1
EXHIBIT 10.72
AMENDED AND RESTATED CREDIT AGREEMENT
by and among
MEGO MORTGAGE CORPORATION,
THE LENDERS PARTY HERETO,
and
THE FIRST NATIONAL BANK OF CHICAGO,
AS AGENT
dated as of February 19, 1998
2
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....................................... 26
2.3. [Intentionally Omitted.]............................... 26
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. Agent Fees..................................... 27
2.6.3. Collateral Agent Fees.......................... 27
2.6.4. Amendment and Waiver Fees...................... 27
2.7. Method of Selecting New Advances....................... 27
2.8. Conversion and Continuation of Outstanding Advances.... 27
2.9. Reductions to Aggregate Commitment..................... 27
2.10. Principal Payments..................................... 28
2.10.1. Optional Principal Payments................... 28
2.10.2. Required Payments Related to Borrowing Base... 28
2.10.3. Required Payments Related to Reductions
in the Aggregate Commitment................... 28
2.10.4. Settlement Account Payments................... 28
2.10.5. Final Payment on Termination Date............. 29
2.11. Changes in Interest Rate, Etc.......................... 29
2.12. Rates Applicable After Default......................... 29
2.13. Method of Payment...................................... 29
2.14. Notes; Telephonic Notices.............................. 29
2.15. Interest Payment Dates; Interest and Fee Basis......... 30
2.16. Notification by the Agent.............................. 30
2.17. [Intentionally Omitted.]............................... 30
2.18. Non-Receipt of Funds by the Agent...................... 30
ARTICLE III [INTENTIONALLY OMITTED]........................................ 30
ARTICLE IV CONDITIONS PRECEDENT; WITHHOLDING TAX EXEMPTION................ 31
4.1. Effectiveness.......................................... 31
4.2. Each Advance........................................... 32
4.3. Withholding Tax Exemption.............................. ▇▇
-▇-
▇
▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ AND WARRANTIES................................. 33
5.1. Corporate Existence and Standing....................... 33
5.2. Authorization and Validity............................. 33
5.3. No Conflict; Government Consent........................ 33
5.4. Financial Statements................................... 34
5.5. Material Adverse Change................................ 34
5.6. Taxes.................................................. 34
5.7. Litigation and Contingent Obligations.................. 34
5.8. Subsidiaries........................................... 34
5.9. ERISA.................................................. 34
5.10. Accuracy of Information................................ 35
5.11. Regulation U........................................... 35
5.12. Material Agreements.................................... 35
5.13. Compliance With Laws................................... 35
5.14. Ownership of Properties................................ 35
5.15. Plan Assets; Prohibited Transactions................... 35
5.16. Investment Company Act................................. 35
5.17. Public Utility Holding Company Act..................... 35
5.18. FHA and FNMA Eligibility............................... 36
5.19. Subordinated Indebtedness.............................. 36
5.20. Eligibility............................................ 36
5.21. Recourse Servicing..................................... 36
ARTICLE VI COVENANTS...................................................... 36
6.1. Financial Reporting.................................... 36
6.2. Use of Proceeds........................................ 39
6.3. Notice of Default...................................... 39
6.4. Conduct of Business.................................... 39
6.5. Taxes.................................................. 40
6.6. Insurance.............................................. 40
6.7. Compliance with Laws................................... 40
6.8. Maintenance of Properties.............................. 40
6.9. Inspection............................................. 40
6.10. Dividends.............................................. 40
6.11. Indebtedness........................................... 41
6.12. Merger................................................. 42
6.13. Sale of Assets......................................... 42
6.14. Investments and Acquisitions........................... 42
6.15. Liens.................................................. 43
6.16. Affiliates............................................. 44
6.17. Financial Covenants.................................... 44
6.17.1. Adjusted Leverage Ratio....................... 44
6.18. Tangible Net Worth..................................... 44
6.19. Compliance with Security Agreement..................... 44
6.20. Recourse Servicing..................................... 45
6.21. FHA and FNMA Approvals................................. 45
6.22. Approved Investor Commitments.......................... 45
-ii-
4
6.23. Settlement Account..................................... 45
6.24. Subordinated Indebtedness.............................. 45
6.25. Excluded Subsidiaries.................................. 45
ARTICLE VII DEFAULTS....................................................... 46
ARTICLE VIII COLLATERAL, ACCELERATION AND OTHER REMEDIES.................... 48
8.1. Security and Collateral Agency Agreement............... 48
8.2. AP Qualifying Loans.................................... 48
8.3. Release of Collateral.................................. 48
8.4. Settlement Account..................................... 49
8.5. Termination............................................ 49
8.6. Acceleration........................................... 49
8.7. Other Remedies......................................... 49
8.8. Application of Proceeds................................ 51
8.9. Preservation of Rights................................. 51
ARTICLE IX AMENDMENTS; WAIVERS; GENERAL PROVISIONS........................ 52
9.1. Amendments and Waivers................................. 52
9.2. Survival of Representations............................ 53
9.3. Governmental Regulation................................ 53
9.4. Taxes.................................................. 53
9.5. Entire Agreement....................................... 53
9.6. Several Obligations; Benefits of this Agreement........ 53
9.7. Expenses; Indemnification.............................. 53
9.8. Nonliability of Lenders................................ 54
9.9. Severability of Provisions............................. 54
9.10. Headings............................................... 54
9.11. Numbers of Documents................................... 54
9.12. Accounting............................................. 54
9.13. Confidentiality........................................ 54
9.14. Nonreliance............................................ 54
9.15. Disclosure............................................. 54
9.16. Maximum Interest....................................... 55
ARTICLE X THE AGENT AND THE COLLATERAL AGENT............................. 55
10.1. Appointment; Nature of Relationship.................... 55
10.2. Powers................................................. 55
10.3. General Immunity....................................... 56
10.4. No Responsibility for Loans, Recitals, Etc............. 56
10.5. Action on Instructions of Lenders...................... 56
10.6. Employment of Agents and Counsel....................... 56
10.7. Reliance on Documents; Counsel......................... 56
10.8. Agent's Reimbursement and Indemnification.............. 57
10.9. Notice of Default...................................... 57
10.10. Rights as a Lender..................................... 57
-iii-
5
10.11. Lender Credit Decision................................. 57
10.12. Successor Agent........................................ 57
ARTICLE XI SETOFF; RATABLE PAYMENTS....................................... 58
11.1. Setoff................................................. 58
11.2. Ratable Payments....................................... 58
11.3. Custodial Accounts..................................... 58
ARTICLE XII ASSIGNMENTS; PARTICIPATIONS; COMMITMENT INCREASES.............. 59
12.1. Successors and Assigns................................. 59
12.2. Participations......................................... 59
12.2.1. Permitted Participants; Effect................ 59
12.2.2. Voting Rights................................. 59
12.2.3. Benefit of Setoff............................. 59
12.3. Assignments............................................ 60
12.3.1. Permitted Assignments......................... 60
12.3.2. Effect; Effective Date........................ 60
12.4 [Intentionally Omitted]................................ 60
12.5. Dissemination of Information........................... 60
12.6. Tax Treatment.......................................... 61
ARTICLE XIII NOTICES........................................................ 61
13.1. Notices................................................ 61
13.2. Change of Address...................................... 61
ARTICLE XIV COUNTERPARTS................................................... 61
ARTICLE XV CHOICE OF LAW, CONSENT TO JURISDICTION, WAIVER OF
JURY TRIAL..................................................... 61
15.1. CHOICE OF LAW.......................................... 61
15.2. CONSENT TO JURISDICTION................................ 61
15.3. WAIVER OF JURY TRIAL................................... 62
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 "5A" BORROWER'S UNDERWRITING STANDARDS (ELIGIBLE
NON-CONFORMING MORTGAGE LOANS)
-iv-
6
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" [INTENTIONALLY OMITTED]
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" SECOND AMENDMENT TO SECURITY AND COLLATERAL AGENCY
AGREEMENT
EXHIBIT "J" ASSIGNMENT AGREEMENT
EXHIBIT "K" [INTENTIONALLY OMITTED]
EXHIBIT "L" LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
EXHIBIT "M" MARKET VALUATION FORMULA
EXHIBIT "N" INITIAL APPROVED MARKET VALUE REFERENCE INVESTORS
EXHIBIT "O" FORM OF FNMA EARLY FUNDING TRANSACTION LETTER
-v-
7
AMENDED AND RESTATED CREDIT AGREEMENT
This Amended and Restated Credit Agreement, dated as of February 19, 1998,
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, conventional debt consolidation and
home improvement residential secured and unsecured loans and single family
residential first and second priority mortgage 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)
$80,400,000.
"Advance" means a borrowing hereunder consisting of the aggregate amount
of the several Loans made on the same Borrowing Date.
"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 management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
8
"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 be increased
without the approval of the Borrower, the Agent and all of the Lenders. The
Aggregate Commitment as of the date hereof shall be $55,000,000 provided that
the Aggregate Commitment shall decrease (i) on February 20, 1998 to $45,000,000,
(ii) on February 27, 1998 to $40,000,000, and (iii) on March 4, 1998 to
$35,000,000.
"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.
"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.
"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, (iii) entering into repurchase agreements if it has a "3" following
its name and/or (iv) the purchase of Non-Conforming Mortgage Loans if it has a
"4" 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 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, in the case of
Title I Qualifying Loans and
-2-
9
Conventional HI/DC Qualifying Loans, 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,
(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-
10
(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 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 (iv) 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
-4-
11
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 (i) 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 either (A) in the case of Qualifying Loans which are
not Non-Conforming Mortgage Loans, the valuation procedures
described on Schedule "6" attached hereto or (B) in the case of
Non-Conforming Mortgage Loans, the Borrower has received an
appraisal on the premises securing such Pledged Qualifying Loan,
which appraisal shall be in conformity with the applicable
requirements of any law or any governmental rule, regulation,
policy, guideline or directive (whether or not having the force of
law), or any interpretation thereof, including, without limitation,
the provisions of Title XI of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended, reformed or
otherwise modified from time to time, and any rules promulgated to
implement such provisions and (ii) such market value or appraised
value, as the case may be, and the resulting combined loan-to-value
ratio is in compliance with the Borrower's applicable underwriting
standards set forth in Schedule "5" or Schedule "5A", as the case
may be,
(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
-5-
12
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
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,
-6-
13
(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-five (95%) of the Collateral Value of Eligible
Non-Conforming Mortgage Loans,
(iii) ninety percent (90%) of the Collateral Value of all
Eligible Title I Qualifying Loans other than Eligible Returned Qualifying
Loans,
(iv) ninety-five percent (95%) of the Collateral Value of
Eligible Conventional HI/DC Qualifying Loans other than Eligible Returned
Qualifying Loans, and
-7-
14
(v) seventy-five percent (75%) of the unpaid principal
balance of Eligible Returned Qualifying Loans, calculated on their
respective Pledge Dates
less the aggregate amount of Uncleared Loan Funding Checks on such date and less
the amount of $500,000 (which the parties agree is a reasonable estimate of
principal payments, prepayments and delinquencies that would affect Collateral
Value which are not yet reflected in the Borrower's daily information regarding
the Pledged Qualifying Loans).
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 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 $500,000 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.
"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.
-8-
15
"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.
"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 no Person, or two or more Persons acting in
concert (other than 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 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.
-9-
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 Non-Conforming Mortgage Loans and Title I
Qualifying Loans, one hundred percent (100%) of the unpaid principal
balance of such Non-Conforming Mortgage Loan or Title I Qualifying Loan on
its Pledge Date or (ii) for all other Pledged Qualifying Loans,
ninety-three percent (93%) 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) for all Pledged
Qualifying Loans other than Non-Conforming Mortgage Loans, either (i) 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 (ii) 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 one 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 or (D) for all Pledged Qualifying Loans that are Non-Conforming
Mortgage Loans, the then-current market value of such Qualifying Loan if
sold on a "whole-loan" basis to any Approved Investor then purchasing such
Qualifying Loans as initially established by the Borrower on the related
Collateral Transmittal delivered on or before the Pledge Date thereof,
subject to valuation updates and confirmations as described below. The
value described in (B) of the preceding sentence 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) of such sentence 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. The
values described in (D) of such sentence shall be updated by the Borrower
not less than monthly and shall be confirmed at the Agent's request, by
written evidence of the applicable Approved Investors' then-current
offered prices for whole loans.
"Commitment" means, for each Lender, the sum of such Lender's Primary
Commitment and Swingline Commitment, if any.
-10-
17
"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".
"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.
-11-
18
"Eligible Collateral" means, as of any date, all Eligible Conventional
HI/DC Qualifying Loans, Eligible Title I Qualifying Loans and Eligible
Non-Conforming Mortgage Loans.
"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
$75,000, (iv) is secured by a Mortgage and 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 at all times from and after March 3, 1998 a Covered Loan,
(vi) has not been included in the Borrowing Base for ninety (90) days or more
after its Pledge Date, provided that such ninety (90) day maximum shall be
reduced to forty-five (45) days as of March 4, 1998 and shall be further reduced
to thirty (30) days as of April 2, 1998, (vii) does not have a FICO score of
less than 630 if such Conventional HI/DC Qualifying Loan was first included in
the Collateral after the date hereof or if such Conventional HI/DC Qualifying
Loan is included in the Collateral after March 3, 1998 (regardless of when first
pledged), and (viii) does not have a FICO score of less than 600 if such
Conventional HI/DC Qualifying Loan was already included in the Collateral on the
date hereof (it being understood that any such currently pledged Conventional
HI/DC Qualifying Loan shall cease to constitute Eligible Collateral after March
3, 1998 if such Conventional HI/DC Qualifying Loan has a FICO score of less than
630).
"Eligible Non-Conforming Mortgage Loans" means an Eligible Qualifying Loan
which: (i) is a Non-Conforming Mortgage Loan, (ii) is in conformance with the
Borrower's existing underwriting standards as outlined on Schedule "5A"
attached, with such changes thereto as may hereafter be made with the prior
written approval of the Agent, (iii) qualifies for purchase by at least two (2)
Approved Investors under their then-current underwriting guidelines, (iv) had an
original principal amount at origination of less than $300,000, (v) is a Covered
Loan, (vi) has been included in the Borrowing Base for not more than forty-five
(45) days after its Pledge Date, provided that such forty-five (45) day maximum
shall be reduced to thirty (30) days as of April 2, 1998, and (vii) does not
have a FICO score of less than 680 if it is a Second Mortgage Loan.
"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 was acquired by the Borrower not more than thirty
(30) days prior to its Pledge Date, except for Reinstated Qualifying
Loans;
(iv) 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,
-12-
19
including without limitation the Borrower's inability to make any
representations and warranties regarding such Pledged Qualifying Loan;
(v) 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, and, if the Borrower has
subsequently delivered possession of such Required Qualifying Loan
Documents and Additional Required Qualifying Loan Documents to a
third party, such third party has been approved by the Agent and has
executed a bailee letter satisfactory to the Agent acknowledging the
security interest therein held by the Collateral Agent for the
benefit of the Lenders,
(3) the Collateral Agent has received the Required
Qualifying Loan Documents within five (5) 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 ten percent (10%) of the Aggregate
Commitment,
(vi) 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
-13-
20
(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,
(vii) which, if it is a Non-Conforming Mortgage Loan shipped
directly to an Approved Investor instead of to the Collateral Agent, is
subject to a fully executed and effective Tri-Party Agreement with such
Approved Investor; 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 660 or higher.
"Eligible Returned Qualifying Loan" means, as of any date, an Eligible
Conventional HI/DC Qualifying Loan or an Eligible Title I Qualifying Loan which
then meets all of the requirements for inclusion in the applicable category but
which was previously submitted for purchase to an Approved Investor by the
Collateral Agent pursuant to an Investor Transmittal Letter but which has been
refused for purchase by such Approved Investor and is being or was returned to
the Collateral Agent, provided that (i) there shall be no change in the original
Pledge Date for such a Pledged Qualifying Loan, (ii) the Borrower shall deliver
a detailed written explanation for such refusal within five (5) Business Days
thereafter and, on a case-by-case basis, if the Required Lenders are satisfied
that such refusal was not based on any defect or inadequacy in such Pledged
Qualifying Loan or its documentation, such Pledged Qualifying Loan shall be
returned to the applicable category having a higher advance rate, and (iii)
Pledged Qualifying Loans which are voluntarily withdrawn by the Borrower from
FirstPlus Financial, Inc. after they were submitted and which were not refused
for purchase by FirstPlus Financial, Inc. shall not be included in this
definition.
"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) at all times from and after
March 3, 1998 is a Covered Loan, (iv) does not have a FICO of less than 550, (v)
has not been included in the Borrowing Base for ninety (90) days or more after
its Pledge Date, provided that such ninety (90) day maximum shall be reduced to
forty-five (45) days as of March 4, 1998 and shall be further reduced to thirty
(30) days as of April 2, 1998, and (vi) is not subject to claims processing with
FHA.
"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.
-14-
21
"Excluded Subsidiary" is defined in Section 6.24 hereof.
"Facility Fee Rate" means a percentage of one-quarter of one percent
(0.25%) 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.
"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.
"Floating Rate" means, for any day, a rate of interest per annum equal to
the sum of (i) the Alternate Base Rate for such day plus (ii) one percent (1.0%)
per annum.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.
"FNMA" means the Federal National Mortgage Association or any corporate
successor thereto.
"FNMA Early Funding Transaction Letter" means a letter agreement among the
Borrower, FNMA and the Agent on behalf of the Lenders with respect to the
delivery of, and payment for, Eligible Title I Qualifying Loans, in the form
attached hereto as Exhibit "O".
"Funded Debt" means debt for borrowed money, excluding amounts payable to
Mego Financial but including all Subordinated Indebtedness other than
Subordinated Indebtedness owed to Mego Financial.
-15-
22
"GAAP" means generally accepted accounting principles as in effect from
time to time, consistently applied.
"Greenwich Capital" means Greenwich Capital Markets, Inc.
"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.
"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 by a
supplemental indenture thereto dated as of October 8, 1997 and as further
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.
"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.
"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.
-16-
23
"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 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 Tri-Party Agreements 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.
"MLPSA" means the Amended and Restated Master Loan Purchase and Servicing
Agreement dated as of October 1, 1996 by and between the Borrower, Mego
Financial and Greenwich Capital.
"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.
"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
-17-
24
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.
"Non-Conforming Mortgage Loan" means a Residential Mortgage Loan that is
either secured by a first priority Mortgage or is a Second Mortgage Loan.
"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.
"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 in existence on the date hereof as listed on
Schedule "4" attached hereto so long as
-18-
25
such Indebtedness 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 Floating 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.
"Primary Loan" means a Loan consisting of a portion of a Primary Advance.
"Prior Facility" means the $40,000,000 revolving credit facility which
preceded this Facility and was established under a Credit Agreement dated as of
June 20, 1997 among the Borrower, the Agent and the Lenders, as amended.
-19-
26
"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 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.
"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
-20-
27
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.
"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", "mortgage-related securities, at fair value", and "mortgage servicing
rights", 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.
"Sale and Leaseback Transaction" means any sale or other transfer of
Property by any Person with the intent to lease such Property as lessee.
"Second Mortgage Loan" means a Residential Mortgage Loan secured by a
Mortgage having a second priority lien on the related Single Family Residence
and having a combined loan-to-value ratio at origination (taking into account
the full outstanding principal balance secured by the first priority Mortgage)
not in excess of 100% using the appraised value of such Single Family Residence
at origination as described in clause (iii)(12) of the definition of Basic
Eligibility Requirements.
"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.
-21-
28
"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 that certain Security and Collateral Agency
Agreement dated as of June 20, 1997, as amended by a First Amendment dated as of
February 2, 1998 and a Second Amendment thereto dated 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.
"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
-22-
29
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 Swingline 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.
"Swingline Rate" means, for any day, a rate of interest per annum equal to
the sum of (i) the Alternate Base Rate for such day plus (ii) two percent (2.0%)
per annum.
"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, prepaid commitment fees and prepaid debt 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.
"Termination Date" means May 29, 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,
-23-
30
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, a FNMA
Early Funding Transaction Letter 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 Floating Rate
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 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.
-24-
31
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) at all times from and after March 3, 1998, the sum of (A)
with respect to the portion of the then-current Borrowing Base represented
by Eligible Title I Qualifying Loans and Eligible Conventional HI/DC
Qualifying Loans, 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 for such Qualifying Loans, all as confirmed in writing to the
Agent by the Approved Investors pursuant to the applicable Tri-Party
Agreements, plus (B) with respect to the portion of the then-current
Borrowing Base represented by Eligible Non-Conforming Mortgage Loans, the
aggregate Collateral Value of such Eligible Non-Conforming Mortgage Loans.
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:
-25-
32
(1) the Borrowing Base attributable to Title I Qualifying Loans
which are not secured by a Mortgage shall not exceed, in the aggregate, 5%
of the Aggregate Commitment;
(2) the Borrowing Base value attributable to Eligible
Non-Conforming Mortgage Loans which are Second Mortgage Loans shall not
exceed, in the aggregate, five percent (5%) of the Aggregate Commitment;
(3) the Borrowing Base value attributable to all Eligible
Non-Conforming Mortgage Loans shall not exceed, in the aggregate, fifteen
percent (15%) of the Aggregate Commitment; and
(4) the Borrowing Base value attributable to all Eligible Returned
Qualifying Loans shall not exceed, in the aggregate, $10,000,000.
2.1.3. Types of Advances. Each Advance hereunder shall consist of
one or more Floating Rate Advances or Swingline Advances requested by the
Borrower in accordance with Section 2.7. Primary Advances shall be generally
available as provided in Section 2.2. 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 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 Floating Rate.
2.3. [INTENTIONALLY OMITTED.]
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 Swingline 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.
-26-
33
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 Floating 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 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 Floating 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. Agent Fees. Any fees payable to the Agent pursuant to the
Borrower's letter agreement with the Agent of even date herewith.
2.6.3. 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.
2.6.4. Amendment and Waiver Fees. An amendment and waiver fee
payable to the Agent for the benefit of the Lenders in an amount equal to $3,500
per Lender for this Agreement.
2.7. Method of Selecting New Advances. The Borrower shall select the Type
of Advance. The Borrower shall give the Agent irrevocable notice (a "Borrowing
Notice") not later than (i) noon (Chicago time) on the Borrowing Date of each
Floating Rate Advance, and (ii) 4:00 p.m. (Chicago time) on the proposed
Borrowing Date for each Swingline 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
$1,000,000 or a multiple of $100,000 in excess thereof (other than a
Swingline Advance which shall have no minimum amount), and
-27-
34
(c) the Type of Advance selected.
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. A Floating
Rate Advance shall continue as a Floating Rate Advance unless and until such
Floating Rate Advance is repaid. 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.
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 $1,000,000 (but not less than
$5,000,000), upon at least two (2) 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
Floating Rate Advances upon two (2) Business Days' prior notice to the Agent.
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 noon (Chicago time). 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
-28-
35
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 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. Required Payments Related to Reductions in the Aggregate
Commitment. On each date on which the Aggregate Commitment is reduced as
described in the definition thereof, if the then-current Coverage Requirement is
in excess of the reduced Aggregate Commitment taking effect on such date, the
Borrower shall, prior to the close of business on such date, make a mandatory
payment to the Agent for the benefit of the Lenders in the amount of such
excess. Any such payments shall be allocated among the Lenders in accordance
with their respective Commitment Percentages and shall be applied to principal.
2.10.5. 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 Floating Rate Advance shall
bear interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made at a rate per annum equal to the
Floating Rate for such day. Changes in the rate of interest on that portion of
any Advance maintained as a Floating Rate Advance will take effect
simultaneously with each change in the Alternate Base Rate. The interest rate on
each Swingline Advance shall be recalculated daily for each day that such
Swingline Advance is outstanding.
2.12. Rates Applicable After Default. 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, each Advance shall bear interest at a rate per annum
equal to the Floating 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 each Advance shall bear
interest at a rate per annum equal to the Floating 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. Each payment delivered to the Agent for the
account of any Lender shall be delivered promptly by the Agent to such
-29-
36
Lender in the same type of funds that the Agent received at its address
specified pursuant to Article XIII. 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 shall be payable on each Payment Date, commencing with the first
such date to occur after the date hereof and at maturity or termination of the
Aggregate Commitment. 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, and repayment notice received by it
hereunder. When any Floating 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. [INTENTIONALLY OMITTED.]
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
-30-
37
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
[INTENTIONALLY OMITTED]
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.
(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 Second Amendment to Security Agreement, together
with such executed amendments to the UCC-1 financing statements
under the Prior Facility as the Agent may reasonably request.
-31-
38
(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) Fully executed reaffirmation of the PEC Tri-Party Agreement
recognizing the changes made pursuant to this Agreement, together
with evidence satisfactory to Agent of the signatories' authority to
execute such agreement.
(x) Financial information on the Company as of November 30, 1997 as
described in Section 6.1(i) below.
(xi) Borrowing Base Certificates dated as of December 31, 1997 and as of
a date not more than 2 Business Days prior to the Effective Date
have been executed and delivered to the Agent.
(xii) Establishment and funding of the Settlement Account.
(xiii) Written confirmation from Greenwich Capital that its "Portfolio
Limit" (as defined in the MLPSA) shall be no less than (i)
$125,000,000 through March 31, 1998, and (ii) $100,000,000 from
April 1, 1998 through the Termination Date.
(xiv) Payment of all Fees and other expenses of the Agent due and payable
on or before the Effective Date.
(xv) Such other documents as any Lender or its counsel may have
reasonably requested.
To the extent any of the preceding conditions involves delivery of documents
that have not changed from those previously delivered under the Prior Facility,
Borrower may satisfy such conditions by delivery of a certificate of continued
effectiveness.
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 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.
-32-
39
(iii) All legal matters incident to the making of such Advance shall be
satisfactory to the Lenders and their counsel.
(iv) The aggregate principal balance of all loans sold to Greenwich
Capital by the Borrower under the MLPSA (excluding all loans resold
or transferred by Greenwich Capital pursuant to a "Purchaser
Disposition" (as defined in the MLPSA) prior to the applicable
Borrowing Date) shall not be less than 2.5 times the aggregate
principal balance of the Eligible Collateral as of such date. The
Borrower shall provide to the Agent written confirmation from
Greenwich Capital of such Greenwich Capital loan balance as a
condition to each such Advance.
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:
-33-
40
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.
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 November 30, 1997 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 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).
5.5. Material Adverse Change. Since November 30, 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
through August 31, 1997, filed all United States federal tax returns and all
other tax returns which are required to be filed and has 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
Borrower will file such returns and pay such taxes independently from and after
September 1, 1997. 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
-34-
41
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.
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
-35-
42
or the ownership of their respective Property if failure to comply could
reasonably be expected to have a Material Adverse Effect.
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. Section 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.
-36-
43
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
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) Not later than 15 days after the issuance of the Borrower's audit
report as of December 31, 1997 for January and February of 1998 and
within 30 days after the end of each month thereafter, a balance
sheet and income statement showing the results of the Company's
operations for such month, certified by the Company's chief
financial officer or chief accounting officer.
(v) 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
-37-
44
summary shall show separately information concerning any Qualifying
Loans or Securities with respect to which there is recourse to the
Borrower.
(vi) Not later than 45 days after the end of each month, a certificate
from an Authorized Officer, with respect to the last day of such
month, as to 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
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".
(vii) 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.
(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), including a listing of those specific
Eligible Qualifying Loans which became Ineligible Collateral during
such month (or partial month, if requested by the Agent as set forth
above) 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. As soon as available and in any event within 10
days after the end of each calendar month, for all calendar months
through December 1998, revised cash flow projections.
(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
-38-
45
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.
(xi) 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.
(xii) 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 financial officer of
the Borrower, describing said Reportable Event and the action which
the Borrower proposes to take with respect thereto.
(xiii) 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.
(xiv) Promptly upon the furnishing thereof to the shareholders of the
Borrower, copies of all financial statements, reports and proxy
statements so furnished.
(xv) 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.
(xvi) 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.
(xvii) 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 and promptly after execution thereof,
any and all engagement letters or modifications or supplements
thereto between the Company and Friedman, Billings, ▇▇▇▇▇▇ & Co.
(xviii) Within 10 days after the close of each quarter of its fiscal year,
a certificate of an Authorized Officer setting forth all
calculations necessary to ascertain compliance by the Company with
the terms of the Indenture governing the Subordinated Notes.
(xix) 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
-39-
46
servicing thereof issued by any trustee under the Borrower's
securitizations of Qualifying Loans.
(xx) On the first Business Day of each week a cash position report and a
one page portfolio average summary of warehouse collateral certified
by an Authorized Officer.
(xxi) 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 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
-40-
47
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 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, 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.
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 $80,400,000 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
-41-
48
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;
(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 $5,000,000;
(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
$3,000,000; and
(ix) Permitted Warehouse Indebtedness; or
(b) cause total Funded Debt of the Borrower and its Included Subsidiaries on a
consolidated basis, as determined in accordance with Agreement Accounting
Principles 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) 95% of (A) "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) less (B) "allowance for loss -- loans sold"; and
(iii) 80% 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:
-42-
49
(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 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.
-43-
50
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 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.
-44-
51
6.17. Financial Covenants.
6.17.1. Adjusted Leverage Ratio. The Borrower will not permit, at
any time, 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 (such deduction from total
liabilities not to exceed $80,400,000) to (B) Adjusted Tangible Net Worth to
exceed 1.75 to 1.0.
6.17.2. Adjusted Tangible Net Worth. The Borrower will not at any
time permit its Adjusted Tangible Net Worth to be less than the sum of (A)
$110,000,000 plus (B) seventy-five percent (75%) 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 December 31, 1997 plus (C) 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).
6.17.3. Tangible Net Worth. The Borrower will not at any time
permit its Tangible Net Worth to be less than the sum of (A) $30,000,000 plus
(B) seventy-five percent (75%) of 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 December 31, 1997 plus (C) 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, modification or amendment unless (1) written notice of
any proposed reduction, modification or amendment is given to the Agent prior to
the effective date thereof and (2) if such reduction, modification or amendment
is 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
-45-
52
such Approved Investor Commitments. The Borrower will not execute any Pricing
Letter (as defined in the Greenwich Tri-Party Agreement) which would result in
the sale price of any Conventional HI/DC Qualifying Loan or any Title I
Qualifying Loan being less than the Borrowing Base value attributable to such
loan hereunder.
6.20. 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.
6.21. 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.
6.22. Excluded Subsidiaries. The Borrower has, as of the date hereof,
created certain Subsidiaries listed on Schedule "3" and each labeled as 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, (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 and (iii) no further
"Excluded Subsidiaries" may be created after the date hereof. 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 6.22.
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).
-46-
53
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 or
6.22.
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, or any other event shall occur or condition exist,
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 stated maturity, provided that any such default or other event or
condition occurring prior to the date hereof which has been waived by the holder
or holders of such Material Indebtedness shall not be deemed a Default
hereunder; 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
-47-
54
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.
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
-48-
55
Investors covering Eligible Collateral having an aggregate Borrowing Base value
at least equal to the then existing Coverage Requirement.
7.18. The Borrower shall fail to cause Approved Investors to purchase, and
remit to the Settlement Account payment in full for, Pledged Qualifying Loans
held by the Collateral Agent under either the Prior Facility or this Agreement
having an aggregate unpaid principal balance of at least $35,000,000 during the
period from February 5, 1998 through and including March 3, 1998.
7.19. The Borrower shall breach or default in the performance of the
Borrower's obligations under any Approved Investor Commitment issued to the
Borrower, 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.
8.3. Release of Collateral. Upon the request of the Borrower delivered
from time to time to the Agent and the Collateral Agent but subject to Section
6.20, 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, (iii) the release of such Collateral will not
create a violation of any Lending Sublimit or Borrowing Base Sublimit and (iv)
such release is either (A) pursuant to a successful sale of Collateral to an
Approved Investor pursuant to an Investor Transmittal Letter or (B) with respect
to delinquent Title I Qualifying Loans that are Ineligible Collateral and that
the Borrower needs to present to the FHA to pursue its insurance claims thereon.
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.
-49-
56
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.
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) The Borrower agrees that the Borrower and the Agent shall, if
the Agent in its sole discretion so requires, 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
-50-
57
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 Agent 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, 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 Floating 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
-51-
58
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.
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 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:
-52-
59
(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.
(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", "Eligible
Non-Conforming Qualifying Mortgage Loan", "Borrowing Base" or
"Collateral Value", unless such amendment would, in the Agent's
determination, be favorable to the Lenders.
(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.
(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.
-53-
60
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 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
-54-
61
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.
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.
9.16. Maximum Interest. Notwithstanding the foregoing paragraphs and all
other provisions of this Agreement and the Notes, none of the terms and
provisions of this Agreement or the Notes shall ever be construed to create a
contract to pay to the Lenders for the use, forbearance or detention of money,
interest in excess of the maximum amount of interest permitted to be charged by
the Lenders to the Borrower under applicable state or federal law from time to
time in effect, and the Borrower shall never be required to pay interest in
excess of such maximum amount. If, for any reason interest is paid
-55-
62
hereon in excess of such maximum amount, then promptly upon any determination
that such excess has been paid the Lenders will, at their option, either refund
such excess to the Borrower or apply such excess to the principal owing under
the Notes.
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.
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
-56-
63
(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 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
-57-
64
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 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.
-58-
65
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.
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
-59-
66
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 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.
-60-
67
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 $3,500 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.
12.4 [Intentionally Omitted]
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.
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
-61-
68
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 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.
-62-
69
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: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇,
President
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Vice President
-63-
70
BANK UNITED
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Regional Director
GUARANTY FEDERAL BANK, F.S.B.
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Vice President
-64-
71
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Vice President
-65-
72
SCHEDULE "1"
COMMITMENTS AND COMMITMENT PERCENTAGES
======================================================================================================================
INITIAL PRIMARY
INITIAL COMMITMENT PRIMARY COMMITMENT SWINGLINE
LENDER COMMITMENT PERCENTAGE COMMITMENT PERCENTAGE COMMITMENT
----------------------------------------------------------------------------------------------------------------------
The First National $16,923,076.93 30.769230781% $11,923,076.93 23.8461539% $5,000,000
Bank of Chicago
----------------------------------------------------------------------------------------------------------------------
Bank United $16,923,076.91 30.769230750% $16,923,076.91 33.8461538% -0-
----------------------------------------------------------------------------------------------------------------------
Guaranty Federal $12,692,307.70 23.076923085% $12,692,307.70 25.3846154% -0-
----------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ Bank $8,461,538.46 15.384615384% $8,461,538.46 16.9230769% -0-
======================================================================================================================
-66-
73
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)
TMS Mortgage, Inc.(2)
Republic Bank(2)
Associates Financial Services, Inc.(2)
FirstPlus Financial(2)
PSB Lending Corp.(2)
Master Financial, Inc.(2)
Empire Funding Corp.(2),(4)
Residential Funding Corp.(2),(4)
Delta Funding Corp.(4)
Household Financial(4)
Amresco(4)
-67-
74
SCHEDULE "3"
SUBSIDIARIES AND OTHER INVESTMENTS
(See Sections 5.8 and 6.14)
============================================================================================================
Investment Owned Amount of Percent Jurisdiction of Excluded
In By Investment Ownership Organization or Included
------------------------------------------------------------------------------------------------------------
Mego Mortgage Borrower $3,000.00 100% Delaware Excluded
Home Loan
Acceptance
Corporation
============================================================================================================
-68-
75
SCHEDULE "4"
INDEBTEDNESS AND LIENS
(See Sections 5.14, 6.11 and 6.15)
Maturity, Maximum
Indebtedness Indebtedness Property Commitment and Current
Incurred By Owed To Encumbered (If Any) Outstanding Indebtedness
------------ ------------ ------------------- ------------------------
Mego Greenwich Specific Mortgage Commitment of up to
Mortgage Capital Related Securities $10,000,000 ($10,000,000
Corporation Markets, Inc. outstanding) Matures in
December, 1998
Mego Textron Specific Mortgage Commitment of up to
Mortgage Financial Related Securities $8,800,000 ($5,000,000
Corporation outstanding) Matures in
October, 2002
-69-
76
SCHEDULE "5"
BORROWER'S UNDERWRITING STANDARDS
-70-
77
SCHEDULE "5A"
BORROWER'S UNDERWRITING STANDARDS
(ELIGIBLE NON-CONFORMING MORTGAGE LOANS)
-71-
78
SCHEDULE "6"
BORROWER'S PROPERTY VALUATION PROCEDURES
-72-
79
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.
-73-
80
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.
-74-
81
SCHEDULE "9"
FORM OF DELINQUENCY, DEFAULT AND LOSS REPORT
-75-
82
EXHIBIT "A"
AMENDED AND RESTATED NOTE
February 19, 1998
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.
This Note amends and restates in its entirety that certain [Amended and
Restated] Note dated as of ____________, 1997 made by the Borrower payable to
the Lender.
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 Amended and Restated Credit Agreement dated as of February 19,
1998 (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:____________________________________
-76-
83
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF MEGO MORTGAGE CORPORATION,
DATED FEBRUARY 19, 1998
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
---- ---------- ----------- --------- -------
-77-
84
EXHIBIT "B"
FORM OF OPINION
February 19, 1998
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 an
Amended and Restated Credit Agreement dated as of February 19, 1998 (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 $55,000,000 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.
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
-78-
85
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 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.
-79-
86
EXHIBIT "C"
[INTENTIONALLY OMITTED]
-80-
87
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)
-81-
88
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
Amended and Restated Credit Agreement dated as of February 19, 1998 (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_.
-82-
89
EXHIBIT "F"
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain Amended
and Restated Credit Agreement dated as of February 19, 1998 (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:
-83-
90
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
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___.
----------------------------
-84-
91
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of _________, 199_ with
Provisions of and of
the Agreement
-85-
92
SCHEDULE II TO COMPLIANCE CERTIFICATE
Reports and Deliveries
-86-
93
EXHIBIT "G"
BORROWING BASE CERTIFICATE
Reference is made to that certain Amended and Restated 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 February 19, 1998. 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 $______________
(other than Eligible Returned Qualifying Loans)
(a) Total times .90 $
(b) Excess of Unsecured Title I Qualifying Loans
over 5% of Aggregate Commitment times .90 $______________
(c) subtract (b) from (a) $______________
2. Eligible Conventional HI/DC Qualifying Loans $______________
(other than Eligible Returned Qualifying
Loans) times .952 $______________
3. Eligible Non-Conforming Mortgage Loans $______________
(a) Eligible Non-Conforming Mortgage Loans
which are Second Mortgage Loans times .95(2) $______________
(b) 5% of Aggregate Commitment $
(c) Total of all Eligible Non-Conforming
Mortgage Loans which are not Second
Mortgage Loans times .95 $______________
(d) 15% of Aggregate Commitment $______________
(e) Lesser of (a) and (b) plus (c), but not more
than (d) $______________
4. Eligible Returned Qualifying Loans $______________
(a) Total Times .75 $______________
--------
(1) Each category excludes any Collateral which is Ineligible Collateral as of
the date hereof.
(2) Until 3/4/98, Non-HLTV Loans must have FICO scores of over 630, but will
also include Non- HLTV pledged before February 19, 1998 with FICO scores
over 600. HLTV Loans must have an average FICO score of 660 or higher.
