EXHIBIT 10.1
AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of July 26, 2001, is by and
among AFFINITY TECHNOLOGY GROUP, INC., a Delaware corporation ("Affinity"),
MULTI FINANCIAL SERVICES, INC., a Delaware corporation and a wholly-owned
subsidiary of Affinity ("MFS"), and HOMEGOLD, INC., a South Carolina corporation
("HomeGold").
BACKGROUND STATEMENT
Surety Mortgage, Inc., a Delaware corporation and a wholly-owned
subsidiary of MFS ("Surety"), engages in two lines of business: (i) the
processing and underwriting of mortgage loans for community banks and other
customers from applications generated primarily through Affinity's mortgage
Automated Loan Machines(R) and through referrals by certain parties under
certain contracts, which business currently is conducted by Surety out of its
offices located on Hampton Street in Columbia, South Carolina (the "Hampton
Street Operations"); and (ii) the processing of conforming mortgage loans for
HomeGold pursuant to the Joint Venture Agreement, dated as of December 18, 2000,
between Surety and HomeGold (the "Joint Venture Agreement"), which business
currently is conducted by Surety out of HomeGold's offices located in Lexington,
South Carolina (the "HomeGold Mortgage Operations"). HomeGold desires to develop
the capability to process its own conforming mortgage loans, and Affinity has
agreed to cooperate with HomeGold in its orderly transition into the conforming
loan business in consideration of, among other things, HomeGold's agreement to
loan Affinity $1,000,000 upon the terms and conditions of this Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Loan Agreement.
(a) Loan. HomeGold hereby agrees to loan to Affinity the sum
of $1,000,000, to be advanced by HomeGold to Affinity as follows: (i) the sum of
$500,000 shall be advanced by HomeGold to Affinity immediately upon execution of
this Agreement; and (ii) the remaining sum of $500,000 shall be advanced by
HomeGold to Affinity in five (5) equal monthly installments of $100,000 on the
15th day of each month during the remainder of 2001, with the first such advance
to be made on August 15, 2001. Such loan shall bear interest at the rate of 8%
per annum and shall be evidenced by a note in substantially the form as attached
hereto as EXHIBIT A (the "Note").
(b) Collateral. To secure the payment of all principal and
interest outstanding under the Note, MFS shall pledge to HomeGold all of the
outstanding shares of capital stock of Surety held by MFS (the "Surety Shares"),
in accordance with the Pledge Agreement in substantially the form as attached
hereto as EXHIBIT B.
(c) Repayment Terms. All outstanding principal and interest
under the Note shall become payable in full by Affinity on December 31, 2001.
Notwithstanding the foregoing, Affinity may elect, in its sole and absolute
discretion, to cause MFS to assign, transfer and convey to HomeGold all of MFS's
right, title and interest in the Surety Shares in full and complete satisfaction
of all of Affinity's obligations under the Note, and upon the assignment,
transfer and conveyance by MFS to HomeGold of the Surety Shares pursuant to this
SECTION 1(C), the Note shall be cancelled, marked as "PAID IN FULL," and
returned to Affinity.
(d) Prepayment. Affinity may prepay all or any part of the
principal and interest outstanding under the Note at any time without penalty.
In addition, Affinity shall use the cash proceeds generated through the sale of
Surety's Xxxxxxx Xxxxxx Operations, if such sale shall occur, to repay, to the
extent possible, the outstanding principal and accrued and unpaid interest under
the Note, and such repayment shall be made as promptly as possible following
such sale.
2. Other Agreements.
(a) Grant of Option. MFS hereby grants to HomeGold the option
to purchase from MFS, for aggregate consideration of One Dollar ($1.00), all of
MFS's right, title and interest in the Surety Shares. Such option may be
exercised by HomeGold if, and only if, (i) Affinity shall not cause MFS to
assign to HomeGold the Surety Shares in payment of Affinity's obligations under
the Note, as contemplated by the second sentence of SECTION 1(C) (ii) HomeGold
shall have advanced the full amount of the Loan pursuant to SECTION 1(A) above
and (iii) HomeGold shall not foreclose on the Surety Shares pursuant to the
Pledge Agreement. If exercisable, this option shall be deemed to have been
exercised by HomeGold on January 1, 2002 without any notice or further action by
HomeGold.
