MORTGAGE LOAN WAREHOUSING AGREEMENT
by and among
HOMEGOLD, INC.
and
CAROLINA INVESTORS, INC.,
as Borrowers
THE FINANCIAL INSTITUTIONS PARTY HERETO,
as Lenders
and
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Administrative Agent
Dated as of June 30, 1998
TABLE OF CONTENTS
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ARTICLE I. ACCOUNTING TERMS.................................................1
Section 1.01. Accounting Terms..........................................1
Section 1.02. Computation of Time Periods...............................1
Section 1.03. Rules of Construction.....................................1
ARTICLE II. LOANS............................................................2
Section 2.01. Commitment................................................2
Section 2.02. Notes.....................................................2
Section 2.03. Notice of Borrowing; Making of Loans......................2
Section 2.04. Repayment of Principal....................................6
Section 2.05. Interest..................................................6
Section 2.06. Reduction of Total Commitment; Prepayment of Loans........7
Section 2.07. Payments..................................................8
Section 2.08. Use of Proceeds..........................................10
Section 2.09. Reliance Upon Instructions...............................10
Section 2.10. Eurodollar Rate Not Determinable; Illegality or
Impropriety.............................................10
Section 2.11. Reserve Requirements; Capital Adequacy Circumstances.....11
Section 2.12. Indemnity................................................12
Section 2.13. Sharing of Setoffs.......................................12
Section 2.14. Continuation and Conversion of Loans.....................13
Section 2.15. Joint and Several Liability of the Companies.............14
ARTICLE II(A). BORROWING BASE..............................................15
Section 2A.01. Condition of Lending.....................................15
Section 2A.02. Mandatory Prepayment.....................................15
Section 2A.03. Rights and Obligations Unconditional.....................16
Section 2A.04. Borrowing Base Certificate...............................16
Section 2A.05. General Provisions.......................................16
ARTICLE III. SECURITY AGREEMENT; GUARANTY; ADDITIONAL DOCUMENTS............17
Section 3.01. Security Agreement and Financing Statements..............17
Section 3.02. Guaranties...............................................17
Section 3.03. Further Documents........................................17
ARTICLE IV. CONDITIONS PRECEDENT............................................17
Section 4.01. First Loan...............................................17
Section 4.02. Ongoing Loans............................................20
Section 4.03. Loan Requests............................................21
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Section 4.04. Disbursing Loans.........................................22
Section 4.05. Wet Mortgage Loan Closings...............................22
Section 4.06. Temporary Release of Collateral Documents: Delivery of
Collateral Documents...................................24
Section 4.07. Deemed Representations...................................24
ARTICLE V. REPRESENTATIONS AND WARRANTIES...................................24
Section 5.01. Financial Condition......................................24
Section 5.02. No Change................................................25
Section 5.03. Corporate Existence; Compliance with Law.................25
Section 5.04. Corporate Power; Authorization; Enforceable Obligations..25
Section 5.05. No Legal Bar.............................................25
Section 5.06. No Material Litigation...................................26
Section 5.07. Taxes....................................................26
Section 5.08. Investment Company Act...................................26
Section 5.09. Federal Reserve Board Regulations........................26
Section 5.10. ERISA....................................................26
Section 5.11. Assets...................................................26
Section 5.12. Securities Acts..........................................26
Section 5.13. Consents, etc............................................27
Section 5.14. Ownership; Subsidiaries..................................27
Section 5.15. Joint Benefit............................................27
Section 5.16 Licenses.................................................27
Section 5.17. Chief Executive Office...................................27
Section 5.18. Material Contracts.......................................27
Section 5.19. Permitted Warehouse Indebtedness.........................27
Section 5.20. Full Disclosure..........................................28
Section 5.21. Solvency.................................................28
Section 5.22. Operation of Business; Prior or Existing Restrictions,
Etc...................................................28
ARTICLE VI. AFFIRMATIVE COVENANTS...........................................29
Section 6.01. Financial Statements.....................................29
Section 6.02. Certificates; Reports; Other Information.................30
Section 6.03. Payment of Indebtedness..................................31
Section 6.04. Maintenance of Existence and Properties..................31
Section 6.05. Inspection of Property, Books and Records; Audits........31
Section 6.06. Notices..................................................32
Section 6.07. Credit Documents.........................................33
Section 6.08. Insurance................................................33
Section 6.09. Borrowing Base Certificate...............................33
Section 6.10. Underwriting Standards...................................33
Section 6.11. Borrowing Base...........................................33
Section 6.12. Compliance With Custodian Agreement......................33
Section 6.13. Wet Closing Agents.......................................33
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Section 6.14. Year 2000................................................33
Section 6.15. Pledge of Mortgage Loans.................................34
Section 6.16. Adequate Capital.........................................34
Section 6.17. Additional Required Documents............................34
ARTICLE VII. NEGATIVE COVENANTS............................................34
Section 7.01. Liens....................................................34
Section 7.02. Indebtedness.............................................35
Section 7.03. Consolidation and Merger; Change of Business.............35
Section 7.04. Acquisitions.............................................36
Section 7.05. Transfer of Stock........................................36
Section 7.06. Subsidiaries.............................................36
Section 7.07. Investments; Advances; Guaranties........................36
Section 7.08. Sale of Assets...........................................36
Section 7.09. Dividends................................................37
Section 7.10. Underwriting Standards...................................37
Section 7.11. Margin Regulations.......................................37
Section 7.12. Year 2000 Compatibility..................................37
Section 7.13. Financial Hedge Instruments..............................37
Section 7.14. Transactions With Affiliate..............................38
Section 7.15. Subwarehousing...........................................38
Section 7.16. Bulk Purchases of Mortgage Loans.........................38
Section 7.17. Availability.............................................38
Section 7.18. CII Investor Obligations.................................38
ARTICLE VIII. EVENTS OF DEFAULT............................................38
Section 8.01. Events of Default........................................38
Section 8.02. Remedies.................................................41
Section 8.03. The Administrative Agent May Perform.....................41
Section 8.04. The Administrative Agent's Duties........................41
ARTICLE IX. ADMINISTRATIVE AGENT............................................41
Section 9.01. Appointment..............................................41
Section 9.02. Nature of Duties.........................................42
Section 9.03. Rights, Exculpation, Etc. ...............................42
Section 9.04. Reliance.................................................43
Section 9.05. Indemnification..........................................43
Section 9.06. CIT Individually.........................................44
Section 9.07. Successor Administrative Agent...........................44
Section 9.08. Collateral Matters.......................................45
ARTICLE X. MISCELLANEOUS....................................................46
Section 10.01 Holidays..................................................46
Section 10.02 Records...................................................46
Section 10.03 Amendments and Waivers....................................46
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Section 10.04. No Implied Waiver; Cumulative Remedies...................48
Section 10.05. Notices..................................................48
Section 10.06. Expenses; Taxes; Attorneys' Fees; Indemnification........48
Section 10.07. Application..............................................50
Section 10.08. Severability.............................................50
Section 10.09. Governing Law............................................50
Section 10.10. Prior Understandings.....................................50
Section 10.11. Duration; Survival.......................................50
Section 10.12. Counterparts.............................................50
Section 10.13. Assignments; Participations..............................51
Section 10.14. Successors and Assigns...................................53
Section 10.15. Confidentiality..........................................53
Section 10.16. Waiver of Jury Trial.....................................54
Section 10.17. Right of Setoff..........................................54
Section 10.18. Headings.................................................54
Section 10.19. Forum Selection and Consent to Jurisdiction..............54
Section 10.20. HomeGold as Agent for Companies..........................55
Section 10.21. Periodic Due Diligence Review............................56
ARTICLE XI. DEFINITIONS.....................................................56
LIST OF SCHEDULES AND EXHIBITS
Schedule I Commitment Schedule
Schedule II Approved Investors
Schedule III Pricing Grid
Schedule IV Designated Borrowing Officers
Schedule V Subsidiaries
Schedule VI Material Contracts
Exhibit A Form of Note
Exhibit B Form of Loan Request
Exhibit C Form of Borrowing Base Certificate
Exhibit D Form of Custodian Agreement
Exhibit E Form of Pledge Agreement
Exhibit F Form of Assignment and Acceptance
Exhibit G Underwriting Guidelines
Exhibit H Mortgage Loan Schedule
Exhibit I Form of Security Agreement
Exhibit J Form of Guaranty
Exhibit K Form of Legal Opinion of Counsel for the Companies and the
guarantors
Exhibit L Required Documents
Exhibit M Litigation Schedule
Exhibit N Schedule of Permitted Secured Debt and Permitted Other Debt
Exhibit O Form of Inter-Company Promissory Note
Exhibit P Additional Required Documents
MORTGAGE LOAN WAREHOUSING AGREEMENT
THIS MORTGAGE LOAN WAREHOUSING AGREEMENT, dated as of June 30,
1998, by and among HOMEGOLD, INC., a South Carolina corporation ("HomeGold"),
CAROLINA INVESTORS, INC., a South Carolina corporation ("CII" and together with
HomeGold, collectively the "Companies" and each a "Company"), the financial
institutions from time to time party hereto (each a "Lender" and collectively
the "Lenders"), and THE CIT GROUP/BUSINESS CREDIT, INC. ("CIT"), as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent").
STATEMENT OF PURPOSE
The Companies have requested the Lenders to extend to the
Companies a secured $200,000,000 revolving credit facility in order to finance,
directly or indirectly the Companies' purchase and origination of single-family
residential mortgage loans, and the Lenders have agreed from time to time to
make loans to the Companies, up to the maximum aggregate principal amount of
$200,000,000 outstanding at any time, on the terms and subject to the conditions
set forth herein. All capitalized terms not otherwise defined herein are defined
in Article XI hereof.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I.
ACCOUNTING TERMS
Section 1.01. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP, and all
financial data required to be delivered hereunder shall be prepared in
accordance with GAAP, consistently applied.
Section 1.02. Computation of Time Periods. Except as otherwise
provided in this Agreement, in the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including" and words "to" and "until" each means "to but excluding".
Section 1.03. Rules of Construction. When used in this
Agreement: (i) a reference to time shall be the time in New York City, (ii) a
reference to an agreement, instrument or document shall include such agreement,
instrument or document as the same may be amended, modified or supplemented from
time to time in accordance with its terms and as permitted by the Credit
Documents, and (iii) a reference to a day shall be a calendar day unless
Business Day is specified.
ARTICLE II.
LOANS
Section 2.01. Commitment. (a) Subject to the terms and
conditions and relying upon the representations and warranties herein set forth,
each Lender severally agrees to make Loans to the Companies, which may be either
"A" Loans to HomeGold or "B" Loans to CII, at any time and from time to time on
or after the date hereof and to, but not including, the Maturity Date, in an
aggregate principal amount at any time outstanding to the Companies not to
exceed the amount of such Lender's Commitment, as such Commitment may be reduced
in accordance with the provisions of this Agreement.
(b) Notwithstanding the foregoing (i) the aggregate principal
amount of Loans outstanding at any time to the Companies on a combined basis
shall not exceed the lesser of (A) the Total Commitment and (B) the then current
Borrowing Base of the Companies on a combined basis, (ii) the aggregate
principal amount of "A" Loans outstanding at any time to HomeGold shall not
exceed the then current Borrowing Base of HomeGold on an individual basis, (iii)
the aggregate principal amount of "B" Loans outstanding at any time to CII shall
not exceed the lesser of (A) $35,000,000 and (B) the then current Borrowing Base
of CII on an individual basis, and (iv) the aggregate principal amount of Wet
Loans shall not at any time exceed the Wet Mortgage Loan Sublimit. The Total
Commitment and the Commitment of each Lender shall automatically and permanently
be reduced to zero on the Maturity Date. Within the limits of time and amount
set forth in this Section 2.01, the Companies may borrow, repay and reborrow
hereunder subject to the provisions of this Agreement.
Section 2.02. Notes. The joint and several obligation of the
Companies to repay the unpaid principal amount of the Loans made to them by each
Lender and to pay interest thereon shall be evidenced by a Note dated the date
of this Agreement in the principal amount of such Lender's Commitment with the
blanks appropriately filled in. An executed Note for each Lender shall be
jointly delivered by the Companies to the Administrative Agent on the date of
the execution and delivery of this Agreement and in accordance with Section
10.13 hereof.
Section 2.03. Notice of Borrowing; Making of Loans.
(a) Whenever a Company desires to borrow, the
Administrative Company shall submit a Loan Request to the Administrative Agent
with respect to such proposed borrowing, each such request, to be given not
later than 10:00 a.m. (New York City time) on the date of such proposed
borrowing in the case of a Prime Loan and not later than 12:00 noon (New York
City time) on the third Business Day before the date of such proposed borrowing
in the case of a Eurodollar Loan, setting forth: (i) the Company receiving the
proceeds of such Loan, (ii) the date, which shall be a Business Day, on which
such borrowing is to occur, (iii) whether such Loan is requested to be a Prime
Loan or a Eurodollar Loan and, if a Eurodollar Loan, the Interest Period with
respect thereto, (iv) the principal amount of the Loan being borrowed and, if
the proceeds of such Loan are to be used to originate or purchase Mortgage
Loans, whether or not such Loan is a Wet Loan, and (v) the other information
required by Sections 4.03, 4.04 and 4.05, as applicable. If the proceeds of the
Loan are to be used to
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originate or purchase Mortgage Loans, the Loan Request shall also have attached
a Mortgage Loan Schedule identifying the Mortgage Loans the applicable Company
proposes to pledge to the Administrative Agent and to include in the Borrowing
Base. Such Loan Request shall be given in writing by a Designated Borrowing
Officer, substantially in the form of Exhibit B hereto, containing the original
or facsimile signature of a Designated Borrowing Officer. Except for a Loan
Request when the Administrative Agent will fund the related Loan pursuant to
Section 2.03(e) hereof, the Administrative Agent shall provide each Lender with
prompt notice of each Loan Request. Except as otherwise provided in Section
2.03(e), on the date specified in such request, each Lender shall, subject to
the terms and conditions of this Agreement, make its Pro Rata Share of such Loan
in immediately available funds by wire transfer to the Administrative Agent at
its Office not later than 11:00 a.m. (New York City time). Unless (A) the
Administrative Agent determines that any applicable conditions in Article IV
have not been satisfied or (B) other than in the case of Wet Loans, the
applicable Company fails to deliver the applicable Required Documents and any
other certificates or documents to the Custodian before the date of the proposed
borrowing as required under this Agreement and the Custodian Agreement, the
Administrative Agent shall make the funds so received from the Lenders available
to such Company not later than 3:00 p.m. (New York City time), on the date
specified in such Loan Request in immediately available funds by initiating a
wire transfer.
(b) The Administrative Agent and each Lender shall be
entitled to rely conclusively on each Designated Borrowing Officer's authority
to request a Loan on behalf of the Companies until the Administrative Agent
receives written notice to the contrary. The Administrative Agent and the
Lenders shall have no duty to verify the authenticity of the signature appearing
on any written Loan Request.
(c) The Administrative Agent and the Lenders shall
not incur any liability to the Companies in acting upon any Loan Request
referred to above which the Administrative Agent and the Lenders believe in good
faith to have been given by a Designated Borrowing Officer or for otherwise
acting in good faith under this Section 2.03 and, upon the funding of a Loan by
the Lenders (or by the Administrative Agent on behalf of the Lenders) in
accordance with this Agreement pursuant to any such notice, a Company shall have
effected a Loan hereunder.
(d) Each Loan Request pursuant to this Section 2.03
shall be irrevocable and the Company identified by the Administrative Company as
receiving the proceeds of such Loan in such Loan Request shall be bound to make
a borrowing in accordance therewith. Each Prime Loan shall be in a minimum
amount of $1,000,000 and in multiples of $500,000 if in excess thereof, and each
Eurodollar Loan shall be in a minimum amount of $5,000,000 and in multiples of
$1,000,000 if in excess thereof, provided that the Administrative Company shall
not be entitled to request any Loan that, if made, would result in (i) any
Eurodollar Loan with an Interest Period in excess of one month prior to October
1, 1998 or (ii) an aggregate of more than five separate Eurodollar Loans of any
Lender being outstanding hereunder at any one time.
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(e) (i) Except as otherwise provided in this
subsection 2.03(e), all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares, it being understood
that no Lender shall be responsible for any default by any other Lender in that
other Lender's obligations to make a Loan requested hereunder, nor shall the
Commitment of any Lender be increased or decreased as a result of the default by
any other Lender in that other Lender's obligation to make a Loan requested
hereunder.
(ii) Notwithstanding any other provision of this
Agreement, and in order to reduce the number of fund transfers among the
Companies, the Lenders and the Administrative Agent, the Companies, the Lenders
and the Administrative Agent agree that the Administrative Agent may (but shall
not be obligated to), and the Companies and the Lenders hereby irrevocably
authorize the Administrative Agent to, fund, on behalf of the Lenders, Loans
pursuant to Section 2.01, subject to the procedures for settlement set forth in
subsection 2.03(f); provided, however, that (a) the Administrative Agent shall
in no event fund such Loans if the Administrative Agent shall have received
written notice from the Majority Lenders on the Business Day prior to the day of
the proposed Loan that one or more of the conditions precedent contained in
Sections 4.02, 4.03, 4.04 and 4.05, as applicable, will not be satisfied on the
day of the proposed Loan, and (b) the Administrative Agent shall not otherwise
be required to determine that, or take notice whether, the conditions precedent
in Sections 4.02, 4.03, 4.04 and 4.05, as applicable, have been satisfied.
(iii) Unless (A) the Administrative Agent has
notified the Lenders that the Administrative Agent, on behalf of the Lenders,
will fund a particular Loan pursuant to subsection 2.03(e)(ii), or (B) the
Administrative Agent shall have been notified by any Lender on the Business Day
prior to the day of a proposed Loan that such Lender does not intend to make
available to the Administrative Agent such Lender's Pro Rata Share of the Loan
requested on such day, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent on such day and the
Administrative Agent, in its sole discretion, may, but shall not be obligated
to, cause a corresponding amount to be made available to the relevant Company on
such day. If the Administrative Agent makes such corresponding amount available
to a Company and such corresponding amount is not in fact made available to the
Administrative Agent by such Lender, the Administrative Agent shall be entitled
to recover such corresponding amount on demand from such Lender together with
interest thereon, for each day from the date such payment was due until the date
such amount is paid to the Administrative Agent, at the Fed Funds Rate for three
Business Days and thereafter at the Prime Rate plus the Applicable Prime Rate
Margin. During the period in which such Lender has not paid such corresponding
amount to the Administrative Agent, notwithstanding anything to the contrary
contained in this Agreement or any other Credit Document, the amount so advanced
by the Administrative Agent to a Company shall, for all purposes hereof, be a
Loan made by the Administrative Agent for its own account. Upon any such failure
by a Lender to pay the Administrative Agent, the Administrative Agent shall
promptly thereafter notify the Administrative Company of such failure and the
Companies shall immediately pay such corresponding amount to the Administrative
Agent for its own account.
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(iv) Nothing in this subsection 2.03(e) shall be
deemed to relieve any Lender from its obligations to fulfill its Commitment
hereunder or to prejudice any rights that the Administrative Agent or the
Companies may have against any Lender as a result of any default by such Lender
hereunder.
(f) (i) With respect to all periods for which the
Administrative Agent has funded Loans pursuant to subsection 2.03(e), on Friday
of each week, or if the applicable Friday is not a Business Day, then on the
following Business Day, or such shorter period as the Administrative Agent may
from time to time select (any such week or shorter period being herein called a
"Settlement Period"), the Administrative Agent shall notify each Lender of the
average daily unpaid principal amount of the Loans outstanding during such
Settlement Period. In the event that such amount is greater than the average
daily unpaid principal amount of the Loans outstanding during the Settlement
Period immediately preceding such Settlement Period (or, if there has been no
preceding Settlement Period, the amount of the Loans made on the date of such
Lender's initial funding), each Lender shall promptly make available to the
Administrative Agent its Pro Rata Share of the difference in immediately
available funds. In the event that such amount is less than such average daily
unpaid principal amount, the Administrative Agent shall promptly pay over to
each Lender its Pro Rata Share of the difference in immediately available funds.
In addition, if the Administrative Agent shall so request at any time when a
Potential Default or an Event of Default shall have occurred and be continuing,
or any other event shall have occurred as a result of which the Administrative
Agent shall determine that it is desirable to present claims against the
Companies for repayment, each Lender shall promptly remit to the Administrative
Agent or, as the case may be, the Administrative Agent shall promptly remit to
each Lender, sufficient funds to adjust the interests of the Lenders in the then
outstanding Loans to such an extent that, after giving effect to such
adjustment, each Lender's interest in the then outstanding Loans will be equal
to its Pro Rata Share thereof. The obligations of each Lender under this
subsection 2.03(f) shall be absolute and unconditional. Each Lender shall only
be entitled to receive interest on its Pro Rata Share of the Loans which have
been funded by such Lender.
(ii) In the event that any Lender fails to make any
payment required to be made by it pursuant to subsection 2.03(f)(i), the
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon, for each day from the
date such payment was due until the date such amount is paid to the
Administrative Agent, at the Fed Funds Rate for three Business Days and
thereafter at the Prime Rate plus the Applicable Prime Rate Margin. During the
period in which such Lender has not paid such corresponding amount to the
Administrative Agent, notwithstanding anything to the contrary contained in this
Agreement or any other Credit Document, the amount so advanced by the
Administrative Agent to the Companies shall, for all purposes hereof, be a Loan
made by the Administrative Agent for its own account. Upon any such failure by a
Lender to pay the Administrative Agent, the Administrative Agent shall promptly
thereafter notify the Companies of such failure and the Companies shall
immediately pay such corresponding amount to the Administrative Agent for its
own account. Nothing in this subsection 2.03(f)(ii) shall be deemed to relieve
any Lender from its obligation to fulfill its Commitment hereunder or to
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prejudice any rights that the Administrative Agent or the Companies may have
against any Lender as a result of any default by such Lender hereunder.
Section 2.04. Repayment of Principal. To the extent not due
and payable earlier pursuant to the terms of this Agreement, the entire unpaid
principal amount of each of the Loans shall be due and payable on the Maturity
Date. The Companies shall take all actions required so that all Collateral Sale
Proceeds and all payments of principal, interest, penalties and premiums
received by the Companies which relate to Mortgage Loans pledged to the
Administrative Agent will be paid to the Administrative Agent for the benefit of
the Lenders, provided that (i) with respect to payments constituting Collateral
Sale Proceeds, each Company shall cause all Persons making such payments to
remit such payments directly to the Administrative Agent, and (ii) with respect
to any payment of principal, interest, penalties and premiums received by a
Company relating to a Mortgage Loan pledged to the Administrative Agent, the
applicable Company shall on the Business Day following receipt of such payment,
remit such payment to the Administrative Agent, in each case by way of wire
transfer into the applicable Settlement Account, as payments of principal
hereunder. In the event that notwithstanding the foregoing any such proceeds
required to be paid to the Administrative Agent shall be paid to a Company, such
Company shall immediately upon such receipt pay same over directly to the
Administrative Agent, and while in such Company's possession, such amounts shall
be held in trust for the Administrative Agent.
Section 2.05. Interest.
(a) Interest Rate. Each Loan which is a Eurodollar
Loan shall bear interest on the principal amount thereof from time to time
outstanding from the date of such Loan until such principal amount becomes due,
at a rate per annum equal to the Eurodollar Rate for the Interest Period in
effect for such Loan plus the Applicable Eurodollar Rate Margin. Interest shall
accrue from and include the first date of an Interest Period, but exclude the
last day of such Interest Period. Each Loan which is a Prime Loan shall bear
interest on the principal amount thereof from time to time outstanding from the
date of such Loan, until such principal amount becomes due, at a rate per annum
equal to the Prime Rate plus the Applicable Prime Rate Margin.
(b) Interest Payment Dates. The Companies shall pay
to the Administrative Agent for the account of each Lender interest in arrears
on the unpaid principal amount of each Loan, from the date on which such Loan is
advanced until such principal amount has been repaid in full, which interest
shall be payable (i) if such Loan is a Prime Loan, monthly in arrears on the
first day of each month, commencing August 1, 1998, and (ii) if such Loan is a
Eurodollar Loan (A) on the last day of the Interest Period of such Eurodollar
Loan and (B) for any Interest Period longer than three months, on the day that
occurs during such Interest Period every three (3) months from the first day of
such Interest Period. After maturity of any principal amount of any Loan (by
acceleration, at scheduled maturity or otherwise), interest on such amount shall
be due and payable on demand.
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Section 2.06. Reduction of Total Commitment; Prepayment of Loans.
(a) Subject to the last sentence of this paragraph,
the Companies may reduce the Total Commitment to an amount (which may be zero)
not less than the sum of (i) the aggregate unpaid principal amount of all Loans
then outstanding and (ii) the aggregate principal amount of all Loans not yet
made as to which notice has been given by the Administrative Company under
Section 2.03 hereof. Each such reduction shall be in an amount which is an
integral multiple of $10,000,000, shall be requested by providing not less than
three Business Days' prior written notice to the Administrative Agent and shall
be irrevocable and may not be reinstated. Each such reduction of the Total
Commitment shall reduce the Commitment of each Lender on a pro rata basis.
(b) The Companies shall have the right to prepay, in
whole or in part, all Loans without penalty or premium except as provided in
Section 2.12 hereof.
(c) If at any time (i) the outstanding principal
amount of all Loans exceeds the lesser of the Total Commitment and the Borrowing
Base calculated on a combined basis, (ii) the Borrowing Base of HomeGold on an
individual basis is less than the sum of the outstanding principal amount of all
"A" Loans, or (iii) the Borrowing Base of CII on an individual basis is less
than the sum of the outstanding principal amount of all "B" Loans, then HomeGold
or CII, as appropriate, shall immediately either (i) make a prepayment on the
appropriate Loans in an amount equal to such excess or (ii) provide additional
Eligible Mortgage Loans so that the outstanding principal of the appropriate
Loans does not exceed the Borrowing Base of the Companies on a combined basis or
the Borrowing Base of HomeGold or CII on an individual basis, as the case may
be.
(d) The Companies shall have the right to sell
Collateral for the fair market value thereof (or, with respect to Mortgage
Loans, the Fair Market Value thereof), provided that (i) any such sale shall
only be made with the prior written consent of the Administrative Agent after
the occurrence and during the continuance of an Event of Default, and (ii) the
Collateral Sale Proceeds shall promptly and in any event within two (2) Business
Days of the receipt thereof be paid to the Administrative Agent and applied to
the repayment of the Obligations. All (i) Collateral Sale Proceeds shall be paid
directly to the Administrative Agent by the Person making such payment, and (ii)
payments of principal, interest, penalties and premiums received by a Company in
respect of Mortgage Loans pledged to the Administrative Agent shall be remitted
by the applicable Company to the Administrative Agent on the Business Day
following receipt of such payments; provided that, any such Collateral Sale
Proceeds or such principal, interest penalties and premiums paid to the
Administrative Agent when no Loans are outstanding and no other Obligations are
due and payable under this Agreement, shall be promptly paid to the appropriate
Company.
(e) Notwithstanding anything to the contrary
contained in this Agreement, for a period of two consecutive days in each
calendar year (the "Clean-up Period") during the term of this Agreement, CII
shall repay all outstanding "B" Loans in full, together
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with accrued interest thereon, if any (which Loans may not be reborrowed until
the Clean-up Period has ended).
Section 2.07. Payments.
(a) Time, Place and Manner. All payments and
prepayments to be made in respect of principal, interest, fees or other amounts
due from the Companies hereunder, under the Fee Letter, the Notes or any other
Credit Document shall be payable at or before 12:00 noon, New York City time, on
the day when due without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived. Such payments shall be made to the
Administrative Agent for the account of the Administrative Agent, or the
Lenders, as the case may be, at the Agent Account in Dollars in funds
immediately available at the Bank's Office without setoff, counterclaim or other
deduction of any nature. Any payment received by the Administrative Agent after
12:00 noon, New York City time, will be deemed to have occurred on the next
Business Day. The Administrative Agent shall maintain a separate loan account
for each Company (each, a "Loan Account" and, collectively, the "Loan Accounts")
on its books in the name of each Company in which each Company will be charged
with Loans made by the Administrative Agent or the Lenders to such Company
hereunder and with any other Obligations. The Companies and the Lenders hereby
authorize the Administrative Agent to, and the Administrative Agent may, from
time to time charge the Loan Accounts with any interest, fees, expenses and
other Obligations that are due and payable under this Agreement or any Credit
Document. The Companies and the Lenders confirm that any charges which the
Administrative Agent may so make to the Loan Accounts as herein provided will be
made as an accommodation to the Companies and solely at the Administrative
Agent's discretion and shall constitute a Loan to a Company funded by the
Administrative Agent on behalf of the Lenders and subject to subsections 2.03(e)
and 2.03(f) of this Agreement. Each of the Lenders and the Companies agrees that
the Administrative Agent shall have the right to make such charges regardless of
whether any Event of Default or Potential Default shall have occurred and be
continuing or whether any of the conditions precedent in Sections 4.02, 4.03,
4.04 or 4.05 have been satisfied. The Loan Account for a Company will be
credited upon receipt of "good funds" in the Agent Account with all amounts
actually received by the Administrative Agent from such Company or others for
the account of such Company. Interest on all Loans and all fees that accrue on a
per annum basis shall be computed on the basis of the actual number of days
elapsed in the period during which interest or such fee accrues and a year of
360 days. In computing interest on any Loan, the date of the making of such Loan
shall be included and, if received by 12:00 noon (New York City time), the date
of payment shall be excluded; provided, however, that if a Loan is repaid on the
same day on which it is made, one day's interest shall be paid on such Loan.
(b) Periodic Statements. The Administrative Agent
shall provide the Lenders and the Companies promptly after the end of each
calendar month a summary statement for each Company (in the form from time to
time used by the Administrative Agent) of (A) the opening and closing daily
balances in the Loan Account of each Company during such month, (B) the amounts
and dates of all Loans made during such month, (C) the amounts and dates of all
payments on account of the Loans made during such month and each Lender's
interest in the Loans, (D) the amount of interest accrued on the Loans during
such month, and (E) the amount
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and nature of any charges to the Loan Account of each Company made during such
month on account of interest, fees and expenses and other Obligations. All
entries on any such statement shall, 30 days after the same is sent, be presumed
to be correct and shall constitute prima facie evidence of the information
contained in such statement.
(c) Apportionment of Payments. Except as otherwise
provided in this subsection, aggregate principal and interest payments shall be
apportioned among all outstanding Loans to which such payments relate and
payments of the Unused Line Fee required to be paid by the Companies to the
Lenders under subsections 2.07(e) shall be apportioned ratably among the
Lenders, in each case according to their Pro Rata Shares. All payments shall be
remitted to the Administrative Agent and all such payments and any other
amounts, including, without limitation, proceeds of Collateral received by the
Administrative Agent from or on behalf of the Companies shall be applied subject
to the provisions of this Agreement first, to pay principal of and interest on
any Obligations funded by the Administrative Agent on behalf of the Lenders and
any fees, expense reimbursements or indemnities then due to the Administrative
Agent from the Companies; second, to pay any fees, expense reimbursements or
indemnities then due to the Lenders; third, to pay interest due in respect of
Loans; fourth, to pay or prepay principal of Loans; and fifth, to the Companies
or to such Person as may be lawfully entitled to receive such surplus proceeds.
The Administrative Agent shall promptly distribute to each Lender at its primary
address set forth on the appropriate signature page hereof, or at such other
address as such Lender may designate in writing, such funds as it may be
entitled to receive. The foregoing apportionment of payments is solely for the
purpose of determining the obligations of the Companies hereunder and,
notwithstanding such apportionment, any Lender may on its books and records
allocate payments received by it in a manner different from that contemplated
hereby. No such different allocation shall alter the rights and obligations of
the Companies under this Agreement determined in accordance with the
apportionments contemplated by this Section 2.07(c). To the extent that a
Company makes a payment or payments to the Administrative Agent or the
Administrative Agent receives any payment or other amount, which payment(s) or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause then, to the extent of such payment or proceeds
received, the Obligations or part thereof intended to be satisfied shall be
revived and continue in full force and effect, as if such payment or proceeds
had not been received by the Administrative Agent.
(d) Interest Upon Events of Default. To the extent
permitted by law, after there shall have occurred and so long as there is
continuing an Event of Default pursuant to Section 8.01, all principal,
interest, fees, indemnities or any other Obligations of the Companies hereunder,
under the Fee Letter or under any Note or any other Credit Document (and
including interest accrued under this subsection 2.07(d)) shall bear interest
until paid (before and after judgment), payable on demand, at the Default Rate
such interest rate to change automatically from time to time effective as of the
announced effective date of each change in the Prime Rate.
(e) Unused Line Fee. From and after the Closing Date
until the Maturity Date, the Companies shall pay to the Administrative Agent,
for the account of each
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Lender in accordance with such Lender's Pro Rata Share, an unused line fee (the
"Unused Line Fee") accruing at the rate of one-fourth percent (1/4%) per annum,
on the excess, if any, of the Total Commitment over the aggregate of the Loans
outstanding from time to time. All Unused Line Fees shall be payable monthly in
arrears on the first day of each month commencing August 1, 1998.
(f) Fees. The Companies shall pay to the
Administrative Agent the fees set forth in the Fee Letter at the times set forth
in the Fee Letter. All fees required to be paid to the Administrative Agent
pursuant to the Fee Letter, this Agreement or the other Credit Documents, shall
be paid to the Administrative Agent for its own account as described therein.
All fees under this Agreement, the Fee Letter and the other Credit Documents are
non-refundable under all circumstances.
Section 2.08. Use of Proceeds. The Companies will use the
proceeds of the Loans only for the following purposes to originate or purchase,
directly or indirectly, Eligible Mortgage Loans.
Section 2.09. Reliance Upon Instructions. Without limiting the
coverage of any other indemnities provided in this Agreement, the Companies
hereby jointly and severally indemnify and agree to hold harmless the
Administrative Agent and each of the Lenders, and their respective officers,
employees and agents from and against any and all liabilities, damages, losses,
costs and expenses, including reasonable counsel fees, however arising out of
any actions taken in reliance upon telephonic, telecopier or other instructions
believed in good faith to have been given under this Agreement on the Companies'
behalf by a Designated Borrowing Officer.
Section 2.10. Eurodollar Rate Not Determinable; Illegality or Impropriety.
(a) In the event, and on each occasion, that on or
before the day on which the Eurodollar Rate is to be determined for a borrowing
that is to include Eurodollar Loans, the Administrative Agent has determined in
good faith that, or has been advised by the Bank that, the Eurodollar Rate
cannot be determined for any reason or the Eurodollar Rate will not adequately
and fairly reflect the cost of maintaining Eurodollar Loans or Dollar deposits
in the principal amount of the applicable Eurodollar Loans are not available in
the interbank eurodollar market where the eurodollar and foreign currency and
exchange operations in respect of the Bank's eurodollar loans are then being
conducted, the Administrative Agent shall, as soon as practicable thereafter,
give written notice of such determination to the Administrative Company and the
other Lenders. In the event of any such determination, any request by the
Administrative Company for a Eurodollar Loan pursuant to Section 2.03 shall,
until the Administrative Agent shall have advised the Administrative Company and
the other Lenders that the circumstances giving rise to such notice no longer
exist, be deemed to be a request for a Prime Loan. Each determination by the
Administrative Agent hereunder shall be conclusive and binding absent manifest
error.
(b) In the event that it shall be unlawful or
improper for any Lender to make, maintain or fund any Eurodollar Loan as
contemplated by this Agreement, then such Lender shall forthwith give notice
thereof to the Administrative Agent and the Companies
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describing such illegality or impropriety in reasonable detail. Effective
immediately upon the giving of such notice, the obligation of such Lender to
make Eurodollar Loans shall be suspended for the duration of such illegality or
impropriety and, if and when such illegality or impropriety ceases to exist,
such suspension shall cease, and such Lender shall notify the Administrative
Agent and the Administrative Company. If any such change shall make it unlawful
or improper for any Lender to maintain any outstanding Eurodollar Loan as a
Eurodollar Loan, such Lender shall, upon the happening of such event, notify the
Administrative Agent and the Administrative Company, and the Companies shall
immediately, or if permitted by applicable law, rule, regulation, order, decree,
interpretation, request or directive, no later than the date permitted thereby,
convert each such Eurodollar Loan into a Prime Loan.
Section 2.11. Reserve Requirements; Capital Adequacy Circumstances.
(a) Notwithstanding any other provision herein, if
any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall impose any tax on or change the basis of taxation of payments to any
Lender or any Affiliate of a Lender of the principal of or interest on any
Eurodollar Loan made by such Lender or of any amounts payable hereunder (other
than taxes imposed on the overall net income of such Lender or such Affiliate by
the jurisdiction in which such Lender or such Affiliate has its principal office
or by any political subdivision or taxing authority therein), or shall impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of or credit extended by
such Lender or Affiliate of such Lender (except any such reserve requirement
that is reflected in Reserve Requirements) or shall impose on such Lender or
such Affiliate any other condition affecting this Agreement or any Eurodollar
Loans made by such Lender, and the result of any of the foregoing shall be to
increase the cost to such Lender of making or maintaining any Eurodollar Loan or
to reduce the amount of any sum received or receivable by such Lender hereunder
(whether of principal, interest or otherwise) in respect thereof by an amount
deemed by such Lender to be material, then the Companies shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
additional costs incurred or reduction suffered.
(b) If any Lender shall have determined that the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by such Lender
(or any lending office of such Lender) or by any Affiliate of such Lender, as
the case may be, with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has the effect of reducing the rate of return on such
Lender's capital or on the capital of such Lender's Affiliate, as the case may
be, as a consequence of such Lender's obligations under this Agreement and the
Credit Documents to a level below that which such Lender or such Lender's
Affiliate, as the case may be, could have achieved but for such adoption, change
or compliance (taking into consideration such Lender's policies or such Lender's
Affiliate's policies, as the case
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may be, with respect to capital adequacy) by an amount deemed by such Lender to
be material, then, from time to time, the Companies shall reimburse such Lender
for such reduction.
(c) Any amount or amounts payable by the Companies to
any Lender in accordance with the provisions paragraph (a) or (b) of this
Section 2.11 shall be paid by the Companies to such Lender within ten (10) days
after receipt by the Administrative Company from such Lender of a statement
setting forth (i) in reasonable detail the amount or amounts due, (ii) the basis
for the determination from time to time of such amount or amounts and (iii) that
such amount(s) have been determined in good faith, which statement shall be
conclusive and binding absent manifest error.
(d) The protection of this Section 2.11 shall be
available to any Lender regardless of any possible contention of the invalidity
or inapplicability of the law, rule, regulation, guideline or other change or
condition which shall have occurred or been imposed.
Section 2.12. Indemnity. The Companies shall jointly and
severally indemnify each Lender against any loss or expense that such Lender
actually sustains or incurs as a consequence of (a) any failure by a Company to
fulfill on the date of any borrowing hereunder the applicable conditions set
forth in Article IV, (b) any failure by a Company to borrow any Eurodollar Loan
hereunder or to convert any Prime Loan into a Eurodollar Loan after notice of
such borrowing or conversion has been given pursuant to Section 2.03 or Section
2.14, as the case may be, (c) any payment, prepayment (mandatory or optional) or
conversion of a Eurodollar Loan required by any provision of this Agreement or
otherwise made on a date other than the last day of the Interest Period
applicable thereto, (d) any default in payment or prepayment of the principal
amount of any Eurodollar Loan or any part thereof or interest accrued thereon,
as and when due and payable (at the due date thereof, by notice of prepayment or
otherwise), or (e) the occurrence of any Event of Default, including, in each
such case, any loss (including, without limitation, loss of margin) or
reasonable expense sustained or incurred in liquidating or employing deposits
from third parties acquired to effect or maintain such Loan or any part thereof
as a Eurodollar Loan. Such loss or reasonable expense shall include but not be
limited to an amount equal to the excess, if any, as reasonably determined by
such Lender, of (i) its cost of obtaining the funds for the Loan being paid,
prepaid or converted or not borrowed or converted (based on the Eurodollar Rate
applicable thereto) for the period from the date of such payment, prepayment,
conversion or failure to borrow or convert to the last day of the Interest
Period for such Loan (or, in the case of a failure to borrow or convert, the
last day of the Interest Period for such Loan that would have commenced on the
date of such failure to borrow or convert) over (ii) the amount of interest (as
reasonably determined by such Lender) that would be realized by such Lender in
re-employing the funds so paid, prepaid or converted or not borrowed or
converted for such Interest Period. A certificate of any Lender setting forth in
reasonable detail any amount or amounts that such Lender is entitled to receive
pursuant to this Section 2.12 and the basis for the determination of such amount
or amounts shall be delivered to the Companies and shall be conclusive and
binding absent manifest error.
Section 2.13. Sharing of Setoffs. Each Lender agrees that if
it shall, through the exercise of a right of banker's lien, setoff or
counterclaim against a Company or other security or
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interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, obtain payment (voluntary or involuntary) in
respect of any Obligation as a result of which the aggregate unpaid amount of
the Obligations owing to it shall be proportionately less than the aggregate
unpaid amount of the Obligations owing to any other Lender, it shall
simultaneously purchase from such other Lender at face value a participation in
the Obligations owing to such other Lender, so that the aggregate unpaid amount
of the Obligations and participations in Obligations held by each Lender shall
be in the same proportion to the aggregate unpaid amount of all Obligations
owing to such Lender prior to such exercise of banker's lien, setoff or
counterclaim or other event was to the aggregate unpaid amount of all
Obligations outstanding prior to such exercise of banker's lien, setoff or
counterclaim or other event; provided that if any such purchase or purchases or
adjustments shall be made pursuant to this Section 2.13 and the payment giving
rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustments restored without interest. Each Company expressly
consents to the foregoing arrangements and agrees that any Lender holding a
participation in an Obligation deemed to have been so purchased may exercise any
and all rights of banker's lien, setoff or counterclaim with respect to any and
all moneys owing by the Companies to such Lender by reason thereof as fully as
if such Lender had made a loan directly to the Companies in the amount of such
participation.
Section 2.14. Continuation and Conversion of Loans. Subject to
Section 2.03 and Section 2.10 hereof, a Company shall have the right, at any
time (i) on three (3) Business Days' prior irrevocable written or telecopy
notice to the Administrative Agent, to continue any Eurodollar Loan or any
portion thereof into a subsequent Interest Period or, after the Syndication
Date, to convert any Prime Loan or portion thereof into a Eurodollar Loan, or
(ii) on one (1) Business Day's prior irrevocable written or telecopy notice to
the Administrative Agent, to convert any Eurodollar Loan or portion thereof into
a Prime Loan, subject to the following:
(A) in the case of a continuation of a
Eurodollar Loan or portion thereof as such
or a conversion of a Prime Loan or portion
thereof into a Eurodollar Loan (1) no Event
of Default or Potential Default shall have
occurred and be continuing at the time of
such continuation or conversion and (2)
Eurodollar Loans resulting from this Section
2.14 shall be limited in number as provided
in Section 2.03(d);
(B) in the case of a continuation or conversion
of less than all Loans, the aggregate
principal amount of any Eurodollar Loan
continued or converted shall not be less
than $5,000,000 and in multiples of
$1,000,000 if in excess thereof;
(C) each conversion shall be effected by the
Lenders by applying the proceeds of the new
Loan to the Loan (or portion thereof) being
converted; and, in the case of a conversion
from a Eurodollar Loan to a Prime Loan,
accrued interest on the Eurodollar Loan (or
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portion thereof) being converted shall be
paid by the Companies at the time of
conversion;
(D) if the new Loan made in respect of a
conversion shall be a Eurodollar Loan, the
first Interest Period with respect thereto
shall commence on the date of conversion;
(E) no portion of any Loan shall be continued or
converted to a Eurodollar Loan with an
Interest Period ending later than the
Maturity Date; and
(F) if any conversion of a Eurodollar Loan shall
be effected on a day other than the last day
of an Interest Period, the Companies shall
reimburse each Lender on demand for any loss
incurred or to be incurred by it in the
reemployment of the funds released by such
conversion as provided in Section 2.12
hereof.
In the event that a Company shall not give notice to continue any Eurodollar
Loan into a subsequent Interest Period, such Loan (unless repaid) shall
automatically become a Prime Loan at the expiration of the then current Interest
Period.
Section 2.15. Joint and Several Liability of the Companies.
(a) Notwithstanding anything in this Agreement or any
other Credit Document to the contrary, each of the Companies hereby accepts
joint and several liability hereunder and under the other Credit Documents in
consideration of the financial accommodations to be provided by the
Administrative Agent and the Lenders under this Agreement and the other Credit
Documents, for the mutual benefit, directly and indirectly, of each of the
Companies and in consideration of the undertakings of the other Company to
accept joint and several liability for the Obligations. Each of the Companies,
jointly and severally, hereby irrevocably and unconditionally accepts, not
merely as a surety but also as a co-debtor, joint and several liability with the
other Company, with respect to the payment and performance of all of the
Obligations (including, without limitation, any Obligations arising under this
Section 2.15), it being the intention of the parties hereto that all the
Obligations shall be the joint and several obligations of each of the Companies
without preferences or distinction among them. If and to the extent that any of
the Companies shall fail to make any payment with respect to any of the
Obligations as and when due or to perform any of the Obligations in accordance
with the terms thereof, then in each such event the other Companies will make
such payment with respect to, or perform, such Obligation. Subject to the terms
and conditions hereof, the Obligations of each of the Companies under the
provisions of this Section 2.15 constitute the absolute and unconditional, full
recourse Obligations of each of the Companies enforceable against each such
Person to the full extent of its properties and assets, irrespective of the
validity, regularity or enforceability of this Agreement, the other Credit
Documents or any other circumstances whatsoever.
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(b) The provisions of this Section 2.15 are made for
the benefit of the Administrative Agent and the Lenders and their successors and
assigns, and may be enforced by them from time to time against any or all of the
Companies as often as occasion therefor may arise and without requirement on the
part of the Administrative Agent, the Lenders or such successors or assigns
first to xxxxxxxx any of its or their claims or to exercise any of its or their
rights against any other Company or to exhaust any remedies available to it or
them against any other Company or to resort to any other source or means of
obtaining payment of any of the Obligations hereunder or to elect any other
remedy. The provisions of this Section 2.15 shall remain in effect until all of
the Obligations shall have been paid in full or otherwise fully satisfied.
(c) Each of the Companies hereby agrees that it will
not enforce any of its rights of contribution or subrogation against the other
Company with respect to any liability incurred by it hereunder or under any of
the other Credit Documents, any payments made by it to the Administrative Agent
or the Lenders with respect to any of the Obligations or any Collateral until
such time as all of the Obligations have been paid in full in cash. Any claim
which any Company may have against the other Company with respect to any
payments to the Administrative Agent or the Lenders hereunder or under any other
Credit Documents are hereby expressly made subordinate and junior in right of
payment, without limitation as to any increases in the Obligations arising
hereunder or thereunder, to the prior payment in full in cash of the Obligations
and, in the event of any insolvency, bankruptcy, receivership, liquidation,
reorganization or other similar proceeding under the laws of any jurisdiction
relating to any Company, its debts or its assets, whether voluntary or
involuntary, all such Obligations shall be paid in full in cash before any
payment or distribution of any character, whether in cash, securities or other
property, shall be made to the other Company therefor.
ARTICLE II(A).
BORROWING BASE
Section 2A.01. Condition of Lending. The Administrative Agent
and the Lenders shall have no obligation to (i) make a Loan to the extent that
the aggregate unpaid principal amount of the Loans exceeds, or after giving
effect to a requested Loan will exceed, the lesser of the Total Commitment and
the then current Borrowing Base, calculated on a combined basis, (ii) make an
"A" Loan to HomeGold to the extent that the aggregate unpaid principal amount of
"A" Loans exceeds, or after giving effect to a requested "A" Loan will exceed,
the then current Borrowing Base of HomeGold, calculated on an individual basis
or (iii) make a "B" Loan to CII to the extent that the aggregate unpaid
principal amount of "B" Loans exceeds, or after giving effect to a requested "B"
Loan will exceed, the then current Borrowing Base of CII, calculated on an
individual basis.
Section 2A.02. Mandatory Prepayment. Concurrently with the
delivery of any Borrowing Base Certificate, the Companies shall give notice to
the Administrative Agent of any mandatory prepayment pursuant to Section
2.06(c), which notice shall specify a prepayment date
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no later than the earlier of the date on which such Borrowing Base Certificate
is given and the date on which such Borrowing Base Certificate is required to be
provided to the Lenders.
Section 2A.03. Rights and Obligations Unconditional. Without
limitation of any other provision of this Agreement, the rights of the
Administrative Agent and the Lenders and the obligations of the Companies under
this Article II(A) are absolute and unconditional, and the Administrative Agent
and the Lenders shall not be deemed to have waived the condition set forth in
Section 2A.01 hereof or their right to payment in accordance with Section 2A.02
hereof in any circumstance whatever, including but not limited to circumstances
wherein the Administrative Agent or the Lenders (knowingly or otherwise) make a
Loan hereunder in excess of the Borrowing Base.
Section 2A.04. Borrowing Base Certificate.
(a) By 12:00 noon, New York City time on each
Business Day, the Companies shall furnish to the Administrative Agent a
Borrowing Base Certificate, certified as true and correct by a Designated
Financial Officer, setting forth the Borrowing Base for the Companies,
calculated on a combined basis, and each Company, calculated on an individual
basis, and the other information required therein as of the Companies' close of
business on the preceding Business Day, together with such other information
with respect to any asset included in the Borrowing Base as the Administrative
Agent may request.
(b) In the event of any dispute about the eligibility
of any Mortgage Loan for inclusion in the Borrowing Base or the valuation
thereof, the Administrative Agent's good faith judgment shall control.
(c) The Administrative Agent may dispute the
eligibility of any Mortgage Loan for inclusion in the Borrowing Base or the
valuation thereof by notice of such dispute to the Administrative Company, in
which case the value of such Mortgage Loan shall, at the discretion of the
Administrative Company, either not be included in the Borrowing Base or be
included in the Borrowing Base with a value reasonably acceptable to the
Administrative Agent.
(d) Each Borrowing Base Certificate shall be
accompanied by backup schedules showing the derivation thereof and containing
such detail and such other and further information as the Administrative Agent
may reasonably request from time to time.
Section 2A.05. General Provisions. Notwithstanding anything to
the contrary in this Article II(A), in no event shall any single Mortgage Loan
be counted twice in determining the Borrowing Base.
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ARTICLE III.
SECURITY AGREEMENT; GUARANTY; ADDITIONAL DOCUMENTS
Section 3.01. Security Agreement and Financing Statements. On
or before the date hereof, each of the Companies and Sterling shall execute and
deliver to the Administrative Agent: (1) a security agreement in the form of
that attached hereto as Exhibit I (collectively, the "Security Agreements"),
pursuant to which the Companies and Sterling shall pledge, assign and grant to
the Administrative Agent for the benefit of the Lenders a perfected, first
priority security interest in and lien upon the Collateral described therein as
security for the Obligations, and (2) such UCC financing statements as the
Administrative Agent may request.
Section 3.02 Guaranties. On or before the date hereof, the
Companies shall cause to be executed and delivered to the Administrative Agent
by each of EGI, Sterling, and EMC-TN a continuing guaranty substantially in the
form of that attached hereto as Exhibit J (collectively, the "Guaranties").
Section 3.03. Further Documents. The Companies agree to
execute and deliver and to cause to be executed and delivered to the
Administrative Agent from time to time such confirmatory and supplementary
security agreements, financing statements and other documents, instruments and
agreements, and to take all further actions, as the Administrative Agent may
reasonably request, which are in the Administrative Agent's judgment necessary
or desirable to obtain for the Lenders the benefit of the Credit Documents and
the Collateral.
ARTICLE IV.
CONDITIONS PRECEDENT
Section 4.01. First Loan. As conditions precedent to any
Lender's obligation to make the first Loan hereunder:
(1) The Companies shall have delivered, or
shall have caused to be delivered, to the Administrative
Agent, in form and substance satisfactory to the
Administrative Agent and its counsel, each of the following
(with sufficient copies for each of the Lenders):
(i) A duly executed original of
this Agreement;
(ii) A duly executed original of the
Security Agreements, of the Guaranties, of the
Custodian Agreement and of the Subordination
Agreement;
(iii) Duly executed originals of
each of the Notes;
(iv) (A) Duly executed copies of all
financing statements and other documents, instruments
and agreements, properly
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executed, deemed necessary or appropriate by the
Administrative Agent, in its reasonable discretion,
to obtain for the Administrative Agent on behalf of
the Lenders a perfected, first priority security
interest in and lien upon the Collateral, (B)
searches identifying all of the financing statements
on file with respect to each Company in all
jurisdictions in which the financing statements
referred to in subclause (A) of this clause (iv) will
be filed and (C) duly executed copies of all
financing termination statements (UCC-3) relating to
the termination of the First Union Facility and the
Prudential Facility;
(v) A Pledge Agreement, duly
executed by EGI and each Company together with (A)
the stock certificates representing (1) all of the
common stock of the Companies and Sterling, in the
case of EGI, and (2) all of the common stock of
EMC-TN in the case of HomeGold, (B) all inter-company
promissory notes and (C) other documents and
instruments required to be pledged and delivered to
the Administrative Agent by the terms of each such
Pledge Agreement, in each case accompanied by undated
stock powers or bond powers (as applicable) executed
in blank or other instruments of transfer;
(vi) Such credit applications,
financial statements, authorizations and such
information concerning the Companies taken as a whole
or any of them or the Guarantor or the business,
operations and conditions (financial and otherwise)
of the Companies taken as a whole or any of them or
the Guarantor as any Lender may reasonably request;
(vii) Certified copies of
resolutions of the Board of Directors of each of the
Companies and of the Guarantor Sterling, and EMC-TN
approving the execution and delivery of the Credit
Documents to which such Person is a party, the
performance of the Obligations and any other
obligations thereunder and the consummation of the
transactions contemplated thereby;
(viii) A certificate of the
Secretary or an Assistant Secretary of each of the
Companies and of the Guarantor Sterling, and EMC-TN
certifying the names and true signatures of the
officers of such Person authorized to execute and
deliver the Credit Documents to which such Person is
a party, and the other documents to be delivered by
each Company, the Guarantor, Sterling and EMC-TN to
which such Person is a party, including, without
limitation, each Loan Request;
(ix) A copy of the Articles of
Incorporation of each of the Companies and of the
Guarantor, Sterling and EMC-TN, certified by the
respective Secretary or an Assistant Secretary of
such Person as of the date of this Agreement as being
accurate and complete;
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(x) A copy of the Bylaws of each of
the Companies and of the Guarantor Sterling, and
EMC-TN, certified by the respective Secretary or an
Assistant Secretary of such Person as of the date of
this Agreement as being accurate and complete;
(xi) A certificate (A) of the
Secretary of State of the State of South Carolina,
certifying as of a recent date that HomeGold is in
good standing; (B) of the Secretary of State of the
State of South Carolina, certifying as of a recent
date that CII is in good standing; and (C) of the
Secretary of State of the State of South Carolina,
certifying as of a recent date that EGI is in good
standing;
(xii) An opinion of counsel for the
Companies, the Guarantor, Sterling and EMC-TN
substantially in the form of Exhibit K attached
hereto and covering such other matters as the
Administrative Agent may reasonably request;
(xiii) Evidence satisfactory to the
Administrative Agent that each of the Funding
Accounts and the Settlement Accounts has been opened;
(xiv) A duly completed Borrowing
Base Certificate dated as of the date of the first
Loan hereunder, and certified by the Administrative
Company on behalf of the Companies to be true in all
respects;
(xv) An Exception Report, dated the
Closing Date, from the Custodian duly completed
relating to the Eligible Mortgage Loans to be pledged
to the Administrative Agent, on behalf of the
Lenders, on the Closing Date;
(xvi) A certificate of insurance
evidencing insurance as is required by Section 6.08
hereof, naming the Administrative Agent as loss payee
or additional insured, as appropriate;
(xvii) A form of the Wet Closing
Agent Agreement certified by the Administrative
Company as a true and correct copy thereof shall be
delivered to and approved by the Administrative
Agent; and
(xviii) Such other approvals,
opinions or documents as the Administrative Agent may
reasonably request.
(2) All acts and conditions (including,
without limitation, the obtaining of any necessary regulatory
approvals and the making of any required filings, recordings
or registrations) required to be done and performed and to
have happened precedent to the execution, delivery and
performance of the Credit
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Documents and to constitute the same legal, valid and binding
obligations, enforceable in accordance with their respective
terms, shall have been done and performed and shall have
happened in due and strict compliance with all applicable
laws.
(3) All documentation, including, without
limitation, documentation for corporate and legal proceedings
in connection with the transactions contemplated by the Credit
Documents shall be satisfactory in form and substance to the
Administrative Agent and its counsel.
(4) All fees required to be paid on or
before the date hereof pursuant to Section 2.07(f) above and
any other accrued and unpaid fees or commissions due hereunder
or in connection herewith, and all expenses due to the
Administrative Agent which are required to be paid on or
before the date hereof, shall have been paid prior to (or will
be paid concurrently with) the making of the first Loan
hereunder.
(5) The Companies shall have delivered to
the Administrative Agent and each Lender a copy of each of
EGI's, HomeGold's and CII's audited consolidated and
consolidating financial statements for the fiscal year ended
December 31, 1997, bearing an unqualified opinion from KPMG
Peat Marwick.
(6) After giving effect to all Loans
outstanding on the Closing Date (including all Loans made on
the Closing Date), the Availability, calculated on a combined
basis for the Companies, shall not be less than $30,000,000
and the Companies shall deliver to the Administrative Agent a
certificate of the Designated Financial Officer of the
Administrative Company certifying that the Availability,
calculated on a combined basis for the Companies, is not less
than $30,000,000 and containing the calculation thereof.
Section 4.02. Ongoing Loans. As conditions precedent to any
Lender's obligation to make any Loan hereunder, including the first Loan, at and
as of the date of advance:
(1) There shall have been delivered to the
Administrative Agent a Loan Request therefor;
(2) The representations and warranties of
the Companies or any of them and the Guarantor contained in
the Credit Documents shall be accurate and complete in all
respects as if made on and as of the date of such advance;
(3) There shall not have occurred an Event
of Default or Potential Default, and the making of such Loan
will not create or give rise to an Event of Default or a
Potential Default;
(4) Following the funding of the requested
Loan (i) (A) the aggregate principal amount of Loans
outstanding will not exceed the lesser of
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(x) the Total Commitment and (y) the then current Borrowing
Base of the Company calculated on a combined basis, (B) in the
case of a request for "A" Loans, the aggregate principal
amount of "A" Loans outstanding will not exceed the then
current Borrowing Base of HomeGold, calculated on an
individual basis, or (C) in the case of a request for "B"
Loans, the aggregate principal amount of "B" Loans outstanding
will not exceed the then current Borrowing Base of CII,
calculated on an individual basis, and (ii) the aggregate
principal amount of Loans outstanding advanced by any Lender
will not exceed its Commitment;
(5) Since May 31, 1998, there shall not have
occurred any material adverse change in the financial
condition, assets, nature of assets, operations or prospects
of the Companies taken as a whole or any of them or the
Guarantor from that represented in this Agreement, the other
Credit Documents, or the documents or information furnished to
the Administrative Agent or the Lenders in connection herewith
or therewith, which would reasonably be expected to impair the
ability of the Companies to repay the Obligations or of the
Guarantor to perform under the Parent Guaranty; and
(6) The Required Documents for the Mortgage
Loan(s) being funded therewith shall have been received by the
Custodian (except as otherwise provided in Section 4.05(2)
hereof).
By making a Loan Request to the Administrative Agent hereunder, the Companies
shall be deemed to have represented and warranted the accuracy and completeness
of the statements set forth in subsections 4.02(2) through (6) above.
Section 4.03. Loan Requests. In connection with each request
for a Loan, the Companies shall deliver to the Administrative Agent a signed
Loan Request and a Mortgage Loan Schedule attached thereto. Prior to the funding
of a Loan, other than a Wet Loan the proceeds of which will be used to originate
or purchase a Mortgage Loan (and during the rescission period required by the
Truth in Lending Act relative to the applicable Mortgage Loan), the appropriate
Company or the Closing Agent on behalf of such Company shall deliver to the
Custodian all of the Required Documents as listed on Exhibit L attached hereto,
including, without limitation, each of the following:
(a) the original of each promissory note relating to
a Mortgage Loan duly executed at settlement, and duly endorsed by the
applicable Company in blank and containing any necessary intervening
endorsements on a Mortgage Loan purchased by the applicable Company;
(b) a copy of each mortgage or deed of trust relating
to a Mortgage Loan duly executed at settlement and in recordable form,
certified in writing by the Closing Agent as being a true and accurate
copy of the original mortgage or deed of trust;
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(c) original assignment of each such mortgage or deed
of trust, in recordable form and executed by the applicable Company in
blank, and with respect to a mortgage or deed of trust purchased by a
Company, the original recorded intervening assignment or a copy thereof
certified in writing by the applicable Company as being a true and
accurate copy of the original intervening assignment delivered for
recording; and
(d) with respect to each Mortgage Loan to be pledged
by a Company hereunder which was purchased by such Company, such
Company will deliver the documents required by this Section 4.03 at or
prior to the time of making the Loan.
Upon receipt thereof, the Custodian shall review all documents and instruments
to determine whether on their face only they are satisfactory pursuant to the
terms of the Custodian Agreement. Not later than 1:30 p.m., New York City time,
on the date of the proposed Loan, the Custodian shall deliver to the
Administrative Agent and the Companies an Exception Report and a trust receipt
with respect to the Required Documents for the Mortgage Loans to be pledged to
the Administrative Agent.
Section 4.04. Disbursing Loans. Upon satisfaction of all
conditions for the making of a Loan (other than a Wet Loan) under this Agreement
to fund Mortgage Loans and subject to the limitations contained herein, on the
date of the requested Loan, the Administrative Agent shall, subject to the next
sentence, wire transfer to the applicable Funding Account the requested Loan
amount which amount may be disbursed by the applicable Company directly to the
applicable Closing Agent. Upon the Administrative Agent's wire transfer of the
Loan proceeds into the applicable Funding Account, the applicable Loan shall be
deemed made.
Section 4.05. Wet Mortgage Loan Closings. (1) The Companies
may, subject to the Administrative Agent's approval, and in the Administrative
Agent's sole discretion, deliver Wet Mortgage Loans to be pledged under this
Agreement for inclusion in the Borrowing Base of the Companies calculated on a
combined basis up to the Wet Mortgage Loan Sublimit without the prior delivery
of all original Required Documents otherwise required by this Agreement. In
connection with the pledge of any such Wet Mortgage Loans, the Administrative
Company shall deliver to the Administrative Agent a Loan Request which specifies
that the requested Loan shall fund a Wet Mortgage Loan. Upon receipt of the
required Loan Request, the Administrative Agent shall include any such Wet
Mortgage Loan in the Borrowing Base on the applicable settlement date of such
Wet Mortgage Loan notwithstanding that such Wet Mortgage Loan may not yet have
been closed and funded for purposes of permitting the requested Wet Loan to be
made in respect thereof. If a Wet Mortgage Loan shall not be closed and funded
on or before the second Business Day immediately following the specified
settlement date, or shall be closed but subsequently rescinded pursuant to the
Truth in Lending Act, the Administrative Company shall immediately notify the
Administrative Agent and the Wet Closing Agent to such effect and such Wet
Mortgage Loan shall cease to be included in the Borrowing Base.
(2) In connection with each Wet Closing, each Company agrees
that it shall deliver all Required Documents relating to a Wet Mortgage Loan to
the Custodian not later than fourteen (14) days after the date of the making of
the Wet Loan in respect thereof (provided that on and after November 1, 1998
such fourteen (14) day period shall be reduced to ten (10) days.
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In the event that the Administrative Agent shall not have received all such
Required Documents complying in all respects with the requirements of this
Agreement within such fourteen (14) day period or ten (10) day period, as
applicable, such Wet Mortgage Loan shall cease to be included in the Borrowing
Base. Promptly after the receipt of the Required Documents, the Custodian shall
deliver an Exception Report and trust receipt with respect thereto.
(3) Upon satisfaction of all conditions for the making of a
Wet Loan under this Agreement and subject to the limitations contained herein,
Wet Loans shall be funded in the following manner as directed by the
Administrative Company in each Loan Request:
(a) Wire Transfers: On the date of the requested Wet
Loan, the Administrative Agent shall, subject to the next
sentence, wire transfer to the applicable Funding Account the
requested Loan amount which amount may be disbursed by the
applicable Company directly to the applicable Wet Closing
Agent. Upon the Administrative Agent's wire transfer of the
Loan proceeds into such Funding Account, the applicable Wet
Loan shall be deemed made, provided, however, that until the
applicable Wet Mortgage Loan is closed and funded, the Lenders
shall have a Lien on the Wet Loan proceeds as security for all
Obligations owed to the Lenders and the Closing Agent shall
hold such Wet Loan proceeds as agent for and on behalf of the
Administrative Agent and the Lenders in accordance with the
applicable Wet Closing Agent Agreement.
(b) Upon closing each Wet Mortgage Loan, the Wet
Closing Agent shall, unless advised by the Administrative
Agent to the contrary (which advice may be by telephone),
deliver the applicable Required Documents to the appropriate
Company for endorsement of the Note and transmittal to the
Custodian within the fourteen (14) day period or ten (10) day
period, as applicable, provided herein. While the Required
Documents are in such Company's possession, they shall be held
in trust for the benefit of the Administrative Agent and the
Lenders and such Company shall have no authority to transfer
same to any other Person other than the Custodian, or, if
required by the Administrative Agent, at the Administrative
Agent's direction.
(c) The Administrative Company will not request the
delivery of any wire transfer of Wet Loan proceeds to a
Closing Agent who has been disapproved by the Administrative
Agent. Each Company shall obtain at the Company's expense
"stand behind," indemnity or similar agreement, or "insured
closing letters," for all Closing Agents in form and substance
acceptable to the Administrative Agent from title insurance
companies acceptable to the Administrative Agent providing
such assurance to the Administrative Agent that the funds
delivered to a Closing Agent will be applied only for the
purposes intended in accordance with this Agreement and
providing such other assurances as the Administrative Agent
shall reasonably require. The delivery by a Company of any
such agreement or letter from an approved title insurance
company shall
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not affect the rights that the Lenders or any other Person
would otherwise have with respect to any Wet Closing Agent.
Section 4.06. Temporary Release of Collateral Documents:
Delivery of Collateral Documents. (1) Return to the Companies. The
Administrative Company may from time to time request in writing that the
Custodian return Required Documents to a Company on a temporary basis for the
purpose of correction or completion, in accordance with Section 5(a) of the
Custodian Agreement. The Administrative Agent will not permit the Custodian to
release to the Companies at any given time Required Documents related to
Mortgage Loans included in the Borrowing Base of the Companies, calculated on a
combined basis, with an aggregate Unit Collateral Value in excess of $2,000,000.
If a Company fails to return any Required Documents within ten days of the
delivery thereof to such Company, or if such Required Documents are not
corrected or completed so as to comply with the terms of this Agreement within
such ten day period, the Mortgage Loan to which such Required Documents relate
shall not be included in the Borrowing Base until the date, if any, on which
such Mortgage Loan is so returned and such Required Documents are so corrected
or completed.
(2) Delivery to any Investor or in connection with a
Mortgage-Backed Security. Provided that there is no Potential Default or Event
of Default hereunder, the Administrative Company may from time to time make
requests by written notice to the Custodian to deliver Required Documents
relating to a Mortgage Loan to an Approved Investor (or the custodian designated
by and acting as the bailee of such Approved Investor) for review prior to
purchase, or to a custodian or trustee in connection with the formation of a
mortgage pool supporting a Mortgage-Backed Security, in each case in accordance
with Section 5(b) of the Custodian Agreement. If any such investor or custodian
or trustee in connection with such mortgage pool formation fails to return any
Required Documents to the Custodian within twenty-one days of the delivery
thereof or on such earlier date requested by the Administrative Agent, the
Mortgage Loan to which such Required Documents relate shall not be included in
the Borrowing Base until the date, if any, on which such Required Documents are
returned.
Section 4.07. Deemed Representation. Each request for a Loan
and acceptance by a Company of any Loan proceeds shall constitute a
representation and warranty that the statements contained in Section 4.02 are
true and correct both on the date of such notice and as of the date of the
providing of such Loan.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Each of the Companies represents and warrants to the
Administrative Agent and each Lender that:
Section 5.01. Financial Condition. The consolidated and
consolidating financial statements of EGI and the consolidated and consolidating
financial statements of each of the Companies, dated the Statement Date and the
Interim Date, copies of which have been furnished
-24-
to the Administrative Agent, are complete and correct and have been prepared to
present fairly, in accordance with GAAP, the financial condition of EGI and its
Subsidiaries (including, without limitation, the Companies) and of each of the
Companies and its Subsidiaries at such dates and the results of the operations
and changes in financial position of EGI and its Subsidiaries (including,
without limitation, the Companies) and of each of the Companies and its
Subsidiaries for the fiscal periods then ended.
Section 5.02. No Change. There has been no material adverse
change in the business, operations, assets or financial or other condition of
the Companies taken as a whole, or any of them, the Guarantor or any of their
Subsidiaries from that shown on the consolidated financial statements dated as
of the Interim Date referred to in Section 5.01 above.
Section 5.03. Corporate Existence; Compliance with Law. Each
of the Companies: (1) is duly organized, validly existing and in good standing
as a corporation under the laws of the State of South Carolina, and is qualified
to do business in each jurisdiction where its ownership of property or conduct
of business requires such qualification and where failure to qualify could have
a material adverse effect on such Company or its property or business or on the
ability of such Company to pay or perform the Obligations, (2) has the corporate
power and authority and the legal right to own and operate its property and to
conduct business in the manner in which it does and proposes so to do, and (3)
is in compliance with all Requirements of Law and Contractual Obligations,
including, without limitation, the federal Consumer Credit Protection Act, the
federal Real Estate Settlement Procedures Act, the federal Equal Credit
Opportunity Act, the federal Truth-in-Lending Act, and the regulations
promulgated thereunder, the failure to comply with which could have a material
adverse effect on the business, operations, assets or financial or other
condition of such Company or the Companies taken as a whole or on the Collateral
or the Collateral Value of the Borrowing Base.
Section 5.04. Corporate Power; Authorization; Enforceable
Obligations. Each of the Companies has the corporate power and authority and the
legal right to execute, deliver and perform the Credit Documents and has taken
all necessary corporate action to authorize the execution, delivery and
performance of the Credit Documents. The Credit Documents have been duly
executed and delivered on behalf of each of the Companies and constitute legal,
valid and binding obligations of each of the Companies enforceable against each
of the Companies in accordance with their respective terms, subject to the
effect of applicable bankruptcy and other similar laws affecting the rights of
creditors generally and the effect of equitable principles whether applied in an
action at law or a suit in equity.
Section 5.05. No Legal Bar. The execution, delivery and
performance of the Credit Documents, the borrowing hereunder and the use of the
proceeds thereof, will not violate any Requirement of Law or any Contractual
Obligation of any Company the violation of which could have a material adverse
effect on the business, operations, assets or financial or other condition of
such Company or the Companies taken as a whole or on the Collateral or the
Collateral Value of the Borrowing Base or create or result in the creation of
any Lien (except the Lien created by the Security Agreement or the Pledge
Agreements) on any assets of any Company.
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Section 5.06. No Material Litigation. Except as disclosed on
Exhibit M hereto, no litigation, investigation or proceeding of or before any
court, arbitrator or Governmental Authority is pending or, to the knowledge of
any Company, threatened by or against any Company or against any of its
properties or revenues which is reasonably likely to have a material adverse
effect on the business, operations, property or financial or other condition of
such Company or the Companies taken as a whole or on the Collateral or the
Collateral Value of the Borrowing Base.
Section 5.07. Taxes. All tax returns that are required to be
filed by or on behalf of such Company have been filed and all taxes shown to be
due and payable on said returns or on any assessments made against such Company
or any of its property (other than taxes which are being contested in good faith
by appropriate proceedings and as to which such Company has established adequate
reserves in conformity with GAAP) have been paid and taxes which unknown to such
Company were not paid.
Section 5.08. Investment Company Act. None of the Companies is
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
Section 5.09. Federal Reserve Board Regulations. None of the
Companies is engaged, and neither of the Companies will engage, principally or
as one of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" within the respective
meanings of such terms under Regulation U. No part of the proceeds of any Loan
issued hereunder will be used, directly or indirectly, for "purchasing" or
"carrying" "margin stock" as so defined or for any purpose which violates, or
which would be inconsistent with, the provisions of the Regulations of the Board
of Governors of the Federal Reserve System.
Section 5.10. ERISA. Each of the Companies and each of its
ERISA Affiliates are in compliance in all respects with the requirements of
ERISA and no Reportable Event has occurred under any Plan maintained by any
Company or any of its ERISA Affiliates which is likely to result in the
termination of such Plan for purposes of Title IV of ERISA.
Section 5.11. Assets. Each of the Companies has good and
marketable title to all property and assets owned by such Company and reflected
in the financial statements referred to in Paragraph 5.01 above, except property
and assets sold or otherwise disposed of in the ordinary course of business
subsequent to the respective dates thereof. None of the Companies has any
outstanding Liens on any of its properties or assets and there are no security
agreements to which any Company is a party, nor any title retention agreements,
whether in the form of leases or otherwise, of any personal property except as
permitted under Section 7.01 below.
Section 5.12. Securities Acts. None of the Companies has
issued any unregistered securities in violation of the registration requirements
of the Securities Act of 1933, as amended, or any other law, and none of the
Companies is violating any rule, regulation or requirement under the Securities
Act of 1933, as amended, or the Securities and Exchange Act of
-26-
1934, as amended. None of the Companies is required to qualify an indenture
under the Trust Indenture Act of 1939, as amended, in connection with its
execution and delivery of the Note.
Section 5.13. Consents, etc. No consent, approval,
authorization of, or registration, declaration or filing with, any Governmental
Authority is required on the part of any Company in connection with the
execution and delivery of the Credit Documents (other than filings to perfect
the security interests granted by it) or the performance of or compliance with
the terms, provisions and conditions hereof or thereof.
Section 5.14. Ownership; Subsidiaries. As of the date hereof,
(A) one hundred percent (100%) of the outstanding capital stock of HomeGold and
CII is owned by EGI, and at least eighty percent (80%) of the outstanding
capital stock of Sterling is owned by EGI, (B) one hundred percent (100%) of the
outstanding capital stock of EMC-TN and EMHC II is owned by HomeGold, and (C)
one hundred percent (100%) of the outstanding capital stock of Emergent Residual
Holdings, Corp., a Delaware corporation, is owned by EMHC II. The Subsidiaries
of each Company are listed on Schedule V hereto. Neither Company is a partner in
any partnership, limited liability company or joint venture.
Section 5.15. Joint Benefit. Each of the Companies represents
and warrants to the Administrative Agent and the Lenders that the Companies
engage in complementary lines of business, and therefore each Loan made
hereunder to any of the Companies benefits all of the Companies and each Loan
made hereunder to all of the Companies benefits each of the Companies.
Section 5.16. Licenses. The Administrative Agent and Lenders
will not be required solely as a result of making the Loans pursuant to this
Agreement and taking a pledge of the Mortgage Loans to be licensed, registered
or approved or to obtain permits or otherwise qualify (i) to do business in any
state in which it currently is not so required or (ii) under any state consumer
lending, fair debt collection or other applicable state statute or regulation.
Section 5.17. Chief Executive Office. The chief executive
office of each Company on the Closing Date is located at 00 Xxxxx Xxxx Xxxxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000. The location where each Company
keeps its books and records, including all computer tapes and records relating
to the Collateral is its chief executive office.
Section 5.18. Material Contracts. Set forth in Schedule VI
hereto is a complete and accurate list as of the Closing Date of all Material
Contracts of each Company, showing the parties and subject matter thereof and
amendments and modifications thereto. Each such Material Contract (i) is in full
force and effect and is binding upon and enforceable against the applicable
Company and, to the best of such Company's knowledge, all other parties thereto
in accordance with its terms, (ii) has not been otherwise amended or modified in
any material respect, and (iii) there exists no default under any Material
Contract by such Company or, to the knowledge of such Company, any other party
thereto which has not been cured or waived.
Section 5.19. Permitted Warehouse Indebtedness. All Loans the
proceeds of which are used for the purposes described in clause 1 of Section
2.08 of this Agreement
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constitute Permitted Warehouse Indebtedness (as defined in the EGI Note
Indenture). As of the Closing Date, neither the Companies, EGI nor any
Subsidiary of such Persons have indebtedness permitted under paragraph (i) of
the definition of "Permitted Indebtedness" set forth in the EGI Note Indenture
other than the Obligations under this Agreement or any guarantees by EGI of the
obligations of its subsidiaries in the Small Business Loan Division.
Section 5.20. Full Disclosure. The representations or
warranties made by the Companies under this Agreement and the other Credit
Documents, taken as a whole, are not false or misleading in any material respect
and the Credit Documents, the schedules and exhibits thereto and the
certificates, reports, statements and other documents or information furnished
to the Administrative Agent or the Lenders in connection herewith or therewith
or with the consummation of the transactions contemplated hereby and thereby,
taken as a whole, do not contain any material misstatement of fact or omit to
state a material fact or any fact necessary to make the statements contained
herein or therein not misleading. To the extent the Companies furnish any
projections of the financial position and results of operations of the Companies
for, or as at the end of, certain future periods, such projections were believed
at the time furnished to be reasonable, have been or will have been prepared on
a reasonable basis and in good faith by the Companies, and have been or will be
based on assumptions believed by the Companies to be reasonable at the time made
and upon the best information then reasonably available to the Companies. There
is no fact materially adversely affecting the condition or operations, financial
or otherwise, or the business of a Company which has not been set forth in a
footnote included in the financial statements referred to in Sections 4.01(5)
and 5.01 hereof or a Schedule hereto.
Section 5.21. Solvency. After giving effect to the
transactions contemplated by this Agreement and the Credit Documents and each
Loan, each Company is, and the Companies taken as a whole are, Solvent.
Section 5.22. Operation of Business; Prior or Existing
Restrictions, Etc. The Companies possess all material licenses, qualifications
(including licenses and qualifications required in each state where each
property securing each Mortgage Loan acquired or originated by the Companies is
located), Governmental Authority approvals, permits, franchises, patents,
copyrights, trademarks and trade names, or rights thereto, to conduct the
Companies' business substantially as now conducted and as presently proposed to
be conducted and the Companies are not in violation of any valid rights of
others with respect to any of the foregoing. The Companies have disclosed all
written reports, actions and/or sanctions of any nature threatened, and all
reviews, investigations, examinations, audits, actions and/or sanctions that
have been undertaken and/or imposed as of the date of this Agreement and of
which it has knowledge, by any Governmental Authority with respect to either the
lending or related financial operations of the Companies. The Companies are not
operating under any type of agreement or order (including, without limitation, a
supervisory agreement, memorandum of understanding, cease and desist order,
capital directive, supervisory directive, or consent decree) with any
Governmental Authority, and the Companies are in compliance with any and all
capital, leverage or other financial standards and requirements imposed by any
applicable Governmental Authority.
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ARTICLE VI.
AFFIRMATIVE COVENANTS
Each of the Companies hereby covenants and agrees with the
Administrative Agent and each Lender that, as long as any Obligations remain
unpaid or any Lender has any obligation to make Loans hereunder, the Companies
shall:
Section 6.01. Financial Statements. Furnish or cause to be
furnished to the Lenders:
(1) Within ninety (90) days after the last
day of each fiscal year of the Guarantor and the Companies,
consolidated and consolidating statements of income (and, in
the case of the consolidated statement, cash flows) for each
Company and the Guarantor for such year and consolidated and
consolidating balance sheets for each Company and the
Guarantor as of the end of such year (with the foregoing
consolidating statements to separately display the income and
balance sheet for each Company and the Guarantor and its
consolidated Subsidiaries in a format reasonably acceptable to
the Administrative Agent), presented fairly in all material
respects in accordance with GAAP and accompanied by an
unqualified report of a firm of independent certified public
accountants of nationally recognized standing and including
therewith a copy of any management letter from such certified
public accountants;
(2) Each quarter (other than the fourth
quarter), as soon as available and in any event not later than
forty-five (45) days after the end of the reporting quarter,
(i) unaudited consolidated and consolidating statements of
income (and, in the case of the consolidated statement, cash
flows) for each Company and the Guarantor for such quarter,
and unaudited consolidated and consolidating balance sheets
for each Company and the Guarantor as of the end of such
quarter (with the foregoing consolidating statements to
separately display the income and balance sheet for each
Company and the Guarantor and its consolidated Subsidiaries in
a format reasonably acceptable to the Administrative Agent),
and (ii) a certificate of a Designated Financial Officer of
the Administrative Company and the Guarantor stating that such
financial statements are presented fairly in all material
respects and in accordance with GAAP, subject to year-end
audit adjustments, and further certifying that neither any of
the Companies nor the Guarantor nor any Affiliate thereof is
in default under the terms and conditions of this Agreement or
of any other agreement evidencing or securing any Indebtedness
of such entity;
(3) Within thirty (30) days after the last
day of each month, (i) unaudited consolidated and
consolidating statements of income (and, in the case of the
consolidated statement, cash flows) for each Company and the
Guarantor for such month, and unaudited consolidated and
consolidating balance sheets for each Company and the
Guarantor as of the end of such month (with the
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foregoing consolidating statements to separately display the
income and balance sheet for each Company and the Guarantor
and its consolidated Subsidiaries in a format reasonably
acceptable to the Administrative Agent), and (ii) a
certificate of a Designated Financial Officer of the
Administrative Company and the Guarantor stating that such
financial statements are presented fairly in all material
respects and in accordance with GAAP, subject to year-end
audit adjustments, and further certifying that neither any of
the Companies nor the Guarantor nor any Affiliate thereof is
in default under the terms and conditions of this Agreement or
of any other agreement evidencing or securing any Indebtedness
of such entity.
Section 6.02. Certificates; Reports; Other Information.
(1) Promptly furnish or cause to be
furnished to the Administrative Agent and each Lender such
additional financial and other information regarding the
Collateral, as any Lender or the Administrative Agent may from
time to time reasonably request.
(2) (i) Furnish or cause to be furnished to
the Administrative Agent, no less frequently than monthly,
within ten (10) days after the last day of each calendar month
unless otherwise requested in writing by the Administrative
Agent and more frequently at the request of the Administrative
Agent, a report for such month showing, for all Eligible
Mortgage Loans included in the Borrowing Base during such
month, (A) the current unpaid principal balance of such
Eligible Mortgage Loans, and (B) the payment status of such
Eligible Mortgage Loans, including information regarding
delinquencies of such Eligible Mortgage Loans as of the end of
such month, and (ii) deliver such other monthly reports as the
Administrative Agent may from to time reasonably request.
(3) As soon as possible and in any event
within thirty (30) days after any Reportable Event has
occurred with respect to any Plan or the PBGC or any Company
has instituted or will institute proceedings under Title IV of
ERISA to terminate any Plan, such Company will deliver to the
Administrative Agent a certificate of the chief financial
officer of such Company setting forth details as to such
Reportable Event or Plan termination and the action such
Company proposes to take with respect thereto.
(4) Promptly after the furnishing thereof,
copies of any statement or report furnished to any other
creditor of any Company or the Guarantor pursuant to the terms
of any indenture, loan or credit or similar agreement.
(5) Promptly after the sending or filing
thereof, copies of all financial statements and reports which
any Company and/or the Guarantor send to, or receive from, the
(i) Securities and Exchange Commission or (ii) any other
Governmental Authority in connection with any investigation of
any Company and/or the Guarantor which, if adversely
determined, could have a material
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adverse effect on the business, operations, assets or
financial or other condition of such Company or the Guarantor
or the Companies taken as a whole and, upon the request of the
Administrative Agent, copies of all consultants' reports,
investment bankers' reports, business plans and similar
documents.
Section 6.03. Payment of Indebtedness. Pay or otherwise
satisfy at or before maturity or before it becomes delinquent or accelerated, as
the case may be, all its Indebtedness (including taxes), except Indebtedness
being contested in good faith by appropriate proceedings which stay the
imposition of any Lien and for which provision is made to the satisfaction of
the Lenders and the Administrative Agent for the payment thereof in the event
any Company is found to be obligated to pay such Indebtedness and which
Indebtedness is thereupon promptly paid by such Company.
Section 6.04. Maintenance of Existence and Properties.
Maintain its corporate existence and obtain and maintain all rights, privileges,
licenses, approvals, franchises, properties and assets necessary or desirable in
the normal conduct of its business, including but not limited to all approvals
with respect to the Securities and Exchange Commission or the Securities
Commission of the State of South Carolina, and comply with all Contractual
Obligations and Requirements of Law (including, without limitation, any
Requirements of Law under or in connection with ERISA, the federal Consumer
Credit Protection Act, the federal Real Estate Settlement Procedures Act, the
federal Equal Credit Opportunity Act, the federal Truth-in-Lending Act, and any
regulations promulgated thereunder), except where the failure to so comply is
not likely to have a material adverse effect on the business, operations, assets
or financial or other condition of such Company or the Companies taken as a
whole or on the Collateral or the Collateral Value of the Borrowing Base.
Section 6.05. Inspection of Property, Books and Records;
Audits.
(1) Keep proper books of record and account
in which full, true and correct entries in conformity with
GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities;
and
(2) Permit: (i) representatives or agents of
any Lender or the Administrative Agent to (A) visit and
inspect any of its properties and examine and make abstracts
from any of its books and records (including without
limitation books and records relating to the Collateral) at
any reasonable time and as often as may reasonably be desired
by such Lender or the Administrative Agent (but, prior to the
occurrence of an Event of Default, only upon prior notice),
and (B) discuss the business, operations, properties and
financial and other condition of the Companies or any of them
with officers and employees of any Company, and with its
independent certified public accountants, and (ii)
representatives of the Administrative Agent or any Lender to
conduct periodic operational audits of the business and
operations of any Company, in the case of the Administrative
Agent, at such Company's expense; provided, that the results
of any such visit,
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inspection, examination, discussion or audit, to the extent
such results are proprietary and non-public, shall be
maintained by the Lenders and or the Administrative Agent in
confidentiality except as required by law or regulation or by
any governmental agency or regulatory body having authority
over any Lender or the Administrative Agent, or to the extent
such information may be communicated to any potential Lender,
assignee or participant hereunder or to the legal counsel or
auditors of any Lender or Administrative Agent.
Section 6.06. Notices. Promptly give written notice to the
Administrative Agent (which shall promptly transmit a copy of such notice to
each of the Lenders) of:
(1) The occurrence of any Potential Default
or Event of Default known to responsible management personnel
of any Company and the proposed method of cure thereof;
(2) Any litigation or proceeding affecting
any Company, the Companies taken as a whole, the Guarantor or
the Collateral which could have a material adverse effect on
the Collateral, the Collateral Value of the Borrowing Base or
the business, operations, property, or financial or other
condition of any Company, the Companies taken as a whole or
the Guarantor;
(3) A material adverse change known to
responsible management personnel of any Company or the
Guarantor in the business, operations, property or financial
or other condition of any Company or the Companies taken as a
whole;
(4) Any changes in the following senior
management positions of any Company or the Guarantor:
President, Chief Executive Officer, Chief Operating Officer or
Chief Financial Officer;
(5) Any default by any Company, EGI or any
of any Company's Affiliates under the terms and conditions of
any agreement evidencing or securing any Indebtedness of such
entity;
(6) Any casualty, damage or loss, whether or
not giving rise to a claim under any insurance policy of any
Company or the Guarantor, in an amount greater than
$5,000,000, together with copies of any document relating
thereto (including copies of any such claim) in possession or
control of such Company or the Guarantor or any agent of such
Company or the Guarantor;
(7) Any change in the chief executive office
or principal place of business of any Company or the
Guarantor; and
(8) The assertion of any Lien against the
Collateral not permitted by the terms of this Agreement or the
occurrence of any event that could have a material adverse
effect on the value or marketability of the Collateral
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or the validity, enforceability or priority of the Liens
created under this Agreement, such notice to be provided as
soon as possible and in any event within three Business Days
after such assertion.
Section 6.07. Credit Documents. Comply with and observe all
terms and conditions of the Credit Documents.
Section 6.08. Insurance. Obtain and maintain insurance with
responsible companies in such amounts and against such risks as are usually
carried by corporations engaged in similar businesses similarly situated,
including, without limitation, errors and omissions coverage in form and
substance acceptable to the Administrative Agent and naming the Administrative
Agent as loss payee thereunder, and will maintain an insurance policy containing
fidelity coverage naming the Administrative Agent as additional insured
thereunder, and furnish the Administrative Agent on request full information as
to all such insurance, and to provide within five (5) days after receipt,
certificates or other documents evidencing the renewal of each such policy.
Section 6.09. Borrowing Base Certificate. By 12:00 noon on
each Business Day, a Borrowing Base Certificate, current as of the prior
Business Day, signed by the Designated Financial Officer of each Company (or
such other person as such officer may designate in writing to the Administrative
Agent).
Section 6.10. Underwriting Standards. Originate and acquire
Mortgage Loans in accordance with the Companies' current underwriting standards
in the form attached hereto as Exhibit G and incorporated herein by this
reference.
Section 6.11. Borrowing Base. Maintain (i) all Loans of a
Company in compliance with the then current Borrowing Base of such Company,
calculated on an individual basis and (ii) all Loans in compliance with the then
current Borrowing Base of the Companies, calculated on a combined basis.
Section 6.12. Compliance With Custodian Agreement. With
respect to each Mortgage Loan pledged to the Administrative Agent, the Companies
shall comply with all of its obligations, including its document delivery
requirements set forth in the Custodian Agreement.
Section 6.13. Wet Closing Agents. Cause each Wet Closing Agent
to execute a Wet Closing Agent Agreement in which such Wet Closing Agent
acknowledges and agrees to act as the agent for the Administrative Agent and the
Lenders pursuant to Section 4.05 hereof in connection with the funding of each
Wet Mortgage Loan.
Section 6.14. Year 2000. Any reprogramming required to permit
the proper functioning, in and following the year 2000, of (A) the Companies'
and the Guarantor's computer systems and (B) equipment containing embedded
microchips (including systems and equipment supplied by others or with which
Companies' and the Guarantor's systems interface) and the testing of all such
systems and equipment, as so reprogrammed, will be completed by July 1, 1999.
The cost to the Companies and the Guarantor of such reprogramming and testing
and of
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the reasonably foreseeable consequences of year 2000 to the Companies and the
Guarantor (including, without limitation, reprogramming errors and the failure
of others' systems or equipment) will not result in an Event of Default or have
a material adverse effect on the business, operations, property or financial or
other condition of the Companies and the Guarantor. Except for such of the
reprogramming referred to in the preceding sentences of this Section 6.14 as may
be necessary, the computer and management information systems of the Companies
and the Guarantor are and, with ordinary course upgrading and maintenance, will
continue to be, sufficient to permit the Companies and the Guarantor to conduct
their business without a material adverse effect on the business, operations,
property or financial or other condition of the Companies and the Guarantor.
Section 6.15. Pledge of Mortgage Loans. Within two Business
Days after the origination or purchase of a Mortgage Loan by any Company, pledge
to the Administrative Agent and the Lenders in accordance with the terms and
provisions of this Agreement and the Custodian Agreement all such Mortgage
Loans; provided, that Wet Mortgage Loans shall be pledged to the Agent and the
Lenders in accordance with the terms and provisions of Section 4.05 hereof and
the Custodian Agreement.
Section 6.16. Adequate Capital. At all times during this
Agreement, each Company shall possess sufficient net capital and liquid assets
(or ability to access the same) to satisfy (i) the financial responsibility
requirements of any applicable federal or state regulations relating to its
mortgage lending business and (ii) its obligations as they become due in the
normal course of business.
Section 6.17. Additional Required Documents. Promptly deliver
to the Administrative Agent any Additional Required Documents requested by the
Administrative Agent for any Mortgage Loan included in the Borrowing Base at the
time of such request.
ARTICLE VII.
NEGATIVE COVENANTS
Each of the Companies hereby agrees that, as long as any
Obligations remain unpaid or any Lender has any obligation to make Loans
hereunder, the Companies shall not at any time, directly or indirectly:
Section 7.01. Liens. Create, incur, assume or suffer to exist,
any Lien upon the Collateral except as contemplated by the Security Agreement,
or create, incur, assume or suffer to exist any Lien upon any of the other
property and assets (including servicing rights) of any Company except:
(1) Liens for current taxes, assessments or
other governmental charges which are not delinquent or which
remain payable without penalty, or the validity of which are
contested in good faith by appropriate proceedings upon stay
of execution of the enforcement thereof, provided the
applicable Company shall
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have set aside on its books and shall maintain adequate
reserves for the payment of same in conformity with GAAP;
(2) Liens, deposits or pledges made to
secure statutory obligations, surety or appeal bonds, or bonds
for the release of attachments or for stay of execution, or to
secure the performance of bids, tenders, contracts (other than
for the payment of borrowed money), leases or for purposes of
like general nature in the ordinary course of the Companies'
business;
(3) Purchase money security interests for
property (except Mortgage Loans) hereafter acquired,
conditional sale agreements, or other title retention
agreements, with respect to property hereafter acquired;
provided, however, that no such security interest or agreement
shall affect any servicing rights or extend to any property
other than the property acquired;
(4) Liens in connection with securitization
of Mortgage Loans (other than Liens on Mortgage Loans which
are included in the Borrowing Base), of a nature customary and
usual for such Liens and such securitizations; and
(5) Liens in connection with Permitted
Secured Debt.
Section 7.02. Indebtedness. Create, incur, assume or suffer to
exist, or otherwise become or be liable in respect of any Indebtedness except:
(1) The Obligations;
(2) The CII Subordinated Debt;
(3) Permitted Secured Debt;
(4) Permitted Other Debt; and
(5) Inter-company Indebtedness permitted by
Section 7.07(C) owing to any Company by any other Company,
provided that (i) the repayment of such Indebtedness shall be
subordinated to the payment of the Obligations, pursuant to
the terms of and evidenced by one or more promissory notes,
substantially in the form of Exhibit O hereto and (ii) such
notes shall be pledged to the Administrative Agent for the
benefit of the Lenders.
Section 7.03. Consolidation and Merger; Change of Business.
Liquidate or dissolve or enter into any consolidation, merger, partnership,
joint venture, syndicate or other combination or make any change in the nature
of its business as a mortgage banker as currently conducted, or conduct any
business other than a mortgage banking business; provided, however, that the
foregoing restrictions will not be construed to prohibit (i) any Company from
entering into customary correspondent contracts and (ii) the liquidation,
dissolution, consolidation or merger of Sterling into any other Person.
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Section 7.04. Acquisitions. Without the prior consent of the
Majority Lenders, purchase or acquire or incur liability for the purchase or
acquisition of any or all of the assets or business of any Person, other than in
the normal course of business as currently conducted.
Section 7.05. Transfer of Stock. Permit the acquisition,
purchase, redemption, retirement, transfer or issuance of any shares of its
capital stock now or hereafter outstanding or suffer to exist any event which
would result in EGI owning less than one hundred percent (100%) of the
outstanding capital stock of HomeGold or CII.
Section 7.06. Subsidiaries. Without the prior consent of the
Majority Lenders, organize any Subsidiary other than Emergent Insurance Agency,
Inc., Emergent Mortgage Holdings Corporation, EMHC II, Emergent Residual Holding
Xxxxxxxxxxx, XXX-TN, State Mortgage Originators or SPEs; provided, however, that
CII, EMC-TN and Emergent Mortgage Holdings Corporation shall not be permitted to
organize any Subsidiary.
Section 7.07. Investments; Advances; Guaranties. Make or
commit to make any advance, loan or extension of credit (other than Mortgage
Loans made in the ordinary course of the Companies' business) or capital
contribution to, or purchase any stocks, bonds, notes, debentures or other
securities of, or make any other investment in, or guaranty the indebtedness or
other obligations of, any Person other than another Company; provided, however,
that (A) the Companies shall be permitted to make repayments to CII of CII
Subordinated Debt, subject, however, to the terms of the Subordination
Agreement; and (B) each of the Companies shall be permitted to (i) guaranty the
indebtedness of EGI in conjunction with the private offering of the EGI Notes
issued under the EGI Note Indenture, which Notes and guaranty may be reissued in
substantially identical form in connection with an exchange offer to be
registered with the Securities and Exchange Commission; (ii) make investments in
"strategic alliance mortgage bankers" of HomeGold, provided that at no time may
HomeGold (x) own more than fifteen percent (15%) of the outstanding capital
stock of any such "strategic alliance mortgage banker" or (y) invest more than
$1,000,000 in the aggregate in all "strategic alliance mortgage bankers"; (iii)
make advances to EGI in repayment for allowances made to each of the Companies
by EGI and in the form of reasonable corporate cost allocations; (iv) make
investments in any State Mortgage Originator in order to capitalize such State
Mortgage Originator as permitted in the definition of such term; and (v) make
investments in Emergent Insurance Agency, Inc. not to exceed at any time an
aggregate amount outstanding of $100,000; and (C) each Company shall be
permitted to make loans or advances to any other Company, provided that (i) the
repayment of all such loans and advances is subordinated to the payment of the
Obligations pursuant to the terms of and evidenced by one or more promissory
notes substantially in the form of Exhibit O hereto, and (ii) such notes shall
be pledged to the Administrative Agent for the benefit of the Lenders; provided
further, that, in the absence of an Event of Default, the limitations contained
in this Section 7.07 shall not apply to CII to the extent such limitations are
not permitted by the terms of the EGI Note Indenture.
Section 7.08. Sale of Assets. Sell, lease, assign, transfer or
otherwise dispose of any of the assets of any Company or its Subsidiaries (other
than obsolete or worn out property and other than the sale, transfer or other
disposition of the assets or capital stock of Sterling at
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fair market value), whether now owned or hereafter acquired, other than in the
ordinary course of business as currently conducted or as provided in Section
2.06(d) and at fair market value (it being expressly agreed and understood that
the sale or other disposition of Mortgage-Backed Securities and Mortgage Loans
with or without servicing released and of mortgage servicing rights is in the
ordinary course of business); provided, however, that, in the absence of an
Event of Default, the limitations contained in this Section 7.08 shall not apply
to CII to the extent such limitations are not permitted by the terms of the EGI
Note Indenture.
Section 7.09. Dividends. Without the prior consent of the
Majority Lenders, during any fiscal year, declare and pay any dividends, or
return any capital, to its shareholders or authorize or make any other
distribution, payment or delivery of property or cash to its shareholders as
such, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
for a consideration, any shares of any class of its capital stock now or
hereafter outstanding (or any option or warrants issued by it for or with
respect to its capital stock), or set aside any funds for any of the foregoing
purposes, in excess of fifty percent (50%) of the cumulative Net Income of any
Company and its consolidated Subsidiaries as determined for the most recent four
(4) consecutive completed fiscal quarters of the Companies, on a cumulative
rolling basis; provided, however, that no Company shall make any dividend or
distribution under this Section 7.09 if, at the time of or after giving effect
to such dividend or distribution, an Event of Default shall have occurred and be
continuing; provided, further, that in the absence of an Event of Default, the
limitations contained in this Section 7.09 shall not apply to CII to the extent
such limitations are not permitted by the terms of the EGI Note Indenture.
Section 7.10. Underwriting Standards. Without the prior
consent of the Majority Lenders, alter its current Mortgage Loan origination and
underwriting standards in any material manner from those disclosed to the
Lenders and attached hereto as Exhibit G.
Section 7.11. Margin Regulations. Use any part of the proceeds
of Loans (i) for the purpose of purchasing or carrying any margin stock within
the meaning of Regulations G, T, U or X of the Board of Governors of the Federal
Reserve System or (ii) to extend credit to any Person for the purpose of
purchasing or carrying any such margin stock.
Section 7.12. Year 2000 Compatibility. Each of the Companies
and the Guarantor shall take all action necessary to assure that the Companies'
and the Guarantor's computer-based systems are to operate and effectively
process data including data fields requiring references to dates on and after
January 1, 2000. At the request of the Administrative Agent, the Companies and
the Guarantor shall provide to the Administrative Agent written assurances and
other evidence acceptable to the Administrative Agent and the Lenders of the
Companies' and the Guarantor's compliance with this Section 7.12.
Section 7.13. Financial Hedge Instruments. Engage in or enter
into any derivatives or hedging transactions of any kind other than transactions
regarding the hedging of interest rate or exposure, provided that such
transactions are not entered into for speculative purposes.
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Section 7.14. Transactions With Affiliates. Enter into any
transaction, including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Affiliate (other than the
other Company, the Guarantor any Subsidiary of a Company or, in the case of CII,
any "Restricted Subsidiary" as defined in the EGI Note Indenture), except in the
ordinary course of and pursuant to the reasonable requirements of each Company's
business and upon fair and reasonable terms no less favorable to a Company than
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate.
Section 7.15. Subwarehousing. Purchase any Subwarehouse
Mortgage Loan or engage in any other Subwarehousing activity.
Section 7.16. Bulk Purchases of Mortgage Loans. Make a Bulk
Purchase of Mortgage Loans without the prior written consent of the
Administrative Agent.
Section 7.17. Availability. Fail to maintain at all times
Availability of at least $10,000,000.
Section 7.18. CII Investor Obligations. Permit the aggregate
outstanding principal amount of the CII Investor Obligations to be less than (i)
$125,000,000 from the Closing Date through and including December 30, 1998, (ii)
$115,000,000 from December 31, 1998 through and including December 30, 1999, and
(iii) $105,000,000 thereafter, provided that, if EGI receives cash net proceeds
of $50,000,000 or more from the sale or other disposition of the capital stock
or assets of its Small Business Loan Division, the amounts set forth in clauses
(i) through (iii) above shall be reduced on a dollar-for-dollar basis by the
amount of such cash net proceeds paid or otherwise distributed to or for the
benefit of CII and used to repay the principal amount of the CII Investor
Obligations.
ARTICLE VIII.
