SC 13D

SEC 1746
(11-02)
Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

UNITED STATES	OMB APPROVAL
SECURITIES AND EXCHANGE COMMISSION	OMB Number: 3235-0145
Washington, D.C. 20549	Expires: December 31, 2005
SCHEDULE 13D	Estimated average burden hours per response. . 11

Under the Securities Exchange Act of 1934
(Amendment No.     )*

MEGO FINANCIAL CORPORATION

(Name of Issuer)

Common Stock, par value $0.01 per share

(Title of Class of Securities)

585162308

(CUSIP Number)

Steven J. Gavin
Winston & Strawn
35 West Wacker Drive
Suite 4200
Chicago, Illinois
(312) 558-5600

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

February 27, 2002

(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), Rule 13d-1(f) or Rule 13d-1(g), check the following box.   [   ]

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

^* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

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.

Schedule 13D

CUSIP No.  585162308 Page 2 of 6 Pages
	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Charles K. Stewart
	2.	Check the Appropriate Box if a Member of a Group* (See Instructions)
		(a)			[   ]
		(b)			[X]
	3.	SEC Use Only
	4.	Source of Funds (See Instructions) PF
	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)
	6.	Citizenship or Place of Organization United States of America
Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 1,696,946
			8.	Shared Voting Power 0
			9.	Sole Dispositive Power 1,696,946
			10.	Shared Dispositive Power 0
	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,696,946
	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares* (See Instructions)
	13.	Percent of Class Represented by Amount in Row (11) 18.2%, assuming the issuance of the Warrant Shares and Conversion Shares (as defined below)*
	14.	Type of Reporting Person (See Instructions) IN

*              This percentage is based on information received directly from Mego Financial Corporation on March 3, 2003 stating that 8,104,784 Shares are outstanding.

Schedule 13D

CUSIP No.  585162308 Page 3 of 6 Pages
Item 1.	Security and Issuer
This Schedule 13D relates to shares of Common Stock, par value $0.01 per share (the “Shares”), of Mego Financial Corporation, a New York corporation (the “Issuer”).  The principal executive offices of the Issuer are located at 4310 Paradise Road, Las Vegas, Nevada  89109.
Item 2.	Identity and Background
	(a) and (f).  This Schedule 13D is filed by Charles K. Stewart ("Stewart"), an individual and a citizen of the United States of America.
	(b) The business address of Stewart is 330 S. Wells Street, Suite 1001, Chicago, Illinois 60606.
	(c) Stewart is currently self-employed as an investor.  His office address is 330 S. Wells Street, Suite 1001, Chicago, Illinois 60606.
	(d) and (e)  During the last five years, Stewart was neither (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) nor (ii) 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.
Item 3.	Source and Amount of Funds or Other Consideration
Stewart purchased 500,000 Shares with personal investment funds in the amount of $2,000,000.00 on February 27, 2002.  Stewart also loaned (the "Loan") the Issuer $1,000,000 of his personal investment funds on September 12, 2002 under a Promissory Note pursuant to which he may acquire direct ownership of 797,964 Shares and warrants to purchase an additional 398,982 Shares.
Item 4.	Purpose of Transaction
	Stewart purchased the Shares directly from the Issuer and made the Loan directly to the Issuer and intends to hold such securities and the Loan for investment purposes.  Stewart may, subject to the terms of the Subscription Agreement (as defined below) acquire, directly or indirectly, additional securities of the Issuer directly from the Issuer or on the open market from time to time for investment purposes.  Stewart may also, pursuant to the Promissory Note (as defined below) convert the Promissory Note into 797,964 Shares and warrants to purchase an additional 398,982 Shares.
	Except as set forth in this Item 4, Stewart has no current plans or proposals which relate to or would result in the types of transactions set forth in paragraphs (b) through (j) of Item 4 of Schedule 13D.  Stewart reserves the right to change his plans and intentions at any time, as he deems appropriate.  In the event of such a change, Stewart will amend this Schedule 13D accordingly.

Schedule 13D

CUSIP No.  585162308 Page 4 of 6 Pages
Item 5.	Interest in Securities of the Issuer
	(a)    As of the date of this filing, Stewart holds an aggregate 500,000 Shares and has the right to acquire, within 60 days of this Schedule 13D, an additional 797,964 Shares and warrants to purchase 398,982 Shares.  These Shares represent, in the aggregate, 18.2% of the outstanding shares of the Issuer, assuming issuance of the Conversion Shares and Warrant Shares (as defined below).  This percentage is based on information received directly from Mego Financial Corporation on March 3, 2003 stating that 8,104,784 Shares are outstanding.
	(b)    As of the date of this filing, Stewart has the sole power to vote and dispose of 1,696,946 Shares beneficially owned by him.
	(c)    Stewart has not effected any transaction in Shares of the Issuer during the past sixty (60) days.
	(d)    Not applicable.
	(e)    Not applicable.
Item 6.	Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
On December 13, 2001, the Issuer entered into a Subscription Agreement (the "Subscription Agreement") with Doerge Capital Management (“Doerge”) pursuant to which the Issuer was to issue to Doerge and Doerge was to acquire from the Issuer 500,000 Shares at a purchase price of $4.00 per Share.  Prior to the issuance of those Shares, Doerge assigned its rights and obligations under the Subscription Agreement to Stewart.  The Issuer issued the Shares to Stewart on February 27, 2002 pursuant to the terms of the Subscription Agreement.
Under the terms of the Subscription Agreement, Stewart may not to sell, assign or transfer the Shares except in a transaction(s) which is/are in compliance with the Securities Act of 1933, as amended (the "Act"), or other securities laws and in accordance with the other terms of the Subscription Agreement (as set forth below).  Stewart further agreed to vote all his Shares to ensure that, at all times, at least three independent directors would be appointed to Issuer’s Board of Directors.  In addition, under the Subscription Agreement, Stewart may not, without the prior written consent of the Board of Directors of the Issuer, including a majority of the independent directors of the Issuer, (a) acquire additional securities of Issuer or its affiliates, (b) enter into any transaction with the Issuer or its affiliates or (c) transfer any securities of the Issuer unless the transferee agrees to be bound by the Subscription Agreement other than (i) a disposition pursuant to Rule 144 of the Act, (ii) a disposition through a bona fide underwritten public offering or (iii) a disposition pursuant to an effective registration statement of the Issuer, provided, that in the case of a disposition pursuant to clauses (c)(i)-(c)(iii) above, Stewart may not, after due inquiry, knowingly transfer, in one or more series of transactions, such number of securities of the Issuer so that any one transferee becomes the beneficial owner, directly or indirectly, together with its affiliates, of more than 5% of the outstanding securities of the Issuer.
In addition, pursuant to the Subscription Agreement, neither Stewart nor his affiliates may, until December 13, 2003, propose, discuss, encourage or enter into any business

