EXHIBIT 7
UNCONDITIONAL GUARANTY AND SUBORDINATION AGREEMENT
THIS UNCONDITIONAL GUARANTY, dated as of March 1, 1996 (the
"Guaranty"), is given jointly and severally by Xxxxxx X.
Xxxxxxxxxx, Xxxxxx X. Xxxxxxx and Xxxx X. Love (collectively
referred to as the "Guarantors") and extended to and in favor of
Klaussner Furniture Industries, Inc. ("Lender") for the benefit of
Xxxxxxxx Warehousing, Inc. (the "Debtor").
WHEREAS, the Debtor is a wholly owned subsidiary of Xxxx
Enterprises, Inc. ("Xxxx") and the Guarantor Xxxx X. Love ("Love")
is a beneficial owner of Xxxx and the remaining Guarantors are
creditors of Xxxx; and
WHEREAS, Lender has made a loan in the principal amount of
$1,440,000 (the "Loan") to Debtor as evidenced by a Promissory Note
dated March 1, 1996 (the "Note") executed by Debtor in favor of
Lender; and
WHEREAS, without this Guaranty, Lender would be unwilling to
make the Loan to the Debtor; and
WHEREAS, because of the benefit to the Guarantors from the
Loan, Guarantors have agreed to guaranty to Lender the obligations
of the Debtor to Lender under the Note.
NOW THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the Guarantors, each Guarantor, as to
itself, agrees as follows:
1. Each Guarantor, jointly and severally, absolutely and
unconditionally guarantees the payment when due, upon maturity,
acceleration or otherwise, of any and all
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indebtedness of the Debtor to the Lender due under the Note and all
renewals and extensions thereof (the "Indebtedness"). If the
Indebtedness becomes due and payable, the Guarantors absolutely and
unconditionally promise to pay the Indebtedness to the Lender, or
order, on demand, in lawful money of the United States. Each
Guarantor further jointly and severally agrees to pay any and all
reasonable expenses which may be incurred or paid by Lender in
collecting any and all of the Indebtedness and/or enforcing its
rights under this Guaranty, including all reasonable attorneys'
fees, which expenses shall be deemed Indebtedness. This Guaranty
(and any security interest securing this Guaranty) shall continue
to be effective or shall be reinstated, as the case may be, if at
any time any payment, or any part thereof, of the Indebtedness is
rescinded or must otherwise be restored or returned by Lender upon
the bankruptcy or reorganization of Debtor or otherwise.
2. The Guarantors absolutely and unconditionally guaranty the
payment of the Indebtedness, and unconditionally promise to pay the
Indebtedness to the Lender, or order, on demand, in lawful money of
the United States upon the occurrence of any such event, whether or
not then due or payable by the Debtor, upon (a) the dissolution,
insolvency, or business failure of, or any assignment for benefit
of creditors by, or commencement of any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceedings by or
against the Debtor, Love, or any of Xxxx, Convertible Enterprises,
Inc., Bright Star Enterprises, Inc. or Xxxxxxxx Advertising, Inc.
(collectively the "Corporate Guarantors"), or (b) the appointment
of a receiver for, or the attachment, restraint of, or making or
levying of any order of court or legal process affecting, a
substantial portion of the property of the Debtor or Love or
Corporate Guarantors.
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3. This Guaranty may be terminated by any party hereto (a
"Terminating Guarantor") as to future transactions only upon
written notice of termination hereof to the Lender [such notice to
be given and delivered as provided in the Stock Pledge Agreement
between Guarantors and Lender of even date herewith (the "Stock
Pledge Agreement")], and such notice shall be deemed to be
effective as of noon of the next succeeding business day following
receipt thereof by the Lender. No such notice shall release the
Terminating Guarantor from any liability as to any Indebtedness for
which the Terminating Guarantor or Debtor may be obligated at the
time of receipt by Lender of such notice, or from extensions and
renewals thereof. Any termination of this Guaranty by a
Terminating Guarantor shall not be deemed a termination of this
Guaranty as to any other Guarantor that is a party hereto.
4. The liability of the Guarantors hereunder is exclusive and
independent of any security for or other guaranty of the
Indebtedness of the Debtor, whether executed by the Guarantor or by
any other party, and the liability of the Guarantors hereunder is
not affected or impaired by (a) any direction of application of
payment by the Debtor or by any other party, (b) any other
continuing or other guaranty or undertaking of the Guarantors or of
any other party as to the Indebtedness, (c) any payment on or in
reduction of any such other guaranty or undertaking, (d) any notice
of termination hereof as to future transactions given by the
Guarantors or any Corporate Guarantor or (e) any payment made to
the Lender on the Indebtedness which the Lender repays to the
Debtor pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium, or other debtor relief proceeding, and the
Guarantors waive any right to the deferral or modification of their
obligations hereunder by reason of any such proceedings.
5. The obligations of the Guarantors hereunder are joint and
several, and
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independent of the obligations of the Debtor, and a separate action
may be brought and prosecuted against the Guarantors whether or not
action is brought against the Debtor and whether or not the Debtor
be joined in any such action.
6. The Guarantors each represent that the only members of the
Xxxx Group (as hereinafter defined) that own the stock of Xxxxxxxx
Convertibles, Inc. ("JCI") are the Guarantors and the Corporate
Guarantors. The term "Xxxx Group" shall have the same meaning
given such term in the Note.
7. The Guarantors agree that the Lender may (whether or not
after revocation or termination of this Guaranty), without notice
or demand (except as shall be required by applicable statue and
cannot be waived), and without affecting or impairing their
liability hereunder, from time to time to (a) renew, compromise,
extend, accelerate, or otherwise change the time for payment of, or
otherwise change the terms of the Indebtedness or any part thereof,
including an increase or decrease of the rate of interest thereon,
(b) take and hold security for the payment of this Guaranty or the
Indebtedness and exchange, enforce, waive, and release any such
security, (c) apply such security and direct the order or manner of
sale thereof as the Lender in its discretion may determine, and (d)
release or substitute any one or more endorsers, guarantors,
borrowers, or other obligors.
8. It is not necessary for the Lender to inquire into the
capacity or powers of the Debtor or the officers, directors,
partners, or agents acting or purporting to act on its behalf, and
any Indebtedness made or created in reliance by the Lender upon the
professed exercise of such powers shall be guaranteed hereunder.
9. Any indebtedness of the Debtor and/or the Corporate
Guarantors to the
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Guarantors is hereby subordinated to the payment of the
Indebtedness, and all such indebtedness owed to the Guarantors, if
the Lender so requests, shall be collected, enforced, and received
by the Guarantors as trustee for the Lender and be paid over to the
Lender on account of the Indebtedness of the Debtor, but without
affecting or impairing in any manner the liability of the
Guarantors under the other provisions of this Guaranty, provided,
however, that until the occurrence and continuance of a default
hereunder (a) Xxxx may continue to make all interest payments owing
to Guarantor Xxxxxx X. Xxxxxxxxxx ("Greenfield") under Promissory
Note dated November 7, 1994 in the principal amount of $5,136,602
in favor of Greenfield and to Guarantor, Xxxxxx X. Xxxxxxx
("Xxxxxxx") under Promissory Noted dated November 7, 1994 in the
amount of $5,136,602 in favor of Xxxxxxx, and (b) Xxxx may continue
to make payments of normal salary and other compensation to Love.
Any instruments now or hereafter evidencing any indebtedness of the
Debtor and/or the Corporate Guarantors to the Guarantors shall be
marked with a legend that the same are subject to this Guaranty
and, if the Lender so requests, shall be delivered to the Lender.
10. The Guarantors waive any right to require the Lender to
(a) proceed against the Debtor or any other party, (b) proceed
against or exhaust any security held from the Debtor, or (c) pursue
any other remedy in the Lender's power whatsoever. The Guarantors
expressly waive any right conferred upon the Guarantors under N.C.
Gen. Stat. 26-7, et seq. The Guarantors waive any defense based
on or arising out of any defense of the Debtor other than payment
in full of the Indebtedness, including without limitation any
defense based on or arising out of the unenforceability of the
Indebtedness or any part thereof from any cause, the impairment of
any collateral held as security for this Guaranty or the cessation
from any cause of the liability
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of the Debtor other than payment in full of the Indebtedness. The
Lender may, at its election, foreclose on any security held by the
Lender by one or more judicial or nonjudicial sales or exercise any
other right or remedy the Lender may have against the Debtor, or
any security, without affecting or impairing in any way the
liability of the Guarantors hereunder except to the extent the
Indebtedness has been paid. The Guarantors waive any defense
arising out of any such election by the Lender, even though such
election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of the
Guarantors against the Debtor or any security. The Guarantors
shall have no right of subrogation, reimbursement, contribution,
exoneration or indemnity whatsoever against the Debtor and waive
any right to enforce any remedy which the Lender now has or may
hereafter have against the Debtor, and waive any benefit of, and
any right to participate in any security now or hereafter held by
the Lender. This waiver is expressly intended to prevent the
existence of any claim (as defined in the Bankruptcy Code) in
respect of such rights by the Guarantors against the estate of the
Debtor and to prevent the Guarantors from being a creditor of the
Debtor due to such rights. Each Guarantor waives all presentments,
demands for performance, protests and notices, including without
limitation notices of nonperformance, notices of protest, notices
of dishonor, notices of acceptance of this Guaranty, and notices of
the existence, creation or incurring of new or additional
indebtedness. Each Guarantor agrees that it has sole
responsibility for obtaining such information concerning the
Debtor's financial condition and assets, and of all other
circumstances bearing upon the risk of nonpayment of the
Indebtedness and the nature, scope and extent of the risks which
the Guarantors assume and incur hereunder, and agrees that the
Lender shall have no duty to advise the Guarantors of information
known to it regarding such circumstances or risks.
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11. This Guaranty and the liability and obligations of the
Guarantors hereunder are binding upon the Guarantors and their
respective heirs, executors, administrators, successors, and
assigns, and inures to the benefit of and is enforceable by the
Lender and its successors, transferees, and assigns.
12. No right or power of the Lender hereunder shall be deemed
to have been waived by any act or conduct on the part of the
Lender, or by any neglect to exercise such right or power, or by
any delay in so doing; and every right or power shall continue in
full force and effect until specifically waived or released by an
instrument in writing executed by the Lender.
13. This Guaranty shall be deemed to be made under and shall
be governed by the internal laws of the State of North Carolina in
all respects, including matters of construction, validity, and
performance, without regard to conflict of laws principles. The
terms and provisions hereof may not be waived, altered, modified,
or amended except in writing duly signed by an officer of the
Lender and by the Guarantors. This Guaranty and the Stock Pledge
Agreement securing the Guarantors' obligations hereunder constitute
the entire agreement of the Guarantors with respect to the subject
matter hereof, and there are no other agreements or understandings,
oral or written, with respect thereto. The Guarantors and the
Lender agree that any legal action or proceeding arising out of
this Guaranty shall be subject to the jurisdiction of both the
state and federal courts in North Carolina. For that purpose the
Guarantors hereby submit to the jurisdiction of the state and
federal courts in North Carolina. The Guarantors further agrees to
accept service of process in any such legal action or proceeding by
registered or certified mail, postage prepaid, addressed to the
Guarantors. The Guarantors agree that a final judgment in any such
action
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or proceeding shall be conclusive and may be enforced in any
jurisdiction by suit on the judgment or in any other manner
provided by law. The Guarantors waive any objection to venue in
any state or federal court in North Carolina or based on the
grounds of forum non conveniens. The Guarantors further agree that
any action or proceeding brought against the Lender shall be
brought only in a state or federal court in North Carolina, but
nothing herein shall affect the right of the Lender to serve legal
process in any other manner permitted by law or affect the right of
the Lender to bring any action or proceeding against the Guarantors
or its property in the courts of any other jurisdiction. The
Guarantors waive trial by jury in any such action or proceeding.
14. If any of the provisions of this Guaranty shall
contravene or be held invalid under the laws of the State of North
Carolina, this Guaranty shall be construed as if not containing
those provisions and the rights and obligations of the parties
hereto shall be construed and enforced accordingly.
15. This Guaranty may be executed in any number of
counterparts, each of which when executed and delivered shall be
deemed to be an original and all of which counterparts shall
together constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned Guarantors have executed
this Guaranty under seal as of the date first above written.
/S/Xxxxxx X. Xxxxxxxxxx
XXXXXX X. XXXXXXXXXX,
Residence Address:
0000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
/S/Xxxxxx X. Xxxxxxx
XXXXXX X. XXXXXXX
Residence Address:
000 Xxxxx Xxxxx
Xxxxxx Xxx Xxxx, Xxx Xxxx 00000
/S/Xxxx X. Love
XXXX X. LOVE
Residence Address:
0 Xxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
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STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
On the 1st day of March, 1996 before me personally came Xxxxxx
X. Xxxxxxxxxx to me known, and known to me to be the person
described in and who executed the foregoing instrument, and he duly
acknowledged that he executed the same.
/S/Xxxxxx Xxxxxx
Notary Public
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STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
On the 1st day of March, 1996 before me personally came Xxxxxx
X. Xxxxxxx to me known, and known to me to be the person described
in and who executed the foregoing instrument, and he duly
acknowledged that he executed the same.
/S/Xxxxxx Xxxxxx
Notary Public
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STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
On the 1st day of March, 1996 before me personally came Xxxx
X. Love to me known, and known to me to be the person described in
and who executed the foregoing instrument, and he duly acknowledged
that he executed the same.
/S/Xxxxxx Xxxxxx
Notary Public
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