Exhibit 10.4

 

GUARANTY

 

July 19, 2005

 

Wachovia Bank, National Association
1133 Avenue of the Americas
New York, New York 10036

 

Re:                               Lerner New York, Inc. and Lernco, Inc.

 

Ladies and Gentlemen:

 

Wachovia Bank, National Association (“Wachovia”), successor by merger to
Congress Financial Corporation, as agent (in such capacity “Agent”) for the
Lenders (as defined below) and the Bank Product Providers (as defined in the
Loan Agreement (as defined below)), Lerner New York, Inc., a Delaware
corporation (“Lerner”) and Lernco, Inc., a Delaware corporation (“Lernco” and
together with Lerner and any other person now or hereafter made a party to the
Loan Agreement as a ‘Borrower’, collectively referred to as “Borrowers” and
individually each a “Borrower”) have entered into certain financing arrangements
pursuant to which Lenders may make loans and advances and provide other
financial accommodations to Borrowers as set forth in that certain Amended and
Restated Loan and Security Agreement, dated as of March 16, 2004, by and among
Agent, Borrowers, the persons from time to time party thereto as lenders (the
“Lenders”), The CIT Group/Business Credit, Inc., in its capacity as
documentation agent for the Lenders, and Wachovia, in its capacity as the
arranger for the Lenders (as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, the “Loan
Agreement”), and other agreements, documents and instruments referred to therein
or at any time executed and/or delivered in connection therewith or related
thereto, including, but not limited to, this Guaranty (all of the foregoing,
together with the Loan Agreement, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, being
collectively referred to herein as the “Financing Agreements”).

 

Due to the close business and financial relationships between Borrowers and the
undersigned (“Guarantor”), in consideration of the benefits which will accrue to
Guarantor and as an inducement for and in consideration of Agent and the Lenders
making or continuing to make loans and advances and providing or continuing to
provide other financial accommodations to Borrowers pursuant to the Loan
Agreement and the other Financing Agreements, Guarantor hereby agrees in favor
of Agent and the Lenders as follows:

 

1.             Guaranty.

 

(a)           Guarantor absolutely, unconditionally and irrevocably guarantees
and agrees to be liable for the full and indefeasible payment and performance
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of the following (all of which are
collectively referred to herein as the “Guaranteed Obligations”):

 

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(i) the Obligations (as defined in the Loan Agreement) and (ii) all costs and
expenses (including, without limitation, attorneys’ fees and legal expenses)
incurred by Agent or any Lender in connection with the preparation, execution,
delivery, recording, administration, collection, liquidation, enforcement and
defense of any Borrower’s obligations, liabilities and indebtedness as aforesaid
to Agent or any Lender, the rights of Agent or any Lender in any collateral or
under this Guaranty and all other Financing Agreements or in any way involving
claims by or against Agent or any Lender directly or indirectly arising out of
or related to the relationships between any Borrower, Guarantor or any other
Obligor (as hereinafter defined) and Agent or any Lender, whether such expenses
are incurred before, during or after the initial or any renewal term of the Loan
Agreement and the other Financing Agreements or after the commencement of any
case with respect to any Borrower or Guarantor under the United States
Bankruptcy Code or any similar statute; provided, however, that Guarantor shall
only be liable under this Guaranty for the maximum amount of such liability that
can be hereby incurred without rendering this Guaranty, as it relates to
Guarantor, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer, and not for any greater amount.

 

(b)           This Guaranty is a guaranty of payment and not of collection. 
Guarantor agrees that Agent need not attempt to collect any Guaranteed
Obligations from any Borrower, Guarantor or any other Obligor or to realize upon
any collateral, but may require Guarantor to make immediate payment of all of
the Guaranteed Obligations to Agent, for itself and for the benefit of the
Lenders and the Bank Product Providers, when due, whether by maturity,
acceleration or otherwise, or at any time thereafter.  Agent may apply any
amounts received in respect of the Guaranteed Obligations to any of the
Guaranteed Obligations, in whole or in part (including attorneys’ fees and legal
expenses incurred by Agent or any Lender with respect thereto or otherwise
chargeable to any Borrower, Guarantor or any other Obligor) and in such order as
Agent may elect.

