Document:

Exhibit 10.11c

 

GUARANTY

 

 

DATED as of December 27,
2002

 

 

by

 

 

PRIMAL SOLUTIONS, INC.

 

 

in favor of

 

 

LIGHTBRIDGE, INC.

 

 

TABLE OF
CONTENTS

 

	
  1.     Definitions.

  
	
  2.
      Guaranty of Payment and Performance.

  
	
  3.
      Guarantor’s Agreement to Pay Enforcement Costs, etc.

  
	
  4.
      Full Recourse Liability of Guarantor

  
	
  5.
      Waivers by Guarantor; Lightbridge’s Freedom to Act.

  
	
  6.
      Unenforceability of Obligations Against Wireless.

  
	
  7.
      Subrogation; Subordination.

  
	
   

  	
  7.1.   Waiver
  of Rights Against Wireless.

  
	
   

  	
  7.2.   Subordination.

  
	
   

  	
  7.3.   Provisions
  Supplemental.

  
	
  8.     Further
  Assurances.

  
	
  9.
      Termination; Reinstatement.

  
	
  10.   Successors and
  Assigns.

  
	
  11.   Amendments and
  Waivers.

  
	
  12.
    Notices.

  
	
  13.   Governing Law.

  
	
  14.   Waiver of Jury
  Trial.

  
	
  15.   Miscellaneous.

  

 

 

GUARANTY

 

GUARANTY, dated as
of December 27, 2002, by Primal Solutions, Inc. (the “Guarantor”) in
favor of Lightbridge, Inc., a Massachusetts corporation (“Lightbridge”)
with a principal address at 67 South Bedford Street, Burlington, MA  01803.

 

WHEREAS, Wireless
Billing Systems, a California corporation and a wholly owned subsidiary of
Guarantor (“Wireless”), is the maker of that certain Amended and
Restated Secured Promissory Note, dated as of January 1, 2001, and as
subsequently amended by that certain letter agreement dated December 20, 2001
(collectively, referred to herein as the “2001 Amended Note”) in favor
of Lightbridge;

 

WHEREAS, Wireless
and Lightbridge desire to amend the terms of the 2001 Amended Note pursuant to
that certain 2002 Amended and Restated Secured Promissory Note of even date
herewith (the “2002 Amended Note”);

 

WHEREAS, it is a
condition precedent to Lightbridge’s acceptance of that certain 2002 Amended
Note that the Guarantor execute and deliver to Lightbridge a guaranty
substantially in the form hereof; and

 

WHEREAS,
Lightbridge has requested, and the Guarantor has agreed, that Guarantor
guaranty the obligations of Wireless to Lightbridge under or in respect of the
2002 Amended Note as provided herein;

 

NOW, THEREFORE, the
Guarantor hereby agrees with Lightbridge as follows:

 

1.  Definitions.  The
term “Obligations” means the principal amount of, all accured interest
on, and all other amounts due under, the 2002 Amended Note.  All other capitalized terms used herein
without definition shall have the respective meanings provided therefor in the
2002 Amended Note.

 

2.  Guaranty
of Payment and Performance.  The Guarantor
hereby guarantees to Lightbridge the full and punctual payment when due
(whether at stated maturity, by required pre-payment, by acceleration or
otherwise) after giving effect to any required notice or grace periods, as well
as the performance, of the Obligations, including all such which would become
due but for the operation of the automatic stay pursuant to §362(a) of the
Federal Bankruptcy Code and the operation of §§502(b) and 506(b) of the Federal
Bankruptcy Code.  This Guaranty is an
absolute, unconditional and continuing guaranty of the full and punctual
payment and performance of the Obligations and not of their collectibility only
and is in no way conditioned upon any requirement that Lightbridge first
attempt to collect any of the Obligations from Wireless or resort to any
collateral security or other means of obtaining payment.  Should Wireless default, after giving effect
to any required notice or grace period, in the payment or performance of any of
the Obligations, the obligations of the Guarantor hereunder with respect to
such Obligations in default shall become immediately due and payable to
Lightbridge, without demand or

 

 

notice of any nature, all of which are expressly waived by the
Guarantor.  Payments by the Guarantor
hereunder may be required by Lightbridge on any number of occasions.

 

3.  Guarantor’s
Agreement to Pay Enforcement Costs, etc.  The
Guarantor further agrees, as the principal obligor and not as a guarantor only,
to pay to Lightbridge, on demand, all reasonable costs and expenses (including
court costs and reasonable legal expenses) incurred or expended by Lightbridge
in connection with the enforcement of the Obligations or any of the terms of
the Guaranty.  The Guarantor shall also
pay interest on amounts recoverable under this Section 3 from the time when
such amounts become due until payment, whether before or after judgment, at the
rate of interest for overdue principal set forth in the 2002 Amended Note, provided
that if at any time any applicable usury law would ever render usurious any
amounts called for under the 2002 Amended Note, then the Guarantor shall not be
required to pay interest on the 2002 Amended Note at a rate in excess of the
maximum lawful rate.

