Exhibit 10.7

 

DEBTOR-IN-POSSESSION SUBSIDIARY GUARANTY

 

DEBTOR-IN-POSSESSION SUBSIDIARY GUARANTY (as amended, modified, restated and/or
supplemented from time to time, this “Guaranty”), dated as of October 30, 2009,
made by and among each of the undersigned guarantors, each of which is a debtor
and debtor-in-possession under Chapter 11 of the Bankruptcy Code (as defined in
the Credit Agreement referred to below) (each, a “Guarantor” and collectively,
the “Guarantors”) in favor of BANK OF AMERICA, N.A., as Administrative Agent (in
such capacity, together with any successor administrative agent, the
“Administrative Agent”), for the benefit of the Secured Creditors (as defined
below).  Except as otherwise defined herein, all capitalized terms used herein
and defined in the Credit Agreement (as defined below) shall be used herein as
therein defined.

 

W I T N E S S E T H :

 

WHEREAS, FairPoint Communications, Inc., a Delaware corporation and a debtor and
debtor-in-possession under Chapter 11 of the Bankruptcy Code (“FairPoint”), and
FairPoint Logistics, Inc., a South Dakota corporation and a debtor and
debtor-in-possession under Chapter 11 of the Bankruptcy Code (“FairPoint
Logistics”; and together with FairPoint, each a “Borrower” and collectively the
“Borrowers”) and each of the Guarantors have filed in the United States
Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”)
a voluntary petition for relief under Chapter 11 of the Bankruptcy Code and have
continued in the possession of their assets and in the management of their
businesses pursuant to Sections 1107 and 1108 of the Bankruptcy Code, and such
reorganization cases are being jointly administered under Case Number
09-16335-brl (the “Cases”);

 

WHEREAS, the Borrowers, the lenders from time to time party thereto (the
“Lenders”) and the Administrative Agent have entered into a Debtor-In-Possession
Credit Agreement, dated as of October 27, 2009 (as amended, modified, restated
and/or supplemented from time to time, the “Credit Agreement”), providing for
the making of Loans to, and the issuance of, and participation in, Letters of
Credit for the account of, the Borrowers and/or one or more of their
Subsidiaries, all as contemplated therein (the Lenders, the Letter of Credit
Issuer, the Administrative Agent, the Collateral Agent and the Pledgee referred
to in the Pledge Agreement are herein called the “Secured Creditors”).

 

WHEREAS, each Guarantor is a direct or indirect Subsidiary of the Borrowers.

 

WHEREAS, it is a condition precedent to the making of Loans to the Borrowers and
the issuance of, and participation in, Letters of Credit for the account of the
Borrowers and/or one or more of their Subsidiaries under the Credit Agreement
that each Guarantor shall have executed and delivered this Guaranty to the
Administrative Agent.

 

WHEREAS, each Guarantor will obtain benefits from the incurrence of Loans by the
Borrowers and the issuance of, and participation in, Letters of Credit for the
account of the Borrowers and/or one or more of their Subsidiaries under the
Credit Agreement and,

 

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accordingly, desires to execute this Guaranty in order to satisfy the condition
described in the preceding paragraph and to induce the Lenders to make Loans to
the Borrowers and issue, and/or participate in, Letters of Credit for the
account of the Borrowers and/or one or more of their Subsidiaries.

 

NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to
each Guarantor, the receipt and sufficiency of which are hereby acknowledged,
each Guarantor hereby makes the following representations and warranties to the
Administrative Agent for the benefit of the Secured Creditors and hereby
covenants and agrees with each other Guarantor and the Administrative Agent for
the benefit of the Secured Creditors as follows:

 

1.                                       GUARANTY.  Each Guarantor, jointly and
severally, irrevocably, absolutely and unconditionally guarantees as a primary
obligor and not merely as surety the full and prompt payment when due (whether
at the stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise) of (x) the principal of, premium, if any, and interest on
the Notes issued by, and the Loans made to, the Borrowers under the Credit
Agreement, and all reimbursement obligations and Unpaid Drawings with respect to
Letters of Credit and (y) all other obligations, liabilities and indebtedness
owing by each Borrower to the Secured Creditors under the Credit Agreement and
each other Credit Document to which such Borrower is a party (including, without
limitation, indemnities, Fees and interest thereon, whether now existing or
hereafter incurred under, arising out of or in connection with the Credit
Agreement and any such other Credit Document and the due performance and
compliance by each Borrower with all of the terms, conditions, covenants and
agreements contained in all such Credit Documents (all such principal, premium,
interest, liabilities, indebtedness and obligations being herein collectively
called the “Guaranteed Obligations”).

 

Each Guarantor understands, agrees and confirms that the Secured Creditors may
enforce this Guaranty up to the full amount of the Guaranteed Obligations
against such Guarantor without proceeding against any other Guarantor or either
Borrower, or against any security for the Guaranteed Obligations, or under any
other guaranty covering all or a portion of the Guaranteed Obligations.  This
Guaranty is a guaranty of prompt payment and performance and not of collection. 
In addition, if as a result of an Event of Default any or all of the Obligations
of the Borrowers to the Secured Creditors become due and payable under the
Credit Agreement, each Guarantor, jointly and severally, unconditionally
promises to pay such Obligations to the Secured Creditors, on demand, together
with any and all reasonable expenses which may be incurred by the Administrative
Agent or the other Secured Creditors in collecting any of the Obligations.

 

2.                                       LIABILITY OF GUARANTORS ABSOLUTE.  The
liability of each Guarantor hereunder is primary, absolute, joint and several,
and unconditional and is exclusive and independent of any security for or other
guaranty of the indebtedness of the Borrowers whether executed by such
Guarantor, any other Guarantor, any other guarantor or by any other party, and
the liability of each Guarantor hereunder shall not be affected or impaired by
any circumstance or occurrence whatsoever, including, without limitation: 
(a) any direction as to application of payment by any Borrower or any other
party; (b) any other continuing or other guaranty, undertaking or maximum
liability of a Guarantor or of any other party as to the Guaranteed Obligations;
(c) any payment on or in reduction of any such other guaranty or undertaking;
(d) 

 

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any dissolution, termination or increase, decrease or change in personnel by any
Borrower, (e) the failure of any Guarantor to receive any benefit from or as a
result of its execution, delivery and performance of this Guaranty, (f) any
payment made to any Secured Creditor on the indebtedness which any Secured
Creditor repays any Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
each Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding; (g) any action or
inaction by the Secured Creditors as contemplated in Section 5 hereof, or
(h) any invalidity, rescission, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor.

 

3.                                       OBLIGATIONS OF GUARANTORS INDEPENDENT. 
The obligations of each Guarantor hereunder are independent of the obligations
of any other Guarantor, any other guarantor or any Borrower, and a separate
action or actions may be brought and prosecuted against each Guarantor whether
or not action is brought against any other Guarantor, any other guarantor or any
Borrower and whether or not any other Guarantor, any other guarantor or the
Borrowers be joined in any such action or actions.

 

4.                                       WAIVERS BY GUARANTORS.  (a) Each
Guarantor hereby waives notice of acceptance of this Guaranty and notice of the
existence, creation or incurrence of any new or additional liability to which it
may apply, and waives promptness, diligence, presentment, demand of payment,
demand for performance, protest, notice of dishonor or nonpayment of any such
liabilities, suit or taking of other action by the Administrative Agent or any
other Secured Creditor against, and any other notice to, any party liable
thereon (including such Guarantor, any other Guarantor, any other guarantor or
any Borrower) and each Guarantor further hereby waives any and all notice of the
creation, renewal, extension or accrual of any of the Guaranteed Obligations and
notice or proof of reliance by any Secured Creditor upon this Guaranty, and the
Guaranteed Obligations shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended, modified, supplemented or
waived, in reliance upon this Guaranty.

 

(B)                                 EACH GUARANTOR WAIVES ANY RIGHT TO REQUIRE
THE SECURED CREDITORS TO:  (I) PROCEED AGAINST THE BORROWERS, ANY OTHER
GUARANTOR, ANY OTHER GUARANTOR OF THE GUARANTEED OBLIGATIONS OR ANY OTHER PARTY;
(II) PROCEED AGAINST OR EXHAUST ANY SECURITY HELD FROM THE BORROWERS, ANY OTHER
GUARANTOR, ANY OTHER GUARANTOR OF THE GUARANTEED OBLIGATIONS OR ANY OTHER PARTY;
OR (III) PURSUE ANY OTHER REMEDY IN THE SECURED CREDITORS’ POWER WHATSOEVER. 
EACH GUARANTOR WAIVES ANY DEFENSE BASED ON OR ARISING OUT OF ANY DEFENSE OF THE
BORROWERS, ANY OTHER GUARANTOR, ANY OTHER GUARANTOR OF THE GUARANTEED
OBLIGATIONS OR ANY OTHER PARTY OTHER THAN PAYMENT IN FULL IN CASH OF THE
GUARANTEED OBLIGATIONS, INCLUDING, WITHOUT LIMITATION, ANY DEFENSE BASED ON OR
ARISING OUT OF THE DISABILITY OF THE BORROWERS, ANY OTHER GUARANTOR, ANY OTHER
GUARANTOR OF THE GUARANTEED OBLIGATIONS OR ANY OTHER PARTY, OR THE
UNENFORCEABILITY OF THE GUARANTEED OBLIGATIONS OR ANY PART THEREOF FROM ANY
CAUSE, OR THE CESSATION FROM ANY CAUSE OF THE LIABILITY OF THE BORROWERS OTHER
THAN PAYMENT IN FULL IN CASH OF THE GUARANTEED OBLIGATIONS.  THE SECURED
CREDITORS MAY, AT THEIR ELECTION AND IN ACCORDANCE WITH THE SECURITY DOCUMENTS
GOVERNING THE SAME, FORECLOSE ON ANY COLLATERAL SERVING AS SECURITY HELD BY THE
ADMINISTRATIVE AGENT, THE COLLATERAL AGENT OR THE OTHER SECURED CREDITORS BY ONE
OR MORE JUDICIAL OR NONJUDICIAL SALES, WHETHER OR NOT EVERY ASPECT OF ANY SUCH
SALE IS COMMERCIALLY REASONABLE (TO THE EXTENT SUCH SALE IS PERMITTED BY
APPLICABLE LAW), OR EXERCISE ANY OTHER RIGHT OR REMEDY THE SECURED CREDITORS

