**Exhibit 10.4**

 

**GUARANTY**

 

July 19, 2005

 

Wachovia Bank, National Association1133 Avenue of the AmericasNew York, New York 10036

 

Re:                               LernerNew York, Inc. and Lernco, Inc.

 

Ladies and Gentlemen:

 

Wachovia Bank, National Association (“Wachovia”),successor by merger to Congress Financial Corporation, as agent (in suchcapacity “Agent”) for the Lenders (as defined below) and the BankProduct Providers (as defined in the Loan Agreement (as defined below)), LernerNew York, Inc., a Delaware corporation (“Lerner”) and Lernco, Inc.,a Delaware corporation (“Lernco” and together with Lerner and any otherperson 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 maymake loans and advances and provide other financial accommodations to Borrowersas set forth in that certain Amended and Restated Loan and Security Agreement,dated as of March 16, 2004, by and among Agent, Borrowers, the personsfrom time to time party thereto as lenders (the “Lenders”), The CITGroup/Business Credit, Inc., in its capacity as documentation agent forthe Lenders, and Wachovia, in its capacity as the arranger for the Lenders (asthe same now exists or may hereafter be amended, modified, supplemented,extended, renewed, restated or replaced, the “Loan Agreement”), andother agreements, documents and instruments referred to therein or at any timeexecuted and/or delivered in connection therewith or related thereto,including, but not limited to, this Guaranty (all of the foregoing, togetherwith the Loan Agreement, as the same now exist or may hereafter be amended,modified, supplemented, extended, renewed, restated or replaced, beingcollectively referred to herein as the “Financing Agreements”).

 

Due to the close business and financial relationshipsbetween Borrowers and the undersigned (“Guarantor”), in consideration ofthe benefits which will accrue to Guarantor and as an inducement for and inconsideration of Agent and the Lenders making or continuing to make loans andadvances and providing or continuing to provide other financial accommodationsto 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)           Guarantorabsolutely, unconditionally and irrevocably guarantees and agrees to be liablefor the full and indefeasible payment and performance when due, whether at statedmaturity, by required prepayment, declaration, acceleration, demand orotherwise, of the following (all of which are collectively referred to hereinas the “Guaranteed Obligations”):

 

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(i) theObligations (as defined in the Loan Agreement) and (ii) all costs andexpenses (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 anddefense of any Borrower’s obligations, liabilities and indebtedness asaforesaid to Agent or any Lender, the rights of Agent or any Lender in anycollateral or under this Guaranty and all other Financing Agreements or in anyway involving claims by or against Agent or any Lender directly or indirectlyarising out of or related to the relationships between any Borrower, Guarantoror any other Obligor (as hereinafter defined) and Agent or any Lender, whethersuch expenses are incurred before, during or after the initial or any renewalterm of the Loan Agreement and the other Financing Agreements or after thecommencement of any case with respect to any Borrower or Guarantor under theUnited States Bankruptcy Code or any similar statute; provided, however,that Guarantor shall only be liable under this Guaranty for the maximum amountof such liability that can be hereby incurred without rendering this Guaranty,as it relates to Guarantor, voidable under applicable law relating tofraudulent conveyance or fraudulent transfer, and not for any greater amount.

 

(b)           ThisGuaranty is a guaranty of payment and not of collection.  Guarantor agrees that Agent need not attemptto collect any Guaranteed Obligations from any Borrower, Guarantor or any otherObligor or to realize upon any collateral, but may require Guarantor to makeimmediate payment of all of the Guaranteed Obligations to Agent, for itself andfor 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 inrespect of the Guaranteed Obligations to any of the Guaranteed Obligations, inwhole or in part (including attorneys’ fees and legal expenses incurred byAgent or any Lender with respect thereto or otherwise chargeable to anyBorrower, Guarantor or any other Obligor) and in such order as Agent may elect.

