EXHIBIT 10.18
TERMINATION AGREEMENT
This Termination Agreement (the "Agreement") is effective as of the 6th
day of December, 1996 between Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
("Xxxxxxx Xxxxx"), a corporation organized and existing under the laws of the
State of Delaware, Xxxxxxx Xxxxx Mortgage Capital Inc. ("MLMC"), a corporation
organized and existing under the laws of the State of Delaware, and Xxxxxxx
Xxxxx Credit Corporation ("MLCC"), a corporation organized and existing under
the laws of the State of Delaware (Xxxxxxx Xxxxx, MLMC, and MLCC are referred to
collectively at times as the "ML Entities"), on the one hand, and T.A.R.
Preferred Mortgage Corporation ("PMC"), a corporation organized and existing
under the laws of the State of California, Xxxx X. Xxxxxxxxx ("Xxxxxxxxx"), and
Xxxxxx Xxxxxxxx ("Xxxxxxxx"), on the other hand.
WHEREAS, Xxxxxxx Xxxxx and PMC entered into an agreement, dated February
16, 1996 (the "Engagement Agreement"); and
WHEREAS, a copy of the Engagement Agreement is annexed hereto as Exhibit A;
and
WHEREAS, PMC desires to terminate the Engagement Agreement; and
WHEREAS, Xxxxxxx Xxxxx and PMC are willing to terminate
Engagement Agreement on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the ML Entities, PMC, Xxxxxxxxx,
and Xxxxxxxx agree as follows:
1. The Engagement Agreement, along with the Master Repurchase Agreement,
dated February 26, 1996, the Tri-Party Custody Agreement, dated February 26,
1996, and Amendment No. 1 to the Master Repurchase Agreement, dated May 31,
1996, are hereby terminated, except that PMC's and/or the ML Entities'
obligations as set forth in paragraphs 6, 12, 13, and 14 of the Engagement
Agreement shall survive termination thereof and shall remain in full force and
effect, and that such obligations of PMC and/or the ML Entities shall continue
to be binding on PMC's and/or the ML Entities' successors and assigns, as set
forth in paragraph 10 thereof.
2. Contemporaneous with the effective date of this Agreement, PMC has
issued to Xxxxxxx Xxxxx and MLMC warrants (collectively, the "Warrant"), in the
forms annexed hereto as Exhibit B, to purchase in the aggregate up to 2% of the
common stock of PMC on the terms and conditions set forth in the Warrant. PMC
hereby represents and covenants that it has taken all actions necessary to
issue the Warrant, that the Warrant represents a legal, valid, and binding
obligation of PMC, and that the rights granted to Xxxxxxx Xxxxx and MLMC in the
Warrant do not conflict with or violate the rights of any other person or
entity. In the event that it is determined that the Warrant, for any reason, was
either not validly issued or is subject to a challenge to validity by any person
or entity, PMC agrees, upon request by Xxxxxxx Xxxxx or MLMC, to take all
actions necessary to make the Warrant a legal, valid, and binding obligation of
PMC or, in the alternative, to cancel the Warrant and issue to Xxxxxxx Xxxxx and
MLMC another warrant on substantially the same terms and conditions as the
Warrant.
3. Except as provided in paragraph 6a. below, in the event PMC or any of
its affiliates engages in any "Securitization" (as that term is defined in the
Engagement Agreement) for which the closing occurs after November 15, 1996 and
on or before June 30, 1997, and for which Xxxxxxx Xxxxx does not act as sole
placement agent (in the case of a "Private Placement", as that term is defined
in the Engagement Agreement), sole lead underwriter (in the case of a "Public
Securitization", as that term is defined in the Engagement Agreement), or sole
advisor (in the case of an "Indirect Placement", as that term is defined in the
Engagement Agreement), then, with respect to each such "Securitization":
a. PMC shall pay to Xxxxxxx Xxxxx the amount of
$250,000 contemporaneously with the closing of such
Securitization by wire transfer in accordance with the
instructions set forth in Exhibit C hereto; and
b. In the event that Xxxxxxx Xxxxx acts as sole placement agent,
sole lead underwriter, or sole advisor in connection with any
such Securitization, then the fees to be paid to Xxxxxxx Xxxxx in
connection with such Securitization shall be in lieu of the
$250,000 payment referred to above.
