AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
dated as of August 12, 1997
between
NationsBank, N.A.
and
Hibernia National Bank,
as Lenders
and
Emergent Business Capital, Inc.,
as Borrower
and
NationsBank, N.A.,
as Agent
$25,000,000
TABLE OF CONTENTS
Section Page
1. DEFINITIONS AND ACCOUNTING TERMS...........................................1
1.1 DEFINITIONS.....................................................1
1.2 ACCOUNTING TERMS.................................................7
1.3 USE OF DEFINED TERMS.............................................7
1.4 SECTION AND EXHIBIT REFERENCES, ETC..............................7
2. AMOUNT AND TERMS OF THE LOANS..............................................7
2.1 THE LOANS........................................................7
2.2 INTEREST AND OTHER CHARGES.......................................9
2.3 COMPUTATION OF INTEREST AND OTHER CHARGES.......................10
2.4 CHARGES.........................................................10
2.5 PAYMENT.........................................................10
2.6 PAYMENT ON NON-BANKING DAYS.....................................10
2.7 EFFECTIVE DATE AND TERMINATION..................................10
2.8 LOAN ACCOUNTS; STATEMENTS OF ACCOUNT; PAYMENTS BY
AGENT, LENDERS..................................................11
3. SECURITY INTERESTS........................................................12
4. CONDITIONS PRECEDENT TO ADVANCES..........................................12
4.1 DOCUMENTS.......................................................12
4.2 OTHER CONDITIONS PRECEDENT......................................13
5. CLOSING PROCEDURES........................................................13
5.1 TRANSFERS OF SBA LOAN DOCUMENTS.................................13
5.2 RELEASE OF SECURITY INTEREST IN SBA COLLATERAL..................14
6. GENERAL REPRESENTATIONS AND WARRANTIES....................................14
6.1 ORGANIZATION, STANDING, ETC.....................................14
6.2 ENFORCEABILITY..................................................14
6.3 QUALIFICATION...................................................15
6.4 COMPLIANCE WITH ARTICLES OF INCORPORATION, BY-LAWS, AND OTHER
INSTRUMENTS, ETC.................................................15
6.5 SUBSIDIARIES....................................................15
6.6 FINANCIAL STATEMENTS............................................15
6.7 CHANGES IN FINANCIAL CONDITION..................................16
6.8 TAX RETURNS AND PAYMENTS........................................16
6.9 TITLE TO PROPERTIES AND ASSETS; LIENS; ETC......................16
6.10 PATENTS; TRADEMARKS; FRANCHISES; ETC...........................16
6.11 LITIGATION, ETC................................................16
6.12 ADVERSE DEVELOPMENTS...........................................17
6.13 DISCLOSURE.....................................................17
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6.14 MARGIN SECURITIES..............................................17
6.15 INVESTMENT COMPANY.............................................17
6.16 ERISA..........................................................17
6.17 LOCATIONS......................................................18
6.18 SOLVENCY.......................................................18
6.19 NAME CHANGE; MERGER............................................18
7. AFFIRMATIVE COVENANTS.....................................................18
7.1 INSURANCE.......................................................18
7.2 TAXES AND LIABILITIES...........................................18
7.3 ACCOUNTING; FINANCIAL STATEMENTS; ETC...........................18
7.4 INSPECTION......................................................19
7.5 MAINTENANCE OF CORPORATE EXISTENCE; COMPLIANCE WITH LAWS........19
7.6 USE OF PROCEEDS.................................................20
7.7 NOTICE OF DEFAULT...............................................20
7.8 MAINTENANCE OF PROPERTIES.......................................20
7.9 NOTICE OF ERISA DEVELOPMENTS....................................20
7.10 NOTICE OF LITIGATION OR ADVERSE CHANGE.........................20
7.11 PAYMENT OF LOANS...............................................21
7.12 NOTIFICATION OF CHANGE OF NAME OR BUSINESS LOCATION............21
7.13 TANGIBLE NET WORTH.............................................21
7.14 RATIO OF TOTAL LIABILITIES TO TANGIBLE NET WORTH...............21
7.15 INTEREST COVERAGE RATIO........................................21
7.16 EGI SUBSIDIARY.................................................21
7.17 COLLATERAL REPORTING...........................................21
8. NEGATIVE COVENANTS........................................................21
8.1 DEBT 21
8.2 LIENS...........................................................22
8.3 GUARANTEES......................................................22
8.4 PLAN LIABILITIES................................................22
8.5 FISCAL YEAR.....................................................22
8.6 OTHER TRANSACTIONS..............................................22
8.7 MERGER; SUBSIDIARY; ETC.........................................22
8.8 SALE OF ASSETS..................................................22
8.9 CHANGES IN BUSINESS.............................................23
8.10 DIVIDENDS AND REDEMPTIONS......................................23
8.11 LOANS..........................................................23
8.12 PLEDGE OF CREDIT...............................................23
8.13 INVESTMENTS....................................................23
8.14 CAPITAL EXPENDITURES...........................................23
9. POWER OF ATTORNEY.........................................................23
10. REMEDIES.................................................................24
11. AGENT....................................................................25
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12. MISCELLANEOUS............................................................27
12.1 NO WAIVER; CUMULATIVE REMEDIES.................................27
12.2 AMENDMENTS, ETC................................................28
12.3 ADDRESSES FOR NOTICES, ETC.....................................28
12.4 COSTS, EXPENSES, AND TAXES.....................................29
12.5 COMMERCIAL TRANSACTION.........................................30
12.6 SUCCESSORS AND ASSIGNS.........................................30
12.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................30
12.8 TIME IS OF THE ESSENCE.........................................30
12.9 HEADINGS.......................................................30
12.10 ENTIRE AGREEMENT..............................................30
12.11 SEVERABILITY..................................................30
12.12 PRO RATA PARTICIPATION........................................31
12.13 COUNTERPARTS..................................................31
12.14 GOVERNING LAW; CONSENT TO JURISDICTION........................31
12.15 WAIVER OF TRIAL BY JURY.......................................32
Exhibits:
Exhibit A - - Form of Borrower's Secretary's Certificate (Section 1.1)
Exhibit B - - Form of Borrower's CEO's Certificate (Section 1.1)
Exhibit C - - Form of Opinion (Section 1.1)
Exhibit D - - Form of Escrow Agreement (Section 1.1)
Schedules:
Schedule 1 - - Liens (Section 8.2)
Schedule 2 - - Trademarks, Trade Names, Name Changes, etc. (Sections
6.10 and 6.19)
Schedule 3 - - Litigation (Section 6.11)
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Agreement is made as of the 12th day of August, 1997, between
NationsBank, N.A., as successor to NationsBank of Georgia, N.A. ("NationsBank"),
and Hibernia National Bank ("Hibernia"), as lenders (the "Lenders"),
NationsBank, N.A., as agent for the Lenders (the "Agent"), and Emergent Business
Capital, Inc., a South Carolina corporation (the "Borrower").
Recitals:
Borrower and NationsBank entered into that certain Loan and Security
Agreement dated as of December 29, 1993 (as amended, the "EBC Loan Agreement"),
pursuant to which NationsBank agreed to finance EBC's SBA loan portfolio.
NationsBank has assigned to the Agent and the Lenders all of its right,
title and interest in the EBC Loan Agreement.
The Borrower, the Lenders and the Agent desire to amend and restate the
EBC Loan Agreement to make certain changes, all as more particularly described
herein.
The Borrower, the Lenders and the Agent therefore agree as follows:
1. DEFINITIONS AND ACCOUNTING TERMS
1.1 DEFINITIONS. The following terms, when capitalized as in this
Section 1.1, shall have the following meanings:
"Advance": the proceeds of a Loan.
"Affiliate" of any designated Person: another Person controlling,
controlled by, or under common control with such designated Person (but not
including a Lender), and shall include (x) the spouse, parents, brothers,
sisters, children, and grandchildren of such designated Person, (y) any
association, partnership, trust, entity, or enterprise in which such designated
Person is a director, officer, or general partner or in which such designated
Person together with Affiliates of such designated Person own in the aggregate
at least a 10% beneficial interest in assets, profits, or losses, and (z) any
Subsidiary of such designated Person.
"Agent": NationsBank, N.A., in its capacity as agent for the Lenders,
together with any successor Agent under Section 11 hereof.
"Banking Day": a day for dealings by and between banks, excluding
Saturday, Sunday, any legal holiday in Atlanta, Georgia, and any other day on
which banking institutions in Atlanta, Georgia are generally closed.
"Borrower": Emergent Business Capital, Inc.
"Borrower's CEO's Certificate": the Certificate of the Borrower's Chief
Executive Officer, substantially in the form of Exhibit B.
"Borrower's Secretary's Certificate": the Certificate of the Borrower's
Secretary, substantially in the form of Exhibit A.
"Borrowing Base": defined in Section 2.1(a).
"Borrowing Group": ECM, EFC, and the Borrower.
"Capital Expenditures": the dollar amount of gross expenditures
(including obligations under leases which are required under GAAP to be
capitalized for financial reporting purposes) made or incurred for fixed assets,
real property, and plant and equipment which are required to be capitalized for
financial reporting purposes in accordance with GAAP.
"Code": the Internal Revenue Code of 1986, as amended.
"Collateral": all property described in Section 3 hereof, and all the
Borrower's other property in which the Agent at any time has a security interest
or which at any time are in the Agent's possession or control.
"Commitment": as to each Lender, the amount set forth opposite such
Lender's name on the signature pages hereof, representing such Lender's
obligation, upon and subject to the terms and conditions of this Agreement, to
make Loans.
"Commitment Percentage": as to each Lender, the percentage of the Total
Commitment obtained by dividing such Lender's Commitment by the Total
Commitment.
"Default": (x) an event, act, or condition that would be an Event of
Default but for the requirement(s) that notice be given or time elapse, or (y)
an Event of Default.
"EBC": Emergent Business Capital, Inc.
"EBIT": the total earnings from all sources of the Borrowing Group and
their consolidated Subsidiaries, excluding extraordinary items, before deducting
interest or income tax expense, but after deducting depreciation and
amortization expense.
"ECM": Emergent Commercial Mortgage, Inc.
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"ECM L&SA": the Amended and Restated Loan and Security Agreement, dated
as of ____________, 1997, between NationsBank and ECM.
"EFC": Emergent Financial Corp.
"EFC L&SA": the Amended and Restated Loan and Security Agreement, dated
as of ____________, 1997, between the Lenders, the Agent and EFC.
"EGI": Emergent Group, Inc.
"Eligible SBA Loan: an SBA Loan which is closed pursuant to an issued
SBA Authorization and Loan Agreement and which meets the Lenders' funding
requirements.
"Eligible Stub Loan": the Non-Guaranteed Portion of an Eligible SBA
Loan that (1) is not 60 days or more past due, (2) is owned by EBC, (3) is
assignable to the Agent for the benefit of the Lenders, (4) is collateralized
and guaranteed in a manner satisfactory to the Agent, (5) is not subject to any
offset, recoupment, counterclaim, or defense in favor of the borrower
thereunder, and (6) is otherwise satisfactory to the Agent.
"Eligible Warehoused Loan": the Guaranteed Portion of an Eligible SBA
Loan that is not more than 90 days old (measured from the final funding date),
that is owned by EBC and has not been sold on the secondary market, that is
assignable to the Agent for the benefit of the Lenders, and for which EBC has
provided the Agent with a copy of the related SBA approval and the form of the
related SBA Note, a copy of the related form 1050 settlement sheet in the case
of any multiple-disbursement SBA Loan, and such other documentation as the Agent
reasonably requests, by fax or otherwise.
"Escrow Agent": any escrow agent selected by EBC and the Agent from
time to time to maintain possession of certain documents pursuant to Section 5.1
hereof, and pursuant to an Escrow Agreement to be executed by EBC, the Agent,
and such escrow agent.
