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Limited Litigation Guaranty

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Sectors: Telecommunications
Governing Law: United States
Effective Date: October 24, 1997
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EXECUTION COPY


LIMITED LITIGATION GUARANTY


This LIMITED LITIGATION GUARANTY (this "Guaranty"), dated as of October 24, 1997, by and among PEGASUS PARTNERS, L.P., a Delaware limited partnership, and PEGASUS RELATED PARTNERS, L.P., a Delaware limited partnership (each individually, a "Guarantor" and together, collectively, the "Guarantors"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, individually and as agent (in such capacity, "Agent") for itself and the lenders from time to time signatory to the Credit Agreement hereinafter defined ("Lenders").

W I T N E S S E T H:


WHEREAS, pursuant to that certain Credit Agreement dated as of the date hereof by and among Code-Alarm, Inc., a Michigan corporation ("Borrower"), the other Persons signatory thereto as Credit Parties, Agent and the Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto, and, subject to Section 8, as from time to time amended, restated, supplemented or otherwise modified, the "Credit Agreement"), Lenders have agreed to make Loans to, and incur Letter of Credit Obligations for the benefit of, Borrowers.


WHEREAS, pursuant to that certain Litigation L/C and Term Loan C Agreement of even date herewith among Borrower, Agent and certain of the Lenders (including all exhibits thereto, as may be from time to time amended, restated, supplemented or otherwise modified, the "L/C Agreement"), such Lenders have agreed to incur Litigation L/C Obligations for the benefit of, or under the Term Loan C to, Borrower.


WHEREAS, each Guarantor is a shareholder of Borrower and will, accordingly, derive direct and indirect economic benefits from the making of the Loans and other financial accommodations provided to Borrower pursuant to the Credit Agreement and L/C Agreement; and


WHEREAS, in order to induce Agent and Lenders to enter into the Credit Agreement, L/C Agreement and other Loan Documents and to induce Lenders to make the Loans and to incur Letter of Credit Obligations and Litigation Obligations as provided for in the Credit Agreement and L/C Agreement, each Guarantor has agreed to severally and not jointly guarantee payment of the Litigation Obligations, subject to the limitations set forth herein;


NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, and to induce Lenders to provide the Loans and other financial accommodations under the Credit Agreement and L/C Agreement, it is agreed as follows:


1. DEFINITIONS. Capitalized terms used herein shall have the meanings assigned to them in the Credit Agreement, unless otherwise defined herein.


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References to this "Guaranty" shall mean this Guaranty, including all amendments, modifications and supplements and any annexes, exhibits and schedules to any of the foregoing, and shall refer to this Guaranty as the same may be in effect at the time such reference becomes operative.


In addition, the following terms, as used herein, shall have the meanings set forth below:


"Administrative GP" shall have the meaning ascribed to such term in Section 3(a).


"Aggregate Net Capital" shall mean, as of any date of determination, the sum of (i) the Net Assets of both Guarantors plus (ii) the Unpaid Capital Obligations of the limited partners of each of the Guarantors.


"Aggregate Portfolio Cash Flow" shall mean, as of the last day of any fiscal quarter of the Guarantors or as of the last day of any fiscal year of the Guarantors, the aggregate sum of the EBTDA, as reported to the Guarantors, of all Portfolio Companies of the Guarantors for the most recently ended period of four fiscal quarters (taken as a single accounting period) of each such Portfolio Company which at the time of determination has been reported to the Guarantors (it being acknowledged that a fiscal quarter of a Portfolio Company will not necessarily coincide with a fiscal quarter of the Guarantors); provided that (i) if such period of four fiscal quarters of a Portfolio Company shall include periods prior to the Guarantors making a Portfolio Investment in such Portfolio Company, then "Aggregate Portfolio Cash Flow" shall include the EBTDA of such Portfolio Company only for full fiscal quarters of the Portfolio Company commenced after such Portfolio Investment is made and (ii) the calculation of Aggregate Portfolio Cash Flow for any period shall exclude the EBTDA of each Portfolio Company in which the Guarantors' Portfolio Investments consist exclusively of non-convertible debt instruments and non-convertible preferred stock.


"Capital Demand Date" shall have the meaning ascribed to such term in the Partnership Agreements as in effect to from time to time.

"Capital Demand Notice(s)" shall have the meaning ascribed to such term in the Partnership Agreements as in effect from time to time.


"Cash Collateral Account" shall have the meaning ascribed to such term in Section 6.


"Corporate GP" shall have the meaning ascribed to such terms in Section 3(a).


