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EXHIBIT 10.46
EXHIBIT C
GUARANTY
This GUARANTY is entered into as of June 29, 1995, by INMAC
CORP., a Delaware corporation ("GUARANTOR"), in favor of and for the benefit of
The Prudential Insurance Company of America, a New Jersey corporation, as the
original purchaser (the "PURCHASER") of the Notes (as hereinafter defined).
RECITALS
A. Inmac, B.V., a corporation organized under the laws of The
Netherlands, and a wholly-owned subsidiary of Guarantor ("COMPANY"), has entered
into that certain Note Agreement dated as of June 29, 1995 with the Purchaser
(said Note Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "NOTE AGREEMENT").
B. The proceeds of the Notes will be advanced either to
Guarantor or to its wholly owned Subsidiaries to repay indebtedness, a
significant portion of which Guarantor has guaranteed, and thus the Guaranteed
Obligations (as hereinafter defined) are being incurred for and will inure to
the benefit of Guarantor (which benefits are hereby acknowledged).
C. It is a condition precedent to the purchase of the Notes
under the Note Agreement that Company's obligations thereunder be guaranteed by
Guarantor.
D. Guarantor is willing irrevocably and unconditionally to
guaranty such obligations of Company.
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 the Purchaser to enter into the Note
Agreement and to purchase the Notes thereunder, Guarantor hereby agrees as
follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. Capitalized terms defined in the Note
Agreement and not otherwise defined herein shall have the respective meanings
assigned to them in the Note Agreement. As used in this Guaranty, the following
terms shall have the following meanings unless the context otherwise requires:
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"AFFILIATE" shall mean any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with, the
Company, except a Subsidiary. A Person shall be deemed to control a corporation
if such Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract or otherwise.
"ANNUAL PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" shall
mean, for any four consecutive fiscal quarter period, the sum of the Percentages
of Earnings Transferred attributable to each asset Transferred during such
period.
"ANNUAL PERCENTAGE OF TANGIBLE ASSETS TRANSFERRED" shall mean,
for any four consecutive fiscal quarter period, the sum of the Percentages of
Tangible Assets Transferred attributable to each asset Transferred during such
period.
"BANKRUPTCY LAW" shall have the meaning specified in clause
(xix) of paragraph 7A of the Note Agreement.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental
obligation which, under GAAP, is or will be required to be capitalized on the
books of Guarantor or any Subsidiary, taken at the amount thereof accounted for
as indebtedness (net of interest expense) in accordance with such principles.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et. seq.), as amended,
and the regulations promulgated thereunder.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"COMPANY" shall mean Inmac, B.V., a corporation organized
under the laws of the Netherlands and a wholly-owned Subsidiary.
"CONFIDENTIALITY AGREEMENT" shall mean an agreement in
substantially the form of Exhibit G to the Note Agreement.
"CONSOLIDATED," when used to modify any accounting or defined
term, shall mean such item or defined term as it relates to Guarantor and its
Subsidiaries on a consolidated basis.
"CONSOLIDATED INTEREST EXPENSE" shall mean all consolidated
interest expense of Guarantor and its Subsidiaries, including all commissions,
discounts or
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related amortization and other fees and charges with respect to
letters of credit and bankers' acceptance financing and the net costs associated
with interest swap obligations, amortization of debt expense and original issue
discount and the interest portion of any deferred payment obligation, calculated
in accordance with the effective interest method; provided, however, that
Consolidated Interest Expense shall not include the structuring fee payable
pursuant to the Note Agreement or any legal or agents' fees and expenses payable
in connection with the issuance of the Notes.
"CONSOLIDATED NET EARNINGS" shall mean, as to any fiscal
period, consolidated gross revenues of Guarantor and its Subsidiaries less all
costs, rebates, returns, allowances, discounts, cost of goods sold, selling,
general, administrative and other expenses, and other proper costs, charges and
expenses (including current income taxes and changes in deferred income taxes,
provisions for taxes on unremitted foreign earnings that are included in gross
revenues and current additions to reserves) for such fiscal period. Consolidated
Net Earnings shall not include (i) extraordinary gains; (ii) gains or losses
resulting from the sale or other disposition of capital assets; (iii)
undistributed positive earnings of any Person that is not a Subsidiary; (iv)
gains arising from changes in accounting principles; (v) gains arising from the
write-up of assets; (vi) any undistributed positive earnings of any Subsidiary,
to the extent that the declaration or payment of dividends or other share
distributions, share repurchases or redemptions or repayment of intracompany
loans or advances by such Subsidiary is restricted by charter document,
agreement, law or otherwise; (vii) any gain from the collection of proceeds from
insurance policies or litigation settlements; (viii) any positive earnings of
any Person acquired by Guarantor or a Subsidiary prior to the effective date of
such acquisition; and (ix) gains or losses from the acquisition of securities or
the retirement or extinguishment of Debt.
"CONSOLIDATED TANGIBLE ASSETS" shall mean the gross book value
of all assets (including assets held under Capitalized Lease Obligations) of
Guarantor and its Subsidiaries on a consolidated basis, net of (i) the net book
value of all Intangibles; (ii) all reserves relating to such assets; and (iii)
any write-up since July 30, 1994 in the carrying values of such assets, all
determined in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, with respect to
any Person, the Consolidated Tangible Assets of Guarantor and its Subsidiaries
on a consolidated basis, less (i) all Consolidated liabilities, (ii) to the
extent not already deducted, Consolidated Debt (including Debt of the type
specified in clauses (iii), (iv) or (v) of the definition of Debt); and (iii)
any surplus adjustments attributed to cumulative translation adjustments.
"CREDIT FACILITIES" shall mean the Dutch Credit Facility and
the U.S. Credit Facility.
"CUMULATIVE PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" shall
mean, at the time of determination thereof, the sum of the Percentages of
Earnings
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Capacity Transferred attributable to each asset Transferred from and
after the date hereof.
"CUMULATIVE PERCENTAGE OF TANGIBLE ASSETS TRANSFERRED" shall
mean, at the time of determination thereof, the sum of the Percentages of
Tangible Assets Transferred attributable to each asset Transferred from and
after the date hereof.
"DEBT" shall mean (i) any obligation for borrowed money,
including any obligation evidenced by notes payable, commercial paper, bonds,
debentures or similar written instruments; conditional sales contracts; and
drafts accepted representing extensions of credit (other than for trade and tax
payables, deferred taxes and operating leases); (ii) Capitalized Lease
Obligations; (iii) obligations of a Person other than Guarantor or a Subsidiary
secured by a Lien on, or payable out of the proceeds or production from,
property of Guarantor or any Subsidiary whether or not such obligation is
expressly assumed by Guarantor or such Subsidiary; (iv) Debt of any partnership
or joint venture of which Guarantor or any of its Subsidiaries is a general
partner or joint venturer that is not expressly non-recourse with respect to
Guarantor or Subsidiary; (v) Guarantees of any of the foregoing and (vi) any
modification, extension or renewal of any of the foregoing.
"DOLLAR" or "$" shall mean dollars of the United States, being
the lawful currency of that country.
"DUTCH CREDIT FACILITY" means the revolving credit facility of
the Company and certain Subsidiary Guarantors with ABN Amro Bank, N.V. as agent
for a group of banks contemplated by the commitment letter referred to in
paragraph 5L of the Note Agreement or any replacement or successor facility with
a minimum aggregate borrowing availability of $10,000,000.
"ENVIRONMENTAL AND SAFETY LAWS" shall mean all Federal, state
and local laws, regulations and ordinances relating to the discharge, handling,
disposition or treatment of Hazardous Materials and other substances or the
protection of the environment or of employee health and safety, including
without limitation, CERCLA, the Hazardous Materials Transportation Act (49
U.S.C. Section 1801 et. seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 7401 et. seq.), the Clean Air Act (42 U.S.C. Section 401 et.
seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et. seq.), the
Occupational Safety and Health Act (29 U.S.C. Section 651 et. seq.) and the
Emergency Planning and Community Right-To-Know Act (42 U.S.C. Section 11001 et.
seq.), each as the same may be amended and supplemented.
"ENVIRONMENTAL LIABILITIES AND COSTS" shall mean, as to any
Person, all liabilities, obligations, responsibilities, remedial actions,
losses, damages, punitive damages, consequential damages, treble damages,
contribution, cost recovery, costs
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and expenses (including all fees, disbursements and expenses of counsel, expert
and consulting fees, and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand,
by any Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute, permit, order or agreement with any
Federal, state or local governmental authority or other Person, arising from
environmental, health or safety conditions, or the release or threatened release
of a contaminant, pollutant or Hazardous Material into the environment,
resulting from the operations of such person or its subsidiaries, or breach of
any Environmental and Safety Law or for which such Person or its subsidiaries is
otherwise liable or responsible.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA AFFILIATE" shall mean each person (as defined in
Section 3(9) of ERISA) which together with Guarantor or a Subsidiary would be
deemed to be a "single employer" (i) within the meaning of Section 414 (b), (c),
(m) or (o) of the Code or (ii) as a result of Guarantor or a Subsidiary being or
having been a general partner of such person.
"EVENT OF DEFAULT" shall mean any of the events specified in
paragraph 7A of the Note Agreement, provided that there has been satisfied any
requirement in connection with such event for the giving of notice, or the lapse
of time, or the happening of any further condition, event or act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"EXEMPT SUBSIDIARY" shall mean (i) Inmac, Disc, a corporation
organized under the laws of the State of California; (ii) Inmac, S.A. de C.V., a
corporation organized under the laws of Mexico; (iii) Inmac S.p.A., a
corporation organized under the laws of Italy; (iv) Inmac, Inc., a corporation
organized under the laws of Canada, and (v) Subsidiaries formed and designated
as Exempt Subsidiaries after the date of closing; provided that the amount of
assets contributed or transferred to such post-closing Subsidiary shall be
treated as a Transfer of assets for purposes of computing compliance with
Section 5.9(v) hereof.
"FIXED CHARGES" shall mean the sum of (i) Consolidated
Interest Expense minus Consolidated interest income plus (ii) Consolidated
operating lease payments minus rental income actually received from the sublease
of real property that is then under lease.
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"FOREIGN PENSION PLAN" means any plan, fund (including,
without limitation, any superannuation fund) or other similar program
established or maintained outside the United States of America by Guarantor or
any one or more of its Subsidiaries primarily for the benefit of employees of
Guarantor or such Subsidiaries residing outside the United States of America,
which plan, fund or other similar program provides, or results in, retirement
income, a deferral of income in contemplation of retirement or payments to be
made upon termination of employment, and which plan is not subject to ERISA or
the Code.
"GAAP" shall mean generally accepted accounting principles, as
in effect in the United States from time to time.
"GOOD FAITH CONTEST" shall mean, with respect to any tax,
assessment, Lien, obligation, claim, liability, judgment, injunction, award,
decree, order, law, regulation, statute or similar item, any challenge or
contest thereof by appropriate proceedings timely initiated in good faith by the
Person subject thereto for which adequate reserves therefor have been taken in
accordance with GAAP.
"GUARANTEE" shall mean, as to any Person, any guarantee or
endorsement by such Person of any obligations, or such Person's contingent
liability for any obligations, including an endorsement of such obligation or an
agreement by such Person to purchase or otherwise acquire securities of another
Person, to provide funds for capital contributions or for the payment or
discharge of another Person's obligation, to maintain the solvency, net worth or
other financial condition of another Person, or to make payment for products or
services regardless of whether such products or services are actually used,
delivered or provided, if, in any such case, the intent or effect of such
agreement is to provide assurance that such obligation will be paid or
discharged or that the holders of such obligation will be protected against any
loss in respect thereof.
"GUARANTEED OBLIGATIONS" has the meaning assigned to that term
in subsection 2.1.
"GUARANTY" means this Guaranty dated as of June 29, 1995, as
it may be amended, supplemented or otherwise modified from time to time.
"HAZARDOUS MATERIALS" shall mean (i) any material or substance
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "toxic substances" or any other formulations
intended to define, list or classify substances by reason of their deleterious
properties, (ii) any oil, petroleum or petroleum derived substance, (iii) any
flammable substances or explosives, (iv) any radio active materials, (v)
asbestos in any form, (vi) electrical equipment that contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of 50
parts per million, (vii) pesticides or (viii) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated
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by any governmental agency or authority or which may or could pose a hazard to
the health and safety of persons in the vicinity thereof.
"INCLUDING" shall mean, unless the context clearly requires
otherwise, "including without limitation."
"INSPECTING HOLDER" shall mean (i) the Purchaser and (ii) at
any time prior to the occurrence of an Event of Default, any other holder of at
least 25% of the principal amount of the Notes outstanding at such time
(determined in accordance with paragraph 11V of the Note Agreement) and at any
time after the occurrence of an Event of Default, any other holder of a Note,
regardless of amount.
"INTANGIBLES" shall mean any patents, trademarks, copyrights,
trade names, goodwill (including any amounts, however designated, representing
the cost of acquisition of business and investments in excess of the book value
thereof), unamortized debt discount and expense, deferred research and
development costs, any write-up of asset value after July 31, 1994, and any
other assets treated as intangible assets under GAAP.
"LIEN" shall mean any mortgage, pledge, priority, security
interest, contractual, statutory or common law set-off, encumbrance, lien
(statutory or otherwise) or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention agreement,
any lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code or any similar law
relating to the creation and perfection of security interests of any
jurisdiction, except for vendor liens and title retention agreements relating to
inventory and incurred in the ordinary course of business; provided (i) no
security agreement or UCC-1 Financing Statement is actually executed, (ii) no
other formal action is taken by the debtor in furtherance of creating a
perfected lien, and (iii) in the aggregate, such vendor liens and title
retention contracts do not exceed at any time 25% of Consolidated inventory
(determined as of the end of the fiscal quarter immediately preceding the date
of such determination and net of returns, rebates, allowances and similar
items)) or any other type of preferential contractual arrangement (including
written set-off arrangements) for the purpose, or having the effect, of
protecting a creditor against loss or securing the payment or performance of an
obligation.
"MATERIAL ADVERSE EFFECT" shall mean (i) a material adverse
effect on the business, assets, operations, prospects or condition, financial or
otherwise, of Guarantor and its Subsidiaries, taken as a whole, (ii) material
impairment of the ability of Guarantor to perform any of its obligations
hereunder or under the Warrants, (iii) material impairment of the enforceability
or the rights of, or the benefits available to, the beneficiaries of this
Guaranty, or holders of the Warrants or the holders of the Notes, or (iv)
material impairment of the ability of the Company to perform under the Note
Agreement or the Notes.
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"MOODY'S" shall mean Xxxxx'x Investors Services, Inc.,
including the NCO/Moody's Commercial Division, or any successor Person.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NET PROCEEDS" shall mean the net cash proceeds from the sale
or other issuance at fair market value of any Qualified Stock, other than from
the sale or issuance of Qualified Stock pursuant to employee stock option or
other stock-based employee incentive plans or programs, net of all underwriters'
discounts and commissions, other marketing and selling expenses, attorneys' fees
and expenses and other expenses in connection with such issuance.
"NOTE AGREEMENT" shall mean the Note Agreement dated June 29,
1995 between the Company, as issuer of the Notes, and the Purchaser.
"NOTES" shall mean the the two (2) series of Senior Guaranteed
Notes due 2001 issued by Company pursuant to the Note Agreement.
"NOTE DOCUMENTS" shall mean (i) the Note Agreement; (ii) the
Subsidiary Guaranty; (iii) this Guaranty; (iv) the Notes; (v) the Warrants; and
(vi) any other agreement, instrument, certificate or document executed and
delivered in connection with any Note Document or this Guaranty.
"NOTEHOLDERS" shall mean the Purchaser and any of their
Transferees.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the
name of Guarantor by a Responsible Officer.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"PAYMENT IN FULL", "PAID IN FULL" or any similar term means
payment in full of the Guaranteed Obligations including all principal, interest,
costs, fees and expenses (including legal fees and expenses) of holders of the
Notes as required under the Note Documents.
"PERCENTAGE OF EARNINGS CAPACITY TRANSFERRED" shall mean, with
respect to each asset Transferred pursuant to clause (v) of Section 5.9, the
ratio (expressed as a percentage) of (i) aggregate Consolidated Net Earnings
produced by, or otherwise attributable to, such asset during the 36 month period
most recently ended prior to the effective date of such Transfer to (ii)
Consolidated Net Earnings for such 36 month period.
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"PERCENTAGE OF TANGIBLE ASSETS TRANSFERRED" shall mean, with
respect to each asset Transferred pursuant to clause (v) of Section 5.9, the
ratio (expressed as a percentage) of (i) the greater of such asset's fair market
value or net book value on the date of such Transfer) to (ii) Consolidated
Tangible Assets (determined as of the last day of the fiscal quarter immediately
preceding the date of such Transfer).
"PERSON" shall mean and include an individual, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"PLAN" shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of) Guarantor or a Subsidiary or
an ERISA Affiliate, and each such plan for the five year period immediately
following the latest date on which Guarantor, or a Subsidiary or an ERISA
Affiliate maintained, contributed to or had an obligation to contribute to such
plan.
"PROHIBITED TRANSACTION" shall mean any transaction described
in section 406 of ERISA which is not exempt by reason of section 408 of ERISA or
the transitional rules set forth in section 414(c) of ERISA and any transaction
described in section 4975(c) of the Code which is not exempt by reason of
section 4975(c)(2) or section 4975(d) of the Code, or the transitional rules of
section 2003(c) of ERISA.
"PROPERTY" shall mean all real property owned or leased by
Guarantor or any of its Subsidiaries, and all personal property located thereon
or used or consumed in the operation of the business conducted thereat.
"PURCHASER" shall mean The Prudential Insurance Company of
America and its successors and assigns.
"QUALIFIED STOCK" shall mean Guarantor's common stock or any
other class of Company capital stock that does not have any of the following
rights or features: (i) fixed mandatory or accruing dividends or similar
obligations, (ii) redemption or repurchase (or establishment of a sinking fund
for such purpose) of such capital stock prior to the final maturity of the
Notes, whether mandatory, scheduled or at the option of the holder thereof or
(iii) convertibility or exchangability into securities of the type described in
clauses (i) or (ii) above. Qualified Stock does not include capital stock issued
pursuant to exercise of employee stock options or other similar instruments or
securities issued under stock-based incentive plans.
"REPORTABLE EVENT" shall mean an event described in Section
4043 (c) of ERISA with respect to a Plan other than those events as to which the
30-day notice period is waived under subsection .13, .14, .16, .18, .19 or .20
of PBGC Regulation Section 2615.
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"REQUIRED HOLDER(S)" shall mean the holder or holders of at
least 66-2/3% of the aggregate principal amount of the Notes from time to time
outstanding (determined in accordance with paragraph 11V of the Note Agreement).
"RESPONSIBLE OFFICER" shall mean the chief executive officer,
chief operating officer, chief financial officer or chief accounting officer of
the Company, the Guarantor or any Subsidiary Guarantor, as the case may be, or
any other officer or director of the Company, the Guarantor or any Subsidiary
Guarantor, as the case may be, involved principally in its financial
administration or its controllership functions.
"RESTRICTED PAYMENTS" shall mean, with respect to any Person
(i) any dividend payments or other distributions of cash, assets, properties,
obligations or securities on account of any shares of any class of such Person's
capital stock (other than stock dividends); and (ii) any repurchases,
redemptions, retirement or other acquisitions of such Person's capital stock or
the establishment of any sinking fund or other fund for any such purpose;
provided, however, that the foregoing items, to the extent paid to the Company,
shall not be deemed Restricted Payments.
"S&P" shall mean Standard & Poor's Corporation, or any
successor entity.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SHAREHOLDER" shall mean any Person (other than any
Noteholder) who owns, either individually or together with all other Persons to
whom such Person is related by blood, adoption or marriage or who is an
Affiliate of such Person, 5% or more of any class of Guarantor's capital stock.
For purposes of making this computation, all warrants, rights, options,
convertible securities and other rights to purchase or acquire a class of
Company capital stock held by such holder (other than the holders of the
Warrants) shall be deemed to be exercised.
"SIGNIFICANT HOLDER" shall mean (i) the Purchaser, so long as
it shall hold any Note, or (ii) any other holder of at least $2,500,000 original
principal amount of Notes (or the equivalent in Dutch Guilders, determined in
accordance with paragraph 11V of the Note Agreement).
"SUBSIDIARY" shall mean, as to any Person (i) any corporation,
at least 80% of the total combined voting power of all classes of Voting Stock
of which shall, at the time as of which any determination is being made, be
owned by such Person, either directly or through its other Subsidiaries and (ii)
any partnership or other entity in which such Person or any of its Subsidiaries
holds more than a 80% equity interest and controls the management of such
entity. Unless otherwise clearly specified, "Subsidiaries" of Guarantor shall
include Company.
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"SUBSIDIARY GUARANTORS" shall mean those Subsidiaries who, at
the date of such determination, have guaranteed the Notes pursuant to the
Subsidiary Guaranty.
"SUBSIDIARY GUARANTY" shall mean the guaranty dated June 29,
1995 by Inmac S.A., a French corporation, Inmac Holdings Limited, a limited
liability company organized under the laws of the United Kingdom and registered
in England and Wales, Inmac (U.K.) Limited, a limited liability company
organized under the laws of the United Kingdom and registered in England and
Wales, Inmac aktiebolag, a corporation organized under the laws of Sweden, Inmac
Gesellschatt mit beschrankter Haftung, a corporation organized under the laws of
Germany, in favor of the holders of the Notes and any other Subsidiary who
becomes a party to the Subsidiary Guaranty subsequent to the date hereof
pursuant to paragraph 5M of the Note Agreement.
"TRANSFER" shall mean, with respect to any property or other
asset of a Person, the sale, lease, disposition, exchange or other transfer
thereof.
"TRANSFEREE" shall mean any direct or indirect transferee or
assignee of all or any part of any Note purchased by any Purchaser under the
Note Agreement.
"UNFUNDED CURRENT LIABILITY" of any Plan means the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"U.S. CREDIT FACILITY" shall mean the credit facility of the
Guarantor with ABN Amro Bank, N.V., as agent for a group of banks or any
replacement or successor facility with a maximum aggregate borrowing
availability of $5,000,000.
"VOTING STOCK" shall mean, with respect to any company, any
shares of such company whose holders are entitled under ordinary circumstances
to vote for the election of directors of such company (irrespective of whether
at the time shares of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"WARRANTS" shall mean the detachable warrants to originally
purchase 175,000 shares of Guarantor's common stock issued concurrently with the
Notes.
Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all determinations with respect to accounting
matters hereunder shall be made, and all unaudited financial statements and
certificates and reports as to
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financial matters required to be furnished hereunder shall be prepared, in
accordance with GAAP, applied on a basis consistent with the most recent audited
consolidated financial statements of the Company and its Subsidiaries delivered
pursuant to Section 4.1(i) or (ii) or, if no such statements have been so
delivered, the most recent audited financial statements referred to in Section
3.2. Any reference herein to any specific citation, section or form of law,
statute, rule or regulation shall refer to such new, replacement or analogous
citation, section or form should citation, section or form be modified, amended
or replaced.
1.2 INTERPRETATION.
(a) References to "Sections" and "subsections" shall be to
Sections and subsections, respectively, of this Guaranty unless
otherwise specifically provided. Except as otherwise specified herein,
all accounting terms not otherwise defined herein shall have the
meanings assigned to them under GAAP.
(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 Note Agreement, the terms, conditions
and provisions of this Guaranty shall prevail.
SECTION 2. THE GUARANTY
2.1 GUARANTY OF THE GUARANTEED OBLIGATIONS. Subject to the provisions
of subsection 2.2, Guarantor hereby irrevocably and unconditionally guarantees,
as primary obligor and not merely as surety, the due and punctual payment in
full of all Guaranteed 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 any
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section
362(a)). The term "GUARANTEED OBLIGATIONS" is used herein in its most
comprehensive sense and includes:
(a) any and all liabilities or other obligations of Company
and, to the extent applicable, any Subsidiary Guarantor, in respect of
or under the Notes, including principal of, interest on and Yield
Maintenance Amounts in respect of, the Notes (and in the currencies in
which such Notes may be denominated), or any other Note Document,
including legal fees and expenses of counsel, allocated costs of
internal counsel, indemnities, and other fees and costs, whether such
liabilities or other obligations be absolute or contingent, liquidated
or unliquidated, due or not due, or in existence on the date hereof or
arising hereafter (including pursuant to any renewal, extension or
modification of any Note or Note Document); and
(b) those expenses set forth in subsection 2.9 hereof.
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2.2 CONTRIBUTION BY GUARANTOR. Guarantor under this Guaranty, and each
guarantor under other guaranties, if any, relating to the Note Agreement,
including the Subsidiary Guaranty (the "RELATED GUARANTIES") which contain a
contribution provision similar to that set forth in this subsection 2.2,
together desire to allocate among themselves (collectively, the "CONTRIBUTING
GUARANTORS"), in a fair and equitable manner, their obligations arising under
this Guaranty and the Related Guaranties. Accordingly, in the event any payment
or distribution is made on any date by Guarantor under this Guaranty or a
guarantor under a Related 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 Fair Share Contribution Amount (as defined below) with respect to such
Contributing Guarantor to (y) the aggregate of the Fair Share Contribution
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 Related Guaranties 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. "FAIR SHARE CONTRIBUTION 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/or the Related Guaranties, as applicable, that would not render its
obligations hereunder or thereunder 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; provided that, solely for
purposes of calculating the "Fair Share Contribution Amount" with respect to any
Contributing Guarantor for purposes of this subsection 2.2, 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 any similar provision contained in a Related
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/or the Related Guaranties (including
in respect of this subsection 2.2 or any similar provision contained in a
Related 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 or any similar provision
contained in a Related Guaranty. The amounts payable as contributions hereunder
and under similar provisions in the
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Related Guaranties 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 or any similar provision contained in a Related Guaranty
shall not be construed in any way to limit the liability of any Contributing
Guarantor hereunder or under a Related Guaranty. Each Contributing Guarantor
under a Related Guaranty is a third party beneficiary to the contribution
agreement set forth in this subsection 2.2. In determining the Fair Share
Contribution Amount of the Contributing Guarantors, the Contributing Guarantors
have agreed amongst themselves, and by their acceptance of this Guaranty, each
holder of the Notes agrees, that notwithstanding the foregoing provisions of
this subsection 2.2 any demand for payment of any Guaranteed Obligation by
Guarantor under this Guaranty may be satisfied by payment(s) strictly in
accordance with such request by any Subsidiary Guarantor in accordance with the
terms of the Subsidiary Guaranty; provided that such allocation amongst the
Contributing Guarantors shall in no manner limit or restrict the ability and
right of the Noteholders to make claims under the Related Guarantees or limit
the liability of the Contributing Guarantors under the Related Guarantees and is
intended solely as a limit amongst the Contributing Guarantors on the allocation
mechanism described in this subsection 2.2
2.3 PAYMENT BY GUARANTOR; APPLICATION OF PAYMENTS. Subject to the
provisions of subsection 2.2, Guarantor hereby agrees, in furtherance of the
foregoing and not in limitation of any other right which any Person may have at
law or in equity against Guarantor by virtue hereof, that upon the failure of
Company or a Subsidiary Guarantor to pay any of the Guaranteed 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. Section 362 (a)), Guarantor will upon
demand of any Noteholder pay, or cause to be paid, in cash, to such holder on a
ratable basis, an amount equal to the sum of the unpaid principal amount of all
Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on
such Guaranteed Obligations (including interest which, but for the filing of a
petition in bankruptcy with respect to Company or a Subsidiary Guarantor, would
have accrued on such Guaranteed Obligations, whether or not a claim is allowed
against such debtor for such interest in any such bankruptcy proceeding) and all
other Guaranteed Obligations then owed to/or Noteholders as aforesaid. All such
payments shall be applied promptly from time to time:
First, to the payment of the costs and expenses of any
collection, enforcement or other realization under this Guaranty,
including reasonable compensation to, and all expenses, liabilities and
advances made or incurred by, any agent or counsel acting on behalf of
the Noteholders in connection therewith;
Second, to the payment of all other Guaranteed Obligations;
and
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Third, after payment in full of all Guaranteed Obligations, to
the payment to Guarantor, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct, of any surplus then remaining
from such payments.
2.4 LIABILITY OF GUARANTOR ABSOLUTE. 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
Guaranteed Obligations. In furtherance of the foregoing and without limiting the
generality thereof, Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not
of collectibility.
(b) Any Noteholder may enforce this Guaranty upon the
occurrence of any Event of Default, notwithstanding the existence of
any dispute between Noteholders and Company with respect to the
existence of such Event of Default.
(c) The obligations of Guarantor hereunder are independent of
the respective obligations of Company or the Subsidiary Guarantors
under the Note Documents and a separate action or actions may be
brought and prosecuted against Guarantor whether or not any action is
brought against Company or any Subsidiary Guarantor and whether or not
Company or such Subsidiary Guarantor is joined in any such action or
actions.
(d) Guarantor's payment of a portion, but not all, of the
Guaranteed Obligations shall in no way limit, affect, modify or abridge
Guarantor's liability for any portion of the Guaranteed Obligations
which has not been paid. Without limiting the generality of the
foregoing, if any Noteholder is awarded a judgment in any suit brought
to enforce Guarantor's covenant to pay a portion of the Guaranteed
Obligations, such judgment shall not be deemed to release Guarantor
from its covenant to pay the portion of the Guaranteed Obligations that
is not the subject of such suit.
(e) Any Noteholder, 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 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 Guaranteed Obligations,
(ii) settle, compromise, release or discharge, or accept or refuse any
offer of performance with respect to, or substitutions for, the
Guaranteed
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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
Guaranteed Obligations and take and hold security for the payment of
this Guaranty or the Guaranteed Obligations; (iv) release, surrender,
exchange, substitute, compromise, settle, rescind, waive, alter,
subordinate or modify, with or without consideration, any security for
payment of the Guaranteed Obligations, any other guaranties of the
Guaranteed Obligations, or any other obligation of any Person with
respect to the Guaranteed Obligations; (v) enforce and apply any
security now or hereafter held by or for the benefit of any Noteholder
in respect of this Guaranty or the Guaranteed Obligations and direct
the order or manner of sale thereof, or exercise any other right or
remedy that the Noteholders, or any of them, may have against any such
security, as such Noteholder(s) in its or their sole discretion may
determine consistent with the Note Documents 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 Guarantor against Company or
any security for the Guaranteed Obligations; and (vi) exercise any
other rights available to it under any Note Document.
(f) This Guaranty and the obligations of Guarantor 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 Guaranteed Obligations),
including without limitation the occurrence of any of the following,
whether or not 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 any Note Document, at law, in equity or
otherwise) with respect to the Guaranteed Obligations or any agreement
relating thereto, or with respect to any other guaranty of or security
for the payment of the Guaranteed Obligations; (ii) any rescission,
waiver, amendment or modification of, or any consent to departure from,
any of the terms or provisions (including without limitation provisions
relating to events of default) of any Note Document, or of any other
guaranty or security for the Guaranteed Obligations, in each case
whether or not in accordance with the terms of any Note Document; (iii)
the Guaranteed 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 without instruction
from any source (other than payments received pursuant to any Note
Document or from the proceeds of any security for the Guaranteed
Obligations, except to the extent such security also serves as
collateral for
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indebtedness other than the Guaranteed Obligations) to
the payment of indebtedness other than the Guaranteed Obligations, even
though Noteholders, or any of them, might have elected to apply such
payment to any part or all of the Guaranteed Obligations; (v) any
Noteholder's consent to the change, reorganization or termination of
the corporate structure or existence of Guarantor or any of its
Subsidiaries and to any corresponding restructuring of the Guaranteed
Obligations; (vi) any failure to perfect or continue perfection of a
security interest in any collateral which secures any of the Guaranteed
Obligations; (vii) any defenses, set-offs or counterclaims which
Company or any Subsidiary Guarantor may allege or assert against any
Noteholder in respect of the Guaranteed Obligations, including but not
limited to failure of consideration, breach of warranty, payment,
statute of frauds, statute of limitations, 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 Guarantor as an obligor in respect of the
Guaranteed Obligations.
2.5 WAIVERS BY GUARANTOR. Guarantor hereby waives, for the
benefit of Noteholders:
(a) any right to require Noteholders, as a condition of
payment or performance by Guarantor, to (i) proceed against Company or
any Subsidiary Guarantor or any other Person, (ii) proceed against or
exhaust any security held from Company or any Subsidiary 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 Noteholder in
favor of Company or any Subsidiary Guarantor or any other Person, or
(iv) pursue any other remedy in the power of any Noteholder whatsoever;
(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Company or any
Subsidiary Guarantor including any defense based on or arising out of
the lack of validity or the unenforceability of the Guaranteed
Obligations or any agreement or instrument relating thereto or by
reason of the cessation of the liability of Company or any Subsidiary
Guarantor from any cause other than payment in full of the Guaranteed
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 Noteholder's errors or
omissions in the administration of the Guaranteed Obligations, except
behavior which amounts to bad faith;
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(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 Guarantor's
obligations hereunder, (ii) the benefit of any statute of limitations
affecting Guarantor's liability hereunder or the enforcement hereof,
(iii) any rights to set-offs, recoupments and counterclaims, and (iv)
promptness, diligence and any requirement that any Noteholder 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 any
Note Document, notices of any renewal, extension or modification of the
Guaranteed Obligations or any agreement related thereto, notices of any
extension of credit to Company or any Subsidiary Guarantor 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 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 CERTAIN CALIFORNIA LAW WAIVERS. As used in this subsection
2.6, any reference to "the principal" includes Company, and any reference to
"the creditor" includes each Noteholder. In accordance with Section 2856 of the
California Civil Code:
(a) Guarantor agrees to withhold the exercise of any and all
rights of subrogation, reimbursement and contribution against Company,
against any other guarantor of any of the Guaranteed Obligations, and
against any collateral or security for any of the Guaranteed
Obligations, until the Guaranteed Obligations shall have been paid in
full, all as more fully set forth in subsection 2.7;
(b) Guarantor waives any and all other rights and defenses
available to Guarantor by reason of Sections 2787 to 2855, inclusive,
2899 and 3433 of the California Civil Code, including without
limitation any and all rights or defenses Guarantor may have by reason
of protection afforded to the principal with respect to any of the
Guaranteed Obligations, or to any other guarantor of any of the
Guaranteed Obligations with respect to any of such guarantor's
obligations under its guaranty, in either case pursuant to the
antideficiency or other laws of the State of California limiting or
discharging the principal's indebtedness or such guarantor's
obligations, including without limitation Section 580a, 580b, 580d, or
726 of the California Code of Civil Procedure; and
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(c) Guarantor waives all rights and defenses arising out of an
election of remedies by the creditor, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security
for a Guaranteed Obligation, has destroyed Guarantor's rights of
subrogation and reimbursement against the principal by the operation of
Section 580d of the Code of Civil Procedure or otherwise; and even
though that election of remedies by the creditor, such as nonjudicial
foreclosure with respect to security for an obligation of any other
guarantor of any of the Guaranteed Obligations, has destroyed
Guarantor's rights of contribution against such other guarantor.
No other provision of this Guaranty shall be construed as limiting the
generality of any of the covenants and waivers set forth in this subsection 2.6.
In accordance with subsection 6.6 below, this Guaranty shall be governed by, and
shall be construed and enforced in accordance with, the internal laws of the
State of New York, without regard to conflicts of laws principles. This
subsection 2.6 is included solely out of an abundance of caution, and shall not
be construed to mean that any of the above-referenced provisions of California
law are in any way applicable to this Guaranty or to any of the Guaranteed
Obligations.
2.7 GUARANTOR'S RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the
Guaranteed Obligations shall have been paid in full, Guarantor shall withhold
exercise of (a) any claim, right or remedy, direct or indirect, that Guarantor
now has or may hereafter have against Company or any of its assets in connection
with this Guaranty or the performance by Guarantor of its obligations hereunder,
in each case whether such claim, right or remedy arises in equity, under
contract, by statute (including without limitation under California Civil Code
Section 2847, 2848 or 2849), under common law or otherwise and including without
limitation (i) any right of subrogation, reimbursement or indemnification that
Guarantor now has or may hereafter have against Company, (ii) any right to
enforce, or to participate in, any claim, right or remedy that any Noteholder
now has or may hereafter have against Company, and (iii) any benefit of, and any
right to participate in, any collateral or security now or hereafter held by any
Noteholder, and (b) any right of contribution Guarantor may have against any
other guarantor of any of the Guaranteed Obligations (including without
limitation any such right of contribution under California Civil Code Section
2848 or under a Related Guaranty as contemplated by subsection 2.2). Guarantor
further agrees that, to the extent the 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 Guarantor may have against Company or against any collateral or
security, and any rights of contribution Guarantor may have against any such
other guarantor, shall be junior and subordinate to any rights Noteholders may
have against Company, to all right, title and interest Noteholders may have in
any such collateral or security, and to any right Noteholders may have against
such other guarantor. Any Noteholder, on behalf of all
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Noteholders, may use, sell or dispose of any item of collateral or security as
it sees fit without regard to any subrogation rights Guarantor may have, and
upon any such disposition or sale any rights of subrogation Guarantor may have
shall terminate. If any amount shall be paid to Guarantor on account of any such
subrogation, reimbursement or indemnification rights at any time when all
Guaranteed Obligations shall not have been paid in full, such amount shall be
held in trust by the Guarantor for the benefit of Noteholders and shall
forthwith be ratably paid over to each Noteholder for credit to and application
against the Guaranteed Obligations, whether matured or unmatured, in accordance
with the terms hereof.
2.8 SUBORDINATION OF COMPANY OBLIGATIONS. Any indebtedness of Company
now or hereafter held by Guarantor (other than royalty payments in the ordinary
course of business) is hereby subordinated in right of payment to the Guaranteed
Obligations, and any such indebtedness of Company to Guarantor collected or
received by Guarantor after an Event of Default has occurred and is continuing
shall be held in trust by the Guarantor for the benefit of Noteholders and shall
forthwith be ratably paid over to each Noteholder for credit to and application
against the Guaranteed Obligations but without affecting, impairing or limiting
in any manner the liability of Guarantor under any other provision of this
Guaranty.
2.9 EXPENSES. Guarantor agrees to pay, or cause to be paid, on demand,
and to save Noteholders harmless against liability for (i) any and all
reasonable costs and expenses (including fees and disbursements of outside
counsel and allocated costs of internal counsel) incurred or expended by any
Noteholder in connection with the preparation of any subsequent modification of,
or consent under, this Guaranty, whether or not such consent is granted provided
that, with respect to any amendment proposed by any Significant Holder prior to
the occurrence of an Event of Default, such holder shall notify the Company and
the Guarantor prior to engaging outside counsel to prepare such amendment, (ii)
all reasonable costs and expenses (including outside counsel fees and allocated
costs of internal counsel) incurred by any Noteholder in enforcement or
preservation of any rights under this Guaranty and (iii) any registration tax
incurred in connection with the registration or filing of this Guaranty or any
judgment with respect thereto; provided, however, that, notwithstanding the
foregoing, Guarantor shall be obligated to pay the fees and expenses of only one
outside law firm that is acting as counsel to the Noteholders as a group, except
in the event that any Noteholder reasonably determines that there exists a
conflict of interest between itself and the other Noteholders, it may engage
separate counsel at the expense of the Guarantor. Further, in cases brought by
individual Noteholders resulting from the failure of the Company to make
payments in respect of their Notes, each Noteholder may, if it so elects, retain
its own counsel but the Guarantor shall only be liable for the fees and expenses
of up to four outside law firms.
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2.10 CONTINUING GUARANTY; TERMINATION OF GUARANTY. This Guaranty is a
continuing guaranty and shall remain in effect until all of the Guaranteed
Obligations shall have been paid in full. Guarantor hereby irrevocably waives
any right (including without limitation any such right arising under California
Civil Code Section 2815) to revoke this Guaranty as to future transactions
giving rise to any Guaranteed Obligations.
2.11 AUTHORITY OF GUARANTOR OR COMPANY. It is not necessary for any
Noteholder to inquire into the capacity or powers of Guarantor, Company or any
Subsidiary Guarantor or the officers, directors or any agents acting or
purporting to act on behalf of any of them, including ABN Amro Securities.
2.12 FINANCIAL CONDITION OF COMPANY. Any Notes may be issued by Company
or other indebtedness incurred by it or any Subsidiary Guarantor or renewed,
extended, refinanced or otherwise continued from time to time without notice to
or authorization from Guarantor regardless of the financial or other condition
of Company of such Subsidiary Guarantor at the time of any such grant or
continuation. Noteholders shall have no obligation to disclose or discuss with
Guarantor their assessment, or Guarantor's assessment, of the financial
condition of Company or any Subsidiary Guarantor. Guarantor, as the sole
shareholder of Company and as controlling indirect shareholder of the Subsidiary
Guarantors, has adequate means to obtain information on a continuing basis
concerning the financial condition of Company or any Subsidiary Guarantor and
their respective abilities to perform their obligations under the Note
Documents, and Guarantor assumes the responsibility for being and keeping
informed of the financial condition of Company and the Subsidiary Guarantors and
of all circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations. Guarantor hereby waives and relinquishes any duty on the part of
any Noteholder to disclose any matter, fact or thing relating to the business,
operations or conditions of Company or any Subsidiary Guarantor now known or
hereafter known by any Noteholder.
2.13 RIGHTS CUMULATIVE. The rights, powers and remedies given to
Noteholders by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Noteholders by virtue of
any statute or rule of law or in any Note Document or any other agreement
between Guarantor, Company or any Subsidiary Guarantor and the Noteholders. Any
forbearance or failure to exercise, and any delay by any Noteholder 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.
2.14 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY. (a)
So long as any Guaranteed Obligations remain outstanding, Guarantor shall not,
without the prior written consent of the Required Holder(s), commence or join
with any other Person in commencing any bankruptcy, reorganization or insolvency
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proceedings of or against Company or any Subsidiary Guarantor. The obligations
of Guarantor under this Guaranty shall not be reduced, limited, impaired,
discharged, deferred, suspended or terminated by any proceeding, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership, reorganization,
liquidation or arrangement of Company or any Subsidiary Guarantor or by any
defense which Company or such Subsidiary Guarantor may have by reason of the
order, decree or decision of any court or administrative body resulting from any
such proceeding.
(b) Guarantor acknowledges and agrees that any interest on any
portion of the Guaranteed Obligations which accrues after the commencement of
any proceeding referred to in clause (a) above (or, if interest on any portion
of the Guaranteed 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 Guaranteed Obligations if said proceedings had not been
commenced) shall be included in the Guaranteed Obligations because it is the
intention of Guarantor that the Guaranteed Obligations which are guarantied by
Guarantor pursuant to this Guaranty should be determined without regard to any
rule of law or order which may relieve Company or any Subsidiary Guarantor of
any portion of such Guaranteed Obligations. Guarantor will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Noteholders, or allow the claim of each
Noteholder 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 Guaranteed
Obligations are paid by Company and/or the Subsidiary Guarantors, the
obligations of Guarantor 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
Noteholder as a preference, fraudulent transfer or otherwise, and any such
payments which are so rescinded or recovered shall constitute Guaranteed
Obligations for all purposes under this Guaranty.
2.15 NOTICE OF EVENTS. As soon as Guarantor obtains knowledge thereof,
Guarantor shall give Noteholders written notice of any condition or event which
has resulted in (a) an event, development or change with respect to Guarantor,
Company or any material Subsidiary thereof that has resulted or could reasonably
be expected to result in a Material Adverse Effect or (b) a breach of or
noncompliance with any term, condition or covenant contained herein or in any
Note Document.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Noteholders to accept this Guaranty, to
enter into the Note Agreement and to purchase the Notes and the Warrants,
Guarantor hereby represents and warrants to Noteholders that the following
statements are true and correct:
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3.1 ORGANIZATION. (i) Guarantor is a corporation duly organized and
existing in good standing under the laws of the State of Delaware, each
Subsidiary is duly organized and (where such concept is appropriate) existing in
good standing under the laws of the jurisdiction identified in Schedule 3.1
hereto, and Guarantor has and each Subsidiary has the corporate power to own its
respective property and to carry on its respective business as now being
conducted.
(ii) Schedule 3.1 contains (except as noted therein) complete and
correct lists (A) of Guarantor's Subsidiaries, showing, as to each Subsidiary,
the correct legal name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its Voting Stock and other equity
interests, if any, outstanding owned by Guarantor and/or another Subsidiary, (B)
of Guarantor's Affiliates, other than Subsidiaries, and (C) of Guarantor's
directors, senior officers and Shareholders.
(iii) All of the outstanding shares of Voting Stock or other equity
interests of each Subsidiary shown in Schedule 3.1 as being owned by Guarantor
and/or another Subsidiary have been validly issued, are fully paid and
nonassessable and are owned by Guarantor or such other Subsidiary free and clear
of any Lien (except as otherwise disclosed in Schedule 3.1). Any shares of
Voting Stock or other equity interests in a Subsidiary that are held by any
Person, other than Guarantor or another Subsidiary, are not entitled to
preemptive rights and no such Persons have been granted options, warrants (other
than the Warrants) or other rights to acquire additional shares of such
Subsidiary's Voting Stock or other equity interests, except as disclosed in
Schedule 3.1.
3.2 FINANCIAL STATEMENTS. Guarantor has furnished you with the
following financial statements, identified by a principal financial officer of
Guarantor: (i) a consolidated balance sheet of Guarantor and its Subsidiaries as
of July 30, 1994 and July 31, 1993, and consolidated statements of income
(loss), stockholders' equity and cash flows of Guarantor and its Subsidiaries
for each such fiscal year, all certified by KPMG Peat Marwick, LLP and (ii) a
consolidated balance sheet of Guarantor and its Subsidiaries as of January 28,
1995 and January 29, 1994 and consolidated statements of income (loss),
stockholders' equity and cash flows for the six-month period ended on each such
date, prepared by Guarantor. Such financial statements (including any related
schedules and/or notes) are true and correct in all material respects (subject,
as to interim statements, to changes resulting from audits and year-end
adjustments), have been prepared in accordance with GAAP consistently followed
throughout the periods involved and show all liabilities, direct and contingent,
of Guarantor and its Subsidiaries required to be shown in accordance with such
principles. The balance sheets fairly present the condition of Guarantor and its
Subsidiaries as at the dates thereof, and the statements of income (loss),
stockholders' equity and statements of cash flows fairly present the results of
the operations of Guarantor and its Subsidiaries for the periods indicated.
There has been no material adverse change in the business, condition (financial
or otherwise) or operations of Guarantor and its Subsidiaries, taken as a whole,
since July 30, 1994.
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3.3 ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of Guarantor, threatened against
Guarantor or any of its Subsidiaries, or any of its properties or rights, by or
before any court, arbitrator or administrative or governmental body which might
result in any Material Adverse Effect.
3.4 OUTSTANDING DEBT. Neither Guarantor nor any of its
Subsidiaries has outstanding any Debt except as permitted by Section 5.6. There
exists no default under the provisions of any instrument evidencing such Debt or
of any agreement relating thereto.
3.5 TITLE TO PROPERTIES. Guarantor and its Subsidiaries have good and
marketable title to its respective real properties (other than properties which
it leases) and good title to all of its other respective properties and assets,
including the properties and assets reflected in the balance sheet as at July
30, 1994, referred to in Section 3.2 (other than properties and assets disposed
of in the ordinary course of business taken as a whole), subject to no Lien of
any kind except Liens (i) permitted by Section 5.4 or (ii) that are immaterial
to the conduct of the business and operations of Guarantor and its Subsidiaries,
taken as a whole. All leases necessary in any material respect for the conduct
of the respective businesses of Guarantor and its Subsidiaries are valid and
subsisting and are in full force and effect.
3.6 TAXES. Guarantor and each of its Subsidiaries has filed all
federal, state, local, foreign and other income tax returns which, to the
knowledge of the officers of the Guarantor, are required to be filed, and each
has paid all taxes as shown on such returns and on all assessments received by
it to the extent that such taxes have become due, except such taxes as are
currently subject to a Good Faith Contest. All pending or threatened tax
assessments, audits, investigations or other proceedings are set forth in
Schedule 3.6.
3.7 CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither Guarantor nor any
of its Subsidiaries is a party to any contract or agreement or subject to any
charter or other corporate restriction which has or could reasonably have a
Material Adverse Effect. Neither the execution nor delivery of this Guaranty or
any Note Document nor the offering, issuance and sale of the Notes or the
Warrants, nor fulfillment of nor compliance with the terms and provisions hereof
or any Note Document will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien upon any of the properties
or assets of Guarantor or any of its Subsidiaries pursuant to, the charter or
by-laws of Guarantor or any of its Subsidiaries, any award of any arbitrator or
any agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which Guarantor or any of
its Subsidiaries is subject. Neither Guarantor nor any of its Subsidiaries is a
party to, or otherwise subject to any provision contained in, any
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instrument evidencing Debt of Guarantor or Subsidiary, any agreement relating
thereto or any other contract or agreement (including its charter) which limits
the amount of, or otherwise imposes restrictions on the incurring of, Debt of
Guarantor of the type to be evidenced by this Guaranty except as set forth in
the agreements listed in Schedule 3.7 attached hereto.
3.8 OFFERING OF NOTES. None of Guarantor, Company or any agent acting
on their behalf has, directly or indirectly, offered this Guaranty, the
Subsidiary Guaranty, the Notes, the Warrants or any similar security for sale
to, or solicited any offers to buy this Guaranty, the Subsidiary Guaranty, the
Notes, the Warrants or any similar security, from, or otherwise approached or
negotiated with respect thereto with, any Person other than institutional
investors, and none of Guarantor, Company or any agent acting on their behalf
has taken or will take any action which would subject the issuance or sale of
this Guaranty, the Subsidiary Guaranty, the Notes or the Warrants (including the
shares of Company common stock issuable thereunder) to registration under the
provisions of section 5 of the Securities Act, to qualification under the
provisions of any securities or Blue Sky law of any applicable jurisdiction or
to registration or filing with, or approval or other action by, any other
governmental authority or body.
3.9 REGULATION G, ETC. Neither Guarantor nor any of its Subsidiaries
owns or has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System (herein called "margin stock"). The proceeds of sale of the Notes will be
used to refinance existing Indebtedness and for other working capital purposes.
None of such proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any margin
stock or for the purpose of maintaining, reducing or retiring any indebtedness
which was originally incurred to purchase or carry any stock that is currently a
margin stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation G. None of Guarantor,
Company or any agent acting on their behalf have or has taken or will take any
action which might cause this Guaranty or any Note Document to violate
Regulation G, Regulation T or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the Exchange Act, in each case as in
effect now or as the same may hereafter be in effect.
3.10 COMPLIANCE WITH ERISA. (i) Each Plan is in substantial compliance
with ERISA and the Code; no Reportable Event has occurred with respect to a
Plan; no Plan is insolvent or in reorganization; no Plan has an Unfunded Current
Liability; no Plan has an accumulated or waived funding deficiency or has
applied for an extension of any amortization period within the meaning of
Section 412 of the Code; all contributions required to be made with respect to a
Plan and a Foreign Pension Plan have been timely made; neither Guarantor nor any
Subsidiary nor any ERISA Affiliate has incurred any material liability to or on
account of a Plan pursuant to Section 409, 502 (i), 502 (1), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of
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ERISA or Section 401 (a) (29), 4971, 4975 or 4980 of the Code or expects to
incur any liability (including any indirect, contingent, or secondary liability)
under any of the foregoing Sections with respect to any Plan; no proceedings
have been instituted to terminate or appoint a trustee to administer any Plan;
no condition exists which presents a material risk to Guarantor or any
Subsidiary or any ERISA Affiliate of incurring a liability to or on account of a
Plan pursuant to the foregoing provisions of ERISA and the Code; using actuarial
assumptions and computation methods consistent with Part 1 of subtitle E of
Title IV of ERISA, the aggregate liabilities of Guarantor and its Subsidiaries
and its ERISA Affiliates to all Plans which are multiemployer plans (as defined
in Section 4001 (a) (3) of ERISA) in the event of a complete withdrawal
therefrom, as of the close of the most recent fiscal year of each such Plan
ended prior to the date hereof, would not exceed $500,000; no Lien imposed under
the Code or ERISA on the assets of Guarantor or any Subsidiary or any ERISA
Affiliate exists or is likely to arise on account of any Plan; and Guarantor and
its Subsidiaries may cease contributions to or terminate any employee benefit
plan maintained by any of them without incurring any material liability.
(ii) Each Foreign Pension Plan has been maintained in
substantial compliance with its terms and with the requirements of any and all
applicable laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities. Neither the Guarantor nor any of its Subsidiaries has incurred any
obligation in connection with the termination of or withdrawal from any Foreign
Pension Plan. The present value of the accrued benefit liabilities (whether or
not vested) under each Foreign Pension Plan, determined as of the end of
Guarantor's most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.
3.11 GOVERNMENTAL CONSENT. No circumstance in connection with the
execution and delivery of this Guaranty or the Subsidiary Guaranty, or the
offering, issuance, sale and delivery of the Notes or the Warrants is such as to
require any authorization, consent, approval, exemption or other action by or
notice to or filing with any court or administrative or governmental body (other
than routine filings after the date of closing with the Securities and Exchange
Commission and/or state Blue Sky authorities)(collectively, "CONSENTS") in
connection herewith and therewith, other than Consents already obtained by or on
behalf of Guarantor.
3.12 HOLDING COMPANY AND INVESTMENT COMPANY STATUS. None of Guarantor
nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," or a "public utility," within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or a
"public utility" within the meaning of the Federal Power Act, as amended. None
of Guarantor nor any of its Subsidiaries is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
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Company Act of 1940, as amended, or an "investment adviser" within the meaning
of the Investment Advisers Act of 1940, as amended.
3.13 POSSESSION OF FRANCHISES, ETC. Guarantor and all its Subsidiaries
possess all franchises, certificates, licenses, permits and other authorizations
from governmental political subdivisions or regulatory authorities, free from
unduly burdensome restrictions, that are necessary in any material respect for
the ownership, maintenance and operation of its properties and assets, and none
of Guarantor nor any of its Subsidiaries is in, or has reason to believe it is
in, violation thereof in any material respect.
3.14 COMPLIANCE WITH LAWS. Except as disclosed on Schedule 3.14 hereto,
Guarantor and its Subsidiaries (i) have complied in all material respects with
all applicable laws, statutes, rules and regulations, including Environmental
and Safety Laws, and neither Guarantor nor any Subsidiary has received (A)
notice of any material failure so to comply or (B) any information that would
lead it to believe that it is the subject of any Federal, state, local or
foreign investigation; (ii) does not manage, generate, transport, discharge or
store any Hazardous Materials in material violation of any material
Environmental and Safety Laws; (iii) does not own, operate or maintain any
underground storage tanks or surface impoundments; and (iv) is not aware or any
conditions or circumstances associated with its currently or previously owned or
leased Properties or operations (or those of its tenants), in each case which
may give rise to any liability, fines, penalties or other obligations, including
Environmental Liabilities and Costs, that could have a Material Adverse Effect.
3.15 INTELLECTUAL PROPERTIES. All material patents, patent
applications, copyrights, copyright applications, trade secrets, trade names and
trademarks, technologies, methods, processes or other proprietary properties or
information (collectively, "INTELLECTUAL PROPERTIES") which are used by
Guarantor and its Subsidiaries in the conduct of their respective businesses are
either owned by them or are used, employed or practiced by them under valid and
existing licenses, grants, "shop rights", or other rights. None of Guarantor nor
any Subsidiary has received a notification of infringement of any Intellectual
Property that, individually or in the aggregate, would have a Material Adverse
Effect. No officer, director, employee or Shareholder of Guarantor or any
Subsidiary (other than Guarantor or another Subsidiary) owns or has, nor at the
date of closing will own or have, any interest in any Intellectual Property
owned or used by Guarantor or any Subsidiary in connection with its businesses.
3.16 LABOR AND EMPLOYEE RELATIONS MATTERS. Except as set forth on
Schedule 3.16:
(i) None of Guarantor or its Subsidiaries is or to its
knowledge expects to be the subject of any union organizing activity or labor
dispute, and none of Guarantor or its Subsidiaries has violated any applicable
federal or state law or
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regulation relating to labor or labor practices, which violation would give rise
to a Material Adverse Effect.
(ii) Except as set forth on Schedule 3.16, no present or
former employee of Guarantor or any Subsidiary has advanced claims in writing
against Guarantor or any Subsidiary (whether under any foreign, federal, state
or common law, through a government agency, under an employment agreement,
collective bargaining agreement, personal service or independent contractor
agreement or otherwise) that are currently pending for (A) overtime pay, other
than overtime pay for the current period; (B) wages, salaries or profit sharing
(excluding wages, salaries or profit sharing for the current payroll period);
(C) vacations, time off (including without limitation, potential sick leave) or
pay in lieu of vacation or time off, other than vacation or time off (or pay in
lieu thereof) earned in respect of Guarantor's or any Subsidiary's current
fiscal year; (D) any violation of any statute, ordinance or regulation relating
to minimum wages or maximum hours of work; (E) discrimination against employees
on any basis; (F) unlawful employment or termination practices; (G) any
violation of occupational safety and/or health standards; (H) benefits under any
employee plans or compensation arrangement; and (I) breach of any employment,
personal service or independent contractor agreement; provided, however, that
the Guarantor shall not be deemed to have breached this representation and
warranty unless the liability for clauses (A)-(I) in the aggregate exceeds, or
could reasonably be expected to exceed, $1,000,000.
3.17 AUTHORIZATION AND ENFORCEABILITY. This Guaranty and the Note
Documents have been duly authorized by all necessary corporate action on the
part of Guarantor and its Subsidiaries, as applicable, and have been duly
executed and delivered by duly authorized officers thereof. Each of this
Guaranty and the Note Documents constitutes the legally valid and binding
obligation of Guarantor, Company and/or the Subsidiary Guarantors that is a
party thereto, enforceable against them in accordance with its terms, except
that (i) enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or limiting the rights of creditors
generally and (ii) enforcement is subject to the effect of general principles of
equity, whether applied by a court of law or equity.
3.18 PARI PASSU NATURE. The obligations of Guarantor hereunder do and
will continue to rank pari passu with all other unsecured, senior obligations of
Guarantor, except to the extent of Liens permitted by Section 5.4 hereof or the
obligations listed in Schedule 3.18 or that are mandatorily preferred under
applicable law.
3.19 FOREIGN ENEMIES AND REGULATIONS. Neither the issue and sale of the
Notes or the Warrants or the execution and delivery of this Guaranty or the
Subsidiary Guaranty nor the use of the proceeds thereof as stated in Section 3.9
will violate (i) any regulations promulgated or administered by the Office of
Foreign Assets Control, United States Department of the Treasury, including
without
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limitation, the Foreign Assets Control Regulations, the Transaction
Control Regulations, the Cuban Assets Control Regulations, the Foreign Funds
Control Regulations, the Iranian Assets Control Regulations, the Nicaraguan
Trade Control Regulations, the South African Transaction Regulations, the
Iranian Transactions Regulations, the Iraqi Sanctions Regulations, the Soviet
Gold Coin Regulations, the Panamanian Transaction Regulations or the Libyan
Sanctions Regulations of the United States Treasury Department, 31 C.F.R.,
Subtitle B, Chapter V, as amended, (ii) the Trading with the Enemy Act, as
amended, (iii) Executive Orders 8389, 9095, 9193, 12543 (Libya), 12544 (Libya),
12722 (Iraq) or 12724 (Iraq), 12775 (Haiti), 12779 (Haiti) or 12959 (Iran), all
as may be amended, of the President of the United States or (iv) any rule,
regulation or executive order issued or promulgated pursuant to the laws or
regulations described in the foregoing clauses (i) -(iii).
3.20 SOLVENCY. Other than as set forth in Schedule 3.20, none of the
Company's liability evidenced by the Notes and the Note Agreement, Guarantor's
liability evidenced by this Guaranty and the Warrants, or the Subsidiary
Guarantors' liability evidenced by the Subsidiary Guaranty, was incurred with
the intent to hinder, delay or defraud any of their respective creditors or any
other Person to which it is, on or after the date hereof, indebted. None of
Guarantor, Company or any Subsidiary Guarantor is insolvent on the date hereof,
or will become insolvent as a result of becoming obligated hereunder or under
the Note Documents to which it is a party. For purposes of this Section 3.20,
the term "insolvent" means, with respect to any Person, the financial condition
such that either (i) the sum of such Person's liabilities (including contingent
and unliquidated liabilities computed in the manner set forth below) is greater
than all of its property, at fair valuation or (ii) the present fair salable
value of its assets is less than the amount that will be required to pay its
probable liability on its existing Indebtedness as they become absolute and
matured. Guarantor, Company and each Subsidiary Guarantor each does not intend
to incur, nor does it believe that it is incurring, Indebtedness beyond its
ability to pay as such Indebtedness matures. In computing the amount of
contingent or unliquidated liabilities at any time, such liabilities will be
computed at the amount which, in light of all the known facts and circumstances
existing at such time represents the amount that can reasonably be expected to
become an actual or matured liability. None of Guarantor, Company or any
Subsidiary Guarantor is engaged in any business or transaction for which the
property remaining with it after giving effect to such business or transaction
would be an unreasonably small amount of capital.
3.21 WARRANTS AND WARRANT SHARES. (i) The Warrants have been duly
authorized by all necessary corporate action on the part of Guarantor and have
been duly executed and delivered by it. The Warrants constitute the valid and
legally binding obligations of Guarantor, enforceable against it in accordance
with its terms, except that (i) enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
the rights of creditors generally and (ii) enforcement is subject to the effect
of general principles of equity, whether applied by a court of law or equity.
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(ii) Guarantor has reserved and unissued shares of its common stock at
least equal to the shares of common stock issuable upon exercise of the
Warrants. The shares of common stock issuable upon exercise of any Warrant have
been duly authorized, and upon payment therefor in accordance with the terms of
such Warrant, shall be validly issued, fully paid and nonassessable shares, with
no liability on the part of the exercising holder with respect to obligations of
Guarantor.
3.22 DISCLOSURE. Neither this Guaranty nor any other Note Document
furnished to you by or on behalf of Guarantor, Company or any Subsidiary
Guarantor in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact peculiar to
Guarantor or any of its Subsidiaries which now has or in the future may (so far
as Guarantor can now foresee) have a Material Adverse Effect and which has not
been set forth in this Guaranty or in the Note Documents.
SECTION 4. AFFIRMATIVE COVENANTS.
4.1 FINANCIAL STATEMENTS. Guarantor covenants that it will
deliver to each Significant Holder in duplicate:
(i) as soon as practicable and in any event within 45 days
after the end of each quarterly period in each fiscal year (A)
consolidated statements of income, retained earnings and cash flows and
consolidating statements of income, in each case of Guarantor and its
Subsidiaries for the period from the beginning of the current fiscal
year to the end of such quarterly period and (B) consolidated and
consolidating balance sheets of Guarantor and its Subsidiaries as at
the end of such quarterly period, setting forth in each case in
comparative form figures for the corresponding period in the preceding
fiscal year, all in reasonable detail and satisfactory in form to the
Required Holder(s) and certified by an authorized financial officer of
Guarantor, subject to changes resulting from year-end adjustments;
provided, however, that delivery pursuant to clause (iii) below of
copies of the Quarterly Report on Form 10-Q of Guarantor for such
fiscal quarter filed with the Securities and Exchange Commission shall
be deemed to satisfy the requirements to deliver consolidated
statements and balance sheets under subclauses (A) and (B) of this
clause (i);
(ii) as soon as practicable and in any event within 90 days
after the end of each fiscal year, consolidated statements of income,
retained earnings and cash flows of Guarantor and its Subsidiaries for
such year and consolidated balance sheets of Guarantor and its
Subsidiaries as at the end of such year, setting forth in each case in
comparative form corresponding figures from the preceding annual audit,
all in reasonable detail and
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satisfactory in form to the Required Holder(s) and reported on by
independent public accountants of recognized national standing (which,
if not a "Big Six" accounting firm shall be reasonably acceptable to
the Required Holders) selected by Guarantor whose report shall be
without limitation as to the scope of the audit and satisfactory in
substance to the Required Holder(s); provided, however, that delivery
pursuant to clause (iii) below of copies of the Annual Report on Form
10-K of Guarantor for such fiscal year filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
clause (ii) to deliver annual financial statements;
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration
statements (without exhibits) and all reports, including Reports on
Form 8-K, which it files with the Securities and Exchange Commission
(or any governmental body or agency succeeding to the functions of the
Securities and Exchange Commission);
(iv) promptly upon receipt thereof, a copy of each other
report submitted to Guarantor or any Subsidiary by independent
accountants in connection with any interim or special audit made by
them of the books of Guarantor or any Subsidiary (other than local
statutory audited reports of Subsidiary Guarantors and so-called
"management letters" issued in the ordinary course of audits of annual
financial statements);
(v) within the time periods specified in clauses (i) and
(ii), unaudited data showing revenues and gross profits by product
segment;
(vi) no later than September 30, 1995 and September 30,
1996, an Officer's Certificate showing, with supporting calculations
and underlying assumptions in reasonable detail, projected compliance
with Sections 5.1, 5.2, 5.3, 5.5(ix), 5.6, 5.10 and 5.12 on a quarterly
basis for the fiscal years ending July 31, 1996 and July 31, 1997,
respectively;
(vii) promptly after its transmission, such other
certificates, documents and information as any Guarantor may regularly
furnish to any holder of its other Debt; and
(viii) with reasonable promptness, such other financial data
and other information as such Significant Holder may reasonably
request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, Guarantor will deliver to each Significant Holder an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance by
it with the provisions of Sections 5.1-5.3, 5.4(viii), 5.5(ix), 5.6, 5.7, 5.9,
5.10, 5.12, 5.14 and
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5.19 and stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specifying the nature
and period of existence thereof and what action Guarantor proposes to take with
respect thereto. Together with each delivery of financial statements required by
clause (ii) above, Guarantor will deliver to each Significant Holder a
certificate of such accountants stating that, in making the audit necessary for
their report on such financial statements, they have obtained no knowledge of
any breach of the financial covenants in this Guaranty, or, if they have
obtained knowledge of any such breach, specifying the nature and period of
existence thereof. Such accountants, however, shall not be liable to anyone by
reason of their failure to obtain knowledge of any breach hereunder that would
not be disclosed in the course of an audit conducted in accordance with
generally accepted auditing standards. Guarantor also covenants that forthwith
upon its chief executive officer or principal financial officer obtaining
knowledge of any breach or default hereunder, it will deliver, or cause to be
delivered, to each Significant Holder an Officer's Certificate specifying the
nature and period of existence thereof and what action Guarantor proposes to
take with respect thereto. Delivery of non-public information shall be
conditioned on such Significant Holder's execution and delivery of a
Confidentiality Agreement as required under paragraph 11D of the Note Agreement
(to the extent such holder has not already done so).
4.2 INFORMATION REQUIRED BY RULE 144A. Guarantor covenants that it
will, upon the request of any Noteholder, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of the Securities, except at such
times as Guarantor is subject to the reporting requirements of section 13 or
15(d) of the Exchange Act. For the purpose of this Section 4.2, the term
"qualified institutional buyer" shall have the meaning specified in Rule 144A
under the Securities Act. Delivery of material non-public information shall be
conditioned on such qualified institutional buyer's execution and delivery of a
Confidentiality Agreement.
4.3 INSPECTION OF PROPERTY. Guarantor covenants that it will permit any
duly authorized representative of any Inspecting Holder in writing to visit and
inspect any of its or any of its Subsidiaries' properties, to examine their
corporate books and financial records and make copies thereof or extracts
therefrom and to discuss any of their affairs, finances and accounts with the
principal officers of Guarantor or such Subsidiary and its independent public
accountants, all at such reasonable times and as often as such Inspecting Holder
may reasonably request. Access to material, non-public information may be
conditioned on such Inspecting Holder's execution and delivery to Guarantor or
such Subsidiary of a Confidentiality Agreement. The costs and expenses
associated with the exercise of any rights under this Section 4.3 shall be borne
by such Inspecting Holder, unless and until either a Default or Event of Default
has occurred under the Note Agreement or a breach or default has occurred
hereunder, in which event the reasonable costs and expenses thereof shall be
borne by
X-00
00
Xxxxxxxxx. Xxxxxxxx of material non-public information shall be
conditioned on such Inspecting Holder's execution and delivery of a
Confidentiality Agreement as required under paragraph 11D of the Note Agreement
(to the extent such holder has not already done so). The Inspecting Holders
shall use reasonable efforts to coordinate their inspections and requests for
copies so as, to the extent they can, to avoid unnecessary duplication.
4.4 COVENANT TO SECURE NOTE EQUALLY. Guarantor covenants that, if it or
any Subsidiary shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than Liens permitted by
the provisions of Section 5.4 (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to Section 6.4), it will
make or cause to be made effective provision whereby the Notes and this Guaranty
will be secured by such Lien equally and ratably with any and all other Debt
thereby secured so long as any such other Debt shall be so secured. Guarantor
further covenants to disclose the provisions of this Section 4.4 and Section 5.4
in the footnotes to the annual financial statements that are provided to its
lenders and other creditors.
4.5 MAINTENANCE OF INSURANCE. Guarantor covenants that it and each of
its Subsidiaries will maintain insurance in such amounts and against such
liabilities and hazards as is, to the best of its knowledge, customarily
maintained by other companies operating similar businesses.
4.6 MAINTENANCE OF PROPERTIES; COMPLIANCE WITH LAWS . Guarantor
covenants that it and each Subsidiary will (i) maintain or cause to be
maintained in good repair, working order and condition all equipment and other
properties necessary at that time in its business and that are material to the
conduct of its business taken as a whole and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof; and
(ii) comply with all applicable laws (including Environmental and Safety Laws),
rules, regulations and orders of all Federal, state, local or foreign courts or
governmental agencies, authorities, instrumentalities or regulatory bodies;
except where such noncompliance could not reasonably be expected to result in a
Material Adverse Effect or to the extent that such compliance is subject to a
Good Faith Contest.
4.7 PAYMENT OF TAXES AND CLAIMS. Guarantor will, and will cause each
Subsidiary to, pay all taxes, levies, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income or profits before any penalty or interest accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums that have become due and payable and
which by law have or might become a Lien upon any of its properties or assets,
except to the extent that such charge is subject to a Good Faith Contest.
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4.8 ERISA. As soon as possible and, in any event, within 10 days after
Guarantor, any Subsidiary or any ERISA Affiliate knows or has reason to know of
the occurrence of any of the following, Guarantor will deliver to each of the
Noteholders a certificate of the chief financial officer of Guarantor setting
forth details as to such occurrence and the action, if any, that Guarantor, such
Subsidiary or such ERISA Affiliate is required or proposes to take, together
with any notices required or proposed to be given to or filed with or by
Guarantor, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or
the Plan administrator with respect thereto; that a Reportable Event has
occurred; that an accumulated funding deficiency has been incurred or an
application may be or has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under Section
412 of the Code with respect to a Plan; that a contribution required to be made
to a Plan or Foreign Pension Plan has not been timely made; that a Plan has been
or may be terminated, reorganized, partitioned or declared insolvent under Title
IV of ERISA; that a Plan has an Unfunded Current Liability giving rise to a Lien
under ERISA or the Code; that proceedings may be or have been instituted to
terminate or appoint a trustee to administer a Plan; that a proceeding has been
instituted pursuant to Section 515 of ERISA to collect a delinquent contribution
to a Plan; that Guarantor, any Subsidiary or any ERISA Affiliate will or may
incur any liability (including any indirect, contingent, or secondary liability)
to or on account of the termination of or withdrawal from a Plan under Section
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan
under Section 401 (a) (29), 4971, 4975 or 4980 of the Code or Section 409 or 502
(i) or 502 (1) of ERISA; or that Guarantor or any Subsidiary may incur any
material liability pursuant to any employee welfare benefit plan (as defined in
Section 3 (1) of ERISA) that provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any
employee pension benefit plan (as defined in Section 3 (2) of ERISA). Upon the
request of any Significant Holder, Guarantor will deliver a complete copy of the
annual report (Form 5500) of each Plan (including, to the extent required, the
related financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information) required to be filed with
the Internal Revenue Service. In addition to any certificates or notices
delivered to the Noteholders pursuant to the first sentence hereof, copies of
annual reports and any material notices received by Guarantor, any Subsidiary or
any ERISA Affiliate with respect to any Plan or Foreign Pension Plan shall be
delivered to the Noteholders no later than 10 days after the date such report
has been filed with the Internal Revenue Service or such notice has been
received by Guarantor, the Subsidiary or the ERISA Affiliate, as applicable.
4.9 LEGAL PROCEEDINGS. Guarantor covenants that it will, and will cause
each Subsidiary to, deliver promptly to you any notice of (i) any material
litigation or other legal or administrative proceedings that, if adversely
determined to Guarantor, could reasonably be expected to result in a Material
Adverse Effect, including enforcement, cleanup, removal or other material
governmental or regulatory actions
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instituted, completed or, to its best knowledge, threatened pursuant to any
Environmental and Safety Laws and the amount of Environmental Liabilities and
Costs associated therewith; and (ii) its discovery of any occurrence or
condition on any real property adjoining or in the vicinity of any Property that
such it has reason to believe could cause any Property or any material part
thereof to be subject to any material restrictions on its ownership, occupancy,
transferability or use under any Environmental and Safety Laws.
4.10 ROYALTY ARRANGEMENTS. Guarantor covenants that it will maintain
the existing royalty arrangements between it and its Subsidiaries parties
thereto on terms no less favorable to Guarantor than those that exist on the
date hereof and as are set forth in Schedule 4.10, except for changes, to the
extent necessary, to minimally comply with applicable legal requirements;
provided in no event shall such changes terminate or substantially reduce the
minimum fixed royalty payments to Guarantor.
4.11 CORPORATE EXISTENCE, ETC.; BUSINESS. Guarantor covenants that it
will, and will cause all its Subsidiaries to, preserve and keep in full force
and effect at all times its corporate existence, and rights, licenses, permits,
franchises and other similar rights material to its business, except (i) to the
extent otherwise permitted by Section 5.8 or 5.9, (ii) that the corporate
existence of any Subsidiary may be terminated if, in the good faith judgment of
the Board of Directors of Guarantor, such termination is in the best interest of
Guarantor and is not disadvantageous to the holders of the Notes and (iii) for
any Transfer, by the Guarantor in a single transaction or a series of related
transactions within a six (6) month period, of substantially all of its assets
(other than its rights to the name "Inmac" and its right to reserve royalty
payments from Subsidiaries) to a Subsidiary formed under the laws of any state
of the United States that (A) is not an Exempt Subsidiary and (B) executes and
delivers, simultaneously with the effectiveness of such Transfer, a guaranty of
the Guaranteed Obligations in substantially the form of this Guaranty. Guarantor
covenants it will not, and will not permit any Subsidiary to, engage in any
business other than the businesses conducted by it and its Subsidiaries on the
date of the financial statements described in Section 3.2 and any other business
reasonably related thereto.
4.12 CURRENCY HEDGING. In addition to the covenant set forth in Section
5.18 hereof, Guarantor covenants that it and its Subsidiaries will maintain the
same type of currency transaction exposure practices as are maintained on the
date hereof.
4.13 ADDITIONAL SUBSIDIARY GUARANTORS. Guarantor covenants that if it
creates, forms, purchases, or otherwise acquires a Subsidiary after the date
hereof (other than an Exempt Subsidiary), or assets of Subsidiaries are
Transferred to a Subsidiary that is not a Subsidiary Guarantor, in each case
with the result that such Subsidiary has assets with a net book value in excess
of $500,000, it shall cause such Subsidiary to (i) execute and deliver a
guaranty of the Guaranteed Obligations in substantially the form of the
Subsidiary Guaranty; and (ii) cause to be executed and
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delivered in connection therewith such other documents, certificates and legal
opinions as the Required Holders may reasonably request.
5. NEGATIVE COVENANTS. Guarantor covenants and agrees that,
unless and until all of the Guaranteed Obligations shall have been paid in full,
unless Required Holders shall otherwise consent in writing, it will not, and
will not permit any Subsidiary to:
5.1 CURRENT RATIO REQUIREMENT. Permit the ratio of Consolidated
current assets to Consolidated current liabilities to be less than the required
minimum ratios during the time periods
set forth below:
Minimum Current Ratio Time Period
--------------------- -----------
1.50 Date of closing through July 26, 1997
1.35 July 27, 1997 through July 31, 1999
1.25 At all times from and after August 1, 1999
5.2 CONSOLIDATED TANGIBLE NET WORTH REQUIREMENT. Permit Consolidated
Tangible Net Worth to be less than the sum of (A) $32,000,000 plus (B) on a
cumulative basis, 75% of positive Consolidated Net Earnings for each quarter
after the fiscal quarter ended July 30, 1994 plus (C) 75% of all Net Proceeds
received from all issuances of Qualified Stock after July 30, 1994.
5.3 RESTRICTED PAYMENTS LIMITATION. Directly or indirectly make,
declare, pay or set apart any sum of money or other property for any Restricted
Payments unless, after giving effect thereto (A) no Default or Event of Default
exists or will result therefrom; and (B) the aggregate amount of all Restricted
Payments made after the date of closing does not exceed 25% (or minus 100% in
the case of losses) of Consolidated Net Earnings for each fiscal quarter
beginning July 30, 1995. Notwithstanding the foregoing, Guarantor shall not
make, pay or declare or set apart any sum of money or other property for any
Restricted Payments in excess of $1,000,000 in the aggregate during the period
beginning with the date of this Guaranty and ending on July 26, 1997.
5.4 LIEN RESTRICTIONS. Create, assume or permit to exist at any time
any Lien of any kind (other than to or in favor of the holders of the Notes or
unless prior written consent to the creation, assumption or maintenance thereof
shall have been obtained pursuant to Section 6.4) on or with respect to any of
its property or assets, whether now owned or hereafter acquired (whether or not
provision is made for the equal and ratable securing of the Notes in accordance
with the provisions of Section 4.4 hereof), except
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(i) Liens for taxes, assessments or other governmental
levies or charges not yet due or which are subject to a Good Faith
Contest;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary course
of business for sums not yet due or that are subject to a Good Faith
Contest;
(iii) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security or other similar statutory or legal obligations, in each case
not incurred or made in connection with the incurrence or maintenance
of Debt, the obtaining of advances or credit or the payment of the
deferred purchase price of property, and provided that such Liens do
not in the aggregate materially detract from the value of the property
or assets so encumbered or materially impair the use thereof in the
operation of its business;
(iv) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to Company, Guarantor or another
Subsidiary;
(v) Liens that may be required by this Guaranty;
(vi) Liens existing on the date hereof as set forth on
Schedule 5.4; provided that the Indebtedness secured thereby does not
exceed $1,000,000;
(vii) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for rights-of-way,
utilities and other similar purposes, or zoning or other restrictions
as to use of real property, that are necessary for the conduct of the
operations of Guarantor and its Subsidiaries or that customarily exist
on properties of corporations engaged in similar businesses and are
similarly situated and that do not in any event materially impair their
use in the operations of Guarantor and its Subsidiaries; and
(viii) any Lien other than those specified in clauses (i) -
(vii) above that secures Debt in an aggregate principal amount not to
exceed at any time the sum of $10,000,000 plus 5% of Consolidated
Tangible Net Worth (measured at the end of the fiscal quarter
immediately preceding the date of determination); provided, however,
that in no event shall such Liens attach to or otherwise encumber (A)
Consolidated current assets or (B) capital stock of any Subsidiary.
5.5 LOANS, ADVANCES AND INVESTMENTS. Make or permit to remain
outstanding at any time any loan or advance to, or own, purchase or acquire
stock, obligations or securities of, or any other investment or other interest
in, or make any
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capital contribution to, any Person, or commit or agree to do any of the
foregoing, except for:
(i) [intentionally deleted];
(ii) stock, obligations or securities of a corporation which is, or
after such purchase or acquisition becomes, a Subsidiary;
(iii) obligations directly issued by the United States or any of its
agencies or obligations fully guaranteed by the United States, provided
that such obligations mature within one year from the date acquired;
(iv) (A) certificates of deposit which mature within one year from
the date of purchase that are issued by, or (B) bankers' acceptances
eligible for rediscount under requirements of The Board of Governors of
the Federal Reserve System that are accepted by, any commercial bank or
trust company (1) organized under the laws of the United States or any
of its states or having branch offices therein, (2) having consolidated
capital, surplus and undivided profits aggregating at least
$750,000,000 and (3) whose senior unsecured debt securities are rated
AA or better by S&P or Aa2 or better by Xxxxx'x;
(v) commercial paper given an A-1 or better rating by S&P, a P-1 or
better rating by Xxxxx'x and maturing not more than 270 days from the
date acquired;
(vi) loans and advances (A) between Guarantor and any wholly owned
Subsidiary (other than Exempt Subsidiaries) or (B) between wholly owned
Subsidiaries (other than Exempt Subsidiaries);
(vii) outstanding loans and advances to employees for travel and other
similar expenses reasonably incurred in the ordinary course of
business;
(viii) notes receivables with a term not in excess of 180 days arising
from transactions with customers and suppliers in the ordinary course
of business; and
(ix) any loans, advances or investments other than as specified in
clauses (i) - (viii) above, so long as the aggregate of all such loans,
advances and investments does not, at any time, exceed the sum of (A)
$2,000,000 plus (B) 10% of Consolidated Tangible Net Worth, the latter
measured at the end of the fiscal quarter immediately preceding the
date of determination thereof.
5.6 DEBT RESTRICTIONS. Incur, create, assume or permit to exist
at any time any Debt except for:
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(i) the Notes, this Guaranty and the Subsidiary Guaranty;
(ii) Debt owed by any Subsidiary (other than an Exempt
Subsidiary) to a wholly owned Subsidiary or Guarantor
or owed by Guarantor to any Subsidiary Guarantor;
(iii) additional Debt of Guarantor not to exceed $5,000,000
at any time;
(iv) overdraft facilities, so long as the amount of such
facilities does not exceed $500,000 at any time for
either Guarantor or, separately, for any Subsidiary of
Guarantor;
(v) Capitalized Lease Obligations;
(vi) additional Debt of all the Subsidiary Guarantors
provided that (A) Inmac Geschellshaft mit beschrankter
Haftung may maintain until September 15, 1995 not more
than 7,500,000DM of Debt with Barclays Bank and
3,500,000DM with National Westminster Bank; (B) Inmac
aktiebolag may maintain until September 15, 1995 not
more than SEK 5,100,000 of Debt with Barclays Bank; (C)
the Company may maintain until September 15, 1995 not
more than Dfl.3,882,000 of Debt with Midland Bank; and
(D) except as otherwise set forth in the immediately
preceding subclauses (A) through (C) all other such
additional Debt shall not exceed $5,000,000 in the
aggregate for all Subsidiary Guarantors and $2,000,000
in the aggregate for any individual Subsidiary
Guarantor;
(vii) Debt of Exempt Subsidiaries not to exceed at any time
$3,000,000 in the aggregate for all Exempt
Subsidiaries;
(viii) additional Debt of the Company pursuant to the Dutch
Credit Facility and Guaranties of such Debt by any
Subsidiary Guarantor; provided, however, that in no
event shall any Subsidiary Guarantor have direct
borrowings to such Subsidiary Guarantor (without regard
to co-borrowing obligations) outstanding under the
Dutch Credit Facility that in the aggregate exceed the
amount of its liability under the Subsidiary Guaranty
on the date hereof;
(ix) obligations under currency swaps or hedging
arrangements permitted by paragraph 5J of the Note
Agreement;
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provided, however, that in no event will Guarantor, the Company or any
Subsidiary Guarantor Guarantee any Debt except as provided in clauses (i) and
(viii) of this Section 5.6, and except for the Debt of the Guarantor's Canadian
Subsidiary in the amount of Cdn.$4,000,000, provided that such Guaranties are
terminated no later than December 31, 1995.
5.7 LEVERAGE RESTRICTIONS. Notwithstanding the provisions of Section 5.6
hereof, incur, create, assume or permit to exist at any time any Debt, except to
the extent that the ratio of (a) Consolidated Debt, including the Notes to (b)
the sum of Consolidated Tangible Net Worth plus Consolidated Debt does not, at
any time exceed:
(i) for the period from and after the date of closing through and
including July 26, 1997, 50%;
(ii) for the period from and after July 27, 1997 through and
including July 31, 1999, 47.5%; and
(iii) at all times from and after August 1, 1999, 45%.
5.8 MERGER AND CONSOLIDATION. Merge or consolidate with or into any
other Person, except that:
(i) any Subsidiary other than the Company may merge or consolidate with
or into Guarantor; provided that Guarantor is the continuing or
surviving corporation,
(ii) any Subsidiary other than the Company may merge or consolidate
with or into a wholly owned Subsidiary (other than an Exempt
Subsidiary) that is organized and domiciled either in the United States
or in the country of such merged or consolidated Subsidiary;
(iii) Guarantor may merge with any other solvent corporation, provided
that (A) Guarantor shall be the continuing or surviving corporation;
and (B) no Default or Event of Default exists or would exist
immediately before or after giving effect to such merger; and
(iv) any Subsidiary may merge or consolidate with any other
corporation, provided that, immediately after giving effect to such
merger or consolidation (a) a wholly owned Subsidiary established under
the laws of any State in the United States or established in the
country of such merged or consolidated Subsidiary shall be the
continuing or surviving corporation and (b) no Default or Event of
Default exists or would exist before or after giving effect to such
merger or consolidation.
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5.9 TRANSFER OF ASSETS. Transfer any of its assets except that
(i) any Subsidiary other than the Company may Transfer assets
to Guarantor or a wholly owned Subsidiary (other than an
Exempt Subsidiary) that is organized and domiciled either in
the United States or in the country of the Transferring
Subsidiary;
(ii) Guarantor or any Subsidiary may sell inventory in the
ordinary course of business;
(iii) Guarantor or any Subsidiary may Transfer assets that, in
its good faith, reasonable judgment, have no further useful or
productive capacity, are fully used or depreciated, are
obsolete or are no longer necessary or productive in the
ordinary course of its business;
(iv) Guarantor may Transfer assets if permitted in Section
4.11(iii) or Guarantor or any Subsidiary may Transfer trade
receivables to the extent permitted by Section 5.11; and
(v) Guarantor or any Subsidiary may otherwise Transfer
assets, provided that after giving effect thereto (A) neither
the Annual Percentage of Tangible Assets Transferred nor the
Annual Percentage of Earnings Capacity Transferred pursuant to
this clause (v) shall exceed 5% and (B) neither the Cumulative
Percentage of Tangible Assets Transferred nor the Cumulative
Percentage of Earnings Capacity Transferred pursuant to this
clause (v) shall exceed 20%.
For purposes of determining compliance with the provisions of this
Section 5.9, Transfers of assets described in clause (i) - (iv) above shall not
be included in making the calculations required for the percentage limitations
set forth in clause (v) above.
5.10 SALE AND LEASE-BACK. Enter into any arrangement providing for the
leasing by Guarantor or any Subsidiary of real or personal property which has
been or is to be sold or transferred by Guarantor or any Subsidiary to a lender
or investor or to any other Person to whom funds have been or are to be advanced
by such lender, investor or other Person on the security of such property or
rental obligations of Guarantor or any Subsidiary; provided, however, that
Guarantor and its Subsidiaries may engage in such sale and lease-back
arrangements so long as (i) the aggregate amount of assets subject to such
arrangements, valued at original cost, does not at any time exceed $5,000,000;
(ii) the sales of such assets are subject to, and are permitted by, Section 5.9;
and (iii) the leases of such assets are subject to, and are permitted by,
Section 5.12.
5.11 SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, or discount or
otherwise sell for less than the face value thereof, any of its account
receivables,
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except (i) for sales without recourse of trade receivables as is
customary in countries other than the United States and Canada in the ordinary
course of business and in accordance with the practices and procedures set forth
in Schedule 5.11 hereto; (ii) sales, without recourse and otherwise on market
terms, of trade receivables, the collection of which is doubtful under GAAP; and
(iii) sales of receivables among Company, Guarantor and any Subsidiary
Guarantor.
5.12 FIXED CHARGE COVERAGE. Permit the ratio of (a) Consolidated Net
Earnings plus Consolidated Fixed Charges to (b) Consolidated Fixed Charges for
the four consecutive fiscal quarter period most recently ended as of the date of
determination to be less than (i) 1.05 between the date of closing and July 26,
1997 and (ii) 1.15 at all times from and after July 27, 1997.
5.13 RELATED PARTY TRANSACTIONS. Directly or indirectly engage in any
transaction, including the purchase, sale, exchange or other transfer of
property or other assets or the rendering of any services, or otherwise deal
with, any Shareholder or any other Affiliate of Guarantor, except in the
ordinary course of business and upon terms that are materially no less favorable
to Guarantor or such Subsidiary, as the case may be, than those that might be
obtained in an arm's-length transaction with an unrelated third party; provided,
however, that the foregoing shall not apply to any (i) Transfer of inventory
between Guarantor and any Subsidiary or among Subsidiaries on terms not
materially different than those in existence on the date of this Guaranty, (ii)
related party transactions on the terms set forth in Schedule 5.13, and (iii)
sales to, or purchases from (within the limitations of Section 5.2), any such
Related Party of shares of common stock of Guarantor for cash consideration
equal to the fair market value thereof pursuant to employee stock option, stock
appreciation and similar stock-based incentive plans applicable to employees of
Guarantor that have been approved by a majority of Guarantor's outside directors
and Guarantor's shareholders.
5.14 DEMAND ACCOUNT AND DEPOSIT ARRANGEMENTS. (i) Open or maintain cash
concentration, checking, savings or other accounts subject to set-off, bankers
lien or similar rights with any bank, savings and loan association, credit union
or other financial institution that holds Debt of Guarantor or any Subsidiary
(collectively, "CREDITOR BANKS") with an aggregate balance among all such
accounts (A) maintained at any individual Creditor Bank in excess of $3,000,000
at any time and (B) maintained at all Creditor Banks in excess of $5,000,000 at
any time; and (ii) direct or otherwise permit any royalty payments from any
Subsidiary to Guarantor to be deposited in, or to otherwise flow through, any
account at a Creditor Bank; provided, however, the deposit by the Company or the
Guarantor of the proceeds of the Notes into any account it maintains with any
Creditor Bank shall not constitute a breach of this paragraph 5.14 so long as
the funds remain in such account for a period not to extend beyond September 15,
1995.
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5.15 SUBSIDIARY RESTRICTIONS. Enter into, or be otherwise subject to,
any contract, agreement or other binding obligation that limits the amount of,
or otherwise restricts (i) the payment to Guarantor of dividends or other
redemptions or distributions with respect to its capital stock by any
Subsidiary, (ii) the repayment by any Subsidiary to Guarantor of intercompany
loans or advances, or (iii) other intercompany transfers of property or other
assets to Guarantor by Subsidiaries.
5.16 QUARTERLY PROFITABILITY. Permit Consolidated Net Earnings for
any period of two consecutive fiscal quarters to be negative (i.e., a net loss
when such quarters are combined).
5.17 SALE OF STOCK AND DEBT OF SUBSIDIARIES. Pledge or Transfer, or part
with control of, any shares of capital stock (except directors' qualifying
shares) or Debt of any Subsidiary, or permit a Subsidiary to issue any shares of
capital stock, except to Guarantor or a wholly owned Subsidiary organized in the
United States (other than an Exempt Subsidiary), and except that all shares of
capital stock and Debt of any Subsidiary at the time owned by or owed to
Guarantor and all of its Subsidiaries may be sold as an entirety to any Person
for consideration which represents fair value (as determined in good faith by
the Board of Directors of Guarantor) at the time of such sale; provided,
however, that (i) such sale is treated as an asset sale subject to, and is
permitted by, Section 5.9, (ii) at the time of such sale, such Subsidiary shall
not own, directly or indirectly, any shares of capital stock or Debt of
Guarantor or any other Subsidiary (unless all the shares of capital stock and
Debt of such other Subsidiary owned, directly or indirectly, by Guarantor and
all of its Subsidiaries are simultaneously being sold as permitted by this
Section 5.17), and (iii) no Default or Event of Default would otherwise result
from such transaction.
5.18 CURRENCY SWAP ARRANGEMENTS. Enter into or permit to remain
outstanding any currency swap or similar currency derivative arrangement, except
to the extent that (i) the face or notational amount of all such arrangements
does not exceed, at any time, $20,000,000; (ii) the counterparties to all such
arrangements are any of (A) ABN Amro Bank, N.V., (B) the Purchaser or any of its
Subsidiaries or Affiliates or (C) any other Person whose senior unsecured debt
securities are rated AA or better by S&P or Aa2 or better by Xxxxx'x or whose
commercial paper is rated A-1 or better by S&P or a P-1 or better by Xxxxx'x;
(iii) such arrangement has terms and conditions that are standard market,
ordinary course terms, including an agreement substantially similar to the
standard form swap agreement then being used by the International Swap Dealers
Association, Inc. or any successor entity; and (iv) such swap arrangement is not
primarily speculative in nature.
5.19 NET WORTH OF INMAC S.A. Allow the Net Worth of Inmac S.A. (as
expressed in Dollars, determined in accordance with paragraph 11V of the Note
Agreement) to be less than, at any time, $22,000,000 through May 31, 1998,
$16,000,000 through May 31, 1999, $12,000,000 through May 31, 2000, $8,000,000
through May 31, 2001 and $4,000,000 thereafter. For purposes of this paragraph
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5.19, "Net Worth" means, with respect to Inmac S.A., "capitaux propres" as
determined in accordance with French generally accepted accounting principles
and as reflected in the annual financial statements for the most recently ended
fiscal year of Inmac S.A.
SECTION 6. MISCELLANEOUS
6.1 SURVIVAL OF WARRANTIES. All agreements, representations and
warranties made herein shall survive the execution and delivery of this Guaranty
and the other Note Documents.
6.2 NOTICES. Any communications between Guarantor and any notices or
requests provided herein to be given may be given in accordance with paragraph
11I of the Note Agreement, and shall be deemed to have been received if given in
accordance with said paragraph.
6.3 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.
6.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor therefrom, shall in any event be effective without the written
concurrence of the Required Holders and, in the case of any such amendment or
modification, Guarantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
6.5 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.
6.6 APPLICABLE LAW. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
GUARANTOR AND NOTEHOLDERS HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
6.7 SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty and
shall be binding upon Guarantor and its successors and assigns. This Guaranty
shall inure to the benefit of Noteholders and their respective successors and
assigns. Guarantor shall not assign this Guaranty or any of the rights or
obligations of
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Guarantor hereunder without the prior written consent of all Noteholders. Any
Noteholder 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, and in the event of such transfer or assignment
the rights and privileges herein conferred upon Noteholders shall automatically
extend to and be vested in such Transferee, all subject to the terms and
conditions hereof.
6.8 CONSENT TO JURISDICTION AND SERVICES OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST GUARANTOR ARISING OUT OF OR RELATING TO THIS
GUARANTY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS GUARANTY
GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS GUARANTY. Guarantor hereby
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 Guarantor
at its address provided in subsection 6.2, such substituted service of process
being hereby acknowledged by Guarantor to be sufficient for personal
jurisdiction in any action against Guarantor in any such court and to be
otherwise effective and binding service in every respect. Without limiting the
foregoing, Guarantor hereby appoints in the case of any such action or
proceeding brought in the courts of or in the State of New York, CT Corporation,
with offices on the date hereof at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, to
receive, for it and on its behalf, service of process in the State of New York
with respect thereto. Nothing herein shall affect the right to serve process in
any other manner permitted by law or shall limit the right of any Noteholder to
bring proceedings against Guarantor in the courts of any other jurisdiction.
6.9 WAIVER OF TRIAL BY JURY. GUARANTOR AND, BY ITS ACCEPTANCE OF THE
BENEFITS HEREOF, THE NOTEHOLDERS EACH 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 without limitation contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Guarantor and, by its acceptance of the benefits hereof, the
Noteholders each (i) acknowledges that this waiver is a material inducement for
Guarantor to enter into a business relationship, that Guarantor has 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
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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, 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.
6.10 NO OTHER WRITING. This writing is intended by Guarantor 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.
6.11 FURTHER ASSURANCES. At any time or from time to time, upon the
request of Required Holders, Guarantor shall execute and deliver such further
documents and do such other acts and things as Required Holders may reasonably
request in order to effect fully the purposes of this Guaranty.
6.12 JUDGMENT CURRENCY INDEMNITY. Any payment on account of an amount
that is payable hereunder in Dollars or Dutch Guilders (the "Required Currency")
which is made to or for the account of any Noteholder in the lawful currency of
any other jurisdiction ("Currency"), whether as a result of any judgment or
order or the enforcement thereof or the realization of any security or the
liquidation of the Person obligated to make such payment shall constitute a
discharge of such Person's obligation under this Guaranty, the Note Agreement or
the Notes only to the extent of the amount of the Required Currency which such
Noteholder could purchase in the New York foreign exchange markets with the
amount of other Currency in accordance with normal banking procedures at the
rate of exchange prevailing on the first Business Day following receipt of the
payment first referred to above. If the amount of the Required Currency that
could be so purchased is less than the amount of the Required Currency
originally due to such Noteholder, the Person obligated hereunder to make such
payment shall indemnify and save harmless such Noteholder from and against all
loss or damage arising out of or as a result of such deficiency. This indemnity
shall constitute an obligation separate and independent from the other
obligations contained in this Guaranty, the Note Agreement or the Notes, shall
give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by such Noteholder from time to time and
shall continue in full force and effect notwithstanding any judgment or order
for a liquidated sum in respect of an amount due hereunder or under any judgment
or order. This paragraph shall survive the termination of this Guaranty, the
Note Agreement, the Notes and the Parent Guaranty and the repayment in full of
the Notes.
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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first written above.
INMAC CORP.
By
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Title
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Address: 0000 Xxxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
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