 

4.  Full Recourse Liability of Guarantor.  This
Guaranty shall be a full recourse obligation of the Guarantor which shall give
rise to a general obligation of the Guarantor. 
Lightbridge’s remedies hereunder shall not be limited to recourse only
to any pledged interests under the 2002 Amended Note.

 

5.  Waivers
by Guarantor; Lightbridge’s Freedom to Act.  The
Guarantor waives, to the extent permitted by law, promptness, diligence,
presentment, demand, protest, notice of acceptance, notice of any Obligations
incurred and all other notices of any kind (except for notices expressly
provided for herein), all defenses which may be available by virtue of any
valuation, stay, moratorium law or other similar law now or hereafter in
effect, any right to require the marshalling of assets of Wireless or any other
entity or other person primarily or secondarily liable with respect to any of
the Obligations, and all suretyship defenses generally.  Without limiting the generality of the
foregoing, the Guarantor agrees to the extent permitted by law, that the
obligations of the Guarantor hereunder shall not be released or discharged, in
whole or in part, or otherwise affected by (i) the failure of Lightbridge to
assert any claim or demand or to enforce any right or remedy against Wireless
or any other entity or other person primarily or secondarily liable with
respect to any of the Obligations; (ii) any extensions, compromise,
refinancing, consolidation or renewals of any Obligation; (iii) any change in
the time, place or manner of payment or performance of any of the Obligations
or any rescissions, waivers, compromise, refinancing, consolidation, amendments
or modifications of any of the terms or provisions of the 2002 Amended Note, or
any other guaranty; (iv) the addition, substitution or release of any entity or
other person primarily or secondarily liable for any Obligation, (v) the
adequacy of any rights which Lightbridge may have against any collateral
security or other means of obtaining repayment of any of the Obligations; (vi)
the impairment of any collateral securing any of the Obligations, including
without limitation the failure to perfect or preserve any rights which
Lightbridge might have in such collateral security or the substitution,
exchange, surrender, release, loss or destruction of any such collateral
security; or (vii) any other act or omission which might in any manner or to
any extent vary the risk of the Guarantor or otherwise operate as a release or
discharge of the Guarantor, all of which may be done

 

2

 

without notice to the Guarantor. 
To the fullest extent permitted by law, the Guarantor hereby expressly
waives any and all rights or defenses arising by reason of (A) any “one action”
law which would otherwise prevent Lightbridge from bringing any action or
exercising any other right or remedy (including any right of set-off), against
the Guarantor before or after Lightbridge’s commencement or completion of any
foreclosure action, whether judicially, by exercise of power of sale or
otherwise, or (B) any other law which in any other way would otherwise require
any election of remedies by Lightbridge. 
Without limiting the generality of any other waiver or agreement set
forth in this Guaranty, Guarantor hereby waives any and all rights or defenses
arising directly or indirectly under any one or more of California Civil Code
Sections 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2838, 2839,
2845, 2847, 2848, 2849 and 2850, and California Code of Civil Procedure
Sections 580a, 580b, 580c, 580d and 726.

 

6.  Unenforceability
of Obligations Against Wireless.  If for any reason
Wireless has no legal existence or is under no legal obligation to discharge
any of the Obligations, or if any of the Obligations have become irrecoverable
from Wireless by reason of Wireless’s insolvency, bankruptcy or reorganization
or by other operation of law or for any other reason, this Guaranty shall
nevertheless be binding on the Guarantor to the same extent as if the Guarantor
at all times had been the principal obligor on all such Obligations.  In the event that acceleration of the time
for payment of any of the Obligations is stayed upon the insolvency, bankruptcy
or reorganization of Wireless, or for any other reason, the Obligations with
regard to all such amounts otherwise subject to acceleration under the terms of
the 2002 Amended Note or any other agreement evidencing, securing or otherwise
executed in connection with any Obligation shall be immediately due and payable
by the Guarantor.

 

7.  Subrogation;
Subordination.

 

7.1  Waiver
of Rights Against Wireless.  Until the final
payment and performance in full of all of the Obligations, the Guarantor shall
not exercise any rights against Wireless arising as a result of payment by the
Guarantor hereunder, by way of subrogation, reimbursement, restitution,
contribution or otherwise, and will not prove any claim in competition with
Lightbridge in respect of any payment hereunder in any bankruptcy, insolvency
or reorganization case or proceedings of any nature (provided nothing herein
shall prevent the Guarantor from filing any claims or taking any similar action
to preserve such claims in any such case or proceeding, provided such filing or
action does not materially interfere with the exercise of the rights and
remedies of Lightbridge hereunder); and the Guarantor will not claim any
setoff, recoupment or counterclaim against Wireless in respect of any liability
of the Guarantor to Wireless.