Schedule 13D

CUSIP No.  585162308 Page 5 of 6 Pages
combination (as defined in the Subscription Agreement) with the Issuer or its affiliates unless the consideration paid to the shareholders of the Issuer, other than Stewart, is no less than the greater of the fair market value of the Issuer's common stock at the time of the transaction or $4.00.
In connection with the execution of the Subscription Agreement, the Issuer also entered into that certain Registration Rights Agreement (the "RRA") with Doerge, which was subsequently assigned to Stewart.  Pursuant to the terms and conditions of the RRA, the Issuer agreed to file a registration statement under the Act covering, among other securities, Stewart's Shares.  The registration statement was initially filed on February 25, 2002 and amended on March 8, 2002.  Accordingly, the resale of Stewart's Shares has been registered by the Issuer pursuant to a  Registration Statement (Registration No. 333-83320).
On September 12, 2002, Stewart and the Issuer entered into a Promissory Note, as amended on December 31, 2002 (as amended, the "Promissory Note") pursuant to which Stewart loaned the Issuer $1,000,000 of his personal investment funds. The Loan bears interest at a rate of 7.5% per annum and its stated maturity is March 31, 2003.  The Loan is collateralized by certain assets of the Issuer.  The outstanding principal and accrued interest under the Promissory Note as of February 28, 2003 is $877,760.42 (the "Convertible Amount").  Pursuant to the terms of the Promissory Note, Stewart may convert the Convertible Amount into (i) Shares of the Issuer (the "Conversion Shares") at a conversion price of $1.10 per Share and (ii) warrants to purchase the number of Shares (the "Warrant Shares") that is equal to one-half of the Convertible Amount which Stewart desires to convert divided by $1.10.  As of the date of this Schedule 13D, the Promissory Note is convertible into 797,964 Conversion Shares and 398,982 Warrant Shares.
The summaries above of the Subscription Agreement, Registration Rights Agreement and Promissory Note are qualified in their entirety by the terms of such agreements, copies of which are filed as Exhibits 1-4 to this Schedule 13D and incorporated herein by reference.
Item 7.	Material to Be Filed as Exhibits
Exhibit 1	Subscription Agreement dated December 13, 2001 between Mego Financial Corporation and Doerge Capital Management.
Exhibit 2	Registration Rights Agreement dated December 13, 2001 between Mego Financial Corporation and Doerge Capital Management.
Exhibit 3	Promissory Note dated September 12, 2002 by Mego Financial Corporation to Charles K. Stewart.
Exhibit 4	Amendment to Promissory Note dated December 31, 2002 by Mego Financial Corporation to Charles K. Stewart.

Schedule 13D

CUSIP No.  585162308

Page 6 of 6 Pages

Signatures

After reasonable inquiry and to the best of the undersigned’s knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct.

Dated:  March 3, 2003

Date

/s/ Charles K. Stewart

Signature

Charles K. Stewart

Name/Title

EX-1

EXHIBIT 1

EXECUTION COPY

SUBSCRIPTION AGREEMENT

December 13, 2001

Mego Financial Corp.

4310 Paradise Road

Las Vegas, Nevada  89109

Gentlemen:

The undersigned (“Subscriber”) hereby tenders this Subscription Agreement (this “Agreement”) subject to the terms and conditions set forth herein. If you are in agreement, please indicate your acceptance by executing this Agreement in the space provided and returning one executed counterpart to Subscriber.

1.Subscription.

1.1.Subject to approval by the shareholders of Issuer of the issuance and sale contemplated hereby, and the filing of a Registration Statement pursuant to the terms of the Registration Rights Agreement attached hereto, Subscriber hereby subscribes for the purchase of 500,000 shares (the “Shares” or the “Securities”) of common stock, $.01 par value per share (“Common Stock”), of Mego Financial Corp., a New York corporation (“Issuer” or “Company”), for a purchase price of four dollars ($4.00) per Share to be paid to Issuer by Subscriber in accordance with Section 7.3 hereof.

2.Offering Material.

2.1.Subscriber represents and warrants that it is in receipt of and that it has carefully read and understands the following items (collectively, the “Offering Material”):

(a)Issuer’s Annual Report on Form 10-K for the year ended August 31,2001; and

(b)Such other information as it has requested in order to evaluate aninvestment in Issuer.

3.Restrictions on Transfer.

3.1.Subscriber acknowledges that it is not acquiring the Shares of Common Stock for the purpose of or in connection with any distribution thereof within the meaning of the Securities Act of 1933, as amended (the “Act”), and any applicable state or other securities laws (“Other Securities Laws”), in violation of the Act or Other Securities Laws. Subscriber further agrees that it will not sell, assign or transfer any of the Securities so acquired in violation of the Act or Other Securities Laws and acknowledges that, in taking unregistered securities, it must continue to bear

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the economic risk of its investment for an indefinite period of time because such Securities have not been registered under the Act or Other Securities Laws and further realizes that such Securities cannot be transferred unless such Securities are subsequently registered under the Act and Other Securities Laws or an exemption from such registration is applicable to such transfer. Subscriber further recognizes that Issuer is not assuming any obligation to register such Securities, except pursuant to the Registration Rights Agreement to be entered into by the Issuer and Subscriber at the Closing (as defined in Section Error! Reference source not found. below), in the form attached hereto as Exhibit A (the “Registration Rights Agreement”). Subscriber also acknowledges that appropriate legends reflecting the status of the Securities under the Act and Other Securities Laws will be placed on the face of the certificates for such Securities at the time of their transfer and delivery.

3.2.The Securities may not be transferred except (i) in a transaction which is in compliance with the Act and Other Securities Laws and (ii) in accordance with the other terms and conditions of this Agreement. It shall be a condition to any such transfer that Issuer shall be furnished with an opinion of counsel to the holder of such Securities, reasonably satisfactory to Issuer, to the effect that the proposed transfer would be in compliance with the Act and Other Securities Laws.

3.3.Subscriber understands that the certificate(s) representing the Securities will bear restrictive legends thereon substantially as follows:

“The securities represented by this certificate have been acquired directly or indirectly from the Issuer without being registered under the Securities Act of 1933, as amended (the “Act”), or any other applicable securities laws, and are restricted securities as that term is defined under Rule 144 promulgated under the Act. These securities may not be sold, pledged, transferred, distributed or otherwise disposed of in any manner (“Transfer”) unless they are registered under the Act and any other applicable securities laws, or unless the request for Transfer is accompanied by a favorable opinion of counsel, reasonably satisfactory to the Issuer, stating that the Transfer will not result in a violation of the Act or any other applicable securities laws.”

“The securities represented by this certificate are subject to restrictions upon transfer pursuant to that certain Subscription Agreement (the “Subscription Agreement”) by and among the Issuer and the subscriber to the shares of Common Stock evidenced by this certificate.  A copy of the Subscription Agreement may be obtained from the Issuer without charge upon the written request of the holder hereof.”

3.4.Subscriber understands that Issuer will direct the Transfer Agent for the Common Stock to place a stop transfer instruction against the certificate(s) representing the Securities issued pursuant to this Agreement and will instruct the Transfer Agent to refuse to effect any transfer thereof in the absence of a Registration Statement declared effective by the Securities and Exchange Commission with respect to the Securities or a favorable opinion of counsel to Subscriber, satisfactory to counsel for Issuer, that such transfer is exempt from registration under the Act and any Other Securities Laws.

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3.5.Subscriber understands that it has no rights whatsoever to request, and that the Issuer is under no obligation whatsoever to furnish, a registration of the Securities under the Act or any Other Securities Laws, except under the terms of the Registration Rights Agreement.

3.6.Subscriber will only transfer the Securities issued pursuant to this Agreement in compliance with (i) the Act and Other Securities Laws and (ii) the other terms and conditions of this Agreement.

4.Subscriber’s Representations and Warranties.

In order to induce Issuer to execute this Subscription Agreement and to consummate the transactions set forth therein, Subscriber hereby represents, warrants and covenants to Issuer as follows:

4.1.Subscriber acknowledges that it has had the opportunity to obtain additional information beyond the Offering Material in order to verify the information contained in the Offering Material and to evaluate the risks of an investment in the Securities. With respect to individual or partnership tax and other economic considerations involved in this investment, Subscriber is not relying on the Company (or any agent or representative of the Company). Subscriber has carefully considered and has, to the extent Subscriber believes such discussion necessary, discussed with Subscriber’s legal, tax, accounting and financial advisers the suitability of an investment in the Securities for Subscriber’s particular tax and financial situation.

4.2.Subscriber acknowledges that it has had the opportunity to ask questions of and receive answers from qualified representatives of Issuer concerning the terms and conditions of this Agreement and of the Securities to be issued hereunder, as well as the information contained in the Offering Material, and it has been granted access, prior to subscribing to the Securities and prior to the purchase thereof, to all books, records and documents of Issuer and its subsidiaries.

4.3.Subscriber acknowledges that its attention has been specifically called to, and that its representatives or agents have carefully read, the Offering Material, drafts of the preliminary proxy statement to be filed with the Securities and Exchange Commission in connection with the transaction contemplated hereby, all documents referred to and incorporated therein and any other material received by Subscriber from the Issuer and fully understands the risk involved in the investment.

4.4.Subscriber acknowledges that it is a sophisticated investor familiar with the type of risks inherent in the acquisition of securities such as the Securities and that, by reason of its knowledge and experience in financial and business matters in general, and investments of this type in particular, and the knowledge and experience in financial and business matters of its representatives and agents, it is capable of evaluating the merits and risks of an investment by it in the Securities.

4.5.Subscriber’s financial condition is such that it is under no present need, in order to satisfy any existing or contemplated understanding or indebtedness, to dispose of any portion of the Securities which it is purchasing hereunder. Subscriber is able to bear the economic risk of an investment in the Securities, including, without limiting the generality of the foregoing, the risk

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of losing part or all of its investment in the Securities and its probable inability to sell or transfer the Securities for an indefinite period of time.

4.6.Subscriber is not acquiring the Securities for the purpose of or in connection with any distribution within the meaning of the Act or Other Securities Laws in violation of the Act or Other Securities Laws.

4.7.Subscriber understands that, because the Securities have not been registered under the Act or Other Securities Laws, the Securities therefore must be held indefinitely unless the Securities are subsequently registered under the Act and Other Securities Laws or until an exemption from such registration thereunder is available.

4.8.Subscriber is aware that any sales which may be made in reliance upon Rule 144 promulgated under the Act, may be made only if Issuer is in compliance with the reporting and other requirements under Rule 144, and then only in limited amounts, after the required holding periods, and otherwise in accordance with the terms and conditions of Rule 144.

4.9.Subscriber acknowledges that it is an “accredited investor” within themeaning of Rule 501(a) of Regulation D promulgated under the Act.

4.10.This Agreement has been duly authorized, executed and delivered on behalf of Subscriber and constitutes the valid and binding obligation of the Subscriber enforceable against Subscriber in accordance with its terms.

4.11.Subscriber recognizes that investment in the Securities involves substantial risks. Subscriber further recognizes that no Federal or State agencies have passed upon this offering of the Securities or made any findings or determination as to the fairness of this investment.

4.12.Subscriber is not subscribing for the Securities as a result of or subsequent to any advertisement, article, notice of other communication published in any newspaper, magazine, or similar media or broadcast over television or radio or presented at any seminar.

4.13.If this Agreement is executed and delivered on behalf of a partnership, corporation, trust or estate: (i) such partnership, corporation, trust or estate has the full legal right and power and all authority and approval required (a) to execute and deliver, or authorize execution and delivery of, this Agreement and all other instruments executed and delivered by or on behalf of such partnership, corporation, trust or estate in connection with the purchase of the Securities, (b) to delegate authority pursuant to a power of attorney and (c) to purchase and hold such Securities; (ii) the signature of the party signing on behalf of such partnership, corporation, trust or estate is binding upon such partnership, corporation, trust or estate; and (iii) such partnership, corporation or trust has not been formed for the specific purpose of acquiring the Securities, unless each beneficial owner of such entity is qualified as an “accredited investor” within the meaning of Regulation D promulgated under the Act and has submitted information substantiating such individual qualification.

4.14.Subscriber acknowledges that Issuer has relied on the representations contained herein and that the statutory basis for exemption from the requirements of Section 5 of the Act may not

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be present if, notwithstanding such representations, Subscriber were acquiring the Securities for resale or distribution upon the occurrence or non-occurrence of some predetermined event.

4.15.None of the information supplied by Subscriber for inclusion or incorporation by reference in the proxy statement (the “Proxy Statement”) used in connection with the solicitation of proxies at its Special Meeting (the “Special Meeting”) held to seek approval of transactions contemplated herein shall, at the time it is filed with the Securities and Exchange Commission, at the time it is first mailed to Issuer’s shareholders or at the time of the Special Meeting, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

4.16.Except as set forth on Schedule Error! Reference source not found., neither Subscriber nor any of its affiliates (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”)) (“Affiliates”) or representatives is party to, or is bound by any contract, agreement, arrangement or understanding (whether written or not) with respect to Issuer or any of its Subsidiaries or any securities of Issuer or any of its Subsidiaries, including without limitation, any (i) contract, agreement, arrangement or understanding (whether written or not) which requires such party to (x) repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity or voting interest in, Issuer or any of its Subsidiaries or (y) vote or dispose of any shares of capital stock of, or other equity or voting interest in Issuer or any of its Subsidiaries or (ii) irrevocable proxy, voting agreement or similar agreement, arrangement or understanding (whether written or not) with respect to any shares of capital stock of Issuer or any of its Subsidiaries.

4.17.Except as set forth in Schedule 4.17, neither Subscriber nor any of its Affiliates or representatives possesses, directly or indirectly, any financial, equity, voting or management interest, or is a director, officer, employee, agent or Affiliate of LC Acquisition Corp or Union Square Partners.

4.18.Except as set forth on Schedule Error! Reference source not found., the execution, delivery and performance of this Agreement by Subscriber, and the taking of all action contemplated hereby and the other ancillary agreements contemplated hereby, will not result in any violation of or conflict with or constitute a default under any term of Subscriber’s Articles or Certificate, as the case may be, of Incorporation, or bylaws, or of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to it (which violation or conflict would materially adversely affect the property, business, operations or financial condition of Subscriber), or result in the creation of any mortgage, lien, charge or encumbrance upon any of the properties or assets of Subscriber pursuant to any such term.

4.19.Subscriber agrees that its representations and warranties contained in this Agreement shall survive the closing of the transactions contemplated by this Agreement.

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5.Issuer’s Representations and Warranties.

In order to induce the Subscriber to execute this Subscription Agreement and to consummate the transactions set forth therein, the Issuer hereby represents, warrants and covenants to the Subscriber as follows:

5.1.Organization, Standing, Capitalization, etc.  Issuer is a corporation duly organized, validly existing and in good standing under the laws of the State of New York and has all requisite corporate power and authority to own and operate its properties and to carry on its business as presently conducted and to enter into this Agreement and issue the Securities pursuant hereto.  All of the outstanding shares of capital stock of Issuer have been duly authorized and validly issued and are fully paid and non-assessable.

5.2.Authorization.  This Agreement has been duly authorized, executed and delivered by or on behalf of Issuer and constitutes the valid and binding obligation of Issuer enforceable against Issuer in accordance with its terms.

5.3.Legality of Securities.  The Shares have been duly and validly authorized, and their issuance and sale to Subscriber pursuant to this Agreement have been duly authorized by the Board of Directors of Issuer.  There are no preemptive rights or similar rights on the part of the holders of shares of the Common Stock.  No further approval or authorization of the shareholders of Issuer will be required for the issuance of the Securities as contemplated herein, other than approval by the shareholders of the issuance of the Shares.  When issued and delivered to the Subscriber in accordance with the terms hereof, the Shares will be validly issued and outstanding and fully paid and non-assessable.

5.4.Conflicts with Other Instruments, etc.  Except as set forth on Schedule 5.4, the execution, delivery and performance of this Agreement by Issuer, and the taking of all action contemplated hereby and the other ancillary agreements contemplated thereby, will not result in any violation of or conflict with or constitute a default under any term of Issuer’s Articles of Incorporation, or bylaws, or of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to it (which violation or conflict would materially adversely affect the property, business, operations or financial condition of the Issuer), or result in the creation of any mortgage, lien, charge or encumbrance upon any of the properties or assets of Issuer pursuant to any such term.

5.5.No Other Representations or Warranties.  Issuer is not making any other representations, warranties or guaranties, whether express or implied, with respect to itself or the transactions contemplated by this Agreement, except as expressly set forth in this Section 5. Issuer agrees that its representations and warranties contained in this Agreement shall survive the closing of the transactions contemplated by this Agreement.

6.Certain Deliveries and Covenants of Subscriber.

6.1.Subscriber covenants and agrees to vote all securities of Issuer held by it, and otherwise use its best efforts, to ensure that, at all times, at least three independent directors (as defined in Section 7.5 below) are appointed to the Board of Directors of Issuer.

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6.2.Subscriber covenants and agrees that, from the date of this Agreement, neither Subscriber nor any of its Affiliates or representatives shall, without the prior written consent of the Board of Directors of Issuer, including a majority of the independent directors of Issuer:

(a)acquire additional securities of Issuer or its Affiliates;

(b)transfer any securities of Issuer unless the transferee agrees to be bound by all of the terms and conditions of this Agreement as though such transferee were the Subscriber hereunder, other than the following dispositions:

(i)a disposition pursuant to Rule 144 of the Act;.

(ii)a disposition through a bona fide underwritten public offering; or

(iii)a disposition pursuant to any other effective registration statement relating to equity securities of Issuer under the Act, including a registration statement pursuant to the Registration Rights Agreement;

provided, that in the case of any disposition pursuant to clause (i), (ii) or (iii) above, Subscriber or any of its Affiliates shall not, after due inquiry, knowingly transfer, in one or a series of transfers whenever occurring, more than such quantity of securities as would result in any one transferee becoming the beneficial owner (within the meaning of Section 13(d) of the Exchange Act), directly or indirectly, together with all of its Affiliates, of more than 5% of the outstanding securities of Issuer; or

(c)enter into any transaction with Issuer or its Affiliates(including, without limitation, the transactions described in Section 6.3).

6.3.Notwithstanding any other terms or conditions of this Agreement, neither Subscriber nor any of its Affiliates or representatives shall, for a period of two years from the date of this Agreement, propose, discuss, encourage or enter into any business combination (as defined in Section 7.5 below) with Issuer or any of its Affiliates unless the consideration per share paid to the shareholders of Issuer, other than Subscriber, is no less than the greater of:

(A)the fair market value of the Common Stock at the time of. the transaction,

or

(B)$4.00.

6.4.Issuer and Subscriber hereby covenant, acknowledge and agree that:

(a)The certificate of incorporation and the by-laws of Issuer immediately following the Closing shall contain the provisions with respect to indemnification, exculpation from liability and advancement of expenses set forth in Issuer’s Certificate of Incorporation and By-laws as in effect on the date of this Agreement, which provisions shall not be amended,

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repealed or otherwise modified for a period of six (6) years from the Closing in any manner that would adversely affect the rights (including, without limitation, rights with respect to the transactions contemplated by this Agreement) thereunder of individuals who on or prior to the Closing were directors or officers of Issuer, unless such modification is required by law.

(b)Issuer hereby covenants and agrees that it shall take such necessary measures to maintain in effect, for a period of six (6) years from the Closing, Issuer’s directors’ and officers’ liability insurance substantially similar to such insurance as in effect on the date of this Agreement, except that such insurance shall be in an amount equal to at least $15 million, covering those directors and officers who are currently covered on the date of this Agreement by Issuer’s directors’ and officers’ liability insurance policy (the “Insured Parties”); provided, however, that in no event shall Issuer be required to expend in any one year an amount in excess of 150% of the annual premiums paid by Issuer for such insurance which Issuer represents were not more than $227,000 for the annual period beginning August 1, 2001; provided, further, that if the annual premiums of such insurance coverage exceed such amount, Issuer shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount; and provided, further, that Issuer may substitute for such Issuer policies with at least the same coverage containing terms and conditions which are no less advantageous and provided that said substitution does not result in any gaps or lapses in coverage with respect to matters occurring on or prior to the Closing (including, without limitation, rights with respect to the transactions contemplated by this Agreement).

(c)Issuer shall indemnify, defend and hold harmless each officer, director or employee who is now, or has been at any time prior to the date hereof or who becomes prior to the Closing, an officer, director or employee of Issuer or any of its Subsidiaries (collectively, the “Indemnified Parties”) to the fullest extent permitted by Section 722 of the NYBCL with respect to all acts and omissions arising out of such individuals’ services as officers, directors or employees of Issuer or any of its Subsidiaries or as trustees or fiduciaries of any plan for the benefit of employees of Issuer or any of its Subsidiaries, occurring prior to the Closing (including, without limitation, the transactions contemplated by this Agreement).  Without limitation of the foregoing, in the event any such Indemnified Party is or becomes involved in any capacity in any action, proceeding or investigation in connection with any matter, including without limitation, the transactions contemplated by this Agreement, occurring prior to, and including, the Closing, Issuer shall, from and after the Closing, pay, as incurred, such Indemnified Party’s reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. Issuer shall pay all reasonable expenses, including attorneys’ fees, that may be incurred by any Indemnified Party in enforcing this Section 6.4 or any action involving an Indemnified Party resulting from the transactions contemplated by this Agreement.

(d)In the event that Issuer or any of its successors or assigns (i) consolidates with or merges into any other person or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person or entity, then, and in each such case, proper provision shall be made so that the successors, assigns or transferees of Issuer shall succeed to the obligations set forth in this Section 6.4.

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(e)Each Indemnified Party shall be entitled to the advancement of expenses to the full extent contemplated in this Section 6.4 in connection with any such action.  The rights to indemnification and advancement of expenses under this Section 6.4 shall continue in full force and effect for a period of six (6) years from the Effective Time; provided, however, that all rights to indemnification in respect of any claim for indemnification or advancement of expenses asserted or made within such period shall continue until the disposition of such claim.

(f)Issuer and Subscriber acknowledge and agree that the provisions of this Section 6.4 shall benefit and may be enforced by, or on behalf of, any of the officers, directors or, as the case may be, employees referred to in this Section 6.4.

7.Miscellaneous.

7.1.(a)The representations and warranties of Subscriber contained herein shall be true at and as of the date of the Closing as though such representations and warranties were made at and as of the Closing and all commitments and covenants of Subscriber made herein shall survive the Closing.

(b)The representations and warranties of Issuer contained herein shall be true at and as of the date of the Closing as though such representations and warranties were made at and as of the Closing and all commitments and covenants of Issuer made herein shall survive the Closing.

7.2.This Agreement shall be construed in accordance with and governed bythe laws of the State of New York.

7.3.The closing (the “Closing”) of the issuance and sale of the Shares shall take place at the offices of Swidler Berlin Shereff Friedman, LLP at The Chrysler Building, 405 Lexington Avenue, New York, New York, 10174, or at such other place and at such time and date as Issuer and Subscriber shall mutually agree; provided, the Closing shall occur within two business days after the satisfaction or waiver of the conditions set forth herein and this Agreement shall be automatically terminated if the Closing has not occurred on or prior to March 1, 2002. At the Closing, (i) Subscriber shall deliver the purchase price for the Shares set forth in Section 1.1 hereof by delivering to the Issuer a certified or official bank check payable to the order of Issuer or a wire transfer to an account designated by Issuer, in an amount equal to the purchase price and (ii) Issuer and Subscriber shall execute and deliver the Registration Rights Agreement. Issuer shall deliver to Subscriber duly executed stock certificates (bearing the restrictive legends required by Section 3.3 herein) for the Shares subscribed for and purchased hereunder within a reasonable period of time following the Closing. The affirmative vote of a majority of the shareholders of Issuer who are not parties to that certain Securities Purchase Agreement, dated December 13, 2001, by and among Subscriber, Robert E. Nederlander, Robert E. Nederlander Foundation, RER Corp., Herbert B. Hirsch, Growth Realty, Inc., Growth Realty Holdings, L.L.C., Jerome J. Cohen, Rita Cohen, trustee under an indenture of trust dated October 25, 1991, Rita and Jerome J. Cohen Foundation, Inc., John E. McConnaughy, Jr. and Donald A. Mayerson (the “Securities Purchase Agreement”) with respect to the transaction contemplated by this Agreement, shall be a condition precedent to Issuer’s obligation to issue the Shares to Subscriber. Additionally, the approval of the Special Committee having not been withdrawn with respect to

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the transactions contemplated by this Agreement and the procuring by the Company of a binder for the insurance coverage required by Section 6.4(b) hereof, along with evidence of payment by the Company of the annual premium required by such binder shall be a condition precedent to Issuer’s obligation to issue the Shares to Subscriber. The obligations of the parties to consummate the transactions contemplated hereby are also conditioned upon the filing by the Company of a registration statement with the Securities and Exchange Commission registering the resale of the Shares being issued hereunder in accordance with the terms and conditions of the Registration Rights Agreement.

7.4.Each party shall bear its own costs in connection with this transaction.

7.5.For purposes of this Agreement, (i) the term “business combination” shall mean any of the following: (a) a reorganization with, amalgamation with, consolidation with, or merger into, any other corporation, partnership, organization or other entity, as a result of which the Company is not the surviving entity, (b) 50% or more of the Common Stock of the Company being acquired by any other party or group of parties, or (c) the Company conveying, selling, leasing, assigning, transferring or otherwise disposing of all or substantially all of its property, business or assets; and (ii) the term “independent directors” shall mean qualified persons who, upon a reasonable test under all the circumstances, are independent of (x) the management of Issuer and its Affiliates and (y) Subscriber and its Affiliates.

7.6.(a)This Agreement may not be changed, modified or amended except pursuant to (x) an instrument in writing signed by Issuer, on the one hand, and Subscriber, on the other hand, and (y) the prior written consent with respect to such change, modification or amendment of a majority of the independent directors of Issuer.

(b)The terms, covenants, representations, warranties and conditions contained in this Agreement cannot be waived, except pursuant to (x) an agreement in writing signed by the party waiving compliance and (y) the prior written consent with respect to such waiver of a majority of the independent directors of Issuer.

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the date first set forth above.

SUBSCRIBER:
DOERGE CAPITAL MANAGEMENT
By:	/s/ David Doerge
Name:	David Doerge
Title:	Principal
Address:		The Chicago Mercantile Exchange 30 South Wacker Drive Suite 2112 Chicago, Illinois 60606
ISSUER:
MEGO FINANCIAL CORP.
By:	/s/ Jon A. Joseph
Name:	Jon A. Joseph
Title:	Vice President and General Counsel

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EXHIBIT A

FORM OF REGISTRATION RIGHTS AGREEMENT

JOINDER
to
MEGO FINANCIAL CORP
SUBSCRIPTION AGREEMENT

The undersigned hereby confirms and agrees that:  (i) on or before February 1, 2002, the undersigned acquired or will acquire, shares of the Common Stock, par value $0.01 per share (the “Common Stock”), of Mego Financial Corp., a New York corporation having a principal place of business at 4310 Paradise Road, Las Vegas, Nevada 89109 (the “Company”) as shown on EXHIBIT “A” attached hereto and made a part hereof and (ii) by virtue of the ownership of such shares of Common Stock, the undersigned has become a Subscriber party to and is bound by all of the terms and conditions set forth in that certain Subscription Agreement dated as of December 13, 2001 among the Company and LC Acquisition.

The undersigned hereby acknowledges that it is an “accredited investor” within the meaning of Rule 501(a) of the Regulation D promulgated under the Securities Act of 1933, as amended.

Date:		DOERGE CAPITAL MANAGEMENT
		By:	/s/ David Doerge
		Its:	President
CRANBERRY VENTURES LLC		DOERGE CAPITAL COLLATERALIZED BRIDGE FUND LP
By:	/s/ David Doerge	By:	/s/ David Doerge
Its:	Member	Its:	Manager
		DAVID DOERGE IRA
		/s/ David Doerge
		By:	David Doerge

EXHIBIT “A”

PURCHASER	SHARES
Doerge Capital Management	500,000
Doerge Capital Collateralized Bridge Fund LP	176,000
David Doerge IRA	2,000
Cranberry Ventures LLC	175,000

EX-2

EXHIBIT 2

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into this 13th day of December, 2001, by and between (i) MEGO FINANCIAL CORP., a New York corporation (the “Company”), and (ii) LC ACQUISITION CORP., a California corporation and DOERGE CAPITAL MANAGEMENT (collectively, the “Holders”).

RECITALS

WHEREAS, pursuant to those certain Subscription Agreements, dated December 13, 2001 (the “Subscription Agreements”), LC Acquisition Corp. has subscribed to purchase from the Company 750,000 shares and Doerge Capital Management has subscribed to purchase from the Company 500,000 shares (collectively, the “Company Common Shares”) of the common stock, $.01 par value (the “Common Stock”), of the Company; and

WHEREAS, pursuant to that certain Securities Purchase Agreement, dated December 13, 2001, LC Acquisition Corp. has agreed to purchase from certain shareholders of the Company an aggregate of 1,269,634 shares (the “Sellers Common Shares”) of the Common Stock; and

WHEREAS, the Company desires to provide to the Holders certain registration rights with respect to the Company Common Shares and the Sellers Common Shares (the Company Common Shares and the Sellers Common Shares being referred to herein collectively as the “Restricted Shares”).

AGREEMENT

NOW, THEREFORE, in consideration of the premises and covenants set forth in the Subscription Agreement, the parties agree as follows:

1.             Registration.

(a)           Required Registration.  The Company shall prepare and file with the Securities and Exchange Commission (the “Commission”), and use its commercially reasonable efforts to cause to become effective no later than one hundred twenty (120) days from the date hereof, a registration statement on Form S-3 or, if such form is not then available for use by the Company, on such other appropriate form as is then available for use by the Company (“Registration Statement”), under the Securities Act of 1933, as amended (the “Securities Act”), covering the Restricted Shares, provided, however, that the Company shall not be required to prepare and file any such Registration Statement if the Company shall have afforded the Holders the opportunity to include all of the Restricted Shares in a Registration Statement pursuant to Section 1(b).

(b)           Incidental (Piggyback) Registration.  Subject to the limitations set forth in this Agreement, if the Company at any time prior to the effective date of the Registration Statement required by Section 1(a) hereof proposes to file on its behalf and/or on behalf of any of its security holders (“the demanding security holders”) a Registration Statement under the Securities Act on any form (other than a Registration Statement on Form S-4 or S-8 or any successor form

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for securities to be offered in a transaction of the type referred to in Rule 145 under the Securities Act or to employees of the Company pursuant to any employee benefit plan, respectively) for the general registration of securities to be sold for cash with respect to its Common Stock or any other class of equity security (as defined in Section 3(a)(11) of the Securities Exchange Act of 1934) of the Company, it will give written notice to the Holders at least 15 days before the initial filing with the Commission of such Registration Statement, which notice shall set forth the intended method of disposition of the securities proposed to be registered by the Company. The notice shall offer to include in such filing such aggregate number of shares of Restricted Shares as the Holders may request.

If any of the Holders desire to have Restricted Shares registered under this Section 1(b), they shall advise the Company in writing within 10 days after the date of receipt of such offer from the Company, setting forth the amount of such Restricted Shares for which registration is requested. The Company shall thereupon include in such filing the number of shares of Restricted Shares for which registration is so requested, subject to the following. In the event that the proposed registration by the Company is, in whole or in part, an underwritten public offering of securities of the Company, the Company shall not be required to include any of the Restricted Shares in such underwritten offering unless the Holders agree to accept the offering on the same terms and conditions as the shares of Common Stock, if any, otherwise being sold through underwriters under such registration; provided, however, that: (i) if the managing underwriter determines and advises the Company that the inclusion of all Restricted Shares proposed to be included by the Holders in the underwritten public offering and other issued and outstanding shares of Common Stock proposed to be included therein by the persons other than the Holders, the Company and any demanding security holder (the “Other Shares”) would jeopardize the success of the Company’s offering, then the Company shall be required to include in the offering (in addition to the number of shares to be sold by the Company and any demanding security holder) only that number of Restricted Shares that the managing underwriter believes will not jeopardize the success of the Company’s offering and the number of Restricted Shares and Other Shares included in such underwritten public offering shall be reduced pro rata based upon the number of shares of Restricted Shares and Other Shares requested by the holders thereof to be registered in such underwritten public offering; and (ii) in each case all shares of Common Stock owned by the Holders which are not included in the underwritten public offering shall be withheld from the market by the Holders for a period, not to exceed one hundred twenty (120) calendar days, which the managing underwriter reasonably determines as necessary in order to effect the underwritten public offering. In the event the Company chooses a registration form which limits the size of the offering either in terms of the number of shares or dollar amount, the Company shall not be required to include in the offering (in addition to the number of shares to be sold by the Company) Restricted Shares which would exceed such limits, and the number of Restricted Shares and Other Shares included in such offering shall be reduced pro rata based upon the number of Restricted Shares and Other Shares requested by the holders thereof to be registered in such offering.

2.             Registration Procedures.  In connection with the filing of a Registration Statement pursuant to Section 1 hereof, the Company shall:

(a)           prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to

2

keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of the Restricted Shares until the earlier of such time as (i) all of the Restricted Shares covered by such Registration Statement have been disposed of by the Holders or (ii) the Restricted Shares become eligible for sale under Rule 144(k) under the Securities Act; provided, however, that the Company shall not be required to maintain the effectiveness of such Registration Statement for more than one year with respect to Permitted Transferees (as defined below) that own less than 5% of the outstanding shares of Common Stock of the Company;

(b)           furnish to the Holders such number of copies of a summary prospectus or other prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents, as the Holders may reasonably request;

(c)           use its commercially reasonable efforts to register or qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions within the United States as the Holders shall reasonably request (provided, however, the Company shall not be obligated to qualify as a foreign corporation to do business under the laws of any jurisdiction in which it is not then qualified or to file any general consent to service of process), and do such other reasonable acts and things as may be required of it to enable the Holders to consummate the disposition in such jurisdiction of the securities covered by such Registration Statement; and

(d)           promptly notify in writing the Holders of the happening of any event, during the period of distribution, as a result of which the Registration Statement includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing (in which case, the Company shall promptly provide the Holders with revised or supplemental prospectuses and if so requested by the Company in writing, the Holders shall promptly take action to cease making any offers of the Restricted Shares until receipt and distribution of such revised or supplemental prospectuses).

3.             Blackout Periods.

(a)           With respect to any Registration Statement required to be filed pursuant to this Agreement, if the Company shall furnish to the Holders a certified resolution of the Board of Directors stating that in the Board of Directors’ good faith judgment it would (because of the existence of, or in anticipation of, any acquisition or financing, merger, sale of assets, recapitalization or other similar corporate activity, or the unavailability for reasons beyond the Company’s control of any required audited financial statements, or any other event or condition of similar significance to the Company) be materially disadvantageous (a “Disadvantageous Condition”) to the Company or its shareholders for such a Registration Statement to be maintained effective, or to be filed and become effective, and setting forth the general reasons for such judgment (unless such reasons relate to information which is not then publicly available), the Company shall be entitled to cause such Registration Statement to be withdrawn and the effectiveness of such Registration Statement terminated, or, in the event no Registration Statement has yet been filed, shall be entitled not to file any such Registration Statement, until such Disadvantageous Condition no longer exists (notice of which the Company shall promptly

3

deliver to the Holders); provided, however, that the Company may only declare one (1) Disadvantageous Condition per fiscal year of the Company and any such Disadvantageous Condition may only extend for a period of up to 45 days. Upon receipt of any such notice of a Disadvantageous Condition, the Holders will forthwith discontinue use of the disclosure document contained in such Registration Statement and, if so directed by the Company, each of the Holders will deliver to the Company all copies, other than permanent file copies then in such Holder’s possession, of the disclosure document then covering such Restricted Securities current at the time of receipt of such notice, and, in the event no Registration Statement has yet been filed, all drafts of the disclosure document covering such Restricted Shares. In the event that the Company shall give any notice of a Disadvantageous Condition, the Company shall at such time as it in good faith deems appropriate file a new Registration Statement covering the Restricted Shares that were covered by such withdrawn Registration Statement, and such Registration Statement shall be maintained effective for such time as may be necessary so that the period of effectiveness of such new Registration Statement, when aggregated with the period during which such initial Registration Statement was effective, shall be such time as may be otherwise required by this Agreement.