 

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MAY HAVE AGAINST THE BORROWERS OR ANY OTHER PARTY, OR ANY SECURITY, WITHOUT
AFFECTING OR IMPAIRING IN ANY WAY THE LIABILITY OF ANY GUARANTOR HEREUNDER
EXCEPT TO THE EXTENT THE GUARANTEED OBLIGATIONS HAVE BEEN PAID IN FULL IN CASH. 
EACH GUARANTOR WAIVES ANY DEFENSE ARISING OUT OF ANY SUCH ELECTION BY THE
SECURED CREDITORS, EVEN THOUGH SUCH ELECTION OPERATES TO IMPAIR OR EXTINGUISH
ANY RIGHT OF REIMBURSEMENT, CONTRIBUTION, INDEMNIFICATION OR SUBROGATION OR
OTHER RIGHT OR REMEDY OF SUCH GUARANTOR AGAINST THE BORROWERS, ANY OTHER
GUARANTOR, ANY OTHER GUARANTOR OF THE GUARANTEED OBLIGATIONS OR ANY OTHER PARTY
OR ANY SECURITY.

 

(C)                                  EACH GUARANTOR HEREBY WAIVES THE BENEFITS
OF ANY STATUTE OF LIMITATIONS AFFECTING ITS LIABILITY HEREUNDER OR THE
ENFORCEMENT THEREOF.  ANY PAYMENT BY THE BORROWERS OR OTHER CIRCUMSTANCE WHICH
OPERATES TO TOLL ANY STATUTE OF LIMITATIONS AS TO THE BORROWERS SHALL OPERATE TO
TOLL THE STATUTE OF LIMITATIONS AS TO EACH GUARANTOR.

 

(D)                                 EACH GUARANTOR HAS KNOWLEDGE AND ASSUMES ALL
RESPONSIBILITY FOR BEING AND KEEPING ITSELF INFORMED OF EACH BORROWER’S AND EACH
OTHER GUARANTOR’S FINANCIAL CONDITION, AFFAIRS AND ASSETS, AND OF ALL OTHER
CIRCUMSTANCES BEARING UPON THE RISK OF NONPAYMENT OF THE GUARANTEED OBLIGATIONS
AND THE NATURE, SCOPE AND EXTENT OF THE RISKS WHICH SUCH GUARANTOR ASSUMES AND
INCURS HEREUNDER, AND HAS ADEQUATE MEANS TO OBTAIN FROM EACH BORROWER AND EACH
OTHER GUARANTOR ON AN ONGOING BASIS INFORMATION RELATING THERETO AND TO EACH
BORROWER’S AND EACH OTHER GUARANTOR’S ABILITY TO PAY AND PERFORM ITS RESPECTIVE
GUARANTEED OBLIGATIONS, AND AGREES TO ASSUME THE RESPONSIBILITY FOR KEEPING, AND
TO KEEP, SO INFORMED FOR SO LONG AS THIS GUARANTY IS IN EFFECT.  EACH GUARANTOR
ACKNOWLEDGES AND AGREES THAT (X) THE SECURED CREDITORS SHALL HAVE NO OBLIGATION
TO INVESTIGATE THE FINANCIAL CONDITION OR AFFAIRS OF THE BORROWERS OR ANY OTHER
GUARANTOR FOR THE BENEFIT OF SUCH GUARANTOR NOR TO ADVISE SUCH GUARANTOR OF ANY
FACT RESPECTING, OR ANY CHANGE IN, THE FINANCIAL CONDITION, ASSETS OR AFFAIRS OF
THE BORROWERS OR ANY OTHER GUARANTOR THAT MIGHT BECOME KNOWN TO ANY SECURED
CREDITOR AT ANY TIME, WHETHER OR NOT SUCH SECURED CREDITOR KNOWS OR BELIEVES OR
HAS REASON TO KNOW OR BELIEVE THAT ANY SUCH FACT OR CHANGE IS UNKNOWN TO SUCH
GUARANTOR, OR MIGHT (OR DOES) INCREASE THE RISK OF SUCH GUARANTOR AS GUARANTOR
HEREUNDER, OR MIGHT (OR WOULD) AFFECT THE WILLINGNESS OF SUCH GUARANTOR TO
CONTINUE AS A GUARANTOR OF THE GUARANTEED OBLIGATIONS HEREUNDER AND (Y) THE
SECURED CREDITORS SHALL HAVE NO DUTY TO ADVISE ANY GUARANTOR OF INFORMATION
KNOWN TO THEM REGARDING ANY OF THE AFOREMENTIONED CIRCUMSTANCES OR RISKS.

