GUARANTY AND PLEDGE AGREEMENT
GUARANTY AND PLEDGE AGREEMENT (this "Agreement"), dated as of
February 28, 2005, among Insynq, Inc., a Nevada corporation (the "Company"), M.
Xxxxxxx Xxxxxx and Xxxx Xxxxx (the "Pledgors"), and the pledgees signatory
hereto and their respective endorsees, transferees and assigns (collectively,
the "Pledgees").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Securities Purchase Agreement, dated
the date hereof, between Company and the Pledgees (the "Purchase Agreement"),
the Company has agreed to issue to the Pledgees and the Pledgees have agreed to
purchase from the Company certain of the Company's 8% Callable Secured
Convertible Notes, due three years from the date of issue (the "Notes"), which
are convertible into shares of the Company's Common Stock, par value $.001 per
share (the "Common Stock") and shares of the Company's Series B Convertible
Preferred Stock (the "Preferred Stock" and collectively with the Notes, the
"Convertible Securities"). In connection therewith, the Company shall issue the
Pledgees certain Common Stock purchase warrants (the "Warrants"); and
WHEREAS, as a material inducement to the Pledgees to enter
into the Purchase Agreement, the Pledgees have required and the Pledgors have
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 Pledgors
as set forth below the Pledgors' signatures 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 Pledgors hereby
absolutely, unconditionally and irrevocably guarantee 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 Pledgors shall have
no obligation whatsoever to the Pledgees beyond the Collateral
pledged for the Obligations set forth herein.
2. Waiver of Demand. The Pledgors hereby unconditionally: (i)
waive 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 Pledgors 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 Pledgors, or any
waiver by the Pledgees, or by any other person, of the
performance or observance by the Company or the Pledgors 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 Pledgors, or any receivership, insolvency,
bankruptcy, reorganization, or other similar proceedings,
affecting the Company or the Pledgor or any assets of the
Company or the Pledgors, 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 Pledgors 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 Pledgors 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 Pledgors seek
any reimbursement from the Company in respect of payments made
by the Pledgors hereunder.
(b) In the extent that the Pledgors 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 Pledgors, 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 Pledgors 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
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Pledgors 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 Pledgors hereby pledge with, hypothecate, transfer and
assign 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"). Within ten (10) business days
of the date of this Agreement, the Pledgors 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 Pledgors, to be
held by the Pledgees as security. Any Collateral received by
the Pledgors 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 Pledgors 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 Pledgors agree that it will not sell, assign, transfer,
pledge, hypothecate, encumber or otherwise dispose of the
Collateral.
(c) The Pledgors 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;
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(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 Pledgors 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 Pledgors 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
Pledgors 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 Pledgors.
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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
Pledgors. 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 Pledgors hereby represent and warrant to the Pledgees
that:
(i) the Pledgors 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 Pledgors, 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 Pledgors is a party or by which
the Pledgors 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 Pledgors'
properties pursuant to the provisions of such mortgage,
indenture, contract or other agreement.
(iii) the Pledgors are the sole record and beneficial owner of all
of the Shares; and
(iv) the Pledgors own 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 Pledgors 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 Pledgors are 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,
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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: Insynq, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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With copies to: xx Xxxxxx & Xxxxx, LLP
000 Xxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Pledgor: Xxxx Xxxxx and M. Xxxxxxx Xxxxxx
c/o Insynq, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Chief Executive Officer
If to the Pledgees: AJW Partners, LLC
AJW Offshore, Ltd.
AJW Qualified Partners, LLC
New Millennium Capital Partners II, LLC
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attn: Xxxxx X. Xxxxxxxx
With copies to: Xxxxxxx Xxxxx Xxxxxxx & Ingersoll, LLP
0000 Xxxxxx Xxxxxx, 00xx Xx.
Xxxxxxxxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esquire
(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
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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.
INSYNQ, INC.
By: /s/ Xxxx X. Xxxxx
-----------------------------------------
Xxxx Xxxxx
Chief Executive Officer
PLEDGEES:
AJW PARTNERS, LLC
By: SMS Group, LLC
By: /s/Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
Manager
AJW OFFSHORE, LTD.
By: First Street Manager II, LLC
By: /s/ Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
Manager
AJW QUALIFIED PARTNERS, LLC
By: AJW Manager, 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
[Signatures Continued on Following Page]
PLEDGOR:
/s/Xxxx X. Xxxxx
-----------------------------------------------------
Xxxx X. Xxxxx
Number of Shares subject to this pledge: 184,717
Date such Shares were acquired: Various
PLEDGOR:
/s/ M. Xxxxxxx Xxxxxx
-----------------------------------------------------
M. Xxxxxxx Xxxxxx
Number of Shares subject to this pledge: 133,635
Date such Shares were acquired: Various