-87-
94
(b) $10,000,000
(c) Lesser of (a) or (b) $______________
Borrowing Base from Eligible Collateral $______________
(sum of Items 1(c), 2(c), 3(e) and 4(c))
Add: Unrestricted Balance in Settlement Account $______________
in excess of $100,000*
Less: Uncleared Loan Funding Checks $______________
Less: $500,000 $500,000
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:
-88-
95
EXHIBIT "H"
PEC TRI-PARTY AGREEMENT
-89-
96
EXHIBIT "I"
SECOND AMENDMENT TO
SECURITY AND COLLATERAL AGENCY AGREEMENT
THIS SECOND AMENDMENT TO SECURITY AND COLLATERAL AGENCY AGREEMENT is made
as of February 19, 1998 by and among MEGO MORTGAGE CORPORATION (the "Borrower"),
THE FIRST NATIONAL BANK OF CHICAGO, as administrative agent for the lenders
under the Restated Credit Agreement (as defined below) (the "Agent") and FIRST
CHICAGO NATIONAL PROCESSING CORPORATION (the "Collateral Agent").
The parties have entered into a Security and Collateral Agency Agreement
dated as of June 20, 1997, as amended by a First Amendment to Security and
Collateral Agency Agreement dated as of February 2, 1998 (as so amended, the
"Security Agreement") which relates to an Amended and Restated Credit Agreement
of even date herewith among the Borrower, the Agent and certain lenders named
therein (the "Restated Credit Agreement"). All capitalized terms used herein and
not otherwise defined shall have the meanings given to them in the Security
Agreement.
The Restated Credit Agreement amends and restates in its entirety a Credit
Agreement dated June 20, 1997 (as amended from time to time), and the parties
desire to amend the Security Agreement as required under such Restated Credit
Agreement.
NOW, THEREFORE, in consideration of the foregoing, the parties agree as
follows:
1. Credit Agreement. All references to the Credit Agreement in the
Security Agreement shall be deemed to refer to the Restated Credit Agreement, as
amended from time to time. All Trust Receipts, Shipping Requests and Transmittal
Letters hereafter sent pursuant to the terms of the Security Agreement shall
refer to the Restated Credit Agreement (rather than the Credit Agreement dated
June 20, 1997), as amended from time to time.
2. AP Qualifying Loans. The phrase "seventh (7th) Business Day" in the
second sentence of Paragraph 2(b) of the Security Agreement is hereby changed to
"fifth (5th) Business Day".
3. Collateral Report. The form of Collateral Report attached as Exhibit
6 to the Security Agreement is replaced with the form attached hereto.
4. Continued Effect. As expressly modified as provided herein, the
Security Agreement shall continue in full force and effect.
5. Miscellaneous. This Amendment may be executed in counterparts and
shall constitute a single binding document when a counterpart has been executed
by each party and delivered to the Agent.
-90-
97
IN WITNESS WHEREOF, the Borrower, the Collateral Agent and the Agent
have executed this Amendment as of the date first above written.
MEGO MORTGAGE CORPORATION
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
THE FIRST NATIONAL BANK OF CHICAGO, not
individually but as Agent for the Lenders
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
FIRST CHICAGO NATIONAL PROCESSING
CORPORATION
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
-91-
98
EXHIBIT 6
TO SECURITY AGREEMENT
FORM OF COLLATERAL REPORT
BORROWING BASE $ AMOUNT LIMIT OVER LIMIT
-------------- ---------------------------------------
Eligible Title I Qualifying Loans (90%) ________ _____ __________
plus Eligible Conventional HI/DC Qualifying Loans ________ _____ __________
(a) Non-HLTV Loans (95% of 93%) ________ _____ __________
(b) HLTV Loans (95% of 93%) ________ _____ __________
plus Eligible Non-Conforming Mortgage Loans ________ _____ __________
(a) First Mortgages (95%) ________ _____ __________
(b) Second Mortgages (95%) ________ _____ __________
equals Borrowing Base before status limits ________ _____ __________
Status Limits ________ _____ __________
(a) Agreements to Pledge ________ _____ __________
(10% of Aggregate Commitment)
(b) Trust Receipts (2% of Aggregate Commitment) ________ _____ __________
(c) Unsecured Title I Qualifying Loans ________ _____ __________
(5% of Aggregate Commitment)
(d) Eligible Non-Conforming Mortgage Loans -- ________ _____ __________
Second Mortgages (5% of Aggregate Commitment)
(e) Eligible Non-Conforming Mortgage Loans -- ________ _____ __________
All (15% of Aggregate Commitment)
(f) Eligible Returned Qualifying Loans ________ _____ __________
($10,000,000)
Borrowing Base after status limits ________
plus Unrestricted Balance in Settlement Account
in excess of $100,000*
less Uncleared Loan Funding Checks ________
less $500,000 ________
equals Adjusted Borrowing Base ________
less Coverage Requirement (Facility Outstandings) ________
equals Borrowing Base excess/(shortfall) ________
* 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.
-92-
99
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 Floating 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 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
-93-
100
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 Floating 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
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
-94-
101
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 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.
-95-
102
[NAME OF ASSIGNOR]
By: ___________________________________
Title: ___________________________________
___________________________________
___________________________________
[NAME OF ASSIGNEE]
By: ___________________________________
Title: ___________________________________
___________________________________
___________________________________
-96-
103
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
-97-
104
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which
must include notice address for the Assignor and the Assignee
-98-
105
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.
*To be included only if consent must be obtained from the Borrower pursuant to
Section 12.3.1 of the Credit Agreement.
-99-
106
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 $3,500 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:_____________________________
[Attach photocopy of Schedule 1 to Assignment]
-100-
107
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: Amended and Restated Credit Agreement, dated February 19, 1998 (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)
-101-
108
EXHIBIT "M"
MARKET VALUATION FORMULA
See most recent pricing letter from Greenwich Capital Markets, Inc. or other
Approved Investors.
-102-
109
EXHIBIT "N"
CURRENT APPROVED MARKET VALUE REFERENCE INVESTORS
1. Empire Funding
2. FirstPlus Financial, Inc.
3. The Money Store
4. Master Financial
5. Residential Funding Corp.
-103-
110
EXHIBIT "O"
FORM OF FNMA EARLY FUNDING TRANSACTION LETTER
-104-
111
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: Amended and Restated Credit Agreement, dated February 19, 1998 (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)
-100-