Exhibit 2.3
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GUARANTY AGREEMENT
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This GUARANTY AGREEMENT (this "Guaranty") is made and given this 31st day
of July, 2001, by KFX INC. ("Guarantor"), a corporation duly organized and
existing under the laws of Delaware, for the benefit of PAVILION TECHNOLOGIES,
INC. ("Pavilion"), a corporation duly organized and existing under the laws of
the State of Texas. Guarantor and Pavilion may at times herein be referred to
individually as a "Party" and collectively as the "Parties."
WITNESSETH
WHEREAS, Pavilion, Guarantor and Pegasus Technologies, Inc. ("Pegasus"), a
corporation duly organized and existing under the laws of the State of South
Dakota contemporaneously with this Guaranty, are entering into that certain
Asset Purchase & License Agreement, of even date herewith (the "Definitive
Agreement"); and
WHEREAS, Pegasus is a subsidiary of Guarantor, and Guarantor is the
majority shareholder of Pegasus; and
WHEREAS, as a condition to Pavilion entering into the Definitive Agreement
with Pegasus, Guarantor has agreed to enter into this Guaranty with Pavilion to
guaranty the performance and obligations of Pegasus under the Definitive
Agreement.
NOW, THEREFORE, in consideration of Pavilion entering into the Definitive
Agreement with Pegasus, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Guarantor hereby agrees as
follows:
1. This Guaranty shall be an absolute, continuing, irrevocable, and
unconditional guaranty of payment and performance, and not a guaranty of
collection, by Guarantor of the obligations of Pegasus (the "Obligations") under
the Definitive Agreement. Guarantor shall remain liable on its obligations
hereunder until the earlier of (i) Pavilion's receipt from Pegasus, pursuant to
the term and conditions of the Definitive Agreement, of payments (not including
payments to Pavilion of royalties under the royalty provisions of the Definitive
Agreement) equal to Nine Million Five Hundred Thousand and 00/100 Dollars
($9,500,000 USD); or (ii) the Guarantor ceasing to own at least 50% of all of
the outstanding and issued shares of Pegasus; provided, however, the resulting
controlling entity or entities must agree in writing to (x) comply with all of
Guarantor's obligations hereunder, and (y) be bound by the Definitive Agreement,
or if there is no resulting controlling entity or entities, Guarantor may be
released from its Guaranty obligations by providing continuing adequate
assurances of financial performance by Pegasus under the Definitive Agreement,
as reasonably requested by Pavilion.
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2. In the event of a material default as set forth in Section 15.3.1 of the
Definitive Agreement by Pegasus in the payment of any sums due under or the
performance of any of the terms and conditions of the Definitive Agreement, or
any part thereof, when such payment or performance becomes due, which is not
otherwise cured during the applicable time period set forth in the Definitive
Agreement, Guarantor shall promptly pay or cause to be paid the amounts due to
Pavilion and/or perform or cause to be performed the Obligations required
pursuant to and in accordance with the terms and conditions of the Definitive
Agreement.
3. To the extent permitted by applicable law, Guarantor further waives any and
all rights, by statute or otherwise, to require Pavilion to institute suit or
otherwise exhaust its rights and remedies against Pegasus.
4. Guarantor hereby consents and agrees that, without notice to or subsequent
consent by Guarantor and without affecting or impairing the obligations of
Guarantor as herein set forth, Pavilion may, by action or inaction, compromise,
settle, waive, extend, refuse to enforce, release (in whole or in part), or
otherwise grant indulgences (collectively, "Pavilion Rights") to Pegasus in
respect to any or all of the Obligations and may amend, modify or extend in any
manner the Definitive Agreement or any other documents or agreements relating to
the Obligations other than this Guaranty. Notwithstanding the foregoing, the
exercise of the Pavilion Rights shall not in any way be construed as increasing
the amount of the Guarantor's monetary obligations or broadening the scope of
the its performance obligations hereunder or under the Definitive Agreement.
5. Demands on Guarantor for payment under this Guaranty shall be in writing
and delivered by mail or telecommunication to the following address:
KFx Inc.
0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx Xxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxx, Lipton and Xxxxxxxxx Limited
000 X. XxXxxxx, Xxx. 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
All demands for payment shall be effective when received by Guarantor.
Guarantor may change the address to which demands for payment are to be sent
upon written notice to Pavilion. Such payments shall be made by wire transfer,
in accordance with the wire transfer instructions contained in any such demand,
on the fifteenth (15th ) calendar day in the case of a demand involving
nonpayment of royalties, and on the seventh (7th) calendar day in the case of a
demand for all other nonpayments, next following Guarantor's receipt of any such
demand.
6. Guarantor consents and agrees that Pavilion shall be under no obligation to
marshal any assets in favor of Guarantor. Moreover, Guarantor covenants to pay
all expenses (including
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court costs and reasonable attorney's fees) incurred by Pavilion in connection
with defending and enforcing its rights under this Guaranty.
7. This Guaranty is a primary and original obligation of Guarantor and is an
absolute, unconditional, irrevocable guaranty and, to the extent permitted by
applicable law, shall remain in full force and effect without regard to future
changes in conditions, including change of law, or any invalidity or
irregularity with respect to the execution and delivery of any agreement by
Pavilion with respect to the Obligations. The exercise by Pavilion of any right
or remedy hereunder or under any other instrument, or at law or in equity, shall
not preclude the concurrent or subsequent exercise of any other right or remedy.
8. Guarantor hereby agrees that its obligations under this Guaranty Agreement
shall not be released, discharged, diminished, impaired, reduced, or affected
for any reason or by the occurrence of any event, including, without limitation,
one or more of the following events, whether or not with notice to or the
consent of Guarantor: (a) the dissolution, insolvency, or bankruptcy of
Guarantor, or any other party at any time liable for the payment of any sums due
under or the performance of the terms of the Definitive Agreement; (b) any
renewal, extension, modification, waiver or amendment of the Definitive
Agreement or any instrument, document, or agreement evidencing, securing, or
otherwise relating to the Definitive Agreement; (c) any neglect, delay,
omission, failure, or refusal of Pavilion to take or prosecute any action for
the collection of any sums due under or the performance of any of the terms of
the Definitive Agreement or to take or prosecute any action in connection with
any instrument, document, or agreement evidencing, securing, or otherwise
relating to the Definitive Agreement; (f) the unenforceability or invalidity of
any part of the Definitive Agreement or of any instrument, document, or
agreement evidencing, securing, or otherwise relating to the Definitive
Agreement; (g) any payment by Guarantor or any other party to Pavilion is held
to constitute a preference under applicable bankruptcy or insolvency law or if
for any other reason Pavilion is required to refund any payment or pay the
amount thereof to someone else; (h) any change in the corporate existence,
structure, or ownership of Guarantor; or (i) any other circumstance which might
otherwise constitute a defense available to, or discharge of Guarantor.
9. No assignment or transfer of the Definitive Agreement or this Guaranty
shall operate to extinguish or diminish the liability of Guarantor hereunder;
provided however, that if Guarantor shall cease to own or control a "Controlling
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Interest" in Pegasus, which for purposes of this Guaranty shall mean ownership
or control of at least fifty percent (50%) of the total issued and outstanding
capital stock of Pegasus (such change in ownership shall be referred to herein
as a "Change of Control"). Guarantor may assign and transfer in writing all of
its payment and performance obligations under this Guaranty to either (A) an
entity acquiring a Controlling Interest in Pegasus (a "Controlling Entity") or
(B) an entity who does not acquire a Controlling Interest in Pegasus (an
"Assuming Entity"). In the event of Guarantor's proposed assignment and transfer
of its obligations under this Guaranty to a Controlling Entity upon a Change of
Control, and the Controlling Entity's proposed assumption of Guarantor's
obligations under the Definitive Agreement, Guarantor shall provide Pavilion
with at least thirty (30) days written notice prior to such proposed assignment,
assumption and transfer, which notice shall include the material terms and
conditions of the proposed assignment, transfer and assumption. In the event
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of Guarantor's proposed assignment and transfer of its obligations under this
Guaranty to an Assuming Entity upon a Change of Control, and the Assuming
Entity's proposed assumption of Guarantor's obligations under the Definitive
Agreement, Guarantor shall provide Pavilion with at least forty-five (45) days
written notice prior to such proposed assignment, assumption and transfer, which
notice shall include the material terms and conditions of the proposed
assignment, transfer and assumption. In any event, as applicable, either the
Controlling Entity or the Assuming Entity, in writing, shall assume all of the
obligations of Guarantor, and shall agree to be bound by the terms and
conditions of, the Definitive Agreement; and provided further, that the terms
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and conditions of such assignment and transfer of Guarantor's obligations under
the Guaranty, the assumption of Guarantor's obligations under the Definitive
Agreement, and the assurances to Pavilion of Pegasus's continued performance of
its Obligations under the Definitive Agreement, shall all be on terms reasonably
acceptable to Pavilion. Subject only to the foregoing, the terms and provisions
of this Guaranty shall be binding upon and inure to the benefit of the
respective successors and assigns of the Parties. Any transfer and assignment of
Guarantor's performance and payment obligations hereunder pursuant to this
paragraph 9 shall be considered to be an amendment to this Guaranty, and shall
have no force and effect until the requirements of paragraph 11 of this Guaranty
are met.
10. Guarantor represents and warrants that it is a corporation duly organized
under the laws of Delaware; that it has full power to enter into this Guaranty;
that its execution and delivery hereof has been duly authorized; and that this
Guaranty, upon its execution and delivery constitutes a legal, valid, and
binding obligation of the Guarantor, enforceable against Guarantor in accordance
with its terms.
11. No amendment or waiver of any provision of this Guaranty nor consent to any
departure by the Guarantor therefrom shall in any event be effective unless the
same shall be in writing and signed by Pavilion. No failure on the part of
Pavilion to exercise, and no delay in exercising, any right, power, or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power, or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
12. This Guaranty shall be governed by and construed in accordance with the
internal laws of the State of Delaware, excluding only those provisions
regarding conflict of laws.
13. Guarantor recognizes that Pavilion is relying upon this Guaranty and the
undertakings of Guarantor hereunder in entering into the Definitive Agreement
with Pegasus and further recognizes that the execution and delivery of this
Guaranty is a material inducement to Pavilion in entering into the Definitive
Agreement. Guarantor hereby acknowledges that there are no conditions to the
full effectiveness of this Guaranty.
14. The Definitive Agreement, together with all of its exhibits, schedules and
all of the terms thereof, are incorporated herein by reference, the same as if
stated verbatim herein, and Guarantor agrees that Pavilion may exercise any and
all of the rights and remedies granted to it under the Definitive Agreement
without affecting the validity or enforceability of this Guaranty.
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15. THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT OF GUARANTOR AND
PAVILION WITH RESPECT TO GUARANTOR'S GUARANTY OF THE DEFINITIVE AGREEMENT AND
SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF.
16. If any term or other provision of this Guaranty is found to be invalid or
illegal or incapable of being enforced by any rule of law or public policy, all
other provisions and conditions of this Guaranty shall nevertheless be legally
binding and shall remain in full force and effect. Upon the determination that
any term or other provision is invalid, illegal, or incapable of being enforced,
the parties agree that such provision shall be amended so as to be legal and
enforceable and as nearly as possible to give effect to the intentions of the
parties hereto.
17. This Guaranty has been negotiated by Guarantor and Pavilion and their
respective legal counsel, and legal or equitable principles that might require
the construction of this Guaranty or any provision of this Guaranty against the
party drafting this Guaranty will not apply in any construction or
interpretation of this Guaranty.
[Signature page follows.]
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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed by
its duly authorized representative as of the date first written above.
KFX INC.
By: /s/ Xxxxxxxx Xxxxxxx
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Xxxxxxxx Xxxxxxx
Chairman and CEO
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