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EXHIBIT 10.5
SUBORDINATED GUARANTY
Subordinated Guaranty, dated as of August 3, 2001, by Arris Group,
Inc., a Delaware corporation ("Guarantor"), in favor of Nortel Networks LLC, a
Delaware limited liability company, and its permitted successors and assigns in
accordance with Section 4.2 hereof.
WHEREAS, to induce Nortel to enter into the Agreement and Plan of
Reorganization dated as of October 18, 2000, as amended through the date hereof
(the "Reorganization Agreement"), among Guarantor, Nortel Networks LLC, and the
other parties named therein, Guarantor agreed to provide its guaranty as set
forth herein; and
WHEREAS, Guarantor expects to receive substantial direct or indirect
benefit from the consummation of the transactions contemplated by the
Reorganization Agreement (which benefit is hereby acknowledged by Guarantor).
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, and to induce Nortel Networks LLC
to enter into the Reorganization Agreement and the transactions contemplated
thereby, Guarantor hereby agrees as follows:
ARTICLE I
DEFINITIONS
Section 1.1. The following terms, as used herein, have the
following respective meanings:
"Arris" shall mean Arris Interactive L.L.C., a Delaware limited
liability company.
"Limited Liability Company Agreement" shall mean the Second Amended and
Restated Limited Liability Company Agreement of Arris, dated as of August 3,
2001, as amended, restated, amended and restated, supplemented or otherwise
modified.
"Nortel" shall mean Nortel Networks LLC and its permitted successors
and assigns in accordance with Section 4.2 hereof.
All other capitalized terms used herein and not defined herein shall have the
meanings specified in the Limited Liability Company Agreement.
ARTICLE II
GUARANTY
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Section 2.1. Absolute and Unconditional Guaranty. Guarantor fully,
absolutely, irrevocably, and unconditionally guarantees to Nortel the due and
punctual payment in full and complete and punctual performance of all of the
obligations when due of Arris under and in accordance with the terms of the
Limited Liability Company Agreement, including but not limited to the
obligations of Arris to make, pursuant to Section 8.02 thereof (and subject to
Section 8.02(b)), redemption payments to Nortel and/or any other Class B Member
(all collectively, the "Guarantied Obligations"). Guarantor agrees that the
Guarantied Obligations shall be absolute, unconditional and irrevocable,
irrespective of the validity, regularity or enforceability of the underlying
obligations, the absence of any action to enforce the same, the recovery of any
judgment against Arris, any action to enforce the same or any other
circumstances which might otherwise constitute a legal or equitable discharge or
defense of Guarantor, and each such legal or equitable discharge is hereby
irrevocably and forever waived. In furtherance of the foregoing and without
limiting the generality thereof, Guarantor agrees that: (a) this Guaranty is a
guaranty of payment when due and not of collectibility; (b) subject to the
Subordination Agreement, Nortel may enforce this Guaranty upon the occurrence
and during the continuance of a breach of the obligations of Arris; (c) the
obligations of Guarantor hereunder are independent of the obligations of Arris
under the Limited Liability Company Agreement, and, subject to the Subordination
Agreement, a separate action or actions may be brought and prosecuted against
Guarantor whether or not any action is brought against Arris and whether or not
Arris is joined in any such action or actions; and (d) a payment of a portion,
but not all, of the Guarantied Obligations by Guarantor shall in no way limit,
affect, modify or abridge the liability of Guarantor for any portion of the
Guarantied Obligations that has not been paid.
Guarantor hereby waives diligence, presentment, demand of payment, any
right to require a proceeding first against Arris, protest, notice and all
demands whatsoever. Guarantor covenants that this Guaranty shall not be
discharged except by the complete payment and full performance of the Guarantied
Obligations or termination as provided in Section 4.5. If Nortel is required by
any court or otherwise to return to Arris, Guarantor, or any custodian, trustee
or similar person acting in relation to Arris or Guarantor, any amount paid by
or on behalf of Arris or Guarantor, this Subordinated Guaranty, to the extent
theretofore discharged, shall be reinstated in full force and effect as to such
amount. Guarantor agrees that the Guarantied Obligations shall not be subject to
any right of offset or counterclaim, all of which are waived by Guarantor.
Guarantor shall pay and perform all of the Guarantied Obligations immediately
upon demand therefor.
Any return on any portion of the Guarantied Obligations that accrues
after the commencement of any proceeding, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Arris (or, if interest on any portion of the Guarantied
Obligations ceases to accrue by operation of law by reason of the commencement
of said proceeding, such interest as would have accrued on such portion of the
Guarantied Obligations if said proceeding had not been commenced) shall be
included in the Guarantied Obligations because it is the intention of Guarantor
and Nortel that the Guarantied Obligations should be determined without regard
to any rule of law or order that may relieve Arris of any portion of such
Guarantied Obligations.
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If all or any portion of the Guarantied Obligations is paid by Arris,
the obligations of Guarantor hereunder shall continue and remain in full force
and effect or be reinstated, as the case may be, if and to the extent all or any
part of such payment(s) is rescinded or recovered directly or indirectly from
Nortel as a preference, fraudulent transfer or otherwise, and any such payments
that are so rescinded or recovered shall constitute Guarantied Obligations.
Nortel may from time to time, without notice or demand and without
affecting the validity or enforceability of this Guaranty or giving rise to any
limitation, impairment or discharge of Guarantor's liability hereunder, (a)
renew, extend, accelerate or otherwise change the time, place, manner or terms
of payment of the Guarantied Obligations, (b) settle, compromise, release or
discharge, or accept or refuse any offer of performance with respect to, or
substitutions for, the Guarantied Obligations or any agreement relating thereto
and/or subordinate the payment of the same to the payment of any other
obligations, (c) request and accept other guaranties of the Guarantied
Obligations, and (d) exercise any other rights or remedies as to Arris available
according to law.
This Guaranty and the obligations of Guarantor hereunder shall be valid
and enforceable and shall not be subject to any limitation, impairment or
discharge for any reason (other than payment and performance in full of the
Guarantied Obligations or termination as provided in Section 4.5), including,
without limitation, the occurrence of any of the following, whether or not
Guarantor shall have had notice or knowledge of any of them: (a) any failure to
assert or enforce, or agreement not to assert or enforce, or the stay or
enjoining, by order of court, by operation of law or otherwise, of the exercise
or enforcement of, any claim or demand or any right, power or remedy with
respect to the Guarantied Obligations or any agreement relating thereto, or with
respect to any other guaranty of or security for the payment of the Guarantied
Obligations, (b) any waiver or modification of, or any consent to departure
from, any of the terms or provisions of the Limited Liability Company Agreement,
(c) the Guarantied Obligations, or any agreement relating thereto, at any time
being found to be illegal, invalid or unenforceable in any respect, (d) any
defenses, set-offs or counterclaims which Arris may assert against Nortel in
respect of the Guarantied Obligations, including, but not limited to, failure of
consideration, breach of warranty, payment, statute of frauds, or statute of
limitations and (e) any other act or thing or omission, or delay to do any other
act or thing, which may or might in any manner or to any extent vary the risk of
Guarantor as an obligor in respect of the Guarantied Obligations.
Guarantor hereby waives: (a) any right to require Nortel, as a
condition of payment or performance by Guarantor, to (i) proceed against Arris,
any other guarantor of the Guarantied Obligations or any other person, (ii)
pursue any other remedy in the power of Nortel; (b) any defense arising by
reason of the incapacity, lack of authority or any disability or other defense
of Arris including, without limitation, any defense based on or arising out of
the lack of validity or the unenforceability of the Guarantied Obligations or
any agreement or instrument relating thereto or by reason of the cessation of
the liability of Arris from any cause other than payment in full of the
Guarantied Obligations or termination as provided in Section 4.5; (c) any
defense based upon any statute or rule of law that provides that the obligation
of a surety must be neither larger in amount nor in other respects more
burdensome than that of the principal; (d) any
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defense based upon Nortel's errors or omissions with respect to the Guarantied
Obligations; (e) (i) any principles or provisions of law, statutory or
otherwise, that are or might be in conflict with the terms of this Guaranty and
any legal or equitable discharge of such Guarantor's obligations hereunder, (ii)
the benefit of any statute of limitations affecting such Guarantor's liability
hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments
and counterclaims, and (iv) promptness and diligence; (f) notices, demands,
presentments, protests, notices of protest, notices of dishonor and notices of
any action or inaction, including acceptance of this Guaranty, notices of
default, or any agreement or instrument related thereto, notices of any renewal,
extension or modification of the Guarantied Obligations or any agreement related
thereto; and (g) to the fullest extent permitted by law, any defenses or
benefits that may be derived from or afforded by law which limit the liability
of or exonerate guarantors or sureties, or which may conflict with the terms of
this Guaranty.
Guarantor waives any claim, right or remedy, direct or indirect, that
Guarantor now has or may hereafter have against Arris in connection with this
Guaranty or the performance by Guarantor of its obligations hereunder, in each
case whether such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise and including, without limitation, (a)
any right of subrogation, reimbursement or indemnification that Guarantor now
has or may hereafter have against Arris and (b) any right to enforce, or to
participate in, any claim, right or remedy that Nortel now has or may hereafter
have against Arris. Guarantor further agrees that, to the extent the waiver or
agreement to withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement or indemnification Guarantor may have against Arris,
shall be junior and subordinate to any rights Nortel may have against Arris.
Guarantor shall (i) permit any representative(s) of Nortel, upon
reasonable advance notice, during normal business hours, and without undue
disruption of the business of Guarantor, to visit, and inspect any of the
properties, corporate books and financial records of Guarantor, to make copies
of such books and records, and to discuss the affairs, finances, and accounts of
Guarantor with the principal officers of Guarantor, subject to customary
confidentiality undertakings; (ii) use its reasonable best efforts to comply,
and cause Arris and Guarantor's other subsidiaries to comply, with all of their
respective reporting, document delivery and other requirements under or in
connection with the terms of the Senior Credit Agreement and to take all such
other action reasonably requested by Nortel, to enable Arris, to the fullest
extent possible, to make all payments contemplated by the Limited Liability
Company Agreement; (iii) make, and cause Arris and Guarantor's other
subsidiaries to make, all requisite certifications under the Senior Credit
Agreement, and (iv) refrain from declaring, paying or setting aside any dividend
payments on account of any shares of any class of stock of Guarantor, now or
hereafter outstanding (provided, however, that in no event shall the Company be
required by any of the foregoing provisions of clauses (i) to (iii) to take any
action prohibited by the terms of the Senior Credit Facilities).
Guarantor has adequate means to obtain information from Arris on a
continuing basis concerning the financial condition of Arris and its ability to
perform its obligations under the
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Limited Liability Company Agreement, and Guarantor assumes the responsibility
for being and keeping informed of the financial condition of Arris and of all
circumstances bearing upon the risk of nonpayment of the Guarantied Obligations.
Guarantor agrees to promptly reimburse Nortel for Nortel's reasonable
costs and expenses of collecting any amounts due hereunder, including reasonable
attorneys' fees.
Section 2.2. Severability. In case any provision of this
Subordinated Guaranty shall be found by a court of competent jurisdiction to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
ARTICLE III
SUBORDINATION
The obligations contained in this Subordinated Guaranty and all amounts
payable hereunder are subordinated to the extent and in the manner provided in
the Subordination Agreement dated as of August 3, 2001 among Nortel, The CIT
Group/Business Credit, Inc., as Administrative Agent, Guarantor and Arris
Interactive L.L.C., as such Subordination Agreement may be amended, restated,
amended and restated, supplemented or otherwise modified from time to time (the
"Subordination Agreement"). Each of this Article III and the Subordination
Agreement shall constitute a continuing offer to all persons who, in reliance
upon such provisions, become holders of, or continue to hold Senior Debt (as
defined in the Subordination Agreement), and such provisions are made for the
benefit of the holders of the Senior Debt, and such holders are made obligees
hereunder and any one or more of them may enforce such provisions. Nothing in
this Article III shall be construed as limiting the obligations of Guarantor to
Nortel, which, as between Guarantor and Nortel, are unconditional and absolute.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Governing Law. This Subordinated Guaranty shall be
governed and construed in accordance with the internal laws of the State of
Delaware without giving effect to the principles of conflicts of law.
Section 4.2. Successors and Assigns; Transferability. This
Subordinated Guaranty shall inure to the benefit of Nortel. In the event that
Nortel Networks LLC transfers all or any part of its Class B Interest under the
Limited Liability Company Agreement, this Subordinated Guaranty shall
automatically inure to the benefit of such transferee(s) and its or their
successors and assigns and such transfers shall be permitted provided that the
transferee delivers to the Administrative Agent (and receives a written
acknowledgment from the Administrative Agent of such delivery to the
Administrative Agent) an instrument executed by or on behalf of the transferee
to the effect that the transferee agrees, upon becoming a beneficiary of this
Subordinated Guaranty, that it shall be bound by all of the terms and provisions
of the
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Subordination Agreement. Any attempted transfer in violation of the foregoing
shall be void ab initio. This Subordinated Guaranty shall likewise automatically
inure to the benefit of any subsequent transferee(s) of such Class B Interests.
This Subordinated Guaranty shall be binding upon Guarantor and its successors
and assigns; provided, however that Guarantor may not assign or otherwise
transfer any of its obligations under this Subordinated Guaranty without the
express written consent of Nortel.
Section 4.3. Waiver or alteration. None of the provisions hereof
may be waived, altered or amended, except by a written instrument signed by
Guarantor and Nortel and expressly referring to this Guaranty and the provision
so waived, altered or amended.
Section 4.4. Remedies Cumulative; Waivers. The rights, remedies,
powers and privileges herein provided to Nortel and its successors and assigns
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided to them by law. Guarantor hereby waives any right to a trial by jury
with respect to any claim or action arising out of or based upon this Guaranty.
Section 4.5. Termination. Subject to the reinstatement and other
provisions of this Guaranty, this Guaranty shall terminate upon the first to
occur of (i) an exchange set forth in Section 8.03(a) of the Limited Liability
Company Agreement, or (ii) the redemption in full of all Class B Interests as
provided for in Section 8.02(a) of the Limited Liability Company Agreement.
IN WITNESS WHEREOF, Guarantor has caused this Subordinated Guaranty to
be duly executed by its authorized officer as of the day and year first above
written.
ARRIS GROUP, INC.
By: /s/ Lawrence A. Margolis
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Name: Lawrence A. Margolis
Title:
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