UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
Mego Mortgage Corp.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
585165103
(CUSIP Number)
Neal J. Wilson, Esq.,1775 Eye Street, N.W. Washington, D.C. 20006
(202) 261-3346
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
June 29, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box / /.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 6 Pages
<PAGE>
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Emanuel J. Freidman
SS. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
- --------------------------------------------------------------------------------
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / /
(b) / /
- --------------------------------------------------------------------------------
3
SEC USE ONLY
- --------------------------------------------------------------------------------
4
SOURCE OF FUNDS
PF
- --------------------------------------------------------------------------------
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6
CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER OF
SHARES 7 SOLE VOTING POWER
BENEFICIALLY
OWNED BY 6,766,667
EACH
REPORTING
PERSON
WITH
-------------------------------------------------------------------
8 SHARED VOTING POWER
5,359,116 (1)
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
6,766,667
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
5,359,116 (1)
- --------------------------------------------------------------------------------
Page 2 of 6 Pages
<PAGE>
- --------------------------------------------------------------------------------
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
12,125,783
- --------------------------------------------------------------------------------
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
/ /
- -------------------------------------------------------------------------------
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
39.67%
- --------------------------------------------------------------------------------
14
TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
(1) Representing common shares which may be deemed to be beneficially owned by
Mr. Friedman by virtue of his position as Chairman and Chief Executive Officer
of Friedman Billings Ramsey Group, Inc. Mr. Friedman disclaims beneficial
ownership of such shares.
** See Item 5 for additional information.
Page 3 of 6 Pages
<PAGE>
ITEM 1. Security and Issuer.
This Statement relates to the common stock of Mego Mortgage Corp., having
its principal executive office at 1000 Parkwood Circle, Suite 500, Atlanta, GA
30339.
ITEM 2. Identity and Background.
This statement is being filed by Emanuel J. Friedman:
(a) Emanuel J. Friedman;
(b) 1001 19th Street North, Arlington, VA 22209-1710;
(c) Present principal occupation: Chairman and Chief Executive Officer,
Friedman Billings Ramsey Group, Inc.
(d)-(e) During the last five years, Mr. Friedman has not been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors), or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
(f) Emanuel J. Friedman is a United States citizen.
Item 3. Source and Amount of Funds or Other Consideration.
On June 9, 1998, Mr. Friedman executed a common stock Purchase Agreement
with Mego Mortgage Corp. (Mego), which provided for the purchase of
6,666,667 shares of common stock at a purchase price of $1.50 per share.
The purchase of the common stock was consummated on June 29, 1998. Mr.
Friedman used personal funds to pay the $10,000,000 in consideration paid
to Mego pursuant to the Purchase Agreement. Prior to this acquisition,
Mr. Friedman beneficially owned 100,000 shares of common stock.
The common stock shares purchased by Mr. Friedman on June 29, 1998 have
full voting rights. The common stock shares, however, have not been
registered under the Securities Act of 1933, or any state securities laws
and, unless so registered, may only be offered or sold pursuant to an
exemption from, or a transaction not subject to, the registration
requirements of the Securities Act of 1933 and applicable state securities
laws. Pursuant to a Registration Rights Agreement dated June 29, 1998,
Mego agreed to file on or before September 16, 1998, a registration
statement covering Mr. Friedman's common stock shares and use all
reasonable efforts to cause such registration statement to be declared
effective on or before the 180th day after the date of issuance.
Item 4. Purpose of Transaction.
Mr. Friedman's acquisition of common stock on June 29, 1998 is part of a
broad plan to recapitalize Mego ("the Recapitalization"). Mr. Friedman's
acquisition was made for investment purposes.
Mr. Friedman's acquisition of common stock was made in connection with an
an Offering Memorandum dated June 9, 1998 pursuant to which Mego made
(i) a private offering of up to 16,666,667 shares of its common stock, par
value $.01 per share; and (ii) a private offering of up to 25,000 shares
of its Series A Convertible Preferred Stock, par value $.01 per share.
The price of the common stock sold in the offering was $1.50 per share;
the price of the Series A Preferred Stock was $1,000 per share. The
placement agent for the two private offerings was Friedman, Billings
Ramsey & Co, Inc. The private offerings were concurrent with, and
conditioned upon, an exchange offering relating to the outstanding
corporate debt of Mego.
Page 4 of 6 Pages
<PAGE>
In connection with the Recapitalization, certain existing members of the
Mego Board of Directors resigned, new members of the Board of Directors
were appointed, and the Board of Directors appointed new officers to
various positions. Pursuant to the Purchase Agreement, Mr. Friedman has
the right to appoint one new member to the Mego Board of Directors.
In connection with June 29, 1998 private offering of Series A Preferred
Stock, Mr. Friedman, Friedman Billings Ramsey & Co., Inc. (FBR), Mego,
City National Bank of West Virginia, and Sovereign Bancorp, Inc. entered
into a Co-sale Agreement, whereby in the event that Mr. Friedman or FBR
receives an offer to sell five percent or more of his or its shares of
Mego common stock, City National Bank of West Virginia and Sovereign
Bancorp shall have the right to participate pro rata in such sale.
On June 29, 1998, by separate letter agreements, FBR agreed to vote the
shares of common stock held by it for the nominees of City National Bank
of West Virginia and Sovereign Bancorp to Mego's Board of Directors.
Except as set forth above, Mr. Friedman has no plan or proposal that
relates to or would result in any of the actions described in
Item 4(a)-(j)of the instructions to Schedule 13D.
Mr. Friedman has been informed by Mego's counsel that, as of June 29,
1998, Mego has 30,566,667 shares of common stock issued and outstanding.
Item 5. Interest in Securities of the Issuer.
(a)-(b) As of June 29, 1998:
(i) Mr. Friedman: directly beneficially owns 6,766,667 shares of
common stock (22.14%);
(ii) Mr. Friedman may be deemed to indirectly beneficially own
5,359,116 shares of common stock by virtue of his "control" position
as Chairman and Chief Executive Officer of Friedman Billings Ramsey
Group, Inc. ("FBRG") (17.53%); 4,452,307 of those shares are
beneficially owned by Friedman Billings Ramsey & Co., Inc., a wholly
owned subsidiary of FBRG and a registered broker-dealer; 824,187 of
those shares are beneficially owned by FBR Ashton, a Maryland
limited partnership; 82,622 of those shares are beneficially owned
by FBR Opportunity Fund, Ltd., a Bermuda chartered corporation. FBR
Ashton and FBR Opportunity Fund are investment entities. Friedman
Billings Ramsey Investment Management, Inc., a wholly owned
subsidiary of FBRG and a registered investment adviser, is the
discretionary manager of FBR Ashton. FBR Offshore Management, Inc.,
a wholly owned subsidiary of FBRG and a registered investment
adviser, is the discretionary manager of the FBR Opportunity Fund.
(c) Except for the purchase of 6,666,667 shares of common stock on June
29, 1998, Mr. Friedman has not engaged in any transactions in the
last sixty days.
(d) None.
(e) Not applicable.
Page 5 of 6 Pages
<PAGE>
Item 6. Contracts, Arrangements, Understandings or Relations With Respect
to Securities of the Issuer.
See Item 4.
Item 7. Materials Filed as Exhibits.
Exhibit A Common Stock Purchase Agreement between Mr. Friedman and Mego,
dated June 9, 1998.
Exhibit B Registration Rights Agreement between Mr. Friedman and Mego,
dated June 29, 1998.
Exhibit C Co-sale Agreement among and between Mr. Friedman, Mego, FBR, City
National Bank of West Virginia, and Sovereign Bancorp, Inc.,
dated June 29, 1998.
In accordance with Rule 13d-4 of the Securities Exchange Act of 1934, Mr.
Friedman expressly disclaims the beneficial ownership of the securities
covered by this statement and the filing of this report shall not be
construed as an admission by Mr. Friedman that he is the beneficial owner
of such securities.
Signature
After reasonable inquiry and to the best knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
Date: July 22, 1998
---------------------------------
Emanuel J. Friedman
Page 6 of 6 Pages
<PAGE>
EXHIBIT A
MEGO MORTGAGE CORPORATION
COMMON STOCK
PURCHASE AGREEMENT
This Common Stock Purchase Agreement is made as of June 9, 1998, by and
between Emanuel J. Friedman (the "Purchaser"), and Mego Mortgage Corporation
(the "Company"), a Delaware corporation, with its principal offices at 1000
Parkwood Circle, 5th Floor, Atlanta, Georgia.
WHEREAS, the Company is engaging in a plan of recapitalization (the
"Recapitalization") which includes the following: (i) a private offering (the
"Common Stock Offering") of shares of its common stock, par value S.01 per share
(the "Common Stock"), (ii) a private offering (the "Series A Preferred Stock
Offering") by the Company of shares of its Series A Convertible Preferred Stock,
par value S.01 per share (the "Series A Preferred Stock"); and (iii) an exchange
offer to occur concurrent with the Common Stock Offering and the Series A
Preferred Stock Offering (together, the "Offerings") and as a condition thereto
to exchange shares of Series A Preferred Stock and/or new 12.5% Subordinated
Notes Due 2001 ("New Notes") of the Company or a combination thereof, subject to
certain limitations, for any and all of the outstanding 12.5% Senior
Subordinated Notes Due 2001 of the Company, subject to certain conditions (the
"Exchange Offer");
WHEREAS, the Company will enter into a Placement Agreement (the "Placement
Agreement"), with Friedman, Billings, Ramsey & Company, Incorporated ("FBR"), a
Virginia corporation, pursuant to which FBR will act as placement agent in
connection with the issue and sale of the Common Stock and Series A Preferred
Stock (together with the New Notes, the "Securities") to be issued in the
Offerings, and,
WHEREAS, the completion of the Offerings (the "Closing") is scheduled to
take place on June 18, 1998, or such other date (the "Closing Date") as is
agreed upon by the Company and FBR;
WHEREAS, the Company wishes to offer and sell to Purchaser, and Purchaser
wishes to buy from the Company, on the terms and conditions set forth herein, up
to 6,666,667 shares of Common Stock for a purchase price of $1.50 per share, or
$10,000,000 in aggregate;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Purchase Agreement, the parties agree as follows:
Section 1. Definitions. Capitalized terms not otherwise defined herein
shall have the meanings assigned to them in the Company's Offering Memorandum,
dated June 9, 1998 (the "Offering Memorandum").
Section 2. Agreement to Sell and Purchase the Securities. Subject to the
terms and conditions of this Purchase Agreement, that certain registration
rights agreement (the "Registration Rights Agreement") to be entered into by and
between the Company and Purchaser, as provided in Exhibit A hereto, and the
Placement Agreement, the Company agrees to sell and Purchaser agrees to buy
6,666,667 shares (the "Shares") of Common Stock for a purchase price of $1.50
per share, or $10,000,000 in the aggregate (the "Purchase Price"). Purchaser
shall pay the Purchase Price on the Closing Date in New York Clearing House
Funds, to the account of the Company.
