Exhibit 10.16


 


SUBSIDIARIES GUARANTY


 


SUBSIDIARIES GUARANTY, (as amended, modified, restated
and/or supplemented from time to time, this “Guaranty”), dated as of
March 17, 2004, made by and among each of the undersigned guarantors (each a “Guarantor”
and, together with any other entity that becomes a guarantor hereunder pursuant
to Section 27 hereof, the “Guarantors”) in favor of Bank of America,
N.A., as Administrative Agent (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
Second-Lien Credit Agreement (as defined below) shall be used herein as therein
defined.


 


W  I  T  N  E  S
S  E  T  H :


 


WHEREAS, EnerSys, a Delaware corporation (“Holdings”),
EnerSys Capital Inc., a Delaware corporation (the ”Borrower”), the
lenders from time to time party thereto (the “Lenders”), the
Administrative Agent, Morgan Stanley Senior Funding, Inc., as Syndication
Agent, and Lehman Commercial Paper, Inc., as Documentation Agent, have entered
into a Second-Lien Credit Agreement, dated as of March 17, 2004 (as amended,
modified, restated and/or supplemented from time to time, the “Second-Lien
Credit Agreement”), providing for the making of Second-Lien Loans to the
Borrower, all as contemplated therein (the Lenders, the Administrative Agent,
the Collateral Agent, each other Agent and the Pledgee are herein called the “Secured
Creditors”);


 


WHEREAS, each Guarantor is a direct or indirect
Wholly-Owned Domestic Subsidiary of the Borrower;


 


WHEREAS, it is a condition precedent to the making of
Second-Lien Loans to the Borrower under the Second-Lien Credit Agreement that
each Guarantor shall have executed and delivered to the Administrative Agent
this Guaranty; and


 


WHEREAS, each Guarantor will obtain benefits from the
incurrence of Second-Lien Loans by the Borrower under the Second-Lien Credit
Agreement and, accordingly, desires to execute this Guaranty in order to satisfy
the condition described in the preceding paragraph and to induce the Lenders to
make Second-Lien Loans to the Borrower;


 


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.                                       Each Guarantor, jointly and severally,
irrevocably, absolutely and unconditionally guarantees as a primary obligor and
not merely as surety to the Secured Creditors 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 Second Lien Loan Notes issued by, and the Second-Lien Loans made to, the
Borrower under the Second-Lien Credit Agreement, (y) all other obligations
(including, without limitation, obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due), liabilities and
indebtedness owing by the Borrower to the Secured Creditors under the
Second-Lien Credit Agreement and each other Credit Document to which the
Borrower is a party (including, without limitation, indemnities, Fees and
interest thereon (including, without limitation, any interest accruing after
the commencement of any bankruptcy, insolvency, receivership or similar
proceeding at the rate provided for in the Second-Lien Credit Agreement,
whether or not such interest is an allowed claim in any such proceeding)),
whether now existing or hereafter incurred under, arising out of or in
connection with the Second-Lien Credit Agreement and any such other Credit
Document and the due performance and compliance by the Borrower with all of the
terms, conditions and agreements contained in all such Credit Documents (all
such principal, premium, interest, liabilities, indebtedness and obligations
under this Section 1, 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 the Borrower, or
against any security for the Guaranteed Obligations, or under any other
guaranty covering all or a portion of the Guaranteed Obligations.


 


2.                                       Additionally, each Guarantor, jointly and
severally, unconditionally, absolutely and irrevocably, guarantees the payment
of any and all Guaranteed Obligations whether or not due or payable by the Borrower
upon the occurrence in respect of the Borrower of any of the events specified
in Section 10.05 of the Second-Lien Credit Agreement, and unconditionally,
absolutely and irrevocably, jointly and severally, promises to pay such
Guaranteed Obligations to the Secured Creditors, or order, on demand.  This Guaranty is an absolute, present and
continuing guaranty of prompt payment and performance and not of collection.


 


3.                                       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
Borrower 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 the Borrower or by 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) any
dissolution, termination or increase, decrease or change in personnel by the
Borrower, (e) the failure of the 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 the 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 6 hereof or (h)
any invalidity, rescission, irregularity or unenforceability of all or any part
of the Guaranteed Obligations or of any security therefor.


 

















 


4.                                       The obligations of each Guarantor
hereunder are independent of the obligations of any other Guarantor, any other
guarantor or the 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 the Borrower and whether or not any
other Guarantor, any other guarantor or the Borrower be joined in any such
action or actions.  Each Guarantor
waives (to the fullest extent permitted by applicable law) the benefits of any
statute of limitations affecting its liability hereunder or the enforcement
thereof.  Any payment by the Borrower or
other circumstance which operates to toll any statute of limitations as to the
Borrower shall operate to toll the statute of limitations as to each Guarantor.


 


5.                                       Each Guarantor hereby waives (to the
fullest extent permitted by applicable law) notice of acceptance of this
Guaranty and notice of any liability to which it may apply, and waives
promptness, diligence, presentment, demand of payment, 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 the Borrower) and the 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.


 


6.                                       Any Secured Creditor may (except as shall
be required by applicable statute and cannot be waived) at any time 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 Borrower, any other Credit Party, any Subsidiary thereof,
any other guarantor of the Borrower or others or otherwise act or refrain from
acting;


 

















 


(d)                                 release or substitute any one or more
endorsers, Guarantors, other guarantors, the Borrower, 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 the Borrower to creditors of
the Borrower other than the Secured Creditors;


 


(f)                                    apply any sums by whomsoever paid or
howsoever realized to any liability or liabilities of the Borrower to the
Secured Creditors regardless of what liabilities of the Borrower 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 Borrower 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 or equitable defense to or discharge of the liabilities of a
guarantor or surety or that might otherwise limit recourse against such
Guarantor).


 


7.                                       No invalidity, illegality, irregularity
or unenforceability 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.


 


8.                                       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 Borrower 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.


 


9.                                       Any indebtedness of the Borrower now or
hereafter held by any Guarantor is hereby subordinated to the indebtedness of
the Borrower to the Secured Creditors; and such indebtedness of the 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
Borrower 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
the 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 the 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 upon 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 Creditors as collateral security for any Guaranteed Obligations
thereafter existing.


 


10.                                 (a) 
Each Guarantor waives any right to require the Secured Creditors
to:  (i) proceed against the Borrower,
any other Guarantor, any other guarantor of the Guaranteed Obligations or any
other party; (ii) proceed against or exhaust any security held from the
Borrower, 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
Borrower, 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 Borrower, 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 Borrower other
than payment in full in cash of the Guaranteed Obligations.  Subject to the terms of the Intercreditor
Agreement, the Secured Creditors may, at their election, 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 may have against the Borrower, 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 Borrower, any other guarantor of the Guaranteed Obligations or any
other party or any security.


 


(b)                                 Each Guarantor waives all presentments,
demands for performance, protests and notices, including, without limitation,
notices of nonperformance, notices of protest, notices of dishonor, notices of
acceptance of this Guaranty, and notices of the existence, creation or
incurring of new or additional indebtedness. 
Each Guarantor has knowledge and assumes all responsibility for being
and keeping itself informed of the 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 the Borrower and each other Guarantor on an
ongoing basis information relating thereto and the 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 Borrower 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 Borrower, 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 Obligations
hereunder and (y) the Secured Creditors shall have no duty to advise any Guarantor
of information known to them regarding any of the afore-mentioned circumstances
or risks.


 


(c)                                  Each Guarantor hereby acknowledges and
agrees that no Secured Creditor nor any other Person shall be under any
obligation (a) to marshal any assets in favor of the Guarantor or in payment of
any or all of the liabilities of any Guaranteed Party under the Documents or
the obligation of the Guarantor hereunder or (b) to pursue any other remedy
that the Guarantor may or may not be able to pursue itself any right to which
the Guarantor hereby waives.


 


(d)                                 Each Guarantor
warrants and agrees that each of the waivers set forth in Sections 4, 5 and in
this Section 10 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.


 


11.                                 Notwithstanding anything to the contrary
contained elsewhere in this Guaranty, 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 and that no other
Secured Creditor shall have any right individually to seek to enforce or to
enforce this Guaranty


 

















 


or to realize upon the security
to be granted by the Security Documents, it being understood and agreed that
such rights and remedies may (subject to the Intercreditor Agreement) 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 Security
Documents.  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 11 is among and solely for the benefit of
the Secured Creditors and that, if the Required Lenders so agree (without
requiring the consent of any Guarantor), this Guaranty may (subject to the
Intercreditor Agreement) be directly enforced by any Secured Creditor.


