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CONTINUING GUARANTY
BORROWER: SMALL WORLD TOYS
GUARANTOR: ▇▇▇▇▇ ▇▇▇▇
DATE: DECEMBER 15, 2004
THIS CONTINUING GUARANTY is executed by the above-named guarantor(s)
(jointly and severally, the "Guarantor"), as of the above date, in favor of PNC
BANK, NATIONAL ASSOCIATION ("PNC"), with an address at ▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as agent ("Agent") for itself and the
other Lenders (PNC, the other Lenders and Agent shall be referred to
collectively and individually, as "Bank") under the Revolving Credit and
Security Agreement (the "Loan Agreement") among Bank and the above-named
borrower ("Borrower"), with respect to the Indebtedness of Borrower.
1. CONTINUING GUARANTY. Guarantor hereby unconditionally guarantees and
promises to pay on demand to Agent (BUT SUBJECT TO ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇), for the benefit of Bank, at the address indicated above, or at such
other address as Agent may direct, in lawful money of the United States, and to
perform for the benefit of Bank, all Indebtedness of Borrower now or hereafter
owing to or held by PNC, and all Indebtedness of Borrower now or hereafter owing
to or held by Bank pursuant to or in connection with the Loan Agreement. As used
herein, the term "Indebtedness" is used in its most comprehensive sense and
shall mean and include without limitation, BUT SUBJECT TO THE PROVISIONS OF
SECTION 1A BELOW: (a) any and all debts, duties, obligations, liabilities,
representations, warranties and guaranties of Borrower or any one or more of
them, heretofore, now, or hereafter made, incurred, or created, whether directly
or acquired by assignment or otherwise, or held on behalf of others, however
arising, whether voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated, certain or uncertain, determined or
undetermined, monetary or nonmonetary, written or oral, and whether Borrower may
be liable individually or jointly with others, and regardless of whether
recovery thereon may be or hereafter become barred by any statute of
limitations, discharged or uncollectible in any bankruptcy, insolvency or other
proceeding, or otherwise unenforceable; and (b) any and all amendments,
modifications, renewals and extensions of any or all of the foregoing, including
without limitation amendments, modifications, renewals and extensions which are
evidenced by any new or additional instrument, document or agreement; and (c)
any and all attorneys' fees, court costs, and collection charges incurred in
endeavoring to collect or enforce any of the foregoing against Borrower,
Guarantor, or any other person liable thereon (whether or not suit be brought)
and any other expenses of, for or incidental to collection thereof. As used
herein, the term "Borrower" shall include any successor to the business and
assets of Borrower, and shall also include Borrower in its capacity as a debtor
or debtor in possession under the federal Bankruptcy Code, and any trustee,
custodian or receiver for Borrower or any of its assets, should Borrower
hereafter become the subject of any bankruptcy or insolvency proceeding,
voluntary or involuntary; and all indebtedness, liabilities and obligations
incurred by any such person shall be included in the Indebtedness guaranteed
hereby. This Guaranty is given in consideration for credit and other financial
accommodations which may, from time to time, be given by Bank to Borrower in
Bank's sole discretion, but Guarantor acknowledges and agrees that acceptance by
Bank of this Guaranty shall not constitute a commitment of any kind by Bank to
extend such credit or other financial accommodation to Borrower or to permit
Borrower to incur Indebtedness to Bank.
1A. LIMIT ON INDEBTEDNESS; RELEASE OF GUARANTY. NOTWITHSTANDING ANYTHING
TO THE CONTRARY IN THE DEFINITION OF "INDEBTEDNESS" OR OTHERWISE CONTAINED
HEREIN, THE GUARANTOR'S LIABILITY HEREUNDER SHALL BE LIMITED TO THE SUM OF
$1,000,000, PLUS ALL ATTORNEYS FEES AND OTHER COSTS AND EXPENSES INCURRED IN
COLLECTING THE FOREGOING FROM THE GUARANTOR OR OTHERWISE IN CONNECTION WITH THE
ENFORCEMENT OF THE RIGHTS AND REMEDIES OF AGENT AND BANKS WITH RESPECT TO THE
GUARANTOR. THE GUARANTOR'S LIABILITY HEREUNDER SHALL NOT BE REDUCED OR AFFECTED
BY THE FACT THAT THE INDEBTEDNESS MAY EXCEED SAID AMOUNT OR THE FACT THAT THE
INDEBTEDNESS MAY BE REDUCED BELOW SAID AMOUNT AND SUBSEQUENTLY INCREASED. IN
ADDITION, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, AGENT (ON ITS BEHALF
AND ON BEHALF OF LENDERS) AGREES TO RELEASE GUARANTOR FROM HER OBLIGATIONS UNDER
THIS GUARANTY, UPON WRITTEN REQUEST FROM THE GUARANTOR MADE AFTER THE FIRST
ANNIVERSARY OF THE INITIAL REVOLVING ADVANCE MADE BY BANK TO BORROWER UNDER THE
LOAN AGREEMENT, PROVIDED THAT NO DEFAULT OR EVENT OF DEFAULT
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CONTINUING GUARANTY
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SHALL EXIST HEREUNDER OR UNDER THE LOAN AGREEMENT, AND PROVIDED FURTHER THAT BY
SUCH FIRST ANNIVERSARY THE "SUBORDINATED INDEBTEDNESS" (AS DEFINED BELOW) SHALL
HAVE BEEN REPAID IN FULL FROM PROCEEDS RECEIVED BY SMALL WORLD KIDS, INC.
("SWK") AFTER THE DATE HEREOF FROM THE ISSUANCE OF EQUITY SECURITIES OF SWK. IF
THE SUBORDINATED INDEBTEDNESS SHALL NOT HAVE BEEN SO REPAID BY SUCH DATE, THEN
AGENT (ON ITS BEHALF AND ON BEHALF OF LENDERS) AGREES TO RELEASE GUARANTOR FROM
HER OBLIGATIONS UNDER THIS GUARANTY, UPON WRITTEN REQUEST FROM GUARANTOR MADE NO
EARLIER THAN 20 DAYS AFTER SWK HAS PROVIDED AGENT WITH A COPY OF SWK'S ANNUAL
REPORT ON FORM 10-K TO THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED
DECEMBER 2005, PROVIDED NO DEFAULT OR EVENT OF DEFAULT SHALL EXIST HEREUNDER OR
UNDER THE LOAN AGREEMENT. FOR THE PURPOSES OF THE FOREGOING, "SUBORDINATED
INDEBTEDNESS" SHALL MEAN, COLLECTIVELY, THE INDEBTEDNESS OWED BY SWK PURSUANT TO
(I) THE PROMISSORY NOTE, DATED MAY 20, 2004, BY SWK, IN FAVOR OF SWT, LLC, IN
THE PRINCIPAL AMOUNT OF $5,000,000, (II) THE PROMISSORY NOTE, DATED SEPTEMBER
__, 2004, BY SWK, IN FAVOR OF ST. CLOUD CAPITAL PARTNERS L.P., IN THE PRINCIPAL
AMOUNT OF $2,000,000, AND (III) THE PROMISSORY NOTE, DATED SEPTEMBER 17, 2004,
BY SWK, IN FAVOR OF ▇▇▇▇▇▇ HEDGECAP LTD. AND/OR ▇▇▇▇▇▇ INVESTMENT MANAGEMENT, IN
THE PRINCIPAL AMOUNT OF $1,200,000.
1B. GRACE PERIOD. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
HEREIN, BUT SUBJECT TO AND EXCEPT AS SET FORTH IN SECTION 6 HEREOF, GUARANTOR
SHALL HAVE NO OBLIGATION TO PAY TO AGENT THE AMOUNT OF ANY INDEBTEDNESS
GUARANTEED HEREUNDER UNTIL 120 DAYS AFTER THE DATE THAT SUCH INDEBTEDNESS HAS
COME DUE BY ITS TERMS OR BY ACCELERATION PURSUANT TO THE LOAN AGREEMENT.
2. WAIVERS. Guarantor hereby waives: (a) presentment for payment, notice
of dishonor, demand, protest, and notice thereof as to any instrument, and all
other notices and demands to which Guarantor might be entitled, including
without limitation notice of all of the following: the acceptance hereof; the
creation, existence, or acquisition of any Indebtedness; the amount of the
Indebtedness from time to time outstanding; any foreclosure sale or other
disposition of any property which secures any or all of the Indebtedness or
which secures the obligations of any other guarantor of any or all of the
Indebtedness; any adverse change in Borrower's financial position; any other
fact which might increase Guarantor's risk; any default, partial payment or
non-payment of all or any part of the Indebtedness; the occurrence of any other
Event of Default (as hereinafter defined); any and all agreements and
arrangements between Bank and Borrower and any changes, modifications, or
extensions thereof, and any revocation, modification or release of any guaranty
of any or all of the Indebtedness by any person (including without limitation
any other person signing this Guaranty); (b) any right to require Bank to
institute suit against, or to exhaust its rights and remedies against, Borrower
or any other person, or to proceed against any property of any kind which
secures all or any part of the Indebtedness, or to exercise any right of offset
or other right with respect to any reserves, credits or deposit accounts held by
or maintained with Bank or any indebtedness of Bank to Borrower, or to exercise
any other right or power, or pursue any other remedy Bank may have, and any
rights or defenses by reason of any election of remedies by Bank; (c) any
defense arising by reason of any disability or other defense of Borrower or any
other guarantor or any endorser, co-maker or other person, or by reason of the
cessation from any cause whatsoever of any liability of Borrower or any other
guarantor or any endorser, co-maker or other person, with respect to all or any
part of the Indebtedness, or by reason of any act or omission of Bank or others
which directly or indirectly results in the discharge or release of Borrower or
any other guarantor or any other person or any Indebtedness or any security
therefor, whether by operation of law or otherwise; (d) any defense arising by
reason of any failure of Bank to obtain, perfect, maintain or keep in force any
security interest in, or lien or encumbrance upon, any property of Borrower or
any other person; (e) any defense based upon any failure of Bank to give
Guarantor notice of any sale or other disposition of any property securing any
or all of the Indebtedness, or any defects in any such notice that may be given,
or any failure of Bank to comply with any provision of applicable law in
enforcing any security interest in or lien upon any property securing any or all
of the Indebtedness including, but not limited to, any failure by Bank to
dispose of any property securing any or all of the Indebtedness in a
commercially reasonable manner; (f) any defense based upon or arising out of any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
liquidation or dissolution proceeding commenced by or against Borrower or any
other guarantor or any endorser, co-maker or other person, including without
limitation any discharge of, or bar against collecting, any of the Indebtedness
(including without limitation any interest thereon), in or as a result of any
such proceeding; and (g) the benefit of any and all statutes of limitation with
respect to any action based upon, arising out of or related to this Guaranty.
Until all of the Indebtedness has been paid, performed, and discharged in full,
nothing shall discharge or satisfy the liability of Guarantor hereunder except
the full performance and payment of all of the Indebtedness. If any claim is
ever made upon Bank for repayment or recovery of any amount or amounts received
by Bank prior to the release of this Guaranty pursuant to Section 1A, in payment
of or on account of any of the Indebtedness, because of any claim that any such
payment constituted a preferential transfer or fraudulent conveyance, or for any
other reason whatsoever, and Bank repays all or part of said amount by reason of
any judgment, decree or order of any court or administrative body having
jurisdiction over Bank or any of its property, or by reason of any settlement or
compromise of any such claim effected by Bank with any such claimant (including
without limitation the Borrower), then and in any such event,
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Guarantor agrees that any such judgment, decree, order, settlement and
compromise shall be binding upon Guarantor, notwithstanding any revocation or
release of this Guaranty or the cancellation of any note or other instrument
evidencing any of the Indebtedness, or any release of any of the Indebtedness,
and the Guarantor shall be and remain liable to Bank under this Guaranty for the
amount so repaid or recovered, to the same extent as if such amount had never
originally been received by Bank, and the provisions of this sentence shall
survive, and continue in effect, notwithstanding any revocation or release of
this Guaranty. Guarantor hereby expressly and unconditionally waives (i) until
all of the Indebtedness has been irrevocably paid and performed in full, all
rights of subrogation, reimbursement, indemnity and contribution of every kind
against Borrower, and all rights of recourse to any assets or property of
Borrower, and all rights to any collateral or security held for the payment and
performance of any Indebtedness, including (but not limited to) any of the
foregoing rights which Guarantor may have under any present or future document
or agreement with any Borrower or other person, and including (but not limited
to) any of the foregoing rights which Guarantor may have under any equitable
doctrine of subrogation, implied contract, or unjust enrichment, or any other
equitable or legal doctrine, and (ii) any other rights and defenses that are or
may become available to the Guarantor by reason of Sections 2787 to 2855,
inclusive, of the California Civil Code. Neither Bank, nor any of its directors,
officers, employees, agents, attorneys or any other person affiliated with or
representing Bank shall be liable for any claims, demands, losses or damages, of
any kind whatsoever, made, claimed, incurred or suffered by Guarantor or any
other party through the ordinary negligence of Bank, or any of its directors,
officers, employees, agents, attorneys or any other person affiliated with or
representing Bank.
3. CONSENTS. Guarantor hereby consents and agrees that, without notice to
or by Guarantor and without affecting or impairing in any way the obligations or
liability of Guarantor hereunder, Bank may, from time to time, before or after
revocation of this Guaranty, do any one or more of the following in Bank's sole
and absolute discretion: (a) accelerate, accept partial payments of, compromise
or settle, renew, extend the time for the payment, discharge, or performance of,
refuse to enforce, and release all or any parties to, any or all of the
Indebtedness; (b) grant any other indulgence to Borrower or any other person in
respect of any or all of the Indebtedness or any other matter; (c) accept,
release, waive, surrender, enforce, exchange, modify, impair, or extend the time
for the performance, discharge, or payment of, any and all property of any kind
securing any or all of the Indebtedness or any guaranty of any or all of the
Indebtedness, or on which Bank at any time may have a lien, or refuse to enforce
its rights or make any compromise or settlement or agreement therefor in respect
of any or all of such property; (d) substitute or add, or take any action or
omit to take any action which results in the release of, any one or more
endorsers or guarantors of all or any part of the Indebtedness, including,
without limitation one or more parties to this Guaranty, regardless of any
destruction or impairment of any right of contribution or other right of
Guarantor; (e) amend, alter or change in any respect whatsoever any term or
provision relating to any or all of the Indebtedness, including the rate of
interest thereon; (f) apply any sums received from Borrower, any other
guarantor, endorser, or co-signer, or from the disposition of any collateral or
security, to any indebtedness whatsoever owing from such person or secured by
such collateral or security, in such manner and order as Bank determines in its
sole discretion, and regardless of whether such indebtedness is part of the
Indebtedness, is secured, or is due and payable; (g) apply any sums received
from Guarantor or from the disposition of any collateral or security securing
the obligations of Guarantor, to any of the Indebtedness in such manner and
order as Bank determines in its sole discretion, regardless of whether or not
such Indebtedness is secured or is due and payable. Guarantor consents and
agrees that Bank shall be under no obligation to marshal any assets in favor of
Guarantor, or against or in payment of any or all of the Indebtedness. Guarantor
further consents and agrees that Bank shall have no duties or responsibilities
whatsoever with respect to any property securing any or all of the Indebtedness.
Without limiting the generality of the foregoing, Bank shall have no obligation
to monitor, verify, audit, examine, or obtain or maintain any insurance with
respect to, any property securing any or all of the Indebtedness.
4. ACCOUNT STATED. Bank's books and records showing the account between it
and the Borrower shall be admissible in evidence in any action or proceeding as
prima facie proof of the items therein set forth. Bank's monthly statements
rendered to the Borrower shall be binding upon the Guarantor (whether or not the
Guarantor receives copies thereof), and shall constitute an account stated
between Bank and the Borrower, unless Bank receives a written statement of the
Borrower's exceptions within 30 days after the statement was mailed to the
Borrower. The Guarantor assumes full responsibility for obtaining copies of such
monthly statements from the Borrower, if the Guarantor desires such copies.
5. EXERCISE OF RIGHTS AND REMEDIES; FORECLOSURE OF TRUST DEEDS. Guarantor
consents and agrees that, without notice to or by Guarantor and without
affecting or impairing in any way the obligations or liability of Guarantor
hereunder, Agent may, on behalf of Bank, from time to time, before or after
revocation of this Guaranty, exercise any right or remedy it may have with
respect to any or all of the Indebtedness or any property securing any or all of
the Indebtedness or any guaranty thereof, including without limitation judicial
foreclosure, nonjudicial foreclosure, exercise of a power of sale, and taking a
deed, assignment or transfer in lieu of foreclosure as to any such property, and
Guarantor expressly waives any defense based upon the exercise of any such right
or remedy, notwithstanding the
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effect thereof upon any of Guarantor's rights, including without limitation, any
destruction of Guarantor's right of subrogation against Borrower and any
destruction of Guarantor's right of contribution or other right against any
other guarantor of any or all of the Indebtedness or against any other person,
whether by operation of Sections 580a, 580d or 726 of the California Code of
Civil Procedure, or any comparable provisions of the laws of any other
jurisdiction, or any other statutes or rules of law now or hereafter in effect,
or otherwise. Without limiting the generality of the foregoing, (a) Guarantor
waives all rights and defenses that the Guarantor may have because the
Indebtedness is secured by real property. This means, among other things: (1)
Agent may collect from the Guarantor without first foreclosing on any real or
personal property collateral pledged by the Borrower. (2) If Agent forecloses on
any real property collateral pledged by the Borrower: (A) The amount of the
Indebtedness may be reduced only by the price for which that collateral is sold
at the foreclosure sale, even if the collateral is worth more than the sale
price. (B) Agent may collect from the Guarantor even if Agent, by foreclosing on
the real property collateral, has destroyed any right the Guarantor may have to
collect from the Borrower. This is an unconditional and irrevocable waiver of
any rights and defenses the Guarantor may have because the Indebtedness is
secured by real property. These rights and defenses include, but are not limited
to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the
Code of Civil Procedure. (b) The Guarantor waives all rights and defenses that
the Guarantor may have because the guaranty of another guarantor is secured by
real property. This means, among other things: (1) Agent may collect from the
Guarantor without first foreclosing on any real or personal property collateral
pledged by the other guarantor. (2) If Agent forecloses on any real property
collateral pledged by the other guarantor: (A) The amount of the Indebtedness
may be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price. (B)
Agent may collect from the Guarantor even if Agent, by foreclosing on the real
property collateral, has destroyed any right the Guarantor may have to obtain
contribution from the other guarantor. This is an unconditional and irrevocable
waiver of any rights and defenses the Guarantor may have because the obligations
of the other guarantor are secured by real property. These rights and defenses
include, but are not limited to, any rights or defenses based upon Section 580a,
580b, 580d, or 726 of the Code of Civil Procedure.
6. ACCELERATION. Notwithstanding the terms of all or any part of the
Indebtedness, the obligations of the Guarantor hereunder to pay and perform all
of the Indebtedness shall, immediately upon the occurrence of an event described
in "f" below, and immediately at the option of Agent upon the occurrence of any
other of the following events, become due and payable, without notice, and
without regard to the expressed maturity of any of the Indebtedness: (a) any
warranty, representation, statement, report, or certificate made or delivered to
Bank by Guarantor is incorrect, false, untrue, or misleading when given in any
material respect; or (b) Guarantor shall default in the performance of any of
its obligations hereunder; or (c) any event shall occur which may or does result
in the acceleration of the maturity of any material indebtedness of Guarantor to
others (regardless of any requirement of notice, opportunity to cure or other
condition prior to the exercise of any right of acceleration); or (d) Guarantor
shall fail promptly to perform or comply with any term or condition of any
agreement with any third party which does or may result in a material adverse
effect on the business of Guarantor; or (e) there shall be made or exist any
levy, assessment, attachment, seizure, lien, or encumbrance for any cause or
reason whatsoever upon all or any material part of the property of Guarantor
(unless discharged by payment, release or bond not more than ten days after such
event has occurred); or (f) Guarantor shall (i) apply for, consent to or suffer
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or similar fiduciary of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit of
creditors, (iii) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or
insolvent, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing; or (g) Guarantor shall be deceased or
declared incompetent by any court or a guardian or conservator shall be
appointed for Guarantor or for any of its property; or (h) Guarantor shall
generally not pay its debts as they become due or shall enter into any agreement
(whether written or oral), or offer to enter into any such agreement, with all
or a significant number of its creditors regarding any moratorium or other
indulgence with respect to its debts or the participation of such creditors or
their representatives in the supervision, management, or control of its
business; or (i) Guarantor shall conceal, remove or permit to be concealed or
removed any part of its property, with intent to hinder, delay or defraud its
creditors, or make or suffer any transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law, or shall
make any transfer of its property to or for the benefit of any creditor at a
time when other creditors similarly situated have not been paid; or (j)
Guarantor shall revoke this Guaranty or contest or deny liability under this
Guaranty. All of the foregoing are hereinafter referred to as "Events of
Default".
7. RIGHT TO ATTACHMENT REMEDY. Guarantor agrees that, notwithstanding the
existence of any property securing any or all of the Indebtedness, Agent, on
behalf of Bank, shall have all of the rights of an unsecured creditor of
Guarantor, including without limitation the right to obtain a temporary
protective order and writ of attachment against Guarantor with respect to any
sums due under this Guaranty.
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Guarantor further agrees that in the event any property secures the obligations
of Guarantor under this Guaranty, to the extent that Agent, in its sole and
absolute discretion, determines prior to the disposition of such property that
the amount to be realized by Agent therefrom may be less than the indebtedness
of the Guarantor under this Guaranty, Agent, on behalf of Bank, shall have all
the rights of an unsecured creditor against Guarantor, including without
limitation the right of Agent, prior to the disposition of said property, to
obtain a temporary protective order and writ of attachment against Guarantor.
Guarantor waives the benefit of Section 483.010(b) of the California Code of
Civil Procedure and of any and all other statutes and rules of law now or
hereafter in effect requiring Agent to first resort to or exhaust all such
collateral before seeking or obtaining any attachment remedy against Guarantor.
Bank shall have no liability to Guarantor as a result thereof, whether or not
the actual deficiency realized by Bank is less than the anticipated deficiency
on the basis of which Agent obtains a temporary protective order or writ of
attachment.
8. INDEMNITY. Subject to the limits of Section 1A, Guarantor hereby agrees
to indemnify Bank and hold Bank harmless from and against any and all claims,
debts, liabilities, demands, obligations, actions, causes of action, penalties,
costs and expenses (including without limitation attorneys' fees), of every
nature, character and description, which Bank may sustain or incur based upon or
arising out of any of the Indebtedness, any actual or alleged failure to collect
and pay over any withholding or other tax relating to Borrower or its employees,
any relationship or agreement between Bank and Borrower, any actual or alleged
failure of Bank to comply with any writ of attachment or other legal process
relating to Borrower or any of its property, or any other matter, cause or thing
whatsoever occurred, done, omitted or suffered to be done by Bank relating in
any way to Borrower or the Indebtedness (except any such amounts sustained or
incurred as the result of the gross negligence or willful misconduct of Bank or
any of its directors, officers, employees, agents, attorneys, or any other
person affiliated with or representing Bank).
9. SUBORDINATION. Any and all rights of Guarantor under any and all debts,
liabilities and obligations owing from Borrower to Guarantor, including any
security for and guaranties of any such obligations, whether now existing or
hereafter arising, are hereby subordinated in right of payment to the prior
payment in full of all of the Indebtedness. No payment in respect of any such
subordinated obligations shall at any time be made to or accepted by Guarantor
if at the time of such payment any Indebtedness is outstanding. If any Event of
Default has occurred, Borrower and any assignee, trustee in bankruptcy,
receiver, or any other person having custody or control over any or all of
Borrower's property are hereby authorized and directed to pay to Agent the
entire unpaid balance of the Indebtedness before making any payments whatsoever
to Guarantor, whether as a creditor, shareholder, or otherwise; and insofar as
may be necessary for that purpose, Guarantor hereby assigns and transfers to
Agent, for the benefit of Bank, all rights to any and all debts, liabilities and
obligations owing from Borrower to Guarantor, including any security for and
guaranties of any such obligations, whether now existing or hereafter arising,
including without limitation any payments, dividends or distributions out of the
business or assets of Borrower. Any amounts received by Guarantor in violation
of the foregoing provisions shall be received and held as trustee for the
benefit of Bank and shall forthwith be paid over to Agent to be applied to the
Indebtedness in such order and sequence as Agent shall in its sole discretion
determine, without limiting or affecting any other right or remedy which Bank
may have hereunder or otherwise and without otherwise affecting the liability of
Guarantor hereunder. Guarantor hereby expressly waives any right to set-off or
assert any counterclaim against Borrower.
10. REVOCATION. This is a Continuing Guaranty relating to all of the
Indebtedness, including Indebtedness arising under successive transactions which
from time to time continue the Indebtedness or renew it after it has been
satisfied. Guarantor waives all benefits of California Civil Code Section 2815,
and agrees that the obligations of Guarantor hereunder may not be terminated or
revoked in any manner except by giving 90 days' advance written notice of
revocation to Agent at its address above by registered first-class U.S. mail,
postage prepaid, return receipt requested, and only as to new loans made by Bank
to Borrower more than 90 days after actual receipt of such written notice by
Agent. No termination or revocation of this Guaranty shall be effective until 90
days following the date of actual receipt of said written notice of revocation
by Agent. Notwithstanding such written notice of revocation or any other act of
Guarantor or any other event or circumstance, Guarantor agrees that this
Guaranty and all consents, waivers and other provisions hereof shall continue in
full force and effect as to any and all Indebtedness which is outstanding on or
before the 90th day following actual receipt of said written notice of
revocation by Agent, and all extensions, renewals and modifications of said
Indebtedness (including without limitation amendments, extensions, renewals and
modifications which are evidenced by new or additional instruments, documents or
agreements executed before or after expiration of said 90-day period), and all
interest thereon, accruing before or after expiration of said 90-day period, and
all attorneys' fees, court costs and collection charges, incurred before or
after expiration of said 90-day period, in endeavoring to collect or enforce any
of the foregoing against Borrower, Guarantor or any other person liable thereon
(whether or not suit be brought) and any other expenses of, for or incidental to
collection thereof.
11. INDEPENDENT LIABILITY. Guarantor hereby agrees that one or more
successive or concurrent actions may be brought hereon against Guarantor, in the
same action in which Borrower may be sued or in separate actions, as often as
deemed advisable by Agent. The liability of Guarantor
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hereunder is exclusive and independent of any other guaranty of any or all of
the Indebtedness whether executed by Guarantor or by any other guarantor
(including without limitation any other persons signing this Guaranty). The
liability of Guarantor hereunder shall not be affected, revoked, impaired, or
reduced by any one or more of the following: (a) the fact that the Indebtedness
exceeds the maximum amount of Guarantor's liability, if any, specified herein or
elsewhere (and no agreement specifying a maximum amount of Guarantor's liability
shall be enforceable unless set forth in a writing signed by Agent or set forth
in this Guaranty); or (b) any direction as to the application of payment by
Borrower or by any other party; or (c) any other continuing or restrictive
guaranty or undertaking or any limitation on the liability of any other
guarantor (whether under this Guaranty or under any other agreement); or (d) any
payment on or reduction of any such other guaranty or undertaking; or (e) any
revocation, amendment, modification or release of any such other guaranty or
undertaking; or (f) any dissolution or termination of, or increase, decrease, or
change in membership of any Guarantor which is a partnership. Guarantor hereby
expressly represents that he was not induced to give this Guaranty by the fact
that there are or may be other guarantors either under this Guaranty or
otherwise, and Guarantor agrees that any release of any one or more of such
other guarantors shall not release Guarantor from his or her obligations
hereunder either in full or to any lesser extent. If Guarantor is a married
person, Guarantor hereby expressly agrees that recourse may be had against his
or her separate property for all of his or her obligations hereunder.
12. FINANCIAL CONDITION OF BORROWER. Guarantor is fully aware of the
financial condition of Borrower and is executing and delivering this Guaranty at
Borrower's request and based solely upon her own independent investigation of
all matters pertinent hereto, and Guarantor is not relying in any manner upon
any representation or statement of Bank with respect thereto. Guarantor
represents and warrants that he is in a position to obtain, and Guarantor hereby
assumes full responsibility for obtaining, any additional information concerning
Borrower's financial condition and any other matter pertinent hereto as
Guarantor may desire, and Guarantor is not relying upon or expecting Bank to
furnish to him any information now or hereafter in Bank's possession concerning
the same or any other matter. By executing this Guaranty, Guarantor knowingly
accepts the full range of risks encompassed within a contract of continuing
guaranty, which risks Guarantor acknowledges include without limitation the
possibility that Borrower will incur additional Indebtedness for which Guarantor
will be liable hereunder after Borrower's financial condition or ability to pay
such Indebtedness has deteriorated and/or after bankruptcy or insolvency
proceedings have been commenced by or against Borrower. Guarantor shall have no
right to require Bank to obtain or disclose any information with respect to the
Indebtedness, the financial condition or character of Borrower, the existence of
any collateral or security for any or all of the Indebtedness, the filing by or
against Borrower of any bankruptcy or insolvency proceeding, the existence of
any other guaranties of all or any part of the Indebtedness, any action or
non-action on the part of Bank, Borrower, or any other person, or any other
matter, fact, or occurrence.
13. REPORTS AND FINANCIAL STATEMENTS OF GUARANTOR. Guarantor shall, at its
sole cost and expense, at any time and from time to time, prepare or cause to be
prepared, and provide to Bank upon Agent's request (i) such financial statements
and reports concerning Guarantor for such periods of time as Agent may
designate, (ii) any other information concerning Guarantor's business, financial
condition or affairs as Agent may request, and (iii) copies of any and all
foreign, federal, state and local tax returns and reports of or relating to
Guarantor as Agent may from time to time request. Guarantor hereby intentionally
and knowingly waives any and all rights and privileges it may have not to
divulge or deliver said tax returns, reports and other information which are
requested by Agent hereunder or in any litigation in which Bank may be involved
relating directly or indirectly to Borrower or to Guarantor. Guarantor further
agrees immediately to give written notice to Agent of any adverse change in
Guarantor's financial condition and of any condition or event which constitutes
an Event of Default under this Guaranty. All reports and information furnished
to Bank hereunder shall be complete, accurate and correct in all respects.
Whenever requested by Agent, Guarantor shall further deliver to Agent a
certificate signed by Guarantor (and, if Guarantor is a partnership, by all
general partners of Guarantor, in their individual capacities, and, if Guarantor
is a corporation, by the president and secretary of Guarantor, in their
individual capacities) warranting and representing that all reports, financial
statements and other documents and information delivered or caused to be
delivered to Bank under this Guaranty, are complete, correct and thoroughly and
accurately present the financial condition of Guarantor, and that there exists
on the date of delivery of said certificate to Agent no condition or event which
constitutes an Event of Default under this Guaranty.
14. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and
warrants that (i) it is in Guarantor's direct interest to assist Borrower in
procuring credit, because Borrower is an affiliate of Guarantor, furnishes goods
or services to Guarantor, purchases or acquires goods or services from
Guarantor, and/or otherwise has a direct or indirect corporate or business
relationship with Guarantor, (ii) this Guaranty has been duly and validly
authorized, executed and delivered and constitutes the valid and binding
obligation of Guarantor, enforceable in accordance with its terms, and (iii) the
execution and delivery of this Guaranty does not violate or constitute a default
under (with or without the giving of notice, the passage of time, or both) any
order, judgment, decree, instrument or agreement to which Guarantor is a party
or by which it or its assets are affected or bound.
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CONTINUING GUARANTY
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15. COSTS. Whether or not suit be instituted, Guarantor agrees to
reimburse Bank on demand for all reasonable attorneys' fees and all other
reasonable costs and expenses incurred by Bank in enforcing this Guaranty. In
the event either Bank or Guarantor files any lawsuit against the other
predicated on a breach of this Guaranty, the prevailing party in such action
shall be entitled to recover its attorneys' fees and costs of suit from the
non-prevailing party.
16. NOTICES. Any notice which a party shall be required or shall desire to
give to the other hereunder (except for notice of revocation, which shall be
governed by Section 10 of this Guaranty) shall be given by personal delivery or
by telecopier or by depositing the same in the United States mail, first class
postage pre-paid, addressed to Agent at its address set forth in the heading of
this Guaranty and to Guarantor at her address set forth under her signature
hereon, and such notices shall be deemed duly given on the date of personal
delivery or one day after the date telecopied or 3 business days after the date
of mailing as aforesaid. Agent and Guarantor may change their address for
purposes of receiving notices hereunder by giving written notice thereof to the
other party in accordance herewith. Guarantor shall give Agent immediate written
notice of any change in her address.
17. CLAIMS. Guarantor agrees that any claim or cause of action by
Guarantor against Bank, or any of Bank's directors, officers, employees, agents,
accountants or attorneys, based upon, arising from, or relating to this
Guaranty, or any other transaction contemplated hereby or relating hereto,
occurred, done, omitted or suffered to be done by Bank, or by Bank's directors,
officers, employees, agents, accountants or attorneys, whether sounding in
contract or in tort or otherwise, shall be barred unless asserted by Guarantor
by the commencement of an action or proceeding in a court of competent
jurisdiction within the County of New York, New York, by the filing of a
complaint within one year after the first act, occurrence or omission upon which
such claim or cause of action, or any part thereof, is based and service of a
summons and complaint on an officer of Bank or any other person authorized to
accept service of process on behalf of Bank, within 30 days thereafter.
Guarantor agrees that such one year period is a reasonable and sufficient time
for Guarantor to investigate and act upon any such claim or cause of action. The
one year period provided herein shall not be waived, tolled, or extended except
by a specific written agreement of Bank. This provision shall survive any
termination of this Guaranty or any other agreement.
18. RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the Guarantor's money, securities or other property given to the Bank by
law, Bank shall have, with respect to the Guarantor's obligations to Bank
hereunder and to the extent permitted by law, a contractual possessory security
interest in and a contractual right of setoff against, and the Guarantor hereby
assigns, conveys, delivers, pledges and transfers to Bank all of the Guarantor's
right, title and interest in and to, all of the Guarantor's deposits, moneys,
securities and other property now or hereafter in the possession of or on
deposit with, or in transit to, Bank including without limitation any direct or
indirect subsidiary of The PNC Financial Services Group, Inc., whether held in a
general or special account or deposit, whether held jointly with someone else,
or whether held for safekeeping or otherwise, excluding, however, all ▇▇▇,
▇▇▇▇▇, and trust accounts. Every such security interest and right of setoff may
be exercised without demand upon or notice to the Guarantor.
19. EQUAL CREDIT OPPORTUNITY ACT. If the Guarantor is not an "applicant
for credit" under Section 202.2 (e) of the Equal Credit Opportunity Act of 1974
("ECOA"), the Guarantor acknowledges that (i) this Guaranty has been executed to
provide credit support for the Obligations, and (ii) the Guarantor was not
required to execute this Guaranty in violation of Section 202.7(d) of the ECOA.
20. CONSTRUCTION; SEVERABILITY. If more than one person has executed this
Guaranty, the term "Guarantor" as used herein shall be deemed to refer to all
and any one or more such persons and their obligations hereunder shall be joint
and several. Without limiting the generality of the foregoing, if more than one
person has executed this Guaranty, this Guaranty shall in all respects be
interpreted as though each person signing this Guaranty had signed a separate
Guaranty, and references herein to "other guarantors" or words of similar effect
shall include without limitation other persons signing this Guaranty. As used in
this Guaranty, the term "property" is used in its most comprehensive sense and
shall mean all property of every kind and nature whatsoever, including without
limitation real property, personal property, mixed property, tangible property
and intangible property. Words used herein in the masculine gender shall include
the neuter and feminine gender, words used herein in the neuter gender shall
include the masculine and feminine, words used herein in the singular shall
include the plural and words used in the plural shall include the singular,
wherever the context so reasonably requires. If any provision of this Guaranty
or the application thereof to any party or circumstance is held invalid, void,
inoperative or unenforceable, the remainder of this Guaranty and the application
of such provision to other parties or circumstances shall not be affected
thereby, the provisions of this Guaranty being severable in any such instance.
21. GENERAL PROVISIONS. Agent, on behalf of Bank, shall have the right to
seek recourse against Guarantor to the full extent provided for herein and in
any other instrument or agreement evidencing obligations of Guarantor to Bank,
and against Borrower to the full extent of the Indebtedness. No election in one
form of action or proceeding, or against any party, or on any obligation, shall
constitute a waiver of Bank's right to proceed in any other form of action or
proceeding or against any other party. The failure of Bank to enforce any of the
provisions of this Guaranty at any time or
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CONTINUING GUARANTY
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for any period of time shall not be construed to be a waiver of any such
provision or the right thereafter to enforce the same. All remedies hereunder
shall be cumulative and shall be in addition to all rights, powers and remedies
given to Bank by law or under any other instrument or agreement. Time is of the
essence in the performance by Guarantor of each and every obligation under this
Guaranty. If Borrower is a corporation, partnership or other entity, Guarantor
hereby agrees that Bank shall have no obligation to inquire into the power or
authority of Borrower or any of its officers, directors, partners, or agents
acting or purporting to act on its behalf, and any Indebtedness made or created
in reliance upon the professed exercise of any such power or authority shall be
included in the Indebtedness guaranteed hereby. This Guaranty is the entire and
only agreement between Guarantor and Bank with respect to the guaranty of the
Indebtedness of Borrower by Guarantor, and all representations, warranties,
agreements, or undertakings heretofore or contemporaneously made, which are not
set forth herein, are superseded hereby. No course of dealings between the
parties, no usage of the trade, and no parol or extrinsic evidence of any nature
shall be used or be relevant to supplement or explain or modify any term or
provision of this Guaranty. There are no conditions to the full effectiveness of
this Guaranty. The terms and provisions hereof may not be waived, altered,
modified, or amended except in a writing executed by Guarantor and a duly
authorized officer of Agent. All rights, benefits and privileges hereunder shall
inure to the benefit of Bank and its successors and assigns and shall be binding
upon Guarantor and her heirs, executors, administrators, personal
representatives, successors and assigns. Neither the death of Guarantor nor
notice thereof to Bank shall terminate this Guaranty as to her estate, and,
notwithstanding the death of Guarantor or notice thereof to Bank, this Guaranty
shall continue in full force and effect with respect to all Indebtedness,
including without limitation Indebtedness incurred or created after the death of
Guarantor and notice thereof to Bank. Section headings are used herein for
convenience only. Guarantor acknowledges that the same may not describe
completely the subject matter of the applicable Section, and the same shall not
be used in any manner to construe, limit, define or interpret any term or
provision hereof.
22. GOVERNING LAW; VENUE AND JURISDICTION. This instrument and all acts
and transactions pursuant or relating hereto and all rights and obligations of
the parties hereto shall be governed, construed, and interpreted in accordance
with the internal laws of the State of New York. Any judicial proceeding brought
by or against Guarantor with respect to any of the Indebtedness, this Guaranty,
or any related agreement may be brought in any court of competent jurisdiction
in the State of New York, United States of America, and, by execution and
delivery of this Guaranty, Guarantor accepts for itself and in connection with
its properties, generally and unconditionally, the non-exclusive jurisdiction of
the aforesaid courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Guaranty. Guarantor hereby waives
personal service of any and all process upon it and consents that all such
service of process may be made by registered mail (return receipt requested)
directed to Guarantor and service so made shall be deemed completed five (5)
days after the same shall have been so deposited in the mails of the United
States of America. Nothing herein shall affect the right to serve process in any
manner permitted by law or shall limit the right of Bank to bring proceedings
against Guarantor in the courts of any other jurisdiction. Guarantor waives any
objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon
forum non conveniens. Guarantor waives the right to remove any judicial
proceeding brought against Guarantor in any state court to any federal court.
Any judicial proceeding by Guarantor against Bank involving, directly or
indirectly, any matter or claim in any way arising out of, related to or
connected with this Guaranty or any related agreement, shall be brought only in
a federal or state court located in the County of New York, State of New York.
23. MUTUAL WAIVER OF RIGHT TO JURY TRIAL. BANK AND GUARANTOR HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING BASED
UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS GUARANTEE OR ANY
SUPPLEMENT OR AMENDMENT THERETO; OR (II) ANY OTHER PRESENT OR FUTURE INSTRUMENT
OR AGREEMENT BETWEEN BANK AND GUARANTOR ; OR (III) ANY BREACH, CONDUCT, ACTS OR
OMISSIONS OF BANK OR GUARANTOR OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED WITH OR REPRESENTING
BANK OR GUARANTOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE.
24. RECEIPT OF COPY. Guarantor acknowledges receipt of a copy of this
Guaranty.
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▇▇▇▇▇ ▇▇▇▇
Address: c/o Small World Toys
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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STATE OF ______________ )
) ss.
COUNTY OF ____________ )
On _______________, 2004, before me, _________________________, Notary
Public, personally appeared ▇▇▇▇▇ ▇▇▇▇, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
--------------------------------
(Seal)
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