1
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of September 23, 1999 (this
"Guaranty"), is made by X. XXXXXXX COMPANY, a Michigan corporation, and XXXXXXX
COMPANY OF SOUTH CAROLINA, INC., a Michigan corporation (collectively, the
"Guarantors" and each, individually, a "Guarantor"), in favor of the lenders
(the "Lenders") which are parties to a Credit Agreement (as defined below), and
BANK ONE, MICHIGAN, a Michigan banking corporation, as agent (in such capacity,
the "Agent") for such Lenders under the Credit Agreement.
RECITALS
X. Xxxxxxx Company, a Michigan corporation (the "Company"), has entered
a 1999 Credit Agreement of even date herewith (the "Credit Agreement") with the
Lenders and the Agent, pursuant to which the Lenders have agreed to make Loans
to the Company.
B. As a condition to the effectiveness of the obligations of the
Lenders under the Credit Agreement, the Guarantors are required to guarantee,
among other things, the obligations of the Company in respect of the Loans and
other obligations of the Company under the Notes and the Credit Agreement.
C. The Guarantors have reviewed the Credit Agreement, the Notes, and
all other documents, agreements, instruments and certificates furnished by or on
behalf of the Company in connection therewith (all of the foregoing, as amended
or modified from time to time and together with any agreements or instruments in
replacement thereof, being collectively referred to as the "Operative
Documents"), and the Guarantors have determined that it is in their interest and
to their financial benefit that the parties to the Operative Documents enter
into the transactions contemplated thereby. This Guaranty supersedes the
Guaranty Agreement dated as of June 30, 1996, executed by the Guarantors in
connection with the Credit Agreement dated as of June 30, 1996, among the
Company, the lenders party thereto, and the Agent.
For valuable consideration, the receipt of which is acknowledged, and
as further consideration, and as an inducement to the Lenders to maintain the
credit facilities established by the Operative Documents, the Guarantors agree
with the Lenders and the Agent as follows:
1. Guarantee of Obligations. (a) The Guarantors (i) jointly and
severally guarantee to the Lenders the prompt payment of the principal of and
any and all accrued and unpaid interest (including without limitation interest
which, but for the filing of a bankruptcy petition, would have accrued on the
principal amount of the Guaranteed Obligations) on the Loans, when due, whether
by scheduled maturity, acceleration or otherwise, all in accordance with the
terms of the Notes and the Credit Agreement, all reimbursement obligations under
any letters of credit issued by the Agent for the account of the Company, and
any and all other amounts which may be payable by the Company to the Lenders or
the Agent in connection with or pursuant to any of the Operative Documents,
including without limitation default interest, indemnification payments, and all
costs and expenses incurred by the Lenders or the Agent in connection with
enforcing any obligations of the Company thereunder, including without
limitation the reasonable fees and disbursements of legal counsel, and (ii)
agree to make prompt payment, on
2
demand, of any and all costs and expenses incurred by the Lenders and the Agent
in connection with enforcing the obligations of the Guarantors hereunder,
including without limitation the reasonable fees and disbursements of counsel.
All of the foregoing are collectively referred to as the "Guaranteed
Obligations".
(b) If for any reason any amount payable under or in
connection with any Operative Document shall not be paid in full when the same
becomes due and payable, the Guarantors undertake to pay forthwith each such
amount to the Lenders and the Agent regardless of any defense or setoff or
counterclaim which the Company may have or assert, and regardless of any other
condition or contingency.
(c) The date and amount of the Loans and of each payment of
principal and interest thereon and other amounts received, and the aggregate
amount thereof shown upon the books and records of the Lenders or the Agent, and
in any certificate delivered by the Lenders or the Agent to the Guarantors in
respect thereof, shall be prima facie evidence of the amount due, owing, and
unpaid on the Loans. The failure to record any such information on such books
and records shall not, however, limit or otherwise affect the obligations of the
Company to repay the amount of the Loans together with accrued interest thereon
or the obligations of the Guarantors hereunder with respect thereto.
1. Nature of Guaranty. This Guaranty is an absolute and unconditional
and irrevocable guaranty of payment and not a guaranty of collection and is
wholly independent of and in addition to other rights and remedies of the
Lenders and the Agent and is not contingent upon the pursuit by the Lenders or
the Agent of any such rights and remedies, and the Guarantors waive such
pursuit.