 


12.                                 In order to induce the Lenders to make
Second-Lien Loans to the Borrower pursuant to the Second-Lien Credit Agreement,
each Guarantor represents, warrants and covenants that:


 


(a)                                  such Guarantor (i) is a duly organized
and validly existing corporation, partnership or limited liability company, as
the case may be, in good standing under the laws of the jurisdiction of its
organization, (ii) has the corporate, partnership or limited liability company
power and authority, as the case may be, to own its property and assets and to
transact the business in which it is engaged and presently proposes to engage
and (iii) is duly qualified and is authorized to do business and is in good
standing in each jurisdiction where the conduct of its business requires such
qualification except for failures to be so qualified which, either individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect;


 


(b)                                 such Guarantor has the corporate,
partnership or limited liability company power and authority, as the case may
be, to execute, deliver and perform the terms and provisions of this Guaranty
and each other Credit Document to which it is a party and has taken all
necessary corporate, partnership or limited liability company action, as the
case may be, to authorize the execution, delivery and performance by it of this
Guaranty and each such other Credit Document.


 


(c)                                  such
Guarantor has duly executed and delivered this Guaranty and each other Credit
Document to which it is a party, and this Guaranty and each such other Credit
Document constitutes the legal, valid and binding obligation of such Guarantor
enforceable in accordance with its terms, except to the extent that the
enforceability hereof or thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws generally
affecting creditors’ rights and by equitable principles (regardless of whether
enforcement is sought in equity or at law);


 


(d)                                 neither the execution, delivery or
performance by such Guarantor of this Guaranty or any other Credit Document to
which it is a party, nor compliance by it with the terms and provisions hereof
and thereof, will (i) contravene any provision of any applicable law, statute,
rule or regulation or any applicable order, writ, injunction or decree of any
court or governmental instrumentality, (ii) conflict with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any


 

















 


Lien (except pursuant to the Security Documents) upon
any of the property or assets of such Guarantor or any of its Subsidiaries
pursuant to the terms of any indenture, mortgage, deed of trust, loan
agreement, credit agreement, or any other material agreement, contract or
instrument to which such Guarantor or any of its Subsidiaries is a party or by
which it or any of its property or assets is bound or to which it may be
subject or (iii) violate any provision of the certificate or articles of
incorporation, by-laws, partnership agreement or limited liability company
agreement (or equivalent organizational documents), as the case may be, of such
Guarantor or any of its Subsidiaries;


 


(e)                                  no order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made prior to the date when required and which
remain in full force and effect), or exemption by, any governmental or public
body or authority, or any subdivision thereof, is required to authorize, or is
required in connection with, (i) the execution, delivery and performance of
this Guaranty by such Guarantor or any other Credit Document to which such
Guarantor is a party or (ii) the legality, validity, binding effect or
enforceability of this Guaranty or any other Credit Document to which such
Guarantor is a party; and


 


(f)                                    there are no actions, suits or
proceedings pending or, to such Guarantor’s knowledge, threatened (i) with
respect to this Guaranty or any other Credit Document to which such Guarantor
is a party, (ii) with respect to such Guarantor or any of its Subsidiaries
that, either individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect or (iii) that could reasonably be expected to
have a material adverse effect on the rights or remedies of the Secured
Creditors or on the ability of such Guarantor to perform its obligations to the
Secured Creditors hereunder and under the other Credit Documents to which it is
a party.


 


13.                                 Each Guarantor covenants and agrees that
on and after the Effective Date and until the termination of the Total
Commitment and all Guaranteed Obligations have been paid in full (other than
indemnities described in Sections 12.07 and 13.05 of the Second-Lien Credit
Agreement and analogous provisions in the Security Documents which are not then
due and payable), such Guarantor will comply, and will cause each of its
Subsidiaries to comply, with all of the applicable provisions, covenants and
agreements contained in Sections 8 and 9 of the Second-Lien Credit Agreement,
and 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 8 and 9 of the Second-Lien Credit
Agreement, and so that no Default or Event of Default, is caused by the actions
of such Guarantor or any of its Subsidiaries.


 


14.                                 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 Secured Creditor in connection with
the enforcement of this Guaranty and the protection of the Secured Creditors’
rights hereunder and any amendment, waiver or consent relating hereto
(including, in each case, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel) employed by the
Collateral Agent, the Administrative Agent and each Secured Creditor).


 

















 


15.                                 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.


 


16.                                 Subject to Section 22 hereof, 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 13.01 of the Second-Lien Credit Agreement, with the written consent of
each Lender).


 


17.                                 Each Guarantor acknowledges that 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.


 


18.                                 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 (but subject to the Intercreditor Agreement), upon the occurrence
and during the continuance of an Event of Default, 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 unmatured.