 

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

 

2.             Waiversand Consents.

 

(a)           Noticeof acceptance of this Guaranty, the making of loans and advances and providingother financial accommodations to Borrowers and presentment, demand, protest,notice of protest, notice of nonpayment or default and all other notices towhich any Borrower or Guarantor is entitled are hereby waived byGuarantor.  Guarantor also waives noticeof and hereby consents to, (i) any amendment, modification, supplement,waiver, extension, renewal, or restatement of the Loan Agreement and any of theother Financing Agreements, including, without limitation, extensions of timeof 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 shallapply to the Loan Agreement and the other Financing Agreements and theGuaranteed Obligations as so amended, modified, supplemented, renewed, restatedor extended, increased or decreased, (ii) the taking, exchange, surrenderand releasing of collateral or guarantees now or at any time held by oravailable to Agent or any Lender for the obligations of any Borrower or anyother party at any time liable on or in respect of the Guaranteed Obligationsor who is the owner of any property which is security for the GuaranteedObligations (individually, an “Obligor” and collectively, the “Obligors”),(iii) the exercise of, or refraining from the exercise of any rightsagainst any Borrower or any other Obligor or any collateral, (iv) thesettlement, compromise or release of, or the waiver of any default with respectto, any of the Guaranteed Obligations and (v) any financing by Agent orany Lender of any Borrower under Section 364 of the United StatesBankruptcy Code or consent to the use of cash collateral by Agent or any Lenderunder Section 363 of the United States Bankruptcy Code.  Guarantor agrees that the amount of theGuaranteed Obligations shall not be diminished and the liability of Guarantorhereunder shall not be otherwise impaired or affected by any of the foregoing.

 

(b)           Noinvalidity, irregularity or unenforceability of all or any part of theGuaranteed Obligations shall affect, impair or be a defense to this Guaranty,nor shall any other circumstance which might otherwise constitute a defenseavailable to or legal or equitable discharge of any Borrower in respect of anyof the Guaranteed Obligations, or Guarantor in respect of this Guaranty,affect, impair or be a defense to this Guaranty.  Without limitation of the foregoing, theliability of Guarantor hereunder shall not be discharged or impaired in anyrespect by reason of any failure by Agent to perfect or continue perfection ofany lien or security interest in any collateral or any delay by Agent inperfecting any such lien or security interest. As to interest, fees and expenses, whether arising before or after thecommencement of any case with respect to any Borrower under the United StatesBankruptcy 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.  Guarantoracknowledges that neither Agent nor any Lender has not made any representationsto Guarantor with respect to any Borrower, any other Obligor or otherwise inconnection with the execution and delivery by Guarantor of this Guaranty andGuarantor is not in any respect relying upon Agent or any Lender or anystatements by Agent or any Lender in connection with this Guaranty.

 

(c)           Tothe fullest extent permitted by law, Guarantor hereby irrevocably andunconditionally waives and relinquishes all statutory, contractual, common law,equitable and all other claims against all Borrowers, any collateral for theGuaranteed 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 anyLender by Guarantor hereunder and Guarantor hereby further irrevocably andunconditionally waives and relinquishes any and all other benefits whichGuarantor might otherwise directly or indirectly receive or be entitled toreceive by reason of any amounts paid by or collected or due from Guarantor,any Borrower or any other Obligor upon the Guaranteed Obligations or realizedfrom their property.  The foregoingwaiver of rights is made in favor of Agent and the Lenders only and shall notbe deemed a waiver of such rights for the benefit of any other creditors of anyBorrower, Guarantor or any other Obligor.

 

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

 

(e)           Withoutlimiting the generality of any other waiver or other provision set forth inthis Guaranty, Guarantor hereby irrevocably and unconditionally waives allrights and defenses arising out of an election of remedies by Agent, eventhough that election of remedies, such as a nonjudicial foreclosure withrespect to security for a Guaranteed Obligation, has destroyed Guarantor’srights of subrogation and reimbursement against any Borrower.

 

(f)            Withoutlimiting the generality of any other waiver or other provision set forth inthis Guaranty, Guarantor waives all rights and defenses that Guarantor may havebecause the Guaranteed Obligations are secured by real property.  This means, among other things: (i) Agentmay collect from Guarantor without first foreclosing on any real or personalproperty collateral pledged by any Borrower; and (ii) if Agent forecloseson any real property collateral pledged by any Borrower: (A) the amount ofthe Guaranteed Obligations may be reduced only by the price for which thatcollateral is sold at the foreclosure sale, even if the collateral is worthmore than the sale price and (B) Agent may collect from Guarantor even ifAgent, by foreclosing on the real property collateral, has destroyed any rightGuarantor may have to collect from such Borrower.  This is an unconditional and irrevocable waiverof any rights and defenses Guarantor may have because the GuaranteedObligations are secured by real property.

