EXHIBIT XVIII
[FORM OF SUBSIDIARY GUARANTY]
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY is entered into as of April 21, 1998 by THE
UNDERSIGNED (each a "GUARANTOR" and collectively, "GUARANTORS") in favor of and
for the benefit of XXXXX FARGO BANK, N.A., as administrative agent for and
representative of (in such capacity herein called "GUARANTIED PARTY") the
financial institutions ("LENDERS") party to the Credit Agreement referred to
below and any Interest Rate Exchangers (as hereinafter defined), and, subject to
subsection 5.14, for the benefit of the other Beneficiaries (as hereinafter
defined).
RECITALS
A. Diamond Brands Operating Corp., a Delaware corporation
("COMPANY"), has entered into that certain Credit Agreement dated as of April
21, 1998 with DLJ Capital Funding, Inc., as Syndication Agent, Guarantied Party,
Xxxxxx Xxxxxxx Senior Funding, Inc., as Documentation Agent, and Lenders (said
Credit Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "CREDIT AGREEMENT"; capitalized terms
defined therein and not otherwise defined herein being used herein as therein
defined).
B. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreements (collectively, the "LENDER
INTEREST RATE AGREEMENTS") with or one or more Lenders (in such capacity,
collectively, "INTEREST RATE EXCHANGERS") in accordance with the terms of the
Credit Agreement, and it is desired that the obligations of Company under the
Lender Interest Rate Agreements, including the obligation of Company to make
payments thereunder in the event of early termination thereof (all such
obligations being the "INTEREST RATE OBLIGATIONS"), together with all
obligations of Company under the Credit Agreement and the other Loan Documents,
be guarantied hereunder.
C. A portion of the proceeds of the Loans may be advanced to
Guarantors and thus the Guarantied Obligations (as hereinafter defined) are
being incurred for and will inure to the benefit of Guarantors (which benefits
are hereby acknowledged).
D. Guarantors are willing irrevocably and unconditionally to guaranty
such obligations of Company.
E. Diamond Brands Incorporated, a Minnesota corporation ("HOLDINGS"),
has entered into that certain Guaranty dated as of April 21, 1998 in favor of
Guarantied Party (the "HOLDINGS GUARANTY").
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F. It is a condition precedent to the making of the initial Loans
under the Credit Agreement that Company's obligations thereunder be guarantied
by Guarantors.
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce Lenders and Guarantied Party to enter into the Credit
Agreement and to make Loans and other extensions of credit thereunder and to
induce Interest Rate Exchangers to enter into the Lender Interest Rate
Agreements, Guarantors hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Guaranty, the following terms
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shall have the following meanings unless the context otherwise requires:
"BENEFICIARIES" means Guarantied Party, Lenders and any Interest Rate
Exchangers.
"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.1.
"GUARANTY" means this Subsidiary Guaranty dated as of April 21, 1998,
as it may be amended, supplemented or otherwise modified from time to time.
"PAYMENT IN FULL", "PAID IN FULL" or any similar term means payment in
full of the Guarantied Obligations, including all principal, interest,
costs, fees and expenses (including reasonable legal fees and expenses) of
Beneficiaries as required under the Loan Documents and the Lender Interest
Rate Agreements.
1.2 DEFINED TERMS IN CREDIT AGREEMENT. All capitalized terms used and not
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otherwise defined herein shall have the meanings given such terms in the Credit
Agreement.
1.3 INTERPRETATION.
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(a) References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Guaranty unless otherwise
specifically provided.
(b) In the event of any conflict or inconsistency between the terms,
conditions and provisions of this Guaranty and the terms, conditions and
provisions of the Credit Agreement, the terms, conditions and provisions of
this Guaranty shall prevail.
SECTION 2. THE GUARANTY
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2.1 GUARANTY OF THE GUARANTIED OBLIGATIONS. Subject to the provisions of
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subsection 2.2(a), Guarantors jointly and severally hereby irrevocably and
unconditionally guaranty the due and punctual payment in full of all Guarantied
Obligations when 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
Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)). The term
"GUARANTIED OBLIGATIONS" is used herein in its most comprehensive sense and
includes:
(a) any and all Obligations of Company and any and all Interest Rate
Obligations, in each case now or hereafter made, incurred or created,
whether absolute or contingent, liquidated or unliquidated, whether due or
not due, and however arising under or in connection with the Credit
Agreement and the other Loan Documents and the Lender Interest Rate
Agreements, including those arising under successive borrowing transactions
under the Credit Agreement which shall either continue the Obligations of
Company or from time to time renew them after they have been satisfied and
including interest which, but for the filing of a petition in bankruptcy
with respect to Company, would have accrued on any Guarantied Obligations,
whether or not a claim is allowed against Company for such interest in the
related bankruptcy proceeding; and
(b) those expenses set forth in subsection 2.8 hereof.
2.2 LIMITATION ON AMOUNT GUARANTIED; CONTRIBUTION BY GUARANTORS. (a)
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Anything contained in this Guaranty to the contrary notwithstanding, if any
Fraudulent Transfer Law (as hereinafter defined) is determined by a court of
competent jurisdiction to be applicable to the obligations of any Guarantor
under this Guaranty, such obligations of such Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that would not
render its obligations hereunder subject to avoidance as a fraudulent transfer
or conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "FRAUDULENT
TRANSFER LAWS"), in each case after giving effect to all other liabilities of
such Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (x) in respect of intercompany indebtedness to Company or other
affiliates of Company to the extent that such indebtedness would be discharged
in an amount equal to the amount paid by such Guarantor hereunder and (y) under
any guaranty of Subordinated Indebtedness which guaranty contains a limitation
as to maximum amount similar to that set forth in this subsection 2.2(a),
pursuant to which the liability of such Guarantor hereunder is included in the
liabilities taken into account in determining such maximum amount) and after
giving effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
reimbursement, indemnification or contribution of such Guarantor pursuant to
applicable law or pursuant to the terms of any agreement (including any such
right of contribution under subsection 2.2(b)).
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(b) Each Guarantor under this Guaranty, and Holdings under the Holdings
Guaranty, together desire to allocate among themselves (collectively, the
"CONTRIBUTING GUARANTORS"), in a fair and equitable manner, their obligations
arising under this Guaranty and the Holdings Guaranty. Accordingly, in the
event any payment or distribution is made on any date by any Guarantor under
this Guaranty or Holdings under the Holdings Guaranty (a "FUNDING GUARANTOR")
that exceeds its Fair Share (as defined below) as of such date, that Funding
Guarantor shall be entitled to a contribution from each of the other
Contributing Guarantors in the amount of such other Contributing Guarantor's
Fair Share Shortfall (as defined below) as of such date, with the result that
all such contributions will cause each Contributing Guarantor's Aggregate
Payments (as defined below) to equal its Fair Share as of such date. "FAIR
SHARE" means, with respect to a Contributing Guarantor as of any date of
determination, an amount equal to (i) the ratio of (x) the Adjusted Maximum
Amount (as defined below) with respect to such Contributing Guarantor to (y) the
aggregate of the Adjusted Maximum Amounts with respect to all Contributing
Guarantors multiplied by (ii) the aggregate amount paid or distributed on or
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before such date by all Funding Guarantors under this Guaranty and the Holdings
Guaranty in respect of the obligations guarantied. "FAIR SHARE SHORTFALL"
means, with respect to a Contributing Guarantor as of any date of determination,
the excess, if any, of the Fair Share of such Contributing Guarantor over the
Aggregate Payments of such Contributing Guarantor. "ADJUSTED MAXIMUM AMOUNT"
means, with respect to a Contributing Guarantor as of any date of determination,
the maximum aggregate amount of the obligations of such Contributing Guarantor
under this Guaranty and the Holdings Guaranty, determined as of such date, in
the case of any Guarantor, in accordance with subsection 2.2(a), or, if
applicable, subsection 2.2(a) of the Holdings Guaranty; provided that, solely
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for purposes of calculating the "Adjusted Maximum Amount" with respect to any
Contributing Guarantor for purposes of this subsection 2.2(b), any assets or
liabilities of such Contributing Guarantor arising by virtue of any rights to
subrogation, reimbursement or indemnification or any rights to or obligations of
contribution hereunder or under the Holdings Guaranty shall not be considered as
assets or liabilities of such Contributing Guarantor. "AGGREGATE PAYMENTS"
means, with respect to a Contributing Guarantor as of any date of determination,
an amount equal to (i) the aggregate amount of all payments and distributions
made on or before such date by such Contributing Guarantor in respect of this
Guaranty and the Holdings Guaranty (including in respect of this subsection
2.2(b) or subsection 2.2(b) of the Holdings Guaranty) minus (ii) the aggregate
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amount of all payments received on or before such date by such Contributing
Guarantor from the other Contributing Guarantors as contributions under this
subsection 2.2(b) or subsection 2.2(b) of the Holdings Guaranty. The amounts
payable as contributions hereunder shall be determined as of the date on which
the related payment or distribution is made by the applicable Funding Guarantor.
The allocation among Contributing Guarantors of their obligations as set forth
in this subsection 2.2(b) or subsection 2.2(b) of the Holdings Guaranty shall
not be construed in any way to limit the liability of any Contributing Guarantor
hereunder or under the Holdings Guaranty. Holdings under the Holdings Guaranty
is a third party beneficiary to the contribution agreement set forth in this
subsection 2.2(b).
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2.3 PAYMENT BY GUARANTORS; APPLICATION OF PAYMENTS. Subject to the
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provisions of subsection 2.2(a), Guarantors hereby jointly and severally agree,
in furtherance of the foregoing and not in limitation of any other right which
any Beneficiary may have at law or in equity against any Guarantor by virtue
hereof, that upon the failure of Company to pay any of the Guarantied
Obligations 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 Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)),
Guarantors will upon demand pay, or cause to be paid, in cash, to Guarantied
Party for the ratable benefit of Beneficiaries, an amount equal to the sum of
the unpaid principal amount of all Guarantied Obligations then due as aforesaid,
accrued and unpaid interest on such Guarantied Obligations (including interest
which, but for the filing of a petition in bankruptcy with respect to Company,
would have accrued on such Guarantied Obligations, whether or not a claim is
allowed against Company for such interest in the related bankruptcy proceeding)
and all other Guarantied Obligations then owed to Beneficiaries as aforesaid.
All such payments shall be applied promptly from time to time by Guarantied
Party as provided in subsection 2.4D of the Credit Agreement.
2.4 LIABILITY OF GUARANTORS ABSOLUTE. Each Guarantor agrees that its
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obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than payment in full of the
Guarantied Obligations. In furtherance of the foregoing and without limiting
the generality thereof, each Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of
collectibility.
(b) Guarantied Party may enforce this Guaranty upon the occurrence
and continuation of an Event of Default under the Credit Agreement or the
occurrence and continuation of an Early Termination Date (as defined in a
Master Agreement or an Interest Rate Swap Agreement or Interest Rate and
Currency Exchange Agreement in the form prepared by the International Swap
and Derivatives Association Inc. or a similar event under any similar swap
agreement) under any Lender Interest Rate Agreement (either such occurrence
being an "EVENT OF DEFAULT" for purposes of this Guaranty).
(c) The obligations of each Guarantor hereunder are independent of
the obligations of Company under the Loan Documents or the Lender Interest
Rate Agreements and the obligations of any other guarantor (including any
other Guarantor) of the obligations of Company under the Loan Documents or
the Lender Interest Rate Agreements, and a separate action or actions may
be brought and prosecuted against such Guarantor whether or not any action
is brought against Company or any of such other guarantors and whether or
not Company is joined in any such action or actions.
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(d) Payment by any Guarantor of a portion, but not all, of the
Guarantied Obligations shall in no way limit, affect, modify or abridge any
Guarantor's liability for any portion of the Guarantied Obligations which
has not been paid. Without limiting the generality of the foregoing, if
Guarantied Party is awarded a judgment in any suit brought to enforce any
Guarantor's covenant to pay a portion of the Guarantied Obligations, such
judgment shall not be deemed to release such Guarantor from its covenant to
pay the portion of the Guarantied Obligations that is not the subject of
such suit, and such judgment shall not, except to the extent satisfied by
such Guarantor, limit, affect, modify or abridge any other Guarantor's
liability hereunder in respect of the Guarantied Obligations.
(e) Any Beneficiary, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability of
this Guaranty or giving rise to any reduction, limitation, impairment,
discharge or termination of any Guarantor's liability hereunder, from time
to time may (i) renew, extend, accelerate, increase the rate of interest
on, or otherwise change the time, place, manner or terms of payment of the
Guarantied Obligations, (ii) settle, compromise, release or discharge, or
accept or refuse any offer of performance with respect to, or substitutions
for, the Guarantied Obligations or any agreement relating thereto and/or
subordinate the payment of the same to the payment of any other
obligations; (iii) request and accept other guaranties of the Guarantied
Obligations and take and hold security for the payment of this Guaranty or
the Guarantied Obligations; (iv) release, surrender, exchange, substitute,
compromise, settle, rescind, waive, alter, subordinate or modify, with or
without consideration, any security for payment of the Guarantied
Obligations, any other guaranties of the Guarantied Obligations, or any
other obligation of any Person (including any other Guarantor) with respect
to the Guarantied Obligations; (v) enforce and apply any security now or
hereafter held by or for the benefit of such Beneficiary in respect of this
Guaranty or the Guarantied Obligations and direct the order or manner of
sale thereof, or exercise any other right or remedy that such Beneficiary
may have against any such security, in each case as such Beneficiary in its
discretion may determine consistent with the Credit Agreement or the
applicable Lender Interest Rate Agreement and any applicable security
agreement, including foreclosure on any such security pursuant to one or
more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable, and even though such action operates to
impair or extinguish any right of reimbursement or subrogation or other
right or remedy of any Guarantor against Company or any security for the
Guarantied Obligations; and (vi) exercise any other rights available to it
under the Loan Documents or the Lender Interest Rate Agreements.
(f) This Guaranty and the obligations of Guarantors hereunder shall
be valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than
payment in full of the Guarantied Obligations), including the occurrence of
any of the following, whether
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or not any Guarantor shall have had notice or knowledge of any of them: (i)
any failure or omission to assert or enforce or agreement or election not
to assert or enforce, or the stay or enjoining, by order of court, by
operation of law or otherwise, of the exercise or enforcement of, any claim
or demand or any right, power or remedy (whether arising under the Loan
Documents or the Lender Interest Rate Agreements, at law, in equity or
otherwise) with respect to the Guarantied Obligations or any agreement
relating thereto, or with respect to any other guaranty of or security for
the payment of the Guarantied Obligations; (ii) any rescission, waiver,
amendment or modification of, or any consent to departure from, any of the
terms or provisions (including provisions relating to events of default) of
the Credit Agreement, any of the other Loan Documents, any of the Lender
Interest Rate Agreements or any agreement or instrument executed pursuant
thereto, or of any other guaranty or security for the Guarantied
Obligations, in each case whether or not in accordance with the terms of
the Credit Agreement or such Loan Document, such Lender Interest Rate
Agreement or any agreement relating to such other guaranty or security;
(iii) the Guarantied Obligations, or any agreement relating thereto, at any
time being found to be illegal, invalid or unenforceable in any respect;
(iv) the application of payments received from any source (other than
payments received pursuant to the other Loan Documents or any of the
Lender Interest Rate Agreements or from the proceeds of any security for
the Guarantied Obligations, except to the extent such security also serves
as collateral for indebtedness other than the Guarantied Obligations) to
the payment of indebtedness other than the Guarantied Obligations, even
though any Beneficiary might have elected to apply such payment to any part
or all of the Guarantied Obligations; (v) any Beneficiary's consent to the
change, reorganization or termination of the corporate structure or
existence of Company or any of its Subsidiaries and to any corresponding
restructuring of the Guarantied Obligations; (vi) any failure to perfect or
continue perfection of a security interest in any collateral which secures
any of the Guarantied Obligations; (vii) any defenses (other than the
expiration of applicable statute of limitations), set-offs or counterclaims
which Company may allege or assert against any Beneficiary in respect of
the Guarantied Obligations, including failure of consideration, breach of
warranty, payment, statute of frauds, accord and satisfaction and usury;
and (viii) any other act or thing or omission, or delay to do any other act
or thing, which may or might in any manner or to any extent vary the risk
of any Guarantor as an obligor in respect of the Guarantied Obligations.
2.5 WAIVERS BY GUARANTORS. Each Guarantor hereby waives, for the benefit
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of Beneficiaries:
(a) any right to require any Beneficiary, as a condition of payment
or performance by such Guarantor, to (i) proceed against Company, any other
guarantor (including any other Guarantor) of the Guarantied Obligations or
any other Person, (ii) proceed against or exhaust any security held from
Company, any such other guarantor or any other Person, (iii) proceed
against or have resort to
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any balance of any deposit account or credit on the books of any
Beneficiary in favor of Company or any other Person, or (iv) pursue any
other remedy in the power of any Beneficiary whatsoever;
(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Company (other than the
expiration of applicable statute of limitations) including any defense
based on or arising out of the lack of validity or the unenforceability of
the Guarantied Obligations or any agreement or instrument relating thereto
or by reason of the cessation of the liability of Company from any cause
other than payment in full of the Guarantied Obligations;
(c) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal;
(d) any defense based upon any Beneficiary's errors or omissions in
the administration of the Guarantied Obligations, except behavior which
amounts to gross negligence, willful misconduct or bad faith;
(e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty and any
legal or equitable discharge of such Guarantor's obligations hereunder,
(ii) any rights to set-offs, recoupments and counterclaims, and (iii)
promptness, diligence and any requirement that any Beneficiary protect,
secure, perfect or insure any security interest or lien or any property
subject thereto;
(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Credit Agreement,
the Lender Interest Rate Agreements or any agreement or instrument related
thereto, notices of any renewal, extension or modification of the
Guarantied Obligations or any agreement related thereto, notices of any
extension of credit to Company and notices of any of the matters referred
to in subsection 2.4 and any right to consent to any thereof; and
(g) any defenses (other than expiration of statutes of limitations)
or benefits that may be derived from or afforded by law which limit the
liability of or exonerate guarantors or sureties, or which may conflict
with the terms of this Guaranty.
2.6 GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the
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Guarantied Obligations shall have been indefeasibly paid in full and the
Commitments shall have terminated and all Letters of Credit shall have expired
or been cancelled, each Guarantor hereby waives any claim, right or remedy,
direct or indirect, that such
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Guarantor now has or may hereafter have against Company or any of its assets in
connection with this Guaranty or the performance by such Guarantor of its
obligations hereunder, in each case whether such claim, right or remedy arises
in equity, under contract, by statute, under common law or otherwise and
including without limitation (a) any right of subrogation, reimbursement or
indemnification that such Guarantor now has or may hereafter have against
Company, (b) any right to enforce, or to participate in, any claim, right or
remedy that any Beneficiary now has or may hereafter have against Company, and
(c) any benefit of, and any right to participate in, any collateral or security
now or hereafter held by any Beneficiary. In addition, until the Guarantied
Obligations shall have been indefeasibly paid in full and the Commitments shall
have terminated and all Letters of Credit shall have expired or been cancelled,
each Guarantor shall withhold exercise of any right of contribution such
Guarantor may have against any other guarantor (including any other Guarantor)
of the Guarantied Obligations. Each Guarantor further agrees that, to the extent
the waiver or agreement to withhold the exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification such Guarantor may have
against Company or against any collateral or security, and any rights of
contribution such Guarantor may have against any such other guarantor, shall be
junior and subordinate to any rights any Beneficiary may have against Company,
to all right, title and interest any Beneficiary may have in any such collateral
or security, and to any right any Beneficiary may have against such other
guarantor. If any amount shall be paid to any Guarantor on account of any such
subrogation, reimbursement, indemnification or contribution rights at any time
when all Guarantied Obligations shall not have been paid in full, such amount
shall be held in trust for Guarantied Party on behalf of Beneficiaries and shall
forthwith be paid over to Guarantied Party for the benefit of Beneficiaries to
be credited and applied against the Guarantied Obligations, whether matured or
unmatured, in accordance with the terms hereof.
2.7 SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of Company or any
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Guarantor now or hereafter held by any Guarantor (the "OBLIGEE GUARANTOR") is
hereby subordinated in right of payment to the Guarantied Obligations, and any
such indebtedness collected or received by the Obligee Guarantor after an Event
of Default has occurred and is continuing shall be held in trust for Guarantied
Party on behalf of Beneficiaries and shall forthwith be paid over to Guarantied
Party for the benefit of Beneficiaries to be credited and applied against the
Guarantied Obligations but without affecting, impairing or limiting in any
manner the liability of the Obligee Guarantor under any other provision of this
Guaranty.
2.8 EXPENSES. Guarantors jointly and severally agree to pay, or cause to
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be paid, on demand, and to save Beneficiaries harmless against liability for,
any and all reasonable out-of-pocket costs and expenses (including reasonable
fees and disbursements of counsel and allocated costs of internal counsel)
incurred or expended by any Beneficiary in connection with the enforcement of or
preservation of any rights under this Guaranty.
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2.9 CONTINUING GUARANTY. This Guaranty is a continuing guaranty and shall
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remain in effect until all of the Guarantied Obligations shall have been paid in
full and the Commitments shall have terminated and all Letters of Credit shall
have expired or been cancelled. Each Guarantor hereby irrevocably waives any
right to revoke this Guaranty as to future transactions giving rise to any
Guarantied Obligations.
2.10 AUTHORITY OF GUARANTORS OR COMPANY. It is not necessary for any
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Beneficiary to inquire into the capacity or powers of any Guarantor or Company
or the officers, directors, members, governors or any agents acting or
purporting to act on behalf of any of them.
2.11 FINANCIAL CONDITION OF COMPANY. Any Loans may be granted to Company
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or continued from time to time, and any Lender Interest Rate Agreements may be
entered into from time to time, in each case without notice to or authorization
from any Guarantor regardless of the financial or other condition of Company at
the time of any such grant or continuation or at the time such Lender Interest
Rate Agreement is entered into, as the case may be. No Beneficiary shall have
any obligation to disclose or discuss with any Guarantor its assessment, or any
Guarantor's assessment, of the financial condition of Company. Each Guarantor
has adequate means to obtain information from Company on a continuing basis
concerning the financial condition of Company and its ability to perform its
obligations under the Loan Documents and the Lender Interest Rate Agreements,
and each Guarantor assumes the responsibility for being and keeping informed of
the financial condition of Company and of all circumstances bearing upon the
risk of nonpayment of the Guarantied Obligations. Each Guarantor hereby waives
and relinquishes any duty on the part of any Beneficiary to disclose any matter,
fact or thing relating to the business, operations or conditions of Company now
known or hereafter known by any Beneficiary.
2.12 RIGHTS CUMULATIVE. The rights, powers and remedies given to
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Beneficiaries by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Beneficiaries by virtue
of any statute or rule of law or in any of the other Loan Documents, any of the
Lender Interest Rate Agreements or any agreement between any Guarantor and any
Beneficiary or Beneficiaries or between Company and any Beneficiary or
Beneficiaries. Any forbearance or failure to exercise, and any delay by any
Beneficiary in exercising, any right, power or remedy hereunder shall not impair
any such right, power or remedy or be construed to be a waiver thereof, nor
shall it preclude the further exercise of any such right, power or remedy.
2.13 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY. (a) So
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long as any Guarantied Obligations remain outstanding, no Guarantor shall,
without the prior written consent of Guarantied Party acting pursuant to the
instructions of Requisite Lenders, commence or join with any other Person in
commencing any bankruptcy, reorganization or insolvency proceedings of or
against Company. The obligations of Guarantors under this Guaranty shall not be
reduced, limited, impaired, discharged,
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deferred, suspended or terminated by any proceeding, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership, reorganization, liquidation
or arrangement of Company or by any defense which Company may have by reason of
the order, decree or decision of any court or administrative body resulting from
any such proceeding.
(b) Each Guarantor acknowledges and agrees that any interest on any
portion of the Guarantied Obligations which accrues after the commencement of
any proceeding referred to in clause (a) above (or, if interest on any portion
of the Guarantied Obligations ceases to accrue by operation of law by reason of
the commencement of said proceeding, such interest as would have accrued on such
portion of the Guarantied Obligations if said proceedings had not been
commenced) shall be included in the Guarantied Obligations because it is the
intention of Guarantors and Beneficiaries that the Guarantied Obligations which
are guarantied by Guarantors pursuant to this Guaranty should be determined
without regard to any rule of law or order which may relieve Company of any
portion of such Guarantied Obligations. Guarantors will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Guarantied Party, or allow the claim of
Guarantied Party in respect of, any such interest accruing after the date on
which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied
Obligations is paid by Company, the obligations of Guarantors hereunder shall
continue and remain in full force and effect or be reinstated, as the case may
be, in the event that all or any part of such payment(s) are rescinded or
recovered directly or indirectly from any Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Guarantied Obligations for all purposes under this
Guaranty.
2.14 NOTICE OF EVENTS. As soon as any Guarantor obtains knowledge thereof,
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each such Guarantor shall give Guarantied Party written notice of any condition
or event which has resulted in (a) a material adverse change in the financial
condition of such Guarantor or Company or (b) a breach of or noncompliance with
any term, condition or covenant contained herein or in the Credit Agreement, any
other Loan Document, any Lender Interest Rate Agreements or any other document
delivered pursuant hereto or thereto.
2.15 SET OFF. In addition to any other rights any Beneficiary may have
-------
under law or in equity, if any amount shall at any time be due and owing by any
Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized
at any time or from time to time, without notice (any such notice being hereby
expressly waived), to set off and to appropriate and to apply any and all
deposits (general or special, including indebtedness evidenced by certificates
of deposit, whether matured or unmatured) and any other indebtedness of such
Beneficiary owing to such Guarantor and any other property of such Guarantor
held by any Beneficiary to or for the credit or the account of such
XVIII-11
Guarantor against and on account of the Guarantied Obligations and liabilities
of such Guarantor to any Beneficiary under this Guaranty.
2.16 DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR. If all of the stock or
--------------------------------------------
limited liability company interests of any Guarantor or any of its successors in
interest under this Guaranty shall be sold or otherwise disposed of (including
by merger or consolidation) in an Asset Sale not prohibited by subsection 7.7 of
the Credit Agreement or otherwise consented to by Requisite Lenders, the
Guaranty of such Guarantor or such successor in interest, as the case may be,
hereunder shall automatically be discharged and released without any further
action by any Beneficiary or any other Person effective as of the time of such
Asset Sale; provided that, as a condition precedent to such discharge and
--------
release, Guarantied Party shall have received evidence satisfactory to it that
arrangements satisfactory to it have been made for delivery to Guarantied Party
of the applicable Net Asset Sale Proceeds if required under the Credit
Agreement; provided further that no such delivery shall be required in
----------------
connection with a merger or consolidation of such entity into or with Company or
another subsidiary of Company.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Beneficiaries to accept this Guaranty and to enter
into the Credit Agreement and to make the Loans thereunder, each Guarantor
hereby represents and warrants to Beneficiaries that the following statements
are true and correct:
3.1 CORPORATE EXISTENCE. Each Guarantor is duly organized, validly
-------------------
existing and in good standing under the laws of the state of its incorporation,
has the corporate power to own its assets and to transact the business in which
it is now engaged and is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, except for
failures to be so qualified, authorized or licensed that would not in the
aggregate have a material adverse effect on the business, operations, assets or
financial condition of Guarantor.
3.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each
-------------------------------------------------------
Guarantor has the corporate power, authority and legal right to execute, deliver
and perform this Guaranty and all obligations required hereunder and has taken
all necessary corporate action to authorize its Guaranty hereunder on the terms
and conditions hereof and its execution, delivery and performance of this
Guaranty and all obligations required hereunder. No consent of any other Person
including, without limitation, stockholders and creditors of either Guarantor,
and no license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any governmental
authority is required by either Guarantor in connection with this Guaranty or
the execution, delivery, performance, validity or enforceability of this
Guaranty and all obligations required hereunder. This Guaranty has been, and
each instrument or document
XVIII-12
required hereunder will be, executed and delivered by a duly authorized officer
of each of the Guarantors, and this Guaranty constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the legally valid and binding obligation of each of the Guarantors,
enforceable against each of the Guarantors in accordance with its terms, except
as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws or equitable principles
relating to or limiting creditors' rights generally.
3.3 NO LEGAL BAR TO THIS GUARANTY. The execution, delivery and performance
-----------------------------
of this Guaranty and the documents or instruments required hereunder, and the
use of the proceeds of the borrowings under the Credit Agreement, will not
violate any provision of any existing law or regulation binding on either
Guarantor, or any order, judgment, award or decree of any court, arbitrator or
governmental authority binding on either Guarantor, or the certificate of
incorporation or bylaws of either Guarantor or any securities issued by either
Guarantor, or any mortgage, indenture, lease, contract or other agreement,
instrument or undertaking to which either Guarantor is a party or by which
either Guarantor or any of its assets may be bound, the violation of which would
have a material adverse effect on the business, operations, assets or financial
condition of either Guarantor and will not result in, or require, the creation
or imposition of any Lien on any of its property, assets or revenues pursuant to
the provisions of any such mortgage, indenture, lease, contract or other
agreement, instrument or undertaking.