2. Waivers and Other Agreements. The Guarantors unconditionally (a)
waive any requirement that the Lenders or the Agent, in the event of any default
by the Company, first make demand upon, or seek to enforce remedies against, the
Company before demanding payment under or seeking to enforce this Guaranty, (b)
covenant that this Guaranty will not be discharged except by complete
performance of all obligations of the Company contained in the Operative
Documents, (c) agree that this Guaranty shall remain in full force and effect
without regard to, and shall not be affected or impaired by, any invalidity,
irregularity, or unenforceability in whole or in part of any of the Operative
Documents, or any limitation on the liability of the Company thereunder, or any
limitation on the method or terms of payment thereunder which may now or
hereafter be imposed in any manner whatsoever, (d) waive diligence, presentment,
and protest with respect to, and any notice of default or dishonor in the
payment of any amount at any time payable by the Company under or in connection
with, any of the Operative Documents, and further waive any requirement of
notice of acceptance of, or other formality relating to, this Guaranty, and (e)
agree that the Guaranteed Obligations shall include any amounts paid by the
Company which may be required to be returned to the Company, or to its
representative or to a trustee, custodian, or receiver for the Company.
3. Obligations Absolute. The obligations, covenants, agreements, and
duties of the Guarantors under this Guaranty shall not be released, affected, or
impaired by any of the following, whether or not undertaken with notice to or
consent of the Guarantors: (a) any
-2-
3
assignment or transfer, in whole or in part, of the Loans or any of the
Operative Documents, or (b) any waiver by the Lenders or the Agent, or by any
other person, of the performance or observance by the Company of any of the
agreements, covenants, terms, or conditions contained in any of the Operative
Documents, or (c) any indulgence in or the extension of the time for payment by
the Company of any amounts payable under or in connection with any of the
Operative Documents, or of the time for performance by the Company of any other
obligations under or arising out of any of the Operative Documents, or the
extension or renewal thereof, whether occurring once or more than once, or (d)
the modification, amendment or waiver (whether material or otherwise) of any
duty, agreement, or obligation of the Company set forth in any of the Operative
Documents (the modification, amendment, or waiver from time to time of the
Credit Agreement or the Notes being expressly authorized without further notice
to or consent of the Guarantors), or (e) the voluntary or involuntary
liquidation, sale, or other disposition of all or substantially all of the
assets of the Company, or any receivership, insolvency, bankruptcy,
reorganization, or other similar proceedings affecting the Company or any of its
assets, or (f) the merger or consolidation of the Company or any Guarantor with
any other person, or (g) the release or discharge of the Company or any
Guarantor from the performance or observance of any agreement, covenant, term,
or condition contained in any of the Operative Documents by operation of law, or
(h) any other cause, whether similar or dissimilar to the foregoing, which would
release, affect, or impair the obligations, covenants, agreements, or duties of
the Guarantors hereunder.
4. Representations and Warranties. Each Guarantor represents and
warrants that (a) the execution, delivery, and performance by the Guarantor of
this Guaranty are within its corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, and do not contravene, or constitute a default
under, any provision of applicable law or regulation or of the articles of
incorporation or other charter documents or bylaws of the Guarantor, or of any
agreement, judgment, injunction, order, decree, or other instrument binding upon
the Guarantor or its property; (b) this Guaranty constitutes a legal, valid, and
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
relating to creditors' rights, and except that the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
equitable defenses and to the discretion of the court in which any proceedings
may be brought; and (c) as of the date hereof, each of the following is true and
correct for the Guarantor: (i) the fair saleable value and the fair valuation of
the Guarantor's property is greater than the total amount of its liabilities
(including contingent liabilities) and greater than the amount that would be
required to pay its probable aggregate liability on its existing debts as they
become absolute and matured, (ii) the Guarantor's capital is not unreasonably
small in relation to its current and/or contemplated business or other
undertaken transactions, and (iii) the Guarantor does not intend to incur, or
believe that it will incur, debts beyond its ability to pay such debts as they
become due.
5. Common Enterprise. The Guarantors represent to the Lenders that the
Company and the Guarantors are engaged as an integrated group in the business of
manufacturing and distributing over-the-counter pharmaceutical and nutritional
products for the store and value brand markets; that the integrated operation
requires financing on such a basis that credit
-3-
4
supplied to the Company can be made available from time to time to the Company
and the Guarantors, as required for the continued successful operation of the
Guarantors and the integrated operation as a whole, and that the Guarantors have
requested the Lenders to continue to lend and to make credit available to the
Company and the Guarantors, with the Guarantors expecting to derive benefit,
directly or indirectly, from the loans and other credit extended by the Lenders
to the Company, both in each Guarantor's separate capacity and as a member of
the integrated group, inasmuch as the successful operation and condition of the
Guarantors is dependent upon the continued successful performance of the
functions of the integrated group as a whole.
6. Amendments, Etc. This Guaranty may be amended from time to time and
any provision hereof may be waived in accordance with the requirements of the
Credit Agreement. No such amendment or waiver of any provision of this Guaranty
nor consent to any departure by the Guarantors therefrom shall in any event be
effective unless the same shall be in writing and signed by the Majority Lenders
or all of the Lenders, as the case may be, and to the extent any rights or
duties of the Agent may be affected, the Agent, and then such amendment, waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
7. Notices. All notices, demands, requests, consents, and other
communications hereunder shall be in writing and made in accordance with Section
10.2(a) of the Credit Agreement.
8. Conduct No Waiver; Remedies Cumulative. The obligations of the
Guarantors under this Guaranty are continuing obligations and a separate and
independent cause of action shall arise in respect of each enforcement hereunder
and default hereunder or under the Credit Agreement. No course of dealing on the
part of any Lender or the Agent, nor any delay or failure on the part of any
Lender in exercising any right, power, or privilege hereunder shall operate as a
waiver of such right, power, or privilege or otherwise prejudice the rights and
remedies of the Lenders and the Agent hereunder; nor shall any single or partial
exercise thereof preclude any further exercise thereof or the exercise of any
other right, power or privilege. No right or remedy conferred upon or reserved
to the Lenders or the Agent under this Guaranty is intended to be exclusive of
any other right or remedy, and every right and remedy shall be cumulative and in
addition to every other right or remedy given hereunder or now or hereafter
existing under any applicable law. Every right and remedy given by this Guaranty
or by applicable law to the Lenders or the Agent may be exercised from time to
time and as often as may be deemed expedient by them.
9. Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations, and warranties of the Guarantors made
herein or in any certificate or other document delivered pursuant hereto shall
be deemed to be material and to have been relied upon by the Lenders and the
Agent, notwithstanding any investigation heretofore or hereafter made by any
Lenders or the Agent or on their behalf.
10. Successors and Assigns. The rights and remedies of the Lenders
hereunder shall inure to the benefit of the Lenders and the Agent and their
respective successors and assigns, and
-4-
5
the duties and obligations of the Guarantors hereunder shall be binding upon the
Guarantors and their successors and assigns.
11. Governing Law; Consent to Jurisdiction. This Guaranty is a contract
made under, and the rights and obligations of the parties hereunder shall be
governed by and construed in accordance with, the laws of the State of Michigan
applicable to contracts to be made and to be performed entirely within such
State. The Guarantors further agree that any legal action or proceeding brought
with respect to this Guaranty or the transactions contemplated hereby may be
brought in any court of the State of Michigan, or any court of the United States
of America sitting in Michigan, and the Guarantors irrevocably submit to and
accept generally and unconditionally the jurisdiction of those courts with
respect to their persons and property.
12. Definitions; Headings. Terms used but not defined herein shall have
the respective meanings ascribed thereto in the Credit Agreement. The headings
of the various subdivisions hereof are for convenience of reference only and
shall in no way modify any of the terms or provisions hereof.
13. Integration; Severability; Enforceability. (a) This Guaranty and
the Credit Agreement (including any documents specified therein for execution by
the Guarantors) embody the entire agreement and understanding among the
Guarantors, the Lenders, and the Agent, and supersede all prior agreements and
understandings, relating to the subject matter hereof. If any one or more
provisions of this Guaranty should be invalid, illegal, or unenforceable in any
respect, the validity, legality, and enforceability of the remaining provisions
contained herein shall not in any way be affected, impaired, prejudiced or
disturbed thereby. If at any time any portion of the obligations of the
Guarantors under this Guaranty shall be determined by a court of competent
jurisdiction to be invalid, unenforceable, or avoidable, the remaining portion
of the Guarantors' obligations under this Guaranty shall not in any way be
affected, impaired, prejudiced, or disturbed thereby and shall remain valid and
enforceable to the fullest extent permitted by applicable law.
(b) It is the intent of each Guarantor, the Agent, and the
Lenders that each Guarantor's maximum Guaranteed Obligations shall be in, but
not in excess of:
(i) in a case or proceeding commenced by or against
such Guarantor under the Bankruptcy Code on or within one year from the date on
which any of the Guaranteed Obligations are incurred, the maximum amount that
would not otherwise cause the Guaranteed Obligations (or any other obligations
of such Guarantor to the Agent and the Lenders) to be avoidable or unenforceable
against such Guarantor under (A) Section 548 of the Bankruptcy Code or (B) any
state fraudulent transfer or fraudulent conveyance act or statute applied in
such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or
(ii) in a case or proceeding commenced by or against
such Guarantor under the Bankruptcy Code after one year from the date on which
any of the Guaranteed Obligations are incurred, the maximum amount that would
not otherwise cause the Guaranteed Obligations (or any other obligations of such
Guarantor to the Agent and the Lenders) to be avoidable or unenforceable against
such Guarantor under any state fraudulent transfer or
-5-
6
fraudulent conveyance act or statute applied in any such case or proceeding by
virtue of Section 544 of the Bankruptcy Code; or
(iii) in a case or proceeding commenced by or against
such Guarantor under any law, statute, or regulation other than the Bankruptcy
Code (including without limitation any other bankruptcy, reorganization,
arrangement, moratorium, readjustment of debt, dissolution, liquidation, or
similar debtor relief laws), the maximum amount that would not otherwise cause
the Guaranteed Obligations (or any other obligations of such Guarantor to the
Agent and the Lenders) to be avoidable or unenforceable against such Guarantor
under such law, statute, or regulation, including without limitation any state
fraudulent transfer or fraudulent conveyance act or statute applied in any such
case or proceeding.
