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Exhibit 10.67 Execution Copy AMENDMENT NO. 2
TO
FORBEARANCE AGREEMENT
THIS AMENDMENT NO. 2 TO FORBEARANCE
AGREEMENT (this " Amendment ") is entered into at
Columbus, Ohio, as of August 15, 2008 (the " Amendment
Effective Date" ), by and among the BORROWERS listed on
Schedule 1 hereto (each, a " Borrowe r "
and collectively, the " Borrowers "), FRANKLIN CREDIT
MANAGEMENT CORPORATION, a Delaware corporation ("
FCMC " or " Guarantor "), and THE
HUNTINGTON NATIONAL BANK (" Huntington " or "
Lender "). This Amendment further amends and modifies
a certain Forbearance Agreement and Amendment to Credit Agreements
dated as of December 28, 2007 (as amended, supplemented,
restated or otherwise modified from time to time prior to the date
hereof, the " Forbearance Agreement "), by and among
the Borrowers, FCMC and Lender. All capitalized terms not otherwise
defined herein shall have the meanings ascribed to such terms in
the Forbearance Agreement. RECITALS:
A. As of December 28, 2007,
the Borrowers, FCMC and Lender executed the Forbearance Agreement
amending and restating the terms of certain extensions of credit to
the Borrowers and FCMC, as applicable, and in respect of the
Forbearance Agreement, each of the Acknowledged Defaults are
continuing; and B. As of
December 28, 2007, the Borrowers executed and delivered to
Lender, inter alia , an Amended and Restated Promissory Note
(A Note) in the original principal sum of $600,000,000 (the "
Tranche A Note "); and
C. As of December 28, 2007,
the Borrowers executed and delivered to Lender, inter alia ,
an Amended and Restated Promissory Note (B-1 Note) in the original
principal sum of $79,051,123.50 (the " Tranche B-1
Note "); and D. As of
December 28, 2007, the Borrowers executed and delivered to
Lender, inter alia , an Amended and Restated Promissory Note
(B-2 Note) in the original principal sum of $79,051,123.50 (the "
Tranche B-2 Note "), and the parties thereto
confirmed that the original outstanding principal balance of such
promissory note as of December 28, 2007 was $61,110,686.61,
pursuant to a certain letter agreement dated January 11, 2008;
and E. As of December 28,
2007, the Borrowers executed and delivered to Lender, inter
alia , an Amended and Restated Promissory Note (B-3 Note) in
the original principal sum of $79,051,123.50 (the " Tranche
B-3 Note "); and F. As
of December 28, 2007, the Borrowers executed and delivered to
Lender, inter alia , an Amended and Restated Promissory Note
(B-4 Note) in the original principal sum of $79,051,123.50 (the "
Tranche B-4 Note "); and
G. As of December 28, 2007,
the Borrowers executed and delivered to Lender, inter alia ,
an Amended and Restated Promissory Note (B-5 Note) in the original
principal sum of $25,000,000 (the " Tranche B-5 Note
"); and H. As of December 28,
2007, the Borrowers executed and delivered to Lender, inter
alia , an Amended and Restated Promissory Note (C Note) in the
original principal sum of $125,000,000 (the " Tranche C
Note "); and
I. As of December 28,
2007, the Borrowers executed and delivered to Lender, inter
alia , an Amended and Restated Promissory Note (D Note) in the
original principal sum of $5,000,000, which was thereafter amended
and restated by a Second Amended and Restated Promissory Note (Note
D) dated March 31, 2008, in the original principal sum of
$10,000,000 (the " Tranche D Note " and together with
the Tranche A Note, the Tranche B-1 Note, the Tranche B-2 Note, the
Tranche B-3 Note, the Tranche B-4 Note, the Tranche B-5 Note and
the Tranche C Note, collectively, the " Notes "); and
J. FCMC and the applicable
Borrowers have failed to comply with (i) certain provisions of
Section 11, " Certain Post-Closing Deliverables ," of
the Forbearance Agreement by failing to comply with items 5 and 7
of Schedule 11 to Amendment No. 1 in respect of
post-closing deliverables or requirements, schedules, documents and
other items as required by the Forbearance Agreement, and
(ii) Section 12(b), " Minimum Net Worth ," of the
Forbearance Agreement for the period ending June 30, 2008, by
failing to maintain the minimum Net Worth required by such section
(collectively, the " Identified Forbearance Defaults
"); and K. FCMC and the
Borrowers have requested that Lender waive the Identified
Forbearance Defaults, extend its forbearance in respect of the
Static Loans, amend and modify certain terms and financial
covenants in the Forbearance Agreement, and extend the time periods
or modify the requirements for FCMC and the Borrowers to satisfy
certain post-closing deliverables composing the Identified
Forbearance Defaults, and Lender is willing to do so upon the terms
and subject to the conditions contained herein; and
L. Lender and each participant
of Lender have fully performed all of their respective promises and
agreements to FCMC and the Borrowers and are under no obligation to
grant the extension of forbearance as to the Static Loans, amend
any terms or covenants of any Loan Document or otherwise waive the
Identified Forbearance Defaults, as requested by FCMC and the
Borrowers. 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:
1. Definitions
Added . The following defined terms are hereby added to
Section 2, " Certain Defined Terms ," of the
Forbearance Agreement in their correct alphabetical order and shall
recite as follows: " Amendment No. 2 " shall mean a
certain Amendment No. 2 to Forbearance Agreement dated as of
August 15, 2008. " Cash Flow Available for Debt Service
" shall have the meaning assigned to that term in
Section 12(d). " Debt Service " shall have the meaning
assigned to that term in Section 12(d).