SECTION 4. AFFIRMATIVE COVENANTS
Each Guarantor covenants and agrees that, unless and until all of the
Guarantied Obligations shall have been paid in full and the Commitments shall
have terminated, unless Requisite Lenders shall otherwise consent in writing:
4.1 CORPORATE EXISTENCE, ETC. Each Guarantor shall at all times preserve
------------------------
and keep in full force and effect its corporate existence and all rights and
franchises material to its business.
4.2 COMPLIANCE WITH LAWS, ETC. Each Guarantor shall comply in all material
-------------------------
respects with all applicable laws, rules, regulations and orders, such
compliance to include, without limitation, paying when due all taxes,
assessments and governmental charges imposed upon it or upon any of its
properties or assets or in respect of any of its franchises, businesses, income
or property before any penalty or interest accrues thereon.
4.3 BOOKS AND RECORDS. Subject to the terms of the Credit Agreement, each
-----------------
Guarantor shall keep and maintain books of record and account with respect to
its operations in accordance with generally accepted accounting principles and
shall permit any Beneficiary and its officers, employees and authorized agents,
to the extent Guarantied Party in good xxxxx xxxxx necessary for the proper
administration of this Guaranty, to examine, copy and make excerpts from the
books and records of either Guarantor and its Subsidiaries and to inspect the
properties of either Guarantor and its Subsidiaries, both real and personal, at
such reasonable times as Guarantied Party may request.
XVIII-13
SECTION 5. MISCELLANEOUS
5.1 SURVIVAL OF WARRANTIES. All agreements, representations and warranties
----------------------
made herein shall survive the execution and delivery of this Guaranty and the
other Loan Documents and the Lender Interest Rate Agreements and any increase in
the Commitments under the Credit Agreement.
5.2 NOTICES. Any communications between Guarantied Party and any Guarantor
-------
and any notices or requests provided herein to be given shall be given as
provided in the Credit Agreement to each such party at its address set forth in
the Credit Agreement, on the signature pages hereof or to such other addresses
as each such party may in writing hereafter indicate. Any notice, request or
demand to or upon Guarantied Party or any Guarantor shall not be effective until
received.
5.3 SEVERABILITY. In case any provision in or obligation under this
------------
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
5.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
----------------------
waiver of any provision of this Guaranty, and no consent to any departure by any
Guarantor therefrom, shall in any event be effective without the written
concurrence of Guarantied Party and, in the case of any such amendment or
modification, each Guarantor against whom enforcement of such amendment or
modification is sought. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
5.5 HEADINGS. Section and subsection headings in this Guaranty are
--------
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
5.6 APPLICABLE LAW; RULES OF CONSTRUCTION. THIS GUARANTY AND THE RIGHTS
-------------------------------------
AND OBLIGATIONS OF GUARANTORS AND BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. The
rules of construction set forth in subsection 1.3 of the Credit Agreement shall
be applicable to this Guaranty mutatis mutandis.
5.7 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty and
----------------------
shall be binding upon each Guarantor and its respective successors and assigns.
This Guaranty shall inure to the benefit of Beneficiaries and their respective
successors and assigns. No Guarantor shall assign this Guaranty or any of the
rights or obligations of such Guarantor
XVIII-14
hereunder without the prior written consent of all Lenders. Any Beneficiary may,
without notice or consent, assign its interest in this Guaranty in whole or in
part. The terms and provisions of this Guaranty shall inure to the benefit of
any transferee or assignee of any Loan, and in the event of such transfer or
assignment the rights and privileges herein conferred upon such Beneficiary
shall automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof.
5.8 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
----------------------------------------------
PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF OR RELATING TO THIS
GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN XXX XXXXX, XXXXXX XXX XXXX XX XXX XXXX. BY
EXECUTING AND DELIVERING THIS AGREEMENT, EACH GUARANTOR, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 5.2;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GUARANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH
GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 5.8 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
5.9 WAIVER OF TRIAL BY JURY. EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE
-----------------------
BENEFITS HEREOF, EACH BENEFICIARY EACH
XVIII-15
HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The scope of this
waiver is intended to be all encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including contract claims, tort claims, breach of duty claims and all other
common law and statutory claims. Each Guarantor and, by its acceptance of the
benefits hereof, each Beneficiary, each (i) acknowledges that this waiver is a
material inducement for such Guarantor and Beneficiaries to enter into a
business relationship, that such Guarantor and Beneficiaries have already relied
on this waiver in entering into this Guaranty or accepting the benefits thereof,
as the case may be, and that each will continue to rely on this waiver in their
related future dealings and (ii) further warrants and represents that each has
reviewed this waiver with its legal counsel, and that each knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SUBSECTION 5.9 AND EXECUTED BY GUARANTIED PARTY AND EACH
GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY. In the event of litigation, this
Guaranty may be filed as a written consent to a trial by the court.
5.10 NO OTHER WRITING. This writing is intended by Guarantors and
----------------
Beneficiaries as the final expression of this Guaranty and is also intended as a
complete and exclusive statement of the terms of their agreement with respect to
the matters covered hereby. No course of dealing, course of performance or
trade usage, and no parol evidence of any nature, shall be used to supplement or
modify any terms of this Guaranty. There are no conditions to the full
effectiveness of this Guaranty.
5.11 FURTHER ASSURANCES. At any time or from time to time, upon the
------------------
request of Guarantied Party, Guarantors shall execute and deliver such further
documents and do such other acts and things as Guarantied Party may reasonably
request in order to effect fully the purposes of this Guaranty.
5.12 ADDITIONAL GUARANTORS. The initial Guarantors hereunder shall be
---------------------
such of the Subsidiaries of Company as are signatories hereto on the date
hereof. From time to time subsequent to the date hereof, additional
Subsidiaries of Company may become parties hereto, as additional Guarantors
(each an "ADDITIONAL GUARANTOR"), by executing a counterpart of this Guaranty.
Upon delivery of any such counterpart to Administrative Agent, notice of which
is hereby waived by Guarantors, each such Additional Guarantor shall be a
Guarantor and shall be as fully a party hereto as if such Additional Guarantor
were an original signatory hereof. Each Guarantor expressly agrees that its
obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Guarantor hereunder, nor by any election of
Administrative Agent not to cause any Subsidiary of Company to become an
Additional Guarantor hereunder. This Guaranty
XVIII-16
shall be fully effective as to any Guarantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Guarantor hereunder.
5.13 COUNTERPARTS; EFFECTIVENESS. This Guaranty may be executed in any
---------------------------
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original for all purposes; but all such counterparts together shall
constitute but one and the same instrument. This Guaranty shall become
effective as to each Guarantor upon the execution of a counterpart hereof by
such Guarantor (whether or not a counterpart hereof shall have been executed by
any other Guarantor) and receipt by Guarantied Party of written or telephonic
notification of such execution and authorization of delivery thereof.
5.14 GUARANTIED PARTY AS ADMINISTRATIVE AGENT.
----------------------------------------
(a) Guarantied Party has been appointed to act as Guarantied Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Guarantied Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action, solely in
accordance with this Guaranty and the Credit Agreement; provided that Guarantied
--------
Party shall exercise, or refrain from exercising, any remedies hereunder in
accordance with the instructions of (i) Requisite Lenders or (ii) after payment
in full of all Obligations under the Credit Agreement and the other Loan
Documents, the holders of a majority of the aggregate notional amount (or, with
respect to any Lender Interest Rate Agreement that has been terminated in
accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "REQUISITE OBLIGEES"). In furtherance of the foregoing provisions of
this subsection 5.14, each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to enforce this
Guaranty, it being understood and agreed by such Interest Rate Exchanger that
all rights and remedies hereunder may be exercised solely by Guarantied Party
for the benefit of Beneficiaries in accordance with the terms of this subsection
5.14.
(b) Guarantied Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Guarantied Party under this Guaranty;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Guarantied Party under this Guaranty;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor
Guarantied Party under this Guaranty. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the
XVIII-17
Credit Agreement by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Guarantied
Party under this Guaranty, and the retiring or removed Guarantied Party under
this Guaranty shall promptly (i) transfer to such successor Guarantied Party all
sums held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Guarantied Party under this Guaranty, and (ii) take such other actions as may be
necessary or appropriate in connection with the assignment to such successor
Guarantied Party of the rights created hereunder, whereupon such retiring or
removed Guarantied Party shall be discharged from its duties and obligations
under this Guaranty. After any retiring or removed Guarantied Party's
resignation or removal hereunder as Guarantied Party, the provisions of this
Guaranty shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Guaranty while it was Guarantied Party hereunder.
[Remainder of page intentionally left blank]
XVIII-18
IN WITNESS WHEREOF, each of the undersigned Guarantors has caused this
Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the date first written above.
EMPIRE CANDLE, INC.
By: ____________________________
Name: ____________________________
Title: ____________________________
Address:
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxx Xxxxxxx
XXXXXXX, INC.
By: ____________________________
Name: ____________________________
Title: ____________________________
Address:
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxx Xxxxxxx
S-1
IN WITNESS WHEREOF, the undersigned Additional Guarantor has caused
this Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of ______________, _____.