 

(c)           Payment by Guarantor shall be made in U.S. dollars to Agent at the
office of Agent from time to time on demand as Guaranteed Obligations become
due.  Guarantor shall make all payments to Agent on the Guaranteed Obligations
free and clear of, and without deduction or withholding for or on account of,
any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees,
deductions, withholding, restrictions or conditions of any kind.  One or more
successive or concurrent actions may be brought hereon against Guarantor either
in the same action in which any Borrower or any other Obligor is sued or in
separate actions.  In the event any claim or action, or action on any judgment,
based on this Guaranty is brought against Guarantor, Guarantor agrees not to
deduct, set-off, or seek any counterclaim for or recoup any amounts which are or
may be owed by Agent or any Lender to Guarantor.

 

2.             Waivers and Consents.

 

(a)           Notice of acceptance of this Guaranty, the making of loans and
advances and providing other financial accommodations to Borrowers and
presentment, demand, protest, notice of protest, notice of nonpayment or default
and all other notices to which any Borrower or Guarantor is entitled are hereby
waived by Guarantor.  Guarantor also waives notice of and hereby consents to,
(i) any amendment, modification, supplement, waiver, extension, renewal, or
restatement of the Loan Agreement and any of the other Financing Agreements,
including, without limitation, extensions of time of payment of or increase or
decrease in the amount of any

 

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of the Guaranteed Obligations, the interest rate, fees, other charges, or any
collateral, and the guaranty made herein shall apply to the Loan Agreement and
the other Financing Agreements and the Guaranteed Obligations as so amended,
modified, supplemented, renewed, restated or extended, increased or decreased,
(ii) the taking, exchange, surrender and releasing of collateral or guarantees
now or at any time held by or available to Agent or any Lender for the
obligations of any Borrower or any other party at any time liable on or in
respect of the Guaranteed Obligations or who is the owner of any property which
is security for the Guaranteed Obligations (individually, an “Obligor” and
collectively, the “Obligors”), (iii) the exercise of, or refraining from the
exercise of any rights against any Borrower or any other Obligor or any
collateral, (iv) the settlement, compromise or release of, or the waiver of any
default with respect to, any of the Guaranteed Obligations and (v) any financing
by Agent or any Lender of any Borrower under Section 364 of the United States
Bankruptcy Code or consent to the use of cash collateral by Agent or any Lender
under Section 363 of the United States Bankruptcy Code.  Guarantor agrees that
the amount of the Guaranteed Obligations shall not be diminished and the
liability of Guarantor hereunder shall not be otherwise impaired or affected by
any of the foregoing.

 

(b)           No invalidity, irregularity or unenforceability of all or any part
of the Guaranteed Obligations shall affect, impair or be a defense to this
Guaranty, nor shall any other circumstance which might otherwise constitute a
defense available to or legal or equitable discharge of any Borrower in respect
of any of the Guaranteed Obligations, or Guarantor in respect of this Guaranty,
affect, impair or be a defense to this Guaranty.  Without limitation of the
foregoing, the liability of Guarantor hereunder shall not be discharged or
impaired in any respect by reason of any failure by Agent to perfect or continue
perfection of any lien or security interest in any collateral or any delay by
Agent in perfecting any such lien or security interest.  As to interest, fees
and expenses, whether arising before or after the commencement of any case with
respect to any Borrower under the United States Bankruptcy Code or any similar
statute, Guarantor shall be liable therefor, even if such Borrower’s liability
for such amounts does not, or ceases to, exist by operation of law.  Guarantor
acknowledges that neither Agent nor any Lender has not made any representations
to Guarantor with respect to any Borrower, any other Obligor or otherwise in
connection with the execution and delivery by Guarantor of this Guaranty and
Guarantor is not in any respect relying upon Agent or any Lender or any
statements by Agent or any Lender in connection with this Guaranty.

