▇▇▇▇▇ FARGO BANK REVOLVING LINE OF CREDIT NOTE
_____________________________________________________________________________
$2,000,000.00 Beverly Hills, California
October 1, 1998
FOR VALUE RECEIVED, the undersigned DVD EXPRESS, INC. ("Borrower")
promises to pay to the order of ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION
("Bank") at its office at ▇▇▇▇▇▇▇ Hills Private Client Services, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, 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 $2,000,000.00, 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 .25000% below 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 November 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) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, 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): 02629, #2438842416 Page 1
▇▇▇▇▇ FARGO BANK REVOLVING LINE OF CREDIT NOTE
_____________________________________________________________________________
(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),
expanded 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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
PRESIDENT
Revolving Line of Credit Note (08/96): 02629, #2438842416 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 ▇▇▇▇▇ FARGO
BANK, NATIONAL ASSOCIATION ("Bank"), or order, dated as of October 1, 1998,
in the principal amount of One Million Dollars ($2,000,000.00) (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 ▇▇▇▇▇▇▇▇, prepared by ▇▇▇▇▇▇▇▇, to include balance
sheet and income statement, and within 15 days after filing, but in
no event later than each June 1, copies of ▇▇▇▇▇▇▇▇'s filed federal
income tax returns for such year; and
(b) from time to time such financial and other information as
Bank may reasonably request.
2. 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,
▇▇▇▇▇▇▇▇ 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.
3. 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 by 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. 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
-2-
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 arbitrations 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 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 (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
-3-
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 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 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
-4-
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 ▇▇▇▇▇▇▇▇ has been executed as of the same date
as the Note.
DVD EXPRESS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
-5-
▇▇▇▇▇ FARGO BANK CONTINUING GUARANTY
------------------------------------------------------------------------------
TO: ▇▇▇▇▇ 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 ▇▇▇▇▇ FARGO BANK, NATIONAL
ASSOCIATION ("Bank"), and for other valuable consideration, the undersigned
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("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 GUARANTIES. The liability of Guarantor shall not exceed at any
one time the sum of $3,000,000.00 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 to 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 ▇▇▇▇▇▇▇
HILLS PRIVATE CLIENT SERVICES, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇▇, 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 guaranties.
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 ▇▇▇▇▇▇▇▇▇, 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, ▇▇▇▇▇▇▇▇▇
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 mights 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 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 or 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 any right to enforce any remedy which Bank now has or may
hereafter have against any of 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 of 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 or 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 Bank, or by any neglect to exercise such right of setoff or to enforce
such liens, or by any delay in so doing, and every right of setoff 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, 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
incur 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.
▇▇▇▇▇▇▇▇▇ 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 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 be 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 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 Procedures 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 or 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 actions 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 ▇▇▇▇▇▇▇▇▇ has executed this Guaranty
as of October 1, 1998.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
CONTINUING GUARANTY (08/96), Page 6