 

(E)                                  EACH GUARANTOR HEREBY ACKNOWLEDGES AND
AGREES THAT NO SECURED CREDITOR OR ANY OTHER PERSON SHALL BE UNDER ANY
OBLIGATION (A) TO MARSHAL ANY ASSETS IN FAVOR OF SUCH GUARANTOR OR IN PAYMENT OF
ANY OR ALL OF THE LIABILITIES OF ANY BORROWER UNDER THE CREDIT DOCUMENTS OR THE
OBLIGATION OF SUCH GUARANTOR HEREUNDER OR (B) TO PURSUE ANY OTHER REMEDY THAT
SUCH GUARANTOR MAY OR MAY NOT BE ABLE TO PURSUE ITSELF, ANY RIGHT TO WHICH SUCH
GUARANTOR HEREBY WAIVES.

 

(F)                                    EACH GUARANTOR WARRANTS AND AGREES THAT
EACH OF THE WAIVERS SET FORTH IN SECTION 3 AND IN THIS SECTION 4 IS MADE WITH
FULL KNOWLEDGE OF ITS SIGNIFICANCE AND CONSEQUENCES AND THAT IF ANY OF SUCH
WAIVERS ARE DETERMINED TO BE CONTRARY TO ANY APPLICABLE LAW OR PUBLIC POLICY,
SUCH WAIVERS SHALL BE EFFECTIVE ONLY TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW.

 

5.                                       RIGHTS OF SECURED CREDITORS.  Subject
to Section 4, any Secured Creditor may (except as shall be required by
applicable law and cannot be waived) at any time

 

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and from time to time without the consent of, or notice to, any Guarantor,
without incurring responsibility to such Guarantor, without impairing or
releasing the obligations or liabilities of such Guarantor hereunder, upon or
without any terms or conditions and in whole or in part:

 

(A)                                  CHANGE THE MANNER, PLACE OR TERMS OF
PAYMENT OF, AND/OR CHANGE, INCREASE OR EXTEND THE TIME OF PAYMENT OF, RENEW,
INCREASE, ACCELERATE OR ALTER, ANY OF THE GUARANTEED OBLIGATIONS (INCLUDING,
WITHOUT LIMITATION, ANY INCREASE OR DECREASE IN THE RATE OF INTEREST THEREON OR
THE PRINCIPAL AMOUNT THEREOF), ANY SECURITY THEREFOR, OR ANY LIABILITY INCURRED
DIRECTLY OR INDIRECTLY IN RESPECT THEREOF, AND THE GUARANTY HEREIN MADE SHALL
APPLY TO THE GUARANTEED OBLIGATIONS AS SO CHANGED, EXTENDED, INCREASED,
ACCELERATED, RENEWED OR ALTERED;

 

(B)                                 TAKE AND HOLD SECURITY FOR THE PAYMENT OF
THE GUARANTEED OBLIGATIONS AND SELL, EXCHANGE, RELEASE, SURRENDER, IMPAIR,
REALIZE UPON OR OTHERWISE DEAL WITH IN ANY MANNER AND IN ANY ORDER ANY PROPERTY
OR OTHER COLLATERAL BY WHOMSOEVER AT ANY TIME PLEDGED OR MORTGAGED TO SECURE, OR
HOWSOEVER SECURING, THE GUARANTEED OBLIGATIONS OR ANY LIABILITIES (INCLUDING ANY
OF THOSE HEREUNDER) INCURRED DIRECTLY OR INDIRECTLY IN RESPECT THEREOF OR
HEREOF, AND/OR ANY OFFSET THEREAGAINST;

 

(C)                                  EXERCISE OR REFRAIN FROM EXERCISING ANY
RIGHTS AGAINST THE BORROWERS, ANY OTHER CREDIT PARTY, ANY SUBSIDIARY THEREOF,
ANY OTHER GUARANTOR OF THE GUARANTEED OBLIGATIONS OR OTHERS OR OTHERWISE ACT OR
REFRAIN FROM ACTING;

 

(D)                                 RELEASE OR SUBSTITUTE ANY ONE OR MORE
ENDORSERS, GUARANTORS, OTHER GUARANTORS, THE BORROWERS OR OTHER OBLIGORS;

 

(E)                                  SETTLE OR COMPROMISE ANY OF THE GUARANTEED
OBLIGATIONS, ANY SECURITY THEREFOR OR ANY LIABILITY (INCLUDING ANY OF THOSE
HEREUNDER) INCURRED DIRECTLY OR INDIRECTLY IN RESPECT THEREOF OR HEREOF, AND MAY
SUBORDINATE THE PAYMENT OF ALL OR ANY PART THEREOF TO THE PAYMENT OF ANY
LIABILITY (WHETHER DUE OR NOT) OF A BORROWER TO CREDITORS OF SUCH BORROWER OTHER
THAN THE SECURED CREDITORS;

 

(F)                                    APPLY ANY SUMS BY WHOMSOEVER PAID OR
HOWSOEVER REALIZED TO ANY LIABILITY OR LIABILITIES OF THE BORROWERS TO THE
SECURED CREDITORS REGARDLESS OF WHAT LIABILITIES OF THE BORROWERS REMAIN UNPAID;

 

