Exhibit 10.7
Exhibit 7
AMENDMENT NO. 3 TO
AMENDED AND RESTATED CREDIT AGREEMENT (LICENSING)
THIS AMENDMENT NO. 3 TO AMENDED AND RESTATED CREDIT AGREEMENT (LICENSING) (this
“Amendment”) is entered into as of September 22, 2010 (the “Amendment Effective
Date”), by and among FRANKLIN CREDIT MANAGEMENT CORPORATION, a Delaware
Corporation, and FRANKLIN CREDIT HOLDING CORPORATION, a Delaware corporation
(each, a “Borrower” and collectively “Borrowers”), THE FINANCIAL INSTITUTIONS
PARTY HERETO AS LENDERS (each, a “Lender” and collectively, the “Lenders”) and
THE HUNTINGTON NATIONAL BANK, a national banking association (“Huntington”), as
administrative agent for the Lenders (in such capacity, together with its
successors and assigns in such capacity, the “Administrative Agent”). This
Amendment further amends and modifies a certain Amended and Restated Credit
Agreement (Licensing) dated as of March 31, 2009 (as amended, supplemented,
restated or otherwise modified from time to time prior to the date hereof, the
“Credit Agreement”) by and among Borrowers, the Lenders, the Administrative
Agent and Issuing Bank. Capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Credit Agreement.
RECITALS:
A. As of March 31, 2009, Borrowers, the Lenders, the Administrative Agent and
Issuing Bank executed the Credit Agreement setting forth the terms of certain
extensions of credit to the Borrower; and
B. As of March 31, 2009, Borrowers executed and delivered to the Administrative
Agent, inter alia, a Revolving Promissory Note (Licensing) in the original
principal sum of Two Million Dollars ($2,000,000), which principal sum was
thereafter reduced to One Million Dollars ($1,000,000); and
C. As of March 31, 2009, and at various other times, Borrowers executed and
delivered to the Administrative Agent, inter alia, one or more Applications and
Agreements for Letter of Credit in connection with Issuing Bank’s issuance of
Letters of Credit for the account of one or more of the Borrowers; and
D. As of May 31, 2010, the Draw Loan Commitment expired by its terms and
Borrowers have no right to obtain any Draw Loan Advances under the Credit
Agreement; and

 

 

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E. Borrowers have requested that (i) the Administrative Agent and the Lenders
under the Credit Agreement and that the administrative agent under the Legacy
Loans Credit Agreement consent to the sale, restructuring or spin off by Holding
of its ownership interests in FCMC, subject to the further written consent of
the Administrative Agent at the time such Restructuring is accomplished,
(ii) the Administrative Agent release its Liens in certain real property owned
by FCMC, commonly known as (A) 6 Harrison Street, Unit 6, New York, New York,
and (B) 350 Albany St. New York, New York), (iii) discharge FCMC from any
liability under a certain Limited Recourse Guaranty dated as of March 31, 2009,
(iv) consent to a Change of Control of FCMC resulting from the Restructuring,
(v) waive any other Events of Default resulting from the Restructuring,
(vi) extend the maturity of the Revolving Loan Commitment and the Letter of
Credit Commitment and (vii) amend and modify certain other terms and covenants
in the Credit Agreement, and each Lender, the Administrative Agent and the
Issuing Bank, are willing to do so upon the terms and subject to the conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereto for
themselves and their successors and assigns do hereby agree, represent and
warrant as follows:
16. The definitions of “Change of Control”, “Collateral”, “Loan Documents”
“Mandatory Prepayment Event”, and “Termination Date” set forth in Section 1.01,
“Certain Defined Terms,” of the Credit Agreement are hereby amended to recite as
follows:
“Change of Control” shall mean, other than in connection with the Restructuring:
(a) with respect to any Borrower, the replacement of a majority of the board of
directors from the directors who constituted the board of directors on the
Effective Date for any reason other than death or disability, and such
replacement shall not have been approved by such board of directors, as
constituted on the Effective Date (or as changed over time with the approval of
the then existing board of directors of Holding); or (b) a Person or Persons
acting in concert, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases, exercise of the stock pledge or
otherwise, shall have become the beneficial owner (within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of equity
securities of any Borrower representing more than 20% of the combined voting
power of the outstanding securities of such Person, ordinarily having the right
to vote in the election of directors from the beneficial owners as of the
Effective Date.
“Collateral” shall have the meaning assigned to such term in the Security
Agreement, Mortgage, or any other Loan Document executed and delivered to the
Administrative Agent by any Loan Party, unless released from time to time
pursuant to the terms of this Agreement or the Restructure Agreement, and shall
include without limitation:

  (i)  
a first and best Lien on FCMC’s Cash or Cash Equivalents in account number
01892543486 at Huntington, maintained in an amount satisfactory to the
Administrative Agent, but not less than $7,500,000;

 

 

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  (ii)  
a Mortgage in the FCMC Real Estate, subject to the existing Lien of Huntington,
as agent for certain lenders on 6 Harrison St., Unit 6, New York, New York under
the Legacy Loans Credit Agreement, and subject to the agreement of the
applicable administrative agents and the lenders to release the FCMC Real Estate
pursuant to the terms of the Restructure Agreement;

  (iii)  
a first and best Lien on all FCMC’s now owned or hereafter acquired right,
title, and interest in personal property;

  (iv)  
any monies or sums due FCMC in respect of any program sponsored by any
Governmental Authority, including without limitation any fees received, directly
or indirectly, under the U.S. Treasury Homeowners Affordability and Stability
Plan.

“Loan Documents” shall mean, collectively, this Agreement, the Notes, the
Security Agreement, each agreement in respect of a Blocked Account, Disbursement
Account, Collection Account, or Reserve Account, each deposit account control
agreement, each Application and Agreement for Letter of Credit, letter of credit
reimbursement agreement, pledge agreement, joinder agreement, collateral
assignments, Guarantee, banking services agreement, cash management agreement,
amendment, modification agreement, instrument, financing statements and each
other document or agreement relating to this Agreement or the transactions
contemplated by this Agreement; provided, however, no Transaction Document shall
be a Loan Document, and the FCMC Limited Recourse Guaranty shall not be a Loan
Document.
“Mandatory Prepayment Event” shall mean:
(a) other than with respect to the Restructuring, any sale, transfer, or other
disposition of any Property of any Borrower or any property constituting
Collateral pursuant hereto; or
(b) any casualty or other insured damage to, or any taking under power of
eminent domain or by condemnation or similar proceeding of, any Property of any
Borrower or any Collateral; or
(c) other than with respect to the Restructuring, the issuance by any Borrower
of any Equity Interests, or the receipt by Borrower of any capital contribution;
or
(d) the incurrence by any Borrower of any Subordinated Indebtedness; or

 

 

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(e) the receipt by any Borrower of the proceeds of any settlement or monetary
judgment in respect of any litigation or other similar proceeding.
“Termination Date” shall mean (i) in respect of the Revolving Loan and the
Revolving Loan Commitment and the Letters of Credit and the Letter of Credit
Commitment, September 30, 2011, or such earlier date on which this Agreement
shall terminate in accordance with the provisions hereof or by operation of law,
and (ii) in respect of the Draw Loan and the Draw Loan Commitment May 31, 2010,
which Draw Loan and Draw Commitment have expired and are of no force and effect.
17. New Defined Terms. The following defined terms are hereby added to
Section 1.01, “Certain Defined Terms,” of the Credit Agreement in their correct
alphabetical order and shall recite as follows:
“Amendment No. 3” means a certain Amendment No. 3 to Amended and Restated Credit
Agreement (Licensing) between and among the Administrative Agent, the Lenders
and the Borrowers dated September 22, 2010.
“Deferred Payment Agreement” means a certain Deferred Payment Agreement entered
into as of the effective date of Amendment No. 3.
“FCMC Limited Recourse Guaranty” means a certain Limited Recourse Guaranty dated
as of March 31, 2009, executed and delivered in connection with the Legacy Loans
Credit Agreement.
“FCMC Real Estate” means certain real property owned by FCMC, commonly known as
(i) 6 Harrison Street, Unit 6, New York, New York, and (ii) 350 Albany St. New
York, New York).
“Restructure Agreement” means that certain Restructure Agreement, dated as of
the date of Amendment No. 3, by and among, inter alia, the Borrowers, the
Administrative Agent, and Franklin Mortgage Asset Trust 2009-A.
“Restructuring” means the sale, restructuring or spin off by Holding of its
ownership interests in FCMC, which shall be in form acceptable to the
Administrative Agent.
“TJA Secured Note” means a secured promissory note issued by FCMC for
$1,000,000, guaranteed in full by Thomas J. Axon, and secured by the Guarantor
Collateral.