"Current Market Price" shall mean, as of any date of determination, and for any asset which is a security, the average of the daily market prices of such security for the twenty consecutive trading days immediately preceding such date. The "daily market price" for each


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trading day shall be (i) if such security is then listed on a national securities exchange or is listed on NASDAQ and is designated as a National Market System security, the last sale price on such day on the principal stock exchange or market system on which such security is then listed or admitted for trading, or (ii) if such security is not then listed or admitted to trading on any national securities exchange or designated as a National Market System security on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for such security as reported on NASDAQ or the Electronic Bulletin Board or in the National Daily Quotation Sheets, as applicable.

"Defaulting Limited Partner" shall have the meaning ascribed to such term in the Partnership Agreements as in effect on the date hereof.


"EBTDA" shall mean, for any Portfolio Company and for any period, such Portfolio Company's consolidated earnings before taxes, depreciation and amortization (excluding, in the case of Borrower, any losses with respect to the DEI Litigation).


"Effectiveness Conditions" shall mean, subject to Section 3(b) hereof, (i) the receipt by Agent of each of the items described in Section 3 hereof, in each case in form, scope and substance satisfactory to Agent and written confirmation thereof by Agent pursuant to Section 3(b) hereof, (ii) the execution and delivery by Borrower in favor of the Guarantors of the "Litigation Warrants" referred to and as defined in the Series A Preferred Stock Documents and written confirmation thereof and of receipt of the Litigation Warrant Opinion by Guarantors pursuant to Section 3(b) hereof and (iii) the issuance of the Litigation L/C.


"Effective Date" shall mean the date on which all of the Effectiveness Conditions shall have been satisfied.


"Event of Dissolution" shall have the meaning ascribed to such term in the Partnership Agreements as in effect on the date hereof and any other "Event of Dissolution" as may be hereafter defined in the Partnership Agreements.


"Fair Market Value" shall mean, as of any date of determination and for any asset owned by any Guarantor (A) if such asset is a security which is publicly traded on such date, the Current Market Price of such security or (B) if such asset is not a publicly traded security as of such date, the fair market value of such asset as reasonably determined in good faith by the Managing GP of the applicable Guarantor.

"Guarantor Default" shall mean (i) any failure of either Guarantor to pay or perform any of its obligations under this Guaranty, (ii) any breach by either Guarantor of any representation or warranty hereunder in any material respect, (iii) the occurrence of any insolvency event with respect to either Guarantor under Sections 8.1(h) or 8.1(i) of the Credit Agreement, (iv) any revocation or attempted revocation by either Guarantor of its obligations


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under this Guaranty, or (v) any "Guarantor Default" shall have occurred under and as defined in that certain Limited Supplemental Guaranty of even date herewith among the Guarantors and Agent.


"Guaranteed Obligations" shall have the meaning ascribed to such term in Section 2.1.


"Instruction Certificate(s)" shall mean one or more written certificates executed by Agent and delivered to the Administrative GP stating that (i) Agent is entitled to demand payment under this Guaranty, (ii) Agent has demanded payment under this Guaranty, (iii) the Guarantors have failed to timely satisfy all of such payments properly demanded, (iv) the Administrative GP is instructed to deliver a Capital Demand Notice to each limited partner of each Guarantor specifying the earliest possible Capital Demand Date as is permitted under Section 3.1 of the Partnership Agreements and demanding capital contributions under such section in amounts sufficient to permit the Guarantors to satisfy such unsatisfied payment obligations to Agent under this Guaranty and (v) all of the proceeds of such capital contributions received by the Administrative GP are to be promptly sent, by wire transfer, to an account specified in such certificate for application by Agent to such unsatisfied payment obligations.


"Irrevocable Instruction" shall mean a document, in form and substance acceptable to Agent, pursuant to which the Managing GP instructs the Administrative GP, and the Administrative GP agrees, that upon the Administrative GP's receipt of an Instruction Certificate from Agent, the Administrative Agent shall (i) deliver a Capital Demand Notice to each limited partner of each Guarantor, specifying the earliest Capital Demand Date as is permitted under section 3.1 of the Partnership Agreements and demanding capital contributions under such section in amounts sufficient to permit the Guarantors to satisfy the unpaid Guaranteed Obligations set forth in such Instruction Certificate and (ii) pay all of the proceeds of such capital contributions received by the Administrative GP to Agent on behalf of the Guarantors for application by Agent to such Guaranteed Obligations pursuant to the instructions specified by Agent in such Instruction Certificate. Such Irrevocable Instruction may only be amended, terminated or modified with the written consent of Agent, the Administrative GP and the Managing GP.


"Limitation Amount" shall mean the lesser of $12,000,000 and the originally stated face amount of the Litigation L/C.


"Litigation Warrant Opinion" shall mean an opinion of counsel to Borrower addressed to the Guarantors confirming, as of the date of the delivery thereof, with respect to the "Litigation Warrants" referred to and as defined in the Series A Preferred Stock Documents, substantially the same opinions as were given by such counsel to Guarantors as of October 27, 1997 with respect to the "Attached Warrants" pursuant to and as defined in the Series A Stock Purchase Agreement as provided in the first and third sentences of paragraph 3, paragraph 8 and paragraph 11 (and for purposes of such paragraph 11, counsel may assume that Guarantors' representation remains true), and opining that the Litigation Warrants have been duly executed


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and delivered by the Borrower and constitute valid and binding obligations of Borrower, enforceable against Borrower in accordance with their terms, provided, that such opinion shall not contain assumptions as to issuance in accordance with Series A Purchase Agreement of the Litigation Warrants.

"Managing GP" shall have the meaning ascribed to such term in Section 3(a).


"Net Assets" shall mean, with respect to either Guarantor as of any date of determination, such Guarantor's consolidated total assets, valued at the lower of cost or Fair Market Value, minus its consolidated total liabilities as determined in accordance with GAAP consistently applied and minus the aggregate amount of such Guarantor's consolidated known contingent liabilities (to the extent not included in its total liabilities).


"Partnership Agreements" shall mean the Agreement of Limited Partnership of each Guarantor as in effect as of the date hereof and attached hereto as Exhibit A and B, respectively, as amended or otherwise modified from time to time hereafter.


"Portfolio Company" shall have the meaning ascribed to such term in the Partnership Agreements as of the date hereof.


"Portfolio Investment" shall have the meaning ascribed to such term in the Partnership Agreements as of the date hereof.


"Ratable Share" shall mean 27.7727273% in the case of Pegasus Partners, L.P., and 72.2272727% in the case of Pegasus Related Partners, L.P.


"Termination Date" shall have the meaning ascribed to such term in Section 2.1.


"Trigger Event" shall mean (i) any Event of Dissolution, (ii) the existence of any Defaulting Limited Partner and the failure of the non-defaulting limited partners of the affected Guarantor to assume the Unpaid Capital Obligations of such Defaulting Limited Partner within thirty days of the default giving rise such occurrence, (iii) any Guarantor Default, (iv) the Aggregate Portfolio Cash Flow is less than $1.00, (v) the Aggregate Net Capital at any time shall be less than $125,000,000, (vi) the Unpaid Capital Obligations at any time during the period commencing on the date hereof and ending on October 24, 1998 shall be less than $50,000,000, (vii) the Unpaid Capital Obligations at any time after October 24, 1998 shall be less than $25,000,000, or (viii) any amendment or other modification with respect to either Partnership Agreement shall become effective and shall have a material adverse effect upon the rights or claims of Agent and the Lenders under this Guaranty.


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"Unpaid Capital Obligations" shall mean, with respect to either Guarantor's limited partners, as of any date of determination, the "Unpaid Capital Obligations" under and as defined in such Guarantor's Partnership Agreement as in effect on the date hereof, excluding, however, such obligations of each Default Limited Partner of such Guarantor unless and until such limited partner's obligations are assumed by the non-defaulting limited partners of such Guarantor.


2. THE GUARANTY.


2.1 Guaranty of Guaranteed Obligations of Borrower. Subject to the provisions of this Guaranty, each Guarantor hereby severally (based upon their respective Ratable Shares) and not jointly, irrevocably and unconditionally guarantees to Agent and Lenders, and their respective successors, endorsees, transferees and assigns, the prompt payment (whether at stated maturity, by acceleration or otherwise) of the Litigation Obligations of Borrower (hereinafter the "Guaranteed Obligations"). Subject to the provisions of this Guaranty, in the event that either Guarantor shall fail to timely satisfy any such obligations or any other payment obligations under this Guaranty, Agent shall be thereafter entitled, in its discretion, to deliver one or more Instruction Certificates to the Administrative GP requesting payment thereof pursuant to the Irrevocable Instruction. Each Guarantor agrees that this Guaranty is a guaranty of payment and not of collection, and that its obligations under this Guaranty shall be primary, absolute and, subject to the provisions of this Guaranty, unconditional, irrespective of, and unaffected by:


(a) the genuineness, validity, regularity, enforceability or
any future amendment of, or change in, this Guaranty, any other Loan
Document or any other agreement, document or instrument to which any Credit
Party, either Guarantor or other Persons are or may become a party;

