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EXHIBIT 10.49
CREDIT AGREEMENT
by and among
MEGO MORTGAGE CORPORATION,
THE LENDERS PARTY HERETO,
and
THE FIRST NATIONAL BANK OF CHICAGO,
AS AGENT
dated as of June 20, 1997
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS......................................................................................... -1-
ARTICLE II THE CREDITS........................................................................................-24-
2.1. Commitment, Sublimits and Types of Advances.....................................-24-
2.1.1. Commitment and Lending Sublimits......................................-24-
2.1.2. Borrowing Base Sublimits..............................................-25-
2.1.3. Types of Advances.....................................................-25-
2.2. Primary Advances................................................................-25-
2.3. Buy Down Advances...............................................................-25-
2.4. Swingline Advances..............................................................-26-
2.5. Reallocation of Swingline Advances..............................................-26-
2.6. Fees............................................................................-27-
2.6.1. Facility Fees.........................................................-27-
2.6.2. Closing Fees..........................................................-27-
2.6.3. Agent Fees............................................................-27-
2.6.4. Collateral Agent Fees.................................................-27-
2.6.5. Deficiency Fees Payable in connection with Buy Down Loans.............-27-
2.7. Method of Selecting Types and Interest Periods for New Advances.................-27-
2.8. Conversion and Continuation of Outstanding Advances.............................-28-
2.9. Reductions to Aggregate Commitment..............................................-29-
2.10. Principal Payments..............................................................-29-
2.10.1. Optional Principal Payments............................................-29-
2.10.2. Required Payments Related to Borrowing Base............................-29-
2.10.3. Settlement Account Payments............................................-29-
2.10.4. Final Payment on Termination Date......................................-30-
2.11. Changes in Interest Rate, Etc...................................................-30-
2.12. Rates Applicable After Default..................................................-30-
2.13. Method of Payment...............................................................-30-
2.14. Notes; Telephonic Notices.......................................................-31-
2.15. Interest Payment Dates; Interest and Fee Basis..................................-31-
2.16. Notification by the Agent.......................................................-31-
2.17. Lending Installations...........................................................-31-
2.18. Non-Receipt of Funds by the Agent...............................................-32-
ARTICLE III CHANGE IN CIRCUMSTANCES...........................................................................-32-
3.1. Yield Protection................................................................-32-
3.2. Changes in Capital Adequacy Regulations.........................................-33-
3.3. ................................................................................-33-
3.4. Funding Indemnification.........................................................-33-
3.5. Lender Statements; Survival of Indemnity........................................-33-
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ARTICLE IV CONDITIONS PRECEDENT; WITHHOLDING TAX EXEMPTION....................................................-34-
4.1. Effectiveness...................................................................-34-
4.2. Each Advance....................................................................-35-
4.3. Withholding Tax Exemption.......................................................-36-
ARTICLE V REPRESENTATIONS AND WARRANTIES......................................................................-36-
5.1. Corporate Existence and Standing................................................-36-
5.2. Authorization and Validity......................................................-36-
5.3. No Conflict; Government Consent.................................................-36-
5.4. Financial Statements............................................................-37-
5.5. Material Adverse Change.........................................................-37-
5.6. Taxes...........................................................................-37-
5.7. Litigation and Contingent Obligations...........................................-37-
5.8. Subsidiaries....................................................................-37-
5.9. ERISA...........................................................................-38-
5.10. Accuracy of Information.........................................................-38-
5.11. Regulation U....................................................................-38-
5.12. Material Agreements.............................................................-38-
5.13. Compliance With Laws............................................................-38-
5.14. Ownership of Properties.........................................................-38-
5.15. Plan Assets; Prohibited Transactions............................................-38-
5.16. Investment Company Act..........................................................-38-
5.17. Public Utility Holding Company Act..............................................-39-
5.18. FHA and FNMA Eligibility........................................................-39-
5.19. Subordinated Indebtedness.......................................................-39-
5.20. Eligibility.....................................................................-39-
5.21. Recourse Servicing..............................................................-39-
ARTICLE VI COVENANTS..........................................................................................-39-
6.1. Financial Reporting.............................................................-39-
6.2. Use of Proceeds.................................................................-42-
6.3. Notice of Default...............................................................-42-
6.4. Conduct of Business.............................................................-42-
6.5. Taxes...........................................................................-42-
6.6. Insurance.......................................................................-42-
6.7. Compliance with Laws............................................................-43-
6.8. Maintenance of Properties.......................................................-43-
6.9. Inspection......................................................................-43-
6.10. Dividends.......................................................................-43-
6.11. Indebtedness....................................................................-43-
6.12. Merger..........................................................................-44-
6.13. Sale of Assets..................................................................-44-
6.14. Investments and Acquisitions....................................................-45-
6.15. Liens...........................................................................-45-
6.16. Affiliates......................................................................-46-
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6.17. Financial Covenants.............................................................-46-
6.17.1. Adjusted Leverage Ratio................................................-46-
6.18. Compliance with Security Agreement..............................................-47-
6.19. Recourse Servicing..............................................................-47-
6.20. FHA and FNMA Approvals..........................................................-47-
6.21. Approved Investor Commitments...................................................-47-
6.22. Settlement Account..............................................................-47-
6.23. Subordinated Indebtedness.......................................................-47-
6.24. Excluded Subsidiaries...........................................................-47-
ARTICLE VII DEFAULTS..........................................................................................-48-
ARTICLE VIII COLLATERAL, ACCELERATION AND OTHER REMEDIES......................................................-50-
8.1. Security and Collateral Agency Agreement........................................-50-
8.2. AP Qualifying Loans.............................................................-50-
8.3. Release of Collateral...........................................................-50-
8.4. Settlement Account..............................................................-51-
8.5. Termination.....................................................................-51-
8.6. Acceleration....................................................................-51-
8.7. Other Remedies..................................................................-51-
8.8. Application of Proceeds.........................................................-53-
8.9. Preservation of Rights..........................................................-53-
ARTICLE IX AMENDMENTS; WAIVERS; GENERAL PROVISIONS............................................................-53-
9.1. Amendments and Waivers..........................................................-53-
9.2. Survival of Representations.....................................................-54-
9.3. Governmental Regulation.........................................................-54-
9.4. Taxes...........................................................................-55-
9.5. Entire Agreement................................................................-55-
9.6. Several Obligations; Benefits of this Agreement.................................-55-
9.7. Expenses; Indemnification.......................................................-55-
9.8. Nonliability of Lenders.........................................................-55-
9.9. Severability of Provisions......................................................-56-
9.10. Headings........................................................................-56-
9.11. Numbers of Documents............................................................-56-
9.12. Accounting......................................................................-56-
9.13. Confidentiality.................................................................-56-
9.14. Nonreliance.....................................................................-56-
9.15. Disclosure......................................................................-56-
ARTICLE X THE AGENT AND THE COLLATERAL AGENT..................................................................-57-
10.1. Appointment; Nature of Relationship.............................................-57-
10.2. Powers..........................................................................-57-
10.3. General Immunity................................................................-57-
10.4. No Responsibility for Loans, Recitals, Etc......................................-57-
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10.5. Action on Instructions of Lenders...............................................-58-
10.6. Employment of Agents and Counsel................................................-58-
10.7. Reliance on Documents; Counsel..................................................-58-
10.8. Agent's Reimbursement and Indemnification.......................................-58-
10.9. Notice of Default...............................................................-58-
10.10. Rights as a Lender..............................................................-59-
10.11. Lender Credit Decision..........................................................-59-
10.12. Successor Agent.................................................................-59-
ARTICLE XI SETOFF; RATABLE PAYMENTS...........................................................................-60-
11.1. Setoff..........................................................................-60-
11.2. Ratable Payments................................................................-60-
11.3. Custodial Accounts..............................................................-60-
ARTICLE XII ASSIGNMENTS; PARTICIPATIONS; COMMITMENT INCREASES.................................................-60-
12.1. Successors and Assigns..........................................................-60-
12.2. Participations..................................................................-61-
12.2.1. Permitted Participants; Effect.........................................-61-
12.2.2. Voting Rights..........................................................-61-
12.2.3. Benefit of Setoff......................................................-61-
12.3. Assignments.....................................................................-61-
12.3.1. Permitted Assignments..................................................-61-
12.3.2. Effect; Effective Date.................................................-61-
12.4 Commitment Increases............................................................-62-
12.4.1. Increases to Aggregate Commitment......................................-62-
12.4.2. Procedure for Increases and Addition of New Lenders....................-62-
12.5. Dissemination of Information....................................................-62-
12.6. Tax Treatment...................................................................-63-
ARTICLE XIII NOTICES..........................................................................................-63-
13.1. Notices.........................................................................-63-
13.2. Change of Address...............................................................-63-
ARTICLE XIV COUNTERPARTS......................................................................................-63-
ARTICLE XV CHOICE OF LAW, CONSENT TO JURISDICTION, WAIVER OF JURY TRIAL.......................................-63-
15.1. CHOICE OF LAW...................................................................-63-
15.2. CONSENT TO JURISDICTION.........................................................-63-
15.3. WAIVER OF JURY TRIAL............................................................-64-
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SCHEDULES
SCHEDULE "1" COMMITMENTS AND COMMITMENT PERCENTAGE
SCHEDULE "2" LIST OF APPROVED INVESTORS
SCHEDULE "3" SUBSIDIARIES AND OTHER INVESTMENTS
SCHEDULE "4" INDEBTEDNESS AND LIENS
SCHEDULE "5" BORROWER'S UNDERWRITING STANDARDS
SCHEDULE "6" BORROWER'S PROPERTY VALUATION PROCEDURES
SCHEDULE "7" DESCRIPTION OF TRUSTEE'S RIGHT TO TERMINATE THE BORROWER'S
RIGHTS TO SERVICE CERTAIN SECURITIZATIONS
SCHEDULE "8" DESCRIPTION OF EXISTING AGREEMENTS WITH AFFILIATES
SCHEDULE "9" FORM OF DELINQUENCY, DEFAULT AND LOSS REPORT
EXHIBITS
EXHIBIT "A" NOTE
EXHIBIT "B" FORM OF OPINION
EXHIBIT "C" FORM OF GREENWICH TRI-PARTY AGREEMENT
EXHIBIT "D" COLLATERAL TRANSMITTAL
EXHIBIT "E" AGREEMENT TO PLEDGE
EXHIBIT "F" COMPLIANCE CERTIFICATE
EXHIBIT "G" BORROWING BASE CERTIFICATE
EXHIBIT "H" FORM OF PEC TRI-PARTY AGREEMENT
EXHIBIT "I" SECURITY AND COLLATERAL AGENCY AGREEMENT
EXHIBIT "J" ASSIGNMENT AGREEMENT
EXHIBIT "K" FORM OF AMENDMENT FOR AN INCREASED OR NEW COMMITMENT
EXHIBIT "L" LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
EXHIBIT "M" MARKET VALUATION FORMULA
EXHIBIT "N" INITIAL APPROVED MARKET VALUE REFERENCE INVESTORS
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CREDIT AGREEMENT
This Agreement, dated as of June 20, 1997, is among Mego Mortgage
Corporation, a Delaware corporation, the Lenders, and The First National Bank of
Chicago, as Agent.
RECITALS
The revolving credit facility made available to the Borrower pursuant
to this Agreement shall be used for the origination, acquisition and warehousing
of FHA Title I secured and unsecured loans and conventional debt consolidation
and home improvement residential secured and unsecured loans pending their sale
or securitization. In consideration of the foregoing and for other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Included Subsidiaries (i) acquires any going business or
all or substantially all of the assets of any firm, corporation or limited
liability company, or division thereof, whether through purchase of assets,
merger or otherwise or (ii) directly or indirectly acquires (in one transaction
or as the most recent transaction in a series of transactions) at least a
majority (in number of votes) of the securities of a corporation which have
ordinary voting power for the election of directors (other than securities
having such power only by reason of the happening of a contingency) or a
majority (by percentage or voting power) of the outstanding ownership interests
of a partnership or limited liability company.
"Additional Required Qualifying Loan Documents" means the instruments
and documents described in Schedule "B" to the Security Agreement.
"Adjusted Tangible Net Worth" means Tangible Net Worth, plus the lesser
of (a) the then-outstanding principal balance of the Subordinated Notes and (b)
$90,000,000.
"Advance" means a borrowing hereunder (or conversion or continuation
thereof) consisting of the aggregate amount of the several Loans made on the
same Borrowing Date (or date of conversion or continuation) by some or all of
the Lenders to the Borrower of the same Type and, in the case of Fixed Rate
Advances, for the same Interest Period.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the
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management or policies of the controlled Person, whether through ownership of
stock, by contract or otherwise.
"Agent" means The First National Bank of Chicago in its capacity as
agent for the Lenders pursuant to Article X, and not in its individual capacity
as a Lender, and any successor Agent appointed pursuant to Article X.
"Aggregate Commitment" means, as of any date, the aggregate of the
Lenders' then-current Commitments under this Agreement, as reduced or increased
from time to time, but in no event shall the Aggregate Commitment exceed
$90,000,000 without the approval of the Borrower, the Agent and all of the
Lenders. The Aggregate Commitment as of the date hereof is $40,000,000, as shown
on Schedule "1".
"Agreement" means this credit agreement, as it may be amended or
modified and in effect from time to time.
"Agreement Accounting Principles" means GAAP, applied in a manner
consistent with that used in preparing the financial statements referred to in
Section 5.4.
"Agreement to Pledge" means a written pledge substantially in the form
of Exhibit "E" to this Agreement executed by the Borrower and delivered by
facsimile to the Collateral Agent, specifically identifying all Qualifying Loans
with respect to which the Required Qualifying Loan Documents are not being
delivered on or before the Pledge Date of such Qualifying Loan.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of the Federal Funds Effective Rate for such day plus 1/2% per annum.
"Alternate Base Rate Advance" means an Advance which bears interest at
the Alternate Base Rate.
"Alternate Base Rate Loan" means a Loan which bears interest at the
Alternate Base Rate.
"AP Qualifying Loan" means, on any date, any Qualifying Loan which has
been identified in an Agreement to Pledge and for which the Collateral Agent has
not received the Required Qualifying Loan Documents for such Qualifying Loan by
such date.
"Applicable Margin" means one and one-half percent (1.50%) per annum.
"Approved Investor" means, as of any time, any of the institutions
listed on Schedule "2" attached hereto and any other institution approved in
writing by the Agent (with prompt notice to the Lenders), such approval not to
be unreasonably withheld, which Approved Investor shall be approved for (i) the
purchase of Title I Qualifying Loans if it has a "1" following its name, (ii)
the purchase of Conventional HI/DC Qualifying Loans if it has a "2" following
its name and/or (iii) entering into repurchase agreements if it has a "3"
following its name; provided that any such institutions listed on Schedule "2"
or previously approved by the Agent may be eliminated as an Approved Investor
(or as an Approved Investor of a specific type) by written notice to the
Borrower from the Agent, which elimination notice shall be given only for
reasonable cause or at the election of the Required Lenders, and in either case
any commitments issued by any such
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formerly-Approved Investor after such elimination shall not constitute Approved
Investor Commitments, but commitments of such formerly-Approved Investor
existing at the time of such elimination shall continue to be Approved Investor
Commitments.
"Approved Investor Commitment" means a commitment issued by an Approved
Investor to purchase Qualifying Loans from the Borrower and from the Collateral
Agent pursuant to the applicable Tri-Party Agreement with such Approved
Investor.
"Approved Shareholders" means any of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇
▇. ▇▇▇▇▇, ▇▇. ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ or ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
or any entity in which one or more of such individuals holds a majority of the
voting stock or interests.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Assignment" means a duly executed assignment for the benefit of the
Lenders of a Mortgage, of the indebtedness secured thereby, and of all documents
and rights related to the Qualifying Loan secured by such Mortgage in accordance
with the requirements of the Security Agreement.
"Authorized Officer" means any of the Chairman, President or any Vice
President of the Borrower, acting singly.
"Basic Eligibility Requirements" for a Pledged Qualifying Loan shall
mean that each of the following statements is accurate and complete with respect
to such Pledged Qualifying Loan:
(i) The Borrower is the legal and equitable owner and
holder of such Pledged Qualifying Loan and has full power and authority
to pledge such Pledged Qualifying Loan. Such Pledged Qualifying Loan
and each commitment of a Person to purchase Qualifying Loans from the
Borrower (including Approved Investor Commitments) has been duly and
validly issued to the Borrower, and each Pledged Qualifying Loan
constitutes Eligible Collateral, has been duly and validly pledged to
the Collateral Agent for the benefit of the Secured Parties and is
subject to no Lien other than the lien of the Security Agreement in
favor of the Agent for the benefit of the Lenders.
(ii) Each requirement of any federal, state or local law
including, without limitation, the Title I Regulations (with respect to
Title I Qualifying Loans), usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws applicable to such Pledged Qualifying
Loan has been complied with.
(iii) With respect to each Pledged Qualifying Loan:
(1) it has been originated either by the
Borrower or by the dealer or correspondent from whom the
Borrower has acquired such Pledged Qualifying Loan, it meets
all of the Borrower's underwriting requirements and all
Required Qualifying Loan Documents and Additional Required
Qualifying Loan Documents have been duly executed and
delivered by the parties thereto,
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(2) it is valid and enforceable in accordance
with its terms, without defense or offset, subject to
bankruptcy and similar laws and other general restrictions on
creditors' rights and equitable principles (whether raised in
an equity proceeding or an action at law),
(3) if such Pledged Qualifying Loan is secured
by a Mortgage, the property securing such Pledged Qualifying
Loan is free and clear of all Liens except in favor of the
Borrower subject only to (a) the Lien of current real property
taxes and assessments not yet due and payable; (b) covenants,
conditions and restrictions, rights of way, easements and
other matters of the public record, as of the date of
recording, as are acceptable to mortgage lending institutions
generally and which do not materially adversely affect the
value of such property; (c) other matters to which like
properties are commonly subject which do not materially
interfere with the benefits of the security intended to be
provided by said Mortgage or the use, enjoyment, value or
marketability of the related property; and (d) senior mortgage
Liens to the extent permissible under the underwriting
standards applicable to such Pledged Qualifying Loan,
(4) it has been correctly described in the
Collateral Transmittal submitted to the Collateral Agent in
respect of such Pledged Qualifying Loan,
(5) it has been fully funded to the obligor or,
if such Pledged Qualifying Loan is a conventional home
improvement loan which is evidenced by a RIC or combined debt
consolidation/home improvement loan which is partially
evidenced by a RIC and has been acquired by the Borrower from
a home improvement dealer, labor and materials to be performed
and installed for the benefit of the obligor have been
completed and a completion certificate executed by obligor
reflecting acceptance of such labor and materials has been
delivered to the Borrower,
(6) unless a Qualifying Loan was originated by
the Borrower, the correspondent or dealer from whom the
Borrower has acquired such Pledged Qualifying Loan has been
paid the full acquisition price therefor, in either case by
wire transfer, transmittal through the "Automated Clearing
House" or any similar private clearing house for interbank
transfers of funds, cashier's check or a cleared check or
draft and, if any such item has not been collected upon and
paid to the payee thereof, such amounts have been reflected in
Uncleared Loan Funding Checks and deducted in calculating the
Borrowing Base,
(7) the Collateral Agent has in its possession
(other than with respect to Pledged Qualifying Loans which are
then the subject of an Agreement to Pledge) all Required
Qualifying Loan Documents other than those documents and
instruments which are in the possession of the Borrower
pursuant to a Trust Receipt or in the possession of a Person
to whom delivery was made pursuant to an Investor Transmittal
Letter,
(8) if such Pledged Qualifying Loan is secured
by a Mortgage, such Mortgage and all assignments necessary to
convey such Mortgage to the Borrower have
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been or will be promptly duly recorded where necessary and
each is in a form which will comply with all applicable state
or local recording, registration and filing laws and
regulations,
(9) except to the extent permitted by clause (v)
of the definition of "Eligible Qualifying Loan", there are no
defenses, counterclaims or offsets of any nature whatsoever
with respect to such Pledged Qualifying Loan or the
indebtedness evidenced and secured thereby or with respect to
any Required Qualifying Loan Document and, other than the
related Required Qualifying Loan Documents and Additional
Required Qualifying Loan Documents, there are no instruments
or documents evidencing, securing or guaranteeing payment of
the indebtedness constituting such Pledged Qualifying Loan
which have not been delivered to the Collateral Agent,
(10) each Assignment (a) has been duly authorized
by all necessary corporate action by the Borrower, duly
executed and delivered by the Borrower and is the legal, valid
and binding obligation of the Borrower enforceable in
accordance with its terms, subject to bankruptcy and similar
laws and other general restrictions on creditors' rights and
equitable principles, and (b) is in a form which will comply
with all applicable laws including all applicable recording,
filing and registration laws and regulations and is adequate
and legally sufficient for the purpose intended to be
accomplished thereby, including, without limitation, the
assignment of the rights, powers and benefits of the Borrower
as mortgagee,
(11) upon the recordation of each Assignment and
assuming the possession of the Required Qualifying Loan
Documents by the Collateral Agent and filing of Uniform
Commercial Code financing statements in proper form in the
applicable filing offices, the Collateral Agent, for the
benefit of the Lenders, will have a valid and perfected first
priority security interest in such Pledged Qualifying Loan and
all proceeds, products and profits derived therefrom,
including, without limitation, all moneys, goods, insurance
proceeds and other tangible or intangible property received
upon liquidation thereof, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws
affecting the enforcement of creditors' rights generally and
to general principles of equity,
(12) except for those Qualifying Loans which are
not secured by a Mortgage, the market value of the premises
securing such Pledged Qualifying Loan has been determined, at
the origination or acquisition of the related Qualifying Loan,
by the Borrower in accordance with valuation procedures
described on Schedule "6" attached hereto and is in compliance
with the Borrower's applicable underwriting standards set
forth in Schedule "5",
(13) (a) except for any Title I Qualifying Loans,
all fire and casualty policies covering the premises
encumbered by each Pledged Qualifying Loan (i) name the
Borrower as an insured (subject to the prior rights of senior
mortgage holders) under a standard mortgagee clause not less
favorable in coverage to the mortgagee than is customarily
used in the state where such premises is located, (ii) are in
full force and effect, and (iii) afford insurance against fire
and such other risks as are usually insured
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against in the broad form of extended coverage insurance from
time to time available and (b) if such Pledged Qualifying Loan
is secured by a Mortgage on premises located in a flood plain
as shown on applicable federal flood zone maps, insurance
protecting the owner of the premises and the Borrower (subject
to the prior rights of senior mortgage holders) against flood
hazards as required by FHA is in full force and effect.
(iv) There shall be no breach of the covenants
contained in Paragraph 12 of the Security Agreement and there shall be
no breach of any of the following covenants (the sole remedy for which
shall be the removal of such Pledged Qualifying Loan as Eligible
Collateral):
(1) the Borrower shall not (a) amend or
modify, or waive any of the terms and conditions of, or settle
or compromise any claim in respect of, any Pledged Qualifying
Loan or any rights related to any of the foregoing, if such
amendment, modification or waiver materially and adversely
affects the Collateral Value of such Pledged Qualifying Loan,
or impairs the marketability of such Pledged Qualifying Loan
or (b) release any security or obligor, or, through any other
activity or inactivity, cause any Pledged Qualifying Loan
which shall have been eligible for purchase to become
ineligible for purchase in accordance with the Approved
Investor Commitment related to such Pledged Qualifying Loan,
(2) the Borrower shall not sell,
assign, transfer or otherwise dispose of, or grant any option
with respect to, or pledge or otherwise encumber (except
pursuant to the Security Agreement), any of the Collateral or
any interest therein, other than sales effected pursuant to an
Approved Investor Commitment and related Investor Transmittal
Letters or following a release thereof as provided in Section
8.3 with respect to releases of Pledged Qualifying Loans,
(3) the Borrower is the servicer for
and shall service all Pledged Qualifying Loans in accordance
with the requirements of the Approved Investor Commitments
through a Subservicing Agreement with Preferred Equities
Corporation, an Affiliate of Borrower, and subject to the
terms of the PEC Tri-Party Agreement,
(4) the Borrower shall hold all escrow
funds, if any, collected in respect of Pledged Qualifying
Loans in trust, without commingling the same with any other
fund, and apply the same for the purposes for which such funds
were collected provided that such obligation with respect to
Pledged Qualifying Loans shall not arise until 30 days after
the origination or acquisition of the applicable Qualifying
Loan,
(5) the Borrower shall observe and
perform all of its obligations in connection with each
Approved Investor Commitment related to any Pledged Qualifying
Loan. Within forty-eight (48) hours after a request therefor
by the Agent, a copy of each Approved Investor Commitment
certified by the Borrower, or if requested by the Agent at any
time after a Default has occurred, the originals of such
Approved Investor Commitments shall be delivered to the Agent,
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(6) the Borrower shall hold any prepayment
(which term excludes the principal portion of scheduled
monthly payments made on a Qualifying Loan) arising from or
relating to any Pledged Qualifying Loan in trust, as security
for the Lenders, until such Qualifying Loan is removed from
the Borrowing Base or the Collateral Value of such Qualifying
Loan is appropriately reduced on account of such prepayment,
in each case in accordance with this Agreement or, if a
Default has occurred and is continuing under this Agreement,
then immediately remit to the Agent such prepayments (and all
interest and earnings thereon or with respect thereto),
(7) the Borrower shall do, execute, acknowledge
and deliver, or cause to be done, executed, acknowledged and
delivered, all such other acts, instruments and transfers
(including, without limitation, Assignments) as the Agent or
the Collateral Agent may reasonably request from time to time
in order to create and maintain a perfected first priority
security interest in the Collateral in favor of the Lenders
and to create, maintain and preserve the security and benefits
intended to be afforded by this Agreement, subject to no prior
or equal security interest, lien, charge or encumbrance, or
agreement purporting to grant to any Person a security
interest in the Collateral, and
(8) the Borrower shall promptly notify the Agent
and the Collateral Agent of the occurrence of any event which
would cause any Eligible Collateral to become Ineligible
Collateral, provided that such notification arising from
delinquent payments or prepayments shall be given at the times
and in the manner expressly provided herein.