 

 

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18. Section 7.04, Prohibition of Fundamental Changes; Subsidiaries,” of the
Credit Agreement is hereby amended to recite as follows:
Section 7.04 Prohibition of Fundamental Changes; Subsidiaries. No Borrower shall
enter into any transaction of merger or consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or
dissolution) or sell any substantial portion of its assets other than pursuant
to the Transaction Documents or in connection with the Restructuring. No
Borrower shall permit to exist or establish any Subsidiary (other than a
Subsidiary existing as of the Effective Date).
19. Section 7.05, “Restricted Payments,” of the Credit Agreement is hereby
amended to recite as follows:
Section 7.05 Restricted Payments. No Borrower shall make or declare any
Restricted Payment without the prior written consent of the Administrative
Agent.
20. Section 7.11, “Limitation on Indebtedness,” of the Credit Agreement is
hereby amended to recite as follows:
Section 7.11 Limitation on Indebtedness. Except with the prior written consent
of the Administrative Agent, which consent shall not be unreasonably withheld or
delayed, no Borrower shall incur any liabilities for Indebtedness, other than
(i) the Advances, (ii) the Letters of Credit, (iii) the TJA Secured Note, and
(iv) liabilities owing under the Deferred Payment Agreement.
21. Subsection 8.01(n) of the Credit Agreement is hereby amended to recite as
follows:
(n) [Intentionally Deleted];
22. Consent to Restructuring. Each of the Administrative Agent and the Lenders
hereby consents to the Restructuring and the discharge of FCMC from the FCMC
Limited Recourse Guaranty, upon fulfillment of all terms and conditions of the
Restructure Agreement.
23. Agreement to Release Certain Liens. Each of the Administrative Agent and the
Lenders hereby agree to the release of the Liens on the FCMC Real Estate granted
in connection with the Credit Agreement upon fulfillment of all terms and
conditions contemplated by the Restructure Agreement.

 

 

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24. Conditions of Effectiveness. This Amendment shall become effective as of the
Amendment Effective Date, upon satisfaction of all of the following conditions
precedent:
(a) The Administrative Agent shall have received execution and delivery of, by
all parties signatory hereto, originals, or completion as the case may be, to
the satisfaction of the Administrative Agent and its counsel, of three duly
executed originals of this Amendment;
(b) The representations contained in the immediately following paragraph shall
be true and accurate;
(c) The Administrative Agent shall have received all of the documents and
deliveries required by the Restructure Agreement; and
(d) The Borrowers shall have paid a nonrefundable extension fee of $0.00 in
connection with this Amendment.
25. Representations and Warranties. Each Borrower represents and warrants to the
Administrative Agent and each Lender as follows: (a) after giving effect to this
Amendment, each representation and warranty made by or on behalf of such
Borrower in the Credit Agreement and in any other Loan Document is true and
correct in all material respects on and as of the date hereof as though made on
and as of such date, except to the extent that any such representation or
warranty expressly relates solely to a date prior hereto; (b) the execution,
delivery and performance by such Borrower of this Amendment and each other Loan
Document have been duly authorized by all requisite corporate or organizational
action on the part of such Borrower and will not violate any Requirement of Law
applicable to each Borrower; (c) this Amendment has been duly executed and
delivered by each Borrower, and each of this Amendment, the Credit Agreement and
each other Loan Document as amended hereby constitutes the legal, valid and
binding obligation of each Borrower, enforceable against such Borrower in
accordance with the terms thereof; and (d) no event has occurred and is
continuing, and no condition exists, which would constitute an Event of Default
or a Default.
26. Ratification and Reaffirmation. Each Borrower agrees (i) that all the
obligations, indebtedness and liabilities of such Borrower to the Administrative
Agent and the Lenders under the Credit Agreement are the valid and binding
obligations of such Borrower; (ii) that the obligations, indebtedness and
liabilities of such Borrower evidenced by each Note executed and delivered by
such Borrower are valid and binding without any present right of offset, claim,
defense or recoupment of any kind and are hereby ratified and confirmed in all
respects; and (iii) that the Liens and security interests granted to the
Administrative Agent with respect to the Obligations as security for all
obligations and liabilities of such Borrower under the Credit Agreement, each
Application and Agreement for Letter of Credit and the Revolving Loan Note are
valid and binding and are hereby ratified and confirmed in all respects.

 

 