 

(g)           Withoutlimiting the generality of any other waiver or other provision set forth inthis Guaranty, Guarantor hereby irrevocably and unconditionally waives andrelinquishes, to the maximum extent such waiver or relinquishment is permittedby applicable law, all rights to interpose claims, deductions, setoffs orcounterclaims of any nature (other than compulsory counterclaims) in any actionor 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 owedto Guarantor by any Borrower or any other Obligor is hereby subordinated inright of payment to the indefeasible payment in full to Agent, for itself andfor the benefit of the Lenders and the Bank Product Providers, of theGuaranteed Obligations and all such amounts and any security and guaranteestherefor are hereby assigned to Agent, for itself and for the ratable benefitof the Lenders and Bank Product Providers, as security for the GuaranteedObligations.

 

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

 

5.             AccountStated.  The books and records ofAgent showing the account between Agent, the Lenders and Borrowers shall beadmissible in evidence in any action or proceeding against or involvingGuarantor as primafacie proof of the items therein set forth,and the monthly statements of Agent rendered to Borrowers, to the extent towhich no written objection is made within thirty (30) days from the date ofsending thereof to Borrowers, shall be deemed conclusively correct andconstitute an account stated between Agent, the Lenders and Borrowers and bebinding on Guarantor.

 

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

 

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

 

8.             Amendmentsand Waivers.  Neither this Guarantynor any provision hereof shall be amended, modified, waived or dischargedorally or by course of conduct, but only by a written agreement signed by anauthorized officer of Agent and otherwise in accordance with the terms of theLoan Agreement, and as to any amendments, as also signed by an authorizedofficer of Guarantor.  Agent shall not byany act, delay, omission or otherwise be deemed to have expressly or impliedlywaived any of its or any Lender’s rights, powers and/or remedies unless suchwaiver shall be in writing and signed by an authorized officer of Agent.  Any such waiver shall be enforceable only tothe extent specifically set forth therein. A waiver by Agent of any right, power and/or remedy on any one occasionshall not be construed as a bar to or waiver of any such right, power and/orremedy which Agent or any Lender would otherwise have on any future occasion,whether similar in kind or otherwise.

 

9.             CorporateExistence, Power and Authority. Guarantor is a corporation duly organized and in good standing under thelaws of its state or other jurisdiction of incorporation and is duly qualifiedas a foreign corporation and in good standing in all states or otherjurisdictions where the nature and extent of the business transacted by it orthe ownership of assets makes such qualification necessary, except for thosejurisdictions in which the failure to so qualify would not have a materialadverse effect on the financial condition, results of operation or businessesof Guarantor or the rights of Agent or any Lender hereunder or under any of theother Financing Agreements.  Theexecution, delivery and performance of this Guaranty is within the corporatepowers of Guarantor, have been duly authorized and are not in contravention oflaw or the terms of the certificates of incorporation, by-laws, or otherorganizational documentation of Guarantor, or any indenture, agreement orundertaking to which Guarantor is a party or by which Guarantor or its propertyare bound.  This Guaranty constitutes thelegal, valid and binding obligation of Guarantor enforceable in accordance withits terms.

 

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10.           GoverningLaw; Choice of Forum; Service of Process; Jury Trial Waiver.

 

(a)           Thevalidity, interpretation and enforcement of this Guaranty and any disputearising out of the relationship between Guarantor, Agent and the Lenders,whether in contract, tort, equity or otherwise, shall be governed by theinternal laws of the State of New York (including for such purpose, Sections 5-14-1and 5-1402 of the General Obligations Law of the State of New York) butexcluding any principles of conflicts of law or other rule of law thatwould cause the application of the law of any jurisdiction other than the lawsof the State of New York.

 

(b)           Guarantorhereby irrevocably consents and submits to the non-exclusive jurisdiction ofthe state and federal courts located in the State of New York, New York Countryor 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 forumnonconveniens with respect to any action instituted thereinarising under this Guaranty or any of the other Financing Agreements or in anyway connected with or related or incidental to the dealings of Guarantor, Agentand the Lenders in respect of this Guaranty or any of the other FinancingAgreements or the transactions related hereto or thereto, in each case whethernow existing or hereafter arising and whether in contract, tort, equity orotherwise, and agrees that any dispute arising out of the relationship betweenGuarantor or Borrowers and Agent and the Lenders or the conduct of any suchpersons in connection with this Guaranty, the other Financing Agreements orotherwise shall be heard only in the courts described above (except that Agentshall have the right to bring any action or proceeding against Guarantor or itsproperty in the courts of any other jurisdiction which Agent deems necessary orappropriate in order to realize on any collateral at any time granted by anyBorrower or Guarantor to Agent or to otherwise enforce its rights againstGuarantor or its property).

