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EXHIBIT 10.29
AGREEMENT
This Agreement is made as of the _____ day of November, 1996, between
MEGO FINANCIAL CORP., a New York corporation ("Mego Financial"), and MEGO
MORTGAGE CORPORATION, a Delaware corporation (the "Corporation").
WHEREAS, Mego Financial and the Corporation desire to enter into this
Agreement for the purpose of providing for certain matters relating to the
relationship between Mego Financial and the Corporation.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto hereby agree as
follows:
1. Restrictions Relating to Share Issuance and Acquisitions. During the
period (the "Eighty Percent Period") that and so long as Mego Financial,
presently the sole stockholder of the Corporation, holds shares having at least
80% of the total combined voting power of all classes of stock entitled to vote
for directors of the Corporation and constituting at least 80% of the total
number of shares of each other class of stock of the Corporation, all as defined
in Section 368(c) of the Internal Revenue Code of 1986, as amended (the "Code")
(all such stock in the aggregate constituting "Eighty Percent Control" and Mego
Financial being hereinafter referred to as the "Eighty Percent Holder"), and
although a vote of stockholders is not and shall not be required under
applicable law or the Corporation's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") for the issuance of shares of
capital stock or equity securities or any debt or other instrument that is
convertible or exchangeable into stock or any other equity security of the
Corporation or any subsidiary, including options or any other rights to purchase
capital stock pursuant to any employee benefit plan or stock option plan (a
"Plan") or otherwise, that are authorized under the Certificate of
Incorporation, but unissued, or, to acquire an ownership interest in certain
assets, the advance written approval of the Eighty Percent Holder shall be
required (unless waived in writing by the Eighty Percent Holder) prior to:
(i) the Corporation taking any action, including, without
limitation, the issuance of any capital stock or other equity security or any
debt or other instrument that is convertible or exchangeable into stock or any
other equity security of the Corporation, including options, warrants or any
other rights to purchase capital stock, pursuant to any Plan or otherwise, that
would reduce the percentage of ownership of the Eighty Percent Holder in the
capital stock of the Corporation so that the Eighty Percent Holder thereafter
would not own stock constituting Eighty Percent Control (treating options,
warrants or any other rights to purchase capital stock as exercised immediately
upon issuance for purposes of making this determination) or that otherwise would
reduce (or, with the taking of any action contemplated by the instrument in
question, could reduce) the Eighty Percent Holder's ownership of the
Corporation's stock below "control" of the Corporation within the meaning of
Section 368(c) of the Code;
(ii) the Corporation acquiring or taking any action to cause
any subsidiary to acquire any direct or indirect ownership interest in any asset
that does not constitute part of an active trade or business within the meaning
of Section 355(b) of the Code; provided, however, that the Corporation or any
subsidiary may acquire any asset that is similar in nature to the assets it
holds on October 28, 1996, so long as that acquisition would not cause the
Corporation or any subsidiary not to be engaged in an active trade or business
within the meaning of Section 355(b) of the Code; or
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(iii) the Corporation taking any action to cause the issuance
of any capital stock or equity security, any debt or other instrument that is
convertible or exchangeable into stock or any other equity security by or of any
subsidiary or any right to purchase the same in the Corporation or any
subsidiary, and the Corporation shall not take any such action above without the
prior written approval of the Eighty Percent Holder.
Any attempt to take any such actions without the prior written approval of the
Eighty Percent Holder during the Eighty Percent Period shall be null and void
and any purported issuance of any capital stock or equity security or any
convertible or exchangeable debt or other instrument or any right to purchase
the same in the Corporation or any subsidiary or any acquisition in violation of
this provision shall not terminate the Eighty Percent Period.
2. Restrictions Relating to Boards of Directors and Bylaws. During the
Eighty Percent Period, the Corporation shall not take any action to (i) change
the number of its directors or the number of directors of any subsidiary, (ii)
fill any vacancy in its board of directors or in the board of directors of any
subsidiary or (iii) alter, amend or repeal, in whole or in part, its Bylaws, or
adopt new Bylaws, without the advance written approval of the Eighty Percent
Holder (unless such requirement is waived in writing by the Eighty Percent
Holder).
3. Prior Approval is not Required for Stockholder Vote. The obligations
of the Corporation contained in this Agreement to obtain the advance written
approval of the Eighty Percent Holder shall continue in effect during the Eighty
Percent Period, notwithstanding that the Corporation is required under
applicable law or its Certificate of Incorporation to have a vote of
stockholders to take any such actions, except possibly with respect to certain
acquisitions, and that the Corporation will have a vote of stockholders to take
any such actions, except possibly with respect to certain acquisitions. The
consent or lack of consent of the Eighty Percent Holder with respect to any
matter is not a vote on such matter by the Eighty Percent Holder.
4. Actions and Obligations of Mego Financial. The Corporation is
entering into this Agreement because Mego Financial has agreed to pursue an
initial public offering for the Corporation. Mego Financial agrees to exercise
its rights in a reasonably prompt manner, subject to its use of diligence
reasonably deemed necessary by Mego Financial.
5. Injunctive Relief. The Corporation agrees that any violation of the
foregoing covenants will cause irreparable injury to Mego Financial, that the
remedies at law for any such violation will be inadequate to Mego Financial, and
that Mego Financial shall, in addition to and not in limitation of any other
rights and/or remedies available at law or in equity, be entitled to temporary
and permanent injunctive relief and specific performance without the necessity
of proving actual damage.
6. Severability. Each of the covenants herein is independent and
severable. Each covenant shall remain in full force and effect regardless of the
enforceability of any other covenant herein. If it shall be determined at any
time by a court of competent jurisdiction that any provision of this Agreement
or any portion thereof is unenforceable, then such portions as shall be
determined to be unreasonably restrictive or unenforceable shall thereupon be
deemed amended as to make such restrictions reasonable in the determination of
such court and the provisions, as amended, shall be enforceable between the
parties to the same extent as if such amendment had been made prior to the date
of any alleged breach of such provision.
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7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
8. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, understandings,
negotiations and discussions, both written and oral, between the parties hereto
with respect to the subject matter hereof. This Agreement may not be amended or
modified in any way except by a written instrument executed by the parties
hereto.
9. Benefits; Binding Effect. This Agreement shall be for the benefit of
and binding upon the parties hereto, their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned have hereunto set hand and seal as
of the date first written above.
MEGO FINANCIAL CORP.
By:
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Name:
Title:
MEGO MORTGAGE CORPORATION
By:
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Name:
Title: