XXXXX FARGO BANK REVOLVING LINE OF CREDIT NOTE
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$1,000,000.00 BEVERLY HILLS, CALIFORNIA
JULY 23, 1998
FOR VALUE RECEIVED, the undersigned DVD EXPRESS, INC. ("Borrower")
promises to pay to the order of XXXXX FARGO BANK, NATIONAL ASSOCIATION
("Bank") at its office at XXXXXXX HILLS PRIVATE CLIENT SERVICES, 0000 XXXXX
XXXXXX XXXX, XXXXXXX XXXXX, XX 00000, or at such other place as the holder
hereof may designate, in lawful money of the United States of America and in
immediately available funds, the principal sum of $1,000,000.00, or so much
thereof as may be advanced and be outstanding, with interest thereon, to be
computed on each advance from the date of its disbursement as set forth
herein.
INTEREST:
(a) INTEREST. The outstanding principal balance of this Note shall bear
interest (computed on the basis of a 360-day year, actual days elapsed) at a
rate per annum .75000% above the Prime Rate in effect from time to time. The
"Prime Rate" is a base rate that Bank from time to time establishes and which
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto. Each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is
announced within Bank.
(b) PAYMENT OF INTEREST. Interest accrued on this Note shall be payable
on the 1ST day of each MONTH, commencing SEPTEMBER 1, 1998.
(c) DEFAULT INTEREST. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note
shall bear interest until paid in full at an increased rate per annum
(computed on the basis of a 360-day year, actual days elapsed) equal to 4%
above the rate of interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) BORROWING AND REPAYMENT. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of any document executed in connection with or
governing this Note; provided however, that the total outstanding borrowings
under this Note shall not at any time exceed the principal amount stated
above. The unpaid principal balance of this obligation at any time shall be
the total amounts advanced hereunder by the holder hereof less the amount of
principal payments made hereon by or for any Borrower, which balance may be
endorsed hereon from time to time by the holder. The outstanding principal
balance of this Note shall be due and payable in full on SEPTEMBER 1, 1999.
(b) ADVANCES. Advances hereunder, to the total amount of the principal
sum available hereunder, may be made by the holder at the oral or written
request of (i) XXXXXXX X. XXXXXXX, any one acting alone, who are authorized to
request advances and direct the disposition of any advances until written
notice of the revocation of such authority is received by the holder at the
office designated above, or (ii) any person, with respect to advances
deposited to the credit of any account of any Borrower with the holder, which
advances, when so deposited, shall be conclusively presumed to have been made
to or for the benefit of each Borrower regardless of the fact that persons
other than those authorized to request advances may have authority to draw
against such account. The holder shall have no obligation to determine whether
any person requesting an advance is or has been authorized by any Borrower.
(c) APPLICATION OF PAYMENTS. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.
EVENTS OF DEFAULT:
The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
(a) The failure to pay any principal, interest, fees or other charges
when due hereunder or under any contract, instrument or document executed in
connection with this Note.
(b) The filing of a petition by or against any Borrower, any guarantor
of this Note or any general partner or joint venturer in any Borrower which
is a partnership or a joint venture (with each such guarantor, general
partner and/or joint venturer referred to herein as a "Third Party Obligor")
under any provisions of the Bankruptcy Reform Act, Title 11 of the United
States Code, as amended or recodified from time to time, or under any similar
or other law relating to bankruptcy, insolvency, reorganization or other
relief for debtors; the appointment of a receiver, trustee, custodian or
liquidator of or for any part of the assets or property of any Borrower or
Third Party Obligor; any Borrower or Third Party Obligor becomes insolvent,
makes a general assignment for the benefit of creditors or is generally not
paying its debts as they become due; or any attachment or like levy on any
property of any Borrower or Third Party Obligor.
REVOLVING LINE OF CREDIT NOTE (08/96), PAGE 1
(c) The death or incapacity of any individual Borrower or Third Party
Obligor, or the dissolution or liquidation of any Borrower or Third Party
Obligor which is a corporation, partnership, joint venture or other type of
entity.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under any provisions of any contract, instrument or
document pursuant to which any Borrower or Third Party Obligor has incurred
any obligation for borrowed money, any purchase obligation, or any other
liability of any kind to any person or entity, including the holder.
(e) Any financial statement provided by any Borrower or Third Party
Obligor to Bank proves to be incorrect, false or misleading in any material
respect.