 

(c)           Guarantorhereby waives personal service of any and all process upon it and consents thatall such service of process may be made by certified mail (return receiptrequested) directed to its address set forth on the signature pages hereofand service so made shall be deemed to be completed five (5) days afterthe 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 ofany such courts.  Within thirty (30) daysafter such service, Guarantor shall appear in answer to such process, failingwhich Guarantor shall be deemed in default and judgment may be entered by Agentagainst Guarantor for the amount of the claim and other relief requested.

 

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

 

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

 

(e)           Neitherthe Agent nor any Lender shall have any liability to Guarantor (whether intort, contract, equity or otherwise) for losses suffered by Guarantor inconnection with, arising out of, or in any way related to the transactions orrelationships contemplated by this Guaranty, or any act, omission or eventoccurring in connection herewith, unless it is determined by a final andnon-appealable judgment or court order binding on such person that the losseswere the result of acts or omissions constituting gross negligence or willfulmisconduct of such person (as determined pursuant to a final, non-appealableorder of a court of competent jurisdiction). In any such litigation, Agent and each Lender shall be entitled to thebenefit of the rebuttable presumption that it acted in good faith and with theexercise of ordinary care in the performance by it of the terms of the LoanAgreement and the other Financing Agreements. Except as prohibited by law, Guarantor waives any right which it mayhave to claim or recover in any litigation with Agent or any Lender anyspecial, exemplary, punitive or consequential damages or any damages otherthan, or in addition to, actual damages. Guarantor:  (i) certifiesthat 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) acknowledgesthat in entering into this Guaranty and the other Financing Agreements, Agentand the Lenders are relying upon, among other things, the waivers andcertifications set forth in this Section 10 and elsewhere herein andtherein.

 

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

 

12.           PartialInvalidity.  If any provision of thisGuaranty is held to be invalid or unenforceable, such invalidity orunenforceability shall not invalidate this Guaranty as a whole, but thisGuaranty shall be construed as though it did not contain the particularprovision held to be invalid or unenforceable and the rights and obligations ofthe parties shall be construed and enforced only to such extent as shall bepermitted by applicable law.

 

13.           EntireAgreement.  This Guaranty representsthe entire agreement and understanding of this parties concerning the subjectmatter hereof, and supersedes all other prior agreements, understandings,negotiations and discussions, representations, warranties, commitments,proposals, offers and contracts concerning the subject matter hereof, whetheroral or written.

 

14.           Successorsand Assigns.  This Guaranty shall bebinding upon Guarantor and its successors and assigns and shall inure to thebenefit of Agent, each Lender and Bank Product Providers and their respectivesuccessors, endorsees, transferees and assigns. The liquidation,

 

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dissolution ortermination of Guarantor shall not terminate this Guaranty as to such entity oras to Guarantor.

 

15.           Agreementto be Bound by Loan Agreement. Guarantor hereby agrees to be bound by and to comply with the terms ofeach 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 LoanAgreement).

 

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 forGuarantor or any of its assets or Guarantor in its capacity as debtor ordebtor-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 andall references to the term any “Borrower” wherever used herein shall includeits respective successors and assigns (including, without limitation, anyreceiver, trustee or custodian for such Borrower or any of its assets or suchBorrower in its capacity as debtor or debtor-in-possession under the UnitedStates Bankruptcy Code).  All referencesto the term “Person” or “person” wherever used herein shall mean anyindividual, sole proprietorship, partnership, corporation (including, withoutlimitation, any corporation which elects subchapter S status under the InternalRevenue Code of 1986, as amended), limited liability company, limited liabilitypartnership, business trust, unincorporated association, joint stockcorporation, trust, joint venture or other entity or any government or anyagency or instrumentality or political subdivision thereof.  All references to the plural shall also meanthe singular and to the singular shall also mean the plural.

 

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IN WITNESS WHEREOF, Guarantor has executed anddelivered 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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