GUARANTY
Exhibit 10.5
This GUARANTY (this “Guaranty”), dated as of December 19, 2008 (the “Effective
Date”), is made by FRANKLIN CREDIT HOLDING CORPORATION, a Delaware corporation
(“Holding” or the “Guarantor”), in favor of THE HUNTINGTON NATIONAL BANK, a
national banking association (the “Lender”).
RECITALS
WHEREAS, pursuant to that certain First Amended and Restated Forbearance Agreement and
Amendment to Credit Agreements, dated as of the Effective Date (as amended, supplemented or
otherwise modified from time to time in accordance with the provisions thereof, the
“Forbearance Agreement”), among the Loan Parties party thereto (the “Loan
Parties”), Franklin Credit Management Corporation, a Delaware corporation (“FCMC”), in
its capacities as defined in the Forbearance Agreement, and the Lender, the Lender has agreed to
make and/or maintain Advances and other financial accommodations to and for the benefit of the Loan
Parties, upon the terms and subject to the conditions set forth in the Forbearance Agreement; and
WHEREAS, it is a condition precedent to the obligations of the Lender to make and/or maintain
Advances and the financial accommodations provided under the Forbearance Agreement, that the
Guarantor shall have agreed that this Guaranty shall become in full force and effect immediately
after the filing of the Certificate of Merger; and
WHEREAS, the Guarantor acknowledges that the making and/or maintaining of the Advances and the
other financial accommodations to the Guarantor and the Borrowers under the Forbearance Agreement
will inure to the substantial benefit of the Guarantor;
NOW, THEREFORE, in consideration of the premises and in order to induce the Lender to enter
into the Forbearance Agreement and to make and/or maintain the extensions of credit contemplated
thereby, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor hereby agrees with the Lender as follows:
1. Guaranty. (a) The Guarantor hereby unconditionally and irrevocably guarantees to
the Lender, and its successors, endorsees, transferees and assigns, the prompt and complete payment
and performance by the Borrowers of all Obligations when and as the same shall become due (whether
at stated maturity, by acceleration or otherwise). The Guarantor further agrees to pay any and all
expenses (including, without limitation, all reasonable fees and disbursements of counsel) that may
be paid or incurred by the Lender in enforcing any rights with respect to, or collecting, any or
all of the Obligations and/or enforcing any rights with respect to, or collecting against, the
Guarantor under this Guaranty. This Guaranty shall remain in full force and effect until the
Obligations are paid in full in cash, notwithstanding that from time to time prior thereto the
Borrowers and/or any other guarantor may be free from any Obligations.
(b) The Guarantor agrees that whenever, at any time or from time to time, it shall make any
payment to the Lender on account of its liability hereunder, it will notify the Lender in
writing that such payment is made under this Guaranty for such purpose; provided,
however, that no payment made by the Guarantor through or on behalf of any Borrower or any
other guarantor shall be applied to reduce the Obligations unless and until the Lender shall have
made a demand for payment under this Guaranty.
2. Representations, Warranties and Covenants of the Guarantor. This Guaranty is
delivered pursuant to the Forbearance Agreement and the Guarantor hereby confirms to the Lender
each of its representations and warranties as set forth in the Forbearance Agreement.
3. Right of Set-off. Upon the occurrence of a Forbearance Default, the Guarantor
hereby irrevocably authorizes the Lender (and its Affiliates), at any time and from time to time
and without notice to the Guarantor, any such notice being expressly waived by the Guarantor, to
set-off and appropriate and apply any and all property and deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by the Lender (or any of its Affiliates) to or for the credit
or the account of the Guarantor, or any part thereof in such amounts as the Lender may elect,
against and on account of the obligations and liabilities of the Guarantor to the Lender hereunder
and claims of every nature and description of the Lender (or any of its Affiliates) against the
Guarantor, in any currency, whether arising hereunder or under any other Loan Document, as the
Lender (or any of its Affiliates) may elect, regardless of whether the Lender (or such Affiliate)
has made any demand for payment and although such obligations, liabilities and claims may be
contingent or unmatured. The Lender (or its Affiliate) shall notify the Guarantor promptly of any
such set-off and the application made by the Lender or such Affiliate; provided that the
failure to give such notice shall not affect the validity of such set-off and application. The
rights of the Lender (and its Affiliates) under this Section 3 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) that the Lender (and such
Affiliates) may have under the Forbearance Agreement, at law or in equity.
4. No Subrogation. Notwithstanding any payment or payments made by the Guarantor
hereunder or any set-off or application of funds of the Guarantor by the Lender (or any of its
Affiliates), the Guarantor shall be not be entitled to be subrogated to any of the rights of the
Lender (or any of its Affiliates) against the Borrowers or any other guarantor or any Collateral or
guarantee or right of offset held by the Lender (or its Affiliates) for the payment of the
Obligations, nor shall the Guarantor seek or be entitled to seek any contribution or reimbursement
from the Borrowers or any other guarantor in respect of payments made by the Guarantor hereunder,
in each case until all amounts owing to the Lender (or its Affiliates) on account of the
Obligations are paid in full and the Forbearance Agreement, the Credit Agreements and all other
Loan Documents are terminated. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been paid in full, such
amount shall be held by the Guarantor in trust for the Lender (and its Affiliates), segregated from
other funds of the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to
the Lender in the exact form received by the Guarantor (duly indorsed by the Guarantor to the
Lender, if required), to be applied against the Obligations, whether matured or unmatured, in such
order as the Lender may determine.
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5. Amendments, Etc. with Respect to the Obligations. The Guarantor shall remain
obligated hereunder notwithstanding that, without any reservation of rights against the Guarantor
and without notice to or further assent by the Guarantor, any demand for payment of any of the
Obligations made by the Lender may be rescinded by the Lender and any of the Obligations continued,
and the Obligations, or the liability of any other party upon or for any part thereof, or any
collateral security or guarantee therefor or right of offset with respect thereto, may, from time
to time and in whole or in part, be renewed, extended, amended, modified, accelerated, compromised,
waived, surrendered or released by the Lender, and the Forbearance Agreement, and any other
documents executed and delivered in connection therewith may be amended, restated, modified,
supplemented or terminated, in whole or in part, as the Lender may deem advisable from time to
time, and any collateral security, guarantee or right of offset at any time held by the Lender (and
its Affiliates) for the payment of the Obligations may be sold, exchanged, waived, surrendered or
released. The Lender shall not have any obligation to protect, secure, perfect or insure any Lien
at any time held by it as security for the Obligations or for this Guaranty or any assets subject
thereto. When making any demand hereunder against the Guarantor, the Lender may, but shall be
under no obligation to, make a similar demand on any Borrower or any other guarantor, and any
failure by the Lender to make any such demand or to collect any payments from a Borrower or any
such other guarantor or any release of a Borrower or such other guarantor shall not relieve the
Guarantor of its respective obligations or liabilities hereunder, and shall not impair or affect
the rights and remedies, express or implied, or as a matter of law, of the Lender against the
Guarantor. For the purposes hereof “demand” shall include the commencement and continuance of any
legal proceedings.
6. Waiver of Rights. The Guarantor waives any and all notice of the creation,
renewal, extension or accrual of any of the Obligations, and notice of or proof of reliance by the
Lender upon this Guaranty or acceptance of this Guaranty. The Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended
or waived, in reliance upon this Guaranty, and all dealings between the Borrowers and the
Guarantor, on the one hand, and the Lender, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon this Guaranty. The Guarantor waives
diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon
the Borrowers or the Guarantor with respect to the Obligations.