(f) Any sale or transfer of all or a substantial or material part of the
assets of any Borrower or Third Party Obligor other than in the ordinary
course of its business.
(g) Any violation or breach of any provision of, or any defined event of
default under, any addendum to this Note or any loan agreement, guaranty,
security agreement, deed of trust, mortgage or other document executed in
connection with or securing this Note.
MISCELLANEOUS:
(a) REMEDIES. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower, and
the obligation, if any, of the holder to extend any further credit hereunder
shall immediately cease and terminate. Each Borrower shall pay to the holder
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of the holder's in-house counsel),
expended or incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any
way related to this Note, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including without
limitation, any adversary proceeding, contested matter or motion brought by
Bank or any other person) relating to any Borrower or any other person or
entity.
(b) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower
shall be joint and several.
(c) GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the state of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
DVD EXPRESS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
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XXXXXXX X. XXXXXXX
PRESIDENT
REVOLVING LINE OF CREDIT NOTE (08/96), PAGE 2
ADDENDUM TO PROMISSORY NOTE
THIS ADDENDUM is attached to and made a part of that certain promissory
note executed by DVD EXPRESS, INC. ("Borrower") and payable to XXXXX FARGO
BANK, NATIONAL ASSOCIATION ("Bank"), or order, dated as of July 23, 1998, in
the principal amount of One Million Dollars ($1,000,000.00) (the "Note").
The following provisions are hereby incorporated into the Note:
1. So long as Bank remains committed to extend credit to
Borrower under this Note and until payment in full of all
obligations of Borrower hereunder, Borrower shall provide to Bank
all of the following, in form and detail satisfactory to Bank:
(a) annually, but not later than each June 1, a financial
statement of Xxxxxxxx, prepared by Xxxxxxxx, to include balance sheet
and income statement, and within 15 days after filing, but in no event
later than each June 1, copies of Xxxxxxxx's filed federal income tax
returns, for such
(b) annually, but not later than each June 1, a financial
statement of guarantor, prepared by Guarantor, to include balance sheet
and income statement, and within 15 days after filing, but in no event
later than each June 1, copies of Guarantor's filed federal income tax
returns, for such year; and
(c) from time to time such financial and other information as
Bank may reasonably request.
2. Notwithstanding anything herein to the contrary, Borrower
shall maintain a zero balance on this Note for a period of at least
thirty (30) consecutive days prior to the maturity date hereof.
3. Borrower shall maintain unencumbered personal liquid assets
(defined as cash, cash equivalents and/or publicly traded/quoted
marketable securities acceptable to Bank) with an aggregate fair market
value not at any time less than One Million Dollars ($1,000,000.00)
4. YEAR 2000 COMPLIANCE:
So long as Bank remains committed to extend credit to Borrower
under this Note and until payment in full of all obligations of Borrower
hereunder, Xxxxxxxx agrees to perform
all acts reasonably necessary to ensure that (a) Borrower and any
business in which Borrower holds a substantial interest, and (b) all
customers, suppliers and vendors that are material to Borrower's
business, become Year 2000 Compliant in a timely manner. Such acts shall
include, without limitation, performing a comprehensive review and
assessment of all of Borrower's systems and adopting a detailed plan,
with itemized budget, for the remediation, monitoring and testing of
such systems. As used herein, "Year 2000 Compliant" shall mean, in
regard to any entity, that all software, hardware, firmware, equipment,
goods or systems utilized by or material to the business operations or
financial condition of such entity, will properly perform date sensitive
functions before, during and after the year 2000. Borrower shall,
immediately upon request, provide to Bank such certifications or other
evidence of Borrower's compliance with the terms hereof as Bank may from
time to time require.
5. ARBITRATION:
(a) ARBITRATION. Upon the demand of any party, any Dispute shall
be resolved by binding arbitration (except as set forth in (e) below) in
accordance with the terms of this Note. A "Dispute" shall mean any
action, dispute, claim or controversy of any kind, whether in contract
or tort, statutory or common law, legal or equitable, now existing or
hereafter arising under or in connection with, or in any way pertaining
to, this Note and each other document, contract and instrument required
hereby or now or hereafter delivered to Bank in connection herewith
(collectively, the "Documents"), or any past, present or future
extensions of credit and other activities, transactions or obligations
of any kind related directly or indirectly to any of the Documents,
including without limitation, any of the foregoing arising in connection
with the exercise of any self-help, ancillary or other remedies pursuant
to any of the Documents. Any party may be summary proceedings bring an
action in court to compel arbitration of a Dispute. Any party who fails
or refuses to submit to arbitration following a lawful demand by any
other party shall bear all costs and expenses incurred by such other
party in compelling arbitration of any Dispute.
