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"),
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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.
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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
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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.
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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 HGP's 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
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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.
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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.
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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
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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]
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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/ Xxxxx X. Xxxxxxx
-------------------------------------------
Its: Secretary
HORIZON GROUP PROPERTIES, L.P.
By: HORIZON GROUP PROPERTIES, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Its: Secretary
PRIME RETAIL, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
-------------------------------------------
Its: President
PRIME RETAIL, L.P.
By: PRIME RETAIL, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
-------------------------------------------
Its: President
