EXHIBIT 10.5
FORM OF GUARANTY
1. Identification.
This Guaranty (the "Guaranty"), dated as of February ____, 2006, is
entered into by the Subsidiaries of the Parent identified on Annex I to the
Security Agreement (each a "Guarantor"), for the benefit of the parties
identified on Schedule A hereto (each a "Lender" and collectively, the
"Lenders").
2. Recitals.
2.1 Guarantor is a direct or indirect subsidiary of Universal
Communication Systems, Inc., a Nevada corporation ("Parent"). The Lenders have
made, are making and will be making loans to Parent (the "Loans"). Guarantor
will obtain substantial benefit from the proceeds of the Loans.
2.2 The Loans are and will be evidenced by certain convertible
promissory notes (each a "Convertible Note" and collectively, the "Convertible
Notes") issued by Parent on, about or after the date of this Guaranty pursuant
to subscription agreements dated at or about the date hereof ("Subscription
Agreements"). The Convertible Notes are further described on Schedule A hereto
and were and will be executed by Parent as "Borrower" or "Debtor" for the
benefit of each Lender as the "Holder" or "Lender" thereof.
2.3 In consideration of the Loans made and to be made by Lenders to
Parent and for other good and valuable consideration, and as security for the
performance by Parent of its obligations under the Convertible Notes and as
security for the repayment of the Loans and all other sums due from Debtor to
Lenders arising under the Convertible Notes, Subscription Agreements and any
other agreement between or among them relating to the foregoing (collectively,
the "Obligations"), Guarantor, for good and valuable consideration, receipt of
which is acknowledged, has agreed to enter into this Guaranty. Obligations
include all future advances by Lenders to Parent made by Lenders pursuant to the
Subscription Agreement.
2.4 The Lenders have appointed Barbara R. Mittman as Collateral Agent
pursuant to that certain Collateral Agent Agreement dated at or about February
____, 2006 ("Collateral Agent Agreement"), among the Lenders and Collateral
Agent.
3. Guaranty.
3.1 Guaranty. Guarantor hereby unconditionally and irrevocably
guarantees, jointly and severally with any other Guarantor, the punctual
payment, performance and observance when due, whether at stated maturity, by
acceleration or otherwise, of all of the Obligations now or hereafter existing,
whether for principal, interest (including, without limitation, all interest
that accrues after the commencement of any insolvency, bankruptcy or
reorganization of Parent, whether or not constituting an allowed claim in such
proceeding), fees, commissions, expense reimbursements, liquidated damages,
indemnifications or otherwise (such obligations, to the extent not paid by
Parent being the "Guaranteed Obligations"), and agrees to pay any and all costs,
fees and expenses (including reasonable counsel fees and expenses) incurred by
Collateral Agent and the Lenders in enforcing any rights under the guaranty set
forth herein. Without limiting the generality of the foregoing, Guarantor's
liability shall extend to all amounts that constitute part of the Guaranteed
Obligations and would be owed by Parent to Collateral Agent and the Lenders, but
for the fact that they are unenforceable or not allowable due to the existence
of an insolvency, bankruptcy or reorganization involving Parent.
3.2 Guaranty Absolute. Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the
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Convertible Notes, regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting any of such terms or the rights of
Collateral Agent or the Lenders with respect thereto. The obligations of
Guarantor under this Guaranty are independent of the Guaranteed Obligations, and
a separate action or actions may be brought and prosecuted against Guarantor to
enforce such obligations, irrespective of whether any action is brought against
Parent or any other Guarantor or whether Parent or any other Guarantor is joined
in any such action or actions. The liability of Guarantor under this Guaranty
constitutes a primary obligation, and not a contract of surety, and to the
extent permitted by law, shall be irrevocable, absolute and unconditional
irrespective of, and Guarantor hereby irrevocably waives any defenses it may now
or hereafter have in any way relating to, any or all of the following:
(a) any lack of validity or enforceability of the Convertible Notes
or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from the Convertible Notes,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to Parent or otherwise;
(c) any taking, exchange, release, subordination or non-perfection
of any Collateral, or any taking, release or amendment or waiver of or consent
to departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any change, restructuring or termination of the corporate,
limited liability company or partnership structure or existence of Parent; or
(e) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any representation by
Collateral Agent or the Lenders that might otherwise constitute a defense
available to, or a discharge of, Parent or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by Collateral Agent, the Lenders or any other
entity upon the insolvency, bankruptcy or reorganization of the Parent or
otherwise (and whether as a result of any demand, settlement, litigation or
otherwise), all as though such payment had not been made.