"Escrow Agreement": any escrow agreement executed by EBC, the Agent,
and an Escrow Agent, the approved form of which is attached as Exhibit D.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default": any of the following: (1) non-payment, within seven
days after the due date, of any amount payable on any of the Obligations; (2)
failure to perform any material agreement or meet any obligation of the Borrower
or any of its Affiliates contained herein or in the Subordination Agreement; (3)
nonpayment when due of any premium on any insurance policy required to be
maintained under Section 7.1 hereof; (4) the existence of a default under any
other agreement between the Borrower, ECM or EFC and the Agent or a Lender or
any affiliate of a Lender; (5) any statement, representation, or warranty of the
Borrower made in writing herein or in any other writing at any time furnished or
made by the Borrower to a Lender or the Agent is untrue in any material respect
as of the date furnished or made; (6) suspension of the operation of the
Borrower's present business; (7) any Obligor becomes insolvent or unable to pay
debts as they
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mature, admits in writing that it is so, makes a conveyance fraudulent as to
creditors under any state or federal law, or makes an assignment for the benefit
of creditors, or a proceeding is instituted by or against any Obligor alleging
that such Obligor is insolvent or unable to pay debts as they mature, or a
petition under any provision of Title 11 of the United States Code (entitled
"Bankruptcy"), as amended, is brought by or against any Obligor; (8) entry of
any judgment for more than $50,000 against any Obligor; (9) creation, assertion,
or filing of any Lien (other than a Permitted Lien) against any of the property
of any Obligor; (10) dissolution, merger, or consolidation of any Obligor (other
than a merger or consolidation of the Borrower or the Guarantor with or into the
Borrower or the Guarantor); (11) termination or withdrawal of any guarantee for
any of the Obligations, or of the Subordination Agreement, or the failure for
any other reason of any such guarantee or agreement to be enforceable by the
Agent or the Lenders in accordance with its terms; (12) transfer of a
substantial part of the property of any Obligor; (13) sale, transfer, or
exchange, either directly or indirectly, of a controlling stock interest of the
Borrower; (14) appointment of a receiver for the Collateral or for any property
in which the Borrower has an interest; (15) seizure of the Collateral by any
third party; (16) at least 10% (face value) of the Borrower's loan portfolio
(excluding loans that EBC acquired in connection with its acquisition of its SBA
license, and (for avoidance of doubt) excluding the portion of any loan not
owned by the Borrower) are at least 90 days past due, and have remained at least
90 days past due for at least 30 days; or (17) the Agent or the Lenders in good
faith believe that the prospect of payment or performance of the Obligations has
been impaired.
"GAAP": generally accepted accounting principles applied in a manner
consistent with the financial statements described in Section 6.6.
"Guarantee": a Guarantee, dated the date of this Agreement, of a
Guarantor, in favor of the Agent and the Lenders.
"Guaranteed Portion": the portion of an Eligible SBA Loan which is
guaranteed by the SBA.
"Guarantor": EGI.
"herein", "hereof", "hereunder", etc.: in, of, under, etc. this
Agreement (and not merely in, of, under, etc. the section or provision where
that reference appears).
"Hibernia": Hibernia National Bank, and its successors and assigns.
"including": containing, embracing, or involving the enumerated
item(s), but not necessarily limited to such item(s).
"Insurance": the policy or policies of insurance described in Section
7.1, including all required endorsements thereto.
"Interest on Senior Funded Debt": the interest on the Obligations and
all "Obligations" under the ECM L&SA and the EFC L&SA during the period for
which computation is being made.
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"Lenders": NationsBank and Hibernia, and any of their successors and
assigns.
"Lien": any mortgage, pledge, deed of trust, assignment, security
interest, encumbrance, hypothecation, lien, or charge of any kind, including any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"Loans": the loan(s) under Section 2.1(a) in the principal amount of up
to $25,000,000, plus any Overadvances, made by the Lenders to the Borrower under
this Agreement.
"Multi-Party Agreement": the Multi-Party Agreement (Relating to SBA
Loan Documentation and Administration), dated as of the date of this Agreement,
among EBC, the Agent, the Lenders, and the SBA.
"NationsBank": NationsBank, N.A., and its successors and assigns.
"Non-Guaranteed Portion": the portion of an Eligible SBA Loan which is
not guaranteed by the SBA.
"Note Custodian": ▇▇▇▇▇▇ Services Corporation, as agent for the SBA,
and as agent for the Agent for perfection purposes.
"Obligations": all present and future (a) duties, obligations, and
liabilities of the Borrower to the Agent and the Lenders under this Agreement,
or under any document or agreement executed and delivered pursuant to or in
connection with this Agreement, (b) sums owing to a Lender for goods or services
purchased by the Borrower from any other firm financed by a Lender, (c)
obligations under all notes and contracts of suretyship, guarantee, or
accommodation made by the Borrower in favor of a Lender, and (d) all other
obligations of the Borrower to a Lender, however and whenever created, arising,
or evidenced, whether direct or indirect, through assignment from third parties,
absolute, contingent, or otherwise, primary or secondary, now or hereafter
existing, or due or to become due.
"Obligor": the Borrower, any guarantor, or any other party at any time
primarily or secondarily, directly or indirectly liable on any of the
Obligations.
"Opinion": the legal opinion, of counsel to the Borrower satisfactory
to the Agent, substantially in the form of Exhibit C.
"or": at least one, but not necessarily only one, of the alternatives
enumerated.
"Overadvances": loans by the Lenders to the Borrower in excess of those
described in Section 2.1(a).
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"Permitted Lien": a Lien permitted by Section 8.2.
"Person": any individual, joint venture, partnership, firm,
corporation, trust, unincorporated organization, or other organization or
entity, or a governmental body or any department or agency thereof.
"Plan": any present or future employee benefit plan (as defined in
Section 3 of ERISA) and any trust created thereunder, covered by Title I or
Title IV of ERISA, established or maintained for employees of the Borrower.
"Prime Rate": the rate of interest announced by NationsBank from time
to time as its "Prime Rate".
"Projections": the Borrower's forecasted consolidated and consolidating
balance sheets, profit-and-loss statements, and cash-flow statements, all
prepared on a basis consistent with the Borrower's historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.
"Reportable Event": as defined in Title IV of ERISA.
"SBA": the United States Small Business Administration, an agency of
the United States government.
"SBA Loan": a loan by EBC to a small business concern, approved and
guaranteed by the SBA pursuant to the Loan Guaranty Agreement (Deferred
Participation) between EBC and the SBA, dated April 17, 1992.
"SBA Note": the promissory note evidencing an SBA Loan.
"Securities": any share(s) of beneficial or equity interest or capital
stock or any other instrument commonly understood to be a "security", excluding
promissory notes issued for money borrowed in commercial transactions.
"Solvent": has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to engage,
is able to pay its debts as they mature, and owns property having a value, both
at fair valuation and at present fair saleable value, greater than the amount
required to pay its debts.
"Stub Loans": Loans made under Section 2.1(a)(ii).
"Subordinated Debt": EBC's debt that is subordinated (as to right and
time of payment) to the Obligations under the Subordination Agreement, and any
other debt of EBC, ECM, or EFC that is subordinated (as to right and time of
payment) to such party's obligations to the Agent and the Lenders in a manner
satisfactory to the Agent and the Lenders.
"Subordination Agreement": the Amended and Restated Agreement of
Subordination and Assignment, dated the date of this Agreement, of Carolina
Investors, Inc. and EBC, in favor of the Agent and the Lenders.
6
"Subsidiary" of any designated corporation: any other corporation more
than 20% of the shares of voting stock of which is owned, directly or
indirectly, by such designated corporation, including subsidiary of a
subsidiary.
"Tangible Net Worth": the total assets of the Borrowing Group and their
consolidated Subsidiaries, plus Subordinated Debt, minus Total Liabilities
(excluding from the definition of total assets the amount of (a) any write-up in
the book value of any asset resulting from a revaluation thereof after December
31, 1992, (b) treasury stock, (c) Receivables and other amounts due from
stockholders and other Affiliates, (d) unamortized debt discount and expense and
(e) patents, trademarks, trade names, goodwill, deferred charges, organizational
expenses and other intangible assets, all determined in accordance with GAAP).
"Total Commitment": the sum of the Commitments.
"Total Liabilities": all obligations of the Borrowing Group and their
consolidated Subsidiaries to pay money, excluding Subordinated Debt.
"Warehouse Loans": Loans made under Section 2.1(a)(i).
1.2 ACCOUNTING TERMS. All accounting terms used herein shall be
construed in accordance with GAAP applied consistently with those principles
applied in the preparation of the financial statements referred to in Section
6.6, and all financial data submitted pursuant to this Agreement shall be
prepared in accordance with GAAP. In the event of ambiguities in GAAP, the more
conservative principle or interpretation shall be used.
1.3 USE OF DEFINED TERMS. Any defined term used in the plural preceded
by "the" encompasses all members of the relevant class. Any defined term used in
the singular preceded by "a" or "any" indicates any number of the members of the
relevant class. Any agreement or instrument referred to in Section 1.1, or the
term "Agreement", means such agreement or instrument as from time to time
supplemented and amended. A definition in singular form applies to the plural
form of the term, and vice versa.
1.4 SECTION AND EXHIBIT REFERENCES, ETC. References to sections,
exhibits, and the like refer to those in or attached to this Agreement unless
otherwise specified.
2. AMOUNT AND TERMS OF THE LOANS
2.1 THE LOANS. (a) Revolving Loans. Each Lender agrees, severally but
not jointly, to make loans to the Borrower in amounts equal to such Lender's
Commitment Percentage of each such loan, and the Borrower agrees to borrow from
the Lenders, upon request of the Borrower from time to time, up to (i) 100% of
the face value of EBC's Eligible Warehoused Loans, and (ii) 80% of EBC's
Eligible Stub Loans (the sum of clauses (i) and (ii) being the "Borrowing
Base"); provided, that the total amount of all Loans outstanding at any time
under this Section 2.1(a) shall not exceed the Borrowing Base minus $1,000,000.
The amounts of such Loans shall be determined in the sole discretion of the
Agent and the Lenders to be consistent with the value of the Eligible Warehoused
7
Loans, the Eligible Stub Loans and the Eligible 504 Loans, taking into account
all fluctuations of the value thereof in light of the Agent's and the Lenders'
experience and sound business principles. Such determinations shall be subject
to the requirements of good faith on the Agent's and the Lenders' part, the
Borrower's undertakings hereunder, and especially the Borrower's grant to the
Agent of a security interest in the Collateral as security for the Loans and all
other Obligations, which will, of necessity, fluctuate in amount, and to the
condition that the Lenders at all times be fully secured. To the extent
necessary to reduce the total amount of all Loans outstanding to the maximum
amount then available under this Section 2.1, the Borrower shall pay to the
Lenders, on demand, the amount of outstanding Loans in excess of that maximum
amount.
The Guaranteed Portion of an Eligible SBA Loan shall be included in the
Borrowing Base when EBC has provided the Agent with a copy of the related SBA
approval and the form of the related SBA Note (to be signed at the closing of
such Loan), a copy of the related form 1050 settlement sheet in the case of a
multiple-disbursement SBA Loan, and such other documentation as the Agent
reasonably requests, by fax or otherwise. The Non-Guaranteed Portion of an
Eligible SBA Loan shall be included in the Borrowing Base (to the extent of 80%,
as provided above) at such time as the original, executed SBA Note is delivered
to the Note Custodian (provided that, if such Loan is to be closed by an Escrow
Agent, then 80% of the Non-Guaranteed Portion of such Eligible SBA Loan shall be
included in the Borrowing Base at the same time that the Guaranteed Portion of
such Loan is included in the Borrowing Base).