14. Reinstatement. This Guaranty shall remain in full force and effect
and continue to be effective in the event any petition is filed by or against
the Company or any Guarantor for liquidation or reorganization, in the event the
Company or any Guarantor becomes insolvent or makes an assignment for the
benefit of creditors, or in the event a receiver or trustee is appointed for all
or any significant part of the Company's or any Guarantor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Guaranteed Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by the Lenders or the Agent, whether as a "voidable
preference", "fraudulent conveyance", or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored, or returned, the Guaranteed
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored, or returned.
15. Subrogation and Contribution. (a) If any Guarantor makes a payment
in respect of the Guaranteed Obligations, it shall be subrogated to the rights
of the payee against the Company with respect to such payment and shall have the
rights of contribution set forth below against all other Guarantors (as the term
"Guarantors" is defined in the Credit Agreement, which includes all current
Guarantors of the Guaranteed Obligations and any person at any time becoming a
Guarantor of the Guaranteed Obligations), and each Guarantor agrees that all
other Guarantors shall have the rights of contribution against it set forth
below; provided, that no Guarantor shall enforce its rights to any payment by
way of subrogation or by exercising its right of contribution until all of the
Guaranteed Obligations shall have been paid in full and such payment is not
subject to any possibility of revocation or rescission and the Credit Agreement
has expired or been terminated. If any Guarantor makes a payment in respect of
the Guaranteed Obligations that is smaller in proportion to its Payment
Obligation (as defined below) than such payments by the other Guarantors are in
proportion to the amounts of their respective Payment Obligations, such
Guarantor shall, when permitted by the preceding sentence, pay to the other
Guarantors an amount such that the net payments made by the Guarantors in
respect of the Guaranteed Obligations shall be shared among the Guarantors pro
rata in proportion to their respective Payment Obligations. If any Guarantor
receives any payment by way of subrogation that is greater in proportion to the
amount of its Payment Obligation than the payments received by the other
Guarantors are in proportion to the amounts of their respective Payment
Obligations, such Guarantor shall, when permitted by the second preceding
sentence, pay to the other Guarantors an amount such that the subrogation
payments received by the Guarantors shall
-6-
7
be shared among the Guarantors pro rata in proportion to their respective
Payment Obligations. Notwithstanding anything to the contrary contained in this
paragraph or in this Guaranty, no Guarantor shall have the right of subrogation
or contribution whatsoever, whether arising under this Guaranty or otherwise,
and no liability or obligation shall accrue pursuant to any such rights or shall
be paid or shall be deemed owing, until all of the Guaranteed Obligations shall
be paid in full and not be subject to any possibility of revocation or
rescission and the Credit Agreement has expired or been terminated, and, upon
any enforcement of this Guaranty, all present and future indebtedness,
obligations and liabilities of the Company to any Guarantor shall be fully
junior and subordinate in right and priority of payment to the Guaranteed
Obligations.
(b) For purposes hereof, the "Payment Obligation" of each
Guarantor shall be the sum of (i) the aggregate proceeds of the Guaranteed
Obligations received by such Guarantor plus (ii) the product of (A) the
aggregate Guaranteed Obligations remaining unpaid on the date such Guaranteed
Obligations become due and payable in full, whether by stated maturity,
acceleration, or otherwise, reduced by the amount of such Guaranteed Obligations
attributed to such Guarantors pursuant to clause (i) above, times (B) a
fraction, the numerator of which is such Guarantor's net worth on the effective
date of this Guaranty (determined as of the end of the immediately preceding
fiscal reporting period of such Guarantor), and the denominator of which is the
aggregate net worth of all Guarantors on such effective date.
16. Joint and Several Obligations. The obligations of the Guarantors
hereunder and any other parties now or hereafter guranteeing any of the
Guaranteed Obligations shall be joint and several, and the Guarantors shall be
liable for all of the Guaranteed Obligations, regardless of any additional
guarantors, and the Lenders and the Agent shall have the right, in their sole
discretion, to pursue their remedies against any other guarantor, whether now or
hereafter in existence, or against the Guarantors and any other guarantors
separately or against any two or more jointly, or against some separately and
some jointly.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered as of the day and year first above written.
X. XXXXXXX COMPANY
By:
----------------------------
Its:
------------------------
XXXXXXX COMPANY OF SOUTH CAROLINA,
INC.
By:
----------------------------
Its:
------------------------
-7-
