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may toe any appropriate action under the terms of this Guarantee, whether or not
<br />it shall be liable hereunder, and shall not thereby con e liability or waive any
<br />provisioll of this Guarantee. If the Company sl 'rights under this
<br />paragraph, it shall do so diligently.
<br />(b) If the Company elects to exercise its options as stated in Paragraph 5(a)
<br />the Company shall have the right to select counsel of its choice (subject to the right
<br />of such Assured to object for reasonable cause) to represent the Assured and shall
<br />not be liable for and will not pay the fees of any other counsel, nor will the Company
<br />pay any fees, costs or expenses incurred by an Assured in the defense of those
<br />causes of action which allege matters not covered by this Guarantee.
<br />(c) Whenever the Company shall have brought an action or interposed a
<br />defense as permitted by the provisions of this Guarantee, the Company may
<br />pursue any litigation to final determination by a court of competent jurisdiction and
<br />expressly reserves the right, in its sole discretion, to appeal from an adverse
<br />judgement or order.
<br />(d) In all cases where this Guarantee permits the Company to prosecute or
<br />provide for the defense of any action or proceeding, an Assured shall secure to the
<br />Company the right to so prosecute or provide for the defense of any action or
<br />proceeding, and all appeals therein, and permit the Company to use, at its option,
<br />the name of such Assured for this purpose. Whenever requested by the Company,
<br />an Assured, at the Company's expense, shall give the Company all reasonable aid
<br />in any action or proceeding, securing evidence, obtaining witnesses, prosecuting or
<br />defending the action or lawful act which in the opinion of the Company may be
<br />necessary or desirable to establish the title to the estate or interest as stated
<br />herein, or to establish the lien rights of the Assured. If the Company is prejudiced
<br />by the failure of the Assured to furnish the required cooperation, the Company's
<br />obligations to the Assured under the Guarantee shall terminate.
<br />6. Proof of Loss or Damage - In addition to and after the notices required under
<br />Section 3 of these Conditions and Stipulations have been provided to the
<br />Company, a proof of loss or damage signed and swom to by the Assured shall be
<br />furnished to the Company within ninety (90) days after the Assured shall ascertain
<br />the facts giving rise to the loss or damage. The proof of loss or damage shall
<br />describe the matters covered by this Guarantee which constitute the basis of loss
<br />or damage and shall state, to the extent possible, the basis of calculating the
<br />amount of the loss or damage. If the Company is prejudiced by the failure of the
<br />Assured to provide the required proof of loss or damage, the Company's obligation
<br />to such Assured under the Guarantee shall terminate. In addition, the Assured may
<br />reasonably be required to submit to* examination under oath by any authorized
<br />representative of the Company and shall produce for examination, inspection and
<br />copying, at such reasonable times and places as may be designated by any
<br />authorized representative of the Company, all records, books, ledgers, checks,
<br />correspondence and memoranda, whether bearing a date before or after Date of
<br />Guarantee, which reasonably pertain to the loss or damage. Further, if requested
<br />by any authorized representative of the Company, the Assured shall grant its
<br />permission, in writing, for any authorized representative of the Company to
<br />examine, inspect and copy all records, books, ledgers, checks, correspondence
<br />and memoranda in the custody or control of a third party, which reasonably pertain
<br />to the loss or damage. All information designated as confidential by the Assured
<br />provided to the Company pursuant to this Section shall not be disclosed to others
<br />unless, in the reasonable judgement of the Company, it is necessary in the
<br />administration of the claim. Failure of the Assured to submit for examination under
<br />oath, produce other reasonably requested information or grant permission to secure
<br />reasonably necessary information from third parties as required in the above
<br />paragraph, unless prohibited by law or governmental regulation, shall terminate any
<br />liability of the Company under this Guarantee to the Assured for that claim.
<br />7. Options to Pay or Otherwise the Claims: Termination of Liability - In
<br />case of a claim under this Guarantee, the Company shall have the following
<br />additional options:
<br />(a) To Pay or Tender Payment of the Amount of Liability or to Purchase the
<br />Indebtedness.