(G)                                 CONSENT TO OR WAIVE ANY BREACH OF, OR ANY
ACT, OMISSION OR DEFAULT UNDER, ANY OF THE CREDIT DOCUMENTS OR ANY OF THE
INSTRUMENTS OR AGREEMENTS REFERRED TO THEREIN, OR OTHERWISE AMEND, MODIFY OR
SUPPLEMENT ANY OF THE CREDIT DOCUMENTS OR ANY OF SUCH OTHER INSTRUMENTS OR
AGREEMENTS;

 

(H)                                 ACT OR FAIL TO ACT IN ANY MANNER WHICH MAY
DEPRIVE SUCH GUARANTOR OF ITS RIGHT TO SUBROGATION AGAINST THE BORROWERS TO
RECOVER FULL INDEMNITY FOR ANY PAYMENTS MADE PURSUANT TO THIS GUARANTY, AND/OR

 

(I)                                     TAKE ANY OTHER ACTION OR OMIT TO TAKE
ANY OTHER ACTION WHICH WOULD UNDER OTHERWISE APPLICABLE PRINCIPLES OF COMMON
LAW, GIVE RISE TO A LEGAL OR EQUITABLE DISCHARGE OF SUCH GUARANTOR FROM ITS
LIABILITIES UNDER THIS GUARANTY (INCLUDING, WITHOUT LIMITATION, ANY ACTION OR
OMISSION WHATSOEVER THAT MIGHT OTHERWISE VARY THE RISK OF SUCH GUARANTOR OR
CONSTITUTE A LEGAL

 

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OR EQUITABLE DEFENSE TO OR DISCHARGE OF THE LIABILITIES OF A GUARANTOR OR SURETY
OR THAT MIGHT OTHERWISE LIMIT RECOURSE AGAINST SUCH GUARANTOR).

 

No invalidity, illegality, irregularity or enforceability of all or any part of
the Guaranteed Obligations, the Credit Documents or any other agreement or
instrument relating to the Guaranteed Obligations or of any security or
guarantee therefor shall affect, impair or be a defense to this Guaranty, and
this Guaranty shall be primary, absolute and unconditional notwithstanding the
occurrence of any event or the existence of any other circumstances which might
constitute a legal or equitable discharge of a surety or guarantor except
payment in full in cash of the Guaranteed Obligations.

 

6.                                       CONTINUING GUARANTY.  This Guaranty is
a continuing one and all liabilities to which it applies or may apply under the
terms hereof shall be conclusively presumed to have been created in reliance
hereon.  No failure or delay on the part of any Secured Creditor in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  The rights and remedies herein expressly specified
are cumulative and not exclusive of any rights or remedies which any Secured
Creditor would otherwise have.  No notice to or demand on any Guarantor in any
case shall entitle such Guarantor to any other further notice or demand in
similar or other circumstances or constitute a waiver of the rights of any
Secured Creditor to any other or further action in any circumstances without
notice or demand.  It is not necessary for any Secured Creditor to inquire into
the capacity or powers of the Borrowers or the officers, directors, partners or
agents acting or purporting to act on its or their behalf, and any indebtedness
made or created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.

 

7.                                       SUBORDINATION OF INDEBTEDNESS HELD BY
GUARANTORS.  Any indebtedness of any Borrower now or hereafter held by any
Guarantor is hereby subordinated to the indebtedness of such Borrower to the
Secured Creditors, and such indebtedness of any Borrower to any Guarantor, if
the Administrative Agent or the Collateral Agent, after an Event of Default has
occurred and is continuing, so requests, shall be collected, enforced and
received by such Guarantor as trustee for the Secured Creditors and be paid over
to the Secured Creditors on account of the indebtedness of the Borrowers to the
Secured Creditors, but without affecting or impairing in any manner the
liability of such Guarantor under the other provisions of this Guaranty.  Prior
to the transfer by any Guarantor of any note or negotiable instrument evidencing
any indebtedness of any Borrower to such Guarantor, such Guarantor shall mark
such note or negotiable instrument with a legend that the same is subject to
this subordination.  Without limiting the generality of the foregoing, each
Guarantor hereby agrees with the Secured Creditors that it will not exercise any
right of subrogation which it may at any time otherwise have as a result of this
Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or
otherwise) until all Guaranteed Obligations have been irrevocably paid in full
in cash; provided, that if any amount shall be paid to any Guarantor on account
of such subrogation rights at any time prior to the irrevocable payment in full
in cash of all the Guaranteed Obligations, such amount shall be held in trust
for the benefit of the Secured Creditors and shall forthwith be paid to the
Secured Creditors to be credited and applied to the Guaranteed Obligations,
whether matured or unmatured, in accordance with the terms of the Credit
Documents or, if the Credit Documents do not provide for the application of such
amount, to be held by the Secured

 

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Creditors as collateral security for any Guaranteed Obligations thereafter
existing.  Upon irrevocable payment in full in cash of all of the Guaranteed
Obligations, each Guarantor shall be subrogated to the rights of the Secured
Creditors to receive payments or distributions applicable to the Guaranteed
Obligations until all Indebtedness of the Borrowers held by such Guarantor shall
be paid in full.