(b) Overadvances. The Lenders may make Overadvances as, in their sole
and absolute discretion, they determine to lend. Any such Overadvances may be
evidenced by a written agreement between the Agent, the Lenders and the
Borrower, which agreement may provide, at the Lenders' option, for interest and
fees on such Overadvances in addition to those specified hereunder. Except to
the extent otherwise provided in any such agreement, any such Overadvances shall
be "Loans", shall be repayable upon demand, and shall in all other respects be
subject to the terms and conditions of this Agreement.
(c) Manner of Borrowing Loans. The Borrower shall give the Agent prior
written or telephonic notice no later than 1:00 p.m. (Atlanta time) on the date
of the requested borrowing. Such notice shall be irrevocable and shall specify
the aggregate amount of the proposed borrowing and the date thereof (which shall
be a Banking Day). Such notice, to be effective, must be received by the Agent
by the time specified in the first sentence of this subsection (c). Such notice
shall specify the total amount of the Loan requested from the Lenders. On the
borrowing date specified in such notice, NationsBank shall make such borrowing
available to the Borrower in immediately available funds. On the last Banking
Day of each week the Agent shall notify the Lenders of the amounts then
outstanding under the Loans, at which time the Lenders will pay each other such
amounts as are necessary to ensure that the amounts outstanding under the Loans
are shared pro rata by the Lenders based upon their respective Commitments. The
Borrower hereby agrees that such payments shall represent debits and credits to
their loan accounts; provided, however, after the occurrence of an Event of
Default hereunder, unless waived by all of the Lenders (i) the Agent shall
promptly notify the Lenders that it has received notice from the Borrower of a
proposed borrowing pursuant to this paragraph, (ii) on the borrowing date
specified in such notice, each Lender shall make its ratable share of such
borrowing available to the Borrower at the offices of the Agent in immediately
available funds provided all of the Lenders have elected in their sole
discretion to fund
8
such borrowing, and (iii) the Agent shall pay to the Lenders their pro rata
share of all amounts collected on the Loans promptly after the receipt thereof
by the Agent; provided further, if the Lenders are prevented from funding any of
the proposed borrowings on account of the institution of any bankruptcy
proceeding by or against the Borrower, the Lenders agree to purchase
participations in the Loans of the other Lenders to ensure that the amounts
outstanding to the Lenders on account of the Loans are shared pro rata based
upon their respective Commitment.
2.2 INTEREST AND OTHER CHARGES. The Loans shall bear interest on the
average daily net balance thereof, calculated monthly, at a fluctuating rate of
interest equal to the Prime Rate. Changes in the rate of interest shall be
effected monthly to reflect changes in the Prime Rate, as follows: The rate
shall be adjusted on the first day of each month based on the Prime Rate in
effect at the close of business on the last Banking Day of the preceding
calendar month. Interest shall be due and payable monthly, on the first day of
each month, for the preceding month. The final payment of all accrued and unpaid
interest shall be due and payable on the date that the outstanding principal
amount of the Loans is paid or due and payable in full. After an Event of
Default, interest shall also be due and payable upon the Lender's demand from
time to time.
The Agent shall inform the Borrower of the amount of interest due and
payable as of each payment date set forth in the preceding paragraph, and the
Borrower shall pay the interest when due or the Agent may, in its discretion,
charge such amount to the Borrower's account under this Agreement.
As additional consideration for the credit facility established in
Section 2.1, the Borrower agrees to pay to the Agent, for the ratable benefit of
the Lenders, a fee, payable on the first day of each month for the preceding
month, equal to the average unused principal portion of the revolving credit
facility (i.e., $25,000,000 minus the average daily principal amount of Loans
outstanding) times 0.125% per annum.
For interest computation purposes, the Borrower's account will be
credited for each remittance received on the day that the underlying funds are
collected; the day of receipt of funds shall be deemed to be the following
Banking Day if the receipt is after the Agent's cutoff time for receipt of funds
or if such day is not a Banking Day.
If the outstanding principal amount of the Loans becomes due and
payable or if any payment of principal or interest is not timely made, or (at
the Agent's option) if any Event of Default exists, interest shall accrue on the
unpaid principal balance of the Loans or on such defaulted principal payment,
from the date that the Loans became so due and payable or that the defaulted
payment was not timely made, at a rate of 4% per annum above the Prime Rate.
Changes in the rate shall be effected monthly to reflect changes in the Prime
Rate as follows: The rate shall be adjusted on the first day of each month based
on the Prime Rate in effect at the close of business on the last Banking Day of
the preceding calendar month. Such interest shall continue to accrue until the
date of payment of all principal and accrued but unpaid interest or such
defaulted payment, as applicable, and shall be due and payable upon demand from
time to time by the Agent.
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2.3 COMPUTATION OF INTEREST AND OTHER CHARGES. Interest on the Loans,
and other periodic charges hereunder, shall be computed on the basis of a
360-day year and actual days lapsed.
2.4 CHARGES. The Borrower, the Agent and the Lenders hereby agree that
the only charges imposed upon the Borrower for the use of money in connection
herewith are and shall be the interest described in Section 2.2. All other
charges imposed upon the Borrower in connection with the Loans, any commitment
fees, collection fees, letter of credit fees, facility fees, origination fees,
prepayment charges or early termination fees, default charges, late charges,
attorneys' fees, and reimbursement for costs and expenses paid by the Agent and
the Lenders to third parties, or for damages incurred by the Agent and the
Lenders, are and shall be deemed to be charges made to compensate the Agent and
the Lenders for underwriting or administrative services and costs and other
services or costs performed and incurred, and to be performed and incurred, by
the Agent and the Lenders in connection with the Loans, and shall under no
circumstances be deemed to be charges for the use of money.
In no event shall the amount of interest due or payable hereunder
exceed the maximum rate of interest allowed by applicable law, and if any such
payment is made by the Borrower or received by the Lenders, then such excess sum
shall be credited as a payment of principal, unless the Borrower notifies the
Agent, in writing, that the Borrower elects to have such excess sum returned to
it forthwith. It is the express intent hereof that the Borrower not pay and the
Lenders not receive, directly or indirectly, in any manner whatsoever, interest
in excess of that which may be lawfully paid by the Borrower under applicable
law.
2.5 PAYMENT. All payments by the Borrower shall be made to the Agent at
its address referred to in Section 12.3 hereof in lawful money of the United
States of America and in immediately available funds. The Borrower shall
establish a special collections account, at a bank satisfactory to the Agent
(which may be an Affiliate of a Lender), to collect payments on SBA Loans and
pay them to the Agent. Payments on the Non-Guaranteed Portion of an SBA Loan
shall be applied to repay the related Stub Loan, then to the other Obligations,
and payments relating to the Guaranteed Portion of an SBA Loan shall be applied
to repay the related Warehouse Loan, then to the other Obligations, effective
when the underlying funds are actually collected. The Borrower shall notify the
Agent promptly of the identity of each amount collected, and of how it should be
allocated based on the preceding sentence.
2.6 PAYMENT ON NON-BANKING DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Banking Day, such
payment shall be made on the following Banking Day, and such extension of time
shall be included in the computation of interest.
2.7 EFFECTIVE DATE AND TERMINATION. This Agreement shall be effective
on the date set forth in the first paragraph of this Agreement, and shall
continue in full force and effect until December 29, 2000, at which time all of
the Borrowers' Obligations hereunder shall be due. If the Borrower terminates
this Agreement other than on December 29, 2000 or any subsequent anniversary
thereof, the Borrower shall pay to the Lenders an early termination fee equal to
$125,000 for any termination before December 29, 1998, $83,000 for any
termination after
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December 29, 1998 and before December 29, 1999, and $41,500 for any termination
thereafter not on a December 29. Upon the occurrence of an Event of Default, the
Agent may, and at the direction of either Lender shall, exercise the right to
terminate this Agreement at any time without notice. Notwithstanding any
termination of this Agreement, the Agent and the Lenders shall retain all of
their rights and remedies hereunder (including their security interest in the
Collateral), and the Borrower shall continue to be bound by all the terms,
conditions, and provisions hereof until all of the Obligations of every nature
have been fully disposed of, concluded, finally paid, satisfied, and liquidated.
2.8 LOAN ACCOUNTS; STATEMENTS OF ACCOUNT; PAYMENTS BY AGENT, LENDERS.
(a) Each Lender shall open and maintain on its books a loan account in
the Borrower's name (each, a "Loan Account" and collectively, the "Loan
Accounts"). Each such Loan Account shall show as debits thereto each Loan made
under this Agreement by such Lender to the Borrower and as credits thereto all
payments received by such Lender and applied to principal of such Loan, so that
the balance of such Loan Account at all times reflects the principal amount due
such Lender from the Borrower.
(b) The Agent shall maintain on its books a control account for the
Borrower in which shall be recorded (i) the amount of each disbursement made
hereunder, (ii) the amount of any principal or interest due or to become due
from the Borrower hereunder, and (iii) the amount of any sum received by the
Agent hereunder from the Borrower and each Lender's ratable share therein.
(c) The entries made in the accounts pursuant to subsections (a) and
(b) shall be prima facie evidence, in the absence of manifest error, of the
existence and amounts of the obligations of the Borrower therein recorded and in
case of discrepancy between such accounts, in the absence of manifest error, the
accounts maintained pursuant to subsection (b) shall be controlling.
(d) The Agent will account separately to the Borrower and each Lender
monthly with a statement of Loans, charges and payments made to and by the
Borrower pursuant to this Agreement, and such accounts rendered by the Agent
shall be deemed final, binding and conclusive, save for manifest error, unless
the Agent is notified by the Borrower or either Lender in writing to the
contrary within 30 days of the date the account is received by the Borrower or
any Lender. Failure of the Agent to render such account shall in no way affect
the rights of the Agent or of the Lenders hereunder.
(e) Payment by any Lender to the Agent shall be made not later than
4:00 p.m. (Atlanta time) on the Banking Day such payment is due, provided that,
if such payment is due on demand by another Lender, such demand is made on the
paying Lender not later than 2:00 p.m. (Atlanta time) on such Banking Day.
Payment by the Agent to any Lender shall be made by wire transfer, promptly
following the Agent's receipt of funds received by the Agent, provided that if
the Agent received such funds at or prior to 1:30 p.m. (Atlanta time), the Agent
shall pay such funds to such Lender by 4:00 p.m. (Atlanta time) on such Banking
Day. If a demand for payment is made after the applicable time set forth above,
the payment due shall be made by 4:00 p.m. (Atlanta time) on the first Banking
Day following the date of such demand. If a Lender shall, at any time, fail to
11
make any payment to the Agent required hereunder, the Agent may, but shall not
be required to, retain payments that would otherwise be made to such Lender
hereunder and apply such payments to such Lender's defaulted obligations
hereunder, at such time, and in such order, as the Agent may elect in its sole
discretion. With respect to the payment of any funds under this subsection,
whether from the Agent to a Lender or from a Lender to the Agent, the party
failing to make full payment when due pursuant to the terms hereof shall, upon
demand by the other party, pay such amount together with interest on such amount
at the Federal Funds Effective Rate. "Federal Funds Effective Rate" means, 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 for such day (or, if such day is not a Banking Day,
for the next preceding Banking Day) by the Federal Reserve Bank of Atlanta, or,
if such rate is not so published for any day which is a Banking Day, the average
of the quotations for such day on such transactions received by the Agent from
three federal funds brokers of recognized standing selected by the Agent.
3. SECURITY INTERESTS
As security for the full payment and performance of the Obligations,
the Borrower hereby grants to the Agent, for the ratable benefit of the Lenders,
a security interest in all of the following property and interests in property
of the Borrower, whether now owned or existing or acquired or arising in the
future or in which the Borrower now has or in the future acquires any rights,
and wherever located:
(a) all SBA Loans and SBA Notes, including the Guaranteed Portion and
Non-Guaranteed Portion of each, and all guarantees, collateral, and other
security therefor,
(b) all of the Borrower's accounts, inventory, general intangibles,
instruments, chattel paper, documents, equipment, and other goods,
(c) all accessions to, substitutions for, and replacements, products,
and proceeds of any of the foregoing, including insurance proceeds and rental
payments, and
(d) all books and records (including customer lists, credit files,
computer programs, print-outs, and other computer materials and records)
pertaining to any of the foregoing.
The Borrower shall execute and deliver all supplemental documentation
that the Agent from time to time requests to perfect or maintain the perfection
of the security interest granted in this Section, and shall pay (or reimburse
the Agent for) the cost of filing or recording any such documentation, on
demand.
4. CONDITIONS PRECEDENT TO ADVANCES
4.1 DOCUMENTS. The determination by the Lenders to make Advances is
subject to the Agent's having received the following, in form and substance
satisfactory to the Agent:
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(a) the Guarantee,
(b) the Subordination Agreement,
(c) the Multi-Party Agreement,
(d) the Borrower's Secretary's Certificate,
(e) the Borrower's CEO's Certificate,
(f) certified copies of all documents evidencing other
necessary corporate action and governmental approvals, if any, with
respect to this Agreement,
(g) the Opinion,
(h) appropriate UCC-1 financing statements, and
(i) such other documentation as the Agent reasonably requests.
4.2 OTHER CONDITIONS PRECEDENT. In addition to the foregoing, any
obligation of the Lenders to make each Advance is subject to the following
conditions precedent: (a) the representations and warranties contained in
Section 6 (except 6.13, 6.17, and 6.19) hereof shall be correct on and as of the
date of the Advances with the same effect as though made on and as of such date,
except to the extent that such representations and warranties relate solely to
an earlier date; (b) since the date of the statements referred to in Section 6.6
hereof, no materially adverse change shall have occurred in the Borrower's
business, prospects, condition, affairs, operations, or assets, nor in its right
or ability to carry on its operations; (c) no Default shall exist or would
result from the Advance; (d) the Agent in its sole discretion determines that
such Advance will be fully secured, as provided for in Section 2.1, and will not
cause the outstanding balance of the Loans to exceed the limits described in
Section 2.1; (e) in the case of the first Advance, the Agent shall have received
from the Borrower a non-refundable $100,000 closing fee (which shall be
distributed as follows: $55,000 to NationsBank and $45,000 to Hibernia); and (f)
in the case of the first Advance, all of the conditions precedent to the closing
of the EFC L&SA shall have been satisfied or waived by the Agent and the Lenders
and to the closing of the ECM L&SA shall have been satisfied or waived by
NationsBank.
5. CLOSING PROCEDURES.
5.1 TRANSFERS OF SBA LOAN DOCUMENTS. Before the Lenders fund an Advance
for a Warehouse Loan for an SBA Loan, EBC shall provide the Agent with a copy of
the related SBA approval and the form of the related SBA Note, a copy of the
related form 1050 settlement sheet in the case of any multiple-disbursement SBA
Loan, and such other documentation as the Agent reasonably requests, by fax or
otherwise. EBC shall deliver the original of each such SBA Note, any written
assignment thereof, and any related Escrow Agreement to the Note Custodian by
the third Banking Day following the closing for the related SBA Loan. In
addition, if
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the Borrower requests a Stub Loan for which the Borrowing Base would be
insufficient without the Note Custodian having a perfected security interest in
the related SBA Note, then if and to the extent that the Agent so requests, EBC
shall execute and deliver to the Note Custodian, or to an Escrow Agent to hold
pursuant to an Escrow Agreement, the SBA Note and all other documents relating
to that SBA Loan, and properly executed assignments of each such document, in
recordable form acceptable to the Agent in its sole discretion.
The originals of all such collateral, loan, and other documents (other
than the originals of the SBA Notes, written assignments thereof and any related
Escrow Agreements, which shall be delivered to the Note Custodian in accordance
with the previous paragraph) shall be held by EBC unless specifically requested
by the Agent. The Note Custodian may hold any such specifically-requested
documents until the Agent releases its security interest in such Collateral
pursuant to Section 5.2 (unless an Event of Default exists, in which case the
Agent shall have its right to pursue the rights and remedies), subject to the
SBA's rights to such documents.
Neither the Agent's nor the Lenders' execution of this Agreement nor
their taking of any action contemplated or permitted hereunder shall constitute
or be deemed to be an assumption of any of EBC's liabilities or obligations, and
neither the Agent nor the Lenders shall thereby be deemed to have consented to
any reporting requirements of, or other regulations by, the SBA, except to the
extent provided in the Multi-Party Agreement.
5.2 RELEASE OF SECURITY INTEREST IN SBA COLLATERAL. Upon receipt of
payment in full of an amount not less than the Guaranteed Portion of each SBA
Loan, the Agent shall release its security interest in the Guaranteed Portion of
such SBA Loan, but the Agent shall not release its security interest in the
Non-Guaranteed Portion of such SBA Loan. Upon due payment of all amounts payable
under an SBA Loan, the Note Custodian shall return any related SBA Note that it
holds.
6. GENERAL REPRESENTATIONS AND WARRANTIES.
In order to induce the Agent and the Lenders to enter into this
Agreement and to make Advances hereunder, the Borrower represents and warrants
the following:
6.1 ORGANIZATION, STANDING, ETC. The Borrower is a corporation duly
organized, validly existing, and in good standing under the laws of South
Carolina, and has all requisite power and authority (corporate and otherwise) to
own and operate its properties and to carry on its business as now conducted and
proposed to be conducted; and the Borrower has all requisite power and authority
(corporate and otherwise) to execute, deliver, and perform its obligations under
this Agreement and all other documents executed in connection therewith.
6.2 ENFORCEABILITY. This Agreement, and all other documents executed in
connection with the Loans, when delivered for value received, shall constitute
valid and binding obligations of the Borrower enforceable in accordance with
their terms.
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6.3 The Borrower is duly qualified, licensed, or domesticated, and in
good standing as a foreign corporation duly authorized to do business, in all
jurisdictions in which the character of its properties owned or the nature of
its activities conducted makes such qualification, licensing, or domestication
necessary, as follows: Arkansas, Colorado, District of Columbia, Florida,
Georgia, Kansas, Louisiana, Maryland, Missouri, North Carolina, Texas, Virginia,
and Wisconsin.
6.4 COMPLIANCE WITH ARTICLES OF INCORPORATION, BY-LAWS, AND OTHER
INSTRUMENTS, ETC. (a) The Borrower is not in violation of any material term of
its articles of incorporation or by-laws, and no event, status, or condition has
occurred or exists which upon notice or lapse of time, or both, would constitute
a violation thereof; (b) to the best of its knowledge, the Borrower is not in
violation of any material term of any mortgage, indenture, or agreement relating
to outstanding borrowings to which it is a party, or of any judgment, decree, or
order to which it is subject, or of any other instrument, lease, contract, or
agreement to which it is a party, or of any statute, or governmental rule or
regulation applicable to it, and no event, status, or condition has occurred or
exists which upon the giving of notice or lapse of time, or both, would
constitute a material violation of any such term; (c) the Borrower's execution,
delivery, and performance of this Agreement and the other instruments and
agreements provided for by this Agreement to which the Borrower is, or is to be,
a party, and the carrying out of the transactions contemplated hereby and
thereby have been duly authorized by all requisite action on the part of the
Borrower (corporate and otherwise) and will not result in any violation of the
articles of incorporation or by-laws of the Borrower, or violate or constitute a
default under any term of anything described in clause (b) above, or result in
the creation of any mortgage, lien, encumbrance or charge upon any of the
properties or assets of the Borrower pursuant to any term of anything described
in clause (b) above; and (d) there is no term of anything described in clause
(b) above which materially adversely affects or in the future may (so far as the
Borrower can now foresee) materially adversely affect the Borrower's business,
prospects, condition, affairs, operations, properties, or assets.
6.5 SUBSIDIARIES. EBC has no Subsidiaries.
6.6 FINANCIAL STATEMENTS. The Borrower has furnished the Lenders with
copies of the fiscal year-end consolidated and consolidating balance sheet of
Emergent Group, Inc. and its consolidated subsidiaries (including the Borrower)
as at December 31, 1996, and the consolidated and consolidating statements of
income and of cash flows of such corporations for such fiscal year, which annual
financial statements have been audited by KPMG Peat Marwick LLP, independent
certified public accountants; and copies of such financial statements for each
month thereafter through _______ ___, 1997, duly certified by the chief
financial officer of Emergent Group, Inc. Such financial statements are complete
and have been prepared in accordance with GAAP applied on a basis consistent
with the accounting principles applied in the preceding fiscal period, and
present fairly the financial condition of the Borrower as at the dates indicated
and the results of the operations of the Borrower for such periods. Such
financial statements show all liabilities (direct, indirect, and contingent,
including guarantee and surety obligations) of the Borrower as of the respective
dates thereof, except those arising in the ordinary course of business since the
date of the last of such financial statements.
15
6.7 CHANGES IN FINANCIAL CONDITION. Since the date of the annual
financial statements referenced in Section 6.6, there has been no change in the
assets, liabilities, or financial condition of the Borrower from that set forth
or reflected in the fiscal year-end balance sheet referred to in Section 6.6,
other than changes in the ordinary course of business, none of which has been,
either in any case or in the aggregate, materially adverse.
6.8 TAX RETURNS AND PAYMENTS. All federal, state, and local tax returns
and reports of the Borrower required to be filed have been filed, and all taxes,
assessments, fees, and other governmental charges upon the Borrower, or upon any
of their properties, assets, incomes, or franchises, which are due and payable
in accordance with such returns and reports, have been paid, other than those
presently (a) payable without penalty or interest, or (b) contested in good
faith and by appropriate and lawful proceedings prosecuted diligently. The
aggregate amount of the taxes, assessments, charges, and levies so contested is
not material to the condition (financial or otherwise) and operations of the
Borrower. The charges, accruals, and reserves on the books of the Borrower in
respect of federal, state, and local taxes for all fiscal periods to date are
adequate, and the Borrower does not know of any unpaid assessment for additional
federal, state, or local taxes for any such fiscal period or of any basis
therefor.
6.9 TITLE TO PROPERTIES AND ASSETS; LIENS; ETC. The Borrower has (a)
good and marketable title to its properties and assets, including the Collateral
and the properties and assets reflected in the fiscal year-end balance sheet
referred to in Section 6.6, except properties and assets disposed of since the
date of such balance sheet in the ordinary course of business, and (b) good and
marketable title to its leasehold estates and such properties, assets, and
leasehold interests are subject to no covenant, restriction, easement, right,
lease, or Lien, other than Permitted Liens.
6.10 PATENTS; TRADEMARKS; FRANCHISES; ETC. The Borrower owns or has the
right to use all of the patents, trademarks, service marks, trade names,
copyrights, franchises, and licenses, and rights with respect thereto, necessary
for the conduct of its business as now conducted, without any known conflict
with the rights of others, and, in each case, subject to no Lien, lease,
license, or option, except as specified on Schedule 2. Each such asset or
agreement is in full force and effect, and the holder thereof has fulfilled and
performed all of its obligations with respect thereto. No event has occurred or
exists which permits, or after notice or lapse of time or both would permit,
revocation or termination, or which materially adversely affects or in the
future may materially adversely affect, the rights of such holder thereof with
respect thereto. No other license or franchise is necessary to the operations of
the business of the Borrower as now conducted or proposed to be conducted. The
Borrower does not do business (and has not done business during the last five
years) under any trade names or tradestyles other than those listed on Schedule
2.
6.11 LITIGATION, ETC. Except as specified on Schedule 3, there are no
actions, proceedings, or investigations, however described or denominated,
pending or (to the knowledge of the Borrower) threatened (or any basis therefor
known to the Borrower) which, either in any case or in the aggregate, might
result in any materially adverse change in the Borrower's business, prospects,
condition, affairs, operations, properties, or assets, or in its right or
ability to carry on its operations as now conducted or proposed to be conducted,
or might result in any material liability on the part of the Borrower, and none
which questions the validity of this Agreement or any of the
16
other instruments or agreements provided for by this Agreement or of any action
taken or to be taken in connection with the transactions contemplated hereby or
thereby.
6.12 ADVERSE DEVELOPMENTS. Since the date of the latest financial
statements referred to in Section 6.6, neither the financial condition, business
operations, affairs, or prospects of the Borrower, nor its properties or assets,
have been materially adversely affected in any way as the result of any
legislative or regulatory change, or any revocation, amendment, or termination,
or any pending or threatened such action, or any franchise or license or right
to do business, or any fire, explosion, flood, drought, windstorm, earthquake,
accident, casualty, labor trouble, riot, condemnation, requisition, embargo or
Act of God or the public enemy or of armed forces, or otherwise, whether or not
insured against.
6.13 DISCLOSURE. To the best of the Borrower's knowledge, neither this
Agreement nor the financial statements referred to in Section 6.6 nor any other
document, certificate or statement furnished to Lender by or on behalf of the
Borrower in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained therein or herein not misleading.
6.14 MARGIN SECURITIES. The Borrower is not engaged principally or as
one of its important activities in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System). No part of the
proceeds of the Loans has been or will be used, directly or indirectly, to
purchase or carry any margin securities within the meaning of Regulation U.
6.15 INVESTMENT COMPANY. The Borrower is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
6.16 ERISA. The Borrower and each Plan is in compliance with those
portions of ERISA and the Code pertaining to each Plan. No Plan that is subject
to the minimum funding standards of ERISA or the Code has incurred any
accumulated funding deficiency within the meaning of ERISA or the Code. The
Borrower has incurred, and no facts lead the Borrower to believe it will incur,
any liability to the Pension Benefit Guaranty Corporation in connection with any
Plan. The assets of each Plan that is subject to Title IV of ERISA are
sufficient to provide the benefits under such Plan which the Pension Benefit
Guaranty Corporation would guarantee the payment thereof if such Plan
terminated, and are also sufficient to provide all other benefits due under the
Plan. No Reportable Event has occurred and is continuing with respect to any
Plan. No Plan nor any trust created under a Plan, nor any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) which would subject any Plan,
any trust created thereunder, or any trustee or administrator thereof, or any
party dealing with any Plan or any such trust, to the tax or penalty on
"prohibited transactions" imposed by Section 502 of ERISA or Section 4975 of the
Code.
The Borrower is not required to contribute to (and the Borrower is not
contributing to) a "multiemployer pension plan" (as defined in the Multiemployer
Pension Plan Amendments Act of 1980), and the Borrower does not have any
"withdrawal liability" (as defined in such Act) to any multiemployer pension
plan.
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6.17 LOCATIONS. The Borrower's principal place of business and chief
executive office is located at its address specified in Section 12.3.
6.18 SOLVENCY. The Borrower is Solvent.
6.19 NAME CHANGE; MERGER. During the past five years, the Borrower has
not changed its corporate name or been party to a merger or consolidation,
except as specified in Schedule 2.
7. AFFIRMATIVE COVENANTS.
The Borrower covenants, for so long as any Loan is outstanding or any
of the other Obligations remains unpaid or unperformed, as follows:
7.1 INSURANCE. The Borrower shall insure its property against all risks
to which it is exposed, including loss, damage, fire, theft, and all other such
risks, and in such amounts, as would be prudent for similar businesses similarly
situated, including loss, damage, fire, theft, and all other such risks, and in
such amounts, with such companies, under such policies, and in such form as
shall be satisfactory to the Agent. In addition, the Borrower will maintain
comprehensive public liability and worker's compensation insurance and such
other insurance against loss or damage as are customarily carried by
corporations similarly situated, with reputable insurers, in such amounts, with
such deductibles, and by such methods as shall be adequate and in any event in
amounts of not less than the amounts generally maintained by other companies
engaged in similar businesses.
7.2 TAXES AND LIABILITIES. The Borrower shall pay and discharge, when
due, all taxes, assessments, and governmental charges or levies imposed upon it
or its income or profits, or against its properties, and all lawful claims
which, if unpaid, might become a lien or charge upon any of its properties;
provided, that the Borrower shall not be required to pay any such tax,
assessment, charge, levy, or claim so long as it is being contested in good
faith and by appropriate and lawful proceedings diligently pursued and with
respect to which adequate reserves have been set aside on its books.
7.3 ACCOUNTING; FINANCIAL STATEMENTS; ETC. The Borrower will deliver to
each Lender:
(a) within 30 days after the end of each of the first three
fiscal quarters in each fiscal year of the Borrower a consolidating balance
sheet of the Borrowing Group and their consolidated subsidiaries (including the
Borrower), as at the end of such period and statements of income and of cash
flows of such corporations for such period and for the year-to-date period then
ended, setting forth in each case in comparative form the figures for the
corresponding period of the previous fiscal year, in form and detail as
reasonably required by the Agent, and certified as complete and correct by the
chief financial officers of the Borrowing Group, together with a certificate by
such officers stating that, as of the date of such certification, no Default
exists (or, if
18
any Default exists, specifying the nature thereof and what action the Borrower
has taken, are taking or propose to take with respect thereto);
(b) within 90 days after the end of each fiscal year, a
consolidated balance sheet of EGI and a consolidating balance sheet of EGI and
its consolidated subsidiaries (including the Borrower) as at the end of such
fiscal year, and statements of profit and loss, shareholders' equity, and
changes in cash flows of such corporations for such year, setting forth in each
case in comparative form the figures for the previous fiscal year in form and
detail as reasonably required by the Agent, and accompanied by an unqualified
report and opinion on such financial statements (including on the supplemental
schedules) from KPMG Peat Marwick LLP(or other certified public accountants
satisfactory to the Agent), which report and opinion shall be prepared in
accordance with GAAP, together with a certificate by the chief financial officer
of EGI of the character specified in Section 7.3(a), and a certificate by such
accountants stating whether or not their examination has disclosed the
occurrence or existence of any Default, and, if their examination has disclosed
a Default, specifying the nature and period of existence thereof, and
demonstrating as at the end of such accounting period in reasonable detail
compliance during such accounting period with Sections 6.18, 7.6, 7.13, 7.14,
7.15, 7.16, 8.10, 8.11, 8.13, and 8.14;
(c) copies of all other statements or reports prepared by or
supplied to the Borrower by its accountants or auditors reflecting the financial
position of the Borrower;
(d) within 30 days after the end of each fiscal year,
Projections for the next three years, year-by-year;
(e) within 90 days after the end of each fiscal year,
financial statements, of the type described in Section 7.3(b), for each
Guarantor; and
(f) with reasonable promptness, such other data and
information as either Lender from time to time reasonably requests.
7.4 INSPECTION. The Borrower will permit authorized representatives
designated by any Lender to visit and inspect any of the properties of the
Borrower, including its books and records (and to make extracts therefrom), and
to discuss its affairs, finances, and accounts with its officers, directors,
employees, and accountants, all at such reasonable times and as often as such
Lender reasonably requests. The Borrower will at all times keep accurate and
complete records with respect to the Collateral. The Borrower will pay $2,500 to
the Agent (for its own benefit) as compensation for each field examination
performed (currently anticipated to total four per year absent a Default).
7.5 MAINTENANCE OF CORPORATE EXISTENCE; COMPLIANCE WITH LAWS. The
Borrower shall at all times preserve and maintain in full force and effect its
corporate existence, powers, rights, licenses, permits, and franchises in the
jurisdiction of its incorporation, and shall operate in full compliance with all
applicable laws, statutes, regulations, certificates of authority, and orders in
respect of the conduct of its business, and shall qualify and remain qualified
as a foreign corporation in each jurisdiction in which such qualification is
necessary or appropriate in view of its business and operations.
19
7.6 USE OF PROCEEDS. The proceeds of the Loans will be used solely for
repaying existing debt, and for general corporate purposes. No part of the
proceeds will be used to cause a violation of Section 6.14.
7.7 NOTICE OF DEFAULT. The Borrowers shall promptly notify the Agent,
each Lender and the SBA in writing upon the occurrence or existence of any known
Default, and shall provide to the Agent, each Lender and the SBA with such
written notice a detailed statement by a responsible officer of the Borrower of
all relevant facts and the action being taken or proposed to be taken by the
Borrower with respect thereto.
7.8 MAINTENANCE OF PROPERTIES. The Borrower shall maintain or cause to
be maintained in good repair, working order, and condition all properties used
or useful in its business, and from time to time will make or cause to be made
all appropriate repairs, renewals, and replacement thereof. The Borrower will
not do or permit any act or thing which might impair the value or commit or
permit any waste of its properties or any part thereof or permit any unlawful
occupation, business, or trade to be conducted on or from any of its properties.
7.9 NOTICE OF ERISA DEVELOPMENTS. As soon as possible and in any event
within 30 days after the Borrower knows or has reason to know of any Reportable
Event or "prohibited transaction" (as defined in Section 6.16) with respect to
any Plan or that the Pension Benefit Guaranty Corporation or the Borrower has
instituted or will institute proceedings under ERISA to terminate a Plan subject
to Title IV of ERISA, or a partial termination of a Plan has or is alleged to
have occurred, or any litigation regarding a Plan or naming the trustee of a
Plan or the Borrower with respect to a Plan is threatened or instituted, the
applicable Borrower shall provide to the Agent and the Lenders the written
statement of the chief financial officer of such Borrower setting forth details
of such Reportable Event, prohibited transaction, termination proceeding,
partial termination, or litigation and the action being or proposed to be taken
with respect thereto, together with copies of the notice of such Reportable
Event or any other notices, applications, or forms submitted to the Pension
Benefit Guaranty Corporation, Internal Revenue Service, or United States
Department of Labor, and copies of any notices or correspondence received from
the Pension Benefit Guaranty Corporation, Internal Revenue Service, or United
States Department of Labor, and copies of any pleadings, notices, or other
documents relating to such litigation.
7.10 NOTICE OF LITIGATION OR ADVERSE CHANGE. The Borrower shall
promptly give to the Agent and the Lenders written notice (a) of all threatened
or actual actions, suits, investigations, or proceedings by or before any court,
arbitrator, or governmental department, commission, board, bureau, agency or
other instrumentality (state, federal, or foreign), affecting the Borrower or
the rights or other properties of the Borrower, except any litigation or
proceedings which is not likely to affect the financial condition of the
Borrower or to impair the right or ability of the Borrower to discharge the
Obligations; (b) of any materially adverse change in the condition (financial or
otherwise) of a Borrower; and (c) of any seizure or levy upon any part of any of
the Borrower's properties under any process or by a receiver.
20
7.11 PAYMENT OF LOANS. The Borrower shall punctually pay the principal
and interest on the Loans, and all other sums falling due hereunder or under any
other documents executed in connection with the Loans, in accordance with the
terms hereof and thereof.
7.12 NOTIFICATION OF CHANGE OF NAME OR BUSINESS LOCATION. The Borrower
shall notify the Agent and the Lenders immediately of each change in either
Borrower's corporate name and trade names, in the location of the Borrower's
principal place of business, in each location where any of the Collateral is
kept, and the office where the Borrower's books and records are kept.
7.13 TANGIBLE NET WORTH. The Borrowing Group shall maintain at all
times a Tangible Net Worth of not less than $8,000,000 during 1997, and
continuing to increase by $1,000,000 each fiscal year thereafter.
7.14 RATIO OF TOTAL LIABILITIES TO TANGIBLE NET WORTH. The Borrowing
Group shall maintain at all times a ratio of Total Liabilities to Tangible Net
Worth of not more than 6 to 1.
7.15 INTEREST COVERAGE RATIO. The Borrowing Group shall maintain (x)
for the four-quarter period concluding at the end of each of the first three
fiscal quarters in each fiscal year of the Borrowing Group, a ratio of EBIT to
Interest on Senior Funded Debt of at least 1.15 to 1, and (y) for the
four-quarter period concluding at the end of each fiscal year of the Borrowing
Group, a ratio of EBIT to Interest on Senior Funded Debt of at least 1.5 to 1.
7.16 EGI SUBSIDIARY. The Borrower shall at all times be a wholly-owned
Subsidiary of EGI.
7.17 COLLATERAL REPORTING. The Borrower shall provide to the Agent, on
a weekly basis, a borrowing base certificate in form acceptable to the Agent.
The Borrower shall provide to the Agent such other collateral reports as the
Agent may request from time to time.
NEGATIVE COVENANTS.
The Borrower covenants, for so long as any of the Loans are outstanding
or any of the other Obligations remain unpaid or unperformed, as follows:
8.1 The Borrower will not obtain or attempt to obtain from any party (other than
for the purpose of repaying the Obligations in full) any loans, advances, or
other financial accommodations or arrangements other than (a) the Obligations,
(b) the Subordinated Debt, (c) debt underlying any purchase money security
interest permitted by Section 8.2 not to exceed, in aggregated principal amount,
$100,000 minus any such debt owed ECM or EFC at any one time outstanding, (d)
unsecured borrowings not to exceed in the aggregate $500,000 minus any such debt
owed by ECM or EFC at any one time outstanding, (e) unsecured trade credit,
incurred in the ordinary course of business, having commercially customary
terms, and (f) borrowings of ECM from EBC or Carolina Investors, Inc.
that are fully subordinated to the Obligations.
21
8.2 LIENS. The Borrower shall not create, incur, assume, or suffer to
exist any Lien of any kind upon any of its property or assets (including the
Collateral), whether now owned or hereafter acquired, except (a) Liens in favor
of the Agent, for the benefit of the Lenders; (b) Liens existing on the date
hereof and specified on Schedule 1; (c) Liens on property securing all or part
of the purchase price of such property if (1) such Lien is created
contemporaneously with the acquisition of such property, (2) such Lien attaches
only to the specific item(s) of property so acquired, (3) such Lien secures only
the debt incurred to acquire such property, and (4) the debt secured by such
Lien is permitted by Section 8.1; and (d) Liens for taxes, or for other claims,
that are not then due.
8.3 GUARANTEES. The Borrower shall not guarantee, endorse, become
surety with respect to, or otherwise become directly or contingently liable for
or in connection with the obligations of any other Person, except by endorsement
of negotiable instruments for deposit or collection and similar transactions in
the ordinary course of business.
8.4 PLAN LIABILITIES. The Borrower shall not permit the aggregate
present value of accrued benefits of any Plan subject to Title IV of ERISA,
computed in accordance with actuarial principles and assumptions applied on a
uniform and consistent basis by an enrolled actuary of recognized standing
acceptable to the Agent, to exceed the aggregate value of assets of the Plan,
computed on a fair market value basis, or permit the aggregate present value of
vested benefits of any Plan subject to Title IV of ERISA, computed in accordance
with actuarial principles and assumptions applied on a uniform and consistent
basis by an enrolled actuary of recognized standing acceptable to the Agent, to
exceed the aggregate value of assets of the Plan, computed on a fair market
value basis.
8.5 FISCAL YEAR. The Borrower will not change its fiscal year from a
year ending on December 31 without prior written notice to the Agent.
8.6 OTHER TRANSACTIONS. The Borrower will not engage in any transaction
with any of its officers, directors, employees, or Affiliates, except for an
"arms-length" transaction on terms no more favorable to the other party than
would be granted to an unaffiliated Person, which transaction shall be approved
by its disinterested directors and shall be disclosed in a timely manner to the
Agent before being consummated.
8.7 MERGER; SUBSIDIARY; ETC. The Borrower will not merge or consolidate
with any other corporation, form or acquire any Subsidiary, or issue any share
of capital stock.
8.8 SALE OF ASSETS. The Borrower will not sell, lease or otherwise
transfer all or any substantial part of its assets material to its operations,
except in the ordinary course of its business; provided, that the Borrower may
in any calendar year dispose of items of equipment having an aggregate market
value of not more than $50,000, minus such equipment disposed of by ECM or EFC,
if the Borrower uses the proceeds of such disposition to acquire property of a
similar nature; provided however that EBC may sell, lease or otherwise transfer
all or any substantial part of its assets material to its operations if such
sale or transfer is being pursued in connection with the securitization of such
assets.
22
8.9 CHANGES IN BUSINESS. The Borrower will not engage in any business
other than the business presently conducted by it on the date of this Agreement
and business of substantially the same type or directly related thereto.
8.10 DIVIDENDS AND REDEMPTIONS. The Borrower will not declare or pay
any dividend (other than a dividend payable solely in common stock of the
Borrower) on any share of any class of its capital stock, or apply any of its
property or assets to the purchase, redemption, or other retirement of, or set
apart any sum for the payment of any dividends on, or for the purchase,
redemption, or other retirement of, or make any other distribution by reduction
of capital or otherwise in respect of, any shares of any class of capital stock
of the Borrower.
8.11 LOANS. The Borrower will not make any loans or advances to or
extend any credit to any Person except (a) the extension of trade credit in the
ordinary course of business, (b) advances to employees not to exceed to any one
employee a total of $5,000 minus any advances to such employee by ECM or EFC,
and (c) loans to a Guarantor.
8.12 PLEDGE OF CREDIT. The Borrower will not pledge the Lenders' credit
for any purpose whatsoever.
8.13 INVESTMENTS. The Borrower shall not purchase, acquire, or
otherwise invest in any Person except: (a) Eligible SBA Loans, (b) direct
obligations of the United States of America maturing within one year from the
acquisition thereof, (c) certificates of deposit issued by, or investment
accounts in, banks or financial institutions having a net worth of not less than
$50,000,000, (d) commercial paper rated A-1 by Standard & Poor's Corporation or
P-1 by ▇▇▇▇▇'▇ Investors Service, Inc., (e) overnight repurchase agreements
issued by a Lender or any corporate Affiliate of a Lender, or (f) assets
received from foreclosing on an SBA Loan.
8.14 CAPITAL EXPENDITURES. The Borrowing Group shall not make or incur
Capital Expenditures in excess of $500,000 during any fiscal year of the
Borrower, unless the Lenders gives their prior written consent (which shall not
be unreasonably withheld).
9. POWER OF ATTORNEY.
Subject to the terms of the Multi-Party Agreement, the Borrower hereby
appoints and constitutes the Agent as its attorney-in-fact to do any of the
following if an Event of Default exists: to receive, open, and dispose of all
mail addressed to the Borrower pertaining to Collateral (or appearing to the
Agent possibly to pertain to Collateral); to notify the postal authorities to
change the address and delivery of mail addressed to the Borrower to such
address as the Agent shall designate; to endorse the Borrower's name upon any
notes, acceptances, checks, drafts, money orders, and other forms of payment
that come into the Agent's or a Lender's possession, and to deposit or otherwise
collect the same; to sign the Borrower's name on any document relating to any
Collateral; to execute in the name of the Borrower any affidavits and notices
with regard to any and all lien rights; and to do all other acts and things
necessary to carry out this Agreement. The Borrower hereby waives notice of
presentment, protest, and dishonor of any instrument so endorsed by the Agent.
23
All the Agent's acts as attorney-in-fact are hereby authorized,
ratified, and approved by the Borrower, and the Borrower agrees that, as
attorney-in-fact, the Agent shall not be liable for any acts of omission or
commission, nor for any error of judgment or mistake of fact or law, except to
the extent of loss or damage caused directly and primarily by the Agent's gross
negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable so long as this Agreement remains in effect or any of the
Obligations remains outstanding.
10. REMEDIES.
Upon the occurrence of any Event of Default, and at any time
thereafter, the entire outstanding principal amount of the Loans, together with
all accrued but unpaid interest thereon, and all other of the Obligations shall,
at the option of the Agent or any Lender, immediately become absolute and due
and payable, without presentation, demand of payment, protest, notice for demand
of payment, protest and notice of nonpayment, or any other notice of any kind
with respect thereto, all of which are hereby expressly waived by the Borrower
to the full extent permitted by law. Subject to the terms of the Multi-Party
Agreement, the Agent may exercise from time to time any rights and remedies
available to it under the Uniform Commercial Code and other applicable law in
Georgia or any other applicable jurisdiction. The Borrower agrees, after the
occurrence of any Event of Default, immediately to assemble at the Borrower's
expense all the Collateral at a convenient place acceptable to the Agent, and to
surrender such property to the Agent. The Borrower agrees to pay all costs that
the Agent and the Lenders pay or incur to collect the Obligations or enforce its
and the Lenders' rights hereunder. The Borrower agrees that the Agent may charge
the Borrower's account for, and that the Borrower will pay on demand, all costs
and expenses, including 15% of the total amount involved as attorneys' fees (not
to exceed the amount of attorneys' fees actually incurred), incurred: (i) to
liquidate any Collateral, (ii) to obtain or enforce payment of any Obligations,
or (iii) to prosecute or defend any action or proceeding either against the
Agent, the Lenders or against the Borrower concerning any matter growing out of
or connected with this Agreement or any Receivable or any Obligation. The
Borrower agrees that the Agent may apply any proceeds from disposing of the
Collateral first to any security interest(s), lien(s), or encumbrance(s) prior
to the Agent's security interest.
Any Lender shall be entitled to hold or set off any sums and all other
property of the Borrower, at any time to the credit of the Borrower or in the
possession of such Lender, whether by pledge or otherwise, or upon or in which
such Lender may have a lien or security interest.
Recourse to security shall not at any time be required, and the
Borrower shall at all times remain liable for the repayment to the Agent and the
Lenders of all Obligations in accordance with their terms, regardless of the
existence or non-existence of any Event of Default.
Notwithstanding the foregoing, the Agent and the Lenders shall refrain
from any action with respect to the Collateral of EBC under this Section 10
until it has given the SBA written notice of the occurrence of an Event of
Default, and the Agent and the Lenders agree that their right to take action
with respect to the Collateral of EBC shall in all events be subject to the
SBA's rights under the Multi-Party Agreement, particularly Section 6 thereof.
24
11. AGENT.
11.1 APPOINTMENT OF AGENT. Each of the Lenders hereby irrevocably
designates and appoints NationsBank, N.A. as the Agent of such Lender under this
Agreement and the other loan documents executed in connection herewith (the
"Loan Documents"), and each such Lender irrevocably authorizes the Agent, as the
Agent for such Lender, to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of this
Agreement and such other Loan Documents, including, without limitation, to make
determinations as to the eligibility of SBA Loans, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement or such other Loan Documents, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein and therein, or any fiduciary relationship with any Lender and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Loan Documents or otherwise exist
against the Agent.
11.2 DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
11.3 EXCULPATORY PROVISIONS. Neither the Agent, nor any of its
trustees, officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable to any Lender (or any Lender's participants) for
any action lawfully taken or omitted to be taken by it or such Person under or
in connection with this Agreement or the other Loan Documents (except for its or
such Person's own gross negligence or willful misconduct), or (ii) responsible
in any manner to any Lender (or Lender's participants) for any recitals,
statements, representations or warranties made by the Borrower or any officer or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Agent under or in connection with, this Agreement or
the other Loan Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or the other Loan Documents or
for any failure of the Borrower to perform their obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrower.