EVENTS OF DEFAULT
Section 8.01. Events of Default. Upon the occurrence of any of
the following events (an "Event of Default"):
(A) The Companies shall fail to pay (i) principal or
interest on any loan when due, or any amount payable pursuant to Section 2.06
above when due, or (ii) any fee payable pursuant to Sections 2.07(e) and (f)
above within three (3) Business Days after the due date for such fee; or
(B) Any representation or warranty made or deemed
made by any Company or the Guarantor in any Credit Document or in connection
with any Credit Document shall be inaccurate or incomplete in any material
respect on or as of the date made or deemed made; or
(C) Any Loan Party shall fail to maintain its
corporate existence or shall default in the observance or performance of any
covenant or agreement contained in
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Sections 6.03, 6.04, 6.05(2), 6.08, 6.09, 6.10, 6.11, 6.13, 6.15 or 6.16 or in
Article VII above or in any Security Agreement or Pledge Agreement; or
(D) Any Loan Party shall default in the performance
or observance of (i) the covenant contained in Section 6.01 and such default
shall continue unremedied for a period of 10 days, (ii) the covenants contained
in subparagraphs (1), (2), (3), (5), (6), and (8) of Section 6.06 and such
default shall continue unremedied for a period of 3 Business Days, (iii) the
covenant contained in Section 6.12 of this Agreement and such default shall
continue unremedied for 1 Business Day, or (iv) any other covenants contained in
this Agreement or any other Credit Document not described in paragraph (C) above
or clause (i) of this paragraph (D) and such default shall continue unremedied
for a period of 20 days; or
(E) Any Loan Party shall default in any payment of
principal of or interest or premium on any Indebtedness or in any payment of
principal or of interest or premium with respect to Indebtedness owed by such
Loan Party, or any other event shall occur, the effect of which is to permit
such Indebtedness to be declared or otherwise to become due prior to its stated
maturity; or
(F) (1) Any Loan Party shall commence any case,
proceeding or other action (i) relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to such Loan Party, or seeking to adjudicate such Loan Party a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to such Loan Party or any of its debts, or (ii) seeking appointment of a
receiver, trustee, custodian or other similar official for such Loan Party or
for all or any substantial part of the assets of such Loan Party or such Loan
Party shall make a general assignment for the benefit of its or their creditors;
or (2) there shall be commenced against any Loan Party any case, proceeding or
other action of a nature referred to in clause (1) above which (i) results in
the entry of an order for relief or any such adjudication or appointment, or
(ii) remains undismissed, undischarged or unbonded for a period of sixty (60)
days; or (3) there shall be commenced against any Loan Party case, proceeding or
other action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or substantially all of the assets of any of them
which results in the entry of an order for any such relief which shall not have
been vacated, discharged, stayed, satisfied or bonded pending appeal within
sixty (60) days from the entry thereof; or (4) any Loan Party shall take any
action in furtherance of, or indicating its or their consent to, approval of, or
acquiescence in (other than in connection with a final settlement), any of the
acts set forth in clauses (1), (2) or (3) above; or (5) any Loan Party shall
generally not, or shall be unable to, or shall admit in writing its or their
inability to pay its or their debts as they become due; or
(G) (1) Any Loan Party or any of its ERISA Affiliates
shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA
or Section 4975 of the Code) involving any Plan, (2) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall
exist with respect to any Plan, (3) a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer Plan,
which Reportable
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Event or institution of proceedings is, in the reasonable opinion of the
Administrative Agent, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, and, in the case of a Reportable Event, the
continuance of such Reportable Event unremedied for ten days after notice of
such Reportable Event pursuant to Section 4043(a), (c) or (d) of ERISA is given
or the continuance of such proceedings for ten days after commencement thereof,
as the case may be, (4) any Single Employer Plan shall terminate for purposes of
Title IV of ERISA, (5) any withdrawal liability to a Multiemployer Plan shall be
incurred by any Loan Party or any of its ERISA Affiliates or (6) any other event
or condition shall occur or exist; and in each case in clauses (1) through (6)
above, such event or condition, together with all other such events or
conditions, if any, is likely to subject any Loan Party or any of its respective
ERISA Affiliates to any tax, penalty or other liabilities in the aggregate
material in relation to the business, operations, property or financial or other
condition of any Loan Party or any of its ERISA Affiliates; or
(H) One or more judgments, orders or decrees shall be
entered against any Loan Party and either (i) enforcement proceedings shall have
been commenced by any creditor upon any such judgment, order or decree or (ii)
all such judgments, orders and decrees shall not have been vacated, discharged,
stayed, satisfied or bonded pending appeal within thirty (30) days from the
entry thereof; or
(I) The Guarantor shall fail to observe or perform
any term or provision of the Parent Guaranty or any covenant contained in the
Parent Guaranty is materially breached or the Guarantor shall attempt to rescind
or revoke the Parent Guaranty, with respect to future transactions or otherwise;
or
(J) Any Credit Document shall at any time and for any
reason cease to create a valid and perfected first priority Lien in the
Collateral (other than Collateral released pursuant to the terms of this
Agreement and the other Credit Documents and except as otherwise provided in
this Agreement and the other Credit Documents) or the validity or enforceability
of this Agreement or any Credit Document shall be contested by any Loan Party,
or any Loan Party shall deny it has any further liability or obligation under
this Agreement or any Credit Document to which it is a party; or
(K) The Custodian Agreement or any other Credit
Document shall for whatever reason be terminated or cease to be in full force
and effect other than with the consent of the Administrative Agent, or the
enforceability thereof shall be contested by a Company; or
(L) A default or event of default shall occur under
any credit or financing agreement or indenture to which EGI, any Company or any
other Subsidiary of EGI is a party (including without limitation the CII
Investor Obligations and the EGI Notes) and any applicable cure period provided
for in such credit or financing agreement shall have lapsed, (provided, however,
that notwithstanding the foregoing, the occurrence of a payment default under
any such credit or financing agreement shall constitute an automatic and
immediate Event of Default hereunder).
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Section 8.02. Remedies. If any Event of Default shall occur
and be continuing, the Administrative Agent may and, at the request of the
Majority Lenders, shall by notice to the Companies, (1) declare the Total
Commitment to be terminated, whereupon the same shall forthwith terminate; (2)
declare the Notes, all interest thereon, and all other amounts payable under
this Agreement, and any other Credit Documents to be forthwith due and payable,
whereupon the Notes, all such interest, and all such amounts due under this
Agreement, and under any other Credit Document shall become and be forthwith due
and payable, without presentment, demand, protest, or further notice of any
kind, all of which are hereby expressly waived by the Companies; and/or (3)
exercise any remedies provided in any of the Credit Documents at law or
otherwise, with respect to the Collateral and the Loans; provided, however, that
upon the occurrence of any Event of Default referred to in Section 8.01(F), the
Total Commitment shall automatically terminate and the Notes and any other
amounts payable under this Agreement or any of the other Credit Documents, and
all interest on any of the foregoing shall be forthwith due and payable without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by each Loan Party.
Section 8.03. The Administrative Agent May Perform. If the
Companies fail to perform any agreement contained in this Agreement, the
Administrative Agent may itself perform (but shall not be obligated to perform),
or cause performance of, such agreement, and the expenses of the Administrative
Agent incurred in connection therewith shall be payable by the Companies under
Section 10.06.
Section 8.04. The Administrative Agent's Duties. The powers
conferred on the Administrative Agent under this Agreement are solely to protect
its interest and the interests of the Lenders in the Collateral and shall not
impose any duty upon the Administrative Agent to exercise any such powers.
Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Administrative
Agent shall not have any duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
ARTICLE IX.
ADMINISTRATIVE AGENT
Section 9.01. Appointment. Each Lender (and each subsequent
holder of any Note by its acceptance thereof) hereby irrevocably appoints and
authorizes the Administrative Agent (i) to receive on behalf of each Lender any
payment of principal of or interest on the Notes outstanding hereunder and all
other amounts accrued hereunder for the account of the Lenders and paid to the
Administrative Agent, and, subject to Section 2.03 of this Agreement, to
distribute promptly to each Lender its Pro Rata Share of all payments so
received, (ii) to distribute to each Lender copies of all material notices and
agreements received by the Administrative Agent and not required to be delivered
to each Lender pursuant to the terms of this Agreement, provided that the
Administrative Agent shall not have any liability to the Lenders for the
Administrative Agent's inadvertent failure to distribute any such notice or
agreements to the Lenders, and (iii) subject to Section 9.03 of this Agreement,
to take such action
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as Administrative Agent deems appropriate on its behalf to administer the Loans,
and the Credit Documents and to exercise such other powers delegated to the
Administrative Agent by the terms hereof or the Credit Documents (including,
without limitation, the power to give or to refuse to give notices, waivers,
consents, approvals and instructions and the power to make or to refuse to make
determinations and calculations) together with such powers as are reasonably
incidental thereto to carry out the purposes hereof and thereof. As to any
matters not expressly provided for by this Agreement and the other Credit
Documents (including, without limitation, enforcement or collection of the
Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Majority Lenders, and such instructions of the
Majority Lenders shall be binding upon all Lenders and all holders of Notes;
provided, however, the Administrative Agent shall not be required to take any
action which, in the reasonable opinion of the Administrative Agent, exposes the
Administrative Agent to liability or which is contrary to this Agreement or any
Credit Document or applicable law.
Section 9.02. Nature of Duties. The Administrative Agent shall
have no duties or responsibilities except those expressly set forth in this
Agreement or in the Credit Documents. The duties of the Administrative Agent
shall be mechanical and administrative in nature. The Administrative Agent shall
not have by reason of this Agreement or any Credit Document a fiduciary
relationship in respect of any Lender. Nothing in this Agreement or any of the
Credit Documents, express or implied, is intended to or shall be construed to
impose upon the Administrative Agent any obligations in respect of this
Agreement or any of the Credit Documents except as expressly set forth herein or
therein. Each Lender shall make its own independent investigation of the
financial condition and affairs of the Companies in connection with the making
and the continuance of the Loans hereunder and shall make its own appraisal of
the creditworthiness of the Companies and the value of the Collateral, and the
Administrative Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before the
initial Loan hereunder or at any time or times thereafter, provided that, upon
the reasonable request of a Lender, the Administrative Agent shall provide to
such Lender any documents or reports delivered to the Administrative Agent by
the Companies pursuant to the terms of this Agreement or any Credit Document. If
the Administrative Agent seeks the consent or approval of the Majority Lenders
to the taking or refraining from taking any action hereunder, the Administrative
Agent shall send notice thereof to each Lender. The Administrative Agent shall
promptly notify each Lender any time that the Majority Lenders have instructed
the Administrative Agent to act or refrain from acting pursuant hereto.
Section 9.03. Rights, Exculpation, Etc. The Administrative
Agent and its directors, officers, Administrative Agents or employees shall not
be liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Credit Documents, except for their
own gross negligence or willful misconduct as determined by a final judgment of
a court of competent jurisdiction. Without limiting the generality of the
foregoing, the Administrative Agent (i) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives written notice of the
assignment or transfer thereof, pursuant to
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Section 10.13 hereof, signed by such payee and in form satisfactory to the
Administrative Agent; (ii) may consult with legal counsel (including, without
limitation, counsel to the Administrative Agent or counsel to the Companies),
independent public accountants, the Custodian, and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants, the
Custodian or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, certificates,
warranties or representations made in or in connection with this Agreement or
the other Credit Documents; (iv) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or the other Credit Documents on the part of any
Person, the existence or possible existence of any Default or Event of Default,
or to inspect the Collateral or other property (including, without limitation,
the books and records) of any Person; (v) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or the other Credit Documents or any
other instrument or document furnished pursuant hereto or thereto; and (vi)
shall not be deemed to have made any representation or warranty regarding the
existence, value or collectability of the Collateral, the existence, priority or
perfection of the Administrative Agent's Lien thereon, or the Borrowing Base or
any certificate prepared by the Companies or the Custodian in connection
therewith, nor shall the Administrative Agent be responsible or liable to the
Lenders for any failure to monitor or maintain the Borrowing Base or any portion
of the Collateral or the failure of the Custodian to perform its obligations
under the Custodian Agreement. The Administrative Agent shall not be liable for
any apportionment or distribution of payments made by it in good faith pursuant
to Section 2.07(c), and if any such apportionment or distribution is
subsequently determined to have been made in error the sole recourse of any
Lender to whom payment was due but not made, shall be to recover from other
Lenders any payment in excess of the amount which they are determined to be
entitled. The Administrative Agent may at any time request instructions from the
Lenders with respect to any actions or approvals which by the terms of this
Agreement or of any of the Credit Documents the Administrative Agent is
permitted or required to take or to grant, and if such instructions are promptly
requested, the Administrative Agent shall be absolutely entitled to refrain from
taking any action or to withhold any approval under any of the Credit Documents
until it shall have received such instructions from the Majority Lenders.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against the Administrative Agent as a result of the Administrative
Agent acting or refraining from acting under this Agreement, the Notes, or any
of the other Credit Documents in accordance with the instructions of the
Majority Lenders.
Section 9.04. Reliance. The Administrative Agent shall be
entitled to rely upon any written notices, statements, certificates, orders or
other documents or any telephone message believed by it in good faith to be
genuine and correct and to have been signed, sent or made by the proper Person,
and with respect to all matters pertaining to this Agreement or any of the
Credit Documents and its duties hereunder or thereunder, upon advice of counsel
selected by it.
Section 9.05. Indemnification. To the extent that the
Administrative Agent is not reimbursed and indemnified by the Companies, the
Lenders will reimburse and indemnify the Administrative Agent for and against
any and all liabilities, obligations, losses, damages,
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penalties, actions, judgments, suits, costs, expenses, advances or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Administrative Agent in any way relating to or arising out
of this Agreement or any of the Credit Documents or any action taken or omitted
by the Administrative Agent under this Agreement or any of the Credit Documents,
in proportion to each Lender's Pro Rata Share, including, without limitation,
advances and disbursements made pursuant to Section 9.08; provided, however,
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements for which there has been a final judicial determination that
such resulted from the Administrative Agent's gross negligence or willful
misconduct. The obligations of the Lenders under this Section 9.05 shall survive
the payment in full of the Loans and the termination of this Agreement.
Section 9.06. CIT Individually. With respect to its Pro Rata
Share of the Total Commitment hereunder, the Loans made by it and the Note
issued to or held by it, CIT shall have and may exercise the same rights and
powers hereunder and is subject to the same obligations and liabilities as and
to the extent set forth herein for any other Lender or holder of a Note. The
terms "Lenders" or "Majority Lenders" or any similar terms shall, unless the
context clearly otherwise indicates, include CIT in its individual capacity as a
Lender or one of the Majority Lenders. CIT and its Affiliates may accept
deposits from, lend money to, and generally engage in any kind of banking, trust
or other business with the Companies or any of their Subsidiaries as if it were
not acting as Administrative Agent pursuant hereto without any duty to account
to the Lenders.
Section 9.07. Successor Administrative Agent.
(a) The Administrative Agent may resign from the
performance of all its functions and duties hereunder and under the other Credit
Documents at any time by giving at least thirty (30) Business Days' prior
written notice to the Companies and each Lender. Such resignation shall take
effect upon the acceptance by a successor Administrative Agent of appointment
pursuant to clauses (b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the Majority
Lenders shall appoint a successor Administrative Agent who, in the absence of a
continuing Event of Default, shall be reasonably satisfactory to the Companies.
Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Agreement
and the other Credit Documents. After any Administrative Agent's resignation
hereunder as the Administrative Agent, the provisions of this Article IX shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement and the other Credit Documents.
(c) If a successor Administrative Agent shall not
have been so appointed within said thirty (30) Business Day period, the retiring
Administrative Agent, with
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the consent of the Companies if an Event of Default is not continuing, shall
then appoint a successor Administrative Agent who shall serve as Administrative
Agent until such time, if any, as the Majority Lenders, with the consent of the
Companies, if an Event of Default is not continuing, appoint a successor
Administrative Agent as provided above.
Section 9.08. Collateral Matters.
(a) The Administrative Agent may from time to time,
during the occurrence and continuance of an Event of Default, make such
disbursements and advances ("Agent Advances") which the Administrative Agent, in
its sole discretion, deems necessary or desirable to preserve or protect the
Collateral or any portion thereof, to enhance the likelihood or maximize the
amount of repayment by the Companies of the Loans and other Obligations or to
pay any other amount chargeable to the Companies pursuant to the terms of this
Agreement, including, without limitation, costs, fees and expenses as described
in Section 10.06. The Agent Advances shall be repayable on demand and be secured
by the Collateral. The Agent Advances shall not constitute Loans but shall
otherwise constitute Obligations hereunder. The Administrative Agent shall
notify each Lender and the Companies in writing of each such Administrative
Agent Advance, which notice shall include a description of the purpose of such
Administrative Agent Advance. Without limitation to its obligations pursuant to
Section 9.05, each Lender agrees that it shall make available to the
Administrative Agent, upon the Administrative Agent's demand, in Dollars in
immediately available funds, the amount equal to such Lender's Pro Rata Share of
each such Administrative Agent Advance. If such funds are not made available to
the Administrative Agent by such Lender the Administrative Agent shall be
entitled to recover such funds, on demand from such Lender together with
interest thereon, for each day from the date such payment was due until the date
such amount is paid to the Administrative Agent, at the Fed Funds Rate for three
Business Days and thereafter at the Prime Rate.
(b) The Lenders hereby irrevocably authorize the
Administrative Agent, at its option and in its discretion, to release any Lien
granted to or held by the Administrative Agent upon any Collateral upon
termination of the Total Commitment and payment and satisfaction of all Loans,
and all other Obligations which have matured and which the Administrative Agent
has been notified in writing are then due and payable; or constituting property
being sold or disposed of in the ordinary course of the Companies' business and
in compliance with the terms of this Agreement and the other Credit Documents;
or constituting property in which the Companies owned no interest at the time
the Lien was granted or at any time thereafter; or if approved, authorized or
ratified in writing by the Lenders. Upon request by the Administrative Agent at
any time, the Lenders will confirm in writing the Administrative Agent's
authority to release particular types or items of Collateral pursuant to this
Section 9.08(b).
(c) Without in any manner limiting the Administrative
Agent's authority to act without any specific or further authorization or
consent by the Lenders (as set forth in Section 9.08(b)), each Lender agrees to
confirm in writing, upon request by the Administrative Agent, the authority to
release Collateral conferred upon the Administrative
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Agent under Section 9.08(b). Upon receipt by the Administrative Agent of
confirmation from the Lenders of its authority to release any particular item or
types of Collateral, and upon prior written request by the Companies, the
Administrative Agent shall (and is hereby irrevocably authorized by the Lenders
to) execute such documents as may be necessary to evidence the release of the
Liens granted to the Administrative Agent for the benefit of the Lenders upon
such Collateral; provided, however, that (i) the Administrative Agent shall not
be required to execute any such document on terms which, in the Administrative
Agent's opinion, would expose the Administrative Agent to liability or create
any obligations or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Lien upon (or obligations of
the Companies in respect of) all interests in the Collateral retained by the
Companies.
(d) The Administrative Agent shall have no obligation
whatsoever to any Lenders to assure that the Collateral exists or is owned by
the Companies or is cared for, protected or insured or has been encumbered or
that the Lien granted to the Administrative Agent pursuant to this Agreement has
been properly or sufficiently or lawfully created, perfected, protected or
enforced or is entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to the Administrative Agent in this Section 9.08 or in any of the
Credit Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, the Administrative
Agent may act in any manner it may deem appropriate, in its sole discretion,
given the Administrative Agent's own interest in the Collateral as one of the
Lenders and that the Administrative Agent shall have no duty or liability
whatsoever to any other Lender.
ARTICLE X.
MISCELLANEOUS
Section 10.01. Holidays. Except as otherwise provided herein,
whenever any payment or action to be made or taken hereunder or under the Notes
shall be stated to be due on a day which is not a Business Day, such payment or
action shall be made or taken on the next following Business Day and such
extension of time shall be included in computing interest or fees, if any, in
connection with such payment or action.
Section 10.02. Records. The unpaid principal amount of the
Notes, the unpaid interest accrued thereon, the interest rate or rates
applicable to such unpaid principal amount, the duration of such applicability,
the Total Commitment, and the accrued and unpaid fees set forth in the Fee
Letter and Unused Line Fee shall at all times be ascertained from the records of
the Administrative Agent, which shall be conclusive and binding absent manifest
error.
Section 10.03. Amendments and Waivers. (a) No amendment or
modification of any provision of this Agreement or of any of the Notes or of any
other Credit Document shall be effective without the written agreement of the
Majority Lenders and the Companies and no termination or waiver of any provision
of this Agreement or of any of the Notes, or consent to
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any departure by the Companies therefrom, shall in any event be effective
without the written concurrence of Majority Lenders, which Majority Lenders
shall have the right to grant or withhold at their sole discretion; except that
any amendment, modification, or waiver (i) of any provision of Article II which
amendment, modification or waiver increases the Total Commitment of any Lender,
reduces the principal of, or interest on, the Loans or the amounts payable to
any Lender, reduces the amount of any fee payable for the account of any Lender,
or postpones or extends any date fixed for any payment of principal of, or
interest or fees on, the Loans payable to any Lender, (ii) that increases the
aggregate amount of the Total Commitment except as provided in Section 2.13 of
this Agreement, (iii) of the definitions of "Availability", "Maturity Date",
"Majority Lenders" or "Pro Rata Share", (iv) of the definitions of "Eligible
Mortgage Loan", "Borrowing Base", "Collateral Value of the Borrowing Base", or
"Unit Collateral Value", or if the effect of such amendment, modification or
waiver is to increase the availability of the Companies under the Borrowing
Base, (v) of any provision of this Agreement or any Credit Document that would
release all or a substantial portion of Collateral or the Guarantor (except as
set forth in Section 10.08 hereof or except as otherwise permitted in a Credit
Document) or (vi) of the provisions contained in this Section 10.03, shall be
effective only if evidenced by a writing signed by or on behalf of (A) any
Lender affected thereby in the case of the amendments, modifications or waivers
described in clause (i) above or (B) all Lenders in the case of the amendments,
modifications or waivers described in clauses (ii) through (vi) above. No
amendment, modification, termination, or waiver of any provision of Article X or
any other provision referring to the Administrative Agent shall be effective
without the written concurrence of the Administrative Agent. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on the Companies in any
case shall entitle the Companies to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, waiver or consent
effected in accordance with this Section 10.03 shall be binding on each Lender,
each future Lender, and, if signed by the Companies, on the Companies.
(b) Notwithstanding anything to the contrary
contained in subsection 10.03(a), in the event that the Companies requests that
this Agreement or any other Credit Document be amended or otherwise modified in
a manner which would require the unanimous consent of all of the Lenders and
such amendment or other modification is agreed to by the Majority Lenders, then,
with the consent of the Companies and the Majority Lenders, the Companies and
the Majority Lenders may amend this Agreement without the consent of the Lender
or Lenders which did not agree to such amendment or other modification
(collectively the "Minority Lenders") to provide for (i) the termination of the
Commitment of each of the Minority Lenders, (ii) the addition to this Agreement
of one or more other Lenders, or an increase in the Commitment of one or more of
the Majority Lenders, so that the Total Commitment after giving effect to such
amendment shall be in the same aggregate amount as the Total Commitment
immediately before giving effect to such amendment, (iii) if any Loans are
outstanding at the time of such amendment, the making of such additional Loans
by such new Lenders or Majority Lenders, as the case may be, as may be necessary
to repay in full the outstanding Loans of the Minority Lenders immediately
before giving effect to such amendment and (iv) the payment of all interest,
fees and other Obligations payable or accrued in favor of the
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Minority Lenders and such other modifications to this Agreement as the Companies
and the Majority Lenders may determine to be appropriate.
Section 10.04. No Implied Waiver; Cumulative Remedies. No
course of dealing and no delay or failure of the Lenders or the Administrative
Agent in exercising any right, power or privilege under this Agreement, the
Notes or any other Credit Document shall affect any other or future exercise
thereof or exercise of any other right, power or privilege; nor shall any single
or partial exercise of any such right, power or privilege or any abandonment or
discontinuance of steps to enforce such a right, power or privilege preclude any
further exercise thereof or of any other right, power or privilege. The rights
and remedies of the Lenders or the Administrative Agent under this Agreement,
the Notes and the other Credit Documents are cumulative and not exclusive of any
rights or remedies which the Lenders or the Administrative Agent have thereunder
or at law or in equity or otherwise. The Lenders or the Administrative Agent may
exercise their rights and remedies against the Companies and the Collateral as
the Lenders and the Administrative Agent may elect, and regardless of the
existence or adequacy of any other right or remedy.
Section 10.05. Notices.
(a) All notices, requests, demands, directions and
other communications (collectively "Notices") under the provisions of this
Agreement or the Notes shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied, or delivered
and shall be effective (i) if mailed, three days after being deposited in the
mails, (ii) if telecopied, when sent, confirmation received and (iii) if
delivered, upon delivery. All notices shall be sent to the applicable party at
the address stated on the applicable signature page hereof or in accordance with
the last unrevoked written direction from such party to the other parties
hereto.
(b) The Lenders and the Administrative Agent may
rely, and shall be fully protected in relying, on any notice purportedly made by
or on behalf of the Companies and the Lenders and the Administrative Agent shall
have no duty to verify the identity or authority of any Person giving such
notice. The preceding sentence shall apply to all notices whether or not made in
a manner authorized or required by this Agreement or any other Credit Document.
Section 10.06. Expenses; Taxes; Attorneys' Fees;
Indemnification. The Companies jointly and severally agree to pay or cause to be
paid, on demand, and to save the Administrative Agent (and, in the case of
clauses (c) through (m) below, the Lenders) harmless against liability for the
payment of, all reasonable out-of-pocket expenses, regardless of whether the
transactions contemplated hereby are consummated, including but not limited to
reasonable fees and expenses of counsel for the Administrative Agent (and, in
the case of clauses (c) through (m) below, the Lenders), accounting, due
diligence, periodic field audits, appraisals, lien, judgment and title searches,
filing fees, investigations, monitoring of assets, syndication, miscellaneous
disbursements, examination, travel, lodging and meals, incurred by the
Administrative Agent (and, in the case of clauses (c) through (m) below, the
Lenders) from time to time arising from or relating to: (a) the negotiation,
preparation, execution, delivery,
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performance and administration of this Agreement and the other Credit Documents,
(b) any amendments, waivers or consents to this Agreement or the other Credit
Documents whether or not such documents become effective or are given, (c) the
preservation and protection of any of the Administrative Agent's and the
Lenders' rights under this Agreement or the other Credit Documents, (d) the
defense of any claim or action asserted or brought against the Administrative
Agent or the Lenders by any Person that arises from or relates to this
Agreement, any other Credit Document, the Administrative Agent's or the Lenders'
claims against a Company, or any and all matters in connection therewith, (e)
the commencement or defense of, or intervention in, any court proceeding arising
from or related to this Agreement or any other Credit Document, provided that
this clause (e) shall apply to all Lenders only in connection with any defense
of any court proceedings or in all instances during a continuing Event of
Default; (f) the filing of any petition, complaint, answer, motion or other
pleading by the Administrative Agent or the Lenders, or the taking of any action
in respect of the Collateral or other security, in connection with this
Agreement or any other Credit Document, (g) the protection, collection, lease,
sale, taking possession of or liquidation of, any Collateral or other security
in connection with this Agreement or any other Credit Document, (h) any attempt
to enforce any Lien or security interest in any Collateral or other security in
connection with this Agreement or any other Credit Document, (i) any attempt to
collect from a Company, (j) the receipt of any advice with respect to any of the
foregoing, provided that this clause (j) shall apply to all Lenders only with
respect to the matters described in clauses (c) through (i) and clauses (k)
through (m) of this Section 10.06, (k) all environmental liabilities and costs
arising from or in connection with the past, present or future operations of the
Companies or any of its Subsidiaries involving any damage to real or personal
property or natural resources or harm or injury alleged to have resulted from
any Environmental Discharge on, upon or into such property, (l) any costs or
liabilities incurred in connection with the investigation, removal, cleanup
and/or remediation of any Hazardous Materials present or arising out of the
operations of any facility of the Companies or any of its Subsidiaries, or (m)
any costs or liabilities incurred in connection with any Environmental Lien.
Without limitation of the foregoing or any other provision of any Credit
Document: (x) the Companies jointly and severally agree to pay all stamp,
document, transfer, recording or filing taxes or fees (including, without
limitation, mortgage recording taxes) and similar impositions now or hereafter
determined by the Administrative Agent or any of the Lenders to be payable in
connection with this Agreement or any other Credit Document, and the Companies
jointly and severally agree to save the Administrative Agent and the Lenders
harmless from and against any and all present or future claims, liabilities or
losses with respect to or resulting from any omission to pay or delay in paying
any such taxes, fees or impositions, and (y) if a Company fails to perform any
covenant or agreement contained herein or in any other Credit Document, the
Administrative Agent may itself perform or cause performance of such covenant or
agreement, and the expenses of the Administrative Agent incurred in connection
therewith shall be reimbursed on demand by the Companies. The Companies jointly
and severally agree to indemnify and defend the Administrative Agent and the
Lenders and their directors, officers, Administrative Agents, employees and
affiliates (collectively, the "Indemnified Parties") from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages, costs or
expenses of any nature whatsoever (including reasonable attorneys' fees and
amounts paid in settlement) incurred by, imposed upon or asserted against any of
them arising out of or by reason of any investigation, litigation or other
proceeding or claim brought or threatened relating to, or
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otherwise arising out of or relating to, the execution of this Agreement or any
other Credit Document, the transactions contemplated hereby or thereby or any
Loan or proposed Loan hereunder (including, but without limitation, any use made
or proposed to be made by a Company of the proceeds of any thereof, or the
delivery or use or transfer of or the payment or failure to pay under any Loan)
but excluding any such losses, liabilities, claims, damages, costs or expenses
to the extent finally judicially determined to have resulted from the gross
negligence or willful misconduct of the Indemnified Party.
Section 10.07. Application. Except to the extent, if any,
expressly set forth in this Agreement or in the Credit Documents, the
Administrative Agent and the Lenders shall have the right to apply any payment
received or applied by it in connection with the Obligations to such of the
Obligations then due and payable as it may elect.
Section 10.08. Severability. The provisions of this Agreement
are intended to be severable. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
Section 10.09. Governing Law. This Agreement and the Notes
shall be deemed to be contracts under the laws of the State of New York, without
regard to choice of law principles, and for all purposes shall be governed by
and construed and enforced in accordance with the laws of said State.
Section 10.10. Prior Understandings. This Agreement supersedes
all prior understandings and agreements, whether written or oral, among the
parties hereto relating to the transactions provided for herein other than the
Fee Letter.
Section 10.11. Duration; Survival. All representations and
warranties of the Companies contained herein or made in connection herewith
shall survive the making of the Loans and shall not be waived by the execution
and delivery of this Agreement, the Notes or any other Credit Document, any
investigation by or knowledge of the Administrative Agent or the Lenders, the
making of any Loan hereunder, or any other event whatsoever. All covenants and
agreements of the Companies contained herein shall continue in full force and
effect from and after the date hereof so long as the Companies may borrow
hereunder and until the Obligations have been paid in full. Without limitation,
it is understood that all obligations of the Companies to make payments to or
indemnify the Administrative Agent and the Lenders (including, without
limitation, obligations arising under Section 10.06 hereof) shall survive the
payment in full of the Notes and of all other obligations of the Companies
thereunder and hereunder, termination of this Agreement and all other events
whatsoever and whether or not any Loans are made hereunder.
Section 10.12. Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
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Section 10.13. Assignments; Participations. (a) Each Lender
may with the written consent of the Administrative Agent and, in the absence of
a continuing Event of Default, the Companies, which consent shall not be
unreasonably withheld, assign to one or more commercial banks or other financial
institutions a portion of its rights and obligations under this Agreement
(including, without limitation, a portion of its Commitment and the Loans owing
to it) and the other Credit Documents; provided, however, that (i) each such
assignment shall be in a principal amount of not less than $5,000,000 (or the
remainder of such Lender's Commitment), (ii) the parties to each such assignment
shall execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register (as hereinafter defined), an Assignment and
Acceptance, and (iii) after giving effect to such assignment, CIT's Commitment
shall be at least equal to the lesser of (1) $20,000,000 and (2) an amount equal
to 10% of the aggregate amount of the Total Commitment. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (A) the assignee thereunder shall be a party
hereto and to the other Credit Documents and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and thereunder
and (B) the assigning Lender shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement.
(b) By executing and delivering an Assignment and
Acceptance, the assigning Lender and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Credit Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Credit Document furnished pursuant hereto; (ii) the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of a Company or any of its Subsidiaries or the performance
or observance by a Company of any of its obligations under this Agreement or any
other Credit Document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement and the other Credit Documents,
together with such other documents and information it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon the
Assigning Lender or any Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Credit Documents;
(v) such assignee appoints and authorizes the Administrative Agent to take such
action as Administrative Agent on its behalf and to exercise such powers under
this Agreement and the other Credit Documents as are delegated to the
Administrative Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement and the other Credit Documents are required to be performed by
it as a Lender.
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(c) The Administrative Agent shall maintain at its
address referred to on the signature page hereto, a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Commitment of, and principal
amount of the Loans owing to each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Companies, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Companies and any Lender at any reasonable time and from time
to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee, together with the Note subject
to such assignment, the Administrative Agent shall, if the Administrative Agent
and, if applicable, the Companies consent to such assignment and if such
Assignment and Acceptance has been completed (i) accept such Assignment and
Acceptance, (ii) give prompt notice thereof to the Companies unless the
Companies have consented to such assignment, (iii) record the information
contained therein in the Register and (iv) prepare and distribute to each Lender
and the Companies a revised Schedule I hereto after giving effect to such
assignment, which revised Schedule I shall replace the prior Schedule I and
become part of this Agreement. Within five Business Days after its consent to
such assignment or its receipt of notice thereof from the Administrative Agent,
as the case may be, the Companies, at their own expense, shall execute and
deliver to the Administrative Agent in exchange for the surrendered Note a new
Note to the order of such assignee Lender in an aggregate principal amount equal
to the Commitment assumed by it pursuant to such Assignment and Acceptance, and
if the assigning Lender has retained any Commitment hereunder, a new Note to the
order of the assigning Lender in an aggregate principal amount equal to the
Commitment retained by it hereunder, in each case prepared by the Administrative
Agent. Such new Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note, shall be dated the date of
the Administrative Agent's acceptance of such Assignment and Acceptance and
shall otherwise be in substantially the form of Exhibit F hereto.
(e) Each Lender may sell participations to one or
more banks or other entities in or to all or a portion of its rights and
obligations under this Agreement and the other Credit Documents (including,
without limitation, all or a portion of its Commitment and the Loans owing to
it); provided, that (i) such Lender's obligations under this Agreement
(including, without limitation, its Commitment hereunder) and the other Loan
Documents shall remain unchanged; (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
and the Companies, the Administrative Agent and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and the other Credit Documents; and
(iii) a participant shall not be entitled to require such Lender to take or omit
to take any action hereunder except (A) action directly effecting an extension
of the maturity dates or decrease in the principal amount of the Loans or
Obligations, or (B) action directly effecting an extension of the due dates or a
decrease in the rate of interest payable on the Loans or the fees payable under
this Agreement, or (C) actions directly effecting a release of all or a
substantial portion of the
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Collateral or any Guarantor (except as set forth in Section 9.08 of this
Agreement or any Credit Document).
(f) Notwithstanding the foregoing provisions of this
Section 10.13, each Lender may at any time sell, assign, transfer, or negotiate
all or any part of its rights and obligations under this Agreement and the
Credit Documents to any Affiliate of such Lender.
Section 10.14. Successors and Assigns. This Agreement and the
other Credit Documents shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns except that the
Companies may not assign or transfer any of its rights hereunder or thereunder
without the prior written consent of all of the Lenders.
Section 10.15. Confidentiality. Upon delivering to any Lender
or the Administrative Agent, or permitting any Lender or the Administrative
Agent to inspect, any written information pursuant to this Agreement or the
other Credit Documents, the Companies is delivering or making available such
information to the Lenders or the Administrative Agent with the understanding
that each Lender and the Administrative Agent shall treat such information as
confidential to the extent such information is conspicuously marked
confidential. Each Lender and the Administrative Agent agrees to hold such
information in confidence from the date of disclosure thereof. Subject to the
other provisions of this Section 10.15, each Lender and the Administrative Agent
may disclose confidential information to its officers, directors, employees,
attorneys, accountants or other professionals engaged by any Lender or the
Administrative Agent only after determining that such third party has been
instructed to hold such information in confidence to the same extent as if it
were a Lender. Notwithstanding the foregoing, the provisions of this Section
10.15 shall not apply to information within any one of the following categories
or any combination thereof: (i) information the substance of which, at the time
of disclosure by any Lender or the Administrative Agent, has been disclosed to
or is known to any creditor of a Company (other than information as to which
such creditor is then under an obligation of nondisclosure), or any Person other
than (A) a director, officer, employee or Administrative Agent of any Company or
a professional engaged by a Company or (B) a Person who is then under an
obligation of nondisclosure (otherwise than as a consequence of a wrongful act
of any Lender or the Administrative Agent), (ii) information which any Lender or
the Administrative Agent had in its possession prior to receipt thereof from the
disclosing party, or (iii) information received by any Lender or the
Administrative Agent from a third party having no obligations of nondisclosure
with respect thereto. Nothing contained in this Section 10.15 shall prevent any
disclosure: (x) believed in good faith by any Lender or the Administrative Agent
to be required by any law or guideline or interpretation or application thereof
by any Governmental Authority, arbitrator or grand jury charged with the
interpretation or administration thereof or compliance with any request or
directive of any Governmental Authority, arbitrator or grand jury (whether or
not having the force of law), (y) determined by counsel for any Lender or the
Administrative Agent to be necessary or advisable in connection with enforcement
or preservation of rights under or in connection with this Agreement or any
other Credit Document or (z) of any information which has been made public by a
Person other than any Lender or the Administrative Agent who, to the
Administrative Agent's or such Lender's actual knowledge, was then under an
obligation of nondisclosure. The Lenders and the
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Administrative Agent shall have the right to disclose any confidential
information described in this Section 10.15 to an assignee or prospective
assignee or to a participant or prospective participant in Loans hereunder,
provided that the assigning or selling Lender shall have obtained from such
assignee or prospective assignee or participant or prospective participant a
written agreement to hold such information in confidence to the same extent as
if it were a Lender.
Section 10.16. Waiver of Jury Trial. BY ITS EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE ADMINISTRATIVE AGENT, EACH LENDER, THE GUARANTOR
AND EACH COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, THE
NOTES OR ANY OTHER CREDIT DOCUMENT, ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS, THE
GUARANTOR OR THE COMPANIES IN CONNECTION HEREWITH OR THEREWITH. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE LENDERS TO ENTER
INTO THIS AGREEMENT.
Section 10.17. Right of Setoff. Upon the occurrence and during
the continuance of any Event of Default any Lender and the Administrative Agent
may, and is hereby authorized to, at any time from time to time, without notice
to the Companies (any such notice being expressly waived by the Companies) and
to the fullest extent permitted by law, set off and apply any and all deposits
(general or special, time or demand, provision or final) at any time held and
other indebtedness at any time owing by such Lender or the Administrative Agent
and to or for the credit or the account of the Companies against any and all
Obligations of the Companies now or hereafter existing under the Credit
Documents, irrespective of whether or not any Lender and the Administrative
Agent shall have made any demand hereunder or thereunder and although such
Obligations may be contingent or unmatured. Each Lender and the Administrative
Agent agrees promptly to notify the Companies after any such setoff and
application made by such Lender or the Administrative Agent; provided, however,
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of each Lender and the Administrative Agent
under this Section 10.17 are in addition to the other rights and remedies
(including, without limitation, other rights of setoff under applicable law or
otherwise) which such Lender or the Administrative Agent may have.
Section 10.18. Headings. Section headings herein are included
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
Section 10.19. Forum Selection and Consent to Jurisdiction.
Any litigation based hereon, or arising out of, under or in connection with,
this Agreement or any other Credit Document, or any course of conduct, course of
dealing, statement (whether verbal or written) or action of the Administrative
Agent, any Lender or the Companies may be brought and maintained exclusively in
the courts of the State of New York or the United States District Court for the
Southern District of New York; provided, however, that any suit seeking
enforcement
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against any Collateral or other property may be brought, at the Administrative
Agent's option, in the courts of any jurisdiction where such Collateral or other
property may be found. The Companies hereby expressly and irrevocably submits to
the jurisdiction of the courts of the State of New York and of the United States
District Court for the Southern District of New York for the purpose of any such
litigation and irrevocably agrees to be bound by any judgment rendered thereby
in connection with such litigation. The Companies further irrevocably consents
to the service of process (i) by registered or certified mail, postage prepaid,
to the Administrative Company at its address for notices contained in Section
10.05 hereof, such service to become effective five days after such mailing, or
(ii) by personal service within or without the State of New York. Nothing herein
shall affect the right of the Administrative Agent or any Lender to service of
process in any other manner permitted by law. The Companies hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in an inconvenient forum. To the extent that the
Companies have or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution or otherwise) with respect to
itself or its property, the Companies hereby irrevocably waives such immunity in
respect of its obligations under this Agreement and the other Credit Documents.
Section 10.20. HomeGold as Agent for Companies. Each Company
hereby irrevocably appoints HomeGold as the Administrative Company, agent and
attorney-in-fact for the Companies which appointment shall remain in full force
and effect unless and until the Administrative Agent shall have received prior
written notice signed by each of the Companies that such appointment has been
revoked and that another Company has been appointed Administrative Company).
Each Company hereby irrevocably appoints and authorizes the Administrative
Company (i) to provide the Administrative Agent with all notices with respect to
Loans obtained for the benefit of any Company and all other notices and
instructions under this Agreement and (ii) to take such action as the
Administrative Company deems appropriate on its behalf to obtain Loans and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. It is understood that the handling of the Loan
Account and Collateral of the Companies in a combined fashion, as more fully set
forth herein, is done solely as an accommodation to the Companies in order to
utilize the collective borrowing powers of the Companies in the most efficient
and economical manner and at their request, and that neither the Administrative
Agent nor the Lenders shall incur liability to the Companies as a result hereof.
Each of the Companies expects to derive benefit, directly or indirectly, from
the handling of the Loan Account and the Collateral in a combined fashion since
the successful operation of each Company is dependent on the continued
successful performance of the integrated group. To induce the Administrative
Agent and the Lenders to do so, and in consideration thereof, each of the
Companies hereby jointly and severally agrees to indemnify the Indemnified
Parties and hold the Indemnified Parties harmless against any and all liability,
expense or loss made against such Indemnified Parties by either of the Companies
or by any third party whosoever, arising from or incurred by reason of (a) the
handling of the Loan Account and Collateral of the Companies as herein provided
or (b) the Administrative Agent and the Lenders relying on any instructions of
the Administrative Company.
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Section 10.21. Periodic Due Diligence Review. The Companies
acknowledge that the Administrative Agent has the right to perform continuing
due diligence reviews with respect to the Mortgage Loans, for purposes of
verifying compliance with the representations, warranties and specifications
made hereunder, or otherwise, and the Companies agree that upon reasonable prior
notice to the Companies, the Administrative Agent or its authorized
representatives will be permitted during normal business hours to examine,
inspect, and make copies and extracts of, the Required Documents and any and all
documents, records, agreements, instruments or information relating to such
Mortgage Loans in the possession or under the control of a Company and/or the
Custodian. The Companies also shall make available to the Administrative Agent a
knowledgeable financial or accounting officer for the purpose of answering
questions respecting the Required Documents and the Mortgage Loans. Without
limiting the generality of the foregoing, the Companies acknowledge that the
Administrative Agent and the Lenders may make loans to the Companies based
solely upon the information provided by the Companies to the Administrative
Agent in the Mortgage Loan Schedule and the representations, warranties and
covenants contained herein, and that the Administrative Agent, at its option,
has the right at any time to conduct a partial or complete due diligence review
on some or all of the Mortgage Loans securing such Loan, including without
limitation ordering new credit reports and new appraisals on the related
mortgaged properties and otherwise re-generating the information used to
originate such Mortgage Loans. The Administrative Agent may underwrite such
Mortgage Loans itself or engage a third party underwriter to perform such
underwriting. The Companies agree to cooperate with the Administrative Agent and
any third party underwriter in connection with such underwriting, including, but
not limited to, providing the Lender and any third party underwriter with access
to any and all documents, records, agreements, instruments or information
relating to such Mortgage Loans in the possession, or under the control, of the
Companies. The Companies further agree that the Companies shall reimburse the
Administrative Agent for any and all reasonable out-of-pocket costs and expenses
incurred by the Administrative Agent in connection with the Administrative
Agent's activities pursuant to this Section 10.21.
ARTICLE XI.
DEFINITIONS
For purposes of this Agreement, the terms set forth below
shall have the following meanings (terms defined in the singular are to have a
correlative meaning when used in the plural and vice versa):
"Additional Required Documents" shall mean for any Mortgage
Loan those items described on Exhibit P attached hereto.
""A" Loan" shall mean a Loan made by a Lender or the
Administrative Agent to HomeGold.
"Administrative Agent" shall have the meaning given such term
in the introductory paragraph hereof and any successor(s).
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"Administrative Company" shall have the meaning given to that
term in Section 10.20 hereof.
"Affiliate" shall mean, as to any Person: (1) which directly
or indirectly controls, or is controlled by, or is under common control with
such Person; (2) which directly or indirectly beneficially owns or holds ten
percent or more of any equity or partnership interest of such Person; or (3) ten
percent or more of the equity or partnership interest of which is directly or
indirectly beneficially owned or held by such Person. "Control" as used herein
means the power to direct the management and policies of such Person.
"Agent Account" shall mean an account in the name of the
Administrative Agent designated to the Companies from time to time into which
the Companies shall make all payments to the Administrative Agent for the
account of the Administrative Agent or the Lenders, as the case may be, under
this Agreement.
"Agent Advances" shall have the meaning given that term in
Section 9.08(a) hereof.
"Agreement" shall mean this Agreement, as the same may be
amended, extended or replaced from time to time.
"Applicable Eurodollar Rate Margin" shall mean, with respect
to a Eurodollar Loan, the percentage determined in accordance with the Pricing
Grid, provided that, on and prior to the Pricing Grid Effective Date, the
Applicable Eurodollar Rate Margin shall be equal to 2.5%.
"Applicable Prime Rate Margin" shall mean, with respect to a
Prime Loan, the percentage determined in accordance with the Pricing Grid,
provided that, on and prior to the Pricing Grid Effective Date, the Applicable
Prime Rate Margin shall be equal to 0.5%.
"Approved Investor" shall mean any Person pre-approved in
writing (which pre-approval may be limited in Dollar amounts by type and
otherwise) by the Administrative Agent (including those shown on Schedule II)
and which approval has not been revoked by such Administrative Agent in its sole
discretion (such revocation to be effective on the tenth Business Day following
notice thereof given to the Companies in writing).
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee, and accepted by the
Administrative Agent and, in the absence of a continuing Event of Default,
consented to by the Administrative Company, substantially in the form of Exhibit
F hereto.
"Availability" shall mean, at any time with respect to the
Companies on a combined basis, the difference between (i) the aggregate
Borrowing Base of the Companies on a combined basis and (ii) the sum of the
aggregate outstanding principal amount of all Loans.
"Bank" shall mean The Chase Manhattan Bank or The Dai-Ichi
Kangyo Bank, Limited, New York Branch, or their respective successors.
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""B" Loan" shall mean a Loan made by a Lender or the
Administrative Agent to CII.
"Borrowing Base" shall mean, with respect to a Company as of
the date of determination, the difference between (i) the aggregate amount of
the Unit Collateral Value of all Eligible Mortgage Loans originated or purchased
by such Company and delivered to and held by the Custodian and (ii) such
reserves as the Administrative Agent, in its reasonable business judgment, may
deem appropriate from time to time.
"Bulk Purchase" shall mean the purchase of Mortgage Loans from
a seller and any Affiliate thereof (other than from a Company), in one or a
series of related transactions (i) consisting of at least one hundred (100)
Mortgage Loans or (ii) the aggregate purchase price of which equals or exceeds
$5,000,000.
"Borrowing Base Certificate" shall mean a certificate in the
form of that attached hereto as Exhibit C, properly completed, executed and
delivered to the Administrative Agent and the Lenders which sets forth the
calculation of the Borrowing Base for each Company on an individual basis and
for the Companies on a combined basis.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banks in New York, New York are authorized or obligated
to close their regular banking business and, with respect to any action under
this Agreement that requires the participation of the Custodian, the city in
which the relevant office of the Custodian is located, provided that with
respect to the borrowing, payment, conversion to or continuation of Eurodollar
Loans, Business Day shall also mean a day on which dealings in Dollars are
carried on in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of the Bank's eurodollar loans are
then being conducted.
"Capitalized Lease Obligations" of any Person shall mean the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"CII" shall mean Carolina Investors, Inc., a South Carolina
corporation.
"CII Investor Obligations" shall mean those obligations of CII
to pay principal and interest to holders of CII's Subordinated Debentures
(Series B, Series C and Series D) and Floating Rate Senior Notes (Series 93,
Series 94, Series 95, Series 96, Series 97, Series 98 and Series 99) each as
listed on page 3 in that certain Prospectus of CII dated April 1, 1998
describing the Series D Subordinated Debentures and the Series 99 Floating Rate
Senior Notes, together with those obligations of CII to pay principal and
interest to holders of any similar subordinated debentures or floating rate
senior notes issued by CII subsequent to the above series.
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"CII Subordinated Debt" shall mean indebtedness of the
Companies or any of them payable to CII the repayment of which has been
subordinated to the repayment of the Obligations pursuant to the Subordination
Agreement.
"CIT" shall have the meaning given to that term in the
introductory paragraph to this Agreement.
"Clean-up Period" shall have the meaning specified therefor in
Section 2.06(e) hereof.
"Closing Agent" shall mean a title company, a closing attorney
or other entity which conducts the settlement of a Mortgage Loan and which has
not been disapproved by the Administrative Agent upon written notice to the
Companies.
"Closing Date" shall mean the date on which all of the
conditions set forth in Section 4.01 shall be satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral" shall mean all of the property (tangible and
intangible) purported to be subject to the Lien purported to be created by any
mortgage, deed of trust, security agreement, pledge agreement, assignment or
other security document heretofore or hereafter executed by any Person as
security for all or any part of the Obligations.
"Collateral Sale Proceeds" shall mean all proceeds of the
refinancing, sale or other disposition of Mortgage Loans pledged to the
Administrative Agent and other Collateral (including, without limitation,
Retained Interest Receivables) whether by securitization, whole loan sales or
otherwise.
"Collateral Value of the Borrowing Base" shall mean at any
date the sum of the Unit Collateral Values of all Eligible Mortgage Loans
included in the Borrowing Base at such date (including Eligible Mortgage Loans
shipped either to a permanent investor for purchase pending delivery of the
sales proceeds thereof to a Settlement Account or into pools supporting
mortgage-backed securities pending sale of such mortgage-backed securities and
delivery of the sales proceeds thereof to a Settlement Account).
