GUARANTY
THIS GUARANTY ("Guaranty"), dated as of January 29, 2003, is made by
Commtouch Inc., a California corporation ("Guarantor"), in favor of the Lenders
(as defined below).
Commtouch Software Ltd., an Israeli corporation ("Company"), certain
lenders ("Lenders") and XDL Capital Corp., an Ontario corporation (for the
benefit of itself and the other Lenders, the "Collateral Agent") are parties to
a Convertible Loan Agreement dated as of January 29, 2003 (as amended, modified,
renewed or extended from time to time, the "Convertible Loan Agreement").
References to "Lenders" herein shall include XDL Capital Corp. in its capacity
as Collateral Agent. Guarantor has agreed to guarantee the indebtedness and
other obligations of Company to Lenders under or in connection with the
Convertible Loan Agreement and the promissory notes issued thereunder (the
"Notes"), as set forth herein. Guarantor will derive substantial direct and
indirect benefits from the extension of credit to Company (which benefits are
hereby acknowledged by the Guarantor).
Accordingly, to induce Lenders to extend credit to Company, and in
consideration thereof, Guarantor hereby agrees as follows:
1. Guaranty. Guarantor hereby unconditionally and irrevocably guarantees
to Lenders the full and prompt payment when due (whether at stated maturity,
declaration, acceleration, demand or otherwise) and performance of the
indebtedness, liabilities and other obligations of Company to Lenders under or
in connection with the Convertible Loan Agreement and the Notes and any and all
other documents and instruments executed or delivered in connection therewith
(each a "Document" and, collectively, the "Documents"), including all unpaid
principal, all interest accrued thereon, all fees due to Lenders and all other
amounts payable by Company to Lenders thereunder or in connection therewith, and
including interest that accrues after the commencement by or against Company of
any action, case or proceeding involving insolvency, bankruptcy, reorganization,
arrangement, adjustment, composition, assignment for the benefit of creditors,
liquidation, winding up or dissolution under any applicable laws with respect
thereto (an "Insolvency Proceeding"). The terms "indebtedness," "liabilities"
and "obligations" are used herein in their most comprehensive sense and include
any and all advances, debts, obligations and liabilities, now existing or
hereafter arising, regardless of by what instrument, agreement, contract or
entry in any Lender's accounts they may be evidenced, or whether evidenced by
any instrument, agreement, contract or entry in any Lender's accounts, whether
voluntary or involuntary and whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and whether recovery
upon such indebtedness, liabilities and obligations may be or hereafter become
unenforceable under the Bankruptcy Reform Act of 1978 (the "Bankruptcy Code") or
other applicable law. The foregoing indebtedness, liabilities and other
obligations of Company, and all other indebtedness, liabilities and obligations
to be paid or performed by Guarantor in connection with this Guaranty (including
any and all amounts due under Section 11 hereof), shall hereinafter be
collectively referred to as the "Obligations."