4. Except as provided in paragraph 6a. below, in the event PMC or any of
its affiliates engages in any Securitization for which the closing occurs after
June 30, 1997, and for which Xxxxxxx Xxxxx does not act as sole placement agent
(in the case of a "Private Placement", as that term is defined in the Engagement
Agreement), sole lead underwriter (in the case of a "Public Securitization", as
that term is defined in the Engagement Agreement), or sole advisor (in the case
of an "Indirect Placement", as that term is defined in the Engagement
Agreement), then, with respect to each such "Securitization":
a. PMC shall pay to Xxxxxxx Xxxxx the amount of $500,000
contemporaneously with the closing of such
Securitization by wire transfer in accordance with the
instructions set forth in Exhibit C hereto; and
b. In the event that Xxxxxxx Xxxxx acts as sole placement agent,
sole lead underwriter, or sole advisor in connection with any
such Securitization, then the fees to be paid to Xxxxxxx Xxxxx in
connection with such Securitization shall be in lieu of the
$500,000 payment referred to above.
5. PMC and Xxxxxxx Xxxxx acknowledge and agree that PMC shall have no
obligation to offer Xxxxxxx Xxxxx the opportunity to act as sole placement
agent, sole lead underwriter, or sole advisor in connection with any
Securitization, as contemplated by paragraphs 3 and 4 above, that PMC shall have
no obligation to undertake or engage in any Securitization at any time or from
time to time, and that no assurance can be given that PMC will engage in any
Securitization in the future (if at all). If and to the extent PMC determines to
engage in any Securitizations in the future (as to which no assurance can be
given), PMC shall give Xxxxxxx Xxxxx at least three business days' prior notice
of its intention to engage in any Securitization for which it will not offer
Xxxxxxx Xxxxx the opportunity to participate, as set forth in the previous
sentence, to the extent practicable under the circumstances. PMC and Xxxxxxx
Xxxxx further acknowledge and agree that, in the event PMC offers
Xxxxxxx Xxxxx the opportunity to act as sole placement agent, sole lead
underwriter, or sole advisor in connection with any Securitization, Xxxxxxx
Xxxxx shall have no obligation to act in such capacity or otherwise participate
in such Securitization except on terms and conditions that Xxxxxxx Xxxxx, in its
sole discretion, deems acceptable. Any decision by Xxxxxxx Xxxxx to decline to
act as sole lead underwriter, sole placement agent, or sole advisor, or
otherwise participate, in connection with any Securitization shall not in any
way affect or impair its right to receive the payments set forth in paragraphs
3a., 4a., and 6a. above, or PMC's obligations under this Agreement with respect
to any other Securitizations.
6. a. At such time as the "Aggregate Amount of Payments" received by
Xxxxxxx Xxxxx equals or exceeds the amount of $4,750,000, PMC's obligation to
make payments pursuant to paragraphs 3a. and 4a. above shall terminate. For
purposes of this Agreement, the term "Aggregate Amount of Payments" shall be
defined as the sum of the following: (x) the Warrant Value (as defined below);
(y) the amount of any payments actually received by Xxxxxxx Xxxxx pursuant to
paragraphs 3a. and 4a. above; and (z) the amount of any fees actually received
by Xxxxxxx Xxxxx as a result of its acting as sole placement agent, sole lead
underwriter, or sole advisor with respect to any Securitization, as set forth in
paragraphs 3b. and 4b. above. Xxxxxxx Xxxxx and MLMC shall, in all
instances, retain all rights with respect to the Warrant even if the "Aggregate
Amount of Payments" received by Xxxxxxx Xxxxx pursuant to subsections (y) and
(z) above equals or exceeds the amount of $4,750,000 (although PMC's payment
obligations under paragraphs 3a. and 4a. shall terminate). In no event shall
the foregoing in any way obligate PMC or any affiliate or associate thereof to
undertake or complete a Securitization at any time or from time to time.
