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EXHIBIT 1.1
MEGO MORTGAGE CORPORATION
__% SENIOR SUBORDINATED NOTES DUE 2001
UNDERWRITING AGREEMENT
______, 1996
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UNDERWRITING AGREEMENT
________, 1996
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇▇▇▇▇▇▇ & CO., INC.
c/o FRIEDMAN, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & CO., INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Mego Mortgage Corporation (the "Company") confirms its agreement with
▇▇▇▇▇▇▇▇, Billings, ▇▇▇▇▇▇ & Co., Inc. and ▇▇▇▇▇▇▇▇▇▇▇ & Co., Inc., as
underwriters (collectively, the "Underwriters"), with respect to the sale by
the Company and the purchase by the Underwriters of $40,000,000 aggregate
principal amount of the Company's __% Senior Subordinated Notes due 2001 (the
"Notes"). The Notes will be issued pursuant to an indenture, dated as of
________, 1996 (the "Indenture") between the Company and _____, as trustee (the
"Trustee").
The Company understands that the Underwriters propose to make a public
offering of the Notes as soon as the Underwriters deem advisable after this
Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a registration statement on Form S-1 (No. 333-13421) and a
related preliminary prospectus for the registration of the Notes under the
Securities Act of 1933, as amended (the "Securities Act") and the rules and
regulations thereunder (the "Securities Act Regulations"). The Company has
prepared and filed such amendments thereto, if any, and such amended
preliminary prospectuses, if any, as may have been required to the date hereof,
and will file such additional amendments thereto and such amended prospectuses
as may hereafter be required. The registration statement has been declared
effective under the Securities Act by the Commission. The registration
statement as amended at the time it became effective (including all information
deemed to be a part of the registration statement at the time it became
effective pursuant to Rule 430A(b) of the Securities Act Regulations) is
hereinafter called the "Registration Statement." Any registration statement
filed pursuant to Rule 462(b) of the Securities Act Regulations is hereinafter
called the "Rule 462(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the 462(b) Registration Statement. Each
prospectus included in the registration statement, or amendments thereof,
before it became effective under the Securities Act and any prospectus filed
with the Commission by the Company with the consent of the Underwriters
pursuant to Rule 424(a) of the Securities Act Regulations is hereinafter called
the "Preliminary Prospectus." The term "Prospectus" means the final
prospectus, as first filed with the Commission pursuant to paragraph (1) or (4)
of Rule 424(b) of the Securities Act Regulations. The Commission has not
issued any order preventing or suspending the use of any Preliminary
Prospectus.
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The Company and the Underwriters agree as follows:
1. Sale and Purchase: Upon the basis of the warranties and
representations and other terms and conditions herein set forth, the Company
agrees to sell to each of the Underwriters and each of the Underwriters,
severally and not jointly, agrees to purchase from the Company the respective
aggregate principal amount of Notes set forth opposite the name of such
Underwriter on Schedule I to this Agreement, in each case at a purchase price
of ___% of the principal amount thereof, plus accrued interest, if any, from
___, 1996 to the Closing Time (as defined below). The Underwriters may from
time to time increase or decrease the public offering price after the initial
public offering to such extent as the Underwriters may determine.
2. Payment and Delivery: Payment of the purchase price for the Notes
shall be made to the Company by wire transfer or certified or official bank
check payable in federal (same-day) funds at the office of ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (unless another place
shall be agreed upon by the Underwriters and the Company) against delivery of
the certificates for the Notes to you for your account. Such payment and
delivery shall be made at 10:00 a.m., New York City time, on the third (fourth,
if pricing occurs after 4:30 p.m. New York City time) business day after the
date hereof (unless another time, not later than ten business days after such
date, shall be agreed to by the Underwriters and the Company). The time at
which such payment and delivery are actually made is hereinafter sometimes
called the "Closing Time." Certificates for the Notes shall be delivered to
the Underwriters in definitive form registered in such names and in such
denominations as the Underwriters shall specify. For the purpose of expediting
the checking of the certificates for the Notes by the Underwriters, the Company
agrees to make such certificates available to the Underwriters for such purpose
at least one full business day preceding the Closing Time.
3. Representations and Warranties of the Company: The Company represents
and warrants to each Underwriter that:
(a) each of the Registration Statement and any Rule 462(b)
Registration Statement has become effective under the Securities Act and
no stop order suspending the effectiveness of the Registration Statement
or any Rule 462(b) Registration Statement has been issued under the
Securities Act and no proceedings for that purpose have been instituted
or are pending or, to the knowledge of the Company, are contemplated by
the Commission, and any request on the part of the Commission for
additional information has been complied with;
(b) the Registration Statement complies and the Prospectus and any
further amendments or supplements thereto will, when they become
effective or are filed with the Commission, as the case may be, comply in
all material respects with the requirements of the Securities Act and the
Securities Act Regulations and the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act") and the rules and regulations
thereunder (the "Trust Indenture Act Regulations"); the Registration
Statement did not, and any amendment thereto will not, in each case as of
the applicable effective date, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and the
Prospectus
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and any amendment or supplement thereto will not, as of the applicable
filing date and at Closing Time, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company makes
no warranty or representation with respect to any statement contained in
the Registration Statement or the Prospectus in reliance upon and in
conformity with information concerning the Underwriters and furnished in
writing by or on behalf of the Underwriters to the Company expressly for
use in the Registration Statement or the Prospectus;
(c) the Prospectus delivered to the Underwriters for use in
connection with this offering was identical to the electronically
transmitted copies thereof filed with the Commission pursuant to ▇▇▇▇▇,
except to the extent permitted by Regulation S-T;
(d) the Company had at the date indicated the duly authorized and
outstanding capitalization set forth in the Prospectus under the caption
"Capitalization"; all of the issued and outstanding shares of capital
stock of the Company have been duly and validly authorized and issued and
are fully paid and non-assessable; the Company is a corporation duly
organized and validly existing under the laws of the State of Delaware,
with full power and authority to own its properties and conduct its
business as described in the Registration Statement and the Prospectus,
and to execute and deliver this Agreement and the Indenture and issue the
Notes; the Company has no subsidiaries;
(e) except as disclosed in the Registration Statement and the
Prospectus with respect to the possible termination of servicing rights,
the Company is not in breach of, or in default under (nor has any event
occurred which with notice, lapse of time, or both would constitute a
breach of, or default under), its certificate of incorporation or
by-laws or in the performance or observance of any obligation,
agreement, covenant or condition contained in any indenture, mortgage,
deed of trust, bank loan or credit agreement or other agreement or
instrument to which the Company is a party or by which it is bound,
except for such breaches or defaults which would not have a material
adverse effect on the operations, business or condition of the Company,
and the execution, delivery and performance of this Agreement and the
Indenture and the issuance of the Notes and consummation of the
transactions contemplated hereby and thereby will not conflict with, or
result in any breach of or constitute a default under (nor constitute any
event which with notice, lapse of time, or both would constitute a breach
of, or default under), (i) any provision of the certificate of
incorporation or by-laws of the Company, or (ii) any provision of any
license, indenture, mortgage, deed of trust, bank loan or credit
agreement or other agreement or instrument to which the Company is a
party or by which it or its properties may be bound or affected, or under
any federal, state, local or foreign law, regulation or rule or any
decree, judgment or order applicable to the Company, except in the case
of this clause (ii) for such breaches or defaults which would not have a
material adverse effect on the operations, business or condition of the
Company;
(f) the Indenture has been duly authorized by the Company and when
executed and delivered by the Company and the Trustee will be a legal,
valid and binding agreement of the Company enforceable in accordance with
its terms, except as may be limited by
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bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, and by general principles of
equity;
(g) the Notes have been duly authorized by the Company and when
executed by the Company, authenticated by the Trustee and delivered
against payment therefor as contemplated by this Agreement, will
constitute legal, valid and binding obligations of the Company
enforceable in accordance with their terms and entitled to the benefits
of the Indenture, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and by general principles of equity;
(h) this Agreement has been duly authorized, executed and delivered
by the Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, and by general principles of
equity, and except to the extent that the indemnification provisions of
Section 8 hereof may be limited by federal or state securities laws and
public policy considerations in respect thereof;
(i) the Notes and the Indenture conform in all material respects to
the description thereof contained in the Registration Statement and
Prospectus;
(j) no approval, authorization, consent or order of or filing with
any federal, state or local governmental or regulatory commission, board,
body, authority or agency is required in connection with the execution,