 

8.                                       GUARANTY ENFORCEABLE BY ADMINISTRATIVE
AGENT OR COLLATERAL AGENT.  Notwithstanding anything to the contrary contained
elsewhere in this Guaranty or any other Credit Document, the Secured Creditors
agree (by their acceptance of the benefits of this Guaranty) that this Guaranty
may be enforced only by the action of the Administrative Agent or the Collateral
Agent, in each case acting upon the instructions of the Required Lenders (to the
extent required under the Credit Agreement) and that no other Secured Creditor
will have any right individually to seek to enforce or to enforce this Guaranty
or to realize upon the security to be granted by the Credit Documents, it being
understood and agreed that such rights and remedies may be exercised by the
Administrative Agent or the Collateral Agent, for the benefit of the Secured
Creditors, upon the terms of this Guaranty and the other Credit Documents. 
Exercise by the Administrative Agent or the Collateral Agent of the powers
granted under this Agreement is not a violation of the automatic stay provided
by Section 362 of the Bankruptcy Code and each Guarantor waives applicability
thereof.  The Secured Creditors further agree that this Guaranty may not be
enforced against any director, officer, employee, partner, member or stockholder
of any Guarantor (except to the extent such partner, member or stockholder is
also a Guarantor hereunder).  It is understood and agreed that the agreement in
this Section 8 is among and solely for the benefit of the Secured Creditors.

 

9.                                       REPRESENTATIONS, WARRANTIES AND
COVENANTS OF GUARANTORS.  In order to induce the Lenders to make Loans to, and
issue Letters of Credit for the account of, the Borrowers pursuant to the Credit
Agreement, each Guarantor represents, warrants and covenants that:

 

(A)                                  UNTIL THE TERMINATION OF THE TOTAL
REVOLVING COMMITMENT AND UNTIL SUCH TIME AS NO LOAN OR LETTER OF CREDIT REMAINS
OUTSTANDING AND ALL GUARANTEED OBLIGATIONS HAVE BEEN PAID IN FULL (OTHER THAN
INDEMNITIES DESCRIBED IN SECTION 11.01 OF THE CREDIT AGREEMENT AND ANALOGOUS
PROVISIONS IN THE OTHER CREDIT DOCUMENTS WHICH ARE NOT THEN DUE AND PAYABLE),
SUCH GUARANTOR WILL TAKE, OR WILL REFRAIN FROM TAKING, AS THE CASE MAY BE, ALL
ACTIONS THAT ARE NECESSARY TO BE TAKEN OR NOT TAKEN SO THAT NO VIOLATION OF ANY
PROVISION, COVENANT OR AGREEMENT CONTAINED IN SECTIONS 6 AND 7 OF THE CREDIT
AGREEMENT, AND SO THAT NO EVENT OF DEFAULT, IS CAUSED BY THE ACTIONS OF SUCH
GUARANTOR OR ANY OF ITS SUBSIDIARIES; AND

 

(B)                                 AN EXECUTED (OR CONFORMED) COPY OF EACH OF
THE CREDIT DOCUMENTS HAS BEEN MADE AVAILABLE TO A SENIOR OFFICER OF SUCH
GUARANTOR AND SUCH OFFICER IS FAMILIAR WITH THE CONTENTS THEREOF.

 

10.                                 EXPENSES.  The Guarantors hereby jointly and
severally agree to pay all reasonable out-of-pocket costs and expenses of the
Collateral Agent, the Administrative Agent and each other Secured Creditor in
connection with the enforcement of this Guaranty and the protection of the
Secured Creditors’ rights hereunder (including the reasonable fees,
disbursements and other charges of (x) counsel to the Administrative Agent and
the Collateral

 

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Agent and (y) the Financial Advisor); provided, that the Guarantors’ obligation
to pay the fees, disbursements and other charges of counsel to the Secured
Parties (but not of counsel to the Administrative Agent or the Collateral Agent)
shall be limited to one outside counsel, which as of the Closing Date, is
Wachtell Lipton, Rosen and Katz) and of the Administrative Agent in connection
with any amendment, waiver or consent relating hereto (including, without
limitation, the reasonable fees and disbursements of counsel).

 

11.                                 BENEFIT AND BINDING EFFECT.  This Guaranty
shall be binding upon each Guarantor and its successors and assigns and shall
inure to the benefit of the Secured Creditors and their successors and assigns
to the extent permitted under the Credit Agreement.

 

12.                                 AMENDMENTS; WAIVERS.  Neither this Guaranty
nor any provision hereof may be changed, waived, discharged or terminated except
with the written consent of each Guarantor directly affected thereby (it being
understood that the addition or release of any Guarantor hereunder shall not
constitute a change, waiver, discharge or termination affecting any Guarantor
other than the Guarantor so added or released) and with the written consent of
the Required Lenders (or, to the extent required by Section 11.11 of the Credit
Agreement, with the written consent of each Lender) at all times prior to the
time at which all Credit Document Obligations have been paid in full.

 

13.                                 SET OFF.  In addition to any rights now or
hereafter granted under applicable law (including, without limitation,
Section 151 of the New York Debtor and Creditor Law) and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
an Event of Default (such term to mean and include any “Event of Default” as
defined in the Credit Agreement, each Secured Creditor is hereby authorized, at
any time or from time to time, without notice to any Guarantor or to any other
Person, any such notice being expressly waived, to set off and to appropriate
and apply any and all deposits (general or special) and any other indebtedness
at any time held or owing by such Secured Creditor to or for the credit or the
account of such Guarantor, against and on account of the obligations and
liabilities of such Guarantor to such Secured Creditor under this Guaranty,
irrespective of whether or not such Secured Creditor shall have made any demand
hereunder and although said obligations, liabilities, deposits or claims, or any
of them, shall be contingent or natured.  Each Secured Creditor (by its
acceptance of the benefits hereof) acknowledges and agrees (i) to promptly
notify the relevant Guarantor after any such set-off and application; provided,
that the failure to give such notice shall not affect the validity of such
set-off and application; and (ii) that the provisions of this Section 13 are
subject to the sharing provisions set forth in Section 11.06 of the Credit
Agreement.

 

14.                                 NOTICE.  Except as otherwise specified
herein, all notices, requests, demands or other communications to or upon the
respective parties hereto shall be sent or delivered by mail, telegraph, telex,
telecopy, cable or courier service and all such notices and communications
shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by
courier, be effective when deposited in the mails, delivered to the telegraph
company, cable company or overnight courier, as the case may be, or sent by
telex or telecopier, except that notices and communications to the
Administrative Agent or any Guarantor shall not be effective until received by
the Administrative Agent or such Guarantor, as the case may be.  All notices and
other communications shall be in writing and addressed to such party at (i) in
the case of any Secured

 

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Creditor, as provided in the Credit Agreement, and (ii) in the case of any
Guarantor, at its address set forth opposite its signature below.

 

15.                                 REINSTATEMENT.  If any claim is ever made
upon any Secured Creditor for repayment or recovery of any amount or amounts
received in payment or on account of any of the Guaranteed Obligations and any
of the aforesaid payees repays all or part of said amount by reason of (i) any
judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property or (ii) any settlement or
compromise of any such claim effected by such payee with any such claimant
(including, without limitation, the Borrowers), then and in such event each
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon such Guarantor, notwithstanding any revocation hereof or
the cancellation of any Note or any other instrument evidencing any liability of
the Borrowers, and such Guarantor shall be and remain liable to the aforesaid
payees hereunder for the amount so repaid or recovered to the same extent as if
such amount had never originally been received by any such payee.

 

16.                                 CONSENT TO JURISDICTION; SERVICE OF PROCESS;
AND WAIVER OF TRIAL BY JURY.  (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS
OF THE SECURED CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.  Except for matters within the exclusive
jurisdiction of the Bankruptcy Court, any legal action or proceeding with
respect to this Guaranty or any other Credit Document to which any Guarantor is
a party may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, in each case located
within the City of New York and, by execution and delivery of this Guaranty,
each Guarantor hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts.  Each Guarantor hereby further irrevocably waives any claim that any
such courts lack jurisdiction over such Guarantor, and agrees not to plead or
claim in any legal action or proceeding with respect to this Guaranty or any
other Credit Document to which such Guarantor is a party brought in any of the
aforesaid courts, that any such court lacks jurisdiction over such Guarantor. 
Each Guarantor further irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to each
Guarantor at its address set forth opposite its signature below, such service to
become effective 30 days after such mailing.  Each Guarantor hereby irrevocably
waives any objection to such service of process and further irrevocably waives
and agrees not to plead or claim in any action or proceeding commenced hereunder
or under any other Credit Document to which such Guarantor is a party that such
service of process was in any way invalid or ineffective.  Nothing herein shall
affect the right of any of the Secured Creditors to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against each Guarantor in any other jurisdiction.

 

(B)                                 EXCEPT FOR MATTERS WITHIN THE EXCLUSIVE
JURISDICTION OF THE BANKRUPTCY COURT, EACH GUARANTOR HEREBY IRREVOCABLY WAIVES
(TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW) ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY OR ANY OTHER
CREDIT

 

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DOCUMENT TO WHICH SUCH GUARANTOR IS A PARTY BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

(C)                                  EACH GUARANTOR AND EACH SECURED CREDITOR
(BY ITS ACCEPTANCE OF THE BENEFITS OF THIS GUARANTY) HEREBY IRREVOCABLY WAIVES
ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS TO WHICH SUCH
GUARANTOR IS A PARTY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

17.                                 TERMINATION.  After the Termination Date (as
defined below), but subject to Section 15, this Guaranty shall terminate
(provided that all indemnities set forth herein shall survive any such
termination) and the Administrative Agent, at the request and expense of the
respective Guarantor, will execute and deliver to such Guarantor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Guaranty as provided above.  As used in this Guaranty, ‘‘Termination Date” shall
mean the date upon which the Total Revolving Commitment has been terminated, no
Note or Letter of Credit under the Credit Agreement is outstanding (and all
Loans have been paid in full) and all other Obligations (as defined in the
Credit Agreement) have been paid in full (other than arising from indemnities
for which no request has been made).

