THE THAXTON GROUP, INC.
1524 Pageland Hwy.
P.O. Box 1069
Lancaster, SC 29721
Direct Line: (803) 416-5100
Ph: (888) 842-9866
Fax: (803) 286-5770
____________, 1999
Mr. James T. Garrett, Jr., President
Carolinas First Securities, Inc.
2621 Chelsea Drive
Charlotte, North Carolina 28209
Ladies and Gentlemen:
This letter agreement (this "Agreement") sets forth and confirms the
terms and conditions of the engagement of Carolinas First Securities, Inc.
("Carolinas First") by The Thaxton Group, Inc. (the "Company") as a
non-exclusive selling agent of the Company with respect to the Company's public
offering (the "Offering") of subordinated terms notes due 1, 6, 12, 36 and 60
months and subordinated daily notes (collectively, the "Notes") registered under
the Securities Act of 1933, as amended (the "1933 Act"), pursuant to a
Registration Statement on Form SB-2, as amended (File No. 333-42623) (the
"Registration Statement"), and to be issued under an Indenture, dated February
17, 1998 (the "Indenture"), between the Company and The Bank of New York (the
"Trustee"). The Notes will be offered pursuant to the prospectus included in the
Registration Statement, as it may be supplemented from time to time (the
"Prospectus").
(a) REPRESENTATIONS OF THE COMPANY. The Company represents
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and warrants to Carolinas First as follows:
(i) The Prospectus does not and will not contain any
untrue statements of material fact or omit to state any
material facts required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) During of the Offering, the Company will have
all requisite power and authority and all necessary
authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental regulatory officials and
bodies to own its properties and carry on its businesses as
set forth in the Prospectus and to complete the sale of the
Notes and to enter into this Agreement and to carry out the
provisions and conditions hereof;
(iii) Neither the execution and delivery of this
Agreement, the consummation of the transactions herein
contemplated, nor compliance with the terms and provisions
hereof will conflict with or result in a breach of any of the
terms, provisions or conditions of the articles of
incorporation or bylaws of the Company, or any agreement or
instrument to which the Company is a party, or by which it or
any of its properties, is bound or affected, or violate any
franchise, license, permit, judgement, decree, order, statute,
rule or regulation applicable to the Company;
(iv) The Notes, when issued and delivered to
purchasers in exchange for payment to the Company of the
respective principal amounts thereof and authenticated by the
Trustee as provided in the Indenture, will be duly and validly
issued and fully paid;
(v) This Agreement has been duly and validly
authorized, executed and delivered by the Company and is a
valid and binding agreement and obligation of the Company
enforceable according to its terms except as such obligations
may be limited by bankruptcy or other laws relating to or
affecting creditors' rights generally; and
(vi) The Company is not subject to any material
contingent obligation nor are its properties or business
subject to any material risks, except those that have been
disclosed in the Prospectus.
(b) Representations of Carolinas First. Carolinas First represents
and warrants to the Company that:
(i) Carolinas First has or will acquire all
appropriate licenses and registrations with the Commission,
the National Association of Securities Dealers, Inc. ("NASD")
and any applicable state regulatory bodies to offer and sell
the Notes on a "best efforts" basis as a non-exclusive selling
agent for the Company;
(ii) Neither Carolinas First nor any person
associated with Carolinas First that participates in the
Offering will make any statements to potential purchasers of
the Notes respecting the Notes, the Company, its operations,
financial condition or prospects except such statements as are
contained in the Prospectus; and
(iii) In connection with the offer and sale of any
Notes by Carolinas First, Carolinas First will comply with all
rules and regulations of the NASD and all other pertinent
regulatory bodies applicable to the conduct of its business
including, without limitation, rules of the NASD applicable to
"fair dealing" with customers and the "suitability" of the
Notes for investment by non-institutional investors.
(c) Duties of Carolinas First. On the basis of the representations
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and warranties of the Company herein contained, and subject to the terms and
conditions herein set forth, Carolinas First agrees:
(i) to act as the Company's selling agent in
connection with the Offering on a non-exclusive basis and, as
such, to use its "best efforts" to offer and sell the Notes in
any and all states where the Company is required to distribute
its Notes through a licensed broker-dealer;
(ii) to manage, oversee and provide consulting
advice to the Company with respect to the Offering in all
states, irrespective of whether or not Carolinas First is
acting as the Company's selling agent in a particular state;
(iii) to assist the Company in identifying additional
states where the Company's Notes can be offered and sold in a
cost-effective manner;
(iv) to the extent the officers of the Company
approve the offering of the Notes in any additional state,
Carolinas First shall develop a marketing plan with respect to
such state and shall present such plan to the officers of the
Company for their approval;
(v) if such plan is approved by the officers of the
Company, Carolinas First shall oversee and manage the
implementation of such plan; and
(vi) if requested by the Company, Carolinas First
shall provide consulting advice to the Company on any issue
within its expertise relating to the Offering.
(d) Compensation of Carolinas First. The Company shall pay to
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Carolinas First the following compensation:
(i) commencing in October 1999, on or before the
fifth day of each calendar month during the term of this
Agreement, a monthly management fee in the amount of
$6,250.00; and
(ii) commencing in November 1999, a monthly sales
commission in an amount equal to the product obtained by
multiplying 0.25% by the aggregate principal amount of all
Notes issued by the Company during the preceding calendar
month (including any renewals of any preexisting Notes) with
respect to which Carolinas First acted as selling agent.
(e) Reimbursement of Certain Expenses
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(i) The Company shall reimburse Carolinas First for
the reasonable and necessary travel expenses incurred by
Carolinas First employees in carrying on the
obligations of Carolinas First hereunder; provided, however
that such expenses are approved by the Company prior to the
time they are incurred.
(ii) If, at the Company's request, Carolinas First
elects to apply for a license or otherwise qualify to operate
as a broker-dealer in any state other than Ohio, North
Carolina and South Carolina in order to provide services to
the Company pursuant to this Agreement in such states, the
Company shall reimburse Carolinas First for the licensing
and/or qualification fees associated with such application.
(iii) Carolinas First may, at the Company's request,
incur expenses other than those described in subparagraphs
(e)(i) and (e)(ii) above in connection with the performance of
its obligations hereunder. Carolinas First shall notify the
Company in writing of any such expense prior to the time it is
incurred and, if agreed to and approved by the Company,
Carolinas First shall be entitled to the reimbursement of such
expense by the Company. Any reimbursement of expenses pursuant
to this subparagraph (e)(iii) shall be made by the Company to
Carolinas First on or before the fifth day of the calendar
month following the calendar month in which the Company is
provided a receipt or other evidence by Carolinas First
satisfactory to the Company documenting the payment by
Carolinas First of such expense.
(f) TERM. The initial term of this Agreement shall commence on
October 1, 1999 and shall be for a term of one calendar month. Until terminated
as provided in the following sentence, this Agreement shall automatically be
renewed and extended for successive terms of one calendar month each until so
terminated. Either party may terminate this Agreement by giving the other party
thirty days notice. This Agreement shall terminate on the thirtieth (30th) day
(the "Termination Date") following the giving of such notice. Upon the
termination of this Agreement, the rights and duties of each party arising
hereunder shall terminate; provided, however, that Carolinas First shall be
entitled to (A) any unpaid compensation earned pursuant to subparagraphs (d)(i)
and (d)(ii) of this Agreement and (B) all unpaid reimbursements of expenses
payable pursuant to subparagraphs (e)(i), (d)(ii) and (e)(iii) of this
Agreement, any such amounts shall be paid in a manner consistent with the terms
of this Agreement.
(g) INDEMNIFICATION. To the extent permitted by law, the Company
will indemnify Carolinas First against all claims, losses, damages or
liabilities (or actions in respect thereof), whether arising in connection with
judicial action, regulatory action or arbitration to the extent such claims,
losses, damages or liabilities arise out of or are based upon any untrue
statement (or alleged untrue statement) of a material fact contained in the
Prospectus or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statement
therein not misleading and the Company will reimburse Carolinas First for any
legal and other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such claims,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company by
or on behalf of and relating to Carolinas First specifically for use in the
Prospectus.
(h) REPRESENTATIONS AND AGREEMENT TO SURVIVE TERMINATION. Except
as the context otherwise requires, all representation, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements as of the date hereof; the Termination Date and for the period
between such dates, and such representation, warranties and agreements shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any party hereto and shall survive termination of this
Agreement and the occurrence of the Termination Date.
(i) INDEPENDENT CONTRACTORS. The Company and Carolinas First are
independent contractors and nothing herein shall be deemed or construed to
create any relationship between the parties other than that of independent
contractors.
(j) INTEGRATION CLAUSE. This Agreement contains all of the
understandings between the parties hereto with reference to the Offering, and
cannot be modified or changed except by a written instrument signed by the
parties hereto.
(k) PARTIES. This Agreement shall inure solely to the benefit of
and shall be binding upon each of the parties hereto and their respective
successors, and assigns and no other person shall have or be construed to have
any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provision herein contained.
(l) ARBITRATION. Any controversy, dispute or question arising out
of or in connection with or in relation to this Agreement or its interpretation
performance or non-performance or any breach thereof shall be determined by
arbitration conducted in Charlotte, North Carolina in accordance with then
existing rules of the American Arbitration Association. The Company shall select
one arbitrator, Carolinas First shall select one arbitrator and the two
arbitrators shall select a third with substantially similar qualifications. Any
decision rendered shall be binding upon the parties thereto and may be enforced
in any jurisdiction. However, the arbitrators have no authority to grant any
relief that is inconsistent with this Agreement. The expense of arbitration
shall be borne equally by the Company and Carolinas First.
(m) APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina.
If the foregoing sets forth your understanding with respect to
Carolinas First's proposed participation in the Offering, please so confirm same
by signing and returning one copy of this Agreement.
THE THAXTON GROUP, INC.
By: __________________________
James D. Thaxton, President
ACCEPTED BY:
CAROLINAS FIRST SECURITIES, INC.
By: _______________________________
James T. Garrett, Jr., President