(b) GOVERNING RULES. Arbitration proceedings shall be
administered by the American Arbitration Association ("AAA") or such
other administrator as the parties shall mutually agree upon in
accordance with the AAA Commercial Arbitration Rules. All Disputes
submitted to arbitration shall be resolved in accordance with the
Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the
Documents.
2
The arbitration shall be conducted at a location in California selected by
the AAA or other administrator. If there is any inconsistency between the
terms hereof and any such rules, the terms and procedures set forth herein
shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be
expressly limited to matter directly relevant to the Dispute being
arbitrated. Judgment upon any award rendered in an arbitration may be entered
in any court having jurisdiction; provided however, that nothing contained
herein shall be deemed to be a waiver by any party that is a bank of the
protections afforded to it under 12 U.S.C. Section 91 or any similar
applicable state law.
(c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provisions hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary
remedies, including without limitation injunctive relief, sequestration,
attachment, garnishment or the appointment of a receiver, from a court of
competent jurisdiction before, after or during the pendency of any
arbitration or other proceeding. The exercise of any such remedy shall not
waive the right of any party to compel arbitration or reference hereunder.
(d) ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS. Arbitrators must be
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive law
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the State of California, (ii) may
grant any remedy or relief that a court of the state of California could
order or grant within the scope hereof and such ancillary relief as is
necessary to make effective any award, and (iii) shall have the power to
award recovery of all costs and fees, to impose sanctions and to take such
other actions as they deem necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the California Rules of
Civil Procedure or other applicable law. Any Dispute in which the amount in
controversy is $5,000,000 or less shall be decided by a single arbitrator who
shall not render an award of greater than $5,000,000 (including damages,
costs, fees and expenses). By submission to a single arbitrator, each party
expressly waives any right or claim to recover more than $5,000,000. Any
Dispute in which the amount in controversy
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exceeds $5,000,000 shall be decided by a majority vote of a panel of
three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations.
(e) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000,
the arbitrators shall be required to make specific, written findings of fact
and conclusions of law. In such arbitrations (A) the arbitrators shall not
have the power to make any award which is not supported by substantial
evidence or which is based on legal error, (B) an award shall not be binding
upon the parties unless the findings of fact are supported by substantial
evidence and the conclusions of law are not erroneous under the substantive
law of the state of California, and (C) the parties shall have in addition to
the grounds referred to in the Federal Arbitration Act for vacating,
modifying or correcting an award the right to judicial review of (1) whether
the findings of fact rendered by the arbitrators are supported by substantial
evidence, and (2) whether the conclusions of law are erroneous under the
substantive law of the state of California. Judgment confirming an award in
such a proceeding may be entered only if a court determines the award is
supported by substantial evidence and not based on legal error under the
substantive law of the state of California.
(f) REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE. Notwithstanding
anything herein to the contrary, no Dispute shall be submitted to arbitration
if the Dispute concerns indebtedness secured directly or indirectly, in whole
or in part, by any real property unless (i) the holder of the mortgage, lien
or security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or
benefits that might accrue to them by virtue of the single action rule
statute of California, thereby agreeing that all indebtedness and obligations
of the parties, and all mortgages, liens and obligations of the parties, and
all mortgages, liens and security interests securing such indebtedness and
obligations, shall remain fully valid and enforceable. If any such Dispute is
not submitted to arbitration, the Dispute shall be referred to a referee in
accordance with California Code of Civil Procedure Section 638 et seq., and
this general reference agreement is intended to be specifically enforceable
in accordance with said Section 638. A referee with the qualifications
required herein for arbitrators shall be selected pursuant to the AAA's
selection procedures. Judgment upon the decision rendered by a referee shall
be entered in the court in which such
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proceeding was commenced in accordance with California Code of Civil
Procedure Sections 644 and 645.
(g) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose
the existence, content or results thereof, except for disclosures of
information by a party required in the ordinary course of its business, by
applicable law or regulation, or to the extent necessary to exercise any
judicial review rights set forth herein. If more than one agreement for
arbitration by or between the parties potentially applies to a Dispute, the
arbitration provision most directly related to the Documents or the subject
matter of the Dispute shall control. This Note may be amended or modified
only in writing signed by Bank and Borrower. If any provision of this Note
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or any
remaining provisions of this Note. This arbitration provision shall survive
termination, amendment or expiration of any of the Documents or any
relationship between the parties.