b. For purposes of this Agreement:
(i) "Warrant Value" shall mean the difference between (x) the
exercise price actually paid or payable by Xxxxxxx Xxxxx and MLMC upon
exercise of the Warrant and (y) the "Fair Market Value" (as defined
below) of the Warrant or, if previously exercised, the shares received
upon exercise of the Warrant {the "Warrant Shares").
(ii) For purposes of this Agreement, "Fair Market Value" shall be
defined as follows:
(1) Except as provided below, until such time as PMC effects
a "Resale Registration" (as defined below, the Fair Market Value
of the Warrant or the Warrant Shares shall be zero.
(2) At such time as PMC effects a Resale Registration, the
Fair Market Value of the Warrant or Warrant Shares shall be:
(I) if the common stock of PMC (the "Common Stock") is
listed on an exchange or exchanges, or admitted
for trading in a market system which provides last
sale data under Rule 11Aa3-1 of the General Rules
and Regulations of the Securities and Exchange
Commission (the "Commission") under the Securities
Exchange Act of 1934, as amended (a "Market
System"), the average reported sales price per
share over the ten day trading period ending on
the last business day before PMC effects such
Resale Registration (the "Trading Period") on the
principal exchange on which such Common Stock is
traded, or in such a Market System, as applicable,
multiplied by the number of shares represented by
the Warrant or the
number of Warrant Shares, as the case may be; or
(II) if the Common Stock is not then traded on an
exchange or in such a Market System, the average
of the closing bid and asked prices per share for
the Common Stock in the over-the-counter market as
quoted on NASDAQ over the Trading Period,
multiplied by the number of shares represented by
the Warrant or the number of Warrant Shares, as
the case may be.
c. Notwithstanding the foregoing provisions of this paragraph 6.:
(i) If, prior to the time PMC effects a Resale Registration, Xxxxxxx
Xxxxx or MLMC sells the Warrant or the Warrant Shares to: (a) a person or
entity that is controlled by or under common control with Xxxxxxx Xxxxx or
MLMC (a "ML Controlled Person"), then the Fair Market Value of the Warrant
or Warrant Shares shall be zero; and (b) other than a ML Controlled Person,
then the Fair Market Value shall be the
proceeds received from such person or entity less the sum of (x) the
aggregate exercise price under the Warrant for such Warrant Shares and (y)
the aggregate transaction costs of Xxxxxxx Xxxxx or MLMC, as the case may
be, related to the sale of the Warrant Shares; provided, however, that in
the event that less than all of the Warrant Shares are sold, then the Fair
Market Value of those Warrant Shares sold shall be the proceeds received
less the sum of (x) the aggregate exercise price under the Warrant for the
Warrant Shares that are sold and (y) the aggregate transaction costs of
Xxxxxxx Xxxxx or MLMC, as the case may be, related to the sale of the
Warrant Shares, and the Fair Market Value of the remaining Warrant Shares
held by Xxxxxxx Xxxxx, MLMC, or a ML Controlled Person shall be determined,
for purposes of this Agreement, in accordance with the remaining provisions
of this paragraph;
(ii) If, prior to the time PMC effects a Resale Registration, Xxxxxxx
Xxxxx, MLMC, or a ML Controlled Person sells any Warrant Shares (whether
pursuant to Rule 144 under the Securities Act of 1933 or otherwise), then
the Fair Market Value of the Warrant Shares sold shall be the proceeds
received by Xxxxxxx Xxxxx, MLMC, or such ML Controlled Person from such
sales less the sum of (x) the aggregate exercise price under the Warrant
for such Warrant Shares and (y) the aggregate transaction costs of Xxxxxxx
Xxxxx, MLMC, or such ML
Controlled Person, as the case may be, related to the sale of the Warrant
Shares, and the Fair Market Value of the remaining Warrant Shares held by
Xxxxxxx Xxxxx, MLMC, or a ML Controlled Person shall be determined, for
purposes of this Agreement, in accordance with the applicable provisions of
this paragraph; and
(iii) In the event that PMC consummates an initial public offering of
its common stock (an "IPO", as defined below) and, in connection therewith,
causes all or part of the shares of common stock of PMC issuable upon
exercise of the Warrant to be registered under the Securities Act of 1933
to permit the sale thereof by Xxxxxxx Xxxxx or MLMC or their respective
successors and assigns, as the case may be, then the Fair Market Value of
the shares so registered shall be the proceeds received from the sale of
such shares by Xxxxxxx Xxxxx, MLMC or their respective successors and
assigns less the sum of (x) the aggregate exercise price under the Warrant
for such shares and (y) the aggregate transaction costs of Xxxxxxx Xxxxx,
MLMC, or their respective successors and assigns, as the case may be,
related to the sale of the Warrant Shares, and the Fair Market Value of the
remaining Warrant Shares shall be determined, for purposes of this
Agreement, in accordance with the applicable provisions of this paragraph.
Nothing in the foregoing shall require or obligate PMC to register, or
assist in the sale of, the Warrant or any of the Warrant Shares, by Xxxxxxx
Xxxxx or MLMC other than as contemplated in the Warrant.
d. For purposes of this Agreement, PMC shall be deemed to have
effected a "Resale Registration" on the date upon which subsequent to PMC's
consummation of an IPO: (i) a registration statement filed by PMC with the
Commission that causes the shares of common stock of PMC issuable upon exercise
of the Warrant to be registered under the Securities Act of 1933 to permit the
sale thereof by Xxxxxxx Xxxxx or MLMC or their respective successors or assigns,
as the case may be, becomes effective; and (ii) Xxxxxxx Xxxxx, MLMC or their
respective successors or assigns receive copies of PMC's prospectus under such
registration statement in quantities reasonably requested by them in order to
effect any such sales.
e. For purposes of this Agreement, "IPO" shall mean the first
closing of the initial public offering of the common stock of PMC effected
pursuant to an effective registration statement filed by PMC with the Commission
under the Securities Act of 1933 (other than a registration statement relating
either to: (i) the sale of securities to officers, directors, employees, or
bona fide consultants of the Company, or any of its parents or subsidiaries,
pursuant to a stock option, stock purchase, or similar plan; or
(ii) a reclassification, merger, or other transaction of the type referred to in
Rule 145(a) of the rules and regulations of the Commission under the Securities
Act of 1933).
7. PMC, and its sole shareholders, Xxxxxxxxx and Xxxxxxxx, each represent
and warrant that they will not form any other corporation, partnership, or other
entity to succeed to or conduct the business presently being conducted by PMC,
or transfer to any other corporation, partnership, or other entity all or
substantially all of the assets of PMC, or take any other such acts that might
impair or encumber Xxxxxxx Xxxxx'x rights under this Agreement, unless such
successor entity agrees to be bound by the terms hereof. Notwithstanding the
foregoing, PMC, Xxxxxxxxx, and Xxxxxxxx may reorganize PMC as a corporation
under the laws of a state other than California (whether by merger into a newly
formed corporation or otherwise so long as the shareholders of the newly formed
corporation are identical to the shareholders of PMC immediately following such
transaction, and so long as such newly formed corporation remains bound by the
terms of this Agreement. In addition to any other rights and remedies Xxxxxxx
Xxxxx might have, Xxxxxxxxx and Xxxxxxxx each agree to indemnify and hold
harmless Xxxxxxx Xxxxx from any "loss" it might incur in the event the
representations and warranties set forth in this paragraph are breached. For
purposes of this Agreement, the term "loss" is to include, but not be limited
to, the payments that would have been
required to be paid by any other corporation, partnership, or entity, as
described in the first sentence of this paragraph, or any reorganized PMC or
newly formed corporation, as described in the second sentence of this paragraph,
pursuant to paragraphs 3a., 4a., and 6a. above with respect to any
Securitization done by such other corporation, partnership, or other entity that
would otherwise have been done by PMC, and costs and expenses (including legal
fees) incurred in prosecuting claims arising out of a breach of the
representations and warranties set forth herein. Nothing in this Agreement shall
in any way impair PMC from undertaking any transaction whatsoever including,
without limitation, the sale of all or a portion of the shares or assets of PMC
to any other person or entity, the consummation by PMC of an IPO, or the
acquisition of any other person or entity by PMC, so long as such transactions
do not impair Xxxxxxx Xxxxx'x rights, or interfere with the intent of the
parties, under this Agreement.
