<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-KSB
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended August 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ______
COMMISSION FILE NUMBER: 0-18091
RSI HOLDINGS, INC.
(Name of small business issuer in its charter)
North Carolina 56-1200363
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
Post Office Box 6847, Greenville, South Carolina 29606
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 271-7171
Securities registered under Section 12(b) of the Exchange Act:
(Name of each exchange on
(Title of each class) which registered)
None None
Securities registered pursuant to Section 12(g) of the Exchange Act:
(Title of Class)
Common Stock, par value $.01
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months, (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [x]
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State issuer's revenues for its most recent fiscal year.
The issuer's revenues from operations during fiscal year 1997
were $270,000.
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and ask prices of such stock, as of a specified date within
the past 60 days. The aggregate market value of the voting stock held by
non-affiliates as of November 12, 1997 was $2,561,882.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: November 18, 1997
Common Stock, par value 7,900,822 shares outstanding
$.01 per share
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Company's definitive Proxy
Statement, to be filed pursuant to Regulation 14A for the annual shareholders'
meeting currently scheduled to be held on January 15, 1998, are incorporated by
reference into Part III.
Transitional Small Business Disclosure Format: Yes No X
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PART I.
Item 1. Description of Business
RSI Holdings, Inc. (the "Company") was incorporated in North Carolina
in 1978 and until July of 1994 was engaged in the sale of turf care equipment
and supplies. The Company had three wholly-owned subsidiaries, RSI Holdings of
Florida, Inc. ("RSI Florida"), Sunbelt Distributors, Inc. ("Sunbelt"), and
Wiegmann & Rose International Corp. ("Wiegmann & Rose"). In July 1994, its
primary supplier notified the Company that it would no longer be authorized to
sell its products. As a result, the Company ceased substantially all of its
existing business operations by August 31, 1994 and during the fiscal years
ended August 31, 1995 and 1996 the Company and its wholly-owned subsidiaries
completed the sale of substantially all of its assets.
On November 4, 1996, the Company purchased the outstanding common stock
of CambridgeBanc, Inc., a small specialized consumer finance business that
originates and sells consumer finance receivables, substantially all of which
are loans secured by liens on improved property. On March 18, 1997, the name of
CambridgeBanc, Inc. was changed to HomeAdd Financial Corporation ("HomeAdd").
Through HomeAdd, the Company makes debt consolidation and home
improvement loans secured by second and third mortgages to customers in South
Carolina and North Carolina. These loans are sold on the secondary market.
HomeAdd's primary means of advertising is through direct mail solicitation. The
Company competes with finance companies, banks and other financial institutions,
many of which also solicit loan business through direct mail solicitation. Many
of its competitors are substantially larger and have significantly greater
capital, experience and other resources than the Company. Because many of the
Company's competitors are much larger these competitors are able to spend much
more for advertising in the markets in which the Company operates. In addition
to direct mail solicitations, these competitors advertise through various other
advertising media.
The Company does not have the financial resources to make the loans and
hold them until their maturity, thus the Company is dependent upon a limited
number of purchasers of the loans. Currently the Company primarily sells to two
wholesale lenders, but is approved to sell loans to seven wholesale lenders.
Most of the Company's competitors generate a greater volume of loans than the
Company and this gives the competitors an advantage when dealing with the loan
purchasers. The Company attempts to compete primarily on the basis of service
and competitive pricing. The Company believes that it is presently a relatively
small competitor in its market.
The Company is approved under the Federal Housing Administration
("FHA") as a FHA Title I lender and accordingly must comply with Federal
regulations for FHA Title I lenders. In addition, HomeAdd must comply with
regulations of various States. Changes in Federal and State regulations as well
as changes in the interpretation of existing Federal and State regulations could
create an environment in which HomeAdd would not be able to operate. For further
information about the operations of HomeAdd, see Part II, Item 6, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," which
is incorporated herein by reference.
The Company's executive offices were located at 245 East Broad Street,
Greenville, South Carolina 29601 through August 31, 1997, but moved to 28 East
Court Street, Greenville, South Carolina, 29601 during September 1997. Its
telephone number is (864) 271-7171. At August 31, 1997 the Company and its
operating subsidiary had a total of fourteen (14) full time employees.
<PAGE> 4
Activities During Fiscal Years 1996 and 1995
During the fiscal years ended August 31, 1996 and 1995, the Company
substantially completed the sales of substantially all of its assets. As of
August 31, 1997, the Company's remaining owned real property (a former branch
facility) was located in Tampa, Florida. On November 19, 1997, this property was
sold. For a discussion of the terms of sale of the Tampa property that has not
yet been sold, reference is made to Part II, Item 6, "Management Discussion and
Analysis - Anticipated Liquidity Requirements," which is incorporated herein by
reference.
Wiegmann & Rose International Corp.
Wiegmann & Rose International Corp., a South Carolina corporation, and
a wholly owned subsidiary of the Company, ceased doing business in October 1986.
Prior to this time, Wiegmann & Rose was principally engaged in the fabrication
and repair of shell and tube heat exchangers, pressure vessels and related
equipment. The Company discontinued the Wiegmann & Rose business segment in
1986. Further information regarding Wiegmann & Rose, contained under the
subheading "Legal Proceedings" in Part I, Item 3 hereof is incorporated herein
by reference.
Environmental Matters
The Company is subject to federal, state and local environmental laws
and regulations. Information contained under the subheading "Legal Proceedings"
in Part I, Item 3 is incorporated herein by reference. As discussed under the
subheading "Legal Proceedings", the Company paid $300,000 in connection with
environmental matters at the property formerly owned by Wiegmann & Rose.
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Item 2. Description of Property
During fiscal year 1997 the Company leased approximately 1,545 square
feet of floor space at 245 East Broad Street, Greenville, South Carolina used
for the Company's principal executive offices under a month-to-month lease
arrangement. During fiscal year 1997 the monthly rental was $885. The office
space at 245 East Broad Street, Greenville, South Carolina was leased from Micco
Corporation. Micco Corporation is owned by four shareholders, all of whom are
beneficial owners of more than 5% of the outstanding common stock of the
Company. One of the shareholders is a Vice President and former director of the
Company. One of the shareholders is the spouse of the Chairman of the Board of
Directors and Chief Executive Officer of the Company and the other three
shareholders are her adult children. The Company believes that this lease
contains provisions as favorable to the Company as could be obtained from a
third-party landlord.
During September of 1997, the Company moved its executive offices to a
facility consisting of approximately 3,000 square feet of floor space located at
28 East Court Street, Greenville, South Carolina. The Company believes that the
property is adequate and suitable for executive office space. The monthly rental
expense to be incurred by the Company beginning in September of 1997 is $2,250
under a month-to-month lease arrangement. The lease at 28 East Court Street,
Greenville, South Carolina includes office furniture and equipment. The office
space at 28 East Court Street, Greenville, South Carolina is leased from CTST,
LLC. CTST, LLC is owned by three shareholders, all of whom are beneficial owners
of more than 5% of the outstanding common stock of the Company. One of the
shareholders is a Vice President and former director of the Company and the
other two shareholders are his adult siblings. The Company believes that this
lease contains provisions as favorable to the Company as could be obtained from
a third-party landlord.
Under the terms of a sublease agreement dated November 4, 1996, HomeAdd
leased office and warehouse space containing approximately 3,000 square feet at
1200 Woodruff Road, Greenville, South Carolina for a period of one year. The
monthly rent through October of 1997 was $1,757. During September of 1997,
HomeAdd relocated to a facility at 850 South Pleasantburg Drive, Greenville,
South Carolina containing approximately 3,100 square feet of finished office
space. The Company believes that this office location is adequate and suitable
for its intended use as an office facility. The monthly rental under a five-year
lease arrangement expiring September of 2002 is $4,167.
The Company leases an office facility in Shelby, North Carolina at $350
per month under an arrangement that expires December 31, 1997. The Company
expects to continue the lease of the Shelby location during fiscal year 1998.
The Company believes that this office is adequate and suitable for its intended
use.
During fiscal year 1997, RSI Florida owned 2.03 acres of land and a
22,000 square foot building in Tampa, Florida. The Tampa, Florida property was
leased to Tresca Industries, a turf equipment dealer, on a month-to-month basis
for $2,400 per month (an annual rental rate of approximately $1.31 per square
foot) terminable on 90 days' notice, pursuant to which the Company was
responsible for the payment of utilities, taxes and building insurance. Property
taxes for 1997 were $8,452. The Company believes that its insurance coverage on
the Tampa property was adequate. During fiscal year 1997, the Tampa property was
held for sale and thus was not subject to depreciation for financial statement
purposes. On November 19, 1997, the Tampa property was sold. For a discussion of
the terms of the sale, see Part II, Item 6, "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
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The Company has no plans to invest in real estate or persons engaged
primarily in real estate activities, nor does it have any formal policy with
respect to such investments. As discussed in Part II, Item 6 "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
HomeAdd makes second and third mortgages in the ordinary course of business;
however, HomeAdd attempts to sell the mortgages promptly in the secondary
market. The Company has no formal investment policy with regard to real estate
mortgages; however, the Company does not intend to invest in real estate
mortgages other than in the ordinary course of business.
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Item 3. Legal Proceedings
Wiegmann & Rose
Environmental Litigation
On November 18, 1996, Wiegmann & Rose International Corp. ("Wiegmann &
Rose"), a wholly-owned subsidiary of the Company, entered into an agreement to
settle a lawsuit brought by Triple A Machine Shop, Inc. ("Triple A"). The
lawsuit related to environmental contamination on property formerly owned by
Wiegmann & Rose and sold to Triple A in 1987. Pursuant to the settlement
agreement Wiegmann & Rose paid to Triple A the sum of three hundred thousand
($300,000) dollars. In addition to the settlement of the lawsuit, Triple A
released Wiegmann & Rose and the Company from any further liability to Triple A
in connection with the property or under the agreement made at the time of sale
of the property to Triple A.
Asbestos Litigation
Wiegmann & Rose is also one of numerous defendants with respect to
seven claims for exposure to asbestos, arising in the normal course of business.
All seven of these claims have been dismissed without prejudice with respect to
Wiegmann & Rose, and the applicable statute of limitations has passed with
respect to at least two of the dismissed claims. The dismissed claims are made
in the following lawsuits, in each case seeking unspecified damages for injury
allegedly due to asbestos exposure: (i) Brophy v. Abex et al. (filed April 9,
1992), pending in the San Francisco, California Superior Court, seeks damages
for wrongful death allegedly due to asbestos exposure. Wiegmann & Rose has been
dismissed without prejudice in this action and the applicable statute of
limitations has now run, barring any subsequent action by the plaintiff against
Wiegmann & Rose. (ii) Canga v. Abex et al. (filed March 18, 1993), pending in
the San Francisco Superior Court, seeks damages for personal injuries allegedly
due to asbestos exposure. Wiegmann & Rose has been dismissed without prejudice
in this action. Recent case law, interpreting the asbestos statute of
limitations statutory provision, suggests that plaintiff now may be foreclosed
from filing suit against the Company. In any event, even if the Company could be
brought back into the litigation, the Company continues to believe that it is
unlikely that plaintiff would do so given the number of relatively "deep pocket"
defendants in the case. (iii) Jordison v. Abex et al. (filed January 21, 1994),
pending in the San Francisco Superior Court, seeks damages for personal injuries
allegedly due to asbestos exposure. The case against Wiegmann & Rose has been
dismissed without prejudice. Recent case law, interpreting the asbestos statute
of limitations statutory provision, suggests that plaintiff now may be
foreclosed from filing suit against the Company. In any event, even if the
Company could be brought back into the litigation, the Company continues to
believe that it is unlikely that plaintiff would do so given the number of
relatively "deep pocket" defendants in the case. (iv) Barnes v. Abex et al.
(filed December 3, 1993), pending in the San Francisco Superior Court, seeks
damages for wrongful death allegedly due to asbestos exposure. The case against
Wiegmann & Rose has been dismissed without prejudice, and the applicable statute
of limitations has run, barring any subsequent action by plaintiff against
Wiegmann & Rose. (v) Richardson v. Abex et al. (filed July 20, 1993), pending in
the San Francisco Superior Court, seeks damages for personal injuries allegedly
due to asbestos exposure. The case against Wiegmann & Rose has been dismissed
without prejudice. Recent case law, interpreting the asbestos statute of
limitations statutory provision, suggests that plaintiff now may be foreclosed
from filing suit against the Company. In any event, even if the Company could be
brought back into the litigation, the Company continues to believe that it is
unlikely that plaintiff would do so given the number of relatively "deep pocket"
defendants in the case. (vi) Sorensen v. Abex et al. (filed July 20, 1993),
pending in
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the San Francisco Superior Court, seeks damages for personal injuries allegedly
due to asbestos exposure. The case against Wiegmann & Rose has been dismissed
without prejudice. Recent case law, interpreting the asbestos statute of
limitations statutory provision, suggests that plaintiff now may be foreclosed
from filing suit against the Company. In any event, even if the Company could be
brought back into the litigation, the Company continues to believe that it is
unlikely that plaintiff would do so given the number of relatively "deep pocket"
defendants in the case. (vii) Hall v. Abex et al. (filed February 25, 1994),
pending in the San Francisco Superior Court, seeks damages for personal injuries
allegedly due to asbestos exposure. The case against Wiegmann & Rose has been
dismissed without prejudice. Recent case law, interpreting the asbestos statute
of limitations statutory provision, suggests that plaintiff now may be
foreclosed from filing suit against the Company. In any event, even if the
Company could be brought back into the litigation, the Company continues to
believe that it is unlikely that plaintiff would do so given the number of
relatively "deep pocket" defendants in the case.
As to the substantive nature of the asbestos claims, the Company
believes that if it could be brought back into the litigation, that valid
defenses would be available. The Company also believes that this is the reason
that the Company has been successful in having all seven of these filed actions
dismissed without prejudice against Wiegmann & Rose.
No actions involving asbestos are currently pending.
Insurance
The Company has been reimbursed for substantially all of its defense
costs relating to the environmental and asbestos claims against Wiegmann & Rose
described above, under a reservation of rights, by its two primary insurance
companies. The Company is seeking reimbursement of the $300,000 settlement
discussed above, but there can be no assurance that insurance coverage will be
available to reimburse the Company for the $300,000 settlement. Presently, the
Company and Wiegmann & Rose's insurance carriers are attempting to negotiate a
settlement of this claim. If no settlement is reached, the Company and/or
Wiegmann & Rose's insurance carrier may initiate litigation to resolve the
reimbursement claim.
Holiday Inns, Inc. Litigation
RSI Corporation (now Delta Woodside), the former parent corporation of
the Company, and Sparjax Corporation, RSI Corporation's now-dissolved
subsidiary, are among several defendants in a lawsuit filed on July 29, 1993 by
Holiday Inns, Inc. in the Circuit Court of the Fourth Judicial Circuit for Duval
County, Florida. In connection with the distribution of the Company's common
stock to the shareholders of RSI Corporation in 1989, the Company indemnified
RSI Corporation against certain types of potential liabilities and expenses,
including those arising in connection with the lawsuit by Holiday Inns, Inc.
This suit seeks indemnification for payments made or to be made by
Holiday Inns, Inc., as the guarantor, to the lessor for obligations under a land
lease agreement allegedly in default. The lease agreement was commenced in 1967
and has a term of ninety-nine years. The lessor under the lease agreement was
originally Fernandina Contractors, Inc., and by assignment is currently Sam
Spevak. Holiday Inns, Inc. was the original lessee under the lease agreement.
Payments under the lease agreement are the greater of $24,000 annually (as
adjusted by the consumer price index) or the highest average annual payments
during any five-year period during the first twenty (20) years of the lease,
using a percentage of income formula. The Company has answered the equitable
subrogation claim of Holiday Inns, Inc., but has
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moved to dismiss the remaining counts of the complaint filed by Holiday Inns,
Inc.
The lessee's interest in the lease agreement has been assigned to a
series of parties including RSI Corporation and Sparjax Corporation. RSI
Corporation was the lessee under the lease agreement from June, 1979 to August,
1979, and Sparjax Corporation was the lessee thereunder from August, 1979 to
January, 1981. The current lessee is American Hotel Investors, Inc. ("AHI"). AHI
allegedly has failed to make lease payments due under the lease agreement and
otherwise to comply with its obligations under the lease agreement.
Holiday Inns, Inc. has alleged that Sparjax Corporation, which is the
assignee of the lease agreement from RSI Corporation, is in breach of a written
Indemnification Agreement executed by Sparjax Corporation in favor of Holiday
Inns, Inc. upon its assumption of the lease agreement in 1979. RSI Corporation
acquired all of Sparjax Corporation's outstanding common stock during fiscal
1983, and Sparjax Corporation was dissolved by forfeiture during fiscal 1990. In
connection with such dissolution, no material assets were distributed from
Sparjax Corporation to RSI Corporation. Other than as described herein, there is
no contractual relationship whatsoever between RSI Corporation and Holiday Inns,
Inc.
On or about September 23, 1992, Sam Spevak filed a lawsuit against
Holiday Inns, Inc. for allegedly failing to pay monthly rent under the lease
agreement. This lawsuit is pending in the Circuit Court of the Fourth Judicial
Circuit, in and for Duval County, Florida. On May 4, 1993, Sam Spevak filed a
Second Amended Complaint seeking from Holiday Inns, Inc. unpaid rent, unpaid
taxes, interest, attorney fees and costs. On November 19, 1993, Sam Spevak filed
a Third Amended Complaint in the Court. This complaint seeks from Holiday Inns,
Inc. unpaid rent, unpaid taxes, attorney's fees and costs, and seeking a
declaratory judgment against Holiday Inns, Inc. to establish whether or not
Holiday Inns, Inc. is liable for costs of repair and maintenance to the leased
premises. Holiday Inns, Inc. amended its complaint to assert similar claims
against all subsequent lessees (including RSI Corporation and Sparjax
Corporation) under the lease agreement, seeking indemnification against sums
paid or to be paid to Sam Spevak pursuant to his lawsuit.
During the first quarter of fiscal 1996, the Company reported a
cross-claim filed by Mr. Donald Roberts against all assignees of W. M. R., Inc.,
including RSI Corporation and Sparjax Corporation. Mr. Roberts was an individual
guarantor of W. M. R., Inc.'s obligations under the land lease. Counsel for RSI
Corporation and Sparjax Corporation have moved to dismiss Mr. Roberts'
cross-claims and the court has granted these motions, without prejudice. Counsel
for Sparjax Corporation and RSI Corporation have informed the Company that the
cross-claims do not raise any new substantive issues, but merely seek
indemnification from all assignees in the event that Mr. Roberts is required to
pay Holiday Inns, Inc. on his individual guaranty.
On December 16, 1996, Sam Spevak filed a Fifth Amended Complaint and
Demand for Jury Trial against Holiday Inns, Inc. Sam Spevak's counsel has
alleged in the Fifth Amended Complaint that effective January 1996, the monthly
minimum rent under the lease is $5,595.85.
With respect to RSI Corporation's maximum exposure in this case,
Holiday Inns has asserted that RSI Corporation and all other lessees are
obligated to reimburse it $259,201 for rent it paid to the landlord as a result
of AHI's failure to pay under the lease. This amount, however, only represents
delinquent rent through October 13, 1993, because Holiday Inns contends that the
lessee's obligations under the lease terminated on that date as a result
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of James "Duke" Williams evicting AHI on behalf of the landlord. Mr. Spevak
claims, however, that as of January, 1995, he is entitled to past monthly rent
and interest (from October 13, 1993 through December 20, 1994) of $82,289 plus
future monthly rent through the end of the lease term in 2068 of $1,834,565
(which sum represents the present value using a 6.5% discount rate). If Mr.
Spevak is successful in proving his claim, RSI Corporation's exposure includes
these latter amounts. In addition, should the court determine that Holiday Inns,
Inc. has an obligation to pay the cost of repairs and maintenance incurred to
date and throughout the balance of the lease term, the amount of such costs
could be substantial but cannot be quantified with any reasonable degree of
accuracy. The Company believes the existing motel property is in a state of
significant disrepair such that it is not commercially usable. The City of
Jacksonville has recently sent notice, presumably to all parties involved in
this lawsuit, threatening to condemn the property and demolish the entire
structure. If that occurs, and the Court determines that the lessees have an
obligation to maintain the property during the lease term, RSI Corporation's
exposure could also include the costs of demolition and the expense of
rebuilding the hotel. This liability, of course, cannot be accurately estimated
at this time but no doubt involves a very substantial amount.
RSI Corporation denies any liability to Holiday Inns, Inc. and intends
to defend this matter vigorously. Upon a motion of counsel for RSI Corporation,
Holiday Inns, Inc.'s claims against RSI Corporation were dismissed without
prejudice, but Holiday Inns, Inc. has filed an Amended Complaint to reinstate
certain of its claims, and to add a claim for equitable subrogation against RSI
Corporation and Sparjax Corporation. Counsel for RSI Corporation and Sparjax
Corporation has answered the equitable subrogation claim, and has moved for
dismissal with prejudice with respect to the claims that have previously been
dismissed.
The deposition of James "Duke" Williams, a critical witness in the
case, has now been taken. Mr. Williams was involved in a contract to assume the
lease from Holiday Inns, Inc., which contract was later canceled by Holiday
Inns, Inc. The parties are presently scheduling the depositions of other
important fact witnesses. These include Mr. Spevak and several of the other
officers of Holiday Inns, Inc. who were involved in the negotiations to cancel
the lease with Mr. Williams. The mediation conference held in January 1995 was
not successful. The trial court recently removed the case from the trial docket
upon being notified that a settlement between Sam Spevak, the owner of the
property, and Holiday Inns and WMI, Inc. (and its individual guarantors) has
been reached. Counsel for the Company has asked for and are awaiting receipt of
the settlement documents. Counsel for the Company has been advised that the
settlement amount is less than $2,000,000. A mediation of the case was held on
Tuesday, November 18, 1997, but no settlement was reached. Settlement
discussions are actively proceeding. The case has not been re-set for trial, and
no dispositive motions have been filed. There is no assurance that any
settlement will occur or that the Company will be able to resolve this matter in
a satisfactory manner.
If found liable for any sum as a result of Holiday Inns, Inc.'s claims,
the Company believes RSI Corporation and Sparjax Corporation would have a claim
in equity against AHI, the current and allegedly defaulting lessee under the
lease agreement, and its principal shareholders, who in the aggregate guaranteed
AHI's obligations under the lease for up to $150,000. AHI is a private
corporation and the Company has no information regarding the financial ability
of AHI or its principal shareholders to perform AHI's obligations under the
lease or to reimburse any third party for any payments made under the lease as a
result of the lawsuit described above.
The ultimate outcome of this matter is not known. No provision has been
<PAGE> 11
made in the accompanying financial statements for any liability, which may
result from this matter.
Other Litigation
On January 12, 1995, a Mr. Cesar A. Cuenca served a complaint against
the Company in the 11th Judicial Circuit Court, Dade County, Florida seeking
damages in excess of the minimal jurisdictional amount of the Court, exclusive
of costs and interest, and demanding costs of the action together with such
further relief as the Court shall deem fit. The Plaintiff alleges that he was
injured while operating a vehicle that was sold by the Company. The Complaint
also named the manufacturer of the vehicle. The manufacturer has agreed to
provide full and complete indemnification to the Company based on the facts
known to date. There have been no allegations of any active negligence on the
part of the Company other than that it sold what is alleged to have been a
defective product. Accordingly, unless additional allegations are made against
the Company, the Company expects to continue to receive full indemnity and
defense from the manufacturer. The Company believes, based on the arrangements
with the manufacturer of the vehicle and the Company's own insurance, that there
is no known exposure to the Company from this litigation.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of securities holders during the
fourth quarter of the Company's 1997 fiscal year.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's Common Stock is thinly traded in the over-the-counter
market by NASDAQ. The high and low bid quotations of the Company's Common Stock
are set forth below for the fiscal quarters indicated, as reported by NASDAQ for
such periods. These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
1997 1996
Fiscal High Low High Low
<S> <C> <C> <C> <C>
First Quarter .28 .06 .08 .08
Second Quarter .90 .28 .08 .06
Third Quarter .53 .38 .07 .06
Fourth Quarter .50 .38 .07 .06
</TABLE>
As of November 13, 1997, the Company had approximately 645 shareholders
of record.
The Company paid no cash dividends with respect to its Common Stock
during fiscal 1997, 1996 and 1995, and does not intend to pay cash dividends in
the foreseeable future.
<PAGE> 12
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Special Cautionary Notice Regarding Forward-Looking Statements.
This Report on Form 10-KSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act and 21E of the Exchange Act.
Forward-looking statements are indicated by such terms as "expects", "plans",
"anticipates", and words to similar effect. Such forward-looking statements are
subject to known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company to be
materially different from future results, performance or achievements expressed
or implied by such forward-looking statements. Important factors ("Cautionary
Statements") that could cause the actual results, performance or achievements of
the Company to differ materially from the Company's expectations are disclosed
in this Report on Form 10-KSB including, without limitation, those factors
discussed in the paragraph immediately preceding the heading "Liquidity and
Capital Resources" on pages 18 and 19 and otherwise herein. All written or oral
forward-looking statements attributable to the Company are expressly qualified
in their entirety by the Cautionary Statements.
Change to Going Concern Basis
Because the Company decided in 1994 that it should cease its existing
business operations and sell substantially all of its operating assets, the
Company reported its financial position on the liquidation basis of accounting
during the fiscal years ended August 31, 1994 through August 31, 1996. In the
liquidation basis of accounting, assets were valued at their net realizable
value (rather than at their net historical cost), and liabilities included
estimated costs associated with carrying out the sale of substantially all of
the assets of the Company.
The Company substantially completed its plan to sell substantially all
of its operating assets ("Sale of Assets Plan") during fiscal 1996 and purchased
the common stock of a company engaged in the consumer finance business in
November 1996. Accordingly, on September 1, 1996, the Company adopted the going
concern basis of accounting. The carrying amount of the assets and liabilities
under the liquidation basis of accounting were adjusted to the historical cost
basis under the going concern basis of accounting. This adjustment included a
reduction of the carrying value of the Tampa, Florida real estate then held for
sale from its estimated liquidation value of $430,000 to its depreciated cost on
September 1, 1996 of $263,000, a decrease in net assets of $167,000. Prepaid
expenses were increased by $15,000. The estimated liquidation costs during the
remaining period of liquidation of $152,000 were not included in the balance
sheet.
