Exhibit 10.8
CONTINUING GUARANTY
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
1. GUARANTY; DEFINITIONS. In consideration of any credit or other
financial accommodation heretofore, now or hereafter extended or made to SHOE
PAVILION CORPORATION ("Borrower") by WELLS FARGO BANK, NATIONAL ASSOCIATION
("Bank"), and for other valuable consideration, the undersigned SHOE PAVILION,
INC. ("Guarantor") 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 Borrower to Bank. The
word "Indebtedness" is used herein in its most comprehensive sense and means any
and all advances, debts, obligations and liabilities of Borrower heretofore, now
or hereafter made, incurred or created under or in connection with a Credit
Agreement between Borrower and Bank dated as of December 1, 1998, together with
all promissory notes issued thereunder, as hereafter amended, renewed, replaced
or restated (collectively, the "Credit Agreement"), whether voluntary or
involuntary and however arising, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and whether Borrower may
be liable individually or jointly with others, or 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 FIFTEEN MILLION Dollars ($15,000,000.00) 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 Borrower to Bank.
Notwithstanding the foregoing, Bank may permit the Indebtedness of Borrower 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 Borrower 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 Borrower or Guarantor or any other
event or proceeding affecting Borrower or Guarantor. This Guaranty shall not
apply to any new Indebtedness created after actual receipt by Bank of written
notice of the revocation of this Guaranty by Guarantor as to such new
Indebtedness; provided however, that loans or advances made by Bank to Borrower
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 Borrower 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 One Kaiser Plaza, Suite 850, Oakland, California 94612, or at such
other address as Bank shall from time to time designate. Any payment by
Guarantor 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 Borrower or any other person 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; REINSTATEMENT OF
LIABILITY. The obligations hereunder are joint and several and independent of
the obligations of Borrower, and a separate action or actions may be brought and
prosecuted against Guarantor whether action is brought against Borrower or any
other person, or whether Borrower 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. The liability of Guarantor hereunder shall be reinstated and
revived and the rights of Bank shall continue if and to the extent 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 reasonable
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
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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
Borrower to any Indebtedness of Borrower to Bank, in such order as (i) Borrower
shall direct (so long as such direction is consistent with the terms of the
Credit Agreement) or (ii) if an Event of Default has occurred or Borrower has
not provided direction, Bank shall determine in its reasonable 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, Guarantor 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 Borrower's 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 Borrower; and (d) Guarantor has established adequate means
of obtaining from Borrower on a continuing basis financial and other information
pertaining to Borrower's financial condition. Guarantor agrees to keep
adequately informed from such means of any facts, events or circumstances which
might in any way affect Guarantor's risks hereunder, and Guarantor further
agrees that Bank shall have no obligation to disclose to Guarantor any
information or material about Borrower which is acquired by Bank in any manner.
6. GUARANTOR'S WAIVERS.
(a) Guarantor waives any right to require Bank to: (i) proceed against
Borrower or any other person; (ii) marshal assets or proceed against or exhaust
any security held from Borrower 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 Borrower 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
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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 Borrower or any
other person; (ii) the cessation or limitation from any cause whatsoever, other
than payment in full, of the Indebtedness of Borrower 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 Borrower, if a corporation,
partnership or other type of entity, or any defect in the formation of such
Borrower; (iv) the application by Borrower of the proceeds of any Indebtedness
for purposes other than the purposes represented by Borrower to, or intended or
understood by, Bank or Guarantor; (v) any act or omission by Bank which directly
or indirectly results in or aids the discharge of Borrower 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
Borrower 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 Borrower for reimbursement, or (B) any loss of rights
Guarantor may suffer by reason of any rights, powers or remedies of Borrower in
connection with any anti-deficiency laws or any other laws limiting, qualifying
or discharging Borrower's 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
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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, exercisable after an Event of
Default under the Credit Agreement, 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 lien, 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. INTENTIONALLY DELETED.
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. The non-prevailing party shall
pay to the prevailing party 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 in-house
counsel), expended or incurred by the prevailing party in connection with the
enforcement of any of the prevailing party's rights, powers or remedies and/or
the collection of any amounts which become due to the prevailing 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, Borrower,
Guarantor or any other person) relating to Guarantor or any other person or
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entity. All of the foregoing shall be paid by the non-prevailing party with
interest from the date of demand until paid in full at a rate per annum equal to
ten percent (10%).
11. SUCCESSORS; ASSIGNMENT. This Guaranty shall be binding upon and inure
to the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties; provided however, that Guarantor may not
assign or transfer any of its interests or rights hereunder without Bank's prior
written consent. Guarantor acknowledges that Bank has the right to sell,
assign, transfer, negotiate or grant participations in all or any part of, or
any interest in, any Indebtedness of Borrower 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 Borrower,
Guarantor or otherwise. Guarantor further agrees that Bank may disclose such
documents and information to Borrower.
12. AMENDMENT. This Guaranty may be amended or modified only in writing
signed by Bank and Guarantor.
13. INTENTIONALLY DELETED.
14. 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 Guaranty 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 Guaranty.
15. GOVERNING LAW. This Guaranty shall be governed by and construed in
accordance with the laws of the State of California.
16. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
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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
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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
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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 San Francisco or Oakland,
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. (S)91 or any similar
applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
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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
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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
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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
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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
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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
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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
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arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Documents or the subject matter of the Dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Documents or any relationship between the parties.
IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as
of December 16, 1998.
SHOE PAVILION, INC.
By: /s/ Gary Schwartz
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Title: CFO & VP
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