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27. Reference to and Effect on the Loan Documents. (a) Upon the effectiveness of
this Amendment, each reference in the Credit Agreement to “Amended and Restated
Credit Agreement (Licensing),” “Credit Agreement,” “Agreement,” the prefix
“herein,” “hereof,” or words of similar import, and each reference in the Loan
Documents to the Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended hereby. (b) Except to the extent amended or modified
hereby, all of the representations, warranties, terms, covenants and conditions
of the Credit Agreement and the other Loan Documents shall remain as written
originally and in full force and effect in accordance with their respective
terms and are hereby ratified and confirmed, and nothing herein shall affect,
modify, limit or impair any of the rights and powers which the Administrative
Agent may have hereunder or thereunder. Nothing in this Amendment shall
constitute a novation. The amendments set forth herein shall be limited
precisely as provided for herein, and shall not be deemed to be a waiver of,
amendment of, consent to or modification of any of the Administrative Agent’s or
any Lender’s rights under, or of any other term or provisions of, the Credit
Agreement or any other Loan Document, or of any term or provision of any other
instrument referred to therein or herein or of any transaction or future action
on the part of any Borrower which would require the consent of the Lender.
28. Waiver and Release of All Claims and Defenses. Each Borrower hereby forever
waives, relinquishes, discharges and releases all defenses and claims of every
kind or nature, whether existing by virtue of state, federal, or local law, by
agreement or otherwise, against the Administrative Agent and the Lenders, and
all of their successors, assigns, directors, officers, shareholders, agents,
employees and attorneys, the Obligations or the Collateral, whether previously
or now existing or arising out of or related to any transaction or dealings
between the Administrative Agent, any Lender and any Borrower or any of them,
which any Borrower may have or may have made at any time up through and
including the date of this Amendment, including without limitation, any
affirmative defenses, counterclaims, setoffs, deductions or recoupments, by any
Borrower, and all of their representatives, successors, assigns, agents,
employees, officers, directors and heirs. “Claims” includes all debts, demands,
actions, causes of action, suits, dues, sums of money, accounts, bonds,
warranties, covenants, contracts, controversies, promises, agreements or
obligations of any kind, type or description, and any other claim or demand of
any nature whatsoever, whether known or unknown, accrued or unaccrued, disputed
or undisputed, liquidated or contingent, in contract, tort, at law or in equity,
any of them ever had, claimed to have, now has, or shall or may have. Nothing
contained in this Amendment prevents enforcement of this release.
29. No Waiver. Nothing in this Amendment shall be construed to waive, modify, or
cure any default or Event of Default that exists or may exist under the Credit
Agreement or any other Loan Document.
30. Waiver of Right to Trial by Jury. EACH PARTY TO THIS AMENDMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER THIS AMENDMENT OR ANY LOAN DOCUMENT, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT,
OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE, AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AMENDMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

 

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31. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, and all of which together will
constitute one and the same instrument. Receipt by the Administrative Agent of a
facsimile copy of an executed signature page hereof will constitute receipt by
the Administrative Agent of an executed counterpart of this Amendment.
32. Costs and Expenses. Each Borrower agrees to pay on demand in accordance with
the terms of the Credit Agreement all costs and expenses of the Administrative
Agent in connection with the preparation, reproduction, execution and delivery
of this Amendment and all other Loan Documents entered into in connection
herewith, including the reasonable fees and out-of-pocket expenses of the
Administrative Agent’s counsel with respect thereto.
33. Governing Law. This Amendment and the rights and obligations of the parties
hereto shall be governed by, and construed and interpreted in accordance with,
the laws of the State of Ohio.
34. Headings. Section headings in this Amendment are included herein for
convenience of reference only and will not constitute a part of this Amendment
for any other purpose.
35. Patriot Act Notice. The Administrative Agent hereby notifies each Borrower
that pursuant to the requirements of the USA Patriot Act (Title III of
Pub.L.10756 (signed into law October 26, 2001)) (the “Act”), it is required to
obtain, verify and record information that identifies each Borrower, which
information includes the name and address of each Borrower and other information
that will allow the Administrative Agent to identify each Borrower in accordance
with the Act.
[Signature Page Follows.]

 

 

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IN WITNESS WHEREOF, the Borrowers, the Administrative Agent, the Lenders and
Issuing Bank have hereunto set their hands as of the date first set forth above.

                  BORROWERS:    
 
                FRANKLIN CREDIT MANAGEMENT CORPORATION    
 
           
 
  By:   /s/ Thomas J. Axon     
 
     
 
Name: Thomas J. Axon    
 
      Title: President    
 
                FRANKLIN CREDIT HOLDING CORPORATION    
 
           
 
  By:   /s/ Thomas J. Axon     
 
     
 
Name: Thomas J. Axon    
 
      Title: President    
 
                ADMINISTRATIVE AGENT AND ISSUING BANK:    
 
                THE HUNTINGTON NATIONAL BANK    
 
           
 
  By:   /s/ Richard A. Cheap     
 
     
 
Name:  Richard A. Cheap    
 
      Title:  General Counsel and Secretary    
 
                LENDER AND RISK PARTICIPANT:    
 
            HUNTINGTON FINANCE, LLC    
 
           
 
  By:   /s/ Richard A. Cheap    
 
     
 
Name:  Richard A. Cheap    
 
      Title:  Vice President