 

7.2  Subordination.  The
payment of any amounts due with respect to any indebtedness of Wireless now or
hereafter owed to the Guarantor is hereby subordinated to the prior payment in
full of all of the Obligations.  The
Guarantor agrees that, after the occurrence of any default in the payment or
performance of any of the Obligations (after giving effect to any applicable
grace period), the 

 

3

 

Guarantor
will not demand, sue for or otherwise attempt to collect any such indebtedness
of Wireless to the Guarantor until all of the Obligations shall have been paid
in full.  If, notwithstanding the
foregoing sentence, the Guarantor shall collect, enforce or receive any amounts
in respect of such indebtedness, such amounts shall be collected, enforced and
received by the Guarantor in trust for Lightbridge and be paid over to
Lightbridge on account of the Obligations without affecting in any manner the
liability of the Guarantor under the other provisions of this Guaranty.

 

7.3  Provisions
Supplemental.  The provisions of this Section
7 shall be supplemental to and not in derogation of any rights and remedies of
Lightbridge under any separate subordination agreement which Lightbridge may at
any time and from time to time enter into with the Guarantor.

 

8.  Further Assurances.  The
Guarantor agrees to do all such things and execute all such documents as
Lightbridge may consider reasonably necessary to give full effect to this
Guaranty and to preserve the rights and powers of Lightbridge hereunder.  The Guarantor acknowledges and confirms that
the Guarantor itself has established its own adequate means of obtaining from
Wireless on a continuing basis all information desired by the Guarantor
concerning the financial condition of Wireless and that the Guarantor will look
to Wireless and not to Lightbridge in order for the Guarantor to keep
adequately informed of changes in Wireless’s financial condition.

 

9.  Termination;
Reinstatement.  This Guaranty shall remain in
full force and effect until payment in full of the Obligations, notwithstanding
any intermediate or temporary payment or settlement of the whole or any part of
the Obligations.

 

10.  Successors and
Assigns.  This Guaranty shall be assignable under the same terms as set forth in
the 2002 Amended Note.  This
Guaranty shall be binding upon the Guarantor and its successors, and shall
inure to the benefit of and be enforceable by Lightbridge and its successors
and permitted transferees and assigns of the 2002 Amended Note.

 

11.  Amendments and
Waivers.  No amendment or waiver of any
provision of this Guaranty nor consent to any departure by the Guarantor
therefrom shall be effective unless the same shall be in writing and signed by
Lightbridge. No failure on the part of Lightbridge to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right.

 

12.  Notices.  All notices and other
communications called for hereunder shall be made in writing and, unless
otherwise specifically provided herein, shall be deemed to have been duly made
or given when delivered by hand or five (5) days after being mailed first
class, postage prepaid, or, in the case of telegraphic or facsimile notice,
when transmitted, answer back received, addressed as follows:  if to the Guarantor, at the address set
forth beneath its signature hereto, and if to Lightbridge, at the address for 

 

4

 

Lightbridge set forth in the introductory paragraph of this Guaranty,
or at such address as either party may designate in writing to the other.

 

13.  Governing Law.  THIS
GUARANTY IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.

 

14.  Waiver of Jury
Trial.  EACH OF THE GUARANTOR AND, BY ITS ACCEPTANCE
HEREOF, LIGHTBRIDGE, HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO
ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR
OBLIGATIONS.

 

15.  Miscellaneous.  This
Guaranty constitutes the entire agreement of the Guarantor and Lightbridge with
respect to the matters set forth herein. 
The rights and remedies herein provided are cumulative and not exclusive
of any remedies provided by law or any other agreement, and this Guaranty shall
be in addition to any other guaranty of or collateral security for any of the
Obligations.  The invalidity or
unenforceability of any one or more sections of this Guaranty shall not affect
the validity or enforceability of its remaining provisions.  Captions are for the ease of reference only
and shall not affect the meaning of the relevant provisions.  The meanings of all defined terms used in
this Guaranty shall be equally applicable to the singular and plural forms of
the terms defined.

 

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

 

	
   

  	
  PRIMAL SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Joseph
  R. Simrell

  	
   

  
	
   

  	
  Joseph R. Simrell, President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  18881 Von Karman Avenue

  
	
   

  	
   

  	
  Suite 500

  
	
   

  	
   

  	
  Irvine, California 92612

  
	
   

  	
   

  
	
   

  	
  Facsimile:  (949) 260-1515

  
				

 

5Exhibit
4.1

 

GUARANTY

 

This GUARANTY (“Guaranty”) is made as of the
         day of
           , 2003, by
each party set forth in Schedule I attached hereto (each, a
“Guarantor”), in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, a national
banking association, as Trustee for the Holders (the “Trustee”).  Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to them in the Indenture (as
defined below).