________________________________________
(Name of Additional Guarantor)
By _____________________________________
Title __________________________________
Address: _________________________
____________________________
____________________________
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY is entered into as of April 21, 1998 by THE
UNDERSIGNED (each a "GUARANTOR" and collectively, "GUARANTORS") in favor of and
for the benefit of XXXXX FARGO BANK, N.A., as administrative agent for and
representative of (in such capacity herein called "GUARANTIED PARTY") the
financial institutions ("LENDERS") party to the Credit Agreement referred to
below and any Interest Rate Exchangers (as hereinafter defined), and, subject to
subsection 5.14, for the benefit of the other Beneficiaries (as hereinafter
defined).
RECITALS
A. Diamond Brands Operating Corp., a Delaware corporation
("COMPANY"), has entered into that certain Credit Agreement dated as of April
21, 1998 with DLJ Capital Funding, Inc., as Syndication Agent, Guarantied Party,
Xxxxxx Xxxxxxx Senior Funding, Inc., as Documentation Agent, and Lenders (said
Credit Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "CREDIT AGREEMENT"; capitalized terms
defined therein and not otherwise defined herein being used herein as therein
defined).
B. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreements (collectively, the "LENDER
INTEREST RATE AGREEMENTS") with or one or more Lenders (in such capacity,
collectively, "INTEREST RATE EXCHANGERS") in accordance with the terms of the
Credit Agreement, and it is desired that the obligations of Company under the
Lender Interest Rate Agreements, including the obligation of Company to make
payments thereunder in the event of early termination thereof (all such
obligations being the "INTEREST RATE OBLIGATIONS"), together with all
obligations of Company under the Credit Agreement and the other Loan Documents,
be guarantied hereunder.
C. A portion of the proceeds of the Loans may be advanced to
Guarantors and thus the Guarantied Obligations (as hereinafter defined) are
being incurred for and will inure to the benefit of Guarantors (which benefits
are hereby acknowledged).
D. Guarantors are willing irrevocably and unconditionally to guaranty
such obligations of Company.
E. Diamond Brands Incorporated, a Minnesota corporation ("HOLDINGS"),
has entered into that certain Guaranty dated as of April 21, 1998 in favor of
Guarantied Party (the "HOLDINGS GUARANTY").
F. It is a condition precedent to the making of the initial Loans
under the Credit Agreement that Company's obligations thereunder be guarantied
by Guarantors.
1
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce Lenders and Guarantied Party to enter into the Credit
Agreement and to make Loans and other extensions of credit thereunder and to
induce Interest Rate Exchangers to enter into the Lender Interest Rate
Agreements, Guarantors hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Guaranty, the following terms
---------------------
shall have the following meanings unless the context otherwise requires:
"BENEFICIARIES" means Guarantied Party, Lenders and any Interest Rate
Exchangers.
"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.1.
"GUARANTY" means this Subsidiary Guaranty dated as of April 21, 1998,
as it may be amended, supplemented or otherwise modified from time to time.
"PAYMENT IN FULL", "PAID IN FULL" or any similar term means payment in
full of the Guarantied Obligations, including all principal, interest,
costs, fees and expenses (including reasonable legal fees and expenses) of
Beneficiaries as required under the Loan Documents and the Lender Interest
Rate Agreements.
1.2 DEFINED TERMS IN CREDIT AGREEMENT. All capitalized terms used and not
---------------------------------
otherwise defined herein shall have the meanings given such terms in the Credit
Agreement.
1.3 INTERPRETATION.
--------------
(a) References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Guaranty unless otherwise specifically
provided.
(b) In the event of any conflict or inconsistency between the terms,
conditions and provisions of this Guaranty and the terms, conditions and
provisions of the Credit Agreement, the terms, conditions and provisions of
this Guaranty shall prevail.
SECTION 2. THE GUARANTY
2.1 GUARANTY OF THE GUARANTIED OBLIGATIONS. Subject to the provisions of
--------------------------------------
subsection 2.2(a), Guarantors jointly and severally hereby irrevocably and
unconditionally guaranty the due and punctual payment in full of all Guarantied
Obligations when the
2
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 Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S) 362(a)). The term "GUARANTIED OBLIGATIONS" is
used herein in its most comprehensive sense and includes:
(a) any and all Obligations of Company and any and all Interest Rate
Obligations, in each case now or hereafter made, incurred or created,
whether absolute or contingent, liquidated or unliquidated, whether due or
not due, and however arising under or in connection with the Credit
Agreement and the other Loan Documents and the Lender Interest Rate
Agreements, including those arising under successive borrowing transactions
under the Credit Agreement which shall either continue the Obligations of
Company or from time to time renew them after they have been satisfied and
including interest which, but for the filing of a petition in bankruptcy
with respect to Company, would have accrued on any Guarantied Obligations,
whether or not a claim is allowed against Company for such interest in the
related bankruptcy proceeding; and
(b) those expenses set forth in subsection 2.8 hereof.
2.2 LIMITATION ON AMOUNT GUARANTIED; CONTRIBUTION BY GUARANTORS. (a)
-----------------------------------------------------------
Anything contained in this Guaranty to the contrary notwithstanding, if any
Fraudulent Transfer Law (as hereinafter defined) is determined by a court of
competent jurisdiction to be applicable to the obligations of any Guarantor
under this Guaranty, such obligations of such Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that would not
render its obligations hereunder subject to avoidance as a fraudulent transfer
or conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "FRAUDULENT
TRANSFER LAWS"), in each case after giving effect to all other liabilities of
such Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (x) in respect of intercompany indebtedness to Company or other
affiliates of Company to the extent that such indebtedness would be discharged
in an amount equal to the amount paid by such Guarantor hereunder
and (y) under any guaranty of Subordinated Indebtedness which guaranty contains
a limitation as to maximum amount similar to that set forth in this subsection
2.2(a), pursuant to which the liability of such Guarantor hereunder is included
in the liabilities taken into account in determining such maximum amount) and
after giving effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
reimbursement, indemnification or contribution of such Guarantor pursuant to
applicable law or pursuant to the terms of any agreement (including any such
right of contribution under subsection 2.2(b)).
(b) Each Guarantor under this Guaranty, and Holdings under the Holdings
Guaranty, together desire to allocate among themselves (collectively, the
"CONTRIBUTING GUARANTORS"), in a fair and equitable manner, their obligations
arising under this
3
Guaranty and the Holdings Guaranty. Accordingly, in the event any payment or
distribution is made on any date by any Guarantor under this Guaranty or
Holdings under the Holdings Guaranty (a "FUNDING GUARANTOR") that exceeds its
Fair Share (as defined below) as of such date, that Funding Guarantor shall be
entitled to a contribution from each of the other Contributing Guarantors in the
amount of such other Contributing Guarantor's Fair Share Shortfall (as defined
below) as of such date, with the result that all such contributions will cause
each Contributing Guarantor's Aggregate Payments (as defined below) to equal its
Fair Share as of such date. "FAIR SHARE" means, with respect to a Contributing
Guarantor as of any date of determination, an amount equal to (i) the ratio of
(x) the Adjusted Maximum Amount (as defined below) with respect to such
Contributing Guarantor to (y) the aggregate of the Adjusted Maximum Amounts with
respect to all Contributing Guarantors multiplied by (ii) the aggregate amount
-------------
paid or distributed on or before such date by all Funding Guarantors under this
Guaranty and the Holdings Guaranty in respect of the obligations guarantied.
"FAIR SHARE SHORTFALL" means, with respect to a Contributing Guarantor as of any
date of determination, the excess, if any, of the Fair Share of such
Contributing Guarantor over the Aggregate Payments of such Contributing
Guarantor. "ADJUSTED MAXIMUM AMOUNT" means, with respect to a Contributing
Guarantor as of any date of determination, the maximum aggregate amount of the
obligations of such Contributing Guarantor under this Guaranty and the Holdings
Guaranty, determined as of such date, in the case of any Guarantor, in
accordance with subsection 2.2(a), or, if applicable, subsection 2.2(a) of the
Holdings Guaranty; provided that, solely for purposes of calculating the
--------
"Adjusted Maximum Amount" with respect to any Contributing Guarantor for
purposes of this subsection 2.2(b), any assets or liabilities of such
Contributing Guarantor arising by virtue of any rights to subrogation,
reimbursement or indemnification or any rights to or obligations of contribution
hereunder or under the Holdings Guaranty shall not be considered as assets or
liabilities of such Contributing Guarantor. "AGGREGATE PAYMENTS" means, with
respect to a Contributing Guarantor as of any date of determination, an amount
equal to (i) the aggregate amount of all payments and distributions made on or
before such date by such Contributing Guarantor in respect of this Guaranty and
the Holdings Guaranty (including in respect of this subsection 2.2(b) or
subsection 2.2(b) of the Holdings Guaranty) minus (ii) the aggregate amount of
-----
all payments received on or before such date by such Contributing Guarantor
from the other Contributing Guarantors as contributions under this subsection
2.2(b) or subsection 2.2(b) of the Holdings Guaranty. The amounts payable as
contributions hereunder shall be determined as of the date on which the related
payment or distribution is made by the applicable Funding Guarantor. The
allocation among Contributing Guarantors of their obligations as set forth in
this subsection 2.2(b) or subsection 2.2(b) of the Holdings Guaranty shall not
be construed in any way to limit the liability of any Contributing Guarantor
hereunder or under the Holdings Guaranty. Holdings under the Holdings Guaranty
is a third party beneficiary to the contribution agreement set forth in this
subsection 2.2(b).