"Commitment" shall mean, with respect to each Lender, the
commitment set forth on Schedule I to this Agreement or assigned to such Lender
in accordance with Section 10.13, as such amounts may be reduced from time to
time pursuant to the terms of this Agreement.
"Commonly Controlled Entity" of a Person shall mean a Person,
whether or not incorporated, which is under common control with such Person
within the meaning of Section 414(c) of the Internal Revenue Code.
"Companies" and "Company" shall have the meanings given such
terms in the introductory paragraph hereof.
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"Contractual Obligation" as to any Person shall mean any
provision of any security issued by such Person or of any agreement, instrument
or undertaking to which such Person is a party or by which it or any of its
property is bound.
"Credit Documents" shall mean this Agreement, the Custodian
Agreement, the Security Agreements, the Pledge Agreements, the Guaranties, the
Notes, the Subordination Agreement, the Fee Letter and each other document,
instrument and agreement executed by the Companies or the Guarantor or any
Subsidiary thereof in connection herewith, as any of the same may be amended,
extended or replaced from time to time.
"Custodian" means First Union National Bank and/or any other
financial institution acceptable to the Administrative Agent and, in the absence
of a continuing Event of Default, the Companies, and their respective
successors.
"Custodian Agreement" means that certain Custodian Agreement
dated as of the date hereof among the Companies, the Custodian and the
Administrative Agent, substantially in the form of Exhibit D hereto, as the same
may be modified and supplemented and in effect from time to time and any other
or replacement custodian agreement acceptable to the Agent.
"Default Rate" shall mean a rate per annum equal to the rate
of interest which would otherwise be applicable hereunder plus two percent (2%)
and, if no other rate is otherwise applicable pursuant to the terms of this
Agreement, the rate per annum equal to the Prime Rate plus 2.5%.
"Designated Borrowing Officer" shall mean any officer of the
Administrative Company identified on Schedule IV attached hereto, or such other
officer as shall be designated from time to time in writing by the
Administrative Company to the Administrative Agent.
"Designated Financial Officer" of a Person shall mean the
individual designated from time to time by the Board of Directors or governing
body performing like functions of such Person to be the chief financial officer,
vice president of finance or treasurer of such Person (and individuals
designated from time to time by the Board of Directors or governing body
performing like functions of such Person to act in lieu of the chief financial
officer, vice president of finance or the treasurer).
"Dollars" and the sign "$" shall mean lawful money of the
United States of America.
"EGI" shall mean Emergent Group, Inc., a South Carolina
corporation.
"EGI Note Indenture" shall mean the Indenture dated as of
September 23, 1997, as amended, among EGI, the subsidiaries of EGI named
therein, as subsidiary guarantors, and Bankers Trust Company, as Trustee, with
respect to the EGI Notes.
"EGI Notes" shall mean the $125,000,000 10-3/4% Senior Notes
due 2004 of EGI.
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"Eligible Mortgage Loan" shall mean a Mortgage Loan made
pursuant to the requirements and limitations set forth in the applicable
Underwriting Guidelines with respect to which each of the following statements
shall be accurate and complete (and the Companies by confirming the inclusion of
such Mortgage Loan in any computation of the Collateral Value of the Borrowing
Base shall be deemed to so represent and warrant to the Administrative Agent and
the Lenders at and as of the date of such computation):
(a) Said Mortgage Loan is a binding and valid
obligation of the Obligor thereon, in full force and effect and
enforceable in accordance with its terms.
(b) Said Mortgage Loan is genuine in all respects as
appearing on its face and as represented in the books and records of
the applicable Company and all information set forth therein is true
and correct.
(c) Said Mortgage Loan is free of any default of any
party thereto (including the applicable Company), counterclaims,
offsets and defenses and from any rescission, cancellation or
avoidance, whether by operation of law or otherwise, and the property
subject to the related mortgage is not subject to a foreclosure
proceeding.
(d) There is not a delinquency in any payment under
said Mortgage Loan in excess of 30 days from the due date of such
payment, determined at the end of each calendar month in a manner
consistent with the applicable Company's financial reporting standards.
(e) Said Mortgage Loan contains the entire agreement
of the parties thereto with respect to the subject matter thereof, has
not been modified or amended in any respect and is free of concessions
or understandings with the Obligor thereon of any kind not expressed in
writing therein.
(f) Said Mortgage Loan is in all respects as required
by and in accordance with all applicable laws and regulations governing
the same, including, without limitation, the federal Consumer Credit
Protection Act, the federal Real Estate Settlement Procedures Act, the
federal Equal Credit Opportunity Act, the federal Truth-in-Lending Act,
and the regulations promulgated thereunder and all applicable usury
laws and restrictions, and all notices, disclosures and other
statements or information required by law or regulation to be given,
and any other act required by law or regulation to be performed, in
connection with said Mortgage Loan have been given and performed as
required.
(g) All advance payments and other deposits on said
Mortgage Loan have been paid in cash, and no part of said sums has been
loaned, directly or indirectly, by any Company to the Obligor and there
have been no prepayments on account of said Mortgage Loan, and said
Mortgage Loan has been fully advanced.
(h) At all times said Mortgage Loan will be free and
clear of all Liens, except in favor of the Administrative Agent for the
benefit of the Lenders.
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(i) The Property covered by said Mortgage Loan is
insured against loss or damage by fire and all other hazards normally
included within standard extended coverage in accordance with the
applicable provisions of said Mortgage Loan with the applicable Company
named as a loss payee thereon.
(j) The Property covered by said Mortgage Loan is
free and clear of all Liens except of the applicable Company subject
only to (1) the Lien of current real property taxes and assessments not
yet due and payable; (2) covenants, conditions and restrictions, rights
of way, easements and other matters of the public record, as of the
date of recording, as are acceptable to mortgage lending institutions
generally and specifically referred to in a lender's title insurance
policy delivered to the originator of the Mortgage Loan and (i)
referred to or otherwise considered in the appraisal made for the
originator of the Mortgage Loan or (ii) which do not materially
adversely affect the appraised value of the Property as set forth in
such appraisal; (3) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage Loan or the use,
enjoyment, value or marketability of the related Property; (4) Liens
subordinate in priority to the Lien in favor of the applicable Company;
and (5) in the case of second priority Mortgage Loans, one (1) lien
superior in priority to the Lien in favor of the applicable Company.
(k) If said Mortgage Loan has been withdrawn from the
possession of the Custodian and:
(1) If said Mortgage Loan was withdrawn by
any Company for purposes of correcting clerical or other
nonsubstantive documentation problems pursuant to a trust
receipt, as permitted under Section 5(a) of the Custodian
Agreement, the Unit Collateral Value of said Mortgage Loan
when added to the Unit Collateral Value of other Mortgage
Loans included in the calculation of the Collateral Value of
the Borrowing Base the promissory notes for which have been
similarly withdrawn by any Company does not exceed $2,000,000,
and the promissory note and other documents relating to said
Mortgage Loan are returned to the Custodian within ten (10)
calendar days from the date of withdrawal;
(2) If said Mortgage Loan was shipped by the
Custodian directly to a permanent investor for purchase,
pursuant to Section 5(b) of the Custodian Agreement, such loan
shall remain an Eligible Loan for twenty-one (21) days from
the date of shipment by the Custodian and thereafter upon
return of the Mortgage File (as defined in the Custodian
Agreement) to the Custodian; and
(3) If said Mortgage Loan was shipped by the
Custodian directly to a custodian for purposes of formation of
a pool supporting a Mortgage-Backed Security, pursuant to
Section 5(b) of the Custodian Agreement, said Mortgage Loan
has been returned to the Custodian within twenty-one (21) days
from the date of shipment by the Custodian.
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(l) The outstanding principal balance of
such Mortgage Loan does not exceed $200,000; provided,
however, that the outstanding principal balance of any
Mortgage Loan may exceed $200,000 so long as (i) the
outstanding principal balance of such Mortgage Loan is not
greater than $500,000, (ii) the Mortgage Loan has a
loan-to-value ratio of equal to or less than 85%, and (iii)
the Unit Collateral Value of such Mortgage Loan, when added to
the Unit Collateral Value of all other Mortgage Loans with
respect to which the outstanding principal balance is greater
than $200,000, shall not exceed five percent (5%) of the Total
Commitment.
(m) The Property shall be improved, such
improvements to consist of a completed and occupied
one-to-four unit single family residence, including, but not
limited to, a condominium, planned unit development or
townhouse but excluding in any event a co-op or Mobile Home.
(n) There has been delivered to the
Custodian the Required Documents for said Mortgage Loan;
provided, however, that a Mortgage Loan, the Required
Documents for which have not been delivered to the Custodian,
may be an Eligible Mortgage Loan and may be included in the
Borrowing Base so long as (i) the Required Documents for such
Mortgage Loan shall have been delivered to the Collateral
Agent within fourteen (14) days of the inclusion of such
Mortgage Loan in the Borrowing Base, provided that on and
after November 1, 1998 such fourteen (14) day period shall be
reduced to ten (10) days; (ii) the Unit Collateral Value of
said Mortgage Loan when added to the Unit Collateral Value of
all other Mortgage Loans included in the Borrowing Base for
which the Required Documents have not been delivered to the
Collateral Agent, does not exceed eight and three-quarters
percent (8.75%) of the Total Commitment.
(o) Said Mortgage Loan is not subject to any
servicing arrangement with any Person other than one of the
Companies nor are any servicing rights relating to said
Mortgage Loan subject to any Lien, claim, interest or negative
pledge in favor of any Person other than as permitted
hereunder.
(p) The applicable Company obtained an
appraisal in connection with the origination of said Mortgage
Loan as would satisfy all appraisal requirements for said
Mortgage Loan if such had been originated by a federally
insured depository institution.
(q) Said Mortgage Loan is secured by a first
or second priority mortgage or deed of trust on the Property
covered thereby.
(r) Said Mortgage Loan is not a revolving
credit facility.
(s) No real property taxes due and payable
with respect to the Property (or escrow installments therefor)
covered by said Mortgage Loan are
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more than thirty (30) days past due or there is no insurance
policy in effect covering the related Property.
(t) Said Mortgage Loan, (i) if a High-LTV
Mortgage Loan, has not been included in the Borrowing Base for
more than sixty (60) days, and (ii) if not a High-LTV Mortgage
Loan, has not been included in the Borrowing Base for more
than one hundred twenty (120) days; provided, however, that a
Mortgage Loan may be included in the Borrowing Base for more
than sixty (60) days in the case of a High-LTV Mortgage Loan
or for more than one hundred twenty (120) days in the case of
a Mortgage Loan not a High-LTV Mortgage Loan so long as the
Mortgage Loan is not included in the Borrowing Base for more
than two hundred twenty (220) days, except that a Mortgage
Loan originated or purchased by CII may be so included for
more than two hundred twenty (220) days.
(u) Said Mortgage Loan, in the reasonable
judgment of the Administrative Agent, is otherwise consistent
in all respects with customary standards imposed by whole loan
purchasers, relevant rating agencies and pool insurers for
classification as a "subprime" or a "B/C" Mortgage Loan.
(v) Said Mortgage Loan has an aggregate
loan-to-value ratio of equal to or less than eighty-five
percent (85%); provided, however, that a Mortgage Loan which
has an aggregate loan-to-value ratio of greater than
eighty-five percent (85%) may be included in the Borrowing
Base so long as (i) said Mortgage Loan possesses, in the sole
judgment of the Administrative Agent, the standard
underwriting characteristics of the standard secondary market
for "high-LTV" Mortgage Loans; (ii) said Mortgage Loan (other
than a RFC High-LTV Mortgage Loan) has a loan-to-value ratio
less than one hundred percent (100%); and (iii) the Unit
Collateral Value of said Mortgage Loan (other than an RFC
High-LTV Mortgage Loan) when added to the Unit Collateral
Value of all other Mortgage Loans included in the Borrowing
Base of the type described in this proviso does not exceed
twenty-five percent (25%) of the Total Commitment.
(w) Said Mortgage Loan, if a RFC High-LTV
Mortgage Loan, when added to the Unit Collateral Value of all
other RFC High-LTV Mortgage Loans included in the Borrowing
Base does not exceed five percent (5%) of the Total
Commitment.
"EMC-TN" shall mean Emergent Mortgage Corp. of Tennessee, a
South Carolina corporation.
"EMHC II" shall mean Emergent Mortgage Holdings Corporation
II, a Delaware corporation.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may from time to time be supplemented or amended.
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"ERISA Affiliate" shall mean, with respect to any Person, any
trade or business (whether or not incorporated) that is a member of the group of
which such Person is a member and which is treated as a single employer under
Section 414 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder in effect from time to time.
"Eurodollar Base Rate" shall mean, with respect to a
Eurodollar Loan for the relevant Interest Period, the rate determined by the
Administrative Agent to be the rate at which deposits in Dollars are offered by
the Bank to first-class banks in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect of its
eurodollar loans are then being conducted at approximately 11:00 a.m., New York
City time, two Business Days prior to the first day of such Interest Period, in
the approximate amount of the relevant Eurodollar Loan and having a maturity
equal to such Interest Period.
"Eurodollar Loan" shall mean a Loan bearing interest at the
Eurodollar Rate.
"Eurodollar Rate" means with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the nearest
1/100 of 1%):
Eurodollar Base Rate
-----------------------------
1.00 - Reserve Requirements
"Event of Default" shall have the meaning set forth in
Paragraph 8 above.
"Exception Report" shall mean the exception report prepared by
the Custodian pursuant to the Custodian Agreement.
"Fair Market Value" shall mean, with respect to any Mortgage
Loan, the market bid price obtainable for such Mortgage Loan, as determined on a
reasonable basis by the Administrative Agent (based upon whole loan prices
currently available to the Companies).
"Fed Funds Rate" shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for such day on such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"Fee Letter" means the letter agreement, dated as of the date
hereof, between each Company and the Administrative Agent obligating the
Companies to pay certain fees to the Administrative Agent in connection with
this Agreement, as such letter agreement may be modified, supplemented or
amended from time to time.
"First Union" shall mean First Union National Bank, a national
banking corporation.
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"First Union Facility" shall mean the mortgage warehouse
credit facility extended to HomeGold and EMC-TN by First Union and certain other
lenders pursuant to that certain Mortgage Loan Warehousing Agreement dated as of
December 10, 1997, as amended.
"Funding Accounts" shall mean Account No. 2010000190063
maintained in the name of HomeGold and Account No. 2010000299773 maintained in
the name of CII, each with the Custodian into which Loan proceeds shall be
deposited and from which Mortgage Loan proceeds may be disbursed by the
applicable Company directly to the Closing Agent in connection with the
settlement of Mortgage Loans.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"Governmental Authority" shall mean any nation or government,
any federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guaranties" shall have the meaning given such term in Section
3.02 hereof, as the same may be amended, extended or replaced from time to time.
"Guarantor" shall mean EGI.
"High-LTV Mortgage Loan" shall mean an Eligible Mortgage Loan
of the type described in the proviso to subparagraph (v) of the definition of
"Eligible Mortgage Loan."
"HomeGold" shall mean HomeGold, Inc., a South Carolina
corporation.
"Indebtedness" of any Person shall mean all items of
indebtedness which, in accordance with GAAP and practices thereof, would be
included in determining liabilities as shown on the liability side of a
statement of condition of such Person as of the date as of which indebtedness is
to be determined, including, without limitation: (i) all obligations for money
borrowed and Capitalized Lease Obligations and all obligations evidenced by
notes, bonds, debentures or other similar instruments, (ii) all indebtedness and
liabilities of others assumed or guaranteed by such Person or in respect of
which such Person is secondarily or contingently liable (other than by
endorsement of instruments in the course of collection) whether by reason of any
agreement to acquire such indebtedness or to supply or advance sums or
otherwise, (iii) obligations for the deferred purchase price of property or
services (other than current trade payables incurred in the ordinary course of
business and payable in accordance with customary practices); (iv) current
liabilities in respect of unfunded vested benefits under any Plan; (v)
reimbursement obligations with respect to letters of credit; (vi) obligations or
liabilities secured by a Lien upon property owned by such Person, whether or not
owing by such Person and even though such Person has not assumed or become
liable for the payment thereof, and (vii) net liabilities of such Person under
interest rate cap agreements, interest rate swap agreements, foreign currency
exchange agreements and other hedging agreements or
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arrangements calculated on a basis satisfactory to the Administrative Agent and
in accordance with accepted practice. The term "Debt" shall not include deferred
loan origination fees of any Company.
"Indemnified Parties" shall have the meaning specified
therefor in Section 10.06 hereof.
"Interest Period" shall mean, with respect to any Eurodollar
Loan, the period commencing on the borrowing date for, or the date of any
continuation of or conversion to, such Eurodollar Loan, as the case may be, and
ending one, two, three or six months thereafter as the Administrative Company
may elect in the applicable notice given to the Agent pursuant to Section 2.03
or Section 2.14, as appropriate; provided that (i) any Interest Period that
would otherwise end on a day that is not a Business Day shall be extended to the
next succeeding Business Day, unless such Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Business Day; (ii) any Interest Period that begins on the last Business Day of a
calendar month or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period shall end on the last
Business Day of the applicable calendar month; and (iii) no Interest Period for
any Loan shall end after the Maturity Date. Interest shall accrue from and
include the first date of an Interest Period, but exclude the last day of such
Interest Period..
"Interim Date" shall mean May 31, 1998.
"Lenders" shall have the meaning given that term in the
introductory paragraph to this Agreement.
"Lien" shall mean any security interest, mortgage, pledge,
lien, claim on property, charge or encumbrance (including any conditional sale
or other title retention agreement), any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction, the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction.
"Loan" or "Loans" shall mean any and all loans made by the
Lenders, or by the Administrative Agent on behalf of the Lenders, to the
Companies or made as a result of charges made to the Loan Account, in each case
pursuant to the terms of this Agreement.
"Loan Account" or "Loan Accounts" shall have the meaning
specified therefor in Section 2.07(a) hereof.
"Loan Party" shall mean one or, if plural, each of the
Companies and the Guarantor.
"Loan Request" shall mean a request for a Loan conveyed to the
Administrative Agent from a duly authorized officer of the Administrative
Company on behalf of the Companies
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substantially in the form of that attached hereto as Exhibit B, with such
request to be confirmed in writing upon the request of the Administrative Agent.
"Majority Lenders" shall mean (i) prior to the occurrence of
an Event of Default, those Lenders holding sixty-six and two-thirds percent
(66-2/3%) of the Total Commitment; and (ii) after the occurrence and during the
continuance of an Event of Default, those Lenders holding sixty-six and
two-thirds percent (66-2/3%) of the Loans outstanding under the Agreement.
"Material Contract" means, with respect to any Person, each
contract or agreement to which such Person is a party that constitutes a
"Material Contract" under paragraph (b)(10) of Item 601 of Regulation S-K as
promulgated under the Securities Act of 1933.
"Maturity Date" shall mean June 30, 2001.
"Minority Lenders" shall have the meaning specified therefor
in Section 10.03(b) hereof.
"Mobile Home" shall mean any prefabricated one unit single
family residence that has wheels attached or is not attached to an immovable
foundation or is of the type that is customarily subject to a lien or mortgage
that does not also encumber real property.
"Mortgage" means a mortgage, deed of trust, security deed or
similar lien encumbering real property securing a Mortgage Loan.
"Mortgage-Backed Security" shall mean any security (including,
without limitation, a participation certificate) that represents an interest in
a pool of mortgages, deeds of trusts or other instruments creating a Lien on
Property which is improved by a completed single family residence, including but
not limited to a condominium, planned unit development or townhouse.
"Mortgage Loan" shall mean a residential real estate secured
loan, including, without limitation: (a) a promissory note, any reformation
thereof and related deed of trust (or mortgage) and security agreement; (b) all
guaranties and insurance policies, including, without limitation, all mortgage
and title insurance policies and all fire and extended coverage insurance
policies and rights of the applicable Company to return premiums or payments
with respect thereto; and (c) all right, title and interest of the applicable
Company in the Property covered by said deed of trust (or mortgage).
"Mortgage Loan Schedule" shall mean a schedule of Mortgage
Loans containing the information specified in Exhibit H hereto with respect to
each Mortgage Loan to be delivered by the Companies to the Administrative Agent
pursuant to Section 2.03(a) hereof.
"Mortgage Note" shall mean the note or other evidence of
indebtedness of a mortgagor on a Mortgage Loan.
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"Multiemployer Plan" shall mean, as to any Company or any of
its ERISA Affiliates, a Plan of such Person which is a multiemployer plan as
defined in Section 4001 (a)(3) of ERISA.
"Net Income (Loss)" shall mean, with respect to any Person for
any period, any net earnings (or net loss) of such Person for such period
determined in accordance with GAAP on a consolidated basis.
"Notes" shall mean the joint and several promissory notes of
the Companies executed and delivered to the Lenders under this Agreement and
substantially in the form of Exhibit A hereto, as modified or restated from time
to time and any promissory note or notes issued in exchange or replacement
thereof under this Agreement, including all extensions, renewals, refinancings
or refundings under this Agreement in whole or in part.
"Notices" shall have the meaning specified therefor in Section
10.05 hereof.
"Obligations" shall mean any and all debts, obligations and
liabilities of the Companies or any of them to the Lenders or the Administrative
Agent contained in this Agreement and any of the other Credit Documents, whether
for principal, interest (including, without limitation, all interest that
accrues after the commencement of any case, proceeding or other action relating
to the bankruptcy, insolvency or reorganization of any Company), fees, expenses,
indemnities or otherwise, and any amendments or supplements thereto, extensions
or renewals thereof or replacements therefor under this Agreement, including but
not limited to all indebtedness, obligations and liabilities of the Companies to
the Administrative Agent and the Lenders now existing or hereafter incurred
under or arising out of or in connection with the Notes, this Agreement, the
other Credit Documents, and any documents or instruments executed in connection
therewith; in each case whether now existing or hereafter arising, voluntary or
involuntary, whether or not jointly owed with others, direct or indirect,
absolute or contingent, liquidated or unliquidated, and whether or not from time
to time decreased or extinguished and later increased, created or incurred, and
including all indebtedness of the Companies under any instrument now or
hereafter evidencing or securing any of the foregoing.
"Obligor" shall mean the Person or Persons obligated to pay
the Indebtedness which is the subject of a Mortgage Loan.
"Office" when used in connection with the Administrative Agent
shall mean its office located at 1211 Avenue of the Americas, Xxx Xxxx, Xxx Xxxx
00000 or at such other office or offices of the Administrative Agent as may be
designated in writing from time to time by the Administrative Agent to the
Administrative Company and when used in connection with the Bank shall mean the
office of such entity designated in writing from time to time by the
Administrative Agent to the Administrative Company. In the event The Chase
Manhattan Bank shall be the Bank, the Office for such entity shall until further
written notice from the Administrative Agent to the Administrative Company be
its office located at 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
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"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any successor
thereto.
"Permitted Other Debt" shall mean that certain Indebtedness of
the Company set forth on Exhibit N attached hereto and incorporated herein by
reference.
"Permitted Secured Debt" shall mean that certain Indebtedness
of the Company set forth on Exhibit N attached hereto and incorporated herein by
reference.
"Person" shall mean any corporation, natural person, firm,
joint venture, partnerships, limited liability company, trust, unincorporated
organization or Governmental Authority.
"Plan" shall mean, as any Company or any of its ERISA
Affiliates, any pension plan that is covered by Title IV of ERISA and in respect
of which such Person or a Commonly Controlled Entity of such Person is an
"employer" as defined in Section 3(5) of ERISA.
"Pledge Agreements" shall mean those certain Pledge
Agreements, dated as of the date hereof, among each of EGI and the Companies and
in favor of the Administrative Agent, each substantially in the form of Exhibit
E hereto, as the same may be further amended, supplemented and otherwise
modified from time to time.
"Potential Default" shall mean an event which but for the
lapse of time or the giving of notice, or both, would constitute an Event of
Default.
"Pricing Grid" shall mean the pricing grid attached hereto as
Schedule III.
"Pricing Grid Effective Date" shall mean the first day of the
month following the date of delivery to the Administrative Agent of the
financial statements pursuant to Section 6.01(1) for the Companies' fiscal year
ending December 31, 1998.
"Prime Loan" shall mean a Loan bearing interest at the Prime
Rate.
"Prime Rate" shall mean the interest rate per annum publicly
announced from time to time by the Bank in New York, New York as its Prime Rate,
such interest rate to change automatically from time to time effective as of the
announced effective date of each change in the Prime Rate. The Prime Rate is not
intended to be the lowest rate of interest charged by the Bank to its borrowers.
"Pro Rata Share" shall mean, with respect to any Lender, a
fraction (expressed as a percentage), the numerator of which shall be the amount
of such Lender's Commitment and the denominator of which shall be the Total
Commitment, as adjusted from time to time in accordance with the provisions of
Sections 2.13 and 10.13 hereof, provided that, if the Total Commitment has been
terminated, the numerator shall be the unpaid amount of such Lender's Loans and
the denominator shall be the aggregate amount of all unpaid Loans.
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"Proceeds" shall mean whatever is receivable or received when
Collateral or proceeds are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes, without
limitation, all rights to payment, including return premiums, with respect to
any insurance relating thereto.
"Property" shall mean the real property, including the
improvements thereon, and the personal property (tangible and intangible) which
are encumbered pursuant to a Mortgage Loan.
"Prudential Facility" shall mean the warehouse and securities
facility extended to HomeGold by Prudential Securities Credit Corporation
pursuant to that certain Interim Warehouse and Securities Agreement dated March
4, 1997, as amended.
"Register" shall have the meaning given to that term in
Section 10.13(c) hereof.
"Reportable Event" shall mean a reportable event as defined in
Title IV of ERISA, except actions of general applicability by the Secretary of
Labor under Section 110 of ERISA.
"Required Documents" shall mean for any Mortgage Loan those
items described on Exhibit L attached hereto.
"Requirements of Law" shall mean, as to any Person, the
Articles or Certificate of Incorporation and Bylaws or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation, or
a final and binding determination of an arbitrator or a determination of a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"RFC" shall mean the Residential Funding Corporation.
"RFC Commitment" shall mean the forward commitment agreement,
dated December 3, 1997, as amended, by and between RFC and HomeGold relating to
the sale of RFC High-LTV Mortgage Loans by HomeGold to RFC.
"RFC High-LTV Mortgage Loan" shall mean a High-LTV Mortgage
Loan originated or purchased by HomeGold that has an aggregate loan-to-value
ratio of greater than or equal to one hundred percent (100%) but less than or
equal to one hundred twenty-five percent (125%) and that is subject to the
commitment provided by RFC to HomeGold pursuant to the RFC Commitment.
"Reserve Requirements" shall mean, for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System. Eurodollar Loans shall be
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deemed to constitute Eurocurrency Liabilities and to be subject to such reserve
requirements without benefit of or credit for proration, exceptions or offsets
which may be available from time to time to any Lender or the Affiliate of any
Lender under Regulation D.
"Retained Interest" shall mean, with respect to a pool of
Mortgage Loans that have been transferred by a Company to a trust or other
Person through a sale or securitization, the direct or indirect rights with
respect to such pool, including any rights to receive payments attributable to
such pool, retained by such Company subsequent to such transfer, whether such
rights are security, contractual, arise through the holding of an interest in
such trust or other Person, or otherwise.
"Retained Interest Receivables" shall mean the direct or
indirect right to Retained Interests that would be capitalized on a Person's
balance sheet (in accordance with GAAP), including, without limitation,
subordinated and interest-only certificates and any similar rights arising by
virtue of the holding of capital stock or any other equity interest in any
entity to which Mortgage Loans have been transferred in a sale or
securitization.
"Security Agreements" shall have the meaning given such term
in Paragraph 3(a) above, as the same may be amended, extended or replaced from
time to time.
"Settlement Accounts" shall mean Account No. 2000002023779 for
HomeGold and Account No. 2000002023782 for CII, each maintained in the name of
the Administrative Agent with the Custodian into which all Collateral Sale
Proceeds from the sale of any Collateral by HomeGold and CII, respectively, and
all principal, interest, penalties and premium payments on Mortgage Loans
remitted by HomeGold and CII, respectively, to the Administrative Agent shall be
deposited and from which such moneys shall be disbursed, in accordance with
instructions from the Administrative Agent to the Custodian, to repay the
outstanding Obligations.
"Settlement Period" shall have the meaning set forth in
Section 2.03(f) hereof.
"Single Employer Plan" shall mean, as to any Company or any of
its ERISA Affiliates, any Plan of such Person which is not a Multiemployer Plan.
"Small Business Loan Division" shall mean the subsidiaries of
EGI engaged in the business of making loans, principally to small businesses,
including but not limited to mezzanine financing, Section 7(a) SBA loans, ss.504
SBA loans and asset based loans, and in managing a venture capital fund.
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of such Person is not
less than the total amount of its liabilities, (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its existing debts as
they become absolute and matured, (c) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts or
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liabilities beyond such Person's ability to pay as such debts and liabilities
mature and (e) such Person is not engaged in business or a transaction, and, is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"SPE" shall mean a corporation, grantor trust or other single
purpose entity organized by HomeGold or CII for the sole purpose of acquiring
Mortgage Loans from HomeGold and issuing mortgage-backed securities supported by
such Mortgage Loans, the structure of which is consistent with the structure of
similar entities utilized for the issuance of mortgage-backed securities.
"State Mortgage Originator" shall mean a corporation (other
than any Company) organized by HomeGold to transact business in a specific state
in accordance with the laws of said state for the sole purpose of originating
Mortgage Loans only in such state, provided that (i) all such Mortgage Loans
originated by such corporation shall be immediately sold or transferred to
HomeGold at closing, (ii) said corporation shall be wholly-owned by HomeGold,
(iii) said corporation shall be capitalized at no more than the minimum amount
required under the applicable state laws, which amount shall not, without the
prior consent of the Majority Lenders, exceed (A) with respect to any one such
corporation, $250,000, or (B) with respect to all such corporations, an
aggregate amount equal to $2,000,000, and (iv) said corporation executes and
delivers to the Administrative Agent a Guaranty substantially in the form of
Exhibit J hereto.
"Statement Date" shall mean December 31, 1997.
"Sterling" shall mean Sterling Lending Corporation, a South
Carolina corporation.
"Subordination Agreement" shall mean that certain
Subordination of Debt Agreement of even date herewith made by CII for the
benefit of the Administrative Agent and the Lenders with respect to advances
made by CII to the Companies or any of them.
"Subsidiary" shall mean any corporation, partnership or joint
venture more than fifty percent (50%) of the stock or other ownership interest
of which having by the terms thereof ordinary voting power to elect the board of
directors, managers or trustees of such corporation, partnership or joint
venture (irrespective of whether or not at the time stock of any other class or
classes of such corporation, partnership or joint venture shall have or might
have voting power by reason of the happening of any contingency) shall, at the
time as of which any determination is being made, be owned, either directly or
through Subsidiaries. Notwithstanding the foregoing, any Person (other than a
Company) engaged in the business of making commercial business loans similar to
those made by the Small Business Loan Division of EGI shall not be a Subsidiary
hereunder.
"Subwarehouse Mortgage Loan" means a mortgage loan originated
as a result of a Company's Subwarehousing activities.
"Subwarehousing" means an arrangement pursuant to which a
Company extends credit to a mortgage lender (the "Subwarehouse Company") in
order to fund a mortgage loan to
-73-
be made by the Subwarehouse Company pursuant to a credit agreement between such
Company, as lender, and the Subwarehouse Company, as borrower.
"Total Commitment" shall mean the aggregate Commitments of the
Lenders as set forth on Schedule I which may be reduced or increased pursuant to
the terms of this Agreement.
"Underwriting Guidelines" shall mean the Underwriting
Guidelines of the Company as in effect on the Closing Date, attached as Exhibit
G hereto, as the same may be amended from time to time in accordance with the
terms of Section 7.10 hereof.
"Unit Collateral Value" shall mean at any time,
(i) with respect to each Eligible Mortgage
Loan (other than (A) a High-LTV Mortgage Loan and (B) an
Eligible Mortgage Loan originated or purchased by CII)
included in the Borrowing Base for fewer than one hundred
twenty (120) days, ninety-five percent (95%) of the least of
(x) the unpaid principal balance thereof at such time, (y) the
Fair Market Value thereof at such time and (z) the price at
which the relevant Company purchased such Eligible Mortgage
Loan;
(ii) with respect to each Eligible Mortgage
Loan (other than (A) a High-LTV Mortgage Loan and (B) an
Eligible Mortgage Loan originated or purchased by CII)
included in the Borrowing Base for a period equal to or
greater than one hundred twenty (120) days but less than or
equal to one hundred eighty (180) days, seventy-five percent
(75%) of the least of (x) the unpaid principal balance thereof
at such time, (y) the Fair Market Value thereof at such time
and (z) the price at which the relevant Company purchased such
Eligible Mortgage Loan;
(iii) with respect to each Eligible
Mortgage Loan (other than (A) a High-LTV Mortgage Loan and (B)
an Eligible Mortgage Loan originated or purchased by CII)
included in the Borrowing Base for a period equal to or
greater than one hundred eighty (180) days but less than or
equal to two hundred twenty (220) days, fifty-five percent
(55%) of the least of (x) the unpaid principal balance thereof
at such time, (y) the Fair Market Value thereof at such time
and (z) the price at which the relevant Company purchased such
Eligible Mortgage Loan;
(iv) with respect to each Eligible Mortgage
Loan originated or purchased by CII (other than a High-LTV
Mortgage Loan), eighty-five percent (85%) of the least of (A)
the unpaid principal balance thereof at such time, (B) the
Fair Market Value thereof at such time and (C) the price at
which CII purchased the Eligible Mortgage Loan;
(v) with respect to each Eligible Mortgage
Loan which is a RFC High-LTV Mortgage Loan and which is
included in the Borrowing Base for fewer than thirty (30)
days, sixty percent (60%) of the least of (A) the unpaid
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principal balance thereof at such time, (B) the Fair Market
Value thereof at such time and (C) the price at which HomeGold
purchased the Eligible Mortgage Loan, provided that if RFC,
the Companies and the Administrative Agent enter into a new
RFC Commitment, in form and substance satisfactory to the
Administrative Agent, the Administrative Agent may, in its
sole discretion, increase the percentage set forth in this
paragraph (v) to ninety-five percent (95%);
(vi) with respect to each Eligible Mortgage
Loan which is a High-LTV Mortgage Loan (other than a RFC
High-LTV Mortgage Loan) and which is included in the Borrowing
Base for fewer than sixty (60) days, seventy-five percent
(75%) of the least of (A) the unpaid principal balance thereof
at such time, (B) the Fair Market Value thereof at such time
and (C) the price at which the relevant Company purchased the
Eligible Mortgage Loan; provided that, the Administrative
Agent may, in its sole discretion, increase the percentage set
forth in this subparagraph (vi) from 75% to 80%, based upon
criteria such as the whole loan sale performance of HomeGold
and such other criteria deemed appropriate by the
Administrative Agent, any such increase to be effective upon
delivery to the Administrative Company of written notice of
such increase from the Administrative Agent;
(vii) with respect to each Eligible Mortgage
Loan which is a High-LTV Mortgage Loan (other than a RFC
High-LTV Mortgage Loan) and which is included in the Borrowing
Base for a period greater than sixty (60) days but less than
or equal to one hundred eighty (180) days, fifty-five percent
(55%) of the least of (A) the unpaid principal balance thereof
at such time, (B) the Fair Market Value thereof at such time
and (C) the price at which the relevant Company purchased the
Eligible Mortgage Loan; and
(viii) with respect to each Eligible
Mortgage Loan which is a High-LTV Mortgage Loan (other than a
RFC High-LTV Mortgage Loan) and which is included in the
Borrowing Base for equal to or greater than one hundred eighty
(180) days but less than or equal to two hundred twenty (220)
days, forty percent (40%) of the least of (A) the unpaid
principal balance thereof at such time, (B) the Fair Market
Value thereof at such time and (C) the price at which the
relevant Company purchased the Eligible Mortgage Loan.
"Wet Closing" shall mean a Wet Mortgage Loan closing where the
Administrative Agent is requested to make a Loan prior to, on the date of, or
after, the closing of the Wet Mortgage Loan, but prior to the delivery of the
Required Documents to the Custodian in all such cases in accordance with the
procedures outlined therefor under this Agreement.
"Wet Closing Agent" shall mean each Closing Agent who (1) is
designated by the Administrative Company as responsible for the closing of a Wet
Mortgage Loan and (2) is not disapproved by the Administrative Agent, in its
sole discretion.
-75-
"Wet Closing Agent Agreement" shall mean an agreement executed
by each Wet Closing Agent in connection with the funding of Wet Mortgage Loans
whereby such Wet Closing Agent agrees to act as the agent of the Administrative
Agent in accordance with the provisions of Section 4.05(3)hereof.
"Wet Collateral" shall mean each Wet Mortgage Loan and all
documents and agreements delivered in connection therewith or relating thereto
including, without limitation, the Required Documents related thereto.
"Wet Loans" means Loans the proceeds of which are used to
originate Wet Mortgage Loans.
"Wet Mortgage Loan" shall mean any Eligible Mortgage Loan of
the type described in the proviso to subparagraph (n) of the definition of
"Eligible Mortgage Loan" that is pledged to the Administrative Agent pursuant to
the Wet Closing provisions contained in this Agreement.
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IN WITNESS WHEREOF, the parties hereto have hereto have caused
this Agreement to be duly executed and delivered as of the day and year first
above written.
BORROWERS
HOMEGOLD, INC.
By: /s/ Xxxxx X. Xxxx
-----------------------------
Name: Xxxxx X. Xxxx
Title: Executive Vice President,
CFO, Treasurer and
Assistant Secretary
Address for Notices:
00 Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Group General Counsel
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
CAROLINA INVESTORS, INC.
By: /s/ Xxxxx X. Xxxx
----------------------------
Name: Xxxxx X. Xxxx
Title: Executive Vice President,
CFO, Treasurer and Secretary
Address for Notices:
00 Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Group General Counsel
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
AGENT AND LENDER
----------------
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------------------
Name: Xxxxxx X. Xxxxx
Title: SVP
Address for Notices:
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx
Assistant Vice President
Telecopier No: 000-000-0000
Telephone No: 000-000-0000
with copy to
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
SCHEDULE I
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Commitment Schedule
-------------------
Lender Maximum Commitment Percentage Share
------ ------------------ ----------------
The CIT Group/Business
Credit, Inc.
AGGREGATE FACILITY $200,000,000 100.00%
COMMITMENT
SCHEDULE II
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Schedule of Approved Investors
------------------------------
ContiMortgage
EquiCredit Corporation
Associates Financial Services, Inc.
Ford Consumer Credit
First Union National Bank
First Union Home Equity
Chemical Bank
Bank of Boston
The Money Store
Household Finance
Delta Funding Corporation
Industry Mortgage Company
Amresco Residential Credit Corporation
Greentree Mortgage Services
Advanta Mortgage
Preferred Mortgage Corp.
United Companies/Southern Mortgage Acquisition
NationsCredit Financial Services Corp.
Portfolio Acceptance Corporation
First Plus Financial
New Century Financial Corp.
Residential Funding Corporation
Southern Pacific Funding Corp.
Bay View Federal Bank, FSB
Stornawaye Properties, Inc.
Bayview Financial, Inc.
The CIT Group
C-BASS
G.E. Capital Corp.
Security National Partners
SCHEDULE III
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Pricing Grid
------------
SCHEDULE IV
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Designated Borrowing Officers
-----------------------------
CAROLINA INVESTORS, INC.
Name Title
---- -----
Xxxxx X. Xxxx Executive Vice President,
CFO, Treasurer and
Secretary
Xxxx Xxxxxxx Assistant Treasurer
Xxxxxxxx Champaign Vice President Finance
Xxxxx X. Xxxxxxx Chief Executive Officer
HOMEGOLD, INC.
Name Title
---- -----
Xxxxx X. Xxxx Executive Vice President,
Treasurer, CFO and
Assistant Secretary
Xxxx Xxxxxxx Assistant Treasurer
Xxxxxxxx Champaign Vice President Finance
Xxxxx X. Xxxxxxx Chief Executive Officer
SCHEDULE V
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Subsidiaries
------------
SCHEDULE VI
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Material Contracts
------------------
EXHIBIT A
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Form of Note
------------
EXHIBIT B
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Form of Loan Request
--------------------
EXHIBIT C
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Form of Borrowing Base Certificate
----------------------------------
EXHIBIT D
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Form of Custodian Agreement
---------------------------
EXHIBIT E
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Form of Pledge Agreement
------------------------
EXHIBIT F
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Form of Assignment and Acceptance
---------------------------------
EXHIBIT G
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Underwriting Guidelines
-----------------------
EXHIBIT H
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Mortgage Loan Schedule
----------------------
EXHIBIT I
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Form of Security Agreement
--------------------------
EXHIBIT J
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Form of Guaranty
----------------
EXHIBIT K
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Form of Legal Opinion of Counsel for the
----------------------------------------
Companies and the Guarantor
---------------------------
EXHIBIT L
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Required Documents
------------------
1. An original fully completed Delivery Certificate (as
defined in the Security Agreement);
2. The original executed and fully completed promissory note
relating to the Mortgage Loan (properly endorsed or assigned to the applicable
Company if purchased by such Company), which promissory note shall be duly
endorsed in blank and assigned in blank without recourse by an authorized
officer of the applicable Company;
3. The original executed and fully completed mortgage or deed
of trust relating to the Mortgage Loan in proper form for recordation in the
appropriate jurisdiction and duly recorded in the appropriate jurisdiction;
provided, however, that a certified copy of the executed mortgage or deed of
trust relating to the Mortgage Loan may be delivered to the Collateral Agent in
lieu of the original recorded deed of trust or mortgage until such time as the
original recorded mortgage or deed of trust is received from the recording
jurisdiction and submitted to the Collateral Agent; and
4. An original executed, fully completed and recordable but
unrecorded assignment of the mortgage or deed of trust relating to the Mortgage
Loan in proper form for recordation in the appropriate jurisdiction (unless the
Collateral Agent determines that under applicable State law the assignment
should be recorded in order to adequately protect its interest, in which case
the assignment shall be recorded by the applicable Company and a certified true
copy thereof shall be provided to the Collateral Agent), together with the
original or a duly certified copy of fully completed and proper assignment or
assignments of the mortgage or deed of trust from the original holder through
any subsequent transferees to the applicable Company in proper form for
recordation in the appropriate jurisdiction, duly recorded if local requirements
in the jurisdiction in which the Property is located required the recordation of
such assignment or assignments.
EXHIBIT M
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Litigation Schedule
-------------------
EXHIBIT N
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Schedule of Permitted Secured Debt and Permitted Other Debt
-----------------------------------------------------------
EXHIBIT O
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Form of Inter-Company Promissory Note
-------------------------------------
EXHIBIT P
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF JUNE 30, 1998
Additional Required Documents
-----------------------------
1 Original disclosure statements complying with Regulation Z
("Truth in Lending") of the Board of Governors of the Federal Reserve System and
all agreements relating thereto;
2. Original Equal Credit Opportunity Act notice and additional
disclosure statements or agreements relating thereto;
3. Survey of the Property covered by the Mortgage Loan,
including a determination of whether or not such Property falls into a flood
zone as identified by a HUD identified flood map;
4. Written statement signed by the attorney, title company or
closing agent responsible for supervising the closing of the Mortgage Loan that
such person or entity closed the Mortgage Loan in accordance with any closing
instructions received by such person or entity;
5. A property and casualty insurance policy on the property
subject to the Mortgage Loan covering fire, hazard and extended coverage, and if
applicable, flood and earthquake insurance, all in amounts not less than the
principal amount of the promissory note relating to the Mortgage Loan (or the
maximum amount issuable for flood insurance) which insurance has been endorsed
to provide for payment thereof to the applicable Company, as mortgagee, together
with written notice to the mortgagor of the fact, if true, that mortgagor's
property lies within a flood zone;
6. Original or copy of executed application by the Obligor on
such Mortgage Loan for such Mortgage Loan;
7. Original or copy of credit bureau report on the Obligor on
such Mortgage Loan;
8. Original HUD-1 settlement statement duly executed by the
Obligor on such Mortgage Loan;
9. Original complete appraisal obtained with respect to the
applicable Property obtained in connection with the Mortgage Loan;
10. Original or certified copy of mortgagee's title insurance
policy insuring the lien of the Mortgage Loan against the applicable Property;
and
11. Such other documents as the Administrative Agent may
reasonably request from time to time, including but not limited to verification
of employment of the Obligor
on such Mortgage Loan, verification of deposit by such Obligor (if applicable),
and any inspection reports performed with respect to such Obligor or the
Property covered by such Mortgage Loan.
GUARANTY
GUARANTY, dated as of June 30, 1998, made by EMERGENT GROUP,
INC., a South Carolina corporation (the "Guarantor"), in favor of THE CIT
GROUP/BUSINESS CREDIT, INC., as agent for the Lenders (the "Administrative
Agent") pursuant to the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, HomeGold, Inc. and Carolina Investors, Inc., each a
South Carolina corporation (each a "Company" and collectively, the "Companies"),
the financial institutions from time to time party thereto (the "Lenders"), and
the Administrative Agent are parties to a Mortgage Loan Warehousing Agreement,
dated as of June 30, 1998 (such Agreement, as amended, restated or otherwise
modified from time to time, being hereinafter referred to as the "Credit
Agreement");
WHEREAS, the Guarantor directly owns all of the issued and
outstanding shares of capital stock of each of the Companies; and
WHEREAS, pursuant to the Credit Agreement, the Guarantor is
required to execute and deliver to the Administrative Agent a guaranty
guaranteeing the Loans (as defined in the Credit Agreement) to the Companies and
all other Obligations (as hereinafter defined) under the Credit Documents (as
defined in the Credit Agreement);
NOW, THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Lenders to make and maintain the
Loans pursuant to the Credit Agreement, the Guarantor hereby agrees with the
Lenders as follows:
SECTION 1. Definitions. Reference is hereby made to the Credit
Agreement for a statement of the terms thereof. All terms used in this Guaranty
which are defined therein and not otherwise defined herein shall have the same
meanings herein as set forth therein.
SECTION 2. Guaranty. The Guarantor hereby (i) irrevocably,
absolutely and unconditionally guarantees the prompt payment by the Companies as
and when due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), of all (A) amounts now or hereafter owing in
respect of the Notes, the Credit Agreement and the other Credit Documents,
including, without limitation, all Obligations (as defined in the Credit
Agreement), whether for principal, interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
a Company whether or not a claim for post-filing interest is allowed in such
proceeding), fees, expenses or otherwise, and (B) indebtedness, obligations and
other liabilities, direct or indirect, absolute or contingent, now existing or
hereafter arising of the Companies to the Administrative Agent and the Lenders
(the "Obligations"), and (ii) agrees to pay any and all expenses (including
reasonable counsel fees and expenses) incurred by the Administrative Agent and
the Lenders in enforcing their rights under this Guaranty.
1
SECTION 3. Guarantor's Obligations Unconditional.
(a) The Guarantor hereby guarantees that the Obligations will
be paid strictly in accordance with the terms of the Credit Documents to which
the Companies are a party, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Administrative Agent or the Lenders with respect thereto. The
Guarantor agrees that its guarantee constitutes a guaranty of payment when due
and not of collection, and waives any right to require that any resort be made
by the Administrative Agent or the Lenders to any Collateral. The obligations of
the Guarantor under this Guaranty are independent of the obligations under the
Credit Agreement and the other Credit Documents, and a separate action or
actions may be brought and prosecuted against the Guarantor to enforce this
Guaranty, irrespective of whether any action is brought against the Companies or
whether the Companies are joined in any such action. The liability of the
Guarantor hereunder shall be absolute and unconditional, irrespective of (i) any
lack of validity or enforceability of any Credit Document or any agreement or
instrument relating thereto; (ii) any extension or change in the time, manner or
place of payment of, or in any other term in respect of, all or any of the
Obligations (including, without limitation, any extension for longer than the
original period), or any other amendment or waiver of or consent to any
departure from any provision of any Credit Document other than this Guaranty
(including the creation or existence of any Obligations in excess of the amount
permitted by any lending formulas contained in the Credit Documents or the
amount evidenced by the Credit Documents); (iii) any exchange or release of, or
non-perfection of any lien on or security interest in, any Collateral, or any
release or amendment or waiver of or consent to any departure from any other
guaranty, for all or any of the Obligations; (iv) the existence of any claim,
set-off, defense or other right that the Guarantor may have against any Person,
including, without limitation, the Administrative Agent or the Lenders, or (v)
any other circumstance which might otherwise constitute a defense available to,
or a discharge of, the Companies or any other guarantor in respect of the
Obligations or the Guarantor in respect hereof.
(b) This Guaranty (i) is a continuing guaranty and shall
remain in full force and effect until such date on which the Loans, all of the
Obligations and all other expenses to be paid by the Guarantor pursuant hereto
shall have been satisfied in full, and (ii) shall continue to be effective or
shall be reinstated, as the case may be, if at any time any payment of any of
the Obligations is rescinded or must otherwise be returned by the Administrative
Agent upon the insolvency, bankruptcy or reorganization of the Companies or
otherwise, all as though such payment had not been made.
SECTION 4. Waivers. The Guarantor hereby waives, to the extent
permitted by applicable law, (i) promptness and diligence; (ii) notice of
acceptance and notice of the incurrence of any Obligation by the Companies;
(iii) notice of any actions taken by the Administrative Agent, any Lender or the
Companies or any other Obligor under any Credit Document or any other agreement
or instrument relating thereto; (iv) all other notices, demands and protests,
and all other formalities of every kind in connection with the enforcement of
the Obligations or of the obligations of the Guarantor hereunder, the omission
of or delay in which, but for the provisions of this Section 4, might constitute
grounds for relieving the Guarantor of its obligations hereunder; (v) any right
to compel or direct the Administrative Agent or the Lenders to seek payment or
recovery
2
of any amounts owed under this Guaranty from any one particular fund or source;
(vi) any requirement that the Administrative Agent protect, secure, perfect or
insure any security interest or lien or any property subject thereto or exhaust
any right or take any action against the Companies or any other Person or any
Collateral and (vii) any other defense available to the Guarantor.
SECTION 5. Subrogation. The Guarantor hereby irrevocably
waives and agrees it will not exercise any and all rights which it has or may
have at any time or from time to time (whether arising directly or indirectly by
operation of law or contract) to assert any claim against the Companies on
account of any payments made under this Agreement or otherwise, including,
without limitation, any and all existing and future rights of subrogation,
reimbursement, exoneration, contribution and/or indemnity. If any amount shall
be paid to the Guarantor on account of such subrogation rights at any time when
all of the Obligations and all such other expenses shall not have been paid in
full, such amount shall be held in trust for the benefit of the Administrative
Agent and the Lenders, shall be segregated from the other funds of the Guarantor
and shall forthwith be paid over to the Administrative Agent to be applied in
whole or in part by the Administrative Agent against the Obligations, whether
matured or unmatured, and all such other expenses in accordance with the terms
of the Credit Agreement.
SECTION 6. Representations and Warranties. The Guarantor
hereby represents and warrants as follows:
(a) It is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization as set
forth on the first page hereof, and has all requisite power and authority to
execute, deliver and perform this Guaranty and each other Credit Document to
which the Guarantor is a party.
(b) The execution, delivery and performance by the Guarantor
of this Guaranty and each other Credit Document to which the Guarantor is a
party (i) have been duly authorized by all necessary corporate action; (ii) do
not and will not contravene its organizational documents or any applicable law;
(iii) do not and will not violate any contractual restriction binding on or
otherwise affecting the Guarantor or any of its properties; and (iv) do not and
will not result in or require the creation of any lien, security interest or
other charge or encumbrance upon or with respect to any of its properties (other
than pursuant to any Credit Document).
(c) No authorization, approval or other action by, and no
notice to or filing with, any Governmental Authority or other regulatory body is
required in connection with the due execution, delivery and performance by the
Guarantor of this Guaranty or any of the other Credit Documents to which the
Guarantor is a party.
(d) Each of this Guaranty and the other Credit Documents to
which the Guarantor is a party is a legal, valid and binding obligation of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws and general principles affecting the
enforcement of creditors' rights generally.
3
(e) There is no pending or, to the best knowledge of the
Guarantor, threatened action, suit or proceeding against the Guarantor or to
which any of the properties of the Guarantor is subject before any court, or
other foreign, Federal, State or local governmental authority or any arbitrator
(i) which challenges the validity or enforceability of this Guaranty or any of
the other Credit Documents to which the Guarantor is a party, or (ii) in which
there is a reasonable possibility of an adverse decision which would materially
adversely affect the business, operations or financial condition of the
Guarantor.
(f) The Guarantor now has and will continue to have
independent means of obtaining information concerning the affairs, financial
condition and business of the Companies, and has no need of, or right to obtain
from the Administrative Agent or any Lender, any credit or other information
concerning the affairs, financial condition or business of the Companies that
may come under the control of the Administrative Agent or any Lender.
SECTION 7. Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default, the Administrative Agent and the
Lenders may, and are hereby authorized to, at any time and from time to time,
without notice to the Guarantor (any such notice being expressly waived by the
Guarantor) and to the fullest extent permitted by law, set-off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by the Administrative Agent
or any Lender to or for the credit of the account of the Guarantor against any
and all obligations of the Guarantor now or hereafter existing under this
Guaranty, irrespective of whether or not the Administrative Agent or any Lender
shall have made any demand under this Guaranty and although such obligations may
be contingent or unmatured. The Administrative Agent and the Lenders agree to
notify the Guarantor promptly after any such set-off and application made by the
Administrative Agent or such Lender, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Administrative Agent and the Lenders under this Section 7 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) which the Administrative Agent and the Lenders may have.
SECTION 8. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Guarantor, to it at its address specified on the signature page hereto;
if to the Administrative Agent, to it at its address as specified in the Credit
Agreement; or, as to any such Person, at such other address as shall be
designated by such Person in a written notice to such other Persons complying as
to delivery with the terms of this Section 8. All such notices and other
communications shall be effective (i) if mailed, three days after being
deposited in the mails, (ii) if telecopied, when sent and a confirmation is
received and (iii) if delivered, upon delivery.
SECTION 9. Consent to Jurisdiction; Waiver of Immunities.
(a) The Guarantor hereby irrevocably submits to the
jurisdiction of any New York State or Federal court sitting in New York City in
any action or proceeding arising out of or relating to this Guaranty, and the
Guarantor hereby irrevocably agrees that all claims in respect of
4
such action or proceeding may be heard and determined in such New York State or
Federal court. The Guarantor hereby irrevocably appoints Xxxx X. Xxxxxx (the
"Process Agent"), with an office on the date hereof at Xxxxx 000, 00 Xxxxx Xxxx
Xxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, as its agent to receive on behalf of
the Guarantor and its property service of copies of the summons and complaint
and any other process which may be served in any such action or proceeding. Such
service may be made by mailing (by certified or registered mail, postage prepaid
and return receipt requested) or delivering a copy of such process to the
Guarantor in care of the Process Agent at the Process Agent's above address, and
the Guarantor hereby irrevocably authorizes and directs the Process Agent to
accept such service on its behalf. As an alternative method of service, the
Guarantor also irrevocably consents to the service of any and all process in any
such action or proceeding by the mailing of copies of such process to the
Guarantor at its address specified in Section 8 hereof. The Guarantor agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
(b) Nothing in this Section 9 shall affect the right of the
Administrative Agent to serve legal process in any other manner permitted by law
or affect the right of the Administrative Agent to bring any action or
proceeding against the Guarantor or its property in the courts of any other
jurisdictions.
(c) The Guarantor hereby expressly and irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of venue of any such litigation brought in any such court
referred to above and any claim that any such litigation has been brought in an
inconvenient forum. To the extent that the Guarantor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution or otherwise) with respect to itself or its property, the
Guarantor hereby irrevocably waives such immunity in respect of its obligations
under this Guaranty and the other Credit Documents.
SECTION 10. WAIVER OF JURY TRIAL. EACH OF THE GUARANTOR AND,
BY ACCEPTANCE HEREOF, THE ADMINISTRATIVE AGENT AND THE LENDERS WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY
RIGHTS UNDER THIS GUARANTY, THE CREDIT AGREEMENT OR UNDER ANY AMENDMENT, WAIVER,
CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE
FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY, AND AGREES THAT ANY SUCH
ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
SECTION 11. Miscellaneous.
(a) The Guarantor will make each payment hereunder in Dollars
and in immediately available funds to the Administrative Agent, for the benefit
of the Lenders, at such address specified by the Administrative Agent from time
to time by notice to the Guarantor.
5
(b) No amendment of any provision of this Guaranty shall be
effective unless it is in writing and signed by the Guarantor and the
Administrative Agent, and no waiver of any provision of this Guaranty, and no
consent to any departure by the Guarantor therefrom, shall be effective unless
it is in writing and signed by the Administrative Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(c) No failure on the part of the Administrative Agent, acting
on behalf of the Lenders, to exercise, and no delay in exercising, any right
hereunder or under any other Credit Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any right preclude any other or
further exercise thereof or the exercise of any other right. The rights and
remedies of the Administrative Agent and the Lenders provided herein and in the
other Credit Documents are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law. The rights of the Administrative
Agent and the Lenders under any Credit Document against any party thereto are
not conditional or contingent on any attempt by the Administrative Agent and the
Lenders to exercise any of their rights under any other Credit Document against
such party or against any other Person.
(d) Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and
its successors and assigns, and (ii) inure, together with all rights and
remedies of the Administrative Agent and the Lenders hereunder, to the benefit
of the Administrative Agent and the Lenders and their respective successors,
transferees and assigns. Without limiting the generality of clause (ii) of the
immediately preceding sentence, to the extent permitted by Section 10.13 of the
Credit Agreement, any Lender may assign or otherwise transfer any Note held by
it, and assign or otherwise transfer its rights under any other Credit Document,
to any other Person, and such other Person shall thereupon become vested with
all of the benefits in respect thereof granted to the Lenders herein or
otherwise. None of the rights or obligations of the Guarantor hereunder may be
assigned or otherwise transferred without the prior written consent of the
Administrative Agent.
(f) This Guaranty shall be governed by, and construed in
accordance with the internal laws of the State of New York applicable to
contracts made and to be performed therein without regard to conflict of law
principles.
6
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be executed by an officer thereunto duly authorized, as of the date first above
written.
EMERGENT GROUP, INC.
By: ___________________________
Name:
Title:
Address for Notices:
00 Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention:
Telecopier No.: ( )
7
NOTE
$200,000,000 Dated: June 30, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, HOMEGOLD, INC., a South Carolina
corporation, and CAROLINA INVESTORS, INC., a South Carolina corporation (the
"Borrowers"), HEREBY JOINTLY AND SEVERALLY PROMISE TO PAY to the order of THE
CIT GROUP/BUSINESS CREDIT, INC. (the "Lender") (i) the principal amount of TWO
HUNDRED MILLION DOLLARS ($200,000,000), or if less, the aggregate unpaid
principal amount of all Loans (as defined in the Credit Agreement hereinafter
referred to) made by the Lender to the Borrower, payable on the Maturity Date
(as defined in the Credit Agreement) and (ii) interest on the unpaid principal
amount of all Loans, from the date hereof until all such principal amounts are
paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.
Notwithstanding any other provision of this Note, interest
paid or becoming due hereunder shall in no event exceed the maximum rate
permitted by applicable law. Both principal and interest are payable in lawful
money of the United States of America in immediately available funds to The CIT
Group/Business Credit, Inc., as agent (the "Administrative Agent"), at its
office located at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 or such
other office as the Administrative Agent may designate.
This Note is the Note referred to in, and is entitled to the
benefits of, the Mortgage Loan Warehousing Agreement dated as of June 30, 1998
(as amended or otherwise modified from time to time, the "Credit Agreement"), by
and among the Borrowers, the financial institutions from time to time party to
the Credit Agreement and the Administrative Agent. The Credit Agreement, among
other things, contains provisions for certain stated events of default and also
for prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions specified therein. The Borrowers hereby waive
presentment for payment, demand, protest and notice of dishonor of this Note.
This Note shall be governed by, and construed and interpreted
in accordance with, the internal laws of the State of New York applicable to
contracts made and to be performed therein without consideration as to choice of
law.
HOMEGOLD, INC. CAROLINA INVESTORS, INC.
By:_____________________________________ By:__________________________________
Name: Xxxxx X. Xxxx Name: Xxxxx X. Xxxx
Title: Executive Vice President, Title: Executive Vice President,
CFO, Treasurer and CFO, Treasurer and
Assistant Secretary Secretary
PARENT PLEDGE AGREEMENT
PARENT PLEDGE AGREEMENT dated as of June 30, 1998, made by
EMERGENT GROUP, INC., a South Carolina corporation (the "Pledgor"), in favor of
THE CIT GROUP/BUSINESS CREDIT, INC., as agent for the Lenders parties to the
Credit Agreement referred to below (in such capacity, the "Administrative
Agent").
W I T N E S S E T H:
WHEREAS, HomeGold, Inc. and Carolina Investors, Inc.
(collectively, the "Companies"), the financial institutions from time to time
party to the Credit Agreement (the "Lenders"), and the Administrative Agent are
parties to a Mortgage Loan Warehousing Agreement, dated as of June 30, 1998
(such Agreement, as amended, restated or otherwise modified from time to time,
being hereinafter referred to as the "Credit Agreement");
WHEREAS, pursuant to a Guaranty dated June 30, 1998 (the
"Guaranty"), the Pledgor has agreed to guarantee the obligations of the
Companies under the Credit Agreement;
WHEREAS, the Pledgor owns all of the outstanding capital stock
of each of the Companies and no less than 80% of the outstanding capital stock
of Sterling Lending Corporation ("Sterling");
WHEREAS, it is a condition precedent to the Lenders making and
maintaining Loans under the Credit Agreement that the Pledgor shall have
executed and delivered to the Administrative Agent a pledge agreement providing
for the pledge to the Administrative Agent of, and the grant to the
Administrative Agent for the benefit of the Lenders of a security interest in
all of the issued and outstanding shares of capital stock from time to time
owned by the Pledgor in each of the Companies and Sterling;
WHEREAS, the Pledgor has determined that the execution,
delivery and performance of this Agreement directly benefits, and is in the best
interest of the Pledgor;
NOW, THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Administrative Agent and the
Lenders to enter into the Credit Agreement with the Companies, the Pledgor
hereby agrees with the Administrative Agent as follows:
SECTION 1. Definitions. All terms used in this Agreement which
are defined in the Credit Agreement or in Article 8 or Article 9 of the Uniform
Commercial Code (the "Code") currently in effect in the State of New York and
which are not otherwise defined herein shall have the same meanings herein as
set forth therein.
SECTION 2. Pledge and Grant of Security Interest. As
collateral security for all of the Obligations (as defined in Section 3 hereof),
the Pledgor hereby pledges and collaterally
assigns to the Administrative Agent, and grants to the Administrative Agent for
the benefit of the Lenders a continuing security interest in, the following (the
"Pledged Collateral"):
(a) the shares of stock described in Schedule I hereto (the
"Pledged Shares") issued by the Companies, the certificates representing the
Pledged Shares, all warrants, options and other rights, contractual or
otherwise, in respect thereof and all dividends, interest, cash, instruments and
other property (including but not limited to, any stock dividend and any
distribution in connection with a stock split) from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Shares, including, without limitation, by way of redemption,
bonus, preference, option rights or otherwise;
(b) all additional shares of stock, from time to time acquired
by the Pledgor, of the Companies, the certificates representing such additional
shares, all options and other rights, contractual or otherwise, in respect
thereof and all dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such additional shares; and
(c) all proceeds of any and all of the foregoing;
in each case, whether now owned or hereafter acquired by the
Pledgor and howsoever its interest therein may arise or appear (whether by
ownership, security interest, claim or otherwise).
SECTION 3. Security for Obligations. The security interest
created hereby in the Pledged Collateral constitutes continuing collateral
security for all of the following obligations whether now existing or hereafter
incurred (the "Obligations"):
(a) the prompt payment by the Pledgor, as and when due and
payable, of all amounts from time to time owing by it in respect of its Guaranty
and the other Credit Documents to which it is a party, including, without
limitation, principal of and interest on the Loans (including, without
limitation, all interest that accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any Company, whether or not a claim for post-filing interest
is allowed in such proceeding), and all interest thereon, all fees, commissions,
expense reimbursements, indemnifications and all other amounts due or to become
due under any Credit Document to which it is a party; and
(b) the due performance and observance by the Pledgor of all
of its other obligations from time to time existing in respect of its Guaranty
and the other Credit Documents to which it is a party.
SECTION 4. Delivery of the Pledged Collateral.
(a) All certificates currently representing the Pledged Shares
shall be delivered to the Administrative Agent, together with any necessary
indorsement and/or appropriate stock transfer form duly executed in blank, on or
prior to the execution and delivery of this Agreement. All other promissory
notes, certificates and instruments constituting Pledged
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Collateral from time to time or required to be pledged to the Administrative
Agent pursuant to the terms of the Credit Documents to which it is a party (the
"Additional Collateral") shall be delivered to the Administrative Agent within
10 Business Days of receipt thereof by or on behalf of the Pledgor. All such
promissory notes, certificates and instruments shall be held by or on behalf of
the Administrative Agent pursuant hereto and shall be delivered in suitable form
for transfer by delivery or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to the Administrative Agent. Within 10 Business Days of the receipt
by the Pledgor of the Additional Collateral, a Pledge Amendment, duly executed
by the Pledgor, in substantially the form of Schedule II hereto (a "Pledge
Amendment") shall be delivered to the Administrative Agent, in respect of the
Additional Collateral which are to be pledged pursuant to this Agreement and the
Credit Agreement, which Pledge Amendment shall from and after delivery thereof
constitute part of Schedule I hereto. The Pledgor hereby authorizes the
Administrative Agent to attach each Pledge Amendment to this Agreement and
agrees that all certificates or instruments listed on any Pledge Amendment
delivered to the Administrative Agent shall for all purposes hereunder
constitute Pledged Collateral and the Pledgor shall be deemed upon delivery
thereof to have made the representations and warranties set forth in Section 5
with respect to such Additional Collateral.
(b) If the Pledgor shall receive, by virtue of its being or
having been an owner of any Pledged Collateral, any (i) stock certificate
(including, without limitation, any certificate representing a stock dividend or
distribution in connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets, combination of shares,
stock split, spinoff or split-off), promissory note or other instrument, (ii)
option or right, whether as an addition to, substitution for, or in exchange
for, any Pledged Collateral, or otherwise, (iii) dividends payable in cash
(except such dividends permitted to be retained by the Pledgor pursuant to
Section 7 hereof) or in securities or other property or (iv) dividends or other
distributions in connection with a partial or total liquidation or dissolution
or in connection with a reduction of capital, capital surplus or paid-in
surplus, the Pledgor shall receive such stock certificate, promissory note,
instrument, option, right, payment or distribution in trust for the benefit of
the Administrative Agent, shall segregate it from the Pledgor's other property
and shall deliver it forthwith to the Administrative Agent in the exact form
received, with any necessary indorsement and/or appropriate stock powers or
stock transfer forms duly executed in blank, to be held by the Administrative
Agent as Pledged Collateral and as further collateral security for the
Obligations.
SECTION 5. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledged Shares have been duly authorized and validly
issued, are fully paid and nonassessable and constitute all of the issued shares
of capital stock of each of HomeGold, Inc. and Carolina Investors, Inc. as of
the date hereof. All other shares of stock constituting Pledged Collateral will
be, when issued, duly authorized and validly issued, fully paid and
nonassessable.
-3-
(b) The Pledgor is and will be at all times the legal and
beneficial owner of the Pledged Collateral free and clear of any Lien, security
interest, option or other charge or encumbrance except for the security interest
created by this Agreement and Liens permitted by the Credit Agreement and the
other Credit Documents to which it is a party.
(c) The exercise by the Administrative Agent of any of its
rights and remedies hereunder will not contravene law or any material
contractual restriction binding on or affecting the Pledgor or any of its
properties and will not result in or require the creation of any Lien, security
interest or other charge or encumbrance upon or with respect to any of its
properties other than pursuant to this Agreement and the other Credit Documents.
(d) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority is required to be obtained
or made by the Pledgor for (i) the due execution, delivery and performance by
the Pledgor of this Agreement, (ii) the grant by the Pledgor, or the perfection,
of the security interest purported to be created hereby in the Pledged
Collateral or (iii) the exercise by the Administrative Agent or the Lenders of
any of their rights and remedies hereunder, except as may be required in
connection with any sale of any Pledged Collateral by laws affecting the
offering and sale of securities generally.
(e) This Agreement creates a valid security interest in favor
of the Administrative Agent in the Pledged Collateral, as security for the
Obligations. The Administrative Agent's having possession of the promissory
notes evidencing the Pledged Debt, the certificates representing the Pledged
Shares and all other certificates, instruments and cash constituting Pledged
Collateral from time to time results in the perfection of such security
interest. Such security interest is, or in the case of Pledged Collateral in
which the Pledgor obtains rights after the date hereof, will be, a perfected,
first priority security interest. All action necessary or desirable to perfect
and protect such security interest has been duly taken, except for the
Administrative Agent's having possession of certificates, instruments and cash
constituting Pledged Collateral after the date hereof.
(f) The execution, delivery and performance of this Agreement
will not violate any provision of the EGI Note Indenture, including, without
limitation, Section 1012 thereof, and the Lien created and evidenced by this
Pledge Agreement constitutes a "Permitted Lien" under the terms of the EGI Note
Indenture.
SECTION 6. Covenants as to the Pledged Collateral. So long as
any Obligations shall remain outstanding, the Pledgor will, unless the
Administrative Agent shall otherwise consent in writing:
(a) keep adequate records concerning the Pledged Collateral
and permit the Administrative Agent or any agents or representatives thereof at
any time or from time to time to examine and make copies of and abstracts from
such records pursuant to the terms of Section 6.05 of the Credit Agreement;
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(b) at its expense, upon the request of the Administrative
Agent, promptly deliver to the Administrative Agent a copy of each material
notice or other communication received by it in respect of the Pledged
Collateral;
(c) at its expense, defend the Administrative Agent's right,
title and security interest in and to the Pledged Collateral against the claims
of any Person;
(d) at its expense, at any time and from time to time,
promptly execute and deliver all further instruments and documents and take all
further action that may be necessary or that the Administrative Agent may
reasonably request in order to (i) perfect and protect the security interest
purported to be created hereby, (ii) enable the Administrative Agent to exercise
and enforce its rights and remedies hereunder in respect of the Pledged
Collateral or (iii) otherwise effect the purposes of this Agreement, including,
without limitation, delivering to the Administrative Agent, after the occurrence
and during the continuation of an Event of Default, irrevocable proxies in
respect of the Pledged Collateral;
(e) not sell, assign (by operation of law or otherwise),
exchange or otherwise dispose of any Pledged Collateral or any interest therein
except as permitted by Section 7(a)(i) hereof;
(f) not create or suffer to exist any Lien, security interest
or other charge or encumbrance upon or with respect to any Pledged Collateral
except for the security interest created hereby or pursuant to any other Credit
Document to which it is a party;
(g) not make or consent to any amendment or other modification
or waiver with respect to any Pledged Collateral or enter into any agreement or
permit to exist any restriction with respect to any Pledged Collateral other
than pursuant to the Credit Documents and applicable securities laws;
(h) not permit the issuance of (i) any additional shares of
any class of capital stock of a Company, (ii) any securities convertible
voluntarily by the holder thereof or automatically upon the occurrence or
non-occurrence of any event or condition into, or exchangeable for, any such
shares of capital stock or (iii) any warrants, options, contracts or other
commitments entitling any Person to purchase or otherwise acquire any such
shares of capital stock; and
(i) not take or fail to take any action which would in any
manner impair the enforceability of the Administrative Agent's security interest
in any Pledged Collateral.
SECTION 7. Voting Rights, Dividends, Etc. in Respect of the
Pledged Collateral.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) the Pledgor may exercise any and all voting and
other consensual rights pertaining to any Pledged Collateral for any purpose not
inconsistent with the terms of this
-5-
Agreement, the Credit Agreement or the other Credit Documents; provided,
however, that (A) the Pledgor will not exercise or refrain from exercising any
such right, as the case may be, if the Administrative Agent gives it notice
that, in the Administrative Agent's reasonable judgment, such action would have
a material adverse effect upon such Pledged Collateral and (B) the Pledgor will
give the Administrative Agent at least 5 Business Days' notice of the manner in
which it intends to exercise, or the reasons for refraining from exercising, any
such right which is reasonably likely to have a material adverse effect upon
such Pledged Collateral;
(ii) the Pledgor may receive and retain any and all
dividends paid in respect of the Pledged Collateral; provided, however, that any
and all (A) dividends paid or payable other than in cash in respect of, and
instruments and other property received, receivable or otherwise distributed in
respect of or in exchange for, any Pledged Collateral, (B) dividends and other
distributions paid or payable in cash in respect of any Pledged Collateral in
connection with a partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in surplus, and (C) cash
paid, payable or otherwise distributed in redemption of, or in exchange for, any
Pledged Collateral, shall be, and shall forthwith be delivered to the
Administrative Agent to hold as, Pledged Collateral and shall, if received by
the Pledgor, be received in trust for the benefit of the Administrative Agent,
shall be segregated from the other property or funds of the Pledgor, and shall
be forthwith delivered to the Administrative Agent in the exact form received
with any necessary indorsement and/or appropriate stock powers duly executed in
blank, to be held by the Administrative Agent as Pledged Collateral and as
further collateral security for the Obligations; and
(iii) the Administrative Agent will execute and
deliver (or cause to be executed and delivered) to the Pledgor all such proxies
and other instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights which it is
entitled to exercise pursuant to paragraph (i) of this Section 7(a) and to
receive the dividends which it is authorized to receive and retain pursuant to
paragraph (ii) of this Section 7(a).
(b) Upon the occurrence and during the continuance of an Event
of Default:
(i) all rights of the Pledgor to exercise the voting
and other consensual rights which it would otherwise be entitled to exercise
pursuant to paragraph (i) of subsection (a) of this Section 7, and to receive
the dividends which it would otherwise be authorized to receive and retain
pursuant to paragraph (ii) of subsection (a) of this Section 7, shall cease, and
all such rights shall thereupon become vested in the Administrative Agent which
shall thereupon have the sole right to exercise such voting and other consensual
rights and to receive and hold as Pledged Collateral such dividends and interest
payments;
(ii) without limiting the generality of the
foregoing, the Administrative Agent may at its option exercise any and all
rights of conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Pledged Collateral as if it were the absolute
owner thereof, including, without limitation, the right to exchange, in its
discretion, any and all of the Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization
-6-
or other adjustment of a Company, or upon the exercise by a Company of any
right, privilege or option pertaining to any Pledged Collateral, and, in
connection therewith, to deposit and deliver any and all of the Pledged
Collateral with any committee, depository, transfer agent, registrar or other
designated agent upon such terms and conditions as it may determine; and
(iv) all dividends and interest payments which are
received by the Pledgor contrary to the provisions of paragraph (i) of this
Section 7(b) shall be received in trust for the benefit of the Administrative
Agent, shall be segregated from other funds of the Pledgor, and shall be
forthwith paid over to the Administrative Agent as Pledged Collateral in the
exact form received with any necessary indorsement and/or appropriate stock
powers duly executed in blank, to be held by the Administrative Agent as Pledged
Collateral and as further collateral security for the Obligations.
SECTION 8. Additional Provisions Concerning the Pledged Collateral.
(a) The Pledgor hereby authorizes the Administrative Agent to
file, without the signature of the Pledgor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to the
Pledged Collateral.
(b) The Pledgor hereby irrevocably appoints the Administrative
Agent the Pledgor's attorney-in-fact and proxy, with full authority in the place
and stead of the Pledgor and in the name of the Pledgor or otherwise, from time
to time in the Administrative Agent's discretion exercised reasonably and during
the continuance of an Event of Default, to take any action and to execute any
instrument which the Administrative Agent may deem necessary or reasonably
advisable to accomplish the purposes of this Agreement (subject to the rights of
the Pledgor under Section 7(a) hereof), including, without limitation, to
receive, indorse and collect all instruments made payable to the Pledgor
representing any dividend, interest payment or other distribution in respect of
any Pledged Collateral and to give full discharge for the same.
(c) If the Pledgor fails to perform any agreement or
obligation contained herein, the Administrative Agent itself may perform, or
cause performance of, such agreement or obligation, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by the
Pledgor pursuant to Section 10 hereof.
(d) Other than the exercise of reasonable care to assure the
safe custody of the Pledged Collateral while held hereunder, the Administrative
Agent shall have no duty or liability to preserve rights pertaining thereto and
shall be relieved of all responsibility for the Pledged Collateral upon
surrendering it or tendering surrender of it to the Pledgor. The Administrative
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral in its possession if the Pledged
Collateral is accorded treatment substantially equal to that which the
Administrative Agent accords its own property, it being understood that the
Administrative Agent shall not have responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relating to any Pledged Collateral, whether or not the
Administrative Agent has or is deemed to have knowledge of such matters, or (ii)
taking any necessary steps to preserve rights against any parties with respect
to any Pledged Collateral.
-7-
(e) The Administrative Agent may at any time after the
occurrence and during the continuation of an Event of Default and to the extent
not inconsistent with the Credit Documents in its discretion (i) without notice
to the Pledgor, transfer or register in the name of the Administrative Agent or
any of its nominees any or all of the Pledged Collateral, subject only to the
revocable rights of the Pledgor under Section 7(a) hereof, and (ii) exchange
certificates or instruments constituting Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 9. Remedies Upon Default. If any Event of Default
shall have occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Pledged Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all of the rights and remedies of a secured party
on default under the Code then in effect in the State of New York; and without
limiting the generality of the foregoing and without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange or broker's board or elsewhere, at such
price or prices and on such other terms as the Administrative Agent may deem
commercially reasonable. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least 10 Business Days' notice to the Pledgor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Administrative Agent
shall not be obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. The Administrative Agent may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) The Pledgor recognizes that it is impracticable to effect
a public sale of all or any part of the Pledged Shares or any other securities
constituting Pledged Collateral and that the Administrative Agent may,
therefore, determine to make one or more private sales of any such securities to
a restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges that
any such private sale may be at prices and on terms less favorable to the seller
than the prices and other terms which might have been obtained at a public sale
and, notwithstanding the foregoing, agrees that such private sales shall be
deemed to have been made in a commercially reasonable manner and that the
Administrative Agent shall have no obligation to delay sale of any such
securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the Securities Act
of 1933, as amended (the "Securities Act"). The Pledgor further acknowledges and
agrees that any offer to sell such securities which has been (i) publicly
advertised on a bona fide basis in a newspaper or other publication of general
circulation in the financial community of New York, New York (to the extent that
such an offer may be so advertised without prior registration under the
Securities Act) or (ii) made privately in the manner described above to not less
than fifteen bona fide offerees shall be deemed to involve a "public sale" for
the purposes of Section 9-504(3) of the Code (or any successor or similar,
applicable statutory provision) as then in effect in the State of New York,
notwithstanding that
-8-
such sale may not constitute a "public offering" under the Securities Act, and
that the Administrative Agent may, in such event, bid for the purchase of such
securities.
(c) Any cash held by the Administrative Agent as Pledged
Collateral and all cash proceeds received by the Administrative Agent in respect
of any sale of, collection from, or other realization upon, all or any part of
the Pledged Collateral may, in the discretion of the Administrative Agent, be
held by the Administrative Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Administrative
Agent pursuant to Section 10 hereof) in whole or in part by the Administrative
Agent against, all or any part of the Obligations in such order as the
Administrative Agent shall elect consistent with the provisions of the Credit
Documents. Any surplus of such cash or cash proceeds held by the Administrative
Agent and remaining after payment in full of all of the Obligations shall be
paid over to the Pledgor or to such person as may be lawfully entitled to
receive such surplus.
(d) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which the
Administrative Agent or any Lender is legally entitled, the Pledgor shall be
liable for the deficiency, together with interest thereon at the highest rate
specified in the Credit Agreement for interest on overdue principal thereof or
such other rate as shall be fixed by applicable law, together with the costs of
collection and the reasonable fees of any attorneys employed by the
Administrative Agent and any Lender to collect such deficiency.
SECTION 10. Indemnity and Expenses.
(a) The Pledgor agrees to indemnify the Administrative Agent
from and against any and all claims, losses and liabilities growing out of or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities resulting solely and
directly from the Administrative Agent's gross negligence or willful misconduct
as determined by a final judgment of a court of competent jurisdiction.
(b) The Pledgor will upon demand pay to the Administrative
Agent the amount of any and all reasonable costs and expenses, including the
reasonable fees and disbursements of the Administrative Agent's counsel and of
any experts and agents, which the Administrative Agent may incur in connection
with (i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization upon,
any Pledged Collateral, (iii) the exercise or enforcement of any of the rights
of the Administrative Agent or any of the Lenders hereunder, or (iv) the failure
by the Pledgor to perform or observe any of the provisions hereof.
SECTION 11. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Pledgor, to it at its address specified in the Guaranty, and if to the
Administrative Agent, to it at its address specified in the Credit Agreement, or
as to either such Person at such other address as shall be designated by such
Person in a written notice to such other Person complying as to delivery with
the terms of this Section 11. All such notices and other communications shall be
effective (i) if mailed, three days
-9-
after being deposited in the mails, (ii) if telecopied, when sent and
confirmation is received, or (iii) if delivered, upon delivery.
SECTION 12. Consent to Jurisdiction, Etc.
(a) Any legal action or proceeding with respect to this
Agreement or any document related thereto may be brought in the courts of the
State of New York or of the United States of America for the Southern District
of New York, and, by execution and delivery of this Agreement, the Pledgor
hereby accepts unconditionally the jurisdiction of the aforesaid courts. The
Pledgor hereby irrevocably waives any objection, including without limitation,
any objection to the laying of venue or based on the grounds of forum non
conveniens, which the Pledgor may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions.
(b) The Pledgor irrevocably consents to the service of process
of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Pledgor at its address referred to in Section 11 hereof.
(c) Nothing contained in this Section 12 shall affect the
right of the Administrative Agent to serve legal process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the Pledgor in any other jurisdiction.
SECTION 13. Waiver of Jury Trial. EACH OF THE PLEDGOR AND THE
ADMINISTRATIVE AGENT (BY ACCEPTING THIS AGREEMENT) WAIVES ANY RIGHT TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR ARISING FROM ANY OTHER CREDIT
DOCUMENT AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 14. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Pledgor and the
Administrative Agent, and no waiver of any provision of this Agreement, and no
consent to any departure by the Pledgor therefrom, shall be effective unless it
is in writing and signed by the Administrative Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(b) No failure on the part of the Administrative Agent to
exercise, and no delay in exercising, any right hereunder or under any other
document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Administrative Agent
provided herein and in the other Credit Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The
rights of the Administrative
-10-
Agent under any document against any party thereto are not conditional or
contingent on any attempt by the Administrative Agent to exercise any of its
rights under any other document against such party or against any other person.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest
in the Pledged Collateral and shall (i) remain in full force and effect until
the payment in full or release of the Obligations after the Total Commitment has
been terminated and (ii) be binding on the Pledgor and by its acceptance hereof,
the Administrative Agent, and their respective successors and assigns and shall
inure, together with all rights and remedies of the Administrative Agent and the
Lenders hereunder, to the benefit of the Pledgor, the Administrative Agent and
the Lenders and their respective successors, transferees and assigns. Without
limiting the generality of clause (ii) of the immediately preceding sentence,
the Administrative Agent may assign or otherwise transfer its rights and
obligations under this Agreement to any other Person pursuant to the terms of
the Credit Agreement, and such other Person shall thereupon become vested with
all of the benefits in respect thereof granted to the Administrative Agent
herein or otherwise. Upon any such assignment or transfer, all references in
this Agreement to the Administrative Agent shall mean the assignee of the
Administrative Agent. None of the rights or obligations of the Pledgor hereunder
may be assigned or otherwise transferred without the prior written consent of
the Administrative Agent.
(e) Upon the satisfaction in full of the Obligations after the
Total Commitment has been terminated, (i) this Agreement and the security
interest created hereby shall terminate and all rights to the Pledged Collateral
shall revert to the Pledgor, and (ii) the Administrative Agent will, upon the
Pledgor's request and at the Pledgor's expense promptly, (A) return to the
Pledgor such of the Pledged Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof and (B) execute and deliver
to the Pledgor, without recourse, representation or warranty, such documents as
the Pledgor shall reasonably request to evidence such termination.
(f) This Agreement shall be governed by and construed in
accordance with the law of the State of New York, except as required by
mandatory provisions of law and except to the extent that the validity and
perfection or the perfection and the effect of perfection or non-perfection of
the security interest created hereby, or remedies hereunder, in respect of any
particular Pledged Collateral are governed by the law of a jurisdiction other
than the State of New York.
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IN WITNESS WHEREOF, the Pledgor has caused this Agreement to
be executed and delivered by its officer thereunto duly authorized, as of the
date first above written.
EMERGENT GROUP, INC.
By: _____________________________
Name: _____________________________
Title: _____________________________
ACCEPTED AND AGREED:
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Administrative Agent
By: _______________________
Name:_________________________
Title: _______________________
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SCHEDULE I TO PLEDGE AGREEMENT
Pledged Shares
---------------
Name of Issuer Class Number of Certificate
-------------- ------ --------- -----------
Shares No.(s)
------- ------
HomeGold, Inc.
Carolina Investors, Inc.
Sterling Lending Corporation
SCHEDULE II
TO
PLEDGE AGREEMENT
PLEDGE AMENDMENT
This Pledge Amendment, dated ___________________________, is
delivered pursuant to Section 4 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge Agreement made by Emergent Group, Inc., dated June 30, 1998, as it may
heretofore have been or hereafter may be amended or otherwise modified or
supplemented from time to time and that the promissory notes or shares listed on
this Pledge Amendment shall be and become part of the Pledged Collateral
referred to in said Pledge Agreement and shall secure all of the Obligations
referred to in said Pledge Agreement.
Pledged Shares
--------------
Name of Issuer Number of Shares Class Certificate No(s)
-------------- ----------------- ----- -----------------
EMERGENT GROUP, INC.
By: __________________
Name:
Title:
SUBSIDIARY GUARANTY
SUBSIDIARY GUARANTY, dated as of June 30, 1998, made by
EMERGENT MORTGAGE CORP. OF TENNESSEE, a South Carolina corporation (the
"Guarantor"), in favor of THE CIT GROUP/BUSINESS CREDIT, INC., as agent for the
Lenders (the "Administrative Agent") pursuant to the Credit Agreement referred
to below.
W I T N E S S E T H :
WHEREAS, HomeGold, Inc., a South Carolina corporation
("HomeGold") and Carolina Investors, Inc., a South Carolina corporation
("Carolina" and together with HomeGold, each a "Company" and collectively, the
"Companies"), the financial institutions from time to time party thereto (the
"Lenders"), and the Administrative Agent are parties to a Mortgage Loan
Warehousing Agreement, dated as of June 30, 1998 (such Agreement, as amended,
restated or otherwise modified from time to time, being hereinafter referred to
as the "Credit Agreement");
WHEREAS, the Guarantor is a direct, wholly-owned Subsidiary of
HomeGold and is an Affiliate of Carolina;
WHEREAS, the Lenders are not willing to make the Loans to the
Companies unless the Guarantor unconditionally guarantees payment and
performance to the Lenders of the Obligations under the Credit Agreement (as
herein defined);
NOW, THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Lenders to make and maintain the
Loans pursuant to the Credit Agreement, the Guarantor hereby agrees with the
Lenders as follows:
SECTION 1. Definitions. Reference is hereby made to the Credit
Agreement for a statement of the terms thereof. All terms used in this Guaranty
which are defined therein and not otherwise defined herein shall have the same
meanings herein as set forth therein.
SECTION 2. Guaranty. The Guarantor hereby (i) irrevocably,
absolutely and unconditionally guarantees the prompt payment by the Companies as
and when due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), of all (A) amounts now or hereafter owing in
respect of the Notes, the Credit Agreement and the other Credit Documents,
including, without limitation, all Obligations (as defined in the Credit
Agreement), whether for principal, interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
a Company whether or not a claim for post-filing interest is allowed in such
proceeding), fees, expenses or otherwise, and (B) indebtedness, obligations and
other liabilities, direct or indirect, absolute or contingent, now existing or
hereafter arising of the Companies to the Administrative Agent and the Lenders
(the "Obligations"), and (ii) agrees to pay any and all expenses (including
reasonable counsel fees and expenses) incurred by the Administrative Agent and
the Lenders in enforcing their rights under this Guaranty.
SECTION 3. Guarantor's Obligations Unconditional.
(a) The Guarantor hereby guarantees that the
Obligations will be paid strictly in accordance with the terms of the Credit
Documents to which the Companies are a party, regardless of any law, regulation
or order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of the Administrative Agent or the Lenders with respect
thereto. The Guarantor agrees that its guarantee constitutes a guaranty of
payment when due and not of collection, and waives any right to require that any
resort be made by the Administrative Agent or the Lenders to any Collateral. The
obligations of the Guarantor under this Guaranty are independent of the
obligations under the Credit Agreement and the other Credit Documents, and a
separate action or actions may be brought and prosecuted against the Guarantor
to enforce this Guaranty, irrespective of whether any action is brought against
the Companies or whether the Companies are joined in any such action. The
liability of the Guarantor hereunder shall be absolute and unconditional,
irrespective of (i) any lack of validity or enforceability of any Credit
Document or any agreement or instrument relating thereto; (ii) any extension or
change in the time, manner or place of payment of, or in any other term in
respect of, all or any of the Obligations (including, without limitation, any
extension for longer than the original period), or any other amendment or waiver
of or consent to any departure from any provision of any Credit Document other
than this Guaranty (including the creation or existence of any Obligations in
excess of the amount permitted by any lending formulas contained in the Credit
Documents or the amount evidenced by the Credit Documents); (iii) any exchange
or release of, or non-perfection of any lien on or security interest in, any
Collateral, or any release or amendment or waiver of or consent to any departure
from any other guaranty, for all or any of the Obligations; (iv) the existence
of any claim, set-off, defense or other right that the Guarantor may have
against any Person, including, without limitation, the Administrative Agent or
the Lenders, or (v) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Companies or any other guarantor in
respect of the Obligations or the Guarantor in respect hereof.
(b) This Guaranty (i) is a continuing guaranty and
shall remain in full force and effect until such date on which the Loans, all of
the Obligations and all other expenses to be paid by the Guarantor pursuant
hereto shall have been satisfied in full, and (ii) shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
of any of the Obligations is rescinded or must otherwise be returned by the
Administrative Agent upon the insolvency, bankruptcy or reorganization of the
Companies or otherwise, all as though such payment had not been made.
SECTION 4. Waivers. The Guarantor hereby waives, to the extent
permitted by applicable law, (i) promptness and diligence; (ii) notice of
acceptance and notice of the incurrence of any Obligation by the Companies;
(iii) notice of any actions taken by the Administrative Agent, any Lender or the
Companies or any other Obligor under any Credit Document or any other agreement
or instrument relating thereto; (iv) all other notices, demands and protests,
and all other formalities of every kind in connection with the enforcement of
the Obligations or of the obligations of the Guarantor hereunder, the omission
of or delay in which, but for the provisions of this Section 4, might constitute
grounds for relieving the Guarantor of its obligations hereunder; (v) any right
to compel or direct the Administrative Agent or the Lenders to seek payment or
recovery
of any amounts owed under this Guaranty from any one particular fund or source;
(vi) any requirement that the Administrative Agent protect, secure, perfect or
insure any security interest or lien or any property subject thereto or exhaust
any right or take any action against the Companies or any other Person or any
Collateral and (vii) any other defense available to the Guarantor.
SECTION 5. Subrogation. The Guarantor hereby irrevocably
waives and agrees it will not exercise any and all rights which it has or may
have at any time or from time to time (whether arising directly or indirectly by
operation of law or contract) to assert any claim against the Companies on
account of any payments made under this Agreement or otherwise, including,
without limitation, any and all existing and future rights of subrogation,
reimbursement, exoneration, contribution and/or indemnity. If any amount shall
be paid to the Guarantor on account of such subrogation rights at any time when
all of the Obligations and all such other expenses shall not have been paid in
full, such amount shall be held in trust for the benefit of the Administrative
Agent and the Lenders, shall be segregated from the other funds of the Guarantor
and shall forthwith be paid over to the Administrative Agent to be applied in
whole or in part by the Administrative Agent against the Obligations, whether
matured or unmatured, and all such other expenses in accordance with the terms
of the Credit Agreement.
SECTION 6. Representations and Warranties. The Guarantor
hereby represents and warrants as follows:
(a) It is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization as set forth on the first page hereof, and has all requisite power
and authority to execute, deliver and perform this Guaranty and each other
Credit Document to which the Guarantor is a party.
(b) The execution, delivery and performance by the
Guarantor of this Guaranty and each other Credit Document to which the Guarantor
is a party (i) have been duly authorized by all necessary corporate action; (ii)
do not and will not contravene its organizational documents or any applicable
law; (iii) do not and will not violate any contractual restriction binding on or
otherwise affecting the Guarantor or any of its properties; and (iv) do not and
will not result in or require the creation of any lien, security interest or
other charge or encumbrance upon or with respect to any of its properties (other
than pursuant to any Credit Document).
(c) No authorization, approval or other action by,
and no notice to or filing with, any Governmental Authority or other regulatory
body is required in connection with the due execution, delivery and performance
by the Guarantor of this Guaranty or any of the other Credit Documents to which
the Guarantor is a party.
(d) Each of this Guaranty and the other Credit
Documents to which the Guarantor is a party is a legal, valid and binding
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws and general principles
affecting the enforcement of creditors' rights generally.
(e) There is no pending or, to the best knowledge of
the Guarantor, threatened action, suit or proceeding against the Guarantor or to
which any of the properties of the Guarantor is subject before any court, or
other foreign, Federal, State or local governmental authority or any arbitrator
(i) which challenges the validity or enforceability of this Guaranty or any of
the other Credit Documents to which the Guarantor is a party, or (ii) in which
there is a reasonable possibility of an adverse decision which would materially
adversely affect the business, operations or financial condition of the
Guarantor.
(f) The Guarantor now has and will continue to have
independent means of obtaining information concerning the affairs, financial
condition and business of the Companies, and has no need of, or right to obtain
from the Administrative Agent or any Lender, any credit or other information
concerning the affairs, financial condition or business of the Companies that
may come under the control of the Administrative Agent or any Lender.
SECTION 7. Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default, the Administrative Agent and the
Lenders may, and are hereby authorized to, at any time and from time to time,
without notice to the Guarantor (any such notice being expressly waived by the
Guarantor) and to the fullest extent permitted by law, set-off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by the Administrative Agent
or any Lender to or for the credit of the account of the Guarantor against any
and all obligations of the Guarantor now or hereafter existing under this
Guaranty, irrespective of whether or not the Administrative Agent or any Lender
shall have made any demand under this Guaranty and although such obligations may
be contingent or unmatured. The Administrative Agent and the Lenders agree to
notify the Guarantor promptly after any such set-off and application made by the
Administrative Agent or such Lender, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Administrative Agent and the Lenders under this Section 7 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) which the Administrative Agent and the Lenders may have.
SECTION 8. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Guarantor, to it at its address as specified on the signature page
hereto; if to the Administrative Agent, to it at its address as set forth in the
Credit Agreement; or, as to any such Person, at such other address as shall be
designated by such Person in a written notice to such other Persons complying as
to delivery with the terms of this Section 8. All such notices and other
communications shall be effective (i) if mailed, three days after being
deposited in the mails, (ii) if telecopied, when sent and a confirmation is
received and (iii) if delivered, upon delivery.
SECTION 9. Consent to Jurisdiction; Waiver of Immunities.
(a) The Guarantor hereby irrevocably submits to the
jurisdiction of any New York State or Federal court sitting in New York City in
any action or proceeding arising out of or relating to this Guaranty, and the
Guarantor hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such New York State or
Federal court. The Guarantor hereby irrevocably appoints Xxxx X. Xxxxxx (the
"Process Agent"), with an office on the date hereof at Xxxxx 000, 00 Xxxxx Xxxx
Xxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, as its agent to receive on behalf of
the Guarantor and its property service of copies of the summons and complaint
and any other process which may be served in any such action or proceeding. Such
service may be made by mailing (by certified or registered mail, postage prepaid
and return receipt requested) or delivering a copy of such process to the
Guarantor in care of the Process Agent at the Process Agent's above address, and
the Guarantor hereby irrevocably authorizes and directs the Process Agent to
accept such service on its behalf. As an alternative method of service, the
Guarantor also irrevocably consents to the service of any and all process in any
such action or proceeding by the mailing of copies of such process to the
Guarantor at its address specified in Section 8 hereof. The Guarantor agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
(b) Nothing in this Section 9 shall affect the right of the
Administrative Agent to serve legal process in any other manner permitted by law
or affect the right of the Administrative Agent to bring any action or
proceeding against the Guarantor or its property in the courts of any other
jurisdictions.
(c) The Guarantor hereby expressly and irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of venue of any such litigation brought in any such court
referred to above and any claim that any such litigation has been brought in an
inconvenient forum. To the extent that the Guarantor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution or otherwise) with respect to itself or its property, the
Guarantor hereby irrevocably waives such immunity in respect of its obligations
under this Guaranty and the other Credit Documents.
SECTION 10. WAIVER OF JURY TRIAL. EACH OF THE GUARANTOR AND,
BY ACCEPTANCE HEREOF, THE ADMINISTRATIVE AGENT AND THE LENDERS WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY
RIGHTS UNDER THIS GUARANTY, THE CREDIT AGREEMENT OR UNDER ANY AMENDMENT, WAIVER,
CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE
FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY, AND AGREES THAT ANY SUCH
ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
SECTION 11. Fraudulent Transfers and Conveyances. The
Guarantor and the Administrative Agent (by its acceptance of the benefits of
this Guaranty) hereby confirm that it is their intention that this Guaranty not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Code of 1978, the Uniform Fraudulent Conveyance Act or any similar Federal or
state law. To effectuate the foregoing intention, the Guarantor and the
Administrative Agent
(by its acceptance of the benefits of this Guaranty) hereby irrevocably agree
that the Obligations guaranteed by the Guarantor shall be limited to such amount
as will, after giving effect to such maximum amount and all other (contingent or
otherwise) liabilities of the Guarantor that are relevant under such laws, and
after giving effect to any rights to contribution pursuant to any agreement
providing for an equitable contribution among any other guarantors, result in
the Obligations guaranteed by the Guarantor in respect of such maximum amount
not constituting a fraudulent transfer or conveyance.
SECTION 12. Miscellaneous.
(a) The Guarantor will make each payment hereunder in
Dollars and in immediately available funds to the Administrative Agent, for the
benefit of the Lenders, at such address specified by the Administrative Agent
from time to time by notice to the Guarantor.
(b) No amendment of any provision of this Guaranty
shall be effective unless it is in writing and signed by the Guarantor and the
Administrative Agent, and no waiver of any provision of this Guaranty, and no
consent to any departure by the Guarantor therefrom, shall be effective unless
it is in writing and signed by the Administrative Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(c) No failure on the part of the Administrative
Agent, acting on behalf of the Lenders, to exercise, and no delay in exercising,
any right hereunder or under any other Credit Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Administrative Agent and the Lenders provided herein and in
the other Credit Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the
Administrative Agent and the Lenders under any Credit Document against any party
thereto are not conditional or contingent on any attempt by the Administrative
Agent and the Lenders to exercise any of their rights under any other Credit
Document against such party or against any other Person.
(d) Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the
Guarantor and its successors and assigns, and (ii) inure, together with all
rights and remedies of the Administrative Agent and the Lenders hereunder, to
the benefit of the Administrative Agent and the Lenders and their respective
successors, transferees and assigns. Without limiting the generality of clause
(ii) of the immediately preceding sentence, to the extent permitted by Section
10.13 of the Credit Agreement, any Lender may assign or otherwise transfer any
Note held by it, and assign or otherwise transfer its rights under any other
Credit Document, to any other Person, and such other Person shall thereupon
become vested with all of the benefits in respect thereof granted to the Lenders
herein or otherwise. None of the rights or obligations of the Guarantor
hereunder may be assigned or otherwise transferred without the prior written
consent of the Administrative Agent.
(f) This Guaranty shall be governed by, and construed
in accordance with the internal laws of the State of New York applicable to
contracts made and to be performed therein without regard to conflict of law
principles.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be executed by an officer thereunto duly authorized, as of the date first above
written.
EMERGENT MORTGAGE CORP. OF TENNESSEE
By: ___________________________
Name:
Title:
Address for Notices:
00 Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention:___________________________
Telecopier No.: ( )________________
GUARANTY (STERLING)
GUARANTY, dated as of June 30, 1998, made by STERLING LENDING
CORPORATION, a South Carolina corporation (the "Guarantor"), in favor of THE CIT
GROUP/BUSINESS CREDIT, INC., as agent for the Lenders (the "Administrative
Agent") pursuant to the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, HomeGold, Inc. and Carolina Investors, Inc., each a
South Carolina corporation (each a "Company" and collectively, the "Companies"),
the financial institutions party thereto (the "Lenders"), and the Administrative
Agent are parties to a Mortgage Loan Warehousing Agreement, dated as of June 30,
1998 (such Agreement, as amended, restated or otherwise modified from time to
time, being hereinafter referred to as the "Credit Agreement");
WHEREAS, the Guarantor is an Affiliate of the Companies;
WHEREAS, the Lenders are not willing to make the Loans to the
Companies unless the Guarantor unconditionally guarantees payment and
performance to the Lenders of the Obligations under the Credit Agreement (as
herein defined);
NOW, THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Lenders to make and maintain the
Loans pursuant to the Credit Agreement, the Guarantor hereby agrees with the
Lenders as follows:
SECTION 1. Definitions. Reference is hereby made to the Credit
Agreement for a statement of the terms thereof. All terms used in this Guaranty
which are defined therein and not otherwise defined herein shall have the same
meanings herein as set forth therein.
SECTION 2. Guaranty. The Guarantor hereby (i) irrevocably,
absolutely and unconditionally guarantees the prompt payment by the Companies as
and when due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), of all (A) amounts now or hereafter owing in
respect of the Notes, the Credit Agreement and the other Credit Documents,
including, without limitation, all Obligations (as defined in the Credit
Agreement), whether for principal, interest (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
a Company whether or not a claim for post-filing interest is allowed in such
proceeding), fees, expenses or otherwise, and (B) indebtedness, obligations and
other liabilities, direct or indirect, absolute or contingent, now existing or
hereafter arising of the Companies to the Administrative Agent and the Lenders
(the "Obligations"), and (ii) agrees to pay any and all expenses (including
reasonable counsel fees and expenses) incurred by the Administrative Agent and
the Lenders in enforcing their rights under this Guaranty.
SECTION 3. Guarantor's Obligations Unconditional.
(a) The Guarantor hereby guarantees that the
Obligations will be paid strictly in accordance with the terms of the Credit
Documents to which the Companies are a party, regardless of any law, regulation
or order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of the Administrative Agent or the Lenders with respect
thereto. The Guarantor agrees that its guarantee constitutes a guaranty of
payment when due and not of collection, and waives any right to require that any
resort be made by the Administrative Agent or the Lenders to any Collateral. The
obligations of the Guarantor under this Guaranty are independent of the
obligations under the Credit Agreement and the other Credit Documents, and a
separate action or actions may be brought and prosecuted against the Guarantor
to enforce this Guaranty, irrespective of whether any action is brought against
the Companies or whether the Companies are joined in any such action. The
liability of the Guarantor hereunder shall be absolute and unconditional,
irrespective of (i) any lack of validity or enforceability of any Credit
Document or any agreement or instrument relating thereto; (ii) any extension or
change in the time, manner or place of payment of, or in any other term in
respect of, all or any of the Obligations (including, without limitation, any
extension for longer than the original period), or any other amendment or waiver
of or consent to any departure from any provision of any Credit Document other
than this Guaranty (including the creation or existence of any Obligations in
excess of the amount permitted by any lending formulas contained in the Credit
Documents or the amount evidenced by the Credit Documents); (iii) any exchange
or release of, or non-perfection of any lien on or security interest in, any
Collateral, or any release or amendment or waiver of or consent to any departure
from any other guaranty, for all or any of the Obligations; (iv) the existence
of any claim, set-off, defense or other right that the Guarantor may have
against any Person, including, without limitation, the Administrative Agent or
the Lenders, or (v) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Companies or any other guarantor in
respect of the Obligations or the Guarantor in respect hereof.
(b) This Guaranty (i) is a continuing guaranty and
shall remain in full force and effect until such date on which the Loans, all of
the Obligations and all other expenses to be paid by the Guarantor pursuant
hereto shall have been satisfied in full, and (ii) shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
of any of the Obligations is rescinded or must otherwise be returned by the
Administrative Agent upon the insolvency, bankruptcy or reorganization of the
Companies or otherwise, all as though such payment had not been made.
SECTION 4. Waivers. The Guarantor hereby waives, to the extent
permitted by applicable law, (i) promptness and diligence; (ii) notice of
acceptance and notice of the incurrence of any Obligation by the Companies;
(iii) notice of any actions taken by the Administrative Agent, any Lender or the
Companies or any other Obligor under any Credit Document or any other agreement
or instrument relating thereto; (iv) all other notices, demands and protests,
and all other formalities of every kind in connection with the enforcement of
the Obligations or of the obligations of the Guarantor hereunder, the omission
of or delay in which, but for the provisions of this Section 4, might constitute
grounds for relieving the Guarantor of its obligations hereunder; (v) any right
to compel or direct the Administrative Agent or the Lenders to seek payment or
recovery
of any amounts owed under this Guaranty from any one particular fund or source;
(vi) any requirement that the Administrative Agent protect, secure, perfect or
insure any security interest or lien or any property subject thereto or exhaust
any right or take any action against the Companies or any other Person or any
Collateral and (vii) any other defense available to the Guarantor.
SECTION 5. Subrogation. The Guarantor hereby irrevocably
waives and agrees it will not exercise any and all rights which it has or may
have at any time or from time to time (whether arising directly or indirectly by
operation of law or contract) to assert any claim against the Companies on
account of any payments made under this Agreement or otherwise, including,
without limitation, any and all existing and future rights of subrogation,
reimbursement, exoneration, contribution and/or indemnity. If any amount shall
be paid to the Guarantor on account of such subrogation rights at any time when
all of the Obligations and all such other expenses shall not have been paid in
full, such amount shall be held in trust for the benefit of the Administrative
Agent and the Lenders, shall be segregated from the other funds of the Guarantor
and shall forthwith be paid over to the Administrative Agent to be applied in
whole or in part by the Administrative Agent against the Obligations, whether
matured or unmatured, and all such other expenses in accordance with the terms
of the Credit Agreement.
SECTION 6. Representations and Warranties. The Guarantor
hereby represents and warrants as follows:
(a) It is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization as set forth on the first page hereof, and has all requisite power
and authority to execute, deliver and perform this Guaranty and each other
Credit Document to which the Guarantor is a party.
(b) The execution, delivery and performance by the
Guarantor of this Guaranty and each other Credit Document to which the Guarantor
is a party (i) have been duly authorized by all necessary corporate action; (ii)
do not and will not contravene its organizational documents or any applicable
law; (iii) do not and will not violate any contractual restriction binding on or
otherwise affecting the Guarantor or any of its properties; and (iv) do not and
will not result in or require the creation of any lien, security interest or
other charge or encumbrance upon or with respect to any of its properties (other
than pursuant to any Credit Document).
(c) No authorization, approval or other action by,
and no notice to or filing with, any Governmental Authority or other regulatory
body is required in connection with the due execution, delivery and performance
by the Guarantor of this Guaranty or any of the other Credit Documents to which
the Guarantor is a party.
(d) Each of this Guaranty and the other Credit
Documents to which the Guarantor is a party is a legal, valid and binding
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws and general principles
affecting the enforcement of creditors' rights generally.
(e) There is no pending or, to the best knowledge of
the Guarantor, threatened action, suit or proceeding against the Guarantor or to
which any of the properties of the Guarantor is subject before any court, or
other foreign, Federal, State or local governmental authority or any arbitrator
(i) which challenges the validity or enforceability of this Guaranty or any of
the other Credit Documents to which the Guarantor is a party, or (ii) in which
there is a reasonable possibility of an adverse decision which would materially
adversely affect the business, operations or financial condition of the
Guarantor.
(f) The Guarantor now has and will continue to have
independent means of obtaining information concerning the affairs, financial
condition and business of the Companies, and has no need of, or right to obtain
from the Administrative Agent or any Lender, any credit or other information
concerning the affairs, financial condition or business of the Companies that
may come under the control of the Administrative Agent or any Lender.
SECTION 7. Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default, the Administrative Agent and the
Lenders may, and are hereby authorized to, at any time and from time to time,
without notice to the Guarantor (any such notice being expressly waived by the
Guarantor) and to the fullest extent permitted by law, set-off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by the Administrative Agent
or any Lender to or for the credit of the account of the Guarantor against any
and all obligations of the Guarantor now or hereafter existing under this
Guaranty, irrespective of whether or not the Administrative Agent or any Lender
shall have made any demand under this Guaranty and although such obligations may
be contingent or unmatured. The Administrative Agent and the Lenders agree to
notify the Guarantor promptly after any such set-off and application made by the
Administrative Agent or such Lender, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Administrative Agent and the Lenders under this Section 7 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) which the Administrative Agent and the Lenders may have.
SECTION 8. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Guarantor, to it at its address as specified on the signature page
hereto; if to the Administrative Agent, to it at its address as set forth in the
Credit Agreement; or, as to any such Person, at such other address as shall be
designated by such Person in a written notice to such other Persons complying as
to delivery with the terms of this Section 8. All such notices and other
communications shall be effective (i) if mailed, three days after being
deposited in the mails, (ii) if telecopied, when sent and a confirmation is
received and (iii) if delivered, upon delivery.
SECTION 9. Consent to Jurisdiction; Waiver of Immunities.
(a) The Guarantor hereby irrevocably submits to the
jurisdiction of any New York State or Federal court sitting in New York City in
any action or proceeding arising out of or relating to this Guaranty, and the
Guarantor hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such New York State or
Federal court. The Guarantor hereby irrevocably appoints Xxxx X. Xxxxxx (the
"Process Agent"), with an office on the date hereof at Xxxxx 000, 00 Xxxxx Xxxx
Xxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, as its agent to receive on behalf of
the Guarantor and its property service of copies of the summons and complaint
and any other process which may be served in any such action or proceeding. Such
service may be made by mailing (by certified or registered mail, postage prepaid
and return receipt requested) or delivering a copy of such process to the
Guarantor in care of the Process Agent at the Process Agent's above address, and
the Guarantor hereby irrevocably authorizes and directs the Process Agent to
accept such service on its behalf. As an alternative method of service, the
Guarantor also irrevocably consents to the service of any and all process in any
such action or proceeding by the mailing of copies of such process to the
Guarantor at its address specified in Section 8 hereof. The Guarantor agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
(b) Nothing in this Section 9 shall affect the right of the
Administrative Agent to serve legal process in any other manner permitted by law
or affect the right of the Administrative Agent to bring any action or
proceeding against the Guarantor or its property in the courts of any other
jurisdictions.
(c) The Guarantor hereby expressly and irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of venue of any such litigation brought in any such court
referred to above and any claim that any such litigation has been brought in an
inconvenient forum. To the extent that the Guarantor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution or otherwise) with respect to itself or its property, the
Guarantor hereby irrevocably waives such immunity in respect of its obligations
under this Guaranty and the other Credit Documents.
SECTION 10. WAIVER OF JURY TRIAL. EACH OF THE GUARANTOR AND,
BY ACCEPTANCE HEREOF, THE ADMINISTRATIVE AGENT AND THE LENDERS WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY
RIGHTS UNDER THIS GUARANTY, THE CREDIT AGREEMENT OR UNDER ANY AMENDMENT, WAIVER,
CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE
FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY, AND AGREES THAT ANY SUCH
ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
SECTION 11. Fraudulent Transfers and Conveyances. The
Guarantor and the Administrative Agent (by its acceptance of the benefits of
this Guaranty) hereby confirm that it is their intention that this Guaranty not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Code of 1978, the Uniform Fraudulent Conveyance Act or any similar Federal or
state law. To effectuate the foregoing intention, the Guarantor and the
Administrative Agent
(by its acceptance of the benefits of this Guaranty) hereby irrevocably agree
that the Obligations guaranteed by the Guarantor shall be limited to such amount
as will, after giving effect to such maximum amount and all other (contingent or
otherwise) liabilities of the Guarantor that are relevant under such laws, and
after giving effect to any rights to contribution pursuant to any agreement
providing for an equitable contribution among any other guarantors, result in
the Obligations guaranteed by the Guarantor in respect of such maximum amount
not constituting a fraudulent transfer or conveyance.
SECTION 12. Miscellaneous.
(a) The Guarantor will make each payment hereunder in
Dollars and in immediately available funds to the Administrative Agent, for the
benefit of the Lenders, at such address specified by the Administrative Agent
from time to time by notice to the Guarantor.
(b) No amendment of any provision of this Guaranty
shall be effective unless it is in writing and signed by the Guarantor and the
Administrative Agent, and no waiver of any provision of this Guaranty, and no
consent to any departure by the Guarantor therefrom, shall be effective unless
it is in writing and signed by the Administrative Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(c) No failure on the part of the Administrative
Agent, acting on behalf of the Lenders, to exercise, and no delay in exercising,
any right hereunder or under any other Credit Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Administrative Agent and the Lenders provided herein and in
the other Credit Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the
Administrative Agent and the Lenders under any Credit Document against any party
thereto are not conditional or contingent on any attempt by the Administrative
Agent and the Lenders to exercise any of their rights under any other Credit
Document against such party or against any other Person.
(d) Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the
Guarantor and its successors and assigns, and (ii) inure, together with all
rights and remedies of the Administrative Agent and the Lenders hereunder, to
the benefit of the Administrative Agent and the Lenders and their respective
successors, transferees and assigns. Without limiting the generality of clause
(ii) of the immediately preceding sentence, to the extent permitted by Section
10.13 of the Credit Agreement, any Lender may assign or otherwise transfer any
Note held by it, and assign or otherwise transfer its rights under any other
Credit Document, to any other Person, and such other Person shall thereupon
become vested with all of the benefits in respect thereof granted to the Lenders
herein or otherwise. None of the rights or obligations of the Guarantor
hereunder may be assigned or otherwise transferred without the prior written
consent of the Administrative Agent.
(f) This Guaranty shall be governed by, and construed
in accordance with the internal laws of the State of New York applicable to
contracts made and to be performed therein without regard to conflict of law
principles.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be executed by an officer thereunto duly authorized, as of the date first above
written.
STERLING LENDING CORPORATION
By: ___________________________
Name:
Title:
Address for Notices:
00 Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Group General Counsel
Telecopier No.: ( )
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of June 30, 1998, made by
HOMEGOLD, INC., a South Carolina corporation (the "Grantor"), in favor of THE
CIT GROUP/BUSINESS CREDIT, INC., as administrative agent for the Lenders parties
to the Credit Agreement referred to below (in such capacity, the "Administrative
Agent").
W I T N E S S E T H :
WHEREAS, Grantor and Carolina Investors, Inc., a South
Carolina corporation (together with the Grantor, each a "Borrower" and
collectively the "Borrowers"), the Administrative Agent and the financial
institutions from time to time party thereto (the "Lenders") are parties to a
Mortgage Loan Warehousing Agreement, dated as of June 30, 1998 (such Agreement,
as amended, restated or otherwise modified from time to time, being hereinafter
referred to as the "Credit Agreement");
WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to make revolving credit loans to the Borrowers in an aggregate principal
amount at any one time outstanding not to exceed $200,000,000 (each a "Loan" and
collectively the "Loans");
WHEREAS, it is a condition precedent to the Lenders making any
Loan pursuant to the Credit Agreement that the Grantor shall have executed and
delivered to the Administrative Agent a security agreement providing for the
grant to the Administrative Agent for the benefit of the Lenders of a security
interest in certain personal property of the Grantor;
NOW, THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Lenders to make and maintain the
Loans, the Grantor hereby agrees with the Administrative Agent as follows:
SECTION 1. Definitions. Reference is hereby made to the Credit
Agreement for a statement of the terms thereof. All terms used in this Agreement
which are defined in the Credit Agreement or in Articles 8 and 9 of the Uniform
Commercial Code (the "Code") currently in effect in the State of New York and
which are not otherwise defined herein shall have the same meanings herein as
set forth therein.
SECTION 2. Grant of Security Interest
In order to secure the payment and performance in
full of the Loans and the other Obligations (as defined in Section 3 hereof),
the Grantor hereby assigns and pledges to the Administrative Agent for the
benefit of the Lenders and hereby grants to the Administrative Agent for the
benefit of the Lenders a security interest in and to the following, wherever
located and whether now owned or hereafter existing or acquired by the Grantor
(the "Collateral"):
(1) all Mortgage Loans, including Wet
Mortgage Loans, owned by the Grantor, the Mortgage Note and
Mortgage and the other documents
evidencing or relating to said Mortgage Loan, all servicing
rights and servicing fees and other income arising from or
relating to such Mortgage Loans, and all instruments,
documents, loan agreements, guarantees, interest rate swap,
cap or collar agreements or similar agreements, contract
rights, general intangibles, property rights, proceeds and
payments arising therefrom or relating thereto, including
without limitation the following:
(a) all payments and prepayments of
principal, interest, and other income due or to
become due thereon and all proceeds therefrom, and
all the right, title and interest of every nature
whatsoever of the Grantor in and to such property;
(b) all Liens with respect thereto
or as security therefor;
(c) all hazard insurance policies,
title insurance policies or condemnation proceeds
with respect thereto; and
(d) all prepayment premiums and late
payment charges with respect thereto;
(2) all real estate acquired by the Grantor
by deed in lieu of foreclosure or by foreclosure attributable
to any such Mortgage Loan;
(3) all commitments issued by Investors to
purchase Mortgage Loans from the Grantor ("Purchase
Commitments") and all rights of the Grantor with respect
thereto;
(4) all right, title and interest of the
Grantor in and to all files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs,
cards, accounting records, and other records, information, and
related data of the Grantor with respect to such Mortgage
Loans;
(5) the books and records of the Grantor
relating to any of the foregoing Collateral, including,
without limitation, all customer contracts, sale orders,
minute books, ledgers, records, computer programs, software,
printouts, microfiche and other computer materials, customer
lists, credit files, correspondence and advertising materials,
in each case indicating, summarizing or evidencing any of the
Collateral;
(6) all cash from time to time deposited in
any deposit account of the Grantor with the Custodian,
including, without limitation, the Funding Account and the
Settlement Account;
(7) (a) all moneys, securities and other
property and the proceeds thereof, now or hereafter held or
received by, or in transit to, the Administrative Agent or any
Lender from or for the Grantor, whether for safekeeping,
pledge,
2
custody, transmission, collection or otherwise, and all of the
Grantor's sums and credits with, and all of the Grantor's
claims against the Administrative Agent or any Lender at any
time existing; (b) all rights, interests, choses in action,
causes of actions, claims and all other intangible property of
every kind and nature, in each instance whether now owned or
hereafter acquired by the Grantor, including, without
limitation, all corporate and other business records, all
loans, royalties, servicing rights and all other forms of
obligations receivable whatsoever; (c) all computer programs,
software, printouts and other computer materials, credit
files, correspondence, advertising materials and other source
or business identifiers; (d) all rights under license and
franchise agreements, servicing contracts and other contracts
and contract rights; (e) all interests in partnerships,
limited liability companies and joint ventures, including all
moneys due from time to time in respect thereof; (f) all
federal, state and local tax refunds and federal, state and
local tax refund claims and all judgments in favor of the
Grantor and all of the Grantor's rights with respect thereto;
(g) all right, title and interest under leases, subleases,
licenses and concessions and other agreements relating to
personal property, including all moneys due from time to time
in respect thereof; (h) all payments due or made to the
Grantor in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property by any
Person or Governmental Authority; (i) all lock-box and all
deposit accounts (general or special) or other accounts with
any bank or other financial institution, including, without
limitation, all depository or other accounts maintained by the
Grantor at any Lender and all funds on deposit therein; (j)
all credits with and other claims against third parties; (k)
all rights to indemnification; (l) all reversionary interests
in pension and profit sharing plans and reversionary,
beneficial and residual interests in trusts; (m) all proceeds
of insurance of which the Grantor is the beneficiary; (n) all
letters of credit, guaranties, liens, security interests and
other security held by or granted to the Grantor; (o) all
instruments, files, records, ledger sheets and documents
covering or relating to any of the Collateral; and (p) all
present and future accounts, contract rights, chattel paper,
documents, instruments, general intangibles and other
obligations of any kind, whether or not similar to the
foregoing, in each instance, however and wherever arising;
(8) all investment property, securities,
securities accounts, financial assets and all securities
entitlements of the Grantor in any and all of the foregoing;
and
(9) all proceeds of any and all of the
foregoing Collateral (including, without limitation, proceeds
which constitute property of the types described in any of the
clauses of this Section 2 and, to the extent not otherwise
included, all payments under insurance (whether or not the
Administrative Agent or the Grantor is the loss payee
thereof), or any indemnity, warranty, guaranty or insured
closing letter, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral);
3
in each case howsoever the Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
SECTION 3. Security for Obligations. The security interest
created hereby in the Collateral constitutes continuing collateral security for
all of the following obligations, whether now existing or hereafter incurred
(the "Obligations"):
(a) the prompt payment by the Grantor, as and when due and
payable, of all amounts from time to time owing by it in respect of the Credit
Agreement, the Notes, and the other Credit Documents, including, without
limitation, principal of and interest on the Loans (including, without
limitation, all interest that accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any Borrower, whether or not a claim for post-filing interest
is allowed in such proceeding), all fees, commissions, expense reimbursements,
indemnifications and all other amounts due or to become due under any Credit
Document; and
(b) the due performance and observance by the Grantor of all
of its other obligations from time to time existing in respect of the Credit
Agreement, the Notes, and all other Credit Documents.
SECTION 4. Representations and Warranties. The Grantor
represents and warrants as follows:
(a) There is no pending or threatened action, suit, proceeding
or claim before any court or other Governmental Authority or any arbitrator, or
any order, judgment or award by any court or other Governmental Authority or
arbitrator, that may adversely affect the grant by the Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or the exercise by the Administrative Agent of any of its rights or
remedies hereunder.
(b) All taxes, assessments and other governmental charges
imposed upon the Grantor or any property of the Grantor (including, without
limitation, all federal income and social security taxes on employees' wages)
and which have become due and payable on or prior to the date hereof have been
paid, except to the extent contested in good faith by proper proceedings which
stay the imposition of any penalty, fine and Lien resulting from the non-payment
thereof and with respect to which adequate reserves in accordance with GAAP have
been established for the payment thereof.
(c) The Grantor is and will be at all times the sole and
exclusive owner of the Collateral free and clear of any Lien, except for (i) the
security interest created by this Agreement, and (ii) the security interests and
other encumbrances permitted by the Credit Agreement. No effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording or filing office, except (i) such as may
have been filed in favor of the Administrative Agent relating to this Agreement,
and (ii) such as may have been filed to perfect or protect any security interest
or encumbrance permitted by the Credit Agreement.
4
(d) The exercise by the Administrative Agent of any of its
rights and remedies hereunder will not contravene law or any contractual
restriction binding on or otherwise affecting the Grantor or any of its
properties and will not result in or require the creation of any Lien, security
interest or other charge or encumbrance upon or with respect to any of its
properties.
(e) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or any other Person, is
required for (i) the grant by the Grantor, or the perfection, of the security
interest purported to be created hereby in the Collateral or (ii) the exercise
by the Administrative Agent of any of its rights and remedies hereunder, except
for the filing under the Uniform Commercial Code as in effect in the applicable
jurisdiction of the financing statements described in SCHEDULE I hereto.
(f) This Agreement creates valid security interests in favor
of the Administrative Agent for the benefit of the Lenders in the Collateral, as
security for the Obligations. The Administrative Agent's having possession of
all instruments and cash constituting Collateral from time to time and the
filing of the financing statements described in SCHEDULE I hereto result in the
perfection of such security interests. Such security interests are, or in the
case of Collateral in which the Grantor obtains rights after the date hereof,
will be, perfected, first priority security interests, subject only to the
security interests and other encumbrances permitted pursuant to the Credit
Agreement. Such filings and all other action necessary or desirable to perfect
and protect such security interests have been duly taken, except for the
Administrative Agent's (or any agent, bailee or custodian thereof) having
possession of Collateral consisting of instruments or cash after the date
hereof.
(g) Each Mortgage Loan included in the Collateral and
documents related thereto (a) has not been modified or amended and has not had
any requirements thereof waived except for minor modifications in the ordinary
course of the Grantor's business which do not in any event adversely affect the
value or marketability of the relevant item of Collateral (b) complies with the
terms of the Credit Documents, including, without limitation, this Agreement,
and (c) has been (or, in the case of a Wet Loan, will be upon the funding of the
related Wet Mortgage Loan) fully advanced in the respective face amounts
thereof. With respect to each such pledged Mortgage Loan, the Grantor has (or,
in the case of a Wet Loan, will have upon the funding of the related Wet
Mortgage Loan) in its possession all documents and instruments required to be
possessed by the Grantor (x) under this Agreement, (y) under applicable law and
(z) under a Purchase Commitment, if any, other than those documents and
instruments which are in the possession of the Custodian.
(h) No default, nor any event which would become a default
with notice or lapse of time or both, has occurred and is continuing under any
pledged Mortgage Loan.
(i) Escrow Deposits. Any monies held by the Grantor
representing principal, interest, tax, insurance and other deposits or payments
made by mortgagors under Mortgage Loans are held by the Grantor in accordance
with applicable laws and any agreements relating to same and have been and will
be applied to the obligations for which they were deposited in accordance with
any agreements relating to same.
5
(j) Additional Representations. The additional representations
and warranties set forth in Schedule III attached hereto are true and correct.
SECTION 5. Covenants as to the Collateral. So long as any of
the Obligations shall remain outstanding or the Total Commitment shall not have
terminated, unless the Administrative Agent shall otherwise consent in writing:
(a) Further Assurances. The Grantor will at its expense, at
any time and from time to time, promptly execute and deliver all further
instruments and documents and take all further action that may be necessary or
desirable or that the Administrative Agent may request in order (i) to perfect
and protect the security interest purported to be created hereby; (ii) to enable
the Administrative Agent to exercise and enforce its rights and remedies
hereunder in respect of the Collateral; or (iii) otherwise to effect the
purposes of this Agreement, including, without limitation: (A) marking
conspicuously, at the request of the Administrative Agent, each of its records
pertaining to the Collateral with a legend, in form and substance satisfactory
to the Administrative Agent, indicating that such Collateral is subject to the
security interest created hereby, (B) executing and filing such financing or
continuation statements, or amendments thereto, as may be necessary or desirable
or that the Administrative Agent may request in order to perfect and preserve
the security interest purported to be created hereby, and (C) furnishing to the
Administrative Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Administrative Agent may reasonably request, all in
reasonable detail.
(b) Transfers and Other Liens.
(i) The Grantor will not sell, assign (by operation
of law or otherwise), lease, exchange or otherwise transfer or dispose
of any of the Collateral except to the extent permitted under the
Credit Agreement, subject to the obligation of the Grantor to make
payments pursuant to Section 2.06(d) of the Credit Agreement.
(ii) The Grantor will not create or suffer to exist
any Lien, security interest or other charge or encumbrance upon or with
respect to any Collateral, except for (A) the Liens and security
interest created by this Agreement and the other Credit Documents and
(B) the Liens, security interests and other encumbrances permitted by
the Credit Agreement.
(c) Performance under Servicing Contracts; Escrow Deposits.
The Grantor shall service or cause to be serviced all Mortgages in accordance
with the terms and provisions set forth in Schedule II attended hereto. The
Grantor hereby agrees that upon the occurrence and during the continuance of an
Event of Default, the Administrative Agent may, subject to the prior rights of
any sub-servicer pursuant to a legally binding servicing agreement between the
Grantor and such sub-servicer, terminate the Grantor as servicer and transfer
servicing to the Administrative Agent's designee, at no cost or expense to the
Administrative Agent and the Lenders, it being agreed that the Grantor will pay
any and all fees required to effectuate the transfer of servicing to the
designee of the Administrative Agent. The Grantor shall permit the
Administrative Agent or its designee to inspect the Grantor's servicing
facilities, in the absence
6
of a continuing Event of Default, during normal business hours, for the purpose
of satisfying the Administrative Agent that the Grantor has the ability to
service the Mortgage Loans as provided in the Credit Agreement. It shall hold
all escrow deposits in accordance with all applicable Laws and all agreements
relating to such escrow deposits, without commingling the same with non-escrow
funds, and shall hold and apply the same for purposes for which such escrow
deposits were collected in accordance with all applicable Laws and agreements.
(d) Failure to Qualify for Inclusion in Borrowing Base and
Related Matters. The Grantor shall notify the Administrative Agent of (a) any
default under any Mortgage pledged hereunder and delivered to the Custodian, (b)
the failure of any items of Collateral which are required by the terms hereof to
be covered by a Purchase Commitment to be so covered, (c) the failure of any
Eligible Mortgage Loan that is included in the Borrowing Base to no longer
satisfy the requirements of the Credit Agreement for inclusion in the Borrowing
Base, and (d) any other matter which has a material adverse effect on the
Collateral.
(e) Inspection and Reporting. The Grantor shall permit the
Administrative Agent or any Lender, or any agents or representatives thereof or
such professionals or other Persons as the Administrative Agent may designate
(i) to examine and inspect the books and records of the Grantor and take copies
and extracts therefrom, (ii) to verify materials, leases, notes, receivables,
inventory and other assets of the Grantor from time to time, and (iii) to
conduct physical counts, appraisals and/or valuations at the locations of the
Grantor, in each case as provided in the Credit Agreement.
SECTION 6. Additional Provisions Concerning the Collateral.
(a) The Grantor hereby authorizes the Administrative Agent to
file, without the signature of the Grantor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to the
Collateral.
(b) The Grantor hereby irrevocably appoints the Administrative
Agent the Grantor's attorney-in-fact and proxy, with full authority in the place
and stead of the Grantor and in the name of the Grantor or otherwise, from time
to time in the Administrative Agent's discretion upon the occurrence of an Event
of Default, to take any action and to execute any instrument which such Agent
may deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, (i) to obtain and adjust insurance required to be
paid to the Administrative Agent pursuant to Section 6.09 of the Credit
Agreement and to receive, indorse and collect any drafts or other instruments,
documents and chattel paper in connection therewith, (ii) to ask, demand,
collect, xxx for, recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in respect of any Collateral, (iii) to
receive, indorse, and collect any drafts or other instruments, documents and
chattel paper in connection with clause (i) or (ii) above, and (iv) to file any
claims or take any action or institute any proceedings which the Administrative
Agent may deem necessary or desirable for the collection of any Collateral or
otherwise to enforce the rights of the Administrative Agent with respect to any
Collateral.
7
(c) If the Grantor fails to perform any agreement contained
herein, the Administrative Agent may itself perform, or cause performance of,
such agreement or obligation, in the name of the Grantor or the Administrative
Agent, and the expenses of the Administrative Agent incurred in connection
therewith shall be payable by the Grantor pursuant to Section 8 hereof and shall
be secured by the Collateral.
(d) The powers conferred on the Administrative Agent hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Administrative Agent shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 7. Remedies Upon Default. If any Event of Default
shall have occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party
upon default under the Code (whether or not the Code applies to the affected
Collateral), and also may (i) require the Grantor to, and the Grantor hereby
agrees that it will at its expense and upon request of the Administrative Agent
forthwith, assemble all or part of the Collateral as directed by the
Administrative Agent and make it available to the Administrative Agent at a
place or places to be designated by the Administrative Agent which is reasonably
convenient to both parties and (ii) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Administrative Agent's offices or elsewhere, for
cash, on credit or for future delivery, and at such price or prices and upon
such other terms as the Administrative Agent may deem commercially reasonable.
The Grantor agrees that, to the extent notice of sale shall be required by law,
at least 10 days' notice to the Grantor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. The Administrative Agent shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Grantor hereby waives any claims against the Administrative Agent and the
Lenders arising by reason of the fact that the price at which the Collateral may
have been sold at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Administrative Agent accepts the first offer received
and does not offer the Collateral to more than one offeree and waives all rights
which the Grantor may have to require that all or any part of the Collateral be
marshaled upon any sale (public or private) thereof.
(b) Any cash held by the Administrative Agent as Collateral
and all cash proceeds received by the Administrative Agent in respect of any
sale of or collection from, or other realization upon, all or any part the
Collateral may, in the discretion of the Xxxxxxxxxxxxxx
0
Xxxxx, xx held by the Administrative Agent as collateral for, and/or then or at
any time thereafter applied in whole or in part by the Administrative Agent
against, all or any part of the Obligations.
(c) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which the
Administrative Agent and the Lenders are legally entitled, the Grantor shall be
liable for the deficiency, together with interest thereon at the highest rate
specified in any applicable Credit Document for interest on overdue principal
thereof or such other rate as shall be fixed by applicable law, together with
the costs of collection and the reasonable fees, costs, expenses of any
attorneys employed by the Administrative Agent to collect such deficiency.
SECTION 8. Indemnity and Expenses.
(a) The Grantor agrees to indemnify and hold the
Administrative Agent harmless from and against any and all claims, damages,
losses, liabilities, obligations, penalties, costs or expenses (including,
without limitation, legal fees and disbursements of Administrative Agent's
counsel) to the extent that they arise out of or otherwise result from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from the Agent's
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction.
(b) The Grantor will upon demand pay to the Administrative
Agent the amount of any and all costs and expenses, including the reasonable
fees and disbursements of the Administrative Agent's counsel and of any experts
and agents, which the Administrative Agent may incur in connection with (i) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection from,
or other realization upon, any Collateral, (iii) the exercise or enforcement of
any of the rights of the Administrative Agent hereunder, or (iv) the failure by
the Grantor to perform or observe any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Grantor or the Administrative Agent, to the parties and at the addresses
specified in the Credit Agreement; or as to either such Person at such other
address as shall be designated by such Person in a written notice to such other
Person complying as to delivery with the terms of this Section 9. All such
notices and other communications shall be effective (i) if mailed, three days
after being deposited in the mails, (ii) if telecopied, when sent and
confirmation is received or (iii) if delivered, upon delivery.
SECTION 10. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and the
Administrative Agent, and no waiver of any provision of this Agreement, and no
consent to any departure by the Grantor therefrom, shall
9
be effective unless it is in writing and signed by the Administrative Agent, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
(b) No failure on the part of the Administrative Agent to
exercise, and no delay in exercising, any right hereunder or under any other
Credit Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The rights and remedies of the
Administrative Agent provided herein and in the other Credit Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Administrative Agent under any Credit
Document against any party thereto are not conditional or contingent on any
attempt by the Administrative Agent to exercise any of its rights under any
other Credit Document against such party or against any other Person.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest
in the Collateral and shall (i) remain in full force and effect until the
payment in full of the Obligations after the Total Commitment has been
terminated, and (ii) be binding on the Grantor and its successors and assigns
and shall inure, together with all rights and remedies of the Administrative
Agent hereunder, to the benefit of the Administrative Agent and the Lenders
their respective permitted successors, transferees and assigns. Without limiting
the generality of clause (ii) of the immediately preceding sentence and subject
to the terms of the Credit Agreement, the Administrative Agent and Lenders may
assign or otherwise transfer their rights under this Agreement and any other
Credit Document, to any other Person and such other Person shall thereupon
become vested with all of the benefits in respect thereof granted to the
Administrative Agent and the Lenders herein or otherwise. None of the rights or
obligations of the Grantor hereunder may be assigned or otherwise transferred
without the prior written consent of the Administrative Agent, and any such
assignment or transfer shall be null and void.
(e) Upon the satisfaction in full of the Obligations after the
Total Commitment has been terminated, (i) this Agreement and the security
interests created hereby shall terminate and all rights to the Collateral shall
revert to the Grantor, and (ii) the Administrative Agent will, upon the
Grantor's request and at the Grantor's expense, (A) return to the Grantor such
of the Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof, and (B) execute and deliver to the Grantor
such documents as the Grantor shall reasonably request to evidence such
termination, all without any representation, warranty or recourse whatsoever.
(f) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, except as
required by mandatory provisions of law and except to the extent that the
validity and perfection or the perfection and effect of
10
perfection or non-perfection of the security interest created hereby or remedies
hereunder, in respect of any particular Collateral are governed by the law of a
jurisdiction other than the State of New York.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
11
IN WITNESS WHEREOF, the Grantor has caused this Agreement to
be executed and delivered by its officer thereunto duly authorized as of the
date first above written.
[GRANTOR]
By:_____________________
Name:____________________
Title:____________________
SCHEDULE I TO SECURITY AGREEMENT
UCC-1 FINANCING STATEMENTS
SCHEDULE II TO SECURITY AGREEMENT
SERVICING TERMS AND PROVISIONS
SCHEDULE III TO SECURITY AGREEMENT
ADDITIONAL REPRESENTATIONS AND WARRANTIES RE: ELIGIBLE MORTGAGE LOANS
As to each Mortgage Loan included in the Borrowing Base on the
date of a Loan (and the related Mortgage, Mortgage Note, assignment of mortgage
and mortgaged property), the Grantor shall be deemed to make the following
representations and warranties to the Lenders as of such date and as of each
date Unit Collateral Value is determined. With respect to any representations
and warranties made to the best of the Grantor's knowledge, in the event that it
is discovered that the circumstances with respect to the related Mortgage Loan
are not accurately reflected in such representation and warranty notwithstanding
the knowledge or lack of knowledge of the Grantor, then, notwithstanding that
such representation and warranty is made to the best of the Grantor's knowledge,
such Mortgage Loan may, at the option of the Administrative Agent, be excluded
from the Borrowing Base or be assigned an Unit Collateral Value lower than that
set forth in the Credit Agreement:
(1) Mortgage Loan Schedule. The information set forth on the Mortgage Loan
Schedule with respect to such Eligible Mortgage Loan is true and
correct as of the date of each Loan in all material respects;
(2) No Defenses. To the best of the Grantor's knowledge, there is no valid
offset, defense or counterclaim to any related Mortgage Note or
Mortgage, including the obligation of the mortgagor to pay the unpaid
principal of or interest on such Mortgage Note;
(3) Mortgaged Property Undamaged. To the best of the Grantor's knowledge,
each related mortgaged property is free of material damage and is in
good repair;
(4) No Modifications. Neither the Grantor nor any prior holder of any
related Mortgage has modified such Mortgage in any material respect
(except that such a Mortgage Loan may have been modified by a written
instrument which has been recorded, if necessary, to protect the
interests of the Administrative Agent and which has been delivered to
the Custodian); satisfied, canceled or subordinated such Mortgage in
whole or in part; released the related mortgaged property in whole or
in part from the lien of such Mortgage except for the subordination of
a Mortgage securing a Mortgage Loan, with respect to which the related
superior lien was released in connection with the refinancing of the
mortgage loan relating to such superior lien; or executed any
instrument of release, cancellation, modification or satisfaction with
respect thereto except as has been disclosed to Administrative Agent
prior to the date of the Loan, in which case a copy of such
modification agreement will have been delivered to the Grantor and the
Custodian;
(5) Title Insurance. Except with respect to High-LTV Mortgage Loans, a
lender's policy of title insurance together with a condominium
endorsement, if applicable, and extended coverage endorsement and, if
applicable, an adjustable rate mortgage endorsement in an amount at
least equal to the principal balance as of the date of the funding of
the related
Loan of each such Eligible Mortgage Loan or a commitment (binder) to
issue the same was effective on the date of the origination of such
Eligible Mortgage Loan, each such policy is valid and remains in full
force and effect, and each such policy was issued by a title insurer
qualified to do business in the jurisdiction where the related
mortgaged property is located, which policy insures the Grantor and
successor owners of indebtedness secured by the insured related
Mortgage, as to the first or second priority lien of such Mortgage; to
the best of the Grantor's knowledge, no claims have been made under
such mortgage title insurance policy and no prior holder of such
Mortgage, including the Grantor, has done, by act or omission, anything
which would impair the coverage of such mortgage title insurance
policy;
(6) Origination. Such Eligible Mortgage Loan was originated by the Grantor
or, if not originated by the Grantor, was purchased by the Grantor and
substantially in accordance with the Underwriting Guidelines then in
effect;
(7) No Encroachments. To the best of the Grantor's knowledge, all of the
improvements which were included for the purpose of determining the
Unit Collateral Value of the related mortgaged property lie wholly
within the boundaries and building restriction lines of such property,
and no improvements on adjoining properties encroach upon such
mortgaged property unless the applicable title insurance policy for
such mortgaged property affirmatively insures against loss or damage by
reason of any encroachment that is disclosed or would have been
disclosed by an accurate survey;
(8) Customary Provisions. The related Mortgage contains customary and
enforceable provisions which render the rights and remedies of the
holder thereof adequate for the realization against the related
mortgaged property of the benefits of the security, including, (i) if
such Mortgage is designated as a deed of trust, by trustee's sale and
(ii) otherwise by judicial foreclosure;
(9) Deeds of Trust. With respect to any related Mortgage constituting a
deed of trust, a trustee, duly qualified under applicable law to serve
as such, has been properly designated and currently so serves and is
named in such Mortgage, and no fees or expenses are or will become
payable by, the Administrative Agent to the trustee under the deed of
trust, except in connection with a trustees sale after default by the
related mortgagor;
(10) No Shared Appreciation; No Contingent Interests. Such Eligible Mortgage
Loan does not have a shared appreciation feature, or other contingent
interest feature;
(11) Due on Sale. Such Eligible Mortgage Loan contains a "due-on-sale"
clause unless prohibited by applicable law;
(12) No Condemnation. To the best of the Grantor's knowledge, there is no
proceeding pending or threatened for the total or partial condemnation
of the related mortgaged property, nor is such a proceeding currently
occurring, and such property is undamaged by waste, fire, earthquake or
earth movement except for normal wear and tear;
III-2
(13) No Future Advances. There is no obligation on the part of the Grantor
or any other party under the terms of the related Mortgage or related
Mortgage Note to make payments in addition to those made to the related
Mortgagor;
(14) No Assessments. To the best of the Grantor's knowledge, there are no
defaults in complying with the terms of the Mortgage that would have a
material adverse effect on the value of the related Mortgage Loan, and
all taxes, governmental assessments, insurance premiums, water, sewer
and municipal charges, leasehold payments or ground rents that would
have a material adverse effect on the value of the related Mortgage
Loan which previously became due and owing have been paid, or an escrow
of funds has been established in an amount sufficient to pay for every
such item which remains unpaid. The Grantor has not advanced funds, or
induced, solicited or knowingly received any advance of funds by a
party other than the related Mortgagor, directly or indirectly, for the
payment of any amount required by the related Mortgage except for (A)
payments in the nature of escrow payments, including without
limitation, taxes and insurance payments, and (B) interest accruing
from the date of the related Mortgage Note or date of disbursement of
the related Mortgage proceeds, whichever is later, to the day which
precedes by one month the due date of the first installment of
principal and interest;
(15) Appraisal. The related Mortgage File as defined in the Custodian
Agreement contains an appraisal of the related mortgaged property
signed by an appraiser, duly appointed by the originator, who had no
interest, direct or indirect in the related mortgaged property or in
any loan made on the security thereof, and whose compensation is not
affected by the approval or disapproval of such Eligible Mortgage Loan;
the appraisal satisfies the requirements of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989;
(16) No Graduated Payments; No Buydowns: No Convertible Mortgage Assets.
Unless otherwise specified in the related Loan Request, such Eligible
Mortgage Loan is not a graduated payment mortgage loan or a growing
equity mortgage loan, nor is such Eligible Mortgage Loan subject to a
temporary buydown or similar arrangement. If the Eligible Mortgage Loan
has an adjustable rate, it is not convertible at the option of the
related mortgagor to a fixed rate mortgage loan;
(17) No Fraud. To the best of the Grantor's knowledge, no error, omission,
misrepresentation, negligence, fraud or similar action occurred on the
part of any person in connection with the origination of any Eligible
Mortgage Loan.
III-3
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of June 30, 1998, made by
CAROLINA INVESTORS, INC., a South Carolina corporation (the "Grantor"), in favor
of THE CIT GROUP/BUSINESS CREDIT, INC., as administrative agent for the Lenders
parties to the Credit Agreement referred to below (in such capacity, the
"Administrative Agent").
W I T N E S S E T H :
WHEREAS, Grantor and HomeGold, Inc., a South Carolina
corporation (together with the Grantor, each a "Borrower" and collectively the
"Borrowers"), the Administrative Agent and the financial institutions from time
to time party thereto (the "Lenders") are parties to a Mortgage Loan Warehousing
Agreement, dated as of June 30, 1998 (such Agreement, as amended, restated or
otherwise modified from time to time, being hereinafter referred to as the
"Credit Agreement");
WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to make revolving credit loans to the Borrowers in an aggregate principal
amount at any one time outstanding not to exceed $200,000,000 (each a "Loan" and
collectively the "Loans");
WHEREAS, it is a condition precedent to the Lenders making any
Loan pursuant to the Credit Agreement that the Grantor shall have executed and
delivered to the Administrative Agent a security agreement providing for the
grant to the Administrative Agent for the benefit of the Lenders of a security
interest in certain personal property of the Grantor;
NOW, THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Lenders to make and maintain the
Loans, the Grantor hereby agrees with the Administrative Agent as follows:
SECTION 1. Definitions. Reference is hereby made to the Credit
Agreement for a statement of the terms thereof. All terms used in this Agreement
which are defined in the Credit Agreement or in Articles 8 and 9 of the Uniform
Commercial Code (the "Code") currently in effect in the State of New York and
which are not otherwise defined herein shall have the same meanings herein as
set forth therein.
SECTION 2. Grant of Security Interest
In order to secure the payment and performance in
full of the Loans and the other Obligations (as defined in Section 3 hereof),
the Grantor hereby assigns and pledges to the Administrative Agent for the
benefit of the Lenders and hereby grants to the Administrative Agent for the
benefit of the Lenders a security interest in and to the following, wherever
located and whether now owned or hereafter existing or acquired by the Grantor
(the "Collateral"):
(1) all Mortgage Loans, including Wet
Mortgage Loans, owned by the Grantor, the Mortgage Note and
Mortgage and the other documents
evidencing or relating to said Mortgage Loan, all servicing
rights and servicing fees and other income arising from or
relating to such Mortgage Loans, and all instruments,
documents, loan agreements, guarantees, interest rate swap,
cap or collar agreements or similar agreements, contract
rights, general intangibles, property rights, proceeds and
payments arising therefrom or relating thereto, including
without limitation the following:
(a) all payments and prepayments of
principal, interest, and other income due or to
become due thereon and all proceeds therefrom, and
all the right, title and interest of every nature
whatsoever of the Grantor in and to such property;
(b) all Liens with respect thereto
or as security therefor;
(c) all hazard insurance policies,
title insurance policies or condemnation proceeds
with respect thereto; and
(d) all prepayment premiums and late
payment charges with respect thereto;
(2) all real estate acquired by the Grantor
by deed in lieu of foreclosure or by foreclosure attributable
to any such Mortgage Loan;
(3) all commitments issued by Investors to
purchase Mortgage Loans from the Grantor ("Purchase
Commitments") and all rights of the Grantor with respect
thereto;
(4) all right, title and interest of the
Grantor in and to all files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs,
cards, accounting records, and other records, information, and
related data of the Grantor with respect to such Mortgage
Loans;
(5) the books and records of the Grantor
relating to any of the foregoing Collateral, including,
without limitation, all customer contracts, sale orders,
minute books, ledgers, records, computer programs, software,
printouts, microfiche and other computer materials, customer
lists, credit files, correspondence and advertising materials,
in each case indicating, summarizing or evidencing any of the
Collateral;
(6) all cash from time to time deposited in
any deposit account of the Grantor with the Custodian,
including, without limitation, the Funding Account and the
Settlement Account;
(7) (a) all moneys, securities and other
property and the proceeds thereof, now or hereafter held or
received by, or in transit to, the Administrative Agent or any
Lender from or for the Grantor, whether for safekeeping,
pledge,
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custody, transmission, collection or otherwise, and all of the
Grantor's sums and credits with, and all of the Grantor's
claims against the Administrative Agent or any Lender at any
time existing; (b) all rights, interests, choses in action,
causes of actions, claims and all other intangible property of
every kind and nature, in each instance whether now owned or
hereafter acquired by the Grantor, including, without
limitation, all corporate and other business records, all
loans, royalties, servicing rights and all other forms of
obligations receivable whatsoever; (c) all computer programs,
software, printouts and other computer materials, credit
files, correspondence, advertising materials and other source
or business identifiers; (d) all rights under license and
franchise agreements, servicing contracts and other contracts
and contract rights; (e) all interests in partnerships,
limited liability companies and joint ventures, including all
moneys due from time to time in respect thereof; (f) all
federal, state and local tax refunds and federal, state and
local tax refund claims and all judgments in favor of the
Grantor and all of the Grantor's rights with respect thereto;
(g) all right, title and interest under leases, subleases,
licenses and concessions and other agreements relating to
personal property, including all moneys due from time to time
in respect thereof; (h) all payments due or made to the
Grantor in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property by any
Person or Governmental Authority; (i) all lock-box and all
deposit accounts (general or special) or other accounts with
any bank or other financial institution, including, without
limitation, all depository or other accounts maintained by the
Grantor at any Lender and all funds on deposit therein; (j)
all credits with and other claims against third parties; (k)
all rights to indemnification; (l) all reversionary interests
in pension and profit sharing plans and reversionary,
beneficial and residual interests in trusts; (m) all proceeds
of insurance of which the Grantor is the beneficiary; (n) all
letters of credit, guaranties, liens, security interests and
other security held by or granted to the Grantor; (o) all
instruments, files, records, ledger sheets and documents
covering or relating to any of the Collateral; and (p) all
present and future accounts, contract rights, chattel paper,
documents, instruments, general intangibles and other
obligations of any kind, whether or not similar to the
foregoing, in each instance, however and wherever arising;
(8) all investment property, securities,
securities accounts, financial assets and all securities
entitlements of the Grantor in any and all of the foregoing;
and
(9) all proceeds of any and all of the
foregoing Collateral (including, without limitation, proceeds
which constitute property of the types described in any of the
clauses of this Section 2 and, to the extent not otherwise
included, all payments under insurance (whether or not the
Administrative Agent or the Grantor is the loss payee
thereof), or any indemnity, warranty, guaranty or insured
closing letter, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral);
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in each case howsoever the Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
SECTION 3. Security for Obligations. The security interest
created hereby in the Collateral constitutes continuing collateral security for
all of the following obligations, whether now existing or hereafter incurred
(the "Obligations"):
(a) the prompt payment by the Grantor, as and when due and
payable, of all amounts from time to time owing by it in respect of the Credit
Agreement, the Notes, and the other Credit Documents, including, without
limitation, principal of and interest on the Loans (including, without
limitation, all interest that accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any Borrower, whether or not a claim for post-filing interest
is allowed in such proceeding), all fees, commissions, expense reimbursements,
indemnifications and all other amounts due or to become due under any Credit
Document; and
(b) the due performance and observance by the Grantor of all
of its other obligations from time to time existing in respect of the Credit
Agreement, the Notes, and all other Credit Documents.
SECTION 4. Representations and Warranties. The Grantor
represents and warrants as follows:
(a) There is no pending or threatened action, suit, proceeding
or claim before any court or other Governmental Authority or any arbitrator, or
any order, judgment or award by any court or other Governmental Authority or
arbitrator, that may adversely affect the grant by the Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or the exercise by the Administrative Agent of any of its rights or
remedies hereunder.
(b) All taxes, assessments and other governmental charges
imposed upon the Grantor or any property of the Grantor (including, without
limitation, all federal income and social security taxes on employees' wages)
and which have become due and payable on or prior to the date hereof have been
paid, except to the extent contested in good faith by proper proceedings which
stay the imposition of any penalty, fine and Lien resulting from the non-payment
thereof and with respect to which adequate reserves in accordance with GAAP have
been established for the payment thereof.
(c) The Grantor is and will be at all times the sole and
exclusive owner of the Collateral free and clear of any Lien, except for (i) the
security interest created by this Agreement, and (ii) the security interests and
other encumbrances permitted by the Credit Agreement. No effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording or filing office, except (i) such as may
have been filed in favor of the Administrative Agent relating to this Agreement,
and (ii) such as may have been filed to perfect or protect any security interest
or encumbrance permitted by the Credit Agreement.
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(d) The exercise by the Administrative Agent of any of its
rights and remedies hereunder will not contravene law or any contractual
restriction binding on or otherwise affecting the Grantor or any of its
properties and will not result in or require the creation of any Lien, security
interest or other charge or encumbrance upon or with respect to any of its
properties.
