1
EXECUTED COPY
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Agreement") is made as of this 19th day
of June, 1998 by and between X.X. Xxxxxx Equity Investors I, L.P., a Delaware
limited partnership (the "Guarantor"), and Special Devices, Incorporated, a
Delaware corporation (the "Seller").
W I T N E S S E T H:
WHEREAS, to induce the Seller to enter into an Agreement and Plan of
Merger, dated as of June 19, 1998 (the "Merger Agreement") with SDI Acquisition
Corp., a Delaware corporation ("Acquisition"); and
WHEREAS, the Guarantor or affiliates of the Guarantor (i) have
negotiated the Merger Agreement with the Seller and (ii) own an equity interest
in Acquisition.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the Seller and the Guarantor hereby agree as
follows:
1. Guaranty. The Guarantor hereby unconditionally and irrevocably
guarantees for the benefit of the Seller the full payment by Acquisition of any
final judgment or settlement obtained against Acquisition, or any waiver or
other agreement admitting liability signed by Acquisition, in either case
relating to the failure of Acquisition to fully and faithfully perform each and
all of its respective obligations (direct or contingent) to be performed
pursuant to the Merger Agreement or the breach of any of its representations and
warranties contained in the Merger Agreement, subject to all of the conditions
and limitations set forth therein. It is expressly understood and agreed by the
Seller that: (i) the damages recoverable against the Guarantor under this
Guaranty Agreement shall be limited by, and shall not exceed, the sum of
$15,000,000 in the aggregate, (ii) this is guaranty of collection and not a
guaranty of payment and performance, and (iii) this Guaranty Agreement shall
terminate upon the closing of the Merger pursuant to the Merger Agreement. It is
expressly understood and agreed by the Guarantor that the obligations of the
Guarantor hereunder shall not be discharged or otherwise affected by any
bankruptcy, reorganization, dissolution or similar proceeding commenced by or
against Acquisition.
2. Organization and Good Standing of the Guarantor. The Guarantor
represents and warrants that (i) it is a limited partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and (ii) it is qualified to do business and is in good standing in
all jurisdictions where it is required to be qualified except for such failures
to be so qualified as have not had, and would not be reasonably expected to
have, a material adverse effect on (a) the financial condition of the Guarantor
or (b) the Guarantor's ability to perform its obligations hereunder.
3. Authority, Approvals and Consents. The Guarantor represents and
warrants that (i) it has the power and authority to enter into, execute, deliver
and perform this Agreement, (ii)
2
the execution, delivery and performance of this Agreement have been duly
authorized and approved and no other actions or proceedings on the part of the
Guarantor are necessary to authorize and approve this Agreement, (iii) this
Agreement has been duly executed and delivered by the Guarantor and constitutes
a valid and binding obligation of the Guarantor, enforceable against the
Guarantor in accordance with its terms, and (iv) the execution, delivery and
performance of this Agreement by the Guarantor do not and will not:
(a) contravene or otherwise violate any provisions of the certificate of
formation or agreement of limited partnership of the Guarantor;
(b) (after notice or lapse of time or both) conflict with, result in a
breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination in
respect of, any contract, agreement, commitment, understanding or arrangement of
any kind to which the Guarantor is a party except for such conflicts, breaches,
defaults, modifications, cancellations or terminations as have not had, and
would not be reasonably expected to have, a material adverse effect on (y) the
financial condition of the Guarantor or (z) the Guarantor's ability to perform
its obligations hereunder;
(c) violate or conflict with any statutes, laws, ordinances, codes,
rules, regulations, standards, judgments, decrees, writs, rulings, injunctions,
orders, decisions and other legal requirements of any governmental authority
applicable to the Guarantor, except for such violations or conflicts as have not
had, or would not be reasonably expected to have, a material adverse effect on
(y) the financial condition of the Guarantor or (z) the Guarantor's ability to
perform its obligations hereunder; or
(d) require the approval of any governmental authority the absence of
which would be reasonably expected to have a material adverse effect on (y) the
financial condition of the Guarantor or (z) the Guarantor's ability to perform
its obligations hereunder.
4. Definitions. Any capitalized term in this Agreement that is not
herein defined shall have the meaning given to such term in the Merger
Agreement.
5. Notices. All notices to be given pursuant to this Agreement to
any party must be in writing and will be deemed to have been validly given:
(a) if delivered by hand to an officer or agent of such party at its
address given below;
(b) if delivered by overnight commercial courier (such as Federal
Express); or
(c) if delivered by telecopier transmission, to such party at its
address given below.
The address of each party for the purposes of this Agreement is as
follows:
If to the Guarantor:
3
X.X. Xxxxxx Equity Investors I, L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
Facsimile: (000) 000-0000
With a copy to (which shall constitute notice and is the address to be
used for purpose of service of process):
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Seller:
Special Devices, Incorporated
00000 Xxxx Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: The President
Facsimile: (000) 000-0000
With a copy to (which shall constitute notice and is the address to be
used for purpose of service of process):
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Strong, Esq.
Facsimile: (000) 000-0000
Each party shall by notice to the other change its address for notice whenever
its existing address or facsimile number for notice changes.
6. Assignment. This Agreement and all provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, that neither this Agreement
nor any right, interest, or obligation hereunder may be assigned by Guarantor
without the prior written consent of the Seller.
7. Integration; Amendment; Waiver.
(a) This Guaranty represents the agreement of the Guarantor and the
Seller with respect to the subject matter hereof and there are no promises or
representations by the Guarantor or the Seller relative to the subject matter
hereof not reflected herein.
4
(b) None of the terms or provisions of this Guaranty may be waived,
amended supplemented or otherwise modified except by a written instrument
executed by the Guarantor and Seller, provided that any provision of this
Guaranty may be waived by Seller in a letter or agreement executed by Seller or
by telex or facsimile transmission from Seller.
8. Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
each of which will be deemed an original.
9. Governing Law; Enforcement of Rights. This Agreement will be
governed by the laws of the State of California (regardless of the laws that
might be applicable under principles of conflicts of law) as to all matters,
including but not limited to matters of validity, construction, effect and
performance.
l0. Severability. If any one or more of the provisions of this
Agreement is held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement will
not be affected thereby, and the Guarantor and the Seller will use their
commercially reasonable efforts to substitute one or more valid, legal and
enforceable provisions which insofar as practicable implement the purposes and
intent hereof. To the extent permitted by applicable law, each party waives any
provision of law which renders any provision of this Agreement invalid, illegal
or unenforceable in any respect
11. Third Party Beneficiaries. This Agreement is not intended to
confer upon any other Person any rights or remedies hereunder.
[The remainder of this page is intentionally left blank]
5
IN WITNESS WHEREOF, the parties hereto have caused this Performance
Guaranty Agreement to be duly executed as of the day and year first above
written.
X.X. XXXXXX EQUITY INVESTORS I, L.P.
By: /s/ XXXXXX XXXXXXXX
---------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Managing Member
SPECIAL DEVICES, INCORPORATED
By: /s/ XXXXXX X. XXXXXXX
---------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and CEO