 


19.                                 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 Lender Creditor, as provided in the Second-Lien
Credit Agreement, and (ii) in the case of any Guarantor, at its address set
forth opposite its signature page below; or in any case at such other address as
any of the Persons listed above may hereafter notify the others in writing.


 


20.                                 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 Borrower), 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 Second-Lien Loan Note or any other instrument
evidencing any liability of the Borrower, 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.


 


21.                                 (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. 
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 County 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)                                 Each Guarantor hereby irrevocably waives
(to the fullest 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 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.


 

















 


22.                                 In the event that all of the capital
stock or other equity interests of one or more Guarantors is sold or otherwise
disposed of or liquidated in compliance with the requirements of Section 9.02
of the Second-Lien Credit Agreement (or such sale, other disposition or liquidation
has been approved in writing by the Required Lenders) or the Guaranty of such
Guarantor is required to be released pursuant to the Intercreditor Agreement
and the proceeds of such sale, disposition, liquidation or release are applied
in accordance with the provisions of the Second-Lien Credit Agreement, to the
extent applicable, such Guarantor shall, upon consummation of such sale, other
disposition or other release, be released from this Guaranty automatically and
without further action and this Guaranty shall, as to each such Guarantor or
Guarantors, terminate, and have no further force or effect (it being understood
and agreed that the sale of one or more Persons that own, directly or
indirectly, all of the capital stock or other Equity Interests of any Guarantor
shall be deemed to be a sale of such Guarantor for the purposes of this Section
22).


 


23.                                 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 shall 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 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 to 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, it being
expressly recognized and agreed by all parties hereto that any Guarantor’s
right of contribution arising pursuant to this Section 23 against any other
Guarantor 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 23:  (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
or any guaranteed obligations arising


 

















 


under any guaranty of
Refinancing Senior Subordinated Notes, if any) on such date.  Notwithstanding anything to the contrary
contained above, any Guarantor that is released from this Guaranty pursuant to
Section 22 hereof shall thereafter have no contribution obligations, or rights,
pursuant to this Section 23, and at the time of any such release, if the
released Guarantor had an Aggregate Excess Amount or an Aggregate Deficit
Amount, same shall be deemed reduced to $0, and the contribution rights and
obligations of the remaining Guarantors shall be recalculated on the respective
date of release (as otherwise provided above) based on the payments made
hereunder by the remaining Guarantors. 
All parties hereto recognize and agree that, except for any right of
contribution arising pursuant to this Section 23, 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.


 


24.                                 (a) 
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 (it being understood that it is the intention of the parties to this
Guaranty and the parties to any guaranty of the Refinancing Senior Subordinated
Notes that, to the maximum extent permitted under applicable laws, the
liabilities in respect of the guarantees of the Refinancing Senior Subordinated
Notes shall not be included for the foregoing purposes and that, if any
reduction is required to the amount guaranteed
by any Guarantor hereunder and with respect to the Refinancing Senior
Subordinated Notes, its guarantee of amounts owing in respect of the
Refinancing Senior Subordinated Notes shall first be reduced) 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.  Notwithstanding the provisions of the two preceding sentences, as
between the Secured Creditors and the holders of any Refinancing Senior
Subordinated Notes, it is agreed (and the provisions of the relevant indentures
or other agreements governing the Refinancing Senior Subordinated Notes shall
so provide) that any diminution (whether pursuant to court decree or otherwise)
of any Guarantor’s obligation to make any distribution or payment pursuant to
this Guaranty shall have no force or effect for purposes of the subordination
provisions contained in the respective indenture or other agreements governing
any such Refinancing Senior Subordinated Notes, and that any payments received
in respect of a Guarantor’s obligations with respect to any Refinancing Senior
Subordinated Notes shall be turned over to the holders of the “Guarantor Senior
Debt” or similar term (as defined in each indenture or other agreements
governing any Refinancing Senior Subordinated Notes) (or obligations which
would have constituted “Guarantor Senior Debt” if same had not been reduced or
disallowed) of such Guarantor (which


 

















 


“Guarantor Senior Debt” shall
be calculated as if there were no diminution thereto pursuant to this Section
24 or for any other reason other than the irrevocable payment in full in cash
of the respective obligations which would otherwise have constituted “Guarantor
Senior Debt”) until all such Guarantor Senior Debt (or obligations which would
have constituted “Guarantor Senior Debt” if same had not been reduced or
disallowed) has been irrevocably paid in full in cash.


 


(b)                                 This Guaranty shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Guaranteed Obligations is rescinded or must
otherwise be restored or returned by the Borrower upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower, or
otherwise, all as though such payment had not been made. The Guarantor further
agrees that, without limiting the generality of this Guaranty, if an Event of
Default shall have occurred and be continuing and any Secured Creditor is
prevented by applicable law, including, without limitation, the imposition of
an injunction under Section 105 of the Bankruptcy Code or similar provisions of
any United States or foreign law for the relief of debtors, from exercising its
remedies under the Credit Documents, such Secured Creditor shall be entitled to
receive hereunder from each Guarantor, upon demand therefor, the sums which
would have otherwise been due from the Borrower had such remedies been
exercised.


 


25.                                 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 Borrower and the
Administrative Agent.


 


26.                                 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 Borrower under Sections 4.03 and 4.04 of
the Second-Lien Credit Agreement.


 


27.                                 It is understood and agreed that any
Subsidiary of Holdings that is required to execute a counterpart of this
Guaranty after the date hereof pursuant to the Second-Lien Credit Agreement
shall become a Guarantor hereunder by (x) executing and delivering a
counterpart hereof or appropriate assumption agreement to the Administrative
Agent, in each case as may be requested by (and in form and substance
satisfactory to) the Administrative Agent and (y) taking all actions as
specified in this Guaranty as would have been taken by such Guarantor had it
been an original party to this Guaranty, in each case with all documents and
actions required to be taken to be taken above to the reasonable satisfaction
of the Administrative Agent.


 


*  *  *


 

















 


IN WITNESS
WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered
as of the date first above written.


 


	
  Address:

  	
   

  
	
   

  	
   

  
	
  2366
  Bernville Road

  	
  ENERSYS
  DELAWARE INC.,

  
	
  Reading, PA,
  19605

  	
  as a
  Guarantor

  
	
  Telephone:  (610) 208-1991

  	
   

  
	
  Facsimile:  (610) 208-1671

  	
   

  
	
  Attention:
  Michael T. Philion

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
  2366
  Bernville Road

  	
  ESFINCO,
  INC.,

  
	
  Reading, PA,
  19605

  	
  as a
  Guarantor

  
	
  Telephone:  (610) 208-1991

  	
   

  
	
  Facsimile:  (610) 208-1671

  	
   

  
	
  Attention:
  Michael T. Philion

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
  2366
  Bernville Road

  	
  ESRMCO,
  INC.,

  
	
  Reading, PA,
  19605

  	
  as a
  Guarantor

  
	
  Telephone:  (610) 208-1991

  	
   

  
	
  Facsimile:  (610) 208-1671

  	
   

  
	
  Attention:
  Michael T. Philion

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
  2366
  Bernville Road

  	
  HAWKER
  ENERGY PRODUCTS INC.,

  
	
  Reading, PA,
  19605

  	
  as a
  Guarantor

  
	
  Telephone:  (610) 208-1991

  	
   

  
	
  Facsimile:  (610) 208-1671

  	
   

  
	
  Attention:
  Michael T. Philion

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


	
  2366
  Bernville Road

  	
  HAWKER POWER
  SYSTEMS, INC.,

  
	
  Reading, PA,
  19605

  	
  as a
  Guarantor

  
	
  Telephone:  (610) 208-1991

  	
   

  
	
  Facsimile:  (610) 208-1671

  	
   

  
	
  Attention:
  Michael T. Philion

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
  2366
  Bernville Road

  	
  POWERSAFE
  STANDBY BATTERIES INC.,

  
	
  Reading, PA,
  19605

  	
  as a
  Guarantor

  
	
  Telephone:  (610) 208-1991

  	
   

  
	
  Facsimile:  (610) 208-1671

  	
   

  
	
  Attention:
  Michael T. Philion

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
  2366
  Bernville Road

  	
  HAWKER
  POWERSOURCE, INC.,

  
	
  Reading, PA,
  19605

  	
  as a
  Guarantor

  
	
  Telephone:  (610) 208-1991

  	
   

  
	
  Facsimile:  (610) 208-1671

  	
   

  
	
  Attention:
  Michael T. Philion

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
  2366
  Bernville Road

  	
  NEW PACIFICO
  REALTY, INC.,

  
	
  Reading, PA,
  19605

  	
  as a
  Guarantor

  
	
  Telephone:  (610) 208-1991

  	
   

  
	
  Facsimile:  (610) 208-1671

  	
   

  
	
  Attention:
  Michael T. Philion

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


	
  Accepted and Agreed to:

  	
   

  
	
   

  	
   

  
	
  BANK OF AMERICA, N.A.,

  	
   

  
	
  as Administrative Agent

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  ,

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title: