EXHIBIT 10.6
GUARANTY AND INDEMNITY AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of this 15th day of
June, 1998 by and among Horizon Group Properties, Inc., a Maryland corporation
("HGP"), Horizon Group Properties, L.P. a Delaware limited partnership ("HGP
LP"), Prime Retail, Inc., a Maryland corporation ("Prime"), and Prime Retail,
L.P., a Delaware limited partnership ("Prime LP").
Recitals:
A. Certain affiliates of HGP and HGP LP have borrowed funds pursuant to
that certain Loan Agreement dated as of June 15, 1998 (as amended from time to
time in accordance with the terms thereof and hereof, the "Loan Agreement")
among Indiana Factory Shops, L.L.C., Nebraska Crossing Factory Shops, L.L.C.,
and Third Horizon Group Limited Partnership (collectively, the "Borrowers") and
Nomura Asset Capital Corporation, a Delaware corporation (the "Lender").
B. Pursuant to that certain Guaranty dated as of June 15, 1998 (as amended
from time to time in accordance with the terms thereof (the "Guaranty"), Prime
LP has agreed, jointly and severally, to guarantee certain obligations arising
under the Loan Documents.
C. Prime LP has caused certain funds to be deposited with the Lender (or
its agent) pursuant to the Loan Agreement for the benefit of the Borrowers.
D. Prime LP, as the successor to Horizon/Xxxx Outlet Centers Limited
Partnership ("Horizon/Xxxx LP"), is jointly and severally liable with HGP for
any and all obligations arising under (i) that certain promissory note by
Horizon/Xxxx LP in favor of First of America Bank - Michigan, N.A. ("First of
America") dated December 28, 1995 in the original principal amount of $2,800,000
and (ii) that certain promissory note by Horizon/Xxxx LP in favor of First of
America dated December 28, 1995 in the original principal amount of $650,000
(collectively, the promissory notes described in (i) and (ii) above, as same may
be amended from time to time, shall be referred to, together with any other
documents or instruments executed and/or delivered in connection with or
otherwise related to such notes (collectively, the "First of America Loan
Documents").
E. Pursuant to that certain Reaffirmation of Guaranty dated as of June 15,
1998 (the "LaSalle Guaranty" and collectively with the Guaranty, the
"Guarantees"), Prime LP, as the successor to Horizon/Xxxx LP, has reaffirmed its
guaranty of the obligations of MG Patchogue II Limited Partnership ("MG
Patchogue II") arising under that certain Loan Agreement dated December 23, 1997
between MG Patchogue and LaSalle National Bank (collectively, and as the same
may be amended from time to time, together with any other documents or
instruments executed and/or delivered in connection with or otherwise related to
such agreement, the "LaSalle Loan Documents").
F. Prime LP, as the successor to Horizon/Xxxx LP, may have certain
continuing obligations for liabilities arising under (i) that certain promissory
note by MG Patchogue Limited Partnership
("MG Patchogue") II in favor of Key Bank, N.A. dated August 23, 1991 in the
original principal amount of $550,000 and (ii) that certain Building Loan Note
by MG Patchogue in favor of Key Bank, N.A. dated August 23, 1991 in the original
principal amount of $11,000,000 (collectively, the notes described in (i) and
(ii) above, as the same may be amended from time to time, shall be referred to,
together with any other documents or instruments executed and or delivered in
connection with or otherwise related to such notes, the "ULICO Loan Documents").
G. Prime LP, as the successor to Horizon/Xxxx LP, is subject to certain
obligations under that certain letter agreement dated May 29, 1998 (the "PVH
Letter") among Horizon/Xxxx LP, various affiliates of Horizon/Xxxx LP and
Philips Van Heusen Corporation, the satisfaction of which will inure to the
benefit of HGP and HGP LP.
H. In consideration of the agreement of Prime Retail and Prime LP to
provide the foregoing accommodations, HGP and HGP LP, jointly and severally,
have agreed to make the undertakings contemplated by this Agreement for the
benefit of Prime and Prime LP.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Loan Agreement.
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of HGP and HGP LP. In order to induce
Prime Retail and Prime LP to enter into the Guaranty and this Agreement, HGP and
HGP LP jointly and severally represent and warrant, as of the date hereof, that:
(a) HGP is a Maryland corporation duly organized, validly existing and in
good standing under the laws of the state of its organization. HGP LP is a
Delaware limited partnership duly organized, validly existing and in good
standing under the laws of the state of its organization. Each of HGP and HGP LP
is qualified to do business and is in good standing under the laws of each
jurisdiction in which the nature of its business requires it to be so qualified,
(ii) has full power to own and lease its properties and to conduct its business
as
now being conducted and as contemplated to be conducted in the future, and
(iii) has full power and authority and legal right, has taken all necessary
corporate and partnership action, as applicable, and has obtained all necessary
consents and approvals required by applicable law to permit it to execute,
deliver and perform its obligations under this Agreement. This Agreement has
been duly and validly authorized, executed and delivered by each of HGP and HGP
LP, and constitutes the legal, valid and binding obligations of each of HGP and
HGP LP, enforceable against each of HGP and HGP LP in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors rights generally, and to general principles of
equity.
(b) The execution, delivery and performance of this Agreement by each of
HGP and HGP LP do not (i) conflict with or violate the Amended and Restated
Articles of Incorporation or other charter documents or By-laws, limited
partnership agreement or other organizational documents, as the case may be, of
HGP or HGP LP, (ii) contravene or conflict with any law, statute, rule, or
regulation applicable to HGP or HGP LP, (iii) contravene or conflict with,
result in any breach of, or constitute a default under, any material agreement
or instrument binding on HGP or HGP LP, or to which any of their respective
properties or assets are subject, (iv) result in or require the creation or
imposition of any lien whatsoever upon any of the properties or assets of HGP or
HGP LP (other than the liens arising pursuant to this Agreement or any other
documents or instruments required or contemplated by this Agreement), or (vi)
require any approval of stockholders or partners or any approval or consent of
any Person under any agreement or instrument binding on HGP or HGP LP or to
which any of their respective properties or assets are subject which has not
already been obtained.
(c) To the best knowledge of HGP and HGP LP, no Default or Event of Default
has occurred and is continuing.
ARTICLE THREE
GUARANTY FEE
HGP and HGP LP, jointly and severally, agree to pay Prime LP an annual fee
of $400,000 which shall accrue from the date hereof until the date of the
termination and unconditional release of any and all obligations under the
Guaranty and be payable in equal quarterly installments in arrears on each March
31, June 30, September 30 and December 31, commencing June 30, 1998 (and on the
date of termination and release).
ARTICLE FOUR
COVENANTS RELATING TO GUARANTEES
Each of HGP and HGP LP covenants and agrees with Prime Retail and Prime LP
as follows until the termination and unconditional release of any and all
obligations of Prime and Prime LP under the Guarantees, the First of America
Loan Documents and the ULICO Loan Documents.
4.1 Deliveries under Loan Documents. HGP will deliver copies to Prime LP of
any notices or other information delivered or received by HGP or HGP LP under
the Loan Documents, the First of America Loan Documents, the LaSalle Loan
Documents and the ULICO Loan Documents promptly following the delivery or
receipt of such notices or information. HGP and HGP LP will also provide to
Prime Retail and Prime LP such other data and information (financial and
otherwise) as Prime Retail or Prime LP, from time to time, may reasonably
request bearing upon or related to the financial condition, results of
operations and credit worthiness of HGP and HGP LP.
4.2 Amendments. Neither HGP nor HGP LP will amend, modify, grant, or permit
the amendment, modification, termination or grant of, or any waiver under (or
consent to, or permit or suffer to occur any action or omission which results
in, or is equivalent to, an amendment, modification, or grant of a waiver under)
the Loan Documents, the First of American Loan Documents, the LaSalle Loan
Documents or the ULICO Loan Documents without the prior written consent of Prime
Retail.
4.3 Refinancings and Releases.
(a) HGP and HGP LP hereby agree to use commercially reasonable efforts to
obtain the release of Prime and Prime LP from any and all obligations under the
First of America Loan Documents and the ULICO Loan Documents as promptly as
practicable.
(b) HGP and HGP LP hereby agree to use commercially reasonable efforts to
refinance the obligations under the LaSalle Loan Documents and obtain the
release of the LaSalle Guaranty as promptly as possible following the date
hereof. Without limiting the foregoing, HGP and HGP LP agree to use commercially
reasonable efforts to cause the properties pledged as collateral under the
LaSalle Loan Documents to be released therefrom and pledged as additional
collateral under a loan agreement with Nomura Asset Capital Corporation under
the terms contemplated by the original commitment letter relating to the Loan
Agreement
4.4 Application of Excess Proceeds. HGP and HGP LP hereby agree to apply or
to cause their subsidiaries to apply any Excess Proceeds to permanently reduce
indebtedness with respect to which Prime or Prime LP is or may be liable as a
guarantor, co-obligor or otherwise. "Excess Proceeds" shall mean the aggregate
amount of net cash proceeds (after transaction costs and expenses) received by
HGP or any of its subsidiaries, including HGP LP, with respect to (i) any sale,
transfer or other disposition of HGPs outlet center in Algondones, New Mexico
or (ii) the issuance of any equity interest; provided, however, that "Excess
Proceeds" shall not include any such proceeds applied to make mandatory payments
in respect of any indebtedness of HGP or HGP LP.
ARTICLE FIVE
REMITTANCE OF FUNDS
5.1 Remittance. In accordance with Article VII of the Loan Agreement, funds
have been deposited (the "Closing Deposit") with the Lender (or its agent) on
the Closing Date for purposes of funding the Required Repair Fund and the Tax
and Insurance Escrow Fund (each as defined in the Loan Agreement and
collectively, the "Funds"). HGP and HGP LP hereby agree, jointly and severally,
to remit to Prime LP, promptly upon receipt, any and all monies released,
returned or disbursed to the Borrowers from the Funds and not otherwise required
by the Loan Agreement to be used to satisfy the obligations for which the Funds
have been established; provided, however, that in no event shall the aggregate
amount of funds so remitted to Prime LP (together with the amount paid to Prime
LP pursuant to the following sentence) exceed the amount of the Closing Deposit.
Without limiting the foregoing, HGP and HGP LP hereby agree, jointly and
severally, to pay to Prime on the first anniversary date of the Closing Date an
amount in cash equal to the amount, if any, by which the aggregate amount of
funds theretofore remitted to Prime LP from the Required Repair Fund is less
than $303,736.
ARTICLE SIX
REIMBURSEMENT OF PVH PAYMENTS
6.1 Reimbursement. HGP and HGP LP jointly and severally agree to reimburse
Prime LP, upon demand, for 50% of any payments made by Prime LP pursuant to
paragraph (5) of the PVH Letter; provided, however, that such reimbursement
obligation shall not apply with respect to the payment due pursuant to such
paragraph (5) upon the closing of the merger between Prime LP and Horizon/Xxxx
LP.
ARTICLE SEVEN
INDEMNITY
7.1 Indemnity. HGP and HGP LP jointly and severally agree to indemnify,
defend, protect and hold Prime Retail and Prime LP and each of the their
respective officers, directors and affiliates (collectively, the "Indemnified
Parties") harmless from and against, and to pay within ten (10) days after
demand, any and all claims, damages, losses, liabilities, judgments, costs and
expenses of any kind or nature whatsoever which the Indemnified Parties may
incur or suffer by reason of, in connection with, or by virtue of any breach or
violation of this Agreement by HGP or HGP LP or by reason of the execution,
delivery or performance of, this Agreement, the Guaranty or any other credit
enhancement relating to the Loan Documents, the First of America Loan Documents,
or the LaSalle Loan Documents or the ULICO Loan Documents including, without
limitation, the reasonable fees and expenses of counsel for the Indemnified
Parties with respect thereto. Promptly after receipt by the Indemnified Parties
of notice of the commencement, or threatened commencement, of any action subject
to the indemnities contained in this Section, the Indemnified Parties shall
promptly notify HGP thereof, provided, however, that the failure of any
Indemnified Party so to notify HGP will not affect the obligation of HGP and HGP
LP to indemnify the Indemnified Parties with respect to such actions or any
other action pursuant to this Section except to the extent such obligation shall
have been incurred solely and as a direct consequence of such failure. The
obligations of HGP and HGP LP under this Section shall survive forever,
regardless of the termination of this Agreement or the payment in full of all of
HGP and HGP LP's obligations hereunder. To the extent that the undertaking to
indemnify, defend, protect and hold harmless set forth herein may be
unenforceable as violative of any law or public policy, HGP and HGP LP agree to
pay the maximum portion which is permitted to be paid under applicable law. Any
amounts unpaid following demand pursuant to this Section shall accrue interest
at a rate of 12% per annum.
Notwithstanding the foregoing, in the event the Chief Financial Officer of
HGP shall deliver a written notice (the "Deferral Notice") to Prime LP affirming
that neither HGP nor HGP LP have the liquidity or financial resources to satisfy
any demand for indemnity arising pursuant to this Section 7.1 on or prior to
September 15, 1998, the obligation to satisfy such demand shall be deferred to a
date not later than December 31, 1998; provided that any obligation or
obligations so deferred shell continue to accrue interest at the rate indicated
above.
ARTICLE EIGHT
MISCELLANEOUS
8.1 Modification of this Agreement. No amendment, modification or waiver of
any provision of this Agreement shall be effective unless the same shall be in
writing and signed by Prime, Prime LP, HGP and HGP LP. Any such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
8.2 Waiver of Rights by Prime Retail and Prime Retail LP. No course of
dealing or failure or delay on the part of Prime Retail or Prime LP in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise or the exercise of any other right or privilege. The rights of
Prime Retail and Prime LP under this Agreement are cumulative and not exclusive
of any rights or remedies which Prime Retail or Prime LP would otherwise have,
including, without limitation, any rights of subrogation.
8.3 Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
8.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
8.5 Notices
All notices or other communications required or permitted hereunder shall
be (i) in writing and shall be deemed to be given (A) when received, if
delivered in person, (B) three Business days after deposit in a receptacle of
the United States mail as registered or certified mail, postage prepaid, (C) the
Business Day after notice on which the party to whom such notice is addressed
refuses delivery by mail or by private courier service and (ii) addressed as
follows:
If to HGP or HGP LP Horizon Group Properties, Inc.
0000 Xxxxx Xxxxx
Xxxxxx Xxxxxx, XX 00000
Attn: President
with a copy to: Winston & Xxxxxx
00 X. Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
If to Prime Retail or Prime Retail, Inc.
Prime Retail LP 000 Xxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxx, XX 00000
Attn: C. Xxxx Xxxxxxxxx
with a copy to: Winston & Xxxxxx
00 X. Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
8.6 Waiver of Offset and Counterclaim. HGP and HGP LP hereby waive any and
all rights of offset or counterclaim which HGP and HGP LP may otherwise have
against Prime and Prime LP in connection with the enforcement of their rights
hereunder.
8.7 Joint and Several Liability. The obligations of HGP and HGP LP
hereunder shall be joint and several. Neither Prime Retail nor Prime LP shall
not obligated to exercise any right or take any action against either HGP or HGP
LP prior to the enforcement of its rights against the other.
8.8 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in
Maryland this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (a) consents to
submit itself (without making such submission exclusive) to the personal
jurisdiction of any federal court located in Maryland in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement and (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court.
[signature page follows]
IN WITNESS WHEREOF the parties hereto have executed this instrument as of
the date and year first above written.
HORIZON GROUP PROPERTIES, INC.
By: /s/ Xxxx X. Xxxxxx
Its: Chief Executive Officer and President
HORIZON GROUP PROPERTIES, L.P.
By: HORIZON GROUP PROPERTIES, INC.
By: /s/ Xxxx X. Xxxxxx
Its:Chief Executive Officer and President
PRIME RETAIL, INC.
By: /s/ C. Xxxx Xxxxxxxxx
Its: Executive Vice President, General Counsel
and Secretary
PRIME RETAIL, L.P.
By: PRIME RETAIL, INC.
By: /s/ C. Xxxx Xxxxxxxxx
Its:Executive Vice President, General Counsel
and Secretary