The Company represents to Purchaser that, prior to the Closing, the
Company will be executing substantially identical purchase agreements with
respect to shares of Common Stock and Series A Preferred Stock (except for the
name and address of the Purchaser and the number of shares of Series A Preferred
Stock or Common Stock, as the case may be, purchased) with certain other
investors (the "Other Purchasers') for an aggregate purchase price of at least
$20,000,000. Purchaser and Other Purchasers are hereinafter sometimes referred
to as the "Purchasers," and this Purchase Agreement and such other Purchase
Agreements are hereinafter sometimes referred to as the "Purchase Agreements."
Section 3. Issuance of the Certificates Representing the Securities. At
the Closing, the Company will cause to be delivered to the Purchaser, one
certificate for the Shares being purchased registered in the name of Purchaser
as set forth on the signature page hereof (or in such other name as may be
designated by Purchaser to the Company in writing upon payment of the applicable
purchase price therefor).
Section 4. Representations- Warranties and Covenants of the Company, The
Company hereby represents and warrants to, and covenants with, Purchaser as
follows:
4.1. Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, The Company has all requisite power and authority, and all
necessary authorizations, approvals, consents, orders, licenses, certificates
and permits of and from all governmental or regulatory bodies or any other
person or entity, to own, lease and license its assets and properties and
conduct its business as now being conducted and as described in the Offering
Memorandum, except for such authorizations, approvals, consents, orders,
licenses, certificates and permits the failure to so obtain would not have a
material adverse effect upon the assets or properties, business, results of
operations, prospects or condition (financial or otherwise) of the Company and
its subsidiaries, taken as a whole (a "Material Adverse Effect"'); no such
authorization, approval, consent, order, license, certificate or permit contains
a materially burdensome restriction other than as disclosed in the Offering
Memorandum; and the Company has all such corporate power and authority, and has
or will have as of the Closing such authorizations, approvals, consents, orders,
licenses, certificates and permits as shall be necessary to enter into, deliver
and perform this Agreement, the Purchase Agreements and the Other Transaction
Documents (as defined in Section 4.3, below) and to issue and sell the
Securities (except as may be required under state securities laws). The Company
is duly qualified to do business and is in good standing in every jurisdiction
where such qualification is required by controlling law and where the failure to
so qualify is reasonably likely to have a Material Adverse Effect. The Company
has no subsidiaries that would be deemed to be "significant subsidiaries" for
purposes of Rule 1-02 of Regulation S-X promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), substituting in the tests
set forth in such rule the figure "5%" in each case.
4.2. Authorized Capital Stock. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Offering Memorandum. All
issued and outstanding shares of Company capital stock have been duly and
validly authorized and issued, are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and have not
been issued in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right. All of the
outstanding shares of capital stock of the Company's subsidiaries have been duly
and validly authorized and issued and are fully paid and non-assessable and are
owned, directly or indirectly, by the Company, free and clear of any lien,
pledge, charge, security interest or other encumbrance. The Shares have been
duly authorized and, when issued and sold pursuant to this Purchase Agreement
will be duly and validly issued, fully paid and nonassessable and none of them
will be issued in violation of any preemptive or other similar right, Except as
disclosed in the Offering Memorandum, there is no outstanding option, warrant or
other right calling for the issuance of, and there is no commitment, plan or
arrangement to issue, any share of capital stock of the Company or any
subsidiary or any security convertible into, or exercisable or exchangeable for,
such capital stock. The Shares conform in all material respects to all
statements in relation thereto contained in the Offering Memorandum.
4.3. Due Execution. Delivery and Performance. The execution, delivery and
performance of each of this Agreement and the Placement Agreement, the
Registration Rights Agreement, the Purchase Agreements entered into with the
Other Purchasers, the Option Agreement between the Company and The City National
Bank of West Virginia ("City") and the similar Option Agreement between the
Company and Sovereign Bancorp, Inc. ("Sovereign") the Bulk Servicing Purchase
Agreement and the Flow Servicing Purchase Agreement referred to in Section 7.4
below (the "Servicing Purchase Agreements"'), the Warehouse Line Agreement
referred to in Section 7.16(c) below, and the Flow Purchase Agreement referred
to in Section 7,16(d) below (collectively, the "Other Transaction Documents") by
the Company (a) have been (or prior to Closing will be) duly authorized by all
requisite corporate action of the Company and (b) will not violate (i) the
Certificate of Incorporation or Bylaws of the Company, or (ii) any provision of
any indenture, mortgage, agreement, contract, or other instrument to which the
Company or any of its subsidiaries is bound or be in conflict with, or result in
a breach of or constitute (upon notice or lapse of time or both) a default under
any such indenture, mortgage, agreement, contract, or other instrument or result
in the creation or imposition of any lien, security interest, mortgage, pledge,
charge or other encumbrance of any nature whatsoever upon any of the properties
or assets of the Company or any of its subsidiaries, except for any such
violations, conflicts, breaches or defaults which have been waived in writing as
of the Closing or would not have a Material Adverse Effect. Upon execution and
delivery, this Agreement and the Other Transaction Documents will constitute
legal, valid and binding obligations of the Company, enforceable in accordance
with their respective terms, except insofar as the enforcement thereof may be
limited by bankruptcy law or other laws relating to or affecting the enforcement
of creditors' rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except as rights to indemnity or contribution may be limited under
applicable law.
4.4. Offering Memorandum and Additional Information. The Company has
furnished, and Purchasers acknowledge receipt of the Offering Memorandum dated
June 9, 1998.
The Offering Memorandum when combined with the documents incorporated by
reference therein does not, and any amendment or supplement thereto will not,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. Each document incorporated by reference into the Offering Memorandum
complies in a material respects with the requirements of the Exchange Act, and
the Commission's rules and regulations thereunder ("Exchange Act Regulations")
and, when read together with the other information in the Offering Memorandum,
does not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.5. Legal Proceedings. There are no actions, suits, investigations or
proceedings pending or threatened other than as disclosed in the Offering,
Memorandum (including the documents incorporated by reference therein and
provided to the Purchasers) to which the Company or any of its subsidiaries is a
party or to which any of their properties is subject before or by any court or
governmental agency or both which is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect; and to the knowledge of the
Company, no such actions, suits, investigations or proceedings are threatened by
any person, corporation or governmental agency or body.
4.6. No Material Adverse Change. Subsequent to the respective dates as of
which information is given in the Offering Memorandum, and except as
specifically described therein, there has not been (i) any material adverse
change in the business, properties or assets described or referred to in the
Offering Memorandum, or the results, of operations, condition (financial or
otherwise) earnings, operations, business or business prospects, of the Company
and its subsidiaries, taken as a whole, (ii) any transaction entered into
(whether binding or nonbinding) by the Company and/or its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, except
transactions in the ordinary course of business, (iii) any obligation that is
material to the Company and its subsidiaries, direct or indirect, contingent or
noncontingent, matured or unmatured, absolute or otherwise, incurred by the
Company or its subsidiaries, except obligations incurred in the ordinary course
of business, (iv) any change in the capital stock (other than upon the exercise
of stock options described in the Offering Memorandum) or outstanding
indebtedness of the Company or its subsidiaries (other than indebtedness
incurred in the ordinary course of business consistent with past practice), (v)
any dividend or distribution of any kind declared, paid or made on the capital
stock of the Company or any of its subsidiaries, or (vi) any change in senior
management or key employees, and no such change or event is reasonably expected.
4.7. Law and Regulation. The Company and its subsidiaries are in
compliance with, and conduct their respective businesses in conformity with all
applicable laws and governmental regulations governing the businesses conducted
by the Company and its subsidiaries, as the case may be, except for failures to
comply or conform which would not have a Material Adverse Effect.
4.8. Accounting. Matters. Deloitte & Touche LLP ("D&T"), which has audited
the financial statements, together with the related notes, of the Company as of
August 3 1, 1997 and 1996, and for each of the three years ended August 31 1997,
1996, and 1995, which are included in the Offering Memorandum, are independent
public accountants as required by the Securities Act of 1933, as amended (the
"Securities Act") and the Securities Act Regulations (as if the Offering
Memorandum was a prospectus filed as part of a registration statement filed
under the Securities Act).
The financial statements included or incorporated by reference in the
Offering Memorandum comply as to form in all material respects with applicable
accounting requirements of the Securities Act, the Securities Act Regulations,
the Exchange Act, and the Exchange Act Regulations, including Regulation SA
under the Securities Act (as if such financial statements were filed with or
incorporated by reference in a registration statement under the Securities Act),
and said financial statements present fairly the financial position of the
Company and its Subsidiaries on a consolidated basis as of the dates indicated
and the results of their operations for the periods specified; except as
otherwise stated in the Offering Memorandum, such financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis and such financial statements are consistent in all material
respects with financial statements and other reports filed by the Company and
its Subsidiaries with the Commission; the supporting schedules included are
incorporated by reference in the Offering Memorandum and present fairly the
information required to be stated therein. The selected and summary financial
and statistical data included in the Offering Memorandum present fairly the
information shown therein and have been compiled on a basis consistent with the
audited financial statements presented therein.
The Company and each of its subsidiaries (i) make and keep books and
records which, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of assets-, (ii) maintain a system of internal
accounting controls sufficient to provide reasonable assurance that: (a)
transactions are executed in accordance with management's general or specific
authorizations, (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets, (c) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect thereto, and (d) access
to assets is permitted only with management's general or specific authorization;
and (iii) otherwise conform to the requirements of the Exchange Act, Section
13(b) and Regulation 13b-2 thereunder and shall continue to do so for so long as
Purchaser holds any Shares,
4.9. Compliance with Securities Laws. Assuming (i) the accuracy of the
representations and warranties of FBR and the Purchasers as set forth in the
Placement Agreement and the Purchase Agreements, and (ii) that the Purchaser,
the Other Purchasers and the participants in the Exchange Offer are either
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) or "accredited investors"' (as defined in Rule 501(a) under the Securities
Act) (the Company having received representations from such persons to such
effect), the Company has complied with all applicable federal and state
securities or Blue Sky laws in connection with the Offerings and the Offerings
are or will be exempt from registration under such laws.
4.10. Intangibles. The Company owns or possesses adequate and enforceable
rights to use all trademarks, trademark applications, trade names, service
marks, copyrights, copyright applications, licenses, know-how and other similar
rights and proprietary knowledge (collectively, "Intangibles") necessary for the
conduct of its business as described in the Offering Memorandum. The Company has
not received any notice of, nor to its best knowledge is aware of, any
infringement of or conflict with asserted rights of others with respect to any
intangibles which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a Material Adverse Effect.
4.11. Title. The Company has good title to each of the items of personal
property which are reflected in the financial statements referred to in Section
4.8 or are referred to in the Offering Memorandum as being owned by it and valid
and enforceable leasehold interests in each of the items of real and personal
property which are referred to in the Offering Memorandum as being leased by it,
in each case free and clear of all liens, encumbrances, claims, security
interests and defects, other than those described in the Offering Memorandum and
those which do not and will not have a Material Adverse Effect.