 

W I T N E S S E T H

 

WHEREAS, Watson Pharmaceuticals, Inc., a Nevada
corporation (the “Company”), the financial institutions from time to time party
thereto (the “Lenders”) and the agents thereto have entered into that certain
Credit Agreement, dated as of May       , 2003
(as the same may be amended, restated, modified or supplemented from time to
time, the “Credit Agreement”), pursuant to which the Lenders will make certain
loans to the Company for the working capital and other general corporate needs
of Company and its Subsidiaries;

 

WHEREAS, the Lenders have required as a condition,
among others, to entering into the Credit Agreement and making the loans
thereunder, that the Guarantor guarantee the obligations of the Company under
the Credit Agreement;

 

WHEREAS, certain Subsidiaries of the Company
(including some of the Guarantors) gave a guarantee to the Trustee on July 5,
2000 (the “Old Guaranties”) related to the Company entering into that certain
Credit Agreement dated as of July 5, 2002 (and amended and restated as of
August 28, 2002) by and among the Company, the lenders thereto, SG Cowen
Securities Corporation, Societe General, First Union National Bank and Summit
Bank (the “Old Credit Agreement”);

 

WHEREAS, the Old Credit Agreement was terminated on March
7, 2003, and, pursuant to the terms of the Senior Indenture, dated as of May
18, 1998, as supplemented by that certain First Supplemental Indenture dated as
of May 18, 1998 (collectively the “Indenture”), by and between the Company and
the Trustee, the Old Guaranties terminated on that date as well;

 

WHEREAS, pursuant to the Credit Agreement, the Guarantor is
giving the guarantee to the Lenders and, under the
terms of the Indenture, the
Guarantor is required to enter into this Guaranty;

 

WHEREAS, this Guaranty replaces and supercedes any
guaranty given by any Guarantor to the Trustee or the Holders related to the
Indenture;

 

NOW THEREFORE, in consideration of the premises set
forth above, the terms and conditions contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

1.                                       Guaranty.

 

(a)                                  The
Guarantor unconditionally guarantees for the benefit of the Trustee and the
Holders the full and prompt payment when due, whether at maturity or earlier,
by reason

 

 

of acceleration or otherwise, and at all times thereafter, of all the
Obligations (including, without limitation, interest accruing following the
filing of a bankruptcy petition by or against the Company, at the applicable
rate specified in the Indenture, whether or not such interest is allowed as a
claim in bankruptcy).  The term
“Obligations” shall mean all loans, advances, debts, liabilities and
obligations for monetary amounts from time to time owing by the Company to the
Holders in connection with the Indenture and the Securities, whether due or to
become due, matured or unmatured, liquidated or unliquidated, contingent or
non-contingent, and all covenants and duties regarding such amounts, of any
kind or nature, present or future, whether or not evidenced by any note,
agreement or instrument, arising under or in respect of the Indenture or the
Securities.  This term includes all
principal, interest, fees, expenses, costs or other sums (including, without
limitation, all reasonable fees and disbursements of any law firm or other
external counsel) and any make-whole or other prepayment consideration, in each
case chargeable to the Company under the Indenture or the Securities.

 

(b)                                 At
any time after the occurrence and during the continuance of an Event of
Default, the Guarantor shall pay to the Trustee, for the benefit of the Trustee
and the Holders, promptly on demand and in immediately available funds, the
full amount of the Obligations.  The
Guarantor further agrees to pay and reimburse the Trustee and the Holders for,
on demand and in immediately available funds, (i) all reasonable fees, costs
and expenses (including, without limitation, all court costs and reasonable
fees, costs and expenses of a single counsel to the Trustee and the Holders)
paid or incurred by the Trustee or the Holders in: (A) endeavoring to collect
all or any part of the Obligations owing to such Person from, or in prosecuting
any action against, the Company relating to the Indenture, this Guaranty or the
transactions contemplated thereby; (B) taking any action with respect to the
Guarantor’s obligations hereunder; and (C) preserving, protecting or defending
the enforceability of, or enforcing, this Guaranty or the Trustee’s and the
Holders’ rights hereunder (all such costs and expenses are hereinafter referred
to as the “Expenses”) and (ii) interest on (A) such Obligations which do not
constitute interest, (B) to the extent permitted by applicable law, such
Obligations which constitute interest, and (C) the Expenses, from the date of
demand under this Guaranty until paid in full in cash at the per annum rate of
interest described in the Indenture. 
The Guarantor hereby agrees that this Guaranty is an absolute guaranty
of payment and is not a guaranty of collection.