<br />The Company shall have the option to pay or settle or compromise for or in
<br />10. Reduction of Liabil Termination of Liability - All payments under this
<br />Guarantee, except pay ade for costs, attorneys' fees and expenses
<br />pursuant to Paragraph 5 *Sr Ta ce the amount of liability pro tanto.
<br />11. Payment of Loss
<br />(a) No payment shall be made without producing this Guarantee for
<br />endorsement of the payment unless the Guarantee has been lost or destroyed, in
<br />which case proof of loss or destruction shall be furnished to the satisfaction of the
<br />Company.
<br />(b) When liability and the extent of loss or damage has been definitely fixed in
<br />accordance with these Conditions and Stipulations, the loss or damage shall be
<br />payable within thirty (30) days thereafter.
<br />12. Subrogation Upon Payment or Settlement - Whenever the Company shall
<br />have settled and paid a claim under this Guarantee, all right of subrogation shall
<br />vest in the Company unaffected by any act of the Assured claimant.
<br />The Company shall be subrogated to and be entitled to all rights and remedies
<br />which the Assured would have had against any person or property in respect to the
<br />claim had this Guarantee not been issued. If requested by the Company, the
<br />Assured shall transfer to the Company all rights and remedies against any person
<br />or property necessary in order to perfect this right of subrogation. The Assured shall
<br />permit the Company to sue, compromise or settle in the name of the Assured and
<br />to use the name of the Assured in any transaction or litigation involving these rights
<br />or remedies.
<br />If a payment on account of a claim does not fully cover the loss of the Assured
<br />the Company shall be subrogated to all rights and remedies of the Assured after
<br />the Assured shall have recovered its principal, interest, and costs of collection.
<br />13. Arbitration - Unless prohibited by applicable law, either the Company or the
<br />Assured may demand arbitration pursuant to the Title Insurance Arbitration Rules of
<br />the American Arbitration Association. Arbitrable matters may include, but are not
<br />limited to, any controversy or claim between the Company and the Assured arising
<br />out of or relating to this Guarantee, any service of the Company in connection with
<br />its issuance or the breach of a Guarantee provision or other obligation. All arbitrable
<br />matters when the Amount of Liability is $1,000,000 or less shall be arbitrated at the
<br />option of either the Company or the Assured. All arbitrable matters when the
<br />amount of liability is in excess of $1,000,000 shall be arbitrated only when agreed
<br />to by both the Company and the Assured. The Rules in effect at Date of Guarantee
<br />shall be binding upon the parties. The award may include attorneys' fees only if the
<br />laws of the state in which the land is located permits a court to award attorneys'
<br />fees to a prevailing party. Judgement upon the award rendered by the Arbitrator(s)
<br />may be entered in any court having jurisdiction thereof.
<br />The law of the situs of the land shall apply to an arbitration under the Title A
<br />copy of the Rules may be obtained from the Company upon request.
<br />14. Liability Limited to This Guarantee; Guarantee Entire Contract
<br />(a) This Guarantee together with all endorsements, if any, attached hereto by
<br />the Company is the entire Guarantee and contract between the Assured and the
<br />Company. In interpreting any provision of this Guarantee, this Guarantee shall be
<br />construed as a whole.
<br />(b) Any claim of loss or damage, whether or not based on negligence, or any
<br />action asserting such claim, shall be restricted to this Guarantee.
<br />(c) No amendment of or endorsement to this Guarantee can be made except
<br />by a writing endorsed hereon or attached hereto signed by either the President, a
<br />Vice President, the Secretary, an Assistant Secretary, or validating officer or
<br />authorized signatory of the Company
<br />- 1. -1 10111
<br />of this Guarantee and shall be addressed to the Company at P.O. Box 2029
<br />Houston, Texas 77252-2029.
<br />STEWART TITLE
<br />Page 4 GUARANTY COMPANY
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