8. In consideration of this Agreement, the ML Entities shall and do hereby
each forever release and discharge PMC, and its officers, directors,
shareholders, agents, contractors, attorneys, employees, partners, divisions,
predecessors, successors, assigns, licensees, and any party associated with any
Securitization (collectively, the "PMC Releasees"), of and from any and all
claims (including, but not limited to, claims for attorney's fees), of whatever
kind or nature, in contract or in tort, under the laws of
any jurisdiction, whether known or unknown, suspected or unsuspected, that the
ML Entities, and their successors and assigns, shall, may, or can have against
the PMC Releasees, based on, arising out of, or in connection with: (i) the
Engagement Agreement; (ii) the Master Repurchase Agreement, dated February 26,
1996; (iii) the Tri-Party Custody Agreement, dated February 26, 1996; (iv)
Amendment No. 1 to the Master Repurchase Agreement, dated May 31, 1996; and (v)
any other agreements or understandings made or entered into by Xxxxxxx Xxxxx and
PMC in connection with the foregoing (the "Released Claims"); provided, however,
that PMC shall not be released from its obligations, as set forth in paragraph 1
above, under the Engagement Letter that survive termination thereof, and
Xxxxxxxxx and Xxxxxxxx shall not be released from their obligations, as set
forth in paragraph 8 above, and PMC, Xxxxxxxxx, and Xxxxxxxx shall not otherwise
be released from their obligations under this Agreement. On each day that any
payment is made by PMC under paragraphs 3a., 4a., or 6a. above, the ML Entities
shall be deemed to have released the PMC Releasees from any claims with respect
to such payment.
9. In consideration of this Agreement, PMC, Xxxxxxxxx, and Xxxxxxxx
(collectively, the "PMC Releasors") shall and do hereby each forever release and
discharge the ML Entities, and their respective parents, subsidiaries, and
affiliates, and their respective officers, directors, shareholders, agents,
contractors,
attorneys, employees, partners, divisions, predecessors, successors, assigns,
and licensees (collectively, the "ML Releasees"), of and from any and all claims
(including, but not limited to, claims for attorney's fees), of whatever kind or
nature, in contract or in tort, under the laws of any jurisdiction, whether
known or unknown, suspected or unsuspected, that the PMC Releasors, and their
successors or assigns, shall, may, or can have against the ML Releasees, based
on, arising out of, or in connection with: (i) the Engagement Agreement; (ii)
the Master Repurchase Agreement, dated February 26, 1996; (iii) the Tri-Party
Custody Agreement, dated February 26, 1996; (iv) Amendment No. 1 to the Master
Repurchase Agreement, dated May 31, 1996; and (v) any other agreements or
understandings made or entered into by Xxxxxxx Xxxxx and PMC in connection with
the foregoing; provided, however, that the ML Entities shall not be released
from their obligations under this Agreement.
10. Nothing contained herein shall be construed as an admission of any
kind by any party hereto or used in any proceeding as an admission by any party.