2.3 PAYMENT BY GUARANTORS; APPLICATION OF PAYMENTS. Subject to the
----------------------------------------------
provisions of subsection 2.2(a), Guarantors hereby jointly and severally agree,
in furtherance of the foregoing and not in limitation of any other right which
any Beneficiary
4
may have at law or in equity against any Guarantor by virtue hereof, that upon
the failure of Company to pay any of the Guarantied Obligations 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 Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S) 362(a)), Guarantors will upon demand pay, or
cause to be paid, in cash, to Guarantied Party for the ratable benefit of
Beneficiaries, an amount equal to the sum of the unpaid principal amount of all
Guarantied Obligations then due as aforesaid, accrued and unpaid interest on
such Guarantied Obligations (including interest which, but for the filing of a
petition in bankruptcy with respect to Company, would have accrued on such
Guarantied Obligations, whether or not a claim is allowed against Company for
such interest in the related bankruptcy proceeding) and all other Guarantied
Obligations then owed to Beneficiaries as aforesaid. All such payments shall be
applied promptly from time to time by Guarantied Party as provided in subsection
2.4D of the Credit Agreement.
2.4 LIABILITY OF GUARANTORS ABSOLUTE. Each Guarantor agrees that its
--------------------------------
obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than payment in full of the
Guarantied Obligations. In furtherance of the foregoing and without limiting
the generality thereof, each Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of
collectibility.
(b) Guarantied Party may enforce this Guaranty upon the occurrence and
continuation of an Event of Default under the Credit Agreement or the
occurrence and continuation of an Early Termination Date (as defined in a
Master Agreement or an Interest Rate Swap Agreement or Interest Rate and
Currency Exchange Agreement in the form prepared by the International Swap
and Derivatives Association Inc. or a similar event under any similar swap
agreement) under any Lender Interest Rate Agreement (either such occurrence
being an "EVENT OF DEFAULT" for purposes of this Guaranty).
(c) The obligations of each Guarantor hereunder are independent of the
obligations of Company under the Loan Documents or the Lender Interest Rate
Agreements and the obligations of any other guarantor (including any other
Guarantor) of the obligations of Company under the Loan Documents or the
Lender Interest Rate Agreements, and a separate action or actions may be
brought and prosecuted against such Guarantor whether or not any action is
brought against Company or any of such other guarantors and whether or not
Company is joined in any such action or actions.
(d) Payment by any Guarantor of a portion, but not all, of the
Guarantied Obligations shall in no way limit, affect, modify or abridge any
Guarantor's
5
liability for any portion of the Guarantied Obligations which has not been
paid. Without limiting the generality of the foregoing, if Guarantied Party
is awarded a judgment in any suit brought to enforce any Guarantor's
covenant to pay a portion of the Guarantied Obligations, such judgment shall
not be deemed to release such Guarantor from its covenant to pay the portion
of the Guarantied Obligations that is not the subject of such suit, and such
judgment shall not, except to the extent satisfied by such Guarantor, limit,
affect, modify or abridge any other Guarantor's liability hereunder in
respect of the Guarantied Obligations.
(e) Any Beneficiary, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability of
this Guaranty or giving rise to any reduction, limitation, impairment,
discharge or termination of any Guarantor's liability hereunder, from time
to time may (i) renew, extend, accelerate, increase the rate of interest on,
or otherwise change the time, place, manner or terms of payment of the
Guarantied Obligations, (ii) settle, compromise, release or discharge, or
accept or refuse any offer of performance with respect to, or substitutions
for, the Guarantied Obligations or any agreement relating thereto and/or
subordinate the payment of the same to the payment of any other obligations;
(iii) request and accept other guaranties of the Guarantied Obligations and
take and hold security for the payment of this Guaranty or the Guarantied
Obligations; (iv) release, surrender, exchange, substitute, compromise,
settle, rescind, waive, alter, subordinate or modify, with or without
consideration, any security for payment of the Guarantied Obligations, any
other guaranties of the Guarantied Obligations, or any other obligation of
any Person (including any other Guarantor) with respect to the Guarantied
Obligations; (v) enforce and apply any security now or hereafter held by or
for the benefit of such Beneficiary in respect of this Guaranty or the
Guarantied Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that such Beneficiary may have against
any such security, in each case as such Beneficiary in its discretion may
determine consistent with the Credit Agreement or the applicable Lender
Interest Rate Agreement and any applicable security agreement, including
foreclosure on any such security pursuant to one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable, and even though such action operates to impair or
extinguish any right of reimbursement or subrogation or other right or
remedy of any Guarantor against Company or any security for the Guarantied
Obligations; and (vi) exercise any other rights available to it under the
Loan Documents or the Lender Interest Rate Agreements.
(f) This Guaranty and the obligations of Guarantors hereunder shall be
valid and enforceable and shall not be subject to any reduction, limitation,
impairment, discharge or termination for any reason (other than payment in
full of the Guarantied Obligations), including the occurrence of any of the
following, whether or not any Guarantor shall have had notice or knowledge
of any of them: (i) any failure or omission to assert or enforce or
agreement or election not to assert or
6
enforce, or the stay or enjoining, by order of court, by operation of law or
otherwise, of the exercise or enforcement of, any claim or demand or any
right, power or remedy (whether arising under the Loan Documents or the
Lender Interest Rate Agreements, at law, in equity or otherwise) with
respect to the Guarantied Obligations or any agreement relating thereto, or
with respect to any other guaranty of or security for the payment of the
Guarantied Obligations; (ii) any rescission, waiver, amendment or
modification of, or any consent to departure from, any of the terms or
provisions (including provisions relating to events of default) of the
Credit Agreement, any of the other Loan Documents, any of the Lender
Interest Rate Agreements or any agreement or instrument executed pursuant
thereto, or of any other guaranty or security for the Guarantied
Obligations, in each case whether or not in accordance with the terms of the
Credit Agreement or such Loan Document, such Lender Interest Rate Agreement
or any agreement relating to such other guaranty or security; (iii) the
Guarantied Obligations, or any agreement relating thereto, at any time being
found to be illegal, invalid or unenforceable in any respect; (iv) the
application of payments received from any source (other than payments
received pursuant to the other Loan Documents or any of the Lender Interest
Rate Agreements or from the proceeds of any security for the Guarantied
Obligations, except to the extent such security also serves as collateral
for indebtedness other than the Guarantied Obligations) to the payment of
indebtedness other than the Guarantied Obligations, even though any
Beneficiary might have elected to apply such payment to any part or all of
the Guarantied Obligations; (v) any Beneficiary's consent to the change,
reorganization or termination of the corporate structure or existence of
Company or any of its Subsidiaries and to any corresponding restructuring of
the Guarantied Obligations; (vi) any failure to perfect or continue
perfection of a security interest in any collateral which secures any of the
Guarantied Obligations; (vii) any defenses (other than the expiration of
applicable statute of limitations), set-offs or counterclaims which Company
may allege or assert against any Beneficiary in respect of the Guarantied
Obligations, including failure of consideration, breach of warranty,
payment, statute of frauds, accord and satisfaction and usury; and (viii)
any other act or thing or omission, or delay to do any other act or thing,
which may or might in any manner or to any extent vary the risk of any
Guarantor as an obligor in respect of the Guarantied Obligations.
2.5 WAIVERS BY GUARANTORS. Each Guarantor hereby waives, for the benefit
---------------------
of Beneficiaries:
(a) any right to require any Beneficiary, as a condition of payment or
performance by such Guarantor, to (i) proceed against Company, any other
guarantor (including any other Guarantor) of the Guarantied Obligations or
any other Person, (ii) proceed against or exhaust any security held from
Company, any such other guarantor or any other Person, (iii) proceed against
or have resort to any balance of any deposit account or credit on the books
of any Beneficiary in
7
favor of Company or any other Person, or (iv) pursue any other remedy in the
power of any Beneficiary whatsoever;
(b) any defense arising by reason of the incapacity, lack of authority
or any disability or other defense of Company (other than the expiration of
applicable statute of limitations) including any defense based on or arising
out of the lack of validity or the unenforceability of the Guarantied
Obligations or any agreement or instrument relating thereto or by reason of
the cessation of the liability of Company from any cause other than payment
in full of the Guarantied Obligations;
(c) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal;
(d) any defense based upon any Beneficiary's errors or omissions in the
administration of the Guarantied Obligations, except behavior which amounts
to gross negligence, willful misconduct or bad faith;
(e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty and any
legal or equitable discharge of such Guarantor's obligations hereunder, (ii)
any rights to set-offs, recoupments and counterclaims, and (iii) promptness,
diligence and any requirement that any Beneficiary protect, secure, perfect
or insure any security interest or lien or any property subject thereto;
(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Credit Agreement,
the Lender Interest Rate Agreements or any agreement or instrument related
thereto, notices of any renewal, extension or modification of the Guarantied
Obligations or any agreement related thereto, notices of any extension of
credit to Company and notices of any of the matters referred to in
subsection 2.4 and any right to consent to any thereof; and
(g) any defenses (other than expiration of statutes of limitations) or
benefits that may be derived from or afforded by law which limit the
liability of or exonerate guarantors or sureties, or which may conflict with
the terms of this Guaranty.
2.6 GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the
----------------------------------------------------
Guarantied Obligations shall have been indefeasibly paid in full and the
Commitments shall have terminated and all Letters of Credit shall have expired
or been cancelled, each Guarantor hereby waives any claim, right or remedy,
direct or indirect, that such Guarantor now has or may hereafter have against
Company or any of its assets in
8
connection with this Guaranty or the performance by such Guarantor of its
obligations hereunder, in each case whether such claim, right or remedy arises
in equity, under contract, by statute, under common law or otherwise and
including without limitation (a) any right of subrogation, reimbursement or
indemnification that such Guarantor now has or may hereafter have against
Company, (b) any right to enforce, or to participate in, any claim, right or
remedy that any Beneficiary now has or may hereafter have against Company, and
(c) any benefit of, and any right to participate in, any collateral or security
now or hereafter held by any Beneficiary. In addition, until the Guarantied
Obligations shall have been indefeasibly paid in full and the Commitments shall
have terminated and all Letters of Credit shall have expired or been cancelled,
each Guarantor shall withhold exercise of any right of contribution such
Guarantor may have against any other guarantor (including any other Guarantor)
of the Guarantied Obligations. Each Guarantor further agrees that, to the extent
the waiver or agreement to withhold the exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification such Guarantor may have
against Company or against any collateral or security, and any rights of
contribution such Guarantor may have against any such other guarantor, shall be
junior and subordinate to any rights any Beneficiary may have against Company,
to all right, title and interest any Beneficiary may have in any such collateral
or security, and to any right any Beneficiary may have against such other
guarantor. If any amount shall be paid to any Guarantor on account of any such
subrogation, reimbursement, indemnification or contribution rights at any time
when all Guarantied Obligations shall not have been paid in full, such amount
shall be held in trust for Guarantied Party on behalf of Beneficiaries and shall
forthwith be paid over to Guarantied Party for the benefit of Beneficiaries to
be credited and applied against the Guarantied Obligations, whether matured or
unmatured, in accordance with the terms hereof.