"Borrower" means Mego Mortgage Corporation, a Delaware corporation, and
its successors and assigns.
"Borrowing Base" means, as of any date, subject to the Borrowing Base
Sublimits, the sum of the amounts determined by applying the following
percentages to the Collateral Values of the following categories of Eligible
Collateral, without duplication as any asset is converted from one category to
another, as described below (and the Borrower, by including any Pledged
Qualifying Loan in any computation of the Borrowing Base, shall be deemed to
represent and warrant to the Agent, the Collateral Agent and the Lenders that
such Pledged Qualifying Loan constitutes Eligible Collateral):
(i) one hundred percent (100%) of that portion
of the balance in the Settlement Account in excess of $100,000,
(ii) ninety-seven percent (97%) of the Collateral
Value of Eligible Title I Qualifying Loans, and
(iii) ninety-five percent (95%) of the Collateral
Value of Eligible Conventional HI/DC Qualifying Loans,
less the aggregate amount of Uncleared Loan Funding Checks on such date.
In connection with the Borrowing Base, the Agent is hereby authorized
by the Lenders to grant temporary waivers of strict compliance by the Borrower
with the eligibility requirements regarding
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qualification of any Collateral as Eligible Collateral or with the Lending
Sublimits or Borrowing Base Sublimits when the Agent deems it appropriate, in
its sole discretion, if the aggregate amount of deviation from strict
compliance, based on the Collateral Value so included in the Borrowing Base and
the amount of excess permitted over the Lending Sublimits or Borrowing Base
Sublimits does not exceed $200,000 at any time or up to any amount for up to
three (3) Business Days, if the satisfaction of such eligibility requirements or
sublimits cannot be independently determined because of events beyond the
reasonable control of the Borrower (i.e. natural disasters, transmission
failures, etc.), provided that, if such determination cannot be made for more
than one (1) Business Day, the Borrower certifies in writing that all such
eligibility requirements and sublimits are in fact satisfied.
"Borrowing Base Certificate" means a certificate executed by the chief
financial officer of the Borrower (or another Authorized Officer of the
Borrower) to be delivered to the Agent substantially in the form attached hereto
as Exhibit "G".
"Borrowing Base Sublimits" is defined in Section 2.1.2.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago, Houston, Atlanta and New York for the
conduct of substantially all of their commercial lending activities and on which
dealings in United States dollars are carried on in the London interbank market
and (ii) for all other purposes, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago, Houston, Atlanta and New York for the
conduct of substantially all of their commercial lending activities.
"Buy Down Advance" means an Advance made by one or more of the Lenders,
on a non-prorata basis, at the Buy Down Rate.
"Buy Down Loan" means a Loan which bears interest at the Buy Down Rate.
"Buy Down Rate" means, with respect to a Buy Down Loan, a per annum
rate of interest equal to the sum of (i) one eighth of one percent (0.125%) plus
(ii) the Applicable Margin.
"Capital Expenditures" means, without duplication, any expenditures for
any purchase or other acquisition of any asset which would be classified as a
fixed or capital asset on a consolidated balance sheet of the Borrower and its
Included Subsidiaries prepared in accordance with Agreement Accounting
Principles excluding (i) the cost of assets acquired with Capitalized Lease
Obligations, (ii) expenditures of insurance proceeds to rebuild or replace any
asset after a casualty loss, and (iii) leasehold improvement expenditures for
which the Borrower or an Included Subsidiary is reimbursed promptly by the
lessor.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
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15
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Change in Control" means that Mego Financial, directly or indirectly
through one or more of its Subsidiaries, shall cease to own, free and clear of
all liens or other encumbrances, at least 51% of the outstanding shares of
voting stock of the Borrower on a fully diluted basis unless at all times
thereafter no Person, or two or more Persons acting in concert (other than Mego
Financial and one or more of the Approved Shareholders) shall hold beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of more of the outstanding
shares of voting stock of the Borrower than are then held by the Approved
Shareholders in the aggregate.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral" means all right, title and interest of the Borrower, of
every kind and nature, in and to all of the following property, assets and
rights of the Borrower wherever located, whether now existing or hereafter
arising, and whether now or hereafter owned, acquired by or accruing or owing to
the Borrower, and all proceeds and products thereof:
(i) all Pledged Qualifying Loans, whether Eligible
Collateral or Ineligible Collateral (unless released in accordance with
Section 8.3 hereof), including all Required Qualifying Loan Documents
related thereto;
(ii) any commitments or other agreements issued by the FHA
to insure or guarantee any Pledged Qualifying Loan;
(iii) the Settlement Account and all uncollected deposits
into the Settlement Account;
(iv) all property related to the foregoing, including
without limitation, the right to service Pledged Qualifying Loans while
owned by the Borrower, all accounts and general intangibles of
whatsoever kind so related and all documents or instruments delivered
to the Collateral Agent in respect of any Pledged Qualifying Loan,
including, without limitation, the right to receive all insurance
proceeds and condemnation awards which may be payable in respect of the
premises encumbered by any Mortgage securing a Pledged Qualifying Loan;
and
(v) all proceeds and products of any of the foregoing.
"Collateral Agent" means First Chicago National Processing Corporation
or its successor, as Collateral Agent under the Security Agreement.
"Collateral Agent Review Procedure" means the required review steps set
forth in Exhibit "1" to the Security Agreement.
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16
"Collateral Transmittal" means a transmittal from the Borrower to the
Collateral Agent in written form of the following information for the following
submissions or special treatment of different types of Collateral: (i) the
information described on Exhibit "D" for each AP Qualifying Loan covered by any
Agreement to Pledge, and (ii) the information described on Exhibit "D" (other
than the entry thereon for "AP Status Code") for each Pledged Qualifying Loan
not covered by an Agreement to Pledge.
"Collateral Value" means, with respect to each asset included in
Eligible Collateral on any given day, a value determined as follows:
(i) Cash shall be conclusively determined between the
Collateral Agent and the Agent to avoid duplication with the Collateral
Value of other Collateral; and
(ii) Each Pledged Qualifying Loan shall be valued at the
lowest of (A) (i) for all Pledged Qualifying Loans other than HLTV
Loans, one hundred percent (100%) of the unpaid principal balance of
such Qualifying Loan on its Pledge Date or (ii) for all Pledged
Qualifying Loans that are also HLTV Loans, ninety-five percent (95%) of
the unpaid principal balance of such Qualifying Loan on its Pledge
Date, or (B) the net acquisition cost (including any discounts and
excluding any servicing released premium) of such Qualifying Loan, if
acquired by the Borrower, or (C) the weighted average purchase price
(expressed as a percentage of par) committed to by Greenwich Capital
under its most recent "Pricing Letter" (as defined in the Greenwich
Tri-Party Agreement) delivered to the Agent which could cover such
Qualifying Loan applied to the unpaid principal balance of such
Qualifying Loan on its Pledge Date or (D) at the discretion of the
Agent, if the Agent believes in good faith that the commitment of
Greenwich Capital may not be available, the then-current market value
of such Qualifying Loan as determined by the Agent based upon a survey
conducted by the Agent of two or more of the investors identified on
Exhibit N attached hereto and any other investor suggested by the
Borrower and approved by the Agent which is then selling or buying such
type of Qualifying Loan and taking the pricing (or, if more than one
firm responds to the survey, the average of the pricing) received from
such survey less, in each case, (E) any full or partial principal
prepayments made on account of such Pledged Qualifying Loan after its
Pledge Date. The values described in (A) and (B) of the preceding
sentence (including the determination as to whether or not such Pledged
Qualifying Loan is an HLTV Loan) shall be as determined by the Borrower
as of the Pledge Date of the applicable Pledged Qualifying Loan and
reported to the Collateral Agent on the Pledge Date. The values
calculated under (C) above shall be recalculated not less than monthly
upon each issuance by Greenwich Capital of a new "Pricing Letter" (or,
if such Pledged Qualifying Loan is covered only by a different Approved
Investor, by such other Approved Investor's similar pricing report) and
shall be computed by the Borrower and reported to the Collateral Agent
within two (2) Business Days after such issuance.
"Commitment" means, for each Lender, the sum of such Lender's Primary
Commitment and Swingline Commitment, if any.
"Commitment Percentage" means, for each Lender as of any date, the
percentage of the Aggregate Commitment represented by such Lender's Commitment,
as it may be amended from time to time, which initially shall be as set forth on
Schedule "1".
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"Condemnation" is defined in Section 7.8.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement or take-or-pay contract excluding, however, any contingent obligations
of the Borrower to repurchase Qualifying Loans or to indemnify any party having
an interest in such Qualifying Loans against any loss arising from breaches of
any representations or warranties made by the Borrower regarding the
then-current condition of such Qualifying Loans at the time of the creation of
such party's interest therein.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Conventional HI/DC Qualifying Loan" means a Qualifying Loan which is
either (i) a home improvement loan made solely for the purpose of funding
improvements to a Single Family Residence, (ii) a debt consolidation loan made
solely for the purposes of repaying other debts of the obligor thereunder, or
(iii) a combination of such a home improvement loan and a debt consolidation
loan.
"Conversion/Continuation Notice" is defined in Section 2.8.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time, changing
when and as said corporate base rate changes.
"Coverage Requirement" means, as of any date, the aggregate unpaid
principal amount then outstanding under this Agreement.
"Covered Loan" means any Eligible Qualifying Loan that is subject to an
Approved Investor Commitment issued by, and meets all of the requirements for
sale to, at least one Approved Investor, and which, when aggregated with all
other Eligible Qualifying Loans then subject to such Approved Investor
Commitment, would not cause the aggregate principal balance of such Eligible
Qualifying Loans to exceed the maximum amount of Qualifying Loans that such
Approved Investor is then obliged to purchase.
"Debt Evidence" means a Mortgage Note, an Unsecured Note or a RIC.
"Default" means an event described in Article VII.
"Effective Date" is defined in Section 4.1.
"Eligible Collateral" means, as of any date, all Eligible Conventional
HI/DC Qualifying Loans and Eligible Title I Qualifying Loans.
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18
"Eligible Conventional HI/DC Qualifying Loan" means an Eligible
Qualifying Loan which: (i) is a Conventional HI/DC Qualifying Loan, (ii) is in
conformance with the Borrower's existing underwriting standards as outlined on
Schedule "5" attached, (iii) was for an original principal amount at origination
of less than $100,000, (iv) if such Eligible Qualifying Loan is secured by a
Mortgage, had a loan-to-value ratio at origination of not more than 125% using
the Borrower's market value determination of the premises securing such Eligible
Qualifying Loan as described in clause (iii)(12) of the definition of "Basic
Eligibility Requirements", (v) is either (A) a Covered Loan or (B) if it is not
a Covered Loan on any date, would not cause Eligible Collateral to have included
Eligible Qualifying Loans that are not Covered Loans on more than thirty (30)
days during the then-current fiscal quarter of the Borrower, and (vi) does not
have a FICO score of less than 600.
"Eligible Qualifying Loan" means any Pledged Qualifying Loan:
(i) which meets the Basic Eligibility Requirements;
(ii) which has no monthly installment of principal and/or
interest which is more than 30 days past due;
(iii) which has not been included in the Borrowing Base for
one hundred twenty (120) days or more after its Pledge Date;
(iv) which was acquired by the Borrower not more than
thirty (30) days prior to its Pledge Date, except for Reinstated
Qualifying Loans;
(v) which is not subject to warranty claims or disputes
between the obligor thereunder and the general contractor performing
the home improvement work which (i) remain unresolved for 90 or more
days after first being asserted, or (ii) when combined with all other
claims with respect to Pledged Qualifying Loans, would cause such
combined claims to exceed $500,000 in the aggregate, or (iii) would
cause such Pledged Qualifying Loan to be ineligible for purchase by an
Approved Investor under the applicable Approved Investor Commitment,
including without limitation the Borrower's inability to make any
representations and warranties regarding such Pledged Qualifying Loan;
(vi) for which, if it is an AP Qualifying Loan:
(1) such AP Qualifying Loan has been executed
and delivered by the obligor thereunder and, if secured by a
Mortgage, such Mortgage has become a valid lien securing
actual indebtedness and the Borrower has not learned of any
information to the contrary and has not received any returned
proceeds of its acquisition of such AP Qualifying Loan from
the dealer or correspondent originating such Pledged
Qualifying Loan,
(2) the Borrower has received all of the
Required Qualifying Loan Documents and Additional Required
Qualifying Loan Documents from the obligor thereunder or from
the dealer or correspondent originating such AP Qualifying
Loan on or before the date of the related Agreement to Pledge,
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(3) the Collateral Agent has received the
Required Qualifying Loan Documents within seven (7) Business
Days after the date of the related Agreement to Pledge, and
(4) the Collateral Value of such AP Qualifying
Loan, when aggregated with the Collateral Values attributable
to all AP Qualifying Loans, does not exceed the greater of (x)
fifteen percent (15%) of the Aggregate Commitment or (y)
$9,000,000,
(vii) which, if subject to an Investor Transmittal Letter
or Trust Receipt and if said Pledged Qualifying Loan was:
(1) withdrawn by the Borrower for purposes of
correcting clerical or other non-substantive documentation
problems: (i) the promissory note and other documents relating
to said Pledged Qualifying Loan were returned to the
Collateral Agent within fifteen (15) calendar days from the
date of withdrawal, (ii) said Pledged Qualifying Loan was
released to the Borrower pursuant to a Trust Receipt and (iii)
the Collateral Value of said Pledged Qualifying Loan when
added to the Collateral Value of all other Pledged Qualifying
Loans which have been similarly released to the Borrower does
not exceed two percent (2%) of the Aggregate Commitment,
(2) shipped by the Collateral Agent directly to
an Approved Investor for purchase pursuant to the applicable
transmittal letter, the full purchase price therefor has been
received by the Collateral Agent (or said Pledged Qualifying
Loan has been returned to the Collateral Agent) within
twenty-five (25) days from the date of shipment by the
Collateral Agent, or
(3) shipped by the Collateral Agent directly to
a custodian for purposes of formation of a pool supporting a
Security pursuant to the applicable transmittal letter, the
Security is issued and sold and the purchase price therefor
has been received by the Collateral Agent (or said Pledged
Qualifying Loan has been returned to the Collateral Agent)
within twenty-five (25) days from the date of shipment by the
Collateral Agent, and
(viii) which if it is an HLTV Loan, has a FICO score such
that the weighted average of all FICO scores for HLTV Loans is 655 or
higher.
"Eligible Title I Qualifying Loan" means an Eligible Qualifying Loan
which: (i) is a Title I Qualifying Loan, (ii) is underwritten to the
then-current underwriting standards of FHA, (iii) (A) is a Covered Loan or (B)
if it is not a Covered Loan on any date, would not cause Eligible Collateral to
have included Eligible Qualifying Loans that are not Covered Loans on more than
thirty (30) days during the then-current fiscal quarter of the Borrower, (iv)
does not have a FICO of less than 550, and (v) is not subject to claims
processing with FHA.
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"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
(i) the protection of the environment, (ii) the effect of the environment on
human health, (iii) emissions, discharges or releases of pollutants,
contaminants, hazardous substances or wastes into surface water, ground water or
land, or (iv) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of l974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which bears interest at a
Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to one, two or three month
Interest Periods, the rate determined by the Agent to be the rate at which First
Chicago offers to place deposits in U.S. dollars with first-class banks in the
London interbank market at approximately 11 a.m. (London time) two Business Days
prior to the first day of such Interest Period, in the approximate amount of
$1,000,000 and having a maturity approximately equal to such Interest Period.
"Eurodollar Loan" means a Loan which bears interest at a Eurodollar
Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base
Rate applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(ii) the Applicable Margin. The Eurodollar Rate shall be rounded to the next
higher multiple of 1/16 of 1% if the rate is not such a multiple.
"Excluded Subsidiary" is defined in Section 6.24 hereof.
"Facility Fee Rate" means a percentage of one-fifth of one percent
(0.20%) per annum.
"Federal Agency" means FNMA or FHA.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"Federal Funds Funding Rate" means, with respect to any Fed Funds Loan
for any day, the rate per annum equal to the consensus (or if no consensus
exists, the arithmetic average) of the rates at which reserves are offered by
first class banks to other first class banks (at approximately the time at which
the applicable Borrowing Notice or Conversion/Continuation Notice is received or
the time at which an
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automatic continuation is deemed to have occurred) on such day (or if such day
is not a Business Day, on the immediately preceding Business Day) on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, received by the Agent from three federal funds brokers
of recognized standing selected by the Agent in its sole discretion; provided,
however, that in lieu of determining the rate in the foregoing manner, the Agent
may substitute therefor the consensus (or if no consensus exists, the arithmetic
average) of the rates at which reserves are offered by first class banks to
other first class banks at 10:00 a.m. (Chicago time) on such day (or if such day
is not a Business Day, on the immediately preceding Business Day) on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, received by the Agent from three federal funds brokers
of recognized standing selected by the Agent in its sole discretion.
"Federal Funds Rate" means, for any day, an interest rate per annum
equal to (i) the Federal Funds Funding Rate for such day plus (ii) one quarter
of one percent (0.25%) plus (iii) the Applicable Margin.
"Fed Funds Advance" means an Advance which bears interest at the
Federal Funds Rate.
"Fed Funds Loan" means any Loan made as a part of a Fed Funds Advance.
"Fees" is defined in Section 2.6.
"FHA" means the Federal Housing Administration or other agency,
corporation or instrumentality of the United States to which the powers and
duties of the Federal Housing Administration have been transferred.
"FHA Title I Approved Mortgagee" means an institution that is approved
by the FHA to act as a servicer and mortgagee of record with respect to a Title
I Qualifying Loan insured by the FHA.
"FICO" means the "delinquency predictor" model established by Fair
▇▇▇▇▇ Co. and shown on a credit report prepared by Equifax, TRW or Trans Union.
"First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors.
"Fixed Rate" means the Eurodollar Rate.
"Fixed Rate Advance" means an Advance which bears interest at a Fixed
Rate.
"Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate.
"FNMA" means the Federal National Mortgage Association or any corporate
successor thereto.
"GAAP" means generally accepted accounting principles as in effect from
time to time, consistently applied.
"Greenwich Capital" means Greenwich Capital Markets, Inc.
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22
"Greenwich Tri-Party Agreement" means an agreement among Borrower,
Greenwich Capital and the Agent on behalf of the Lenders with respect to the
Approved Investor Commitment issued by Greenwich Capital, in the form attached
hereto as Exhibit "C".
"HLTV Loan" means any Eligible Conventional HI/DC Qualifying Loan which
(i) is secured by a Mortgage and (ii) had a loan-to-value ratio at origination
of one hundred percent (100%) or more using the Borrower's market value
determination of the premises securing such Eligible Conventional HI/DC
Qualifying Loan as described in clause (iii)(12) of the definition of "Basic
Eligibility Requirements".
"Included Subsidiary" means, as of any date, any Subsidiary of the
Borrower which is not then an Excluded Subsidiary.
"Indebtedness" of a Person means such Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances, or other
instruments, (v) Capitalized Lease Obligations, (vi) Contingent Obligations,
(vii) Letters of Credit, (viii) Sale and Leaseback Transactions, (ix) Operating
Lease Obligations, and (x) Net ▇▇▇▇-to-Market Exposure of Rate Hedging
Agreements.
"Indenture" means a certain Indenture dated as of November 22, 1996
with American Stock Transfer & Trust Company as indenture trustee, as amended
from time to time hereafter, which governs the Subordinated Notes.
"Ineligible Collateral" means any Pledged Item that does not at the
time constitute Eligible Collateral.
"Interest Period" means, with respect to a Eurodollar Advance, a period
of one, two or three months commencing on a Business Day, all as selected by the
Borrower pursuant to this Agreement. An Interest Period of one, two or three
months shall end on the day which corresponds numerically to such date one, two
or three months thereafter, provided, however, that if there is no such
numerically corresponding day in such next, second or third succeeding month,
such Interest Period shall end on the last Business Day of such next, second or
third succeeding month. If an Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall end on the next succeeding
Business Day, provided, however, that if, with respect to a one, two or three
month Interest Period, said next succeeding Business Day falls in a new calendar
month, such Interest Period shall end on the immediately preceding Business Day.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade) or contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; any deposit accounts and certificate of deposit owned by such Person;
and structured notes, derivative financial instruments and other similar
instruments or contracts owned by such Person.
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"Investor Transmittal Letter" means either a "Whole Loan Sale
Transmittal Letter" or a "Warehouse-Related MBS Transmittal Letter"
substantially in the form of Exhibits "4" and "5" to the Security Agreement.
"IO Securities" means a security representing an undivided interest in
all or a portion of the interest payments due on a pool of Qualifying Loans.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent,
any office, branch, subsidiary or affiliate of such Lender or the Agent.
"Lending Sublimits" is defined in Section 2.1.1.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's loan made
pursuant to Article II (or any conversion or continuation thereof).
"Loan Documents" means this Agreement and the Notes, the Security
Agreement, the PEC Tri-Party Agreement, the Greenwich Tri-Party Agreement and
the other documents and agreements contemplated hereby and executed by the
Borrower in favor of the Agent or any Lender.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower to perform its obligations under the Loan Documents, or
(iii) the validity or enforceability of any of the Loan Documents or the rights
or remedies of the Agent or the Lenders thereunder.
"Mego Financial" means Mego Financial Corp., a New York corporation,
which currently holds in excess of 80% of the common voting stock in the
Borrower.
"Mortgage" means a mortgage, deed of trust, security deed or similar
instrument purporting to create a lien or similar interest in real estate and
improvements thereon.
"Mortgage Note" means a note evidencing the indebtedness secured by a
Mortgage.
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"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"Net ▇▇▇▇-to-Market Exposure" of a Person means, as of any date of
determination, the excess (if any) of all unrealized losses over all unrealized
profits of such Person arising from Rate Hedging Agreements. "Unrealized losses"
means the fair market value of the cost to such Person of replacing such Rate
Hedging Agreement as of the date of determination (assuming the Rate Hedging
Agreement were to be terminated as of that date), and "unrealized profits" means
the fair market value of the gain to such Person of replacing such Rate Hedging
Agreement as of the date of determination (assuming such Rate Hedging Agreement
were to be terminated as of that date).
"Net Worth" means as of any date of determination thereof, the net
worth of the Borrower and its Included Subsidiaries on a consolidated basis as
determined in accordance with Agreement Accounting Principles.
"Notes" means promissory notes evidencing amounts that may be advanced
from time to time under this Agreement in substantially the form of Exhibit "A"
attached hereto, each duly executed by the Borrower and payable to the order of
a Lender, including any amendment, modification, renewal or replacement of such
promissory notes.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Lenders
or to any Lender, the Agent, the Collateral Agent or any indemnified party
hereunder arising under the Loan Documents.
"Operating Lease Obligations" means, as at any date of determination,
the amount obtained by aggregating the present values, determined in the case of
each particular Operating Lease by applying a discount rate (which discount rate
shall equal the discount rate which would be applied under Agreement Accounting
Principles if such Operating Lease were a Capitalized Lease) from the date on
which each fixed lease payment is due under such Operating Lease to such date of
determination, of all fixed lease payments due under all Operating Leases of the
Borrower and its Included Subsidiaries.
"Operating Lease" of a Person means any lease of Property (other than a
Capitalized Lease) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of the
lessor) of one year or more.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the first day of each month.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
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"PEC Tri-Party Agreement" means the agreement among the Borrower, the
Agent for the benefit of the Lenders and Preferred Equities Corporation, an
Affiliate of Borrower, with respect to the subservicing of the Pledged
Qualifying Loans, in the form attached hereto as Exhibit "H".
"Permitted Warehouse Indebtedness" means Indebtedness of the Borrower
or any Included Subsidiary which is either (i) secured by Qualifying Loans that
are not of a type that could be an Eligible Qualifying Loan under this Agreement
or (ii) secured by Qualifying Loans that could be Eligible Qualifying Loans
under this Agreement but do not then qualify for inclusion in the Borrowing Base
and which are pledged to the Collateral Agent for the benefit of the holders of
such Indebtedness (or if not pledged to the Collateral Agent, other arrangements
have been made to ensure to the Agent's satisfaction that the Lenders'
collateral pool does not overlap with the collateral pool securing such other
Indebtedness), provided in each case that the Agent has received copies of all
loan documents governing such Indebtedness confirming that, or has received
written confirmation from the holders of such Indebtedness that, such conditions
have been satisfied.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, limited liability company, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"Pledge Date" means the date on which a Qualifying Loan is first
delivered in pledge to the Collateral Agent or is otherwise made subject to a
security interest in favor of the Agent or Collateral Agent for the benefit of
the Lenders, provided that the date of delivery of a Qualifying Loan covered by
an Agreement to Pledge shall be deemed to be the date of delivery of such
Agreement to Pledge even after subsequent delivery of the related Required
Qualifying Loan Documents.
"Pledged Qualifying Loans" means all Qualifying Loans that are from
time to time delivered (or, in the case of AP Qualifying Loans, are committed to
be delivered) to the Collateral Agent pursuant to this Agreement and the
Security Agreement.
"Primary Advance" means a Eurodollar Advance, a Fed Funds Advance, a
Buy Down Advance or an Alternate Base Rate Advance.
"Primary Commitment" means, for each Lender, the obligation of such
Lender to make Loans not exceeding the amount set forth as its "Primary
Commitment" (which equals its Commitment minus its Swingline Commitment, if any)
on Schedule "1" attached hereto or as set forth in any Notice of Assignment
relating to any assignment that has become effective pursuant to Section 12.3.2,
as such amount may be modified from time to time pursuant to the terms hereof.
"Primary Commitment Percentage" means, for each Lender as of any date,
the quotient of (a) such Lender's Primary Commitment divided by (b) the
aggregate Primary Commitments (which equals the Aggregate Commitment minus the
Swingline Commitment), which Primary Commitment Percentage shall initially be as
set forth on Schedule "1" attached hereto, as it may be amended from time to
time.
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"Primary Loan" means a Loan consisting of a portion of a Primary
Advance.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"Purchasers" is defined in Section 12.3.1.
"Qualifying Loan" means (i) a loan of money evidenced by a Mortgage
Note or an Unsecured Note or (ii) a RIC, whether or not secured by a Mortgage.
"Rate Hedging Agreement" means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate floor, cap or collar protection
agreements, forward rate currency or interest rate options, puts and warrants.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all Rate
Hedging Agreements, and (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Hedging Agreement.
"Recourse Servicing" means any servicing rights under a Servicing
Agreement which obligates the Borrower either to repurchase Qualifying Loans
upon default by the borrower thereunder or to indemnify any party having an
interest in such Qualifying Loans against any loss arising from such a default
for reasons other than a breach of any representations or warranties regarding
the condition of such Qualifying Loans at origination which were made by the
Borrower as originator of such Qualifying Loans, provided that "Recourse
Servicing" shall not be deemed to include any servicing rights which provide for
recourse against the Borrower which is contractually limited to recovery against
the value of any related IO Securities, Residual Certificates or excess
servicing rights held by the Borrower or the cash flows to be received thereon
as a result of their subordination to senior securities, certificates or rights
created and governed by the same documents that created and govern such IO
Securities, Residual Certificates and excess servicing rights.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
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"Reinstated Qualifying Loan" means a Title I Qualifying Loan or a
Conventional HI/DC Qualifying Loan previously sold by the Borrower which the
Borrower has repurchased as a result of a default by the obligor thereunder
which default has subsequently been cured so that such Qualifying Loan qualifies
as an Eligible Qualifying Loan, including without limitation meeting all
requirements of the applicable Approved Investor Commitment, notwithstanding
such prior default and repurchase.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least 75%
of the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 75% of the aggregate unpaid principal
amount of the outstanding Advances.
"Required Qualifying Loan Documents" means the instruments and
documents described in Schedule "A" to the Security Agreement, as applicable to
a particular Qualifying Loan, which are required to be delivered to the
Collateral Agent.
"Reserve Requirement" means, with respect to the Eurodollar Rate
applicable to an Interest Period, the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves) which is
imposed under Regulation D on eurocurrency liabilities.
"Residential Mortgage Loan" means a Qualifying Loan secured by a
Mortgage on a Single Family Residence.
"Residual Certificates" means a security (whether identified as a
certificate, instrument or interest) representing the residual interest in a
real estate mortgage investment conduit or other entity formed by the Borrower
and in which Borrower has retained a residual interest which residual interest
is only payable on a fully subordinated basis after all regular interests in
and/or debt issued by such entity has been fully repaid.
"Restricted Assets" means "cash deposits, restricted", "excess
servicing rights" and "mortgage-related securities, at fair value", as such
categories are established and valued under Agreement Accounting Principles and
disclosed by the consolidated financial statements of the Borrower and its
Included Subsidiaries.
"RIC" means a retail installment contract evidencing indebtedness
arising from home improvements made for the benefit of the obligor thereunder.
"Risk-Based Capital Guidelines" is defined in Section 3.2.
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"Sale and Leaseback Transaction" means any sale or other transfer of
Property by any Person with the intent to lease such Property as lessee.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Secured Parties" is defined in Paragraph 1 of the Security Agreement.
"Security or Securities" means a security representing an undivided
fractional interest in a pool of Title I Qualifying Loans or Conventional HI/DC
Qualifying Loans, which security is issued or sponsored by the Borrower, or an
Affiliate of Borrower.
"Security Agreement" means the Security and Collateral Agency Agreement
as of even date herewith, substantially in the form of Exhibit "I" attached
hereto, by and among the Borrower, the Agent, and the Collateral Agent, pursuant
to which a security interest is created in favor of the Collateral Agent for the
Lenders under this Agreement in certain Collateral to be pledged pursuant to
this Agreement, as the same may, from time to time, be further supplemented,
modified or amended.
"Servicing Agreement" means a written contract of the Borrower with
another Person to act on behalf of such other Person to, among other things,
receive payments in respect of Qualifying Loans and to service Qualifying Loans,
whether or not such Qualifying Loans are Pledged Qualifying Loans.
"Settlement Account" means the account established pursuant to Section
8.4.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Single Family Residence" means a one to four family dwelling unit,
which may be a condominium unit but which shall not be a mobile home,
manufactured housing or a dwelling unit in a cooperative apartment building.
"Subordinated Indebtedness" of a Person means (i) any Indebtedness of
the Borrower to Mego Financial (other than Tax Agreement Indebtedness), the
payment of which is subordinated to payment of the Obligations to the written
satisfaction of the Required Lenders, and (ii) the Subordinated Notes.
"Subordinated Notes" means (i) those senior subordinated unsecured
promissory notes of the Borrower issued and outstanding from time to time
pursuant to the Indenture, which notes currently bear interest at 12.5% per
annum payable semi-annually with the entire principal sum being due on December
1, 2001, as such Indenture may be amended from time to time hereafter with the
prior written approval of the Agent, such approval not to be unreasonably
withheld or delayed, and (ii) any subordinated unsecured promissory notes of the
Borrower issued and outstanding from time to time pursuant to indentures
executed and delivered after the date hereof, provided that such notes and
indenture provide for no principal payments thereunder prior to the Termination
Date and have otherwise been reviewed and approved by the Agent, such approval
not to be unreasonably withheld or delayed.
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"Subservicing Agreement" means a Servicing Agreement between the
Borrower and a Person which does not own the Qualifying Loans being serviced
thereunder but only has servicing or other non-ownership rights with respect
thereto.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of the
Borrower and its Subsidiaries, Property which (i) represents more than 10% of
the consolidated assets of the Borrower and its Subsidiaries as would be shown
in the consolidated financial statements of the Borrower and its Subsidiaries as
at the beginning of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 10% of the
consolidated net sales or of the consolidated net income of the Borrower and its
Subsidiaries as reflected in the financial statements referred to in clause (i)
above.
"Swingline Advance" means an Advance made by the Swingline Lender under
the special availability provisions described in Section 2.4 bearing interest at
the Alternate Base Rate.
"Swingline Commitment" means the obligation of the Swingline Lender to
make Swingline Loans not exceeding in the aggregate the amount of Five Million
Dollars ($5,000,000) as shown on Schedule "1", as such amount may be modified
from time to time pursuant to the terms hereof.
"Swingline Lender" means First Chicago.
"Swingline Loan" means a Loan consisting of a portion of a Swingline
Advance.
"Tangible Net Worth" means Net Worth less the sum of the following
(without duplication): (a) any assets of the Borrower and its consolidated
Included Subsidiaries which would be treated as intangibles under Agreement
Accounting Principles including, without limitation, good-will, research and
development costs, trade-marks, trade names, copyrights, patents and unamortized
debt discount and expenses (but without deduction of (i) any write-ups of assets
made in accordance with Agreement Accounting Principles or (ii) any IO
Securities, Residual Certificates, mortgage servicing rights or excess servicing
rights as determined in accordance with Agreement Accounting Principles), (b)
loans or other extensions of credit to officers of the Borrower or of any of its
consolidated Subsidiaries other than Qualifying Loans made to such Persons in
the ordinary course of business, and (c) any loans or extensions of credit to
Excluded Subsidiaries and Affiliates.
"Tax Agreement Indebtedness" means any and all Indebtedness of the
Borrower to Mego Financial under the tax-sharing agreement described on Schedule
6.16, as amended from time to time, on account of the Borrower's share of the
consolidated federal income tax liability of the Borrower and Mego Financial.
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"Termination Date" means June 15, 1998.
"Title I Qualifying Loan" means either a Residential Mortgage Loan or
an unsecured loan which (i) is a home improvement loan made solely for the
purpose of funding improvements to a Single Family Residence owned by the
obligor under such loan and (ii) is insured by the FHA pursuant to Title I,
Section 2 of the National Housing Act, as amended and in effect from time to
time, and the Title I Regulations.
"Title I Regulations" means 24 C.F.R. Parts 201 and 202, and other
issuances of the United States Department of Housing and Urban Development
relating to Title I Qualifying Loans, including the related handbooks,
circulars, notices and mortgage letters, each as amended and in effect from time
to time.
"Transfer of Note Report" means, with respect to each Title I
Qualifying Loan, the Title I Transfer of Note Report as contained in the United
States Department of Housing and Urban Development form number HUD-27030 (8-86)
or any update or modification thereof. To the extent permissible under
applicable H.U.D. rules and regulations, one Transfer of Note Report may be
utilized for multiple Title I Qualifying Loans.
"Transferee" is defined in Section 12.5.
"Tri-Party Agreement" means the Greenwich Tri-Party Agreement or a
similar agreement satisfactory to the Required Lenders with any other Approved
Investor.
"Trust Receipt" means a trust receipt substantially in the form of
Exhibit "2" to the Security Agreement.
"Type" means, with respect to any Advance, its nature as an Alternate
Base Rate Advance, Buy Down Advance, Eurodollar Advance, Fed Funds Advance or
Swingline Advance.
"Uncleared Loan Funding Checks" shall mean any check or draft issued by
the Borrower or other item which represents all or any portion of the amount to
be secured by a Pledged Qualifying Loan if such check or draft or other item has
not been collected upon and paid to the named payee therein in good funds.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Unsecured Note" means a note evidencing any indebtedness which is not
secured by a Mortgage.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
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Subsidiaries of such Person, or (ii) any partnership, limited liability company,
association, joint venture or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1. Commitment, Sublimits and Types of Advances.
2.1.1. Commitment and Lending Sublimits. From and including
the date of this Agreement and prior to the Termination Date, each Lender
severally agrees, on the terms and conditions set forth in this Agreement
(including the lending sublimits (the "Lending Sublimits") set forth below and
the Borrowing Base Sublimits under Section 2.1.2), to make Loans to the Borrower
from time to time; provided that, on any date, after giving effect to such Loans
and all other loans that the Borrower has requested be made on such date under
this Agreement:
(1) the aggregate principal balance then outstanding
under all Loans then held by such Lender shall not exceed the amount of
such Lender's then-current Commitment;
(2) the aggregate principal balance then outstanding of
all Primary Loans then held by such Lender shall not exceed the amount
of such Lender's Primary Commitment;
(3) the aggregate principal balance of all outstanding
Swingline Loans held by the Swingline Lender on such date shall not
exceed the Swingline Lender's Swingline Commitment;
(4) the aggregate principal balance of all outstanding
Advances under this Agreement on such date shall not exceed the
Aggregate Commitment; and
(5) the Coverage Requirement on such date shall not
exceed the lowest of (i) the Aggregate Commitment or (ii) the
then-current Borrowing Base or (iii) the maximum purchase price payable
by the Approved Investors (including without limitation Greenwich
Capital) after taking into account all minimum and maximum limits
established by the applicable Approved Investor Commitments and the
most recent Pricing Letters issued thereunder, all as confirmed in
writing to the Agent by the Approved Investors pursuant to the
Tri-Party Agreements.
Subject to the terms of this Agreement, the Borrower may borrow, repay and
reborrow at any time prior to the Termination Date. The Commitments to lend
hereunder shall expire on the Termination Date.
2.1.2. Borrowing Base Sublimits. The maximum amount that can
be credited toward the Borrowing Base from certain types of Collateral shall be
limited (the "Borrowing Base Sublimits") so that:
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(1) the Borrowing Base value attributable to Eligible
Conventional HI/DC Qualifying Loans having FICO scores of 600 to 620
shall not exceed, in the aggregate, 6% of the Aggregate Commitment;
(2) the Borrowing Base value attributable to Title I
Qualifying Loans which are not secured by a Mortgage shall not exceed,
in the aggregate, 5% of the Aggregate Commitment; and
(3) the Borrowing Base value attributable to Conventional
HI/DC Qualifying Loans which are not secured by a Mortgage shall not
exceed, in the aggregate, 5% of the Aggregate Commitment.
2.1.3. Types of Advances. Each Advance hereunder shall
consist of one or more Alternate Base Rate Advances, Buy Down Advances, Fixed
Rate Advances, Fed Funds Advances or Swingline Advances requested by the
Borrower in accordance with Sections 2.7 and 2.8. Primary Advances shall be
generally available as provided in Section 2.2. Buy Down Advances shall only be
available as provided in Section 2.3. Swingline Advances shall only be available
as provided in Section 2.4.
2.2. Primary Advances. Subject to the terms and conditions herein
the Borrower may request any of the Primary Advances (other than Buy Down
Advances) from the Lenders on a pro rata basis in accordance with each such
Lender's Primary Commitment Percentage. Primary Advances shall accrue interest
at the Eurodollar Rate, the Federal Funds Rate or the Alternate Base Rate, as
selected by the Borrower in accordance with Sections 2.7 and 2.8.
2.3. Buy Down Advances. On or before the first day of each month,
the Borrower may, at its option, allocate a portion of the Commitment of each
Lender (with the consent of such Lender) to be available for Buy Down Advances
and notify the Agent of such allocation. During such calendar month Buy Down
Loans can only be requested from Lenders identified in such a notice to the
Agent and the aggregate principal balance of all Buy Down Loans from each such
Lender outstanding during such month cannot exceed the portion of such Lender's
Commitment so allocated for such month. To the extent a Lender has agreed with
the Borrower and so communicated to the Agent, the Borrower may request Buy Down
Loans from such Lender on a non-pro rata basis. The Agent will collect and remit
interest on such Buy Down Loans at the Buy Down Rate, but shall not be obligated
to confirm any matters with respect to Net Deposits maintained with such Lender
or to collect any fees or amounts charged by such Lender with regard to any
deficiency in such Net Deposits. Upon the occurrence of any Default each such
Buy-Down Loan shall be automatically converted to an Alternate Base Rate Loan.
Buy Down Loans are based upon the expectation that the
Borrower will maintain average daily "Net Deposits" of at least 100% of the
amount of each Buy Down Loan with the Lender providing such Buy Down Loan during
the term of such Buy Down Loan. The term "Net Deposits" shall mean all
non-interest bearing time and demand deposits which are maintained by Borrower
at such Lender after deduction of any portion of such deposits necessary in such
Lender's reasonable discretion to compensate such Lender for all reserve
requirements of the Federal Reserve Board, all insurance assessments of the
Federal Deposit Insurance Corporation and other service and activity charges.
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Each Lender shall impose its own requirements upon the
Borrower in dealing with deviations in actual Net Deposits from projected Net
Deposits. If the daily average of Net Deposits maintained by the Borrower at
such Lender during any month is less than the daily average outstanding
principal balance of such Lender's Buy Down Loans for such month, the deficiency
may, at such Lender's discretion, either be made up by maintaining a
corresponding excess amount of Net Deposits with such Lender thereafter, or the
Borrower will pay to such Lender a balance deficiency fee based on such
deficiency. If the daily average of Net Deposits maintained by the Borrower with
such Lender during any calendar month exceeds the daily average outstanding
principal balance of such Lender's Buy Down Loans for the applicable borrowing
period, any excess may be credited against Net Deposits required to support such
Lender's Buy Down Loans in following months in a manner acceptable to the
Borrower and such Lender. All such matters shall be governed by separate
understandings among such Lender and the Borrower and the Agent shall have no
responsibility therefor.
2.4. Swingline Advances. Subject to the terms and conditions herein
(including the Lending Sublimits), the Borrower may request Swingline Advances
from only the Swingline Lender on a non-pro rata basis. On any Borrowing Date
each Swingline Advance requested by the Borrower shall be funded to the Borrower
by the Swingline Lender in the amount designated in the Borrowing Notice. If any
amounts are advanced by the Swingline Lender to cover checks or wire transfers
from Borrower accounts maintained with the Swingline Lender when there are
insufficient funds in such accounts to cover the applicable check or wire
transfer and sufficient funds are not deposited in the applicable account before
the close of business on the day on which the applicable check or wire transfer
request is honored, then the Borrower shall be deemed to have requested, and the
Swingline Lender may (but shall not be obligated to) elect to make, a Swingline
Advance at the Alternate Base Rate to pay such overdraft amount (even if such a
Swingline Advance would cause the aggregate amount of all outstanding Swingline
Advances to exceed the Swingline Commitment); provided however, that (i) the
Swingline Lender shall not make any such Swingline Advance to the extent such
Advance would cause the Coverage Requirement to exceed the lesser of (A) the
Aggregate Commitment or (B) the then-current Borrowing Base, and (ii) the
reallocations of any such Swingline Advances among the Lenders shall be as set
forth in, but subject to the provisions of, Section 2.5. The Borrower may, from
time to time upon five (5) Business Days advance written notice to the Lenders,
elect to convert all or any portion (in multiples of $500,000) of the Swingline
Lender's Swingline Commitment into an increase in the Primary Commitment of the
Swingline Lender. Once so converted the Swingline Commitment shall not be
restored or increased without the written consent of the Swingline Lender.
2.5. Reallocation of Swingline Advances. With respect to all
Swingline Advances, at the request of Swingline Lender given at any time,
whether or not a Default or Unmatured Default has occurred, all Swingline
Advances shall be reallocated among all Lenders, in accordance with each
Lender's Commitment Percentage, and shall thereafter be deemed Alternate Base
Rate Advances. Each Lender holding less than its Commitment Percentage of all
such Advances being allocated shall immediately purchase for cash and at face
value such participations in the Notes held by other Lenders, and make such
other adjustments, as may be needed to cause each Lender to hold its Commitment
Percentage of such Advances. Notwithstanding the preceding provisions of this
Section 2.5, (i) the obligation of each Lender to purchase participations
described in the preceding sentence with respect to any particular Swingline
Advance is subject to the condition that the Swingline Lender believed in good
faith that all conditions under Section 4.2 were satisfied at the time the
applicable Swingline Advance was made, and (ii) no Lender shall be required to
so purchase such participations to the extent that such purchase would cause
such
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Lender's share of the aggregate unpaid principal amount of all Loans then
outstanding under this Agreement to exceed its Commitment hereunder.
Notwithstanding anything to the contrary contained in this Agreement, after any
such reallocation has occurred: (i) the Swingline Commitment shall be zero and
(ii) all future Advances, if any, shall be made as Alternate Base Rate Advances.
2.6. Fees. The Borrower shall pay the following fees (the "Fees"):
2.6.1. Facility Fees. A facility fee based on the Aggregate
Commitment from time to time from and after the date hereof, calculated at the
Facility Fee Rate, expressed as a per diem rate on the actual Aggregate
Commitment for each day during the preceding full or partial calendar quarter,
payable in arrears, on the last day of each such calendar quarter and on the
Termination Date. This fee shall be paid to the Agent and allocated among the
Lenders on a pro rata basis in accordance with their respective Commitments
during such quarter.
2.6.2. Closing Fees. A closing fee based on the Aggregate
Commitment in effect on the date hereof, calculated as one-twentieth of one
percent (0.05%) on the Aggregate Commitment, payable on the first to occur of
(i) March 31, 1997 and (ii) the Effective Date. This fee shall be paid to the
Agent and allocated among the Lenders on a pro rata basis in accordance with
their respective Commitments on the date hereof.
2.6.3. Agent Fees. Any fees payable to the Agent pursuant to
the Borrower's letter agreement with the Agent dated December 23, 1996.
2.6.4. Collateral Agent Fees. Any fees payable to Collateral
Agent for its services rendered pursuant to the Security Agreement as agreed to
by the Borrower and charged by Collateral Agent from time to time.
2.6.5. Deficiency Fees Payable in connection with Buy Down
Loans. The Borrower shall pay any fees and other charges when due to any Lender
providing Buy Down Loans under separate agreement as described in Section 2.3.
2.7. Method of Selecting Types and Interest Periods for New
Advances. The Borrower shall select the Type of Advance and, in the case of each
Fixed Rate Advance, the Interest Period applicable to each Advance from time to
time. The Borrower shall give the Agent irrevocable notice (a "Borrowing
Notice") not later than (i) noon (Chicago time) on the Borrowing Date of each
Alternate Base Rate Advance, Buy Down Advance or Fed Funds Advance, (ii) 4:00
p.m. (Chicago time) on the proposed Borrowing Date for each Swingline Advance,
and (iii) 10:00 a.m. (Chicago time) at least three Business Days before the
Borrowing Date for each Eurodollar Advance, specifying:
(a) the Borrowing Date, which shall be a Business Day, of such
Advance,
(b) the aggregate amount of such Advance, which shall not be less
than $4,000,000 or a multiple of $100,000 in excess thereof
(other than a Swingline Advance which shall have no minimum
amount),
(c) the Type of Advance selected,
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(d) in the case of each Eurodollar Advance, the Interest Period
applicable thereto, and
(e) if such Advance includes one or more Buy Down Loans, the
Lender or Lenders designated for such Buy Down Loans and the
amount of such Buy Down Loans allocated to each such Lender.
Not later than noon (Chicago time) on each Borrowing Date, with respect to all
Advances other than Swingline Advances, each Lender shall make available its
Loan or Loans comprising such Advance, in funds immediately available in Chicago
to the Agent at its address specified pursuant to Article XIII. Swingline
Advances may be made available at any time up to the close of business with
respect to Swingline Advances. The Agent will make the funds so received from
the Lenders available to the Borrower at the Agent's aforesaid address.
2.8. Conversion and Continuation of Outstanding Advances. An
Alternate Base Rate Advance shall continue as an Alternate Base Rate Advance
unless and until such Alternate Base Rate Advance is converted into another Type
of Advance (other than a Buy Down Advance or Swingline Advance). A Buy Down
Advance shall continue as a Buy Down Advance unless and until the Borrower has
paid any such Buy Down Advance by noon (Chicago time) on any Business Day. A Fed
Funds Advance shall continue as a Fed Funds Advance unless and until (a) such
Advance is converted into a different Type of Advance (other than a Buy Down
Advance or a Swingline Advance) in accordance with the terms hereof or (b) the
Borrower has paid any such Fed Funds Advance prior to noon (Chicago time) on any
Business Day. A Swingline Advance shall continue as a Swingline Advance unless
and until the Borrower has paid any such Swingline Advance prior to 3:00 p.m.
(Chicago time) on any Business Day. Each Eurodollar Advance shall continue as a
Eurodollar Advance until the end of the then applicable Interest Period
therefor, at which time such Eurodollar Advance shall be automatically converted
into an Alternate Base Rate Advance unless the Borrower shall have given the
Agent a Conversion/Continuation Notice requesting that, at the end of such
Interest Period, such Eurodollar Advance either continue as a Eurodollar Advance
for the same or another Interest Period or be converted into an Advance of
another Type (other than a Buy Down Advance or Swingline Advance). Buy Down
Advances and Swingline Advances may be repaid out of new Advances hereunder but
may not be converted directly to a different Type of Advance. The Borrower may
elect from time to time to convert all or any part of an Advance of any Type
(other than a Buy Down Advance or Swingline Advance) into any other Type or
Types of Advances (other than a Buy Down Advance or Swingline Advance); provided
that any conversion of any Eurodollar Advance shall be made on, and only on, the
last day of the Interest Period applicable thereto. The Borrower shall give the
Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion
of an Alternate Base Rate Advance or a Fed Funds Advance or conversion or
continuation of a Eurodollar Advance not later than (i) noon (Chicago time) on
the date of the requested conversion, in the case of a conversion into an
Alternate Base Rate Advance or a Fed Funds Advance or (ii) 10:00 a.m. (Chicago
time) at least three Business Days prior to the date of the requested conversion
into or continuation of a Eurodollar Advance, specifying:
(i) the requested date which shall be a Business Day, of such
conversion or continuation,
(ii) the aggregate amount and Type of the Advance which is to be
converted or continued, and
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(iii) the amount and Type(s) of Advance(s) into which such Advance
is to be converted or continued and, in the case of a
conversion into or continuation of a Eurodollar Advance, the
duration of the Interest Period applicable thereto.
2.9. Reductions to Aggregate Commitment. The Borrower may from time
to time permanently reduce the Aggregate Commitment, in whole or in part,
ratably among the Lenders in integral multiples of $10,000,000, upon at least 30
Business Days' prior written notice to the Agent, which notice shall specify the
amount of any such reduction. On or before the effective date of any such
reduction, the Borrower shall, if necessary, repay sufficient Loans to prevent
the remaining outstanding Loans hereunder, after giving effect to such permanent
reduction, from exceeding the Lending Sublimits. Upon any reduction of the
Aggregate Commitment, upon the election of the Swingline Lender, the aggregate
Swingline Commitment shall be reduced by an amount to be determined by the
Swingline Lender in its sole discretion up to the same percentage as the
reduction in the Aggregate Commitment.
2.10. Principal Payments.
2.10.1. Optional Principal Payments. The Borrower may from
time to time pay, without penalty or premium, all or any portion of the
outstanding Alternate Base Rate Advances or Buy Down Advances upon two Business
Days' prior notice to the Agent. A Fixed Rate Advance may not be paid prior to
the last day of the applicable Interest Period unless the Borrower
simultaneously pays the amounts due under Section 3.4. Fed Funds Advances and
Swingline Advances may be paid on any Business Day provided that the Borrower
has given the Agent written notice of such repayment on the date of such
intended payment by (i) 10:00 a.m. (Chicago time) for Fed Funds Advances and
(ii) noon (Chicago time) for Swingline Advances. All optional principal payments
shall be applied to the Type of Advance designated by the Borrower when making
such payment, provided that any payments received during the continuance of a
Default and after Section 2.5 has been invoked shall be applied on a pro rata
basis to all Advances then outstanding. Payments so allocated to an Advance
shall be distributed to the Lenders holding the Loans comprising such Advance on
a pro rata basis in accordance with the respective unpaid principal balances of
such Loans.
2.10.2. Required Payments Related to Borrowing Base. On any
date that the Coverage Requirement is in excess of the then-current Borrowing
Base, the Borrower shall, prior to the close of business on such date, either
deliver sufficient Eligible Collateral to eliminate such excess or make a
mandatory payment to the Agent for the benefit of the Lenders in the amount of
such excess. Any such payment shall be allocated as directed by the Borrower
unless a Default (other than the Borrower's obligation to so deliver Eligible
Collateral or make a mandatory payment by the close of business on such day)
then exists and Section 2.5 has been invoked in which case such payment shall be
allocated in accordance with the Lenders' respective outstanding Loans and in
conjunction with the procedures described in Section 2.5, with such payments
applied first to accrued and unpaid interest and thereafter to principal.
2.10.3. Settlement Account Payments. Prior to the occurrence
of a Default, to the extent the amounts in the Settlement Account are not needed
to keep the Borrowing Base at least equal to the Coverage Requirement, the
Borrower may withdraw or otherwise direct the application of such amounts. Upon
the occurrence of a Default (and during the continuance thereof), at the
direction of the Required Lenders, the Agent may declare a portion of the
principal balance of the Loans, equal to any amounts then
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on deposit in the Settlement Account and any deposits made in the Settlement
Account during the continuance of such Default, to be due and payable without
demand (unless previously declared due and payable). Such amount shall be
withdrawn from the Settlement Account by the Agent and shall be applied to the
Obligations in accordance with Section 8.8.
2.10.4. Final Payment on Termination Date. Any outstanding
Advances and all other unpaid Obligations, unless required to be paid earlier
pursuant to the terms hereof, shall be paid in full by the Borrower on the
Termination Date.
2.11. Changes in Interest Rate, Etc. Each Alternate Base Rate
Advance shall bear interest on the outstanding principal amount thereof, for
each day from and including the date such Advance is made or is converted into
an Alternate Base Rate Advance pursuant to Section 2.8 to but excluding the date
it becomes due or is converted into a Eurodollar Advance pursuant to Section 2.8
hereof, at a rate per annum equal to the Alternate Base Rate for such day.
Changes in the rate of interest on that portion of any Advance maintained as an
Alternate Base Rate Advance will take effect simultaneously with each change in
the Alternate Base Rate. The interest rate on each Swingline Advance or Fed
Funds Advance shall be recalculated daily for each day that such Swingline
Advance or Fed Funds Advance is continued under Section 2.8. Each Eurodollar
Advance shall bear interest on the outstanding principal amount thereof from and
including the first day of the Interest Period applicable thereto to (but not
including) the last day of such Interest Period at the interest rate determined
as applicable to such Eurodollar Advance. Not more than six (6) different
Interest Periods may be in effect at any time and no Interest Period may end
after the Termination Date.
2.12. Rates Applicable After Default. Notwithstanding anything to
the contrary contained in Section 2.7 or 2.8, during the continuance of a
Default or Unmatured Default the Required Lenders may, at their option, by
notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 9.1 requiring
unanimous consent of the Lenders to reductions in interest rates), declare that
no Advance may be made as, converted into or continued as a Fixed Rate Advance.
If any Default occurs under Section 7.6 or 7.7 or if any Advance is not paid at
maturity, whether by acceleration or otherwise, (i) each Eurodollar Advance
shall bear interest for the remainder of the applicable Interest Period at the
rate otherwise applicable to such Interest Period plus 2% per annum and (ii)
each Advance (other than those under clause (i) above) shall bear interest at a
rate per annum equal to the Alternate Base Rate plus 2% per annum. During the
continuance of any other Default the Required Lenders may, at their option, by
notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 9.1 requiring
unanimous consent of the Lenders to reductions in interest rates), declare that
(i) each Eurodollar Advance shall bear interest for the remainder of the
applicable Interest Period at the rate otherwise applicable to such Interest
Period plus 2% per annum and (ii) each Advance (other than those under clause
(i) above) shall bear interest at a rate per annum equal to the Alternate Base
Rate plus 2% per annum.
2.13. Method of Payment. All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Agent at the Agent's address specified pursuant to
Article XIII, or at any other Lending Installation of the Agent specified in
writing by the Agent to the Borrower, on the date when due by (i) noon (Chicago
time) with respect to all Advances other than Swingline Advances, or (ii) 4:00
p.m. (Chicago time) with respect to Swingline Advances and all such payments
shall be applied in accordance with Section 2.10.1. Notwithstanding the
foregoing, if the
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Borrower fails to give the Agent notice of repayment of a Fed Funds Advance
before 10:00 a.m. (Chicago time) on the Business Day that the Borrower intends
to repay such Fed Funds Advance, any payment of such Fed Funds Advance received
by the Agent on such Business Day shall be deemed to have been received by the
Agent at the opening of business on the following Business Day. Each payment
delivered to the Agent for the account of any Lender shall be delivered promptly
by the Agent to such Lender in the same type of funds that the Agent received at
its address specified pursuant to Article XIII or at any Lending Installation
specified in a notice received by the Agent from such Lender. The Agent is
hereby authorized to charge the account of the Borrower maintained with First
Chicago for each payment of principal, interest and fees as it becomes due
hereunder.
2.14. Notes; Telephonic Notices. Each Lender is hereby authorized to
record the principal amount of each of its Loans and each repayment on the
schedules attached to its Notes, provided, however, that neither the failure to
so record nor any error in such recordation shall affect the Borrower's
obligations under such Notes. The Borrower hereby authorizes the Lenders and the
Agent to extend, convert or continue Advances, effect selections of Types of
Advances and to transfer funds based on telephonic notices made by any person or
persons the Agent or any Lender in good faith believes to be acting on behalf of
the Borrower. The Borrower agrees to deliver promptly to the Agent a written
confirmation, if such confirmation is requested by the Agent or any Lender, of
each telephonic notice signed by an Authorized Officer. If the written
confirmation differs in any material respect from the action taken by the Agent
and the Lenders, the records of the Agent and the Lenders shall govern absent
manifest error.
2.15. Interest Payment Dates; Interest and Fee Basis. Interest
accrued on each Advance other than a Eurodollar Advance shall be payable on each
Payment Date, commencing with the first such date to occur after the date hereof
and at maturity. Interest accrued on each Eurodollar Advance shall be payable on
the last day of its applicable Interest Period, on any date on which the
Eurodollar Advance is prepaid, whether by acceleration or otherwise, and at
maturity. Interest and Fees shall be calculated for actual days elapsed on the
basis of a 360-day year. Interest shall be payable for the day an Advance is
made but not for the day of any payment on the amount paid if payment is
received at the place of payment prior to the time required for payment as set
forth in Section 2.13. If any payment of principal of or interest on an Advance
or of Fees shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing
interest in connection with such payment.
2.16. Notification by the Agent. Promptly after receipt thereof, the
Agent will notify each Lender of the contents of each Aggregate Commitment
reduction notice, Borrowing Notice, Conversion/Continuation Notice, and
repayment notice received by it hereunder. Promptly upon determination thereof,
the Agent will notify each Lender and the Borrower of the interest rate
applicable to each Eurodollar Advance. When any Fed Funds Advances or Alternate
Base Rate Advances are outstanding or have been requested, the Agent will give
each Lender making or holding any such Loans and the Borrower prompt notice of
each change in such rates.
2.17. Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by each Lender for
the benefit of such Lending Installation. Each Lender may, by written or telex
notice to the Agent and
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the Borrower, designate a Lending Installation through which Loans will be made
by it and for whose account Loan payments are to be made.
2.18. Non-Receipt of Funds by the Agent. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or an Advance or (ii) in the case of the Borrower, a payment
of principal, interest or Fees to the Agent for the account of the Lenders, that
it does not intend to make such payment, the Agent may assume that such payment
has been made. The Agent may, but shall not be obligated to, make the amount of
such payment available to the intended recipient in reliance upon such
assumption. If such Lender or the Borrower, as the case may be, has not in fact
made such payment to the Agent, the recipient of such payment shall, on demand
by the Agent, repay to the Agent the amount so made available together with
interest thereon in respect of each day during the period commencing on the date
such amount was so made available by the Agent until the date the Agent recovers
such amount at a rate per annum equal to (i) in the case of payment due from a
Lender, the Federal Funds Effective Rate for such day or (ii) in the case of
payment due from the Borrower, the interest rate applicable to the relevant
Loan. Notwithstanding the preceding sentence, if the Agent has made the amount
of any such payment available to the Borrower and a Lender has not in fact paid
such payment to the Agent, the amount due to the Agent from the Borrower shall,
to the extent a Swingline Advance would then be available to the Borrower, be
deemed to be a Swingline Advance made on the date the corresponding amount was
so made available to the Borrower by the Agent.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law), or any interpretation thereof, or the compliance
of any Lender therewith,
(i) subjects any Lender or any applicable Lending Installation to
any tax, duty, charge or withholding on or from payments due
from the Borrower (excluding federal or state taxation of the
overall net income of any Lender or applicable Lending
Installation), or changes the basis of taxation of payments to
any Lender in respect of its Loans or other amounts due it
hereunder, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender or any
applicable Lending Installation (other than reserves and
assessments taken into account in determining the interest
rate applicable to Fixed Rate Advances), or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation
of making, funding or maintaining loans or reduces any amount
receivable by any Lender or any applicable Lending
Installation in connection with loans, or requires any Lender
or any applicable Lending Installation to make any payment
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calculated by reference to the amount of loans held or
interest received by it, by an amount deemed material by such
Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender determines is attributable to making, funding and
maintaining its Loans and its Commitment.
3.2. Changes in Capital Adequacy Regulations. If a Lender
determines the amount of capital required or expected to be maintained by such
Lender, any Lending Installation of such Lender or any corporation controlling
such Lender is increased as a result of a Change, then, within 15 days of demand
by such Lender, the Borrower shall pay such Lender the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender determines is attributable to this
Agreement, its Loans or its obligation to make Loans hereunder (after taking
into account such Lender's policies as to capital adequacy). "Change" means (i)
any change after the date of this Agreement in the Risk-Based Capital Guidelines
or (ii) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Lender or any Lending Installation or any corporation
controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-based
capital guidelines in effect in the United States on the date of this Agreement,
including transition rules, and (ii) the corresponding capital regulations
promulgated by regulatory authorities outside the United States implementing the
July 1988 report of the Basle Committee on Banking Regulation and Supervisory
Practices Entitled "International Convergence of Capital Measurements and
Capital Standards," including transition rules, and any amendments to such
regulations adopted prior to the date of this Agreement.
3.3. Availability of Types of Advances. If any Lender determines
that maintenance of any of its Fixed Rate Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation or directive,
whether or not having the force of law, the Agent shall suspend the availability
of the affected Type of Advance and require any Fixed Rate Advances of the
affected Type to be either repaid or converted to Alternate Base Rate Advances,
at the Borrower's election; or if the Required Lenders determine that (i)
deposits of a type or maturity appropriate to match fund Fixed Rate Advances or
Fed Funds Advances are not available, or (ii) an interest rate applicable to a
Type of Advance does not accurately reflect the cost of making an Advance of
such Type, then, if for any reason whatsoever the provisions of Section 3.1 are
inapplicable, the Agent shall suspend the availability of the affected Type of
Advance with respect to any Fixed Rate Advances or Fed Funds Advances made after
the date of any such determination, provided that such suspension shall not
affect the availability of Alternate Base Rate Advances upon compliance with the
terms hereof.
3.4. Funding Indemnification. If any payment of a Fixed Rate
Advance occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment or any other reason (except
for a repayment required under Section 3.3 due to the violation of a law, rule,
regulation or directive that was in effect at the time the Borrower presented
the Borrowing Notice for the Fixed Rate Advance so required to be repaid), or a
Fixed Rate Advance is not made, continued or converted on the date specified by
the Borrower for any reason other than default by the Lenders, the Borrower will
indemnify each Lender for any loss or cost incurred by it resulting therefrom,
including,
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without limitation, any loss or cost in liquidating or employing deposits
acquired to fund or maintain the Fixed Rate Advance.
3.5. Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Fixed Rate Loans to reduce any liability of the
Borrower to such Lender under Sections 3.1 and 3.2 or to avoid the
unavailability of a Type of Advance under Section 3.3, so long as such
designation is not disadvantageous to such Lender. Each Lender shall deliver a
written statement of such Lender to the Borrower (with a copy to the Agent) as
to the amount due, if any, under Section 3.1, 3.2 or 3.4. Such written statement
shall set forth in reasonable detail the calculations upon which such Lender
determined such amount and shall be final, conclusive and binding on the
Borrower in the absence of manifest error. Determination of amounts payable
under such Sections in connection with a Fixed Rate Loan shall be calculated as
though each Lender funded its Fixed Rate Loan through the purchase of a deposit
of the type and maturity corresponding to the deposit used as a reference in
determining the Eurodollar Rate applicable to such Loan, whether in fact that is
the case or not. Unless otherwise provided herein, the amount specified in the
written statement of any Lender shall be payable on demand after receipt by the
Borrower of such written statement. The obligations of the Borrower under
Sections 3.1, 3.2 and 3.4 shall survive payment of the Obligations and
termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT; WITHHOLDING TAX EXEMPTION
4.1. Effectiveness. This Agreement shall not be effective and no
Lender shall be required to make the initial Advance hereunder until a date (the
"Effective Date") upon which the Borrower has furnished or caused to be
furnished to the Agent (with sufficient copies for the Lenders) the following:
(i) Copies of the certificate of incorporation of the Borrower,
together with all amendments, and a certificate of good
standing, both certified by the appropriate governmental
officer in its jurisdiction of incorporation.
(ii) Copies, certified by the Secretary or Assistant Secretary of
the Borrower, of its by-laws and of its Board of Directors'
resolutions (and resolutions of other bodies, if any are
deemed necessary by counsel for any Lender) authorizing the
execution of the Loan Documents.
(iii) An incumbency certificate, executed by the Secretary or
Assistant Secretary of the Borrower, which shall identify by
name and title and bear the signature of the officers of the
Borrower authorized to sign the Loan Documents and to make
borrowings hereunder, upon which certificate the Agent and the
Lenders shall be entitled to rely until informed of any change
in writing by the Borrower.
(iv) A certificate, signed by the chief financial officer of the
Borrower, stating that on the initial Borrowing Date no
Default or Unmatured Default has occurred and is continuing.
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(v) A written opinion of the Borrower's counsel, addressed to the
Lenders in substantially the form of Exhibit "B" hereto.
(vi) Notes payable to the order of each of the Lenders.
(vii) A fully executed Security Agreement, together with such executed
UCC-1 financing statements as the Agent may reasonably request.
(viii) Written money transfer instructions, in substantially the form of
Exhibit "L" hereto, addressed to the Agent and signed by an
Authorized Officer, together with such other related money
transfer authorizations as the Agent may have reasonably
requested.
(ix) A fully executed PEC Tri-Party Agreement, together with evidence
satisfactory to Agent of the signatories' authority to execute
such agreement.
(x) Fully executed Greenwich Capital Tri-Party Agreement and Tri-Party
Agreements from any other Approved Investors then required to
support all Eligible Collateral at the time of the initial
Advance, together with evidence satisfactory to Agent of the
signatories' authority to execute such agreements.
(xi) The most recently completed review by the Agent's internal
auditors or outside auditors of the Borrower's or PEC's servicing
of the Qualifying Loans shall have been deemed acceptable by the
Required Lenders.
(xii) A Borrowing Base Certificate dated as of the Effective Date has
been executed and delivered to the Agent.
(xiii) Establishment and funding of the Settlement Account.
(xiv) Payment of all Fees due and payable on or before the Effective
Date.
(xv) Such other documents as any Lender or its counsel may have
reasonably requested.
4.2. Each Advance. The Lenders shall not be required to make any
Advance (other than an Advance that, after giving effect thereto and to the
application of the proceeds thereof, does not increase the aggregate amount of
outstanding Advances), unless on the applicable Borrowing Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article V are true
and correct in all material respects as of such Borrowing Date
except to the extent (A) any such representation or warranty is
stated to relate solely to an earlier date, in which case such
representation or warranty shall be true and correct on and as of
such earlier date or (B) the Borrower has advised the Agent in
writing in detail of any change in circumstances that causes a
specified modification to any such representation and warranty to
be needed to make such representation and warranty true and
correct in all material respects and the
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Required Lenders have, in their sole discretion, acknowledged and
accepted in writing the existence of such change in circumstances
and the nature of such modification.
(iii) All legal matters incident to the making of such Advance shall be
satisfactory to the Lenders and their counsel.
Each Borrowing Notice with respect to each such Advance shall
constitute a representation and warranty by the Borrower that, after giving
effect to the amount of the Advance being requested, (a) the conditions
contained in Sections 4.2(i), (ii) and (iii) have been satisfied, (b) the
Borrower has provided the Collateral Agent with the true and correct information
necessary to calculate the Collateral Value for all Eligible Collateral, (c) the
then current Borrowing Base is equal to or greater than the Coverage Requirement
and (d) no Lending Sublimit has been exceeded. Any Lender may require a duly
completed compliance certificate in substantially the form of Exhibit "F" hereto
as a condition to making an Advance.
4.3. Withholding Tax Exemption. At least five Business Days prior
to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States of America, or a state thereof, agrees that it will deliver to
each of the Borrower and the Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, certifying in either case that such
Lender is entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any United States federal income taxes. Each
Lender which so delivers a Form 1001 or 4224 further undertakes to deliver to
each of the Borrower and the Agent two additional copies of such form (or a
successor form) on or before the date that such form expires (currently, three
successive calendar years for Form 1001 and one calendar year for Form 4224) or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent forms so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by the Borrower or the Agent,
in each case certifying that such Lender is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of any United
States federal income taxes, unless an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender advises the Borrower
and the Agent that it is not capable of receiving payments without any deduction
or withholding of United States federal income tax.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
5.1. Corporate Existence and Standing. Each of the Borrower and its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted, to the extent failure to maintain such authority would
have a material adverse effect on the business of the Borrower and its
Subsidiaries taken as a whole.
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5.2. Authorization and Validity. The Borrower has the corporate
power and authority and legal right to execute and deliver the Loan Documents
and to perform its obligations thereunder. The execution and delivery by the
Borrower of the Loan Documents and the performance of its obligations thereunder
have been duly authorized by proper corporate proceedings, and the Loan
Documents constitute legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
5.3. No Conflict; Government Consent. Neither the execution and
delivery by the Borrower of the Loan Documents, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Borrower or any of its Subsidiaries or the
Borrower's or any Subsidiary's articles of incorporation or by-laws or the
provisions of any indenture, instrument or agreement to which the Borrower or
any of its Subsidiaries is a party or is subject, or by which it, or its
Property, is bound, or conflict with or constitute a default thereunder, or,
except as created by the Loan Documents, result in the creation or imposition of
any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to
the terms of any such indenture, instrument or agreement. No order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, or other action in respect of any
governmental or public body or authority, or any subdivision thereof, is
required to authorize, or is required in connection with the execution, delivery
and performance of, or the legality, validity, binding effect or enforceability
of, any of the Loan Documents (other than filings to perfect the Liens granted
pursuant to the Security Agreement).
5.4. Financial Statements. The August 31, 1996 audited and the
February 28, 1997 unaudited financial statements of the Borrower heretofore
delivered to the Lenders were prepared in accordance with GAAP in effect on the
date such statements were prepared (except that such unaudited statements do not
contain footnotes) and fairly present the consolidated financial condition and
operations of the Borrower at such date and the results of its operations for
the period then ended (subject to normal year-end adjustments). The Lenders
acknowledge that the Borrower has recently created a Subsidiary to hold 1% of
the Residual Certificates issued in connection with the securitization of
certain Qualifying Loans which will be reflected in the Borrower's subsequent
consolidated financial statements.
5.5. Material Adverse Change. Since February 28, 1997, there has
been no change in the business, Property, prospects, condition (financial or
otherwise) or results of operations of the Borrower and its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect.
5.6. Taxes. Mego Financial, on a consolidated basis with the
Borrower, has filed all United States federal tax returns and all other tax
returns which are required to be filed and have paid all taxes due pursuant to
said returns or pursuant to any assessment received by the Borrower, except such
taxes, if any, as are being contested in good faith by appropriate proceedings
and as to which adequate reserves have been provided in accordance with
Agreement Accounting Principles and as to which no Lien exists. The consolidated
United States income tax returns of Mego Financial and the Borrower have not
been audited by the Internal Revenue Service for any year after the fiscal year
ended August 31, 1988. No tax liens have been filed and no claims are being
asserted with respect to any such taxes. The charges, accruals and reserves on
the books of the Borrower in respect of any taxes or other governmental charges
are adequate.
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5.7. Litigation and Contingent Obligations. There is no litigation,
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of their officers, threatened against or affecting the
Borrower or any of its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect or which seeks to prevent, enjoin or delay the making of
the Loans or Advances. Other than any liability incident to such litigation,
arbitration or proceedings, the Borrower has no material contingent obligations
not provided for or disclosed in the financial statements referred to in Section
5.4.
5.8. Subsidiaries. Schedule "3" hereto contains an accurate list of
all Subsidiaries of the Borrower as of the date of this Agreement, setting forth
their respective jurisdictions of incorporation and the percentage of their
respective capital stock owned by the Borrower or other Subsidiaries and whether
such Subsidiary is an Included Subsidiary or an Excluded Subsidiary. All of the
issued and outstanding shares of capital stock of such Subsidiaries have been
duly authorized and issued and are fully paid and non-assessable.
5.9. ERISA. The Unfunded Liabilities of all Single Employer Plans
do not in the aggregate exceed $500,000. Neither the Borrower nor any other
member of the Controlled Group has incurred, or is reasonably expected to incur,
any withdrawal liability to Multiemployer Plans in excess of $500,000 in the
aggregate. Each Plan complies in all material respects with all applicable
requirements of law and regulations, no Reportable Event has occurred with
respect to any Plan, neither the Borrower nor any other members of the
Controlled Group has withdrawn from any Plan or initiated steps to do so, and no
steps have been taken to reorganize or terminate any Plan.
5.10. Accuracy of Information. No information, exhibit or report
furnished by the Borrower or any of its Subsidiaries to the Agent or to any
Lender in connection with the negotiation of, or compliance with, the Loan
Documents contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
misleading.
5.11. Regulation U. Margin stock (as defined in Regulation U)
constitutes less than 25% of those assets of the Borrower and its Subsidiaries
which are subject to any limitation on sale, pledge, or other restriction
hereunder.
5.12. Material Agreements. Neither the Borrower nor any Subsidiary
is a party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. Except as disclosed on Schedule "7" hereto or in the Borrower's
financial statements, neither the Borrower nor any Subsidiary is in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in (i) any agreement to which it is a party, which
default could reasonably be expected to have a Material Adverse Effect or (ii)
any agreement or instrument evidencing or governing Indebtedness.
5.13. Compliance With Laws. The Borrower and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property if failure to comply
could reasonably be expected to have a Material Adverse Effect.
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5.14. Ownership of Properties. Except as set forth on Schedule "4"
hereto, on the date of this Agreement, the Borrower and its Subsidiaries will
have good title, free of all Liens other than those permitted by Section 6.15,
to all of the Property and assets reflected in the financial statements as owned
by it.
5.15. Plan Assets; Prohibited Transactions. The Borrower is not an
entity deemed to hold "plan assets" within the meaning of 29 C.F.R. ss.
2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA)
which is subject to Title I of ERISA or any plan (within the meaning of Section
4975 of the Code); and neither the execution of this Agreement and the making of
Loans hereunder do not give rise to a prohibited transaction within the meaning
of Section 406 of ERISA or Section 4975 of the Code.
5.16. Investment Company Act. Neither the Borrower nor any
Subsidiary thereof is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
5.17. Public Utility Holding Company Act. Neither the Borrower nor
any Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
5.18. FHA and FNMA Eligibility. The Borrower is (i) an FHA Title I
Approved Mortgagee in good standing, meets all eligible requirements of law and
governmental regulation so as to be eligible to originate, purchase, hold and
service Title I Qualifying Loans insured by FHA under the Title I Regulations
and is an approved seller and servicer in good standing of Title I Qualifying
Loans insured by FHA under the Title I Regulations and (ii) a FNMA
seller/servicer in good standing.
5.19. Subordinated Indebtedness. The Obligations constitute senior
indebtedness which is entitled to the benefits of the subordination provisions
of the Subordinated Notes and all other outstanding Subordinated Indebtedness.
5.20. Eligibility. Each Pledged Qualifying Loan having a Collateral
Value included in determining the Borrowing Base constitutes Eligible Collateral
hereunder and, when aggregated with other Pledged Qualifying Loans of a similar
type or status, does not cause any violation of a Borrowing Base Sublimit.
5.21. Recourse Servicing. The Borrower does not have any Recourse
Servicing.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
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6.1. Financial Reporting. The Borrower will maintain, for itself
and each Subsidiary, a system of accounting established and administered in
accordance with generally accepted accounting principles, and furnish to the
Lenders:
(i) Within 120 days after the close of each of its fiscal years,
an unqualified audit report certified by independent certified
public accountants, acceptable to the Lenders, prepared in
accordance with Agreement Accounting Principles on a
consolidated and consolidating basis (consolidating statements
need not be certified by such accountants), to the extent
applicable, for itself and the Subsidiaries, including
statements of financial condition as of the end of such
period, related profit and loss and changes in shareholders'
equity statements, and a statement of cash flows, accompanied
by (a) any management letter prepared by said accountants and
(b) a certificate of said accountants that, in the course of
their examination necessary for their certification of the
foregoing, they have obtained no knowledge of any Default or
Unmatured Default, or if, in the opinion of such accountants,
any Default or Unmatured Default shall exist, stating the
nature and status thereof.
(ii) Within 60 days after the close of the first three quarterly
periods of each of its fiscal years, for itself and the
Subsidiaries, consolidated and consolidating, to the extent
applicable, unaudited statements of financial condition as at
the close of each such period and consolidated and
consolidating profit and loss statements (showing a breakout
of servicing sales gains attributed to servicing originated in
prior periods), a changes in shareholders' equity statement
and a statement of cash flows for the period from the
beginning of such fiscal year to the end of such quarter, all
certified (subject to normal year-end adjustments) by its
chief financial officer or chief accounting officer.
(iii) Together with the financial statements required under Sections
6.1(i) and (ii), a compliance certificate in substantially the
form of Exhibit "F" hereto signed by its chief financial
officer or chief accounting officer showing the calculations
necessary to determine compliance with this Agreement and that
no Default or Unmatured Defaults exists, or if any Default or
Unmatured Default exists, stating the nature and status
thereof.
(iv) As soon as available but in any event within 45 days after the
end of each calendar month an executive summary regarding the
Borrower's production and servicing. Such summary shall show
separately information concerning any Qualifying Loans or
Securities with respect to which there is recourse to the
Borrower.
(v) As soon as available, but in any event within ten (10) days
after the end of each month, a certificate from an Authorized
Officer as to (i) those specific Eligible Qualifying Loans
which became Ineligible Collateral during such month due to
the existence of a past due payment exceeding the time limit
set forth in clause (ii) of the definition of Eligible
Qualifying Loan, (ii) the most recent delinquency, default
data and loss statistics on each pool of Qualifying Loans
serviced by the Borrower under its Servicing Agreements or
under any whole loan sale agreements or similar agreements in
which the Borrower retains an economic interest in, or
recourse with respect to, such pool of Qualifying Loans,
together with a summary of the applicable delinquency, default
and loss levels, if any, under each of such Servicing
Agreements or other agreements at which the Borrower's
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right to receive servicing income thereunder can be reduced or
interrupted or at which the Borrower could be required to
provide additional security for the benefit of any senior
interests in such pool, such data and statistics to be
presented in the form attached hereto as Schedule "9".
(vi) If the Borrower has any Rate Hedging Agreements then in
effect, as soon as available but in any event within 15 days
after the end of each month, a secondary marketing report for
such month reasonably satisfactory to the Agent.
(vii) As soon as available, but in any event within 30 days after
the end of each month (or, with respect to the last month of
any fiscal quarter, 45 days), a certificate from the
Borrower's chief financial officer as to the total liabilities
of the Borrower and its Included Subsidiaries on a
consolidated basis, as of the last day of the preceding month,
as determined in accordance with Agreement Accounting
Principles.
(viii) As soon as available, but in any event within 150 days after
the beginning of each fiscal year of the Borrower, a copy of
the plan and forecast (including a projected consolidated and
consolidating balance sheet, income statement and cash flow
statement) of the Borrower for such fiscal year.
(ix) As soon as available and in any event within 10 days after the
end of each calendar month (and within one Business Day after
any request therefor by the Agent, which requests shall be
made only when the Agent reasonably determine such a delivery
is necessary), a Borrowing Base Certificate (which shall
include the Borrower's reconciliation of any discrepancies
from the Collateral Agent's reports on the status of Eligible
Collateral at the end of such month (or the end of the prior
Business Day, if requested by the Agent as set forth above).
(x) Within 10 days after the issuance of Borrower's response
thereto (but in no event later than 20 days after the
Borrower's receipt of such reports) copies of all compliance
and audit reports received from FHA (including each statement
of the Borrower's insurance coverage reserve account with the
FHA and all notices regarding loan transfer or other
adjustments thereto), Greenwich Capital or any other Approved
Investor and the Borrower's response thereto; and promptly
upon receipt, a copy of any notice from (i) FHA to the effect
that it is or is contemplating withdrawing its approval of the
Borrower as a FHA Title I Approved Mortgagee, or as an
approved seller and servicer for Title I Qualifying Loans or
(ii) Greenwich Capital or any other Approved Investor to the
effect that it is contemplating terminating any existing
Approved Investor Commitment or ceasing to issue any further
such Approved Investor Commitments to the Borrower.
(x) Within 270 days after the close of each fiscal year, a
statement of the Unfunded Liabilities of each Single Employer
Plan, certified as correct by an actuary enrolled under ERISA.
(xi) As soon as possible and in any event within 10 days after the
Borrower knows that any Reportable Event has occurred with
respect to any Plan, a statement, signed by the chief
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financial officer of the Borrower, describing said Reportable
Event and the action which the Borrower proposes to take with
respect thereto.
(xii) As soon as possible and in any event within 10 days after
receipt by the Borrower, a copy of (a) any notice or claim to
the effect that the Borrower or any of its Subsidiaries is or
may be liable to any Person as a result of the release by the
Borrower, any of its Subsidiaries, or any other Person of any
toxic or hazardous waste or substance into the environment,
and (b) any notice alleging any violation of any federal,
state or local environmental, health or safety law or
regulation by the Borrower or any of its Subsidiaries, which,
in either case, could reasonably be expected to have a
Material Adverse Effect.
(xiii) Promptly upon the furnishing thereof to the shareholders of
the Borrower, copies of all financial statements, reports and
proxy statements so furnished.
(xiv) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular
reports which the Borrower or any of its Subsidiaries files
with the Securities and Exchange Commission.
(xv) Within 10 days after the Borrower's receipt thereof, copies of
all reports, analysis and comments received by the Borrower
from the rating agencies or any investment banks or other
analysts with respect to the Borrower's prior, existing or
proposed debt or equity offerings and placements and
securitizations of Qualifying Loans.
(xvi) Within 10 days after the Borrower's delivery thereof to any
prospective investors, copies of any offering memorandum,
prospectus or private placement memorandum regarding the
securitization of the Borrower's Qualifying Loans.
(xvii) Within 10 days after the Borrower's receipt thereof, copies of
any servicing certificates, reports or other material
regarding the status of Qualifying Loans or the Borrower's
servicing thereof issued by any trustee under the Borrower's
securitizations of Qualifying Loans.
(xviii) Such other information (including non-financial information)
as the Agent or any Lender may from time to time reasonably
request.
6.2. Use of Proceeds. The Borrower will, and will cause each
Subsidiary to, only use the proceeds of the Advances for the financing purposes
described in the recitals hereto or to reimburse the Borrower for its funds
previously advanced for such financing purposes. The Borrower will not, nor will
it permit any Subsidiary to, use any of the proceeds of the Advances to purchase
or carry any "margin stock" (as defined in Regulation U) or to make any
Acquisition for which the board of directors of the Person being acquired has
not consented to such Acquisition.
6.3. Notice of Default. The Borrower will, and will cause each
Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of
any Default or Unmatured Default and of any other
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50
development, financial or otherwise, which could reasonably be expected to have
a Material Adverse Effect.
6.4. Conduct of Business. The Borrower will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as is conducted
generally from time to time by companies in the consumer finance business in the
United States and to do all things necessary to remain duly incorporated,
validly existing and in good standing as a domestic corporation in its
jurisdiction of incorporation and maintain all requisite authority to conduct
its business in each jurisdiction in which its business is conducted to the
extent failure to maintain such authority would have a material adverse effect
on the business of the Borrower and its Subsidiaries taken as a whole. The
Borrower will use its best efforts to adhere in all material respects to
customary practices and standards in the industry insofar as adherence to such
practices and standards would require the Borrower to cause obligors to comply
with their obligations under such Pledged Qualifying Loans with respect to any
real estate securing such indebtedness.
6.5. Taxes. Borrower will timely file or cause to be filed,
complete and correct United States federal (on a consolidated basis with Mego
Financial's filing) and applicable foreign, state and local tax returns required
by law and pay when due all taxes, assessments and governmental charges and
levies upon it or its income, profits or Property, except those which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been set aside in accordance with Agreement Accounting
Principles.
6.6. Insurance. The Borrower will, and will cause each Subsidiary
to, maintain with financially sound and reputable insurance companies insurance
on all their Property in such amounts and covering such risks as is consistent
with sound business practice, and the Borrower will furnish to any Lender upon
request full information as to the insurance carried. The Borrower will at all
times, upon request of the Agent, furnish to the Agent copies of its, and each
of its Subsidiaries', current fidelity bond and of its, and each of its
Subsidiaries', insurance policy containing mortgage bankers errors and omissions
coverage, and such bonds and policies, to the extent possible, shall each
provide that it is not cancelable without thirty (30) days prior written notice
to the Agent.
6.7. Compliance with Laws. The Borrower will, and will cause each
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject to the
extent failure to so comply would have a material adverse effect on the business
of the Borrower and its Subsidiaries taken as a whole.
6.8. Maintenance of Properties. The Borrower will, and will cause
each Subsidiary to, do all things necessary to maintain, preserve, protect and
keep its Property in good repair, working order and condition, and make all
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times.
6.9. Inspection. The Borrower will, and will cause each Subsidiary
to, permit the Agent, the Collateral Agent and the Lenders, by their respective
representatives and agents, to inspect any of the Property, corporate books and
financial records of the Borrower and each Subsidiary, to examine and make
copies of the books of accounts and other financial records of the Borrower and
each Subsidiary, and to discuss the affairs, finances and accounts of the
Borrower and each Subsidiary with, and to be advised as
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51
to the same by, their respective officers at such reasonable times and intervals
as the Agent, the Collateral Agent or any Lender may designate. Without limiting
the generality of the foregoing, a third party auditor approved by the Required
Lenders shall have the right to audit the internal controls of Borrower and
Preferred Equities Corporation or any successor subservicer, review the method
of calculating the Borrowing Base, and perform such other reviews as may be
required to insure that the Borrower maintains books and records in accordance
with the requirements of this Agreement and sound business practices. Such
audits may be done twice per year at the Borrower's cost, with Lenders to pay
for any additional audits done during the calendar year.
6.10. Dividends. The Borrower will not, nor will it permit any
Included Subsidiary to, declare or pay any dividends or make any distributions
on its capital stock (other than dividends payable in its own capital stock) or
redeem, repurchase or otherwise acquire or retire any of its capital stock at
any time outstanding, except that, provided no Default then exists hereunder,
(i) any Included Subsidiary may declare and pay dividends or make distributions
to the Borrower or to a Wholly-Owned Subsidiary which is also an Included
Subsidiary, or (so long as such dividends or distributions are paid or made on a
pro-rata basis to Borrower, directly or indirectly, as well) to others holding
an interest in any such Subsidiary which is not a Wholly-Owned Subsidiary which
is also an Included Subsidiary, and (ii) the Borrower may declare and pay
dividends or make distributions (other than payments of Tax Sharing Indebtedness
which shall not be subject to this Section 6.10) in a cumulative amount not to
exceed the sum of (A) thirty-three percent (33%) of the Borrower's aggregate
positive net income (excluding losses and determined in accordance with
Agreement Accounting Principles) for each fiscal quarter ending after the
Effective Date and (B) the aggregate net cash proceeds obtained by the Borrower
or its Included Subsidiaries through the issuance or sale of stock (or the
conversion of any convertible debt of Borrower to stock) during such fiscal
quarters.
6.11. Indebtedness. The Borrower will not, nor will it permit any
Included Subsidiary to, create, incur or suffer to exist any Indebtedness which
would (a) constitute Indebtedness of any type (including Contingent Obligations)
other than:
(i) the Subordinated Notes (not to exceed $90,000,000 in the
aggregate);
(ii) Tax Agreement Indebtedness or Subordinated Indebtedness due
and owing from time to time to Mego Financial;
(iii) Indebtedness secured solely by "excess servicing rights" or
"mortgage-related securities" (as such categories of assets
are established and valued under Agreement Accounting
Principles and disclosed on the Borrower's consolidated
financial statements) or by the stock of any Included
Subsidiary holding such "excess servicing rights" or
"mortgage-related securities" or proceeds thereof as its sole
assets;
(iv) the Obligations under this Agreement;
(v) Indebtedness created by the Borrower's obligation to
repurchase Qualifying Loans or IO Securities sold to Greenwich
Capital or other third parties subject to repurchase
agreements, but only to the extent the Agent has given prior
written approval to the identity of such other third parties
and the terms of such repurchase agreements;
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52
(vi) Rate Hedging Agreements, to the extent the counter-parties to
any such Agreements involving projected annual payments by the
Borrower in excess of $1,000,000, before netting, have been
approved by the Agent;
(vii) Capitalized Lease Obligations and Indebtedness created solely
for the purpose of financing all or a portion of the purchase
price for Borrower's operating assets, provided the total
Indebtedness permitted under this Section 6.11(a)(vii)
outstanding at any time shall not exceed $2,750,000;
(viii) Operating Lease Obligations related to the Borrower's existing
and former principal office and the Borrower's existing and
future branch offices up to an aggregate annual rental
obligation of $2,000,000; and
(ix) Permitted Warehouse Indebtedness; or
(b) cause (A) total liabilities of the Borrower and its Included Subsidiaries on
a consolidated basis, as determined in accordance with Agreement Accounting
Principles, less (B) all Subordinated Indebtedness to exceed the sum of the
following percentages of the values of the following categories of assets of the
Borrower and its Included Subsidiaries, as such categories and values are
established by Agreement Accounting Principles and disclosed on the Borrower's
financial statements:
(i) 100% of "cash";
(ii) 93% of "loans held for sale, net" (provided that any
Qualifying Loan owned by the Borrower for more than 180 days
after the date of its origination, if originated by the
Borrower, or after the date of its acquisition, if acquired by
the Borrower, shall be excluded from such category); and
(iii) 55% of Restricted Assets.
6.12. Merger. The Borrower will not, nor will it permit any Included
Subsidiary to, merge or consolidate with or into any other Person, except that
an Included Subsidiary may merge into the Borrower or a Wholly-Owned Subsidiary
which is also an Included Subsidiary.
6.13. Sale of Assets. The Borrower will not, nor will it permit any
Included Subsidiary to, lease, sell or otherwise dispose of its Property, to any
other Person, except:
(i) Sales of Qualifying Loans in the ordinary course of business.
(ii) Sales of Securities.
(iii) Leases, sales or other dispositions of its Property that,
together with all other Property of the Borrower and its
Included Subsidiaries previously leased, sold or disposed of
(other than Qualifying Loans in the ordinary course of
business and Securities) as permitted by this Section during
the twelve-month period ending with the month in which any
such
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lease, sale or other disposition occurs, do not constitute a
Substantial Portion of the Property of the Borrower and its
Included Subsidiaries.
6.14. Investments and Acquisitions. The Borrower will not, nor will
it permit any Included Subsidiary to, make or suffer to exist any Investments
(including without limitation, loans and advances to, and other Investments in,
Subsidiaries), or commitments therefor, or to create any Subsidiary or to become
or remain a partner in any partnership or joint venture, or to make any
Acquisition of any Person, except:
(i) Short-term obligations of, or fully guaranteed by, the United
States of America.
(ii) Commercial paper rated A-l or better by Standard and Poor's
Ratings Group, a division of McGraw Hill, or P-l or better by
▇▇▇▇▇'▇ Investors Service, Inc.
(iii) Demand deposit accounts maintained in the ordinary course of
business.
(iv) Certificates of deposit issued by and time deposits with
commercial banks (whether domestic or foreign) having capital
and surplus in excess of $100,000,000.
(v) Investments in existence on the date hereof and described in
Schedule "3" hereto.
(vi) Investments in the ordinary course of the Borrower's mortgage
banking business to purchase: (a) Qualifying Loans (and in
connection with commitments to purchase the same); and (b)
real estate acquired by foreclosure.
(vii) Investments in the ordinary course of the Borrower's mortgage
banking business to enter into Rate Hedging Agreements to the
extent permitted pursuant to Section 6.11.
(viii) Investments in Subsidiaries, whether created or acquired,
which (i) have executed and delivered either a joinder in this
Agreement and thereby assumed joint and several liability for
the Borrower's obligations hereunder or a guaranty of the
Borrower's obligations hereunder in each case in form and
substance satisfactory to the Agent and provided that the
Obligations as so undertaken by such Subsidiary constitute
"Senior Indebtedness" under the Indenture or any other
indenture governing any Subordinated Notes issued hereafter or
(ii) are Excluded Subsidiaries.
(ix) Investments in Subsidiaries which are single purpose,
bankruptcy remote entities created to facilitate
securitization of the Borrower's Qualifying Loans and are
wholly owned by the Borrower, directly or indirectly, and do
not have any Indebtedness.
6.15. Liens. The Borrower will not, nor will it permit any Included
Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the
Property of the Borrower or any of its Included Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or levies
on its Property if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are
being
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contested in good faith and by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have
been set aside on its books.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of
obligations not more than 60 days past due.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions,
or other social security or retirement benefits, or similar
legislation.
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a
nature generally existing with respect to properties of a
similar character and which do not in any material way affect
the marketability of the same or interfere with the use
thereof in the business of the Borrower or the Subsidiaries.
(v) Liens existing on the date hereof and described in Schedule
"4" hereto.
(vi) Liens in favor of the Agent and the Collateral Agent, for the
benefit of the Lenders, granted pursuant to this Agreement or
the Security Agreement.
(vii) Liens with respect to IO Securities, Residual Certificates or
excess servicing rights arising from the documents creating
and governing such securities, certificates and rights as a
result of the subordinate nature of such assets to other
senior interests created and governed by such documents.
(viii) Liens securing Indebtedness permitted under Section
6.11(a)(iii), (vii) or (ix).
(ix) Liens on (i) Property of Subsidiaries acquired by the Company
in existence at the time of such acquisition or (ii) Property
of Excluded Subsidiaries.
6.16. Affiliates. The Borrower will not, and will not permit any
Included Subsidiary to, enter into any transaction (including, without
limitation, the purchase or sale of any Property or service) with, or make any
payment or transfer to, any Affiliate (other than the Borrower) except pursuant
to the existing agreements listed on Schedule "8" attached hereto and as may be
entered into hereafter in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's or such Included Subsidiary's business
and upon fair and reasonable terms no less favorable to the Borrower or such
Included Subsidiary than the Borrower or such Included Subsidiary would obtain
in a comparable arms-length transaction.
6.17. Financial Covenants.
6.17.1. Adjusted Leverage Ratio. The Borrower will not permit,
as of the end of any calendar month, the ratio of (A) total liabilities of the
Borrower and its Included Subsidiaries on a consolidated basis, as determined in
accordance with Agreement Accounting Principles, less Subordinated Indebtedness
to (B) Adjusted Tangible Net Worth to exceed 3.0 to 1.0.
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6.17.2. Adjusted Tangible Net Worth. The Borrower will not,
at any time permit its Adjusted Tangible Net Worth to be less than $65,000,000
plus fifty percent (50%) of the sum of (i) the sum of the Borrower's positive
net income (excluding losses and determined in accordance with Agreement
Accounting Principles) for each fiscal quarter ending after November 30, 1996
plus (ii) 100% of the net proceeds obtained by the Borrower or its Included
Subsidiaries through the issuance or sale of stock or additional Subordinated
Notes (after deduction of all costs of such issuance or acquisition and any
portion of such proceeds used to repay previously issued Subordinated Notes).
6.18. Compliance with Security Agreement. The Borrower will not fail
to perform in any material respect any of its obligations under the Security
Agreement or enter into similar security agreements for Qualifying Loans not
included in Collateral with any Person other than the Collateral Agent.
6.19. Recourse Servicing. The Borrower will not at any time acquire
or create any Recourse Servicing beyond the Recourse Servicing held by the
Company on the Effective Date.
6.20. FHA and FNMA Approvals. The Borrower (i) will maintain its
status as a FHA Title I Approved Mortgagee and remain approved by FHA as a
seller/servicer of Title I Qualifying Loans, (ii) will maintain its status as an
approved seller/servicer for FNMA for Title I Qualifying Loans unless terminated
solely as a result of the Borrower's failure to sell the required number of
loans to maintain such status, and (iii) will not permit the FHA or FNMA to
withdraw such approval of the Borrower.
6.21. Approved Investor Commitments. The Borrower will, at all times
through the Termination Date, keep the Approved Investor Commitment with
Greenwich Capital and the Greenwich Tri-Party Agreement in full force and effect
without any reduction or modification adverse to the Lenders except for
limitations expressly provided therein, unless specifically approved in writing
in advance by the Required Lenders. The Borrower shall maintain all other
Approved Investor Commitments to the extent needed to cover the Pledged
Qualifying Loans and perform all of its obligations in connection with such
Approved Investor Commitments.
6.22. Settlement Account. The Borrower agrees to maintain the
Settlement Account with the Agent with a minimum balance of $100,000 at all
times prior to the Termination Date. The Borrower hereby grants to the Agent for
the benefit of the Lenders a security interest in such Settlement Account and
all deposits therein and interest earned thereon. The Agent shall, in addition
to any other rights available to it, have the right, without notice to the
Borrower, to set off all or any portion of the Settlement Account against the
Obligations at any time after a Default has occurred and is continuing.
6.23. Subordinated Indebtedness. The Borrower will not, and will not
permit any Subsidiary to, make any amendment or modification to any indenture,
note or other agreement evidencing or governing any Subordinated Indebtedness,
or directly or indirectly voluntarily prepay, defease or in substance defease,
purchase, redeem, retire or otherwise acquire, any Subordinated Indebtedness,
other than with proceeds of other Subordinated Indebtedness or proceeds of any
issuance of stock in the Borrower or its Included Subsidiaries.
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6.24. Excluded Subsidiaries. The Borrower shall have the right to
create, from time to time, an "Excluded Subsidiary" which will not be included
in the definition of "Included Subsidiary" and thus will not be subject to
certain of the conditions and restrictions imposed by this Agreement provided
that (i) each such Excluded Subsidiary shall not be included in the calculation
of the Borrower's Adjusted Tangible Net Worth for purposes of calculating the
Borrower's compliance with this Agreement and shall not be included in certain
other calculations as indicated herein and (ii) the Borrower's aggregate
Investment in Excluded Subsidiaries (including without limitation loans and
advances to Excluded Subsidiaries) shall not exceed at any time twenty-four
percent (24%) of the Borrower's then-current Adjusted Tangible Net Worth. No
Subsidiary shall constitute an Excluded Subsidiary until the Borrower has given
written notice of such designation to the Agent and certified that such
Subsidiary meets the requirements of this Section 6.24.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by or on
behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent
under or in connection with this Agreement, any Loan, or any certificate or
information delivered in connection with this Agreement or any other Loan
Document shall be materially false on the date as of which made (it being
understood that if any of the representations and warranties made in connection
with the definition of "Borrowing Base" are not true and correct as of any date
with respect to any Pledged Item, such Pledged Item shall be removed from
Eligible Collateral as the sole remedy for such failure).
7.2. Nonpayment of principal of any Note when due (including but
not limited to payments required pursuant to Section 2.10.2), or nonpayment of
interest upon any Note or of any Fee or other obligations under any of the Loan
Documents within five days after the same becomes due.
7.3. The breach by the Borrower of any of the terms or provisions
of Sections 6.2, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.17, 6.19, 6.20, 6.21,
6.22 or 6.23.
7.4. The breach by the Borrower (other than a breach which
constitutes a Default under any other Section of this Article VII) of any of the
terms or provisions of this Agreement which is not remedied within 30 days after
the earlier to occur of (i) receipt of written notice from the Agent or any
Lender of such breach or (ii) the date that the Borrower obtains knowledge of
such breach.
7.5. Failure of the Borrower or any of its Subsidiaries to pay when
due either (i) the Capitalized Leases with NBD Bank, Agent's Affiliate, or (ii)
any other Indebtedness aggregating in excess of $5,000,000 (collectively, items
(i) and (ii) being referred to as "Material Indebtedness"); or the default by
the Borrower or any of its Subsidiaries in the performance of any term,
provision or condition contained in any agreement under which any such Material
Indebtedness was created or is governed which has not been waived by the holder
or holders of such Material Indebtedness, or any other event shall occur or
condition exist which has not been so waived, the effect of which is to cause,
or to permit the holder or holders of such Material Indebtedness to cause, such
Material Indebtedness to become due prior to its
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stated maturity; or any Material Indebtedness of the Borrower or any of its
Subsidiaries shall be declared to be due and payable or required to be prepaid
or repurchased (other than by a regularly scheduled payment) prior to the stated
maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or
admit in writing its inability to pay, its debts generally as they become due.
7.6. The Borrower or any of its Subsidiaries shall (i) have an
order for relief entered with respect to it under the Federal bankruptcy laws as
now or hereafter in effect, (ii) make an assignment for the benefit of
creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment
of a receiver, custodian, trustee, examiner, liquidator or similar official for
it or any Substantial Portion of its Property, (iv) institute any proceeding
seeking an order for relief under the Federal bankruptcy laws as now or
hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file an
answer or other pleading denying the material allegations of any such proceeding
filed against it, (v) take any corporate action to authorize or effect any of
the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in
good faith any appointment or proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the Borrower
or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Borrower or any of its Subsidiaries or any
Substantial Portion of its Property, or a proceeding described in Section
7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and
such appointment continues undischarged or such proceeding continues undismissed
or unstayed for a period of 60 consecutive days.
7.8. Any court, government or governmental agency shall condemn,
seize or otherwise appropriate, or take custody or control of (each a
"Condemnation"), all or any portion of the Property of the Borrower and its
Subsidiaries which, when taken together with all other Property of the Borrower
and its Subsidiaries so condemned, seized, appropriated, or taken custody or
control of, during the twelve-month period ending with the month in which any
such Condemnation occurs, constitutes a Substantial Portion.
7.9. The Borrower or any of its Subsidiaries shall fail within 30
days to pay, bond or otherwise discharge any judgment or order for the payment
of money in excess of $500,000, which is not stayed on appeal or otherwise being
appropriately contested in good faith.
7.10. Any Change in Control shall occur.
7.11. The occurrence of any "default", as defined in any Loan
Document (other than this Agreement or the Notes) or the breach of any of the
terms or provisions of any Loan Document (other than this Agreement or the
Notes), which default or breach continues beyond any period of grace therein
provided.
7.12. The Security Agreement shall for any reason fail to create a
valid and perfected first priority security interest in any collateral purported
to be covered thereby, except as permitted by the terms of the Security
Agreement, or the Security Agreement shall fail to remain in full force or
effect or any action shall be taken to discontinue or to assert the invalidity
or unenforceability of the Security Agreement, or the Borrower shall fail to
comply with any of the terms or provisions of the Security Agreement.
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7.13. The Unfunded Liabilities of all Single Employer Plans shall
exceed in the aggregate $500,000 or any Reportable Event shall occur in
connection with any Plan.
7.14. The Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer Plans by
the Borrower or any other member of the Controlled Group as withdrawal liability
(determined as of the date of such notification), exceeds $500,000 or requires
payments exceeding $100,000 per annum.
7.15. The representations and warranties set forth in "Section 5.15
Plan Assets; Prohibited Transactions" shall at any time not be true and correct.
7.16. PEC shall breach or default in the performance of its
obligations under the PEC Tri-Party Agreement or the subservicing agreement
described therein, which breach or default continues beyond any period of grace
therein provided, provided that such breach or default by PEC shall not
constitute a Default if the Borrower has not later than 7 days after the
occurrence of such breach or default (or the expiration of any grace period, if
applicable) replaced PEC with a replacement subservicer satisfactory to the
Agent.
7.17. Greenwich Capital shall breach or default in the performance of
its obligations under the Greenwich Tri-Party Agreement or the Approved Investor
Commitment described therein, which breach or default continues beyond any
period of grace therein provided unless the Borrower has, prior to the
expiration of any such grace period available to Greenwich Capital with respect
to such breach or default, obtained Approved Investor Commitments, and related
Tri-Party Agreements, from other Approved Investors covering Eligible Collateral
having an aggregate Borrowing Base value at least equal to the then-existing
Coverage Requirement.
7.18. The Borrower shall breach or default in the performance of the
Borrower's obligations under the Approved Investor Commitment issued to the
Borrower by Greenwich Capital, which breach or default, if subject to cure under
the terms thereof, continues without cure or waiver beyond a date that is two
(2) Business Days prior to the expiration of the cure period available to the
Borrower thereunder.
ARTICLE VIII
COLLATERAL, ACCELERATION AND OTHER REMEDIES
8.1. Security and Collateral Agency Agreement. Pursuant to the
Security Agreement, a security interest in and a continuing lien upon the
Collateral has been created in favor of the Collateral Agent for the benefit of
the Lenders.
8.2. AP Qualifying Loans. The Borrower agrees that while it is in
possession of any Required Qualifying Loan Documents for an AP Qualifying Loan,
it will hold same in trust and as agent and bailee for the Collateral Agent,
without authority to make any other disposition thereof, or of the proceeds
thereof, except as may be otherwise permitted in writing by the Collateral
Agent. The Borrower assumes the responsibility for loss or destruction of any
such Required Qualifying Loan Documents until the same are delivered to the
Collateral Agent.
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8.3. Release of Collateral. Upon the request of the Borrower
Borrower delivered from time to time to the Agent and the Collateral Agent but
subject to Section 6.22, the Agent shall authorize the Collateral Agent to
release Collateral (including Ineligible Collateral) specified in such notice
from the lien of this Agreement, if, but only if, (i) at the time of such
release no Default or Unmatured Default shall have occurred and then be
continuing, (ii) the Borrowing Base, after giving effect to such release, is at
least equal to the Coverage Requirement or any payment under Section 2.10 which
may be required as a result of such release has been made and (iii) the release
of such Collateral will not create a violation of any Lending Sublimit or
Borrowing Base Sublimit.
8.4. Settlement Account. There is hereby established with the
Agent, for the benefit of the Lenders, a "cash collateral" account of the
Borrower, Account #19-29623 ("Settlement Account") into which shall be deposited
all cash proceeds from the sale of any Pledged Qualifying Loan. Only the Agent
shall have access to the Settlement Account. All amounts in the Settlement
Account shall be applied as described in Section 2.10.3.
8.5. Termination. If all Commitments under this Agreement shall
have expired or been terminated pursuant to the express terms hereof and no
Obligations shall be outstanding, the Agent shall promptly deliver or cause to
be delivered all cash standing to the credit of the Settlement Account and shall
cause the Collateral Agent to return to the Borrower all Required Qualifying
Loan Documents and any other items relating to the Pledged Qualifying Loans
delivered to the Collateral Agent and not previously returned to the Borrower or
delivered at the Borrower's direction hereunder. The receipt by the Borrower of
any cash in the Settlement Account and of all such items related to the Pledged
Qualifying Loans returned or delivered to the Borrower pursuant to any provision
of this Agreement, together with UCC-3 termination statements executed by the
Agent, shall be a complete and full acquittance for all items related to the
Pledged Qualifying Loans so delivered.
8.6. Acceleration. If any Default described in Section 7.6 or 7.7
occurs with respect to the Borrower, the obligations of the Lenders to make
Loans hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the part of
the Agent or any Lender. If any other Default occurs, the Required Lenders (or
the Agent with the consent of the Required Lenders) may (i) terminate the
obligations of the Lenders to make Loans hereunder and they shall, upon notice
to the Borrower, terminate and/or (ii) declare the Obligations to be due and
payable, whereupon the Obligations shall become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which the
Borrower hereby expressly waives.
If, within 30 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.
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8.7. Other Remedies.
(i) Unless a Default shall have occurred and then be
continuing, the Borrower shall be entitled to receive and collect
directly all sums payable to the Borrower in respect of the Collateral
except proceeds from the sale thereof which shall be deposited into
the Settlement Account for application pursuant to Section 2.10.3.
(ii) Upon the occurrence of a Default and during the
continuance thereof, the Agent and the Collateral Agent, on
behalf of the Lenders, shall be entitled to all the rights and
remedies hereunder and in the Security Agreement, subject to the
limitations and requirements of Paragraph 16 thereof, and all other
rights or remedies at law or in equity existing or conferred upon the
Lenders by other jurisdictions or other applicable law.
(iii) Following the occurrence and during the continuance of
a Default or an Unmatured Default, no Lender shall be obligated to
fund any Loan hereunder.
(iv) Following the occurrence of a Default and during the
continuance thereof, the Borrower agrees that the Borrower and the
Agent shall, if so directed by a vote of the Required Lenders,
implement certain procedures with respect to the Borrower's funding of
AP Qualifying Loans, all at the Borrower's sole expense. Such
procedures may include, but are not limited to: (i) reducing the
advance rate against Eligible Collateral which are AP Qualifying Loans
for purposes of determining the Collateral Value component of the
Borrowing Base, (ii) requiring that if (A) AP Qualifying Loans are
acquired with wire transfers, such wire transfers originate from
accounts located at a lending office of a Lender, (B) AP Qualifying
Loans are acquired with funds from accounts which are not located at a
lending office of a Lender, the financial institution which holds such
account enter into an agreement with the Borrower and the Agent which
shall provide that the Agent shall have exclusive dominion and control
over the funds in such account, (iii) requiring the Borrower to provide
the Agent and the Lenders with such information regarding the
acquisition of such AP Qualifying Loans as the Required Lenders may
reasonably request. The Borrower, at its expense, shall from time to
time execute and deliver to the Agent or the Collateral Agent all such
assignments, certificates, supplemental documents, and financing
statements, and shall do all other acts or things, as the Agent may
reasonably request in order to more fully implement such procedures.
(v) The Borrower waives, to the extent permitted by law,
any right to require the Agent or any Lender to (i) proceed against any
Person, (ii) proceed against or exhaust any of the Collateral or pursue
its rights and remedies as against the Collateral in any particular
order or (iii) pursue any other remedy in its power.
(vi) The Agent on behalf of the Lenders may, but shall not
be obligated to, advance any sums or do any act or thing necessary to
uphold and enforce the lien and priority of, or the security intended
to be afforded by, any Pledged Qualifying Loans, including, without
limitation, payment of delinquent taxes or assessments and insurance
premiums. The Borrower shall provide any and all information required
by the Agent to administer this Agreement or collect on the Collateral.
All advances, charges, costs and expenses, including reasonable
attorneys fees,
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incurred or paid by the Agent in exercising any right, power or remedy
conferred by this Agreement, or in the enforcement hereof (or by any
Lender acting on instruction of the Required Lenders in the
enforcement hereof), together with interest thereon at the rate per
annum of 2% plus the Alternate Base Rate from the time of payment
until repaid, shall become a part of the Obligations.
(vii) Following the occurrence of a Default and the
acceleration of the Obligations the Agent shall be entitled to receive
and collect all sums payable to the Borrower in respect of the
Collateral and (a) the Agent, at the request of the Required Lenders,
may in its own name or in the name of the Borrower or otherwise,
demand, ▇▇▇ for, collect or receive any money or property at any time
payable or receivable on account of or in exchange for any of the
Collateral, (b) the Borrower shall receive and hold in trust for the
Lenders any amounts thereafter received by the Borrower upon or in
respect of any of the Collateral, advising the Agent as to the source
of such funds and, if the Agent so requests at the direction of the
Required Lenders, forthwith paying such amounts to the Agent, and (c)
any and all amounts so received and collected by the Agent either
directly or from the Borrower shall be deposited in the Settlement
Account.
8.8. Application of Proceeds. After a Default and acceleration of
the Obligations, the proceeds of any sale or enforcement of all or any part of
the Collateral pursuant to the Security Agreement and the balance of any moneys
in the Settlement Account shall be applied by the Agent:
FIRST, to the payment of all costs and expenses of such sale
or enforcement, including reasonable compensation to the Agent's
agents and counsel, and all expenses, liabilities and advances made or
incurred by the Agent or any Lender acting on instructions of the
Required Lenders in connection therewith;
SECOND, to the payment of all costs and expenses incurred by
the Collateral Agent under the Security Agreement;
THIRD, to the payment of the outstanding principal balance of,
and all accrued and unpaid interest on and Fees attributable to, all
Loans under this Agreement, ratably according to the amount so due to
each Lender, until such amounts are paid in full;
FOURTH, to the extent proceeds remain after application under
the preceding subparagraphs, to the payment of all remaining
Obligations, until such amounts are paid in full; and
FIFTH, to the payment to the Borrower, or to its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
The Agent shall have absolute discretion as to the time of application
of any such proceeds, moneys or balances in accordance with this Agreement. If
the proceeds of any such sale are insufficient to cover the costs and expenses
of such sale, as aforesaid, and the payment in full of the Obligations, the
Borrower shall remain liable for any deficiency.
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8.9. Preservation of Rights. No delay or omission of the
Lenders or the Agent to exercise any right under the Loan Documents shall
impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Loan notwithstanding the existence of
a Default or the inability of the Borrower to satisfy the conditions precedent
to such Loan shall not constitute any waiver or acquiescence. Any single or
partial exercise of any such right shall not preclude other or further exercise
thereof or the exercise of any other right, and no waiver, amendment or other
variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Lenders required
pursuant to Section 9.1, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Agent and the
Lenders until the Obligations have been paid in full.
ARTICLE IX
AMENDMENTS; WAIVERS; GENERAL PROVISIONS
9.1. Amendments and Waivers. Other than (a) Commitment
increases pursuant to Section 12.4 (which may be accomplished solely by the
Borrower, the Agent and the subject Lender) and (b) temporary waivers of
Collateral eligibility permitted pursuant to the definition of "Borrowing Base"
(which may be accomplished solely by the Agent), the Required Lenders (or the
Agent with the consent in writing of the Required Lenders) and the Borrower may
enter into agreements supplemental hereto for the purpose of adding or
modifying any provisions to the Loan Documents or changing in any manner the
rights of the Lenders or the Borrower hereunder or waiving any Default
hereunder; provided, however, that no such supplemental agreement shall,
without the consent of each Lender directly or indirectly affected thereby:
(i) Extend the final maturity of any Loan or Note or forgive all
or any portion of the principal amount thereof, or reduce the
rate or extend the time of payment of interest or fees thereon.
(ii) Reduce the percentage specified in the definition of Required
Lenders.
(iii) Extend the Termination Date, or reduce the amount of or extend
the payment date for the mandatory payments required under
Section 2.10, or increase the amount of the Commitment of any
Lender hereunder (other than in accordance with Section 12.4).
(iv) Amend this Section 9.1.
(v) Except as provided herein or in the Security Agreement,
release any Collateral.
(vi) Amend the definitions of "Eligible Title I Qualifying Loan,"
"Eligible Conventional HI/DC Qualifying Loan", "Borrowing Base"
or "Collateral Value".
(vii) Permit the Borrower to assign its rights under this Agreement
or amend or waive any restriction on the Borrower's ability to
assign its rights or obligations under any of the Loan
Documents.
(viii) Amend or waive any Lending Sublimits or Borrowing Base
Sublimits.
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(ix) Amend or waive any provision herein regarding the
indemnification of the Agent, the Collateral Agent or any
Lender.
(x) Amend or waive any provision herein regarding the allocation
among the Lenders of any payments or proceeds received by the
Agent hereunder.
No amendment of any provision of this Agreement relating to the Agent or the
Collateral Agent shall be effective without the written consent of the Agent or
the Collateral Agent, as the case may be. In addition, the consent of the
Collateral Agent shall be required for the effectiveness of any amendment
referred to in Section 9.1(iv), (v), (vi), (viii) and/or (ix) above. The Agent
may waive payment of the fee required under Section 12.3.2 without obtaining
the consent of any other party to this Agreement.
9.2. Survival of Representations. All representations and
warranties of the Borrower contained in this Agreement shall survive delivery of
the Notes and the making of the Loans herein contemplated.
9.3. Governmental Regulation. Anything contained in this Agreement
to the contrary notwithstanding, no Lender shall be obligated to extend credit
to the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.4. Taxes. Any taxes (excluding federal or state income taxes on
the overall net income of any Lender) or other similar assessments or charges
made by any governmental or revenue authority in respect of the Loan Documents
shall be paid by the Borrower, together with interest and penalties, if any.
9.5. Entire Agreement. The Loan Documents embody the entire
agreement and understanding among the Borrower, the Agent, the Collateral Agent
and the Lenders and supersede all prior agreements and understandings among the
Borrower, the Agent and the Lenders relating to the subject matter thereof,
other than the fee letter described in Section 2.7.3 and any other agreements
entered into in connection with the fees described in Sections 2.7.4 and 2.7.5.
9.6. Several Obligations; Benefits of this Agreement. The
respective obligations of the Lenders hereunder are several and not joint and no
Lender shall be the partner or agent of any other (except to the extent to which
the Agent is authorized to act as such). The failure of any Lender to perform
any of its obligations hereunder shall not relieve any other Lender from any of
its obligations hereunder. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns.
9.7. Expenses; Indemnification. The Borrower shall reimburse the
Agent and the Collateral Agent for any costs, internal charges (other than any
charges or allocations based on the salaries of or time spent by any
non-attorney employees of the Agent or Collateral Agent) and out-of-pocket
expenses (including attorneys' fees and time charges of attorneys for the Agent
and the Collateral Agent, which attorneys may be employees of the Agent or the
Collateral Agent) paid or incurred by the Agent or the Collateral Agent in
connection with the preparation, negotiation, execution, delivery, review,
amendment, modification, and administration of the Loan Documents. The Borrower
also agrees to reimburse the Agent, the Collateral Agent and the Lenders for any
costs, internal charges and out-of-pocket expenses (including attorneys' fees
and time charges of attorneys for the Agent, the Collateral Agent and the
Lenders, which attorneys may be employees of the Agent, the Collateral Agent or
the Lenders) paid or
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incurred by the Agent, the Collateral Agent or any Lender in connection with
the collection and enforcement of the Loan Documents. The Borrower further
agrees to indemnify the Agent, the Collateral Agent and each Lender, its
directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefor whether or not the Agent,
the Collateral Agent or any Lender is a party thereto) which any of them may
pay or incur arising out of or relating to this Agreement, the other Loan
Documents, the transactions contemplated hereby or the direct or indirect
application or proposed application of the proceeds of any Loan hereunder
except to the extent that they are determined by a court of competent
jurisdiction in a final and non-appealable order to have resulted from the
gross negligence or willful misconduct of the party seeking indemnification.
The obligations of the Borrower under this Section shall survive the
termination of this Agreement.
9.8. Nonliability of Lenders. The relationship between the Borrower
and the Lenders, the Agent and the Collateral Agent shall be solely that of
borrower and lender. Neither the Agent nor any Lender shall have any fiduciary
responsibilities to the Borrower. Neither the Agent, the Collateral Agent nor
any Lender undertakes any responsibility to the Borrower to review or inform the
Borrower of any matter in connection with any phase of the Borrower's business
or operations. The Borrower agrees that neither the Agent, the Collateral Agent
nor any Lender shall have liability to the Borrower (whether sounding in tort,
contract or otherwise) for losses suffered by the Borrower in connection with,
arising out of, or in any way related to, the transactions contemplated and the
relationship established by the Loan Documents, or any act, omission or event
occurring in connection therewith, unless it is determined by a court of
competent jurisdiction in a final and non-appealable order that such losses
resulted from the gross negligence or willful misconduct of the party from which
recovery is sought, or with respect to the liability of any Lender, from the
failure of such Lender to fund a Loan when required under the terms of this
Agreement. Neither the Agent, the Collateral Agent nor any Lender shall have
any liability with respect to, and the Borrower hereby waives, releases and
agrees not to ▇▇▇ for, any special, indirect or consequential damages suffered
by the Borrower in connection with, arising out of, or in any way related to the
Loan Documents or the transactions contemplated thereby.
9.9. Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.10. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
9.11. Numbers of Documents. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Agent with
sufficient counterparts so that the Agent may furnish one to each of the
Lenders.
9.12. Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles.
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9.13. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to its Affiliates and to other Lenders and
their respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to that Lender or to a Transferee, (iii) to regulatory
officials, (iv) to any Person as requested pursuant to or as required by law,
regulation, or legal process, (v) to any Person in connection with any legal
proceeding to which that Lender is a party, and (vi) permitted by Section 12.5.
9.14. Nonreliance. Each Lender hereby represents that it is not
relying on or looking to any margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve System) for the repayment of the Loans
provided for herein.
9.15. Disclosure. The Borrower and each Lender hereby (i)
acknowledge and agree that NBD Bank, an Affiliate of First Chicago, holds
certain Capitalized Leases with the Borrower and First Chicago and/or its
Affiliates from time to time may hold other investments in, make other loans to
or have other relationships with the Borrower, and (ii) waive any liability of
First Chicago or such Affiliate to the Borrower or any Lender, respectively,
arising out of or resulting from the existence of such investments, loans or
relationships or conflicts of interest related thereto other than liabilities
arising out of the gross negligence or willful misconduct of First Chicago or
its Affiliates.
ARTICLE X
THE AGENT AND THE COLLATERAL AGENT
10.1. Appointment; Nature of Relationship. The First National Bank
of Chicago is hereby appointed by the Lenders as the Agent hereunder and under
each other Loan Document, and each of the Lenders irrevocably authorizes the
Agent to act as the contractual representative of such Lender with the rights
and duties expressly set forth herein and in the other Loan Documents. First
Chicago National Processing Corporation is hereby appointed by the Lenders as
the Collateral Agent hereunder and under the Security Agreement, and each of the
Lenders irrevocably authorizes the Collateral Agent to act as the contractual
representative of such Lender with the rights and duties expressly set forth
herein and in the Security Agreement. The Agent and the Collateral Agent are
hereby authorized to enter into the Security Agreement on behalf of the Lenders
and all obligations of the Lenders thereunder shall be binding upon each Lender
as if such Lender had executed the Security Agreement. For purposes of this
Article X (other than Section 10.12), each reference to the term "Agent" shall
be deemed to be a collective reference to the Agent and the Collateral Agent.
The Agent agrees to act as such contractual representative upon the express
conditions contained in this Article X. Notwithstanding the use of the defined
term "Agent," it is expressly understood and agreed that the Agent shall have
not have any fiduciary responsibilities to any Lender by reason of this
Agreement or any other Loan Document and that the Agent is merely acting as the
representative of the Lenders with only those duties as are expressly set forth
in this Agreement and the other Loan Documents. In its capacity as the Lenders'
contractual representative, the Agent (i) does not hereby assume any fiduciary
duties to any of the Lenders, (ii) is a "representative" of the Lenders within
the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting
as an independent contractor, the rights and duties of which are limited to
those expressly set forth in this Agreement and the other Loan Documents.
Without limiting Section 10.3 below, each of the Lenders hereby agrees to assert
no claim against the Agent on any agency theory or any other theory of liability
for breach of fiduciary duty, all of which claims each Lender hereby waives.
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10.2. Powers. The Agent shall have and may exercise such powers
under the Loan Documents as are specifically delegated to the Agent by the terms
of each thereof, together with such powers as are reasonably incidental thereto.
The Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
for its or their own gross negligence or willful misconduct, or with respect to
the liability of any Lender, for the failure of such Lender to fund a Loan when
required under the terms of this Agreement.
10.4. No Responsibility for Loans, Recitals, Etc. Neither the Agent
nor any of its directors, officers, agents or employees shall be responsible for
or have any duty to ascertain, inquire into, or verify (i) any statement,
warranty or representation made in connection with any Loan Document or any
borrowing hereunder; (ii) the performance or observance of any of the covenants
or agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (iii) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered to the Agent; (iv) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other instrument or writing furnished in connection therewith; or (v) the
value, sufficiency, creation, perfection or priority of any interest in any
collateral security. The Agent shall have no duty to disclose to the Lenders
information that is not required to be furnished by the Borrower to the Agent at
such time, but is voluntarily furnished by the Borrower to the Agent (either in
its capacity as Agent or in its individual capacity).
10.5. Action on Instructions of Lenders. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder and
under any other Loan Document in accordance with written instructions signed by
the Required Lenders, and such instructions and any action taken or failure to
act pursuant thereto shall be binding on all of the Lenders and on all holders
of Notes. The Lenders hereby acknowledge that the Agent shall be under no duty
to take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement or any other Loan Document unless it shall be
requested in writing to do so by the Required Lenders. The Agent shall be fully
justified in failing or refusing to take any action hereunder and under any
other Loan Document unless it shall first be indemnified to its satisfaction by
the Lenders pro rata against any and all liability, cost and expense that it may
incur by reason of taking or continuing to take any such action.
10.6. Employment of Agents and Counsel. The Agent may execute any of
its duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be
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genuine and correct and to have been signed or sent by the proper person or
persons, and, in respect to legal matters, upon the opinion of counsel selected
by the Agent, which counsel may be employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The Lenders agree
to reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (i) for any amounts not
reimbursed by the Borrower for which the Agent is entitled to reimbursement by
the Borrower under the Loan Documents, (ii) for any other expenses incurred by
the Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents and
(iii) for any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of the Loan Documents or any other document
delivered in connection therewith or the transactions contemplated thereby, or
the enforcement of any of the terms thereof or of any such other documents,
provided that no Lender shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the Agent. The
obligations of the Lenders under this Section 10.8 shall survive payment of the
Obligations and termination of this Agreement.
10.9. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Unmatured Default
hereunder unless the Agent has received written notice from a Lender or the
Borrower referring to this Agreement describing such Default or Unmatured
Default and stating that such notice is a "notice of default". In the event
that the Agent receives such a notice, the Agent shall give prompt notice
thereof to the Lenders.
10.10. Rights as a Lender. In the event the Agent is a Lender, the
Agent shall have the same rights and powers hereunder and under any other Loan
Document as any Lender and may exercise the same as though it were not the
Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a
Lender, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Subsidiaries in which the Borrower or such
Subsidiary is not restricted hereby from engaging with any other Person. The
Agent, in its individual capacity, is not obligated to remain a Lender.
10.11. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements prepared by the Borrower and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
10.12. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. Upon any such resignation, the Required Lenders shall have
the right to appoint, on behalf of the Borrower and the Lenders, a successor
Agent. If no successor Agent shall have been so appointed by the
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Required Lenders within thirty days after the resigning Agent's giving notice
of its intention to resign, then the resigning Agent may appoint, on behalf of
the Borrower and the Lenders, a successor Agent. If the Agent has resigned and
no successor Agent has been appointed, the Lenders may perform all the duties
of the Agent hereunder and the Borrower shall make all payments in respect of
the Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders. No successor Agent shall be deemed to be appointed
hereunder until such successor Agent has accepted the appointment. Any such
successor Agent shall be a commercial bank having capital and retained earnings
of at least $250,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
resigning Agent. Upon the effectiveness of the resignation of the Agent, the
resigning Agent shall be discharged from its duties and obligations hereunder
and under the Loan Documents. After the effectiveness of the resignation of an
Agent, the provisions of this Article X shall continue in effect for the
benefit of such Agent in respect of any actions taken or omitted to be taken by
it while it was acting as the Agent hereunder and under the other Loan
Documents.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any rights
of the Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender to
or for the credit or account of the Borrower may be offset and applied toward
the payment of the Obligations owing to such Lender, whether or not the
Obligations, or any part hereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or
otherwise, has payment made to it upon its Loans (other than payments received
pursuant to Section 3.1, 3.2 or 3.4) in a greater proportion than that received
by any other Lender, such Lender agrees, promptly upon demand, to purchase a
portion of the Loans held by the other Lenders so that after such purchase each
Lender will hold its ratable proportion of Loans. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.
11.3. Custodial Accounts. The Borrower agrees that funds received
and held by the Borrower as custodian for any mortgage pools or Security which
are deposited into accounts with any Lender shall be clearly identified as
custodial accounts, and each Lender agrees that each provision of the foregoing
subsections of this Article XI shall not apply to such custodial accounts. The
Borrower shall not deposit any of its general funds in any custodial accounts or
otherwise commingle funds in any custodial accounts.
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ARTICLE XII
ASSIGNMENTS; PARTICIPATIONS; COMMITMENT INCREASES
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (ii) any assignment by any Lender must be made in compliance
with Section 12.3. Notwithstanding clause (ii) of this Section, any Lender may
at any time, without the consent of the Borrower or the Agent, assign all or any
portion of its rights under this Agreement and its Notes to a Federal Reserve
Bank; provided, however, that no such assignment to a Federal Reserve Bank shall
release the transferor Lender from its obligations hereunder. The Agent may
treat the payee of any Note as the owner thereof for all purposes hereof unless
and until such payee complies with Section 12.3 in the case of an assignment
thereof or, in the case of any other transfer, a written notice of the transfer
is filed with the Agent. Any assignee or transferee of a Note agrees by
acceptance thereof to be bound by all the terms and provisions of the Loan
Documents. Any request, authority or consent of any Person, who at the time of
making such request or giving such authority or consent is the holder of any
Note, shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
12.2. Participations.
12.2.1 Permitted Participants; Effect. Any Lender may,
in the ordinary course of its business and in accordance with applicable law, at
any time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Note held by such
Lender, any Commitment of such Lender or any other interest of such Lender under
the Loan Documents. In the event of any such sale by a Lender of participating
interests to a Participant, such Lender's obligations under the Loan Documents
shall remain unchanged, such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Lender shall remain
the holder of any such Note for all purposes under the Loan Documents, all
amounts payable by the Borrower under this Agreement shall be determined as if
such Lender had not sold such participating interests, and the Borrower and the
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole
right to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than any
amendment, modification or waiver with respect to any Loan or Commitment in
which such Participant has an interest which forgives principal, interest or
fees or reduces the interest rate or fees payable with respect to any such Loan
or Commitment, postpones any date fixed for any payment of principal of, or
interest or fees on, any such Loan or Commitment or releases any portion of
Collateral (other than as expressly permitted pursuant to the Loan Documents).
12.2.3. Benefit of Setoff. The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in Section 11.1
in respect of its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under the Loan Documents, provided that each
Lender shall retain the right of
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setoff provided in Section 11.1 with respect to the amount of participating
interests sold to each Participant. The Lenders agree to share with each
Participant, and each Participant, by exercising the right of setoff provided
in Section 11.1, agrees to share with each Lender, any amount received pursuant
to the exercise of its right of setoff, such amounts to be shared in accordance
with Section 11.2 as if each Participant were a Lender.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at
any time assign to one or more banks or other entities ("Purchasers") all or
any part of its rights and obligations under the Loan Documents. Such
assignment shall be substantially in the form of Exhibit "J" hereto or in such
other form as may be agreed to by the parties thereto. The consent of the
Borrower and the Agent shall be required prior to an assignment becoming
effective with respect to a Purchaser which is not a Lender or an Affiliate
thereof; provided, however, that if a Default has occurred and is continuing,
the consent of the Borrower shall not be required. Such consent shall not be
unreasonably withheld or delayed. Each such assignment which is for less than
the remaining amount of the assigning Lender's Commitment shall not leave the
assigning Lender with a Commitment of less than $10,000,000.
12.3.2. Effect; Effective Date. Upon (i) delivery to the
Agent of a notice of assignment, substantially in the form attached as
Annex "I" to Exhibit "J" hereto (a "Notice of Assignment"), together with any
consents required by Section 12.3.1, and (ii) payment of a $2,500 fee to the
Agent for processing such assignment, such assignment shall become effective on
the effective date specified in such Notice of Assignment. The Notice of
Assignment shall contain a representation by the Purchaser to the effect that
none of the consideration used to make the purchase of the Commitment and Loans
under the applicable assignment agreement are "plan assets" as defined under
ERISA and that the rights and interests of the Purchaser in and under the Loan
Documents will not be "plan assets" under ERISA. On and after the effective
date of such assignment, such Purchaser shall for all purposes be a Lender
party to this Agreement and any other Loan Document executed by the Lenders and
shall have all the rights and obligations of a Lender under the Loan Documents,
to the same extent as if it were an original party hereto, and no further
consent or action by the Borrower, the Lenders or the Agent shall be required
to release the transferor Lender with respect to the percentage of the
Aggregate Commitment and Loans assigned to such Purchaser. Upon the
consummation of any assignment to a Purchaser pursuant to this Section 12.3.2,
the transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that replacement Notes are issued to such transferor Lender and
new Notes or, as appropriate, replacement Notes, are issued to such Purchaser,
in each case in principal amounts reflecting their Commitment, as adjusted
pursuant to such assignment. In addition, within a reasonable time after the
effective date of any assignment, the Agent shall, and is hereby authorized and
directed to, revise Schedule "1" reflecting the revised commitments and
percentages of each of the Lenders and shall distribute such revised Schedule
"1" to each of the Lenders and the Borrower, whereupon such revised Schedule
shall replace the old Schedule and become part of this Agreement.
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12.4 Commitment Increases.
12.4.1. Increases to Aggregate Commitment. The
Borrower shall have the right to increase the Aggregate Commitment by obtaining
additional Commitments, either from one or more of the Lenders or another
lending institution provided that (A) the Agent has approved the identity of
any such new Lender, such approval not to be unreasonably withheld, (B) any
such new Lender assumes all of the rights and obligations of a "Lender"
hereunder, and (C) the procedure described in Section 12.4.2 has been complied
with, provided further that the Aggregate Commitment shall not at any time
exceed $90,000,000 without the approval of the Agent and all of the Lenders.
12.4.2. Procedure for Increases and Addition of New
Lenders. This Agreement permits certain increases in a Lender's Commitment and
the admission of new Lenders providing new Commitments, without any consents or
approvals from the other Lenders. Any amendment hereto for such an increase or
addition shall be in the form attached hereto as Exhibit "K" and shall only
require the written signatures of the Agent, the Borrower and the Lender(s)
being added or increasing their Commitment, subject only to the approval of all
Lenders if any such increase would cause the Aggregate Commitment to exceed
$90,000,000. In addition, within a reasonable time after the effective date of
any increase, the Agent shall, and is hereby authorized and directed to, revise
Schedule "1", reflecting such increase and shall distribute such revised
Schedule to each of the Lenders and the Borrower, whereupon such revised
Schedule shall replace the old Schedule and become part of this Agreement.
12.5. Dissemination of Information. The Borrower
authorizes each Lender to disclose to any Participant or Purchaser or any other
Person acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
Lender's possession concerning the creditworthiness of the Borrower and its
Subsidiaries; provided that each Transferee and prospective Transferee agrees
to be bound by Section 9.13 of this Agreement.
12.6. Tax Treatment. If any interest in any Loan Document
is transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 4.3.
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ARTICLE XIII
NOTICES
13.1. Notices. Except as otherwise permitted by Section 2.14 with
respect to borrowing notices, all notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, facsimile
transmission or similar writing) and shall be given to such party: (x) in the
case of the Borrower, the Agent or any Lender, at its address or facsimile
number set forth on the signature pages hereof, (y) in the case of the
Collateral Agent, at its address or facsimile number set forth on the signature
pages of the Security Agreement or (z) in the case of any party, such other
address or facsimile number as such party may hereafter specify for the purpose
by notice to the Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by facsimile transmission, when
transmitted to the facsimile number specified in this Section and confirmation
of receipt is received, (ii) if given by mail, 72 hours after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means, when delivered at the address
specified in this Section; provided that notices to the Agent under Article II
shall not be effective until received.
13.2. Change of Address. The Borrower, the Agent and any Lender may
each change the address for service of notice upon it by a notice in writing to
the other parties hereto.
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrower, the
Agent and the Lenders and each party has notified the Agent by telex or
telephone that it has taken such action.
ARTICLE XV
CHOICE OF LAW, CONSENT TO JURISDICTION, WAIVER OF JURY TRIAL
15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING
A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS,
BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE
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VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF
THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS
OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO,
ILLINOIS.
15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
{Rest of page intentionally left blank}
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IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.
MEGO MORTGAGE CORPORATION, a Delaware
corporation
By:
-------------------------------------------
Print Name:
-----------------------------------
Title:
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇ Fax:
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, President
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:
-------------------------------------------
Print Name:
-----------------------------------
Title:
----------------------------------------
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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BANK UNITED
By:
---------------------------------------
Print Name:
-------------------------------
Title:
------------------------------------
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Regional Director
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SCHEDULE "1"
COMMITMENTS AND COMMITMENT PERCENTAGES
PRIMARY
COMMITMENT PRIMARY COMMITMENT SWINGLINE
LENDER COMMITMENT PERCENTAGE COMMITMENT PERCENTAGE COMMITMENT
------ ---------- ---------- ---------- ---------- ----------
The First National $20,000,000 50.0000% $15,000,000 42.8571% $5,000,000
Bank of Chicago
Bank United $20,000,000 50.0000% $20,000,000 57.1429% -0-
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SCHEDULE "2"
LIST OF APPROVED INVESTORS
Greenwich Capital Markets, Inc. (1, 2, 3)
Greenwich Capital Financial Products, Inc.(1, 2, 3)
BankBoston, N.A. (1)
Atlantic Bank (1)
Federal National Mortgage Association (1)
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SCHEDULE "3"
SUBSIDIARIES AND OTHER INVESTMENTS
(See Sections 5.8 and 6.14)
Investment
Excluded Owned Amount of Percent Jurisdiction of
In By Investment Ownership Organization or Included
---------- ----- ---------- ---------- --------------- -----------
Mego Mortgage Borrower $3,000.00 100% Delaware Excluded
Home Loan
Acceptance
Corporation
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SCHEDULE "4"
INDEBTEDNESS AND LIENS
(See Sections 5.14, 6.11 and 6.15)
Maturity and
Indebtedness Indebtedness Property Amount of
Incurred By Owed To Encumbered (If Any) Indebtedness
----------- ------- ------------------- -------------
Mego Bank Boston, Specifically Up to $30,000,000
Mortgage N.A., (formerly Pledged Unsold Matures August, 1997,
Corporation known as The Loan To be satisfied at the
First National Inventory closing of this
Bank of Boston transaction.
Mego Greenwich Specific Mortgage Up to $11,000,000
Mortgage Capital Related Securities Matures in May, 1988
Corporation Markets, Inc.
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SCHEDULE "5"
BORROWER'S UNDERWRITING STANDARDS
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SCHEDULE "6"
BORROWER'S PROPERTY VALUATION PROCEDURES
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SCHEDULE "7"
DESCRIPTION OF TRUSTEE'S RIGHT TO TERMINATE
THE BORROWER'S RIGHTS TO SERVICE CERTAIN SECURITIZATIONS
(See Section 5.12)
Description of Trustee's Right to Terminate the Borrower's Rights to Service
First Securitization - Mego Mortgage FHA Title I Loan Trust 1996-1.
Pooling and servicing agreements relating to the Borrower's securitization
transactions contain provisions with respect to the maximum permitted loan
delinquency rates and loan default rates, which, if exceeded, would allow the
termination of the Borrower's right to service the related loans. At present,
the delinquency rates on the pools of loans sold in the March 1996
securitization transaction, Mego Mortgage FHA Title I Loan Trust 1996-1, and
the August 1996 securitization, Mego Mortgage Title I Loan Trust 1996-2,
exceeds the permitted limit set forth in the related pooling and servicing
agreement. Accordingly, this condition could result in the termination of the
Borrower's servicing rights with respect to those pools of loans by the
trustee, the master servicer or the insurance company providing credit
enhancement for that transaction. Although the insurance company has indicated
that it, and to its knowledge, the trustee and the master servicer have no
present intention to terminate the Borrower's servicing rights related to those
pools of loans, no assurance can be given that one or more of such parties will
not exercise its right to terminate. In the event of such termination, there
would be a material adverse effect on the valuation of the Borrower's mortgage
servicing rights and the results of operations in the amount of mortgage
servicing rights on the date of termination.
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SCHEDULE "8"
DESCRIPTION OF EXISTING AGREEMENTS WITH AFFILIATES
(See Section 6.16)
1) Services and Consulting Agreement dated as of September 1, 1996
between Borrower and Preferred Equities Corporation.
2) Loan Program Sub-Servicing Agreement entered into as of September 1,
1996 between Borrower and Preferred Equities Corporation, as amended
by letter agreement dated December 1, 1996.
3) Tax Allocation and Indemnity Agreement between Borrower and Mego
Financial Corp. dated as of Nov. 1996.
4) Agreement between Borrower and Mego Financial Corp. dated Nov. 1996 in
which Borrower agrees to take no action which could reduce Mego
Financial Corp.'s ownership of Borrower below 80% without the consent
of Mego Financial Corp.
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SCHEDULE "9"
FORM OF DELINQUENCY, DEFAULT AND LOSS REPORT
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EXHIBIT "A"
NOTE
June 20, 1997
MEGO MORTGAGE CORPORATION, a Delaware corporation (the "Borrower"),
promises to pay to the order of _________________________________ (the
"Lender") the lesser of the Lender's Commitment under the Agreement (as
hereinafter defined) or the aggregate unpaid principal amount of all Loans made
by the Lender to the Borrower pursuant to Article II of the Agreement, in
immediately available funds at the main office of The First National Bank of
Chicago in Chicago, Illinois, as Agent, together with interest on the unpaid
principal amount hereof at the rates and on the dates set forth in the
Agreement. The Borrower shall pay the principal of and any accrued and unpaid
interest on the Loans in full on the Termination Date, unless payment is
required or permitted earlier pursuant to the terms of the Agreement.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Credit Agreement dated as of June 20, 1997 (which, as it
may be amended or modified and in effect from time to time, is herein called
the "Agreement"), among the Borrower, the lenders party thereto, including the
Lender, and The First National Bank of Chicago, as Agent, to which Agreement
reference is hereby made for a statement of the terms and conditions governing
this Note, including the terms and conditions under which this Note may be
prepaid or its maturity date accelerated. This Note is secured pursuant to the
Security Agreement, all as more specifically described in the Agreement, and
reference is made thereto for a statement of the terms and provisions thereof.
Capitalized terms used herein and not otherwise defined herein are used with
the meanings attributed to them in the Agreement.
This Note is to be governed by and construed and enforced in
accordance with the laws of the State of Illinois.
MEGO MORTGAGE CORPORATION, a Delaware
corporation
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
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SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF MEGO MORTGAGE CORPORATION,
DATED JUNE 20, 1997
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
---- ---------- ----------- ------------ -------
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EXHIBIT "B"
FORM OF OPINION
June 20, 1997
The Agent and the Lenders who are parties to the
Credit Agreement described below.
Gentlemen/Ladies:
We are counsel for Mego Mortgage Corporation (the "Borrower"), and
have represented the Borrower in connection with its execution and delivery of
a Credit Agreement dated as of June 20, 1997 (the "Agreement") among the
Borrower, the Lenders named therein, and The First National Bank of Chicago, as
Agent, and providing for Advances in an aggregate principal amount not
exceeding $40,000,000 at any one time outstanding. All capitalized terms used
in this opinion and not otherwise defined herein shall have the meanings
attributed to them in the Agreement.
We have examined the Borrower's certificate of incorporation, by-laws,
resolutions, the Loan Documents, the Uniform Commercial Code financing
statements (the "Financing Statements") relating to the Loan Documents and such
other matters of fact and law which we deem necessary in order to render this
opinion. Based upon the foregoing, it is our opinion that:
l. The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of its state of incorporation and
has all requisite corporate authority to conduct its business in each
jurisdiction in which its business is conducted, to the extent failure to
maintain such authority would have a material adverse effect on the business of
the Borrower.
2. The execution and delivery of the Loan Documents by the
Borrower and the performance by the Borrower of the Obligations have been duly
authorized by all necessary corporate action and proceedings on the part of the
Borrower and will not:
(a) require any consent of the Borrower's shareholders;
(b) violate any law, rule or regulation, binding on the
Borrower or the Borrower's certificate of incorporation or by-laws or
any order, writ, judgment, injunction, decree, award, indenture,
instrument or agreement binding upon the Borrower of which we are
aware (except that we express no opinion as to any law, rule,
regulation, order, writ, judgment, injunction, decree, award,
indenture or agreement the violation of which would not have a
material adverse effect on the Borrower); or
(c) except as created by the Loan Documents, result in,
or require, the creation or imposition of any Lien pursuant to the
provisions of any indenture, instrument or agreement binding upon the
Borrower of which we are aware.
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3. Upon the execution of the Loan Documents by [Authorized
Officers], the Loan Documents shall be duly executed and delivered by the
Borrower and constitute legal, valid and binding obligations of the Borrower
enforceable in accordance with their terms except to the extent the enforcement
thereof may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and subject also to the availability
of equitable remedies if equitable remedies are sought.
4. To the best of our knowledge, there is no litigation or
proceeding against the Borrower which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
5. No approval, authorization, consent, adjudication or order of
any federal or Delaware governmental authority, which has not been obtained by
the Borrower, is required to be obtained by the Borrower in connection with the
execution and delivery of the Loan Documents, the borrowings under the
Agreement or in connection with the payment by the Borrower of the Obligations.
6. The Obligations constitute senior indebtedness which is
entitled to the benefits of the subordination provisions of all outstanding
Subordinated Notes.
7. The provisions of the Collateral Documents are sufficient to
create in favor of the Lenders a security interest in all right, title and
interest of the Borrower in those items and types of collateral described in
the Collateral Documents in which a security interest may be created under
Article 9 of the Uniform Commercial Code as in effect in Illinois. Upon the
execution of the Financing Statements by [Authorized Officers], the Financing
Statements shall be duly executed by the Borrower. The description of the
collateral set forth in said financing statements is sufficient to perfect a
security interest in the items and types of collateral described therein in
which a security interest may be perfected by the filing of a financing
statement under the Uniform Commercial Code as in effect in each state
indicated in Exhibit A hereto. Such filings, together with the payment of any
required filing fees, are sufficient to perfect the security interest created
by the Collateral Documents in all right, title and interest of the Borrower in
those items and types of collateral described in the Collateral Documents in
which a security interest may be perfected by the filing of a financing
statement under the Uniform Commercial Code in such states, except that we
express no opinion as to personal property affixed to real property in such
manner as to become a fixture under the laws of any state in which the
collateral may be located and we call your attention to the fact that the
Lenders' security interest in certain of such collateral may not be perfected
by filing financing statements under the Uniform Commercial Code.
This opinion may be relied upon by the Agent, the Lenders and their
participants, assignees and other transferees.
Very truly yours,
-----------------------------------
NOTE: Counsel's opinion will be limited to Federal law the General
Corporation Law of Delaware and Florida law except counsel will
opine as to UCC in Illinois and for purposes of the opinion in
paragraph 3 counsel will assume substantive law or Illinois is
substantially similar to Florida law. In addition, as to
factual matters counsel will rely on representations of the
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Borrower. Also, counsel's opinion will contain its
standard qualifications and assumptions. For purposes of the
opinion in paragraph 2(b) counsel will assume Bank of Boston
has been paid and has released existing liens.
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EXHIBIT "C"
FORM OF GREENWICH TRI-PARTY AGREEMENT
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EXHIBIT "D"
COLLATERAL TRANSMITTAL
1. CUSTOMER NAME _____________________________________________
2. LOAN NUMBER _______________________________________________
3. MORTGAGOR _________________________________________________
SURNAME ONLY
4. AP STATUS CODE ____________________________________________
5. DEPOSIT DATE ______________________________________________
6. ORIGINAL NOTE AMOUNT $_____________________________________
7. OUTSTANDING PRINCIPAL BALANCE $____________________________
8. ACQUISITION COST $_________________________________________
9. TAKE-OUT VALUE $___________________________________________
10. NOTE DATE _________________________________________________
11. NOTE RATE _________________________________________________
12. LOAN TYPE _________________________________________________
13. LOAN LTV __________________________________________________
(FOR SECURED CONVENTIONAL ONLY)
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EXHIBIT "E"
AGREEMENT TO PLEDGE
SECURITY AGREEMENT AS PROVIDED FOR BY
THE UNIFORM COMMERCIAL CODE OF ILLINOIS
Mego Mortgage Corporation (the "Borrower") pursuant to that certain
Credit Agreement dated as of April _____, 1997 (as amended, extended and
replaced from time to time, the "Credit Agreement") among the Borrower, The
First National Bank of Chicago, as agent, and certain other Lenders, and
pursuant to that certain Security and Collateral Agency Agreement among the
Borrower, the Agent, the Lenders and First Chicago National Processing
Corporation (the "Collateral Agent") for new value this day received, and as
security for the payment of any and all indebtedness and obligations of the
Borrower under the Credit Agreement, hereby creates and grants to the
Collateral Agent for the benefit of the lenders under the Credit Agreement a
security interest in and to the mortgage loans identified as AP Qualifying
Loans by the inclusion of an "AP Status Code" on the Borrower's Collateral
Transmittals on the date indicated below which provide the information
concerning the AP Qualifying Loans required by the Credit Agreement. All
capitalized terms used herein shall have the meanings given to them in the
Credit Agreement.
MEGO MORTGAGE CORPORATION, a Delaware
corporation
By:
------------------------------------
Its:
-----------------------------------
Dated:_______________, 199_.
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EXHIBIT "F"
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain
Credit Agreement dated as of June 20, 1997 (as amended, modified, renewed or
extended from time to time, the "Agreement") among the Mego Mortgage
Corporation (the "Borrower"), the lenders party thereto and The First National
Bank of Chicago, as Agent for the Lenders. Unless otherwise defined herein,
capitalized terms used in this Compliance Certificate have the meanings
ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _____________________ of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Borrower and its Subsidiaries during the
accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which constitutes
a Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and
computations evidencing the Borrower's compliance with certain covenants of the
Agreement, all of which data and computations are true, complete and correct.
5. Schedule II attached hereto sets forth the various reports and
deliveries which are required under the Credit Agreement, the Security
Agreement and the other Loan Documents and the status of compliance.
Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
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---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
The foregoing certifications, together with the computations set forth
in Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this _____ day of
______________, 19___.
----------------------------------
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SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of _________, 199_ with
Provisions of ______ and ________ of
the Agreement
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SCHEDULE II TO COMPLIANCE CERTIFICATE
Reports and Deliveries
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EXHIBIT "G"
BORROWING BASE CERTIFICATE
Reference is made to that certain Credit Agreement (the "Credit
Agreement"), among MEGO MORTGAGE CORPORATION (the "Borrower"), the lenders
named therein (the "Lenders") and The First National Bank of Chicago, as agent
for the Lenders, dated as of June 20, 1997. Capitalized terms not otherwise
defined herein are used with the same meanings as in the Credit Agreement.
Borrowing Base:(1)
--------------
Collateral Value of the following Eligible Collateral:
1. Eligible Title I Qualifying Loans $
-------------------------------------------
Total times .97 $
-------------------------------------------
2. Eligible Conventional HI/DC Qualifying Loans $
-------------------------------------------
(a) Non-HLTV Loans with FICO scores of over 620 $
-------------------------------------------
(b) HLTV Loans with FICO scores of over 620 $
-------------------------------------------
(c) Non-HLTV Loans with FICO scores of 600-620 $
-------------------------------------------
(d) HLTV Loans with FICO scores of 600-620 $
-------------------------------------------
(e) 6% of Aggregate Commitment $
-------------------------------------------
(f) Total (sum of (i) items (a) and (b) and (ii) lower $
of (A) the sum of items (c) and (d) or (B) item (e)) -------------------------------------------
times .95
3. Excess of Unsecured Title I Qualifying Loans $
over 5% of Aggregate Commitment -------------------------------------------
over 5% of Aggregate Commitment
times .97
4. Excess of Unsecured Conventional HI/DC Qualifying $
Loans over 5% of Aggregate Commitment -------------------------------------------
times .95
__________________________________
(1) Each category excludes any Collateral which is Ineligible
Collateral as of the date hereof, except for ineligibility due
to delinquencies which is addressed on an aggregated basis by an
adjustment to the Borrowing Base.
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Borrowing Base from Eligible Collateral $
(sum of Items 1 and 2(f) less Items 3 and 4) -------------------------------------------
Add: Unrestricted Balance in Settlement Account $
in excess of $100,000* -------------------------------------------
Less: Uncleared Loan Funding Checks $
-------------------------------------------
Reconciling Items: Timing Difference
Loan Detail Difference
--------------------------------------------
BORROWING BASE
============================================
COVERAGE REQUIREMENT:
Advances $
-------------------------------------------
EXCESS OF BORROWING BASE OVER
COVERAGE REQUIREMENT $
-------------------------------------------
* After deduction of proceeds from disposition of Eligible Collateral
included in Borrowing Base calculation for the Business Day such
proceeds are received, to avoid duplication.
Certification: To the best of the knowledge and belief (after
reasonable investigation) of the officer of the Borrower executing this
Certificate, the Borrower hereby certifies to The First National Bank of
Chicago for the benefit of lenders under the Credit Agreement that: (a) the
above information is, and the computations are accurate and complete and in
accordance with the requirements of the Credit Agreement, and (b) as of the
date hereof, (1) all representations and warranties of the Borrower set forth
in the Credit Agreement are accurate and complete, (2) there does not exist a
Default or an Unmatured Default under the Credit Agreement, and (3) the
Borrower has given written notice to The First National Bank of Chicago of any
Default or Unmatured Default if such now exists under the Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Borrowing Base
Certificate to be executed and delivered by its duly authorized officer this
___ day of __________, 199_.
MEGO MORTGAGE CORPORATION
By:
----------------------------------
Name:
Title:
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EXHIBIT "H"
FORM OF PEC TRI-PARTY AGREEMENT
-93-
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EXHIBIT "I"
SECURITY AND COLLATERAL AGENCY AGREEMENT
-94-
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EXHIBIT "J"
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
__________________________ (the "Assignor") and _________________ (the
"Assignee") is dated as of _________________, 19__. The parties hereto agree
as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit
Agreement (which, as it may be amended, modified, renewed or extended from time
to time is herein called the "Credit Agreement") described in Item 1 of
Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used herein and
not otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and
assigns to the Assignee, and the Assignee hereby purchases and assumes from the
Assignor, an interest in and to the Assignor's rights and obligations under the
Credit Agreement such that after giving effect to such assignment the Assignee
shall have purchased pursuant to this Assignment Agreement the percentage
interest specified in Item 3 of Schedule 1 of all outstanding rights and
obligations under the Credit Agreement relating to the facilities listed in
Item 3 of Schedule 1 and the other Loan Documents. The aggregate Commitment
(or Loans, if the applicable Commitment has been terminated) purchased by the
Assignee hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment
Agreement (the "Effective Date") shall be the later of the date specified in
Item 5 of Schedule 1 or two Business Days (or such shorter period agreed to by
the Agent) after a Notice of Assignment substantially in the form of Annex "I"
attached hereto has been delivered to the Agent. Such Notice of Assignment
must include any consents required to be delivered to the Agent by Section
12.3.1 of the Credit Agreement. In no event will the Effective Date occur if
the payments required to be made by the Assignee to the Assignor on the
Effective Date under Sections 4 and 5 hereof are not made on the proposed
Effective Date. The Assignor will notify the Assignee of the proposed
Effective Date no later than the Business Day prior to the proposed Effective
Date. As of the Effective Date, (i) the Assignee shall have the rights and
obligations of a Lender under the Loan Documents with respect to the rights and
obligations assigned to the Assignee hereunder and (ii) the Assignor shall
relinquish its rights and be released from its corresponding obligations under
the Loan Documents with respect to the rights and obligations assigned to the
Assignee hereunder.
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the
Assignee shall be entitled to receive from the Agent all payments of principal,
interest and fees with respect to the interest assigned hereby. The Assignee
shall advance funds directly to the Agent with respect to all Loans and
reimbursement payments made on or after the Effective Date with respect to the
interest assigned hereby. [In consideration for the sale and assignment of
Loans hereunder, (i) the Assignee shall pay the Assignor, on the Effective
Date, an amount equal to the principal amount of the portion of all Alternate
Base Rate Loans assigned to the Assignee hereunder and (ii) with respect to
each Fixed Rate Loan made by the Assignor and assigned to the Assignee
hereunder which is outstanding on the Effective Date, (a) on the last day of
the Interest Period therefor or (b) on such earlier date agreed to by the
Assignor and the Assignee or (c) on the date on which any such Fixed Rate Loan
either becomes due (by acceleration or otherwise) or is
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prepaid (the date as described in the foregoing clauses (a), (b) or (c) being
hereinafter referred to as the "Payment Date"), the Assignee shall pay the
Assignor an amount equal to the principal amount of the portion of such Fixed
Rate Loan assigned to the Assignee which is outstanding on the Payment Date.
If the Assignor and the Assignee agree that the Payment Date for such Fixed
Rate Loan shall be the Effective Date, they shall agree to the interest rate
applicable to the portion of such Loan assigned hereunder for the period from
the Effective Date to the end of the existing Interest Period applicable to
such Fixed Rate Loan (the "Agreed Interest Rate") and any interest received by
the Assignee in excess of the Agreed Interest Rate shall be remitted to the
Assignor. In the event interest for the period from the Effective Date to but
not including the Payment Date is not paid by the Borrower with respect to any
Fixed Rate Loan sold by the Assignor to the Assignee hereunder, the Assignee
shall pay to the Assignor interest for such period on the portion of such Fixed
Rate Loan sold by the Assignor to the Assignee hereunder at the applicable rate
provided by the Credit Agreement. In the event a prepayment of any Fixed Rate
Loan which is existing on the Payment Date and assigned by the Assignor to the
Assignee hereunder occurs after the Payment Date but before the end of the
Interest Period applicable to such Fixed Rate Loan, the Assignee shall remit to
the Assignor the excess of the prepayment penalty paid with respect to the
portion of such Fixed Rate Loan assigned to the Assignee hereunder over the
amount which would have been paid if such prepayment penalty was calculated
based on the Agreed Interest Rate. The Assignee will also promptly remit to
the Assignor (i) any principal payments received from the Agent with respect to
Fixed Rate Loans prior to the Payment Date and (ii) any amounts of interest on
Loans and fees received from the Agent which relate to the portion of the Loans
assigned to the Assignee hereunder for periods prior to the Effective Date, in
the case of Alternate Base Rate Loans or fees, or the Payment Date, in the case
of Fixed Rate Loans, and not previously paid by the Assignee to the Assignor.]*
In the event that either party hereto receives any payment to which the other
party hereto is entitled under this Assignment Agreement, then the party
receiving such amount shall promptly remit it to the other party hereto.
*Each Assignor may insert its standard payment provisions in lieu of the
payment terms included in this Exhibit.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the
Assignor a fee on each day on which a payment of interest or facility fees is
made under the Credit Agreement with respect to the amounts assigned to the
Assignee hereunder (other than a payment of interest or facility fees for the
period prior to the Effective Date or, in the case of Fixed Rate Loans, the
Payment Date, which the Assignee is obligated to deliver to the Assignor
pursuant to Section 4 hereof). The amount of such fee shall be the difference
between (i) the interest or fee, as applicable, paid with respect to the
amounts assigned to the Assignee hereunder and (ii) the interest or fee, as
applicable, which would have been paid with respect to the amounts assigned to
the Assignee hereunder if each interest rate was ___ of 1% less than the
interest rate paid by the Borrower or if the facility fee was ___ of 1% less
than the facility fee paid by the Borrower, as applicable. In addition, the
Assignee agrees to pay ___% of the recordation fee required to be paid to the
Agent in connection with this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor
nor any of its officers, directors, employees, agents or attorneys shall be
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responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrower or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Borrower or any guarantor, (iv) the performance of or compliance with any of
the terms or provisions of any of the Loan Documents, (v) inspecting any of the
Property, books or records of the Borrower, (vi) the validity, enforceability,
perfection, priority, condition, value or sufficiency of any collateral
securing or purporting to secure the Loans or (vii) any mistake, error of
judgment, or action taken or omitted to be taken in connection with the Loans
or the Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms
that it has received a copy of the Credit Agreement, together with copies of
the financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Lender and based on such documents and information at it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents, (iii) appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under the
Loan Documents as are delegated to the Agent by the terms thereof, together
with such powers as are reasonably incidental thereto, (iv) agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of the Loan Documents are required to be performed by it as a Lender, (v)
agrees that its payment instructions and notice instructions are as set forth
in the attachment to Schedule 1, (vi) confirms that none of the funds, monies,
assets or other consideration being used to make the purchase and assumption
hereunder are "plan assets" as defined under ERISA and that its rights,
benefits and interests in and under the Loan Documents will not be "plan
assets" under ERISA, [and (viii) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying that the Assignee is entitled
to receive payments under the Loan Documents without deduction or withholding
of any United States federal income taxes].*
*to be inserted if required by the Credit Agreement.
8. INDEMNITY. The Assignee agrees to indemnify and hold the
Assignor harmless against any and all losses, costs and expenses (including,
without limitation, reasonable attorneys' fees) and liabilities incurred by the
Assignor in connection with or arising in any manner from the Assignee's
non-performance of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the
Assignee shall have the right pursuant to Section 12.3.1 of the Credit
Agreement to assign the rights which are assigned to the Assignee hereunder to
any entity or person, provided that (i) any such subsequent assignment does not
violate any of the terms and conditions of the Loan Documents or any law, rule,
regulation, order, writ, judgment, injunction or decree and that any consent
required under the terms of the Loan Documents has been obtained and (ii)
unless the prior written consent of the Assignor is obtained, the Assignee is
not thereby released from its obligations to the Assignor hereunder, if any
remain unsatisfied, including, without limitation, its obligations under
[Sections 4, 5 and 8] hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
Aggregate Commitment occurs between the date of this Assignment Agreement and
the Effective Date, the percentage
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interest specified in Item 3 of Schedule 1 shall remain the same, but the
dollar amount purchased shall be recalculated based on the reduced Aggregate
Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached
Notice of Assignment embody the entire agreement and understanding between the
parties hereto and supersede all prior agreements and understandings between
the parties hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by
the internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment
Agreement in the manner set forth in the Credit Agreement. For the purpose
hereof, the addresses of the parties hereto (until notice of a change is
delivered) shall be the address set forth in the attachment to Schedule 1.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By:
-------------------------------
Title:
-------------------------------
-------------------------------
-------------------------------
[NAME OF ASSIGNEE]
By:
-------------------------------
Title:
-------------------------------
-------------------------------
-------------------------------
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SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
2. Date of Assignment Agreement: , 19
------------- --
3. Amounts (As of Date of Item 2 above):
Facility Facility Facility Facility
1* 2* *3 *4
-------- -------- --------- --------
a. Total of Commitments
(Loans)** under
Credit Agreement $ $ $ $
-------- -------- ---------
b. Assignee's Percentage
of each Facility purchased
under the Assignment
Agreement*** % % % %
-------- -------- --------- --------
c. Amount of Assigned Share in
each Facility purchased under
the Assignment
Agreement $ $ $ $
--------- -------- ---------
4. Assignee's Aggregate (Loan
Amount)** Commitment Amount
Purchased Hereunder: $
5. Proposed Effective Date:
---------
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
------------------------------ ---------------------------------
Title: Title:
--------------------------- ------------------------------
* Insert specific facility names per Credit Agreement
** If a Commitment has been terminated, insert outstanding Loans in
place of Commitment
*** Percentage taken to 10 decimal places
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Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignor and the Assignee
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ANNEX "I"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
____________________, 19__
To: [NAME OF BORROWER]*
-------------------
-------------------
[NAME OF AGENT]
-------------------
-------------------
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit
Agreement") described in Item 1 of Schedule 1 attached hereto ("Schedule 1").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and
delivered to the Borrower and the Agent pursuant to Section 12.3.2 of the
Credit Agreement.
3. The Assignor and the Assignee have entered into an
Assignment Agreement, dated as of ___________, 19__ (the "Assignment"),
pursuant to which, among other things, the Assignor has sold, assigned,
delegated and transferred to the Assignee, and the Assignee has purchased,
accepted and assumed from the Assignor the percentage interest specified in
Item 3 of Schedule 1 of all outstandings, rights and obligations under the
Credit Agreement relating to the facilities listed in Item 3 of Schedule 1.
The Effective Date of the Assignment shall be the later of the date specified
in Item 5 of Schedule 1 or two Business Days (or such shorter period as agreed
to by the Agent) after this Notice of Assignment and any consents and fees
required by Sections 12.3.1 and 12.3.2 of the Credit Agreement have been
delivered to the Agent, provided that the Effective Date shall not occur if any
condition precedent agreed to by the Assignor and the Assignee has not been
satisfied.
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*To be included only if consent must be obtained from the Borrower pursuant to
Section 12.3.1 of the Credit Agreement.
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4. The Assignor and the Assignee hereby give to the Borrower
and the Agent notice of the assignment and delegation referred to herein. The
Assignor will confer with the Agent before the date specified in Item 5 of
Schedule 1 to determine if the Assignment Agreement will become effective on
such date pursuant to Section 3 hereof, and will confer with the Agent to
determine the Effective Date pursuant to Section 3 hereof if it occurs
thereafter. The Assignor shall notify the Agent if the Assignment Agreement
does not become effective on any proposed Effective Date as a result of the
failure to satisfy the conditions precedent agreed to by the Assignor and the
Assignee. At the request of the Agent, the Assignor will give the Agent
written confirmation of the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or
before the Effective Date the processing fee of $2,500 required by Section
12.3.2 of the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the
Assignor and the Assignee request and direct that the Agent prepare and cause
the Borrower to execute and deliver new Notes or, as appropriate, replacements
notes, to the Assignor and the Assignee. The Assignor and, if applicable, the
Assignee each agree to deliver to the Agent the original Note received by it
from the Borrower upon its receipt of a new Note in the appropriate amount.
7. The Assignee advises the Agent that notice and payment
instructions are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of
the funds, monies, assets or other consideration being used to make the
purchase pursuant to the Assignment are "plan assets" as defined under ERISA
and that its rights, benefits, and interests in and under the Loan Documents
will not be "plan assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent
under the Loan Documents in accordance with the terms thereof. The Assignee
acknowledges that the Agent has no duty to supply information with respect to
the Borrower or the Loan Documents to the Assignee until the Assignee becomes a
party to the Credit Agreement.*
*May be eliminated if Assignee is a party to the Credit Agreement prior to the
Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: By:
------------------------------- ------------------------------
Title: Title:
---------------------------- ---------------------------
ACKNOWLEDGED [AND CONSENTED TO] ACKNOWLEDGED [AND CONSENTED TO]
BY [NAME OF AGENT] BY [NAME OF BORROWER]
By: By:
------------------------------- ------------------------------
Title: Title:
--------------------------- ---------------------------
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[Attach photocopy of Schedule 1 to Assignment]
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EXHIBIT "K"
FORM OF AMENDMENT FOR AN INCREASED OR NEW COMMITMENT
This AMENDMENT is made as of the _____ day of __________, 19___ by and
among Mego Mortgage Corporation (the "Borrower"), The First National Bank of
Chicago, as agent under the "Credit Agreement" (as defined below) (the "Agent")
and _________________________ (the "Supplemental Lender").
The Borrower, the Agent and certain other Lenders, as described
therein, are parties to a Credit Agreement dated as of June 20, 1997 (the
"Credit Agreement"). All terms used herein and not otherwise defined shall
have the same meaning given to them in the Credit Agreement.
Pursuant to Section 12.4.1 of the Credit Agreement, the Borrower has
the right to increase the Aggregate Commitment by obtaining additional
Commitments upon satisfaction of certain conditions. Pursuant to Section
12.4.2 of the Credit Agreement, this Amendment requires only the signature of
the Borrower, the Agent and the Supplemental Lender so long as the Aggregate
Commitment is not increased above $90,000,000.
The Supplemental Lender is either (a) an existing Lender which is
increasing its Commitment, or (b) a new Lender which is a lending institution
whose identity the Agent will approve by its signature below.
In consideration of the foregoing, such Supplemental Lender, from and
after the date hereof shall have a Commitment of $_______________, consisting
of a Primary Commitment of $__________ and a Swingline Commitment of
$____________ resulting in a new Aggregate Commitment of $_______________ as of
the date hereof, and if it is a new Lender, the Supplemental Lender hereby
assumes all of the rights and obligations of a Lender under the Credit
Agreement.
The Borrower has executed and delivered to the Supplemental Lender as
of the date hereof new or amended and restated Notes in the form attached to
the Credit Agreement as Exhibit A to evidence the new or increased Commitment
of the Supplemental Lender.
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IN WITNESS WHEREOF, the Agent, the Borrower and the Supplemental
Lender have executed this Amendment as of the date shown above.
MEGO MORTGAGE CORPORATION
By:
-----------------------------------
Its
---------------------------
By:
-----------------------------------
Its
---------------------------
THE FIRST NATIONAL BANK OF CHICAGO, as
Agent
By:
-----------------------------------
Its
---------------------------
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EXHIBIT "L"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To The First National Bank of Chicago,
as Agent (the "Agent") under the Credit Agreement
Described Below.
Re: Credit Agreement, dated June 20, 1997 (as the same may be amended or
modified, the "Credit Agreement"), among Mego Mortgage Corporation
(the "Borrower"), the Lenders named therein and the Agent.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned thereto in the Credit Agreement.
The Agent is specifically authorized and directed to act upon the
following standing money transfer instructions with respect to the proceeds of
Advances or other extensions of credit from time to time until receipt by the
Agent of a specific written revocation of such instructions by the Borrower,
provided, however, that the Agent may otherwise transfer funds as hereafter
directed in writing by the Borrower in accordance with Section 13.1 of the
Credit Agreement or based on any telephonic notice made in accordance with
Section 2.14 of the Credit Agreement.
Facility Identification Number(s)
----------------------------------------------
Customer/Account Name
---------------------------------------------------------
Transfer Funds To
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
For Account No.
----------------------------------------------------------------
Reference/Attention To
---------------------------------------------------------
Authorized Officer (Customer Representative) Date
---------------------------
-------------------------------------------- -------------------------------
(Please Print) Signature
Bank Officer Name Date
---------------------------
-------------------------------------------- -------------------------------
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
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EXHIBIT "M"
MARKET VALUATION FORMULA
See most recent pricing letter from Greenwich Capital Markets,
Inc. or other Approved Investors.
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EXHIBIT "N"
INITIAL APPROVED MARKET VALUE REFERENCE INVESTORS
1. Cityscape Corp.
2. First Plus Financial, Inc.
3. The Money Store
4. Clearview Capital
5. Greentree Financial Corp.
6. Statewide
7. Associates
8. Preferred Credit Corp.
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