delivery and performance of the Indenture and the sale of the Notes as
contemplated hereby other than (A) such as have been obtained or made, or
will have been obtained or made at the Closing Time, under the Securities
Act and the Trust Indenture Act, and (B) any necessary qualification
under the securities or blue sky laws of the various jurisdictions in
which the Notes are being offered by the Underwriters;
(k) Deloitte & Touche LLP, whose reports on the financial statements
of the Company are filed with the Commission as part of the Registration
Statement and Prospectus, are independent public accountants as required
by the Securities Act and the Securities Act Regulations;
(l) the Company has all necessary licenses, authorizations, consents
and approvals and has made all necessary filings required under any
federal, state or local law, regulation or rule, and has obtained all
necessary authorizations, consents and approvals from other persons,
required in order to conduct its business, except to the extent that any
failure to have any such licenses, authorizations, consents or approvals,
to make any such filings or to obtain any such authorizations, consents
or approvals would not, alone or in the aggregate, have a material
adverse effect on the business, properties, prospects, results of
operations or condition of the Company; the Company is not in violation
of, or in default under, any such license, authorization, consent or
approval or any federal, state, local or foreign law, regulation or rule
or any decree, order or judgment applicable to the
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Company the effect of which could be material and adverse to the
business, properties, prospects, results of operations or condition of
the Company;
(m) all legal or governmental proceedings, contracts or documents of
a character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement
have been so described or filed as required;
(n) except as disclosed in the Registration Statement and the
Prospectus with respect to the Commission's investigation of Mego
Financial Corp. (the Company's parent), there are no actions, suits or
proceedings pending or, to the Company's knowledge, threatened against
the Company or any of its properties, at law or in equity, or before or
by any federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency which could result in a
judgment, decree or order having a material adverse effect on the
business, condition, prospects or property of the Company;
(o) the financial statements, including the notes thereto, included
in the Registration Statement and the Prospectus present fairly the
financial position of the Company as of the dates indicated and the
results of operations and changes in financial position and cash flow of
the Company for the periods specified; such financial statements have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as
indicated in the notes thereto);
(p) subsequent to the effective date of the Registration Statement
and the date of the Prospectus, and except as may be otherwise stated in
the Registration Statement or Prospectus, there has not been (A) any
material and unfavorable change, financial or otherwise, in the business,
properties, prospects, results of operations or condition (financial or
otherwise), present or prospective, of the Company, (B) any transaction,
other than in the ordinary course of business, which is material to the
Company, contemplated or entered into by the Company or (C) any
obligation, contingent or otherwise, directly or indirectly incurred by
the Company, other than in the ordinary course of business, which is
material to the Company;
(q) the Company has complied with, and is and will be in compliance
with, the provisions of that certain Florida act relating to disclosure
of doing business with Cuba, codified as Section 517.075 of the Florida
statutes, and the rules and regulations thereunder (collectively, the
"Cuba Act") or is exempt therefrom;
(r) the Company is not, and upon the sale of the Notes as herein
contemplated and the application of the net proceeds therefrom as
described in the Prospectus under the caption "Use of Proceeds," will not
be, an "investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of 1940,
as amended (the "1940 Act");
(s) there are no persons with registration or other similar rights
to have any securities registered pursuant to the Registration Statement
or otherwise registered by the Company under the Securities Act;
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(t) any certificate signed by any officer of the Company delivered
to the Underwriters or to counsel for the Underwriters pursuant to or in
connection with this Agreement shall be deemed a representation and
warranty by the Company to the Underwriters as to the matters covered
thereby; and
(u) The Company has prepared and filed with the Commission a
registration statement on Form S-1 (No. 333-12443) including a prospectus
(including any amendments or supplements thereto, the "Common Stock
Registration Statement") registering up to 2,300,000 shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"),
in connection with the proposed public offering of the Common Stock.
4. Certain Covenants of the Company: The Company hereby agrees with each
Underwriter:
(a) to furnish such information as may be required and otherwise to
cooperate in qualifying the Notes for offering and sale under the
securities or blue sky laws of such states as the Underwriters may
designate and to maintain such qualifications in effect as long as
required for the distribution of the Notes, provided that the Company
shall not be required to qualify as a foreign corporation or to consent
to the service of process under the laws of any such state or subject
itself to taxation as doing business in any jurisdiction (except service
of process with respect to the offering and sale of the Notes);
(b) to prepare the Prospectus in a form approved by the Underwriters
and file such Prospectus with the Commission pursuant to Rule 424(b) not
later than 10:00 a.m. (New York City time), on the second business day
following the execution and delivery of this Agreement and to furnish
promptly (and with respect to the initial delivery of such Prospectus,
not later than 10:00 a.m. (New York City time) on the day following the
execution and delivery of this Agreement) to the Underwriters as many
copies of the Prospectus (or of the Prospectus as amended or
supplemented if the Company shall have made any amendments or
supplements thereto after the effective date of the Registration
Statement) as the Underwriters may reasonably request for the purposes
contemplated by the Securities Act Regulations, which Prospectus and any
amendments or supplements thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to ▇▇▇▇▇, except to the extent permitted by
Regulation S-T;
(c) to advise the Underwriters promptly and (if requested by the
Underwriters) to confirm such advice in writing, when the Registration
Statement has become effective and when any post-effective amendment
thereto becomes effective under the Securities Act Regulations;
(d) to advise the Underwriters promptly, confirming such advice in
writing, of (i) the happening of any event known to the Company within
the time during which a Prospectus relating to the Notes is required to
be delivered under the Securities Act Regulations which, in the judgment
of the Company, would require the making of any
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change in the Prospectus then being used so that the Prospectus would
not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are
made, not misleading, (ii) any request by the Commission for amendments
or supplements to the Registration Statement or Prospectus or for
additional information with respect thereto, or (iii) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use
of any Preliminary Prospectus or the Prospectus, or of the suspension of
the qualification of the Notes for offering or sale in any jurisdiction,
or of the initiation or threatening of any proceedings for any of such
purposes and, if the Commission or any other government agency or
authority should issue any such order, to make every reasonable effort to
obtain the lifting or removal of such order as soon as possible; to
prepare and furnish, at the Company's expense, to the Underwriters
promptly any proposed amendments or supplements to the Registration
Statement or Prospectus as may be necessary and to file no such amendment
or supplement to which the Underwriters shall reasonably object in
writing;
(e) to furnish to the Underwriters for a period of five years from
the date of this Agreement (i) copies of all annual, quarterly and
current reports supplied to holders of the Notes, (ii) copies of all
reports filed by the Company with the Commission and (iii) such other
information as the Underwriters may reasonably request regarding the
Company;
(f) to furnish promptly to the Underwriters three signed copies of
the Registration Statement, as initially filed with the Commission, and
of all amendments thereto (including all exhibits thereto) and such
number of conformed copies of the foregoing as the Underwriters may
reasonably request;
(g) to apply the net proceeds from the sale of the Notes in the
manner set forth under the caption "Use of Proceeds" in the Prospectus;
(h) to pay all expenses, fees and taxes (other than any transfer
taxes and the fees and disbursements of counsel for the Underwriters
except as set forth under Section 5 hereof and clauses (iii) and (iv)
below) in connection with (i) the preparation and filing of the
Registration Statement, each Preliminary Prospectus, the Prospectus, and
any amendments or supplements thereto, and the printing and furnishing of
copies of each thereof to the Underwriters and to dealers (including
costs of mailing and shipment), (ii) the preparation, issuance,
execution, authentication and delivery of the Notes, (iii) the printing
of this Agreement and any dealer agreements, and the reproduction
and/or printing and furnishing of copies of each thereof to dealers
(including costs of mailing and shipment), (iv) the qualification of the
Notes for offering and sale under state laws and the determination of
their eligibility for investment under state law as aforesaid (including
the reasonable legal fees and filing fees and other disbursements of
counsel for the Underwriters) and the printing and furnishing of copies
of any blue sky surveys or legal investment surveys to the Underwriters
and to dealers, (v) any filing for review of the public offering of the
Notes by the NASD, (vi) the fees and expenses of any transfer agent
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or registrar for the Notes, (vii) any fees payable to investment rating
agencies with respect to the Notes and (viii) the performance of the
Company's other obligations hereunder;
(i) to furnish to the Underwriters, during the period referred to in
clause (i) of paragraph (d) above, not less than two business days before
filing with the Commission subsequent to the effective date of the
Prospectus, a copy of any document proposed to be filed with the
Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"); and
(j) to make generally available to its Note holders as soon as
practicable after the effective date of the Registration Statement an
earning statement (in form, at the option of the Company, complying with
the provisions of Rule 158 under the Securities Act) covering a period of
12 months beginning after the effective date of the Registration
Statement.
5. Reimbursement of the Underwriters' Expenses: If the Notes are not
delivered for any reason other than the termination of this Agreement pursuant
to the first two paragraphs of Section 7 hereof or the default by the
Underwriters in their obligations hereunder, the Company shall reimburse the
Underwriters for all of their reasonable out-of-pocket expenses relating to the
transactions contemplated hereby, including the reasonable fees and
disbursements of their counsel.
6. Conditions of the Underwriters' Obligations: The obligations of the
Underwriters hereunder are subject to the accuracy of the representations and
warranties on the part of the Company on the date hereof and at the Closing
Time, the performance by the Company of its obligations hereunder and to the
following conditions:
(a) The Company shall furnish to the Underwriters at the Closing
Time an opinion of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇,
P.A., counsel for the Company, addressed to the Underwriters and dated
the Closing Time and in form satisfactory to ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP,
counsel for the Underwriters, stating that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware with full corporate power and authority to own
its properties and to conduct its business and to execute and
deliver this Agreement and the Indenture and to issue the Notes;
(ii) the Company is duly qualified or licensed by and is in
good standing in each jurisdiction in which the character or
location of its assets or properties or the nature of its business
makes such qualification necessary and in which the failure,
individually or in the aggregate, to be so licensed or qualified
could have a material adverse effect on the operations, business
or condition of the Company;
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(iii) this Agreement has been duly authorized, executed and
delivered by the Company;
(iv) the Indenture has been duly authorized, executed and
delivered by the Company, and, assuming due authorization,
execution and delivery by the Trustee, is a legal, valid and
binding agreement of the Company enforceable against the Company in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and by general principles of equity;
the Indenture has been duly qualified under the Trust Indenture
Act;
(v) the Notes have been duly authorized, executed and
delivered by the Company and, assuming due authentication thereof
by the Trustee and upon payment therefor and delivery in accordance
with this Agreement, will be legal, valid and binding obligations
of the Company enforceable in accordance with their terms and
entitled to the benefits of the Indenture, except as may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general principles of equity;
(vi) the Company has an authorized capitalization as set forth
in the Registration Statement and the Prospectus; the outstanding
shares of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable, and,
to the best of such counsel's knowledge, the Company has no
subsidiaries;
(vii) the Notes and the Indenture conform in all material
respects to the descriptions thereof contained in the Registration
Statement and Prospectus;
(viii) the statements under the captions "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources," "Business -
Government Regulation," "Management-Employment Agreement,"
"Management-Company Stock Option Plan," "Certain Transactions" and
"Description of the Notes" in the Registration Statement and the
Prospectus, insofar as such statements constitute a summary of the
legal matters or documents referred to therein, constitute accurate
summaries thereof in all material respects and accurately present
the information called for with respect to such matters or
documents;
(ix) as of the effective date of the Registration Statement,
the Registration Statement and the Prospectus (except
as to the financial statements and other financial and statistical
data contained therein, as to which such counsel need express no
opinion) complied as to form in all material respects with the
requirements of the Securities Act Regulations;
(x) the Registration Statement has become effective under the
Securities Act and, to the best of such counsel's knowledge, no
stop order
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suspending the effectiveness of the Registration Statement has been
issued and no proceedings with respect thereto have been commenced
or threatened;
(xi) no approval, authorization, consent or order of or filing
with any federal, or to such counsel's knowledge, state or local
governmental or regulatory commission, board, body, authority or
agency is required in connection with the execution and delivery of
the Indenture and the sale and delivery of the Notes by the Company
as contemplated hereby other than such as have been obtained or
made under the Securities Act and the Trust Indenture Act and
except that such counsel need express no opinion as to any
necessary qualification under the state securities or blue sky laws
of the various jurisdictions in which the Notes are being offered
by the Underwriters;
(xii) the execution, delivery and performance of this
Agreement and the Indenture and the issuance of the Notes by the
Company and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not conflict with,
or result in any breach of, or constitute a default under (nor
constitute any event which with notice, lapse of time, or both
would constitute a breach of or default under), (i) any provisions
of the certificate of incorporation or by-laws of the Company, (ii)
any provision of any material license, indenture, mortgage, deed of
trust, bank loan, credit agreement or other agreement or instrument
known to such counsel to which the Company is a party or by which
it or its properties may be bound or affected, or (iii) the
Securities Act or the rules and regulations of the Commission or
any other federal law or any decree, judgment or order applicable
to the Company, except in the case of clause (ii) for such
conflicts, breaches or defaults which have been waived or which
individually or in the aggregate would not have a material adverse
effect on the operations, business or condition of the Company;
(xiii) to such counsel's knowledge, there are no contracts,
licenses, agreements, leases or documents of a character which are
required to be filed as exhibits to the Registration Statement or
to be summarized or described in the Prospectus which have not been
so filed, summarized or described;
(xiv) to such counsel's knowledge, except as disclosed in the
Registration Statement and the Prospectus with respect to the
possible termination of servicing rights, the Company is not in
breach of, or in default under (nor has any event occurred which
with notice, lapse of time, or both would constitute a breach of,
or default under), any license, indenture, mortgage, deed of trust,
bank loan or credit agreement or any other agreement or instrument
to which the Company is a party or by which it or its properties
may be bound or affected or under any law, regulation or rule or
any decree, judgment or order applicable to the Company, except
such breaches or defaults which would not have a material adverse
effect on the operations, business or condition of the Company;
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(xv) to such counsel's knowledge, except as disclosed in the
Registration Statement and the Prospectus with respect to the
Commission's investigation of Mego Financial Corp., there are no
actions, suits or proceedings pending or threatened against the
Company or any of its properties, at law or in equity or before or
by any commission, board, body, authority or agency which are
required to be described in the Prospectus but are not so described;
(xvi) the form of certificate used to evidence the Notes
complies in all material respects with all applicable statutory
requirements and with any applicable requirements of the
certificate of incorporation and by-laws of the Company;
(xvii) to the best of such counsel's knowledge, there are no
persons with registration or other similar rights to have any
securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the Securities Act; and
(xviii) the Company is not, and will not become upon and as a
result of the sale of the Notes and the application of the net
proceeds therefrom as described in the Prospectus under the caption
"Use of Proceeds," an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined
in the 1940 Act.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants of the Company and
representatives of the Underwriters at which the contents of the
Registration Statement and Prospectus were discussed and, although such
counsel is not passing upon and does not assume responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or Prospectus (except as and to the extent stated
in subparagraphs (vii) and (viii) above), on the basis of the foregoing
nothing has come to the attention of such counsel that causes them to
believe that either the Registration Statement or any amendment thereto
at the time such Registration Statement or amendment became effective
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being
understood that, in each case, such counsel need express no view
with respect to the financial statements and other financial and
statistical data included in the Registration Statement or Prospectus).
(b) The Underwriters shall have received from Deloitte & Touche LLP,
letters dated, respectively, as of the date of this Agreement and the
Closing Time, as the case may be, and addressed to the Underwriters in
the forms heretofore approved by the Underwriters.
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(c) The Underwriters shall have received at the Closing Time the
favorable opinion of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the
Underwriters, dated the Closing Time, in form and substance satisfactory
to the Underwriters.
(d) No amendment or supplement to the Registration Statement or
Prospectus shall have been filed to which the Underwriters shall have
objected in writing.
(e) Prior to the Closing Time (i) no stop order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus shall have
been issued by the Commission, and no suspension of the qualification of
the Notes for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceedings for any of such purposes, has occurred;
and (ii) the Registration Statement and all amendments thereto, or
modifications thereof, if any, and the Prospectus and all amendments or
supplements thereto, or modifications thereof, if any, shall not contain
an untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.
(f) Between the time of execution of this Agreement and the Closing
Time (i) no material and unfavorable change, financial or otherwise
(other than as disclosed in the Registration Statement and Prospectus),
in the business, condition or prospects of the Company shall occur or
become known and (ii) no transaction which is material and unfavorable to
the Company shall have been entered into by the Company.
(g) The Company will, at the Closing Time, deliver to the
Underwriters a certificate of two of its executive officers to the effect
that, to each of such officer's knowledge, the representations and
warranties of the Company set forth in this Agreement and the conditions
set forth in paragraph (e) and paragraph (f) have been met and are true
and correct as of such date.
(h) The NASD shall not have raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(i) The Company shall have furnished to the Underwriters such other
documents and certificates as to the accuracy and completeness of any
statement in the Registration Statement and the Prospectus or any
amendment or supplement thereto as of the Closing Time as the
Underwriters may reasonably request.
(j) The Company shall perform such of its obligations under this
Agreement as are to be performed by the terms hereof at or before the
Closing Time.
(k) The Common Stock Registration Statement registering the Common
Stock shall have become effective under the Securities Act, and no stop
order suspending the effectiveness of the Common Stock Registration
Statement shall have been issued and no proceedings for that purpose
shall have been instituted or be threatened, pending or contemplated, and
the offering of the Common Stock shall have been consummated as
contemplated in the Common Stock Registration Statement at the Closing
Time.
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7. Termination: The obligations of the Underwriters hereunder shall be
subject to termination in the absolute discretion of the Underwriters, at any
time prior to the Closing Time, if trading in securities on the New York Stock
Exchange shall have been suspended or minimum prices shall have been
established on the New York Stock Exchange, or if a banking moratorium shall
have been declared either by the United States or New York State authorities,
or if the United States shall have declared war in accordance with its
constitutional processes or there shall have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis
of such magnitude in its effect on the financial markets of the United States
as, in the judgment of the Underwriters, to make it impracticable to market the
Notes.
If the Underwriters elect to terminate this Agreement as provided in this
Section 7 the Company shall be notified promptly by letter or telegram.
If the sale to the Underwriters of the Notes, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted
under this Agreement or if such sale is not carried out because the Company
shall be unable to comply with any of the terms of this Agreement, the Company
shall not be under any obligation or liability under this Agreement (except to
the extent provided in Sections 4(h), 5 and 8 hereof) and the Underwriters
shall be under no obligation or liability to the Company under this Agreement
(except to the extent provided in Section 8 hereof).
8. Indemnity by the Company and the Underwriters:
(a) The Company agrees to indemnify, defend and hold harmless each
Underwriter, and any person who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any loss, expense, liability or claim (including
the reasonable cost of investigation) which, jointly or severally, any
Underwriter or controlling person may incur under the Securities Act, the
Exchange Act or otherwise, insofar as such loss, expense, liability or
claim arises out of or is based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or in the Registration Statement as amended by any
post-effective amendment thereof by the Company) or in a Prospectus (the
term Prospectus for the purpose of this Section 8 being deemed to include
any Preliminary Prospectus, the Prospectus and the Prospectus as amended
or supplemented by the Company), or arises out of or is based upon
any omission or alleged omission to state a material fact required to be
stated in either such Registration Statement or Prospectus or necessary to
make the statements made therein, in light of the circumstances under
which they were made, not misleading, except insofar as any such loss,
expense, liability or claim arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact contained in and
in conformity with information furnished in writing by the Underwriters to
the Company expressly for use in such Registration Statement or such
Prospectus or arises out of or is based upon any omission or alleged
omission to state a material fact in connection with such information
required to be stated in either such Registration Statement or Prospectus
or necessary to make such information not misleading.