 

(c)           To the fullest extent permitted by law, Guarantor hereby
irrevocably and unconditionally waives and relinquishes all statutory,
contractual, common law, equitable and all other claims against all Borrowers,
any collateral for the Guaranteed Obligations or other assets of any Borrower or
any other Obligor, for subrogation, reimbursement, exoneration, contribution,
indemnification, setoff or other recourse in respect to sums paid or payable to
Agent or any Lender by Guarantor hereunder and Guarantor hereby further
irrevocably and unconditionally waives and relinquishes any and all other
benefits which Guarantor might otherwise directly or indirectly receive or be
entitled to receive by reason of any amounts paid by or collected or due from
Guarantor, any Borrower or any other Obligor upon the Guaranteed Obligations or
realized from their property.  The foregoing waiver of rights is made in favor
of Agent and the Lenders only and shall not be deemed a waiver of such rights
for the benefit of any other creditors of any Borrower, Guarantor or any other
Obligor.

 

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(d)           Guarantor hereby irrevocably and unconditionally waives and
relinquishes any right to revoke this Guaranty that Guarantor may now have or
hereafter acquire.

 

(e)           Without limiting the generality of any other waiver or other
provision set forth in this Guaranty, Guarantor hereby irrevocably and
unconditionally waives all rights and defenses arising out of an election of
remedies by Agent, 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 any Borrower.

 

(f)            Without limiting the generality of any other waiver or other
provision set forth in this Guaranty, Guarantor waives all rights and defenses
that Guarantor may have because the Guaranteed Obligations are secured by real
property.  This means, among other things: (i) Agent may collect from Guarantor
without first foreclosing on any real or personal property collateral pledged by
any Borrower; and (ii) if Agent forecloses on any real property collateral
pledged by any Borrower: (A) the amount of the Guaranteed Obligations may be
reduced only by the price for which that collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price and (B) Agent may
collect from Guarantor even if Agent, by foreclosing on the real property
collateral, has destroyed any right Guarantor may have to collect from such
Borrower.  This is an unconditional and irrevocable waiver of any rights and
defenses Guarantor may have because the Guaranteed Obligations are secured by
real property.

 

(g)           Without limiting the generality of any other waiver or other
provision set forth in this Guaranty, Guarantor hereby irrevocably and
unconditionally waives and relinquishes, to the maximum extent such waiver or
relinquishment is permitted by applicable law, all rights to interpose claims,
deductions, setoffs or counterclaims of any nature (other than compulsory
counterclaims) in any action or proceeding with respect to this Guaranty,
Guarantor’s obligations hereunder, or any matter arising from or related to the
foregoing.

 

3.             Subordination.  Payment of all amounts now or hereafter owed to
Guarantor by any Borrower or any other Obligor is hereby subordinated in right
of payment to the indefeasible payment in full to Agent, for itself and for the
benefit of the Lenders and the Bank Product Providers, of the Guaranteed
Obligations and all such amounts and any security and guarantees therefor are
hereby assigned to Agent, for itself and for the ratable benefit of the Lenders
and Bank Product Providers, as security for the Guaranteed Obligations.

 

4.             Acceleration.  Notwithstanding anything to the contrary contained
herein or any of the terms of any of the other Financing Agreements, the
liability of Guarantor for the entirety of the Guaranteed Obligations shall
mature and become immediately due and payable upon the acceleration of the
Guaranteed Obligations.

 

5.             Account Stated.  The books and records of Agent showing the
account between Agent, the Lenders and Borrowers shall be admissible in evidence
in any action or proceeding against or involving Guarantor as prima facie proof
of the items therein set forth, and the monthly statements of Agent rendered to
Borrowers, to the extent to which no written objection is made within thirty
(30) days from the date of sending thereof to Borrowers, shall be deemed
conclusively correct and constitute an account stated between Agent, the Lenders
and Borrowers and be binding on Guarantor.

 

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6.             Termination.  This Guaranty is continuing, unlimited, absolute
and unconditional.  All Guaranteed Obligations shall be conclusively presumed to
have been created in reliance on this Guaranty.  This Guaranty may not be
terminated and shall continue so long as either (a) the Loan Agreement shall be
in effect (whether during its original term or any renewal, substitution or
extension thereof) or (b) any non-contingent Guaranteed Obligations shall be
outstanding.

 

7.             Reinstatement.  If any payment of any Guaranteed Obligations is
invalidated, declared to be fraudulent or preferential, set aside, rescinded, or
if after receipt of any payment of, or proceeds of collateral applied to the
payment of, any of the Guaranteed Obligations, Agent or any Lender is required
to surrender, return or otherwise restore such payment or proceeds to any Person
for any reason, then the Guaranteed Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this Guaranty shall
continue in full force and effect as if such payment or proceeds had not been
received by Agent or such Lender.  Guarantor shall be liable to pay to Agent and
the Lender, and does indemnify and hold Agent and the Lenders harmless for the
amount of any payments or proceeds rescinded, invalidated, surrendered or
returned.  This Section 7 shall remain effective notwithstanding any contrary
action which may be taken by Agent or any Lender in reliance upon such payment
or proceeds.  This Section 7 shall survive the termination of this Guaranty.

 

8.             Amendments and Waivers.  Neither this Guaranty nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Agent and otherwise in accordance with the terms of the Loan Agreement, and as
to any amendments, as also signed by an authorized officer of Guarantor.  Agent
shall not by any act, delay, omission or otherwise be deemed to have expressly
or impliedly waived any of its or any Lender’s rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Agent.  Any such waiver shall be enforceable only to the extent specifically set
forth therein.  A waiver by Agent of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Agent or any Lender would otherwise have on any future
occasion, whether similar in kind or otherwise.

 

9.             Corporate Existence, Power and Authority.  Guarantor is a
corporation duly organized and in good standing under the laws of its state or
other jurisdiction of incorporation and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it or the ownership of assets
makes such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a material adverse effect on the financial
condition, results of operation or businesses of Guarantor or the rights of
Agent or any Lender hereunder or under any of the other Financing Agreements. 
The execution, delivery and performance of this Guaranty is within the corporate
powers of Guarantor, have been duly authorized and are not in contravention of
law or the terms of the certificates of incorporation, by-laws, or other
organizational documentation of Guarantor, or any indenture, agreement or
undertaking to which Guarantor is a party or by which Guarantor or its property
are bound.  This Guaranty constitutes the legal, valid and binding obligation of
Guarantor enforceable in accordance with its terms.

 

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10.           Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.

 

(a)           The validity, interpretation and enforcement of this Guaranty and
any dispute arising out of the relationship between Guarantor, Agent and the
Lenders, whether in contract, tort, equity or otherwise, shall be governed by
the internal laws of the State of New York (including for such purpose, Sections
5-14-1 and 5-1402 of the General Obligations Law of the State of New York) but
excluding any principles of conflicts of law or other rule of law that would
cause the application of the law of any jurisdiction other than the laws of the
State of New York.

 

(b)           Guarantor hereby irrevocably consents and submits to the
non-exclusive jurisdiction of the state and federal courts located in the State
of New York, New York Country or in the United States District Court for the
Southern District of New York, whichever Agent may elect, and waives any
objection based on venue or forum non conveniens with respect to any action
instituted therein arising under this Guaranty or any of the other Financing
Agreements or in any way connected with or related or incidental to the dealings
of Guarantor, Agent and the Lenders in respect of this Guaranty or any of the
other Financing Agreements or the transactions related hereto or thereto, in
each case whether now existing or hereafter arising and whether in contract,
tort, equity or otherwise, and agrees that any dispute arising out of the
relationship between Guarantor or Borrowers and Agent and the Lenders or the
conduct of any such persons in connection with this Guaranty, the other
Financing Agreements or otherwise shall be heard only in the courts described
above (except that Agent shall have the right to bring any action or proceeding
against Guarantor or its property in the courts of any other jurisdiction which
Agent deems necessary or appropriate in order to realize on any collateral at
any time granted by any Borrower or Guarantor to Agent or to otherwise enforce
its rights against Guarantor or its property).

 

(c)           Guarantor hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth on the
signature pages hereof and service so made shall be deemed to be completed five
(5) days after the same shall have been so deposited in the U.S. mails, or, at
Agent’s option, by service upon Guarantor in any other manner provided under the
rules of any such courts.  Within thirty (30) days after such service, Guarantor
shall appear in answer to such process, failing which Guarantor shall be deemed
in default and judgment may be entered by Agent against Guarantor for the amount
of the claim and other relief requested.

 

(d)           GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS GUARANTY OR ANY OF THE
OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF GUARANTOR, AGENT AND THE LENDERS IN RESPECT OF
THIS GUARANTY OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  GUARANTOR HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT GUARANTOR OR LENDER MAY FILE
AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN

 

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EVIDENCE OF THE CONSENT OF GUARANTOR AND LENDER TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.

 

(e)           Neither the Agent nor any Lender shall have any liability to
Guarantor (whether in tort, contract, equity or otherwise) for losses suffered
by Guarantor in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Guaranty, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on such person that the
losses were the result of acts or omissions constituting gross negligence or
willful misconduct of such person (as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction).  In any such
litigation, Agent and each Lender shall be entitled to the benefit of the
rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of the Loan Agreement and
the other Financing Agreements.  Except as prohibited by law, Guarantor waives
any right which it may have to claim or recover in any litigation with Agent or
any Lender any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages.  Guarantor: 
(i) certifies that none of Agent, any Lender or any of their respective
representatives, agents or attorneys acting for or on behalf of such person has
represented, expressly or otherwise, that such person would not, in the event of
litigation, seek to enforce any of the waivers provided for in this Guaranty and
(ii) acknowledges that in entering into this Guaranty and the other Financing
Agreements, Agent and the Lenders are relying upon, among other things, the
waivers and certifications set forth in this Section 10 and elsewhere herein and
therein.

 

11.           Notices.  All notices, requests and demands hereunder shall be in
writing and (a) made to Agent at its address set forth above and to Guarantor at
its chief executive office set forth below, or to such other address as either
party may designate by written notice to the other in accordance with this
provision, and (b) deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.

 

12.           Partial Invalidity.  If any provision of this Guaranty is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Guaranty as a whole, but this Guaranty shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.

 

13.           Entire Agreement.  This Guaranty represents the entire agreement
and understanding of this parties concerning the subject matter hereof, and
supersedes all other prior agreements, understandings, negotiations and
discussions, representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or written.

 

14.           Successors and Assigns.  This Guaranty shall be binding upon
Guarantor and its successors and assigns and shall inure to the benefit of
Agent, each Lender and Bank Product Providers and their respective successors,
endorsees, transferees and assigns.  The liquidation,

 

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dissolution or termination of Guarantor shall not terminate this Guaranty as to
such entity or as to Guarantor.

 

15.           Agreement to be Bound by Loan Agreement.  Guarantor hereby agrees
to be bound by and to comply with the terms of each provision of the Loan
Agreement that references or purports to bind a “Guarantor”, an “Obligor” or a
“Subsidiary” of any Borrower (each as defined in the Loan Agreement).

 

16.           Construction.  All references to the term “Guarantor” wherever
used herein shall mean Guarantor and its successors and assigns (including,
without limitation, any receiver, trustee or custodian for Guarantor or any of
its assets or Guarantor in its capacity as debtor or debtor-in-possession under
the United States Bankruptcy Code).  All references to the term “Agent” or any
“Lender” wherever used herein shall include their respective successors and
assigns and all references to the term any “Borrower” wherever used herein shall
include its respective successors and assigns (including, without limitation,
any receiver, trustee or custodian for such Borrower or any of its assets or
such Borrower in its capacity as debtor or debtor-in-possession under the United
States Bankruptcy Code).  All references to the term “Person” or “person”
wherever used herein shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability company, limited liability partnership, business trust,
unincorporated association, joint stock corporation, trust, joint venture or
other entity or any government or any agency or instrumentality or political
subdivision thereof.  All references to the plural shall also mean the singular
and to the singular shall also mean the plural.

 

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IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as of the
day and year first above written.

 

 

JASMINE COMPANY, INC.,

 

a Massachusetts corporation

 

 

 

 

 

 

 

By:

/s/ Ronald W. Ristau

 

Name:

Ronald W. Ristau

 

Title:

Chief Operating Officer,

 

 

 

Chief Financial Officer and Secretary

 

 

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