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Exhibit
10.40
GENERAL CONTINUING
GUARANTY
February 26,
2007
BFI Business Finance
1655 The Alameda
San Jose, California 95126
To: BFI Business Finance
For good and valuable
consideration, and in order to induce BFI Business Finance ,
a California corporation (“Lender”), to extend and/or
continue to extend financial accommodations to Spy Optic, Inc.,
a California corporation (“Borrower”), pursuant to
the terms and conditions of that certain Loan and Security
Agreement and/or promissory note (individually and
collectively, the “Agreement”), dated
February 26, 2007 , evidencing and otherwise relating
to a loan by Lender to Borrower in the original principal amount of
Five Million and 00/100 Dollars ($5,000,000.00) (the
“Loan”), or pursuant to any other present or future
agreement between Lender and Borrower, and in consideration
thereof, and in consideration of any loans, advances, or financial
accommodations heretofore or hereafter granted by Lender to or for
the account of Borrower, whether pursuant to the Agreement, or
otherwise, Orange 21 Inc. , a Delaware corporation
(“Guarantor”), whose address is 2070 Las Palmas
Drive, Carlsbad, California 92011 , hereby, jointly and
severally, guarantees, promises and undertakes as
follows:
1. Guarantor unconditionally,
absolutely and irrevocably guarantees and promises to pay to
Lender, or order, on demand, in lawful money of the United States,
any and all indebtedness and/or obligations of Borrower to Lender
and the payment to Lender of all sums which may be presently due
and owing and of all sums which shall in the future become due and
owing to Lender from Borrower whether under the Agreement or
otherwise. The terms “indebtedness” and
“obligations” (hereinafter collectively referred to as
the “Obligations”) are used herein in their most
comprehensive sense and include, without limitation, the Loan and
any and all advances, debts, obligations, and liabilities of
Borrower, heretofore, now, or hereafter made, incurred, or created,
whether voluntarily or involuntarily, and however arising,
including, without limitation, (a) indebtedness owing by
Borrower to third parties who have granted Lender a security
interest in the accounts, chattel paper and/or general intangibles
of said third party; (b) any and all attorneys’ fees,
expenses, costs, premiums, charges and/or interest owed by Borrower
to Lender, whether under the Agreement, or otherwise, whether due
or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, whether Borrower may be liable
individually or jointly with others, whether recovery upon such
indebtedness may be or hereafter becomes barred by any statute of
limitations or whether such indebtedness may be or hereafter
becomes otherwise unenforceable, and includes Borrower’s
prompt, full and faithful performance, observance and discharge or
each and every term, condition, agreement, representation, warranty
undertaking and provision to be performed by Borrower under the
Agreement; (c) any and all obligations or liabilities of
Borrower to Lender arising out of any other agreement by Borrower
including without limitation any agreement to indemnify Lender for
environmental liability or to clean up hazardous waste;
(d) any and all indebtedness, obligations or liabilities for
which Borrower would otherwise be liable to Lender were it not for
the invalidity, irregularity or unenforceability of them by reason
of any bankruptcy, insolvency or other law or order of any kind,
including from and after the filing by or against Borrower of a
bankruptcy petition, whether an involuntary or voluntary bankruptcy
case, and all attorneys’ fees related thereto; and
(e) any and all amendments, modifications, renewals and/or
extensions of any of the above, including without limit amendments,
modifications, renewals and/or extensions which are evidenced by
new or additional instruments, documents or agreements.
2. This General Continuing
Guaranty (this “Guaranty”) is a continuing guaranty
that shall remain effective during the term of the Agreement and
relates to any Obligations, including those which arise under
successive transactions which shall either continue the Obligations
from time to time or renew them after they have been satisfied
until this Guaranty has been expressly terminated. Any such
termination (a) shall be applicable only with respect to
Obligations incurred at least thirty (30) days after written
notice to Lender specifying such termination, (b) shall be
effective only with respect to transactions having their inception
after the effective date of termination, and (c) shall not
affect the Loan or any rights or obligations arising out of
transactions having their inception prior to such date. No
termination shall be effective until such time as Lender is no
longer committed or otherwise obligated to make the Loan or any
other loans or advances, or to grant any credit whatsoever to
Borrower. In the absence of any termination of this Guaranty,
Guarantor agrees that nothing shall discharge or satisfy its
obligations created hereunder except for the full payment and
performance of the Obligations with interest.
3. Guarantor agrees that it
is directly and primarily liable to Lender, that the obligations
hereunder are independent of the obligations of Borrower, and that
a separate action or actions may be brought and prosecuted against
Guarantor irrespective of whether Borrower is joined in any such
action or actions. Guarantor agrees that any releases which may be
given by Lender to Borrower or any other guarantor or endorser
shall not release it from this Guaranty.
4. In the event that any
bankruptcy, insolvency, receivership or similar proceeding is
instituted by or against Guarantor and/or Borrower or in the event
that either Guarantor or Borrower become insolvent, make an
assignment for the benefit of creditors, or attempt to effect a
composition with creditors, or if there be any default under the
Agreement (whether declared or not), then, at Lender’s
election, without notice or demand, the obligations of Guarantor
created hereunder shall become due, payable and enforceable against
Guarantor whether or not the Obligations are then due and
payable.
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5. Guarantor agrees to
indemnify Lender and hold Lender harmless against all obligations,
demands, and liabilities, by whomsoever asserted and against all
losses in any way suffered, incurred, or paid by Lender as a result
of or in any way arising out of, following, or consequential to
transactions with Borrower whether under the Agreement, or
otherwise, and also agrees that this Guaranty shall not be impaired
by any modification, supplement, extension, or amendment of any
contract or agreement to which Lender and Borrower may hereafter
agree, nor by any modification, release, or other alteration of any
of the Obligations hereby guaranteed or of any security therefor,
nor by any agreements or arrangements whatsoever with Borrower or
anyone else.
6. Guarantor hereby
authorizes Lender, without notice or demand and without affecting
its liability hereunder, from time to time to: (a) renew,
compromise, extend, accelerate, or otherwise change the interest
rate, time for payment, or the other terms of any of the
Obligations guaranteed hereby, and exchange, enforce, waive, and
release any security therefor; (b) apply such security and
direct the order or manner of sale thereof as Lender in its
discretion may determine; (c) release or substitute any one or
more endorser(s) or guarantor(s); and (d) assign, without
notice, this Guaranty in whole or in part and/or Lender’s
rights hereunder to anyone at any time. Guarantor agrees that
Lender may do any or all of the foregoing in such manner, upon such
terms, and at such times as Lender, in its discretion, deems
advisable, without, in any way or respect, impairing, affecting,
reducing or releasing Guarantor from its undertakings hereunder and
Guarantor hereby consents to each and all of the foregoing acts,
events and/or occurrences.
7. Guarantor hereby waives
any right to assert against Lender as a defense, counterclaim,
set-off on crossclaim, any defense (legal or equitable), set-off,
counterclaim, and/or claim which Guarantor may now or at any time
hereafter have against Borrower and/or any other party liable to
Lender in any way or manner.
8. Guarantor hereby waives
all defenses, counterclaims and/off-sets of any kind or nature,
arising directly or indirectly from the present or future lack of
perfection, sufficiency, validity and/or enforceability of the
Agreement, or any security interest.
9. Guarantor hereby waives
any defense arising by reason of any claim or defense based upon an
election of remedies by Lender, which, in any manner impairs,
affects, reduces, releases, destroys and/or extinguishes
Guarantor’s subrogation rights, rights to proceed against
Borrower for reimbursement, and/or any rights of Guarantor to
proceed against Borrower or against any other person or security,
including, but not limited to, any defense based upon an election
of remedies by Lender under the provisions of Section 580d of
the California Code of Civil Procedure, and/or any similar law of
California or of any other State or of the United States. Guarantor
waives all presentments, demands for performance, notices of
non-performance, protests, notices of protest, notices of dishonor,
notices of default, notices of acceptance of this Guaranty, and
notices of the existence, creation, or incurring of new or
additional indebtedness, and all other notices or formalities to
which Guarantor may be entitled. Guarantor waives any right to a
jury trial in any action hereunder or arising out of Lender’s
transactions with Borrower. Guarantor also hereby waives any right
of subrogation it may have or assert, or any other right of
reimbursement from Borrower or any other party, unless Lender
expressly consents to Guarantor’s assertion of such rights.
Without limiting the foregoing, Guarantor expressly waives all
benefits which might otherwise be available to Guarantor under
California Civil Code Sections 2809, 2810, 2815, 2819, 2822, 2839,
2845, 2847, 2848, 2849, 2850, 2899 and 3433 and California Code of
Civil Procedure Sections 580a, 580b, 580d and 726, as those
statutory provisions are now in effect and hereafter amended, and
under any other similar statutes now and hereafter in effect deemed
applicable to this Guaranty and its enforcement.
10. Guarantor waives all
presentments, demands for performance, notices of non-performance,
protests, notices of protest, notices of dishonor, notices of
default, notices of intent to accelerate or demand payment of any
kind, diligence in collecting any Obligations, notices of
acceptance of this Guaranty, notices of the existence, creation, or
incurring of new or additional indebtedness, notices respecting the
terms, time and place of any public or private sale of personal
property security held from Borrower or any other person, and all
other notices or formalities to which Guarantor may be entitled.
Each Guarantor hereby waives any claim, right or remedy now
existing or hereafter acquired against the Borrower, which claims
arise from the performance of such Guarantor’s obligations
under the respective guaranties, including without limitation, any
right of subrogation, reimbursement, exoneration, contribution,
indemnification or participation in any claim, right or remedy
against Borrower for any security which Lender now has or hereafter
acquires, whether or not such claim, right or remedy arises in
equity, under contract, by statute, under common law or otherwise.
Lender may modify the terms of any Obligations, compromise, extend,
increase, accelerate, r
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