4.12. Contracts. Each material contract or agreement to which the Company
is a party is in full force and effect and is valid and enforceable by and
against the Company in accordance with its terms, assuming the due
authorization, execution and delivery thereof by each of the other parties
thereto. Except as disclosed in the Offering Memorandum, neither the Company,
nor to the best knowledge of the Company, any other party is in default in the
observance or performance of any term or obligation to be performed by it under
any such agreement, and no event has occurred which with notice or lapse of time
or both would constitute such a default, in any such case which default or event
would have a Material Adverse Effect. Except as described in the Offering
Memorandum, no default exists, and no event has occurred which with notice or
lapse of time or both would constitute a default, in the due performance and
observance of any term, covenant or condition by the Company of any other
agreement or instrument to which the Company is a party or by which it or its
properties or business may be bound or affected which default or event would
have a Material Adverse Effect.
4.13. No Violation. The Company is not in violation of any term or
provision of its Certificate of Incorporation or Bylaws or of any franchise,
license, permit, judgment, decree, order, statute, rule or regulation, where the
consequences of such violation would have a Material Adverse Effect.
4.14. Transactions with Affiliates. No transaction has occurred or is
contemplated between or among the Company and any of its officers or directors
or any affiliate or affiliates of any such officer or director that would have
been required to be described in the Offering Memorandum if it were part of a
Registration Statement under the Securities Act and is not described in the
Offering Memorandum,
4.15. No Manipulation. The Company has not taken, nor will it take,
directly or indirectly, any action designed to or which might reasonably be
expected to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of any of the Shares.
4.16. Taxes. The Company or its former parent, Mego Financial Corp., has
filed all Federal, state, local and foreign tax returns which are required to be
filed by the Company through the date hereof, or has received extensions
thereof, and has paid all taxes shown on such returns and all assessments
received by it to the extent that the same are material and have become due.
4.17. Investment Company Act of 1940. The Company is not, and will not
become upon the issuance and sale of the Securities and the application of net
proceeds therefrom as described in the Offering Memorandum under the caption
"Use of Proceeds," an "investment company" or, assuming FBR is not an
"investment company," an entity "controlled" by an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended (the " 1940
Act").
4.18. Use of Proceeds. The Company will apply the proceeds from the
Offerings as set forth in the Offering Memorandum.
4.19. Board of Directors. As of the Closing, the Board of Directors of the
Company shall have seven members and Purchaser shall be entitled at the Closing
or at any time thereafter to designate one member, who shall be appointed to the
Board of Directors promptly following his designation and who shall also be
elected to any executive or similar committee of the Board of Directors. After
the Closing and until the first date on which Purchaser holds shares of Common
Stock (on an as-converted basis) and Common Stock representing less than 7.0% of
the outstanding shares of Common Stock (including the number of shares of Common
Stock into which all outstanding shares of Common Stock are convertible) (the
"7% Termination Date") (a) the Board of Directors shall continue to have seven
members (as adjusted pursuant to the following sentence and the similar
provision of the Preferred Stock Purchase Agreement of even date herewith
between the Company and Sovereign), and (b) Purchaser shall be entitled to
nominate one member of the Board of Directors at each meeting of shareholders at
which directors are elected, and such member shall also be elected to any
executive or similar committee of the Board of Directors. The Company shall use
its best efforts to cause the nominees of Purchaser to be elected to the Board
of Directors and appointed to such committee. Purchaser shall have the right at
all times until the 7% Termination Date to designate .a. representative (who
shall be reasonably satisfactory to the Company) who shall be given notice of
and who shall have the right to attend all meetings of the Board of Directors of
the Company and all meetings of any executive or similar committee of the Board
of Directors.
4.20. Certificates. Any certificates signed by any officer of the Company
or its subsidiaries, and delivered to the Purchasers or to counsel for the
Purchasers pursuant to the terms of this Agreement shall be deemed a
representation and warranty by the Company to the Purchaser as to the matters
covered thereby.
4.21. Mortgage-Related Asset Revaluation. Immediately following Closing,
the Company shall cooperate with City, with the advice of their respective
advisors, to arrive at a mutually satisfactory, and more conservative set of
assumptions to be used to value the mortgage-related assets carried on the
Company's balance sheet.
4.22. Other Transaction. The material terms of all of the transactions
relating to the Recapitalization are accurately disclosed on Exhibit E.
4.23. Best Efforts. The Company shall cooperate with Purchaser and shall
use its reasonable best efforts to do or cause to be done all things necessary
or appropriate on its part in order to effect the consummation of the
transactions contemplated under this Agreement.
4.24. Due Diligence. In order to permit Purchaser to perform further due
diligence, the Company shall give to Purchaser and its accountants, counsel and
other authorized representatives reasonable access during normal business hours
throughout the period prior to the Closing Date to all of its properties, books,
records, contracts and other documents relating to its business as Purchaser may
reasonably request, subject to the obligation of Purchaser and its authorized
representatives to maintain the confidentiality of all non-public information
concerning the Company obtained by reason of such access.
Section 5. Representations; Warranties and Covenants of Purchaser.
Purchaser hereby represents, warrants and covenants to the Company as follows:
5.1. Compliance with United States Securities Laws. Purchaser understands
and acknowledges that the Shares have not been registered under the Securities
Act, and that the Shares may not be offered or sold in the United States or to,
or for the account or benefit of, any "U.S. person" (as defined in Regulation S
under the Securities Act), unless such Securities are registered under the
Securities Act or such offer or sale is made pursuant to an exemption from the
registration requirements of the Securities Act. The Shares are being offered
and sold in reliance on an exemption from registration pursuant to Section 4(2)
of the Securities Act and Rule 506 promulgated thereunder. Purchaser further
represents that it has read and understands the investor notices and legends set
forth in the Offering Memorandum.
5.2. Status of Purchaser. Purchaser is purchasing the Shares for its own
account or for persons or accounts as to which it exercises investment
discretion. Such Purchaser is an "accredited investor" (as defined in Rule
501(a) under the Securities Act) and is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with respect to
investments in restricted securities and has requested, received, reviewed and
considered all information it deems relevant in making a decision to execute the
Purchase Agreement and to purchase the Shares. Purchaser has agreed to purchase
the Shares for investment and not with a view to distribution. To the extent
that any certificate representing the Shares is registered in the name of
Purchaser's nominee, Purchaser confirms that such nominee is acting as custodian
for Purchaser of the Shares represented thereby.
5.3. Restrictions on Re-Sale. Purchaser understands that the Shares are
only transferable on the books and records of the Company and its Transfer Agent
and Registrar and that the Company and the Transfer Agent and Registrar will not
register any transfer of the Shares which the Company in good faith believes
violates the restrictions set forth in this Section 5.3 or violates any state or
federal securities laws. Purchaser will not, directly or indirectly, voluntarily
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) its rights under this
Purchase Agreement or the Shares otherwise than in compliance with the
Securities Act, any applicable state securities or blue sky laws and any
applicable securities laws of jurisdictions outside the United States, and the
rules and regulations promulgated thereunder.
Purchaser understands that the Company intends to register the Shares
under the Securities Act as contemplated in the Registration Rights Agreement.
After registration of the Shares under the Securities Act, Purchaser agrees to
comply with the prospectus delivery and all other requirements of the Securities
Act in connection with any sale or other disposition of the Shares. Purchaser
agrees that Purchaser or its broker will deliver to each transferee a copy of a
current prospectus until the Company gives written notice to the Purchaser that
delivery of a current prospectus is no longer required. Purchaser agrees to
confirm with the Company that the prospectus is in fact current and that the
Shares may be lawfully sold prior to any sale or other disposition by Purchaser.
5.4. Due Execution. Delivery and Performance of the Purchase Agreement and
Other Obligations. Upon approval of this Agreement and the transactions
contemplated herein by its Board of Directors: Purchaser will have full right,
power, authority and capacity to enter into this Purchase Agreement and to
consummate the transactions contemplated hereby; the execution, delivery and
performance of this Purchase Agreement by Purchaser will have been duly
authorized by all requisite corporate action of Purchaser; upon the execution
and delivery of this Purchase Agreement by Purchaser, this Purchase Agreement
shall constitute the legal, valid and binding obligations of Purchaser,
enforceable against Purchaser in accordance with its terms except insofar as the
enforcement thereof may be limited by bankruptcy law or other laws relating to
or affecting the enforcement of creditors' rights generally or by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as rights to indemnity and
contribution may be limited under applicable law.
5.5. Representations, Warranties and Covenants at Closing. Each of the
representations and warranties contained in this Section 5 is true and correct
as of the date of this Purchase Agreement and will be true and correct as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date. Each of the covenants contained in this
Section 5 will have been performed as of the Closing Date if performance is
required as of such date by this Section 5.
Section 6. Survival of Representations, Warranties, Covenants and
Agreements. Notwithstanding any investigation made by either party to this
Purchase Agreement, all representations, warranties, covenants and agreements
made by the Company and Purchaser herein shall survive the execution of this
Purchase Agreement, the delivery of certificates representing the Shares and the
receipt of payment for the Shares.
Section 7. Conditions to Closing. The obligations of the Purchaser
hereunder are subject to (1) the accuracy of the representations and warranties
on the part of the Company in all material respects on the date hereof, at the
Closing Date, (ii) the performance by the Company of its obligations hereunder
in all material respects, and (iii) the following further conditions:
7.1. Exchange Offer. The Company shall have consummated the Exchange Offer
with respect to at least $76 million in aggregate principal amount of Original
Notes.
7.2. Additional Equity. The Company shall have consummated or sale of
additional shares of Common Stock and Series A Preferred Stock pursuant to the
Offerings for aggregate gross proceeds to the Company of not less than
$20,000,000.
7.3. Waiver of Change of Control Payments. All current and former
directors, officers, employees and consultants of the Company or any subsidiary
who would be entitled as a result of the consummation of the Recapitalization to
receive payments or other benefits pursuant to "change of control" provisions of
any agreement between such person and the Company or any subsidiary shall have
irrevocably waived their rights to receive such payments or benefits and the
Company shall have irrevocably determined not to make such payments.
7.4. Servicing Purchase Agreements. The Company and City shall have
entered into a Bulk Servicing Purchase Agreement including the terms set forth
on Exhibit B and a Flow Servicing Purchase Agreement including the terms set
forth on Exhibit 0 and each such Agreement shall have been determined by City in
the exercise of its sole and absolute discretion to be satisfactory in form and
substance.
7.5. Registration Rights Agreement. The Company and Purchaser shall have
entered into the Registration Rights Agreement and such agreement shall have
been determined by Purchaser in the exercise of its sole and absolute discretion
to be satisfactory in form and substance.