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15
If any action is brought against any Underwriter or controlling
person in respect of which indemnity may be sought against the Company
pursuant to the preceding paragraph, such Underwriter shall promptly
notify the Company in writing of the institution of such action and the
Company shall assume the defense of such action, including the employment
of counsel and payment of expenses. The Underwriter or controlling
person shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the
expense of the Underwriter or such controlling person unless the
employment of such counsel shall have been authorized in writing by the
Company in connection with the defense of such action or the Company
shall not have employed counsel to have charge of the defense of such
action within a reasonable time or such indemnified party or parties
shall have reasonably concluded (based on the advice of counsel) that
there may be defenses available to it or them which are different from or
additional to those available to the Company (in which case the Company
shall not have the right to direct the defense of such action on behalf
of the indemnified party or parties), in any of which events such fees
and expenses shall be borne by the Company and paid as incurred (it being
understood, however, that the Company shall not be liable for the
expenses of more than one separate counsel for the Underwriters or
controlling persons in any one action or series of related actions in the
same jurisdiction representing the indemnified parties who are parties to
such action). Anything in this paragraph to the contrary
notwithstanding, the Company shall not be liable for any settlement of
any such claim or action effected without its written consent.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify, defend and hold harmless the Company, its directors and
officers and any person who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act from
and against any loss, expense, liability or claim (including the
reasonable cost of investigation) which, jointly or severally, the
Company or any such person may incur under the Securities Act, the
Exchange Act or otherwise, insofar as such loss, expense, liability or
claim arises out of or is based upon any untrue statement or alleged
untrue statement of a material fact contained in and in conformity with
information furnished in writing by the Underwriters to the Company
expressly for use in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof by the
Company) or in a Prospectus, or arises out of or is based upon any
omission or alleged omission to state a material fact in connection with
such information required to be stated either in such Registration
Statement or Prospectus or necessary to make such information not
misleading.
If any action is brought against the Company or any such person in
respect of which indemnity may be sought against the Underwriters
pursuant to the foregoing paragraph, the Company or such person shall
promptly notify the Underwriters in writing of the institution of such
action and the Underwriters shall assume the defense of such action,
including the employment of counsel and payment of expenses. The Company
or such person shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense
of the Company or such person unless the employment of such counsel shall
have been authorized in writing by the Underwriters in connection with
the defense of such action or the Underwriters shall not
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have employed counsel to have charge of the defense of such action
within a reasonable time or such indemnified party or parties shall have
reasonably concluded (based on the advice of counsel) that there may be
defenses available to it or them which are different from or additional to
those available to the Underwriters (in which case the Underwriters shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and
expenses shall be borne by the Underwriters and paid as incurred (it being
understood, however, that the Underwriters shall not be liable for the
expenses of more than one separate counsel in any one action or series of
related actions in the same jurisdiction representing the indemnified
parties who are parties to such action). Anything in this paragraph to the
contrary notwithstanding, no Underwriter shall be liable for any
settlement of any such claim or action effected without its written
consent.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under subsections (a) and (b) of this
Section 8 in respect of any losses, expenses, liabilities or claims
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses,
expenses, liabilities or claims (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand
and the Underwriters on the other hand from the offering of the Notes or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Underwriters on
the other in connection with the statements or omissions which resulted
in such losses, expenses, liabilities or claims, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total proceeds from the offering (net
of underwriting discounts and commissions but before deducting expenses)
received by the Company bear to the underwriting discounts and
commissions received by the Underwriters. The relative fault of the
Company on the one hand and of the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue
statement or alleged untrue statement of a material fact or omission or
alleged omission relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the
losses, claims, damages and liabilities referred to above shall be deemed
to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any claim or
action.
(d) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in
subsection (c) above. Notwithstanding the provisions of this Section 8,
no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Notes underwritten by it
and distributed to the public were offered to the public exceeds the
amount of any damages which such
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Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
(e) The indemnity and contribution agreements contained in this
Section 8 and the covenants, warranties and representations of the
Company contained in this Agreement shall remain in full force and effect
regardless of any investigation made by or on behalf of the Underwriters,
or any person who controls the Underwriters within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, or by or on
behalf of the Company, its directors and officers or any person who
controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, and shall survive any termination
of this Agreement or the sale and delivery of the Notes. The Company and
the Underwriters agree promptly to notify the others of the commencement
of any litigation or proceeding against it and, in the case of the
Company, against any of the Company's officers and directors, in
connection with the sale and delivery of the Notes, or in connection with
the Registration Statement or Prospectus.
9. Substitution of Underwriters. If one or more of the Underwriters shall
fail (other than for a reason sufficient to justify the cancellation or
termination of this Agreement under Section 7) to purchase at the Closing Time
the Notes agreed to be purchased at the Closing Time by such Underwriter or
Underwriters, the other Underwriter may find one or more substitute
underwriters to purchase such Notes or make such other arrangements as such
other Underwriter may deem advisable or such other Underwriter may agree to
purchase such Notes, in each case upon the terms set forth in this Agreement.
If no such arrangements have been made by the close of business on the business
day following the Closing Time,
(a) if the aggregate principal amount of Notes to be purchased by
the defaulting Underwriter at the Closing Time shall not exceed 10% of
the aggregate principal amount of Notes that all the Underwriters are
obligated to purchase at the Closing Time, then the nondefaulting
Underwriter shall be obligated to purchase such Notes on the terms herein
set forth; provided, that in no event shall the aggregate principal amount
of Notes that any Underwriter has agreed to purchase pursuant to Section 1
be increased pursuant to this Section 9 by more than one-ninth of such
aggregate principal amount of Notes without the written consent of such
Underwriter, or
(b) if the aggregate principal amount of Notes to be purchased by
the defaulting Underwriters at the Closing Time shall exceed 10% of the
aggregate principal amount of Notes that all the Underwriters are
obligated to purchase at the Closing Time, then the Company shall be
entitled to an additional business day within which it may, but is not
obligated to, find one or more substitute underwriters reasonably
satisfactory to the Underwriters to purchase such Notes upon the terms
set forth in this Agreement.
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In any such case, either the Underwriters or the Company shall have the
right to postpone the Closing Time for a period of not more than five business
days in order that necessary changes and arrangements (including any necessary
amendments or supplements to the Registration Statement or Prospectus) may be
effected by the Underwriters and the Company. If the aggregate principal
amount of Notes to be purchased at the Closing Time by such defaulting
Underwriter or Underwriters shall exceed 10% of the aggregate principal amount
of Notes that all the Underwriters are obligated to purchase at the Closing
Time, and neither the nondefaulting Underwriter nor the Company shall make
arrangements pursuant to this Section within the period stated for the purchase
of the Notes that the defaulting Underwriter agreed to purchase, this Agreement
shall terminate with respect to the Notes to be purchased at the Closing Time
without liability on the part of any nondefaulting Underwriter to the Company
and without liability on the part of the Company, except in both cases as
provided in Sections 5, 7 and 8. The provisions of this Section shall not in
any way affect the liability of any defaulting Underwriter to the Company or
the nondefaulting Underwriter arising out of such default. A substitute
underwriter hereunder shall become an Underwriter for all purposes of this
Agreement.
10. Notices: Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram and, if to
the Underwriters, shall be sufficient in all respects if delivered or sent to
▇▇▇▇▇▇▇▇, Billings, ▇▇▇▇▇▇ & Co., Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Compliance Department; if to the Company, shall be
sufficient in all respects if delivered to the Company at the offices of the
Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Executive Vice President.
11. GOVERNING LAW; HEADINGS: THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES. The section headings in this Agreement have
been inserted as a matter of convenience of reference and are not a part of
this Agreement.
12. Parties at Interest: The Agreement herein set forth has been and is
made solely for the benefit of the Underwriters and the Company and the
controlling persons, directors and officers referred to in Section 8 hereof, and
their respective successors, assigns, executors and administrators. No other
person, partnership, association or corporation (including a purchaser, as such
purchaser, from the Underwriters) shall acquire or have any right under or by
virtue of this Agreement.
13. Counterparts: This Agreement may be signed by the parties in
counterparts which together shall constitute one and the same agreement among
the parties.
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If the foregoing correctly sets forth the understanding among the Company
and the Underwriters, please so indicate in the space provided below for the
purpose, whereupon this letter shall constitute a binding agreement between the
Company and the Underwriters.
Very truly yours,
MEGO MORTGAGE CORPORATION
By
-------------------------------
Title:
Accepted and agreed to as
of the date first above
written:
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & CO., INC.
on behalf of itself and ▇▇▇▇▇▇▇▇▇▇▇ & Co., Inc.
By
-------------------------------------
Title:
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20
SCHEDULE I
Aggregate Principal Amount
Underwriter of Notes to be Purchased
----------- --------------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇▇▇▇▇▇▇▇ & Co., Inc................
-----------
Total........... $40,000,000
===========