2.7 SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of Company or any
----------------------------------
Guarantor now or hereafter held by any Guarantor (the "OBLIGEE GUARANTOR") is
hereby subordinated in right of payment to the Guarantied Obligations, and any
such indebtedness collected or received by the Obligee Guarantor after an Event
of Default has occurred and is continuing shall be held in trust for Guarantied
Party on behalf of Beneficiaries and shall forthwith be paid over to Guarantied
Party for the benefit of Beneficiaries to be credited and applied against the
Guarantied Obligations but without affecting, impairing or limiting in any
manner the liability of the Obligee Guarantor under any other provision of this
Guaranty.
2.8 EXPENSES. Guarantors jointly and severally agree to pay, or cause to
--------
be paid, on demand, and to save Beneficiaries harmless against liability for,
any and all reasonable out-of-pocket costs and expenses (including reasonable
fees and disbursements of counsel and allocated costs of internal counsel)
incurred or expended by any Beneficiary in connection with the enforcement of or
preservation of any rights under this Guaranty.
9
2.9 CONTINUING GUARANTY. This Guaranty is a continuing guaranty and shall
-------------------
remain in effect until all of the Guarantied Obligations shall have been paid in
full and the Commitments shall have terminated and all Letters of Credit shall
have expired or been cancelled. Each Guarantor hereby irrevocably waives any
right to revoke this Guaranty as to future transactions giving rise to any
Guarantied Obligations.
2.10 AUTHORITY OF GUARANTORS OR COMPANY. It is not necessary for any
----------------------------------
Beneficiary to inquire into the capacity or powers of any Guarantor or Company
or the officers, directors, members, governors or any agents acting or
purporting to act on behalf of any of them.
2.11 FINANCIAL CONDITION OF COMPANY. Any Loans may be granted to Company or
------------------------------
continued from time to time, and any Lender Interest Rate Agreements may be
entered into from time to time, in each case without notice to or authorization
from any Guarantor regardless of the financial or other condition of Company at
the time of any such grant or continuation or at the time such Lender Interest
Rate Agreement is entered into, as the case may be. No Beneficiary shall have
any obligation to disclose or discuss with any Guarantor its assessment, or any
Guarantor's assessment, of the financial condition of Company. Each Guarantor
has adequate means to obtain information from Company on a continuing basis
concerning the financial condition of Company and its ability to perform its
obligations under the Loan Documents and the Lender Interest Rate Agreements,
and each Guarantor assumes the responsibility for being and keeping informed of
the financial condition of Company and of all circumstances bearing upon the
risk of nonpayment of the Guarantied Obligations. Each Guarantor hereby waives
and relinquishes any duty on the part of any Beneficiary to disclose any matter,
fact or thing relating to the business, operations or conditions of Company now
known or hereafter known by any Beneficiary.
2.12 RIGHTS CUMULATIVE. The rights, powers and remedies given to
-----------------
Beneficiaries by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Beneficiaries by virtue
of any statute or rule of law or in any of the other Loan Documents, any of the
Lender Interest Rate Agreements or any agreement between any Guarantor and any
Beneficiary or Beneficiaries or between Company and any Beneficiary or
Beneficiaries. Any forbearance or failure to exercise, and any delay by any
Beneficiary in exercising, any right, power or remedy hereunder shall not impair
any such right, power or remedy or be construed to be a waiver thereof, nor
shall it preclude the further exercise of any such right, power or remedy.
2.13 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY. (a) So
-------------------------------------------------------------
long as any Guarantied Obligations remain outstanding, no Guarantor shall,
without the prior written consent of Guarantied Party acting pursuant to the
instructions of Requisite Lenders, commence or join with any other Person in
commencing any bankruptcy, reorganization or insolvency proceedings of or
against Company. The obligations of Guarantors under this Guaranty shall not be
reduced, limited, impaired, discharged,
10
deferred, suspended or terminated by any proceeding, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership, reorganization, liquidation
or arrangement of Company or by any defense which Company may have by reason of
the order, decree or decision of any court or administrative body resulting from
any such proceeding.
(b) Each Guarantor acknowledges and agrees that any interest on any
portion of the Guarantied Obligations which accrues after the commencement of
any proceeding referred to in clause (a) above (or, if interest on any portion
of the Guarantied Obligations ceases to accrue by operation of law by reason of
the commencement of said proceeding, such interest as would have accrued on such
portion of the Guarantied Obligations if said proceedings had not been
commenced) shall be included in the Guarantied Obligations because it is the
intention of Guarantors and Beneficiaries that the Guarantied Obligations which
are guarantied by Guarantors pursuant to this Guaranty should be determined
without regard to any rule of law or order which may relieve Company of any
portion of such Guarantied Obligations. Guarantors will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Guarantied Party, or allow the claim of
Guarantied Party in respect of, any such interest accruing after the date on
which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied Obligations
is paid by Company, the obligations of Guarantors hereunder shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) are rescinded or recovered
directly or indirectly from any Beneficiary as a preference, fraudulent transfer
or otherwise, and any such payments which are so rescinded or recovered shall
constitute Guarantied Obligations for all purposes under this Guaranty.
2.14 NOTICE OF EVENTS. As soon as any Guarantor obtains knowledge thereof,
----------------
each such Guarantor shall give Guarantied Party written notice of any condition
or event which has resulted in (a) a material adverse change in the financial
condition of such Guarantor or Company or (b) a breach of or noncompliance with
any term, condition or covenant contained herein or in the Credit Agreement, any
other Loan Document, any Lender Interest Rate Agreements or any other document
delivered pursuant hereto or thereto.
2.15 SET OFF. In addition to any other rights any Beneficiary may have
-------
under law or in equity, if any amount shall at any time be due and owing by any
Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized
at any time or from time to time, without notice (any such notice being hereby
expressly waived), to set off and to appropriate and to apply any and all
deposits (general or special, including indebtedness evidenced by certificates
of deposit, whether matured or unmatured) and any other indebtedness of such
Beneficiary owing to such Guarantor and any other property of such Guarantor
held by any Beneficiary to or for the credit or the account of such
11
Guarantor against and on account of the Guarantied Obligations and liabilities
of such Guarantor to any Beneficiary under this Guaranty.
2.16 DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR. If all of the stock or
--------------------------------------------
limited liability company interests of any Guarantor or any of its successors in
interest under this Guaranty shall be sold or otherwise disposed of (including
by merger or consolidation) in an Asset Sale not prohibited by subsection 7.7 of
the Credit Agreement or otherwise consented to by Requisite Lenders, the
Guaranty of such Guarantor or such successor in interest, as the case may be,
hereunder shall automatically be discharged and released without any further
action by any Beneficiary or any other Person effective as of the time of such
Asset Sale; provided that, as a condition precedent to such discharge and
--------
release, Guarantied Party shall have received evidence satisfactory to it that
arrangements satisfactory to it have been made for delivery to Guarantied Party
of the applicable Net Asset Sale Proceeds if required under the Credit
Agreement; provided further that no such delivery shall be required in
----------------
connection with a merger or consolidation of such entity into or with Company or
another subsidiary of Company.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Beneficiaries to accept this Guaranty and to enter
into the Credit Agreement and to make the Loans thereunder, each Guarantor
hereby represents and warrants to Beneficiaries that the following statements
are true and correct:
3.1 CORPORATE EXISTENCE. Each Guarantor is duly organized, validly
-------------------
existing and in good standing under the laws of the state of its incorporation,
has the corporate power to own its assets and to transact the business in which
it is now engaged and is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, except for
failures to be so qualified, authorized or licensed that would not in the
aggregate have a material adverse effect on the business, operations, assets or
financial condition of Guarantor.
3.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each
-------------------------------------------------------
Guarantor has the corporate power, authority and legal right to execute, deliver
and perform this Guaranty and all obligations required hereunder and has taken
all necessary corporate action to authorize its Guaranty hereunder on the terms
and conditions hereof and its execution, delivery and performance of this
Guaranty and all obligations required hereunder. No consent of any other Person
including, without limitation, stockholders and creditors of either Guarantor,
and no license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any governmental
authority is required by either Guarantor in connection with this Guaranty or
the execution, delivery, performance, validity or enforceability of this
Guaranty and all obligations required hereunder. This Guaranty has been, and
each instrument or document required hereunder will be, executed and delivered
by a duly authorized officer of each of the Guarantors, and this Guaranty
constitutes, and each instrument or document
12
required hereunder when executed and delivered hereunder will constitute, the
legally valid and binding obligation of each of the Guarantors, enforceable
against each of the Guarantors in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws or equitable principles relating to or limiting
creditors' rights generally.
3.3 NO LEGAL BAR TO THIS GUARANTY. The execution, delivery and performance
-----------------------------
of this Guaranty and the documents or instruments required hereunder, and the
use of the proceeds of the borrowings under the Credit Agreement, will not
violate any provision of any existing law or regulation binding on either
Guarantor, or any order, judgment, award or decree of any court, arbitrator or
governmental authority binding on either Guarantor, or the certificate of
incorporation or bylaws of either Guarantor or any securities issued by either
Guarantor, or any mortgage, indenture, lease, contract or other agreement,
instrument or undertaking to which either Guarantor is a party or by which
either Guarantor or any of its assets may be bound, the violation of which would
have a material adverse effect on the business, operations, assets or financial
condition of either Guarantor and will not result in, or require, the creation
or imposition of any Lien on any of its property, assets or revenues pursuant to
the provisions of any such mortgage, indenture, lease, contract or other
agreement, instrument or undertaking.
SECTION 4. AFFIRMATIVE COVENANTS
Each Guarantor covenants and agrees that, unless and until all of the
Guarantied Obligations shall have been paid in full and the Commitments shall
have terminated, unless Requisite Lenders shall otherwise consent in writing:
4.1 CORPORATE EXISTENCE, ETC. Each Guarantor shall at all times preserve
------------------------
and keep in full force and effect its corporate existence and all rights and
franchises material to its business.
4.2 COMPLIANCE WITH LAWS, ETC. Each Guarantor shall comply in all material
-------------------------
respects with all applicable laws, rules, regulations and orders, such
compliance to include, without limitation, paying when due all taxes,
assessments and governmental charges imposed upon it or upon any of its
properties or assets or in respect of any of its franchises, businesses, income
or property before any penalty or interest accrues thereon.
4.3 BOOKS AND RECORDS. Subject to the terms of the Credit Agreement, each
-----------------
Guarantor shall keep and maintain books of record and account with respect to
its operations in accordance with generally accepted accounting principles and
shall permit any Beneficiary and its officers, employees and authorized agents,
to the extent Guarantied Party in good xxxxx xxxxx necessary for the proper
administration of this Guaranty, to examine, copy and make excerpts from the
books and records of either Guarantor and its Subsidiaries and to inspect the
properties of either Guarantor and its Subsidiaries, both real and personal, at
such reasonable times as Guarantied Party may request.
13
SECTION 5. MISCELLANEOUS
5.1 SURVIVAL OF WARRANTIES. All agreements, representations and warranties
----------------------
made herein shall survive the execution and delivery of this Guaranty and the
other Loan Documents and the Lender Interest Rate Agreements and any increase in
the Commitments under the Credit Agreement.
5.2 NOTICES. Any communications between Guarantied Party and any Guarantor
-------
and any notices or requests provided herein to be given shall be given as
provided in the Credit Agreement to each such party at its address set forth in
the Credit Agreement, on the signature pages hereof or to such other addresses
as each such party may in writing hereafter indicate. Any notice, request or
demand to or upon Guarantied Party or any Guarantor shall not be effective until
received.
5.3 SEVERABILITY. In case any provision in or obligation under this
------------
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
5.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
----------------------
waiver of any provision of this Guaranty, and no consent to any departure by any
Guarantor therefrom, shall in any event be effective without the written
concurrence of Guarantied Party and, in the case of any such amendment or
modification, each Guarantor against whom enforcement of such amendment or
modification is sought. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
5.5 HEADINGS. Section and subsection headings in this Guaranty are
--------
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
5.6 APPLICABLE LAW; RULES OF CONSTRUCTION. THIS GUARANTY AND THE RIGHTS
-------------------------------------
AND OBLIGATIONS OF GUARANTORS AND BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. The
rules of construction set forth in subsection 1.3 of the Credit Agreement shall
be applicable to this Guaranty mutatis mutandis.
5.7 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty and
----------------------
shall be binding upon each Guarantor and its respective successors and assigns.
This Guaranty shall inure to the benefit of Beneficiaries and their respective
successors and assigns. No Guarantor shall assign this Guaranty or any of the
rights or obligations of such Guarantor
14
hereunder without the prior written consent of all Lenders. Any Beneficiary may,
without notice or consent, assign its interest in this Guaranty in whole or in
part. The terms and provisions of this Guaranty shall inure to the benefit of
any transferee or assignee of any Loan, and in the event of such transfer or
assignment the rights and privileges herein conferred upon such Beneficiary
shall automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof.
5.8 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
----------------------------------------------
PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF OR RELATING TO THIS
GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN XXX XXXXX, XXXXXX XXX XXXX XX XXX XXXX. BY
EXECUTING AND DELIVERING THIS AGREEMENT, EACH GUARANTOR, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY
SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 5.2;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GUARANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH
GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 5.8 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
5.9 WAIVER OF TRIAL BY JURY. EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE
-----------------------
BENEFITS HEREOF, EACH BENEFICIARY EACH
15
HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The scope of this
waiver is intended to be all encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including contract claims, tort claims, breach of duty claims and all other
common law and statutory claims. Each Guarantor and, by its acceptance of the
benefits hereof, each Beneficiary, each (i) acknowledges that this waiver is a
material inducement for such Guarantor and Beneficiaries to enter into a
business relationship, that such Guarantor and Beneficiaries have already relied
on this waiver in entering into this Guaranty or accepting the benefits thereof,
as the case may be, and that each will continue to rely on this waiver in their
related future dealings and (ii) further warrants and represents that each has
reviewed this waiver with its legal counsel, and that each knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SUBSECTION 5.9 AND EXECUTED BY GUARANTIED PARTY AND EACH
GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY. In the event of litigation, this
Guaranty may be filed as a written consent to a trial by the court.
5.10 NO OTHER WRITING. This writing is intended by Guarantors and
----------------
Beneficiaries as the final expression of this Guaranty and is also intended as a
complete and exclusive statement of the terms of their agreement with respect to
the matters covered hereby. No course of dealing, course of performance or
trade usage, and no parol evidence of any nature, shall be used to supplement or
modify any terms of this Guaranty. There are no conditions to the full
effectiveness of this Guaranty.
5.11 FURTHER ASSURANCES. At any time or from time to time, upon the
------------------
request of Guarantied Party, Guarantors shall execute and deliver such further
documents and do such other acts and things as Guarantied Party may reasonably
request in order to effect fully the purposes of this Guaranty.
5.12 ADDITIONAL GUARANTORS. The initial Guarantors hereunder shall be
---------------------
such of the Subsidiaries of Company as are signatories hereto on the date
hereof. From time to time subsequent to the date hereof, additional
Subsidiaries of Company may become parties hereto, as additional Guarantors
(each an "ADDITIONAL GUARANTOR"), by executing a counterpart of this Guaranty.
Upon delivery of any such counterpart to Administrative Agent, notice of which
is hereby waived by Guarantors, each such Additional Guarantor shall be a
Guarantor and shall be as fully a party hereto as if such Additional Guarantor
were an original signatory hereof. Each Guarantor expressly agrees that its
obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Guarantor hereunder, nor by any election of
Administrative Agent not to cause any Subsidiary of Company to become an
Additional Guarantor hereunder. This Guaranty
16
shall be fully effective as to any Guarantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Guarantor hereunder.
5.13 COUNTERPARTS; EFFECTIVENESS. This Guaranty may be executed in any
---------------------------
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original for all purposes; but all such counterparts together shall
constitute but one and the same instrument. This Guaranty shall become effective
as to each Guarantor upon the execution of a counterpart hereof by such
Guarantor (whether or not a counterpart hereof shall have been executed by any
other Guarantor) and receipt by Guarantied Party of written or telephonic
notification of such execution and authorization of delivery thereof.
5.14 GUARANTIED PARTY AS ADMINISTRATIVE AGENT.
----------------------------------------
(a) Guarantied Party has been appointed to act as Guarantied Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Guarantied Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action, solely in
accordance with this Guaranty and the Credit Agreement; provided that Guarantied
--------
Party shall exercise, or refrain from exercising, any remedies hereunder in
accordance with the instructions of (i) Requisite Lenders or (ii) after payment
in full of all Obligations under the Credit Agreement and the other Loan
Documents, the holders of a majority of the aggregate notional amount (or, with
respect to any Lender Interest Rate Agreement that has been terminated in
accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "REQUISITE OBLIGEES"). In furtherance of the foregoing provisions of
this subsection 5.14, each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to enforce this
Guaranty, it being understood and agreed by such Interest Rate Exchanger that
all rights and remedies hereunder may be exercised solely by Guarantied Party
for the benefit of Beneficiaries in accordance with the terms of this subsection
5.14.
(b) Guarantied Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Guarantied Party under this Guaranty;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Guarantied Party under this Guaranty;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor
Guarantied Party under this Guaranty. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the
17
Credit Agreement by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Guarantied
Party under this Guaranty, and the retiring or removed Guarantied Party under
this Guaranty shall promptly (i) transfer to such successor Guarantied Party all
sums held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Guarantied Party under this Guaranty, and (ii) take such other actions as may be
necessary or appropriate in connection with the assignment to such successor
Guarantied Party of the rights created hereunder, whereupon such retiring or
removed Guarantied Party shall be discharged from its duties and obligations
under this Guaranty. After any retiring or removed Guarantied Party's
resignation or removal hereunder as Guarantied Party, the provisions of this
Guaranty shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Guaranty while it was Guarantied Party hereunder.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, each of the undersigned Guarantors has caused this
Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the date first written above.
EMPIRE CANDLE, INC.
By: ____________________________
Name: ____________________________
Title: ____________________________
Address:
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxx Xxxxxxx
XXXXXXX, INC.
By: ____________________________
Name: ____________________________
Title: ____________________________
Address:
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxx Xxxxxxx
S-1
IN WITNESS WHEREOF, the undersigned Additional Guarantor has caused
this Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of ______________, _____.
________________________________________
(Name of Additional Guarantor)
By _____________________________________
Title __________________________________
Address: _______________________________
_______________________________
_______________________________