(e) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or any other Person, is
required for (i) the grant by the Grantor, or the perfection, of the security
interest purported to be created hereby in the Collateral or (ii) the exercise
by the Administrative Agent of any of its rights and remedies hereunder, except
for the filing under the Uniform Commercial Code as in effect in the applicable
jurisdiction of the financing statements described in Schedule I hereto.
(f) This Agreement creates valid security interests in favor
of the Administrative Agent for the benefit of the Lenders in the Collateral, as
security for the Obligations. The Administrative Agent's having possession of
all instruments and cash constituting Collateral from time to time and the
filing of the financing statements described in Schedule I hereto result in the
perfection of such security interests. Such security interests are, or in the
case of Collateral in which the Grantor obtains rights after the date hereof,
will be, perfected, first priority security interests, subject only to the
security interests and other encumbrances permitted pursuant to the Credit
Agreement. Such filings and all other action necessary or desirable to perfect
and protect such security interests have been duly taken, except for the
Administrative Agent's (or any agent, bailee or custodian thereof) having
possession of Collateral consisting of instruments or cash after the date
hereof.
(g) Each Mortgage Loan included in the Collateral and
documents related thereto (a) has not been modified or amended and has not had
any requirements thereof waived except for minor modifications in the ordinary
course of the Grantor's business which do not in any event adversely affect the
value or marketability of the relevant item of Collateral (b) complies with the
terms of the Credit Documents, including, without limitation, this Agreement,
and (c) has been (or, in the case of a Wet Loan, will be upon the funding of the
related Wet Mortgage Loan) fully advanced in the respective face amounts
thereof. With respect to each such pledged Mortgage Loan, the Grantor has (or,
in the case of a Wet Loan, will have upon the funding of the related Wet
Mortgage Loan) in its possession all documents and instruments required to be
possessed by the Grantor (x) under this Agreement, (y) under applicable law and
(z) under a Purchase Commitment, if any, other than those documents and
instruments which are in the possession of the Custodian.
(h) No default, nor any event which would become a default
with notice or lapse of time or both, has occurred and is continuing under any
pledged Mortgage Loan.
(i) Escrow Deposits. Any monies held by the Grantor
representing principal, interest, tax, insurance and other deposits or payments
made by mortgagors under Mortgage Loans are held by the Grantor in accordance
with applicable laws and any agreements relating to same and have been and will
be applied to the obligations for which they were deposited in accordance with
any agreements relating to same.
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(j) Additional Representations. The additional representations
and warranties set forth in Schedule III attached hereto are true and correct.
SECTION 5. Covenants as to the Collateral. So long as any of
the Obligations shall remain outstanding or the Total Commitment shall not have
terminated, unless the Administrative Agent shall otherwise consent in writing:
(a) Further Assurances. The Grantor will at its expense, at
any time and from time to time, promptly execute and deliver all further
instruments and documents and take all further action that may be necessary or
desirable or that the Administrative Agent may request in order (i) to perfect
and protect the security interest purported to be created hereby; (ii) to enable
the Administrative Agent to exercise and enforce its rights and remedies
hereunder in respect of the Collateral; or (iii) otherwise to effect the
purposes of this Agreement, including, without limitation: (A) marking
conspicuously, at the request of the Administrative Agent, each of its records
pertaining to the Collateral with a legend, in form and substance satisfactory
to the Administrative Agent, indicating that such Collateral is subject to the
security interest created hereby, (B) executing and filing such financing or
continuation statements, or amendments thereto, as may be necessary or desirable
or that the Administrative Agent may request in order to perfect and preserve
the security interest purported to be created hereby, and (C) furnishing to the
Administrative Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Administrative Agent may reasonably request, all in
reasonable detail.
(b) Transfers and Other Liens.
(i) The Grantor will not sell, assign (by operation
of law or otherwise), lease, exchange or otherwise transfer or dispose
of any of the Collateral except to the extent permitted under the
Credit Agreement, subject to the obligation of the Grantor to make
payments pursuant to Section 2.06(d) of the Credit Agreement.
(ii) The Grantor will not create or suffer to exist
any Lien, security interest or other charge or encumbrance upon or with
respect to any Collateral, except for (A) the Liens and security
interest created by this Agreement and the other Credit Documents and
(B) the Liens, security interests and other encumbrances permitted by
the Credit Agreement.
(c) Performance under Servicing Contracts; Escrow Deposits.
The Grantor shall service or cause to be serviced all Mortgages in accordance
with the terms and provisions set forth in Schedule II attended hereto. The
Grantor hereby agrees that upon the occurrence and during the continuance of an
Event of Default, the Administrative Agent may, subject to the prior rights of
any sub-servicer pursuant to a legally binding servicing agreement between the
Grantor and such sub-servicer, terminate the Grantor as servicer and transfer
servicing to the Administrative Agent's designee, at no cost or expense to the
Administrative Agent and the Lenders, it being agreed that the Grantor will pay
any and all fees required to effectuate the transfer of servicing to the
designee of the Administrative Agent. The Grantor shall permit the
Administrative Agent or its designee to inspect the Grantor's servicing
facilities, in the absence
6
of a continuing Event of Default, during normal business hours, for the purpose
of satisfying the Administrative Agent that the Grantor has the ability to
service the Mortgage Loans as provided in the Credit Agreement. It shall hold
all escrow deposits in accordance with all applicable Laws and all agreements
relating to such escrow deposits, without commingling the same with non-escrow
funds, and shall hold and apply the same for purposes for which such escrow
deposits were collected in accordance with all applicable Laws and agreements.
(d) Failure to Qualify for Inclusion in Borrowing Base and
Related Matters. The Grantor shall notify the Administrative Agent of (a) any
default under any Mortgage pledged hereunder and delivered to the Custodian, (b)
the failure of any items of Collateral which are required by the terms hereof to
be covered by a Purchase Commitment to be so covered, (c) the failure of any
Eligible Mortgage Loan that is included in the Borrowing Base to no longer
satisfy the requirements of the Credit Agreement for inclusion in the Borrowing
Base, and (d) any other matter which has a material adverse effect on the
Collateral.
(e) Inspection and Reporting. The Grantor shall permit the
Administrative Agent or any Lender, or any agents or representatives thereof or
such professionals or other Persons as the Administrative Agent may designate
(i) to examine and inspect the books and records of the Grantor and take copies
and extracts therefrom, (ii) to verify materials, leases, notes, receivables,
inventory and other assets of the Grantor from time to time, and (iii) to
conduct physical counts, appraisals and/or valuations at the locations of the
Grantor, in each case as provided in the Credit Agreement.
SECTION 6. Additional Provisions Concerning the Collateral.
(a) The Grantor hereby authorizes the Administrative Agent to
file, without the signature of the Grantor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to the
Collateral.
(b) The Grantor hereby irrevocably appoints the Administrative
Agent the Grantor's attorney-in-fact and proxy, with full authority in the place
and stead of the Grantor and in the name of the Grantor or otherwise, from time
to time in the Administrative Agent's discretion upon the occurrence of an Event
of Default, to take any action and to execute any instrument which such Agent
may deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, (i) to obtain and adjust insurance required to be
paid to the Administrative Agent pursuant to Section 6.09 of the Credit
Agreement and to receive, indorse and collect any drafts or other instruments,
documents and chattel paper in connection therewith, (ii) to ask, demand,
collect, xxx for, recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in respect of any Collateral, (iii) to
receive, indorse, and collect any drafts or other instruments, documents and
chattel paper in connection with clause (i) or (ii) above, and (iv) to file any
claims or take any action or institute any proceedings which the Administrative
Agent may deem necessary or desirable for the collection of any Collateral or
otherwise to enforce the rights of the Administrative Agent with respect to any
Collateral.
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(c) If the Grantor fails to perform any agreement contained
herein, the Administrative Agent may itself perform, or cause performance of,
such agreement or obligation, in the name of the Grantor or the Administrative
Agent, and the expenses of the Administrative Agent incurred in connection
therewith shall be payable by the Grantor pursuant to Section 8 hereof and shall
be secured by the Collateral.
(d) The powers conferred on the Administrative Agent hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Administrative Agent shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 7. Remedies Upon Default. If any Event of Default
shall have occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party
upon default under the Code (whether or not the Code applies to the affected
Collateral), and also may (i) require the Grantor to, and the Grantor hereby
agrees that it will at its expense and upon request of the Administrative Agent
forthwith, assemble all or part of the Collateral as directed by the
Administrative Agent and make it available to the Administrative Agent at a
place or places to be designated by the Administrative Agent which is reasonably
convenient to both parties and (ii) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Administrative Agent's offices or elsewhere, for
cash, on credit or for future delivery, and at such price or prices and upon
such other terms as the Administrative Agent may deem commercially reasonable.
The Grantor agrees that, to the extent notice of sale shall be required by law,
at least 10 days' notice to the Grantor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. The Administrative Agent shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Grantor hereby waives any claims against the Administrative Agent and the
Lenders arising by reason of the fact that the price at which the Collateral may
have been sold at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Administrative Agent accepts the first offer received
and does not offer the Collateral to more than one offeree and waives all rights
which the Grantor may have to require that all or any part of the Collateral be
marshaled upon any sale (public or private) thereof.
(b) Any cash held by the Administrative Agent as Collateral
and all cash proceeds received by the Administrative Agent in respect of any
sale of or collection from, or other realization upon, all or any part the
Collateral may, in the discretion of the Xxxxxxxxxxxxxx
0
Xxxxx, xx held by the Administrative Agent as collateral for, and/or then or at
any time thereafter applied in whole or in part by the Administrative Agent
against, all or any part of the Obligations.
(c) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which the
Administrative Agent and the Lenders are legally entitled, the Grantor shall be
liable for the deficiency, together with interest thereon at the highest rate
specified in any applicable Credit Document for interest on overdue principal
thereof or such other rate as shall be fixed by applicable law, together with
the costs of collection and the reasonable fees, costs, expenses of any
attorneys employed by the Administrative Agent to collect such deficiency.
SECTION 8. Indemnity and Expenses.
(a) The Grantor agrees to indemnify and hold the
Administrative Agent harmless from and against any and all claims, damages,
losses, liabilities, obligations, penalties, costs or expenses (including,
without limitation, legal fees and disbursements of Administrative Agent's
counsel) to the extent that they arise out of or otherwise result from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from the Agent's
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction.
(b) The Grantor will upon demand pay to the Administrative
Agent the amount of any and all costs and expenses, including the reasonable
fees and disbursements of the Administrative Agent's counsel and of any experts
and agents, which the Administrative Agent may incur in connection with (i) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection from,
or other realization upon, any Collateral, (iii) the exercise or enforcement of
any of the rights of the Administrative Agent hereunder, or (iv) the failure by
the Grantor to perform or observe any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Grantor or the Administrative Agent, to the parties and at the addresses
specified in the Credit Agreement; or as to either such Person at such other
address as shall be designated by such Person in a written notice to such other
Person complying as to delivery with the terms of this Section 9. All such
notices and other communications shall be effective (i) if mailed, three days
after being deposited in the mails, (ii) if telecopied, when sent and
confirmation is received or (iii) if delivered, upon delivery.
SECTION 10. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and the
Administrative Agent, and no waiver of any provision of this Agreement, and no
consent to any departure by the Grantor therefrom, shall
9
be effective unless it is in writing and signed by the Administrative Agent, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
(b) No failure on the part of the Administrative Agent to
exercise, and no delay in exercising, any right hereunder or under any other
Credit Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The rights and remedies of the
Administrative Agent provided herein and in the other Credit Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Administrative Agent under any Credit
Document against any party thereto are not conditional or contingent on any
attempt by the Administrative Agent to exercise any of its rights under any
other Credit Document against such party or against any other Person.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest
in the Collateral and shall (i) remain in full force and effect until the
payment in full of the Obligations after the Total Commitment has been
terminated, and (ii) be binding on the Grantor and its successors and assigns
and shall inure, together with all rights and remedies of the Administrative
Agent hereunder, to the benefit of the Administrative Agent and the Lenders
their respective permitted successors, transferees and assigns. Without limiting
the generality of clause (ii) of the immediately preceding sentence and subject
to the terms of the Credit Agreement, the Administrative Agent and Lenders may
assign or otherwise transfer their rights under this Agreement and any other
Credit Document, to any other Person and such other Person shall thereupon
become vested with all of the benefits in respect thereof granted to the
Administrative Agent and the Lenders herein or otherwise. None of the rights or
obligations of the Grantor hereunder may be assigned or otherwise transferred
without the prior written consent of the Administrative Agent, and any such
assignment or transfer shall be null and void.
(e) Upon the satisfaction in full of the Obligations after the
Total Commitment has been terminated, (i) this Agreement and the security
interests created hereby shall terminate and all rights to the Collateral shall
revert to the Grantor, and (ii) the Administrative Agent will, upon the
Grantor's request and at the Grantor's expense, (A) return to the Grantor such
of the Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof, and (B) execute and deliver to the Grantor
such documents as the Grantor shall reasonably request to evidence such
termination, all without any representation, warranty or recourse whatsoever.
(f) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, except as
required by mandatory provisions of law and except to the extent that the
validity and perfection or the perfection and effect of
10
perfection or non-perfection of the security interest created hereby or remedies
hereunder, in respect of any particular Collateral are governed by the law of a
jurisdiction other than the State of New York.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the Grantor has caused this Agreement to
be executed and delivered by its officer thereunto duly authorized as of the
date first above written.
[GRANTOR]
By: ________________
Name: ________________
Title:________________
SCHEDULE I TO SECURITY AGREEMENT
UCC-1 FINANCING STATEMENTS
SCHEDULE II TO SECURITY AGREEMENT
SERVICING TERMS AND PROVISIONS
SCHEDULE III TO SECURITY AGREEMENT
ADDITIONAL REPRESENTATIONS AND WARRANTIES RE: ELIGIBLE MORTGAGE LOANS
As to each Mortgage Loan included in the Borrowing Base on the
date of a Loan (and the related Mortgage, Mortgage Note, assignment of mortgage
and mortgaged property), the Grantor shall be deemed to make the following
representations and warranties to the Lenders as of such date and as of each
date Unit Collateral Value is determined. With respect to any representations
and warranties made to the best of the Grantor's knowledge, in the event that it
is discovered that the circumstances with respect to the related Mortgage Loan
are not accurately reflected in such representation and warranty notwithstanding
the knowledge or lack of knowledge of the Grantor, then, notwithstanding that
such representation and warranty is made to the best of the Grantor's knowledge,
such Mortgage Loan may, at the option of the Administrative Agent, be excluded
from the Borrowing Base or be assigned an Unit Collateral Value lower than that
set forth in the Credit Agreement:
(1) Mortgage Loan Schedule. The information set forth on the Mortgage Loan
Schedule with respect to such Eligible Mortgage Loan is true and
correct as of the date of each Loan in all material respects;
(2) No Defenses. To the best of the Grantor's knowledge, there is no valid
offset, defense or counterclaim to any related Mortgage Note or
Mortgage, including the obligation of the mortgagor to pay the unpaid
principal of or interest on such Mortgage Note;
(3) Mortgaged Property Undamaged. To the best of the Grantor's knowledge,
each related mortgaged property is free of material damage and is in
good repair;
(4) No Modifications. Neither the Grantor nor any prior holder of any
related Mortgage has modified such Mortgage in any material respect
(except that such a Mortgage Loan may have been modified by a written
instrument which has been recorded, if necessary, to protect the
interests of the Administrative Agent and which has been delivered to
the Custodian); satisfied, canceled or subordinated such Mortgage in
whole or in part; released the related mortgaged property in whole or
in part from the lien of such Mortgage except for the subordination of
a Mortgage securing a Mortgage Loan, with respect to which the related
superior lien was released in connection with the refinancing of the
mortgage loan relating to such superior lien; or executed any
instrument of release, cancellation, modification or satisfaction with
respect thereto except as has been disclosed to Administrative Agent
prior to the date of the Loan, in which case a copy of such
modification agreement will have been delivered to the Grantor and the
Custodian;
(5) Title Insurance. Except with respect to High-LTV Mortgage Loans, a
lender's policy of title insurance together with a condominium
endorsement, if applicable, and extended coverage endorsement and, if
applicable, an adjustable rate mortgage endorsement in an amount at
least equal to the principal balance as of the date of the funding of
the related
Loan of each such Eligible Mortgage Loan or a commitment (binder) to
issue the same was effective on the date of the origination of such
Eligible Mortgage Loan, each such policy is valid and remains in full
force and effect, and each such policy was issued by a title insurer
qualified to do business in the jurisdiction where the related
mortgaged property is located, which policy insures the Grantor and
successor owners of indebtedness secured by the insured related
Mortgage, as to the first or second priority lien of such Mortgage; to
the best of the Grantor's knowledge, no claims have been made under
such mortgage title insurance policy and no prior holder of such
Mortgage, including the Grantor, has done, by act or omission, anything
which would impair the coverage of such mortgage title insurance
policy;
(6) Origination. Such Eligible Mortgage Loan was originated by the Grantor
or, if not originated by the Grantor, was purchased by the Grantor and
substantially in accordance with the Underwriting Guidelines then in
effect;
(7) No Encroachments. To the best of the Grantor's knowledge, all of the
improvements which were included for the purpose of determining the
Unit Collateral Value of the related mortgaged property lie wholly
within the boundaries and building restriction lines of such property,
and no improvements on adjoining properties encroach upon such
mortgaged property unless the applicable title insurance policy for
such mortgaged property affirmatively insures against loss or damage by
reason of any encroachment that is disclosed or would have been
disclosed by an accurate survey;
(8) Customary Provisions. The related Mortgage contains customary and
enforceable provisions which render the rights and remedies of the
holder thereof adequate for the realization against the related
mortgaged property of the benefits of the security, including, (i) if
such Mortgage is designated as a deed of trust, by trustee's sale and
(ii) otherwise by judicial foreclosure;
(9) Deeds of Trust. With respect to any related Mortgage constituting a
deed of trust, a trustee, duly qualified under applicable law to serve
as such, has been properly designated and currently so serves and is
named in such Mortgage, and no fees or expenses are or will become
payable by, the Administrative Agent to the trustee under the deed of
trust, except in connection with a trustees sale after default by the
related mortgagor;
(10) No Shared Appreciation; No Contingent Interests. Such Eligible Mortgage
Loan does not have a shared appreciation feature, or other contingent
interest feature;
(11) Due on Sale. Such Eligible Mortgage Loan contains a "due-on-sale"
clause unless prohibited by applicable law;
(12) No Condemnation. To the best of the Grantor's knowledge, there is no
proceeding pending or threatened for the total or partial condemnation
of the related mortgaged property, nor is such a proceeding currently
occurring, and such property is undamaged by waste, fire, earthquake or
earth movement except for normal wear and tear;
III-2
(13) No Future Advances. There is no obligation on the part of the Grantor
or any other party under the terms of the related Mortgage or related
Mortgage Note to make payments in addition to those made to the related
Mortgagor;
(14) No Assessments. To the best of the Grantor's knowledge, there are no
defaults in complying with the terms of the Mortgage that would have a
material adverse effect on the value of the related Mortgage Loan, and
all taxes, governmental assessments, insurance premiums, water, sewer
and municipal charges, leasehold payments or ground rents that would
have a material adverse effect on the value of the related Mortgage
Loan which previously became due and owing have been paid, or an escrow
of funds has been established in an amount sufficient to pay for every
such item which remains unpaid. The Grantor has not advanced funds, or
induced, solicited or knowingly received any advance of funds by a
party other than the related Mortgagor, directly or indirectly, for the
payment of any amount required by the related Mortgage except for (A)
payments in the nature of escrow payments, including without
limitation, taxes and insurance payments, and (B) interest accruing
from the date of the related Mortgage Note or date of disbursement of
the related Mortgage proceeds, whichever is later, to the day which
precedes by one month the due date of the first installment of
principal and interest;
(15) Appraisal. The related Mortgage File as defined in the Custodian
Agreement contains an appraisal of the related mortgaged property
signed by an appraiser, duly appointed by the originator, who had no
interest, direct or indirect in the related mortgaged property or in
any loan made on the security thereof, and whose compensation is not
affected by the approval or disapproval of such Eligible Mortgage Loan;
the appraisal satisfies the requirements of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989;
(16) No Graduated Payments; No Buydowns: No Convertible Mortgage Assets.
Unless otherwise specified in the related Loan Request, such Eligible
Mortgage Loan is not a graduated payment mortgage loan or a growing
equity mortgage loan, nor is such Eligible Mortgage Loan subject to a
temporary buydown or similar arrangement. If the Eligible Mortgage Loan
has an adjustable rate, it is not convertible at the option of the
related mortgagor to a fixed rate mortgage loan;
(17) No Fraud. To the best of the Grantor's knowledge, no error, omission,
misrepresentation, negligence, fraud or similar action occurred on the
part of any person in connection with the origination of any Eligible
Mortgage Loan.
III-3
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of June 30, 1998, made by STERLING LENDING
CORPORATION, a South Carolina corporation (the "Grantor"), in favor of THE CIT
GROUP/BUSINESS CREDIT, INC., as administrative agent for the Lenders parties to
the Credit Agreement referred to below (in such capacity, the "Administrative
Agent").
W I T N E S S E T H :
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WHEREAS, HomeGold, Inc. and Carolina Investors, Inc., each a South Carolina
corporation (each a "Borrower" and collectively the "Borrowers"), the
Administrative Agent and the financial institutions from time to time party
thereto (the "Lenders") are parties to a Mortgage Loan Warehousing Agreement,
dated as of June 30, 1998 (such Agreement, as amended, restated or otherwise
modified from time to time, being hereinafter referred to as the "Credit
Agreement");
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make
revolving credit loans to the Borrowers in an aggregate principal amount at any
one time outstanding not to exceed $200,000,000 (each a "Loan" and collectively
the "Loans");
WHEREAS, it is a condition precedent to the Lenders making any Loan
pursuant to the Credit Agreement that the Grantor shall have executed and
delivered to the Administrative Agent a security agreement providing for the
grant to the Administrative Agent for the benefit of the Lenders of a security
interest in certain personal property of the Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Lenders to make and maintain the Loans, the Grantor
hereby agrees with the Administrative Agent as follows:
SECTION 1. Definitions. Reference is hereby made to the Credit Agreement
for a statement of the terms thereof. All terms used in this Agreement which are
defined in the Credit Agreement or in Articles 8 and 9 of the Uniform Commercial
Code (the "Code") currently in effect in the State of New York and which are not
otherwise defined herein shall have the same meanings herein as set forth
therein.
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SECTION 2. Grant of Security Interest
In order to secure the payment and performance in full of the Loans and the
other Obligations (as defined in Section 3 hereof), the Grantor hereby assigns
and pledges to the Administrative Agent for the benefit of the Lenders and
hereby grants to the Administrative Agent for the benefit of the Lenders a
security interest in and to the following, wherever located and whether now
owned or hereafter existing or acquired by the Grantor (the "Collateral"):
(1) all Mortgage Loans, including Wet
Mortgage Loans, owned by the Grantor, the Mortgage Note and
Mortgage and the other documents evidencing or relating to
said Mortgage Loan, all servicing rights and servicing fees
and other income arising from or relating to such Mortgage
Loans, and all instruments, documents, loan agreements,
guarantees, interest rate swap, cap or collar agreements or
similar agreements, contract rights, general intangibles,
property rights, proceeds and payments arising therefrom or
relating thereto, including without limitation the following:
(a) all payments and prepayments of
principal, interest, and other income due or to become
due thereon and all proceeds therefrom, and all the
right, title and interest of every nature whatsoever
of the Grantor in and to such property;
(b) all Liens with respect thereto
or as security therefor;
(c) all hazard insurance policies,
title insurance policies or condemnation proceeds with
respect thereto; and
(d) all prepayment premiums and late
payment charges with respect thereto;
(2) all real estate acquired by the Grantor
by deed in lieu of foreclosure or by foreclosure attributable
to any such Mortgage Loan;
(3) all commitments issued by Investors to
purchase Mortgage Loans from the Grantor ("Purchase
Commitments") and all rights of the Grantor with respect
thereto;
(4) all right, title and interest of the
Grantor in and to all files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs,
cards, accounting records, and other records, information, and
related data of the Grantor with respect to such Mortgage
Loans;
(5) the books and records of the Grantor
relating to any of the foregoing Collateral, including,
without limitation, all customer contracts, sale orders,
minute books, ledgers, records, computer programs, software,
printouts, microfiche and other computer materials, customer
lists, credit files, correspondence and advertising materials,
in each case indicating, summarizing or evidencing any of the
Collateral;
(6) all cash from time to time deposited in
any deposit account of the Grantor with the Custodian,
including, without limitation, the Funding Account and the
Settlement Account;
(7) (a) all moneys, securities and other
property and the proceeds thereof, now or hereafter held or
received by, or in transit to, the Administrative Agent or any
Lender from or for the Grantor, whether for safekeeping,
pledge,
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custody, transmission, collection or otherwise, and all of
the Grantor's sums and credits with, and all of the Grantor's
claims against the Administrative Agent or any Lender at any
time existing; (b) all rights, interests, choses in action,
causes of actions, claims and all other intangible property
of every kind and nature, in each instance whether now owned
or hereafter acquired by the Grantor, including, without
limitation, all corporate and other business records, all
loans, royalties, servicing rights and all other forms of
obligations receivable whatsoever; (c) all computer programs,
software, printouts and other computer materials, credit
files, correspondence, advertising materials and other source
or business identifiers; (d) all rights under license and
franchise agreements, servicing contracts and other contracts
and contract rights; (e) all interests in partnerships,
limited liability companies and joint ventures, including all
moneys due from time to time in respect thereof; (f) all
federal, state and local tax refunds and federal, state and
local tax refund claims and all judgments in favor of the
Grantor and all of the Grantor's rights with respect thereto;
(g) all right, title and interest under leases, subleases,
licenses and concessions and other agreements relating to
personal property, including all moneys due from time to time
in respect thereof; (h) all payments due or made to the
Grantor in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property by any
Person or Governmental Authority; (i) all lock-box and all
deposit accounts (general or special) or other accounts with
any bank or other financial institution, including, without
limitation, all depository or other accounts maintained by
the Grantor at any Lender and all funds on deposit therein;
(j) all credits with and other claims against third parties;
(k) all rights to indemnification; (l) all reversionary
interests in pension and profit sharing plans and
reversionary, beneficial and residual interests in trusts;
(m) all proceeds of insurance of which the Grantor is the
beneficiary; (n) all letters of credit, guaranties, liens,
security interests and other security held by or granted to
the Grantor; (o) all instruments, files, records, ledger
sheets and documents covering or relating to any of the
Collateral; and (p) all present and future accounts, contract
rights, chattel paper, documents, instruments, general
intangibles and other obligations of any kind, whether or not
similar to the foregoing, in each instance, however and
wherever arising;
(8) all investment property, securities,
securities accounts, financial assets and all securities
entitlements of the Grantor in any and all of the foregoing;
and
(9) all proceeds of any and all of the
foregoing Collateral (including, without limitation, proceeds
which constitute property of the types described in any of the
clauses of this Section 2 and, to the extent not otherwise
included, all payments under insurance (whether or not the
Administrative Agent or the Grantor is the loss payee
thereof), or any indemnity, warranty, guaranty or insured
closing letter, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral);
-3-
in each case howsoever the Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
SECTION 3. Security for Obligations. The security interest
created hereby in the Collateral constitutes continuing collateral security for
all of the following obligations, whether now existing or hereafter incurred
(the "Obligations"):
(a) the prompt payment by the Grantor, as and when due and
payable, of all amounts from time to time owing by it in respect of the Credit
Agreement, the Notes, and the other Credit Documents, including, without
limitation, principal of and interest on the Loans (including, without
limitation, all interest that accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any Borrower, whether or not a claim for post-filing interest
is allowed in such proceeding), all fees, commissions, expense reimbursements,
indemnifications and all other amounts due or to become due under any Credit
Document; and
(b) the due performance and observance by the Grantor of all
of its other obligations from time to time existing in respect of the Credit
Agreement, the Notes, and all other Credit Documents.
SECTION 4. Representations and Warranties. The Grantor
represents and warrants as
follows:
(a) There is no pending or threatened action, suit, proceeding
or claim before any court or other Governmental Authority or any arbitrator, or
any order, judgment or award by any court or other Governmental Authority or
arbitrator, that may adversely affect the grant by the Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or the exercise by the Administrative Agent of any of its rights or
remedies hereunder.
(b) All taxes, assessments and other governmental charges
imposed upon the Grantor or any property of the Grantor (including, without
limitation, all federal income and social security taxes on employees' wages)
and which have become due and payable on or prior to the date hereof have been
paid, except to the extent contested in good faith by proper proceedings which
stay the imposition of any penalty, fine and Lien resulting from the non-payment
thereof and with respect to which adequate reserves in accordance with GAAP have
been established for the payment thereof.
(c) The Grantor is and will be at all times the sole and
exclusive owner of the Collateral free and clear of any Lien, except for (i) the
security interest created by this Agreement, and (ii) the security interests and
other encumbrances permitted by the Credit Agreement. No effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording or filing office, except (i) such as may
have been filed in favor of the Administrative Agent relating to this Agreement,
and (ii) such as may have been filed to perfect or protect any security interest
or encumbrance permitted by the Credit Agreement.
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(d) The exercise by the Administrative Agent of any of its
rights and remedies hereunder will not contravene law or any contractual
restriction binding on or otherwise affecting the Grantor or any of its
properties and will not result in or require the creation of any Lien, security
interest or other charge or encumbrance upon or with respect to any of its
properties.
(e) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or any other Person, is
required for (i) the grant by the Grantor, or the perfection, of the security
interest purported to be created hereby in the Collateral or (ii) the exercise
by the Administrative Agent of any of its rights and remedies hereunder, except
for the filing under the Uniform Commercial Code as in effect in the applicable
jurisdiction of the financing statements described in SCHEDULE I hereto.
(f) This Agreement creates valid security interests in favor
of the Administrative Agent for the benefit of the Lenders in the Collateral, as
security for the Obligations. The Administrative Agent's having possession of
all instruments and cash constituting Collateral from time to time and the
filing of the financing statements described in SCHEDULE I hereto result in the
perfection of such security interests. Such security interests are, or in the
case of Collateral in which the Grantor obtains rights after the date hereof,
will be, perfected, first priority security interests, subject only to the
security interests and other encumbrances permitted pursuant to the Credit
Agreement. Such filings and all other action necessary or desirable to perfect
and protect such security interests have been duly taken, except for the
Administrative Agent's (or any agent, bailee or custodian thereof) having
possession of Collateral consisting of instruments or cash after the date
hereof.
(g) Each Mortgage Loan included in the Collateral and
documents related thereto (a) has not been modified or amended and has not had
any requirements thereof waived except for minor modifications in the ordinary
course of the Grantor's business which do not in any event adversely affect the
value or marketability of the relevant item of Collateral (b) complies with the
terms of the Credit Documents, including, without limitation, this Agreement,
and (c) has been (or, in the case of a Wet Loan, will be upon the funding of the
related Wet Mortgage Loan) fully advanced in the respective face amounts
thereof. With respect to each such pledged Mortgage Loan, the Grantor has (or,
in the case of a Wet Loan, will have upon the funding of the related Wet
Mortgage Loan) in its possession all documents and instruments required to be
possessed by the Grantor (x) under this Agreement, (y) under applicable law and
(z) under a Purchase Commitment, if any, other than those documents and
instruments which are in the possession of the Custodian.
(h) No default, nor any event which would become a default
with notice or lapse of time or both, has occurred and is continuing under any
pledged Mortgage Loan.
(i) Escrow Deposits. Any monies held by the Grantor
representing principal, interest, tax, insurance and other deposits or payments
made by mortgagors under Mortgage Loans are held by the Grantor in accordance
with applicable laws and any agreements relating to same and have been and will
be applied to the obligations for which they were deposited in accordance with
any agreements relating to same.
-5-
(j) Additional Representations. The additional representations
and warranties set forth in Schedule III attached hereto are true and correct.
SECTION 5. Covenants as to the Collateral. So long as any of
the Obligations shall remain outstanding or the Total Commitment shall not have
terminated, unless the Administrative Agent shall otherwise consent in writing:
(a) Further Assurances. The Grantor will at its expense, at
any time and from time to time, promptly execute and deliver all further
instruments and documents and take all further action that may be necessary or
desirable or that the Administrative Agent may request in order (i) to perfect
and protect the security interest purported to be created hereby; (ii) to enable
the Administrative Agent to exercise and enforce its rights and remedies
hereunder in respect of the Collateral; or (iii) otherwise to effect the
purposes of this Agreement, including, without limitation: (A) marking
conspicuously, at the request of the Administrative Agent, each of its records
pertaining to the Collateral with a legend, in form and substance satisfactory
to the Administrative Agent, indicating that such Collateral is subject to the
security interest created hereby, (B) executing and filing such financing or
continuation statements, or amendments thereto, as may be necessary or desirable
or that the Administrative Agent may request in order to perfect and preserve
the security interest purported to be created hereby, and (C) furnishing to the
Administrative Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Administrative Agent may reasonably request, all in
reasonable detail.
(b) Transfers and Other Liens.
(i) The Grantor will not sell, assign (by operation
of law or otherwise), lease, exchange or otherwise transfer or dispose
of any of the Collateral except to the extent permitted under the
Credit Agreement, subject to the obligation of the Grantor to make
payments pursuant to Section 2.06(d) of the Credit Agreement.
(ii) The Grantor will not create or suffer to exist
any Lien, security interest or other charge or encumbrance upon or with
respect to any Collateral, except for (A) the Liens and security
interest created by this Agreement and the other Credit Documents and
(B) the Liens, security interests and other encumbrances permitted by
the Credit Agreement.
(c) Performance under Servicing Contracts; Escrow Deposits.
The Grantor shall service or cause to be serviced all Mortgages in accordance
with the terms and provisions set forth in Schedule II attended hereto. The
Grantor hereby agrees that upon the occurrence and during the continuance of an
Event of Default, the Administrative Agent may, subject to the prior rights of
any sub-servicer pursuant to a legally binding servicing agreement between the
Grantor and such sub-servicer, terminate the Grantor as servicer and transfer
servicing to the Administrative Agent's designee, at no cost or expense to the
Administrative Agent and the Lenders, it being agreed that the Grantor will pay
any and all fees required to effectuate the transfer of servicing to the
designee of the Administrative Agent. The Grantor shall permit the
Administrative Agent or its designee to inspect the Grantor's servicing
facilities, in the absence
-6-
of a continuing Event of Default, during normal business hours, for the purpose
of satisfying the Administrative Agent that the Grantor has the ability to
service the Mortgage Loans as provided in the Credit Agreement. It shall hold
all escrow deposits in accordance with all applicable Laws and all agreements
relating to such escrow deposits, without commingling the same with non-escrow
funds, and shall hold and apply the same for purposes for which such escrow
deposits were collected in accordance with all applicable Laws and agreements.
(d) Failure to Qualify for Inclusion in Borrowing Base and
Related Matters. The Grantor shall notify the Administrative Agent of (a) any
default under any Mortgage pledged hereunder and delivered to the Custodian, (b)
the failure of any items of Collateral which are required by the terms hereof to
be covered by a Purchase Commitment to be so covered, (c) the failure of any
Eligible Mortgage Loan that is included in the Borrowing Base to no longer
satisfy the requirements of the Credit Agreement for inclusion in the Borrowing
Base, and (d) any other matter which has a material adverse effect on the
Collateral.
(e) Inspection and Reporting. The Grantor shall permit the
Administrative Agent or any Lender, or any agents or representatives thereof or
such professionals or other Persons as the Administrative Agent may designate
(i) to examine and inspect the books and records of the Grantor and take copies
and extracts therefrom, (ii) to verify materials, leases, notes, receivables,
inventory and other assets of the Grantor from time to time, and (iii) to
conduct physical counts, appraisals and/or valuations at the locations of the
Grantor, in each case as provided in the Credit Agreement.
SECTION 6. Additional Provisions Concerning the Collateral.
(a) The Grantor hereby authorizes the Administrative Agent to
file, without the signature of the Grantor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to the
Collateral.
(b) The Grantor hereby irrevocably appoints the Administrative
Agent the Grantor's attorney-in-fact and proxy, with full authority in the place
and stead of the Grantor and in the name of the Grantor or otherwise, from time
to time in the Administrative Agent's discretion upon the occurrence of an Event
of Default, to take any action and to execute any instrument which such Agent
may deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, (i) to obtain and adjust insurance required to be
paid to the Administrative Agent pursuant to Section 6.09 of the Credit
Agreement and to receive, indorse and collect any drafts or other instruments,
documents and chattel paper in connection therewith, (ii) to ask, demand,
collect, xxx for, recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in respect of any Collateral, (iii) to
receive, indorse, and collect any drafts or other instruments, documents and
chattel paper in connection with clause (i) or (ii) above, and (iv) to file any
claims or take any action or institute any proceedings which the Administrative
Agent may deem necessary or desirable for the collection of any Collateral or
otherwise to enforce the rights of the Administrative Agent with respect to any
Collateral.
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(c) If the Grantor fails to perform any agreement contained
herein, the Administrative Agent may itself perform, or cause performance of,
such agreement or obligation, in the name of the Grantor or the Administrative
Agent, and the expenses of the Administrative Agent incurred in connection
therewith shall be payable by the Grantor pursuant to Section 8 hereof and shall
be secured by the Collateral.
(d) The powers conferred on the Administrative Agent hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Administrative Agent shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 7. Remedies Upon Default. If any Event of Default
shall have occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party
upon default under the Code (whether or not the Code applies to the affected
Collateral), and also may (i) require the Grantor to, and the Grantor hereby
agrees that it will at its expense and upon request of the Administrative Agent
forthwith, assemble all or part of the Collateral as directed by the
Administrative Agent and make it available to the Administrative Agent at a
place or places to be designated by the Administrative Agent which is reasonably
convenient to both parties and (ii) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Administrative Agent's offices or elsewhere, for
cash, on credit or for future delivery, and at such price or prices and upon
such other terms as the Administrative Agent may deem commercially reasonable.
The Grantor agrees that, to the extent notice of sale shall be required by law,
at least 10 days' notice to the Grantor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. The Administrative Agent shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Grantor hereby waives any claims against the Administrative Agent and the
Lenders arising by reason of the fact that the price at which the Collateral may
have been sold at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Administrative Agent accepts the first offer received
and does not offer the Collateral to more than one offeree and waives all rights
which the Grantor may have to require that all or any part of the Collateral be
marshaled upon any sale (public or private) thereof.
(b) Any cash held by the Administrative Agent as Collateral
and all cash proceeds received by the Administrative Agent in respect of any
sale of or collection from, or other realization upon, all or any part the
Collateral may, in the discretion of the Administrative
-8-
Agent, be held by the Administrative Agent as collateral for, and/or then or at
any time thereafter applied in whole or in part by the Administrative Agent
against, all or any part of the Obligations.
(c) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which the
Administrative Agent and the Lenders are legally entitled, the Grantor shall be
liable for the deficiency, together with interest thereon at the highest rate
specified in any applicable Credit Document for interest on overdue principal
thereof or such other rate as shall be fixed by applicable law, together with
the costs of collection and the reasonable fees, costs, expenses of any
attorneys employed by the Administrative Agent to collect such deficiency.
SECTION 8. Indemnity and Expenses.
(a) The Grantor agrees to indemnify and hold the
Administrative Agent harmless from and against any and all claims, damages,
losses, liabilities, obligations, penalties, costs or expenses (including,
without limitation, legal fees and disbursements of Administrative Agent's
counsel) to the extent that they arise out of or otherwise result from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from the Agent's
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction.
(b) The Grantor will upon demand pay to the Administrative
Agent the amount of any and all costs and expenses, including the reasonable
fees and disbursements of the Administrative Agent's counsel and of any experts
and agents, which the Administrative Agent may incur in connection with (i) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection from,
or other realization upon, any Collateral, (iii) the exercise or enforcement of
any of the rights of the Administrative Agent hereunder, or (iv) the failure by
the Grantor to perform or observe any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Grantor or the Administrative Agent, to the parties and at the addresses
specified in the Credit Agreement; or as to either such Person at such other
address as shall be designated by such Person in a written notice to such other
Person complying as to delivery with the terms of this Section 9. All such
notices and other communications shall be effective (i) if mailed, three days
after being deposited in the mails, (ii) if telecopied, when sent and
confirmation is received or (iii) if delivered, upon delivery.
SECTION 10. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and the
Administrative Agent, and no waiver of any provision of this Agreement, and no
consent to any departure by the Grantor therefrom, shall
-9-
be effective unless it is in writing and signed by the Administrative Agent, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
(b) No failure on the part of the Administrative Agent to
exercise, and no delay in exercising, any right hereunder or under any other
Credit Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The rights and remedies of the
Administrative Agent provided herein and in the other Credit Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Administrative Agent under any Credit
Document against any party thereto are not conditional or contingent on any
attempt by the Administrative Agent to exercise any of its rights under any
other Credit Document against such party or against any other Person.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest
in the Collateral and shall (i) remain in full force and effect until the
payment in full of the Obligations after the Total Commitment has been
terminated, and (ii) be binding on the Grantor and its successors and assigns
and shall inure, together with all rights and remedies of the Administrative
Agent hereunder, to the benefit of the Administrative Agent and the Lenders
their respective permitted successors, transferees and assigns. Without limiting
the generality of clause (ii) of the immediately preceding sentence and subject
to the terms of the Credit Agreement, the Administrative Agent and Lenders may
assign or otherwise transfer their rights under this Agreement and any other
Credit Document, to any other Person and such other Person shall thereupon
become vested with all of the benefits in respect thereof granted to the
Administrative Agent and the Lenders herein or otherwise. None of the rights or
obligations of the Grantor hereunder may be assigned or otherwise transferred
without the prior written consent of the Administrative Agent, and any such
assignment or transfer shall be null and void.
(e) Upon the satisfaction in full of the Obligations after the
Total Commitment has been terminated, (i) this Agreement and the security
interests created hereby shall terminate and all rights to the Collateral shall
revert to the Grantor, and (ii) the Administrative Agent will, upon the
Grantor's request and at the Grantor's expense, (A) return to the Grantor such
of the Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof, and (B) execute and deliver to the Grantor
such documents as the Grantor shall reasonably request to evidence such
termination, all without any representation, warranty or recourse whatsoever.
(f) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, except as
required by mandatory provisions of law and except to the extent that the
validity and perfection or the perfection and effect of
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perfection or non-perfection of the security interest created hereby or remedies
hereunder, in respect of any particular Collateral are governed by the law of a
jurisdiction other than the State of New York.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the Grantor has caused this Agreement to
be executed and delivered by its officer thereunto duly authorized as of the
date first above written.
[GRANTOR]
By: _________________________________
Name: _________________________________
Title: _________________________________
SCHEDULE I TO SECURITY AGREEMENT
UCC-1 FINANCING STATEMENTS
SCHEDULE II TO SECURITY AGREEMENT
SERVICING TERMS AND PROVISIONS
SCHEDULE III TO SECURITY AGREEMENT
ADDITIONAL REPRESENTATIONS AND WARRANTIES RE: ELIGIBLE MORTGAGE LOANS
As to each Mortgage Loan included in the Borrowing Base on the
date of a Loan (and the related Mortgage, Mortgage Note, assignment of mortgage
and mortgaged property), the Grantor shall be deemed to make the following
representations and warranties to the Lenders as of such date and as of each
date Unit Collateral Value is determined. With respect to any representations
and warranties made to the best of the Grantor's knowledge, in the event that it
is discovered that the circumstances with respect to the related Mortgage Loan
are not accurately reflected in such representation and warranty notwithstanding
the knowledge or lack of knowledge of the Grantor, then, notwithstanding that
such representation and warranty is made to the best of the Grantor's knowledge,
such Mortgage Loan may, at the option of the Administrative Agent, be excluded
from the Borrowing Base or be assigned an Unit Collateral Value lower than that
set forth in the Credit Agreement:
(1) Mortgage Loan Schedule. The information set forth on the Mortgage Loan
Schedule with respect to such Eligible Mortgage Loan is true and
correct as of the date of each Loan in all material respects;
(2) No Defenses. To the best of the Grantor's knowledge, there is no valid
offset, defense or counterclaim to any related Mortgage Note or
Mortgage, including the obligation of the mortgagor to pay the unpaid
principal of or interest on such Mortgage Note;
(3) Mortgaged Property Undamaged. To the best of the Grantor's knowledge,
each related mortgaged property is free of material damage and is in
good repair;
(4) No Modifications. Neither the Grantor nor any prior holder of any
related Mortgage has modified such Mortgage in any material respect
(except that such a Mortgage Loan may have been modified by a written
instrument which has been recorded, if necessary, to protect the
interests of the Administrative Agent and which has been delivered to
the Custodian); satisfied, canceled or subordinated such Mortgage in
whole or in part; released the related mortgaged property in whole or
in part from the lien of such Mortgage except for the subordination of
a Mortgage securing a Mortgage Loan, with respect to which the related
superior lien was released in connection with the refinancing of the
mortgage loan relating to such superior lien; or executed any
instrument of release, cancellation, modification or satisfaction with
respect thereto except as has been disclosed to Administrative Agent
prior to the date of the Loan, in which case a copy of such
modification agreement will have been delivered to the Grantor and the
Custodian;
(5) Title Insurance. Except with respect to High-LTV Mortgage Loans, a
lender's policy of title insurance together with a condominium
endorsement, if applicable, and extended coverage endorsement and, if
applicable, an adjustable rate mortgage endorsement in an amount at
least equal to the principal balance as of the date of the funding of
the related
Loan of each such Eligible Mortgage Loan or a commitment (binder) to
issue the same was effective on the date of the origination of such
Eligible Mortgage Loan, each such policy is valid and remains in full
force and effect, and each such policy was issued by a title insurer
qualified to do business in the jurisdiction where the related
mortgaged property is located, which policy insures the Grantor and
successor owners of indebtedness secured by the insured related
Mortgage, as to the first or second priority lien of such Mortgage; to
the best of the Grantor's knowledge, no claims have been made under
such mortgage title insurance policy and no prior holder of such
Mortgage, including the Grantor, has done, by act or omission, anything
which would impair the coverage of such mortgage title insurance
policy;
(6) Origination. Such Eligible Mortgage Loan was originated by the Grantor
or, if not originated by the Grantor, was purchased by the Grantor and
substantially in accordance with the Underwriting Guidelines then in
effect;
(7) No Encroachments. To the best of the Grantor's knowledge, all of the
improvements which were included for the purpose of determining the
Unit Collateral Value of the related mortgaged property lie wholly
within the boundaries and building restriction lines of such property,
and no improvements on adjoining properties encroach upon such
mortgaged property unless the applicable title insurance policy for
such mortgaged property affirmatively insures against loss or damage by
reason of any encroachment that is disclosed or would have been
disclosed by an accurate survey;
(8) Customary Provisions. The related Mortgage contains customary and
enforceable provisions which render the rights and remedies of the
holder thereof adequate for the realization against the related
mortgaged property of the benefits of the security, including, (i) if
such Mortgage is designated as a deed of trust, by trustee's sale and
(ii) otherwise by judicial foreclosure;
(9) Deeds of Trust. With respect to any related Mortgage constituting a
deed of trust, a trustee, duly qualified under applicable law to serve
as such, has been properly designated and currently so serves and is
named in such Mortgage, and no fees or expenses are or will become
payable by, the Administrative Agent to the trustee under the deed of
trust, except in connection with a trustees sale after default by the
related mortgagor;
(10) No Shared Appreciation; No Contingent Interests. Such Eligible Mortgage
Loan does not have a shared appreciation feature, or other contingent
interest feature;
(11) Due on Sale. Such Eligible Mortgage Loan contains a "due-on-sale"
clause unless prohibited by applicable law;
(12) No Condemnation. To the best of the Grantor's knowledge, there is no
proceeding pending or threatened for the total or partial condemnation
of the related mortgaged property, nor is such a proceeding currently
occurring, and such property is undamaged by waste, fire, earthquake or
earth movement except for normal wear and tear;
III-2
(13) No Future Advances. There is no obligation on the part of the Grantor
or any other party under the terms of the related Mortgage or related
Mortgage Note to make payments in addition to those made to the related
Mortgagor;
(14) No Assessments. To the best of the Grantor's knowledge, there are no
defaults in complying with the terms of the Mortgage that would have a
material adverse effect on the value of the related Mortgage Loan, and
all taxes, governmental assessments, insurance premiums, water, sewer
and municipal charges, leasehold payments or ground rents that would
have a material adverse effect on the value of the related Mortgage
Loan which previously became due and owing have been paid, or an escrow
of funds has been established in an amount sufficient to pay for every
such item which remains unpaid. The Grantor has not advanced funds, or
induced, solicited or knowingly received any advance of funds by a
party other than the related Mortgagor, directly or indirectly, for the
payment of any amount required by the related Mortgage except for (A)
payments in the nature of escrow payments, including without
limitation, taxes and insurance payments, and (B) interest accruing
from the date of the related Mortgage Note or date of disbursement of
the related Mortgage proceeds, whichever is later, to the day which
precedes by one month the due date of the first installment of
principal and interest;
(15) Appraisal. The related Mortgage File as defined in the Custodian
Agreement contains an appraisal of the related mortgaged property
signed by an appraiser, duly appointed by the originator, who had no
interest, direct or indirect in the related mortgaged property or in
any loan made on the security thereof, and whose compensation is not
affected by the approval or disapproval of such Eligible Mortgage Loan;
the appraisal satisfies the requirements of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989;
(16) No Graduated Payments; No Buydowns: No Convertible Mortgage Assets.
Unless otherwise specified in the related Loan Request, such Eligible
Mortgage Loan is not a graduated payment mortgage loan or a growing
equity mortgage loan, nor is such Eligible Mortgage Loan subject to a
temporary buydown or similar arrangement. If the Eligible Mortgage Loan
has an adjustable rate, it is not convertible at the option of the
related mortgagor to a fixed rate mortgage loan;
(17) No Fraud. To the best of the Grantor's knowledge, no error, omission,
misrepresentation, negligence, fraud or similar action occurred on the
part of any person in connection with the origination of any Eligible
Mortgage Loan.
III-3
PLEDGE AGREEMENT
----------------
PLEDGE AND SECURITY AGREEMENT dated as of June 30, 1998, made by
HOMEGOLD, INC., a South Carolina corporation (the "Pledgor"), in favor of THE
CIT GROUP/BUSINESS CREDIT, INC., as agent for the Lenders parties to the Credit
Agreement referred to below (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Pledgor and Carolina Investors, Inc. (collectively, the
"Companies"), the financial institutions from time to time party to the Credit
Agreement (the "Lenders"), and the Administrative Agent are parties to a
Mortgage Loan Warehousing Agreement, dated as of June 30, 1998 (such Agreement,
as amended, restated or otherwise modified from time to time, being hereinafter
referred to as the "Credit Agreement");
WHEREAS, the Companies have requested the Administrative Agent and the
Lenders to provide to the Companies a secured $200,000,000 revolving credit
facility;
WHEREAS, it is a condition precedent to the Lenders making and
maintaining Loans under the Credit Agreement that the Pledgor shall have
executed and delivered to the Administrative Agent a pledge and security
agreement providing for the pledge to the Administrative Agent of, and the grant
to the Administrative Agent for the benefit of the Lenders of a security
interest in, (i) certain indebtedness from time to time owing to the Pledgor and
(ii) all of the issued and outstanding shares of capital stock of the Pledged
Subsidiaries (as defined herein) from time to time owned by the Pledgor;
WHEREAS, the Pledgor has determined that the execution, delivery and
performance of this Agreement directly benefits, and is in the best interest of
the Pledgor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Administrative Agent and the Lenders to enter
into the Credit Agreement with the Companies, the Pledgor hereby agrees with the
Administrative Agent as follows:
SECTION 1. Definitions. All terms used in this Agreement which are
defined in the Credit Agreement or in Article 8 or Article 9 of the Uniform
Commercial Code (the "Code") currently in effect in the State of New York and
which are not otherwise defined herein shall have the same meanings herein as
set forth therein.