 

2.                                       Obligations
Unconditional.  The Guarantor hereby
agrees that its obligations under this Guaranty shall be unconditional,
irrespective of:

 

(i)                                     the
validity, or enforceability, avoidance or subordination of any of the
Obligations or any other instruments (including the Securities) or agreements
evidencing the Obligations;

 

(ii)                                  the
absence of any attempt by, or on behalf of, the Trustee or the Holders to
collect, or to take any other action to enforce, all or any part of the
Obligations whether from or against the Company or any other Person;

 

(iii)                               the
existence of an Event of Default under the Indenture or the election of any
remedy available under the Indenture, the Securities or any other instrument or
agreement related to the Indenture, or applicable requirements of law by, or on
behalf of, the Trustee or the Holders with respect to all or any part of the
Obligations;

 

2

 

(iv)                              the
waiver, consent, extension, forbearance or granting of any indulgence by, or on
behalf of, the Trustee or the Holders with respect to any provision of any of
the Indenture, the Securities or the other instruments or agreements related to
the Indenture or evidencing the Obligations;

 

(v)                                 any
borrowing or grant of a security interest by the Company, as
debtor-in-possession, under Section 364 of Title 11 of the United States Code
(11 U.S.C. §§ 101 et seq.) (the “Bankruptcy Code”);

 

(vi)                              the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion
of the claims against the Company held by the Trustee or the Holders for
repayment of all or any part of the Obligations or any Expenses; or

 

(vii)                           any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of Company or guarantor of the Obligations.

 

3.                                       Enforcement;
Application of Payments.  Upon the
occurrence and during the continuance of an Event of Default, the Trustee and
the Holders may proceed directly and at once, without notice, against the
Guarantor to obtain performance of and to collect and recover the full amount,
or any portion, of the Obligations then due and payable to the Trustee and the
Holders, without first proceeding against the Company or any other Person, or
against any security or collateral for the Obligations.  The Trustee and the Holders shall have the
exclusive right to determine the application of payments from the Guarantor,
the Company or any other Person, on account of the Obligations or any other
liability of the Guarantor to the Trustee or the Holders.

 

4.                                       Waivers.

 

(a)                                  The
Guarantor hereby waives diligence, presentment, demand of payment, protest or
notice with respect to the Obligations, all setoffs and counterclaims and all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance of this
Guaranty, the benefits of all statutes of limitation applicable to an action to
enforce this Guaranty, and all other demands whatsoever (and shall not require
that the same be made on the Company as a condition precedent to the
Guarantor’s obligations hereunder), and covenants that this Guaranty will not
be discharged except by satisfaction of the Obligations or the termination of
this Guaranty by its terms.  The
Guarantor further waives all notices that the principal amount, or any portion
thereof, and/or any interest on any instrument or document evidencing all or
any part of the Obligations is due, notices of any and all proceedings to
collect from the maker, any endorser or any other guarantor of all or any part
of the Obligations, or from any other Person, and, to the extent permitted by
law, notices of exchange, sale, surrender or other handling of security or
collateral given to the Trustee or the Holders to secure payment of all or any
part of the Obligations.

 

(b)                                 The
Trustee and the Holders are hereby authorized, without notice or demand and
without affecting the liability of the Guarantor hereunder, from time to time,
(i) to renew, extend, accelerate or otherwise change the time for payment of,
or other terms relating to, all or any part of the Obligations, or to otherwise
modify, amend or change the terms of the

 

3

 

Indenture, the Securities and any other instruments or agreements
related thereto; (ii) to accept partial payments on all or any part of the
Obligations; (iii) to take and hold security or collateral for the payment of
all or any part of the Obligations, this Guaranty, or any other guaranties of
all or any part of the Obligations or other liabilities of the Company; (iv) to
exchange, enforce, waive and release any such security or collateral; (v) to
apply such security or collateral and direct the order or manner of sale
thereof as in its discretion it may determine; (vi) to settle, release,
exchange, enforce, waive, compromise or collect or otherwise liquidate all or
any part of the Obligations, this Guaranty, any other guaranty of all or any
part of the Obligations, and any security or collateral for the Obligations or
for any such guaranty.  Any of the
foregoing may be done in any manner, without affecting or impairing the
obligations of the Guarantor hereunder.

 

5.                                       Setoff.  Upon the occurrence and during the
continuance of an Event of Default, the Trustee and each Holder may, without
notice to the Guarantor and regardless of the acceptance of any security or
collateral for the payment hereof, appropriate and apply toward the payment of
all or any part of the Obligations owing to such Persons (i) any indebtedness
due or to become due from the Trustee or such Holder to the Guarantor, and (ii)
any moneys, credits or other property belonging to the Guarantor, at any time
held by or coming into the possession of the Trustee or such Holder or their
respective affiliates.