IN WITNESS WHEREOF, this Xxxxxxxx has been executed as of the same date
as the Note.
DVD EXPRESS, INC.
By: /s/ Xxxxxxx X Xxxxxxx
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Xxxxxxx X. Xxxxxxx
President
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XXXXX FARGO BANK CONTINUING GUARANTY
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TO: XXXXX FARGO BANK, NATIONAL ASSOCIATION
1. GUARANTY; DEFINITIONS. In consideration of any credit or other
financial accommodation heretofore, now or hereafter extended or made to DVD
EXPRESS, INC. ("Borrowers"), or any of them, by XXXXX FARGO BANK, NATIONAL
ASSOCIATION ("Bank"), and for other valuable consideration, the undersigned
XXXXXXX X. XXXXXXX ("Guarantor"), jointly and severally unconditionally
guarantees and promises to pay to Bank, or order, on demand in lawful money
of the United States of America and in immediately available funds, any and
all indebtedness of any of the Borrowers to Bank. The term "Indebtedness" is
used herein in its most comprehensive sense and includes any and all
advances, debts, obligations and liabilities of Borrowers, or any of them,
heretofore, now or hereafter made, incurred or created, whether voluntary or
involuntary and however arising, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and
whether Borrowers may be liable individually or jointly with others, and
whether recovery upon such Indebtedness may be or hereafter becomes
unenforceable.
2. MAXIMUM LIABILITY; SUCCESSIVE TRANSACTIONS; REVOCATION; OBLIGATION
UNDER OTHER GUARANTEES. The liability of Guarantor shall not exceed at any
one time the sum of $1,000,000.00 for principal, plus all interest thereon
and costs and expenses pertaining to the enforcement of this Guaranty and/or
the collection of the Indebtedness of any of the Borrowers to Bank.
Notwithstanding the foregoing, Bank may permit the Indebtedness of Borrowers
to exceed Guarantor's liability. This is a continuing guaranty and all
rights, powers and remedies hereunder shall apply to all past, present and
future Indebtedness of each of the Borrowers to Bank, including that arising
under successive transactions which shall either continue the Indebtedness,
increase or decrease it, or from time to time create new Indebtedness after
all or any prior Indebtedness has been satisfied, and notwithstanding the
death, incapacity, dissolution, liquidation or bankruptcy of any of the
Borrowers or Guarantor or any other event or proceeding affecting any of the
Borrowers or Guarantor. This Guaranty shall not apply to any new Indebtedness
created after actual receipt by Bank of written notice of its revocation as
to such new Indebtedness; provided however, that loans or advances made by
Bank of any of the Borrowers after revocation under commitments existing
prior to receipt by Bank of such revocation, and extensions, renewals or
modifications, of any kind, of Indebtedness incurred by any of the Borrowers
or committed by Bank prior to receipt by Bank of such revocation, shall not
be considered new Indebtedness. Any such notice must be sent to Bank by
registered U.S. mail, postage prepaid, addressed to its office at XXXXXXX
HILLS PRIVATE CLIENT SERVICES, 0000 XXXXX XXXXXX XXXX, XXXXXXX XXXXX, XX
00000, or at such other address as Bank shall from time to time designate.
Any payment by Guarantor with respect to the Indebtedness shall not reduce
Guarantor's maximum obligation hereunder unless written notice to that effect
is actually received by Bank at or prior to the time of such payment. The
obligations of Guarantor hereunder shall be in addition to any obligations of
Guarantor under any other guaranties of any liabilities or obligations of any
of the Borrowers or any other persons heretofore or hereafter given to Bank
unless said other guaranties are expressly modified or revoked in writing;
and this Guaranty shall not, unless expressly herein provided, affect or
invalidate any such other guarantees.
3. OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE
OF LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are
joint and several and independent of the obligations of Xxxxxxxxx, and a
separate action or actions may be brought and prosecuted against Guarantor
whether action is brought against any of the Borrowers or any other person,
or whether any of the Borrowers or any other person is joined in any such
action or actions. Guarantor acknowledges that this Guaranty is absolute and
unconditional, there are no conditions precedent to the effectiveness of this
Guaranty, and this Guaranty is in full force and effect and is binding on
Guarantor as of the date written below, regardless of whether Bank obtains
collateral or any guaranties from others or takes any other action
contemplated by Guarantor. Guarantor waives the benefit of any statute of
limitations affecting Guarantor's liability hereunder or the enforcement
thereof, and Guarantor agrees that any payment of any Indebtedness or other
act which shall toll any statute of limitations applicable thereto shall
similarly operate to toll such statute of limitations applicable to
Guarantor's liability hereunder. The liability of Guarantor hereunder shall be
CONTINUING GUARANTY (08/96), PAGE 1
reinstated and revived and the rights of Bank shall continue if and to the
extent that for any reason any amount at any time paid on account of any
Indebtedness guaranteed hereby is rescinded or must otherwise be restored by
Bank, whether as a result of any proceedings in bankruptcy or reorganization
or otherwise, all as though such amount had not been paid. The determination
as to whether any amount so paid must be rescinded or restored shall be made
by Bank in its sole discretion; provided however, that if Bank chooses to
contest any such matter at the request of Guarantor, Guarantor agrees to
indemnify and hold Bank harmless from and against all costs and expenses,
including reasonable attorneys' fees, expended or incurred by Bank in
connection therewith, including without limitation, in any litigation with
respect thereto.
4. AUTHORIZATIONS TO BANK. Guarantor authorizes Bank either before or
after revocation hereof, without notice to or demand on Guarantor, and
without affecting Guarantor's liability hereunder, from time to time to: (a)
alter, compromise, renew, extend, accelerate or otherwise change the time for
payment of, or otherwise change the terms of, the Indebtedness or any portion
thereof, including increase or decrease of the rate of interest thereon; (b)
take and hold security for the payment of this Guaranty or the Indebtedness
or any portion thereof, and exchange, enforce, waive, subordinate or release
any such security; (c) apply such security and direct the order or manner of
sale thereof, including without limitation, a non-judicial sale permitted by
the terms of the controlling security agreement or deed of trust, as Bank in
its discretion may determine; (d) release or substitute any one or more of
the endorsers or any other guarantors of the Indebtedness, or any portion
thereof, or any other party thereto; and (e) apply payments received by Bank
from any of the Borrowers to any Indebtedness of any of the Borrowers to
Bank, in such order as Bank shall determine in its sole discretion, whether
or not such Indebtedness is covered by this Guaranty, and Guarantor hereby
waives any provision of law regarding application of payments which specifies
otherwise. Bank may without notice assign this Guaranty in whole or in part.
Upon Bank's request, Xxxxxxxxx agrees to provide to Bank copies of
Guarantor's financial statements.
5. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants
to Bank that: (a) this Guaranty is executed at Borrowers' request; (b)
Guarantor shall not, without Bank's prior written consent, sell, lease,
assign, encumber, hypothecate, transfer or otherwise dispose of all or a
substantial or material part of Guarantor's assets other than in the ordinary
course of Guarantor's business; (c) Bank has made no representation to
Guarantor as to the creditworthiness of any of the Borrowers; and (d)
Guarantor has established adequate means of obtaining from each of the
Borrowers on a continuing basis financial and other information pertaining to
Borrowers' financial condition. Guarantor agrees to keep adequately informed
from such means of any facts, events or circumstances which might in any way
affect Guarantor's risks hereunder, and Guarantor further agrees that Bank
shall have no obligation to disclose to Guarantor any information or material
about any of the Borrowers which is acquired by Bank in any manner.
6. GUARANTOR'S WAIVERS.
(a) Guarantor waives any right to require Bank to: (i) proceed against
any of the Borrowers or any other person; (ii) marshal assets or proceed
against or exhaust any security held from any of the Borrowers or any other
person; (iii) give notice of the terms, time and place of any public or
private sale of personal property security held from any of the Borrowers or
any other person, or otherwise comply with the provisions of Section 9504 of
the California Uniform Commercial Code; (iv) take any action or pursue any
other remedy in Bank's power; or (v) make any presentment or demand for
performance, or give any notice of nonperformance, protest, notice of protest
or notice of dishonor hereunder or in connection with any obligations or
evidences of indebtedness held by Bank as security for or which constitute in
whole or in part the Indebtedness guaranteed hereunder, or in connection with
the creation of new or additional Indebtedness.