7.6. Opinion of Greenberg Traurig. The Company shall have furnished to the
Purchaser on the Closing Date an opinion of Greenberg Traurig Hoffman Lipoff
Rosen & Quentel, P.A., counsel for the Company, addressed to the Purchaser and
dated the Closing Date and in form reasonably satisfactory to the Purchaser,
stating that:
(a) the authorized shares of capital stock of the Company conform as to
legal matters to the description thereof contained in the Offering Memorandum
under the heading "Description of Capital Stock-, the Company has an authorized
capitalization as set forth in the Offering Memorandum under the caption
"Capitalization"- the issued and outstanding shares of capital stock of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable, to such counsel's knowledge, except as set forth in the Offering
Memorandum, there are no outstanding (i) securities or obligations of the
Company convertible into or exercisable or exchangeable for any shares of
capital stock of the Company, (ii) warrants, rights, or options to subscribe for
or purchase from the Company any shares of capital stock or any such convertible
or exchangeable securities or obligations, or (iii) obligations of the Company
to issue any shares of capital stock, any such convertible or exchangeable
securities or obligation, or any such warrants, rights, or options; the Shares
have been duly authorized, and, when issued and sold pursuant to this Purchase
Agreement, will be duly and validly issued, fully paid and nonassessable.
(b) the Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware with all requisite
corporate power and authority to own, lease and license its assets and
properties and conduct its business as now being conducted and as described in
the Offering Memorandum and to enter into, deliver and perform this Agreement,
the Purchase Agreements and the Other Transaction Documents;
(c) the Company is duly qualified in or registered by and in good standing
as a foreign corporation in each jurisdiction listed on Exhibit E hereto;
(d) to such counsel's knowledge, except as described in the Offering
Memorandum, the Company is not in breach of, or in default under (nor has any
event occurred that with notice, lapse of time, or both would constitute a
breach of or default under) its Certificate of Incorporation or in the
performance or observation of any obligation, agreement, covenant, or condition
contained in any license, indenture, mortgage, deed of trust, loan or credit
agreement, or any other agreement or instrument known to such counsel to which
the Company or any of its subsidiaries is a party or by which any of them or
their respective properties may be bound or affected or under any law,
regulation, or rule or any decree, judgment, or order applicable to the Company
or any of its subsidiaries, except such breaches or defaults that are not
reasonably likely to have a Material Adverse Effect;
(e) the execution, delivery, and performance of this Agreement and the
Other Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated under this Agreement and the Other Transaction
Documents, as the case may be, do not and will not conflict with, or result in
any breach of, or constitute a default under (nor constitute any event that with
notice, lapse of time, or both would constitute a breach of or default under)
(i) any provisions of the Company's certificate of incorporation or by-laws,
(ii) any provision of any license, indenture, mortgage, deed of trust, loan or
credit agreement, or other agreement or instrument known to such counsel and to
which the Company or any subsidiary is a party or by which any of them or their
respective properties may be bound or affected, or (iii) to such counsel's
knowledge, assuming (x) the accuracy of the representations and warranties of
the Company, FBR and the Purchasers set forth in the Placement Agreement, the
Purchase Agreements and the Other Transaction Documents, and (y) that the
Purchaser, the Other Purchasers and the participants in the Exchange Offer are
either "qualified institutional buyers" (as defined in Rule 144A under the
Securities Act) or "accredited investors" (as defined in Rule 501(a) under the
Securities Act), any law or regulation or any decree, judgment, or order
applicable to the Company or any subsidiary, except in the case of clause (ii)
for such conflicts, breaches, or defaults that have been waived or individually
or in the aggregate are not reasonably likely to have a Material Adverse Effect;
(f) the Company has fall corporate power, and authority to enter into and
perform this Agreement and the Other Transaction Documents and to consummate the
transactions contemplated herein; this Agreement and the Other Transaction
Documents have been duly authorized, executed, and delivered by the Company and
will constitute valid and binding agreements of the Company enforceable against
the Company in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
creditors' rights generally, and by general principles of equity, whether
considered at law or in equity, and except as rights to indemnity or
contribution may be limited under applicable law;
(g) assuming (x) the accuracy of the representations and warranties of the
Company, FBR and the Purchasers set forth in the Placement Agreement, the
Purchase Agreements and the Other Transaction Documents, and (y) that the
Purchaser, the Other Purchasers and the participants in the Exchange Offer are
either "qualified institutional buyers" (as defined in Rule 144A under the
Securities Act) or "accredited investors" (as defined in Rule 501(a) under the
Securities Act), no approval, authorization, consent, or order of or filing with
any federal or, to such counsel's knowledge, state governmental or regulatory
commission, board, body, authority, or agency is required in connection with the
execution, delivery, and performance by the Company of this Agreement and the
Other Transaction Documents or the consummation of the transactions contemplated
hereby and thereby by the Company, or the sale and delivery of the Shares by the
Company as contemplated hereby, other than (i) the filing of a certificate of
designation of the Series A Preferred Stock with the Secretary of State of
Delaware, (ii) the filing of a Current Report on Form 8-K, (iii) filings
required pursuant to the terms of the Registration Rights Agreement and any
other registration rights agreements entered into pursuant to the Offerings and
the Exchange Offer, and (iv) as may be required pursuant to any state securities
laws;
(h) to such counsel's knowledge, each of the Company and its subsidiaries
has all necessary licenses, authorizations, consents, and approvals and has made
all necessary filings required under any federal, state, or local law,
regulation or rule, and has obtained all necessary authorizations, consents, and
approvals from other persons, required to conduct their respective businesses,
as described in the Offering Memorandum, except to the extent that any failure
to have any such licenses, authorizations, consents, or approvals would not,
individually or in the aggregate, have a Material Adverse Effect, to such
counsel's knowledge, neither the Company nor any of its subsidiaries is in
violation of, in default under, or has received any notice regarding a possible
violation, default, or revocation of any such license, authorization, consent,
or approval or any federal, state, local, or foreign law, regulation, or decree,
order, or judgment applicable to the Company or any of its subsidiaries, which
would result in a Material Adverse Effect; and no such license, authorization,
consent, or approval contains a materially burdensome restriction that is not
adequately disclosed in the Offering Memorandum;
(i) the issuance and sale of the Shares by the Company is not subject to
preemptive or other similar rights arising by operation of law, under the
Certificate of Incorporation or Bylaws of the Company or under any agreement
known to such counsel to which the Company or any of its subsidiaries is a
party;
(j) the form of certificate used to evidence the shares complies in all
material respects with all applicable statutory requirements, with any
applicable requirements of the Certificate of Incorporation and Bylaws of the
Company and the requirements of The Nasdaq National Market;
(k) the statements under the captions "Business - Government Regulation,"
"Description of the Original Notes," "Description of the New Notes,"
"Description of Capital stock' and "Certain Federal Income Tax Consequences" in
the Offering Memorandum, insofar as such statements constitute a summary of the
legal matters referred to therein, constitute accurate summaries thereof in all
material respects;
(l) except as described in the Offering Memorandum, to such counsel's
knowledge, there are no actions, suits, investigations or proceedings pending to
which the Company or any of its subsidiaries is a party or to which any of their
properties is subject before or by any court or governmental agency or both,
which is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect;
(m) neither the Company nor any of its subsidiaries is, or solely as a
result of transactions contemplated hereby and the application of the proceeds
from the sale of the Shares or the consummation of the Recapitalization, will
become an "investment company" or, assuming that FBR is not an "investment
company," a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "1940 Act").
In addition, such counsel shall state that they have participated in
conferences with the directors, officers and employees of the Company and its
independent public accountants at which the contents of the Offering Memorandum
were discussed and, although such counsel is not passing upon and does not
assume responsibility for the accuracy, completeness, or fairness of the
statements contained in the Offering Memorandum (except as and to the extent
stated above), they have no reason to believe that the Offering Memorandum, as
of its date and as of the date of such counsel's opinion, contained or contains
any untrue statement of a material fact or omitted or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading (it
being understood that, in each case, such counsel need express no view with
respect to the financial statements and other financial and statistical data
included in the Offering Memorandum).
7.7. Comfort Letter. The Purchaser shall have received from Deloitte &
Touche LLP, letters relating to the Offering Memorandum dated as of the Closing
Date addressed to the Purchaser and in form and substance satisfactory to it.
7.8. Offering Memorandum. The Offering Memorandum, as amended or
supplemented after the date hereof, shall not, in Purchaser's reasonable
judgment, (i) disclose a material change in the assets or properties, business,
results of operations, prospects or condition (financial or otherwise) of the
Company and its subsidiaries taken as a whole, as described in the Offering
Memorandum dated June 9, 1998, or (ii) contain an untrue statement of material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;
7.9. Other Transactions. There shall have been, in Purchaser's reasonable
judgment, no material change in the terms of the transactions described in
Exhibit F.
7.10. No Material Adverse Effect. Between the time of execution of this
Agreement and the Closing Date no event shall have occurred which has had or is
reasonably likely to have a Material Adverse Effect.
7.11. Certificates. The Company will, on the Closing Date deliver to the
Purchaser a certificate of the Chief Executive Officer and the Chief Financial
Officer of the Company to the effect that, to each of such officer's knowledge,
the representations and warranties of the Company M forth in this Agreement are
true and correct as of such date and the conditions set forth in Sections 7.1,
7.2, 7.3, 7.9, 7.10, 7,12 and 7.13 of this Agreement have been met. The Company
shall have furnished to the Purchaser such other documents and certificates as
to the accuracy and completeness of any statement in the Offering Memorandum,
the representations, warranties and statements of the Company contained herein,
and the performance by the Company of its covenants contained herein, and the
fulfillment of any conditions contained herein as of the Closing Date as the
Purchaser may reasonably request.
7.12. Consents. The Company shall have obtained in writing all consents of
third parties necessary to permit the consummation of the transactions
contemplated by this Agreement and the Other Transaction Documents and no such
consent shall contain any term or condition that Purchaser reasonably deems to
be materially disadvantageous to the Company or Purchaser.
7.13. Related Party Indebtedness. At the Closing, the Company shall
have no outstanding indebtedness to Mego Financial Corp.
7.14. Documents. The Company shall have delivered to Purchaser executed
copies of the Purchase Agreements entered into with the Other Purchasers and all
other agreements between the Company and any Other Purchasers or any holder of
the Original Notes or the New Notes relating to the Offerings or the
Recapitalization.
7.15. Additional Conditions. The obligations of Purchaser hereunder are
further subject to the satisfaction of each of the following conditions:
(a) Certificate of Designation. The certificate of designation of
the Series A Preferred Stock shall have been determined by Purchaser in the
exercise of its sole and absolute discretion to be satisfactory in form and
substance.
(b) Letter from FBR. FBR shall have delivered to Purchaser a letter
in the form attached hereto as Exhibit G.
(c) Warehouse Line Agreement. The Company and Sovereign shall have
entered into a Warehouse Line Agreement, which Agreement: (i) shall include,
inter alia, the terms set forth in Exhibit H hereto, and (ii) shall otherwise
have been determined by Purchaser in the exercise of its sole and absolute
discretion to be satisfactory in form and substance.
(d) Flow Loan Purchase Agreement. The Company and Sovereign shall
have entered into a Flow Loan Purchase Agreement, which Agreement: (i) shall
include, inter alia, the terms set forth in Exhibit I hereto, (ii) shall provide
that the Company shall retain servicing rights with respect to all loans
purchased in the Flow Loan Purchase Agreement, and (iii) shall otherwise have
been determined by Purchaser in the exercise of its sole and absolute discretion
to be satisfactory in form and substance.
(e) Amendment of Placement Agreement. The Company and FBR shall have
entered into an Amendment to the Placement Agreement under the terms of which
the parties thereto agree that the fees to be paid to FBR shall be paid by the
delivery of shares of Common Stock valued at $1.50 per share.
Section 8. Conditions to Closing. The obligations of the Company hereunder
are subject to (i) the accuracy of the representations and warranties on the
part of the Purchaser in all material respects on the date hereof, at the
Closing Date, and (ii) the performance by the Purchaser of its obligations
hereunder in all material respects.
Section 9. Compliance with the Securities Act.
9.1. Information Available. So long as Purchaser holds any shares of the
Company's capital stock, the Company will furnish to each Purchaser:
(a) as soon as practicable after available, one copy of (i) its Annual
Report to Shareholders, and (H) if not included in substance in the Annual
Report to Shareholders, its Annual Report on Form 10-K, and (iii) each of its
Quarterly Reports to Shareholders and its Quarterly Reports on Form 10-Q, and
(b) upon the reasonable request of Purchaser, all other information of a
kind that is generally available to the public.
9.2. Legend Requirement. Purchaser hereby agrees that the Shares will be
subject to Section 5.3 hereof and to that effect the following legend will
appear on the Shares until such time as the Company may deem such legend to be
no longer required under the federal or state securities laws-
The Securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, of the United States of America
(the "Act") and may have been issued in reliance upon the exemption set forth in
Section 4(2) of the Securities Act and Rule 506 promulgated thereunder. The
Securities represented by this certificate may not be offered, sold, transferred
or otherwise disposed of in the United States or to, of for the account or
benefit of, any "U.S. person" (as defined in Regulation S) unless registered
under the Act or an exemption from the registration requirements of the Art is
available.
Section 10. Broker's Fee. Purchaser acknowledges that the Company has
advised it that the Company intends to pay FBR, the placement agent: (i) a fee
(the "Offerings Fee") equal to 6.0% of the gross proceeds received from the sale
of the shares of Common Stock (except for those shares sold to the Purchaser)
and Series A Preferred Stock sold in the Offerings and shares of Common Stock
(except for those shares sold to the Purchaser or his affiliates) sold in the
Rights Offering; and (ii) a fee (the "Advisory Fee") of $1,000,000 as financial
advisor in connection with the Recapitalization. Purchaser further acknowledges
that the Company has advised it that the Offering Fee is payable upon
consummation of the Offerings in Common Stock valued at the Offering Price and
the Advisory Fee is payable upon consummation of the Rights Offering in Common
Stock valued at the Offering Price. Purchaser further acknowledges that the
Company has advised it that the Company has also agreed: (i) to reimburse FBR on
request by the FBR for the FBR out-of-pocket expenses, including, among other
things, the fees and expenses of legal counsel; and (ii) to indemnify FBR
against certain liabilities, including liabilities under the Securities Act, and
other liabilities incurred in connection with the Offerings, and to contribute
to payments FBR may be required to make in respect thereof. The parties hereto
hereby represent that there are no other brokers or finders entitled to
compensation in connection with the We of the securities contemplated hereby.
Section 11. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by registered air
mail, postage prepaid, or sent by facsimile transmission with a confirmation
copy sent by registered mail, and shall be deemed given when so mailed:
(a) if to the Company, to 1000 Parkwood Circle, Atlanta, Georgia 30339,
Attention: Jeffrey S. Moore, or to such other person at such other place as the
Company shall designate to the Purchaser in writing;
(b) if to Purchaser, to 2120 Leroy Place, Washington, D.C. 20008, or at
such other address or addresses as Purchaser may have furnished to the Company,
or
(c) if to any transferee or transferees of Purchaser, at such address or
addresses as shall have been furnished to the other parties hereto at the time
of the transfer or transfers, or at such other address or addresses as may have
been furnished by such transferee or transferees to the other parties hereto in
writing,
Section 12. Amendments. No amendment, interpretation or waiver of-any
of the provisions of this Purchase Agreement shall be effective unless made
in writing and signed by the parties to this Purchase Agreement,
Section 13. Headings. The headings of the sections, subsections and
subparagraphs of this Purchase Agreement are used for convenience only and shall
not affect the meaning or interpretation of the contents of this Purchase
Agreement.
Section 14. Enforcement. The failure to enforce or to require the
performance at any time of any of the provisions of this Purchase Agreement
shall in no way be construed to be a waiver of such provisions, and shall not
affect either the validity of this Purchase Agreement or any part hereof or the
right of any party thereafter to enforce each and every provision in accordance
with the terms of this Purchase Agreement.
Section 15. Governing Law. This Purchase Agreement and the relationships
of the parties in connection with the subject matter of this Purchase Agreement
shall be governed by and determined in accordance with the laws of the State of
Georgia in the United States of America.
Section 16. Severability. If any severable provision of this Purchase
Agreement is held to be invalid or unenforceable by any judgment of a tribunal
of competent jurisdiction, the remainder of this Purchase Agreement shall not be
affected by such judgment, and the Purchase Agreement shall be carried out as
nearly as possible according to its original terms and intent.
Section 17. Counterparts. This Purchase Agreement may be executed in
counterparts, all of which shall constitute one agreement, and each such
counterpart shall be deemed to have been made, executed and delivered on the
date set out at the head of this Purchase Agreement without regard to the dates
or times when such counterparts may actually have been made, executed or
delivered.
Section 18. Assignment. This Purchase Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of, as the case may be,
and be enforceable by and against the parties hereto and their respective
successors and assigns, but neither this Purchase Agreement nor any of the
rights, interests or obligations of the parties hereunder shall be assigned by
any of the parties hereto without the prior written consent of each of the other
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives the day and year first above
written.
MEGO MORTGAGE CORPORATION
By:_______________________________
Name: Jeffrey S. Moore
Title: President and Chief
Executive Officer
EMANUEL J. FRIEDMAN
By:________________________________
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of June 29, 1998 by and between Mego Mortgage Corporation, a Delaware
corporation (the "Company"), and Emanuel J. Friedman ("Friedman") in connection
with the purchase of the Company's common stock, par value $.01 per share (the
"Common Stock") in the transactions comprising the Company's Recapitalization
(as defined below).
WHEREAS, the Company is engaging in a plan of recapitalization (the
"Recapitalization") which includes the following: (i) a private offering (the
"Common Stock Offering") of shares of its Common Stock. (ii) a private offering
(the "Series A Preferred Stock Offering") by the Company of shares of its Series
A convertible preferred stock (the "Series A Preferred Stock"); and (iii) an
offer occurring concurrently with the Common Stock Offering and the Series A
Preferred Stock Offering (together, the "Offerings") and as a condition thereto
to exchange shares of Series A Preferred Stock and/or new 12 1/2% Subordinated
Notes Due 2001 (the "New Notes") of the Company or a combination thereof,
subject to certain limitations, for any and all of the outstanding 12 1/2%
Senior Subordinated Notes Due 2001 of the Company, subject to certain conditions
(the "Exchange Offer")
WHEREAS, the Company his entered into a Placement Agreement dated as of
June 9, 1998 (the Placement Agreement"), with Friedman, Billings, Ramsey & Co.,
Inc. ("FBR"), a Virginia corporation, pursuant to which FBR will act as
placement agent in connection with the issue and sale of the Common Stock and
Series A Preferred Stock to be issued in the Recapitalization;
WHEREAS, the Company has entered into various Purchase Agreements (each a
"Purchase Agreement") with certain purchasers of Common Stock and Series A
Preferred Stock in conjunction with the Offerings, and
WHEREAS, as an incentive to induce investors to participate in the
Recapitalization, the Company has agreed to provide registration rights to
holders of Common Stock acquired in the Offerings and to holders of Series A
Preferred Stock issued in the Offerings and the Exchange Offer relating to the
shares of Common Stock underlying the Series A Preferred Stock (such shares of
Common Stock are referred to herein as the "Securities").
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged by
all parties hereto, the parties, intending to be legally obligated, hereby agree
as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
"Act": The Securities Act of 1933, as amended,
"Broker-Dealer": Any broker or dealer registered as such under the
Exchange Act.
"Closing Date": The date of this Agreement.
"Commission": or "SEC": The United States Securities and Exchange
Commission.
"DTC": The Depository Trust Company.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"NASD": National Association of Securities Dealers, Inc.
"Person": An individual, partnership, corporation, trust or unincorporated
organization, or a government or in agency, authority or political subdivision
thereof.
"Prospectus": The prospectus included in a Registration Statement, as
amended or supplemented, including post-effective amendments, therein.
"Registration Default": As defined in Section 3 hereof.
"Resale Filing Deadline": As defined in Section 2 hereof.
"Resale Registration Statement": As defined in Section 2 hereof.
"Securities": As defined in the preamble hereto.
"Transfer Restricted Securities": Each Security, until the earliest to
occur of (a) the date on which such Security has been effectively registered
under the Act and disposed of in accordance with a Resale Registration Statement
or such other applicable registration statement, (b) the date on which such
Security is available for sale without restriction to the public pursuant to
Rule 144 under the Act or by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated in the Resale Registration Statement.
"Underlying Common Stock": The shares of Company Common Stock into which
the Series A Preferred Stock may be converted.
"Underwritten Registration" or "Underwritten Offering": An offering in
which securities of the Company arc sold to an underwriter for reoffering to the
public pursuant to an affective registration statement filed with the
Commission.
SECTION 2. RESALE REGISTRATION STATEMENT
(a) Registration. The Company shall:
(x) cause to be filed one or more registration statements on Form
S-1, S-2, S-3 Or S4, if the use of such form is then available (each a
"Resale Registration Statement") pursuant to Rule 415 under the Act, on or
prior to September 16, 1998 (the "Resale Filing Deadline"), which Resale
Registration Statements shall provide for resales of all Transfer
Restricted Securities, the holders of which shall have provided the
information required pursuant to Section 2(b) hereof-, and
(y) use its reasonable best efforts to cause such Resale
Registration Statements to be declared effective by the Commission on or
before the 180th day after the Closing Date.
The Company shall use its reasonable best efforts to keep such Resale
Registration Statement continuously effective, supplemented and amended to the
extent necessary to ensure that it is available for resales of Securities by the
holders of Transfer Restricted Securities entitled to the benefit of this
Section 2(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, until the earlier of (i) a period of at least three
years following the Closing Date or (ii) the date on which all Transfer
Restricted Securities may be sold without restriction.
(b) Provision by Friedman of Certain Information in Connection with the
Shelf Registration Statement. Friedman may not include any of its Transfer
Restricted Securities in any Resale Registration Statement pursuant to this
Agreement unless and until Friedman furnishes to the Company in writing, within
20 business days after receipt of a request therefor, such information as the
Company may reasonably request for use in connection with any Resale
Registration Statement or Prospectus or preliminary Prospectus included therein.