 

18.                                 CONTRIBUTION.  At any time a payment in
respect of the Guaranteed Obligations is made under this Guaranty, the right of
contribution of each Guarantor against each other Guarantor shalt be determined
as provided in the immediately following sentence, with the right of
contribution of each Guarantor to be revised and restated as of each date on
which a payment (a “Relevant Payment”) is made on the Guaranteed Obligations
under this Guaranty.  At any time that a Relevant Payment is made by a Guarantor
that results in the aggregate payments made by such Guarantor in respect of the
Guaranteed Obligations to and including the date of the Relevant Payment
exceeding such Guarantor’s Contribution Percentage (as defined below) of the
aggregate payments made by all Guarantors in respect of the Guaranteed
Obligations to and including the date of the Relevant Payment (such excess, the
“Aggregate Excess Amount”), each such Guarantor shall have a right of
contribution against each other Guarantor who either has not made any payments
or has made payments in respect of the Guaranteed Obligations to and including
the date of the Relevant Payment in an aggregate amount less than such other
Guarantor’s Contribution Percentage of the aggregate payments made to and
including the date of the Relevant Payment by all Guarantors in respect of the
Guaranteed Obligations (the aggregate amount of such deficit, the “Aggregate
Deficit Amount”) in an amount equal to (x) a fraction the numerator of which is
the Aggregate Excess Amount of such Guarantor and the denominator of which is
the Aggregate Excess Amount of all Guarantors multiplied by (y) the Aggregate
Deficit Amount of such other Guarantor.  A Guarantor’s right of contribution
pursuant to the preceding sentences shall arise at the time of each computation,
subject to adjustment at the time of each computation; provided, that no
Guarantor may take any action to enforce such right until the Guaranteed
Obligations have been irrevocably paid in full in cash and the Total Revolving
Commitment and all Letters of Credit have been terminated (or have expired,
undrawn), it being expressly recognized and agreed by all parties hereto that
any Guarantor’s right of contribution arising pursuant to this Section 18
against any other Guarantor

 

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shall be expressly junior and subordinate to such other Guarantor’s obligations
and liabilities in respect of the Guaranteed Obligations and any other
obligations owing under this Guaranty.  As used in this Section 18 (i) each
Guarantor’s “Contribution Percentage” shall mean the percentage obtained by
dividing (x) the Adjusted Net Worth (as defined below) of such Guarantor by
(y) the aggregate Adjusted Net Worth of all Guarantors; (ii) the “Adjusted Net
Worth” of each Guarantor shall mean the greater of (x) the Net Worth (as defined
below) of such Guarantor and (y) zero; and (iii) the “Net Worth” of each
Guarantor shall mean the amount by which the fair saleable value of such
Guarantor’s assets on the date of any Relevant Payment exceeds its existing
debts and other liabilities (including contingent liabilities, but without
giving effect to any Guaranteed Obligations arising under this Guaranty) on such
date.  All parties hereto recognize and agree that, except for any right of
contribution arising pursuant to this Section 18, each Guarantor who makes any
payment in respect of the Guaranteed Obligations shall have no right of
contribution or subrogation against any other Guarantor in respect of such
payment until all of the Guaranteed Obligations have been irrevocably paid in
full in cash.  Each of the Guarantors recognizes and acknowledges that the
rights to contribution arising hereunder shall constitute an asset in favor of
the party entitled to such contribution.  In this connection, each Guarantor has
the right to waive its contribution right against any Guarantor to the extent
that after giving effect to such waiver such Guarantor would remain solvent, in
the determination of the Required Lenders.

 

19.                                 LIMITATION ON GUARANTEED OBLIGATIONS.  Each
Guarantor and each Secured Creditor (by its acceptance of the benefits of this
Guaranty) hereby confirms that it is its intention that this Guaranty not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Code, the Uniform Fraudulent Conveyance Act of any similar Federal or state
law.  To effectuate the foregoing intention, each Guarantor and each Secured
Creditor (by its acceptance of the benefits of this Guaranty) hereby irrevocably
agrees that the Guaranteed Obligations guaranteed by such Guarantor shall be
limited to such amount as will, after giving effect to such maximum amount and
all other (contingent or otherwise) liabilities of such Guarantor that are
relevant under such laws and after giving effect to any rights to contribution
pursuant to any agreement providing for an equitable contribution among such
Guarantor and the other Guarantors, result in the Guaranteed Obligations of such
Guarantor in respect of such maximum amount not constituting a fraudulent
transfer or conveyance.

 

20.                                 COUNTERPARTS.  This Guaranty may be executed
in any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.  A set
of counterparts executed by all the parties hereto shall be lodged with the
Borrowers and the Administrative Agent.

 

21.                                 PAYMENTS.  All payments made by any
Guarantor hereunder will be made without setoff, counterclaim or other defense
and on the same basis as payments are made by the Borrowers under Sections 3.03
and 3.04 of the Credit Agreement.

 

22.                                 HEADINGS DESCRIPTIVE.  The headings of the
several Sections of this Guaranty are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Guaranty.

 

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[SIGNATURE PAGES OMITTED]

 

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