2. Liability of Guarantor. The liability of Guarantor under this Guaranty
shall be irrevocable, absolute, independent and unconditional, and shall not be
affected by any circumstance which might constitute a discharge of a surety or
guarantor other than the indefeasible payment and performance in full of all
Obligations and / or conversion by all Lenders and/or (if a Lender declines to
convert or be repaid upon an event as described in Section 4.4 of the Promissory
Note), the expiry of 12 months from the date of the request to convert or be
repaid, by Company to the declining Lender. In furtherance of the foregoing and
without limiting the generality thereof, Guarantor agrees as follows: (i)
Guarantor's liability hereunder shall be the immediate, direct, and primary
obligation of Guarantor and shall not be contingent upon any Lender's exercise
or enforcement of any remedy it may have against Company or any other person or
entity ("Person"), or against any collateral for any Obligations; (ii) this
Guaranty is a guaranty of payment when due and not of collectibility; (iii) the
Collateral Agent, and not individual Lenders other than the Collateral Agent,
may enforce this Guaranty upon the occurrence of a default notwithstanding any
dispute between any Lender and Company with respect to the existence of such
default; (iv) Guarantor's payment of a portion, but not all, of the Obligations
shall in no way limit, affect, modify or abridge Guarantor's liability for any
portion of the Obligations remaining unsatisfied; and (v) to the extent legally
permissible, Guarantor's liability with respect to the Obligations shall remain
in full force and effect without regard to, and shall not be impaired or
affected by, nor shall Guarantor be exonerated or discharged by, (A) any
Insolvency Proceeding with respect to Company, Guarantor, any other guarantor or
any other Person; (B) any limitation, discharge, or cessation of the liability
of Company, any other guarantor or any other Person for any Obligations due to
any statute, regulation or rule of law, or any invalidity or unenforceability in
whole or in part of any of the Obligations; (C) any merger, acquisition,
consolidation or change in structure of Company, Guarantor or any other
guarantor or Person, or any sale, lease, transfer or other disposition of any or
all of the assets or shares of Company, Guarantor, any other guarantor or other
Person; (D) any assignment or other transfer, in whole or in part, of any
Lender's interests in and rights under this Guaranty, including any Lender's
right to receive payment of the Obligations, or any assignment or other
transfer, in whole or in part, of any Lender's interests in and to any
collateral securing the Obligations; (E) any claim, defense, counterclaim or
setoff, other than that of prior performance and those arising under the
Convertible Loan Agreement, that Company, Guarantor, any other guarantor or
other Person may have or assert, including any defense of incapacity or lack of
corporate or other authority to execute or deliver any Document or this Guaranty
or any other document related thereto; (F) any direction of application of
payment to Company, Guarantor, any other guarantor or other Person; and (G) any
Lender's vote, claim, distribution, election, acceptance, action or inaction in
any bankruptcy case related to the Obligations.
3. Consents. Guarantor hereby consents and agrees that, without notice to
or further assent from Guarantor: (i) the time, manner, place or terms of any
payment under any Document may be extended or changed, including by an increase
or decrease in the interest rate on any Obligation or any fee or other amount
payable under such Document, by a modification or renewal of any Document or
otherwise by way of prior agreement with the Company, or in accordance with the
Document, or at law; (ii) the time for Company's performance of or compliance
with any term, covenant or agreement on its part to be performed or observed
under any Document may be extended, or such performance or compliance waived, or
failure in or departure from such performance or compliance consented to, all in
such manner and upon such terms as Lenders may deem proper; (iii) any Lender may
discharge or release, in whole or in
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part, any other guarantor or any other Person liable for the payment and
performance of all or any part of the Obligations, and may permit or consent to
any such action or any result of such action, and no Lender shall be liable to
Guarantor for any failure to collect or enforce payment of the Obligations; (iv)
the Collateral Agent on behalf of the Lenders, may take and hold security of any
kind, at any time, as collateral for the Obligations, and may, from time to
time, in whole or in part, exchange, sell, surrender, release, subordinate,
modify, waive, rescind, compromise or extend such security and may permit or
consent to any such action or the result of any such action, and may apply such
security and direct the order or manner of sale thereof; (v) any Lender may
request and accept other guaranties of the Obligations and may, from time to
time, in whole or in part, surrender, release, subordinate, modify, waive,
rescind, compromise or extend any such guaranty and may permit or consent to any
such action or the result of any such action; and (vi) any Lender may exercise,
or waive or otherwise refrain from exercising, any other right, remedy, power or
privilege granted by any Document, or otherwise available to any Lender, with
respect to the Obligations and any collateral therefor, even if the exercise of
such right, remedy, power or privilege affects or eliminates any right of
subrogation or any other right of Guarantor against Company; all as Lenders may
deem advisable, and all without impairing, abridging, releasing or affecting
this Guaranty.
4. Waivers. (a) Guarantor waives and agrees not to assert: (i) any right
to require any Lender to proceed against Company, any other guarantor or any
other Person, to proceed against or exhaust any collateral or other security
held for the Obligations (except to the extent required by applicable law), to
give notice of or institute any public or private sale, foreclosure, or other
disposition of any collateral or security for the Obligations, including,
without limitation, to comply with applicable provisions of the California
Uniform Commercial Code ("UCC") or any equivalent provision of any other
applicable law in connection with the sale, foreclosure, or other disposition of
any collateral or to pursue any other right, remedy, power or privilege of any
Lender whatsoever; (ii) any defense arising by reason of any lack of corporate
or other authority or any other defense of Company, Guarantor or any other
Person; (iii) any defense based upon any Lender's errors or omissions in the
administration of the Obligations; (iv) any rights to set-offs and
counterclaims; (v) any and all rights and defenses arising out of an election of
remedies by the creditor, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed the Guarantor's rights of subrogation and reimbursement against
the principal by the operation of Section 580d of the California Code of Civil
Procedure or otherwise; and (vi) without limiting the generality of the
foregoing, to the fullest extent permitted by law, any other defenses or
benefits that may be derived from or afforded by applicable law limiting the
liability of or exonerating guarantors or sureties, or which may conflict with
the terms of this Guaranty, including, without limitation, any and all benefits
that otherwise might be available to Guarantor under California Civil Code
ss.ss.1432, 2809, 2810, 2815, 2819, 2839, 2845, 2848, 2849, 2850, 2899 and 3433
and California Code of Civil Procedure ss.ss.580a, 580b, 580d and 726. (b)
Guarantor waives any and all notice of the acceptance of this Guaranty, and any
and all notice of the creation, renewal, modification, extension or accrual of
the Obligations, or the reliance by any Lender upon this Guaranty, or the
exercise of any right, power or privilege hereunder. The Obligations shall
conclusively be deemed to have been created, contracted, incurred and permitted
to exist in reliance upon this Guaranty. Guarantor waives promptness, diligence,
presentment, protest, demand for payment, notice of default, dishonor or
nonpayment and all other notices to or upon Company, Guarantor or any other
Person with respect to the Obligations. (c) The obligations of Guarantor
hereunder
3.
are independent of and separate from the obligations of Company and any other
guarantor and upon the occurrence and during the continuance of any default, a
separate action or actions may be brought against Guarantor, whether or not
Company or any such other guarantor is joined therein or a separate action or
actions are brought against Company or any such other guarantor. (d) Guarantor
shall not have any right to require any Lender to obtain or disclose any
information with respect to (i) the financial condition or character of Company
or the ability of Company to pay and perform the Obligations; (ii) the
Obligations; (iii) any collateral or other security for any or all of the
Obligations; (iv) the existence or nonexistence of any other guarantees of all
or any part of the Obligations; (v) any action or inaction on the part of any
Lender or any other Person; or (vi) any other matter, fact or occurrence
whatsoever.
5. Subrogation. Until the Obligations shall be satisfied in full and / or
conversion by all Lenders and/or (if a Lender declines to convert or be repaid
upon an event as defined in section 4.4 of the Promissory Note), the expiry of
12 months from the date of the request to convert or be repaid, by Company to
the declining Lender, Guarantor shall not have, and shall not directly or
indirectly exercise, (i) any rights that it may acquire by way of subrogation
under this Guaranty, by any payment hereunder or otherwise, (ii) any rights of
contribution, indemnification, reimbursement or similar suretyship claims
arising out of this Guaranty, or (iii) any other right which it might otherwise
have or acquire (in any way whatsoever) which could entitle it at any time to
share or participate in any right, remedy or security of the any Lender as
against Company or other guarantors, whether in connection with this Guaranty or
otherwise. If any amount shall be paid to Guarantor on account of the foregoing
rights at any time when any Obligations are outstanding, such amount shall be
held in trust for the benefit of Lenders and shall forthwith be paid to Lenders
to be credited and applied to the Obligations.
6. Termination. This Guaranty shall terminate upon full satisfaction of
the Obligations and / or conversion by all Lenders and/or (if a Lender declines
to convert or be repaid upon an event as defined in section 4.4 of the
Promissory Note), the expiry of 12 months from the date of the request to
convert or be repaid, by Company to the declining Lender. To the extent any
payment is rescinded or restored, the Obligations shall be revived in full force
and effect without reduction or discharge for such payment.