(b)           Notwithstanding anything to the contrary set forth herein, at any time after the Registration Statement has been declared effective, the Company may delay the disclosure of material non-public information concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Company and its counsel, in the best interest of the Company (a “Blackout Period”); provided, that the Company shall promptly (i) notify the Holders in writing of the existence of material non-public information giving rise to a Blackout Period and the date on which the Blackout Period will begin, and (ii) notify the Holders in writing in advance of, or on the same date on which, the Blackout Period ends; and, provided further, that during any consecutive 365 day period, there shall be only two Blackout Periods, such Blackout Periods in total not to exceed 90 days. For purposes of determining the length of a Blackout Period above, the Blackout Period shall begin on and include the date the Holders receive the notice referred to in clause (i) and shall end on and include the date specified as the Blackout Period ending date in the notice referred to in clause (ii).

4.             Expenses.  All expenses incurred in complying with this Agreement, including, without limitation, all registration and filing fees (including all expenses incident to filing with the NASD), printing expenses, fees and disbursements of counsel for the Company, expenses of any special audits incident to or required by any such registration and expenses (including attorneys’ fees) of complying with the securities or blue sky laws of any jurisdictions pursuant to Section 2(c), except to the extent required to be paid by participating selling securityholders by state securities or blue sky laws, shall be paid by the Company, except that the Company shall not be liable for any fees, discounts or commissions to any underwriter or broker or any fees or disbursements of counsel for the Holders in respect of the securities sold by the Holders.

5.             Indemnification.

(a)           Indemnification by Company.  The Company shall indemnify and hold harmless the Holders, each underwriter of the Restricted Shares, if any, and each other person, if any, who controls any of the foregoing persons, within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which any of the foregoing persons may

4

become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement of a material fact contained in the Registration Statement under which such Restricted Shares were registered under the Securities Act, any final prospectus contained therein, or any amendment or supplement thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or, with respect to any final prospectus, necessary to make the statements therein in light of the circumstances under which they were made, not misleading; and shall reimburse the Holders, such underwriter and each such controlling person for any legal or any other expenses reasonably incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be obligated to so indemnify the Holders, any such underwriter or any such controlling person insofar as such losses, claims, damages or liabilities arise out of or are based upon any untrue statement or alleged untrue statement or omission or alleged omission made in said Registration Statement, said final prospectus or said amendment or supplement in reliance upon and in conformity with information furnished in writing by the Holders or any such underwriter for use in the preparation thereof.

(b)           Indemnification by Holders.  The Holders shall, jointly and severally, indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 5(a) for the indemnification of the Holders by the Company) the Company, each director of the Company, each officer of the Company who shall sign such Registration Statement and any person who controls the Company within the meaning of the Securities Act, with respect to any untrue statement or omission from such Registration Statement or final prospectus contained therein or any amendment or supplement thereto, if such untrue statement or omission was (i) made in reliance upon and in conformity with information furnished to the Company by the Holders for use in the preparation of such Registration Statement, final prospectus or amendment or supplement or (ii) contained in any Registration Statement which was utilized by the Holders or any controlling person or affiliate of the Holders after the Holders were notified, in accordance with Section 2(d) hereof, that such Registration Statement contained an untrue statement of a material fact or omitted to state any material fact.

(c)           Indemnification Procedures.  Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in this Section 5, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party, give written notice to the latter of such claim and/or the commencement of such action. In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate in and assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall be responsible for anylegal or other expenses subsequently incurred by the latter in connection with the defense thereof, provided that if any indemnified party shall have reasonably concluded that there may be one or more legal defenses available to such indemnified party which conflict in any material respect with those available to the indemnifying party, or that such claim or litigation involvesor could have an effect upon matters beyond the scope of the indemnity agreement provided in this Section 5, such indemnifying party shall not have the right to assume the defense of such action

5

on behalf of such indemnified party and such indemnifying party shall reimburse such indemnified party and any person controlling such indemnified party for that portion of the fees and expenses of any counsel retained by the indemnified party which are reasonably related to the matters covered by the indemnity agreement provided in this Section 5. The indemnifying party shall not make any settlement of any claims indemnified against thereunder without the written consent of the indemnified party or parties, which consent shall not be unreasonably withheld.

6.             Certain Limitations on Registration Rights.  Notwithstanding the other provisions of this Agreement, the Company shall not be obligated to register the Restricted Shares of the Holders if, in the opinion of counsel to the Company, the sale or other disposition of each of the Holder’s Restricted Shares may be effected without registering such Restricted Shares under the Securities Act. The Company’s obligations under Section 1 are also expressly conditioned upon the Holders furnishing to the Company in writing such information concerning the Holders and the controlling persons of each of the Holders and the terms of each of the Holder’s proposed offering of Restricted Shares as the Company shall reasonably request for inclusion in the Registration Statement.

7.             Miscellaneous.

(a)           Duty to Cooperate.  The Holders and each Permitted Transferee by its acceptance of the Restricted Shares agree to cooperate with the Company in connection with the preparation and filing of the Registration Statement hereunder, including furnishing to the Company such information regarding the Holders or Permitted Transferee, the Restricted Shares held by the Holders or Permitted Transferee and the intended method of disposition of such Restricted Shares as shall be reasonably required to effect the registration of such Restricted Shares and executing such documents in connection with such registration as the Company may reasonably request, unless the Holders or Permitted Transferee have notified the Company in writing of its election to exclude all of its Restricted Shares from the Registration Statement.

(b)           Notice Generally.  Any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to the provisions of this Agreement shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged, delivered by reputable overnight courier, telecopied and confirmed separately in writing by a copy mailed as follows or sent by registered or certified mail, return receipt requested, postage prepaid, to the addresses set forth in the Subscription Agreement.

(c)           Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto; provided, however, that the Holders’ rights hereunder may not be transferred without the prior written consent of the Company, except with respect to the preferred shareholders of LC Acquisition Corp. (the “Permitted Transferees”) to whom LC Acquisition Corp. may transfer its rights hereunder so long as such Permitted Transferees acknowledge that the Restricted Shares have not been registered under the Act and are subject to restrictions on transfer under the Act and Other Securities Laws and agree to be bound by all provisions of this Agreement including the obligations to provide certain information required to be disclosed about such Permitted Transferees in any prospectus, registration statement or supplement or amendment thereto filed

6

or provided in accordance with this Agreement and, to the extent such Permitted Transferees (i) received Company Common Shares that were issued pursuant to the Subscription Agreement, or (ii) beneficially own (within the meaning of Section 13(d) of the Exchange Act), directly or indirectly, together with all of its Affiliates, more than 5% of the outstanding securities of the Company, agree to be bound by all provisions of the Subscription Agreement as though such Permitted Transferees were the Subscriber thereunder.

(d)           Governing Law.  This Agreement shall be governed by the laws of the State of New York, without regard to the provisions thereof relating to conflict of laws.

(e)           Severability.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provisions 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.

(f)            Entire Agreement.  This Agreement, together with the Subscription Agreement, is intended by the parties as a final expression of their agreement and intended to be a complete exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof.

(g)           Counterparts.  This Agreement may be executed in separate counterparts, each of which shall collectively and separately, constitute one agreement.

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IN WITNESS WHEREOF, the Company and Holders have executed this Agreement as of the date first above written.