3.3 Waiver. Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that Collateral Agent or the
Lenders exhaust any right or take any action against any Borrower or any other
person or entity or any Collateral. Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated herein
and that the waiver set forth in this Section 3.3 is knowingly made in
contemplation of such benefits. Guarantor hereby waives any right to revoke this
Guaranty, and acknowledges that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future.
3.4 Continuing Guaranty; Assignments. This Guaranty is a continuing
guaranty and shall (a) remain in full force and effect until the later of the
indefeasible cash payment in full of the Guaranteed Obligations and all other
amounts payable under this Guaranty, the Subscription Agreements and Convertible
Notes, (b) be binding upon Guarantor, its successors and assigns and (c) inure
to the benefit of and be enforceable by the Lenders and their successors,
pledgees, transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Lender may pledge, assign or otherwise transfer all or
any portion of its rights and obligations under this Guaranty (including,
without limitation, all or any portion of its Convertible Notes owing to it) to
any other Person, and such other Person shall thereupon become vested with all
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(Guaranty Agreement)
the benefits in respect thereof granted such Collateral Agent or Lender herein
or otherwise.
3.5 Subrogation. No Guarantor will exercise any rights that it may now
or hereafter acquire against the Collateral Agent or any Lender or other
Guarantor (if any) that arise from the existence, payment, performance or
enforcement of such Guarantor's obligations under this Guaranty, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from the Collateral Agent or any Lender
or other Guarantor (if any), directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under this Guaranty shall have been indefeasibly
paid in full in cash.
3.6 Maximum Obligations. Notwithstanding any provision herein contained
to the contrary, Guarantor's liability with respect to the Obligations shall be
limited to an amount not to exceed, as of any date of determination, the amount
that could be claimed by Lenders from Guarantor without rendering such claim
voidable or avoidable under Section 548 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law.
4. Miscellaneous.
4.1 Expenses. Guarantor shall pay to the Lenders, on demand, the amount
of any and all reasonable expenses, including, without limitation, attorneys'
fees, legal expenses and brokers' fees, which the Lenders may incur in
connection with exercise or enforcement of any the rights, remedies or powers of
the Lenders hereunder or with respect to any or all of the Obligations.
4.2 Waivers, Amendment and Remedies. No course of dealing by the
Lenders and no failure by the Lenders to exercise, or delay by the Lenders, in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, and no single or partial exercise thereof shall preclude any other or
further exercise thereof or the exercise of any other right, remedy or power of
the Lenders. No amendment, modification or waiver of any provision of this
Guaranty and no consent to any departure by Guarantor therefrom, shall, in any
event, be effective unless contained in a writing signed by the Majority in
Interest (as such term is defined in the Collateral Agent Agreement) or the
Lender or Lenders against whom such amendment, modification or waiver is sought,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. The rights, remedies and powers of
the Lenders, not only hereunder, but also under any instruments and agreements
evidencing or securing the Obligations and under applicable law are cumulative,
and may be exercised by the Lenders from time to time in such order as the
Lenders may elect.
4.3 Notices. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being faxed (provided that a copy is
delivered by first class mail) to the party to receive the same at its address
set forth below or to such other address as either party shall hereafter give to
the other by notice duly made under this Section:
To Parent and
Guarantor, to: Universal Communication Systems, Inc.
407 Lincoln Road, Suite 12F
Miami Beach, FL 33139
Attn: Michael J. Zwebner, CEO
Fax: (305) 672-1965
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With a copy by telecopier only to:
Torys LLP
466 Lexington Avenue
New York, NY 10017
Attn: Andrew J. Beck, Esq.
Fax: (212) 682-0200
To Lenders: To the addresses and telecopier numbers
set forth on Schedule A
To the Collateral Agent:
Barbara R. Mittman, Esq.
Grushko & Mittman, P.C.
551 Fifth Avenue, Suite 1601
New York, NY 10176
Fax: (212) 697-3575
With a copy to: Grushko & Mittman, P.C.
551 Fifth Avenue, Suite 1601
New York, New York 10176
Fax: (212) 697-3575
Any party may change its address by written notice in accordance with this
paragraph.
4.4 Term; Binding Effect. This Guaranty shall (a) remain in full force
and effect until payment and satisfaction in full of all of the Obligations; (b)
be binding upon Guarantor and its successors and permitted assigns; and (c)
inure to the benefit of the Lenders and their respective successors and assigns.
All the rights and benefits granted by Guarantor to the Collateral Agent and
Lenders hereunder and other agreements and documents delivered in connection
therewith are deemed granted to both the Collateral Agent and Lenders. Upon the
payment in full of the Obligations, (i) this Guaranty shall terminate and (ii)
the Lenders will, upon Guarantor's request and at Guarantor's expense, execute
and deliver to Guarantor such documents as Guarantor shall reasonably request to
evidence such termination, all without any representation, warranty or recourse
whatsoever.
4.5 Captions. The captions of Paragraphs, Articles and Sections in this
Guaranty have been included for convenience of reference only, and shall not
define or limit the provisions hereof and have no legal or other significance
whatsoever.
4.6 Governing Law; Venue; Severability. This Guaranty shall be governed
by and construed in accordance with the laws of the State of New York without
regard to principles of conflicts or choice of law. Any legal action or
proceeding against Guarantor with respect to this Guaranty may be brought in the
courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Guaranty, Guarantor
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. Guarantor hereby
irrevocably waives any objection which they may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Guaranty brought in the aforesaid courts and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum. If any provision of this Guaranty, or the application
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(Guaranty Agreement)
thereof to any person or circumstance, is held invalid, such invalidity shall
not affect any other provisions which can be given effect without the invalid
provision or application, and to this end the provisions hereof shall be
severable and the remaining, valid provisions shall remain of full force and
effect.
4.7 Satisfaction of Obligations. For all purposes of this Guaranty, the
payment in full of the Obligations shall be conclusively deemed to have occurred
when either the Obligations have been indefeasibly paid in cash or all
outstanding Convertible Notes have been converted to common stock pursuant to
the terms of the Convertible Notes and the Subscription Agreements.
4.8 Counterparts/Execution. This Agreement may be executed in any
number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.
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(Guaranty Agreement)
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Guaranty, as of the date first written above.
"GUARANTOR" "GUARANTOR"
AIRWATER CORPORATION AIRWATER PATENTS CORP.
A Florida corporation A Florida corporation
By: __________________________________ By:_________________________________
Its: _________________________________ Its: _______________________________
"GUARANTOR" "GUARANTOR"
AIR WATER FRIDGES AND FREEZERS INC. ATOMOSPHERIC WATER TECHNOLOGIES
A Florida corporation A Texas corporation
By: __________________________________ By:_________________________________
Its: _________________________________ Its: _______________________________
"GUARANTOR" "GUARANTOR"
MILLENNIUM ELECTRIC TOU, LTD. MISA WATER PRODUCTS, LTD.
An Israeli corporation A Florida corporation
By: __________________________________ By:_________________________________
Its: _________________________________ Its: _______________________________
"GUARANTOR" "GUARANTOR"
SOLAR ONE, INC. SOLAR STYLE, LTD.
A Florida corporation An Israeli corporation
By: __________________________________ By:_________________________________
Its: _________________________________ Its: _______________________________
"GUARANTOR"
SOLAR STYLE (USA), INC.
A Florida corporation
By: __________________________________
Its: _________________________________
APPROVED BY "LENDERS":
- -------------------------------------- ------------------------------------
ALPHA CAPITAL AKTIENGESELLSCHAFT BRISTOL INVESTMENT FUND, LTD.
- -------------------------------------- ------------------------------------
MONTGOMERY EQUITY PARTNERS
THIS GUARANTY AGREEMENT MAY BE SIGNED BY FACSIMILE SIGNATURE AND
DELIVERED BY CONFIRMED FACSIMILE TRANSMISSION.
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(Guaranty Agreement)
SCHEDULE A TO GUARANTY
- ---------------------------------- ------------------------------- ----------------------------
LENDER PRINCIPAL AMOUNT OF NOTE TO PRINCIPAL AMOUNT OF NOTE
BE ISSUED AT INITIAL CLOSING TO BE ISSUED AT SECOND
CLOSING
- ---------------------------------- ------------------------------- ----------------------------
ALPHA CAPITAL AKTIENGESELLSCHAFT $301,205.00 $301,205.00
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196
- ---------------------------------- ------------------------------- ----------------------------
BRISTOL INVESTMENT FUND, LTD. $481,928.00 $481,928.00
Caledonian Fund Services Limited
69 Dr. Roy's Drive
George Town, Grand Cayman
Cayman Islands
Fax: (310) 696-0334
- ---------------------------------- ------------------------------- ----------------------------
MONTGOMERY EQUITY PARTNERS $722,892.00 $722,892.00
- ---------------------------------- ------------------------------- ----------------------------
TOTALS $1,506,025.00 $1,506,025.00
- ---------------------------------- ------------------------------- ----------------------------
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(Guaranty Agreement)