CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made this 19th day of December, 1995
by and between Block Financial Corporation, a Delaware corporation ("Lender"),
and National Consumer Services Corp., L.L.C., a Georgia limited liability
company ("Borrower").
Recitals:
Borrower has requested Lender to extend credit to Borrower to
enable it to borrow, repay and reborrow hereunder amounts initially not
exceeding Twenty Million Dollars ($20,000,000) in aggregate principal at any
time outstanding, and Lender is willing to extend such credit upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS; CONSTRUCTION
1.1. Certain Definitions. In addition to other words and
terms defined elsewhere in this Agreement, as used herein the following
words and terms shall have the following meanings, respectively, unless the
context hereof otherwise clearly requires:
"Adjusted LIBOR Rate" shall have the meaning set forth in Section 2.4.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly through one or more intermediaries (including but not
limited to all directors and executive officers of such Person) controlling,
controlled by, or under direct or indirect common control with, such Person. For
purposes of the preceding sentence, "control" means (i) with respect to a Person
that is a corporation, the right to exercise, directly or indirectly, more than
50% of the voting rights attributable to the shares of such corporation, whether
through the ownership of voting securities, by contract or otherwise, and (ii)
with respect to a Person that is not corporation, the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Affiliate Transaction" shall have the meaning set forth in
Section 6.4.
"Agreement" shall mean this Credit Agreement, as it may be amended,
modified or supplemented from time to time.
"Business Day" shall mean any day other than a Saturday, Sunday, public
holiday under the laws of the State of Missouri or other day on which Lender is
normally closed for business in Kansas City, Missouri.
"Capitalized Lease" shall mean at any time any lease that is, or is
required under GAAP to be, capitalized on the balance sheet of Borrower at such
time.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and any successor statute of similar
import, and regulations thereunder, in each case as in effect from time to time.
"CERCLIS" shall mean the Comprehensive Environmental Response,
Compensation and Liability Information System List, as the same may be amended
from time to time.
"Closing Date" shall have the meaning set forth in Section 4.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute of similar import, and regulations thereunder, in each
case as in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
"Commitment Fee" shall have the meaning set forth in Section 2.2.
"Committed Amount" shall have the meaning set forth in Section 2.1(a).
"Control Group Member" shall mean each trade or business (whether or
not incorporated) that together with Borrower is treated as a single employer
under Sections 4001(a)(14) or 4001(b)(1) of ERISA or Sections 414(b), (c), (m)
or (o) of the Code.
"Debt-to-Equity Ratio" shall mean, with respect to a particular day,
the ratio of (A) the sum of (i) the Committed Amount as of such day and (ii) the
principal amount outstanding as of such day of all Indebtedness of Borrower
other than pursuant to this Agreement, to (B) the owners' equity of Borrower as
of such day.
"Dollar," "Dollars" and the symbol "$" shall mean lawful money of the
United States of America.
"Environmental Affiliate" shall mean, with respect to any Person, any
other Person whose liability (contingent or otherwise) for any Environmental
Claim such Person has retained, assumed or otherwise is liable for (by Law,
agreement or otherwise).
"Environmental Approvals" shall mean any Governmental Action pursuant
to or required under any Environmental Law.
2
"Environmental Claim" shall mean, with respect to any Person, any
action, suit, proceeding, investigation, notice, claim, complaint, demand,
request for information or other communication (written or oral) by any other
Person (including but not limited to any Governmental Authority, citizens'
group, or present or former employee of such Person) alleging, asserting or
claiming any actual or potential (a) violation of any Environmental Law, (b)
liability under any Environmental Law or (c) liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, fines or penalties arising out of, based on or
resulting from the presence, or release into the environment, of any
Environmental Concern Materials at any location, whether or not owned by such
Person.
"Environmental Cleanup Site" shall mean any location that is listed or
proposed for listing on the National Priorities List, on CERCLIS or on any
similar state list of sites requiring investigation or cleanup, or that is the
subject of any pending or threatened action, suit, proceeding or investigation
related to or arising from any alleged violation of any Environmental Law.
"Environmental Concern Materials" shall mean (a) any flammable
substance, explosive, radioactive material, hazardous material, hazardous waste,
toxic substance, solid waste, pollutant, contaminant or any related material,
raw material, substance, product or by-product of any substance specified in or
regulated or otherwise affected by any Environmental Law (including, but not
limited to, any "hazardous substance" as defined in CERCLA or any similar state
law), (b) any toxic chemical or other substance from or related to industrial,
commercial or institutional activities, and (c) asbestos, gasoline, diesel fuel,
motor oil, waste and used oil, heating oil and other petroleum products or
compounds, polychlorinated biphenyls, radon and urea formaldehyde.
"Environmental Law" shall mean any Law, whether now existing or
subsequently enacted or amended, relating to (a) pollution or protection of the
environment, including natural resources, (b) exposure of Persons, including but
not limited to employees, to Environmental Concern Materials, (c) protection of
the public health or welfare from the effects of products, by-products, wastes,
emissions, discharges or releases of Environmental Concern Materials or (d)
regulation of the manufacture, use or introduction into commerce of
Environmental Concern Materials including their manufacture, formulation,
packaging, labeling, distribution, transportation, handling, storage or
disposal. Without limitation, "Environmental Law" shall also include any
Environmental Approval and the terms and conditions thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed also to refer to any successor sections.
"Event of Default" shall have the meaning set forth in Section 7.1.
3
"Exception Loan" shall mean a Mortgage Loan that, or with respect to
which, (i) meets the criteria set forth in clauses (b) through (i) of the
definition of "Qualified Mortgage Loan," (ii) complies substantially with the
underwriting criteria set forth in Schedule 6.11 and (iii) variances from the
underwriting criteria set forth in Section 6.11 are approved in writing by a
senior executive of Borrower prior to the origination of such Mortgage Loan.
"Exception Sale Loan" shall mean an Exception Loan that, as of the date
in question, Lender has agreed to purchase from Borrower pursuant to the Loan
Purchase Agreement.
"Governmental Action" shall have the meaning set forth in Section 3.4.
"Governmental Authority" shall mean any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury or
arbitrator.
"H&R Block Franchisee" means (i) any Person authorized by a franchise
agreement with H&R Block, Inc. or any of its Subsidiaries to operate an office
that operates under the "H&R Block" name and is open to the public for the
preparation of tax returns, and (ii) any Person authorized by a franchise
agreement (or subfranchise agreement) with a Person referred to in subclause (i)
of this sentence to operate an office that operates under the "H&R Block" name
and is open to the public for the preparation of tax returns.
"Indebtedness" of a Person shall mean:
(a) All obligations on account of money borrowed by, or credit
extended to or on behalf of, or for on account of deposits with or
advances to, such Person;
(b) All obligations of such Person evidenced by bonds,
debentures, notes or similar instruments;
(c) All obligations of such Person for the deferred purchase
price of property or services;
(d) All obligations secured by a Lien on property owned by
such Person (whether or not assumed), and all obligations of such
Person under Capitalized Leases (without regard to any limitation of
the rights and remedies of the holder of such Lien or the lessor under
such Capitalized Leases to repossession or sale of such property);
(e) The face amount of all letters of credit issued for the
account of such Person and, without duplication, the unreimbursed
amount of all drafts drawn
4
thereunder, and all other obligations of such Person associated with
such letters of credit or draws thereon;
(f) All obligations of such Person in respect of acceptances
or similar obligations issued for the account of such Person;
(g) All obligations of such Person under a product financing
or similar arrangement described in paragraph 8 of FASB Statement of
Accounting Standards No. 49 or any similar requirement of GAAP; and
(h) All obligations of such Person under any interest rate or
currency protection agreement, interest rate or currency future,
interest rate or currency option, interest rate or currency swap or cap
or other interest rate or currency hedge agreement.
"Indemnified Parties" shall mean Lender and its Affiliates (other than
Borrower, in the event Borrower is an Affiliate of Lender), and the directors,
officers and employees of each of the foregoing.
"Law" shall mean any law (including common law), constitution, statute,
treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree
or award of any Governmental Authority.
"LIBOR Rate" shall have the meaning set forth in Section 2.4.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge, claim or other encumbrance or security arrangement of any
nature whatsoever or any agreement to give any of the foregoing, including but
not limited to any conditional sale or title retention arrangement, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security.
"Loan" shall mean any loan made by Lender to Borrower under this
Agreement, and "Loans" shall mean all Loans made by Lender under this Agreement.
"Loan Commitment" shall have the meaning set forth in Section 2.1(a).
"Loan Documents" shall mean this Agreement, the Note, the Security
Agreement, and all other agreements and instruments executed and delivered in
connection herewith or therewith or extending, renewing, refinancing or
refunding any indebtedness, obligation or liability arising under any of the
foregoing, in each case as the same may be amended, modified or supplemented
from time to time hereafter; provided that the term "Loan Documents" shall not
include the Other Transaction Documents.
"Loan Purchase Agreement" shall have the meaning set forth in
Section 4.1(d).
5
"Material Adverse Effect" shall mean: (a) a material adverse effect on
the business, operations, condition (financial or otherwise) or prospects of
Borrower, (b) a material adverse effect on the ability of Borrower to perform or
comply with any of the terms and conditions of any Loan Document or any of the
Other Transaction Documents, or (c) any adverse effect on the legality,
validity, binding effect, enforceability of admissibility into evidence of any
Loan Document or any of the Other Transaction Documents, or the ability of
Lender to enforce any rights or remedies under or in connection with any Loan
Document or Other Transaction Document.
"Maturity Date" shall mean December 31, 1998.
"Member" means any person that is admitted to Borrower pursuant to the
provisions of the Operating Agreement.
"Mortgage" shall mean the mortgage, deed of trust or other instrument
creating a lien on an estate in fee simple interest in real property (including
the improvements thereof) securing a Mortgage Loan.
"Mortgage Documents" shall mean any and all documents required to be
executed by the obligor(s) under a Mortgage Loan in connection with such
Mortgage Loan.
"Mortgage Loan" shall mean a loan extended to a natural person or
persons, which loan is secured by a mortgage, deed of trust, or equivalent
consensual security interest in such person's or persons' ownership interest in
real property and a one- to four-family residential structure attached to such
real property.
"Mortgage Note" shall mean the note or other evidence of indebtedness
evidencing the indebtedness of the obligor(s) under a Mortgage Loan.
"Multiemployer Plan" shall mean any employee benefit plan that is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which Borrower or any Controlled Group Member has or had an obligation to
contribute.
"Note" shall mean the promissory note of Borrower executed and
delivered under Section 2.1(c), and any promissory note or notes issued in
substitution therefor in connection with any extensions, renewals, refinancings
or refundings thereof in whole or in part.
"Notice" shall have the meaning set forth in Section 8.5.
"Obligations" shall mean all indebtedness, obligations and liabilities
of Borrower to Lender from time to time arising under or in connection with or
related to or evidenced by or secured by or under color of this Agreement or any
other Loan Document, and all extensions, renewals or refinancings thereof,
whether such indebtedness, obligations or liabilities are direct or indirect,
otherwise secured or unsecured, joint or several, absolute
6
or contingent, due or to become due, whether for payment or performance, now
existing or hereafter arising. Without limitation of the foregoing, such
indebtedness, obligations and liabilities include the principal amount of
Loans, interest, fees, indemnities or expenses under or in connection with
this Agreement or any other Loan Document, and all extensions, renewals,
refinancings thereof, whether or not such Loans were made in compliance with
the terms and conditions of this Agreement or in excess of the obligation of
Lender to lend. Obligations shall remain Obligations notwithstanding any
assignment or transfer by Lender or any subsequent assignment or transfer of
any of the rights of Lender under this Agreement or any other Loan Document
or any interest therein.
"Office," when used in connection with Lender, shall mean its office
located at 4435 Main Street, Suite 500, Kansas City, Missouri 64111, or at such
other office or offices of Lender or any Subsidiary or Affiliate thereof as may
be designated in writing from time to time by Lender to Borrower.
"Operating Agreement" shall mean that certain Operating Agreement for
Borrower dated as of September 15, 1995, as amended from time to time.
"Other Transaction Documents" shall mean the documents contemplated by
Sections 4.1(c) and (d).
"PBGC" means the Pension Benefit Guaranty Corporation established under
Title IV of ERISA or any other governmental agency, department or
instrumentality succeeding to the functions of such corporation.
"Pension-Related Event" shall mean any of the following events or
conditions:
(a) Any action is taken by any Person (i) to terminate, or
which would result in the termination of, a Plan, either pursuant to
its terms or by operation of law (including, without limitation, any
amendment of a Plan that would result in a termination under Section
4041(e) of ERISA), or (ii) to have a trustee appointed for a Plan
pursuant to Section 4042 of ERISA;
(b) PBGC notifies any Person of its determination that an
event described in Section 4042 of ERISA has occurred with respect to a
Plan, that a Plan should be terminated, or that a trustee should be
appointed for a Plan;
(c) Any Reportable Event occurs with respect to a Plan;
(d) Any action occurs or is taken that could result in
Borrower becoming subject to liability for a complete or partial
withdrawal by any Person from a Multiemployer Plan (including, without
limitation, seller liability incurred under Section 4204(a)(2) of
ERISA), or Borrower or any Controlled Group Member receives form any
Person a notice or demand for payment on account of any such alleged or
asserted liability;
7
(e) (i) There occurs any failure to meet the minimum funding
standard under Section 302 of ERISA or Section 412 of the Code with
respect to a Plan, or any tax return is filed showing any tax payable
under Section 4971(a) of the Code with respect to any such failure, or
Borrower or any Controlled Group Member receives a notice of deficiency
form the Internal Revenue Service with respect to any alleged or
asserted such failure or (ii) any request is made by any Person for a
variance from the minimum funding standard, or an extension of the
period for amortizing unfunded liabilities, with respect to a Plan; or
(f) the liability (contingent or otherwise) of Borrower for or
in connection with any Postretirement Benefits as of any day, whether
such liability is funded or unfunded, at any time exceeds ten percent
(10%) of the owners' equity of Borrower as of such day.
"Permitted Distribution" shall mean a dividend or distribution made by
Borrower to any one or more of its Members on account of any equity or ownership
interest in Borrower, which, at the time of and after giving effect to such
dividend or distribution, the following conditions have been satisfied:
(a) no Event of Default or Potential Default shall have
occurred and be continuing or would occur as a consequence thereof and
each of the representations and warranties of Borrower set forth in
Article 3 is true on and as of the date of such dividend or
distribution both before and after giving effect thereto; and
(b) the Debt-to-Equity Ratio of Borrower is not less than 7
to 1; and
(c) the owners' equity of Borrower is not less than $500,000;
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated association, joint venture, joint-stock company, limited
liability company, trust, Governmental Authority or other entity.
"Plan" means any employee pension benefit plan within the meaning of
Section 3(2) of ERISA (other than a Multiemployer Plan) covered by Title IV of
ERISA by reason of Section 4021 of ERISA, of which Borrower or any Controlled
Group Member is or has been within the preceding five years a "contributing
sponsor" within the meaning of Section 4001(a)(13) of ERISA, or which is or has
been within the preceding five years maintained for employees of Borrower or any
Controlled Group Member.
"Potential Default" shall mean any event or condition that with notice,
passage of time or a determination by Lender would constitute an Event of
Default.
8
"Postretirement Benefits" shall mean any benefits, other than
retirement income, provided by Borrower to retired employees, or to their
spouses, dependents or beneficiaries, including (without limitation) group
medical insurance or benefits, or group life insurance or death benefits.
"Qualified Insurer" shall mean an insurance company or security or
bonding company qualified to write the insurance policy in the relevant
jurisdiction that, in the case of a fire, hazard or flood insurance policy,
shall have a rating of "A" or better from A.M. Best.
"Qualified Mortgage Loan" shall mean a Mortgage Loan that, or with
respect to which:
(a) complies with the underwriting criteria set forth in
Schedule 6.11;
(b) in all material respects complies with, and was originated
and made in compliance with, all applicable Laws, including (without
limitation) the federal Truth-in-Lending Act (15 U.S.C. (Section)
(Section) 1601 et seq.), the federal Real Estate Settlement Procedures
Act (12 U.S.C. (Section)(Section) 2601 et seq.) and all applicable
usury, consumer finance, small loan, equal credit opportunity, flood
insurance and disclosure laws;
(c) the Mortgage, Mortgage Note and other Mortgage Documents
pertaining to such Mortgage Loan have been duly executed and delivered
by the applicable obligor(s) and every required mortgagor, grantor and
trustor;
(d) Borrower has received a written opinion from legal counsel
to the effect that the form of the Mortgage and Mortgage Note
pertaining to such Mortgage Loan is sufficient to constitute legal,
valid and binding obligations, enforceable against the obligor(s)
thereunder in accordance with the respective terms thereof, subject to
bankruptcy, insolvency and other laws relating to the enforcement of
creditors' rights in general and to general principles of equity;
(e) the Mortgage, Mortgage Note and other Mortgage Documents
contain customary and enforceable provisions (subject to bankruptcy,
insolvency and other laws relating to the enforcement of creditors'
rights in general and to general principles of equity) such as render
the rights and remedies of the holder thereof adequate for the
realization against the Underlying Property of the benefits of the
security, including foreclosure;
(f) the Mortgage has been duly and timely filed and recorded
in the proper official records and creates a valid lien, with the
priority purported to be created thereby, on the Underlying Property;
9
(g) the Underlying Property is covered by an ALTA Loan Policy
of Title Insurance issued by a financially sound and reputable title
insurance company, which policy is assignable and insures that the
applicable Mortgage is a valid first lien (or second lien in the case
of second mortgages) on such Underlying Property, subject only to
standard exceptions stated therein;
(h) the Underlying Property is covered by fire and hazard
insurance policy issued by a Qualified Insurer with extended coverage
containing a mortgagee's loss payable clause and suitable provisions
for payment of mortgages in order of priority in an amount not less
than the least of (i) the outstanding principal balance of the Mortgage
Loan and the related senior mortgage, if any, (ii) the full insurable
value of the Underlying Property and (iii) the minimum amount required
to compensate for damage or loss on a replacement cost basis; and
(i) any Underlying Property located in an area identified in
the Federal Register by the Flood Emergency Management Agency as having
special flood hazard is covered by a flood insurance policy issued by a
Qualified Insurer containing a mortgagee's loss payable clause and
suitable provisions for payment of mortgages in order of priority in an
amount representing coverage not less than the least of (i) the
outstanding principal balance of the Mortgage Loan and the related
senior mortgage, if any, (ii) the full insurable value of the
Underlying Property and (iii) the minimum amount of insurance available
under the National Flood Insurance Act of 1968, as amended.
"Regular Payment Date" shall mean the fifth Business Day of each
calendar month after the date hereof.
"Related Litigation" shall have the meaning set forth in Section
8.12(b)(i).
"Reportable Event" means (i) a reportable event described in Section
4043 of ERISA and regulations thereunder, (ii) a withdrawal by a substantial
employer from a Plan to which more than one employer contributes, as referred to
in Section 4063(b) of ERISA, (iii) a cessation of operations at a facility
causing more than twenty percent (20%) of Plan participants to be separated from
employment, as referred to in Section 4062(e) of ERISA, or (iv) a failure to
make a required installment or other payment with respect to a Plan when due in
accordance with Section 412 of the Code or Section 302 of ERISA that causes the
total unpaid balance of missed installments and payments (including unpaid
interest) to exceed $750,000.
"Security Agreement" shall have the meaning set forth in Section
4.1(b).
"Solvent" means, with respect to any Person at any time, that as such
time (a) the sum of the debts and liabilities (including, without limitation,
contingent liabilities) of such Person is not greater than all of the assets of
such Person at a fair valuation, (b) the present fair salable value of the
assets of such Person is not less than the amount that will
10
be required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person has not incurred, will not incur,
does not intend to incur, and does not believe that it will incur, debts or
liabilities (including, without limitation, contingent liabilities) beyond such
person's ability to pay as such debts or liabilities mature, (d) such Person is
not engaged in, and is not about to engage in, a business or a transaction
(other than the underwriting, origination, processing, purchase, sale and/or
securitization of mortgage loans secured by residential real estate and the
making of warehousing lines of credit and other credit facilities to enable
others to originate such loans) for which such Person's property constitutes or
would constitute unreasonably small capital, and (e) such Person is not
otherwise insolvent as defined in, or otherwise in a condition that could in any
circumstances then or subsequently render any transfer, conveyance, obligation
or act then made, incurred or performed by it avoidable or fraudulent pursuant
to, any Law that may be applicable to such Person pertaining to bankruptcy,
insolvency or creditors' rights (including, but not limited to, the Bankruptcy
Code of 1978, as amended, and, to the extent applicable to such Person, the
Uniform Fraudulent Conveyance Act, Uniform Fraudulent Transfer Act, or any
other applicable Law pertaining to fraudulent conveyances or fraudulent
transfers or preferences).
"Standard Notice" shall mean an irrevocable notice provided to Lender
on a Business Day that is at least one Business Day in advance. Standard Notice
must be provided no later than 10:00 a.m., Kansas City time, on the last day
permitted for such notice.
"Subsidiary" of a Person at any time shall mean any corporation of
which a majority (by number of shares or number of votes) of any class of
outstanding capital stock normally entitled to vote for the election of one or
more directors (regardless of any contingency that does or may suspend or dilute
the voting rights of such class) is at such time owned directly or indirectly,
beneficially or of record, by such Person or one or more Subsidiaries of such
Person, and/or any trust of which a majority of the beneficial interest is at
such time owned directly or indirectly, beneficially or of record, by such
Person or one or more Subsidiaries of such Person.
"Taxes" shall have the meaning set forth in Section 2.8.
"Underlying Property" shall mean the real property, including the
improvements thereon, upon which a Mortgage creates a lien securing a Mortgage
Loan.
1.2. Construction. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular, the
singular the plural and the part the plural; and "or" has the inclusive meaning
represented by the phrase "and/or"; and "property" includes all properties and
assets of any kind or nature, tangible or intangible, real, personal or mixed.
References in this Agreement to "determination" (and similar terms) by Lender
include good faith estimates by Lender (in the case of quantitative
determinations) and good faith beliefs by Lender (in the case of qualitative
11
determinations). The words "hereof," "herein," "hereunder" and similar terms in
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. The section and other headings contained in this
Agreement are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation thereof in any respect.
Section, subsection, schedule and exhibit references are to this Agreement
unless otherwise specified.
1.3. Accounting Principles.
(a) As used herein, "GAAP" shall mean generally accepted
accounting principles in the United States, applied on a consistent basis.
(b) Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial matters shall be
made, and all financial statements to be delivered pursuant to this Agreement
shall be prepared, in accordance with GAAP; and all accounting or financial
terms shall have the meanings ascribed to such terms by GAAP.
(c) If and to the extent that the financial statements
generally prepared by Borrower apply accounting principles other than GAAP, all
financial statements referred to in this Agreement or any other Loan Document
shall be delivered in duplicate, one set based on the accounting principles then
generally applied by Borrower and one set based on GAAP. To the extent this
Agreement or such other Loan Document requires financial statements to be
accompanied by an opinion of independent accountants, each set of financial
statements shall be accompanied by such opinion.
ARTICLE 2 -- THE LOANS
2.1. The Loans.
(a) Loan Commitment. Subject to and upon the terms and
conditions and relying upon the representations and warranties herein set forth,
Lender agrees (such agreement being herein called the "Loan Commitment") to make
Loans to Borrower at any time or from time to time on or after the Closing Date
to, but not including, the Maturity Date in an aggregate amount not exceeding at
any one time outstanding the lessor of (i) Lender's Committed Amount and (ii)
the maximum aggregate outstanding principal balance of Loans permitted under
Section 6.12 at such time. Lender's "Committed Amount" at any time shall be
equal to $20,000,000, as such amount may be increased under Section 2.2 at such
time.
(b) Nature of Credit. Within the limits of time and amount set
forth in this Section 2.1, and subject to the other provisions of this
Agreement, Borrower may borrow, repay and reborrow Loans hereunder.
12
(c) Note. The obligation of Borrower to repay the unpaid
principal amount of the Loans and to pay interest thereon shall be evidenced in
part by a promissory note of Borrower, dated the Closing Date, in substantially
the form attached hereto as Exhibit A, with the blanks appropriately filled,
payable to the order of Lender in a face amount equal to the Committed Amount of
Lender.
(d) Maturity. To the extent not due and payable earlier, the
Loans shall be due and payable on the Maturity Date.
2.2. Commitment Fee; Increase in the Committed Amount.
(a) Commitment Fee. Borrower agrees to pay to Lender a
commitment fee (the "Commitment Fee") for each day from and including the
Closing Date to but not including the Maturity Date equal to 0.25% per annum on
the amount (not less than zero) equal to the unborrowed portion of the Committed
Amount on such day. Such Commitment Fee shall be due and payable for the
preceding calendar month for which such fee has not been paid on (i) each
Regular Payment Date and (ii) the Maturity Date.
(b) Optional Increase of the Committed Amount. Borrower may
increase the Committed Amount of Lender to (i) $50,000,000 at any time during
the 3-month period commencing 9 months from and after the date of this Agreement
and (ii) $100,000,000 at any time during the 3-month period commencing 21 months
from and after the date of this Agreement. Increases in the Committed Amount
shall be made by providing not less than 60 days notice (which notice shall be
irrevocable) to such effect to Lender, which notice shall specify the date
during the applicable three-month period on which such increase shall take
effect. After the date specified in such notice the Commitment Fee shall be
calculated upon the Committed Amount as so increased. Upon the increase of the
Committed Amount pursuant to this Section 2.2(b), Borrower shall execute and
deliver a new Note reflecting such increased Committed Amount and upon delivery
of such Note Lender shall cancel and deliver to Borrower the Note reflecting the
prior Committed Amount.
2.3. Making of Loans. Whenever Borrower desires that Lender
make a Loan, Borrower shall provide Standard Notice to Lender setting forth
the following information:
(a) The date, which shall be a Business Day, on which such
proposed Loan is to be made;
(b) A list of Qualified Mortgage Loans and Exception Loans
to be funded by such proposed Loan; and
(c) The principal amount of such proposed Loan, which amount
shall not exceed the sum of (i) the aggregate outstanding principal amount of
all Qualified Mortgage Loans set forth in the list referred to in the
immediately foregoing
13
subclause (b) and (ii) 95% of the aggregate outstanding principal amount of all
Exception Loans set forth in the list referred to in the immediately foregoing
subclause (b).
Standard Notice having been so provided, unless any applicable condition
specified in Article 4 has not been satisfied, on the date specified in such
Standard Notice Lender shall make the proceeds of the Loan available to Borrower
at Lender's Office by federal wire transfer of funds immediately available at
such domestic account designated by Borrower in such Standard Notice, no later
than 12:00 Noon, Kansas City time, in funds immediately available at such
office.
2.4. Interest Rate. The unpaid principal amount of the Loans
shall bear interest for each day until due at a fluctuating rate per annum (the
"Adjusted LIBOR Rate") equal to two percent (2%) per annum above the London
interbank offered rate for one month United States dollar deposits as published
in the Wall Street Journal (the "LIBOR Rate"). Any change in the Adjusted LIBOR
Rate derived from a change in the LIBOR Rate shall take effect on the day on
which the change in the LIBOR Rate occurred. Interest on the unpaid principal
amount of the Loans shall be calculated on the basis of the actual number of
days elapsed in a year of 360 days.
2.5. Loan Principal Repayments. (a) On the Maturity Date,
Borrower shall pay to Lender the entire outstanding principal balance of the
Loans together with all accrued and unpaid interest thereon, and all fees and
charges payable, if any, in connection therewith. Borrower shall have the right
at its option from time to time to prepay the Loans in whole or in part without
premium or penalty.
(b) If at any time the aggregate outstanding principal balance
of Loans hereunder exceeds the amount permitted by Section 6.12, Borrower shall,
on the date such excess occurs, prepay such amount of the Loans so as to
eliminate such excess.
2.6. Interest Payment Dates. Interest on the Loans shall be
due and payable (i) for each calendar month on the Regular Payment Date next
following such calendar month and (ii) on the Maturity Date. After maturity of
the Loans (by acceleration or otherwise), interest on the Loans shall be due
and payable on demand.
2.7. Payments Generally; Interest on Overdue Amounts.
(a) Payments Generally. All payments and prepayments to be
made by Borrower in respect of principal, interest, fees, indemnity, expenses or
other amounts due from Borrower hereunder or under any other Loan Document shall
be payable in Dollars by 12:00 o'clock noon, Kansas City time, on or before the
day when due without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, and an action therefor shall immediately
accrue, without setoff, counterclaim, withholding or other deduction, reduction
or diminution of any kind or nature. Such payments shall be made to Lender at
its Office in Dollars in funds immediately available
14
at such Office. Any payment or prepayment received by Lender after 12:00
o'clock noon, Kansas City time, on any day shall be deemed to have been
received on the next succeeding Business Day.
(b) Interest on Overdue Amounts. To the extent permitted by
Law, after there shall have become due (by acceleration or otherwise) principal,
interest, fees, indemnity, expenses or any other amounts due from Borrower
hereunder or any other Loan Document, such amounts shall bear interest for each
day until paid (before and after judgment), payable on demand, at a rate per
annum (in each case based on a year of 360 days and actual days elapsed) that
for each day shall be equal to 2% above the then-current Adjusted LIBOR Rate. To
the extent permitted by Law, interest accrued on any amount that has become due
hereunder or under any Loan Document shall compound on a day-to-day basis, and
hence shall be added daily to the overdue amount to which such interest relates.
2.8. Taxes.
(a) Payments Net of Taxes. All payments made by Borrower under
this Agreement or any other Loan Document shall be made free and clear of, and
without reduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withhold or
assessed by any Governmental Authority, and all liabilities with respect
thereto, excluding franchise taxes or taxes imposed on or measured by the net
income of Lender (all such nonexcluded taxes, levies, imposts, deductions,
charges or withholdings being hereinafter referred to as "Taxes"). If any Taxes
or withholdings with respect to Taxes are required to be withheld or deducted
from any amounts payable to Lender under this Agreement or any other Loan
Document, Borrower shall pay the relevant amount of such Taxes or withholdings
and the amounts so payable to Lender shall be increased to the extent necessary
to yield to Lender (after payment of all Taxes) interest on any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and the other Loan Documents. Whenever any Taxes are paid by Borrower
with respect to payments made in connection with this Agreement or any other
Loan Document, as promptly as possible thereafter, Borrower shall send to Lender
a certified copy of an original official receipt received by Borrower showing
payment thereof.
(b) Indemnity. Borrower hereby indemnifies Lender for the full
amount of all Taxes attributable to payments by or on behalf of Borrower
hereunder or under any of the other Loan Documents, any Taxes paid by Lender,
and any present or future claims, liabilities or losses with respect to or
resulting from any omission to pay or delay in paying any Taxes (including any
incremental Taxes, interest or penalties that may become payable by Lender as a
result of any failure to pay such Taxes), whether or not such Taxes were
correctly or legally asserted. Such indemnification shall be made within 15 days
from the date Lender makes written demand therefor. Lender must notify Borrower
promptly in writing of the event giving rise to such indemnification and give
15
Borrower sole control of the defense and all negotiations for its settlement and
compromise.
2.9. Usury. In no event shall the total of all amounts payable
hereunder, whether interest or of other charges that may or might be
characterized as interest, exceed the maximum rate or amount permitted to be
charged under applicable Law. If Lender receives any payment that is or would be
in excess of the interest or other charge permitted to be charged under
applicable Law, the portion of the payment that is in excess of the permissible
amount shall have been, and shall be deemed to have been, a payment in reduction
in principal of the Loans or, if such portion exceeds the aggregate unpaid
principal amount of the Loans, the excess shall be refunded to Borrower.
ARTICLE 3 -- REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
3.1. Organizational Status. Borrower (i) is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Georgia, (ii) has the requisite power and authority to
own its property and to transact the business in which it is engaged, and (iii)
is duly qualified or licensed to do business in good standing under the laws of
each jurisdiction where its ownership of its properties or the nature of its
activities or both makes such qualification or licensing necessary or advisable,
except where the failure to be so licensed or qualified, individually or in the
aggregate, could not have a Material Adverse Effect.
3.2. Power and Authorization. Borrower has the requisite power
and authority to execute, deliver, perform, and take all actions contemplated
by, the Loan Documents and Other Transaction Documents and all such actions have
been duly and validly authorized by all necessary proceedings on its part.
Without limitation of the foregoing, Borrower has the requisite power and
authority to borrow pursuant to the Loan Documents to the fullest extent
permitted hereby and thereby from time to time, and has taken all necessary
action to authorize such borrowings.
3.3. Execution and Binding Effect. This Agreement and each of
the other Loan Documents and the Other Transaction Documents has been duly and
validly executed and delivered by Borrower. This Agreement and each other Loan
Document and Other Transaction Document when executed and delivered by Borrower
will constitute the legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency or other similar laws of
general application affecting the enforcement of creditors' rights or by general
principles of equity limiting the availability of equitable remedies.
3.4. Governmental Approvals and Filings. No approval, order,
consent, authorization, certificate, license, permit or validation of, or
exemption or other action by,
16
or filing, recording or registration with, or notice to, any Governmental
Authority (collectively, "Governmental Action") is or will be necessary in
connection with the execution and delivery of any Loan Document or Other
Transaction Document by Borrower, consummation by Borrower of the transactions
herein or therein contemplated, performance of or compliance with the terms
and conditions hereof or thereof by Borrower (other than such filings as are
necessary to perfect a security interest), or to ensure the legality, validity,
binding effect, enforceability or admissibility in evidence hereof or thereof.
3.5. Absence of Conflicts. Neither the execution and delivery
of any Loan Document or Other Transaction Document by Borrower, nor
consummation by Borrower of the transactions herein or therein contemplated,
nor performance or compliance with the terms and conditions hereof or thereof
by Borrower, does or will
(a) violate or conflict with any Law, or
(b) violate, conflict with or result in a breach of any term
or condition of, or constitute a default under, or result in (or give
rise to any right, contingent or otherwise, of any Person to cause) any
termination, cancellation, prepayment or acceleration of performance
of, or result in the creation or imposition of (or give rise to any
obligation, contingent or otherwise, to create or impose) any Lien upon
any property of Borrower (except for any Lien in favor or Lender
securing the Obligations) pursuant to, or otherwise result in (or give
rise to any right, contingent or otherwise, of any Person to cause) any
change in any right, power, privilege, duty or obligation of Borrower
under or in connection with,
(i) the Articles of Organization or Operating
Agreement (or other constituent documents) of Borrower,
(ii) any agreement or instrument creating evidencing,
securing or guaranteeing any Indebtedness to which Borrower is
a party or by which Borrower or its properties (now owned or
hereafter acquired) may be subject or bound, or
(iii) any other agreement or instrument or
arrangement to which Borrower is a party or by which Borrower
or any of its property or assets may be subject or bound,
except, in the case of this clause (b)(iii), for matters that,
individually or in the aggregate, could not have a Material
Adverse Effect.
3.6. Accurate and Complete Disclosure. All information
heretofore, contemporaneously or hereafter provided (orally or in writing) by or
on behalf of Borrower to Lender pursuant to in connection with any Loan Document
or any transaction contemplated hereby or thereby is or will be (as the case may
be) true and accurate in all material respects on the date as of which such
information is dated (or, if
17
not dated, when received by Lender) and does not or will not (as the case may
be) omit to state any material fact necessary to make such information not
misleading at such time in light of the circumstances in which it was
provided. Borrower has disclosed to Lender in writing every fact or
circumstance known to Borrower that has, or which could have, a Material Adverse
Effect.
3.7. Solvency. On and as of the Closing Date, and on the
date of each Loan and after giving effect to application of the proceeds
thereof in accordance with the terms of the Loan Documents, Borrower is and
will be Solvent.
3.8. Partnerships, Subsidiaries, Etc. Borrower is neither a
partner (general or limited) of any partnership nor a party to any joint venture
agreement. Borrower does not own (beneficially or of record) any equity or
similar interest in any Person (including but not limited to any interest
pursuant to which Borrower has or may in any circumstance have an obligation to
make capital contributions to, or be generally liable for or on account of the
liabilities, acts or omissions of such other Person).
3.9. Litigation. There is no pending or threatened action,
suit, proceeding or investigation by or before any Governmental Authority
against or affecting Borrower, except for matters that, if adversely
decided, individually or in the aggregate, could not have a Material Adverse
Effect.
3.10. Absence of Events of Default. No event has occurred
and is continuing and no condition exists that constitutes an Event of
Default or Potential Default.
3.11. Absence of Other Conflicts. Borrower is not in
violation of or conflict with, or is subject to any contingent liability on
account of any violation of or conflict with:
(a) any Law,
(b) its Articles of Organization or Operating Agreement (or
other constituent documents), or
(c) any agreement or instrument or arrangement to which
it is party or by which it or any of its properties (now owned or
hereafter acquired) may be subject or bound,
except for matters that, individually or in the aggregate, could not have a
Material Adverse Effect.
3.12. Insurance. Borrower maintains with financially sound and
reputable insurers insurance with respect to its properties and business and
against at least such liabilities, casualties and contingencies and in at least
such types and amounts as is
18
customary in the case of corporations or limited liability companies engaged
in the same or a similar business or having similar properties similarly
situated.
3.13. Title to Property; Liens. Borrower has good and
marketable title in fee simple to all real property owned or purported to be
owned by it and good title to all other property of whatever nature owned or
purported to be owned by it, including but not limited to all property reflected
in the most recent balance sheet submitted pursuant to Section 5.1(a) (except as
sold or otherwise disposed of in the ordinary course of business after the date
of such balance sheet and except for such defects in title that, individually or
in the aggregate, could not have a Material Adverse Effect). None of the
properties and assets of Borrower are subject to any Liens, except for Liens
that are permitted pursuant to Section 6.2.
3.14. Intellectual Property. Borrower owns, or is licensed or
otherwise has the right to use, all of the patents, trademarks, service marks,
names (trade, service, fictitious or otherwise), copyrights, technology
(including but not limited to computer programs and software), processes, data
bases and other rights, free from burdensome restrictions, necessary to own and
operate its properties and to carry on its business as presently conducted and
presently planned to be conducted without conflict with the rights of others,
except for matters that, individually or in the aggregate, could not have a
Material Adverse Effect.
3.15. Taxes. All tax and information returns required to be
filed by or on behalf of Borrower have been properly prepared, executed and
filed. All taxes, assessments, fees and other governmental charges upon Borrower
or upon its properties, income, sales or franchises that are due and payable
have been paid, other than those not yet delinquent and payable without premium
or penalty, and except for those being diligently contested in good faith by
appropriate proceedings, and in each case adequate reserves and provisions for
taxes have been made on the books of Borrower.
3.16. Employee Benefits. Borrower has no liability
(contingent or otherwise) for or in connection with, and none of its
properties is subject to a Lien in connection with, any Pension-Related Event.
3.17. Environmental Matters.
(a) Borrower and each of its Environmental Affiliates is and
has been in full compliance with all applicable Environmental Laws, except for
matters that, individually or in the aggregate, could not have a Material
Adverse Effect. There are no circumstances that may prevent or interfere with
such full compliance in the future.
(b) Borrower and each of its Environmental Affiliates have all
Environmental Approvals necessary or desirable for the ownership and operation
of their respective properties, facilities and businesses as presently owned and
operated and as
19
presently proposed to be owned and operated, except for matters that,
individually or in the aggregate, would not have a Material Adverse Effect.
(c) There is no Environmental Claim pending or threatened, and
there are no past or present acts, omissions, events or circumstances (including
but not limited to any dumping, leaching, deposition, removal, abandonment,
escape, emission, discharge or release of Environmental Concern Material at, on
or under any facility or property now or previously owned, operated or leased by
Borrower or any of its Environmental Affiliates) that could form the basis of
any Environmental Claim against Borrower or any of its Environmental Affiliates,
except for matters that, if adversely decided, individually or in the aggregate,
could not have a Material Adverse Effect.
(d) No facility or property now or previously owned, operated
or leased by Borrower or any of its Environmental Affiliates is an Environmental
Cleanup Site. Neither Borrower nor any of its Environmental Affiliates has
directly transported or directly arranged for the transportation of any
Environmental Concern Materials to any Environmental Cleanup Site. No Lien
exists, and no condition exists that could result in the filing of a Lien,
against any property of Borrower or any of its Environmental Affiliates under
any Environmental Law.
3.18. Regulatory Restrictions. Borrower is not (a) an
"investment company" or a company "controlled" by an investment company within
the meaning of the Investment Company Act of 1940, as amended, (b) a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of
either a "holding company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended, (c) subject to
regulation under the Federal Power Act, the Interstate Commerce Act, or the
Investment Company Act of 1940, as amended, or (d) subject to any other Law that
purports to restrict or regulate its ability to borrow money or obtain credit.
3.19. Indebtedness. Borrower has no liabilities or
obligations with respect to Indebtedness other than Indebtedness set forth
in Schedule 3.19.
3.20. Ownership of Mortgage Loans; Servicing Agreements. As of
the date of this Agreement, Borrower (i) neither owns, nor has a security
interest in, any loan that is secured by a mortgage, deed of trust or equivalent
consensual security interest in real property and (ii) is not a party to any
agreement with a third party servicer pertaining to the servicing of Mortgage
Loans owned by Borrower.
3.21. H&R Block Franchisee Loans. As of the date of this
Agreement, (i) there are no outstanding advances, loans or extensions of credit
from Borrower to any H&R Block Franchisee or any Subsidiary or Affiliate of an
H&R Block Franchisee, and (ii) Borrower has not made or entered into any written
agreement pertaining to the making of any of the foregoing advances, loans or
extensions of credit.
20
ARTICLE 4 -- CONDITIONS OF LENDING
4.1. Conditions to Effectiveness. This Agreement shall be
and become effective on such date (herein referred to as the "Closing Date")
when, and only when, the following conditions precedent have all been satisfied:
(a) Agreement; Note. This Agreement shall have been duly
executed by Borrower and Lender, and Lender shall have received an
executed Note conforming to the requirements hereof, duly executed on
behalf of Borrower.
(b) Security Agreement. Lender shall have received a Security
Agreement substantially in the form of Exhibit B hereto (the "Security
Agreement"), duly executed on behalf of Borrower, as well as all
documents necessary to perfect the security interest contemplated by
such Security Agreement, duly executed on behalf of Borrower.
(c) Option and Warrant Agreement. Lender, Borrower and
W.D. Everitt, Jr. shall have entered into an Option and Warrant
Agreement in such form acceptable to Lender in its sole discretion,
pursuant to which Lender shall have an option to purchase 40% of the
equity interest of Borrower for apurchase price of $4,000,000.
(d) Loan Purchase Agreement. Lender and Borrower shall have
entered into a Loan Purchase Agreement in such form acceptable to
Lender in its sole discretion, which Loan Purchase Agreement shall
provide for, among other things, Lender to purchase 100% of Qualified
Mortgage Loans offered to it by Borrower (provided that Borrower shall
offer not less than 80% in principal amount of Qualified Mortgage
Loans) (the "Loan Purchase Agreement").
(e) Proceedings. Lender shall have received certificates
signed by each Member dated as of the Closing Date as to (i) true
copies of the Articles of Organization and the Operating Agreement (or
other constituent documents) of Borrower in effect on such date (which
documents shall have been amended to Lender's satisfaction), (ii) true
copies of all requisite action taken by Borrower authorizing the
execution, delivery and performance of the Loan Documents and Other
Transaction Documents and (iii) the incumbency and signature of the
Manager of Borrower executing this Agreement and the other Loan
Documents and Other Transaction Documents. Lender shall have received a
certificate from the Secretary of State of Georgia dated not more than
45 days before the Closing Date showing the good standing of Borrower
in the State of Georgia.
(f) Legal Opinion of Counsel to Borrower. Lender shall have
received an opinion addressed to Lender, dated the Closing Date, of
Fleming, Drummond & Ray, a limited liability company, counsel to
Borrower in substantially the form
21
attached hereto as Exhibit C; Borrower hereby expressly instructs
such counsel to prepare such opinion and to deliver such opinion to Lender.
4.2. Conditions to All Loans. The obligation of Lender to make
any Loan is subject to performance by Borrower of its obligations to be
performed hereunder and under the other Loan Documents and the Other Transaction
Documents on or before the date of such Loan, satisfaction of the conditions
precedent set forth herein and in the other Loan Documents (including without
limitation the conditions precedent to the effectiveness of this Agreement set
forth in Section 4.1) and to the satisfaction of the following further
conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by Borrower herein and in each
other Loan Document shall be true and correct in all material respects
on and as of the date of such Loans as if made on and as of such date,
both before and after giving effect to the Loans requested to be made
on such date.
(b) No Defaults. No Event of Default or Potential Default
shall have occurred and be continuing on the date of such Loans
or after giving effect to the Loans requested to be made on such
date.
(c) No Violations of Law, etc. Neither the making nor use
of the Loans shall cause Lender to violate or conflict with any Law.
Each request by Borrower for any Loan shall constitute a representation and
warranty by Borrower that the conditions set forth in this Section 4.2 have been
satisfied as of the date of such request. Failure of Lender to receive notice
from Borrower to the contrary before the Loan pertaining to such Loan is made
shall constitute a further representation and warranty by Borrower that the
conditions set forth in this Section 4.2 have been satisfied as of the date such
Loan is made.
ARTICLE 5 -- AFFIRMATIVE COVENANTS
Except as otherwise provided in this Article 5, so long as
Lender is obligated to make Loans to Borrower under this Agreement or so long as
there remains outstanding any Obligations:
5.1. Basic Reporting Requirements.
(a) Annual Audit Reports. As soon as practicable, and in any
event within 120 days after the close of each fiscal year of Borrower, Borrower
shall furnish or cause to be furnished to Lender statements of income, cash
flows and changes in owners' equity of Borrower for such fiscal year and a
statement of financial position as of the close of such fiscal year, and notes
to each, all in reasonable detail, setting forth in comparative form the
corresponding figures for the preceding fiscal year. Such financial
22
statements shall (i) for Borrower's fiscal year ended December 31, 1995, be
accompanied by an opinion of independent certified accountants selected by
Borrower and (ii) for each of Borrower's fiscal years ended after December 31,
1995, be accompanied by an opinion of independent certified public accountants
of recognized national standing selected by Borrower. Such opinion shall be
free of exceptions or qualifications not acceptable to Lender and in any event
shall be free of any exception or qualification that relates to a limited
scope of examination. In addition, such opinion for each of Borrower's fiscal
years ended after December 31, 1995 shall be free of any exception or
qualification that is of "going concern" or like nature. Such opinion in any
event shall contain a written statement of such accountants that (i) such
accountants examined such financial statements in accordance with generally
accepted auditing standards considered necessary under the circumstances and
(ii) in the opinion of such accountants such financial statements present
fairly the financial position of Borrower as of the end of such fiscal year
and the results of its operations and its cash flows and changes in owners'
equity for such fiscal year, in conformity with GAAP.
(b) Mortgage Loan Reporting. On each Business Day before the
Maturity Date, Borrower shall submit to Lender a report substantially in the
form attached hereto as Exhibit D with respect to the immediately preceding
Business Day.
(c) Other Information. Borrower shall furnish to Lender, as
soon as available but not later than 30 days after the end of each calendar
month, a copy of such monthly financial reports as prepared by Borrower in its
normal course of business for such month. In addition, Borrower shall promptly
furnish to Lender such other financial information and in such form as Lender
may reasonably request from time to time.
(d) Notice of Certain Events. Promptly upon becoming aware of
any of the following, Borrower shall give Lender notice thereof, together with a
written statement setting forth the details thereof and any action with respect
thereto taken or proposed to be taken by Borrower:
(i) any Event of Default or Potential Default;
(ii) any material adverse change in the business, operations,
or condition (financial or otherwise) or prospects of Borrower other
than any proposed, but yet-to-be enacted, changes in Law;
(iii) any pending or threatened action, suit, investigation or
proceeding by or before any Governmental Authority against or affecting
Borrower, except for matters that if decided adversely, individually or
in the aggregate, could not have a Material Adverse Effect; or
(iv) any Pension-Related Event, which notice shall be
accompanied by a copy of any notice, request, return, petition or other
document received by Borrower or any Controlled Group Member from any
Person, or that has been or
23
is to be filed with or provided to any Person (including, without
limitation, the Internal Revenue Service, PBGC or any Plan
beneficiary, alternate payee or employer representative), in
connection with such Pension-Related Event.
(v) any Environmental Claim pending or threatened against
Borrower or any of its Environmental Affiliates, or any past or present
acts, omissions, events or circumstances (including but not limited to
any dumping, leaching, deposition, removal, abandonment, escape,
emission, discharge or release of any Environmental Concern Material
at, or under any facility or property now or previously owned, operated
or leased by Borrower or any of its Environmental Affiliates) that
could form the basis of such Environmental Claim, which Environmental
Claim, if resolved adversely, individually or in the aggregate with
other Environmental Claims, could have a Material Adverse Effect.
(e) Visitation; Verification; Copies of Mortgage Documents.
Borrower shall permit such Persons as Lender may designate from time to time to
visit and inspect any of the properties of Borrower, to examine Borrower's books
and records and take copies and extracts therefrom and to discuss its affairs
with its Manager, officers, Members or other equity owners, employees and
independent accountants at such times and as often as Lender may reasonably
request. Borrower authorizes its Manager, such officers, Members or other equity
owners and independent accountants to discuss with Lender the affairs of
Borrower. In addition, Borrower shall provide copies of Mortgage Documents
pertaining to Mortgage Loans owned by Borrower as Lender may reasonably request
from time to time.
5.2. Insurance. Borrower shall maintain with financially sound
and reputable insurance companies, insurance with respect to its properties and
business and against such liabilities, casualties and contingencies and of such
types and in such amounts as is customary in the case of corporations or limited
liability companies engaged in the same or similar businesses or having similar
properties similarly situated.
5.3. Payment of Taxes and Other Potential Charges and
Priority Claims. Borrower shall pay or discharge
(a) on or prior to the date on which penalties attach thereto,
all taxes, assessments and other governmental charges imposed upon it
or any of its properties;
(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, landlords and other
like Persons that, if unpaid, might result in the creation of a Lien
upon any such property; and
(c) on or prior to the date when due, all other lawful claims
that, if unpaid, might result in the creation of a Lien upon any such
property or that, if unpaid,
24
might give rise to a claim entitled to priority over general
creditors of Borrower in a case under Title 11 (Bankruptcy) of the
United States Code, as amended;
provided that unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced, Borrower need not pay or discharge any
such tax, assessment, charge or claim so long as (x) the validity thereof is
contested in good faith and by appropriate proceedings diligently conducted and
(y) such reserves or other appropriate provisions as may be required by GAAP
shall have been made therefore.
5.4. Preservation of Organizational Status. Borrower shall
maintain its status as a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Georgia, and to be
duly qualified to do business in good standing in all jurisdictions in which the
ownership of its properties or the nature of its business or both make such
qualification necessary or advisable, except for matters that, individually or
in the aggregate, could not have a Material Adverse Effect.
5.5 Governmental Approvals and Filings. Borrower shall keep
and maintain in full force and effect all Governmental Actions necessary or
advisable in connection with execution and delivery of any Loan Document or
Other Transaction Document by Borrower, consummation by Borrower of the
transactions herein or therein contemplated, performance of or compliance with
the terms and conditions hereof or thereof by Borrower or to ensure the
legality, validity, binding effect, enforceability or admissibility in evidence
hereof or thereof.
5.6. Maintenance of Properties and Mortgage Loans. Borrower
shall maintain in good repair, working order and condition the properties now or
hereafter owned, leased or otherwise possessed by it and shall make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto so that the business carried on in connection therewith may be properly
and advantageously conducted at all times. Borrower shall take, or cause to be
taken, all steps and actions necessary for all Mortgage Loans owned by it to
maintain their status as Qualified Mortgage Loans or Exceptions Loans, as the
case may be.
5.7. Avoidance of Other Conflicts. Borrower shall not
violate or conflict with, be in violation of or conflict with, or be or
remain subject to any liability (contingent or otherwise) on account of any
violation or conflict with
(a) any Law,
(b) its Articles of Organization or Operating Agreement (or
other constituent documents), or
(c) any agreement or instrument to which it is party or
by which it or any of its properties (now owned or hereafter
acquired) may be subject or bound,
25
except for matters that could not, individually or in the aggregate,
have a Material Adverse Effect.
5.8. Financial Accounting Practices. Borrower shall make and
keep books, records and accounts that, in reasonable detail, accurately and
fairly reflect its transactions and dispositions of its assets and maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (a) transactions are executed in accordance with management's
general or specific authorization, (b) transactions are recorded as necessary to
(i) permit preparation of financial statements in conformity with GAAP and (ii)
maintain accountability for assets, (c) access to assets is permitted only in
accordance with management's general or specific authorization and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
5.9 Use of Proceeds. Borrower shall apply the proceeds of all
Loans hereunder only for the purpose (and for no other purpose) of (i) funding
Qualified Mortgage Loans and Exception Loans originated by a Subsidiary or
Affiliate of H&R Block, Inc. or a Subsidiary or Affiliate of an H&R Block
Franchisee (but only to the extent (A) such Qualified Mortgage Loans and
Exception Loans are purchased by Borrower within 25 Business Days after the date
such Qualified Mortgage Loans and Exception Loans are funded or (B) the
advances, loans or extensions of credit made by Borrower to fund such Qualified
Mortgage Loans and Extension Loans are repaid to Borrower within 25 Business
Days after the date such Qualified Mortgage Loans and Exception Loans are
funded) and (ii) making or purchasing Qualified Mortgage Loans and Exception
Loans; provided that the amount of Exception Loans that may be owned by Borrower
on any day shall be subject to the provisions of Section 6.6. Borrower shall not
use the proceeds of any Loans hereunder directly or indirectly for any unlawful
purpose or in any manner inconsistent with any other provision of any Loan
Document.
5.10. Real Property. Upon acquisition by Borrower of any
Underlying Property (whether pursuant to foreclosure or deed in lieu of
foreclosure) or any time thereafter, Borrower shall at Lender's request (i)
execute and deliver a first priority mortgage or deed of trust, in such form as
designated by Lender, in favor of Lender covering such Underlying Property and
(ii) deliver an ALTA-form title insurance policy naming Lender as insured
mortgagee, issued by a title insurance company acceptable to Lender, in an
amount not less than the fair market value of such Underlying Property (as
determined by Lender in its reasonable discretion), insuring that Lender has a
first mortgage, with such endorsements as may be required by Lender and with no
exceptions or exclusions other than standard exceptions or exclusions or as may
be approved by Lender.
5.11. Servicing of Mortgage Loans. Borrower covenants to
service, or to cause a third-party servicer to service, at Borrower's sole cost
and expense all Mortgage Loans owned by Borrower in accordance with prudent
residential mortgage loan servicing standards.
26
5.12. Delivery of Notes. (a) Borrower shall cause to be
delivered to Lender (or such third party designated by Lender in writing) each
Mortgage Note (i) pertaining to a Mortgage Loan owned by Borrower or (ii) in
which Borrower has been granted a security interest. Each such Mortgage Note
shall be delivered directly to Lender (i) with respect to Mortgage Loans
purchased by Borrower, by the Person from whom Borrower purchased the applicable
Mortgage Loan, such delivery to be made concurrently with the purchase by
Borrower of such Mortgage Loan and (ii) with respect Mortgage Notes in which
Borrower has been granted a security interest, by the Person that processed the
origination of the applicable Mortgage Loan, such delivery to be made within one
day after the closing of such Mortgage Loan. Lender acknowledges and agrees that
any Mortgage Note in Lender's possession with respect to which Borrower has a
security interest (other than a Mortgage Note pertaining to a Mortgage Loan
purchased by Borrower) shall be held by Lender as a bailee of Borrower and that
this Agreement shall be deemed notification of Borrower's security interest in
such Mortgage Note.
(b) Borrower shall deliver to Lender (or such third party
designated by Lender in writing) each promissory note pertaining to advances,
loans and extensions of credit to H&R Block Franchisees or Subsidiaries or
Affiliates of H&R Block Franchisees permitted by Section 6.6. Each such
promissory note shall be delivered directly to Lender within one day after the
closing or making of such advance loan or extension of credit.
(c) Borrower shall deliver to Lender a Collateral Assignment
of Mortgage substantially in the form of Exhibit E attached hereto, duly
executed and acknowledged by Borrower, with respect to each Mortgage (i)
pertaining to a Mortgage Loan owned by Borrower or (ii) in which Borrower has
been granted a security interest. Each such Collateral Assignment of Mortgage
shall be delivered to Lender within seven days after the closing of the
applicable Mortgage Loan.
5.13. Further Assurances. Borrower shall promptly, upon the
request of Lender, at Borrower's expense, cause, make, execute, endorse,
acknowledge, file and/or deliver to Lender from time to time such assignments,
conveyances, and financing or continuation statements, and take such further
steps relating to the collateral covered by any of the Loan Documents
(including, without limitation, the assignment or transfer of such collateral to
Lender or such third-party designated by Lender) as Lender may reasonably
require.
ARTICLE 6 -- NEGATIVE COVENANTS
So long as Lender is obligated to make Loans to Borrower under
this Agreement or so long as there remains outstanding any Obligations:
27
6.1. Indebtedness. Borrower shall not create, incur, assume or
suffer to exist any Indebtedness exceeding an aggregate outstanding principal
amount of $50,000 other than (i) Indebtedness of Borrower under this Agreement,
(ii) Indebtedness of Borrower in existence on the date hereof and disclosed on
Schedule 3.19 and (iii) Indebtedness secured by Liens permitted pursuant to
Section 6.2.
6.2. Liens. Borrower shall not, directly or indirectly,
create, incur, assume or suffer to exist any Lien on any of its properties,
assets or revenues, whether now owned or hereafter acquired, other than the
following:
(i) Liens created under the Loan Documents in favor or
Lender;
(ii) Liens incurred or pledges and deposits made in connection
with worker's compensation, unemployment insurance and other social
security benefits and Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature, in each case, incurred in the ordinary
course of business;
(iii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good
faith by appropriate proceedings promptly instituted and diligently
concluded (provided that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made
therefor);
(iv) Liens imposed by Law, such as mechanics' carriers',
warehousemen's, materialmen's, and vendors' Liens, incurred in good
faith in the ordinary course of business with respect to amounts not
yet delinquent or being contested in good faith by appropriate
proceedings if a reserve or other appropriate provisions, if any, as
shall be required by GAAP shall have been made therefor;
(v) Liens of landlords or mortgagees of landlords, arising
solely by operation of Law, on fixtures and movable property located on
premises leased by Borrower in the ordinary course of business;
(vi) financing statements filed or recorded with respect to
personal property leased by Borrower in the ordinary course of business
to the owners of such personal property (provided such financing
statements are filed or recorded solely in connection with such leases
and not the borrowing of money or the obtaining of advances or credit
or Capitalized Lease obligations); and
(vii) Liens arising out of judgments or awards in respect of
which it shall in good faith be prosecuting an appeal or proceedings
for review and in respect of which it shall have secured a subsisting
stay of execution pending such appeal or proceedings for review.
28
6.3. Fundamental Changes. Borrower shall not (i) enter into
any transaction of merger or consolidation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), (ii) convey, sell, lease, or
otherwise transfer all or substantially all of its business, property or assets,
whether in one or a series of transactions or (iii) sell, assign, convey or
otherwise transfer to any Person a participation or other partial interest in
Mortgage Loans or loans made by Borrower as permitted pursuant to clause (ii) of
Section 6.6; provided that this Section 6.3 shall not prohibit Borrower from
selling its entire ownership interest in Mortgage Loans in the ordinary course
of business.
6.4. Transactions with Affiliates. Borrower shall not sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (an "Affiliate Transaction"), unless such Affiliate Transaction is on
terms that are no less favorable to Borrower than those that would have been
obtained in a comparable transaction by Borrower with an unrelated Person;
provided that this Section 6.4 shall not be deemed to prohibit the transactions
contemplated by any Loan Document or any Other Transaction Document.
6.5. Contingent Obligations. Borrower shall not agree to
create, incur, assume, guarantee, endorse or otherwise in any way be or become
responsible or liable, directly or indirectly, for any contingent obligations
of any other Person.
6.6. Investments, Loans and Advances; Structure. Borrower
shall not make any advance, loan, extension of credit or capital contribution
to, or purchase any stock, bonds, notes, debentures or other securities or
equity interests of, or make any other investments in, any Person except for (i)
Qualified Mortgage Loans and Exception Loans made or purchased by Borrower in
the ordinary course of business (provided, however, that at no time shall the
aggregate outstanding principal balance of Exception Loans owned by Borrower as
of the close of business on any day exceed 10% of the combined aggregate
outstanding principal balance of Exception Loans and Qualified Loans owned by
Borrower as of the close of business on such day), (ii) advances, loans and
extensions of credit to H&R Block Franchisees or Subsidiaries or Affiliates of
H&R Block Franchisees solely for the purpose of funding Qualified Mortgage Loans
and Exception Loans and solely pursuant written loan agreements in form and
substance approved in writing in advance by Lender, (iii) overnight funds with
federally chartered and federally insured institutions and (iv) other short-term
investments rated A or higher by Standard & Poors, Moody's, Best, Fitch or any
other appropriate rating agency and that have a maturity of one year or less. In
addition, Borrower shall not form any subsidiary corporation or limited
liability company without the prior written consent of Lender and Borrower shall
not take any action or forbear from taking any action (including, without
limitation, the granting of consents to actions taken or proposed to be taken by
others) that would cause Borrower to be taxable as a corporation for federal
income tax purposes.
29
6.7. Lease Obligations. Borrower shall not create or suffer to
exist any obligations for the payment or rent or any property under lease or
agreement to lease, except for operating leases entered into by Borrower in the
ordinary course of business that provide for aggregate annual rentals that do
not exceed $120,000.
6.8. Restricted Payments. Borrower shall not, directly or
indirectly (i) declare or pay any dividend or make any distribution on account
of any equity or ownership interest in Borrower other than a Permitted
Distribution and other than pursuant to Section 4.01(a) (or applicable successor
section) of the Operating Agreement or (ii) purchase, redeem, call or otherwise
acquire or retire for value any equity or ownership interest in Borrower;
provided that this Section 6.8 shall not be deemed to prohibit the transactions
contemplated by the Other Transaction Documents. Not later than the date of
making any Permitted Distribution, the Manager of Borrower shall deliver to
Lender an officer's certificate signed by the Manager of Borrower stating that
such Permitted Distribution is permitted and setting forth the basis upon which
the calculations required by this Section 6.8 were computed.
6.9. Change in Business; Funding or Purchasing of Loans.
Borrower shall not engage in any material line of business substantially
different from those lines of business carried on by Borrower on the date
hereof, and Borrower shall not fund or purchase any loans other than Qualified
Mortgage Loans and Exception Loans.
6.10. Amendments of Organization Documents and Material
Agreements. Borrower shall not, without the prior written consent of Lender,
modify, amend, supplement or replace, nor permit any modification, amendment,
supplement or replacement of, (i) the Articles of Organization or the Operating
Agreement (or other constituent documents) of Borrower or any document executed
and delivered in connection with any of the forgoing, (ii) any agreement with
any third-party servicer pertaining to the servicing of the Mortgage Loans owned
by Borrower or (iii) any agreement with an H&R Block Franchisee or a Subsidiary
or Affiliate of an H&R Block Franchisee pertaining to advances, loans or
extensions of credit by Borrower to such H&R Block Franchisee or Subsidiary or
Affiliate.
6.11. Amendments of Underwriting Criteria. Borrower shall
not modify, amend, supplement or replace, nor permit any modification,
amendment, supplement or replacement of, the underwriting criteria set
forth in Schedule 6.11 without the prior written consent of Lender.
6.12. Borrowing Base. (a) Borrower shall not permit the
aggregate outstanding principal balance of Loans hereunder on any day to be
greater than the sum of (i) the aggregate outstanding principal balance of
Qualified Mortgage Loans and Exception Sale Loans that are owned by Borrower on
such day and have been outstanding as of such day for less than 91 days, plus
(ii) 95% of the aggregate outstanding principal balance of Exception Loans
(other than Exception Sale Loans) that
30
are owned by Borrower on such day and have been outstanding as of such day for
less than 91 days, plus (iii) the aggregate original principal balance of
Qualified Mortgage Loans and Exception Sale Loans that are originated on the
Business Day next following such day and are originated in states that require
the funds for Mortgage Loans to be available 24 hours prior to the origination
of such Mortgage Loans, plus (iv) 95% of the aggregate original principal
balance of Exception Loans (other than Exception Sale Loans) that are
originated on the Business Day next following such day and are originated in
states that require the funds for Mortgage Loans to be available 24 hours
prior to the origination of such Mortgage Loans, plus (v) the aggregate amount
of proceeds advanced by Borrower pursuant to, and in compliance with, clause
(i) of Section 5.9.
(b) In the event Borrower repurchases from Lender any Mortgage
Loan sold to Lender pursuant to the Loan Purchase Agreement, such Mortgage Loan
shall be deemed to have commenced being outstanding for purposes of this Section
6.12 as of the date of such repurchase.
6.13. Third-Party Servicing Agreements. Borrower shall not,
without the prior written consent of Lender, enter into any agreements with
any third party pertaining to the servicing by such party of Mortgage Loans
owned by Borrower.
ARTICLE 7 -- DEFAULTS
7.1. Events of Default. An Event of Default shall mean the
occurrence or existence of one or more of the following events or conditions
(for any reason, whether voluntary, involuntary or effected or required
by Law):
(a) Principal of any Loan shall not have been paid when due.
(b) Interest on any Loan, any fees, indemnity or expenses, or
any other amount due hereunder or under any other Loan Document shall
not have been paid when due and such failure (other than a failure
pertaining to any amount due on or after the Maturity Date) shall have
continued for a period of five Business Days.
(c) Any representation or warranty made or deemed to be made
by Borrower in or pursuant to or in connection with any Loan Document,
or any statement made by Borrower (or the Manager or any Member of
Borrower) in any financial statement, certificate, report, exhibit or
document furnished by Borrower (or such Manager or Member) to Lender
pursuant to or in connection with any Loan Document, shall prove to
have been false or misleading in any material respect as of the time
when made or deemed made (including by omission of material information
necessary to make such representation, warranty or statement not
misleading).
31
(d) Borrower shall default in the performance or observance
of any of the covenants contained in Section 5.1(d)(i) or Article 6.
(e) Borrower shall default in the performance or observance of
any other covenant, agreement or duty under this Agreement or any other
Loan Document and (i) in the case of a default under Section 5.1 (other
than as referred to in subsection (d)(i) thereof), such default shall
have continued for a period of ten Business Days and (ii) in the case
of any other default, such default shall have continued for a period of
thirty days.
(f) One or more judgments for the payment of money shall have
been entered against Borrower, which judgment or judgments equal or
exceed $100,000 in the aggregate, and such judgment or judgments shall
have remained undischarged and unstayed for a period of thirty
consecutive days.
(g) One or more writs or warrants of attachment, garnishment,
execution, distraint or similar process equal to or exceeding in value
the aggregate amount of $100,000 shall have been issued against
Borrower or any of its properties and shall have remained undischarged
and unstayed for a period of thirty consecutive days.
(h) Any Loan Document or term or provision thereof shall
cease, for any reason, to be in full force and effect, or any Loan
Document shall cease to be effective to grant a lien on the collateral
described therein with the priority purported to be created thereby; or
Borrower shall, or shall purport to, terminate (except in accordance
with the terms of such Loan Document), repudiate, declare voidable,
void or otherwise contest the enforceability of, any Loan Document or
term or provision thereof or any obligation or liability of Borrower
thereunder.
(i) Any Other Transaction Document or any material term or
provision thereof shall cease to be in full force and effect; or any
party (other than Lender) thereto shall, or shall purport to,
terminate, repudiate, declare voidable or void or otherwise contest the
enforceability of, any of such agreements or any material term or
provision thereof or any material obligation or liability of any party
thereunder; or any party (other than Lender) thereto shall default
beyond any applicable grace or cure period in the observance or
performance of any material term, provision or condition thereof.
(j) A Governmental Authority shall have ruled, determined or
held that the forms of the Mortgage Note and the Mortgage pertaining to
any Mortgage Loan owned by Borrower are such that they do not
constitute legal, valid and binding obligations, enforceable against
the obligor(s) thereunder in accordance with the respective terms
thereof (subject to bankruptcy, insolvency and other laws relating to
the enforcement of creditors' rights in general and to general
principles of equity), and Lender shall determine in good faith (which
32
determination shall be conclusive) that such ruling, determination or
holding, individually or in the aggregate could have a Material Adverse
Effect.
(k) Any one or more Pension-Related Events referred to in
subsection (a)(ii), (b) or (e) of the definition of "Pension-Related
Event" shall have occurred; or any one or more other Pension-Related
Events shall have occurred and Lender shall determine in good faith
(which determination shall be conclusive) that such other
Pension-Related Events, individually or in the aggregate, could have a
Material Adverse Effect.
(l) Any one or more of the events or conditions set forth in
the following clauses (i) or (ii) shall have occurred in respect of
Borrower or any of its Environmental Affiliates, and Lender shall
determine in good faith (which determination shall be conclusive) that
such events or conditions, individually or in the aggregate, could have
a Material Adverse Effect: (i) any past or present violation of any
Environmental Law by such Person, or (ii) the existence of any pending
or threatened Environmental Claim against any such Person, or the
existence of any past or present acts, omissions, events or
circumstances that could form the basis of any Environmental Claim
against any such Person.
(m) A proceeding shall have been instituted in respect of
Borrower
(i) seeking to have an order for relief entered in
respect of such Person, or seeking a declaration or entailing
a finding that such Person is insolvent or similar declaration
or finding, or seeking dissolution, winding up, charter
revocation or forfeiture, liquidation, reorganization,
arrangement, adjustment, composition or other similar relief
with respect to such Person, its assets or its debts under any
Law relating to bankruptcy, insolvency, relief of debtors or
protection of creditors, termination of legal entities or any
other similar Law now or hereinafter in effect, or
(ii) seeking appointment of a receiver, trustee,
liquidator, assignee sequestrator or other custodian for such
Person or for all or any substantial part of its property,
and such proceeding shall result in the entry, making or grant of such
order for relief, declaration, finding, relief or appointment, or such
proceeding shall remain undismissed and unstayed for a period of thirty
consecutive days.
(n) Borrower shall become insolvent; shall fail to pay, become
unable to pay, or state that it is or will be unable to pay, its debts
as they become due; shall voluntarily suspend transaction of its
business; shall make a general assignment for the benefit of creditors;
shall institute (or fail to controvert in a timely and appropriate
manner) a proceeding described in Section 7.1(m)(i), or
33
(whether or not any such proceeding has been instituted) shall consent
to or acquiesce in any such order for relief described therein; shall
institute (or fail to controvert in a timely and appropriate manner) a
proceeding described in Section 7.1(m)(ii), or (whether or not any
such proceeding has been instituted) shall consent to or acquiesce in
any such appointment or to the taking of possession by any such
custodian of all or any substantial part of its property; shall
dissolve, wind up, revoke or forfeit its charter other constituent
documents) or liquidate itself or any tantial part of its property;
or shall take any action in herance of any of the foregoing.
7.2. Consequences of an Event of Default. (a) If an Event of
Default specified in subsections (a) through (l) of Section 7.1 shall occur and
be continuing or shall exist, then, in addition to all other rights and remedies
that Lender may have hereunder or under any other Loan Document, at law, in
equity or otherwise, Lender shall be under no further obligation to make Loans
hereunder, and Lender may, by notice to Borrower, from time to time do any of
the following:
(i) Declare the Loan Commitment terminated, whereupon the Loan
Commitment will terminate and any fees hereunder shall be immediately
due and payable without presentment, demand, protest or further notice
of any kind, all of which are hereby waived, and an action therefor
shall immediately accrue.
(ii) Declare the unpaid principal amount of the Loans,
interest accrued thereon and all other Obligations to be immediately
due and payable without presentment, demand, protest or further notice
of any kind, all of which are hereby waived, and an action therefor
shall immediately accrue.
(b) If an Event of Default specified in subsections (m) or (n)
of Section 7.1 shall occur or exist, then, in addition to all other rights and
remedies that Lender may have hereunder or under any other Loan Document, at
law, in equity or otherwise, the Loan Commitment shall automatically terminate
and Lender shall be under no further obligation to make Loans, and the unpaid
principal amount of the Loans, interest accrued thereon and all other
Obligations shall become immediately due and payable without presentment,
demand, protest or further notice of any kind, all of which are hereby waived,
and an action therefor shall immediately accrue.
ARTICLE 8 -- MISCELLANEOUS
8.1. Holidays. Whenever any payment or action to be made or
taken hereunder or under any other Loan Document shall be stated to be due on a
day that is not a Business Day, such payment or action shall be made or taken on
the next following Business Day and such extension of time shall be included in
computing interest or fees, if any, in connection with such payment or action.
34
8.2. Records. The unpaid principal amount of the Loans, the
unpaid interest accrued thereof, the interest rate or rates applicable to such
unpaid principal amount, the duration of such applicability, the Committed
Amount, and the accrued and unpaid fees owing to Lender shall at all times be
ascertained from the records of Lender, which shall be conclusive absent obvious
error.
8.3. Amendments and Waivers. Lender and Borrower may from time
to time amend, modify or supplement the provisions of this Agreement or any
other Loan Document for the purpose of amending, adding to, or waiving any
provisions, or changing in any manner the rights and duties of Borrower and
Lender. Any such amendment, modification or supplement must be in writing signed
by Borrower and Lender and shall be effective only to the extent set forth in
such writing. Any Event of Default or Potential Default waived or consented to
in any such amendment, modification or supplement shall be deemed to be cured
and not continuing to the extent and for the period set forth in such waiver or
consent, but no such waiver or consent shall extend to any other or subsequent
Event of Default or Potential Default or impair any right consequent thereto.
8.4. No Implied Waiver; Cumulative Remedies. No course of
dealing and no delay or failure of Lender in exercising any right, power or
privilege under this Agreement or any other Loan Document shall affect any other
or future exercise thereof or exercise of any other right, power or privilege;
nor shall any single or partial exercise of any such right, power or privilege
or any abandonment or discontinuance of steps to enforce such a right, power or
privilege preclude any further exercise thereof or of any other right, power or
privilege. The rights and remedies of Lender under this Agreement and any other
Loan Document are cumulative and not exclusive of any rights or remedies that
Lender would otherwise have hereunder or thereunder, at law, in equity or
otherwise.
8.5. Notices. (a) Except to the extent otherwise expressly
permitted hereunder or thereunder, all notices, requests, demands, directions
and other communications (collectively, "Notices") under this Agreement or any
Loan Document shall be in writing (including facsimile communication) and shall
be sent by first-class mail, or by nationally-recognized overnight courier, or
by facsimile transmission (with confirmation in writing mailed first-class or
sent by such overnight courier) or by personal delivery. All Notices shall be
sent to the applicable party at the address stated on the signature page hereof
or in accordance with the last unrevoked written direction from such party to
the other party, in all cases with postage or other charges prepaid. Any such
properly given Notice shall be effective on the earliest to occur of receipt,
telephone confirmation of receipt of facsimile transmission, one Business Day
after delivery to a nationally-recognized overnight courier, or three Business
Days after deposit in the mail.
(b) Lender may rely on any notice (whether or not such notice
is made in a manner permitted or required by this Agreement or any Loan
Document) purportedly
35
made by or on behalf of Borrower, and Lender shall not have any duty to verify
the identity or authority of any Person giving such notice.
8.6. Expenses; Taxes; Indemnity. (a) Borrower agrees to pay or
cause to be paid and to save Lender harmless against liability for the payment
of all reasonable out-of-pocket costs and expenses (including but not limited to
reasonable fees and expenses of counsel, including legal counsel, auditors, and
all other professional, accounting, evaluation and consulting costs) incurred by
Lender from time to time arising from or relating to the enforcement or
preservation of rights under this Agreement or any Loan Documents (including but
not limited to any such costs and expenses arising from or relating to (i)
collection or enforcement by Lender of an outstanding Loan or any other amount
owing hereunder or thereunder and (ii) any litigation, proceeding, dispute, work
out, restructuring or rescheduling related in any way to this Agreement or the
Loan Documents).
(b) Borrower hereby agrees to pay all stamp, document,
transfer, recording, filing, registration, search, sales and excise fees and
taxes and all similar impositions now or hereafter determined by Lender to be
payable in connection with this Agreement or any other Loan Documents or any
other documents, instruments or transactions pursuant to or in connection
herewith or therewith, and Borrower agrees to save Lender harmless from and
against any and all present or future claims, liabilities or losses with respect
to or resulting from any omission to pay or delay in paying any such fees, taxes
or impositions.
(c) Borrower hereby agrees to reimburse and indemnify each of
the Indemnified Parties from and against any and all losses, liabilities,
claims, damages, expenses, obligations, penalties, actions, judgments, suits,
costs or disbursements of any kind or nature whatsoever (including, without
limitation, the fees and disbursements of counsel for such Indemnified Party in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnified Party shall be
designated a party thereto) that may at any time be imposed on, asserted against
or incurred by such Indemnified Party as a result of, or arising out of, or in
any way related to or by reason of, this Agreement or any other Loan Document,
any transaction from time to time contemplated hereby or thereby, or any
transaction financed in whole or in part or directly or indirectly with the
proceeds of any Loan (and without in any way limiting the generality of the
foregoing, including any violation or breach of any Environmental Law or any
other Law by Borrower or any of its Environmental Affiliates; any Environmental
Claim arising out of the management, use, control, ownership or operation of
property by any such Persons, including all on-site and off-site activities
involving Environmental Concern Materials; or any exercise by Lender of any of
its rights or remedies under this Agreement or any other Loan Document); but
excluding any such losses, liabilities, claims, damages, expenses, obligations,
penalties, actions, judgments, suits, costs or disbursements to the extent
resulting from the negligence or willful misconduct of such Indemnified Party,
as finally determined by a court of competent jurisdiction. If and to the extent
that the foregoing obligations of Borrower
36
under this subsection (c), or any other indemnification obligation of Borrower
hereunder or under any other Loan Document, are unenforceable for any reason,
Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of such obligations that is permissible under applicable Law.
(d) Notwithstanding the provisions of Section 8.6(c) Borrower
shall not be obligated to reimburse and indemnify Indemnified Parties pursuant
to Section 8.6(c) from and against losses, liabilities, claims, damages,
expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements as a result of, or arising out of, or in any way related to or by
reason of, the breach of any Environmental Law by any of Borrower's
Environmental Affiliates or any Environmental Claim arising out of the
management, use, control, ownership or operation of property by any of
Borrower's Environmental Affiliates to the extent (i) such breach of
Environmental Law or such Environmental Claim pertains to a Mortgage Loan
purchased by Lender (and not subsequently repurchased by Borrower from Lender)
pursuant to the Loan Purchase Agreement or the Underlying Property pertaining to
such Mortgage Loan and (ii) such losses, liabilities, claims, damages, expenses,
obligations, penalties, actions, judgments, suits, costs or disbursements would
not have been imposed on, asserted against or incurred by such Indemnified Party
had such Mortgage Loan not been purchased by Lender.
8.7. Severability. The provisions of this Agreement are
intended to be severable. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
8.8. Prior Understandings. This Agreement and the other Loan
Documents supersede all prior and contemporaneous understandings and
agreements, whether written or oral, between the parties hereto relating to
the transactions provided for herein and therein.
8.9. Duration; Survival. All representations and warranties of
Borrower contained herein or in any other Loan Document or made in connection
herewith or therewith shall survive the making of, and shall not be waived by
the execution and delivery of, this Agreement, or any other Loan Document, any
investigation by or knowledge of Lender, the making of any Loan, or any other
event or condition whatever. All covenants and agreements of Borrower contained
herein or in any other Loan Document shall continue in full force and effect
from and after the date hereof so long as Borrower may borrow hereunder and
until payment in full of all amounts due Lender under this Agreement or any
other Loan Documents. Without limitation, all obligations of Borrower hereunder
or under any other Loan Document to make payments to Lender shall survive
termination of Borrower's right to borrow hereunder and all other events and
conditions whatever.
37
8.10. Set-Off. Borrower hereby agrees that if any Obligation
of Borrower shall be due and payable (by acceleration or otherwise), Lender
shall have the right, without notice to Borrower, to set-off against and to
appropriate and apply to such Obligation any indebtedness, liability or
obligation of any nature owing to Borrower by Lender. Such right shall be
absolute and unconditional in all circumstances and, without limitation, shall
exist whether or not Lender or any other Person shall have given notice or made
any demand to Borrower or any other Person, whether such indebtedness,
obligation or liability owed to Borrower is contingent, absolute, matured or
unmatured (it being agreed that Lender may deem such indebtedness, obligation or
liability to be then due and payable at the time of such set-off), and
regardless of the existence or adequacy of any collateral or any other security,
right or remedy available to Lender. The rights provided by this Section are in
addition to all other rights and remedies that Lender may otherwise have under
this Agreement, any other Loan Document, at law or in equity, or otherwise, and
nothing in this Agreement or any other Loan Document shall be deemed a waiver or
prohibition of or restriction on the rights of set-off of any such Person.
8.11. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Borrower, Lender, all future holders of the
Note, and their respective successors and assigns, except that Borrower may not
assign or transfer any of its rights hereunder or interests herein without the
prior written consent of Lender, and any purported assignment without such
consent shall be void.
8.12. Governing Law; Submission to Jurisdiction; Waiver of
Jury Trial; Limitation of Liability.
(a) Governing Law. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS
(EXCEPT TO THE EXTENT, IF ANY, OTHERWISE EXPRESSLY STATED IN SUCH OTHER LOAN
DOCUMENTS) SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF MISSOURI, WITHOUT REGARD TO PRINCIPLES OF CHOICE
OF LAW.
(b) Certain Waivers. BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY ANY PERSON
ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING
IN CONNECTION HEREWITH OR THEREWITH (COLLECTIVELY, "RELATED
LITIGATION") MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION SITTING IN JACKSON COUNTY, MISSOURI, SUBMITS TO THE
JURISDICTION OF SUCH COURTS, AND TO THE FULLEST EXTENT PERMITTED BY LAW
AGREES THAT IT
38
WILL NOT BRING ANY RELATED LITIGATION IN ANY OTHER FORUM (BUT NOTHING
HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION, SUIT OR
PROCEEDING IN ANY OTHER FORUM);
(ii) WAIVES ANY OBJECTION THAT IT MAY HAVE AT ANY TIME TO THE
LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT,
WAIVES ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN
AN INCONVENIENT FORM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO
ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES
NOT HAVE JURISDICTION OVER BORROWER;
(iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT
OR OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER AT THE ADDRESS FOR NOTICES
DESCRIBED IN SECTION 8.5, AND CONSENTS AND AGREES THAT SUCH SERVICE
SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT
NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS
SERVED IN ANY OTHER MANNER PERMITTED BY LAW); AND
(iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED
LITIGATION.
(c) Limitation of Liability. TO THE FULLEST EXTENT PERMITTED
BY LAW, NO CLAIM MAY BE MADE BY BORROWER AGAINST LENDER OR ANY AFFILIATE,
DIRECTOR, OFFICER, EMPLOYEE, ATTORNEY OR AGENT OF LENDER FOR ANY SPECIAL,
INCIDENTAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM
ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION
HEREWITH OR THEREWITH (WHETHER FOR BREACH OF CONTRACT, TORT OR ANY OTHER THEORY
OF LIABILITY). BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY
CLAIM FOR ANY SUCH DAMAGES, WHETHER SUCH CLAIM PRESENTLY EXISTS OR ARISES
HEREAFTER AND WHETHER OR NOT SUCH CLAIM IS KNOWN OR SUSPECTED TO EXIST IN ITS
FAVOR.
39
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by a proper and duly authorized
officer or representative on the day and year first above written.
BLOCK FINANCIAL CORPORATION
By /s/ CLIFFORD A. DAVIS, JR.
---------------------------
Clifford A. Davis, Jr.
Vice President, Finance and
Corporate Development
Address for Notices:
Block Financial Corporation
4435 Main Street, Suite 500
Kansas City, Missouri 64111
Attn: Clifford A. Davis, Jr.
Telephone: 816-751-6000
Facsimile: 816-561-0673
NATIONAL CONSUMER SERVICES
CORP., L.L.C.
By /s/ JOHN B. STANFORTH
---------------------------
John B. Stanforth, Manager
Address for Notices:
ACKNOWLEDGED AND National Consumer Services Corp., L.L.C.
AGREED: 7000 Peachtree Dunwoody Road
Building 17, Suite 120
/s/ W.D. EVERITT, JR. Atlanta, Georgia 30328
- ---------------------- Attn: John B. Stanforth
W.D. Everitt, Jr.
Telephone: 770-395-1119______________
Facsimile: 770-668-0541______________
40