MEGO FINANCIAL CORP.
By:	/s/ Jon A. Joseph
Name:	Jon A. Joseph
Title:	Vice President and General Counsel
LC ACQUISITION CORP.
By:	/s/ Floyd W. Kephart
Name:	Floyd W. Kephart
Title:	President
DOERGE CAPITAL MANAGEMENT
By:	/s/ David Doerge
Name:	David Doerge
Title:	Principal

EX-3

EXHIBIT 3

Promissory Note

Principal Amount: $1,000,000 Date of Note:  September 12, 2002

FOR VALUE RECEIVED, MEGO Financial Corp., a New York corporation d/b/a Leisure Industries Corporation of America, Inc. (the “Borrower”) (there is only one borrower) hereby promise to pay to the order of Charles K. Stewart (“Holder”), in lawful money of the United Stales of America, the principal amount of One Million and 00/100 DOLLARS ($1,000,000) (“Principal Amount”), or so much as may be outstanding, together with interest on said principal amount outstanding from the date hereof until this Note is paid in full at such place as the holder hereof may from time to time designate.

1.             MATURITY: The outstanding principal balance of this Note, and all accrual interest @ 7.5% and other sums due hereunder, if not sooner paid, shall be due and payable in full 30 days from the date of this Note (“Maturity Date”).

2.             EVENTS OF DEFAULT: If any of the following events takes place before the Maturity Date (each, an “Event of Default”), Holder at its option may declare all principal and accrued and unpaid interest thereon and all other amounts payable under this Promissory Note immediately due and payable; provided, however, that this Promissory Note shall automatically become due and payable without any declaration in the case of an Event of Default specified in clause 3 or 5, below:

(1)The Borrower fails to make payment of the full amount due under this Promissory Note on demand at the Maturity Date; or

(2)A receiver, liquidator or trustee is appointed by a court order (i) of the Borrower or (ii) for any part of the Borrower’s assets or properties; or

(3)The Borrower is adjudicated bankrupt or insolvent; or

(4)Any of the Borrower’s property is sequestered by or in consequence of a court order and such order remains in effect for more than 30 days; or

(5)The Borrower files a petition in voluntary bankruptcy or requests reorganization under any provision of any bankruptcy, reorganization or insolvency law or consents to the filing of any petition against it under such law; or

(6)Any petition against the Borrower is filed under bankruptcy, receivership or insolvency law; or

(7)The Borrower makes a formal or informal general assignment for the benefit of its creditors, or admits in writing its inability to pay debts generally when they

become due, or consents to the appointment of a receiver, liquidator or trustee of the Borrower or for all or any part of its property; or

(8)An attachment or execution is levied against any part the Borrower’s assets that is not released within 30 days; or

(9)The Borrower dissolves, liquidates or ceases business activity, or transfers any major portion of its asset other than in the ordinary course of business; or

(10)The Borrower breaches any covenant or agreement on its part contained in this Promissory Note;

(11)There exists any material inaccuracy or untruthfulness of any representation or warranty of the Borrower set forth in this Promissory Note; or

(12)The Borrower shall default under any promissory note, credit agreement, loan agreement, conditional sales contract, guarantee, lease, indenture, bond, debenture or other material obligation to which it is a party whatsoever and a party thereto or a holder thereof is entitled to accelerate the obligations of the Borrower.

3.             LAWFUL RATE OF INTEREST: It is expressly stipulated and agreed to be the intent of The Borrower and Holder at all times to comply with applicable state law or applicable United States federal law (to the extent that it permits Holder to contract for, charge, or receive a greater amount of interest that under state law) and that this section shall control every other covenant and agreement in this Note.  If the applicable law (state or federal) is ever judicially interpreted so as to render usurious any amount called for under this Note or received with respect to the indebtedness evidenced by this Note, or if Holder’s exercise of the option to accelerate the maturity of this Note, results in The Borrower having paid any interest in excess of that permitted by applicable law, then it is The Borrower’s and Holder’s express intent that all excess amounts theretofore collected by Holder be credited on the principal balance of this Note (or, if this Note has been or would thereby be paid in full, refunded to The Borrower), and the provisions of this Note immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder.

4.             PREPAYMENT: The Borrower may prepay this Note at any time, in whole or in part.

5.             SEVERABLE PROVISION: Every provision of this Note is intended to be severable.  If any term or provision hereof is declared by a court of competent jurisdiction to be illegal, invalid or unenforceable for any reason whatsoever, such illegality, invalidity or unenforceability shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable.

6.             TIME OF ESSENCE: Time is of the essence of this Note and the performance of each of the covenants and agreements contained herein.

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7.             GOVERNING LAW: This note shall be governed by and construed in accordance with the laws of the State of Illinois.  In the event of any dispute regarding the subject matter of this Note, such dispute shall be submitted to arbitration before a single arbitrator in the city of Chicago in accordance with the rules of the American Arbitration Association.  Any decision or award shall be final and binding upon the parties hereto.  All legal fees, arbitration fees, filing fees, collection fees and expenses shall be paid to the prevailing party by the losing party.

8.             COLLATERAL: Lender shall have a Senior Secured Interest in all the Assets of the Company identified on Schedule A.  Security interest shall evidenced by UCC filing in the State of Illinois.

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and delivered as of the date first above written.

MEGO FINANCIAL CORPORATION,
d/b/a LEISURE INDUSTRIES
CORPORATION OF AMERICA, INC.
By:	/s/ Floyd W. Kephart
Its:	Chairman and CEO

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Exhibit A - Page 4

EX-4

EXHIBIT 4

AMENDMENT TO PROMISSORY NOTE

THIS AMENDMENT TO PROMISSORY NOTE (“Amendment”) relates to the loan evidenced by a Promissory Note (“Note”) dated on or about September 12, 2002, executed by Mego Financial Corp., a New York corporation doing business as Leisure Industries Corporation (“Borrower”), and Charles K. Stewart (“Holder”) in the original principal amount of ONE MILLION AND 00/100 DOLLARS ($1,000,000.00) (the “Note”).  The current outstanding principal of the note is Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000,00).  The Note is secured and is due and payable December 31, 2002 (the “Maturity Date”).

Borrower has requested Holder to modify the terms of the Note in the following manner:

1.The Maturity Date of the Note is modified from December 31, 2002 to March 31, 2003.

2.The following shall be added to the end of Section 8 of the Note as additional Collateral under the Note:

“COLLATERAL: To secure payment of this Note, Borrower hereby grants holder a security interest in and pledges to Holder all of Borrower’s interest in and to the collateral described in that certain Custody Agreement between Troon & Co., Leisure Homes Corporation and Wells Fargo Bank Minnesota.  Borrower consents and agrees that Holder may file one or more financing statements as necessary to evidence or perfect the security interest granted herein.”

3.Section 9 shall be added to the Note as follows:

“Holder shall have the right to convert the principal balance of the Note plus any accrued interest into common stock of the Borrower at a conversion price of $1.10 per share.  If Holder elects to convert the Note, in whole or in part, Holder shall be entitled to receive warrants to purchase common stock of the Borrower equal to fifty percent (50%) of the amount of the converted amount of principal and accrued interest at a conversion price of $1.10 per share.”

This Amendment is a revision of the Note only and not a novation.  Except as provided herein, all terms and conditions of the Note shall retain in full force and effect.  All capitalized terms not defined herein shall have the meanings ascribed to them in the Note.

Dated this 31st day of December, 2002.

“BORROWER”		“HOLDER”
Mego Financial Corp.,
By:	/s/ Floyd W. Kephart	/s/ Charles K. Stewart
Floyd W. Kephart		Charles K. Stewart
Its:  Chairman and CEO