New Business Acquired
On November 4, 1996, the Company purchased the outstanding common stock
of CambridgeBanc, Inc., a small specialized consumer finance business that
originates and sells consumer finance receivables, substantially all of which
are loans secured by liens on improved property. On March 18, 1997, the name of
CambridgeBanc, Inc. was changed to HomeAdd Financial Corporation ("HomeAdd").
<PAGE> 13
Results of Operations
As stated above, the Company acquired a consumer loan business on
November 4, 1996. The following discussion of the results of operations during
the year ended August 31, 1997 relates to the consumer loan business during the
period beginning November 4, 1996 through August 31, 1997.
Revenues were $270,000 during the fiscal year ended August 31, 1997 and
consisted of loan origination fees and gain from the sale of the loans made.
General and administrative expenses of $978,000 include expenses
incurred by HomeAdd of $609,000 during the year ended August 31, 1997. The
corporate general and administrative expenses primarily consist of salaries,
legal, audit and other administrative expenses. The HomeAdd expenses primarily
relate to advertising, salaries, and various administrative expenses of HomeAdd.
The results of operations for the fiscal year ended August 31, 1997
included the $300,000 cost to settle the lawsuit relating to environmental
litigation found on the property formerly owned by Wiegmann & Rose and sold to
Triple A in 1987. For further discussion of the settlement of the lawsuit,
reference is made to Part I, Item 3, "Legal Proceedings," which is incorporated
herein by reference.
HomeAdd offers high loan-to-value loans ("HLTV Loans") to certain
qualified borrowers that permit the loan proceeds to be used for debt
consolidation and home improvements. Under the terms of these HLTV loans,
HomeAdd will make loans secured by a second or third mortgage in which the loans
can be up to 125% of the estimated fair value of the real property. A qualified
borrower is required to be a homeowner with acceptable levels of income and have
an acceptable credit history. Approximately 96% of loan volume during fiscal
1997 consisted of HLTV Loans. The Company expects that most of the loans made
during fiscal 1998 will be HLTV Loans.
HomeAdd also offers Title I home improvement loans ("Title I Loans")
under the Title I program administrated by the Federal Housing Administration
("FHA"). HomeAdd was approved by FHA as a Title I lender during 1995. The Title
I program was established by Title I of the National Housing Act of 1934. Loans
made under the Title I program are 90% guaranteed by the United States
Department of Housing and Urban Development ("HUD"). In addition to the FHA
Title I license, HomeAdd has to apply for licenses to operate under the banking
laws of each State in which this business chooses to operate. HomeAdd is
currently authorized to operate under the laws of South Carolina and North
Carolina. HomeAdd is subject to ongoing monitoring by regulatory authorities and
the failure to comply with applicable regulations could result in the forfeiture
of licenses on which the business is dependent. Approximately 4% of loan volume
during fiscal 1997 were Title I home improvement loans. The Company does not
expect Title I home improvement loans to be a material portion of its business
during fiscal 1998.
The Company sells substantially all of the loans it originates on a
non-recourse basis in the secondary market. The non-recourse basis means that
the Company represents that loans were properly documented and made in
accordance with applicable lending criteria, but that the purchaser of the loans
assumes the full credit risk. The Company's credit guidelines for the Company's
loans currently meet the underwriting criteria of the current loan purchasers.
During the fiscal year ended August 31, 1997, the Company made loans aggregating
$3,424,000 of which $150,000 in loans were made under the Title I Loan program
and $3,274,000 in loans were made under the HLTV Loan program. Substantially all
of the loans were sold on a non-recourse basis in the secondary market ($21,000
of these were sold during September of 1997).
<PAGE> 14
As of August 31, 1997, HomeAdd had eleven employees. The initial office
in Greenville, South Carolina includes sales, underwriting and administrative
personnel. An additional sales office in Charlotte, North Carolina opened on
April 1, 1997, but the Company determined that it was more cost effective to
generate its loan activities through direct mail solicitations from its
Greenville, South Carolina office, accordingly, the Charlotte, North Carolina
office was closed during October of 1997. The Company currently has no plans to
open additional sales offices. The Company currently plans to attempt to
increase its volume of loans made by going into additional markets, first in
North Carolina and then possibly other Southeastern States. The Company faces
stiff competition in these markets. Additional personnel will be added when and
if the volume of loans increases to a level that requires the additional
personnel. If HomeAdd achieves its budgeted operating goals, the Company
estimates that 14 employees will be required by HomeAdd at August 31, 1998.
There is no assurance, however, that it's operating goals can be accomplished.
The consumer finance market is highly competitive and fragmented.
HomeAdd competes with a number of finance companies that provide financing to
individuals who may not have sufficient equity in their homes to qualify for
traditional second mortgage financing. HomeAdd also competes with established
home improvement lenders, other Title I lenders (many of whom are now making
HLTV Loans), existing mortgage brokers and bankers that offer multi-purpose
second mortgages. To a lesser extent, HomeAdd competes with commercial banks,
savings and loan associations, credit unions, insurance companies, and captive
finance arms of major manufacturing companies that may apply more traditional
lending criteria and require greater equity in the underlying real property
assets. Almost all of these competitors or potential competitors are
substantially larger and have significantly greater capital, experience and
other resources than the Company.
The Company expects that during the next twelve months the increase in
its business, if any, will be in HLTV Loans. Title I home improvement loans are
not expected to be a material factor in its business during the next twelve
months.
Debt consolidation and home equity loan volume generally are not
materially impacted by seasonal climate changes and, with the exclusion of
slowdowns during the holiday and vacation seasons, tends to be relatively stable
throughout the year. Home improvement loan volume generally tracks the
seasonality of home improvement contract work. Volume tends to build during the
spring and early summer months. A decline is typically experienced in late
summer and early fall until temperatures begin to drop. This change in seasons
precipitates the need for new siding, window and insulation contracts. Peak
volume is generally experienced in November and early December and declines
dramatically from the holiday season through the winter months.
HomeAdd attempts to sell, on a non-recourse basis, all of its loans on
the secondary market to wholesale buyers. HomeAdd does not have the capital that
would be necessary to make a significant volume of loans unless it is able
promptly to sell its loans on the secondary market. There can be no assurance
that the secondary market for loans will continue to be available to HomeAdd.
Adverse changes in the secondary market could materially impair HomeAdd's
ability to originate and sell loans on a favorable or timely basis. Delays in
the sale of a loan pool beyond a quarter-end could result in greater losses for
such quarter. If HomeAdd is unable to sell its loans on the secondary market,
its ability to grow could be materially impaired and its results of operations
and financial condition could be materially adversely affected. See Liquidity
and Capital Resources - Capital Requirements for HomeAdd.
<PAGE> 15
A portion of the revenues projected in HomeAdd's business plan is
dependent on the continuation of the Title I Loan program, which is federally
funded. The Title I Loan program provides that qualifying loans are eligible for
FHA insurance. In September of 1997, a HUD official told a group of lenders that
the FHA Title I home improvement program will have to demonstrate that it is
needed and satisfies certain "core issues" in order to survive. In August of
1995, bills were introduced in both houses of the United States Congress that
would, among other things, abolish HUD, reduce federal spending for housing and
community development activities and eliminate the Title I Loan program. Other
changes to HUD have been proposed, which, if adopted, could materially and
adversely affect the operation of the Title I Loan program. Discontinuation of
or a significant reduction in the Title I Loan program or HomeAdd's authority to
originate loans under the Title I Loan program would have an adverse effect on
the ability of HomeAdd to carry out its business plan.
The Company expects that HomeAdd will continue to operate at a loss
during, at a minimum, fiscal year 1998, but based on its business plan,
currently expects HomeAdd to operate at a modest profit by fiscal 1999. The
foregoing is a forward-looking statement and the Company cautions that there can
be no assurance that this goal can be achieved. An important factor which could
cause the Company's results to differ materially from the forward-looking
statement include lower origination volume due to real estate market conditions
that might affect the appraised values of the real property that would be used
as collateral for the loans that HomeAdd plans to originate. HomeAdd's business
might be reduced if values of the collateral increase and HomeAdd's customers
might then qualify for more traditional sources of credit such as banks. Another
important factor is the adverse consequences of changes in interest rate
environment such as increases in rates that might reduce the number of customers
that would be willing to execute loans at the higher rates. Other factors that
could cause the Company's results to differ materially from the forward-looking
statement included, but are not limited to, the following: inability of
borrowers to repay their loans and the increased risk of default in that this
would adversely affect the ability of the Company to sell its loans; the limited
operating history of lending operations in that HomeAdd has only had a Title I
lending license since November of 1995 and most of its personnel have been
employed by HomeAdd for less than one year; general economic conditions in the
Company's market, including inflation, recession, interest rates and other
economic factors that might affect the credit rating of its customers in which
case HomeAdd would no longer be able to make loans to these potential customers
with reduced credit ratings because HomeAdd would not be able to sell the loans
for an amount that would be profitable for HomeAdd; loss of funding sources,
particularly since the Company currently only has arrangements for a credit
facility with one bank; loss of ability to sell loans since the Company does not
have sufficient resources to finance holding a substantial number of loans to
their maturity; general lending risks that might result in HomeAdd making
uncollectible loans or loans that it would be unable to sell; dependence on
Federal programs particularly since the need to continue the Title I Loan
program is now under discussion by HUD officials; impact of competition,
particularly since almost all of HomeAdd's competitors or potential competitors
are substantially larger and have significantly greater capital, experience and
other resources than the Company, and many competitors and potential competitors
already have existing relationships with the Company's potential customers;
regulation of lending activities in that HomeAdd, in addition to the FHA Title I
license discussed below, operates under the banking laws of various States;
changes in the regulatory environment in that both the Federal government and
each State in which HomeAdd operates might make changes in the regulations under
which HomeAdd operates or in the interpretation of existing regulations at any
time and HomeAdd may not be able to comply with these regulations; and
dependence on key executives, particularly since HomeAdd and the Company have a
limited
<PAGE> 16
number of personnel.
Liquidity and Capital Resources
Anticipated Liquidity Requirements
As discussed below under "Cash and Cash Equivalents" and "Debt
Arrangements," the Company currently has substantial cash liquidity and,
although there can be no assurance in this regard, anticipates that such capital
resources will be sufficient to enable the Company to meet its liquidity
requirements during the next twelve months.
In addition to its ordinary expenses, the Company will continue to
incur legal expenses relating to its contingent liabilities. The Company plans
to continue to attempt to settle its contingent liabilities, but it cannot
estimate when these will be settled or the ultimate outcome of the lawsuits or
matters described above under Item 3 of Part I, "Legal Proceedings" or of any
unknown contingencies. There can be no assurance that the Company's cash
balances will be sufficient to allow it to fund its operations and meet its
recorded liabilities and any known or unknown contingent liabilities. The
ultimate outcome of these contingencies is not known. No provision has been made
in the accompanying financial statements for any liability that may result from
these matters.
Fiscal Year 1997 Activities
The Company executed a contract to sell its office and warehouse
facility in Tampa, Florida for $425,000, less certain selling expenses, during
August of 1997. The sale was consummated on November 19, 1997. Under the terms
of the agreement, the Company agreed to finance $75,000 of this sales price over
ten years and will hold a second mortgage on the Tampa property bearing interest
at 8.5% interest. The Company can offer no assurance as to the creditworthiness
of the purchaser of the building. Proceeds from the sale of the Tampa facility
were applied first to the payment of expenses related to the sale, and remaining
proceeds were used to provide operating capital for HomeAdd.
Cash and Cash Equivalents
Cash and cash equivalents in the amount of $759,000 as of August 31,
1997 included United States treasury bills with a maturity of three months when
purchased and having a cost basis of $670,000. Cash in excess of the amounts
invested in United States treasury bills is invested as available in a money
market fund, which may be liquidated by the Company to meet its cash needs on a
daily basis. The Company earned $94,000 on its investments during the year ended
August 31, 1997.
U. S. Treasury Bill
The Company is required as described in the following paragraph to
maintain an investment in HomeAdd of $500,000. At August 31, 1997, the assets of
the Company included a U. S. Treasury bill with a fair market value of $508,000
that matures on November 28, 1997 for $515,000.
Debt Arrangements
During December of 1996, HomeAdd executed a warehouse line of credit
with a bank in the amount of $500,000 that is used to finance loans made to
third parties in connection with its consumer finance business. The loans made
by HomeAdd are collateral for this line of credit. This line of credit
<PAGE> 17
bears interest at the bank's prime rate plus one percent. During August of 1997,
HomeAdd executed an amendment to the line of credit agreement in which, among
other things, the bank extended the time for repayment of an advance from
fifteen days to twenty-five days. Under the terms of the loan agreement and an
agreement that the Company has executed with HomeAdd, HomeAdd is required to
maintain tangible net worth of at least $500,000. See the next paragraph for the
amount of net worth required by HUD. The bank also requires that this tangible
net worth include certain specified assets with maturity of five years or less
in the amount of $500,000. This line expires on April 30, 1998.
Capital Requirements for HomeAdd
During the year ended August 31, 1997, the Company invested $924,000 in
HomeAdd. The investment was used as follows: acquisition of common stock -
$15,000, equipment rental for first year - $18,000, purchase of U. S. Treasury
bill - $500,000, purchase of money market account - $25,000 and operating
capital of $366,000. HUD requires that HomeAdd have an adjusted net worth of at
least $250,000. Given its cash and cash equivalents position, the Company
believes that it has the capacity to provide the additional capital that will be
required by HomeAdd during fiscal 1998. The Company presently anticipates that
it will need additional external sources of capital at least by fiscal year 1999
and presently intends to explore an increase in a bank line of credit.
Year 2000
The Company has assessed key financial, informational and operational
systems. Management does not anticipate that the Company will encounter
significant operational issues relating to Year 2000. Furthermore, the financial
impact of making required systems changes is not expected to be material to the
Company's consolidated financial position, results of operations or cash flows.
Item 7. Financial Statements
The response to this Item is set forth on page F-2 and submitted as a
separate section of this report.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
<PAGE> 18
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
Information required under Items 9, 10, 11 and 12 of Part III is
incorporated herein by reference to the portions of the definitive Proxy
Statement to be filed with the Securities and Exchange Commission on or prior to
120 days following the end of the Company's fiscal year.
Item 13. Exhibits, and Reports on Form 8-K
(a) Listing of Exhibits
3.1 Articles of Incorporation of RSI Holdings, Inc., as amended:
Incorporated by reference to Exhibit 3.2 and 3.2.2 to the Registration
Statement on Form S-4 of RSI Corporation and Porter Brothers, Inc.,
File No. 33-30247 (the "Form S-4").
3.1.1 Articles of Amendment and Certificate of Reduction of Capital of Porter
Brothers, Inc.: Incorporated by reference to Exhibit 4.1 to the Form
8-K of the Registrant filed with the Securities and Exchange Commission
on November 28, 1989, File No. 0-7067.
3.2.1 By-laws of RSI Holdings, Inc., as amended: Incorporated by reference to
Exhibit 3.1.1 to the Form S-4.
3.2.2 Amendments to By-laws: Incorporated by reference to Exhibit 3.2.2 to
the Form 10-KSB of the Registrant filed with the Securities and
Exchange Commission for the fiscal year ended August 31, 1996,
File No. 0-18091.
4.1 See Exhibits 3.1, 3.1.1, 3.2.1 and 3.2.2.
4.1.1 Specimen of Certificate for RSI Holdings, Inc., common stock:
Incorporated by reference to Exhibit 4.1.2 to the Form S-4.
*10.1 RSI Holdings, Inc., Stock Option Plan, including an amendment:
Incorporated by reference to Exhibit 10.9 to the Form 10-K of the
Registrant filed with the Securities and Exchange Commission for the
fiscal year ended August 31, 1990, File No. 0-18091 (the "1990 Form
10-K").
*10.1.1 Amendment to Stock Option Plan: Incorporated by reference to Exhibit
10.9.1 to the Form 10-K of the Registrant filed with the Securities and
Exchange Commission for the fiscal year ended August 31, 1992, as
amended, File No. 0-18091 (the "1992 Form 10-K").
*10.1.2 Proposed Amendment to Stock Option Plan
10.2 Agreement by and between the Company and Treadco, Inc. dated as of
February 6, 1996: Incorporated by reference to Exhibit 10.1 to the Form
10-QSB of the Registrant filed with the Securities and Exchange
Commission for the quarter ended February 29, 1996, File No. 0-18091.
10.3 Letter Agreement by and between the Registrant and Tresca Industries
dated September 8, 1994: Incorporated by reference to Exhibit 10.18
<PAGE> 19
to the 1994 Form 10-K of the Registrant filed with the Securities and
Exchange Commission for the fiscal year ended August 31, 1994, File No.
0-18091.
*10.4 RSI Holdings, Inc. Incentive Stock Award Plan, including an amendment:
Incorporated by reference to Exhibit 10.8 to the 1990 Form 10-K.
*10.5 Amendment to Incentive Stock Award Plan: Incorporated by reference to
Exhibit 10.8.1 to the 1992 Form 10-K.
10.6 Loan Agreement dated December 12, 1996 by and among the Company,
CambridgeBanc, Inc. and First Union National Bank, together with
related documents: Incorporated by reference to the Form 10-QSB of the
Registrant filed with the Securities and Exchange Commission for the
fiscal quarter ended November 30, 1996, File No. 0-18091.
10.7 First Amendment to Loan Agreement dated as of August 25, 1997 by and
among the Company, HomeAdd Financial Corporation, and First Union
National Bank.
*10.8 Stock Option Agreement by and between the Registrant and C. C. Guy
dated as of July 2, 1997.
*10.9 Stock Option Agreement by and between the Registrant and Charles M.
Bolt dated as of July 2, 1997.
10.10 Lease Agreement by and between Hewitt Coleman Companies, Inc., Lessor
and HomeAdd Financial Corporation, Lessee dated August 4, 1997.
10.11 Agreement by and between the Company and Fuller D. Tresca dated
November 19, 1997.
21. Subsidiaries of the Registrant.
23. Consent of Ernst & Young LLP, Independent Auditors.
27. Financial Data Schedule (For SEC use only)
99. Consent Decree and Judgment dated December 31, 1991 entered by the
United States District Court for the Northern District of California in
Wiegmann & Rose International Corp., a South Carolina corporation
("Wiegmann & Rose"), plaintiff, v. NL Industries, Inc., a New Jersey
corporation, and Esselte Pendaflex Corporation, a New York corporation,
defendants; NL Industries, Inc., a New Jersey corporation, and Esselte
Pendaflex Corporation, a New York corporation, third party plaintiffs,
v. Triple A Machine Shop, Inc., a California corporation ("Triple A"),
third party defendant, C.A. No. C-88-4817 FMS: Incorporated by
reference to Exhibit 28.1 to the Registrant's Form 8-K, filed with the
Securities and Exchange Commission on January 3, 1992, File No.
0-18091.
99.1 Settlement Agreement and Release by and between Wiegmann & Rose, Delta
Woodside Industries, Inc., formerly known as RSI Corporation, a South
Carolina corporation and Triple A: Incorporated by reference to Exhibit
99.1 to the Registrant's Form 8-K, filed with the Securities and
Exchange Commission on November 18, 1996, File No. 0-18091.
* Management contract or compensatory plan required to be filed as an exhibit
pursuant to Item 13 of Form 10-KSB.
<PAGE> 20
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the fourth
quarter of the fiscal year ended August 31, 1997.
<PAGE> 21
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RSI HOLDINGS, INC. TITLE
/s/ Buck Mickel November 25, 1997 Chairman of the Board of Directors
Buck Mickel (Date) and Chief Executive Officer
(Principal Executive Officer)
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ Buck Mickel November 25, 1997 Director, Chairman of the
Buck Mickel (Date) Board and Chief Executive Officer
(Principal Executive Officer)
/s/ C. C. Guy November 25, 1997 Director
C. C. Guy (Date)
/s/ Charles M. Bolt November 25, 1997 Director
Charles M. Bolt (Date)
/s/ Buck A. Mickel November 25, 1997 Director
Buck A. Mickel (Date)
/s/ Joe F. Ogburn November 25, 1997 Vice President and Treasurer
Joe F. Ogburn (Date) (Principal Financial and
Accounting Officer)
<PAGE> 22
Annual Report on Form 10-KSB
Item 7, Item 14(a)(1) and (2), (c) and (d)
List of Financial Statements
Financial Statements
Year Ended August 31, 1997
RSI Holdings, Inc.
Greenville, South Carolina
<PAGE> 23
RSI Holdings, Inc.
Form 10-KSB-Item 14(a)(1) and (2)
Index of Financial Statements
The following consolidated financial statements of RSI Holdings, Inc. are
included in Item 7:
Consolidated balance sheet - August 31, 1997
Consolidated statement of operations - Year ended August 31, 1997
Consolidated statement of shareholders' equity - Year ended August 31,
1997
Consolidated statement of cash flows - Year ended August 31, 1997
Consolidated statement of changes in net assets in liquidation - Year
ended August 31, 1997
Notes to consolidated financial statements - August 31, 1997
<PAGE> 24
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Shareholders
RSI Holdings, Inc.
We have audited the accompanying consolidated balance sheet of RSI Holdings,
Inc. as of August 31, 1997 and the related consolidated statements of
operations, shareholders' equity and cash flows for the year then ended. We have
also audited the consolidated statement of changes in net assets in liquidation
for the year ended August 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As more fully described in Note 1, the Company has changed its basis of
accounting effective September 1, 1996 from the liquidation basis to the going
concern basis.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of RSI
Holdings, Inc, at August 31, 1997, and the consolidated results of its
operations and its cash flows for the year then ended and the changes in
consolidated net assets in liquidation for the year ended August 31, 1996, in
conformity with generally accepted accounting principles.
/s/ ERNST AND YOUNG LLP
October 15, 1997
<PAGE> 25
RSI Holdings, Inc.
Consolidated Balance Sheet
August 31, 1997
ASSETS
Current assets:
Cash and cash equivalents $ 759,000
Notes and accounts receivable, net of allowance for
doubtful accounts of $28,000 34,000
Prepaid expenses 63,000
----------
Total current assets 856,000
Property and equipment:
Cost 55,000
Less accumulated depreciation 25,000
----------
30,000
Other assets:
U.S. Treasury bill (Note 5) 508,000
Land and building held for sale, net of accumulated
depreciation of $301,000 (Note 3) 248,000
Other 15,000
----------
771,000
----------
$1,657,000
==========
<PAGE> 26
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 30,000
Accrued expenses (Note 4) 132,000
Note payable (Note 5) 19,000
-----------
181,000
Deferred compensation 116,000
Shareholders' equity:
Common Stock, $.01 par value - authorized 25,000,000 shares,
issued and outstanding 7,999,292 shares at August 31, 1997 80,000
Excess of paid-in capital over par value 3,799,000
Deficit (2,495,000)
-----------
1,384,000
Less cost of 98,470 shares of Common Stock in treasury (24,000)
-----------
1,360,000
Contingencies (Note 10)
-----------
$ 1,657,000
===========
See accompanying notes.
<PAGE> 27
RSI Holdings, Inc.
Consolidated Statement of Operations
Year Ended August 31, 1997
Revenues:
Origination fees $ 199,000
Gain on sale of loans 71,000
-----------
Total revenue 270,000
Expenses:
Selling, general and administrative 978,000
-----------
Loss from operations (708,000)
Other income (expense)
Interest income 94,000
Rental income on asset held for sale 29,000
Interest expense (16,000)
Cost to settle lawsuit (300,000)
-----------
Total other income (expense) (193,000)
-----------
Net loss $ (901,000)
===========
Net loss per share $ (.11)
===========
Weighted average number of shares outstanding 7,916,205
===========
See accompanying notes.
<PAGE> 28
RSI Holdings, Inc.
Consolidated Statement of Shareholders' Equity
Year Ended August 31, 1997
<TABLE>
<CAPTION>
Excess Of
Paid-in
Common Stock Capital Treasury Stock
-------------------- Over --------------------
Shares Amount Par Value (Deficit) Shares Amount Total
--------- ------- ---------- ----------- ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 1, 1996 7,994,292 $80,000 $3,799,000 $(1,594,000) -- $ -- $2,285,000
Purchase of common stock -- -- -- -- 98,470 (24,000) (24,000)
Shares of common stock
issued under provisions
of stock option plan 5,000 -- -- -- -- -- --
Net (loss) for year ended
August 31, 1997 -- -- -- (901,000) -- -- (901,000)
--------- ------- ---------- ----------- ------ -------- ----------
Balance at August 31, 1997 7,999,292 $80,000 $3,799,000 $(2,495,000) 98,470 $(24,000) $1,360,000
========= ======= ========== =========== ====== ======== ==========
</TABLE>
See accompanying notes.
<PAGE> 29
RSI Holdings, Inc.
Consolidated Statement of Cash Flows
Year Ended August 31, 1997
OPERATING ACTIVITIES
Net (loss) $ (901,000)
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation and amortization 20,000
Changes in operating assets and
liabilities:
Accounts receivable 3,000
Notes receivable (21,000)
Prepaid expenses and other (47,000)
Accounts payable and accrued expenses 65,000
------------
Net cash used in operating activities (881,000)
INVESTING ACTIVITIES
Purchase of U.S. Treasury bill (508,000)
Acquisition of outstanding stock of HomeAdd
Financial Corporation (Note 2) (15,000)
Purchase of common stock (24,000)
Organization expense (13,000)
Purchase of equipment (18,000)
Other (5,000)
------------
Net cash used in investing activities (583,000)
FINANCING ACTIVITIES
Advances under bank lines of credit 3,182,000
Payments on bank line of credit (3,163,000)
Payment of deferred compensation (52,000)
------------
Net cash used in financing activities (33,000)
------------
Decrease in cash and cash equivalents (1,497,000)
Cash and cash equivalents at beginning of year 2,256,000
------------
Cash and cash equivalents at end of year $ 759,000
============
See accompanying notes.
<PAGE> 30
RSI Holdings, Inc.
Consolidated Statement of Changes in Net Assets
in Liquidation
Year Ended August 31, 1996
Net assets in liquidation at beginning of year $ 2,143,000
Changes in net assets in liquidation attributed to:
Cash and cash equivalents 784,000
Trade accounts payable 2,000
Accrued expenses 110,000
Estimated costs during remaining period of liquidation 389,000
Accounts receivable as a result of collections (11,000)
Sales of property and equipment (1,119,000)
Change in net realizable value of real property (10,000)
Other assets (3,000)
-----------
Increase in net assets in liquidation 142,000
-----------
Net assets in liquidation at end of year (Note 1) $ 2,285,000
===========
See accompanying notes.
<PAGE> 31
RSI Holdings, Inc.
Notes to Consolidated Financial Statements
August 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
RSI Holdings, Inc., (the "Company") ceased all of its former business operations
during August of 1994 and by the end of fiscal 1996, the Company had sold
substantially all of the operating assets of its former business. Concurrent
with the decision in 1994 to cease all of its former business operations, the
Company had adopted the liquidation basis of accounting. Generally accepted
accounting principles for the liquidation basis of accounting required that
assets be valued at their estimated net realizable value and liabilities be
presented at their estimated settlement amounts and also include estimated costs
associated with carrying out the liquidation. The Company's financial statements
were prepared under the liquidation basis of accounting through August 31, 1996.
During November of 1996 the Company decided not to liquidate and acquired the
outstanding common stock of a consumer finance company. Accordingly, effective
September 1, 1996 the Company adopted the going concern basis of accounting.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries (all of which are wholly-owned). Significant intercompany
balances and transactions have been eliminated.
DESCRIPTION OF BUSINESS
The Company and its principal operating subsidiary are primarily engaged in the
business of originating and selling second residential mortgage loans. The funds
for these loans are obtained principally through the utilization of a bank line
of credit.
Substantially all of the Company's loans are non-conforming in that the loans
may exceed the market value of the underlying mortgaged assets. It is the
Company's policy to sell these loans to selected third party wholesalers on a
non-recourse basis.
<PAGE> 32
RSI Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Company considers all highly liquid investments (United States treasury
bills) with a maturity of three months or less when purchased to be cash
equivalents.
PROPERTY AND EQUIPMENT
Property and equipment consists of office furniture and equipment and is stated
at cost. Depreciation is computed principally by the straight-line method over
the estimated useful lives of the assets. Estimated lives are 5 to 7 years for
furniture and office equipment.
LAND AND BUILDING HELD FOR SALE
Land and building held for sale is stated at the lower of cost or estimated fair
value.
REVENUE RECOGNITION
Origination fees charged on loans made is recognized as income when the loan
proceeds are disbursed. Gain on sale of loans is recorded when the loans are
sold. Mortgage loans are sold servicing released and on a non-recourse basis,
with customary representations and warranties. In connection with the sale of
mortgage loans, the Company receives cash premiums.
ADVERTISING COSTS
Advertising expense is primarily the costs of direct mail solicitation for home
improvement loans and debt consolidation loans and is recorded as expense in the
period in which the solicitations are mailed. The Company incurred advertising
expense of $181,000 during fiscal year 1997.
USE OF ESTIMATES
The preparation of the financial statements of the company in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts. These estimates are based on
information available as of the date of the financial statements. Therefore,
actual results could differ from those estimates.
<PAGE> 33
RSI Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash and cash
equivalents, notes and accounts receivable, treasury bills, accounts payable and
notes payable approximate their fair values.
STOCK OPTIONS
The Company accounts for and will continue to account for stock options under
Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees." Applying Financial Accounting Standards Board Statement No. 123,
"Accounting for Stock-Based Compensation", which was adopted during the year
would not materially affect net loss and loss per share for fiscal 1997 (see
Note 7).
2. ACQUISITION
On November 4, 1996, the Company purchased for cash all of the outstanding
common stock of CambridgeBanc, Inc. from Emergent Group, Inc. (a company related
through a common board member, an officer and certain shareholders) for the
total purchase price of $15,000. The purchase method of accounting was used to
account for the acquisition. The assets that were owned by CambridgeBanc, Inc.
consisted of furniture and equipment that the Company believes had a fair value
of $15,000. In addition to the purchase agreement to acquire the common stock,
the Company executed a lease agreement with Emergent Group, Inc. in which the
Company paid $18,000 for the use of additional furniture and equipment for one
year. These assets were used by CambridgeBanc, Inc. in its previous operations.
CambridgeBanc, Inc. executed a sublease agreement to rent for one year from
Emergent Group, Inc. the office space that it occupied at $1,757 per month at
the time of the purchase.
In March 1997, CambridgeBanc, Inc. changed its name to HomeAdd Financial
Corporation ("HomeAdd"). Through HomeAdd, the Company now is engaging in the
business of originating and selling home improvement and other loans secured by
liens on improved property.
<PAGE> 34
RSI Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
3. LAND AND BUILDING HELD FOR SALE
Land and building held for sale are classified as follows:
Land $200,000
Building and improvements 349,000
--------
549,000
Less accumulated depreciation 301,000
--------
$248,000
========
4. ACCRUED EXPENSES
Accrued expenses at August 31, 1997 are as follows:
Deferred compensation $168,000
Other 80,000
--------
248,000
Less current portion 132,000
--------
$116,000
========
5. NOTE PAYABLE
During December of 1996, HomeAdd executed a warehouse line of credit with a bank
in the amount of $500,000 that is used to finance loans made to third parties in
connection with its consumer finance business. Borrowings under the line of
credit were $19,000 at August 31, 1997. The loans made by HomeAdd are collateral
for this line of credit. This line of credit bears interest at the bank's prime
rate plus one percent. Under the terms of the loan agreement, HomeAdd is
required to maintain tangible net worth of at least $500,000. The bank also
requires that this tangible net worth include certain specified assets with
maturity of five years or less in the amount of $500,000.
The Company incurred and paid interest cost of $16,000 during 1997.
Approximately $3,000 of the total interest incurred and paid relates to the
above arrangements with a bank and approximately $13,000 related to a deferred
compensation arrangement.
<PAGE> 35
RSI Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
6. LEASES
On November 4, 1997, the Company's newly acquired subsidiary, executed a
sublease agreement to rent for one year from Emergent Group, Inc. the office
space that it occupied at $1,757 per month at the time of the purchase. In
connection with the acquisition of the subsidiary, the Company also executed a
lease agreement with Emergent Group, Inc. pursuant to which the Company paid
$18,000 for the use of additional furniture and equipment for one year. These
assets were used by the subsidiary in its previous operations.
The Company leases its principal executive offices under a month-to-month lease
arrangement. Under the lease arrangement, the monthly rent was $885 and $354,
respectively, during the years ended August 31, 1997 and August 31, 1996. The
office space is leased from a corporation whose directors and officers include a
Vice President and former director and wife of the Chairman of the Board of the
Company and its shareholders all own more than 5% of the outstanding stock of
the Company. Subsequent to year-end, the Company moved its executive offices and
entered into a month-to-month lease arrangement in the amount of $2,250 per
month. This office space is leased from a corporation which is owned by three
shareholders.
The Company leases office facilities in Shelby, North Carolina at $350 per month
under an arrangement that expires December 31, 1997.
The Company's operating subsidiary leases office space in Greenville, South
Carolina at approximately $4,200 per month under an arrangement that expires
September 1, 2002.
Additionally, the Company leases an automobile under a noncancelable operating
lease that expires in November of 1997. The lease requires the Company to pay
taxes, insurance, maintenance and repairs.
Total rental paid relating to operating leases for fiscal years 1997 and 1996
(net of sub-lease rental income of $23,000 during 1996) was $54,000 and $21,000,
respectively.
<PAGE> 36
RSI Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
6. LEASES (CONTINUED)
The Company's obligations for minimum rentals under non-cancelable leases are as
follows:
Year Ending August 31
---------------------
1998 $57,000
1999 50,000
2000 50,000
2001 50,000
2002 50,000
7. SHAREHOLDERS' EQUITY
On November 15, 1991, the Company adopted a Stock Option Plan that authorizes
the Board of Directors to grant option of up to 250,000 shares of the Company's
Common Stock. As of August 31, 1997, 172,500 shares have been awarded to plan
participants.
All options under the Stock Option Plan were granted at not less than fair
market value at dates of grant.
<PAGE> 37
RSI Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
7. SHAREHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
Number Average
Stock Options Of Shares Option Price
---------------------------------------------- --------- ---------------
<S> <C> <C>
FISCAL YEAR 1996 ACTIVITY
Options outstanding at September 1, 1995 90,000 $0.125
No shares were granted or exercised during
fiscal year 1996 - -
------- ------
Options outstanding at August 31, 1996
90,000 0.125
FISCAL YEAR 1997 ACTIVITY
Options granted 102,500 0.375
Options exercised 5,000 0.125
------- ------
Options outstanding at August 31, 1997 187,500 $0.125 - $0.375
======= ===============
</TABLE>
The outstanding options at August 31, 1997 expire on June 4, 2002 and July 2,
2007 and had a weighted average remaining contractual life of approximately 7
years. There were 167,500 options currently exercisable with option prices
ranging from $.125 to $.375 with a weighted average exercise price of $.235.
The Company also has an Incentive Award Plan that was adopted on November 15,
1991 that authorizes the Board of Directors to grant up to 250,000 shares to key
management employees. At August 31, 1997 and during the two years ended August
31, 1997, there were no shares outstanding under the Incentive Award Plan.
As disclosed in Note 1, the Company adopted the disclosure only provisions of
FAS 123. By adopting FAS 123, the Company's net loss available to common
shareholder and net loss per share would not have been materially different from
those amounts reported in the consolidated statement of operations; therefore,
supplemental proforma information has not been disclosed as permitted by FAS
123.
<PAGE> 38
RSI Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
8. INCOME TAXES
During fiscal 1997, net deferred tax benefits were not recorded relating to
temporary differences since the Company is not assured that the resulting
additional deferred tax assets will be realized. Significant components of the
Company's deferred tax assets and liabilities are as follows:
ASSETS
Net operating loss carryforward $3,638,000
Insurance accruals 71,000
Allowance for doubtful accounts 10,000
Other 41,000
----------
3,760,000
Valuation allowance 3,755,000
----------
Deferred tax assets 5,000
LIABILITIES
Depreciation 5,000
----------
Net deferred taxes $ -
==========
At August 31, 1997, the Company has net operating loss carryforwards available
for income tax purposes of approximately $9,900,000. Such carryforwards expire
in 2006 through 2012. The Company's ability to use its existing net operating
loss carryforward may be jeopardized or lost if the Company undergoes an
"ownership change" as defined by the Internal Revenue code.
The valuation allowance increased $208,000, net during 1997.
9. AFFILIATED PARTY TRANSACTIONS
The secretary of the Company is a member of a law firm which represents the
Company. Legal fees for services rendered by this firm to the Company amounted
to approximately $18,000 and $35,000 for the 1997 and 1996 fiscal years,
respectively.
See Note 6 concerning leases with affiliated parties.
<PAGE> 39
RSI Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
10. CONTINGENCIES
On November 18, 1996, Wiegmann & Rose International Corp. ("Wiegmann & Rose"), a
wholly-owned subsidiary of the Company, entered into an agreement to settle a
lawsuit brought by Triple A Machine Shop, Inc. ("Triple A") relating to
environmental contamination on property formerly owned by Wiegmann & Rose and
sold to Triple A in 1987. Pursuant to the settlement agreement Wiegmann & Rose
paid to Triple A the sum of three hundred thousand ($300,000) dollars in
exchange for settlement of the lawsuit as well as Triple A's release of Wiegmann
& Rose and the Company from any further liability to Triple A in connection with
the property or under the agreement made at the time of sale of the property.
Wiegmann & Rose has also been sued, along with several other defendants, in
seven personal injury asbestos suits. Although, Wiegmann & Rose has been
dismissed without prejudice in each of the seven suits, Wiegmann & Rose could be
brought back into the litigation in five of these seven dismissed cases. No
provisions have been made in the accompanying financial statements for any
liability which may result from this matter.
In addition, the Company is one of several defendants in a lawsuit filed in July
1993 claiming indemnification with respect to payments due and the cost of
performing certain covenants and obligations under a land lease agreement
allegedly in default. This agreement relates to a motel property previously
operated by the Company. The Company intends to defend this matter vigorously.
The ultimate outcome of this matter is not known. No provision has been made in
the accompanying financial statements for any liability which may result from
this matter.
In addition, during January 1995, a complaint against the Company seeking
damages in excess of the minimal jurisdictional amount was served. The Plaintiff
alleges that he was injured while operating a vehicle that was sold by the
Company. The Complaint also named the manufacturer of the vehicle. The
manufacturer has accepted defense of the Company regarding this matter under
reservation of rights. The Company believes, however, based on the arrangements
with the manufacturer and the Company's own insurance, that this action should
not have a material adverse effect on the Company's financial position.
<PAGE> 40
RSI Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
10. CONTINGENCIES (CONTINUED)
In February 1994, an individual served a complaint against the Company seeking
damages in excess of $15,000 for injuries sustained while operating a turf care
product sold by the Company. The complaint also included the manufacturer of the
product. The manufacturer and its insurance carrier accepted defense of the
Company regarding this matter. The case was settled in February 1997 and this
case is now resolved in its entirety. The Company did not incur any liability in
the settlement of this matter.
<PAGE> 41
INDEX OF EXHIBITS
3.1 Articles of Incorporation of RSI Holdings, Inc., as amended:
Incorporated by reference to Exhibit 3.2 and 3.2.2 to the Registration
Statement on Form S-4 of RSI Corporation and Porter Brothers, Inc.,
File No. 33-30247 (the "Form S-4").
3.1.1 Articles of Amendment and Certificate of Reduction of Capital of Porter
Brothers, Inc.: Incorporated by reference to Exhibit 4.1 to the Form
8-K of the Registrant filed with the Securities and Exchange Commission
on November 28, 1989, File No. 0-7067.
3.2.1 By-laws of RSI Holdings, Inc., as amended: Incorporated by reference to
Exhibit 3.1.1 to the Form S-4.
3.2.2 Amendments to By-laws.
4.1 See Exhibits 3.1, 3.1.1, 3.2.1 and 3.2.2.
4.1.1 Specimen of Certificate for RSI Holdings, Inc., common stock:
Incorporated by reference to Exhibit 4.1.2 to the Form S-4.
*10.1 RSI Holdings, Inc., Stock Option Plan, including an amendment:
Incorporated by reference to Exhibit 10.9 to the Form 10-K of the
Registrant filed with the Securities and Exchange Commission for the
fiscal year ended August 31, 1990, File No. 0-18091 (the "1990 Form
10-K").
*10.1.1 Amendment to Stock Option Plan: Incorporated by reference to Exhibit
10.9.1 to the Form 10-K of the Registrant filed with the Securities and
Exchange Commission for the fiscal year ended August 31, 1992, as
amended, File No. 0-18091 (the "1992 Form 10-K").
*10.1.2 Proposed Amendment to Stock Option Plan.
10.2 Agreement by and between the Company and Treadco, Inc. dated as of
February 6, 1996: Incorporated by reference to Exhibit 10.1 to the Form
10-QSB of the Registrant filed with the Securities and Exchange
Commission for the quarter ended February 29, 1996, File No. 0-18091.
10.3 Letter Agreement by and between the Registrant and Tresca Industries
dated September 8, 1994: Incorporated by reference to Exhibit 10.18 to
the 1994 Form 10-K of the Registrant filed with the Securities and
Exchange Commission for the fiscal year ended August 31, 1994, File No.
0-18091.
*10.4 RSI Holdings, Inc. Incentive Stock Award Plan, including an amendment:
Incorporated by reference to Exhibit 10.8 to the 1990 Form 10-K.
*10.5 Amendment to Incentive Stock Award Plan: Incorporated by reference to
Exhibit 10.8.1 to the 1992 Form 10-K.
10.6 Loan Agreement dated December 12, 1996 by and among the Company,
CambridgeBanc, Inc. and First Union National Bank, together with
related documents: Incorporated by reference to the Form 10-QSB of the
Registrant filed with the Securities and Exchange Commission for the
fiscal quarter ended November 30, 1996, File No. 0-18091.
10.7 First Amendment to Loan Agreement dated as of August 25, 1997 by and
among the Company, HomeAdd Financial Corporation, and First Union
National Bank.
<PAGE> 42
*10.8 Stock Option Agreement by and between the Registrant and C. C. Guy
dated as of July 2, 1997.
*10.9 Stock Option Agreement by and between the Registrant and Charles M.
Bolt dated as of July 2, 1997.
10.10 Lease Agreement by and between Hewitt Coleman Companies, Inc., Lessor
and HomeAdd Financial Corporation, Lessee dated August 4, 1997.
10.11 Agreement by and between the Company and Fuller D. Tresca dated
November 19, 1997.
21. Subsidiaries of the Registrant.
23. Consent of Ernst & Young LLP, Independent Auditors.
27. Financial Data Schedule (For SEC use only)
99. Consent Decree and Judgment dated December 31, 1991 entered by the
United States District Court for the Northern District of California in
Wiegmann & Rose International Corp., a South Carolina corporation
("Wiegmann & Rose"), plaintiff, v. NL Industries, Inc., a New Jersey
corporation, and Esselte Pendaflex Corporation, a New York corporation,
defendants; NL Industries, Inc., a New Jersey corporation, and Esselte
Pendaflex Corporation, a New York corporation, third party plaintiffs,
v. Triple A Machine Shop, Inc., a California corporation ("Triple A"),
third party defendant, C.A. No. C-88-4817 FMS: Incorporated by
reference to Exhibit 28.1 to the Registrant's Form 8-K, filed with the
Securities and Exchange Commission on January 3, 1992, File No.
0-18091.
99.1 Settlement Agreement and Release by and between Wiegmann & Rose, Delta
Woodside Industries, Inc., formerly known as RSI Corporation, a South
Carolina corporation and Triple A: Incorporated by reference to Exhibit
99.1 to the Registrant's Form 8-K, filed with the Securities and
Exchange Commission on November 18, 1996, File No. 0-18091.
* Management contract or compensatory plan required to be filed as an exhibit
pursuant to Item 13 of Form 10-KSB.
<PAGE> 1
EXHIBIT 10.1.2
AMENDMENT NO. 3 TO RSI HOLDINGS, INC.
STOCK OPTION PLAN
This Amendment is made as of the ______ day of _______, 1997 to the
RSI Holdings, Inc. Stock Option Plan, as amended to date (the "Plan").
1. The second sentence of Section 4 entitled "Stock Subject to
Plan" shall be deleted and replaced with the following:
An aggregate of 750,000 shares are reserved for the grant
under this Plan of Options, any or all of which, at the
Board's (or Committee's, as applicable) discretion, may be
intended to qualify as incentive stock options under Section
422 of the Code.
In all other respects the Plan shall remain unchanged.
<PAGE> 1
Exhibit 10.7
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "Amendment") executed as
of the 25th day of August, 1997 by and among First Union National Bank, a
national banking association ("First Union")(f/k/a First Union National Bank of
South Carolina), HomeAdd Financial Corporation, a South Carolina corporation
(f/k/a CambridgeBanc, Inc.) ("Borrower"), and RSI Holdings, Inc., a North
Carolina corporation ("RSI").
FACTUAL BACKGROUND:
First Union has previously extended a revolving line of credit to
Borrower in the original principal amount up to Five Hundred Thousand and
No/100 Dollars ($500,000.00)("Loan") as set forth in that certain Loan
Agreement dated to be effective as of December 12, 1996 (the "Loan Agreement").
Amounts outstanding under the Loan Agreement are evidenced by a certain
promissory note also dated December 12, 1997. Advances made to Borrower
pursuant to the terms of the Loan Agreement have been or will be used to
finance FHA Title I and conventional loans and are secured by the mortgages and
promissory notes evidencing such loans. The Loan Agreement anticipates the sale
of the loans financed by the Loan by the Borrower to various Purchasers (as
defined in the Loan Agreement) as well as the bailment of the collateral to the
same Purchasers on behalf of First Union pursuant to a Bailee Agreement (as
defined in the Loan Agreement).
Borrower has requested and First Union has agreed (i) to allow bulk
purchases of loans by Purchasers and, therefore, to delete the requirement that
each Purchaser execute a Purchase Commitment prior to purchasing a loan from
Borrower and (ii) to extend the time for repayment of an Advance from fifteen
(15) days to twenty-five (25) days. The parties have agreed to amend the Loan
Agreement accordingly. Additionally, each of Borrower and First Union has
changed its name and desire to recognize the change in this Amendment.
Any terms used and not otherwise defined herein shall have the meaning
set forth in the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
hereinbelow and of the premises recited hereinabove (which are hereby averred
by the parties to be true and correct) and other good and valuable
consideration, the receipt, sufficiency and adequacy of which the parties do
hereby acknowledge, the parties do hereby agree as follows:
1. Each reference to "CambridgeBanc, Inc." in the Loan Agreement
and any other Loan Document (as defined in the Loan
Agreement) shall be deleted in its entirety and replaced with
"HomeAdd Financial Corporation". The term "Borrower" as used
therein shall hereafter mean "HomeAdd Financial Corporation".
2. Each reference to "First Union National Bank of South
Carolina" in the Loan Agreement and any other Loan Document
shall be deleted in its entirety and replaced with "First
Union National Bank". The term "First Union" as used therein
shall hereafter mean "First Union National Bank".
<PAGE> 2
3. Section 1.19 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"SECTION 1.19 "MORTGAGE LOAN" means any mortgage loan to
finance an FHA Mortgage or a Conventional Loan Mortgage which
First Union has determined in its reasonable sole discretion
to be acceptable as security for the Note which has been made
to a Mortgagor by Borrower."
4. Section 1.25 of the Loan Agreement is hereby deleted in its
entirety.
5. Section 1.26 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"SECTION 1.26 "PURCHASE PRICE" means the amount to be paid by
a Purchaser to Borrower for the purchase of any specified
Mortgage Note(s) and related Mortgage(s)."
6. Section 1.27 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"SECTION 1.27 "PURCHASER" means any person or entity
reasonably acceptable to First Union with respect to the
purchase of a Mortgage Note(s) and related Mortgage(s). First
Union's entering into of a Bailee Agreement with a potential
Purchaser shall be deemed to constitute approval of such
entity as a Purchaser."
7. Section 2.3.3 of the Loan Agreement is hereby amended to
delete the requirement that a Purchase Commitment be
delivered to First Union before an Advance is made for a
Mortgage Loan.
8. Section 5.1 of the Loan Agreement is hereby deleted in its
entirety.
9. Section 5.2 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"SECTION 5.2 SALE OF MORTGAGE NOTES; PLEDGE OF BORROWER'S
ACCOUNT; ACKNOWLEDGEMENT OF Bailment. With respect to each
Mortgage Loan, Borrower agrees that the Mortgage Note and
Collateral Documents shall be sold to a Purchaser within
twenty-five (25) days of the date of the Advance funding the
respective Mortgage Loan. Purchaser shall be instructed to
pay the Purchase Price thereof directly to Borrower who shall
then pay such amounts to First Union in the manner required
by First Union herein. Borrower agrees to deliver the
originals of the Mortgage, the Mortgage Note, the Collateral
Documents and any and all other documents required herein for
each Mortgage Loan directly to the Purchaser under cover of a
bailee letter in form and content acceptable to First Union
(substantially in the form of the Bailee Agreement attached
hereto as Exhibit A), and, upon First Union's request, to
provide copies of all such documents, along with any other
documents requested by First Union, to First Union. Borrower
acknowledges that failure of Purchaser to comply with the
terms of such bailee letter shall result in Borrower being
required to repay the Loan, or a portion thereof, in
accordance with the terms of Section 2.2."
<PAGE> 3
10. Section 5.4 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"SECTION 5.4 REMOVAL OF MORTGAGE NOTES. In the event that
Borrower does not sell a Mortgage Note to a Purchaser or
First Union has not received the full Purchase Price from the
Purchaser with (a) twenty-five (25) days from the date First
Union advances funds to Borrower to finance the Mortgage Loan
as evidenced by such Mortgage Note, then Borrower, promptly
following the request of First Union, shall remove such
Mortgage Note and Mortgage from the Collateral and repay the
outstanding principal balance of the Loan, in accordance with
Section 2.2 by an amount equal to the amount advanced by
First Union for any Mortgage Loan evidenced by such removed
Mortgage Note and Mortgage."
11. Section 7.1.18 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"SECTION 7.1.18 FUTURE PURCHASERS. Before selling Mortgage
Loans to Purchasers who are not Purchasers as of the closing
date of the Loan, Borrower will submit the names of such
potential Purchasers and any other information reasonably
required by First Union to First Union for approval, in its
sole reasonable discretion, and upon receipt of approval of
the potential Purchasers by First Union, shall require each
such Purchaser to execute a Bailee Agreement prior to the
sale of any Mortgage Loan to such potential Purchaser."
12. Section 9.1(a) is hereby deleted in its entirety and replaced
with the following:
"(a) if Borrower fails to pay any amount due to First Union
on its due date under the Note or this Agreement or otherwise
be in default under the Note, except that if failure to pay a
principal payment when due in accordance with Article V is
caused by a Purchaser's failure to purchase a Mortgage Loan
(which failure to purchase is not directly or indirectly the
fault of Borrower or a result of Borrower's actions),
Borrower shall not be in default unless such principal
payment is not made within fifteen (15) days from the date on
which such principal payment is due.
13. Section 13.2 is hereby deleted in its entirety and replaced
with the following:
"SECTION 13.2 RELEASE. Borrower acknowledges and agrees that
First Union shall have no liability to Borrower or any other
person for failure of a Purchaser to purchase a Mortgage
Note."
14. Exhibit A to the Loan Agreement, the "Bailee Agreement", is
hereby amended as set forth on Exhibit A attached hereto. Any
bailments made following the date hereof shall be subject to
such amended Bailee Agreement.
15. All Loan Documents are hereby modified to the extent
necessary such that any reference to the "Loan Agreement"
shall refer to the Loan Agreement as modified hereby.
16. Borrower and RSI hereby represent and warrant that, at the
time of the execution and delivery of this Agreement,
Borrower and RSI are in compliance with their respective
covenants set forth in
<PAGE> 4
the Loan Agreement and Borrower hereby confirms that the
representations and warranties set forth therein continue to
be true and accurate, except that Borrower owns all of the
issued and outstanding stock of HomeAdd Financial Services
Corp., a North Carolina corporation.
17. Borrower agrees to hold First Union harmless and indemnify
First Union and its successors and assigns from any and all
claims or causes of action arising in connection with this
Amendment or otherwise related to the Loan (including without
limitation, court costs and reasonable attorneys fees), other
than those resulting from or caused by First Union's gross
negligence or recklessness. Borrower also acknowledges that
the Indemnity and Release language set forth in Article XIII
of the Loan Agreement shall remain in full force and effect
following the date hereof, except as modified hereby.
18. Borrower agrees to execute and deliver to First Union,
promptly upon request from First Union, such other and
further documents as may be reasonably necessary or
appropriate to consummate the transactions contemplated
herein.
19. This Amendment may be executed in two (2) or more
counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
instrument, and in making proof of this Amendment, it shall
not be necessary to produce or account for more than one such
counterpart.
20. This Agreement is not a novation and except as otherwise
modified hereby, the terms and provisions of the Loan
Agreement and all Loan Documents shall remain in full force
and effect and shall continue to be secured by the Collateral
with the same force, effect and priority.
21. RSI hereby reaffirms its obligations arising under the
Capital Contribution Agreement and acknowledges that the
Capital Contribution Agreement shall continue in full force
and effect following the execution of this Amendment.
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first written above.
HomeAdd Financial Corporation
/s/ Matthew J. Marron, Jr.
----------------------------------
By: Matthew J. Marron, Jr.
Its: President
RSI Holdings, Inc.
/s/ Buck A. Mickel
----------------------------------
By: Buck A. Mickel
Its: Vice President
First Union National Bank
/s/ Charles P. Cecil
----------------------------------
By: Charles P. Cecil
Its: Senior Vice President
<PAGE> 6
DRAFT DOCUMENT 11/12/97
Exhibit A
BAILEE AGREEMENT
THIS BAILEE AGREEMENT is entered into by and among First Union
National Bank ("Lender"), HomeAdd Financial Corporation (f/k/a CambridgeBanc,
Inc.) ("Seller"), and , ("Buyer").
WHEREAS, Seller may, from time to time, originate and close
residential mortgage loans (each, a "Mortgage Loan"); and
WHEREAS, each Mortgage Loan will be evidenced by a promissory note
(each, a "Mortgage Note") and secured by a mortgage or certain other documents
(collectively, together with each Mortgage Note, the "Collateral"); and
WHEREAS, Seller may obtain monies from Lender to fund such Mortgage
Loans pursuant to a Loan Agreement dated December 12, 1996, among Lender,
Seller and RSI Holdings, Inc., as the same may be amended from time to time
("Loan Agreement"), and will grant Lender a security interest in the Collateral
securing such Mortgage Loans; and
WHEREAS, Seller intends to sell certain closed Mortgage Loans to
Buyer and
WHEREAS, Lender has requested that Buyer act as Lender's bailee with
respect to such Collateral until the related Mortgage Loan is purchased by
Buyer.
NOW, THEREFORE, in consideration of the agreements set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Lender, Seller, and Buyer agree as follows:
Section 1. Notification and Acknowledgment of Security Interest.
Seller shall attach to each shipment to Buyer of one or more Mortgage Notes a
cover letter, substantially in the form of Exhibit A attached hereto, that: (a)
references this Bailee Agreement, and (b) acknowledges that each related
Mortgage Loan is subject to Lender's security interest. Seller, shall promptly
forward such cover letter and Mortgage Note(s) and other Collateral related
thereto to Buyer at the following address (or such other address as may be sent
in writing by Buyer to Seller and Lender):
Attn:
Immediately upon receipt, and not later than seventy-two (72) hours following
receipt of a Bulk Purchase, Buyer shall sign and date such cover letter and
shall mail and telefax it to Lender at the following address or number (or such
other address or number as may be sent in writing by Lender to Buyer and
Seller):
Lender: First Union National Bank
1 Beattie Place
Greenville, South Carolina 29602
Attention: Linda G. Burroughs
Telefax: (864) 255-8261
Telephone: (864) 255-8337
<PAGE> 7
For the purposes hereof, a "Bulk Purchase" shall mean the purchase by Buyer of
more than one (1) Mortgage Loan on the same date from Seller. The Mortgage Loan
file shall not be deemed complete until the receipt by Buyer of the original
executed Mortgage Note endorsed in blank or to Buyer, together with the other
documents required by the Loan Agreement. Such cover letter, when executed by
Buyer, shall constitute acknowledgment by Buyer of Lender's security interest
in the related Collateral, provided, however, that the failure of Buyer to
acknowledge such cover letter shall not impair or affect the enforceability of
this Bailee Agreement or of Lender's lien on the related Collateral evidenced
hereby. Borrower shall not be required to return a cover letter to Lender for a
non Bulk Purchase.
Section 2. Buyer as Bailee. Effective upon Buyer's receipt of the
Collateral and the cover letter described in Section 1 above, Buyer will hold
the Collateral, in which Lender holds a security interest, as bailee for the
benefit of Lender, pursuant to the provisions of the Uniform Commercial Code,
as adopted in the State of South Carolina, until Buyer's status as bailee is
terminated as set forth in Section 3 hereof. Prior to such termination, Buyer
shall not deliver the Collateral to Seller or any third party. Buyer shall act
only as a bailee for Lender and shall not be deemed to be a representative,
trustee, or fiduciary or otherwise an agent of or for Lender or Seller with
respect to the Collateral. The standard of care to be exercised by Buyer in
holding the Collateral shall be the same degree of care and skill as Buyer
exercises when it holds Mortgage Loan documents on its own behalf.
Section 3. Termination of Security Interest and Release of Bailee.
Buyer's status and obligations as bailee shall automatically terminate, without
further action by any party, upon the earliest to occur of: (i) payment of the
Purchase Price to Seller, as set forth in Section 4 hereof (the "Purchase
Date"); or (ii) return of the Collateral to Lender, as set forth in Section 5
hereof. Lender agrees that its security interest in the Collateral and that all
right, title, and interest it may have in each related Mortgage Loan purchased
by Buyer are and shall be fully released effective as of the Purchase Date,
whereupon Buyer will have no further obligations to Lender with respect to such
Collateral.
Section 4. Purchase Price. The "Purchase Price" means the price Buyer
agrees to pay to purchase a Mortgage Loan. Lender and Seller acknowledge that
the Purchase Price may be less than the full principal amount of the Mortgage
Note evidencing the Mortgage Loan, and that Seller may have paid or advanced
other funds to Buyer which funds are not included in the Purchase Price. Buyer
agrees that the Purchase Price paid to Seller with respect to a particular
Mortgage Loan shall not be reduced due to adjustments relating to another
Mortgage Loan. For purposes of the Purchase Date set forth in Section 3 hereof,
the Purchase Price shall be deemed paid in full when either: (a) Seller
collects funds in the amount of the Purchase Price pursuant to a cashiers check
mailed to Seller's address set forth in Section 7 below from Buyer and deposits
such check in its account with Lender referenced hereinbelow (or any other
account designated by Lender); (b) Seller receives a federal wire transfer in
the amount of the Purchase Price into its account with Lender referenced
hereinbelow (or any other account designated by Lender) from Buyer:
Bank: First Union National Bank of South Carolina
Address: 1 Beattie Place, Greenville, SC 29602
ABA Number: 053207766
<PAGE> 8
Account: 2010000314483 (note, this account # may change as
of January 1997 contact First Union for confirmation of
account #)
Attention: Linda G. Burroughs
or (c) Seller collects funds in such other manner as requested by Lender and
such funds are deposited in the account with Lender referenced hereinabove (or
any other account designated by Lender). Seller agrees promptly to process and
submit any such cashiers check received from Buyer for payment to Lender. Buyer
shall not be liable to Lender or Seller for any additional expenses incurred by
Lender or Seller because of: (i) payments lost or delayed due to incorrect wire
transfer or mailing instructions provided by Seller; (ii) Seller's failure
promptly to process a cashiers check; or (iii) Lender's failure to promptly
submit a cashiers check for payment. Buyer shall notify Seller of the purchase
of a Mortgage Loan by sending a funding advice to Seller, and, upon Lender's
request, Seller shall promptly telecopy such funding advice to Lender.
Section 5. Return of Collateral to Lender. Buyer will deliver the Note
and other Collateral in Buyer's possession to Lender: (a) upon receipt by Buyer
of Lender's written request therefor (provided that such request is received by
Buyer prior to Buyer's payment of the Purchase Price to Seller); or (b)
promptly, in the event that Buyer elects not to purchase the Mortgage Loan, or
in the event that the Mortgage Note or other Collateral is defective and
requires correction. In the alternative, Buyer shall take such other action
with respect to the Note and other Collateral as may be agreed upon in writing
between Lender and Buyer with notice to Seller. Any delivery from Buyer to
Lender shall be made by express mail to the address of Lender set forth in
Section 1 hereof. In no event shall Buyer return any item of Collateral to
Seller prior to the termination of Lender's security interest in the
Collateral.
Section 6. Representation and Warranties.
(a) As of the date of delivery of each Mortgage Loan to Buyer:
(i) Lender represents and warrants to Buyer that (A) Lender has not
assigned, hypothecated, transferred, pledged, or otherwise conveyed
the Collateral to any other party, or recorded any assignment of
mortgage or deed of trust relating to such Mortgage Loan, and (B)
during the period that Buyer holds the Collateral as bailee, unless
and until the Collateral is returned by Buyer to Lender, Lender will
not assign, hypothecate, transfer, pledge, or otherwise convey any of
Lender's right, title, or interest in such Collateral; nor will Lender
need or cause to be needed any assignment of mortgage or deed of trust
relating to such Mortgage Loan;
(ii) Seller certifies to Buyer that the documents relating to each
Mortgage Loan purchased have been delivered to Buyer by Seller or
Seller's closing agent (except for any loan and security agreement
between Lender and Seller, and any unrecorded assignment of a mortgage
or deed of trust) ; and
(iii) Lender's execution and delivery of this Bailee Agreement have
been specifically approved by Lender. This Bailee Agreement
constitutes the "written agreement" governing Lender's rights and
obligations with respect to Buyer in connection with Lender's role as
Seller's warehouse lender for the Mortgage Loans, and Lender shall
continuously maintain all components of such "written agreement" as an
<PAGE> 9
official record of Lender or any successor thereof that Lender owns or
controls.
(b) Immediately following payment of the Purchase Price for a particular
Mortgage Loan as described in Section 4 hereinabove, Lender represents
and warrants that (i) Lender has fully relinquished all right, title,
and interest it may have in and to such Mortgage Loan; (ii) all notes,
mortgages, and other original documents, instruments, and materials
that have been delivered to Buyer pursuant to subsection 6(a)(ii)
above have been released to Buyer; and (iii) any unrecorded
assignments in Lender's possession relating to such Mortgage Loan are
null and void, and Lender covenants to and agrees with Buyer that
Lender immediately will take any and all action necessary to assign
and transfer any recorded interest in such Mortgage Loan to Buyer.
Section 7. Notices. Any notices sent to Buyer or Lender pursuant to
this Agreement shall be sent to the address applicable in accordance with
Section 1 of this Agreement, and any notices sent to Seller pursuant to this
Agreement shall be sent to Seller at the following address (or such other
address as may be sent in writing by Seller to Buyer and Lender):
HomeAdd Financial Corporation
Post Office Box 17918
Greenville, South Carolina 29606
Attention: Matthew J. Marron, Jr.
Section 8. Counterparts. This Bailee Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Bailee
Agreement by signing any such counterpart.
[SEE SIGNATURE PAGE ATTACHED]
<PAGE> 10
IN WITNESS WHEREOF, each of the undersigned has caused this Bailee
Agreement to be duly executed and delivered by its duly authorized officer as
of ________________, 19_____.
LENDER: First Union National Bank
By:
Name:
Title:
SELLER: HomeAdd Financial Corporation
By: /s/ Matthew J. Marron, Jr.
---------------------------
Name: Matthew J. Marron, Jr.
Title: President
BUYER:
By:
Name:
Title:
<PAGE> 11
Exhibit A to Bailee Agreement
WAREHOUSE LENDER'S LETTER
Date:
Attention: Residential Mortgages - Conduit
Dear______________________________:
Promissory Notes and all other documents evidencing the below-listed loans are
attached hereto and are being delivered to ("________ "), in _________ capacity
as bailee for First Union National Bank ("Lender"), pursuant to the Bailee
Agreement dated ____________ , 199___ (the "Bailee Agreement"), among Lender, as
warehouse lender, HomeAdd Financial Corporation (f/k/a CambridgeBanc, Inc.), as
Seller, and , as Buyer. Lender holds a security interest in such Promissory
Notes, Mortgage and all documents related thereto.
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:________________
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Loan # Name:
Execution of this letter shall constitute Buyer's agreement that it will; (i)
send or cause to be sent to Seller payments relating to the above-referenced
Promissory Notes as specified in Section 4 of the Bailee Agreement within
twenty-five (25) days of receipt of this letter; or (ii) in the alternative,
return such Promissory Notes and other documents to Lender as specified in
Section 5 of the Bailee Agreement within ten (10) days of receipt of this
letter.
Sincerely,
HomeAdd Financial Corporation
Name:
Title:
<PAGE> 12
The undersigned hereby acknowledges receipt of this letter and the
above-referenced Promissory Notes and other documents, and that the undersigned
will hold such Promissory Notes and other documents as bailee on behalf of the
above-referenced Lender, subject to Lender's security interest therein and the
terms and conditions of the Bailee Agreement.
By:
Name:
Title:
By:
Name:
Title:
<PAGE> 1
Exhibit 10.8
RSI HOLDINGS, INC.
STOCK OPTION AGREEMENT
Name of Optionee: C.C. Guy
Date of Grant: July 2, 1997
Number of shares subject to Options: 10,000
Exercise price per share: $.375
Options expire and are no longer valid on or after: July 2, 2002, unless an
earlier date of expiration occurs pursuant to the terms set forth below
The Options shall be exercisable according to the following schedule (subject
to adjustment as provided below):
5,000 Shares Beginning July 2, 1998
5,000 Shares Beginning July 2, 1999
An Option that becomes exercisable in whole or in part according to
the foregoing schedule may be exercised subsequently at any time prior to its
scheduled expiration, subject to earlier termination as described below.
ADDITIONAL OPTION TERMS:
The Options shall not be transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code of 1986, as amended, or Title 1 of the
Employee Retirement Income Security Act, or the rules thereunder.
Any unexercised Option shall terminate prior to its fixed term three
months after the date that the Optionee ceases to be an employee of RSI
Holdings, Inc. (the "Company") or a subsidiary of the Company, unless the
Optionee shall (a) die while an employee of the Company, or a subsidiary of the
Company, or within a period of three (3) months after the termination of his
employment with the Company or a subsidiary of the Company, in which case his
personal representative or representatives may exercise the previously
unexercised portion of the Options at any time within one (1) year after his
termination of employment to the extent the Optionee could have exercised such
Options as of the date of his death (but no later than the end of the fixed
term of the Option); (b) terminates his or her employment with the Company or a
subsidiary of the Company by reason of having become permanently and totally
disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of
1986, as amended (the "Code") (or any successor provision), in which case he or
his personal representative may exercise the previously unexercised portion of
the Options at any time within one (1) year after termination of his employment
to the extent the Optionee could have exercised such Options as of the date of
his becoming permanently and totally disabled. In no event may the Options be
exercised after the expiration of their fixed term.
An Option shall be deemed exercised when the holder (a) shall indicate
<PAGE> 2
the decision to do so in writing delivered to the Company, (b) shall at the
same time tender to the Company payment in full in cash (or in shares of the
Company's Common Stock at the value of such shares at the time of exercise) of
the exercise price for the shares for which the Option is exercised, (c) shall
tender to the Company payment in full in cash of the amount of all federal and
state withholding or other employment taxes applicable to the taxable income,
if any, of the holder resulting from such exercise, and (d) shall comply with
such other reasonable requirements as the Board of the Company may establish.
Neither the Optionee nor his personal representative(s) or estate shall have
any of the rights of a shareholder with reference to shares subject to an
Option until a certificate for the shares has been executed and delivered.
An Option may be exercised for any lesser number of shares than the
full amount for which it could be exercised. Such a partial exercise of an
Option shall not affect the right to exercise the Options from time to time in
accordance with this agreement for the remaining shares subject to the Options.
The number and kind of shares subject to Options hereunder and/or the
exercise price will be appropriately adjusted by the Board in the event of any
change in the outstanding stock of the Company by reason of stock dividend,
consolidation, stock split, recapitalization, reorganization, merger, split-up
or the like. Such adjustment shall be designed to preserve, but not increase,
the benefits to the Optionee. The determinations of the Board as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.
No certificate(s) for shares shall be executed or delivered upon
exercise of an Option until the Company shall have taken such action, if any,
as is then required to comply with the provisions of the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the South Carolina Uniform Securities Act, as
amended, any other applicable state blue sky law(s) and the requirements of any
exchange on which the Company's Common Stock may, at the time, be listed. BY
SIGNING BELOW, THE OPTIONEE STATES THAT HE UNDERSTANDS THAT THE SHARES
UNDERLYING THESE OPTIONS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION AND THAT, EVEN AFTER
EXERCISE, THEY CANNOT BE SOLD BY OPTIONEE WITHOUT REGISTRATION UNDER APPLICABLE
SECURITIES LAWS OR EXEMPTION THEREFROM. THE OPTIONEE ALSO REPRESENTS TO THE
COMPANY THAT HE UNDERSTANDS THAT, IF HE INTENDS TO RELY UPON RULE 144
PROMULGATED UNDER THE SECURITIES ACT IN CONNECTION WITH THE SELL OF ANY
SECURITIES ACQUIRED BY HIM UPON THE EXERCISE OF THE OPTIONS, UNDER CURRENT
REGULATIONS HE MUST HOLD THE SECURITIES ACQUIRED FROM THE EXERCISE OF THE
OPTIONS FOR A MINIMUM OF ONE YEAR AFTER EXERCISE. In the case of the exercise
of an Option by a person or estate acquiring the right to exercise the Options
by bequest or inheritance, the Board may require reasonable evidence as to the
ownership of the Options and may require such consents and releases of taxing
authorities as it may deem advisable.
This agreement does not in any way confer any right to continue as a
director of the Company.
By the Optionee's and the Company's signatures below, the Optionee and
the Company agree that these Options are granted under and governed by the
terms and conditions of this agreement.
<PAGE> 3
RSI HOLDINGS, INC.
By: /s/ Buck Mickel
Title: Chairman
WITNESS:
/s/ Mary W. Murphy
OPTIONEE:
/s/ C. C. Guy
C.C. Guy
<PAGE> 1
Exhibit 10.9
RSI HOLDINGS, INC.
STOCK OPTION AGREEMENT
Name of Optionee: Charles M. Bolt
Date of Grant: July 2, 1997
Number of shares subject to Options: 10,000
Exercise price per share: $.375
Options expire and are no longer valid on or after: July 2, 2002, unless an
earlier date of expiration occurs pursuant to the terms set forth below
The Options shall be exercisable according to the following schedule (subject
to adjustment as provided below):
5,000 Shares Beginning July 2, 1998
5,000 Shares Beginning July 2, 1999
An Option that becomes exercisable in whole or in part according to
the foregoing schedule may be exercised subsequently at any time prior to its
scheduled expiration, subject to earlier termination as described below.
ADDITIONAL OPTION TERMS:
The Options shall not be transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code of 1986, as amended, or Title 1 of the
Employee Retirement Income Security Act, or the rules thereunder.
Any unexercised Option shall terminate prior to its fixed term three
months after the date that the Optionee ceases to be an employee of RSI
Holdings, Inc. (the "Company") or a subsidiary of the Company, unless the
Optionee shall (a) die while an employee of the Company, or a subsidiary of the
Company, or within a period of three (3) months after the termination of his
employment with the Company or a subsidiary of the Company, in which case his
personal representative or representatives may exercise the previously
unexercised portion of the Options at any time within one (1) year after his
termination of employment to the extent the Optionee could have exercised such
Options as of the date of his death (but no later than the end of the fixed
term of the Option); (b) terminates his or her employment with the Company or a
subsidiary of the Company by reason of having become permanently and totally
disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of
1986, as amended (the "Code") (or any successor provision), in which case he or
his personal representative may exercise the previously unexercised portion of
the Options at any time within one (1) year after termination of his employment
to the extent the Optionee could have exercised such Options as of the date of
his becoming permanently and totally disabled. In no event may the Options be
exercised after the expiration of their fixed term.
<PAGE> 2
An Option shall be deemed exercised when the holder (a) shall indicate
the decision to do so in writing delivered to the Company, (b) shall at the
same time tender to the Company payment in full in cash (or in shares of the
Company's Common Stock at the value of such shares at the time of exercise) of
the exercise price for the shares for which the Option is exercised, (c) shall
tender to the Company payment in full in cash of the amount of all federal and
state withholding or other employment taxes applicable to the taxable income,
if any, of the holder resulting from such exercise, and (d) shall comply with
such other reasonable requirements as the Board of the Company may establish.
Neither the Optionee nor his personal representative(s) or estate shall have
any of the rights of a shareholder with reference to shares subject to an
Option until a certificate for the shares has been executed and delivered.
An Option may be exercised for any lesser number of shares than the
full amount for which it could be exercised. Such a partial exercise of an
Option shall not affect the right to exercise the Options from time to time in
accordance with this agreement for the remaining shares subject to the Options.
The number and kind of shares subject to Options hereunder and/or the
exercise price will be appropriately adjusted by the Board in the event of any
change in the outstanding stock of the Company by reason of stock dividend,
consolidation, stock split, recapitalization, reorganization, merger, split-up
or the like. Such adjustment shall be designed to preserve, but not increase,
the benefits to the Optionee. The determinations of the Board as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.
No certificate(s) for shares shall be executed or delivered upon
exercise of an Option until the Company shall have taken such action, if any,
as is then required to comply with the provisions of the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the South Carolina Uniform Securities Act, as
amended, any other applicable state blue sky law(s) and the requirements of any
exchange on which the Company's Common Stock may, at the time, be listed. BY
SIGNING BELOW, THE OPTIONEE STATES THAT HE UNDERSTANDS THAT THE SHARES
UNDERLYING THESE OPTIONS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION AND THAT, EVEN AFTER
EXERCISE, THEY CANNOT BE SOLD BY OPTIONEE WITHOUT REGISTRATION UNDER APPLICABLE
SECURITIES LAWS OR EXEMPTION THEREFROM. THE OPTIONEE ALSO REPRESENTS TO THE
COMPANY THAT HE UNDERSTANDS THAT, IF HE INTENDS TO RELY UPON RULE 144
PROMULGATED UNDER THE SECURITIES ACT IN CONNECTION WITH THE SELL OF ANY
SECURITIES ACQUIRED BY HIM UPON THE EXERCISE OF THE OPTIONS, UNDER CURRENT
REGULATIONS HE MUST HOLD THE SECURITIES ACQUIRED FROM THE EXERCISE OF THE
OPTIONS FOR A MINIMUM OF ONE YEAR AFTER EXERCISE. In the case of the exercise
of an Option by a person or estate acquiring the right to exercise the Options
by bequest or inheritance, the Board may require reasonable evidence as to the
ownership of the Options and may require such consents and releases of taxing
authorities as it may deem advisable.
This agreement does not in any way confer any right to continue as a
director of the Company.
<PAGE> 3
By the Optionee's and the Company's signatures below, the Optionee and
the Company agree that these Options are granted under and governed by the
terms and conditions of this agreement.
RSI HOLDINGS, INC.
By: /s/ Buck Mickel
Title: Chairman
WITNESS:
/s/ Mary W. Murphy
OPTIONEE:
/s/ Charles M. Bolt
Charles M. Bolt
<PAGE> 1
EXHIBIT 10.10
LEASE AGREEMENT
850 SOUTH PLEASANTBURG BUILDING
FOR
HOMEADD FINANCIAL CORPORATION
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. PREMISES......................................................................1
2. TERM..........................................................................1
3. RENT..........................................................................1
4. PREPARATION OF PREMISES.......................................................2
5. LATE PAYMENT CHARGE...........................................................2
6. USE...........................................................................2
7. LESSEE'S REPAIRS..............................................................2
8. LESSOR'S REPAIRS..............................................................3
9. ALTERATIONS...................................................................3
10. ASSIGNMENT....................................................................3
11. SUBLETTING....................................................................3
12. AIR CONDITIONING AND ELECTRICAL EQUIPMENT.....................................3
13. HAZARDOUS MATERIAL............................................................4
14. INSOLVENCY OR BANKRUPTCY......................................................4
15. DEFAULT.......................................................................4
16. ACCEPTANCE OF RENT AFTER TERMINATION..........................................5
17. RELETTING BY LESSOR...........................................................5
18. LESSOR'S RIGHTS CUMULATIVE....................................................5
19. NO WAIVER.....................................................................5
20. LESSOR'S LIEN.................................................................6
21. ATTORNEY'S FEES...............................................................6
22. HOLDING OVER..................................................................6
23. SALES PROHIBITED..............................................................6
24. INDEMNIFICATION OF LESSOR.....................................................6
25. MUTUAL WAIVER OF SUBROGATION..................................................7
26. UTILITIES AND SERVICES........................................................7
27. DESTRUCTION, FIRE AND OTHER CASUALTY..........................................7
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
28. EMINENT DOMAIN................................................................7
29. END OF TERM...................................................................8
30. AIR RIGHTS....................................................................8
31. QUIET ENJOYMENT...............................................................8
32. NO REPRESENTATIONS............................................................8
33. NOTICES.......................................................................8
34. SUNDRY CHARGES................................................................9
35. PARKING.......................................................................9
36. SIGNS, CARDING................................................................9
37. ACCESS TO PREMISES............................................................9
38. DAMAGE OR THEFT OF PERSONAL PROPERTY.........................................10
39. MORTGAGEE'S RIGHTS...........................................................10
40. STORAGE......................................................................10
41. SET OFF AND DELIVERY OF POSSESSION...........................................10
42. OCCUPANCY PERMIT.............................................................11
43. SECURITY DEPOSIT.............................................................11
44. SEVERABILITY.................................................................11
45. PARAGRAPH HEADINGS...........................................................11
46. RELOCATION OF PREMISES.......................................................11
47. BUILDING RULES AND REGULATIONS...............................................11
48. ADVANCE RENT.................................................................12
49. RENEWAL OPTION...............................................................12
50. RIGHT OF FIRST OFFER.........................................................12
ADDENDUM (IF ANY)
EXHIBITS
EXHIBIT A DEMISED PREMISES
EXHIBIT B RENT SCHEDULE
EXHIBIT C PREPARATION OF PREMISES
EXHIBIT D BUILDING RULES AND REGULATIONS
</TABLE>
<PAGE> 3
850 BUILDING
850 S. PLEASANTBURG DRIVE
GREENVILLE, SOUTH CAROLINA
STATE OF SOUTH CAROLINA )
) LEASE AGREEMENT
COUNTY OF GREENVILLE )
THIS LEASE AGREEMENT made this fourth day of August, 1997, between
HEWITT COLEMAN COMPANIES, INC., hereafter called the Lessor and HOMEADD
FINANCIAL CORPORATION, hereafter called Lessee.
W I T N E S S E T H
1. PREMISES. Lessor hereby leases to Lessee and Lessee hereby hires
from Lessor the premises located at 850 S. PLEASANTBURG DRIVE, Greenville,
South Carolina, hereinafter referred to as "Office Building", described as
follows:
Suite Number 205 containing approximately 3,226 RENTABLE SQUARE FEET,
hereinafter referred to as "Demised Premises", as shown on Exhibit A attached
hereto and made a part hereof,
Lessee's usable square footage is 3,102 square feet. The difference
between the rentable and the usable square feet represent Lessee's prorata
share of the common areas in the Building.
2. TERM. TO HAVE AND TO HOLD said premises for the term of FIVE (5) YEARS
commencing on the RENTAL COMMENCEMENT DATE and ending at midnight five (5)
years from the Rental Commencement Date, unless the term hereby demised shall
be sooner terminated as hereinafter provided, and subject to the conditions and
for the consideration hereinafter stated.
The RENTAL COMMENCEMENT DATE shall be the date of substantial
completion of the Lessee's improvements or upon occupancy by the Lessee,
whichever is sooner. "Substantial completion" shall be the date the Premises
are ready for Lessee's occupancy, except for a "punch list" of items that would
not prevent Lessee's operation of their business.
3. RENT. That the Lessee shall pay as rent for the Demised Premises the
sum of (see Rent Schedule -- Exhibit "B") per annum payable each and every
month in advance according to the schedule on Exhibit "B". Lessor and Lessee
hereby agree that the Lessee shall pay no more than one month's rent in
advance. All payments shall be made to Hewitt Coleman Companies, inc., and are
due on the first day of each month at Post Office Box 5500, Greenville, South
Carolina 29606, or to such agent and at such places as Lessor shall designate.
Should this Lease commence on any day other than the first day of the month,
rent for said first month shall be prorated.
As additional rent, during the term of this Lease and any renewals
thereof, Lessee shall pay its proportionate share of any increases in Operating
Expenses in excess of the Base Amount. "Base Amount" for determining any
increases is defined as the amount of the Operating Expenses for the Building
for the Base Year. (Base Year is defined as calendar year 1997). In no case
shall the Lessee ever pay less than the Base Amount per square foot per annum
for Operating Expenses. Lessor shall provide evidence of such increases to the
Lessee within ninety (90) days of each calendar year following the Base Year
and the additional rent shall be paid upon thirty (30) days written notice to
Lessee.
The Lessee's proportionate share of the increases shall be a fraction,
the numerator of which is the number of square feet of rentable area in the
Demised Premises herein described and the denominator of which is the total
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number of rentable square feet of floor area in the 850 Building (36,878
rentable square feet) of which the Demised Premises are a part. (Should Lessee
exercise any option under this Lease, the foregoing proportionate share shall be
adjusted accordingly).
"Operating Expenses" shall include all Real Estate Taxes and all
direct costs of operation and maintenance of the Buildings, parking lot
maintenance (including sealing and restriping) and grounds and shall include,
but not be limited to Utility Costs, property management salaries/fees,
maintenance and janitorial expenses, administrative salaries, costs and fees,
property and general liability, insurance, security, and landscaping. The term
"Utility Costs" shall include Lessor's annual expenses for the operation and
maintenance of the Buildings and the Office Space with respect to utility
charges for furnishing heat, air conditioning, electricity, water, sewage, gas,
garbage removal, etc. The term "Real Estate Taxes" shall mean the annual taxes
and any special assessments or other charges levied against the real property
of which the Office Space is a part by any authority having the direct power so
to tax, including any city, county, state or federal government, or any school,
agricultural, transportation or environmental control agency for lighting,
drainage, or other improvements of the district thereof, and shall include any
such taxes, charges or assessments.
4. PREPARATION OF PREMISES. Lessor agrees to provide improvements, if
any, to the Premises in accordance with Exhibit "C" which attached herein.
5. LATE PAYMENT CHARGE. It is understood that the minimum guaranteed
rent is payable on or before the first day of the month, in accordance with this
agreement, without offset or deduction of any nature.
A. In the event any rental payment is not received within ten (10)
days of when due, it is agreed that Lessee shall pay a one time late payment
charge equal to two (2%) percent of the amount past due plus a $25.00 per month
late notice processing charge, such charges to be additional rent.
B. All sums payable by Lessee to Lessor and not paid within 30 days
shall be subject to an additional charge of $50.00 for issuance of a Demand for
Payment letter and a charge of $100.00 plus costs for processing of a "Show
Cause" order issued by a Magistrate, such charges to be additional rent.
C. In addition, all past due amounts not paid within 30 days when due
shall be subject to reimbursement for all collection costs including court
costs and legal fees in addition to any penalty charges allowed by law and such
charge shall be additional rent.
D. If a check of Lessee's shall not be paid by Lessee's bank
immediately upon presentation, Lessee shall pay to Lessor upon demand a bad
check charge equal to $25.00, and Lessor may require, by giving notice to
Lessee, (and in addition to any penalty arising out of the above) that all
future rental payments are to be made by cashier's check, or money order, and
that the delivery of Lessee's personal or corporate check will no longer
constitute a payment of rental as provided in this Lease. Any acceptance by
personal or corporate check thereafter by Lessor shall not be construed as a
subsequent waiver of said rights.
Late payment charges shall in no way authorize or permit Lessee to
delay prompt payment of its monetary lease obligations. Lessee further agrees
that the late charges and other charges imposed herein are fair and reasonable,
and to the best of Lessee's knowledge, comply with all laws, regulations and
statutes, and constitutes an agreement between Lessor and Lessee as to the
estimated compensation for costs and administration expenses incurred by the
Lessor and/or Lessor's Agent due to the late payment of rent to Lessor by the
Lessee. Lessee further agrees that the late charge assessed pursuant to this
Lease is not interest, and the late charge assessed does not constitute a
lender or borrower/creditor relationship between the Lessor, Lessor's Agent,
and Lessee.
6. USE. Lessee shall use and occupy the Demised Premises for office
purposes and no other purpose.
7. LESSEE'S REPAIRS. Lessee shall, at his own expense, keep the Demised
Premises in good order and repair, except for those repairs expressly required
to be made by Lessor. Should it become necessary for Lessee to repair or replace
any of the improvement in the Demised Premises, including but not limited to any
glass in the Demised Premises, the repair or replacement shall be of the same
size and quality as originally furnished. If Lessee fails to make proper repairs
or replacements required of it, Lessor, at his option, may make such repairs or
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replacements at Lessee's expense, and the amount expended by Lessor shall be
immediately due and payable in full as additional rental hereunder.
8. LESSOR'S REPAIRS. Lessor agrees to keep in good repair all structural
portions of the Demised Premises including, but not limited to, roof, exterior
and interior walls, heating and air conditioning equipment, electrical systems
(exclusive of tenant equipment) and plumbing, except for those repairs caused by
the negligence and undue wear and tear of Lessee, its agents, employees or
invitees. Further, it is hereby expressly agreed that Lessor's obligation to
keep the Demised Premises in good repair does not in any way imply redecorating
the Demised Premises during the term of this Lease, or any extension thereof.
9. ALTERATIONS. Lessee shall make no installations, alterations,
additions or improvements to the Demised Premises without submitting plans and
specifications to Lessor and securing Lessor's advance written consent in each
instance, whose consent is not to be unreasonably withheld. Such work shall be
done at Lessee's sole expense by employees of or contractors employed by
Lessor, or by contractors employed by Lessee, subject to Lessor's consent in
writing prior to letting of any such contractor(s) and subject to other
conditions Lessor may impose. Lessee shall, before making any installments,
alterations, additions or improvements at its expense, obtain all permits,
approvals and certificates required by any governmental body or agency and
certificates of final approval thereof and shall deliver promptly duplicates of
all such permits, approvals and certificates to Lessor. Lessee agrees to carry
or cause Lessee's contractors to carry such workmen's compensation, general
liability, personal and property damage insurance as Lessor may require. Lessee
agrees to obtain and deliver to Lessor written and unconditional waivers of
mechanic's liens upon the real property in which the Demised Premises are
located for all work, labor and service to be performed and materials to be
furnished in connection with such work, signed by all contractors,
subcontractors, materialmen and laborers involved in such work. In the event
any mechanic's lien is filed against the Demised Premises or the real property
of which the same forms a part for work claimed to have been done or materials
furnished to Lessee, the same shall be discharged by Lessee within ten (10)
days thereafter, at Lessee's expense, by filing the required bond. All such
installations, alterations, additions or improvements, except trade fixtures,
shall, at Lessor's option, remain on the premises as property of the lessor
without compensation to Lessee, or shall be removed therefrom and the premises
restored to its original condition at the expense of Lessee, normal wear and
tear excepted.
10. ASSIGNMENT. This Lease may not be assigned unless assignee has credit
which in the sole opinion of Landlord, is equal to or better than Lessee's
credit. Upon written approval of any assignment of the Lease by Lessor, if any,
Lessee shall be released of its obligations under the Lease Agreement. Any
assignment or license to occupy by Lessee without Lessor's written approval
shall be void and shall terminate the Lease at the option of Lessor.
11. ASSIGNMENT AND SUBLETTING. Lessee shall not assign nor permit an
assignment by operation of law of this Lease or any interest hereunder nor
sublet or suffer or permit the Demised Premises or any part thereof to be used
by any party other than the Lessee without the express written consent of
Lessor, which shall not be unreasonably withheld. Any sublease or license to
occupy by Lessee shall be void and shall terminate the Lease at the option of
Lessor. Upon subletting, the Lessee shall not be released of its obligations
and the Sublessee shall be bound by all terms and conditions of the Lease.
12. AIR CONDITIONING AND ELECTRICAL EQUIPMENT. Lessee shall not install
or connect any air conditioning equipment, electric-driven motor or any
electrical, gas or water appliance or equipment other than typewriters, personal
computers, telephone equipment and other small business machines without first
securing Lessor's written consent, which shall not be unreasonably withheld. If
such consent is obtained, Lessee shall, each month, promptly pay, at the rates
prevailing in the area in which the Demised Premises are located, for the gas,
electricity or water used for the operation of any such appliances; in addition
to the rental provided in this Lease. Lessor shall have the right to require
Lessee to restore the Demised Premises to the condition existing prior to the
installation of any such appliance, normal wear and tear excepted, including the
removal of any ducts, wiring, piping and so forth, the repair and replacement of
all damage caused by the installation and removal thereof, except that if Lessee
is then in default hereunder, Lessor shall have the option to retain any such
fixture and all ducts, wiring, piping and so forth, and the right to require the
delivery of the Demised Premises in the condition as changed as the result of
the installation of such appliance, ducts, wiring, piping and so forth.
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13. HAZARDOUS MATERIAL. Lessee agrees that its operation on the Premises
will not violate any federal, state or local laws, rules or ordinances for
environmental protection, including, but not limited to, the following: Federal
Clean Air Act, 42 U.S.C. ss. 1857 et seq.; Federal Clean Water Act, 33 U.S.C.
ss. 1151 et seq.; Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6903,
6921 et seq.; Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA" or "SUPERFUND"), 42 U.S.C. ss. 9601 et seq.; National
Environmental Policy Act, 42 U.S.C. ss. 1857 et seq.; regulations of the
Environmental Protection Agency (40 CFR, Chapters 373, 380 and 403; and the
South Carolina Hazardous Substance Act, S.C. Code ss. 23-39-10, et seq.
Lessee shall not cause or permit to continue any intentional or
unintentional release of hazardous materials other than those licensed or
permitted by governmental agencies or by applicable law or regulations. Should
Lessee cause or permit any intentional or unintentional release of hazardous
materials onto the surface or into the subsurface of the Premises resulting in
damage to soil, surface water, ground water, flora or fauna on the Premises,
within waters of the state or the United States, or on adjacent properties,
Lessee shall notify Lessor and the appropriate jurisdictional governmental
agencies.
Lessee shall indemnify and save Lessor harmless as provided in Section
24 from any fines, suits, claims, demands, losses and actions (including
attorneys' fees) that (1) arise from any violation by Lessee of the foregoing
provisions of this Section 13, or (2) allege or are based upon any violation by
Lessee or any federal, state or local laws, rules or ordinances for
environmental protection, including but not limited to those itemized above in
this Section, or upon the existence of hazardous materials in the possession or
control of Lessee, or upon any other threatened or actual damage to the
environment by Lessee; provided that such indemnification shall not extend to
any independent acts or omissions of Lessor.
Lessee shall not do or permit to be done any act or thing which will
invalidate fire or other insurance policies covering the Building or the
Demised Premises. If by reason of Lessee's possession of materials considered
to be hazardous to persons or property, any insurance premiums are increased
beyond rates otherwise available, Lessee shall reimburse Lessor for the full
amount of any such increase paid by Lessor.
Lessor represents that, to the best of its knowledge after reasonable
investigation and inquiry, the Property is free from hazardous materials or any
materials which would violate any federal, state or local laws, rules or
ordinances for environmental protection, including but not limited to those
itemized above in this Section. Lessor agrees that its operations on the
Property will not violate any of such laws, rules or regulations and that it
will require such an agreement of all other Lessees on the Property. Lessor
will indemnify and save Lessee harmless as provided in Section 24 from any
fines, suits, claims, demands, losses and actions (including attorneys' fees)
that (1) are asserted against Lessee as a result of Lessee's use or occupation
of the Premises or status as Lessee under this Lease; (2) allege or are based
upon any violation of any federal, state or local laws, rules of ordinances for
environmental protection, including, but not limited to those itemized above in
this Section, or upon any claimed or actual existence of hazardous materials,
or upon any other threatened or actual damage to the environment; and (3)
either (a) arise from events occurring prior to the Commencement Date of this
Lease, or (b) do not arise from any acts or alleged acts of Lessee or Lessee's
agents, employees, visitors or guests.
14. INSOLVENCY OR BANKRUPTCY. Lessee agrees that (a) the appointment of
a receiver to take possession of all or substantially all of the assets of
Lessee, or of the Demised Premises, (b) an assignment by Lessee for the benefit
of creditors, (c) a transfer in fraud of creditors, or (d) any action taken or
suffered by Lessee under any insolvency, bankruptcy, reorganization act or other
debtor relief proceeding, shall constitute a breach of this Lease by Lessee.
Upon the happening of any such event, Lessee shall be deemed to be in default
hereunder. In no event shall this Lease be assigned or assignable by operation
of law or by or in voluntary or involuntary bankruptcy or other debtor's relief
proceedings or otherwise and in no event shall this Lease or any rights or
privileges hereunder be an asset of Lessee under any bankruptcy, insolvency,
reorganization proceedings or other debtor's relief proceedings.
15. DEFAULT. Lessee shall be deemed to be in default if Lessee (a)
breaches this Lease or defaults in the performance of any of the covenants
herein contained; (b) fails to pay when due any rental or other sum owing under
this Lease; or (c) abandons or vacates the Demised Premises. In the event the
Lessee shall remain in default for a period of ten (10) days after the giving
of written notice of the same, then, Lessor may, at his option, terminate this
Lease and upon the termination the Lessee shall at once surrender possession of
the Demised Premises to the
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Lessor in good condition as when received, normal wear and tear excepted; and if
such possession is not immediately surrendered, the Lessor may re-enter and take
possession of the Demised Premises and remove all persons and effects therefrom,
using such force as may be necessary without being guilty of any trespass or
forcible entry or retainer.
In the event Lessor defaults in the performance of any covenant or
agreement to be performed by Lessor under this Lease, Lessee shall give Lessor
written notice of said default. Lessor shall commence a cure of said default
and shall cure said default within thirty (30) days after the giving of notice
by Lessee; provided, however, that in the event said default can not be cured
within said thirty (30) day period, but Lessor commences action to cure said
default within said thirty (30) day period and in fact cures said default. In
the event Lessor fails to timely cure said default after being given notice by
Lessee, Lessee shall have the following remedies:
A. The right to cure said default, in which event Lessee shall furnish
Lessor a statement for Lessee's reasonable expenses incurred in curing said
default, for which Lessor shall reimburse Lessee within fifteen (15) days after
receipt of said statement; or
B. The right to terminate the Lease ten (10) days after giving Lessor
written notice of termination.
Nothing in this paragraph shall grant Lessee the right to offset or
deduct from rent or other amounts payable by Lessee to Lessor under this Lease
against any claims by Lessee against Lessor.
16. ACCEPTANCE OF RENT AFTER TERMINATION. No receipt of monies by the
Lessor from the Lessee after the termination of this Lease or the giving of
notice of an intention to terminate shall reinstate, continue or extend the term
of this Lease or affect any notice given to Lessee prior to the receipt of such
money, it being specifically agreed that after service of a notice of the
commencement of a suit or after any judgment for possession of the Demised
Premises, the Lessor may receive and collect any rent due and the payment
thereof shall not waive or affect the notice, suit, or judgment.
17. RELETTING BY LESSOR. In the event of an uncured default by the Lessee
under Paragraph 15 above, the Lessor may, with or without terminating this Lease
(at Lessor's option), enter into the Demised Premises, remove the Lessee's
property and signs therefrom and relet the same as Lessor (or for the account of
the Lessee) for such rent and upon terms as shall be satisfactory to the Lessor,
without such re-entry working a forfeiture of the rents to be paid and the
covenants to be performed by the Lessee during the full term of this Lease; and
for the purpose of such reletting the Lessor is authorized to make any repairs,
changes, alterations or additions in or to the Demised Premises that may be
necessary or convenient, and Lessee agrees to indemnify Lessor for all loss and
damage which Lessor may suffer by reason of such action, whether through
inability to relet the premises or through decrease in rent, or otherwise, and
in such event, Lessor may, at its option, declare the entire amount of the rent
which would become due and payable during the remainder of the term of this
Lease to be due and payable immediately, in which event, Lessee agrees to pay
the same to Lessor, or its agent, together with reasonable attorneys fees and
costs that may be applicable, at once, together with all rents theretofore due;
provided, however, that such payments shall not constitute a penalty or
forfeiture or liquidated damages, but shall merely constitute payment in advance
of the rent for the remainder of the said term. Upon making such payment, Lessee
shall receive from Lessor all rents received by Lessor from other tenants on
account of said premises during the term of this Lease, less the cost of
reletting, including reasonable attorney's fees, or alterations and repairs that
Lessor deems necessary, provided, however, that the monies to which the Lessee
shall so become entitled shall in no event exceed the entire amount payable by
Lessee to Lessor under the preceding sentence of this paragraph.
18. LESSOR'S RIGHTS CUMULATIVE. The right in Lessor to terminate this
Lease as herein set forth is in addition to and not in exhaustion of such other
rights that Lessor has or causes of action that may accrue to Lessor because of
Lessee's failure to fulfill, perform or observe the obligations, agreements or
covenants of this Lease, and the exercise or pursuit by Lessor of any of the
rights or causes of action accruing hereunder shall not be an exhaustion of
other rights or causes of action that Lessor might otherwise have.
19. NO WAIVER. No waiver of any conditions expressed in this Lease shall
be implied by any neglect of Lessor to exercise his remedies under this Lease on
account of the violation of such condition, and no express waiver shall affect
any condition other than the one specified in such waiver, and that condition
only for the time
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and in the manner specifically stated. No waiver by Lessor of his right to or
failure by Lessor to exercise his right to terminate this Lease on account of a
violation of a condition of this Lease shall affect Lessor's right to terminate
this Lease for any later breach of the same or another covenant or condition.
20. LESSOR'S LIEN. A first lien is hereby expressly reserved by Lessor
and granted by Lessee upon the terms of this Lease and upon all interest of
Lessee in this leasehold and in Lessee's personalty located at the Demised
Premises for the payment of rent and also for the satisfaction of any cause of
action which may accrue by the provisions of this Lease. Lessor agrees to
subordinate the lien provided herein for reasonable purposes and shall execute
such documents as necessary to effect such subordination.
21. ATTORNEY'S FEES. Lessee will pay all reasonable attorney's fees and
expenses, including, without limitation, court costs, incurred by Lessor in
enforcing any of the obligations of Lessee under this Lease, or in any
litigation or negotiation in which the Lessor shall, without his fault, become
involved through or on account of this Lease. Lessee hereby assigns to Lessor
Lessee's homestead and exemption.
22. HOLDING OVER. If Lessee holds possession of the Demised Premises or
any part thereof after the expiration of the term of this Lease, Lessee shall be
only a tenant at will from month-to-month at double the monthly rental payable
hereunder and upon all other terms and conditions of this Lease, and shall
continue this month-to-month tenancy until such possession shall cease. Nothing
contained in this clause shall be construed as a consent by Lessor to the
occupancy or possession by Lessee of the Demised Premises beyond the expiration
of the term of this Lease, and further, the provision of this clause shall not
operate as a waiver by Lessor of his right of re-entry or other rights under
this Lease or estop Lessor from exercising any of his remedies under the terms
of this Lease and in addition the Lessor shall be entitled to the benefit of all
legal remedies that now may be in force or may be hereafter enacted.
23. SALES PROHIBITED. In consideration for the execution of this Lease by
Lessor, Lessee shall not use the Demised Premises for any purpose except that
which is expressly above specified, and in particular will not expose nor offer
for sale on the Demised Premises any alcoholic or other liquors, tobacco, drugs,
flowers, candies, confections or any other thing or things whether of a like or
of a wholly different nature, without the written consent of Lessor.
24. INDEMNIFICATION OF LESSOR. (a) Lessor shall not be liable to Lessee
Lessee hereby waives all claims against Lessor for any injury or damage to any
person or property in or about the Demised Premises by or from any cause
whatsoever, including, without limiting the generality of the foregoing, any
damage or injury caused by any defect in the Demised Premises or by water
leakage of any character from the roof, walls, basement or other portion of the
Demised Premises or the Office Building, or caused by gas, fire, oil,
electricity or any cause whatsoever in, on or about the Demised Premises or the
Office Building or any part thereof. Lessee shall, during the entire term
hereof, procure and keep in full force and effect a policy of public liability
and contents damage insurance with respect to the leased premises, and the
business operated by Lessee and any subtenants of Lessee in the leased premises.
in which the limits of public liability shall be not less than One Million
Dollars ($1,000,000.00) per occurrence, plus such other insurance as shall be
appropriate in light of Lessee's operations. Such policy or policies shall name
Lessor as additional insured.
(b) Lessee shall indemnify and hold Lessor harmless from and defend
Lessor against any and all claims, actions, liabilities, injuries or damages to
any person or property whatsoever (1) arising out of Lessee's use or occupancy
of the Demised Premises or the Office Building, or (2) occurring in, on, or
about the Demised Premises or any part thereof, or occurring in, on, or about
the Office Building, when such injury or damage shall be caused in part or in
whole by the neglect, fault of, or omission of any duty with respect to the
same, the Lessee, its agents, servants, employees, guests or invitees.
(c) Lessor shall protect, defend, indemnify, and hold Lessee harmless
from and against any and all claims, actions, injuries or damages to any person
or property arising our Lessor's breach of or default under this Lease, and
from and against all reasonable attorney's fees and court costs incurred in or
about any such claim or action or proceeding brought thereon.
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25. MUTUAL WAIVER OF SUBROGATION. Each insurance policy carried by Lessor
insuring the Real Property against loss by fire and causes covered by standard
extended coverage, and each insurance policy carried by Lessee and insuring the
Premises for liability and its fixtures and contents against loss by fire and
causes covered by standard extended coverage, shall be written in a manner so as
to provide that the insurance coverage waives all right of recovery by way of
subrogation against Lessor or Lessee in connection with any loss or damage
covered by such policies. Neither Lessor nor Lessee shall be liable to the other
for any loss or damage caused by fire, water or any of the risks enumerated in
standard extended coverage insurance, provided such insurance was in effect at
the time of such loss or damage.
26. UTILITIES AND SERVICES. Lessor shall furnish to the Demised Premises
during reasonable hours of generally recognized business days, (which are 8:00
a.m. to 6:00 p.m. Monday through Friday and 8:00 a.m. to 12:00 p.m. on
Saturdays), water, sewer, normal electrical service, heat and air conditioning,
janitorial service (not including cleaning of carpets or furniture other than
normal vacuuming and dusting) and trash disposal required in the reasonable
judgment of Lessor for the comfortable use and occupancy of the Demised
Premises. If Lessor shall elect to furnish any such utilities or services to
Lessee (other than heat and air conditioning and janitorial service), Lessee
agrees to purchase the same from Lessor, provided that Lessor shall charge
therefor not more than the consumer rate charged by the public service
corporation or municipal authority, as the case may be, supplying similar
services in the area in which the Demised Premises are situated. Lessor shall
not be liable for, and Lessee shall not be entitled to any abatement or
reduction of rental by reason of Lessor's failure to furnish any of the
foregoing when such failure is caused by accidents, breakage, repairs, strikes,
lockouts or other labor disturbances or labor disputes of any character, by any
accident or casualty whatsoever, or by the act or default of the Lessee, or
other parties, or by any other cause, similar or dissimilar, beyond the
reasonable control of the Lessor. Lessor shall not be liable under any
circumstances for loss of or injury to Demised Premises or the contents thereof,
however occurring, through, in connection with, or incidental to the failure to
furnish any of the foregoing, and such failure shall not be considered or
construed as an actual or constructive eviction of the Lessee, nor shall it in
any way operate to release the Lessee from the prompt and punctual payment of
rent or the performance of each and all of the other covenants herein contained
by the Lessee to be performed. Whenever heat generating machines or equipment
are used by Lessee in the Demised Premises which require greater air
conditioning capacity or greater operating and maintenance expense for the air
conditioning system in order to cool the Demised Premises to the temperature
maintained in other leased portions of the Building, Lessor reserves the right
to do any of the following: (1) refuse to maintain the premises at temperatures
consistent with other portions of the Building; (2) install supplementary air
conditioning units in the Demised Premises, and the cost thereof, including the
cost of installation and the cost of operation and maintenance thereof, shall be
paid by Lessee to Lessor upon demand by Lessor; or (3) charge Lessee for the
additional operation and maintenance expense of cooling the Demised Premises
with the existing air conditioning equipment.
27. DESTRUCTION, FIRE AND OTHER CASUALTY. In the event the Demised
Premises is so damaged by fire or other casualty that rebuilding or repairs
cannot be completed, in the opinion of the Lessor, within One Hundred and Eighty
(180) days from the date of the fire or other casualty, then either Lessor or
Lessee may terminate this Lease, in which event rent shall be abated from the
date of such damage or destruction. However, if the Demised Premises are damaged
by fire or other casualty and if the damage or destruction is such, in the
opinion of the Lessor, that rebuilding or repairs can be completed within One
Hundred and Eighty (180) days, then the Lessor may either (l) make such repairs
with reasonable promptness and shall allow Lessee a proportionate abatement in
the rent for such time as the Demised Premises, or the portion thereof, shall be
untenantable and Lessee covenants and agrees that the terms of this Lease shall
not be otherwise affected, or (2) terminate this Lease effective as of the date
of fire or other casualty by giving Lessee notice of such termination within
fifteen (15) days after the fire or other casualty. However, if the damage or
destruction was caused by fault or neglect of Lessee, there shall be no
abatement for rent. In lieu of abatement of rent while the premises are being
repaired, Lessor, at its option, shall bear the expense of moving the personal
property of Lessee from Lessee's space to a temporary space and back again when
said repairs are completed. However, Lessor shall not be required to see that
the said personal property is situated in Lessee's temporary space in exactly
the same way it was situated in Lessee's regular office space.
28. EMINENT DOMAIN. Except as provided below, if the whole or any part of
Demised Premises shall be taken or condemned by any competent authority for any
public or quasi-public use or purpose, then, and in that event, the term of this
Lease shall cease and terminate as of the date of such taking or condemnation,
and the entire,
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amount of the condemnation award shall be paid to Lessor. The current rental,
however, shall in such case be apportioned. Provided, however, that in the event
only a portion of the Demised Premises is taken and the Demised Premises is
still usable for the purposes herein leased, Lessor, at his option, may
terminate this Lease, or Lessor may continue this Lease and the rental shall be
decreased prorata to reflect the space no longer usable by Lessee on account of
such taking. In no event shall Lessee be entitled to claim any portion of the
proceeds from any condemnation or eminent domain proceedings respecting the
Demised Premises or the Office Building.
29. END OF TERM. Lessee shall, at the termination of this Lease, by lapse
of time or otherwise, return the Demised Premises to the Lessor in as good
condition as when received, loss by normal wear and tear excepted, and cleared
of all persons and property except as otherwise provided, together with all keys
thereto. Lessee shall continue to be responsible for rent or damage caused by
failure to make proper delivery of the Demised Premises, together with the keys
of same. All fixtures and improvements in or upon the Demised Premises and
equipment or fixtures attached to the Demised Premises, whether placed there by
Lessor or Lessee, shall remain upon the premises without compensation,
allowance, or credit to Lessee provided; however, if prior to such termination
or within ten (10) days thereafter Lessor so directs by notice, Lessee shall
promptly remove and repair any damages in connection with the installation and
removal of any installation, additions, fixtures and improvements placed in the
Demised Premises by Lessee, or by Lessor at Lessee's request, which are
designated in the notice. If Lessee shall not remove all effects from Demised
Premises as above agreed, the Lessor may, at his option, remove and store the
same without liability to the Lessee for loss thereof, and Lessee shall pay
Lessor at demand any and all expenses incurred in the removal and storage of
said effects for any length of time during which the same shall be in the
Lessor's possession; or, Lessor, at his option, without notice, may sell the
effects or any of the same for such price as the Lessor deems best and apply the
proceeds of the sale upon any amounts due under the Lease, including the
expenses of the removal and sale.
30. AIR RIGHTS. It is understood and agreed that this Lease does not
grant any rights to light and air over the Demised Premises or the Building.
31. QUIET ENJOYMENT. Lessor covenants that Lessee, upon paying the rent
and additional rent and complying with the terms, covenants and conditions
herein contained, shall and may peaceably and quietly have, hold and enjoy the
Demised Premises for the term aforesaid.
32. NO REPRESENTATIONS. Neither Lessor nor Lessor's agent has made any
representations or promises, except such as are contained herein or endorsed
hereon, to the Lessee respecting the condition of the Demised Premises or any
other matter or thing relating to the Demised Premises or the Lease. The taking
possession of the Demised Premises by the Lessee shall be conclusive evidence
against the Lessee or anyone holding under this Lease that the Demised Premises
were in good and satisfactory condition when possession of the Demised Premises
was so taken.
33. NOTICES. All notices required to be given to Lessor hereunder shall
be sent by Registered or Certified Mail to Lessor, c/o Mr. Charles Warne, Post
Office Box 5500, Greenville, South Carolina 29606, or to such other address as
Lessor may direct from time to time by written notice forwarded to Lessee by
Registered or Certified Mail.
All notices required to be given to Lessee shall be sent by Registered
or Certified Mail to Lessee at:
HomeAdd Financial Corporation
The 850 Building, Suite 205
850 S. Pleasantburg Drive
Greenville, South Carolina 29608
or to such other address as Lessee may direct from time to time by
written notice forwarded to Lessor by Registered or Certified Mail. All notices
mailed in accord with this Paragraph shall be effective on the date of mailing.
8
<PAGE> 11
In the alternative, Lessor may give notice to Lessee as follows:
Lessee hereby appoints as his agent to receive the service of all dispossessory
or distraint proceedings and notices thereunder, and all notices required under
this Lease the person in charge of said premises at the time of occupying
premises; and if no person is in charge or occupying same, then such service or
notice may be made by attaching the same on the main entrance to premises. Any
notice by Lessee to Lessor must be served by Certified Mail, Return Receipt
Requested at the address hereinafter given, or at such other address as Lessor
shall designate in writing.
34. SUNDRY CHARGES. It is further understood and agreed between the
parties hereto that any charges against the Lessee by the Lessor for supplies,
services, or for work done on the Demised Premises by order of the Lessee or
otherwise accruing under this Lease shall be considered as additional rental due
and shall be included in any lien for rent due and unpaid.
35. PARKING. The Lessee, its employees, visitors and guests are
authorized to make reasonable use of the parking facilities which form part of
the Real Estate, subject to posted rules and regulations and at the sole risk of
each driver and user of said facility. Lessee shall cooperate with the Lessor in
limiting the use of said parking facility by Lessee, its employees, guests and
visitors to the approximate proportionate share in relation to the Demised
Premises. The parking facility shall not be used for the storage of abandoned or
defective vehicles or for any other purpose except transient parking. Neither
Lessee nor Lessee's employees, officers, agents, guests, invitees or other
persons visiting the Demised Premises shall have any rights to any particular
parking space or spaces, and no special markings or signs may be placed on any
parking spaces by Lessee. Lessee's anticipated parkings need is thirty (30)
spaces.
Lessee shall have use of three (3) unreserved covered parking spaces
during the term of their lease.
36. SIGNS, CARDING. (a) Lessee shall not paint or place signs, placards
or other advertisement of any character upon or in the windows of the Demised
Premises, upon the outside walls or the roof of the Demised Premises or of the
Building, or on any other part of the Real Estate except with the specific
written consent of Lessor. In the event that the Lessee places any sign,
placards or advertisement in or around the Demised Premises or the Real Estate
in violation of this paragraph, Lessor may, in addition to any and all other
remedies available hereunder, at law or in equity, remove such sign, placard or
advertisement, without being liable to Lessee or any other party for entry into
the Demised Premises for purposes of such removal or for damages to such sign,
placard or advertisement or to the property to which it was affixed or attached.
(b) In no event shall the Lessor have any responsibility for
installing signs, placards or other advertisement for Lessee or be responsible
for the cost of any signs, placards or advertising for or of Lessee. Lessor
reserves the right to change the name of the Buildings and the Office Building
at any time, and in addition, the right to erect signs, permanent or temporary,
as to such name or the leasing (renting) of the Buildings.
37. ACCESS TO PREMISES. Lessee shall permit Lessor to erect, use and
maintain pipes and conduits in and through walls which bound or are within the
Demised Premises. Lessor or Lessor's agent shall have the right to enter the
Demised Premises at all times to inspect and examine the same for purposes,
without limitation, of ascertaining whether Lessee is maintaining the Demised
Premises as required hereunder and of maintaining the security of the Building;
to show the Demised Premises to prospective purchasers of the Office Building;
to place "For Sale" notices upon the Office Building and to make such
decorations, repairs, alterations, improvements or additions as Lessor may deem
necessary or desirable, and Lessor shall be allowed to take all material and
equipment into and upon the Demised Premises that may be required therefor.
During the three (3) months period prior to the expiration of the term of this
Lease, or any renewal term, Lessor may exhibit the Demised Premises to
prospective lessees, If, at any time during the last three (3) months of the
term, Lessee shall have removed all or substantially all of Lessee's property
from the Demised Premises, Lessor may immediately enter and alter, renovate and
redecorate the Demised Premises, without elimination or abatement of rent, or
incurring liability to Lessee, and such acts shall have no effect upon this
Lease. If Lessee shall not be personally present to open and permit an entry
into the Demised Premises, at any time when for any reason an entry therein
shall be necessary or permissible hereunder, Lessor or Lessor's agents may enter
the same by a master key, or may forcibly enter the same, without rendering
Lessor or such agents liable therefor (if, during such entry Lessor or Lessor's
agents shall accord reasonable care to Lessee's property), and without in any
manner affecting the obligations and covenants of this Lease. Nothing herein
contained, however, shall be deemed or construed to impose upon Lessor any
obligation, responsibility or liability for the care,
9
<PAGE> 12
supervision or repair of the Building or any part thereof, other than as herein
provided. Lessor shall also have the right, at any time, to reasonably change
the arrangement and/or location of entrances or passageways, doors and doorways,
corridors, elevators, stairs, toilets or other public parts of the Office
Building, if any, providing that such changes do not materially interfere with
or change Lessee's use of or access to the Demised Premises.
38. DAMAGE OR THEFT OF PERSONAL PROPERTY. All personal property brought
into the Demised Premises shall be at the risk of the Lessee only, and Lessor
shall not be liable for theft thereof or any damages thereto occasioned from any
act of co-tenants, or other occupants of the Building or any other person.
39. MORTGAGEE'S RIGHTS. (a) This Lease shall be subject and subordinate
to any deeds of trust, deeds of secure debt, security deeds, or mortgages, or to
any liens resulting from any other method of financing or refinancing now or
hereafter encumbering all or any part of Demised Premises, the Building or the
Real Estate, including any ground lease, and to all advances made or hereafter
to be made upon the security thereof, or renewals or extensions of all or any
part thereof (which security instrument or instruments are hereinafter
collectively referred to as the "mortgage"); provided such is (are) granted by
the Lessor, its successors and/or assigns. Lessee may not grant any such
mortgage or otherwise encumber in any way its interest hereunder, without the
specific written consent of Lessor. This provision shall be self-operative and
no further instrument of subordination shall be required by any of the grantees
in the mortgage (hereinafter referred to as a "mortgagee"). However, the Lessee,
upon request of any party in interest, shall execute promptly such instruments
to carry out the intent hereof as shall be required by the Lessor, and if Lessee
fails to so execute any such instrument, the Lessor is hereby expressly
empowered and authorized to execute such instrument in the name of Lessee, and
as the act of Lessee, as attorney in fact for Lessee, such power and authority
being coupled with an interest and irrevocable.
(b) Within ten (10) days after request therefor by Lessor, the Lessee
agrees to execute and deliver in recordable form an estoppel certificate to any
mortgagee, proposed mortgagee, purchaser, proposed purchaser or Lessor
certifying (if such be the case) that this Lease is unmodified and in full
force and effect (and if there has been modification, that the same is in full
force and effect as modified and stating the modifications); that there are no
defenses or offsets against the enforcement thereof or stating those claimed by
the Lessee; and stating the date to which rentals and other charges have been
paid. Such certificate shall also include such other information as may be
reasonably required by mortgagee along with a subordination, non-disturbance
and attornment agreement required by any mortgagee or proposed mortgagee. In
the event Lessee fails to execute and deliver such an estoppel certificate
within ten (10) days after the request therefor, Lessor is hereby expressly
empowered and authorized to execute such a certificate in the name of Lessee,
and as the act of Lessee, as attorney in fact for Lessee, the power and
authority herein conveyed being coupled with an interest and irrevocable.
(c) In the event of any foreclosure sale, sale under power of sale
under the mortgage, or sale in lieu of foreclosure or sale under the any such
mortgage, this Lease shall continue in full force and effect, and Lessee will,
upon request, attorn to and acknowledge said purchaser as Lessor hereunder.
(d) If, in connection with obtaining any financing for the Real Estate
or the Building by the Lessor, the lender (a bank, insurance company, or other
recognized institutional lender) shall request reasonable modifications in this
Lease as a condition to such financing, Lessee shall not unreasonably withhold,
delay or defer its consent thereto, provided that such modifications do not
increase the obligations of Lessee hereunder or materially adversely affect the
interest of Lessee in the Demised Premises hereunder.
40. STORAGE. If the Lessor makes available to Lessee any storage space
outside the Demised Premises, anything stored therein shall be wholly at the
risk of Lessee, and Lessor shall have no responsibility of any character in
respect thereof.
41. SET OFF AND DELIVERY OF POSSESSION. This Lease and the obligation of
Lessee to pay rent hereunder and perform all of the other covenants and
agreements hereunder on the part of Lessee to be performed shall in no way be
affected, impaired or excused because Lessor is unable to fulfill any of its
obligations under this Lease or is delayed in supplying any service to be
supplied by Lessor, or is unable to make or is delayed in making any repairs,
additions, alterations or decorations to the Demised Premises or is unable to
supply or is delayed in supplying any equipment or fixture, and Lessee shall
have no right to set off or deduct any claims it may have against Lessor for any
reason whatsoever against the rents and other amounts payable by Lessee
hereunder. If
10
<PAGE> 13
Lessor is unable to deliver possession of the Demised Premises to Lessee in or
before the Commencement Date because of the retention of possession thereof by
parties other than Lessor, or because the Demised Premises are not ready for
occupancy by Lessee, then Lessor shall not be liable to Lessee in damages, and
this Lease shall not terminate, provided that Lessor shall transfer to Lessee
any rights of Lessor against the person retaining possession of the Demised
Premises.
42. OCCUPANCY PERMIT. Upon execution of this Lease, Lessee expressly
covenants and agrees that on or before occupying the Demised Premises, it shall
apply for and pay for a City of Greenville Occupancy Permit pursuant to Section
6-25 of the 1974 Code of the City of Greenville, as amended by Ordinance of the
Greenville City Council on December 21, 1979 and furnish copy of same to Lessor.
43. SECURITY DEPOSIT. The Lessee, concurrently with the execution of this
Lease has deposited with the Lessor the sum of $4,166.92, the receipt being
hereby acknowledged, which sum shall be retained by the Lessor as security for
the payment by the Lessee of the rent herein agreed to be paid and for the
faithful performance of the covenants of this Lease. If, at any time, the Lessee
shall be in default in any of the provisions of this Lease, the Lessor shall
have the right to use said deposit, or so much thereof as may be necessary in
payment of any rent in default as aforesaid and/or in payment of any expense
incurred by the Lessor in and about the curing of any default by said Lessee,
and/or in payment of any damages incurred by the Lessor by reason of such
default of the Lessee, or at the Lessor's option, the same may be retained by
the Lessor in liquidation of part of the damages suffered by the Lessor by
reason of the default of the Lessee. In the event that said deposit shall not be
utilized for any such purpose, then such deposit shall be applied to the rent
last due for the term of this Lease or any renewal term thereof. Said deposit
shall not bear interest.
44. SEVERABILITY. If any clause or provision of this Lease Agreement is
illegal, invalid or unenforceable under present or future laws effective during
the term of this Lease, then and in that event it is the intention of the
parties hereto that the remainder of this Lease shall not be affected thereby,
and that in lieu of each clause or provision of this Lease Agreement which is
illegal, invalid or unenforceable, there shall be added as a part of this Lease
Agreement a clause or provision as similar in terms to such illegal invalid or
unenforceable clause or provision as may be possible and be legal, valid and
enforceable.
45. PARAGRAPH HEADINGS. The paragraph headings are intended to be solely
a matter of convenience, and shall in no way define, limit, describe the scope,
meaning or intent of the paragraphs of this Lease.
46. RELOCATION OF PREMISES. Anything contained in this Lease the contrary
withstanding, in the event that the Demised Premises is less than 1,500 square
feet, Lessor shall have the option at any time to substitute a substantially
equivalent amount of space elsewhere within the Office Building for the Demised
Premises hereinbefore provided for, by giving Lessee written notice thirty (30)
days in advance of such relocation and thereupon transferring and removing the
Lessee from the Demised Premises herein specified to the substitute space.
Lessor shall be responsible only for the actual expense of the physical
relocation of Lessee's personal property and the expense of any renovation or
alterations necessary to make the new spaces substantially conform in layout and
appointments with the Demised Premises. If Lessor exercises the option as
aforesaid, the substituted space shall, for all intents and purposes, be deemed
and shall constitute the Demised Premises hereunder, and all the other terms,
covenants, conditions, provisions and agreements of this Lease shall continue in
full force and effect and shall apply to the substituted space. After such
relocation, the additional rental hereunder for operating expenses and taxes
shall be determined with reference to the actual amount of square feet in the
new premises and to the Real Estate of which the new premises are a part.
47. BUILDING RULES AND REGULATIONS. Lessee agrees to abide by all rules
and regulations of the building imposed by Lessor. These regulations are imposed
for the cleanliness, good appearance, proper maintenance, good order and
reasonable use of the premises and the building, and as may be necessary for the
proper enjoyment of the building by all tenants and their clients, customers and
employees. A copy of the regulations is attached hereto as Exhibit "D", but the
rules and regulations may be changed from time to time on reasonable notice to
Lessee. Breach of building rules and regulations shall not be grounds for
termination of the Lease unless Lessee continues to breach the same after ten
(10) days' written notice by Lessor, and then only in the event such rules or
regulations have been made for the above stated purposes.
11
<PAGE> 14
48. ADVANCE RENT. Concurrent with execution of this Lease Agreement,
Lessee shall pay the first month's rent of $4,166.92 in advance.
49. RENEWAL OPTION. Lessee shall have the option to renew this Lease for
one (1) - two (2) year term for which the Base Rent shall be increased each
renewal year by the prior year's increase in the Consumer Price Index (CPI). In
order to exercise said renewal option, Lessee shall provide Lessor with written
notice at least 180 days prior to expiration of the existing lease term.
50. RIGHT OF FIRST OFFER. Lessee shall have an ongoing Right of First
Offer on the space across the hallway from it's Demised Premises (see Exhibit
"A"). If another party desires the expansion space, Lessor shall be required to
make a written offer on the space to Lessee, stating the general terms and
conditions, and Lessee shall have five (5) business days to respond in writing
to Lessor's offer. If Lessee accepts the offer, then Lessee must execute a
written Lease Agreement within five (5) days of Lessee's acceptance of the offer
or Lessee's rights to the expansion space shall be terminated, not only for this
offer, but for any other offer for the expansion space for the duration of
Lessee's lease term or renewal term in the Building.
12
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
LESSOR: HEWITT COLEMAN
COMPANIES, INC.
/s/ John W. Fort
Witness BY: /s/ Charles Warne
/s/ C. Buck Warne ITS: President
Witness
DATE: 8/4/97
LESSEE: HOMEADD FINANCIAL
CORPORATION
/s/ Mary W. Murphy BY: /s/ Matthew J. Marron, Jr.
Witness
/s/ Charles C. Mickel ITS: President
Witness
DATE: 7/28/97
<PAGE> 16
EXHIBIT A
DEMISED PREMISES
<PAGE> 17
EXHIBIT B
RENT SCHEDULE
Lessee agrees to pay Lessor the following rent:
<TABLE>
<CAPTION>
YEAR RENT / SF / YR MONTHLY RENT
<S> <C> <C>
1 $15.50 $4,166.92
2 $15.50 $4,166.92
3 $15.50 $4,166.92
4 $15.50/SF/YR
Increased by Prior Year's Increase in the Consumer Price Index
(All Urban Consumers)
5 Prior Year's Base Rent/SF Increased by the Prior Year's Increase in
the Consumer Price Index (All Urban Consumers)
</TABLE>
AGREED TO BY:
LESSOR: HEWITT COLEMAN LESSEE: HOMEADD FINANCIAL
COMPANIES, INC. CORPORATION
By: /s/ Charles Warne By: /s/ Matthew J. Marron, Jr.
Its: President Its: President
Date: 8/4/97 Date: 7/28/97
<PAGE> 18
EXHIBIT C
PREPARATION OF PREMISES
Lessor agrees to construct improvements to Lessee's Premises in accordance with
the floorplan attached as Exhibit C-1 and in accordance with the following:
- - Demolish and/or build new walls per the drawing on Exhibit C-1
- - New ceiling tile to be installed throughout the Premises
- - Doors to be hollow core doors with wood frames
- - All walls to be painted with two (2) coats of flat latex paint
- - Relocate three (3) light fixtures
- - Install five (5) exit lights and six (6) emergency lights
- - Install electrical outlets and wall switches per the floorplan drawing
- - Install new vinyl cove base on all walls
- - Install paint grade base cabinets and laminate countertops per the
drawing, except countertop shall be installed in the place of the cooktop
unit
- - Install new carpet or vinyl VCT throughout with a $15/square yard
installed allowance
- - Move existing water fountain to wall at restrooms
Lessor agrees to perform the above work at no extra charge to tenant. Any
changes to the above improvements must be approved in writing by Lessor and
Lessee and paid for by Lessee directly to the Lessor's contractor.
The open space partitions shown on Exhibit C-1 are to be provided by Lessee
with Lessor providing electrical service for the units, but excludes installing
or wiring the open space furniture which is Lessee's responsibility.
AGREED TO BY:
/s/ Charles Warne /s/ Matthew J. Marron, Jr.
Lessor Lessee
8/4/97 7/28/97
Date Date
<PAGE> 19
EXHIBIT D
BUILDING RULES AND REGULATIONS
RULE 1: Sidewalks, entrys, passages, courts, corridors, stairways
shall not be obstructed by Lessee or their employees or used by them for other
purposes than for ingress and egress.
RULE 2: Lessor shall have the right to specify the proper weight and
position of any safe or other heavy article that may be brought into the
premises. Any damage done to the Building by taking in or removing any safe or
other heavy article or from overloading any floor in any way shall be paid by
the Lessee.
RULE 3: No sign, advertisement, or notice shall be inscribed, painted
or affixed on any part of the inside or outside of said Building unless of such
color, size and style and in such place upon or in said Building as shall be
first designated by the Lessor, but there shall be no obligation or duty on
Lessor to allow any sign, advertisement or notice to be inscribed, painted or
affixed on any part of the inside or outside of said Building. Signs on doors
will be painted for the Lessee by a sign writer appointed by the Lessor. the
cost of the painting to be paid by the Lessee. Directory in a conspicuous place
with the names of the Lessees will be provided as set forth in the Lease. Any
necessary revision in this will be made by Lessor within a reasonable time
after written notice from the Lessee of the error or change making the revision
necessary. No showcase or any other fixture or object whatsoever shall be
placed in front of the Building or in the court or corridor without written
consent of the Lessor.
RULE 4: No Lessee shall employ any person or persons, other than the
janitor of the Lessor (who will be provided with passkeys to offices), for the
purpose of cleaning or taking charge of the Demised Premises without the
written consent of the Lessor, it being understood and agreed that the Lessor
shall in no way be responsible to any Lessee for any loss of property from the
Demised Premises however occurring or for any damage done to the furniture by
the janitor or any of his employees, or by any other person or persons
whomsoever. Any person or persons employed by the Lessee with the written
consent of the Lessor must be subject to and under the control and direction of
the janitor of the Office Building and all things in the Building and outside
of said Demised Premises.
RULE 5: No additional locks, hooks or attachments shall be placed on
any door or window of the Building. At the termination of this Lease, Lessee
shall surrender to the Lessor all keys of the premises and Building received by
said Lessee.
RULE 6: No animals or birds, bicycles or other vehicles shall be
allowed in the halls, corridors, elevators or elsewhere in the Building.
RULE 7: The water closets, wash basins, sinks and other apparatus
shall not be used for any other purpose than those for which they were
constructed and no sweepings, rubbish or other substance shall be thrown
therein nor shall anything be thrown by the Lessees, their agents or employees,
out of the windows, doors or other openings.
RULE 8: The floors, skylights and windows that reflect or admit light
into the corridors or passageways in the public areas of the Office Building or
to any place in said Office Building shall not be covered or obstructed by any
of the Lessees.
RULE 9: Lessees and occupants shall not attempt to open windows at any
time.
RULE 10: If any Lessee desires telegraphic, telephonic or other
electronic connections, the Lessor or its agents will direct the electricians
as to where and how the wires may be introduced and without such directions, no
boring or cutting for wires will be permitted.
<PAGE> 20
RULE 11: No shade or awning shall be put up, no painting done or any
alterations made in any part of the Building by putting up or changing any
partitions doors or windows, nor shall there be any nailing, boring, screwing
into woodwork or walls or plastering, nor shall there be upon the premises any
engine, boiler or other machinery without the written consent of the Lessor or
its agent in each and every instance.
RULE 12: Lessee, its employees, agents or invitees shall not use the
Demised Premises for the purpose of lodging rooms or for any immoral or
unlawful purposes. No room or rooms shall be occupied or used for sleeping or
lodging, apartment or for any other purpose than the purpose for which same is
leased at any time.
RULE 13: No Lessee shall permit gambling or unlawful practice or
practices of any kind in the leased premises.
RULE 14: NIGHTWATCH. The Lessor may establish a nightwatch, and if
established after ordinary office hours, the Building is in charge of the
nightwatchman, and every person entering or leaving the Building is expected to
be questioned by him as to his business in the Building if unknown to the
watchman.
RULE 15: Lessee shall not install or operate vending machines, stoves
or any other cooking devices or equipment of any kind in the leased premises
without written consent of the Lessor or its agent. No offensive odors shall be
permitted in or about the premises.
RULE 16: All glass, locks and trimmings, in or about the doors and
windows and all electric globes and shades belonging to the Office Building
shall be kept whole, and whenever broken by any Lessee, shall be immediately
replaced or repaired and put in order by such Lessee under the direction and to
the satisfaction of the Lessor, and, on removal, shall be left whole and in
good repair.
RULE 17: Lessor reserves the right to make and enforce such other
reasonable rules and regulations as in its judgment may be deemed necessary or
advisable from time to time to promote the safety, care and cleanliness of the
premises and for the preservation of good order therein.
RULE 18: No person shall disturb the occupants of this or any
adjoining Building premises by the use of any musical instrument, unseemly
noises, whistling, singing or in any other way.
RULE 19: Canvassing, soliciting and peddling in the Building is
prohibited and each Lessee shall cooperate to prevent the same.
6
<PAGE> 1
EXHIBIT 10.11
PURCHASE MONEY MORTGAGE NOTE
$75,000.00 November 19, 1997
Jacksonville, Florida
For value received, the undersigned (jointly and severally if more than
one) ("Maker") promises to pay to the order of RSI HOLDINGS OF FLORIDA, INC., a
Florida corporation, or its successors or assigns, the principal sum of Seventy
Five Thousand Dollars ($75,000.00), together with interest thereon at the
Interest Rate (as hereinafter defined), from date until maturity, both
principal and interest being payable in lawful money of the United States of
America, at P. O. Box 520, Shelby, North Carolina 28151-0520, or at such other
place as the holder hereof ("Holder") may designate in writing, said principal
and interest to be payable on the dates and in the amounts as follows:
This note shall be paid in one hundred twenty (120) consecutive
monthly installment payments, commencing December 19, 1997, and
continuing on the same day of each and every month thereafter;
the first one hundred nineteen (119) payments shall be in the
amount of $929.90 principal plus accrued interest on the unpaid
principal balance; and the final payment due November 19, 2007,
shall be in the amount of the unpaid principal balance plus
accrued interest thereon.
The Interest Rate on this note shall be a rate of eight and one-half
percent (8.5%) per annum.
This note and all sums due hereunder shall bear interest from the date
when due, whether by lapse of time or on acceleration, at the Default Rate (as
hereinafter defined) until paid. The Default Rate shall be a rate of interest
per annum equal to the highest rate allowed by law.
Anything in this note, the mortgage referred to below, or any other
agreements or arrangements by Maker or others in connection with the loan
evidenced by this note to the contrary notwithstanding, if from any
circumstances whatever fulfillment of any provision of any of the foregoing
documents or agreements at the time performance of said provision shall be due
shall involve transcending the limit of validity prescribed by the usury laws
applicable in the State of Florida as preempted and prescribed from time to
time by the laws of the United States of America or any rule or regulation of
any department or agency thereof, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity so that in no event
shall exaction be possible under any of the aforesaid documents or agreements
in excess of the limit of such validity, but such obligation shall be fulfilled
to the limit of such validity, and if under any circumstances whatsoever
interest in excess of the limit of such validity will have been paid in
connection with the loan evidenced by this note, such excess shall be applied
by Holder, the manner of handling such excess to be at Holder's election, and
in case any such excess interest has
<PAGE> 2
accrued, Holder shall eliminate such excess interest so that under no
circumstances shall interest on the loan evidenced by this note exceed the
maximum rate allowed by applicable law as preempted and prescribed from time to
time by the laws of the United States of America or any rule or regulation of
any department or agency thereof.
Maker and each guarantor and endorser waive presentment, notice of
dishonor, protest, and any other notices or demands in connection with the
delivery, acceptance, performance, default, or enforcement of this note and all
other requirements necessary to hold each of them liable as Maker, guarantors,
or endorsers, as applicable. Maker and each guarantor and endorser further
waive any venue privilege and diversity of citizenship privilege that they have
now or may have in the future, and each of them hereby specifically agrees,
notwithstanding the provision of any state or federal law to the contrary, that
the venue for the enforcement, construction, or interpretation of this note
shall be the court selected by Holder and each of them hereby specifically
waives the right to sue or be sued in the court of any other county in the
State of Florida, any court in any other state or country or in any federal
court or in any state or federal administrative tribunal.
Maker and each guarantor and endorser, jointly and severally, agree to
pay to Holder all costs of collection, including reasonable attorneys' fees,
whether incurred with respect to collection, trial, appeal, enforcement of any
judgment, bankruptcy or insolvency proceedings, or any subsequent proceedings
or appeals from any order or judgment entered therein, or otherwise, whether
suit be brought or not, if, after maturity of this note, default hereunder, or
the occurrence of an event of default under the mortgage referred to below,
counsel shall be employed to collect this note or to protect the security
hereof.
If any of said installments of principal or interest shall not be paid
when due, or if a default occurs in the performance of any other agreement in
this note or in the loan agreement referred to above or in the mortgage
referred to below, or if a default occurs in the performance of any other
obligation to Holder of Maker or any guarantor or endorser of this note
(including any obligation of Maker or any guarantor or endorser and one or more
other persons) or in the performance of any obligation to Holder of any entity
in which Maker or any guarantor or endorser of this note is a principal
(including any obligation of any such entity and one or more other persons),
which default is not cured within the applicable curative period, if any, then
the entire principal sum and accrued interest shall immediately become due and
payable without notice at the option of Holder, time being of the essence of
this note. Failure to exercise such option shall not constitute a waiver of the
right to exercise the same in the event of any subsequent default.
Maker and each guarantor and endorser agree that their liability on
this note shall not be affected by any release of or change in any security for
the payment of this note and that each of them shall be jointly, severally,
directly, and primarily liable for the payment of all sums owing and to be
owing hereunder, regardless of the lack of any notice or diligence, and
regardless of any act or omission, with respect to the collection of any amount
due hereunder or in connection with any right, lien, interest, or property at
any and all times had or existing as security for any amount due hereunder.
<PAGE> 3
Maker and each guarantor and endorser consent to any extensions,
renewals, or modifications of this note, or any part hereof, without notice,
and Maker and each guarantor and endorser agree that each of them will remain
liable as such during any extension, renewal, or modification hereof until the
entire indebtedness evidenced by this note is fully paid.
This note is secured by a mortgage of even date herewith encumbering
real property therein described and recorded in the official public records of
Hillsborough County, Florida.
Maker reserves the right to pay this note, in full or in part, without
premium or penalty, but any such partial prepayments shall be applied against
the installments due in the inverse order of their maturity.
This note may not by changed orally, but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought.
Maker acknowledges that Holder shall have no obligation to renew,
modify, or extend this note or to refinance the indebtedness under this note
upon the maturity hereof.
Maker shall pay to Holder a "late charge" not to exceed an amount equal
to five percent of any principal or interest that is not paid within 10 days
after the due date thereof to cover the extra expense involved in handling
delinquent payments. Holder's collection of a late charge hereunder shall not
be deemed a waiver by Holder of any of its rights under this note, the mortgage
referred to above, or any other document between Maker and payee.
This note shall be construed in all respects and enforced according to
the laws of the State of Florida.
<PAGE> 4
BY ACCEPTANCE HEREOF PAYEE AGREES, AND BY EXECUTION HEREOF MAKER
AGREES, THAT NEITHER PAYEE NOR MAKER, NOR ANY ASSIGNEE, SUCCESSOR, HEIR, OR
LEGAL REPRESENTATIVE OF EITHER OF THEM (ALL OF WHOM ARE HEREINAFTER REFERRED TO
AS THE "PARTIES") SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF
THIS NOTE, THE MORTGAGE REFERRED TO ABOVE, THE LOAN AGREEMENT REFERRED TO
ABOVE, OR ANY OTHER INSTRUMENT EVIDENCING, SECURING OR RELATING TO THE
INDEBTEDNESS EVIDENCED HEREBY, ANY RELATED AGREEMENT OR INSTRUMENT, ANY OTHER
COLLATERAL FOR THE INDEBTEDNESS EVIDENCED HEREBY, OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG THE PARTIES, OR ANY OF THEM. NONE OF THE PARTIES
WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN
WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY PAYEE
AND MAKER, ARE A MATERIAL INDUCEMENT FOR PAYEE TO MAKE THE LOAN OR EXTENSION OF
CREDIT EVIDENCED HEREBY, AND SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER MAKER
NOR PAYEE HAS IN ANY WAY AGREED WITH OR REPRESENTED TO THE OTHER THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
This note consists of four pages, of which this is the fourth page.
/s/ Fuller D. Tresca (SEAL)
FULLER D. TRESCA, JR.
/s/ Judith T. Tresca (SEAL)
JUDITH T. TRESCA
THE PROPER FLORIDA DOCUMENTARY STAMP TAX IN THE AMOUNT OF $262.50 HAS BEEN PAID
AND THE PROPER DOCUMENTARY STAMPS HAVE BEEN AFFIXED TO THE MORTGAGE SECURING
THIS NOTE.
<PAGE> 5
PURCHASE MONEY SECOND MORTGAGE
AND SECURITY AGREEMENT
This Mortgage and Security Agreement (this "Mortgage") is made as of
November 19, 1997, by FULLER D. TRESCA, JR. and JUDITH T. TRESCA ("Mortgagor"),
whose post office address is 4827 Philips Highway, Jacksonville, Florida 32207,
to and for the benefit of RSI HOLDINGS OF FLORIDA, INC., a Florida corporation
("Mortgagee"), whose post office address is P. O. Box 520, Shelby, North
Carolina 28151-0520.
RECITALS:
WHEREAS, Mortgagee has agreed to make a mortgage loan to Mortgagor and,
as a condition to such loan has required that the loan be adequately secured,
and
WHEREAS, Mortgagor is the fee simple owner of the Mortgaged Property as
hereinafter defined, and has consented to the terms and conditions hereof, and
WHEREAS, the proceeds of the aforesaid loan will be used
to acquire/develop the Mortgaged Property.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor hereby covenants, agrees, represents, and warrants to
Mortgagee as follows:
I. THE MORTGAGED PROPERTY
To secure the payment and performance of any and all sums and
obligations which may or shall become due under that certain promissory note
(the "Note") of even date herewith, due November ___, 2007, in the principal
amount of $75,000.00, and the performance of the covenants and agreements
contained in this Mortgage and the Loan Documents (which sums and obligations
and all other sums which may or shall become due under this Mortgage are herein
collectively called the "Indebtedness"), and in order to charge the properties,
interests and rights hereinafter described with the payment and performance of
the Indebtedness and for and in consideration of the sum of Ten and No/100
Dollars ($10.00), Mortgagor does hereby grant, bargain, sell, assign, mortgage,
hypothecate, pledge, convey, warrant, and grant a security interest to Mortgagee
in and to the following property:
(A) All of the land (the "Land") in Hillsborough County, State of
Florida, described on Exhibit A attached hereto and made a part hereof, to have
and to hold the same, together with each and every tenement, hereditament,
easement, right, power, privilege, immunity and appurtenance thereunto belonging
or in any wise appertaining and the reversion and reversions, remainder and
remainders, and also the estate, right, title, interest, homestead, right of
dower, separate estate, property, possession and claim whatsoever, in law as
well as in equity, of Mortgagor of, in, and to the same and every part and
parcel thereof unto Mortgagee in fee simple.
(B) (i) All personal property and fixtures now or hereafter affixed to
or located on the property described in paragraph (A) hereof which is deemed to
be fixtures and a part of the real property under applicable law; (ii) all
articles of personal property and all materials delivered to the property
described in paragraph (A) hereof for use in any way thereon, and owned by
Mortgagor; (iii) all contract rights, general intangibles, actions and rights in
action, including all rights to insurance policies and proceeds and all liquor
licenses; all equipment including parts, accessories, attachments, special
tools, additions and accessions thereto, and (iv) all proceeds, products,
replacements, additions, substitutions, renewals and accessions of any of the
foregoing items (the foregoing are sometimes referred to herein as the
"Personalty"). This Mortgage is a self-operative security agreement with respect
to the above described
<PAGE> 6
property, but Mortgagor agrees to execute and deliver on demand such other
security agreements, financing statements and other instruments as Mortgagee may
request in order to perfect its security interest or to impose the lien hereof
more specifically upon any of such property. Mortgagee shall have all the rights
and remedies in addition to those specified herein of a secured party under the
Florida Uniform Commercial Code.
(C) All leases and other agreements affecting the use, enjoyment or
occupancy oft he Land and the Personalty (the "Leases") and all rents, leases,
issues, profits, revenue, income, proceeds, and other benefits flowing or
derived from the Land and the Personalty (the "Rents"), provided, however, that
permission is hereby given to Mortgagor so long as no default has occurred
hereunder, to collect, receive, and use such benefits from the property as they
become due and payable, but not in advance thereof.
(D) All proceeds of and any unearned premiums on any insurance policies
covering any of the items described in subparagraphs (A), (B), and (C) above,
including, but not limited to the right to receive and apply the proceeds of any
insurance, judgments, or settlements made in lieu thereof.
Everything referred to in paragraphs (A), (B) and (C) hereof and any
additional property hereafter acquired by Mortgagor and subject to the lien of
this Mortgage or any part of these properties is herein referred to as the
"Mortgaged Property."
PROVIDED ALWAYS, that if Mortgagor shall pay to Mortgagee the
Indebtedness as and when due, and faithfully perform all the covenants and
agreements in this Mortgage to be kept, performed or observed by Mortgagor, then
this Mortgage shall cease and be void, but shall otherwise remain in full force
and effect.
II. COVENANTS OF MORTGAGOR
1. Warranty of Title. Mortgagor represents, covenants and warrants that
(i) Mortgagor is indefeasibly seized of the Mortgaged Property in fee simple and
Mortgagor has lawful authority, power, and the legal right to convey, mortgage
and encumber the same as provided by this Mortgage, and (ii) this instrument
constitutes a valid second mortgage on the Mortgaged Property. Mortgagor will
preserve its title to the Mortgaged Property and will forever warrant and defend
the same to Mortgagee and will forever warrant and defend the validity and
priority of the lien of this Mortgage against the claims of all persons and
parties whomsoever.
2. Payment of Taxes and Liens. Mortgagor shall pay all taxes,
assessments, liens, levies, liabilities, obligations and encumbrances of every
nature and kind whether now or hereafter imposed, levied or assessed on the
Mortgaged Property, this Mortgage or the indebtedness secured hereby. All such
payments shall be made when due and payable before they become delinquent and
before any interest attaches or any penalty is incurred. Insofar as any such
lien or encumbrance is of record the same shall be promptly satisfied or
released and evidence of such satisfaction or release shall be given to
Mortgagee.
3. Insurance. Mortgagor shall keep the improvements now existing or
hereafter erected on the Mortgaged Property and all parts of the Mortgaged
Property insured as may be required from time to time by Mortgagee against loss
by fire or other casualty and contingency in such amounts and for such periods
as may be required by Mortgagee, and shall pay promptly, when due, all premiums
for such insurance. All such insurance shall be carried with companies approved
by Mortgagee and the policies and renewals thereof shall be held by Mortgagee
and have attached thereto loss payable clauses in favor of and in form
acceptable to Mortgagee. In the event of loss, Mortgagor shall give immediate
notice by mail to Mortgagee and Mortgagee may make proof of loss if not made
promptly by Mortgagor, and each insurance company concerned is hereby authorized
and directed to make payments for such loss directly to Mortgagee instead of to
Mortgagor or to Mortgagor and Mortgagee jointly, and the insurance proceeds or
any part thereof may be applied by Mortgagee at its option, after deducting
therefrom all its expenses including attorney's fees, either to reduction of the
indebtedness hereby secured or the restoration or repair of the damaged
property. Mortgagee is hereby authorized, at its option, to settle and
compromise any claims, awards, damages, rights of action and proceeds, and any
other payment or relief under any insurance policy. In the event of foreclosure
of this Mortgage or other transfer of title to the Mortgaged Property in
extinguishment of the indebtedness secured hereby, all right, title, and
interest of Mortgagor in and to any insurance policies then in force shall pass
to Mortgagee.
<PAGE> 7
4. Condemnation. If all or any part of the Mortgaged Property shall be
damaged or taken through condemnation (which term when used herein shall include
any damage or taking by any governmental authority or any other authority
authorized by the laws of the State of Florida or the United States of America
to so damage or take, and any transfer by private sale in lieu thereof), either
temporarily or permanently, then the entire Indebtedness shall, at the option of
Mortgagee, become immediately due and payable. Mortgagee shall be entitled to
all compensation awards, damages, claims, rights of action and proceeds of, or
on account of any damage or taking through condemnation and is hereby
authorized, at its option, to commence, appear in and prosecute, in its own or
Mortgagor's name, any action or proceeding relating to any condemnation, and to
settle or compromise any claim in connection therewith. All such compensation
awards, damages, claims, rights of action and proceeds, and any other payments
or relief, and the right thereto, are hereby assigned by Mortgagor to Mortgagee,
who, after deducting therefrom all its expenses, including attorneys' fees, may
release any monies so received by it without affecting the lien of this Mortgage
or may apply the same, in such manner as Mortgagee shall determine, to the
reduction of the sums secured hereby. Any balance of such monies then remaining
shall be paid to Mortgagor. Mortgagor agrees to execute such further assignments
of any compensations, awards, damages, claims, rights of action and proceeds as
Mortgagee may require.
5. Care of Mortgaged Property. Mortgagor shall not remove or demolish
any building or other property forming a part of the Mortgaged Property without
the written consent of Mortgagee, or permit, commit, or suffer any waste,
impairment or deterioration of the Mortgaged Property or any part thereof, and
shall keep the same and the improvements thereon in good condition and repair.
Mortgagor shall notify Mortgagee in writing within five (5) days of any injury,
damage or impairment of or occurring on the Mortgaged Property including, but
not limited to, serious injury or loss by death or otherwise occurring on the
Mortgaged Property. Mortgagee may, at Mortgagee's discretion, have the Mortgaged
Property inspected at the time and Mortgagor shall pay all costs incurred by
Mortgagee in executing such inspection.
6. Mortgagee's Right to Make Certain Payments. In the event Mortgagor
fails to pay and/or discharge the taxes, assessments, liens, levies,
liabilities, obligations and encumbrances, or fails to keep the Mortgaged
Property insured or to deliver the policies, premiums paid, or fails to repair
the Mortgaged Property as herein agreed, Mortgagee is hereby authorized at its
election to pay and/or discharge the taxes, assessments, liens, levies,
liabilities, obligations and encumbrances or any part thereof, to procure and
pay for such insurance or to make and pay for such repairs, without any
obligation on its part to determine the validity and/or necessity thereof, and
without Mortgagee waiving or affecting any option, lien, equity or right under
or by virtue of this Mortgage. The full amount of each and every such payment
made by Mortgagee shall be immediately due and payable by Mortgagor and shall
bear interest from the date thereof until paid at the Default Rate, as
hereinafter defined, and together with such interest, shall be secured by the
lien of this Mortgage. Nothing herein contained shall be construed as requiring
Mortgagee to advance or expend monies for any of the purposes mentioned in this
paragraph.
7. Payment of Expenses. Mortgagor shall pay all the costs and charges
and expenses, including reasonable attorneys' fees, whether incurred at the
trial or appellate level, disbursements and costs of abstracts of title,
incurred or paid at any time by Mortgagee because and/or in the event of the
failure on the part of Mortgagor promptly and fully to perform, comply with and
abide by each and every stipulation, agreement, condition and covenant of this
Mortgage. Such costs, charges and expenses, shall be immediately due and
payable, without notice, demand, attempt to collect or suit pending. The full
amount of each and every such payment shall bear interest from the date thereof
until paid at the Default Rate, as hereinafter defined. All such costs, charges
and expenses so incurred or paid, together with such interest, shall be secured
by the lien of this Mortgage.
8. No Transfer. It is understood and agreed by Mortgagor that as part
of the inducement to Mortgagee to execute and deliver this Mortgage, Mortgagee
has considered and relied on the creditworthiness, experience, expertise and
reliability of Mortgagor as to the development, operation and marketing of the
Mortgaged Property. Mortgagor covenants and agrees not to sell, convey,
transfer, lease or further encumber any interest in or any part of the Mortgaged
Property without the prior written consent of Mortgagee, and any such sale,
conveyance, transfer, lease or encumbrance made without Mortgagee's prior
written consent shall be deemed to be an event of default under this Mortgage.
If any person should obtain an interest in all or any part of the Mortgaged
Property pursuant to the execution or enforcement of any lien, security interest
or other right, whether superior, equal or subordinate to this Mortgage or the
lien hereof, such event shall be deemed to be a transfer by Mortgagor and a
default hereunder. Additionally, if Mortgagor is a corporation or partnership,
the sale, assignment, pledge, transfer, hypothecation, or
<PAGE> 8
other disposition of any proprietary or beneficial interest in Mortgagor without
the prior written consent of Mortgagee shall be deemed to be an event of default
under this Mortgage.
9. After Acquired Property. The lien of this Mortgage will
automatically attach, without further act, to all after acquired property
located in or on, or attached to, or used or intended to be used in connection
with the Mortgaged Property or the operation thereof.
10. Additional Documents. At any time and from time to time, upon
Mortgagee's request, Mortgagor shall make, execute and deliver or cause to be
made, executed and delivered to Mortgagee and, where appropriate, shall cause to
be recorded or filed and from time to time thereafter to be rerecorded or
refiled at such time and in such offices and places as shall be deemed desirable
by Mortgagee any and all such further mortgages, instruments of further
assurance, certificates and other documents as Mortgagee may consider necessary
or desirable in order to effectuate, complete or perfect, or to continue and
preserve the obligations of Mortgagor under this Mortgage, and the lien of this
Mortgage as a valid and subsisting first lien upon all of the Mortgaged
Property, whether now owned or hereafter acquired by Mortgagor. Upon any failure
by Mortgagor to do so, Mortgagee may make, execute, record, file, re-record, or
refile any and all such mortgages, instruments, certificates and documents for
and in the name of Mortgagor, and Mortgagor hereby irrevocably appoints
Mortgagee as the agent and attorney-in-fact of Mortgagor to do so.
11. Organization, Corporate/Partnership Power, Etc. If a corporation or
partnership, Mortgagor represents and warrants that Mortgagor (i) is duly
organized, validly existing and in good standing under the laws of the state of
its creation, (ii) has corporate/partnership power and authority to own its
properties and to carry on its business as now being conducted, (iii) is
qualified to do business in the jurisdiction in which the Land is located and
(iv) is in compliance with all laws, regulations, ordinances and orders of all
public authorities applicable to it.
12. Validity of Loan Documents. If a corporation or partnership,
Mortgagor represents and warrants that (a) the execution, delivery and
performance by Mortgagor of the Note and this Mortgage, and the borrowing
evidenced by the Note, (i) are within the corporate/partnership powers and
purposes of Mortgagor, (ii) have been duly authorized by all requisite
corporate/partnership action, (iii) have received all necessary governmental
approval and (iv) will not violate any provision of law, any order of any court
or other agency of government, the articles of incorporation and
by-laws/partnership agreement of Mortgagor or any indenture, agreement or other
instrument to which Mortgagor is a party or by which it or any of its property
is bound, or be in conflict with, result in a breach of or constitute (with due
notice or lapse of time) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of its property or assets, except
as contemplated by the provisions of this Mortgage; and (b) the Note and this
Mortgage, when executed and delivered by Mortgagor, will constitute the legal,
valid and binding obligations of Mortgagor and other obligors named therein, if
any, in accordance with their respective terms.
13. Taxes. Mortgagor has filed all federal, state, county and municipal
income tax returns required to have been filed by it and has paid all taxes that
have become due pursuant to such returns, pursuant to any assessments received
by it or pursuant to law, and Mortgagor does not know of any basis for any
additional assessment with respect to such taxes.
14. Litigation. There is not now pending against or affecting Mortgagor
or the Mortgaged Property or any part of it, nor to the knowledge of Mortgagor,
is there threatened or contemplated, any action, suit or proceeding at law or in
equity or by or before any administrative agency that if adversely determined
would materially impair or affect its financial condition or operation or
Mortgagor's ownership of the Mortgaged Property.
<PAGE> 9
15. Hazardous Substances.
(a) Mortgagor hereby represents and warrants to Mortgagee that (i):
all hazardous or toxic substances, within the definition of any applicable
statute or regulation, which may be used by any person for any purpose upon the
Property, shall be used or stored thereon only in a safe and approved manner, in
accordance with all industrial standards and all laws, regulations and
requirements for such storage promulgated by any applicable governmental agency
or authority; (ii) other than as described in (i) above, the Mortgaged Property
will not be used for the purpose of storing such hazardous or toxic substances;
and (iii) other than as described in (i) above, no such storage or use will
otherwise be allowed on the Mortgaged Property which will cause, or which will
increase the likelihood of causing, the release of such hazardous or toxic
substances onto the Mortgaged Property.
(b) Mortgagor hereby agrees to indemnify Mortgagee and hold
Mortgagee harmless from and against any and all losses, liabilities, including
strict liability, damages, injuries, expenses, including reasonable attorneys'
fees, costs of any settlement or judgment and claims of any and every kind
whatsoever paid incurred or suffered by, or asserted against, Mortgagee by any
person or entity or governmental agency for, with respect to, or as a direct or
indirect result of, the escape, seepage, leakage, spillage, discharge, emission,
discharging or release from the premises after the date hereof of any Hazardous
Substance (including, without limitation, any losses, liabilities, including
strict liability, damages, injuries, expenses, including reasonable attorneys'
fees, costs of any settlement or judgment or claims asserted or arising under
the Comprehensive Environmental Response, Compensation and Liability Act, any so
called federal, state or local "Superfund" or "Superlien" laws, or other law,
ordinance, code, rule, regulation, order or decree regulating or imposing
liability (including strict liability) with respect to, substances or standards
of conduct concerning any Hazardous Substance), regardless of whether within the
control of Mortgagee.
(c) For purposes of this Mortgage, "Hazardous Substances" shall
mean and include those elements or compounds which are contained in the list of
hazardous substances adopted by the United States Environmental Protection
Agency (EPA) and the list of toxic pollutants designated by Congress or the EPA
or defined by any other Federal, state or local statute, law, ordinance, code,
rule, regulation, order or decree regulating, relating to, or imposing liability
or standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material or other substance deemed to be harmful to human health or
the environment as now or at any time hereafter in effect.
(d) If Mortgagor receives any notice of (i) the happening of any
material event involving the spill, release, leak, seepage, discharge or cleanup
of any Hazardous Substance on the Mortgaged Property or in connection with
Mortgagor's operations thereon or (ii) any complaint, order, citation or notice
with regard to air emissions, water discharges, or any other environmental,
health or safety matter affecting Mortgagor (an "Environmental Complaint") from
any person or entity (including without limitation the EPA) then Mortgagor shall
immediately notify Mortgagee orally and in writing of said notice.
(e) Mortgagee shall have the right, but not the obligation, without
limitation of Mortgagee's rights under this Mortgage, to enter onto the
Mortgaged Property or to take such other actions as it deems necessary or
advisable to cleanup, remove, resolve or minimize the impact of, or otherwise
deal with, any such Hazardous Substance or Environmental Complaint following
receipt of any notice from any person or entity (including without limitation
the EPA) asserting the existence of any Hazardous Substance or an Environmental
Complaint pertaining to the Mortgaged Property or any part thereof which, if
true, could result in an order, suit or other action against Mortgagor and/or
which, in the sole opinion of Mortgagee, could jeopardize its security under
this Mortgage. All reasonable costs and expenses incurred by Mortgagee in the
exercise of any such rights shall be secured by this Instrument and shall be
payable by Mortgagor upon demand.
III. EVENTS OF DEFAULT
16. Events of Default. Any one of the following shall constitute an
event of default:
(a) Failure by Mortgagor to pay, as and when due and payable, the
Indebtedness, or any deposits for taxes, assessments or insurance premiums due
hereunder, or any other sums to be paid by Mortgagor, under this Mortgage.
<PAGE> 10
(b) Failure by Mortgagor to duly keep, perform and observe any
covenant, condition or agreement in this Mortgage, the Note, or any other
instrument evidencing, securing or governing the loan secured by this Mortgage
(the "Loan Documents") for a period of thirty (30) days after Mortgagee gives
written notice specifying the failure.
(c) If Mortgagor: (i) files a voluntary petition in bankruptcy, or
(ii) is adjudicated as a bankrupt or insolvent, or (iii) files any petition or
answer seeking or acquiescing in any reorganization, management, composition,
readjustment, liquidation, dissolution or similar relief for itself under any
law relating to bankruptcy, insolvency or other relief for debtors, or (iv)
seeks, consents to or acquiesces in the appointment of any trustee, receiver,
master or liquidator of itself or of all or any part of the Mortgaged Property,
or (v) makes any general assignment for the benefit of creditors, or (vi) makes
any admission in writing of its inability to pay its debts generally as they
become due; or if (vii) a court of competent jurisdiction enters an order,
judgment or decree approving a petition filed against it seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief, under any present or future federal, state, or other statute,
law or regulation relating to bankruptcy, insolvency or other relief for
debtors, which order, judgment or decree remains unvacated and unstayed for an
aggregate of sixty (60) days whether or not consecutive from the date of entry
thereof; or (viii) any trustee, receiver or liquidator of Mortgagor or of any
part of the Mortgaged Property is appointed without the prior written consent of
Mortgagee, which appointment shall remain unvacated and unstayed for an
aggregate of sixty (60) days whether or not consecutive.
(d) If any material representation or warranty by or on behalf of
Mortgagor or any guarantor contained in this Mortgage, in any guaranty or in any
Loan Document shall prove to have been false or incorrect in any material
respect.
(e) Any default by any guarantor under any guaranty of the loan
secured by the Mortgage.
(f) If the Mortgagor or any guarantor shall have concealed,
removed, or permitted to be concealed or removed, any part of its properties,
with intent to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its properties which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law, or shall have made any
transfer of its properties to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid, or shall have suffered or
permitted, while insolvent, any creditor to obtain a lien upon any of its
properties through legal proceedings or distraint which is not vacated within
thirty (30) days from the date thereof.
(g) If Mortgagor defaults under the superior mortgage and such
default is not cured within the applicable curative period set forth in such
superior mortgage, if any, or if Mortgagor enters into any modification or
amendment of the superior mortgage or accepts any future advance thereunder
without the prior written consent of Mortgagee.
(h) If at any time Mortgagee reasonably shall deem itself insecure.
IV. REMEDIES OF MORTGAGEE
17. Acceleration. If an event of default shall have occurred, Mortgagee
may, at Mortgagee's option and without notice to Mortgagor, declare the
Indebtedness and all other sums secured hereby, to be due and payable
immediately, and upon such declaration such Indebtedness and other sums shall
immediately become due and payable without demand, notice or presentment for
payment.
18. Foreclosure. If an event of default shall have occurred, Mortgagee
may proceed by suit or suits at law or in equity or by any other appropriate
proceeding or remedy; (a) to enforce payment and performance of the Note or the
performance of any term hereof or any other right; (b) to foreclose this
Mortgage and to sell, as an entirety or in separate lots or parcels, the
Mortgaged Property under the judgment or decree of a court or courts of
competent jurisdiction; (c) to collect all rents, issues, profits, revenues,
income, proceeds or other benefits from the Mortgaged Property; (d) to seek
appointment of a receiver to enter upon and take possession of the Mortgaged
Property and to collect all rents, issues, profits, revenues, income or other
benefits thereof and apply the same as the court may direct and such receiver
shall have all rights and powers permitted under law; and (e) to pursue any
other remedy available to it, including, but not limited to taking possession of
the Mortgaged Property without notice or hearing. Mortgagee may
<PAGE> 11
take action either by such proceedings or by the exercise of its power with
respect to entry or taking possession, or both as Mortgagee may determine.
19. Uniform Commercial Code. To exercise from time to time any and all
rights and remedies of a secured creditor under the UCC as in effect from time
to time in the State of Florida and any and all rights and remedies available to
it under any other applicable law.
20. Right of Lender to Perform. Should Mortgagor fail to perform or
observe any covenants or comply with any conditions contained in the Loan
Documents, then Mortgagee, without releasing the Mortgagor from its obligation
to do so, may perform such covenants or conditions, and appear in and defend any
action affecting the Loan Documents, but shall not be obliged to do so. To the
extent that the Mortgagee shall incur any costs or pay any sums in connection
therewith, including any costs or expenses of arbitration, litigation, and
reasonable attorneys' fees (whether incurred in litigation or otherwise), then
the same shall be included as part of the Indebtedness, and shall bear interest
from the date of payment thereof by the Mortgagee at the default rate of
interest stated in the Note and the Mortgagor covenants to reimburse the
Mortgagee therefor immediately upon demand.
21. No Waiver. No delay or omission of Mortgagee or of any holder of
the Note and Mortgage to exercise any right, power or remedy accruing upon any
event of default shall exhaust or impair any such right, power or remedy or be
construed as a waiver of any such event of default or constitute acquiescence
therein.
22. Non-Exclusive Remedies. No right, power or remedy conferred upon or
reserved to Mortgagee by this Mortgage, the Note, or any of the Loan Documents
is exclusive of any other right, power or remedy, but each and every such right,
power and remedy shall be cumulative and concurrent and shall be in addition to
any other right, power or remedy given hereunder or under the Guaranties, or now
or hereafter existing at law, in equity or by statute.
V. MISCELLANEOUS
23. Successors and Assigns Bound. Whenever one of the parties hereto is
named or referred to herein, the heirs, personal representatives, successors and
assigns of such party shall be included and all covenants and agreements
contained in this Mortgage, by or on behalf of Mortgagor or Mortgagee, shall
bind and inure to the benefit of their respective heirs, personal
representatives, successors and assigns. If there are two or more mortgagors,
the provisions hereof shall apply to the mortgagors jointly and severally.
24. Invalid or Unenforceable. In the event that any of the covenants,
agreements, terms or provisions contained in the Note, this Mortgage, the
Guaranty or the Loan Agreement shall be invalid, illegal or unenforceable in any
respect, the validity of the remaining covenants, agreements, terms or
provisions contained herein and in the Note and any other instrument securing or
related to the Note shall be in no way affected, prejudiced or disturbed
thereby.
25. Future Advances. This Mortgage is given to secure not only existing
indebtedness, but also such future advances, whether such advances are
obligatory or are to be made at the option of Mortgagee, or otherwise, as are
made within fifteen (15) years from the date hereof, to the same extent as if
such future advances are made on the date of the execution of this Mortgage. The
total amount of indebtedness that may be so secured may decrease or increase
from time to time, but the total unpaid balance so secured at one time shall not
exceed $10,000,000, plus interest thereon, and any disbursements made for the
payment of taxes, levies or insurance on the Mortgaged Property, and any other
sums expended by Mortgagee to protect, preserve and complete the Mortgaged
Property or this Mortgage with interest on such disbursements at the Default
Rate.
26. Loan Expenses. To the extent permitted by the laws of the state in
which the Mortgaged Property is situated, Mortgagor shall pay all costs and
expenses in connection with the preparation, execution, delivery and recording
of this Mortgage, including, but not limited to, fees and disbursements of
counsel appointed by Mortgagee to prepare the loan documents implementing the
letter agreement of Mortgagee pursuant to which this Mortgage is granted (the
"Commitment") and close the loan transaction, recording costs and expenses,
stamp and other taxes, surveys, appraisals and policies of title and casualty
insurance.
27. No Representation by Mortgagee. By accepting or approving anything
required to be observed, performed or fulfilled, or to be given to Mortgagee,
pursuant to this Mortgage, the Loan Agreement or the
<PAGE> 12
Commitment, including but not limited to any officer's certificate, balance
sheet, statement of income, profit and loss or other financial statement, survey
or appraisal, Mortgagee shall not be deemed to have warranted or represented the
sufficiency, legality, effectiveness or legal effect of the same, or of any
term, provision or condition thereof, and such acceptance or approval thereof
shall not be or constitute any warranty or representation with respect thereto
by Mortgagee.
28. Notices. All notices, demands, requests and other communications
required under this Mortgage and the Note shall be in writing and shall be
deemed to have been properly given when deposited in the United States mail and
sent by United States first class mail, postage prepaid, addressed to the party
for whom it is intended at its address set forth in the preamble hereof. Any
party may designate a change of address by written notice to the others, given
at least ten (10) days before such change of address is to become effective.
29. Mortgagee's Right to Perform the Obligations. If Mortgagor shall
fail to make any payment or perform any obligation or other act required of
Mortgagor by this Mortgage, then at any time thereafter without notice to or
demand upon Mortgagor, except as herein provided, and without waiving or
releasing any remedy or Event of Default, Mortgagee may make such payment or
perform such act for the account of and at the expense of Mortgagor, and shall
have the right to enter the Land for such purpose and to take all such action
thereon and with respect to the Mortgaged Property as may be necessary or
appropriate for such purpose. All sums so paid by Mortgagee and all costs and
expenses, including, without limitation, reasonable attorneys' fees and expenses
so incurred, together with interest thereon at the Default Rate from the date of
payment, shall constitute a part of the Indebtedness and shall be paid by
Mortgagor to Mortgagee on demand. If Mortgagee shall elect to pay any tax or
other imposition, Mortgagee shall give written notice of such election to
Mortgagor and if Mortgagor fails to pay such imposition within thirty (30) days
after giving said notice, Mortgagee may do so in reliance on any bill, statement
or assessment procured from the appropriate governmental or non-governmental
office, without inquiring into the accuracy, amount or validity of such tax or
other imposition. Similarly, in making any payments to protect the security
intended to be created by this Mortgage, Mortgagee shall not be bound to inquire
into the accuracy, amount or validity of any apparent or threatened adverse
title, lien, encumbrance, claim or charge before making an advance for the
purpose of preventing or removing the same, provided Mortgagee has given
Mortgagor ten (10) days' written notice of Mortgagee's intention to pay same.
Mortgagor shall indemnify Mortgagee for all losses and expenses, including
reasonable attorneys' fees, incurred by reason of any acts performed by
Mortgagee pursuant to the provisions of this paragraph. Any funds expended by
Mortgagee hereunder, together with interest thereon at the Default Rate (as
hereinafter defined) from the date of such expenditures, shall constitute
additions to the Indebtedness and shall be secured by this Mortgage and shall be
paid by Mortgagor to Mortgagee upon demand.
30. Maximum Rate of Interest. Anything in the Note, this Mortgage, the
Loan Agreement, the Commitment or any other agreements or arrangements by
Mortgagor in connection with the loan evidenced by the Note to the contrary
notwithstanding, if from any circumstances whatever fulfillment of any
provisions of any of the foregoing documents or agreements at the time
performance of said provision shall be due shall involve transcending the limit
of validity prescribed by the usury laws applicable in the state where the Land
is located as preempted and prescribed from time to time by the laws of the
United States of America or any rule or regulation of any department or agency
thereof, then, ipso facto the obligation to be fulfilled shall be reduced to the
limit of such validity so that in no event shall exaction be possible under any
of the aforesaid documents or agreements in excess of the limit of such
validity, but such obligation shall be fulfilled to the limit of such validity,
and if under any circumstances whatsoever interest in excess of the limit of
such validity will have been paid by Mortgagor in connection with the loan
evidenced by the Note, such excess shall be applied by Mortgagee to the unpaid
principal balance of the Note or refunded to Mortgagor, the manner of handling
such excess to be at Mortgagee's election, and in case any such excess interest
has accrued, Mortgagee shall eliminate such excess interest so that under no
circumstances shall interest on the loan evidenced by the Note exceed the
maximum rate allowed by applicable law as preempted and prescribed from time to
time by the laws of the United States of America or any rule or regulation of
any department or agency thereof.
31. Purchase Money Mortgage. The Note evidences and this mortgage
secures all or a portion of the purchase price of the Property in connection
with the purchase thereof by Mortgagor. This is a purchase money mortgage.
32. Assignment of Rents. As additional security for the indebtedness
secured hereby, Mortgagor sells, transfers and assigns unto Mortgagee all the
right, title and interest of Mortgagor in and to the rents, issues, profits,
<PAGE> 13
revenues, royalties, rights and benefits from the Property, together with all
leases thereof now made or hereafter entered into, whether written or verbal.
Mortgagor authorizes and empowers the Mortgagee to collect the rents, issues,
profits, revenues, royalties, rights and benefits as they shall become due, and
does direct each and all of the tenants of the premises to pay the rents as now
may be due or shall become due hereafter to Mortgagee upon demand for payment by
Mortgagee, provided, however, that no such demand shall be made unless and until
there has been a default in the payment of any sums secured by this mortgage,
but the tenants shall pay the rents to Mortgagee upon such demand without the
necessity of inquiry into the propriety of doing so, and shall be fully
protected in so doing. Until such demand is made, Mortgagor is authorized to
collect, or continue collecting, the rents, issues, profits, revenues,
royalties, rights and benefits, but this privilege shall not operate to permit
the collection by Mortgagor of any installment of rent in advance of the date
prescribed in the lease or leases for its or their payment. The amount collected
under this assignment, less the expense of collection, if any, shall be applied
on account of taxes and assessments on the Land, insurance premiums and
delinquencies of principal and interest under the Note and this Mortgage.
Nothing contained in this assignment shall be construed as making Mortgagee a
mortgagee in possession, nor shall Mortgagee be liable for laches or failure to
collect the rents, issues, profits, revenues, royalties, rights and benefits; it
is understood that Mortgagee is to account only for such sums as actually are
collected. Neither the existence of this assignment nor the exercise of its
privilege to collect the rents, issues, profits, revenues, royalties, rights and
benefits under it shall be construed as a waiver by Mortgagee of the right to
enforce payment of the indebtedness secured hereby in strict accordance with the
terms and provisions of this mortgage and the Note.
33. Financing Statement. This Mortgage constitutes a "Security
Agreement" within the meaning of the Uniform Commercial Code as adopted by the
state in which the Property is located, and Mortgagor hereby grants to Mortgagee
a security interest in the Property. Pursuant to Chapter 679, Florida Statutes,
this mortgage constitutes a financing statement covering the Property as defined
in this mortgage. The mailing addresses of Mortgagor/Debtor and Mortgagee/
Secured Party are as set forth herein. Some of the Personal Property is or may
become attached as fixtures on the Land encumbered by this mortgage. This
mortgage is being filed in the real estate records of the county in which the
Land encumbered hereby is situated. Mortgagee shall have all the rights and
remedies with respect to the Property afforded to it by the Uniform Commercial
Code as adopted by the state in which the Property, is located, in addition to,
but not in limitation of, the other rights afforded Mortgagee by the Mortgage
(and the Loan Agreement and the Security Agreement, if any).
34. Prior Mortgages. This mortgage is subject and subordinate to the
mortgage dated November ___, 1997, between Mortgagor as mortgagor, and
_________________________, as mortgagee, securing an original principal amount
of ___________ and recorded in Official Records Book ____, page ____ public
records of Hillsborough County, Florida, and encumbering the real property
described herein (the "Outstanding Mortgage"). Mortgagor shall not, without the
prior written consent of Mortgagee, enter into any agreement whereby the
Outstanding Mortgage and the note secured thereby, or either of them, are
modified or amended in any manner whatsoever, or the time for the payment of the
note secured by the Outstanding Mortgage extended or the principal amount of
said note increased. Mortgagor will maintain the Outstanding Mortgage and note
secured thereby in good standing strictly in accordance with their terms, and
will make all payments required by the terms of the Outstanding Mortgage and the
note secured thereby by a time that is on or prior to the due date for said
payments, without the benefit of any grace or acceleration periods provided for
in the Outstanding Mortgage and the note secured thereby, and Mortgagor will,
from time to time, and whenever Mortgagee, its successors and assigns so demand,
submit evidence to Mortgagee that Mortgagor has maintained and is maintaining
the Outstanding Mortgage and the note secured thereby in good standing. Should
any default be made in the payment of any installment of principal or interest
on the note secured by the Outstanding Mortgage, Mortgagee may, without notice
or demand to Mortgagor, pay such installment of principal or interest and the
amount so paid shall be payable by Mortgagor on demand by Mortgagee with
interest thereon at the rate applicable under the Note secured hereby, from the
time of such payment, and said amount so paid by Mortgagee may be added to the
indebtedness secured by this mortgage and shall be secured by this mortgage.
Upon the failure of Mortgagor to keep, observe or perform, or cause to be kept,
observed and performed, any of the terms, covenants, provisions and agreements
of the Outstanding Mortgage, Mortgagor agrees that Mortgagee may, on behalf of
Mortgagor or in the name of Mortgagor, keep, observe or perform, or cause to be
kept, observed or performed, any of such terms, covenants, provisions or
agreements and to enter upon the mortgaged property and take all such action
thereon as may be necessary therefor, to the end that the rights of Mortgagor in
and to the property encumbered by the Outstanding Mortgage shall be kept
unimpaired and free from default, and all monies so expended by Mortgagee with
interest thereon from date of each such expenditure shall be paid by Mortgagor
to Mortgagee promptly upon demand by Mortgagee and shall be added to the
indebtedness
<PAGE> 14
evidenced by the Note secured hereby. Failure of Mortgagor to comply strictly
with the provisions of this paragraph shall constitute an event of default under
this Mortgage and the Note secured hereby and, at the option of Mortgagee, the
aggregate sum mentioned in the Note secured hereby shall become due and payable
as fully and completely as if the aggregate sum mentioned in the Note secured
hereby were originally stipulated to be paid on the date of such an event of
default, and upon such acceleration Mortgagee may pursue such rights and
remedies as are provided for in this mortgage.
35. Modification. This Mortgage may not be changed, waived, discharged,
released or terminated orally, but only by an instrument or instruments in
writing, signed by the party against which enforcement of the change, waiver,
discharge, release or termination is asserted.
36. Applicable Law. This Mortgage shall be governed by and construed
according to the laws in effect in the state in which the Land is situated.
37. Strict Performance. Any failure by Mortgagee to insist upon strict
performance by Mortgagor of any of the terms and provisions of this Mortgage or
of the Note shall not be deemed to be a waiver of any of the terms or provisions
of this Mortgage or the Note, and Mortgagee shall have the right thereafter to
insist upon strict performance by Mortgagor of any and all of them.
38. Headings. The article headings and the paragraph and subparagraph
titles hereof are inserted for convenience of reference only, and shall in no
way alter or modify the text or substance of such articles, paragraphs and
subparagraphs.
39. Obligation of Mortgagor. Mortgagor shall pay the cost of releasing
or satisfying this Mortgage of record.
40. Default Rate. The "Default Rate" shall be the highest non-usurious
rate allowed by law, provided that in no event shall the Default Rate exceed the
maximum lawful non-usurious rate permitted by applicable law, whether now or
hereafter in effect.
41. Recitals. The recitals set forth herein are true and correct.
42. WAIVER OF RIGHT TO JURY TRIAL. IN CONSIDERATION OF THE MUTUAL
COVENANTS CONTAINED HEREIN, BOTH MORTGAGOR AND MORTGAGEE HEREBY WAIVE THE RIGHT
TO A JURY TRIAL IN ANY SUIT CONCERNING THIS MORTGAGE AND AT EITHER PARTY'S
REQUEST, THE OTHER PARTY WILL JOIN IN ASKING THE COURT IN WHICH SUCH SUIT IS
PENDING TO TRY THE SUIT AND DECIDE ALL ISSUES, INCLUDING ISSUES OF FACT, WITHOUT
A JURY. MORTGAGOR AND MORTGAGEE HAVE SPECIFICALLY DISCUSSED AND NEG0TIATED THIS
WAVIER AND AGREE THAT IT IS AN ESSENTIAL PART OF THEIR AGREEMENTS CONCERNING
THIS MORTGAGE.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the date
above first written.
Signed, sealed and delivered
in the presence of:
/s/ Charles L. Cranford /s/ Fuller D.Tresca (SEAL)
Printed Charles L. Cranford FULLER D. TRESCA, JR.
/s/ Etteene T. Hope /s/ Judity T. Tresca (SEAL)
Printed Etteene T. Hope JUDITH T. TRESCA
4827 Philips Highway
Jacksonville, Florida 32207
<PAGE> 15
STATE OF FLORIDA
COUNTY OF DUVAL
The foregoing instrument was acknowledged before me this November 19, 1997, by
FULLER D. TRESCA, JR., who is personally known to me or has produced as
identification.
/s/Charles L.Cranford
-----------------------------------------
Printed
Notary Public, County and State aforesaid
Serial No.: CC587958
My commission expires: October 5, 2000
(Notarial Seal)
<PAGE> 16
STATE OF FLORIDA
COUNTY OF DUVAL
The foregoing instrument was acknowledged before me this November 19, 1997, by
JUDITH T. TRESCA, who is personally known to me or has produced __________ as
identification.
/s/ Charles L. Cranford
-----------------------------------------
Printed Charles L. Cranford
-------------------------------
Notary Public, County and State aforesaid
Serial No.: CC587958
My commission expires: October 5, 2000
(Notarial Seal)
<PAGE> 17
Prepared by and Return to
Martin, Ade, Birchfield & Mickler P.A.
P.O. Box 59
Jacksonville, Florida 32201
WARRANTY DEED
THIS DEED is made as of November 19, 1997, between RSI HOLDINGS OF
FLORIDA, INC., a Florida corporation, herein the "grantor," and FULLER D.
TRESCA, JR., post-office address, 4827 Philips Highway, Jacksonville, Florida
32207, herein the "grantee". (As used herein, the terms grantor and grantee
shall include, where the context permits or requires, singular or plural, heirs,
personal representatives, successors, or assigns.)
WITNESSETH, That the grantor in consideration of One Dollar and other
valuable considerations paid by the grantee, the receipt and sufficiency of
which are hereby acknowledged, has granted, bargained, sold, and conveyed and by
these presents does hereby grant, bargain, sell, and convey unto the grantee
forever all of that certain property in Hillsborough County, Florida, described
on Exhibit A attached hereto.
Real estate parcel no.: 40538-0000
TO HAVE AND TO HOLD the same, together with the hereditaments and
appurtenances, unto the grantee in fee simple. And the grantor does hereby fully
warrant the title to said property and will defend the same against the lawful
claims of all persons whomsoever.
This conveyance is subject to those matters set forth on Exhibit B attached
hereto, and to ad valorem taxes levied or which may become a lien subsequent to
December 31 of the calendar year next preceding the date hereof.
IN WITNESS WHEREOF, this deed has been executed as of the date first above
written.
Signed, sealed and delivered RSI HOLDINGS OF FLORIDA, INC.
in the presence of:
/s/ Patricia Coulson By /s/ C. M. Bolt
Printed Patricia Coulson C. M. Bolt
Its President
/s/ Kristina Garrison
Printed Kristina Garrison (Corporate Seal)
P. O. Box 520
Shelby, North Carolina 28151-0520
<PAGE> 18
STATE OF Florida
COUNTY OF Broward
The foregoing instrument was acknowledged before me this November 6,
1997, by C. M. Bolt, President of RSI HOLDINGS OF FLORIDA, INC., a Florida
corporation, on behalf of the corporation. He is personally known to me or has
produced FL DR LIC B43015330181 ______________ as identification.
/s/ Kristina Garrison
Printed Kristina Garrison
Notary Public, County and State aforesaid
Serial No.: CC 486137
My commission expires: 8-6-99
(Notarial Seal)
<PAGE> 19
EXHIBIT A
Lot 48 of STATE HIGHWAY FARMS as per map or plat thereof recorded in Plat Book
26, Page 33 of the Public Records of Hillsborough County, Florida, less the east
622 feet thereof and less that part lying west of the east right of way line of
State Road 43, a/k/a U.S. Highway 301, all within Section 36, T28S, R19E of
Hillsborough County, Florida.
<PAGE> 20
EXHIBIT B
1. Easement(s) in favor of Tampa Electric Company by instrument(s)
recorded in Official Records Book 2533, page 962.
2. Permanent Utility Easement(s) in favor of Hillsborough County Aviation
Authority as recorded in Official Records Book 7801, page 136.
3. Temporary Construction Easement(s) in favor of Hillsborough County
Aviation Authority as recorded in Official Records Book 7801, page 140.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
The following are the subsidiaries of the Company, for each of which
the voting stock is 100% owned by the Company.
(1) RSI Holdings of Florida, Inc., incorporated in Florida. This
corporation is inactive.
(2) Sunbelt Distributors, Inc., incorporated in South Carolina. This
corporation is inactive.
(3) Wiegmann & Rose International Corp., incorporated in South Carolina.
This corporation is inactive.
(4) HomeAdd Financial Corporation, incorporated in South Carolina.
<PAGE> 1
EXHIBIT 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-45019) pertaining to the RSI Holdings, Inc. Incentive Stock
Award Plan and in the Registration Statement (Form S-8 No. 33-45021) pertaining
to the RSI Holdings, Inc. Stock Option Plan of our report dated October 15,
1997, with respect to the consolidated financial statements of RSI Holdings,
Inc. included in the Annual Report (Form 10-KSB) for the year ended August 31,
1997.
/s/ ERNST AND YOUNG LLP
Greenville, South Carolina
November 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT AUGUST 31, 1997 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<CASH> 759,000
<SECURITIES> 0
<RECEIVABLES> 62,000
<ALLOWANCES> 28,000
<INVENTORY> 0
<CURRENT-ASSETS> 856,000
<PP&E> 55,000
<DEPRECIATION> 25,000
<TOTAL-ASSETS> 1,657,000
<CURRENT-LIABILITIES> 181,000
<BONDS> 0
0
0
<COMMON> 80,000
<OTHER-SE> 1,280,000
<TOTAL-LIABILITY-AND-EQUITY> 1,657,000
<SALES> 0
<TOTAL-REVENUES> 393,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,278,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,000
<INCOME-PRETAX> (901,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (901,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (901,000)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
