Exhibit 2.5
GUARANTY AND PLEDGE AGREEMENT
THIS AGREEMENT is made as of March 1, 2006, between Sand Hills General
Partners, a Texas general partnership ("Guarantor") and David M. Klausmeyer
("DMK").
R E C I T A L S:
Reference is made to the Note dated this date executed by Sand Hills
Partners, L.L.C., a Delaware Limited Liability Company ("SHP") in favor of the
DMK (the "Note") which Note is secured by SHP's interests in Guarantor and
delivered simultaneous with the Note (the "Pledge Agreement"). The Note and
the and Pledge Agreement are each issued pursuant to a Partnership Interest
Purchase Agreement ("Purchase Agreement") between SHP and DMK, also dated as
of this date.
The Guarantor has, as a condition to DMK's sale of his partnership
interest in Guarantor, agreed to guarantee SHP's Obligations under the Note
and the Pledge Agreement and to pledge those shares attached hereto as
Schedule 1, which by this reference is incorporated herein (the "Shares").
NOW THEREFORE, for good and valuable consideration and to induce DMK to
enter into the Purchase Agreement, the Guarantor agrees as follows:
1. DEFINITIONS.
When used in this Guaranty and Pledge Agreement the following terms
shall have the following meanings:
1.1 Collateral" shall mean all property and interests in property
on or in which a lien or security interest is or has been granted by the
Guarantor to DMK pursuant to Section 2.2 of this Agreement; and
1.2 "Default" shall mean the happening of either of the
following events: (a) the occurrence of a "Default" as such term is defined in
the Note, the Pledge Agreement, this Agreement or any other document or
instrument executed and delivered pursuant to the Purchase Agreement or (b)
the undersigned fails to perform any covenant or agreement contained in this
Agreement or if any representation or warranty contained in this Agreement is
found to have been untrue, incomplete or misleading in any material respect
when furnished; and
1.3 "Indebtedness" shall mean any and all indebtedness,
obligations and liabilities of any kind of SHP to DMK arising out of the
Purchase Agreement, or any document or instrument executed and delivered
pursuant to the Purchase Agreement
2. GUARANTY AND PLEDGE.
2.1 Guaranty. The Guarantor hereby guarantees the full and
prompt payment when due, whether at maturity or earlier (by reason of
acceleration) and at all times thereafter, of all of the Indebtedness and the
undersigned further agree to pay all costs and expenses including, without
limitation, all court costs and attorneys' fees and expenses paid or incurred
in endeavoring to collect all or any part of the Indebtedness from, or in
prosecuting any action against, SHP or Guarantor.
2.2 Pledge and Security Interests. In addition, to secure the
payment and performance of the Indebtedness and the Guarantor's obligations
under this Agreement, the Guarantor grants to DMK a security interest in:
(a) and pledges to the DMK those Shares set forth in
Schedule 1 hereto, and
(b) all proceeds derived from distributions respecting the
property described in this Section 2.2. or the
proceeds of sale of the property described in Section
2.2.
2.3 Limited Recourse. DMK and the Guarantor mutually agree
that the DMK's sole recourse against the Guarantor under
this Guaranty, in the event of a Default on the Indebtedness
or this Agreement, is to proceed against the Collateral
provided hereunder by Guarantor.
3. TERMS AND CONDITIONS.
Subject to the provisions of the Purchase Agreement, and any and all
documents or instruments executed and delivered pursuant to the Purchase
Agreement, DMK shall have the exclusive right to determine the application of
payments and credits, if any, from the undersigned, SHP or from any other
guarantor of the Indebtedness.
DMK is authorized, without notice or demand and without affecting the
liability of the Guarantor, from time to time to (a) renew, extend, accelerate
or otherwise change the time for payment of, or other terms relating to, the
Indebtedness, or otherwise modify, amend or change the terms of the Note, the
Pledge Agreement, the Purchase Agreement, or any other agreement, document or
instrument now or hereafter executed by SHP, or the Guarantor and delivered to
DMK; (b) accept partial payments on the Indebtedness; (c) take and hold
security or collateral for the undersigned's obligations under this Agreement,
or any other guarantees of, or support or Pledge Agreement relating to, the
Indebtedness guaranteed hereby, and exchange, enforce, waive and release any
such security or collateral; (d) apply such security or collateral and direct
the order or manner of sale as in its sole discretion it may determine; and
(e) settle, release, compromise, collect or otherwise liquidate the
Indebtedness and any security or collateral in any manner, without affecting
or impairing the obligations of the undersigned.
At any time after the Indebtedness becomes due or is declared due, DMK
may, at his discretion, upon notice to the Guarantor and regardless of the
acceptance of any security or collateral for the payment, appropriate and
apply toward the payment of the Indebtedness (i) any indebtedness due or to
become due from DMK to the Guarantor; and (ii) any monies, credits or other
property belonging to the Guarantor or its affiliates, at any time held by DMK
on deposit or otherwise.
DMK shall not be required to take any steps to preserve any rights
against prior parties (if any) to or in any of the Collateral or Indebtedness.
DMK may, but shall not be obligated to, and the undersigned hereby
designate DMK as attorney-in-fact to contest, pay and/or discharge all liens,
encumbrances, taxes or assessments on, or claims, actions or demands against
any of the Collateral upon notice to, but without the consent of, the
undersigned and to take all actions and proceedings in his name or in the name
of his duly appointed agent or any other appropriate person to remove or
contest such liens, encumbrances, claims, actions, demands, taxes or
assessments by litigation or otherwise. The undersigned agree to pay on demand
and/or authorize DMK to charge their account with all costs, attorneys' fees,
expenses, and all other sums advanced or paid by DMK.
The right is expressly granted to DMK, at its discretion, to file one or
more financing statements, and with respect thereto to serve as the Attorney-
in-Fact for each of the undersigned for the purpose of executing such
financing statements under applicable law, naming the Guarantor as debtor and
DMK as secured party, and describing the types or items of Collateral. DMK may
further serve as the Attorney-in-Fact for the Guarantor for the purpose of
executing any additional notices, affidavits or other documents, as DMK may
deem necessary to protect its security interest. The Guarantor hereby agrees
to pay on demand and/or authorize DMK to charge their account with the amount
of any and all filing fees and expenses, which DMK deems necessary to incur to
protect its interest in the Collateral.
DMK shall exercise reasonable care in the custody and preservation of
the Collateral to the extent required by applicable statute, and shall be
deemed to have exercised reasonable care if it takes such action for that
purpose as the undersigned shall reasonably request in writing; but under no
circumstances shall any omission to do any act not requested by Guarantor be
deemed a failure to exercise reasonable care, nor shall any omission to comply
with any request of the undersigned of itself be deemed a failure to exercise
reasonable care. The undersigned hereby agrees to pay on demand and/or
authorize DMK to charge its account with any cost and expense, including,
without limitation, attorneys' fees, incurred by DMK in the reasonable
preservation of the Collateral.
The Guarantor consents and agrees that DMK shall be under no obligation
to marshal any assets against, or in payment of, any or all of the
Indebtedness. The Guarantor further agrees that to the extent that SHP makes a
payment or payments to DMK, 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 bankruptcy act, state or federal law, common law or equitable cause, then
to the extent of such payment or repayment, the obligation intended to be
satisfied shall be reviewed and continued in full force and effect as if said
payment had not been made, and the Guarantor shall, upon demand by DMK,
immediately satisfy such obligation in full in accordance with the terms of
this Agreement. Guarantor further agrees that any and all claims of the
Guarantor against SHP or against any other guarantor of the Indebtedness or
against any of their respective properties, arising by reason of any payment
by the undersigned to DMK shall be subordinate and subject in right of payment
to the prior payment, in full, of all principal and interest, all costs of
collection (including attorneys' fees), and any other liabilities or
obligations owing to DMK by SHP or Guarantor which may arise either with
respect to or on the Note or with respect to any other instruments, documents,
items or other writings now or to be delivered to DMK in connection with the
Purchase Agreement.
The Guarantor assumes responsibility for keeping itself informed of its
financial condition and the acts of SHP and of all other circumstances bearing
upon the risk of non-payment or Default of the Note and the Pledge Agreement.
The Guarantor agrees that DMK shall have no duty to advise them of information
known to DMK regarding such condition or any such circumstances.
No delay on the part of DMK in the exercise of any right or remedy shall
operate as a waiver or constitute a discharge of the Guarantor's obligations
under this Agreement, and no single or partial exercise by DMK of any right or
remedy shall preclude the further exercise to any extent; nor shall any
modification or waiver of any of the provisions of this Agreement be binding
upon DMK except as expressly set forth in a writing duly signed and delivered
on DMK's behalf by an authorized officer. DMK's failure at any time or times
to require strict performance by SHP or any other party or the undersigned of
any of the provisions, warranties, terms and conditions contained in the
Note, the Pledge Agreement, or the Purchase Agreement or any other instrument
or document now or at any time or times executed by SHP or any other party or
the undersigned and delivered to DMK pursuant to the Purchase Agreement shall
not discharge Guarantor's obligations under this Agreement nor shall it waive,
affect or diminish any right of DMK at any time or times to demand strict
performance and such right shall not be deemed to have been waived by any act
or knowledge of DMK, his agents, officers or employees, unless such waiver is
contained in an instrument in writing, signed by an officer of DMK and
directed to SHP or any other party or the undersigned, specifying such waiver.
No waiver by DMK of any default shall operate as a waiver of either any other
default or the same default on a future occasion, and no action or inaction by
DMK including, without limitation, DMK's failure to take any steps to preserve
its rights in the Collateral or in any other security for the Indebtedness
shall in any way affect or impair DMK's rights or the obligations of the
Guarantor under this Agreement. The Guarantor agrees that its obligations
under this Agreement will not be discharged except by complete performance of
such obligations. Any determination by a court of competent jurisdiction of
the amount of any principal and/or interest owing by SHP to DMK shall be
conclusive and binding on the Guarantor irrespective of whether the Guarantor
were a party to the suit or action in which such determination was made.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Guarantor represents and warrants that: (a) this Agreement
constitutes a valid, legal and binding obligation of the Guarantor,
enforceable against the undersigned in accordance with its terms; (b) the
Guarantor is the lawful owners of all of the outstanding Shares as set forth
in Schedule 1 hereto; (c) the Shares are subject to no prior security
interest, encumbrance, or lien whatsoever; (d) subject to laws on foreign
ownership imposed by applicable government regulations, the Shares may be
freely transferred by the undersigned and, in the event of a Default, the
Shares may be sold by DMK; (e) until the Indebtedness to DMK has been repaid
in full, no other shares or any other stock will be issued by the respective
entities whose shares are held by Guarantor unless said shares are or other
stock are immediately delivered to DMK pursuant to the terms of this Agreement
and the holder of such shares, if not already a party to this Agreement,
assumes obligations as an additional guarantor under this Agreement.
4.2 Financial Statement. The undersigned covenants and agrees with DMK
that it will: (i) furnish to DMK within forty-five (45) days after the end of
each fiscal quarter, a statement of income and financial condition (including
balance sheets, earnings and operating statements and statements of the source
and application of funds) for the previous quarter, certified by such entities
chief financial officer and accompanied by a certificate of said officer
stating whether he has knowledge of any Default or of the occurrence of any
event which with notice or lapse of time or both would constitute such
Default, and if so, stating the facts with respect thereto; (ii) duly pay and
discharge all taxes, assessments and governmental charges, claims for labor,
supplies, rent or other obligations imposed upon the undersigned or against
its properties prior to their becoming delinquent, except to the extent that
the same shall be contested in good faith by appropriate proceedings by the
undersigned; and (iii) comply in all material respects with all applicable
statues and governmental regulations.
5. DEFAULT.
Upon any default as defined in this Agreement, DMK may, at its sole
election: (a) proceed directly and at once, without notice, against the
Guarantor to collect and recover the full amount or any portion of the
Indebtedness, without first proceeding against SHP any collateral or any other
party or any other person, firm or corporation; (b) with or without notice,
transfer to or register in the name of itself or its nominee any of the
Shares, and whether or not so transferred or registered, receive the income
and dividends, including stock dividends and rights to subscribe, and hold the
same as a part of the Collateral to secure the performance and payment of the
Indebtedness, and/or apply the same as hereinafter provided; (c) exchange any
of the Shares for other property upon the reorganization, recapitalization, or
other readjustment; (d) vote the Shares and exercise or cause its nominee to
exercise all or any powers with the same force and effect as an absolute
owner. All of the above rights and powers may be exercised by DMK without
liability, except the obligation to account for property actually received.
In addition to any other rights given by law and under this Agreement,
DMK shall have the rights and remedies with respect to the Collateral of a
secured party under the Texas Uniform Commercial Code (whether or not that
Code is in effect in the jurisdiction where the rights and remedies are
asserted) all of which remedies shall be cumulative, and none exclusive, to
the extent permitted by law. DMK may sell or cause to be sold, in one or more
sales or parcels, at such price or prices as DMK may deem best, and for cash
or on credit or for future delivery, without assumption of any credit risk,
all or any of the Collateral, at public or private sale, without demand of
performance but with notice to the undersigned, and the purchaser of any or
all of the Collateral so sold shall then hold the same absolutely, free from
any claim or right of any kind including (but not limited to) any equity of
redemption of the Guarantor. Any requirements of reasonable notice shall be
met if such notice is mailed, postage prepaid, to the Guarantor at the address
set forth in its signature page hereto, at least ten (10) days before the time
of the sale or disposition. Any other requirement of notice, demand or
advertisement for sale is waived. DMK may, in its own name, or in the name of
its designee, buy at any public or, if permitted by law, any private sale,
and, in lieu of the actual payment of the purchase price, DMK may set-off the
amount of such price against the Guarantor's obligations. The undersigned will
pay to DMK all expenses (including Attorney's fees) of, or incident to, the
enforcement of any of the provisions.
Any right to set-off exercised by DMK shall be deemed to have been
exercised immediately on the occurrence of a default of SHP (subject to any
rights to cure) or any other party to the Purchase Agreement, even though such
set-off is made or entered on the books of DMK at any subsequent time.
In view of the fact that US federal and state securities laws may impose
certain restrictions on the method by which a sale of the Shares may be
effected, it is agreed that in the event of the non-payment of any of the
Indebtedness when due (whether at maturity or by acceleration) DMK may from
time to time attempt to sell all or any part of the Shares by means of a
private placement, restricting the bidders and prospective purchasers to those
who will represent and agree that they are purchasing for investment only and
not for distribution. In so doing, DMK may solicit offers to buy the Shares,
or any of it, for cash, from a limited number of investors deemed by DMK in
its reasonable judgment to be responsible parties who might be interested in
purchasing such Collateral. The undersigned agrees that acceptance by DMK of
the highest offer after soliciting offers from two or more potential buyers
would be commercially reasonable.
DMK, at any time and at its option, may apply all or any net cash
receipts from the sale of Collateral to the payment of principal (in whole or
in part) on any or all of the Indebtedness, applying or reapplying, or
distributing or allocating the same as it shall elect, whether or not then
due, making proper rebate of interest or discount. In case of any sale by DMK
of any of the Collateral on credit or for future delivery, the property sold
may be retained by DMK until the selling price is paid by the purchaser, but
DMK shall incur no liability in case of failure of the purchaser to take and
pay for the property so sold. In case of any such failure, the property so
sold may be again similarly sold.
6. INDEMNIFICATION.
Guarantor, will at all times now and hereafter indemnify and hold DMK
harmless from and against all loss or damage arising in connection with this
Agreement and against all claims, liability, demands, actions or suits,
whether groundless or otherwise, and all liabilities, payments, costs, charges
and expenses including attorneys' fees incurred by DMK.
7. MISCELLANEOUS.
This Agreement shall be binding upon the undersigned and upon the heirs,
executors, successors and assigns of the undersigned, and shall inure to the
benefit of DMK's successors, assigns and participants (if any); all references
to the undersigned shall be deemed to include their respective successors,
assigns, participants, receivers or trustees (as the case may be).
This Agreement embodies the entire agreement and understanding of the
parties hereto, and shall constitute a continuing agreement applicable to
future as well as existing transactions between DMK and the undersigned.
THIS AGREEMENT HAS BEEN DELIVERED AT AND SHALL BE DEEMED TO HAVE
BEEN IN HOUSTON, TEXAS, AND SHALL BE INTERPRETED, AND THE RIGHTS AND
LIABILITIES OF THE PARTIES DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS, AND AS PART OF THE CONSIDERATION FOR ENTERING INTO THIS
AGEEEMENT, THE UNDERSIGNED CONSENTS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN THE STATE OF TEXAS, AND FURTHER CONSENT THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE UNDERSIGNED
AT THE ADDRESS STATED AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED TWO
(2) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED. THE UNDERSIGNED FURTHER
CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT.
The headings used in this Agreement are for the convenience of the
reader only; such headings constitute no part whatsoever of the agreement
between the parties.
No invalidity, irregularity or unenforceability of the Indebtedness
hereby secured shall affect, impair or be a defense to any provision contained
here this Agreement. If any term, condition or provision of this Agreement is
determined to be invalid or unenforceable, such determination shall not affect
the validity or enforceability of any other term, condition or provision of
this Agreement.
If this Agreement shall differ or conflict in terms with any other
agreement or obligation or Indebtedness of the undersigned, SHP to or with
DMK, that which gives DMK the greater right, as determined by DMK, shall
prevail.
GUARANTOR
Sand Hills General Partners, a Texas
General Partnership by its General Partner,
Sand Hills Partners, L.L.C., a
Delaware Limited Liability Company
/s/George Jarkesy
George Jarkesy
Its Managing Member
18205 Burkhardt
Tomball, Texas 77377
Accepted and approved by
/s/David M. Klausmeyer
David M. Klausmeyer
SCHEDULE 1
SHAREHOLDINGS OF GUARANTOR SUBJECT TO THIS PLEDGE
NAME OF ENTITY NO. OF SHARES
G/O International, Inc., 6,400,000
Waterbury Resources, Ltd. 632,000