7. Payments. Guarantor hereby agrees, in furtherance of the foregoing
provisions of this Guaranty and not in limitation of any other right which any
Lender or any other Person may have against Guarantor by virtue hereof, upon the
failure of Company to pay any of the Obligations due to such Lender when and as
the same shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would
become due but for the operation of the automatic stay under ss.362(a) of the
Bankruptcy Code), Guarantor shall forthwith pay, or cause to be paid, in cash,
to such Lender an amount equal to the amount of the Obligations then due as
aforesaid (including interest which, but for the filing of a petition in any
Insolvency Proceeding with respect to Company, would have accrued on such
Obligations, whether or not a claim is allowed against Company for such interest
in any such Insolvency Proceeding). All payments made by Guarantor hereunder may
be applied in such order as such Lender shall elect. Guarantor shall make each
payment hereunder, without deduction (whether for taxes or otherwise), set-off
or counterclaim, on the day when due in same day or immediately available funds,
and in U.S. dollars.
4.
8. Representations; Covenants. (a) Guarantor represents and/or warrants to
each Lender that (i) Guarantor is a corporation duly organized, validly existing
and in good standing under the law of the jurisdiction of its incorporation, and
has all requisite power and authority to own its assets and carry on its
business and to execute, deliver and perform its obligations under this
Guaranty; (ii) the execution, delivery and performance by Guarantor of this
Guaranty have been duly authorized by all necessary corporate action of
Guarantor, and do not and will not result in a breach of or constitute a default
under any material agreement, lease or instrument to which Guarantor is a party
or by which it or its properties may be bound or affected, or violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree or the like binding on or affecting Guarantor; (iii) this Guaranty
constitutes the legal, valid and binding obligation of Guarantor, enforceable
against Guarantor in accordance with its terms; (iv) no authorization, consent,
approval, license, exemption of, or filing or registration with, any
governmental agency or authority is required for the due execution, delivery or
performance by Guarantor of this Guaranty; and (v) as of the date of the signing
of this Guaranty, Guarantor does not have sufficient assets to fully cover all
of the Obligations in the event of a default by the Company under the
Convertible Loan Agreement and makes no representations that it will possess
sufficient assets in the future, and Lenders, in signing below, acknowledge that
they are aware of this fact, nevertheless find sufficient value in this Guaranty
and voluntarily waive any claims against the employees or representatives of
Guarantor relating to such insufficiency of assets (subject to fraud or
fraudulent preference laws). (b) So long as this Guaranty shall be in effect,
Guarantor (i) will not voluntarily liquidate, wind up or dissolve itself, merge
with or consolidate into, or acquire all or substantially all of the assets of,
any Person, or sell, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets, except that Guarantor may merge with or consolidate into any other
Person or sell, transfer, lease or otherwise dispose of all or substantially all
of its assets to another Person, provided that the surviving entity or such
Person shall expressly assume by an amendment hereto all of the obligations of
Guarantor hereunder and no default exists; and (ii) will furnish to Lenders from
time to time such information respecting Guarantor's financial condition as any
Lender may from time to time reasonably request and will execute, acknowledge,
deliver, file, notarize and register at its own expense all such further
agreements, instruments, certificates, documents and assurances and perform such
acts as any Lender shall deem necessary or appropriate to effectuate the
purposes of this Guaranty and shall reasonably request.
9. Notices. All notices and other communications provided for hereunder
shall, unless otherwise stated herein, be in writing (including by facsimile or
email) and shall be mailed, sent or delivered (i) if to Collateral Agent, to XDL
Capital Corp., , attn. Xxxxxx Xxxxxx with a copy to Xxxxx Xxxxxx, fax (416)
000-0000, email: xxxxxxx@xxx.xxx; xxxxxxx@xxx.xxx; and; and (ii) if to
Guarantor, at or to its address or facsimile number or email address set forth
below its name on the signature page hereof, or at or to such other address or
facsimile number or email address as such party shall have designated in a
written notice to the other party. All such notices and communications shall be
effective upon receipt.
10. No Waiver. No failure on the part of any Lender to exercise, and no
delay in exercising, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, remedy, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege.
5.
The rights and remedies under this Guaranty are cumulative and not exclusive of
any rights, remedies, powers and privileges that may otherwise be available to
any Lender.
11. Costs and Expenses. Guarantor agrees to pay on demand all reasonable
costs and expenses of Lenders and reasonable fees and disbursements of counsel
in connection with the enforcement, or preservation of any rights under, this
Guaranty.
12. Binding Effect; Entire Agreement; Amendments. This Guaranty shall be
binding upon Guarantor and its successors and assigns, and inure to the benefit
of and be enforceable by each Lender and its successors, endorsees, transferees
and assigns; provided that Guarantor shall not have the right to assign or
transfer its rights and obligations hereunder without the prior written consent
of Lenders. This Guaranty constitutes the entire agreement of Guarantor with
respect to the matters set forth herein and supersedes any prior agreements,
commitments, discussions and understandings, oral or written, with respect
thereto. There are no conditions to the full effectiveness of this Guaranty.
This Guaranty may not be amended except by a writing signed by Guarantor and
Lenders. No waiver of any rights of any Lender under any provision of this
Guaranty or consent to any departure by Guarantor therefrom shall be effective
unless in writing and signed by such Lender. Any such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
13. Knowing and Explicit Waivers. Guarantor acknowledges that it has
either obtained the advice of legal counsel or has had the opportunity to obtain
such advice in connection with the terms and provisions of this Guaranty.
Guarantor acknowledges and agrees that each of the waivers and consents set
forth herein, including, without limitation, those contained in Sections 2
through 4, are made with full knowledge of their significance and consequences.
Additionally, Guarantor acknowledges and agrees that by executing this Guaranty,
it is waiving certain rights, benefits, protections and defenses to which it may
otherwise be entitled under applicable law, including, without limitation, under
the provisions of the California Civil Code and California Code of Civil
Procedure referred to in Section 4, and that all such waivers herein are
explicit, knowing waivers. Guarantor further acknowledges and agrees that each
Lender is relying on such waivers in creating the Obligations, and that such
waivers are a material part of the consideration which such Lender is receiving
for creating the Obligations.
14. Severability. Whenever possible, each provision of the Guaranty shall
be interpreted in such manner as to be effective and valid under all applicable
laws and regulations. If, however, any provision of this Guaranty shall be
prohibited by or invalid under any such law or regulation, it shall be deemed
modified to conform to the minimum requirements of such law or regulation, or,
if for any reason it is not deemed so modified, it shall be ineffective and
invalid only to the extent of such prohibition or invalidity without affecting
the remaining provisions of this Guaranty.
15. Law; Submission to Jurisdiction. This Guaranty shall be governed by
and construed in accordance with California law. Guarantor hereby (i) submits to
the non-exclusive jurisdiction of the courts of the State of California and the
Federal courts of the United States sitting in the State of California for the
purpose of any action or proceeding arising out of or relating to this Guaranty,
(ii) agrees that all claims in respect of any such action or proceeding
6.
may be heard and determined in such courts, (iii) irrevocably waives (to the
extent permitted by applicable law) any objection which it now or hereafter may
have to the laying of venue of any such action or proceeding brought in any of
the foregoing courts in and of the State of California, and any objection on the
ground that any such action or proceeding in any such court has been brought in
an inconvenient forum, and (iv) agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner permitted by law.
16. Multiple Guarantors; Joint and Several Liability. When this Guaranty
is executed by more than one Guarantor, the word "Guarantor" shall mean all and
any one or more of them, and the obligations of all Persons signing this
Guaranty shall be joint and several.
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty, as
of the date first above written.
COMMTOUCH INC.
By _______________________________
Xxxxxx Xxxxxx, CEO
Address:
0000 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
Attn.: Xxxxxx Xxxxxx
Fax: 000-000-0000
7.