11.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or refusing
to take any action under this Agreement and the other Loan Documents unless it
shall first receive such advice or shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take such action. The
Agent shall in all cases be fully protected in
25
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of either Lender, and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
the Lenders.
11.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default hereunder unless
the Agent has received notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall promptly give notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by either Lender; provided that prior to the receipt of
such direction, the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
11.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to enter into this Agreement. Each Lender
also represents that it will, independently and without reliance upon the Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the Agent
hereunder or by the other Loan Documents, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Borrower which may come into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
11.7 INDEMNIFICATION. The Lenders agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective Commitment Percentages, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, limitation, at any time following the payment of the Loans) be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of this Agreement or the other Loan Documents, or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
26
disbursements resulting solely from the Agent's gross negligence or willful
misconduct or resulting solely from transactions or occurrences that occur at a
time after such Lender has assigned all of its interests, rights and obligations
under this Agreement. The agreements in the subsection shall survive the payment
of the Loans, the Obligations and all other amounts payable hereunder and the
termination of this Agreement.
11.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates
may, in their individual capacity, make loans to, accept deposits from and
generally engage in any kind of business with the Borrower as if the Agent were
not the Agent hereunder; provided, however, neither the Agent nor any Lender
shall make any loans or other extensions of credit to the Borrower secured by
the Collateral without the prior written consent of each of the Lenders. With
respect to its Commitment and the Loans made or renewed by it, the Agent, in its
individual capacity as a Lender, shall have and may exercise the same rights and
powers under this Agreement and the other Loan Documents and is subject to the
same obligations and liabilities as and to the extent set forth herein and in
the other Loan Documents for any other Lender. The terms "Lenders" or any other
term shall, unless the context clearly otherwise indicates, include the Agent in
its individual capacity as a Lender.
11.9 RESIGNATION AND REMOVAL OF AGENT. The Agent may resign as Agent
upon ten days' notice to the Lenders for any reason, and the Agent may be
removed at the unanimous election of all of the Lenders (other than the Lender
that is also the Agent) in the event of the Agent's gross negligence or willful
misconduct in the performance of its duties hereunder and under the other Loan
Documents. If the Agent shall resign or be removed as Agent under this
Agreement, then the Lenders shall appoint from among the Lenders (other than the
Lender who shall have resigned or shall have been removed) a successor agent for
the Lenders, which successor agent shall be approved by the Borrower (which
approval shall not be unreasonably withheld), whereupon such successor agent
shall succeed to the rights, powers and duties of the Agent, and the term
"Agent" shall mean such successor agent effective upon its appointment, and the
former Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of such former Agent or any of the
parties to this Agreement. After the retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Section 11 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement.
11.10 NOTICES FROM AGENT TO LENDERS. The Agent shall promptly, upon
receipt thereof, forward to each Lender copies of any written notices, reports
or other information (including the borrowing base certificate and other
collateral reports described in Section 7.17) supplied to it by the Borrower
(but which the Borrower is not required to supply directly to the Lenders).
12. MISCELLANEOUS.
12.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of
the Agent or the Lenders in exercising any right, power, or remedy hereunder, or
under any other document or agreement given by the Borrower or received by the
Agent or the Lenders in connection herewith, shall operate as a waiver thereof,
and no waiver shall be valid unless in
27
writing signed by the Agent and the Lenders (and then only to the extent therein
stated); nor shall any single or partial exercise of any such right, power, or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power, or remedy hereunder or thereunder. The remedies herein and
therein provided are cumulative and not exclusive of any remedies provided by
law or in equity.
12.2 AMENDMENTS, ETC. No amendment, modification, termination, or
waiver of any provision of this Agreement or of any other document or agreement
given by the Agent or the Lenders or received by the Borrower in connection
herewith, nor consent to any departure by the Borrower therefrom, shall in any
event be effective unless it is in writing and signed by the Agent and the
Lenders (and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given). No notice to or demand
on the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances.
12.3 ADDRESSES FOR NOTICES, ETC. All notices, requests, demands, and
other communications provided for hereunder, other than routine communications
in the ordinary course of business, shall be in writing (including telecopies)
and mailed, telecopied, or delivered as follows:
if to the Borrower:
Emergent Business Capital, Inc.
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Wyche, Burgess, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Lenders:
NationsBank, N.A.
Business Credit Division
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
28
Hibernia National Bank
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Agent
NationsBank, N.A.
Business Credit Division
P. O. Box 3406
Atlanta, Georgia 30302-3406
Attention: ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the SBA:
U.S. Small Business Administration
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: Office of Financial Institutions
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or, as to each party, at such other address as it designates in a written notice
to the other party complying as to the delivery with the terms of this Section.
Except as otherwise expressly provided in this Agreement, all such notices,
requests, demands, and other communications shall, when mailed or telecopied, be
effective two Banking Days after being deposited in the mails (postage paid) or
when sent over a telecopier owned or operated by a party hereto with an
answerback response set forth on the sender's copy of the document, addressed as
aforesaid, and otherwise shall be effective upon receipt.
12.4 COSTS, EXPENSES, AND TAXES. The Borrower shall pay to the Agent
and the Lenders, on demand, all costs and expenses paid or incurred by the Agent
and the Lenders in connection with the preparation, reproduction, execution,
delivery, administration, or enforcement of this Agreement and other instruments
and documents from time to time delivered in connection with this Agreement,
including the fees and expenses of counsel for the Agent and the Lenders, and in
connection with the Lenders' initial evaluation of the line of credit
contemplated by this Agreement (including travel and field exam expenses). In
addition, the Borrower shall pay any and all stamp and other taxes and recording
and filing fees payable or determined to be payable in connection with the
execution and delivery of this Agreement and all other instruments and documents
from time to time delivered in connection with this Agreement, and shall save
and hold harmless the Agent and the Lenders from and against any and all
liabilities with respect to or resulting from any delay in paying or failure to
pay such taxes or fees.
29
12.5 COMMERCIAL TRANSACTION. THE BORROWER HEREBY ACKNOWLEDGES THAT THE
OBLIGATIONS AROSE OUT OF A "COMMERCIAL TRANSACTION" (AS DEFINED IN O.C.G.A. ss.
44-14-260(1), CONCERNING FORECLOSURE OF INTERESTS IN PERSONAL PROPERTY), AND
AGREES THAT AFTER ANY EVENT OF DEFAULT (AS "Event of Default" IS DEFINED IN
SECTION 1.1), THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO AN IMMEDIATE
WRIT OF POSSESSION WITHOUT NOTICE OR HEARING. THE BORROWER KNOWINGLY AND
INTELLIGENTLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO ANY NOTICE OR POSTING OF
A BOND BY THE AGENT OR ANY LENDER PRIOR TO SEIZURE BY THE AGENT OR ANY LENDER
(OR THE AGENT OR ANY LENDER'S TRANSFEREES, ASSIGNS, OR SUCCESSORS IN INTEREST)
OF THE COLLATERAL OR ANY PORTION THEREOF. THIS IS INTENDED BY THE BORROWER AS A
"WAIVER" AS DEFINED IN O.C.G.A. ss. 44-14-260(3) (RELATING TO FORECLOSURE OF
INTERESTS IN PERSONAL PROPERTY).
12.6 SUCCESSORS AND ASSIGNS. All of the terms of this Agreement, and
each of the documents and agreements executed and delivered pursuant to this
Agreement, shall bind, benefit, and be enforceable by the successors and
assignees of the parties hereto, whether so expressed or not. The Borrower shall
not assign or transfer this Agreement, or any of its rights hereunder, without
the prior written consent of the Agent and the Lenders. Neither Lender shall
assign or transfer this Agreement, or any of its rights hereunder, without the
prior written consent of the other Lender, such consent not to be unreasonably
withheld.
12.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, covenants, and agreements contained herein or made in writing by the
Borrower in connection herewith shall survive the execution and delivery of this
Agreement and any and all other documents and instruments relating to or arising
out of any of the foregoing.
12.8 TIME IS OF THE ESSENCE. Time is of the essence of this Agreement.
12.9 HEADINGS. The headings in this Agreement are for convenience of
reference only, and are not a substantive part of the agreement.
12.10 ENTIRE AGREEMENT. This Agreement and the Multi-Party Agreement
embody the entire agreement and understanding between the parties hereto and
supersede all prior agreements and understandings relating to the subject matter
hereof and thereof.
12.11 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. In case any one or more of the provisions in this Agreement
shall for any reason be held to be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
30
12.12 PRO RATA PARTICIPATION.
(a) Each Lender agrees that:
(i) if it shall exercise any right of counterclaim, set-off,
banker's lien or similar right, or if under any applicable bankruptcy,
insolvency or other similar law it receives a secured claim the
security for which is a debt owed by it to the Borrower, it shall
apportion the amount thereof, on a pro rata basis, between (A) amounts
at the time owed to it by the Borrower under this Agreement, and (b)
amounts otherwise owed to it by the Borrower, and
(ii) if, as a result of the exercise of a right or the receipt
of a secured claim and the apportionment thereof described in clause
(i) of this Section 12.12(a) or otherwise, it shall receive payment of
a proportion of the aggregate amount of principal and interest due with
respect to the Obligations owed to it greater than the proportion of
such amounts then received by any other Lender, such Lender shall
purchase a participation (which it shall be deemed to have purchased
simultaneously upon the receipt of such payment) in the Obligations
then held by the other Lenders so that all such recoveries of principal
and interest with respect to all Obligations owed to each Lender shall
be pro rata on the basis of the respective amount of the Obligations
owed to all Lenders, provided that if all or part of such
proportionately greater payment received by such purchasing Lender is
thereafter recovered by or on behalf of the Borrower from such Lender,
such purchase price paid for such participation shall be returned to
such Lender to the extent of such recovery, but without interest.
(b) Each Lender which receives such a secured claim shall exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Lenders entitled under this Section 12.12 to share in the benefits of any
recovery on such secured claim.
(c) The Borrower expressly consents to the foregoing arrangements and
agrees that any holder of a participation in any Obligation so purchased or
otherwise acquired of which the Borrower has received notice may exercise any
and all rights of banker's lien, set-off or counterclaim with respect to any and
all monies owing by the Borrower to such holder as fully as if such holder were
a holder of such Obligation in the amount of the participation held by such
holder.
12.13 COUNTERPARTS. This Agreement may be executed in separate
counterparts.
12.14 GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT AND THE
OTHER DOCUMENTS AND AGREEMENTS EXECUTED IN CONNECTION HEREWITH (UNLESS
SPECIFICALLY STIPULATED TO THE CONTRARY IN SUCH DOCUMENT OR AGREEMENT), AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER, SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
GEORGIA (DISREGARDING ANY CONFLICTS-OF-LAWS RULE THAT WOULD APPLY THE LAW OF ANY
OTHER JURISDICTION). THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT SITTING IN ATLANTA,
GEORGIA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER DOCUMENTS OR AGREEMENTS DESCRIBED OR CONTEMPLATED
HEREIN, AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH UNITED STATES
FEDERAL OR STATE COURT. SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY
OTHER PROCESS WHICH MAY BE SERVED ON THE BORROWER IN ANY SUCH ACTION OR
PROCEEDING MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE
BORROWER IN ACCORDANCE WITH SECTION 12.3 HEREOF.
12.15 WAIVER OF TRIAL BY JURY. THE BORROWER, THE AGENT AND EACH LENDER
EACH WAIVE ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO
TRANSACTIONS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER
DOCUMENTS DESCRIBED OR CONTEMPLATED HEREIN.
31
IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders have
executed this Loan and Security Agreement.
Borrowers:
EMERGENT BUSINESS CAPITAL, INC.
[Seal]
By:
---------------------------------------
Title:------------------------------------
Attest:
By:--------------------------
Secretary
Lenders:
Commitment: $15,000,000 NATIONSBANK, N.A.
By:--------------------------------------
Title:-----------------------------------
Commitment: $10,000,000 HIBERNIA NATIONAL BANK
By:---------------------------------------
Title:-----------------------------------
Agent:
NATIONSBANK, N.A.
By:--------------------------------------
Title:-----------------------------------
EXHIBIT A
Secretary's Certificate
I, ▇▇▇▇▇ ▇▇▇▇, Secretary of Emergent Business Capital, Inc (the
"Borrower"), a South Carolina corporation, hereby certify that:
1. Attached hereto as Exhibit 1 is a certified copy of the articles of
incorporation of the Borrower as originally filed, together with all amendments
thereto.
2. Attached hereto as Exhibit 2 is a true and correct copy of the
by-laws of the Borrower. Those by-laws have not been amended, modified, or
revoked, and are in full force and effect as of the date hereof.
3. Attached hereto as Exhibit 3 is a good standing certificate for the
Borrower issued by the South Carolina Secretary of State on _______________,
1997.
4. The Borrower has since the date of the certificate referred to in P.
3 above through the date hereof remained in good standing under the laws of the
state of South Carolina.
5. No suit or proceeding for the dissolution or liquidation of the
Borrower has been instituted or is now threatened.
6. Attached hereto as Exhibit 4 is a true and complete copy of
resolutions of the Board of Directors of the Borrower, adopted at a meeting duly
called and held on ________________, 1997, at which meeting a quorum for the
transaction of business was present and acting throughout. The corporate action
in adopting those resolutions was duly taken at that meeting in accordance with
the provisions of law and of the Borrower's articles of incorporation and
by-laws, and those resolutions are now in full force and effect and have not
been modified in any respect.
7. The resolutions referred to in P. 6 authorized the Borrower and its
officers referred to therein to execute and deliver, and to do all things
necessary or appropriate for the payment and performance of all the Borrower's
obligations under, the Amended and Restated Loan and Security Agreement (the
"Agreement") dated as of _________________, 1997, between NationsBank, N.A. and
Hibernia National Bank (the "Lenders"), NationsBank, N.A., as Agent for the
Lenders, and the Borrower, and all certificates, agreements and other documents
to be executed and delivered to the Agent and Lenders by the Borrower pursuant
to the Agreement, and pursuant to the specific resolutions referred to in P. 6.
8. The following persons have been duly elected, have duly qualified,
as of the date of the execution of the Agreement were, and on the date hereof
are, officers of the Borrower, holding
the offices set opposite their names below, and the signatures set opposite
their names below are their genuine signatures:
Name Title Signature
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Chief Executive ---------------------
Officer
▇▇▇▇▇ ▇▇▇▇ Executive Vice --------------------
Pres., Chief Financial
Officer, Secretary and
Treasurer
▇. ▇▇▇▇▇ Lining Senior Vice President ----------------------
and Controller
9. Attached hereto as Exhibit 5 is a true and complete copy of the
April 17, 1992 Loan Guaranty Agreement (Deferred Participation) between the
Borrower and the SBA. That Agreement is now in full force and effect and has not
been modified in any respect.
IN WITNESS WHEREOF, I have signed this Certificate and affixed to it
the Borrower's corporate seal on ___________ __, 1997.
----------------------
Secretary
[Seal]
2
EXHIBIT 4
----
Board of Directors' Resolutions
----
EXHIBIT B
CEO's Certificate
I, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive Officer of Emergent Business
Capital, Inc (the "Borrower"), a South Carolina corporation, do hereby certify,
pursuant to Section 4.1 of the Amended and Restated Loan and Security Agreement
(the "Agreement") between NationsBank, N.A. and Hibernia National Bank (the
"Lenders"), NationsBank, N.A., as Agent for the Lenders, and the Borrower, dated
as of _______ __, 1997, that ▇▇▇▇▇ ▇▇▇▇ has been duly elected, has duly
qualified, as of the date of the execution of the Agreement was, and on the date
hereof is, the Secretary of the Borrower, and that the signature appearing below
is a true specimen of his signature.
-----------------------
▇▇▇▇▇ ▇▇▇▇, Secretary
___________, 1997.
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive Officer
EXHIBIT C
[To Be Retyped on Letterhead
of Counsel to the Borrower]
________ __, 1997
NationsBank, N.A.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Hibernia National Bank
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Emergent Business Capital, Inc.
Ladies and Gentlemen:
We have acted as counsel to Emergent Business Capital, Inc. a South
Carolina corporation (the "Borrower"), in connection with their execution and
delivery of the April __, 1997 Amended and Restated Loan and Security Agreement
(the "Loan Agreement") between the Borrower, each of you as Lenders, and
NationsBank, N.A., as Agent for the Lenders, and certain related documents.
Unless otherwise specified in this opinion letter, the terms used herein have
the same meanings as in the Loan Agreement.
We also have acted as counsel to the Guarantor in connection with the
execution and delivery by each of its Guarantee and the execution and delivery
by Carolina Investors, Inc. ("Carolina") of the Subordination Agreement.
In so acting, we have examined the Loan Agreement, the Multi-Party
Agreement, and the Subordination Agreement (the "Borrower Documents"), and each
Guarantee, and originals or copies of all other documents that we deemed
relevant and necessary as a basis for the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
(1) The Borrower is a corporation duly organized and validly
existing in good standing under the laws of South Carolina, and has all
requisite power and authority to conduct its business, to own and operate its
properties, and to execute, deliver, and perform all of its obligations under
the Borrower Documents. The Borrower has no Subsidiaries. The Borrower is duly
qualified, licensed, or domesticated and in good standing as a foreign
corporation duly
authorized to do business in all jurisdictions in which the character of its
properties owned or the nature of its activities conducted makes such
qualification, licensing, or domestication necessary (as set forth in Section
6.3 of the Loan Agreement).
(2) The Borrower's execution, delivery, and performance of the
Borrower Documents have been duly authorized by all necessary corporate action
and do not and will not (a) require any consent or approval of shareholders of
the Borrower or violate the articles of incorporation, by-laws, or Securities of
the Borrower, (b) violate any provision of any law, rule, or regulation
(including Regulation X of the Board of Governors of the Federal Reserve System)
of the United States or of South Carolina, or, to the best of our knowledge, any
order, judgment, injunction, decree, determination, or award of any court,
arbitrator, or governmental department, agency, or other instrumentality, (c) to
the best of our knowledge, result in a breach of or constitute a default under
any agreement or instrument to which the Borrower is a party or by which it or
its properties may be bound or affected, or (d) result in, or require, to the
best of our knowledge, the creation or imposition of any Lien upon or with
respect to any of the properties now owned or hereafter acquired by the Borrower
(other than the Liens created by the Loan Documents). To the best of our
knowledge, the Borrower is not in violation of any provision of any of the items
described in clause (b) of this paragraph or in default under any provision of
any of the items described in clause (c) of this paragraph.
(3) No authorization, consent, approval, license, or exemption
of, or filing or registration with, any court or governmental department,
agency, or other instrumentality of the United States or of South Carolina is or
will be necessary to the Borrower's valid execution, delivery, or performance of
the Borrower Documents or for the payment to the Agent and the Lenders of all
sums due and payable thereunder.
(4) The Borrower Documents have each been duly executed and
delivered by the Borrower, and constitute the Borrower's legal, valid, and
binding obligations, enforceable against the Borrower in accordance with their
terms, except as limited by bankruptcy, insolvency, and similar laws affecting
creditors' rights generally and by general principles of equity.
(5) To the best of our knowledge, there are no actions, suits,
or proceedings pending or threatened against or affecting the Borrower or the
Guarantor or the properties of the Borrower or the Guarantor before any court,
arbitrator, or governmental department, commission, board, bureau, agency, or
other instrumentality (state, federal, or foreign) which, if determined
adversely to the Borrower or any of the Guarantor, would have a materially
adverse effect on the financial condition, properties, or operations of the
Borrower or the Guarantor, or create a Lien on any property of the Borrower or
the Guarantor.
(6) You should perfect all the security interests granted
under the Loan Agreement (in Collateral for which a security interest can be
perfected by filing UCC-1 financing statements) by filing UCC-3 assignments in
the attached form with the South Carolina Secretary of State. Upon the filing of
such UCC-3 assignments, you will have a perfected first-priority security
interest in such Collateral, and no further recording or filing in South
Carolina or any other
2
jurisdiction is necessary or advisable in order to establish and perfect such
first-priority security interest.
(7) The Guarantee has been duly authorized, executed, and
delivered by the Guarantor, and constitutes the Guarantor's legal, valid, and
binding obligation, enforceable against the Guarantor in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency, and
similar laws affecting creditors' rights generally and by general principles of
equity.
(8) The Subordination Agreement has been duly authorized,
executed, and delivered by Carolina, and constitutes Carolina's legal, valid,
and binding obligation, enforceable against Carolina in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency, and
similar laws affecting creditors' rights generally and by general principles of
equity.
This opinion is limited to the laws of the United States and of South
Carolina. The opinion in paragraph no. 4 is given as if the laws of South
Carolina governed the Borrower Documents, despite their express choice of
Georgia law as the law governing their construction and interpretation. No
opinion is given as to the validity of the choice of law in the Borrower
Documents.
Our opinions set forth herein as to the validity, binding effect, and
enforceability of the Borrower Documents are specifically qualified to the
extent that the validity, binding effect, or enforceability of any obligations
of the Borrower under any of the Borrower Documents, or the availability or
enforceability of any of the remedies provided therein, may be subject to or
limited by (i) applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium, and other statutory or decisional laws, heretofore or
hereafter enacted or in effect, affecting the rights of creditors generally to
the extent the same may constitutionally be applied including, without
limitation, decisional or statutory law concerning recourse by creditors to
security in the absence of notice of a hearing; (ii) the exercise of judicial or
administrative discretion in accordance with general equitable principles; (iii)
the possible unenforceability of any provision requiring or in effect requiring
that waivers or amendments of any provision of any of the Borrower Documents, or
any related document, may be effected only in writing; (iv) the possible
unenforceability of provisions imposing increased interest rates or late payment
charges upon delinquency in payment or default, to the extent that any such
provision is deemed a "penalty"; (v) limitations imposed by rules and statutes
regarding forum, venue, pleading, service of process, qualification to do
business, and statutes of limitation; or (vi) limitations on the availability or
enforceability of the remedies of specific performance or injunctive relief and
of waivers contained in the Borrower Documents, all of which may be limited by
equitable principles or applicable laws, rules, regulations, court decisions,
and constitutional requirements.
All opinions rendered herein are limited to the existing laws of the
State of South Carolina and laws of the United States of America, all as in
effect on the date hereof, and we express no opinion as to any other laws,
rules, or regulations of such jurisdictions or matters governed by such laws,
rules, or regulations; nor do we undertake, by delivery hereof or otherwise, to
advise you of any changes in such laws, rules, or regulations.
3
This opinion is made as of the date hereof, and we undertake no (and
hereby disclaim any) obligation to advise you of any change in any matter set
forth herein. This opinion is limited to the matters expressly set forth herein
and no opinion is implied or may be inferred beyond the matters expressly stated
herein. This opinion is solely for your benefit in connection with the Borrower
Documents and may not be relied upon in any manner by any other person.
Very truly yours,
WYCHE, BURGESS, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, P.A.
By:
----------------------
▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
4
[RDS]H:\WPDocs\NB\Emergent\Loan&Sec.Agr
-32-
0077309.09
SCHEDULE 1
Liens
NONE
SCHEDULE 2
Trademarks, Tradenames, Name Changes, etc.
Emergent Business Capital, Inc.
SCHEDULE 3
Litigation
NONE