11. The parties acknowledge and agree that no press release, interview, or
other publicity shall be issued with respect to this Agreement or its contents
and that the terms of this Agreement shall be kept strictly confidential;
provided, however, that the parties shall have the right to disclose this
Agreement and the
terms hereof to their respective accountants and outside auditors, to any person
or entity to the extent necessary to effect the terms of this Agreement
(including the Warrant), to any person providing financing to PMC, and as
required by law (including as required to any regulatory entities or to effect
an IPO by PMC).
12. This Agreement shall inure to the benefit of and shall be binding upon
the successors, assigns, representatives, and beneficiaries of the parties
hereto and upon any corporation or other entity into or with which any party
hereto may merge or consolidate. This Agreement embodies the entire
understanding of the parties, and supersedes all prior agreements, oral or
written, and may be amended or modified only by a written agreement executed by
each of the parties. Each provision of this Agreement shall be interpreted in
such manner as to be effective under applicable law. If any provision of this
Agreement shall be or become prohibited or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
13. Each party represents that it is the sole owner of all right, title,
and interest with respect to the Released Claims, has not assigned, transferred,
or conveyed any Released Claims to any person or entity, and has all power and
authority necessary to make
the agreements set forth herein and has taken all necessary corporate action to
authorize the execution and delivery of this Agreement and the performance of
its obligations hereunder. No consent of any other person including, without
limitation, stockholders or creditors of the parties, and no license, permit,
approval, or authorization of, exemption by, notice or report to, or
registration, filing, or declaration with, any governmental authority is
required by the parties in connection with the execution and delivery of this
Agreement or the performance of its obligations hereunder. This Agreement has
been, and each instrument or document required hereunder will be, executed and
delivered by a duly authorized officer of the parties hereto, and this Agreement
constitutes a legally valid and binding obligation of the parties enforceable
against the parties in accordance with its terms.
14. This Agreement shall be governed by the laws of the State of New York
without regard to its choice of law principles.
15. The parties each represent that they have had the opportunity to
consult with counsel of their choice regarding this Agreement and that, after
such consultation, they enter into this Agreement of their own free will.
16. The parties agree that any claim arising under or relating to this
Agreement or the Warrant shall be brought only in
the Supreme Court of the State of New York, County of New York, or the United
States District Court for the Southern District of New York, and that, in
connection with any such claims, the parties waive their right to trial by jury
and any defense based on inconvenient forum. PMC, Xxxxxxxxx, and Xxxxxxxx each
hereby consent to the jurisdiction of the Supreme Court of the State of New
York, County of New York, or the United States District Court for the Southern
District of New York, in connection with any action that might be brought under
or relating to this Agreement or the Warrant.
17. a. All notices to the ML Entities under this Agreement shall be made
by registered first class mail, return receipt requested, or by facsimile, to:
Xx. X.X. Xx Xxxxxx
Managing Director
Asset Backed Finance Group
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
World Xxxxxxxxx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000.
b. All notices to PMC, Xxxxxxxxx, or Xxxxxxxx under this Agreement
shall be made by registered first class mail, return receipt requested, or by
facsimile, to:
if to PMC, to:
T.A.R. Preferred Mortgage Corporation
00000 XxxXxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx or Xxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to Xxxxxxxxx, to:
T.A.R. Preferred Mortgage Corporation
00000 XxxXxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx
Telephone: (000) 000-0000, ext. 101
Facsimile: (000) 000-0000
if to Xxxxxxxx, to:
T.A.R. Preferred Mortgage Corporation
00000 XxxXxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000, ext. 102
Facsimile: (000) 000-0000
18. Xxxxxxx Xxxxx and MLMC agree to execute a Stockholders Agreement
substantially in the form of Exhibit D hereto.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement on the day and year first written above.
T.A.R. Preferred Mortgage Corporation
By: _____________________________________
Xxxx X. Xxxxxxxxx
Its Chief Executive Officer
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
By: _____________________________________
Its: _______________________________
Xxxxxxx Xxxxx Mortgage Capital Inc.
By: _____________________________________
Its: _______________________________
Xxxx X. Xxxxxxxxx
_________________________________________
Xxxxxx Xxxxxxxx
_________________________________________