 

6.                                       Financial
Information.  The Guarantor hereby
assumes responsibility for keeping itself informed of the financial condition
of the Company and any and all other endorsers and/or other guarantors of all
or any part of the Obligations, and of all other circumstances bearing upon the
risk of nonpayment of the Obligations, or any part thereof, that diligent
inquiry would reveal, and the Guarantor hereby agrees that the Trustee and the
Holders shall have no duty to advise the Guarantor of information known to it
regarding such condition or any circumstances. 
In the event the Trustee or any Holder, in its sole discretion,
undertakes at any time or from time to time to provide any such information to
the Guarantor, the Trustee or such Holder shall be under no obligation (i) to undertake
any investigation not a part of its regular business routine, (ii) to disclose
any information which the Trustee or such Holder, pursuant to accepted or
reasonable commercial finance or banking practices, wishes to maintain
confidential or (iii) to make any other or future disclosures of such
information or any other information to the Guarantor.

 

7.                                       Reinstatement.  The Guarantor further agrees that, to the
extent that the Company or any other guarantor of all or any part of the
Obligations makes a payment or payments to the Trustee or the Holders, which
payment or payments, or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to the
Company, the Guarantor, such other guarantor or any other Person, or their
respective estates, trustees, receivers or any other party, including, without
limitation, the Guarantor under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or
repayment, the part of the Obligations which has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the time immediately preceding such initial payment, reduction or
satisfaction.

 

8.                                       Subrogation.  Until the Obligations have been paid in
full, the Guarantor hereby agrees that it shall have no right of subrogation
with respect to such Obligations (under

 

4

 

contract, Section 509 of the Bankruptcy Code or otherwise) or any other
right of indemnity, reimbursement or contribution.

 

9.                                       Subordination.  The Guarantor agrees that any and all claims
of the Guarantor against the Company, any endorser or other guarantor of all or
any part of the Obligations, or against any of the Company’s properties, shall
be subordinated to all of the Obligations until the Obligations have been paid,
performed or otherwise satisfied in full. 
Notwithstanding any right of the Guarantor to ask for, demand, sue for,
take or receive any payment from the Company, all rights of the Guarantor,
whether now or hereafter arising and howsoever existing, in any assets of the
Company shall be and hereby are subordinated to the rights of the Trustee and
the Holders in those assets until the Obligations are paid, performed or
otherwise satisfied in full or this Guaranty terminates by its terms.  The Guarantor shall have no right to
possession of any such asset or to foreclose upon any such asset, whether by
judicial action or otherwise, unless and until all of the Obligations shall
have been fully paid, performed or otherwise satisfied or this Guaranty
terminates by its terms.  If all or any
part of the assets of the Company, or the proceeds thereof, are subject to any
distribution, division or application to the creditors of the Company, whether
partial or complete, voluntary or involuntary, and whether by reason of
liquidation, bankruptcy, arrangement, receivership, assignment for the benefit
of creditors or any other action or proceeding, or if the business of the
Company is dissolved or if substantially all of the assets of the Company are
sold, then, and in any such event, any payment or distribution of any kind or
character, either in cash, securities or other property, which shall be payable
or deliverable upon or with respect to any Indebtedness of the Company to the
Guarantor (“Company Indebtedness”) shall be paid or delivered directly to the
Trustee, for the benefit of the Trustee and the Holders, for application on the
Obligations, due or to become due, until such Obligations shall have first been
fully paid and performed or otherwise satisfied.  The Guarantor agrees that until the Obligations have been paid in
full in cash, the Guarantor will not assign or transfer to any Person (other
than to the Trustee) any claim the Guarantor has or may have against the
Company in respect of payments hereunder.

 

10.                                 Enforcement;
Amendments; Waivers.  No delay on
the part of the Trustee or the Holders in the exercise of any right or remedy
arising under this Guaranty, the Indenture, the Securities or any of the other
instrument or agreement related to the Indenture or otherwise with respect to
all or any part of the Obligations or any other guaranty of or security for all
or any part of the Obligations shall operate as a waiver thereof, and no single
or partial exercise by the Trustee or the Holders of any such right or remedy
shall preclude any further exercise thereof. 
No modification or waiver of any of the provisions of this Guaranty
shall be binding upon the Trustee and the Holders, except as expressly set
forth in a writing duly signed and delivered by the Trustee.  Failure by the Trustee or the Holders at any
time or times hereafter to require strict performance by the Company, any other
guarantor of all or any part of the Obligations or any other Person of any of
the provisions, warranties, terms and conditions contained in the Indenture,
the Securities or any other instruments or agreements related thereto now or at
any time or times hereafter executed by such Persons and delivered to the
Trustee or any Holder shall not waive, affect or diminish any right of the
Trustee or the Holders at any time or times hereafter to demand strict
performance thereof and such right shall not be deemed to have been waived by
any act or knowledge of the Trustee or the Holders, or their respective agents,
officers or employees, unless such waiver is contained in an instrument in
writing, directed and delivered to the Company or the Guarantor, as applicable,
specifying such waiver,

 

5

 

and is signed by the Trustee. 
No waiver of any Event of Default by the Trustee or the Holders shall
operate as a waiver of any other Event of Default or the same Event of Default
on a future occasion, and no action by the Trustee or the Holders permitted
hereunder shall in any way affect or impair the Trustee’s or the Holders’
rights and remedies or the obligations of the Guarantor under this Guaranty.  Any determination by a court of competent
jurisdiction of the amount of any principal and/or interest owing by the
Company to the Trustee or any Holder shall be conclusive and binding on the
Guarantor irrespective of whether the Guarantor was a party to the suit or
action in which such determination was made.

 

11.                                 Effectiveness;
Termination.  This Guaranty shall
become effective against the Guarantor upon its execution by the Guarantor and
delivery to the Trustee and shall continue in full force and effect and may not
be terminated or otherwise revoked until the Obligations shall have been fully
paid and discharged.  If,
notwithstanding the foregoing, the Guarantor shall have any right under
applicable law to terminate or revoke its obligations under this Guaranty, the
Guarantor agrees that such termination or revocation shall not be effective
until a written notice of such revocation or termination, specifically
referring hereto, signed by the Guarantor, is received by the Trustee.  Such notice shall not affect the right and
power of the Trustee and the Holders to enforce rights arising prior to receipt
thereof by the Trustee.  If the Holders
make loans or take other action after the Guarantor terminates or revokes its
obligations under this Guaranty but before the Trustee receives such written
notice, the rights of the Trustee and the Holders with respect thereto shall be
the same as if such termination or revocation had not occurred.

 

Notwithstanding any other provision of this Guaranty, if (i) the Guarantor is sold in accordance
with the terms of the Credit Agreement or (ii) the
Guarantor has executed and delivered this Guaranty solely because of the
requirement under the Indenture that any guarantor under the Credit Agreement
also be a Guarantor under the Indenture, then at such time as the Guarantor is
sold or is no longer a guarantor under the Credit Agreement, as the case may
be, this Guaranty shall automatically terminate, without any further action
from any party, and the Guarantor shall thereupon be released from any
obligations thereafter arising hereunder.

 

Notwithstanding any of the foregoing, if and for so
long as the Securities are (without any requirement that any Subsidiary
subsequently be the Guarantor of any Securities) assigned a rating of (a) Baa2
(or the equivalent) or higher by Moody’s Investors Service, Inc., or its
successors, and (b) BBB (or the equivalent) or higher by Standard & Poor’s
Ratings Service, a division of the McGraw-Hill Companies, Inc., or its
successors, this Guaranty shall be of no further force or effect and the
Guarantor of any such Securities shall be deemed automatically and
unconditionally released and discharged from all obligations hereunder.

 

12.                                 Successors
and Assigns.  This Guaranty shall be
binding upon the Guarantor and upon the successors and permitted assigns of the
Guarantor and shall inure to the benefit of the Trustee and the Holders and
their respective successors and permitted assigns; all references herein to the
Company and to the Guarantor shall be deemed to include their respective
successors and permitted assigns.  The
successors and permitted assigns of the Guarantor and the Company shall
include, without limitation, their respective receivers, trustees or
debtors-in-possession.  All references
to the singular shall be deemed to include the plural where the context so
requires.

 

6

 

13.                                 Governing
Law.  This Guaranty shall be
construed and enforced and the rights and duties of the parties shall be
governed in all respects in accordance with the law of the State of New York.

 

14.                                 Certain
Consents and Waivers.

 

(a)                                  Personal
Jurisdiction.

 

(i)                                     EACH OF THE
TRUSTEE, THE HOLDERS AND THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS,
FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK
STATE COURT OR FEDERAL COURT SITTING IN NEW YORK, NEW YORK, AND ANY COURT
HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN SUCH COURTS, IN ANY ACTION
OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS GUARANTY, THE INDENTURE, THE
SECURITIES OR THE OTHER INSTRUMENTS OR AGREEMENTS RELATED THERETO, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. 
EACH OF THE TRUSTEE, THE HOLDERS AND THE GUARANTOR AGREES THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW.

 

(ii)                                  THE GUARANTOR
AGREES THAT THE TRUSTEE AND THE HOLDERS SHALL HAVE THE RIGHT TO PROCEED AGAINST
SUCH PERSON OR ITS PROPERTY IN A COURT IN ANY OTHER JURISDICTION TO ENABLE THE
TRUSTEE AND THE HOLDERS TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF THE TRUSTEE AND THE HOLDERS.