2. Amendment to
Section 1(a) . The second sentence of Section 1(a)
"Forbearance, Ratification and Reaffirmation, Forgiveness of
Indebtedness" of the Forbearance Agreement is hereby amended to
recite as follows: In addition, absent the occurrence and
continuance of a Forbearance Default, prior to December 31,
2008, Lender agrees not to initiate collection proceedings or
exercise its remedies under the Loan Documents in respect of any
Static Loan against Guarantor, any Borrower or any Collateral for
such Static Loan or elect to have
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interest accrue under the respective Loan Documents at the
stated rate applicable after default.
3. Amendments to
Section 12 . Paragraphs (b) " Minimum Net Worth
," (d) " Interest Coverage Ratios " and (o) " WMC
Claim " of Section 12, " Covenants ," of the
Forbearance Agreement are hereby replaced in their entirety with
the paragraphs set forth below and are amended respectively to
recite as follows: (b)
Intentionally Left Blank. (d)
Cash Flow Coverage . Until such time as all Tranche A
Advances and Tranche B Advances are indefeasibly paid in full,
Guarantor and each Subsidiary on a consolidated basis shall
maintain as of the end of each quarterly period a ratio of Cash
Flow Available for Debt Service to Debt Service of not less than
1.20 to 1.00, with such ratio being determined (i) initially
as of September 30, 2008, for the period from January 1,
2008, through and including September 30, 2008 (on a
year-to-date basis), and (ii) as of December 31, 2008,
and continuing as of the end of each quarter thereafter, for the
most recently-ended twelve consecutive (12) month period
ending on such date. " Cash Flow Available for Debt Service
" shall mean for any period all Collections (which term includes
without limitation all servicing fees paid in cash, net payments
received in cash pursuant to Interest Rate Hedge Agreements, due
diligence fees paid in cash, interest payments and dividends paid
in cash and any other cash payments); provided that for the
purposes of the determination of Cash Flow, each such item of
Collection shall be required to be received by Lender in the Lock
Box or turned over to Lender by the Borrower and deposited in one
of the Blocked Accounts at Huntington, and in each instance
(i) applied to the Obligations (other than to principal of the
Tranche D Advances, unless such application is accompanied by a
permanent reduction thereof) or (ii) used to establish or
augment any Reserves. " Debt Service " shall mean for any
period the sum of (i) Interest Expense, plus
(ii) scheduled principal payments on Indebtedness. "
Interest Expense " shall mean for any period total interest
expense (other than PIK Interest), whether paid or accrued or due
and payable (including without limitation in respect of all
Advances and any Subordinated Indebtedness), plus the interest
component of capital lease obligations for such period, plus all
bank fees capitalized pursuant to GAAP (other than the
Restructuring Fee), plus net costs under Interest Rate Hedge
Agreements. (o) WMC Claim .
FCMC and the applicable Borrower agree to diligently pursue all of
their claims and demands against WMC Mortgage Corp. and its
successors and assigns ("WMC"), and agree, upon Lender’s
request, to collaterally assign any commercial tort claim pursuant
to Loan Documents satisfactory to Lender. FCMC and the applicable
Borrower further agree that neither such party will enter into any
settlement agreement with WMC without the prior written consent of
Lender. 4. Waiver of
Identified Forbearance Defaults . Lender hereby waives the
Identified Forbearance Defaults for the period through and
including June 30, 2008.
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5. Schedule 11 .
Schedule 11 to the Forbearanc
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