7. Guaranty Absolute and Unconditional. The Guarantor understands and agrees that
this Guaranty shall be construed as a continuing, absolute, unconditional guarantee of the full and
punctual payment and performance by the Borrowers of the Obligations and not of their
collectibility only and is in no way conditioned upon any requirement that the Lender or any other
party first attempt to collect any of the Obligations from the Borrowers, without regard to (a) the
validity, regularity or enforceability of the Forbearance Agreement, any other Loan Document, any
of the Obligations or any other Collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by the Lender or any Affiliate of Lender, (b)
any defense, set-off or counterclaim (other than a defense of payment or performance) that may at
any time be available to or be asserted by the Borrowers against the Lender or any of its
Affiliates, (c) any document presented in connection with the Forbearance Agreement, or any other
Loan Documents or this Guaranty proving to be forged, fraudulent, invalid or insufficient in any
respect of any statement therein being untrue or inaccurate in any
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respect, or (d) any other circumstance whatsoever (with or without notice to or knowledge of
the Borrowers or the Guarantor) that constitutes, or might be construed to constitute, an equitable
or legal discharge of the Borrowers from the Obligations, or of the Guarantor from this Guaranty,
in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against
the Guarantor, the Lender may, but shall be under no obligation to, pursue such rights and remedies
as it may have against the Borrowers or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset of Lender or any of its Affiliates with
respect thereto, and any failure by the Lender to pursue such other rights or remedies or to
collect any payments from the Borrowers or any such other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any release of the
Borrowers or other Person or any such collateral security, guarantee or right of offset, shall not
relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the Lender (or any of its
Affiliates) against the Guarantor. This Guaranty shall remain in full force and effect and be
binding in accordance with and to the extent of its terms upon the Guarantor and the successors and
assigns thereof, and shall inure to the benefit of the Lender (and its Affiliates) and its
respective successors, endorsees, transferees and assigns, in each case until all the Obligations
and the obligations of the Guarantor under this Guaranty shall have been satisfied by payment in
full and the Forbearance Agreement, and the other Loan Documents shall be terminated,
notwithstanding that from time to time during the term of such agreement the Borrowers may be free
from any Obligations.
8. Reinstatement. This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the Lender or any of its Affiliates upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of any Borrower or the
Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, any Borrower or the Guarantor or any substantial part of its
respective assets, or otherwise, all as though such payments had not been made.
9. Payments. The Guarantor hereby guarantees that payments hereunder will be paid to
the Lender without set-off or counterclaim in United States dollars in accordance with the wiring
instructions of the Lender. Payments and performance required under this Guaranty shall be payable
and performed whenever any amount or performance guaranteed hereunder has not been promptly made to
the Lender in accordance with the Forbearance Agreement, or other Loan Documents. When pursuing
its rights and remedies hereunder against the Guarantor, the Lender may, but shall be under no
obligation to, pursue the rights, remedies, powers and privileges as it may have against the
Borrowers or any other Person or against any collateral security or guaranty for the Obligations or
any right of offset with respect thereto. Any failure by Lender or any of its Affiliates to pursue
the other rights, remedies, powers or privileges or to collect any payments from the Borrowers or
any other Person or to realize upon any collateral security or guaranty or to exercise any right of
offset, or any release of the Borrowers or any other Person or of any collateral security, guaranty
or right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not
impair or affect the rights, remedies, powers or privileges, whether express, implied or available
as a matter of law, of the Lender against the Guarantor.
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10. Indemnification. The Guarantor hereby agrees to:
(i) pay or reimburse the Lender on demand for all reasonable out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution of, and any
amendment, modification or supplement to, or any waiver under, this Guaranty and any other
document prepared in connection herewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including without limitation the reasonable
fees and disbursements of counsel to the Lender;
(ii) pay on demand all reasonable costs and expenses of the Lender, including without
limitation the reasonable fees and disbursements of counsel to the Lender, in connection
with the occurrence or continuance of a default under this Guaranty and the enforcement,
collection, protection or preservation (whether through negotiations, legal proceedings or
otherwise) of this Guaranty, any Obligation or any right, remedy, power or privilege of the
Lender hereunder or under any other Loan Document;
(iii) pay and hold the Lender (and its Affiliates) harmless from and against any and
all present and future stamp, excise, recording or other similar taxes or fees payable in
connection with the execution, delivery, recording and filing of this Guaranty and hold the
Lender (and its Affiliates) harmless from and against any and all liabilities with respect
to or resulting from any delay or omission to pay such taxes or fees; and
(iv) indemnify the Lender, its Affiliates, and each of their respective directors,
officers, employees and agents and hold each of them harmless from and against, any and all
liabilities, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements, including without limitation the reasonable fees and disbursement of
counsel to the Lender, and such other parties, that are incurred by any of them in
connection with, arising out of or in any way relating to any investigation, claim,
litigation or other proceeding, pending or threatened (regardless of whether any of them is
designated a party thereto), in any such case arising out of or principally with respect to
this Guaranty or any other Loan Document or the transactions contemplated herein or therein;
provided that neither the Lender nor any of its Affiliates shall be entitled to any
indemnification for any of the foregoing resulting from its gross negligence or willful
misconduct.
If and to the extent that the indemnification obligations of the Guarantor under this Section 10
may be unenforceable for any reason, the Guarantor hereby agrees to make the maximum contribution
to the payment and satisfaction of each of such indemnity obligations that is permissible under
applicable law. This indemnification and contribution shall survive the termination of this
Guaranty and the other Loan Documents.
11. Notices. All notices, requests and other communications provided for herein
(including without limitation any modifications of, or waivers, requests or consents under, this
Guaranty) shall be given or made in writing (including without limitation by telex or
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telecopy) and delivered to the intended recipient at the applicable address set forth on the
signature pages hereof; or, as to any party, at such other address as shall be designated by such
party in a written notice to each other party. All such communications shall be deemed to have
been duly given when transmitted by telex or telecopy or personally delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as aforesaid.
12. Severability. 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 provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.
13. Integration. This Guaranty, the Forbearance Agreement, and the other Loan
Documents represent the agreement of the Guarantor with respect to the subject matter hereof and
thereof and there are no promises or representations by the Lender relative to the subject matter
hereof or thereof not reflected herein or therein.
14. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of the terms or
provisions of this Guaranty may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Guarantor and the Lender; provided that any provision of
this Guaranty may be waived by the Lender.
(b) Neither the Lender nor any of its Affiliates shall by any act of (except by a written
instrument pursuant to Section 14(a) hereof) delay, indulgence, omission or otherwise be deemed to
have waived any right or remedy hereunder or to have acquiesced in any Forbearance Default or Event
of Default or in any breach of any of the terms and conditions hereof or of the Forbearance
Agreement, or any other Loan Document. No failure to exercise, nor any delay in exercising, on the
part of the Lender or any of its Affiliates, any right, power or privilege hereunder or under the
Forbearance Agreement, or any other Loan Document shall operate as a waiver thereof. No single or
partial exercise, on the part of the Lender, of any right, power or privilege hereunder or under
the Forbearance Agreement, or any other Loan Document shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the Lender of any
right or remedy hereunder or under the Forbearance Agreement, or any other Loan Document on any one
occasion shall not be construed as a bar to any right or remedy that the Lender would otherwise
have on any future occasion.
(c) The rights and remedies provided herein and in the Forbearance Agreement, and the other
Loan Documents are cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
15. Section Headings. The section headings used in this Guaranty are for convenience
of reference only and are not to affect the construction hereof or be taken into consideration in
the interpretation hereof.
16. Successors and Assigns. This Guaranty shall be binding upon the respective
successors and assigns of the Guarantor and shall inure to the benefit of the Lender
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and its successors and assigns; provided that this Guaranty may not be assigned by the
Guarantor without the express written consent of the Lender.
17. Governing Law. This Guaranty shall be governed by the local laws of the State of
Ohio without reference to the choice of laws doctrines thereof.
18. Termination. This Guaranty shall terminate upon the final payment in full of the
Obligations and the termination of the Forbearance Agreement, the Credit Agreements, and the other
Loan Documents.
19. Recourse. The Guarantor and the Lender agree that the Obligations shall be
recourse obligations of the Borrowers as and to the extent set forth in the Forbearance Agreement,
the Credit Agreements and the other Loan Documents.
20. Defined Terms. Capitalized terms used but not defined herein (except when each
letter is capitalized for emphasis) shall adopt their respective meanings as set forth in the
Forbearance Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed and delivered
by its duly authorized officer as of the day and year first above written.
| FRANKLIN CREDIT HOLDING CORPORATION | ||||
| By: /s/ Xxxxxx X. Xxxx
|
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| Title: President |
Signature Page to Guaranty