 

(b)                                 Service of Process.  THE
GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS 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 THE GUARANTOR’S
NOTICE ADDRESS SPECIFIED PURSUANT TO SECTION 17, SUCH SERVICE TO BECOME
EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. 
THE GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM  NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR

 

7

 

PROCEEDING
WITH RESPECT TO THIS GUARANTY, THE INDENTURE, THE SECURITIES OR ANY OTHER
INSTRUMENTS OR AGREEMENTS RELATED THERETO IN ANY JURISDICTION SET FORTH
ABOVE.  NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE TRUSTEE OR THE HOLDERS TO BRING PROCEEDINGS AGAINST THE GUARANTOR
IN THE COURTS OF ANOTHER JURISDICTION.

 

(c)                                  Waiver
of Jury Trial.  EACH OF THE TRUSTEE,
THE HOLDERS AND THE GUARANTOR WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE HOLDER OR THE
GUARANTOR ARISING OUT OF OR RELATED TO THIS GUARANTY.  ANY SUCH PERSON MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS GUARANTY WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

15.                                 Waiver
of Bond.  The Guarantor waives the
posting of any bond otherwise required of the Trustee or the Holders in
connection with any judicial process or proceeding to enforce any judgment or
other court order entered in favor of the Trustee or the Holders, or to enforce
by specific performance, temporary restraining order, or preliminary or
permanent injunction or this Guaranty.

 

16.                                 Advice
of Counsel.  The Guarantor
represents and warrants to the Trustee and the Holders that it has discussed
this Guaranty and, specifically, the provisions of Sections 13 through 15
hereof, with the Guarantor’s lawyers.

 

17.                                 Notices.  Any notice, demand, request or any other
communication required or desired to be served, given or delivered hereunder
shall be in writing and shall be served, given and delivered as provided in the
Indenture.

 

8

 

18.                                 Severability.  Wherever possible, each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.

 

19.                                 Merger.  This Guaranty represents the final agreement
of the Guarantor with respect to the matters contained herein and supercedes
any and all prior agreements, including but not limited to any prior guaranty,
and may not be contradicted by evidence of prior or contemporaneous agreements
or subsequent oral agreements between the Guarantor and the Trustee and the
Holders.

 

20.                                 Execution
in Counterparts.  This Guaranty may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.

 

[Signature Page
Follows]

 

9

 

IN WITNESS WHEREOF, this Guaranty has been duly
executed as of the day and year first set forth above.

 

	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  Watson Laboratories, Inc., a Nevada corporation

  
	
   

  	
  Watson Laboratories, Inc., a New York corporation

  
	
   

  	
  Watson Laboratories, Inc—Ohio., a New York
  corporation

  
	
   

  	
  Watson Laboratories, Inc., a Delaware corporation

  
	
   

  	
  Watson Pharma, Inc., a Delaware corporation

  
	
   

  	
  Watson Laboratories Caribe, Inc., a Delaware
  corporation

  
	
   

  	
  The Rugby Group, Inc., a New York corporation

  
	
   

  	
  Rugby Laboratories, Inc., a New York corporation

  
	
   

  	
  Rugby Laboratories, Inc., a Florida corporation

  
	
   

  	
  Watson Laboratories, Inc., a Connecticut corporation

  
	
   

  	
  Makoff R&D Laboratories, Inc., a California
  corporation

  
	
   

  	
  R&D Ferrlecit Capital Resources, Inc., a
  California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

	
  Acknowledged and agreed to

  as of the         day
  of         , 2003

  
	
   

  
	
  WACHOVIA BANK, NATIONAL

  ASSOCIATION, as Trustee

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

10

 

Schedule I

 

Subsidiary
Guarantors

 

	
  Subsidiary

  	
   

  	
  Jurisdiction
  of Organization

  
	
  Watson
  Laboratories, Inc.

  	
   

  	
  Nevada

  
	
  Watson
  Laboratories, Inc.

  	
   

  	
  New York

  
	
  Watson
  Laboratories, Inc—Ohio.

  	
   

  	
  New York

  
	
  Watson
  Laboratories, Inc.

  	
   

  	
  Delaware

  
	
  Watson Pharma,
  Inc.

  	
   

  	
  Delaware

  
	
  Watson Laboratories
  Caribe, Inc.

  	
   

  	
  Delaware

  
	
  The Rugby Group,
  Inc.

  	
   

  	
  New York

  
	
  Rugby
  Laboratories, Inc.

  	
   

  	
  New York

  
	
  Royce
  Laboratories, Inc.

  	
   

  	
  Florida

  
	
  Watson
  Laboratories, Inc.

  	
   

  	
  Connecticut

  
	
  Makoff R&D
  Laboratories, Inc.

  	
   

  	
  California

  
	
  R&D
  Ferrlecit Capital Resources, Inc.

  	
   

  	
  California

  

 

11

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