(b) the absence of any action to enforce this Guaranty or any
other Loan Document or the waiver or consent by Agent and/or Lenders with
respect to any of the provisions thereof;

(c) the existence, value or condition of, or failure to
perfect its Lien against, any Collateral for the Guaranteed Obligations or
any action, or the absence of any action, by Agent in respect thereof;

(d) the discharge, avoidance, subordination or other
ineffectiveness of any of the Guaranteed Obligations, whether pursuant to
any insolvency proceeding or otherwise;

(e) the insolvency of any Credit Party, either Guarantor or other
Person; or


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(f) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor;


it being agreed by each Guarantor that its obligations under this Guaranty shall not be discharged until the later of the following dates (hereinafter, the "Termination Date"): (i) in the event that the Litigation L/C shall have been issued, the earliest date on which Term Loan C has been repaid in full, the Litigation L/C has expired, been canceled, or been terminated, all other Guaranteed Obligations have been paid in full, and the Lenders shall have no further obligations to incur Litigation L/C Obligations under the Credit Agreement or L/C Agreement or (ii) in the event that the Litigation L/C shall not have been issued, the earliest date on which the Litigation L/C have not been issued and the Lenders have no further obligation to incur Litigation L/C Obligations under the Credit Agreement or L/C Agreement; provided, however, that the Termination Date may thereafter be deemed to have not occurred upon Guarantors' obligations under this Guaranty being reinstated pursuant to Section 2.8 and shall be extended until such time as the payments giving rise to such reinstatement are thereafter again repaid to Agent and Lenders. Subject to limitations described in Section 2.2, each Guarantor shall be regarded, and shall be in the same position, as principal debtor with respect to the Guaranteed Obligations. Each Guarantor agrees that any notice or directive given at any time to Agent which is inconsistent with this section, or Sections 2.5 or 2.7, shall be null and void and may be ignored by Agent and Lenders, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Guaranty for the reason that such pleading or introduction would be at variance with the written terms of this Guaranty, unless Agent and Lenders have specifically agreed otherwise in writing. It is agreed among Guarantor, Agent and Lenders that the foregoing provisions, and those of Sections 2.5 and 2.7, are of the essence of the transaction contemplated by the Loan Documents and that, but for this Guaranty and such waivers, Agent and Lenders would decline to enter into the Credit Agreement and L/C Agreement.


2.2 Limitations. Notwithstanding anything in Section 2.1 or elsewhere in this Guaranty to the contrary, (a) the aggregate liability of Guarantors under this Guaranty shall, in no event, exceed, the Limitation Amount, plus interest on each amount payable hereunder from the date such payment by Guarantors hereunder is due and payable pursuant to clause (b) of this section (at a per annum rate equal to the Default Rate for Term Loan C if it were bearing interest based upon the Index Rate computed on the basis of 360 days and actual days elapsed), until such payment is received by Agent, and plus all costs and expenses (including, without limitation, attorneys' and paralegals' fees and expenses) incurred by Agent following either Guarantor's failure to timely satisfy its obligations hereunder, in connection with the enforcement and collection of the Guarantors' obligations under this Guaranty against the Guarantors and their respective partners and properties, (b) each payment by Guarantors hereunder shall be due and payable on the tenth (10th) calendar day following the date on which demand for such payment is given by Agent to Guarantors, and (c) Agent shall not be permitted to demand payment hereunder from Guarantors, and Guarantors shall not be liable hereunder for any such demanded payment, unless the Effectiveness Conditions shall have been satisfied, there shall have occurred a draw under the Litigation L/C or the Litigation L/C Obligations shall have been converted to the Term


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Loan C pursuant to the terms of the Loan Documents, and Borrower shall have failed to pay, when due, all or any portion of the Litigation Obligations.

2.3 Payment by Guarantor. Payment by either Guarantor shall be made to Agent in immediately available Federal funds to an account designated by Agent or at the address set forth herein for the giving of notice to Agent or at any other address that may be specified in writing from time to time by Agent, and shall be credited and applied to the Guaranteed Obligations.


2.4 Enforcement of Guaranty. In no event shall Agent have any obligation (although it is entitled, at its option) to proceed against Borrower, any other Credit Party, one but not the other Guarantor, or other Person, or any Collateral, before seeking satisfaction from either Guarantor.


2.5 Waiver. In addition to the provisions of Section 2.1 hereof, each Guarantor waives, and agrees that it shall not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshaling of assets or redemption laws, or exemption, whether now or at an
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