Guaranty will not violate any requirement of law applicable to the
undersigned or any material contract, agreement or instrument to which the
undersigned is a party or by which the undersigned or any property of the
undersigned is bound or result in the creation or imposition of any
mortgage, lien or other encumbrance other than to Lender on any of the
property or assets of the undersigned pursuant to the provisions of any of
the foregoing.
(e) Consents or Approvals. No consent of any other person or entity
(including, without limitation, any creditor of the undersigned) and no
consent, license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any
governmental authority is required in connection with the execution,
delivery, performance, validity or enforceability of this Guaranty, where
failure to obtain such consent would have a material adverse effect on the
business, operating assets or condition, financial or otherwise, of the
undersigned.
(f) Litigation. No litigation, arbitration, investigation or
administrative proceeding of or before any court, arbitrator or
governmental authority, bureau or agency is currently pending or, to the
best knowledge of the undersigned, threatened (i) with respect to this
Guaranty or any of the transactions contemplated by this Guaranty or (ii)
against or affecting the undersigned, or any of property or assets of the
undersigned, which, if adversely determined, would have a material adverse
effect on the business, operating assets or condition, financial or
otherwise, of the undersigned.
(g) Financial Benefit. The undersigned has derived or expects to
derive a financial or other advantage from each and every loan, advance or
extension of credit made under the Loan Agreement or other Obligation
incurred by Borrower to Lender.
The foregoing representations and warranties shall be deemed to have been
made by the undersigned on the date of each borrowing by Borrower under the Loan
Agreement on and as of such date of such borrowing as though made hereunder on
and as of such date.
6. Acceleration. If (i) any Event of Default (as such term is defined in
either of the Notes) shall occur and be continuing under any agreement made by
Borrower or the undersigned to Lender, or make a general assignment or (ii) any
of the Guarantors shall make an assignment for the benefit of creditors, or
apply for or consent to the appointment of a receiver or trustee for it or for a
substantial part of its property or business; or such a receiver or trustee
shall otherwise be appointed; (iii) Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against any of
the Guarantors which is not vacated within ninety (90) days or (iv) any money
judgment, writ or similar final process shall be entered or filed against any of
the Guarantors or any of their properties or other assets for more than
$250,000, and shall remain unvacated, unbonded or unstayed for a period of
ninety (90) days, then any and all Obligations shall for purposes hereof, at
Lender's option, be deemed due and payable without notice notwithstanding that
any such Obligation is not then due and payable by Borrower.
(b) The undersigned will promptly notify Lender of any default by the
undersigned in the performance or observance of any term or condition of
any agreement to which the undersigned is a party if the effect of such
default is to cause, or permit the holder of any obligation under such
agreement to cause, such obligation to become due prior to its stated
maturity and, if such an event occurs, Lender shall have the right to
accelerate the undersigned's obligations hereunder.
7. Payments from Guarantor. Lender, in its sole and absolute
discretion, with or without notice to the undersigned, may apply on account of
the Obligations any payment from the undersigned or any other guarantor, or
amounts realized from any security for the Obligations, or may deposit any and
all such amounts realized in a non-interest bearing cash collateral deposit
account to be maintained as security for the Obligations.
8. Costs. The undersigned shall pay on demand, all costs, fees and expenses
(including expenses for legal services of every kind) relating or incidental to
the enforcement or protection of the rights of Lender hereunder or under any of
the Obligations.
9. No Termination. This is a continuing irrevocable guaranty and shall
remain in full force and effect and be binding upon the undersigned, and the
undersigned's successors and assigns, until all of the Obligations have been
paid in full. If any of the present or future Obligations are guarantied by
persons, partnerships or corporations in addition to the undersigned, the death,
release or discharge in whole or in part or the bankruptcy, merger,
consolidation, incorporation, liquidation or dissolution of one or more of them
shall not discharge or affect the liabilities of the undersigned under this
Guaranty.
10. Recapture. Anything in this Guaranty to the contrary notwithstanding,
if Lender receives any payment or payments on account of the liabilities
guaranteed hereby, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver, or any other party under
any Insolvency Law, common law or equitable doctrine, then to the extent of any
sum not finally retained by Xxxxxx, the undersigned's obligations to Lender
shall be reinstated and this Guaranty shall remain in full force and effect (or
be reinstated) until payment shall have been made to Lender, which payment shall
be due on demand.
11. Books and Records. The books and records of Xxxxxx showing the account
between Xxxxxx and Borrower shall be admissible in evidence in any action or
proceeding, shall be binding upon the undersigned for the purpose of
establishing the items therein set forth and shall constitute prima facie proof
thereof.
12. No Waiver. No failure on the part of Lender to exercise, and no delay
in exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by Lender of any right, remedy
or power hereunder preclude any other or future exercise of any other legal
right, remedy or power. Each and every right, remedy and power hereby granted to
Lender or allowed it by law or other agreement shall be cumulative and not
exclusive of any other, and may be exercised by Lender at any time and from time
to time.
13. Waiver of Jury Trial. THE UNDERSIGNED DOES HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR WITH RESPECT TO THIS GUARANTY OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR RELATING OR INCIDENTAL HERETO. THE UNDERSIGNED DOES
HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF XXXXXX HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
14. Governing Law; Jurisdiction; Amendments. THIS INSTRUMENT CANNOT BE
CHANGED OR TERMINATED ORALLY, AND SHALL BE GOVERNED, CONSTRUED AND INTERPRETED
AS TO VALIDITY, ENFORCEMENT AND IN ALL OTHER RESPECTS IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. THE UNDERSIGNED EXPRESSLY CONSENTS TO THE
JURISDICTION AND VENUE OF THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF
NEW YORK, AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK FOR ALL PURPOSES IN CONNECTION HEREWITH. ANY JUDICIAL PROCEEDING BY THE
UNDERSIGNED AGAINST LENDER INVOLVING, DIRECTLY OR INDIRECTLY ANY MATTER OR CLAIM
IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED HEREWITH SHALL BE BROUGHT
ONLY IN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK OR THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE
UNDERSIGNED FURTHER CONSENTS THAT ANY SUMMONS, SUBPOENA OR OTHER PROCESS OR
PAPERS (INCLUDING, WITHOUT LIMITATION, ANY NOTICE OR MOTION OR OTHER APPLICATION
TO EITHER OF THE AFOREMENTIONED COURTS OR A JUDGE THEREOF) OR ANY NOTICE IN
CONNECTION WITH ANY PROCEEDINGS HEREUNDER, MAY BE SERVED INSIDE OR OUTSIDE OF
THE STATE OF NEW YORK OR THE SOUTHERN DISTRICT OF NEW YORK BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY PERSONAL SERVICE PROVIDED A
REASONABLE TIME FOR APPEARANCE IS PERMITTED, OR IN SUCH OTHER MANNER AS MAY BE
PERMISSIBLE UNDER THE RULES OF SAID COURTS. THE UNDERSIGNED WAIVES ANY OBJECTION
TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREON AND SHALL NOT ASSERT
ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON
CONVENIENS.
15. Severability. To the extent permitted by applicable law, any provision
of this Guaranty which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
16. Amendments, Waivers. No amendment or waiver of any provision of this
Guaranty nor consent to any departure by the undersigned therefrom shall in any
event be effective unless the same shall be in writing executed by the
undersigned and Xxxxxx.
17. Notice. All notices, requests and demands to or upon the undersigned,
shall be in writing and shall be sent in accordance to Section 11.8 of the
Securities Purchase Agreement.
18. Successors. Lender may, from time to time, without notice to the
undersigned, sell, assign, transfer or otherwise dispose of all or any part of
the Obligations and/or rights under this Guaranty. Without limiting the
generality of the foregoing, Lender may assign, or grant participations to, one
or more banks, financial institutions or other entities all or any part of any
of the Obligations. In each such event, Lender, its Affiliates and each and
every immediate and successive purchaser, assignee, transferee or holder of all
or any part of the Obligations shall have the right to enforce this Guaranty, by
legal action or otherwise, for its own benefit as fully as if such purchaser,
assignee, transferee or holder were herein by name specifically given such
right. Lender shall have an unimpaired right to enforce this Guaranty for its
benefit with respect to that portion of the Obligations which Lender has not
disposed of, sold, assigned, or otherwise transferred.
19. Release. Nothing except cash payment in full of the Obligations, either
by Xxxxxxxx, the undersigned, or any third party on either of their behalf,
shall release the undersigned from liability under this Guaranty.
[Signature page follows.]
IN WITNESS WHEREOF, this Guaranty has been executed by the undersigned this
31st day of August, 2004.
PIPELINE DATA PROCESSING, Inc.
By:_________________________________
Name:
-------------------------------------
Title:
------------------------------------
Address: c/o Pipeline Data Inc.
00 Xxxx Xxxx Xxxxxx,
Xxxxxxx Xxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx,
Chief Financial Officer
Facsimile: (000) 000-0000