Friedman shall not be entitled to Liquidated Damages pursuant to Section 3
hereof unless and until Friedman shall have used its best efforts to provide any
and all such reasonably requested information. Friedman agrees to promptly
furnish to the Company all information relating to a Resale Registration
Statement required to be disclosed in such Resale Registration Statement in
order to make the information previously furnished to the Company by Friedman
not materially misleading.
SECTION 3. LIQUIDATED DAMAGES
Subject to the provisions of Section 2(b) hereof, if (i) the applicable
Resale Registration Statements required by this Agreement is not filed with the
Commission on of prior to the date specified for such filing in this Agreement
or (ii) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being restored to effectiveness by
amendment or otherwise within thirty (30) business days or succeeded immediately
by in additional Resale Registration Statement that cures such failure and that
is itself immediately declared effective within thirty (30) business days (each
such event referred to in clauses (i) and (h), a "Registration Default"), the
Company shall pay liquidated damages to Friedman with respect to the first
90-day period immediately following the occurrence of such Registration Default,
in an amount equal to $.05 per share per week of Common Stock. The amount of the
liquidated damages shall increase by an additional $.05 per share per week with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of liquidated damages of $.50 per week. All
accrued liquidated damages shall be paid to Friedman by the Company by wire
transfer of immediately available funds or by federal funds check on the 91st
day following the occurrence of a Registration Default. Following the cure of
all Registration Defaults relating to any particular Transfer Restricted
Securities, the accrual of liquidated damages with respect to such Transfer
Restricted Securities will cease.
All obligations of the Company set forth in the preceding paragraph that
are outstanding with respect to any Transfer Restricted Security at the time
such Security ceases to be a Transfer Restricted Security shall survive until
such time as all such obligations with respect to such Security shall have been
satisfied in full.
SECTION 4. REGISTRATION PROCEDURES
(a) Resale Registration Statement. In connection with each Resale
Registration Statement, the Company shall comply with all the provisions of
Section 4(c) below and shall use all reasonable efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended methods thereof. In this regard the Company
will, by September 16, 1998, prepare and file with the Commission a Registration
Statement relating to the registration an any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted Securities
in accordance with such intended methods of resale.
(b) General Provisions. In connection with any Resale Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
the Securities by Broker-Dealers), the Company shall:
(i) use its renewable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 2 of this Agreement, and
upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for resale
of Transfer Restricted Securities during the period required by this
Agreement, the Company shall file promptly, and as appropriate, an
amendment or supplement to such Registration Statement, in the cue of
clause (A), correcting any such misstatement or omission, and, in the case
of either clause (A) or (B), use all reasonable efforts to cause such
amendment to be declared effective and such Registration Statement and the
related Prospectus to become usable for their intended purpose(s) as soon
as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 2 hereof or such shorter period as will
terminate when all Transfer Restricted Securities covered by such
Registration Statement cease to be Transfer Restricted Securities, cause
the Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the Act in a
timely manner, and reasonably assisting Friedman in complying with the
provisions of the Act with respect to the disposition of all Securities
covered by such Registration Statement during the applicable period in
accordance with the intended method of methods of distribution by the
sellers thereof set forth in such Registration Statement of supplement to
the Prospectus;
(iii) advise the underwriter(s), if any, Friedman promptly and, if
requested by such Persons in writing, to confirm such advice in writing,
(A) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration Statement
or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the issuance by the
Commission of any stop order or other order or action suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities or Blue Sky commission of the
exemption, qualification or registration of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, or (D) of the existence
of any fact or the happening or any event that makes any statement of a
material fact made in the Registration Statement, the prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement or the Prospectus in order to make the
statements therein not misleading. If at any time the Commission shall
issue any stop order or other order or take other action suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the exemption, qualification or registration of the Transfer Restricted
Securities under state securities or Blue Sky laws, the Company shall use
all reasonable efforts to obtain the withdrawal or lifting of such order
at the earliest possible time;
(iv) furnish to Friedman and each of the underwriter(s), if any,
before filing with the Commission, copies of any Registration Statement or
any Prospectus included therein or any amendment-, or supplements to any
such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review of Friedman and
the underwriter(s), if any, for a period of at least five business days,
and the Company will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated by
reference) to which Friedman or the underwriter(s), if any, shall
reasonably object within five business days after the receipt thereof
Friedman or the underwriter, if any, shall be deemed to have reasonably
objected to such filing if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed, contains
a material misstatement or omission;
(v) make available at reasonable times and upon reasonable notice
for inspection by Friedman, any underwriter participating in any
disposition pursuant to such Registration Statement, and any attorney or
accountant retained by Friedman or any of the underwriter(s), all
financial and other records, pertinent corporate documents and properties
of the Company and cause the Company's' officers, directors and employees
to supply all information reasonably requested by Friedman or any
underwriter, attorney or accountant in connection with such Registration
Statement subsequent to the filing thereof and prior to its effectiveness;
(vi) if requested by Friedman or the underwriter(s), if any,
promptly incorporate in any Registration Statement or Prospectus, pursuant
to a supplement or post-effective amendment if necessary such information
as Friedman and the underwriter(s), if any, may reasonably request to have
included herein, provided such information is usual and customary in such
a document, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities, information
with respect to the principal amount of Transfer Restricted Securities
being sold to underwriter(s), the purchase price being paid therefor and
any other terms of the offering of the Transfer. Restricted Securities to
be sold in such offering, and make all required filings of such Prospectus
Supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment,
(vii) furnish to Friedman and each of the underwriter(s), if any,
without change one copy of the Registration Statement, as first filed with
the Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits;
(viii) deliver to Friedman and each of the underwriter(s), if any,
without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request, and the Company hereby consent to the use
Prospectus and any amendment. or supplement thereto (other than in those
states or jurisdictions in the Company has not complied with or satisfied
the requirements of the relevant "blue sky" securities laws) by Friedman
and each of the underwriter(s), if any, in connection with the offering
and the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(ix) enter into such agreements (including an underwriting
agreement), and make representations and warranties, and take all such
other actions in connection therewith in or expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement, to the extent
reasonably and customary in this type of offering and as may be reasonably
requested by Friedman or any underwriter in connection with any sale or
pursuant to any Registration Statement contemplated by this Agreement, and
if the registration is on Underwritten Registration, the Company shall:
(A) furnish to Friedman and each underwriter, if any, in such
substance and as they may request and as are customarily made by
issuers to underwriters in primary underwritten offerings, upon the
date of the effectiveness of the Resale Registration Statement:
(1) a certificate, dated the date of effectiveness of
the Resale Registration Statement, as the case may be, signed
by (i) the President or any Vice President and (ii) a
principal financial or accounting officer of the Company,
confirming, as of the date thereof, the matters set forth in
paragraph (c) of Section 5 of the Placement Agreement such
other matters as such parties may reasonably request,
(2) an opinion, dated the date of effectiveness of the
Resale Registration Statement, as the case may be, of counsel
for the Company, covering the matters set forth in paragraph
(a) of Section 5 of the Placement Agreement and such other
matters as such parties may reasonably request, and in any
event including a statement to the that such counsel has
participated in conferences with officers and offer represent
of the Company, representatives of the independent public
accountants for the Company, Friedman's representatives and
Friedman's counsel in connection with the preparation of such
Registration Statement and the related Prospectus and have
considered the matters required to be stated therein and the
statements contained therein although such has not
independently verified the accuracy, completeness or fairness
of such statements; and that such counsel advises that, on the
basis of the foregoing, no facts came to counsel's attention
that caused such counsel to believe that the applicable
Registration Statement, at the time such Registration
Statement or any post-effective thereto become effective.
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or
that the Prospectus contained in such Registration Statement
as of its date, an untrue statement of a material fact or
omitted to state a material fact necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading. Without limiting the
foregoing, such counsel may state further that such counsel
assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the
financial statements, notes and schedules and other financial
data included in any Registration Statement contemplated by
this Agreement or the related Prospectus, and
(3) a customary comfort letter, dated as of the date of
effectiveness of the Resale Registration Statement, as the
case may be, from the Company's independent accountants. in
the customary form and covering matters of the type
Customarily covered in comfort letters by underwriters in
connection with primary underwritten offerings, and affirming
the matters set forth in the comfort letters delivered
pursuant to Section 5(b) of the Placement Agreement, without
exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 6 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company pursuant to this clause (ix), if any.
If at any time the covenants of the Company contemplated in clause (A)(1)
above cease to be true and correct, the Company shall so advise Friedman and the
underwriter(s), if any, and Friedman promptly and, if requested by such Persons,
shall confirm such advice in writing;
(x) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification
of the Transfer Restricted Securities under the securities or Blue Sky and
securities laws of such jurisdictions as Friedman or underwriter(s) may
reasonably request and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Transfer
Restricted Securities covered by the Resale Registration Statement;
provided, that the Company shall not be required to register or qualify as
a foreign corporation where it is not now so qualified or to take any
action that would subject it to the service of process in suits or to
taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xi) cooperate with Friedman and the underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be
in such denominations and registered in such names as Friedman or the
underwriter(s), if any, may reasonably request at least two business days
prior to any sale of Transfer Restricted Securities made by such
underwriter(s);
(xii) use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable Friedman or the underwriter(s),
if any, to consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in paragraph (m) above;
(xiii) if any fact or event contemplated by paragraph (b)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain (in untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading;
(xiv) provide a CUSIP number for shares of Common Stock and
Underlying Common Stock that are Transfer Restricted Securities not later
than the effective date of the Registration Statement.
(xv) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of
the NASD, and use its reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies
or authorities as may be necessary to enable Friedman to consummate the
disposition of such Transfer Restricted Securities;
(xvi) otherwise comply with all applicable rules and regulations of
the Commission, and make generally available to its security holders, as
soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) for the twelve-month
period (A) commencing at the end of any fiscal quarter in which Transfer
Restricted Securities are sold to underwriters in a firm, or best efforts
underwritten offering or (B) if not sold to underwriters in such an
offering, beginning with the first month of the Company's first fiscal
quarter commencing after the affective date of the Registration Statement;
(xvii) cause all shares of Common Stock which are Transfer
Restricted Securities covered by the Registration Statement to be listed
on each securities exchange or market, if applicable, on which similar
securities issued by the Company are then listed if requested by the
Holders of a majority in aggregate principal amount of the Notes or the
managing underwriter(s); and
(xviii) provide promptly to Friedman, as long as he remains a
stockholder of the Company, upon request each document filed with the
Commission pursuant to the requirements of Sections 13, 14 and 15 of the
Exchange Act for a period of three years from the Closing Date.
Friedman agrees by acquisition of a Transfer Restricted Security that,
upon receipt of any notice from the Company of the existence of any fact of the
kind described in Section 4(b)(iii)(D) hereof, Friedman will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until Friedman's receipt of the copies of the
supplemented or amended Prospectus, or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by the Company, Friedman will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in Friedman's possession of the Prospectus covering
such Transfer Restricted Securities that was current immediately prior to the
time of receipt of such notice, In the event the Company shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3, shall be extended by the number of days during
the period from and including the date of the giving of such notice pursuant to
Section 5(c)(iii)(D) hereof to and including the date when Friedman shall have
received the copies of it supplemented or amended Prospectus or shall have
received the Advice.
SECTION 5. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company regardless of whether a
Registration Statement becomes effective, including without limitation. (i) all
registration and filing fees and expenses (including filings made by Friedman
with the NASD (and, if applicable, the fees and expenses of any "qualified
independent underwriter" and its counsel that may be required by the NASD);(ii)
all fees and expenses of compliance with federal securities, foreign securities
and state Blue Sky or securities laws; (iii) all expenses of printing (including
the printing of Prospectuses), messenger and delivery services and telephone
incurred by the Company; (iv) all fees and disbursements of counsel for the
Company and, subject to Section 5(b) below, Friedman; (v) all application and
filing fees in connection with listing the shares of the Common Stock on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; (vi) all fees and disbursements of independent certified
public accountants of the Company (including the expenses of any special audit
and comfort letters required by or incident to such performance); and (vii) all
fees and charges of the Rating Agencies, if any; provided, that the Company will
not bear certain personal expenses of Friedman, including, underwriting
discounts, commissions, and messenger and delivery services and telephone
expenses incurred by Friedman.
The Company will, in any event, bear its internal expense (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit, all
trustee and Rating Agency fees and charges and the fees and expenses of any
Person, including special experts, retained by the Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Resale Registration Statement),
the Company will reimburse Friedman. as applicable, for the reasonable fees and
disbursements of not mom than one counsel as may be chosen by Friedman.
SECTION 6. INDEMNIFICATION
(a) The Company shall indemnify and hold Friedman harmless, to the fullest
extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including without limitation,
reimbursement of all reasonable costs of investigating, preparing, pursuing or
defending any claim or action, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the reasonable
fees and charges of counsel) directly or indirectly caused by, related to, based
upon, arising out of or in connection with any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arc caused by art untrue
statement or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to Friedman furnished
in writing to the Company by Friedman expressly for use therein or any agent or
representative of Friedman.
In case any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against Friedman with
respect to which indemnity may be sought against the Company, Friedman shall
promptly notify the Company in writing (provided, that the failure to give such
notice shall not relieve the Company of its obligations pursuant to this
Agreement unless and to the extent materially and adversely affected). Friedman
shall have the right to employ its own counsel in any such action and the fees
and expenses of such counsel shall be paid, as incurred by the Company
(regardless of whether it is ultimately determined that Friedman is not entitled
to indemnification hereunder); provided, that if Friedman is not successful and
it is determined that Friedman is not entitled to indemnification hereunder,
then Friedman shall reimburse the Company for all monies advanced by the Company
to which Friedman was not entitled. The Company shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for Friedman, which firm shall be designated by the holders
of a majority of the shares of Common Stock that are subject to, or affected by,
such action or proceeding. The Company shall not be liable for any settlement of
any such action or proceeding effected without the Company's prior written
consent, which consent shall not be withheld unreasonably, and the Company will
indemnify and hold Friedman harmless from and against any loss, claim, damage,
liability or expense by reason of any settlement of any action effected with the
prior written consent of the Company. The Company shall not, without the prior
written consent of Friedman, settle or compromise or consent to the entry of
judgment in or otherwise seek to terminate any pending or threatened action,.
claim, litigation or proceeding in respect of which indemnification or
contribution may be sought hereunder, unless such settlement, compromise,
consent or termination includes an unconditional release of Friedman from all
liability arising out of such action, claim, litigation or proceeding.
(b) Friedman agrees to indemnify and hold harmless the Company, and its
respective directors, officers and any person controlling (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) the Company, and the
respective officers, directors, partners, employees, representatives and agents
or each such person, to the same extent as the foregoing indemnity from the
Company to Friedman, but only with respect to claims and actions based on
information relating to Friedman furnished in writing by Friedman expressly for
use in any Registration Statement. In case any action or proceeding shall be
brought against the Company or its directors or officers or any such controlling
person in respect of which indemnity may be sought against Friedman, Friedman
shall have the rights and duties given the Company and the Company or its
directors or officers or such controlling person shall have the rights and
duties given to each Indemnified Holder by the preceding paragraph. In no event
shall the liability of Friedman hereunder be greater in amount than the dollar
amount of the net proceeds received by Friedman upon the sale of the Restricted
Securities giving rise to such indemnification obligation.
(c) If the indemnification provided for in this Section 6 is unavailable
to any indemnified party under Section 6(a) or Section 0(b) hereof (other than
by reason of the exceptions provided therein) in respect of any losses, claims,
damages,, liabilities or expenses referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand, and Friedman on the other hand from their purchase of Transfer
Restricted Securities or if such allocation is not permitted by applicable law,
the relative fault of the Company on the one hand and of Friedman on the other
in connection with the statements or emissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand, and
of Friedman on the other, shall be determined by reference to. among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by Friedman and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in the second paragraph
of Section 6(a), any legal or other fees, expenses or charges reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
SECTION 7. RULE 144
The Company hereby agrees with Friedman, for so long as any Transfer
Restricted Securities remain outstanding, to make available to Friedman in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from Friedman, the information required by Rule 144 under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144.
SECTION 8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
Friedman may not participate in any Underwritten Registration hereunder
unless Friedman (a) agrees to sell Friedman's Transfer Restricted Securities on
the basis provided in any underwriting arrangements provided by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of such
underwriting arrangements.
SECTION 9. SELECTION OF UNDERWRITERS
Friedman as a holder of Transfer Restricted Securities covered by the
Resale Registration Statement who desire to do so may sell such Transfer
Restricted Securities in an Underwritten Offering, In any such Underwritten
Offering, the investment banker or investment bankers and manager or managers
that will administrator the offering will be selected by the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities
included in such offering, provided, that such investment bankers and managers
must be reasonably satisfactory to the Company.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company agrees that monetary damages (including the
liquidated damages contemplated hereby) would not be adequate compensation of
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreement. The Company will not, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to its
securities to any Person, except as contemplated by the Offering Memorandum. The
rights granted to Friedman hereunder do not in any way breach or conflict with
and are not inconsistent with the rights granted to the holders of the Company's
securities wider any agreement in effect on the date hereof.
(c) Adjustments Affecting the Securities Common Stock. The Company will
not take any action, or permit any change to occur, with respect to the
Securities that would materially and adversely affect the ability of Friedman to
resell such Securities.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Company in writing from both
parties.
(e) Notice. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class or certified
mail, telex, telecopier, or reliable overnight delivery service.
(i) If to Friedman:
Emanuel J, Friedman
2120 Leroy Place
Washington, D.C. 20008
Telecopier No., (703) 312-9698
(ii) If to the Company: MEGO MORTGAGE CORPORATION Fifth Floor 1000
Parkwood Circle Atlanta, Georgia 30339 Telecopier No.: (800)
694-6346
Attention: Edward B. Meyercord
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if sent via a reliable overnight delivery service.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, by the parties hereto, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO THE CONFLICT
OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof, in any circumstances, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the retaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the Purchase Agreement,
and the Placement Agreement (as defined in the Purchase Agreement) is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto, in respect of the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Transfer Restricted Securities. This Agreement,
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
MEGO MORTGAGE CORPORATION
By:________________________
Name: Jeffrey S. Moore
Title: President and Chief Executive Officer
EMANUAL J. FRIEDMAN
___________________________
<PAGE>
EXHIBIT C
CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT (this "Agreement") is made this 29th day of June,
1998, by and among MEGO MORTGAGE CORPORATION, a Delaware corporation (the
"Company"), and EMANUEL J. FRIEDMAN, FRIEDMAN, BILLINGS, RAMSEY & COMPANY,
INCORPORATED, a Virginia corporation (individually, a "Transferor" and
collectively, the "Transferors"), CITY NATIONAL BANK OF WEST VIRGINIA, a
national banking association, and SOVEREIGN BANCORP, INC., a Pennsylvania
corporation (individually, an "Investor" and collectively, the "Investors').
RECITALS
A. Each Investor has executed a Preferred Stock Purchase Agreement with
the Company, dated June 9, 1998, which provides for the purchase of 10,000
shares of Series A Preferred Stock of the Company (the "Preferred Stock") for a
purchase price of $1,000 per share, or $10,000,000 in aggregate, and also
provides for the purchase of up to 6,666,667 shares of Common Stock of the
Company (the "Common Stock") at a purchase price of $1.50 per share;
B. Emanuel J. Friedman has executed a Common Stock Purchase Agreement with
the Company, dated June 9, 1998, which provides for the purchase of 6,666,667
shares of Common Stock at a purchase price of $1.50 per share; and
C. The Transferors have agreed to grant the Investors the opportunity to
participate, upon the terms and conditions set forth in this Agreement, in
subsequent sales of the Common Stock made by the Transferors to induce the
Investors to make the proposed investment.
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises, covenants and
obligations contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the patties hereto
hereby agree as follows:
ARTICLE I
SALES BY TRANSFERORS
1.1 Notice of Purchase Offers. Should any of the Transferors propose to
accept one or more bona fide offers (collectively, the "Purchase Offer") from
any persons (the "Purchase Offeror") to purchase shares of the Company's Common
Stock from such Transferor, then the Transferor or Transferors shall promptly
notify the Investors of its or their intent to sell such shares and the terms
and conditions of such Purchase Offer.
1.2 Right to Participate. The Investors shall have the right, exercisable
upon written notice to such selling Transferor or Transferors within 10 business
days after receipt of the notice of the Purchase Offer, to participate in the
Transferor's sale of Common Stock on the same terms and conditions. To the
extent any Investor exercises such right of participation, the number of shares
of Common Stock which the Transferor may sell pursuant to the Purchase Offer
shall be correspondingly reduced. The right of participation of the Investors
shall be subject to the following terms and conditions:
(a) Each Investor may sell all or any part of that number of shares of
Common Stock equal to the product obtained by multiplying (i) the aggregate
number of shares of Common Stock covered by the Purchase Offer by (ii) a
fraction, the numerator of which is the number of shares of Common Stock of the
Company at the time owned by such Investor and the denominator of which is the
combined number of shares of Common Stock of the Company at the time owned by
the selling Transferor (including shares transferred to Permitted Transferees,
as defined below, in accordance herewith) and the Investors. For purposes of
such computation, the Investors shall be deemed to own the number of shares of
Common Stock into which all of their Preferred Stock is at the time convertible.
(b) An Investor participating in the sale pursuant to a Purchase Offer
shall, if requested by the selling Transferor or Transferors, or the Purchase
Offeror, enter into a purchase and sale agreement with the Purchase Offeror on
the same terms and conditions applicable to the selling Transferor or
Transferors or shall deliver to the selling Transferor or Transferors for
transfer to the Purchase Offeror one or more certificates, properly endorsed for
transfer, which represent:
(i) the number of shares of Common Stock which the Investor elects
and is permitted to sell pursuant to this Section 1.2; or
(ii) the number of shares of Preferred Stock which is at such time
convertible into the number of shares of Common Stock which the Investor elects
and is permitted to sell pursuant to this Section 1.2; provided, however, that
if the Purchase Offeror objects to the delivery of Preferred Stock in lieu of
Common Stock, the Investor shall convert and deliver Common Stock as provided in
subparagraph (b)(i) above,
1.3 Consummation of Sale. The sale of shares to be sold by any Investor
hereunder shall be consummated as set forth in any applicable Purchase
Agreement. If such shares are instead to be delivered to the selling Transferor
or Transferors as provided in Section 1.2(b), the certificates representing such
shares shall be transferred by the selling Transferor or Transferors to the
Purchase Offeror in consummation of the sale of the Common Stock pursuant to the
terms and conditions specified in the notice to the Investor pursuant to Section
1.1 and the selling Transferor or Transferors shall promptly thereafter remit to
the Investor that portion of the sale proceeds to which the Investor is entitled
by reason of its participation in such sale, without setoff or deduction.
1.4 Ongoing Rights. The exercise or non-exercise of the rights of the
Investor hereunder to participate in one or more sales of Common Stock made by a
Transferor shall not adversely affect its right to participate in subsequent
Common Stock sales by a Transferor pursuant to Section 1.1 hereof
1.5 Exceptions. The participation rights of the Investors shall not apply
to (a) any pledge of Common Stock made by a Transferor pursuant to a bona fide
loan transaction which creates a mere security interest, (b) any transfer of
Common Stock to the Transferor's descendants or spouse or to a trustee for their
benefit, or (c) any bonafide gift of Common Stock; provided that (i) the
Transferor shall inform the Investor of such pledge, transfer or gift prior to
effecting it and (ii) the pledgee, transferee or donee (collectively, the
"Permitted Transferees") shall furnish the Investors with a written agreement to
be bound by and comply with all provisions of this Agreement applicable to the
Transferors.
ARTICLE 2
PROHIBITED TRANSFERS
2.1 Treatment of Prohibited Transfers. If a Transferor sells any Common
Stock in contravention of the participation rights of the Investor under this
Agreement (a "Prohibited Transfer"), the Investors, in addition to such other
remethes as may be available at law, in equity or hereunder, shall have the put
option provided in Section 2.2 below, and such Transferor shall be bound by the
applicable provisions of such put option.
2.2 Put Option. In the event of a Prohibited Transfer, the Investors shall
have the right to sell to the selling Transferor or Transferors a number of
shares of Common Stock (either directly or through delivery of Preferred Stock)
equal to the number of shares the Investors would have been entitled to transfer
to the Purchase Offeror in the Prohibited Transfer pursuant to the terms hereof.
Such sale shall be made on the following terms and conditions:
(a) The price per share and terms at which the shares are to be sold
to the selling Transferor or Transferors shall be equal to the price per share
paid and terms agreed to, by the purchaser to the selling Transferor or
Transferors in the Prohibited Transfer. The selling Transferor or Transferors
shall also reimburse the Investors for any and all fees and expenses, including
legal fees and expenses, incurred pursuant to the exercise or the attempted
exercise of the Investors' rights under this Article 2.
(b) Within 90 days after the later of the dates on which the
Investors (i) received notice from a Transferor of the Prohibited Transfer or
(ii) otherwise became aware of the Prohibited Transfer, the Investors shall, if
exercising the put option created hereby, deliver to the selling Transferor or
Transferors the certificate or certificates representing shares to be sold, each
certificate to be properly endorsed for transfer.
(c) The selling Transferor or Transferors shall, upon receipt of the
certificate or certificates for the shares to be sold by the Investor, pursuant
to Section 2.2(b), pay the aggregate purchase price therefor and the amount of
reimbursable fees and expenses, as specified in Section 2.2(a), by certified
check or bank draft made payable to the order of the Investors.
(d) Notwithstanding the foregoing, any attempt to transfer shares of
the Company in violation of Article I hereof, shall be void and the Company
agrees it will not effect such a transfer nor will it treat any purported
transferee as the holder of such shares without the written consent of the
Investors.
ARTICLE 3
LEGENDED CERTIFICATES
3.1 Legend. Each certificate representing shares of the Common Stock of
the Company now or hereafter owned by a Transferor or issued to any Permitted
Transferee pursuant to Section 1.5 shall be endorsed with the following legend:
"The shares of stock represented by this certificate are subject to a
Co-Sale Agreement, by and among the registered owner of this certificate, the
Company and certain other shareholders of the Company, copies of which are
available for inspection at the offices of the Company,"
3.2 Legend Removal. The Section 3.1 legend shall be removed upon
termination of this Agreement in accordance with the provisions of Section 5.
1.
ARTICLE 4
RIGHT OF FIRST REFUSAL
4.1 Notice of Bona Fide Offer. If a Transferor shall have obtained a
bonafide offer in writing for the purchase, in one or a series of related
transactions, shares of Common Stock representing 5% or more of the aggregate
number of shares of Common Stock owned by the Transferor, and the Transferor
desires to accept such offer, then such Transferor shall give notice to the
Investors of such proposed transaction (the "Option Notice"). The Option Notice
shall describe the proposed transferee, the number of shares of Common Stock
proposed to be transferred (the "Offered Stock"), the price per share, and all
other material terms and conditions of the proposed transaction, and also shall
be accompanied by a copy of the writing comprising the bonafide offer.
(a) 4.2 Investors' Option. For a period of 15 consecutive days
following their receipt of such Option Notice (the "Option Period'), the
Investors shall have the irrevocable option, subject to the condition set forth
in Section 4.4 below, to purchase their pro rata share of the Offered Stock for
the consideration and on the terms set forth in the Option Notice. For purposes
of the preceding sentence, an Investor's "pro rata" share shall mean a
percentage determined by dividing the number of shares of Common Stock owned by
such Investor by the total number of shares of outstanding Common Stock owned by
both Investors (assuming that the Investors own the number of shares of Common
Stock into which all of their Preferred Stock is at the time convertible). In
the event that the Option Notice specifies that the Selling Transferor will
receive non-cash consideration in exchange for the Offered Stock, the Investors
shall have the option to purchase the Offered Stock for a cash amount equal to
the fair market value of the noncash consideration specified in the Option
Notice, as determined by an independent investment banking firm of national
standing selected by the Investors and the selling Transferor.
4.3 Exercise of the Option. An Investor choosing to exercise said option
shall during the Option Period notify the Selling Transferor in writing of such
election and the number of shares it wishes to purchase, up to its pro rata
share(the "Exercise Notice "). If one but not both of the Investors exercises
the option (or exercises the option in full), the selling Transferor shall so
notify the Investor exercising its option to purchase shares (or exercising such
option in full) and such Investor shall have an additional option for five
consecutive days following its receipt of notice to purchase all of the Offered
Stock (or the portion of the other Investor's pro rata share of the Offered
Stock for which the option was not exercised) for the consideration and on the
terms set forth in the Option Notice and as otherwise provided herein. If both
Investors exercise the option for less than their pro rata shares, the Investors
shall be deemed not to have exercised their option and the selling Transferor
may dispose of the Offered Stock pursuant to Section 4.6.
4.4 Right to be Exercised in Whole. Notwithstanding the foregoing, any
Selling Transferor shall not be required to sell any of the Offered Stock to the
Investors pursuant to the option described in Section 4.2 above unless options
have been exercised by the Investors to purchase all of the Offered Stock.
4.5 Closing of Exercise. In the event that the Investors exercise options
to purchase, in the aggregate, all of the Offered Stock pursuant to Section 4.3
above, then a closing shall be held with respect to such purchases within 20
days after the date upon which the last of such options shall have been
exercised or on such other date as the Selling Transferor and the Investors
exercising such options shall mutually agree. At such closing, the Selling
Transferor shall deliver to the purchasing Investors certificates representing
the shares of Common Stock being acquired by such Investors, together with fully
executed stock powers, endorsed in the name of the transferee, against payment
of the purchase price therefor in accordance with the terms contained in the
Option Notice. Such shares shall be delivered by the Selling Transferor free and
clear of any lien, pledge, security interest or other encumbrance, other than as
described in this Agreement.
4.6 Sale to Third Party if Right Not Exercised. If the Investors have not
exercised their options to purchase, in the aggregate, all of the Offered Stock
pursuant to Section 4.3 above, the Selling Transferor shall have the right for a
period of 90 days after the expiration of the option period, to sell all (but
not less than all) of the Offered Stock not purchased by the Investors in
accordance with the terms of the bonafide offer, provided that such transferee
agrees in writing to be bound by the terms of this Agreement to the same extent
as the Selling Transferor,
4.7 Right to Participate. In the event that an Investor does not exercise
the option provided for in this Article 4 (or is deemed under the last sentence
of Section 4.3 riot to have exercised such option), such Investor shall
nevertheless be entitled to exercise the right of participation provided for in
Article 1 with respect to the proposed sale described in the Option Notice.
ARTICLE 5
MISCELLANEOUS PROVISIONS
5.1 Termination of Co-Sale Rights. The rights of each Investor under this
Agreement and the obligations of a Transferor with respect to such Investor
shall terminate at such time as the Investor shall no longer be the owner of any
shares of Common Stock or Preferred Stock of the Company.
5.2 Notices. Any notice required or permitted to be given to a party
pursuant to the provisions of this Agreement shall be in writing and shall be
effective upon facsimile delivery, personal delivery or upon deposit in the U.S.
mail, postage prepaid and properly addressed to the party to be notified as set
forth below such party's signature or at such other address as such party may
designate by ten (10) days advance written notice to the other parties hereto.
5.3 Successors and Assigns. This Agreement and the rights and obligations
of the parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, assigns and legal representatives.
5.4 Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
5.5 Amendments. Any amendment or modification of this Agreement shall be
effective only if evidenced by a written instrument executed by duly authorized
representatives of the parties hereto. Any waiver by a party of its rights
hereunder shall be effective only if evidenced by a written instrument executed
by a duly authorized representative of such party, In no event shall such waiver
of any rights hereunder constitute the waiver of such rights in any fixture
instance unless the waiver so specifies in writing.
5.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Georgia.
5.7 Other Obligations of Company. The Company agrees to use its best
efforts to enforce the terms of this Agreement, to inform the Investors of any
breach hereof and to assist the Investors in the exercise of its rights and
performance of its obligations under Article 2 hereof.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, The parties have executed this Agreement on the day and
year indicated above.
THE COMPANY: MEGO MORTGAGE CORPORATION
By:______________________________
Name:
Title:
THE INVESTORS: CITY NATIONAL BANK OF WEST VIRGINIA
By:________________________________
Name: Robert A. Henson
Title: CFO
SOVEREIGN BANCORP., INC.
By:_________________________________
Name:
Title:
THE TRANSFERORS: EMANUEL J. FRIEDMAN
____________________________________
FRIEDMAN, BILLINGS, RAMSEY &
COMPANY, INCORPORATED
By:___________________________________
Name:
