EXHIBIT 10.6
------------
THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY, INCLUDING THE
RIGHT TO DEMAND PAYMENT HEREUNDER AND TO ENFORCE ANY INSTRUMENTS SECURING THIS
GUARANTY, ARE MADE EXPRESSLY SUBJECT AND SUBORDINATE TO CERTAIN RIGHTS OF THE
HOLDER(S) OF THE INDEBTEDNESS AND OTHER OBLIGATIONS OWING FROM TIME TO TIME BY
HAROLD'S STORES, INC. AND CERTAIN OF ITS SUBSIDIARIES PURSUANT TO A LOAN AND
SECURITY AGREEMENT ENTERED INTO AS OF FEBRUARY 5, 2003, BETWEEN HAROLD'S STORES,
INC. AND CERTAIN OF ITS SUBSIDIARIES AND ▇▇▇▇▇ FARGO RETAIL FINANCE II, LLC, AS
THE SAME MAY BE AMENDED, MODIFIED, RESTATED AND SUPPLEMENTED FROM TIME TO TIME,
ALL AS MORE PARTICULARLY PROVIDED PURSUANT TO THE TERMS OF THE SUBORDINATION AND
INTERCREDITOR AGREEMENT ENTERED INTO IN AUGUST 2006, AMONG HAROLD'S STORES, INC.
AND CERTAIN OF ITS SUBSIDIARIES, RONHOW, LLC AND ▇▇▇▇▇ FARGO RETAIL FINANCE II,
LLC, AS THE SAME MAY BE AMENDED, MODIFIED, RESTATED AND SUPPLEMENTED FROM TIME
TO TIME, THE TERMS OF WHICH SUBORDINATION AND INTERCREDITOR AGREEMENT BY THIS
REFERENCE ARE MADE A PART OF THIS GUARANTY. PAYEE AND EACH OTHER HOLDER,
ASSIGNEE OR TRANSFEREE OF THIS GUARANTY, BY ACCEPTANCE HEREOF, AGREE TO BE BOUND
BY SUCH SUBORDINATION AND INTERCREDITOR AGREEMENT.
SUBORDINATED GUARANTY
THIS SUBORDINATED GUARANTY ("GUARANTY"), dated as of August 31, 2006, is
executed and delivered by HAROLD'S FINANCIAL CORPORATION, an Oklahoma
corporation, HAROLD'S DIRECT, INC., an Oklahoma corporation, HAROLD'S STORES OF
TEXAS, L.P., a Texas limited partnership, HAROLD'S OF JACKSON, INC., a
Mississippi corporation, THE CORNER PROPERTIES, INC., an Oklahoma corporation,
HAROLD'S LIMITED PARTNERS, INC., an Oklahoma corporation, HAROLD'S DBO, INC., a
Texas corporation and HSTX, INC., a Texas corporation (each a "GUARANTOR" and
collectively, "GUARANTORS") for the benefit of RONHOW, LLC, a Georgia limited
liability company ("LENDER").
WHEREAS, Harold's Stores, Inc., an Oklahoma corporation ("BORROWER") owns,
directly or indirectly, all of the issued and outstanding capital stock or
partnership interests of each of the Guarantors;
WHEREAS, Borrower and Lender have entered into that certain
Subordinated Loan Agreement, dated as even date herewith (the "LOAN AGREEMENT");
WHEREAS, pursuant to the Loan Agreement, Lender has agreed to make
available to Borrower certain financial accommodations on the terms and
conditions set forth in the Loan Agreement;
WHEREAS, Guarantors' execution and delivery of this Guaranty is a
condition to Lender making, and continuing to make, such financial
accommodations to Borrower;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Guarantors, Guarantors,
intending to be legally bound, hereby agree as follows:
Section 1. Guaranty.
(a) Guarantors hereby absolutely, irrevocably and
unconditionally guarantee the due and punctual payment and performance when due,
whether at stated maturity, by acceleration or otherwise, of the following
(collectively referred to as the "GUARANTEED OBLIGATIONS"): (1) all present and
future indebtedness and obligations owing by Borrower to Lender under or in
connection with the Loan Agreement and any other Loan Document, including
without limitation, the repayment of all principal of the Loan, and the payment
of all interest, fees, charges, attorneys' fees and other amounts payable to
Lender thereunder or in connection therewith; (2) any and all extensions,
renewals, modifications, amendments or substitutions of the foregoing; (3) all
expenses, including, without limitation, attorneys' fees and disbursements, that
are incurred by Lender in the enforcement of any of the foregoing; and (4) all
other Obligations.
(b) All expenses, including, without limitation, attorneys'
fees and disbursements that are incurred by Lender in the enforcement of the
obligations of the Guarantors hereunder, shall be fully recoverable from the
Guarantors.
(c) All expenses, including, without limitation, attorneys'
fees and disbursements, that are incurred by Lender in connection with the Loan
Agreement and any other Loan Document shall be recoverable from Guarantors;.
(d) Any amounts due from Guarantors to Lender shall bear
interest from the date that is ten (10) days after Lender's demand therefor, and
in the case of all of the foregoing amounts, until such amounts are paid in full
at the highest rate then applicable to the Guaranteed Obligations.
Section 2. Guaranty of Payment and Not of Collection. This
Guaranty is a guaranty of payment, and not merely of collection. Accordingly,
Lender shall not be obligated or required before enforcing this Guaranty against
Guarantors: (a) to pursue any right or remedy Lender may have against Borrower
or any other person or commence any suit or other proceeding against Borrower or
any other person in any court or other tribunal; (b) to make any claim in a
liquidation or bankruptcy of Borrower or any other person; or (c) to make demand
of Borrower or any other person or to enforce or seek to enforce or realize upon
any collateral security held by Lender which may secure any of the Guaranteed
Obligations.
Section 3. Guaranty Absolute. Guarantors guarantee that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
documents evidencing the same, regardless of any applicable law now or hereafter
in effect in any jurisdiction affecting any of such terms or the rights of
Lender with respect thereto. The liability of Guarantors under this Guaranty
shall be absolute, irrevocable and unconditional in accordance with its terms
and shall remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever,
2
including without limitation, the following (whether or not Guarantors consent
thereto or have notice thereof):
(a) (i) Any change in the amount, interest rate or due date or
other term of any of the Guaranteed Obligations, (ii) any change in the time,
place or manner of payment of all or any portion of the Guaranteed Obligations,
(iii) any amendment or waiver of, or consent to the departure from or other
indulgence with respect to, the Loan Agreement, any other Loan Document, or any
other document or instrument evidencing or relating to any Guaranteed
Obligations, or (iv) any waiver, renewal, extension, addition, or supplement to,
or deletion from, or any other action or inaction under or in respect of, the
Loan Agreement, any of the other Loan Documents, or any other documents,
instruments or agreements relating to the Guaranteed Obligations or any other
instrument or agreement referred to therein or evidencing any Guaranteed
Obligations or any assignment or transfer of any of the foregoing;
(b) any lack of validity or enforceability of the Loan
Agreement, any of the other Loan Documents, or any other document, instrument or
agreement referred to therein or evidencing any Guaranteed Obligations or any
assignment or transfer of any of the foregoing;
(c) any furnishing to Lender of any additional security for
the Guaranteed Obligations, or any sale, exchange, release or surrender of, or
realization on, any security for the Guaranteed Obligations;
(d) any settlement or compromise of any of the Guaranteed
Obligations, any security therefor, or any liability of any other party with
respect to the Guaranteed Obligations, or any subordination of the payment of
the Guaranteed Obligations to the payment of any other liability of Borrower or
any other obligor with respect to the Guaranteed Obligations;
(e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to any
Guarantor, Borrower or any other person, or any action taken with respect to
this Guaranty by any trustee or receiver, or by any court, in any such
proceeding;
(f) any act or failure to act by Borrower or any other person
which may adversely affect the Guarantors' subrogation rights, if any, against
Borrower to recover payments made under this Guaranty;
(g) any nonperfection of any security interest or other lien
on any collateral securing in any way any of the Guaranteed Obligations;
(h) any application of sums paid by Borrower or any other
person with respect to the liabilities of Borrower to Lender, regardless of what
liabilities of Borrower remain unpaid;
(i) any defect, limitation or insufficiency in the borrowing
powers of Borrower or in the exercise thereof; or
(j) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Guarantor hereunder, including,
without limitation, the failure by Lender to provide copies of any notice
delivered to Borrower in accordance with the terms of
3
any of the Loan Documents.
Section 4. Action with Respect to Guaranteed Obligations.
Lender may, at any time and from time to time, without the consent of, or notice
to, Guarantors, and without discharging Guarantors from their obligations
hereunder, take any and all actions described in SECTION 3 hereof and may
otherwise: (i) amend, modify, alter or supplement the Loan Agreement or any
other Loan Document; (ii) sell, exchange, release or otherwise deal with all, or
any part, of any collateral; (iii) release any person liable in any manner for
the payment or collection of the Guaranteed Obligations; (iv) exercise, or
refrain from exercising, any rights against Borrower or any other person; and
(v) apply any sum, by whomsoever paid or however realized, to the Guaranteed
Obligations in such order as Lender shall elect.
Section 5. Representations and Warranties. Each Guarantor
hereby makes to Administrative Agent and Lender the following representations
and warranties:
(a) Organization; Power; Qualification. Such Guarantor is a
corporation or limited partnership duly organized or formed, validly existing
and in good standing under the jurisdiction of its incorporation or formation,
has the power and authority to own or lease its respective properties and to
carry on its respective business as now being and hereafter proposed to be
conducted, and is duly qualified and is in good standing as a foreign
corporation or limited partnership, and authorized to do business, in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization and where the failure to
be so qualified or authorized would have, in each instance, a material adverse
effect on Borrower's or such Guarantor's operations, properties, financial
conditions or ability to perform its respective obligations under the Loan
Documents (a "MATERIAL ADVERSE EFFECT").
(b) Authorization. Such Guarantor has the right and power, and
has taken all necessary action to authorize it, to guaranty the Guaranteed
Obligations hereunder. Such Guarantor has the right and power, and has taken all
necessary action to authorize it, to execute, deliver and perform this Guaranty
and any other Loan Document to which it is a party in accordance with their
respective terms and to consummate the transactions contemplated hereby and
thereby. This Guaranty has been duly executed and delivered by the duly
authorized officers of such Guarantor, and each is a legal, valid and binding
obligation of the Guarantor, enforceable against it in accordance with its
respective terms.
(c) Compliance with Laws. The execution, delivery and
performance of this Guaranty in accordance with its terms do not and will not,
by the passage of time, the giving of notice, or otherwise: (i) require any
governmental approval, OTHER THAN such as have been obtained and are in full
force and effect, or violate any applicable law relating to such Guarantor; (ii)
conflict with, result in a breach of, or constitute a default under the articles
of incorporation or bylaws of such Guarantor or any indenture, agreement or
other instrument to which such Guarantor is a party or by which it or any of its
properties may be bound; or (iii) result in or require the creation or
imposition of any lien, other than liens in favor of Lender, upon or with
respect to any property now owned or acquired by such Guarantor.
(d) Governmental Approvals. Such Guarantor is in compliance
with each governmental approval applicable to it and in compliance with all
other applicable law relating to
4
it, except for non-compliances which, and governmental approvals the failure to
possess which, would not, individually or in the aggregate, have a Material
Adverse Effect.
(e) Defaults. No Event of Default or any event that with the
giving of notice or passage of time would constitute an Event of Default has
occurred and is continuing or would exist after giving effect to any of the Loan
Documents.
Section 6. Contribution. To the extent that any Guarantor
shall be required hereunder to pay any portion of any Guaranteed Obligation
exceeding the greater of (a) the amount of the economic benefit actually
received by such Guarantor from the Loans and other Obligations and (b) the
amount such Guarantor would otherwise have paid if such Guarantor had paid the
aggregate amount of the Guaranteed Obligations (excluding the amount thereof
repaid by the Borrower) in the same proportion as such Guarantor's net worth on
the date enforcement is sought hereunder bears to the aggregate net worth of all
the Guarantors on such date, then such Guarantor shall be reimbursed by such
other Guarantors for the amount of such excess, pro rata, based on the
respective net worth of such other Guarantors on such date.
Section 7. Waiver. Guarantors, to the fullest extent permitted
by applicable law, hereby waive notice of acceptance hereof or any presentment,
demand, protest or notice of any kind which in any manner or to any extent might
vary the risk of Guarantors or which otherwise might operate to discharge
Guarantors from their obligations hereunder.
Section 8. Inability to Accelerate Loan. If Lender is
prevented under applicable law or otherwise from demanding or accelerating
payment of any of the Guaranteed Obligations by reason of any automatic stay or
otherwise, Lender shall be entitled, subject to the provisions of the
Intercreditor Agreement (as defined in Section 26 below), to receive from
Guarantors, upon demand therefor, the sums which otherwise would have been due
had such demand or acceleration occurred.
Section 9. Reinstatement of Guaranteed Obligations. Subject to
the terms of the Intercreditor Agreement, if claim is ever made on Lender for
repayment or recovery of any amount or amounts received in payment or on account
of any of the Guaranteed Obligations, and Lender repays all or part of said
amount by reason of (a) any judgment, decree or order of any court or
administrative body of competent jurisdiction, or (b) any settlement or
compromise of any such claim effected by Lender with any such claimant
(including Borrower or a trustee in bankruptcy for Borrower), then and in such
event Guarantors agree that any such judgment, decree, order, settlement or
compromise shall be binding on them, notwithstanding any revocation hereof or
the cancellation of the Loan Agreement, any of the other Loan Documents, or any
other instrument evidencing any liability of Borrower, and Guarantors shall be
and remain liable to Lender for the amounts so repaid or recovered to the same
extent as if such amount had never originally been paid to Lender. Guarantor's
liability under this SECTION 9 shall survive the termination of this Guaranty.
Section 10. Subrogation. Upon the making by Guarantors of any
payment hereunder for the account of Borrower, Guarantors shall be subrogated to
the rights of the payee against Borrower; PROVIDED, HOWEVER, that Guarantors
shall not enforce any right or receive any payment by way of subrogation or
otherwise take any action in respect of any other claim or
5
cause of action Guarantors may have against Borrower arising by reason of any
payment or performance by Guarantors pursuant to this Guaranty, unless and until
all of the Guaranteed Obligations have been indefeasibly paid and performed in
full. If any amount shall be paid to Guarantors on account of or in respect of
such subrogation rights or other claims or causes of action, Guarantors shall
hold such amount in trust for the benefit of Lender and shall forthwith pay such
amount to Lender to be credited and applied against the Guaranteed Obligations,
whether matured or unmatured, in accordance with the terms of the Loan Agreement
or to be held by Lender as collateral security for any Guaranteed Obligations
existing.
Section 11. Set off. In addition to any rights now or
hereafter granted under any of the other Loan Documents or applicable law and
not by way of limitation of any such rights, Guarantors hereby authorize Lender,
at any time upon the occurrence and during the continuation of an Event of
Default, without any prior notice to Guarantors or to any other person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any indebtedness at any time held or owing by Lender, or an affiliate of Lender,
to or for the credit or the account of Guarantors against and on account of any
of the Guaranteed Obligations, although such obligations shall be contingent or
unmatured. Lender agrees to give Guarantors prompt notice after the exercise by
Lender of such right of set off but the failure of Lender to give such notice
shall not affect the validity of any such set off.
Section 12. Information. Guarantors assume all responsibility
for being and keeping themselves informed of the financial condition of
Borrower, and of all other circumstances bearing upon the risk of nonpayment of
any of the Guaranteed Obligations and the nature, scope and extent of the risks
that the Guarantors assumes and incurs hereunder, and agrees that Lender shall
not have any duty whatsoever to advise Guarantors of information regarding such
circumstances or risks.
Section 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE, AND
WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES OR PROVISIONS.
Section 14. Consent to Jurisdiction, Exclusive Venue.
Guarantors hereby irrevocably consent to the jurisdiction of the United States
District Court for the Northern District of Georgia and of all Georgia state
courts sitting in ▇▇▇▇▇▇ County, Georgia, for the purpose of any litigation to
which Lender may be a party and which concerns this Guaranty or the Guaranteed
Obligations. It is further agreed that venue for any such action shall lie
exclusively with courts sitting in ▇▇▇▇▇▇ County, Georgia, unless Lender agrees
to the contrary in writing.
Section 15. Waiver of Trial by Jury. LENDER AND GUARANTORS
HEREBY KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY
IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR
TORT OR OTHERWISE, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO
THIS GUARANTY OR THE LOAN DOCUMENTS.
6
Section 16. Standard of Care; Limitation of Damage. Lender
shall be liable to Guarantors only for matters arising from this Guaranty or
otherwise related to the Guaranteed Obligations resulting from Lender's gross
negligence or willful misconduct, and liability for all other matters is hereby
waived. Lender shall not in any event be liable to Guarantors for special or
consequential damages arising from this Agreement or otherwise related to the
Guaranteed Obligations.
Section 17. Loan Accounts. Lender may maintain books and
accounts setting forth the amounts of principal, interest and other sums paid
and payable with respect to the Guaranteed Obligations, and in the case of any
dispute relating to any of the outstanding amount, payment or receipt of any of
the Guaranteed Obligation or otherwise, the entries in such books and accounts
shall be deemed prima facie evidence of the matters set forth therein. The
failure of Lender to maintain such books and accounts shall not in any way
relieve or discharge Guarantors of any of its obligations hereunder.
Section 18. Waiver of Remedies. No delay or failure on the
part of Lender in the exercise of any right or remedy it may have against any
Guarantors hereunder or otherwise shall operate as a waiver thereof, and no
single or partial exercise by Lender of any such right or remedy shall preclude
other or further exercise thereof or the exercise of any other such right or
remedy.
Section 19. Termination. This Guaranty shall remain in full
force and effect until the indefeasible payment in full of the Guaranteed
Obligations.
Section 20. Successors and Assigns. Each reference herein to
Lender shall be deemed to include such person's respective successors and
assigns (including, but not limited to, any holder of the Guaranteed
Obligations) in whose favor the provisions of this Guaranty also shall inure,
and each reference herein to Guarantors shall be deemed to include Guarantors'
successors and assigns, upon whom this Guaranty also shall be binding. Lender
may, in accordance with the applicable provisions of the Loan Agreement, assign,
transfer or sell any Guaranteed Obligation, to any person without the consent
of, or notice to, Guarantors and without releasing, discharging or modifying
Guarantors' obligations hereunder. Guarantors hereby consent to the delivery by
Lender to any assignee (or any prospective assignee) of any financial or other
information regarding Borrower or Guarantors. Guarantors may not assign or
transfer their rights or obligations hereunder or under any other Loan Document
to any person without the prior written consent of (and any such assignment or
transfer without such consent shall be null and void).
Section 21. Amendments. This Guaranty may not be amended
except in writing signed by Lender and Guarantors.
Section 22. Notices. All notices and other communications
required or provided for hereunder shall be (a) in writing (including facsimile
transmission or similar writing), (b) sent in the case of Guarantors, to the
address provided on the signature page to this Guaranty unless a change of
address has been sent to all other parties in accordance with the terms of this
SECTION 21, or in the case of a notice to Lender, to the address provided for in
the Loan Agreement and (c) all such notices and other communications shall be
deemed effective (i)
7
if mailed, when received; (ii) if telecopied, when transmitted, or (iii) if hand
delivered, when delivered; PROVIDED, HOWEVER, that any notice of a change of
address for notices shall not be effective until received.
Section 23. Severability. In case any provision of this
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 24. Headings. Section headings used in this Guaranty
are for convenience only and shall not affect the construction of this Guaranty.
Section 25. Definitions. Capitalized terms used and not
otherwise defined herein have the respective meanings given them in the Loan
Agreement.
Section 26. Subordination. Guarantors' obligations to Lender
under this Guaranty are subordinated to Guarantors' obligations to ▇▇▇▇▇ Fargo
Retail Finance II, LLC ("AGENT") and certain other lenders, pursuant to the
terms of that certain Subordination and Intercreditor Agreement, dated as of
even date herewith, by and among Lender, Borrower, Guarantors and Agent (the
"Intercreditor Agreement").
[Signatures on Next Page]
8
IN WITNESS WHEREOF, Guarantors have duly executed and delivered this
Guaranty as of the date and year first written above.
GUARANTORS:
Address for Notices:
c/o Harold's Stores, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telecopy Number: ▇▇▇-▇▇▇-▇▇▇▇
HAROLD'S FINANCIAL CORPORATION, an
Oklahoma corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Interim CEO
HAROLD'S DIRECT, INC., an Oklahoma
corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Interim CEO
HAROLD'S STORES OF TEXAS, L.P., a Texas
limited partnership
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Interim CEO
HAROLD'S OF JACKSON, INC, a Mississippi
corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Interim CEO
[Signature Page to Subordinated Guaranty]
THE CORNER PROPERTIES, INC., an Oklahoma
corporation
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Interim CEO
HAROLD'S LIMITED PARTNERS, INC., an
Oklahoma corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Interim CEO
HAROLD'S DBO, INC., a Texas corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Interim CEO
HSTX, INC., a Texas corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Interim CEO
[Signature Page to Subordinated Guaranty]