(b) Guarantor waives any defense to its obligations hereunder based
upon or arising by reason of: (i) any disability or other defense of any of
the Borrowers or any other person; (ii) the cessation or limitation from any
cause whatsoever, other than payment in full, of the Indebtedness of any of
the Borrowers or any other person; (iii) any lack of authority of any
officer, director, partner, agent or any other person acting or purporting to
act on behalf of any of the Borrowers which is a corporation, partnership or
other type of entity, or any defect in the formation of any of such Borrower;
(iv) the application by any of the Borrowers of the proceeds of any
Indebtedness for purposes other than the purposes represented by Borrowers
to, or intended proceeds of any Indebtedness for purposes other than the
purposes represented by Borrowers to, or intended or understood by, Bank or
Guarantor; (v) any act or omission by Bank which directly or indirectly
results in or
CONTINUING GUARANTY (08/96), PAGE 2
aids the discharge of any of the Borrowers or any portion of the Indebtedness
by operation of law of otherwise, or which in any way impairs or suspends any
rights or remedies of Bank against Borrower; (vi) any impairment of the value
of any interest in any security for the Indebtedness or any portion thereof,
including without limitation, the failure to obtain or maintain perfection or
recordation of any interest in any such security, the release of any such
security without substitution, and/or the failure to preserve the value of,
or to comply with applicable law in disposing of, any such security; or (vii)
any modification of the Indebtedness, in any form whatsoever, including any
modification made after revocation hereof to any Indebtedness incurred prior
to such revocation, and including without limitation the renewal, extension,
acceleration or other change in time for payment of, or other change in the
terms of, the Indebtedness or any portion thereof, including increase or
decrease of the rate of interest thereon. Until all Indebtedness shall have
been paid in full, Guarantor shall have no right of subrogation, and
Guarantor waives the right to enforce any remedy which Bank now has or may
hereafter have against any of the the Borrowers or any other person, and
waives any benefit of, or any right to participate in, any security now or
hereafter held by Bank. Guarantor further waives all rights and defenses
Guarantor may have arising out of (A) any election or remedies by Bank, even
though that election of remedies, such as a non-judicial foreclosure with
respect to any security for any portion of the Indebtedness, destroys
Guarantor's rights of subrogation of Guarantor's rights to proceed against
any of the Borrowers for reimbursement, or (B) any loss of rights Guarantor
may suffer by reason of any rights, powers or remedies of any of the
Borrowers in connection with any anti-deficiency laws or any other laws
limiting, qualifying or discharging Borrowers' Indebtedness, whether by
operation of Sections 726, 580a or 580d of the Code of Civil Procedure as
from time to time amended, or otherwise, including any rights Guarantor may
have to a Section 580a fair market value hearing to determine the size of a
deficiency following any trustee's foreclosure sale or other disposition of
any real property security for any portion of the Indebtedness.
7. BANK'S RIGHTS WITH RESPECT TO GUARANTOR'S PROPERTY IN BANK'S
POSSESSION. In addition to all liens upon and rights of setoff against the
monies, securities or other property of Guarantor given to Bank by law, Bank
shall have a lien upon and a right of setoff against all monies, securities
and other property of Guarantor now or hereafter in the possession of or on
deposit with Bank, whether held in a general or special account or deposit or
for safekeeping or otherwise, and every such lien and right of setoff may be
exercised without demand upon or notice to Guarantor. No lien or right of
setoff shall be deemed to have been waived by any act or conduct on the part
of the Bank, or by any neglect to exercise such right of setoff or to enforce
such lien, or by any delay in so doing, and every right of setoff and lien
shall continue in full force and lien shall continue in full force and effect
until such right of setoff or lien is specifically waived or released by Bank
in writing.
8. SUBORDINATION. Any Indebtedness of any of the Borrowers now or
hereafter held by Guarantor is hereby subordinated to the Indebtedness of
Borrowers to Bank. Such Indebtedness of Borrowers to Guarantor is assigned
to Bank as security for this Guaranty and the Indebtedness and, if Bank
requests, shall be collected and received by Guarantor as trustee for Bank
and paid over to Bank on account of the Indebtedness of Borrowers to Bank but
without reducing or affecting in any manner the liability of Guarantor under
the other provisions of this Guaranty. Any notes or other instruments now or
hereafter evidencing such Indebtedness of any of the Borrowers to Guarantor
shall be marked with a legend that the same are subject to this Guaranty and,
if Bank so requests, shall be delivered to Bank. Guarantor will, and Bank is
hereby authorized in the name of Guarantor from time to time to, execute and
file financing statements and continuation statements and execute such other
documents and take such other action as Bank deems necessary or appropriate
to perfect, preserve and enforce its rights hereunder.
9. REMEDIES; NO WAIVER. All rights, powers and remedies of Bank
hereunder are cumulative. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy hereunder shall affect or operate as a
waiver of such right, power or remedy; nor shall any single or partial
exercise of any such right, power or remedy preclude, waive or otherwise
affect any other or further exercise thereof or the exercise of any other
right, power or remedy. Any waiver, permit, consent or approval of any kind
by bank of any breach of this Guaranty, or any such waiver of any provisions
or conditions hereof, must be in writing and shall be effective only to the
extent set forth in writing.
10. COSTS, EXPENSES AND ATTORNEYS' FEES. Guarantor shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended
CONTINUING GUARANTY (08/96), PAGE 3
or incurred by Bank in connection with the enforcement of any of Bank's
rights, powers or remedies and/or the collection of any amounts which become
due to Bank under this Guaranty, and the prosecution or defense of any action
in any way related to this Guaranty, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any
of the foregoing incurred in connection with any bankruptcy proceeding
(including without limitation, any adversary proceeding, contested matter or
motion brought by Bank or any other person) relating to Guarantor or any
other person or entity. All of the foregoing shall be paid by Guarantor with
interest from the date of demand until paid in full at a rate per annum equal
to the greater of ten percent (10%) or Bank's Prime Rate in effect from time
to time. The "Prime Rate" is a base rate that Bank from time to time
establishes and which serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto.
11. SUCCESSORS; ASSIGNMENT. This Guaranty shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however,
that Guarantor may not assign or transfer any of its interests or rights
hereunder without Bank's prior written consent. Guarantor acknowledges that
Bank has the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, any Indebtedness of
Borrowers to Bank and any obligations with respect thereto, including this
Guaranty. In connection therewith, Bank may disclose all documents and
information which Bank now has or hereafter acquires relating to Guarantor
and/or this Guaranty, whether furnished by Borrowers, Guarantor or otherwise.
Xxxxxxxxx further agrees that Bank may disclose such documents and
information to Borrowers.
12. AMENDMENT. This Guaranty may be amended or modified only in writing
signed by Bank and Guarantor.
13. OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this
Guaranty as a Guarantor hereby expressly agrees that recourse may be had
against his or her separate property for all his or her obligations under
this Guaranty.
14. APPLICATION OF SINGULAR AND PLURAL. In all cases where there is but
a single Borrower, then all words used herein in the plural shall be deemed
to have been used in the singular where the context and construction so
require; and when there is more than one Borrower named herein, or when this
Guaranty is executed by more than one Guarantor, the word "Borrowers" and the
word "Guarantor" respectively shall mean all or any one or more of them as
the context requires.
15. UNDERSTANDING WITH RESPECT TO WAIVERS; SEVERABILITY OF PROVISIONS.
Guarantor warrants and agrees that each of the waivers set forth herein is
made with Guarantor's full knowledge of its significance and consequences,
and that under the circumstances, the waivers are reasonable and not contrary
to public policy or law. If any waiver or other provision of this Agreement
shall be held to be prohibited by or invalid under applicable public policy
or law, such waiver or other provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder
of such waiver or other provision or any remaining provisions of this
Agreement.
16. GOVERNING LAW. This Guaranty shall be governed by and construed in
accordance with the laws of the state of California.
17. ARBITRATION.
(a) ARBITRATION. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in
accordance with the terms of this Guaranty. A "Dispute" shall mean any
action, dispute, claim or controversy of any kind, whether in contract or
tort, statutory or common law, legal or equitable, now existing or hereafter
arising under or in connection with, or in any way pertaining to, this
Guaranty and each other document, contract and instrument required hereby or
now or hereafter delivered to Bank in connection herewith (collectively, the
"Documents"), or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or
indirectly to any of the Documents, including without limitation, any of the
foregoing arising in connection with the exercise of any self-help, ancillary
or other remedies pursuant to any of the Documents. Any party may by summary
CONTINUING GUARANTY (08/96), PAGE 4
proceedings bring an action in court to compel arbitration of a Dispute. Any
party who fails or refuses to submit to arbitration following a lawful demand
by any other party shall bear all costs and expenses incurred by such other
party in compelling arbitration of any Dispute.
(b) GOVERNING RULES. Arbitration proceedings shall be administered
by the American Arbitration Association ("AAA") or such other administrator
as the parties shall mutually agree upon in accordance with the AAA
Commercial Arbitration Rules. All Disputes submitted to arbitration shall be
resolved in accordance with the Federal Arbitration Act (Title 9 of the
United States Code), notwithstanding any conflicting choice of law provision
in any of the Documents. The arbitration shall be conducted at a location in
California selected by the AAA or other administrator. If there is any
inconsistency between the terms hereof and any such rules, the terms and
procedures set forth herein shall control. All statutes of limitation
applicable to any Dispute shall apply to any arbitration proceeding. All
discovery activities shall be expressly limited to matters directly relevant
to the Dispute being arbitrated. Judgment upon any award rendered in an
arbitration may be entered in any court having jurisdiction; provided
however, that nothing contained herein shall be deemed to be a waiver by any
party that is a bank of the protections afforded to it under 12 U.S.C.
Section 91 or any similar applicable state law.
(c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary
remedies, including without limitation injunctive relief, sequestration,
attachment, garnishment or the appointment of a receiver, from a court of
competent jurisdiction before, after or during the pendency of any
arbitration or other proceeding. The exercise of any such remedy shall not
waive the right of any party to compel arbitration or reference hereunder.
(d) ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS. Arbitrators must
be active members of the California State Bar or retired judges of the state
or federal judiciary of California, with expertise in the substantive law
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to
make effective any award, and (iii) shall the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they
deem necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the California Rules of Civil Procedure or other
applicable law. Any Dispute in which the amount in controversy is $5,000,000
or less shall be decided by a single arbitrator who shall not render an award
of greater than $5,000,000 (including damages, costs, fees and expenses). By
submission to a single arbitrator, each party expressly waives any right or
claim to recover more than $5,000,000. Any Dispute in which the amount in
controversy exceeds $5,000,000 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must
actively participate in all hearings and deliberations.
(e) JUDICIAL REVIEW. Notwithstanding anything herein to the
contrary, in any arbitration in which the amount, in controversy exceeds
$25,000,000, the arbitrators shall be required to make specific, written
findings of fact and conclusions of law. In such arbitrations (i) the
arbitrators shall not have the power to make any award which is not supported
by substantial evidence or which is based on legal error, (ii) an award shall
not be binding upon the parties unless the findings of fact are supported by
substantial evidence and the conclusions of law are not erroneous under the
substantive law of the state of California, and (iii) the parties shall have
in addition to the grounds referred to in the Federal Arbitration Act for
vacating, modifying or correcting an award the right to judicial review of
(A) whether the findings of fact rendered by the arbitrators are supported by
substantial evidence, and (B) whether the conclusions of law are erroneous
under the substantive law of the state of California. Judgment confirming an
award in such a proceeding may be entered only if a court determines the
award is supported by substantial evidence and not based on legal error under
the substantive law of the state of California.
(f) REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE. Notwithstanding
anything herein to the contrary, no Dispute shall be submitted to arbitration
if the Dispute concerns indebtedness secured directly or indirectly, in
CONTINUING GUARANTY (08/96), PAGE 5
whole or in part, by any real property unless (i) the holder of the mortgage,
lien or security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or
benefits that might accrue to them by virtue of the single action rule
statute of California, thereby agreeing that all indebtedness and obligations
of the parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If
any such Dispute is not submitted to arbitration, the Dispute shall be
referred to a referee in accordance with California Code of Civil Procedure
Section 638 et seq., and this general reference agreement is intended to be
specifically enforceable in accordance with said Section 638. A referee with
the qualifications required herein for arbitrators shall be selected pursuant
to the AAA's selection procedures. Judgment upon the decision rendered by a
referee shall be entered in the court in which such proceeding was commenced
in accordance with California Code of Civil Procedure Sections 644 and 645.
(g) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose
the existence, content or results thereof, except for disclosures of
information by a party required in the ordinary course of its business, by
applicable law or regulation, or to the extent necessary to exercise any
judicial review rights set forth herein. If more than one agreement for
arbitration by or between the parties potentially applies to a Dispute, the
arbitration provision most directly related to the Documents or the subject
matter of the Dispute shall control. This arbitration provision shall survive
termination, amendment or expiration of any of the Documents or any
relationship between the parties.
IN WITNESS WHEREOF, the undersigned Xxxxxxxxx has executed this Guaranty
as of July 23, 1998.
/s/ XXXXXXX X. XXXXXXX
----------------------------
XXXXXXX X. XXXXXXX