(b) Employment Agreement. Affinity agrees to use its
commercially reasonable efforts to cause Xxxxx X. Childress, the President of
Surety, to enter into an employment agreement with HomeGold that becomes
effective on January 1, 2002. Such agreement shall have such terms and
conditions as may be mutually agreed upon by Affinity, HomeGold and Ms.
Childress.
(c) Joint Venture Agreement. Each party hereby covenants and
agrees that it shall not terminate the Joint Venture Agreement prior to December
31, 2001 and that it shall use its commercially reasonable efforts to maximize
the amount of business done by Surety through its HomeGold Mortgage Operations.
(d) Operation of Surety. At any time prior to the delivery by
MFS of the Surety Shares to HomeGold pursuant to SECTION 1(C) or SECTION 2(A),
MFS shall retain all of the rights of ownership of the Surety Shares and may
cause Surety to sell its Xxxxxxx Xxxxxx Operations and, subject to SECTION 1(D),
to distribute to MFS the proceeds of such sale and any and all of Surety's
assets; provided, however, that (i) unless and until the Note has been paid in
full, MFS shall not be permitted to cause Surety to distribute to MFS any of the
assets used by Surety in the Xxxxxxx Xxxxxx Operations other than undeployed
inventories, cash and other assets not directly related to the Xxxxxxx Xxxxxx
Operations, and further provided that, no distribution shall be made which would
cause Surety to fail to meet any net worth or other requirement of any of its
licenses or any agreement to which it is a party; and (ii) in no event shall
Surety be permitted to distribute or transfer the mortgage brokerage licenses
and permits currently held by Surety. After the date hereof, neither Affinity
nor MFS shall take any action to sell the Surety Shares or cause Surety to issue
additional shares of its capital stock to any person other than MFS.
Notwithstanding any provision in this Agreement to the contrary, without the
prior written consent of HomeGold, Affinity may not sell the Xxxxxxx Xxxxxx
Operations if such sale will generate gross proceeds of less than $1 million.
(e) Non-Inducement or Hiring of Employees. After December 31,
2001, neither Affinity nor MFS shall, for itself or on behalf of any other
person, solicit or induce any employee of Surety who is engaged in the HomeGold
Mortgage Operations to leave his or her employment with Surety, including, but
not limited to, any individual employed by Surety in the HomeGold Mortgage
Operations conducted by Surety as of the date hereof. Any employee who has not
been employed by Surety for a period of six consecutive months shall no longer
be considered an employee of Surety for purposes of this SECTION 2(E).
(f) Working Capital Adjustment. If MFS shall deliver the Surety
Shares to HomeGold pursuant to SECTION 1(C) or SECTION 2(A), the parties agree
to cooperate in good faith to prepare a balance sheet of Surety as of the
effective date of such delivery, which balance sheet shall reflect all the
current assets, as defined by GAAP, except for inventory and intercompany
accounts, of Surety as of such date (the "Surety Assets") and all current
liabilities, except for intercompany accounts, of Surety as of such date (the
"Surety Liabilities"). Upon the delivery of the Surety Shares to HomeGold
pursuant to SECTION 1(C) or SECTION 2(A), HomeGold shall pay to Affinity, by
wire transfer of immediately available funds, the amount by which the Surety
Assets exceed the Surety Liabilities (if the Surety Assets exceed the Surety
Liabilities), and Affinity shall pay to HomeGold, by wire transfer of
immediately available funds, the amount by which the Surety Liabilities exceed
the Surety Assets (if the Surety Liabilities exceed the Surety Assets). All
intercompany payables and receivables of Surety shall be cancelled without
consideration upon transfer of the Surety Shares to HomeGold.
3. Representations and Warranties of the Parties.
(a) Valid Agreement. Each of the parties represents and
warrants to the other parties: (i) that this Agreement has been duly authorized
by all necessary corporate action, (ii) that this Agreement has been duly and
validly executed and delivered by it and (iii) that this Agreement constitutes
its valid and binding agreement, enforceable against it in accordance with its
terms.
4. Representations and Warranties of Affinity and MFS. Affinity
and MFS represent, warrant, and agree as follows:
(a) Surety Shares. Affinity and MFS hereby represent and
warrant to HomeGold: (i) that Affinity is the sole record and beneficial owner
of all of the outstanding shares of MFS, and that MFS is the sole record and
beneficial owner of the Surety Shares; (ii) that the Surety Shares constitute
all the issued and outstanding shares of capital stock of Surety, and that there
are no options, warrants or other agreements of Surety to issue to any party any
shares of its capital stock or any securities convertible into capital stock;
and (iii) that MFS owns the Surety Shares free of any claims, mortgages,
pledges, liens, encumbrances and security interests of every nature whatsoever
except those granted to HomeGold hereunder, and that no consent or approval of
any governmental or regulatory authority, or of any securities exchange, which
has not been obtained, was or is necessary to the validity of the pledge of the
Surety Shares to HomeGold pursuant to this Agreement.
(b) Compliance with Law; Authorizations. Neither Affinity, MFS
nor Surety has received any notice of any violation of or non-compliance with
any law, rule, regulation, order, ordinance or requirement applicable to
Surety's operations and no such violation or non-compliance exists. Surety owns,
holds, possesses or lawfully uses in the operation of its business all licenses,
permits, rights, applications, filings, registrations and other authorizations
necessary to conduct Surety's business ("Authorizations") free and clear of all
liens, charges, restrictions and encumbrance and in compliance with laws and
regulations of any governmental entities. None of such Authorizations will be
adversely affected by consummation of the transactions contemplated hereby
except that all or certain of such Authorizations require the consent of the
issuer of such Authorization in the event of a change of control with respect to
Surety; the parties agree to cooperate in attempting to obtain any such
necessary consents. All such Authorizations are renewable by their terms or in
the ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
(c) Taxes. Surety has filed or caused to be filed, within the
time and in the manner prescribed by law, all federal, state, local and foreign
tax returns and tax reports required to be filed by Surety. Such returns and
reports are accurate and complete in all material respects. All federal, state,
local and foreign income, payroll, profits, franchise, sales, use, occupancy,
excise and other taxes and assessments (including interest and penalties)
reflected on such returns payable by, or due from, Surety on or prior to the
date hereof have been fully paid.
(d) No Breach. The execution, delivery and performance of this
Agreement by Affinity and MFS does not and will not violate, conflict with or
result in the breach of any term, condition or provision of, or require the
consent of any other person under:
(i) any existing law, ordinance, or governmental rule
or regulation to which Affinity, MFS or Surety is subject;
(ii) any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental or regulatory
official, body or authority which is applicable to Affinity,
MFS or Surety; or
(iii) any mortgage, indenture, agreement, contract,
commitment, lease, plan, Authorization (as defined in SECTION
4(B)), or other instrument, document or understanding, oral or
written, to which Affinity, MFS or Surety is a party, except
for Surety's warehouse line with Regions Bank.
No authorization, approval or consent of and no registration or filing
with, any governmental or regulatory official, body or authority is required in
connection with the execution, delivery or performance of this Agreement by
Affinity and MFS.
(e) Financial Statements. Affinity has delivered to HomeGold
copies of Surety's financial statements as of December 31, 2000 (collectively,
the "Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods involved (except as otherwise indicated in the
notes thereto), and are true and correct in all material respects, and present
fairly, in all material respects, the financial condition of Surety as at the
dates of such balance sheets and the results of operations for such respective
periods then ended.
Except as shown on the balance sheets of Surety dated as of
May 31, 2001 (the "Latest Financial Statements"), Surety does not have any
liabilities or obligations, either direct or indirect, matured or unmatured or
absolute, contingent or otherwise ("Liabilities"), except current Liabilities
incurred in the ordinary course of business.
(f) Adverse Changes. Since May 31, 2001, there has been (a) no
material adverse change in (i) the assets, liabilities or financial condition of
Surety from that set forth in the Latest Financial Statements or (ii) the
condition (other than financial) or business of Surety, (b) no damage,
destruction or loss, whether or not covered by insurance, (c) no labor dispute,
other than routine grievances by individual employees, or (d) any other claim or
obligation incurred which would adversely affect the business of Surety.
(g) No Litigation. No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
best knowledge of Affinity and MFS, threatened against Surety nor does Affinity
or MFS know of any basis that would make any such litigation, arbitration,
investigation or proceeding reasonably likely to occur, the result of which
could have a materially adverse affect on Surety or its business.
(h)Third Party Consents. The Surety Shares may be conveyed,
transferred and assigned by MFS to HomeGold without the consent of any third
party.
(i) Interim Operations. From and after May 31, 2001, Surety
has operated and carried on its business in the ordinary course consistent with
prior practice. Specifically, without limitation, Surety has refrained from
granting any wage, salary or other compensation increase (except for letter
agreement date July, 2001 with Xxxxx X. Childress) and refrained from adopting
any new or expanded employee benefit plan.
(j) Omissions. No representation or warranty by Affinity or
MFS in this Agreement, or any other information or item to be furnished to
HomeGold in connection with transactions contemplated herein, contains nor will
contain any untrue statement of a material fact, nor omits nor will omit to
state a material fact necessary to make statements contained therein not be
misleading.
(k) Effective Representations. All the foregoing
representations and warranties are made by Affinity and MFS with the knowledge
and expectation that HomeGold, notwithstanding any personal inspection or
examination of the documents, properties or other items described herein, is
entering into the transactions described or contemplated herein in full reliance
on Affinity and MFS representations and warranties, and all of said
representations and warranties are made as of the date hereofand shall
specifically survive the closing of this Agreement.
5. Representations and Warranties of HomeGold. HomeGold
represents as follows:
(a) No Breach. The execution, delivery and performance of
this Agreement by HomeGold does not and will not violate, conflict with or
result in the breach of any term, condition or provision of, or require the
consent of any other person under:
(i) any existing law, ordinance, or governmental rule
or regulation to which HomeGold is subject;
(ii) any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental or regulatory
official, body or authority which is applicable to HomeGold;
or
(iii) any mortgage, indenture, agreement, contract,
commitment, lease, plan, Authorization (as defined in SECTION
4(B)), or other instrument, document or understanding, oral or
written, to which HomeGold is a party, or by which the assets
of HomeGold may be affected.
No authorization, approval or consent of and no registration or filing
with, any governmental or regulatory official, body or authority is required in
connection with the execution delivery or performance of this Agreement by
HomeGold.
(b) Omissions. No representation or warranty by HomeGold in
this Agreement, or any other information or item to be furnished to Affinity or
MFS in connection with transactions contemplated herein, contains nor will
contain any untrue statement of a material fact, nor omits nor will omit to
state a material fact necessary to make statements contained therein not be
misleading.
(c) Accredited Investor. HomeGold is an "accredited
investor", as that term is defined in Regulation D promulgated by the U.S.
Securities and Exchange Commission. HomeGold acknowledges that the Surety Shares
have not been registered under federal or state securities laws and are
therefore restricted securities under such securities laws.
6. Interim Operations.
(a) Access. From the date hereof until December 31, 2001,
during reasonable business hours, Affinity, MFS and Surety will permit HomeGold
and its proper agents, to have access to the premises on which Surety conducts
its business, and to all its books, records and personnel. Surety will furnish
HomeGold such information concerning its business as HomeGold shall reasonably
request. Surety will provide to HomeGold copies of all financial information,
contracts, and other written documents related to its business. HomeGold shall
be permitted to contact any of lenders to discuss the payoff, refinance or
assumption of any of Surety's debt. The access rights are referred to as "Due
Diligence". During the Due Diligence period, HomeGold shall be entitled to
inspect all assets to be purchased and, when reasonable, provide for third party
inspection of such assets.
(b) Confidentiality. HomeGold will maintain in confidence all
information received by it in connection with its Due Diligence or otherwise
acquired from Affinity, MFS or Surety in connection with the transactions
contemplated hereby and will not disclose any confidential information to any
third party or use any confidential information for any purpose except as in the
performance of the understandings hereunder, or otherwise with the written
consent of Affinity or MFS. This restriction does not apply to information
generally known in the public or which is not considered confidential by
Affinity.
(c) Conduct of Business. From the date hereof and until
December 31, 2001, Surety will use commercially reasonable efforts to conduct
its business in a reasonable and prudent manner in accordance with past
practices, will engage in no transaction out of the ordinary course of business,
and will use commercially reasonable efforts to preserve its existing business
organization and relation with its employees, customers, suppliers and others
with whom it has a business relationship, will not incur any incur any long term
debt that would not be treated as a Current Liability pursuant to SECTION 2(F)
above and will maintain and comply with all Authorizations (as defined in
SECTION 4(B)).
7. Indemnification. The liability of any party in respect of a
breach of a representation, warranty, covenant, indemnity or agreement contained
in or arising in connection with this Agreement shall be governed by the terms
of this Section.
(a) Indemnification by Affinity and MFS. Affinity and MFS
agree to indemnify and hold HomeGold harmless against and from any and all
taxes, claims, liabilities, damages, losses, costs and expenses, including
without limitation reasonable attorneys' fees and other expenses of defending
any actions or claims, amounts of judgments and amounts paid in settlement
(collectively, all of the foregoing being called "Costs"), incurred by HomeGold
or Surety and arising out of, or attributable to (i) any breach of any
representation, warranty or covenant made by Affinity or MFS herein; (ii) any
claim, known or unknown, arising out of, or by virtue of, or based upon Surety's
business and operations prior to the December 31, 2001 which is not reflected in
the latest Financial Statements or in the Surety Liabilities, as defined in
SECTION 2(F) above or; (iii) any nonfulfillment of any
agreement of Affinity or MFS hereunder. Affinity and MFS jointly and severally
shall pay HomeGold upon demand the amount to be indemnified, subject to the
following: HomeGold shall, within fifteen (15) days after the service of process
in a lawsuit or after it receives notice from any third party that such party
intends to assert a claim which could result in indemnification hereunder, give
Affinity and MFS notice of such claim. If Affinity and MFS has no good faith
defense to such third party claim, Affinity and MFS shall pay such claim
forthwith or reimburse HomeGold if HomeGold has paid same. Otherwise, Affinity
and MFS shall have the right to assume the defense of any such claim or lawsuit
asserted against HomeGold or Surety by a third party, with counsel reasonably
satisfactory to HomeGold, and in such event, Affinity and MFS will not be liable
to HomeGold for any further legal or other expenses incurred by HomeGold in
connection with the defense thereof, other than the reasonable cost of
investigation or assistance required by HomeGold. HomeGold may, however,
participate actively, at its sole expense, in any such lawsuit. If Affinity and
MFS so assumes the defense of any such claim or lawsuit, all costs of the
defense thereof shall thereafter be borne by Affinity and MFS, and Affinity and
MFS shall have the authority to compromise and settle such claim or lawsuit or
to appeal (or cause HomeGold or Surety to appeal) any adverse judgment or ruling
with the cost of such appeal to be paid by Affinity and MFS; provided, however,
that if any such compromise or settlement would have an adverse effect on
HomeGold or Surety, Affinity and MFS shall have the authority to compromise or
settle such claim or lawsuit only with the written consent of HomeGold.
HomeGold, Affinity and MFS will cooperate fully with each other with respect to
discovery, inquiries or investigations in connection with any claim or lawsuit
for which indemnity is sought hereunder.
(b) Indemnification by HomeGold. HomeGold agrees to indemnify
and hold Affinity and MFS harmless against any and all Costs, as defined in
SECTION 7(A), incurred by Affinity and MFS and arising out of or attributable to
(i) any breach of any representation, warranty or covenant made by HomeGold
herein, (ii) any nonfulfillment of any agreement of HomeGold hereunder, or (iii)
any claim arising out of or by virtue of or based upon operation of the Surety's
business after December 31, 2001, except to the extent that such claim is one as
to which Affinity and MFS is required to indemnify HomeGold pursuant to this
Agreement . HomeGold shall pay Affinity and MFS upon demand the amount to be
indemnified, subject to the following: Affinity and MFS shall, within fifteen
(15) days after the service of process in a lawsuit or after they receive notice
from any third party that such party intends to assert a claim which could
result in indemnification hereunder, give HomeGold notice of such claim. If
HomeGold has no good faith defense to such third party claim, HomeGold shall pay
such claim forthwith or reimburse Affinity and MFS if Affinity and MFS has paid
same. Otherwise, HomeGold shall have the right to assume the defense of any such
claim or lawsuit asserted against Affinity and MFS by a third party, with
counsel reasonably satisfactory to Affinity and MFS, and in such event, HomeGold
will not be liable to Affinity and MFS for any further legal or other expenses
incurred by Affinity and MFS in connection with the defense thereof, other than
the reasonable cost of investigation or assistance required by HomeGold.
Affinity and MFS may, however, participate actively, at their sole expense, in
any such lawsuit. If HomeGold so assumes the defense of any such claim or
lawsuit, all costs of the defense thereof shall thereafter be borne by HomeGold,
and HomeGold shall have the authority to compromise and settle such claim or
lawsuit or to appeal (or cause Affinity and MFS to appeal) any adverse judgment
or ruling with the cost of such appeal to be paid by HomeGold; provided,
however, that if any such compromise or settlement would have an adverse effect
on Affinity and MFS, HomeGold shall have the authority to compromise or settle
such claim or lawsuit only with the written consent of Affinity and MFS.
HomeGold, Affinity and MFS will cooperate fully with each other with respect to
discovery, inquiries or investigations in connection with any claim or lawsuit
for which indemnity is sought hereunder.
8. Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements contained herein shall survive the
transfer of the Surety stock to HomeGold and the repayment and cancellation of
the Note.
9. Miscellaneous.
(a) Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of the parties hereto. Any
failure of any of the parties to comply with any obligation, representation,
warranty, covenant, agreement or condition herein may be waived by the party
entitled to the benefits thereof only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, representation, warranty, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
(b) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered by hand, by
overnight delivery service or by facsimile transmission (with confirmed receipt)
or three (3) business days after being mailed by registered or certified mail
(return receipt requested), postage prepaid, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice; provided that the notices of a change of address shall be effective only
upon receipt thereof):
If to Affinity or MFS:
Affinity Technology Group, Inc.
0000 Xxxx Xxxxxx
00xx Xxxxx
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, President and
Chief Executive Officer
If to HomeGold:
HomeGold, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, President and
Chief Executive Officer
(c) Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other party, nor is this Agreement intended to confer
upon any other person except the parties hereto any rights or remedies
hereunder.
(d) Governing Law. The execution, interpretation and
performance of this Agreement shall be governed by the internal laws and
judicial decisions of the State of South Carolina.
(e) Facsimile Signatures; Counterparts. This Agreement may be
executed by facsimile signature and in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
(f) Entire Agreement. This Agreement, including the Exhibits
hereto, embody the entire agreement and understanding of the parties hereto in
respect of the subject matter hereof. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the
transactions contemplated by this Agreement, provided that the Joint Venture
Agreement shall continue in full force and effect in accordance with the terms
thereof.
IN WITNESS WHEREOF, Affinity, MFS and HomeGold have caused this
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
AFFINITY TECHNOLOGY GROUP, INC.
By: _____________________________
Name: _____________________________
Title:_____________________________
MULTIFINANCIAL SERVICES, INC.
By: _____________________________
Name: _____________________________
Title:_____________________________
HOMEGOLD, INC.
By: _____________________________
Name: _____________________________
Title:_____________________________
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT
BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS, OR
AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
LAWS.
NON -NEGOTIABLE PROMISSORY NOTE
Columbia, South Carolina July 26, 2001
$1,000,000
FOR VALUE RECEIVED, AFFINITY TECHNOLOGY GROUP, INC., a Delaware
corporation ("Affinity"), hereby promises to pay to the order HOMEGOLD, INC., a
South Carolina corporation ("HomeGold"), the principal sum of ONE MILLION
DOLLARS ($1,000,000) with interest thereon as hereinafter provided.
Principal. All outstanding principal and accrued
interest hereunder are payable on December 31, 2001.
Interest. From the date hereof to and including the due date, the
outstanding principal amount of this Note shall bear simple interest at the rate
per annum equal to eight and no/100 percent (8.00%).
Payment. All payments of principal of and interest on this Note shall
be made in lawful money of the United States of America. Notwithstanding the
foregoing, Affinity may cause Multi Financial Services, Inc., a Delaware
corporation and a wholly-owned subsidiary of Affinity ("MFS"), to deliver to
HomeGold, in full and complete satisfaction of all of Affinity's obligations
under this Note, the Surety Shares.
Prepayment. This Note may be prepaid by Affinity at any time without
penalty or additional charge. Notwithstanding the foregoing, Affinity shall use
the cash proceeds received from the sale of the Xxxxxxx Xxxxxx Operations, if
such sale shall occur, to repay, to the extent possible, the outstanding
principal and accrued and unpaid interest under the Note, and such repayment
shall be made as promptly as possible following such sale.
Waivers. To the extent permitted by applicable law, Affinity hereby
waives presentment, demand for performance, notice of non-performance, protest,
notice of protest and notice of dishonor. No delay on the part of HomeGold in
exercising any right hereunder shall operate as a waiver of such right or any
other right.
Severability. To the extent any provision of this Note is prohibited by
or invalid under the applicable law of any jurisdiction, such provision shall be
ineffective only to the extent of such prohibition or invalidity and only in any
such jurisdiction, without prohibiting or invalidating such provision in any
other jurisdiction or the remaining provisions of this Note in any jurisdiction.
Headings. The headings of the various sections and subsections of this
Note have been inserted for convenience only and shall not in any way affect the
meaning or construction of any of the provisions hereof.
Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of South Carolina, without giving effect
to the conflict of laws provisions thereof.
Agreement. This Note has been delivered by Affinity to HomeGold
pursuant to the Agreement, dated as of the date hereof, between Affinity, MFS
and HomeGold (the "Agreement"), and is subject to the terms and conditions of
the Agreement. Defined terms used but not defined herein shall have the meanings
given to them in the Agreement.
IN WITNESS WHEREOF, Affinity has duly executed this Note as of the date
first above written.
AFFINITY TECHNOLOGY GROUP, INC.
By:
------------------------------------
Xxxxxx X. Xxxxx
President and Chief Executive Officer
EXHIBIT B
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Agreement"), dated as of July 26, 2001, is
made by AFFINITY TECHNOLOGY GROUP, INC., a Delaware corporation ("Affinity"),
and MULTI FINANCIAL SERVICES, INC., a Delaware corporation and a wholly-owned
subsidiary of Affinity (the "Pledgor"), for the benefit of HOMEGOLD, INC., a
South Carolina corporation (the "Pledgee").
BACKGROUND STATEMENT
Affinity, the Pledgor and the Pledgee have entered into an Agreement
(the "Loan Agreement"), dated as of the date hereof, pursuant to which, among
other things, the Pledgee has made a loan to Affinity evidenced by a note in the
principal amount of $1,000,000, dated as of the date hereof, delivered by
Affinity to the Pledgee (the "Note"). To provide security to the Pledgee for the
performance of Affinity's obligations under the Note, the Pledgor has agreed to
pledge to the Pledgee all the Pledgor's right, title and interest in the
outstanding shares (the "Surety Shares") of capital stock of Surety Mortgage,
Inc., a Delaware corporation and a wholly-owned subsidiary of the Pledgor
("Surety").
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the Pledgee and the Pledgor agree as follows:
1. Pledge. As collateral security for the full and timely payment,
performance and observance of Affinity's obligations under the Note (the
"Obligations"), the Pledgor deposits and pledges with the Pledgee, in form
transferable for delivery, the Surety Shares (the "Pledged Securities"),
together with any and all proceeds of any of the foregoing in whatever form (the
Pledged Securities and the proceeds thereof are referred to collectively as the
"Pledged Collateral").
2. Representations and Warranties. The Pledgor represents and warrants
that the Pledged Securities are, and will be on deposit hereunder, duly and
validly pledged with the Pledgee in accordance with the law, and agrees to
defend the Pledgee's right, title, lien and security interest in and to the
Pledged Collateral against the claims and demands of all persons whomsoever. The
Pledgor also represents and warrants to the Pledgee that the Pledgor has, and
will have on deposit hereunder, good title to all of the Pledged Collateral,
free and clear of all claims, mortgages, pledges, liens, encumbrances and
security interests of every nature whatsoever except those granted to the
Pledgee pursuant to the Loan Agreement and this Agreement, and that no consent
or approval of any governmental or regulatory authority, or of any securities
exchange, which has not been obtained, was or is necessary to the validity of
this pledge.
3. Voting Rights. So long as Affinity is not in default of its
obligations under the Note, the Pledgor shall be entitled to exercise the voting
power with respect to the Pledged Securities. Notwithstanding the foregoing, if
Affinity shall be in default of its obligations under the Note, the Pledgee
shall have the sole and absolute right, in addition to any other rights herein
contained, to exercise all voting power with respect to the Pledged Securities,
and in such event the Pledgor hereby appoints the Pledgee as the Pledgor's true
and lawful proxy to vote such shares in any manner that the Pledgee deems
advisable for or against all matters that may be submitted to a vote of the
stockholders of Surety.
4. Dividends and Other Distributions. Subject to SECTION 2(D) of the
Loan Agreement, all dividends and other distributions payable in cash or
property with respect to any of the Pledged Securities shall by paid to the
Pledgor. Notwithstanding the foregoing, any shares of the capital stock of
Surety that are issued in connection with a stock dividend, stock split,
reclassification, recapitalization or similar transaction, or in the merger or
consolidation of Surety into another corporation, shall be delivered to the
Pledgee to be held by it as additional collateral hereunder, and all of the same
shall constitute Pledged Collateral for all purposes hereof.
5. Remedies. Upon the occurrence of a default by Affinity under the
terms of the Note, the Pledgee shall have all the rights and remedies available
under law, including without limitation the rights of a secured party under the
South Carolina Uniform Commercial Code.
6. No Waiver. No delay on the part of the Pledgee in exercising any of
its options, powers or rights, or partial or single exercise thereof, shall
constitute a waiver thereof.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of South Carolina without giving effect to
the principles of conflicts of law.
8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute but one and the same instrument.
[The remainder of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this
Agreement to be duly executed under seal as of the day and year first above
written.
AFFINITY TECHNOLOGY GROUP, INC.
By: _____________________________
Name: _____________________________
Title:_____________________________
THE PLEDGOR:
MULTIFINANCIAL SERVICES, INC.
By: _____________________________
Name: _____________________________
Title:_____________________________
THE PLEDGOR:
HOMEGOLD, INC.
By: _____________________________
Name: _____________________________
Title:_____________________________