SECTION 2. Pledge and Grant of Security Interest. As collateral
security for all of the Obligations (as defined in Section 3 hereof), the
Pledgor hereby pledges and collaterally assigns to the Administrative Agent, and
grants to the Administrative Agent for the benefit of the Lenders a continuing
security interest in, the following (the "Pledged Collateral"):
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(a) the indebtedness described in Schedule I hereto and all
indebtedness from time to time required to be pledged to the Administrative
Agent pursuant to the terms of the Credit Agreement (the "Pledged Debt"), the
promissory notes and other instruments evidencing the Pledged Debt and all
interest, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Debt;
(b) the shares of stock described in Schedule II hereto (the "Pledged
Shares") issued by the subsidiaries of the Pledgor listed therein (the "Pledged
Subsidiaries"), the certificates representing the Pledged Shares, all warrants,
options and other rights, contractual or otherwise, in respect thereof and all
dividends, interest, cash, instruments and other property (including but not
limited to, any stock dividend and any distribution in connection with a stock
split) from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares, including,
without limitation, by way of redemption, bonus, preference, option rights or
otherwise;
(c) all additional shares of stock, from time to time acquired by the
Pledgor, of the Pledged Subsidiaries, the certificates representing such
additional shares, all options and other rights, contractual or otherwise, in
respect thereof and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such additional shares; and
(d) all proceeds of any and all of the foregoing;
in each case, whether now owned or hereafter acquired by the Pledgor
and howsoever its interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise).
SECTION 3. Security for Obligations. The security interest created
hereby in the Pledged Collateral constitutes continuing collateral security for
all of the following obligations whether now existing or hereafter incurred (the
"Obligations"):
(a) the prompt payment by the Pledgor, as and when due and payable, of
all amounts from time to time owing by it in respect of the Credit Agreement,
the Notes and the other Credit Documents, including, without limitation,
principal of and interest on the Loans (including, without limitation, all
interest that accrues after the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or reorganization of any Company,
whether or not a claim for post-filing interest is allowed in such proceeding),
and all interest thereon, all fees, commissions, expense reimbursements,
indemnifications and all other amounts due or to become due under any Credit
Document; and
(b) the due performance and observance by the Pledgor of all of its
other obligations from time to time existing in respect of the Credit Agreement
and the other Credit Documents.
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SECTION 4. Delivery of the Pledged Collateral.
(a) All promissory notes currently evidencing the Pledged Debt and all
certificates currently representing the Pledged Shares shall be delivered to the
Administrative Agent, together with any necessary indorsement and/or appropriate
stock transfer form duly executed in blank with respect to such Pledged Shares,
on or prior to the execution and delivery of this Agreement. All other
promissory notes, certificates and instruments constituting Pledged Collateral
from time to time or required to be pledged to the Administrative Agent pursuant
to the terms of the Credit Agreement (the "Additional Collateral") shall be
delivered to the Administrative Agent within 10 Business Days of receipt thereof
by or on behalf of the Pledgor. All such promissory notes, certificates and
instruments shall be held by or on behalf of the Administrative Agent pursuant
hereto and shall be delivered in suitable form for transfer by delivery or shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance reasonably satisfactory to the Administrative Agent.
Within 10 Business Days of the receipt by the Pledgor of the Additional
Collateral, a Pledge Amendment, duly executed by the Pledgor, in substantially
the form of Schedule III hereto (a "Pledge Amendment") shall be delivered to the
Administrative Agent, in respect of the Additional Collateral which are to be
pledged pursuant to this Agreement and the Credit Agreement, which Pledge
Amendment shall from and after delivery thereof constitute part of Schedules I
and II hereto. The Pledgor hereby authorizes the Administrative Agent to attach
each Pledge Amendment to this Agreement and agrees that all promissory notes,
certificates or instruments listed on any Pledge Amendment delivered to the
Administrative Agent shall for all purposes hereunder constitute Pledged
Collateral and the Pledgor shall be deemed upon delivery thereof to have made
the representations and warranties set forth in Section 5 with respect to such
Additional Collateral.
(b) If the Pledgor shall receive, by virtue of its being or having been
an owner of any Pledged Collateral, any (i) stock certificate (including,
without limitation, any certificate representing a stock dividend or
distribution in connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets, combination of shares,
stock split, spinoff or split-off), promissory note or other instrument, (ii)
option or right, whether as an addition to, substitution for, or in exchange
for, any Pledged Collateral, or otherwise, (iii) dividends payable in cash
(except such dividends permitted to be retained by the Pledgor pursuant to
Section 7 hereof) or in securities or other property or (iv) dividends or other
distributions in connection with a partial or total liquidation or dissolution
or in connection with a reduction of capital, capital surplus or paid-in
surplus, the Pledgor shall receive such stock certificate, promissory note,
instrument, option, right, payment or distribution in trust for the benefit of
the Administrative Agent, shall segregate it from the Pledgor's other property
and shall deliver it forthwith to the Administrative Agent in the exact form
received, with any necessary indorsement and/or appropriate stock powers or
stock transfer forms duly executed in blank, to be held by the Administrative
Agent as Pledged Collateral and as further collateral security for the
Obligations.
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SECTION 5. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledged Shares have been duly authorized and validly issued,
are fully paid and nonassessable and constitute all of the issued shares of
capital stock of the Pledged Subsidiaries as of the date hereof. All other
shares of stock constituting Pledged Collateral will be, when issued, duly
authorized and validly issued, fully paid and nonassessable.
(b) The promissory notes[s] currently evidencing the Pledged Debt have
been, and all other promissory notes from time to time evidencing Pledged Debt,
when executed and delivered, will have been, duly authorized, executed and
delivered by the respective makers thereof, and all such promissory notes are or
will be, as the case may be, legal, valid and binding obligations of such
makers, enforceable against such makers in accordance with their respective
terms, subject as to enforceability to applicable bankruptcy, insolvency,
reorganization and similar laws affecting creditors' rights and to general
principles of equity.
(c) The Pledgor is and will be at all times the legal and beneficial
owner of the Pledged Collateral free and clear of any Lien, security interest,
option or other charge or encumbrance except for the security interest created
by this Agreement and Liens permitted by the Credit Agreement.
(d) The exercise by the Administrative Agent of any of its rights and
remedies hereunder will not contravene law or any material contractual
restriction binding on or affecting the Pledgor or any of its properties and
will not result in or require the creation of any Lien, security interest or
other charge or encumbrance upon or with respect to any of its properties other
than pursuant to this Agreement and the other Credit Documents.
(e) No authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority is required to be obtained or made by
the Pledgor for (i) the due execution, delivery and performance by the Pledgor
of this Agreement, (ii) the grant by the Pledgor, or the perfection, of the
security interest purported to be created hereby in the Pledged Collateral or
(iii) the exercise by the Administrative Agent or the Lenders of any of their
rights and remedies hereunder, except as may be required in connection with any
sale of any Pledged Collateral by laws affecting the offering and sale of
securities generally.
(f) This Agreement creates a valid security interest in favor of the
Administrative Agent in the Pledged Collateral, as security for the Obligations.
The Administrative Agent's having possession of the promissory notes evidencing
the Pledged Debt, the certificates representing the Pledged Shares and all other
certificates, instruments and cash constituting Pledged Collateral from time to
time results in the perfection of such security interest. Such security interest
is, or in the case of Pledged Collateral in which the Pledgor obtains rights
after the date hereof, will be, a perfected, first priority security interest.
All action necessary or desirable to perfect and protect such security interest
has been duly taken, except for the Administrative Agent's having possession of
certificates, instruments and cash constituting Pledged Collateral after the
date hereof.
-4-
SECTION 6. Covenants as to the Pledged Collateral. So long as any
Obligations shall remain outstanding, the Pledgor will, unless the
Administrative Agent shall otherwise consent in writing:
(a) keep adequate records concerning the Pledged Collateral and permit
the Administrative Agent or any agents or representatives thereof at any time or
from time to time to examine and make copies of and abstracts from such records
pursuant to the terms of Section 6.05 of the Credit Agreement;
(b) at its expense, upon the request of the Administrative Agent,
promptly deliver to the Administrative Agent a copy of each material notice or
other communication received by it in respect of the Pledged Collateral;
(c) at its expense, defend the Administrative Agent's right, title and
security interest in and to the Pledged Collateral against the claims of any
Person;
(d) at its expense, at any time and from time to time, promptly execute
and deliver all further instruments and documents and take all further action
that may be necessary or that the Administrative Agent may reasonably request in
order to (i) perfect and protect the security interest purported to be created
hereby, (ii) enable the Administrative Agent to exercise and enforce its rights
and remedies hereunder in respect of the Pledged Collateral or (iii) otherwise
effect the purposes of this Agreement, including, without limitation, delivering
to the Administrative Agent, after the occurrence and during the continuation of
an Event of Default, irrevocable proxies in respect of the Pledged Collateral;
(e) not sell, assign (by operation of law or otherwise), exchange or
otherwise dispose of any Pledged Collateral or any interest therein except as
permitted by Section 7(a)(i) hereof;
(f) not create or suffer to exist any Lien, security interest or other
charge or encumbrance upon or with respect to any Pledged Collateral except for
the security interest created hereby or pursuant to any other Credit Document
and Liens permitted by the Credit Agreement;
(g) not make or consent to any amendment or other modification or
waiver with respect to any Pledged Collateral or enter into any agreement or
permit to exist any restriction with respect to any Pledged Collateral other
than pursuant to the Credit Documents and applicable securities laws;
(h) not permit the issuance of (i) any additional shares of any class
of capital stock of a Pledged Subsidiary, (ii) any securities convertible
voluntarily by the holder thereof or automatically upon the occurrence or
non-occurrence of any event or condition into, or exchangeable for, any such
shares of capital stock or (iii) any warrants, options, contracts or other
commitments entitling any Person to purchase or otherwise acquire any such
shares of capital stock; and
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(i) not take or fail to take any action which would in any manner
impair the enforceability of the Administrative Agent's security interest in any
Pledged Collateral.
SECTION 7. Voting Rights, Dividends, Etc. in Respect of the Pledged
Collateral.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) the Pledgor may exercise any and all voting and other consensual
rights pertaining to any Pledged Collateral for any purpose not inconsistent
with the terms of this Agreement, the Credit Agreement or the other Credit
Documents; provided, however, that (A) the Pledgor will not exercise or refrain
from exercising any such right, as the case may be, if the Administrative Agent
gives it notice that, in the Administrative Agent's reasonable judgment, such
action would have a material adverse effect upon such Pledged Collateral and (B)
the Pledgor will give the Administrative Agent at least 5 Business Days' notice
of the manner in which it intends to exercise, or the reasons for refraining
from exercising, any such right which is reasonably likely to have a material
adverse effect upon such Pledged Collateral;
(ii) the Pledgor may receive and retain any and all dividends or
interest paid in respect of the Pledged Collateral; provided, however, that any
and all (A) dividends and interest paid or payable other than in cash in respect
of, and instruments and other property received, receivable or otherwise
distributed in respect of or in exchange for, any Pledged Collateral, (B)
dividends and other distributions paid or payable in cash in respect of any
Pledged Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in surplus, and (C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral, shall be, and shall
forthwith be delivered to the Administrative Agent to hold as, Pledged
Collateral and shall, if received by the Pledgor, be received in trust for the
benefit of the Administrative Agent, shall be segregated from the other property
or funds of the Pledgor, and shall be forthwith delivered to the Administrative
Agent in the exact form received with any necessary indorsement and/or
appropriate stock powers duly executed in blank, to be held by the
Administrative Agent as Pledged Collateral and as further collateral security
for the Obligations; and
(iii) the Administrative Agent will execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other instruments as
the Pledgor may reasonably request for the purpose of enabling the Pledgor to
exercise the voting and other rights which it is entitled to exercise pursuant
to paragraph (i) of this Section 7(a) and to receive the dividends which it is
authorized to receive and retain pursuant to paragraph (ii) of this Section
7(a).
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) all rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant to
paragraph (i) of subsection (a) of this Section 7, and to receive the dividends
and interest payments which it would otherwise be authorized to receive and
retain pursuant to paragraph (ii) of subsection (a) of this Section 7,
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shall cease, and all such rights shall thereupon become vested in the
Administrative Agent which shall thereupon have the sole right to exercise such
voting and other consensual rights and to receive and hold as Pledged Collateral
such dividends and interest payments;
(ii) the Administrative Agent is authorized to notify each debtor with
respect to the Pledged Debt to make payment directly to the Administrative Agent
and may collect any and all monies due or to become due to the Pledgor in
respect of the Pledged Debt and the Pledgor hereby authorizes each such debtor
to make such payment directly to the Administrative Agent without any duty of
inquiry;
(iii) without limiting the generality of the foregoing, the
Administrative Agent may at its option exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or options
pertaining to any of the Pledged Collateral as if it were the absolute owner
thereof, including, without limitation, the right to exchange, in its
discretion, any and all of the Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization or other adjustment of a Pledged
Subsidiary, or upon the exercise by a Pledged Subsidiary of any right, privilege
or option pertaining to any Pledged Collateral, and, in connection therewith, to
deposit and deliver any and all of the Pledged Collateral with any committee,
depository, transfer agent, registrar or other designated agent upon such terms
and conditions as it may determine; and
(iv) all dividends and interest payments which are received by the
Pledgor contrary to the provisions of paragraph (i) of this Section 7(b) shall
be received in trust for the benefit of the Administrative Agent, shall be
segregated from other funds of the Pledgor, and shall be forthwith paid over to
the Administrative Agent as Pledged Collateral in the exact form received with
any necessary indorsement and/or appropriate stock powers duly executed in
blank, to be held by the Administrative Agent as Pledged Collateral and as
further collateral security for the Obligations.
SECTION 8. Additional Provisions Concerning the Pledged Collateral.
(a) The Pledgor hereby authorizes the Administrative Agent to file,
without the signature of the Pledgor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to the
Pledged Collateral.
(b) The Pledgor hereby irrevocably appoints the Administrative Agent
the Pledgor's attorney-in-fact and proxy, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Administrative Agent's discretion exercised reasonably and during
the continuance of an Event of Default, to take any action and to execute any
instrument which the Administrative Agent may deem necessary or reasonably
advisable to accomplish the purposes of this Agreement (subject to the rights of
the Pledgor under Section 7(a) hereof), including, without limitation, to
receive, indorse and collect all instruments made payable to the Pledgor
representing any dividend, interest payment or other distribution in respect of
any Pledged Collateral and to give full discharge for the same.
-7-
(c) If the Pledgor fails to perform any agreement or obligation
contained herein, the Administrative Agent itself may perform, or cause
performance of, such agreement or obligation, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by the
Pledgor pursuant to Section 10 hereof.
(d) Other than the exercise of reasonable care to assure the safe
custody of the Pledged Collateral while held hereunder, the Administrative Agent
shall have no duty or liability to preserve rights pertaining thereto and shall
be relieved of all responsibility for the Pledged Collateral upon surrendering
it or tendering surrender of it to the Pledgor. The Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
the Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equal to that which the Administrative Agent accords its
own property, it being understood that the Administrative Agent shall not have
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not the Administrative Agent has or is deemed to
have knowledge of such matters, or (ii) taking any necessary steps to preserve
rights against any parties with respect to any Pledged Collateral.
(e) The Administrative Agent may at any time after the occurrence and
during the continuation of an Event of Default and to the extent not
inconsistent with the Credit Agreement in its discretion (i) without notice to
the Pledgor, transfer or register in the name of the Administrative Agent or any
of its nominees any or all of the Pledged Collateral, subject only to the
revocable rights of the Pledgor under Section 7(a) hereof, and (ii) exchange
certificates or instruments constituting Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 9. Remedies Upon Default. If any Event of Default shall have
occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party on
default under the Code then in effect in the State of New York; and without
limiting the generality of the foregoing and without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange or broker's board or elsewhere, at such
price or prices and on such other terms as the Administrative Agent may deem
commercially reasonable. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least 10 Business Days' notice to the Pledgor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Administrative Agent
shall not be obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. The Administrative Agent may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
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(b) The Pledgor recognizes that it is impracticable to effect a public
sale of all or any part of the Pledged Shares or any other securities
constituting Pledged Collateral and that the Administrative Agent may,
therefore, determine to make one or more private sales of any such securities to
a restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges that
any such private sale may be at prices and on terms less favorable to the seller
than the prices and other terms which might have been obtained at a public sale
and, notwithstanding the foregoing, agrees that such private sales shall be
deemed to have been made in a commercially reasonable manner and that the
Administrative Agent shall have no obligation to delay sale of any such
securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the Securities Act
of 1933, as amended (the "Securities Act"). The Pledgor further acknowledges and
agrees that any offer to sell such securities which has been (i) publicly
advertised on a bona fide basis in a newspaper or other publication of general
circulation in the financial community of New York, New York (to the extent that
such an offer may be so advertised without prior registration under the
Securities Act) or (ii) made privately in the manner described above to not less
than fifteen bona fide offerees shall be deemed to involve a "public sale" for
the purposes of Section 9-504(3) of the Code (or any successor or similar,
applicable statutory provision) as then in effect in the State of New York,
notwithstanding that such sale may not constitute a "public offering" under the
Securities Act, and that the Administrative Agent may, in such event, bid for
the purchase of such securities.
(c) Any cash held by the Administrative Agent as Pledged Collateral and
all cash proceeds received by the Administrative Agent in respect of any sale
of, collection from, or other realization upon, all or any part of the Pledged
Collateral may, in the discretion of the Administrative Agent, be held by the
Administrative Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Administrative Agent
pursuant to Section 10 hereof) in whole or in part by the Administrative Agent
against, all or any part of the Obligations in such order as the Administrative
Agent shall elect consistent with the provisions of the Credit Agreement. Any
surplus of such cash or cash proceeds held by the Administrative Agent and
remaining after payment in full of all of the Obligations shall be paid over to
the Pledgor or to such person as may be lawfully entitled to receive such
surplus.
(d) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Administrative
Agent or any Lender is legally entitled, the Pledgor shall be liable for the
deficiency, together with interest thereon at the highest rate specified in the
Credit Agreement for interest on overdue principal thereof or such other rate as
shall be fixed by applicable law, together with the costs of collection and the
reasonable fees of any attorneys employed by the Administrative Agent and any
Lender to collect such deficiency.
SECTION 10. Indemnity and Expenses.
(a) The Pledgor agrees to indemnify the Administrative Agent from and
against any and all claims, losses and liabilities growing out of or resulting
from this Agreement
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(including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting solely and directly from the Administrative
Agent's gross negligence or willful misconduct as determined by a final judgment
of a court of competent jurisdiction.
(b) The Pledgor will upon demand pay to the Administrative Agent the
amount of any and all reasonable costs and expenses, including the reasonable
fees and disbursements of the Administrative Agent's counsel and of any experts
and agents, which the Administrative Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Pledged Collateral, (iii) the exercise or enforcement of any of the rights of
the Administrative Agent or any of the Lenders hereunder, or (iv) the failure by
the Pledgor to perform or observe any of the provisions hereof.
SECTION 11. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed (by certified mail,
postage prepaid and return receipt requested), telecopied or delivered, if to
the Pledgor, to it at its address specified in the Credit Agreement, and if to
the Administrative Agent, to it at its address specified in the Credit
Agreement, or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 11. All such notices and other
communications shall be effective (i) if mailed, three days after being
deposited in the mails, (ii) if telecopied, when sent and confirmation is
received, or (iii) if delivered, upon delivery.
SECTION 12. Consent to Jurisdiction, Etc.
(a) Any legal action or proceeding with respect to this Agreement or
any document related thereto may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, the Pledgor hereby accepts
unconditionally the jurisdiction of the aforesaid courts. The Pledgor hereby
irrevocably waives any objection, including without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens, which the
Pledgor may now or hereafter have to the bringing of any such action or
proceeding in such respective jurisdictions.
(b) The Pledgor irrevocably consents to the service of process of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the Pledgor
at its address referred to in Section 11 hereof.
(c) Nothing contained in this Section 12 shall affect the right of the
Administrative Agent to serve legal process in any other manner permitted by law
or to commence legal proceedings or otherwise proceed against the Pledgor in any
other jurisdiction.
SECTION 13. Waiver of Jury Trial. EACH OF THE PLEDGOR AND THE
ADMINISTRATIVE AGENT (BY ACCEPTING THIS AGREEMENT) WAIVES ANY RIGHT TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
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CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR
ARISING FROM ANY OTHER CREDIT DOCUMENT AND AGREES THAT ANY SUCH ACTION,
PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 14. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by the Pledgor and the Administrative Agent,
and no waiver of any provision of this Agreement, and no consent to any
departure by the Pledgor therefrom, shall be effective unless it is in writing
and signed by the Administrative Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(b) No failure on the part of the Administrative Agent to exercise, and
no delay in exercising, any right hereunder or under any other document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The rights and remedies of the Administrative Agent provided herein
and in the other Credit Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the
Administrative Agent under any document against any party thereto are not
conditional or contingent on any attempt by the Administrative Agent to exercise
any of its rights under any other document against such party or against any
other person.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the
Pledged Collateral and shall (i) remain in full force and effect until the
payment in full or release of the Obligations after the Total Commitment has
been terminated and (ii) be binding on the Pledgor and by its acceptance hereof,
the Administrative Agent, and their respective successors and assigns and shall
inure, together with all rights and remedies of the Administrative Agent and the
Lenders hereunder, to the benefit of the Pledgor, the Administrative Agent and
the Lenders and their respective successors, transferees and assigns. Without
limiting the generality of clause (ii) of the immediately preceding sentence,
the Administrative Agent may assign or otherwise transfer its rights and
obligations under this Agreement to any other Person pursuant to the terms of
the Credit Agreement, and such other Person shall thereupon become vested with
all of the benefits in respect thereof granted to the Administrative Agent
herein or otherwise. Upon any such assignment or transfer, all references in
this Agreement to the Administrative Agent shall mean the assignee of the
Administrative Agent. None of the rights or obligations of the Pledgor hereunder
may be assigned or otherwise transferred without the prior written consent of
the Administrative Agent.
-11-
(e) Upon the satisfaction in full of the Obligations after the Total
Commitment has been terminated, (i) this Agreement and the security interest
created hereby shall terminate and all rights to the Pledged Collateral shall
revert to the Pledgor, and (ii) the Administrative Agent will, upon the
Pledgor's request and at the Pledgor's expense promptly, (A) return to the
Pledgor such of the Pledged Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof and (B) execute and deliver
to the Pledgor, without recourse, representation or warranty, such documents as
the Pledgor shall reasonably request to evidence such termination.
(f) This Agreement shall be governed by and construed in accordance
with the law of the State of New York, except as required by mandatory
provisions of law and except to the extent that the validity and perfection or
the perfection and the effect of perfection or non-perfection of the security
interest created hereby, or remedies hereunder, in respect of any particular
Pledged Collateral are governed by the law of a jurisdiction other than the
State of New York.
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IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.
[PLEDGOR]
By: ________________________________________
Name: ________________________________________
Title: ________________________________________
ACCEPTED AND AGREED:
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Administrative Agent
By: ________________________________________
Name: ________________________________________
Title: ________________________________________
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SCHEDULE I TO PLEDGE AGREEMENT
Pledged Debt
------------
Name of Maker Description Original Principal Amount
------------- ----------- -------------------------
Carolina Investors, Inc. Subordinated Intercompany Promissory $200,000,000
Note dated June 30, 1998.
SCHEDULE II TO PLEDGE AGREEMENT
Pledged Shares
--------------
Certificate
Name of Issuer Number of Shares Class No.(s)
-------------- ---------------- ----- ------
Emergent Mortgage
Corporation of
Tennessee
SCHEDULE III
TO
PLEDGE AGREEMENT
PLEDGE AMENDMENT
----------------
This Pledge Amendment, dated ___________________________, is delivered
pursuant to Section 4 of the Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Pledge
Agreement, dated June 30, 1998, as it may heretofore have been or hereafter may
be amended or otherwise modified or supplemented from time to time and that the
promissory notes or shares listed on this Pledge Amendment shall be and become
part of the Pledged Collateral referred to in said Pledge Agreement and shall
secure all of the Obligations referred to in said Pledge Agreement.
Pledged Debt
------------
Principal Amount
Name of Maker Description Outstanding as of
------------- ----------- -----------------
Pledged Shares
--------------
Name of Issuer Number of Shares Class Certificate No(s)
-------------- ---------------- ----- -----------------
HOMEGOLD, INC.
By: ___________________________________________
Name:
Title:
PLEDGE AGREEMENT
----------------
PLEDGE AND SECURITY AGREEMENT dated as of June 30, 1998, made by
CAROLINA INVESTORS, INC., a South Carolina corporation (the "Pledgor"), in favor
of THE CIT GROUP/BUSINESS CREDIT, INC., as agent for the Lenders parties to the
Credit Agreement referred to below (in such capacity, the "Administrative
Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Pledgor and HomeGold, Inc.(collectively, the "Companies"),
the financial institutions from time to time party to the Credit Agreement (the
"Lenders"), and the Administrative Agent are parties to a Mortgage Loan
Warehousing Agreement, dated as of June 30, 1998 (such Agreement, as amended,
restated or otherwise modified from time to time, being hereinafter referred to
as the "Credit Agreement");
WHEREAS, the Companies have requested the Administrative Agent and the
Lenders to provide to the Companies a secured $200,000,000 revolving credit
facility;
WHEREAS, it is a condition precedent to the Lenders making and
maintaining Loans under the Credit Agreement that the Pledgor shall have
executed and delivered to the Administrative Agent a pledge and security
agreement providing for the pledge to the Administrative Agent of, and the grant
to the Administrative Agent for the benefit of the Lenders of a security
interest in, (i) certain indebtedness from time to time owing to the Pledgor and
(ii) all of the issued and outstanding shares of capital stock of the Pledged
Subsidiaries (as defined herein) from time to time owned by the Pledgor;
WHEREAS, the Pledgor has determined that the execution, delivery and
performance of this Agreement directly benefits, and is in the best interest of
the Pledgor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Administrative Agent and the Lenders to enter
into the Credit Agreement with the Companies, the Pledgor hereby agrees with the
Administrative Agent as follows:
SECTION 1. Definitions. All terms used in this Agreement which are
defined in the Credit Agreement or in Article 8 or Article 9 of the Uniform
Commercial Code (the "Code") currently in effect in the State of New York and
which are not otherwise defined herein shall have the same meanings herein as
set forth therein.
SECTION 2. Pledge and Grant of Security Interest. As collateral
security for all of the Obligations (as defined in Section 3 hereof), the
Pledgor hereby pledges and collaterally assigns to the Administrative Agent, and
grants to the Administrative Agent for the benefit of the Lenders a continuing
security interest in, the following (the "Pledged Collateral"):
-1-
(a) the indebtedness described in Schedule I hereto and all
indebtedness from time to time required to be pledged to the Administrative
Agent pursuant to the terms of the Credit Agreement (the "Pledged Debt"), the
promissory notes and other instruments evidencing the Pledged Debt and all
interest, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Debt;
(b) the shares of stock described in Schedule II hereto (the "Pledged
Shares") issued by the subsidiaries of the Pledgor listed therein (the "Pledged
Subsidiaries"), the certificates representing the Pledged Shares, all warrants,
options and other rights, contractual or otherwise, in respect thereof and all
dividends, interest, cash, instruments and other property (including but not
limited to, any stock dividend and any distribution in connection with a stock
split) from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares, including,
without limitation, by way of redemption, bonus, preference, option rights or
otherwise;
(c) all additional shares of stock, from time to time acquired by the
Pledgor, of the Pledged Subsidiaries, the certificates representing such
additional shares, all options and other rights, contractual or otherwise, in
respect thereof and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such additional shares; and
(d) all proceeds of any and all of the foregoing;
in each case, whether now owned or hereafter acquired by the Pledgor
and howsoever its interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise).
SECTION 3. Security for Obligations. The security interest created
hereby in the Pledged Collateral constitutes continuing collateral security for
all of the following obligations whether now existing or hereafter incurred (the
"Obligations"):
(a) the prompt payment by the Pledgor, as and when due and payable, of
all amounts from time to time owing by it in respect of the Credit Agreement,
the Notes and the other Credit Documents, including, without limitation,
principal of and interest on the Loans (including, without limitation, all
interest that accrues after the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or reorganization of any Company,
whether or not a claim for post-filing interest is allowed in such proceeding),
and all interest thereon, all fees, commissions, expense reimbursements,
indemnifications and all other amounts due or to become due under any Credit
Document; and
(b) the due performance and observance by the Pledgor of all of its
other obligations from time to time existing in respect of the Credit Agreement
and the other Credit Documents.
-2-
SECTION 4. Delivery of the Pledged Collateral.
(a) All promissory notes currently evidencing the Pledged Debt and all
certificates currently representing the Pledged Shares shall be delivered to the
Administrative Agent, together with any necessary indorsement and/or appropriate
stock transfer form duly executed in blank with respect to such Pledged Shares,
on or prior to the execution and delivery of this Agreement. All other
promissory notes, certificates and instruments constituting Pledged Collateral
from time to time or required to be pledged to the Administrative Agent pursuant
to the terms of the Credit Agreement (the "Additional Collateral") shall be
delivered to the Administrative Agent within 10 Business Days of receipt thereof
by or on behalf of the Pledgor. All such promissory notes, certificates and
instruments shall be held by or on behalf of the Administrative Agent pursuant
hereto and shall be delivered in suitable form for transfer by delivery or shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance reasonably satisfactory to the Administrative Agent.
Within 10 Business Days of the receipt by the Pledgor of the Additional
Collateral, a Pledge Amendment, duly executed by the Pledgor, in substantially
the form of Schedule III hereto (a "Pledge Amendment") shall be delivered to the
Administrative Agent, in respect of the Additional Collateral which are to be
pledged pursuant to this Agreement and the Credit Agreement, which Pledge
Amendment shall from and after delivery thereof constitute part of Schedules I
and II hereto. The Pledgor hereby authorizes the Administrative Agent to attach
each Pledge Amendment to this Agreement and agrees that all promissory notes,
certificates or instruments listed on any Pledge Amendment delivered to the
Administrative Agent shall for all purposes hereunder constitute Pledged
Collateral and the Pledgor shall be deemed upon delivery thereof to have made
the representations and warranties set forth in Section 5 with respect to such
Additional Collateral.
(b) If the Pledgor shall receive, by virtue of its being or having been
an owner of any Pledged Collateral, any (i) stock certificate (including,
without limitation, any certificate representing a stock dividend or
distribution in connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets, combination of shares,
stock split, spinoff or split-off), promissory note or other instrument, (ii)
option or right, whether as an addition to, substitution for, or in exchange
for, any Pledged Collateral, or otherwise, (iii) dividends payable in cash
(except such dividends permitted to be retained by the Pledgor pursuant to
Section 7 hereof) or in securities or other property or (iv) dividends or other
distributions in connection with a partial or total liquidation or dissolution
or in connection with a reduction of capital, capital surplus or paid-in
surplus, the Pledgor shall receive such stock certificate, promissory note,
instrument, option, right, payment or distribution in trust for the benefit of
the Administrative Agent, shall segregate it from the Pledgor's other property
and shall deliver it forthwith to the Administrative Agent in the exact form
received, with any necessary indorsement and/or appropriate stock powers or
stock transfer forms duly executed in blank, to be held by the Administrative
Agent as Pledged Collateral and as further collateral security for the
Obligations.
-3-
SECTION 5. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledged Shares have been duly authorized and validly issued,
are fully paid and nonassessable and constitute all of the issued shares of
capital stock of the Pledged Subsidiaries as of the date hereof. All other
shares of stock constituting Pledged Collateral will be, when issued, duly
authorized and validly issued, fully paid and nonassessable.
(b) The promissory notes[s] currently evidencing the Pledged Debt have
been, and all other promissory notes from time to time evidencing Pledged Debt,
when executed and delivered, will have been, duly authorized, executed and
delivered by the respective makers thereof, and all such promissory notes are or
will be, as the case may be, legal, valid and binding obligations of such
makers, enforceable against such makers in accordance with their respective
terms, subject as to enforceability to applicable bankruptcy, insolvency,
reorganization and similar laws affecting creditors' rights and to general
principles of equity.
(c) The Pledgor is and will be at all times the legal and beneficial
owner of the Pledged Collateral free and clear of any Lien, security interest,
option or other charge or encumbrance except for the security interest created
by this Agreement and Liens permitted by the Credit Agreement.
(d) The exercise by the Administrative Agent of any of its rights and
remedies hereunder will not contravene law or any material contractual
restriction binding on or affecting the Pledgor or any of its properties and
will not result in or require the creation of any Lien, security interest or
other charge or encumbrance upon or with respect to any of its properties other
than pursuant to this Agreement and the other Credit Documents.
(e) No authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority is required to be obtained or made by
the Pledgor for (i) the due execution, delivery and performance by the Pledgor
of this Agreement, (ii) the grant by the Pledgor, or the perfection, of the
security interest purported to be created hereby in the Pledged Collateral or
(iii) the exercise by the Administrative Agent or the Lenders of any of their
rights and remedies hereunder, except as may be required in connection with any
sale of any Pledged Collateral by laws affecting the offering and sale of
securities generally.
(f) This Agreement creates a valid security interest in favor of the
Administrative Agent in the Pledged Collateral, as security for the Obligations.
The Administrative Agent's having possession of the promissory notes evidencing
the Pledged Debt, the certificates representing the Pledged Shares and all other
certificates, instruments and cash constituting Pledged Collateral from time to
time results in the perfection of such security interest. Such security interest
is, or in the case of Pledged Collateral in which the Pledgor obtains rights
after the date hereof, will be, a perfected, first priority security interest.
All action necessary or desirable to perfect and protect such security interest
has been duly taken, except for the Administrative Agent's having possession of
certificates, instruments and cash constituting Pledged Collateral after the
date hereof.
-4-
SECTION 6. Covenants as to the Pledged Collateral. So long as any
Obligations shall remain outstanding, the Pledgor will, unless the
Administrative Agent shall otherwise consent in writing:
(a) keep adequate records concerning the Pledged Collateral and permit
the Administrative Agent or any agents or representatives thereof at any time or
from time to time to examine and make copies of and abstracts from such records
pursuant to the terms of Section 6.05 of the Credit Agreement;
(b) at its expense, upon the request of the Administrative Agent,
promptly deliver to the Administrative Agent a copy of each material notice or
other communication received by it in respect of the Pledged Collateral;
(c) at its expense, defend the Administrative Agent's right, title and
security interest in and to the Pledged Collateral against the claims of any
Person;
(d) at its expense, at any time and from time to time, promptly execute
and deliver all further instruments and documents and take all further action
that may be necessary or that the Administrative Agent may reasonably request in
order to (i) perfect and protect the security interest purported to be created
hereby, (ii) enable the Administrative Agent to exercise and enforce its rights
and remedies hereunder in respect of the Pledged Collateral or (iii) otherwise
effect the purposes of this Agreement, including, without limitation, delivering
to the Administrative Agent, after the occurrence and during the continuation of
an Event of Default, irrevocable proxies in respect of the Pledged Collateral;
(e) not sell, assign (by operation of law or otherwise), exchange or
otherwise dispose of any Pledged Collateral or any interest therein except as
permitted by Section 7(a)(i) hereof;
(f) not create or suffer to exist any Lien, security interest or other
charge or encumbrance upon or with respect to any Pledged Collateral except for
the security interest created hereby or pursuant to any other Credit Document
and Liens permitted by the Credit Agreement;
(g) not make or consent to any amendment or other modification or
waiver with respect to any Pledged Collateral or enter into any agreement or
permit to exist any restriction with respect to any Pledged Collateral other
than pursuant to the Credit Documents and applicable securities laws;
(h) not permit the issuance of (i) any additional shares of any class
of capital stock of a Pledged Subsidiary, (ii) any securities convertible
voluntarily by the holder thereof or automatically upon the occurrence or
non-occurrence of any event or condition into, or exchangeable for, any such
shares of capital stock or (iii) any warrants, options, contracts or other
commitments entitling any Person to purchase or otherwise acquire any such
shares of capital stock; and
-5-
(i) not take or fail to take any action which would in any manner
impair the enforceability of the Administrative Agent's security interest in any
Pledged Collateral.
SECTION 7. Voting Rights, Dividends, Etc. in Respect of the Pledged
Collateral.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) the Pledgor may exercise any and all voting and other
consensual rights pertaining to any Pledged Collateral for any purpose not
inconsistent with the terms of this Agreement, the Credit Agreement or the other
Credit Documents; provided, however, that (A) the Pledgor will not exercise or
refrain from exercising any such right, as the case may be, if the
Administrative Agent gives it notice that, in the Administrative Agent's
reasonable judgment, such action would have a material adverse effect upon such
Pledged Collateral and (B) the Pledgor will give the Administrative Agent at
least 5 Business Days' notice of the manner in which it intends to exercise, or
the reasons for refraining from exercising, any such right which is reasonably
likely to have a material adverse effect upon such Pledged Collateral;
(ii) the Pledgor may receive and retain any and all dividends
or interest paid in respect of the Pledged Collateral; provided, however, that
any and all (A) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or otherwise
distributed in respect of or in exchange for, any Pledged Collateral, (B)
dividends and other distributions paid or payable in cash in respect of any
Pledged Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in surplus, and (C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral, shall be, and shall
forthwith be delivered to the Administrative Agent to hold as, Pledged
Collateral and shall, if received by the Pledgor, be received in trust for the
benefit of the Administrative Agent, shall be segregated from the other property
or funds of the Pledgor, and shall be forthwith delivered to the Administrative
Agent in the exact form received with any necessary indorsement and/or
appropriate stock powers duly executed in blank, to be held by the
Administrative Agent as Pledged Collateral and as further collateral security
for the Obligations; and
(iii) the Administrative Agent will execute and deliver (or
cause to be executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of enabling
the Pledgor to exercise the voting and other rights which it is entitled to
exercise pursuant to paragraph (i) of this Section 7(a) and to receive the
dividends which it is authorized to receive and retain pursuant to paragraph
(ii) of this Section 7(a).
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) all rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant to
paragraph (i) of subsection (a) of this Section 7, and to receive the dividends
and interest payments which it would otherwise be authorized to receive and
retain pursuant to paragraph (ii) of subsection (a) of this Section 7,
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shall cease, and all such rights shall thereupon become vested in the
Administrative Agent which shall thereupon have the sole right to exercise such
voting and other consensual rights and to receive and hold as Pledged Collateral
such dividends and interest payments;
(ii) the Administrative Agent is authorized to notify each debtor
with respect to the Pledged Debt to make payment directly to the Administrative
Agent and may collect any and all monies due or to become due to the Pledgor in
respect of the Pledged Debt and the Pledgor hereby authorizes each such debtor
to make such payment directly to the Administrative Agent without any duty of
inquiry;
(iii) without limiting the generality of the foregoing, the
Administrative Agent may at its option exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or options
pertaining to any of the Pledged Collateral as if it were the absolute owner
thereof, including, without limitation, the right to exchange, in its
discretion, any and all of the Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization or other adjustment of a Pledged
Subsidiary, or upon the exercise by a Pledged Subsidiary of any right, privilege
or option pertaining to any Pledged Collateral, and, in connection therewith, to
deposit and deliver any and all of the Pledged Collateral with any committee,
depository, transfer agent, registrar or other designated agent upon such terms
and conditions as it may determine; and
(iv) all dividends and interest payments which are received by
the Pledgor contrary to the provisions of paragraph (i) of this Section 7(b)
shall be received in trust for the benefit of the Administrative Agent, shall be
segregated from other funds of the Pledgor, and shall be forthwith paid over to
the Administrative Agent as Pledged Collateral in the exact form received with
any necessary indorsement and/or appropriate stock powers duly executed in
blank, to be held by the Administrative Agent as Pledged Collateral and as
further collateral security for the Obligations.
SECTION 8. Additional Provisions Concerning the Pledged Collateral.
(a) The Pledgor hereby authorizes the Administrative Agent to file,
without the signature of the Pledgor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to the
Pledged Collateral.
(b) The Pledgor hereby irrevocably appoints the Administrative Agent
the Pledgor's attorney-in-fact and proxy, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Administrative Agent's discretion exercised reasonably and during
the continuance of an Event of Default, to take any action and to execute any
instrument which the Administrative Agent may deem necessary or reasonably
advisable to accomplish the purposes of this Agreement (subject to the rights of
the Pledgor under Section 7(a) hereof), including, without limitation, to
receive, indorse and collect all instruments made payable to the Pledgor
representing any dividend, interest payment or other distribution in respect of
any Pledged Collateral and to give full discharge for the same.
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(c) If the Pledgor fails to perform any agreement or obligation
contained herein, the Administrative Agent itself may perform, or cause
performance of, such agreement or obligation, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by the
Pledgor pursuant to Section 10 hereof.
(d) Other than the exercise of reasonable care to assure the safe
custody of the Pledged Collateral while held hereunder, the Administrative Agent
shall have no duty or liability to preserve rights pertaining thereto and shall
be relieved of all responsibility for the Pledged Collateral upon surrendering
it or tendering surrender of it to the Pledgor. The Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
the Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equal to that which the Administrative Agent accords its
own property, it being understood that the Administrative Agent shall not have
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not the Administrative Agent has or is deemed to
have knowledge of such matters, or (ii) taking any necessary steps to preserve
rights against any parties with respect to any Pledged Collateral.
(e) The Administrative Agent may at any time after the occurrence and
during the continuation of an Event of Default and to the extent not
inconsistent with the Credit Agreement in its discretion (i) without notice to
the Pledgor, transfer or register in the name of the Administrative Agent or any
of its nominees any or all of the Pledged Collateral, subject only to the
revocable rights of the Pledgor under Section 7(a) hereof, and (ii) exchange
certificates or instruments constituting Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 9. Remedies Upon Default. If any Event of Default shall have
occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party on
default under the Code then in effect in the State of New York; and without
limiting the generality of the foregoing and without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange or broker's board or elsewhere, at such
price or prices and on such other terms as the Administrative Agent may deem
commercially reasonable. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least 10 Business Days' notice to the Pledgor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Administrative Agent
shall not be obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. The Administrative Agent may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
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(b) The Pledgor recognizes that it is impracticable to effect a public
sale of all or any part of the Pledged Shares or any other securities
constituting Pledged Collateral and that the Administrative Agent may,
therefore, determine to make one or more private sales of any such securities to
a restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges that
any such private sale may be at prices and on terms less favorable to the seller
than the prices and other terms which might have been obtained at a public sale
and, notwithstanding the foregoing, agrees that such private sales shall be
deemed to have been made in a commercially reasonable manner and that the
Administrative Agent shall have no obligation to delay sale of any such
securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the Securities Act
of 1933, as amended (the "Securities Act"). The Pledgor further acknowledges and
agrees that any offer to sell such securities which has been (i) publicly
advertised on a bona fide basis in a newspaper or other publication of general
circulation in the financial community of New York, New York (to the extent that
such an offer may be so advertised without prior registration under the
Securities Act) or (ii) made privately in the manner described above to not less
than fifteen bona fide offerees shall be deemed to involve a "public sale" for
the purposes of Section 9-504(3) of the Code (or any successor or similar,
applicable statutory provision) as then in effect in the State of New York,
notwithstanding that such sale may not constitute a "public offering" under the
Securities Act, and that the Administrative Agent may, in such event, bid for
the purchase of such securities.
(c) Any cash held by the Administrative Agent as Pledged Collateral and
all cash proceeds received by the Administrative Agent in respect of any sale
of, collection from, or other realization upon, all or any part of the Pledged
Collateral may, in the discretion of the Administrative Agent, be held by the
Administrative Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Administrative Agent
pursuant to Section 10 hereof) in whole or in part by the Administrative Agent
against, all or any part of the Obligations in such order as the Administrative
Agent shall elect consistent with the provisions of the Credit Agreement. Any
surplus of such cash or cash proceeds held by the Administrative Agent and
remaining after payment in full of all of the Obligations shall be paid over to
the Pledgor or to such person as may be lawfully entitled to receive such
surplus.
(d) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Administrative
Agent or any Lender is legally entitled, the Pledgor shall be liable for the
deficiency, together with interest thereon at the highest rate specified in the
Credit Agreement for interest on overdue principal thereof or such other rate as
shall be fixed by applicable law, together with the costs of collection and the
reasonable fees of any attorneys employed by the Administrative Agent and any
Lender to collect such deficiency.
SECTION 10. Indemnity and Expenses.
(a) The Pledgor agrees to indemnify the Administrative Agent from and
against any and all claims, losses and liabilities growing out of or resulting
from this Agreement
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(including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from the
Administrative Agent's gross negligence or willful misconduct as determined by a
final judgment of a court of competent jurisdiction.
(b) The Pledgor will upon demand pay to the Administrative Agent the
amount of any and all reasonable costs and expenses, including the reasonable
fees and disbursements of the Administrative Agent's counsel and of any experts
and agents, which the Administrative Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Pledged Collateral, (iii) the exercise or enforcement of any of the rights of
the Administrative Agent or any of the Lenders hereunder, or (iv) the failure by
the Pledgor to perform or observe any of the provisions hereof.
SECTION 11. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed (by certified mail,
postage prepaid and return receipt requested), telecopied or delivered, if to
the Pledgor, to it at its address specified in the Credit Agreement, and if to
the Administrative Agent, to it at its address specified in the Credit
Agreement, or as to either such Person at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 11. All such notices and other
communications shall be effective (i) if mailed, three days after being
deposited in the mails, (ii) if telecopied, when sent and confirmation is
received, or (iii) if delivered, upon delivery.
SECTION 12. Consent to Jurisdiction, Etc.
(a) Any legal action or proceeding with respect to this Agreement or
any document related thereto may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, the Pledgor hereby accepts
unconditionally the jurisdiction of the aforesaid courts. The Pledgor hereby
irrevocably waives any objection, including without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens, which the
Pledgor may now or hereafter have to the bringing of any such action or
proceeding in such respective jurisdictions.
(b) The Pledgor irrevocably consents to the service of process of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the Pledgor
at its address referred to in Section 11 hereof.
(c) Nothing contained in this Section 12 shall affect the right of the
Administrative Agent to serve legal process in any other manner permitted by law
or to commence legal proceedings or otherwise proceed against the Pledgor in any
other jurisdiction.
SECTION 13. Waiver of Jury Trial. EACH OF THE PLEDGOR AND THE
ADMINISTRATIVE AGENT (BY ACCEPTING THIS AGREEMENT) WAIVES ANY RIGHT TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
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CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
OR ARISING FROM ANY OTHER CREDIT DOCUMENT AND AGREES THAT ANY SUCH ACTION,
PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 14. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by the Pledgor and the Administrative Agent,
and no waiver of any provision of this Agreement, and no consent to any
departure by the Pledgor therefrom, shall be effective unless it is in writing
and signed by the Administrative Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(b) No failure on the part of the Administrative Agent to exercise, and
no delay in exercising, any right hereunder or under any other document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The rights and remedies of the Administrative Agent provided herein
and in the other Credit Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the
Administrative Agent under any document against any party thereto are not
conditional or contingent on any attempt by the Administrative Agent to exercise
any of its rights under any other document against such party or against any
other person.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the
Pledged Collateral and shall (i) remain in full force and effect until the
payment in full or release of the Obligations after the Total Commitment has
been terminated and (ii) be binding on the Pledgor and by its acceptance hereof,
the Administrative Agent, and their respective successors and assigns and shall
inure, together with all rights and remedies of the Administrative Agent and the
Lenders hereunder, to the benefit of the Pledgor, the Administrative Agent and
the Lenders and their respective successors, transferees and assigns. Without
limiting the generality of clause (ii) of the immediately preceding sentence,
the Administrative Agent may assign or otherwise transfer its rights and
obligations under this Agreement to any other Person pursuant to the terms of
the Credit Agreement, and such other Person shall thereupon become vested with
all of the benefits in respect thereof granted to the Administrative Agent
herein or otherwise. Upon any such assignment or transfer, all references in
this Agreement to the Administrative Agent shall mean the assignee of the
Administrative Agent. None of the rights or obligations of the Pledgor hereunder
may be assigned or otherwise transferred without the prior written consent of
the Administrative Agent.
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(e) Upon the satisfaction in full of the Obligations after the Total
Commitment has been terminated, (i) this Agreement and the security interest
created hereby shall terminate and all rights to the Pledged Collateral shall
revert to the Pledgor, and (ii) the Administrative Agent will, upon the
Pledgor's request and at the Pledgor's expense promptly, (A) return to the
Pledgor such of the Pledged Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof and (B) execute and deliver
to the Pledgor, without recourse, representation or warranty, such documents as
the Pledgor shall reasonably request to evidence such termination.
(f) This Agreement shall be governed by and construed in accordance
with the law of the State of New York, except as required by mandatory
provisions of law and except to the extent that the validity and perfection or
the perfection and the effect of perfection or non-perfection of the security
interest created hereby, or remedies hereunder, in respect of any particular
Pledged Collateral are governed by the law of a jurisdiction other than the
State of New York.
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IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.
[PLEDGOR]
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
ACCEPTED AND AGREED:
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Administrative Agent
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
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SCHEDULE I TO PLEDGE AGREEMENT
Pledged Debt
------------
Name of Maker Description Original Principal Amount
------------- ----------- -------------------------
HomeGold, Inc. Subordinated Intercompany $200,000,000
Promissory Note dated June
30, 1998.
SCHEDULE II TO PLEDGE AGREEMENT
Pledged Shares
--------------
Certificate
Name of Issuer Number of Shares Class No.(s)
-------------- ---------------- ----- ------
NONE
SCHEDULE III
TO
PLEDGE AGREEMENT
PLEDGE AMENDMENT
----------------
This Pledge Amendment, dated ___________________________, is delivered
pursuant to Section 4 of the Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Pledge
Agreement, dated June 30, 1998, as it may heretofore have been or hereafter may
be amended or otherwise modified or supplemented from time to time and that the
promissory notes or shares listed on this Pledge Amendment shall be and become
part of the Pledged Collateral referred to in said Pledge Agreement and shall
secure all of the Obligations referred to in said Pledge Agreement.
Pledged Debt
------------
Principal Amount
Name of Maker Description Outstanding as of
------------- ----------- -----------------
Pledged Shares
--------------
Name of Issuer Number of Shares Class Certificate No(s)
-------------- ---------------- ----- -----------------
CAROLINA INVESTORS, INC.
By: _______________________________
Name:
Title:
