Exhibit 10.75

 

EXECUTION COPY

 

STOCK PURCHASE AGREEMENT

 

dated as of January 22, 2013,

 

among

 

FIRSTCITY BUSINESS LENDING CORPORATION

 

as the Seller

 

and

 

CS ABL HOLDINGS, LLC

 

as the Purchaser

 

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Table of Contents

 

 

Page

 

 

ARTICLE I Defined Terms

2

Section 1.01. Definitions

2

 

 

ARTICLE II The Transaction

18

Section 2.01. Purchase and Sale of the Purchased Interests

18

Section 2.02. Calculation of the Initial Purchase Price

21

Section 2.03. Post-Closing Adjustment to Purchase Price

21

Section 2.04. Deliveries

24

 

 

ARTICLE III The Closing; Conditions to Closing

25

Section 3.01. The Closing

25

Section 3.02. Conditions Precedent to the Obligations of the Seller

25

Section 3.03. Conditions Precedent to the Obligations of the Purchaser

26

 

 

ARTICLE IV Representations and Warranties of the Seller About the Company

29

Section 4.01. Existence and Power

29

Section 4.02. Authorization; Binding Effect

30

Section 4.03. Contravention

30

Section 4.04. Consents

30

Section 4.05. Capitalization

30

Section 4.06. Financial Statements

31

Section 4.07. Taxes

31

Section 4.08. Litigation

32

Section 4.09. Permits; Compliance with Laws

32

Section 4.10. Absence of Certain Changes or Events

32

Section 4.11. Assets; Property

33

Section 4.12. Material Contracts

34

Section 4.13. Portfolio Loans

37

Section 4.14. Intellectual Property

40

Section 4.15. Insurance

42

Section 4.16. Books and Records

42

Section 4.17. Environmental Matters

42

Section 4.18. Employees; ERISA

43

Section 4.19. Certain Business Relationships with the Company

44

Section 4.20. Undisclosed Liabilities

44

Section 4.21. Subsidiaries

44

Section 4.22. Pending Loans

44

Section 4.23. Non-Recourse Assets

45

Section 4.24 Disclosure

45

 

 

ARTICLE V Representations and Warranties of Seller About Seller

45

Section 5.01. Existence and Power

45

 

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Section 5.02. Authorization; Binding Effect

45

Section 5.03. Contravention

45

Section 5.04. Consents

46

Section 5.05. Litigation

46

Section 5.06. Title to Securities

46

Section 5.07. Sophisticated Seller; Adequate Information; Securities Laws

46

Section 5.08. Transactions With the Company

47

Section 5.09. Brokers, Finders

47

Section 5.10. Solvency

47

Section 5.11. Seller Guarantee

47

 

 

ARTICLE VI Representations and Warranties of the Purchaser

47

Section 6.01. Existence and Power

47

Section 6.02. Authorization; Binding Effect

48

Section 6.03. Contravention

48

Section 6.04. Consents

48

Section 6.05. Litigation

48

Section 6.06. Investment Representations

49

Section 6.07. Brokers, Finders

49

Section 6.08. Disclosure

50

Section 6.09. Purchaser Guarantee

50

 

 

ARTICLE VII Covenants of the Seller and Purchaser

50

Section 7.01. Conduct of Business Pending Closing

50

Section 7.02. Access to Information; Cooperation

51

Section 7.03. Disclosure Schedules

52

Section 7.04. Reporting Requirements

53

Section 7.05. No Solicitation of Purchase or Sale

54

Section 7.06. Public Announcements; Confidentiality

55

Section 7.07. Non-Solicitation

56

Section 7.08. Seller Guarantee

56

Section 7.09. Purchaser Guarantee

57

Section 7.10. Instructions to Escrow Agent

57

 

 

ARTICLE VIII Indemnification

57

Section 8.01. Indemnification

57

Section 8.02. Survival of Indemnification

59

Section 8.03. Certain Limitations; Allocation of Liability

59

Section 8.04. Fraud Exception

60

 

 

ARTICLE IX Termination and Expenses

61

Section 9.01. Termination

61

Section 9.02. Effect of Termination

62

Section 9.03. Treatment of Deposit

62

 

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ARTICLE X Miscellaneous

63

Section 10.01. Notices

63

Section 10.02. Counterparts

63

Section 10.03. Amendment of Agreement

63

Section 10.04. Successors and Assigns; Assignability

63

Section 10.05. Governing Law

63

Section 10.06. Integration

63

Section 10.07. Fees and Expenses

63

Section 10.08. Severability

64

Section 10.09. Further Assurances

64

Section 10.10. No Third-Party Rights

64

Section 10.11. Submission to Jurisdiction

64

Section 10.12. Waiver of Jury Trial

64

Section 10.13. No Waiver; Remedies

65

Section 10.14. Interpretation

65

Section 10.15. Ambiguities

65

Section 10.16. Incorporation of Schedules and Exhibits

65

 

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Exhibits

 

 

Exhibit A

Form of Purchaser Officer’s Certificate

 

 

Exhibit B

Form of Key Officer Employment Agreement

 

 

Exhibit C

Form of Seller Officer’s Certificate

 

 

Exhibit D

Form of Secretary’s Certificate

 

 

Exhibit E

Transition Servicing Agreement

 

 

Exhibit F

Escrow Agreement

 

 

Exhibit G

Wells Fargo Term Sheet

 

 

Exhibit H

Portfolio Loan Schedule

 

 

Exhibit I

Pioneer Loan Acquisition Procedure

 

 

Schedules

 

 

4.04

Seller Required Consents

 

 

4.05(c)

No Other Agreements

 

 

4.08

Litigation

 

 

4.09(a)

Permits

 

 

4.10

Absence of Certain Changes or Events

 

 

4.12(a)

Material Contracts (Datasite)

 

 

4.12(c)(ii)

Material Breach or Default Under Material Contracts

 

 

4.12(c)(iii)

Forfeiture or Frustration of Material Contracts

 

 

4.12(d)

Liens

 

 

4.13(a)

Outstanding Principal

 

 

4.13(g)

Default Under Portfolio Credit Documents

 

 

4.13(h)(i)

Self Insurance of Portfolio Loan Collateral

 

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4.13(h)(ii)

Insurance of Portfolio Loan Collateral

 

 

4.14(a)

Intellectual Property

 

 

4.18(a)

Employees

 

 

4.18(c)

Benefit Plans

 

 

4.19(a)

Certain Transactions of Agreements

 

 

4.19(b)

No Other Related Party Transactions

 

 

4.21

Subsidiaries

 

 

4.22

Pending Loans

 

 

5.08

Transactions With the Company

 

 

6.04

Purchaser Required Consents

 

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STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of January 22, 2013, among
FirstCity Business Lending Corporation, a Texas corporation (“Seller”); and CS
ABL Holdings, LLC, a Delaware limited liability company (the “Purchaser”).  Each
of the Seller and the Purchaser may hereinafter be referred to as a “Party” and
collectively as the “Parties”.

 

RECITALS

 

A.                                   As of the date of this Agreement, the
Seller owns 100,000 shares of Common Stock and 800,000 shares of Preferred Stock
(collectively, the “Shares”) of American Business Lending, Inc., a Texas
corporation (the “Company”), which represent one hundred percent (100%) of the
issued and outstanding capital stock of the Company.  Seller is a direct
wholly-owned subsidiary of FirstCity Commercial Corporation, a Texas corporation
(“FCC”), which is a direct wholly-owned subsidiary of FLBG Corporation, a Texas
corporation (“FLBG”), which is a direct wholly-owned subsidiary of FirstCity
Financial Corporation, a Delaware corporation (“FirstCity”);

 

B.                                     Purchaser is a direct wholly-owned
subsidiary of CapitalSpring Finance Company, LLC, a Delaware limited liability
company (“CapitalSpring” or the “Purchaser Guarantor”);

 

C.                                     Concurrently with the execution and
delivery of this Agreement, and as a condition and inducement to the Purchaser’s
willingness to enter into this Agreement, FirstCity (the “Seller Guarantor”) is
entering into a guarantee in favor of the Purchaser, dated as of the date hereof
(the “FirstCity Guarantee”), with respect to certain obligations of Seller under
this Agreement;

 

D.                                    Concurrently with the execution and
delivery of this Agreement, and as a condition and inducement to the Seller’s
willingness to enter into this Agreement, the Purchaser Guarantor is entering
into a guarantee in favor of the Seller, dated as of the date hereof (the
“Purchaser Guarantee”), with respect to certain obligations of Purchaser under
this Agreement; and

 

E.                                      On the terms and subject to the
conditions and for the consideration set forth in this Agreement, the Purchaser
desires to acquire from the Seller, and the Seller desire to sell to the
Purchaser, all of Seller’s right, title and interest in and to the Shares
(collectively, the “Purchased Interests”).  As of the Closing (as defined
below), the Purchased Interests shall, in aggregate, represent one hundred
percent (100%) of the outstanding capital stock in the Company, and Purchaser
shall be the sole equity owner thereof.

 

AGREEMENT

 

In consideration of the premises and the mutual covenants and the agreements
herein set forth, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, hereby agree as follows:

 

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ARTICLE I

 

Defined Terms

 

Section 1.01.  Definitions.  As used in this Agreement, the following terms have
the meanings stated:

 

“Action” means an action, suit, litigation, arbitration, investigation,
complaint, contest, hearing, inquiry, inquest, audit, examination or other
proceeding, whether civil, criminal, administrative, investigative or appellate,
in law or equity before any arbitrator or Governmental Body.

 

“Affiliate” of a Person means any other Person (a) that directly or indirectly
Controls, is Controlled by or is under common Control with, the Person or any of
its Subsidiaries, (b) that directly or indirectly beneficially owns or holds 10%
or more of any class of Equity Security or other similar interests of the Person
or any of its Subsidiaries or (c) 10% or more of the Equity Securities of which
is directly or indirectly beneficially owned or held by the Person or any of its
Subsidiaries.  With respect to a natural person, such natural person’s
Affiliates shall also include such natural person’s spouse, and their siblings,
parents and lineal descendants.

 

“ASBA” shall mean AMRESCO SBA Holdings, Inc., a Delaware corporation, and its
successors and assigns.

 

“ASBA Asset Purchase Agreement” shall mean the Asset Purchase Agreement dated as
of June 30, 2006, by and among NCS I, LLC, a Delaware limited liability company,
and ASBA, as “sellers,” Company, as the “purchaser,” Seller, and FirstCity, and
including all amendments, modifications and supplements hereto and any
appendices, exhibits or schedules to any of the foregoing, pursuant to which
Borrower acquired the SBA 7(a) Loan lending authority of ASBA and the Serviced
ASBA Assets.

 

“ASBA Note” shall mean the Note dated November 30, 2006, executed by Company in
favor of ASBA in the original principal amount of $4,197,926, to pay part of the
purchase price under the ASBA Asset Purchase Agreement and secured solely by the
Serviced ASBA Assets and as to which recourse against Company is limited to
proceeds of the serviced ASBA Assets as provided in such Note and the ASBA Asset
Purchase Agreement.

 

“ASBA Security Agreement” shall mean the Security Agreement dated November 30,
2006, executed by Company in favor of ASBA to grant to ASBA a security interest
in the Serviced ASBA Assets and related collateral to secure the obligations of
Company under the ASBA Asset Purchase Agreement, the ASBA Note and the ASBA
Security Agreement.

 

“Asset Purchase Documents” shall mean the ASBA Asset Purchase Agreement, the
ASBA Note, and all other agreements, instruments, certificates, legal opinions,
and other documents required to be executed or delivered in connection with the

 

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consummation of the transactions contemplated by the ASBA Asset Purchase
Agreement.

 

“Assets” has the meaning set forth in Section 4.11.

 

“Benefit Plan” means any employee pension benefit plan covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code,
and  any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, restricted stock,
stock appreciation rights, phantom stock, retirement, supplemental retirement,
vacation, severance, termination, disability, death benefit, hospitalization,
retiree medical or other plan, program, insurance, arrangement, agreement,
commitment or understanding (whether or not legally binding) providing benefits
to any current or former employee, officer, director or shareholder of the
Company.

 

“Business” means the business and operations of the Company as conducted by the
Company on the date of this Agreement.

 

“Business Day” means any day that is not a Saturday, Sunday or a day on which
banks are required or authorized by Law to be closed in New York or Texas.

 

“CapitalSpring” has the meaning set forth in the Recitals.

 

“Charges” means all Taxes, levies, assessments, charges, Liens, claims or
encumbrances upon or relating to (a) the Assets, (b) the employees, payroll,
income or gross receipts of Company, (c) the ownership or use of any of the
Assets, or (d) and any other aspect of Company’s business.

 

“Cleanup” means all actions required to (a) cleanup, remove, treat or otherwise
remediate Hazardous Materials present in the indoor or outdoor environment,
(b) prevent, pursuant to Law, the Release of Hazardous Materials so that they do
not enter the environment, migrate, endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment, (c) perform pre-remedial
studies and investigations and post-remedial monitoring and care, or (d) respond
to any government directives, orders, requests for information or other
documents in any way relating to cleanup, removal, treatment or remediation or
potential cleanup, removal, treatment or remediation of Hazardous Materials in
the indoor or outdoor environment.

 

“Closing” has the meaning set forth in Section 3.01.

 

“Closing Balance Sheet” has the meaning set forth in Section 2.03(a).

 

“Closing Date” has the meaning set forth in Section 3.01.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

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“Collateral” means the inventory, Equipment, Fixtures, accounts, Real Property,
general intangibles (including franchises and licenses), Securities, vehicles
and other property in which a security interest or Lien is retained or granted
to a lender pursuant to a Portfolio Credit Document, and all cash and non-cash
proceeds thereof, but does not include the Non-Recourse Assets.

 

“Common Stock” means common stock of the Company, par value $0.001.

 

“Company” has the meaning set forth in the heading of this Agreement.

 

“Company Debt” means all Debt of the Company as of the Closing Date, excluding
the Non-Recourse Debt.

 

“Company Intellectual Property” has the meaning set forth in Section 4.14(a).

 

“Company Stock” has the meaning set forth in Section 4.05(a).

 

“Competing Transaction” means any (a) merger, consolidation, recapitalization,
reorganization or other business combination directly involving the Company,
(b) acquisition in any manner, directly or indirectly, of an interest in any
Securities of the Company, or (c) acquisition in any manner, directly or
indirectly, of all or a substantial portion of the Assets, other than the
Transactions.

 

“Confidential Information” means all information, data, “know-how”, documents,
reports, agreements, interpretations, plans, studies, forecasts and records
(whether in oral or written form, electronically stored or otherwise) containing
or otherwise reflecting information concerning the Company, the Business, the
Assets or the Transactions, including, without limitation (a) financial
information, books and records, cost information and Contracts, (b) marketing
plans and strategies, customer, client, vendor and supplier Contracts,
information relating to, and lists of, past, current and prospective customers,
suppliers, vendors, business contacts and clients, (c) operating procedures,
techniques, systems, processes and methods, all Company Intellectual Property,
product information, including research and development and proposed products
and services, (d) employee records and information, and (e) other commercial
“know-how”, trade secrets and information not available to the public generally;
provided, however, that “Confidential Information” does not include information
which (i) is in the public domain at the time other than as a result of any
breach of Section 7.06(b) by the Seller or its Representatives after the date of
this Agreement other than such disclosures as occur in the ordinary course of
business of the Company, (ii) was known to the Seller or its Representatives
prior to the acquisition by the Seller of the Company, (iii) which becomes
public through no fault of the Company, the Seller or any other Person, or
(iv) which is information possessed by FirstCity and its Affiliates (including,
without limitation, FirstCity Servicing) that is related to their business
operations or to the acquisition of distressed assets and is not specifically
related to the Business or the Company.

 

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“Consents” means any approval, consent, authorization or order of, notice to or
registration or filing with, or any other action by, any Governmental Body or
other Person.

 

“Contract” means any agreement, contract, license, lease, instrument, document,
note, bond, mortgage, indenture, guarantee, purchase order, letter of credit,
undertaking, obligation, commitment, or other legally binding commitment or
obligation, whether or not written, each as amended or modified from time to
time.

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by Contract or otherwise.

 

“Controlled Group” for any Person at any date means all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common Control which, together with the Person, are treated as a single
employer under Sections 414(b) or 414(c) of the Code.

 

“Datasite” means the information hosted in the folder “CapitalSpring” on the
FCFC SharePoint Extranet Portal located at https://sxp.fcfc.com.

 

“Datasite Download Date” has the meaning set forth in Section 4.12(a).

 

“Debt” of a Person at any date means, without duplication (a) all obligations of
the Person (i) for borrowed money, (ii) evidenced by bonds, debentures, notes or
other similar instruments, (iii) conditional sale, title retention or other
similar agreements or arrangements creating an obligation with respect to the
payment of the deferred purchase price of property or services, (iv) as lessee
under capitalized leases, (v) under letters of credit or guarantees issued for
the account of the Person and (vi) arising under acceptance facilities, (b) all
obligations of the type referred to in clause (a) above of others guaranteed by
the Person, (c) all obligations of the type referred to in clause (a) above of
others secured by a Lien on any asset of the Person whether or not such
obligation is assumed by the Person, (d) all obligations of such Person with
respect to interest rate, currency and total return swaps, hedges and similar
arrangements, and (e) all obligations of such Person with respect to the
aggregate Unfunded Vested Liabilities under each Benefit Plan of the Person.

 

“Debtor” shall mean a borrower under any Portfolio Loan and any Persons
obligated or liable (other than the SBA), whether as guarantor, endorser, surety
or otherwise, on or with respect to any Portfolio Loan and their successors and
assigns, including any debtor-in-possession or trustee-in-bankruptcy.

 

“Deposit” means a good faith deposit, in the amount of Two Hundred Fifty
Thousand Dollars ($250,000.00), to be delivered by the Purchaser to the Escrow
Agent upon the execution and delivery of this Agreement.

 

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“Dollars” and “$” refer to United States dollars and other lawful currency of
the United States of America from time to time in effect.

 

“Due Diligence Period” has the meaning set forth in Section 2.01(b).

 

“Environmental Laws” means all federal, state, local and foreign Laws  relating
to pollution, human health, safety, industrial hygiene or protection of the
environment, including, without limitation, laws relating to Releases or
threatened Releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
disposal, Cleanup, transport or handling of Hazardous Materials and all Laws
with regard to record keeping, notification, disclosure and reporting
requirements respecting Hazardous Materials, and all similar Laws.

 

“Equipment” means all tangible personal property of a Person, including, without
limitation, all equipment and machinery in all of its forms, wherever located,
now or hereafter existing.

 

“Equity Securities” of a Person means (a) shares of capital stock, limited
liability company membership interests, partnership interests, joint venture
interests, or other equity securities, stock or shares of any kind of such
Person, including the Purchased  Interests (b) securities directly or indirectly
convertible into or exercisable or exchangeable for any of the securities
referred to in (a) above, (c) rights, warrants, options, calls, subscriptions or
commitments of any kind or character relating to, or entitling any Person
directly or indirectly to purchase or otherwise acquire, any of the securities
or rights referred to in (a) or (b) above, and (d) equity equivalents, interests
in the ownership or earnings of, or equity appreciation, phantom stock or other
similar rights of, or with respect to, such Person.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the related regulations and published interpretations.

 

“Escrow Agent” means the party named as the Escrow Agent under the Escrow
Agreement.

 

“Escrow Agreement” means the Escrow Agreement, dated on or about the date
hereof, among the Seller, the Purchaser and the Escrow Agent, which is attached
hereto as Exhibit F.

 

“Escrow Amount” has the meaning set forth in Section 2.01(a).

 

“Estimated Balance Sheet” has the meaning set forth in Section 2.02(a)(ii).

 

“Estimated Total Equity” has the meaning set forth in Section 2.02(a)(ii).

 

“FCC” has the meaning set forth in the recitals of this Agreement.

 

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“Financial Statements” has the meaning set forth in Section 4.06.

 

“FirstCity” has the meaning set forth in the recitals of this Agreement.

 

“FirstCity Servicing” means FirstCity Servicing Corporation, a Texas
corporation.

 

“Final Closing Balance Sheet” has the meaning set forth in Section 2.03(c)(iii).

 

“Final Total Equity” has the meaning set forth in Section 2.03(c)(iii).

 

“Fixtures” means, to the extent not covered by the definition of Equipment, all
fixtures appurtenant to Real Property or Leaseholds in all of their forms,
wherever located, now or hereafter existing.

 

“FLBG” has the meaning set forth in the recitals of this Agreement.

 

“Fundamental Representations” has the meaning set forth in Section 8.02.

 

“GAAP” means generally accepted accounting principles in the United States as in
effect from time to time, consistently applied throughout the periods to which
reference is made.

 

“Gateway Non-Performing Loans” means the loans acquired under the Gateway
Portfolio Purchase Agreement that were designated as “Non-Performing Loans” as
defined in the Gateway Portfolio Purchase Agreement.

 

“Gateway Promissory Note” means the promissory note dated February 27, 2007, in
the stated principal amount of $6,945,694.08 delivered in connection with the
Gateway Portfolio Purchase Agreement, executed by Company in favor of State
Bank, Gateway National Bank, and GNB Financial, n.a. in the amount of and to
evidence the purchase price payable by Company for the Gateway Non-Performing
Loans, and payable solely from payments collected by Company on the Gateway
Non-Performing Loans.

 

“Gateway Portfolio Purchase Agreement” means that certain SBA Loan Portfolio
Purchase Agreement dated as of December 21, 2006 (as amended or modified from
time to time) by and among State Bank, Gateway National Bank, GNB Financial,
n.a. and Company.

 

“Governmental Body” means any government or any agency, bureau, commission,
court, department, official, political subdivision, tribunal, board or other
instrumentality of any administrative, judicial, legislative, executive,
regulatory, police or taxing authority of any government, whether supranational,
national, federal, state, regional, provincial, local, domestic or foreign.

 

“Guaranteed Portion” means the portion of each Portfolio Loan guaranteed by the
SBA.

 

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“Guaranty” means a guaranty of any obligor’s obligations under the Portfolio
Loan Agreements.

 

“Hazardous Materials” means any hazardous or toxic substance, waste,
contaminant, pollutant, gas or material, including, without limitation,
radioactive materials, oil, petroleum and petroleum products and constituents
thereof, which are regulated under any Environmental Law.

 

“Indemnification Cap” has the meaning set forth in Section 8.03(b).

 

“Independent Accounting Firm” means an accounting firm of international
reputation independent of the Seller and the Purchaser which accounting firm is
mutually acceptable to the Purchaser and the Seller.

 

“Initial Purchase Price” means an amount equal to (a) the Estimated Total Equity
plus (b) an amount equal to the lesser of (i) Three Million Seven Hundred
Thousand Dollars ($3,700,000.00) or (ii) fifty percent (50%) of the Estimated
Total Equity of the Company.

 

“Initial Schedule Updates” has the meaning set forth in Section 7.03(a).

 

“Intellectual Property” means all copyrights, uncopyrighted works, trademarks,
trademark rights, trademark registrations, patents, including, without
limitation, all reissues, divisions, continuations and extensions thereof,
patent rights, unpatented inventions, service marks, logos, trade names, trade
name rights, computer software licenses, data, software, permits, trade secrets,
know-how, protected models, designs, methods, concepts, plans, specifications,
schematics, formulas, inventions, technology, processes and intellectual
property rights and other proprietary rights, whether or not subject to
statutory registration, together with applications and licenses for, and the
goodwill of the Business relating to, any of the foregoing.

 

“Key Officer Employment Agreement” has the meaning set forth in Section 3.02(f).

 

“Key Officer” means Charles Bell.

 

“Law” means each applicable treaty, statute, law, rule, regulation, order,
guidance or recommendation (or any change in its interpretation or
administration) by any Governmental Body, central bank or comparable agency and
any request or directive (whether or not having the force of law) of any of
those Persons and each judgment, injunction, order, writ, decree or award of any
Governmental Body, arbitrator or other Person.

 

“Leaseholds” means all real property interests as lessee, together with all
tenements, hereditaments, easements, rights of way, privileges and appurtenances
to those and improvements on or to those interests.

 

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“Licensed Intellectual Property” has the meaning set forth in Section 4.14(a).

 

“Lien” means any security interest, lien (statutory or otherwise), claim,
pledge, mortgage, deed of trust, hypothecation, charge, easement, deposit
arrangement, preference, priority, license, lease, conveyance of any right,
option, right of first refusal or offer, restriction or encumbrance of any kind,
including, without limitation, any restriction on use, voting, transfer, receipt
of income or exercise of any other attribute of ownership, and the filing of or
agreement to give any financing statement under the uniform commercial code or
comparable law of any jurisdiction to evidence any of the foregoing.

 

“Loan File” means the file(s) maintained by Company with respect to all
Portfolio Loans, Pending Loans and Non-Recourse Assets, containing the Portfolio
Credit Documents pertaining to such Portfolio Loans and the Non-Recourse Asset
Documents pertaining to such Non-Recourse Assets, together with a copy of each
note or other instrument evidencing each Portfolio Loan or Non-Recourse Asset,
any secondary sales documents related to each Portfolio Loan or Non-Recourse
Asset, any and all other documents, instruments, credit files and underwriting
materials in the possession of the Company (or any agent or representative of
Company) related to all Portfolio Loans, Pending Loans and Non-Recourse Assets,
including documents relating to the management, servicing and correspondence of
such Portfolio Loans and Non-Recourse Assets compiled by Company since the
origination of such Portfolio Loans or the acquisition such Portfolio Loans or
Non-Recourse Assets (and all documents received by it from a prior originator or
seller, if not originated by Company), and including all documents, files and
written information of any kind existing with respect to such Portfolio Loans
and Non-Recourse Assets in the possession of the Company (or any agent or
representative of Company), and, including without limitation loan history and
other data residing on Company’s loan accounting system, provided that the term
“Loan File” shall not include any Records or stored computer data of FirstCity
Servicing maintained by FirstCity Servicing in its capacity as servicer for the
Company or pursuant to the Transition Servicing Agreement, though FirstCity
Servicing will, subject to Purchaser and Company being responsible for and
paying any conversion costs related to such computer data, provide a download of
computer data stored by it in connection with its servicing duties.

 

“LOI” means that certain non-binding letter of intent, dated October 3, 2012, by
and among CapitalSpring, the Company and the Seller, as such letter of intent
has been amended by that certain letter dated December 31, 2012, by and among
those Persons.

 

“Losses” means any and all liabilities, obligations, losses, damages, costs,
expenses, claims, penalties, Actions, judgments, diminution in value,
disbursements of any kind or nature whatsoever, interest, fines, Cleanup costs,
settlements, costs of preparation and investigation, costs incurred in enforcing
any of the Transaction Documents and reasonable attorneys’ fees and expenses.

 

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“Material Adverse Effect” means, with respect to any Person, an effect, event,
development, change, state of facts, condition (financial or otherwise),
circumstance or occurrence, either singly or in the aggregate, that is or would
be reasonably expected to be materially adverse to the financial condition,
assets, liabilities, business or results of operations of such Person, taken as
a whole; provided, however, that a Material Adverse Effect shall not be deemed
to include effects, events, developments, changes, states of facts, conditions,
circumstances or occurrences arising out of, relating to or resulting from: (a) 
changes in general economic, regulatory or business conditions in the United
States generally or in world capital markets, (b) changes in the economy,
financial or credit markets or political or regulatory conditions that affect
the SBA lending industry; (c) any change in Law or the interpretation thereof or
GAAP or the interpretation thereof (but not changes made by such Person to its
own accounting requirements or principles); or (d) acts of war, armed hostility,
terrorism or natural disasters; provided, however, that each event in
(a) through (d) above shall constitute a “Material Adverse Effect” with respect
to a Person if such Person is reasonably expected to be affected in a materially
disproportionate manner relative to other participants in such Person’s
industry.

 

“Material Contract” has the meaning set forth in Section 4.12(a).

 

“Non-Performing Loan Schedule” means that section of Exhibit H reflecting each
Portfolio Loan that is either in default or is projected to be in default in the
next ninety (90) days.

 

“Non-Recourse Assets” means (i) the Serviced ASBA Assets, and (ii) the Gateway
Non-Performing Loans and related assets which are collateral for the Gateway
Promissory Note and obligations related to the Gateway Portfolio Purchase
Agreement.

 

“Non-Recourse Asset Documents” means all loan agreements and all Guaranties
(including without limitation all Secondary Participation Guaranty Agreements),
security documents, deeds of trust, letters of credit, waivers, amendments,
modifications, supplements, forebearances, intercreditor agreements and all
other documents or instruments in the possession of the Company which evidence
or secure a Non-Recourse Asset.

 

“Non-Recourse Debt” means (i) the Debt evidenced by the ASBA Note, ASBA Security
Agreement and ASBA Asset Purchase Agreement, and (ii) the Debt evidenced by the
Gateway Promissory Note.

 

“Organizational Documents” means the articles of incorporation, certificate of
incorporation, charter, bylaws, articles of formation, certificate of formation,
regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
certificates executed, adopted or filed in connection with the creation,
formation or organization of a Person, including any amendments thereto.

 

“Owned Intellectual Property” has the meaning set forth in Section 4.14(a).

 

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“Party” has the meaning set forth in the Preamble.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.

 

“PCB” has the meaning set forth in Section 4.17.

 

“Pending Loans” has the meaning set forth in Section 4.22.

 

“Performing Loan Schedule” means that section of Exhibit H reflecting each
Portfolio Loan that is not in default and is not currently projected to be in
default in the next ninety (90) days.

 

“Permit” means any permit, license, approval, consent, permission, notice,
franchise, confirmation, endorsement, waiver, certification, registration,
qualification, or other authorization issued, granted, or given by or under the
authority of any Governmental Body or pursuant to any federal, state, local or
foreign Law.

 

“Permitted Liens” means (i) Liens associated with Debt reflected in the
Company’s Financial Statements or disclosed in the notes to the Company’s
Financial Statements; (ii) any Liens created pursuant to the Wells Fargo Credit
Documents or any loan documents executed pursuant to the terms of the Wells
Fargo Credit Documents for the benefit of Wells Fargo Capital Finance, LLC, as
the Lender to secure the Debt and obligations under the Wells Fargo Credit
Documents and which have been disclosed to the Purchaser; (iii) Liens for
Charges which are not yet due and payable, or claims and unfunded liabilities
under ERISA not yet due and payable or which are being contested in good faith
by appropriate proceedings diligently pursued; (iv) Liens arising in connection
with worker’s compensation, unemployment insurance, old age pensions and social
security benefits which are not overdue or are being contested in good faith by
appropriate proceedings diligently pursued, provided that in the case of any
such contest any proceedings commenced for the enforcement of such Lien shall
have been duly suspended and such provision for the payment of such Lien has
been made on the books of Borrower as may be required by GAAP; (v) Liens
incurred in the ordinary course of business to secure the performance of
statutory obligations arising in connection with progress payments or advance
payments due under contracts with the United States Government or any agency
thereof entered into in the ordinary course of business; (vi) Liens created in
favor of ASBA on the Serviced ASBA Assets solely to secure payment and
performance of the ASBA Note and obligations under the ASBA Security Agreement
which have been disclosed to the Purchaser; (vii) easements, covenants,
conditions, restrictions and other similar matters of record affecting title to
real property which do not or would not materially impair the use or occupancy
of such real property in the operation of the business conducted thereon;
(viii) Liens arising under sales contracts and equipment leases with third
parties entered into in the ordinary course of business of the Company.

 

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“Person” means any individual, corporation, partnership, limited liability
company, association, joint venture, trust or any other entity or organization,
including, without limitation, any Governmental Body.

 

“Pioneer Loan” means the guaranteed and unguaranteed portion of that certain
loan, in the aggregate principal amount of $1,115,900, made to Pioneer Discount
Furniture, Inc. and Gregory L. Ratliff, as borrowers, by the Company, as
evidenced by that certain promissory note dated March 29, 2010.

 

“Pooling and Servicing Documents” means, collectively, (i) the Pooling and
Servicing Agreement, dated as of October 31, 1997, between Marine Midland Bank,
as Trustee and the Company, the assignee of Independence Funding, LLC, as seller
and servicer, (ii) the Pooling and Servicing Agreement, dated as of August 31,
1999, between LaSalle Bank National Association, as trustee and the Company, the
assignee of AMRESCO Independence Funding, Inc., as seller and servicer and
(iii) the Pooling and Servicing Agreement, dated as of August 31, 2000, between
HSBC Bank USA, as trustee and the Company, the assignee of AMRESCO Independence
Funding, Inc., as seller and servicer and (iv) any ancillary documents entered
into by the Seller and/or the Company in connection with any of the foregoing,
each of (i)-(iv) as amended or modified.

 

“Portfolio Credit Documents” means all Portfolio Loan Agreements and all
Guaranties (including without limitation all Secondary Participation Guaranty
Agreements), security documents, deeds of trust, letters of credit, waivers,
amendments, modifications, supplements, forebearances, intercreditor agreements
and all other documents or instruments executed and delivered in connection with
a Portfolio Loan.

 

“Portfolio Loans” means the 7(a) loans made by the Company (or a
predecessor-in-interest) as part of the Business, as set forth on Exhibit H and
any Portfolio Loans originated by the Company after the date of Exhibit H in the
ordinary course of business of the Company; the term Portfolio Loans does not
include any Non-Recourse Assets.

 

“Portfolio Loan Agreements” means those loan agreements related to each
Portfolio Loan pursuant to which the Company made Portfolio Loans to the
obligors thereunder.

 

“Pre-Closing Schedule Updates” has the meaning set forth in Section 7.03(a).

 

“Preferred Stock” means preferred stock of the Company, par value $0.001.

 

“Principal Balance” means, for a Portfolio Loan and as of the date of
determination, the funds which have been actually advanced to or for the benefit
of the Debtor pursuant to the related Portfolio Credit Document, less any
principal payments made by the Debtor.

 

“Public Announcement” has the meaning set forth in Section 7.06(a).

 

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“Purchase Price” means an amount equal to (a) the Total Equity as of the Closing
Date plus (b) an amount equal to the lesser of (i) Three Million Seven Hundred
Thousand Dollars ($3,700,000) or (ii) fifty percent (50%) of the Total Equity of
the Company as of the Closing Date.

 

“Purchase Price Statement” has the meaning set forth in Section 2.03(a).

 

“Purchased Interests” has the meaning set forth in the Recitals.

 

“Purchaser” has the meaning set forth in the heading of this Agreement, and its
successors and permitted assigns; provided that the Purchaser shall have no
right to assign any or all of its rights under this Agreement to any Person
prior to the Closing except to a direct or indirect wholly-owned Subsidiary of
CapitalSpring and only with the consent of the Seller, such consent to an
assignment to not be unreasonably withheld or delayed, provided that any refusal
of the Seller to consent to any assignment shall not be unreasonable if based on
any assignment by CapitalSpring, the Purchaser or the Purchaser Guarantor not
providing for CapitalSpring, the Purchaser and the Purchaser Guarantor to remain
liable for all their obligations under this Agreement or not providing for the
assignee not to assume all obligations and duties of the Purchaser under this
Agreement.

 

“Purchaser Confidential Information” means any information, data, “know-how”,
documents, reports, agreements, interpretations, plans, studies, forecasts and
records (whether in oral or written form, electronically stored or otherwise)
containing or otherwise reflecting information concerning CapitalSpring, the
Purchaser, the Purchaser Guarantor and their Affiliates which is limited to
(a) financial information, books and records and cost information, (b) marketing
plans and strategies with respect to the Company, and (c) any other information
concerning CapitalSpring, the Purchaser and their Affiliates identified to
Seller as confidential; provided, however, that “Purchaser Confidential
Information” does not include information which (i) is in the public domain at
the time other than as a result of any breach of Section 7.06(b) by the Seller
or its Representatives, (ii) which becomes public through no fault of the Seller
or any of its Representatives or of the Company and its Representatives while
the Company is a Subsidiary of the Seller, or (iii) information which was known
to the Seller and its Affiliates prior to the execution of the LOI.

 

“Purchaser Guarantee” shall have the meaning set forth in the recitals.

 

“Purchaser Guarantor” shall have the meaning set forth in the recitals.

 

“Purchaser Indemnified Person” means the Purchaser and its Affiliates and each
of their respective shareholders, partners, members, managers, directors,
officers, employees, agents and Affiliates and any successors and assigns of the
foregoing.

 

“Purchaser Required Consents” means the Consents set forth on Schedule 6.04.

 

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“Purchaser DD Termination Notice” has the meaning set forth in Section 2.01(b).

 

“Real Property” means all real property interests, other than as lessee,
together with all tenements, hereditaments, easements, rights of way, privileges
and appurtenances to those interests and improvements and fixtures on or to
those interests.

 

“Records” means the following items to the extent that they relate to or are
connected with the Portfolio Loans, Pending Loans and Non-Recourse Assets: all
ledgers, journals, bookkeeping memoranda, account cards relating to the
Portfolio Loans, reports, computer listings, indexes, stored computer data,
credit and other files specifically relating to the Portfolio Loans, Collateral
records, certificates of title and all other correspondence, memoranda and other
related record; provided that the term “Records” shall not include any records
or stored computer data of FirstCity Servicing maintained by FirstCity Servicing
in its capacity as servicer for the Company or pursuant to the Transition
Servicing Agreement, though FirstCity Servicing will, subject to Purchaser and
Company being responsible for and paying any conversion costs related to such
computer data, provide a download of computer data stored by it in connection
with its servicing duties.

 

“Related Party” means any officer, director, employee, agent, representative,
member, manager, Affiliate, or advisor of the Company or the Seller or any third
party acting on behalf of, or at the direction of, the Company or the Seller.

 

“Release” means (a) any releasing, spilling, discharging, disposing, leaking,
pumping, injecting, pouring, depositing, dispersing, emitting, leaching or
migrating into the indoor or outdoor environment and (b) the abandonment or
discarding of barrels, tanks, containers or receptacles, whether or not sealed
or closed, containing, or which formerly contained, Hazardous Materials.

 

“Repurchase Consideration” has the meaning set forth in Section 8.03(c).

 

“Repurchase Right” has the meaning set forth in Section 8.03(c).

 

“Restricted Payment” means (a) any dividend or other distribution of any kind on
or in respect of any Equity Securities, and (b) any payments in cash or
otherwise, on account of the purchase, redemption, retirement or acquisition of
(i) any Equity Securities, or (ii) any option, warrant or other right to acquire
any Equity Securities.

 

“Restricted Person” has the meaning set forth in Section 7.01.

 

“SBA” shall mean the United States Small Business Administration or any other
federal agency administering the SBA Act.

 

“SBA Act” shall mean the Small Business Act of 1953, as in effect from time to
time.

 

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“SBA Authorization and Loan Agreement” means as to each Portfolio Loan, the
Authorization (SBA 7(a) Guaranteed Loan) between the Company, the SBA, and
borrower as approved in accordance with the SBA Rules and Regulations.

 

“SBA Rules and Regulations” shall mean the SBA Act, as amended, any other
legislation binding on SBA relating to financial transactions, any Loan Guaranty
Agreement, all rules and regulations promulgated from time to time under the SBA
Act, and SBA Standard Operating Procedures and Official Notices, all as from
time to time in effect.

 

“Schedule Updates” has the meaning set forth in Section 7.03(a).

 

“SEC” means the United States Securities and Exchange Commission and includes
any Governmental Body succeeding to the functions thereof.

 

“Secondary Participation Guaranty Agreement” means a Secondary Participation
Guaranty Agreement entered into in connection with a Portfolio Loan, in the form
required by the SBA.

 

“Securities” means (a) Equity Securities, (b) notes, bonds, debentures,
certificates of deposit and all other evidences of indebtedness, (c) securities
directly or indirectly convertible into or exercisable or exchangeable for any
of the securities referred to in (b) above, (d) rights, warrants, options,
calls, subscriptions or commitments of any kind or character relating to, or
entitling any Person to purchase or otherwise acquire, any of the securities or
rights referred to in (b) or (c) above, and all other securities of any type.

 

“Securities Act” means the Securities Act of 1933, as amended, and the related
regulations and published interpretations.

 

“Securitization Trust” means a securitization trust identified in a Pooling and
Servicing Document.

 

“Seller” has the meaning set forth in the heading of this Agreement.

 

“Seller Financing Restructure Related Termination Notice” has the meaning set
forth in Section 2.01(d).

 

“Seller Financing Restructure Related Termination Period” has the meaning set
forth in Section 2.01(d).

 

“Seller Guarantee” shall have the meaning set forth in the recitals.

 

“Seller Guarantor” shall have the meaning set forth in the recitals.

 

“Seller Indemnified Person” means the Seller, each Key Officer and their
shareholders, partners, members, managers, directors, officers, employees,
agents and Affiliates, and any successors and assigns of the foregoing.

 

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“Seller Key Employee Agreement Termination Notice” has the meaning set forth in
Section 2.01(f).

 

“Seller Key Employee Agreement Termination Period” has the meaning set forth in
Section 2.01(c).

 

“Seller Required Consents” means the Consents set forth on Schedule 4.04.

 

“Seller SBA-Related Termination Notice” has the meaning set forth in
Section 2.01(c).

 

“Seller SBA-Related Termination Period” has the meaning set forth in
Section 2.01(c).

 

“Seller Servicing Termination Notice” has the meaning set forth in
Section 2.01(e).

 

“Seller Servicing Termination Period” has the meaning set forth in
Section 2.01(e).

 

“Seller’s Knowledge” means the knowledge, after reasonable inquiry, of the Key
Officers, James Holmes and James Sartain.

 

“Serviced ASBA Assets” shall mean (i) the unguaranteed portions of any
SBA-guaranteed note receivable originated by ASBA and transferred to Company
pursuant to the Asset Purchase Agreement and being serviced by the Company, and
(ii) excepting only the “SBLC License” (as defined in the Asset Purchase
Agreement), any other “Transferred Assets” (as defined in the Asset Purchase
Agreement) transferred by ASBA to Company pursuant to the Asset Purchase
Agreement, and (iii) all proceeds of the property described in clause (i) above.

 

“Shares” has the meaning set forth in the Recitals.

 

“Solvent” means, with respect to Seller, that as of the date of determination
both (a)(i) the sum of Seller’s Debt (including contingent liabilities) does not
exceed all of its property, at a fair valuation, (ii) the present fair saleable
value of the property of the Seller is not less than the amount that will be
required to pay the probable liabilities of Seller’s then existing Debts as they
become absolute, and matured, (iii) Seller’s capital is not unreasonably small
in relation to its business or any contemplated or undertaken transaction, and
(iv) Seller does not intend to incur, or believe (nor should it reasonably
believe) that it will incur, Debt beyond its ability to pay such Debt as they
become due, and (b) Seller is “solvent” within the meaning given that term and
similar terms under applicable Laws relating to fraudulent transfers and
conveyances.  For purposes of this definition, the amount of any contingent
liability at any time shall be computed as the amount that, in light of all of
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability

 

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(irrespective of whether such contingent liabilities meet the criteria for
accrual under Statement of Financial Accounting Standard No. 5).

 

“Subsidiary” of any Person means any Person (a) of which such first Person
(either alone or through or together with any other Subsidiary) owns, directly
or indirectly, more than 50% of the Equity Securities of such other Person, the
holders of which are generally entitled to vote for the election of the board of
directors, general partner, the manager or other governing body of, or otherwise
control the business and affairs of, such other Person, or (b) the operations of
which are consolidated with such first Person, pursuant to GAAP, for financial
reporting purpose.

 

“Tax” or “Taxes” means all taxes, charges, fees, levies, duties, imposts,
deposits, withholdings, restrictions, fines, interests, penalties, additions to
tax or other tax, assessment or charge of any kind, including, without
limitation, income, excise, personal property, real property, withholding,
sales, use, gross receipts, value added, franchise, profits, capital, premium,
occupational, production, severance, ad valorem, occupancy, stamp, transfer,
employment, payroll, unemployment insurance, social security, disability,
workers compensation imposed by any Governmental Body, and all interest and
penalties thereon and additions thereto.

 

“Tax Return” means any federal, state, local or foreign return, report, claim
for refund, declaration, statement or other form relating to Taxes, including,
without limitation, any schedule thereto or amendment thereof.

 

“Termination Date” means July 15, 2013, as it may be extended by the mutual
written consent of the Parties.

 

“Threshold Amount” means an amount equal to $75,000.

 

“Total Equity” means the “Total Equity” of the Company as shown on the most
recent available internally prepared monthly financial statements of the date of
determination, which amount was $7,507,331.50 as of November 30, 2012.

 

“Transaction Documents” means this Agreement, the Transition Servicing
Agreement, the Purchaser Guarantee, the Seller Guarantee and each other document
required to be delivered in connection therewith.

 

“Transactions” means the transactions contemplated by, or described in, the
Transaction Documents, including, without limitation, the sale, transfer,
assignment, conveyance and delivery of the Purchased Interests by the Seller to
the Purchaser.

 

“Transfer” means a direct or indirect offer, transfer, sale, assignment, pledge,
conveyance, hypothecation, license, sublicense or other disposition of all or
any interest.

 

“Transfer Agent” means Colson Services Corp. or any successor acting as fiscal
transfer agent for the SBA.

 

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“Transition Servicing Agreement” means that certain transition servicing
agreement dated the Closing Date, between Company and FirstCity Servicing.

 

“Unfunded Portfolio Loan Commitments” means the outstanding commitments of the
Company to originate Portfolio Loans.

 

“Unfunded Vested Liabilities” of a Person means, with respect to any Benefit
Plan at any time, the excess, if any, of (a) the present value of all vested
nonforfeitable benefits under the Benefit Plan, over (b) the fair market value
of all Benefit Plan assets allocable to those benefits, all determined as of the
then most recent valuation date for the Benefit Plan, but only to the extent
that the excess represents a potential liability of the Person or any member of
its Controlled Group to the PBGC or the Benefit Plan under Title IV of ERISA.

 

“Unguaranteed Portion” means the portion of each Portfolio Loan not guaranteed
by the SBA.

 

“WARN ACT” means the Workers Adjustment and Retraining Notification Act, 29
U.S.C. §2101, et seq.

 

“Wells Fargo Credit Documents” means (a) the Amended and Restated Loan
Agreement, dated as of January 31, 2012, between the Company, as the borrower
and Wells Fargo Capital Finance, LLC, as the lender, and (b) any documents
entered into by Seller, FirstCity and/or the Company in connection therewith,
each as amended.

 

“Wells Fargo Term Sheet” has the meaning set forth in Section 3.03(q).

 

ARTICLE II

 

The Transaction

 

Section 2.01.  Purchase and Sale of the Purchased Interests.

 

(a)  Payment at Closing.  Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing, as payment in full of the Purchase Price for
the purchase of the Purchased Interests, which Purchase Price shall be subject
to adjustment after the Closing Date as provided in this Article II, the
Purchaser shall pay, or cause to be paid, (i) to the Seller, by wire transfer of
immediately available funds, an amount in cash equal to the Initial Purchase
Price less an amount equal to five percent of such Initial Purchase Price (the
“Escrow Amount”) and (ii) to the Escrow Agent, the Escrow Amount less the
Deposit.

 

(b)  Due Diligence Period.  The Purchaser has performed due diligence related to
the Company and its operations and has had access to financial information
related to the Company.  Company grants to Purchaser the right to perform
additional due diligence related to the Company which shall commence upon
execution of this

 

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Agreement and conclude thirty (30) days after the date of execution of this
Agreement (the “Due Diligence Period”).  During the Due Diligence Period, the
Company agrees to allow the Purchaser, and its lenders, counsel, accountants,
and other representatives, upon reasonable notice and at reasonable times,
access to any and all of the Company’s books, tax returns, Assets and records,
that Purchaser may reasonably wish to consider in the evaluation of the
Purchased Interests and to complete its legal, financial, accounting, tax, and
other customary due diligence reviews of the Seller, the Company, their
financial condition, their operations, the Assets, the Business, the Real
Property and legal and tax matters, with results satisfactory to the Purchaser
in its sole and absolute discretion.  The Company further agrees to allow the
Purchaser to consult with members of the Company’s staff regarding the status of
Company and its business operations during the Due Diligence Period and will
provide the Purchaser with physical space and support at the offices of Company
sufficient to allow the Purchaser to conduct the due diligence.  During the Due
Diligence Period, all costs of the Purchaser’s due diligence will be borne by
the Purchaser.  If within the Due Diligence Period, the Purchaser determines not
to proceed with the purchase of the Purchased Interests for any reason, or no
reason, the Purchaser shall deliver written notice to the Seller (the “Purchaser
DD Termination Notice”) on or before the expiration of the Due Diligence Period
and such Purchaser DD Termination Notice shall have the effect of terminating
this Agreement as set forth in Article IX.  Without limitation on the
Purchaser’s rights under Article IX, except to the extent the Purchaser timely
delivers such Purchaser DD Termination Notice to the Seller prior to the
expiration of the Due Diligence Period, the Purchaser shall no longer be
permitted to deliver a Purchaser DD Termination Notice.

 

(c)  SBA Application.  The Purchaser shall commence preparation of the
application to the SBA for approval of the acquisition and transfer of the
Purchased Interests upon execution of this Agreement and shall provide the
completed application to the Seller and the Company on or before February 28,
2013.  The Seller and the Company shall each provide its full cooperation with
respect to the preparation and submission of the application.  If the
application to the SBA is not provided to the Seller and the Company on or
before February 28, 2013, the Seller may elect not to proceed with the sale of
the Purchased Interests and the Seller shall furnish written notice to the
Purchaser (the “Seller SBA-Related Termination Notice”) within five (5) Business
Days (the “Seller SBA-Related Termination Period”) after February 28, 2013. Such
Seller SBA-Related Termination Notice shall have the effect of terminating this
Agreement as set forth in Article IX. Without limitation on the Seller’s rights
under Article IX, except to the extent the Seller timely delivers such Seller
SBA-Related Termination Notice to the Purchaser prior to the expiration of the
Seller SBA-Related Termination Period, the Seller shall no longer be permitted
to deliver a Seller SBA-Related Termination Notice.

 

(d)  Financing Restructure.  The Purchaser shall have reached written agreement
with Wells Fargo Capital Finance, LLC regarding the terms for an amendment to
the Wells Fargo Credit Documents on substantially the terms set forth on the
Wells Fargo

 

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Term Sheet, or shall have reached written agreement with another lender of
comparable size and reputation for a financing facility on substantially similar
terms to those set forth in the Wells Fargo Term Sheet.  If no such written
agreement shall have been reached on or before February 28, 2013, the Seller may
elect not to proceed with the sale of the Purchased Interests and the Seller
shall furnish written notice to the Purchaser (the “Seller Financing Restructure
Related Termination Notice”) within five (5) Business Days (the “Seller
Financing Restructure Related Termination Period”) after February 28, 2013. Such
Seller Financing Restructure Related Termination Notice shall have the effect of
terminating this Agreement as set forth in Article IX. Without limitation on the
Seller’s rights under Article IX, except to the extent the Seller timely
delivers such Seller Financing Restructure Related Termination Notice to the
Purchaser prior to the expiration of the Seller Financing Restructure Related
Termination Period, the Seller shall no longer be permitted to deliver a Seller
Financing Restructure Related Termination Notice.

 

(e)  Transition Servicing Agreement.  The Seller and the Purchaser shall
commence negotiation and preparation of the Transition Servicing Agreement upon
execution of this Agreement.  If the event that the Seller and Purchaser have
not executed the Transition Servicing Agreement on or before February 28, 2013,
the Seller may elect not to proceed with the sale of the Purchased Interests and
the Seller shall furnish written notice to the Purchaser (the “Seller Servicing
Termination Notice”) within five (5) Business Days (the “Seller Servicing
Termination Period”) after February 28, 2013. Such Seller Servicing Termination
Notice shall have the effect of terminating this Agreement as set forth in
Article IX. Without limitation on the Seller’s rights under Article IX, except
to the extent the Seller timely delivers such Seller Servicing Termination
Notice to the Purchaser prior to the expiration of the Seller Servicing
Termination Period, the Seller shall no longer be permitted to deliver a Seller
Servicing Termination Notice.

 

(f)  Key Officer Employment Agreement.  The Key Officer and the Purchaser shall
commence negotiation and preparation of the Key Officer Employment Agreement
upon execution of this Agreement.  If the event that the Key Officer and
Purchaser have not agreed to the terms of the Key Officer Employment Agreement
on or before February 28, 2013, the Seller may elect not to proceed with the
sale of the Purchased Interests and the Seller shall furnish written notice to
the Purchaser (the “Seller Key Employee Agreement Termination Notice”) within
five (5) Business Days (the “Seller Key Employee Agreement Termination Period”)
after February 28, 2013. Such Seller Key Employee Agreement Termination Notice
shall have the effect of terminating this Agreement as set forth in Article IX.
Without limitation on the Seller’s rights under Article IX, except to the extent
the Seller timely delivers such Seller Key Employee Agreement Termination Notice
to the Purchaser prior to the expiration of the Seller Key Employee Agreement
Termination Period, the Seller shall no longer be permitted to deliver a Seller
Key Employee Agreement Termination Notice.

 

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Section 2.02.  Calculation of the Initial Purchase Price.

 

(a)  Preparation of Estimated Balance Sheet.

 

(i)  From the date of this Agreement through the earlier to occur of (x) the
Closing Date, and (y) the date on which this Agreement is terminated in
accordance with the provisions of Section 9.01 hereof, the Seller shall cause
the Company to, on each by no later than the 25th day of the following month
deliver the estimates of the Total Equity as of the end of the prior calendar
month.

 

(ii)  On or prior to the date which is two (2) Business Days prior to the
Closing Date, the Seller shall cause the Company’s chief financial officer to
prepare and deliver to the Purchaser, and the Purchaser shall have the right to
discuss, review and object to, a monthly internally prepared balance sheet
prepared in conformity with GAAP applied on a basis consistent with the
preparation of the Financial Statements (excluding adjustments required by the
consummation of the Transactions) which reasonably estimates the financial
position of the Company as of the end of the month prior to the Closing Date (as
so prepared the “Estimated Balance Sheet”) and sets forth a detailed calculation
of such officer’s estimate of the Total Equity as of the Closing Date (the
“Estimated Total Equity”); provided, however, that in the event that the
Purchaser reasonably objects to such computation, the Purchaser and the Seller
shall engage in good faith negotiations for a period of five (5) days to resolve
such objection. If the Parties cannot come to a resolution within such five
(5)-day period, Purchaser shall have the right to terminate this Agreement in
accordance with Article IX, provided that Purchaser shall not be entitled to the
return of the Deposit unless the objections of the Purchaser to the computation
were based upon reasonable positions supportable by GAAP and consistent with
prior positions taken by the Company.

 

(b)  Calculation of Estimated Purchase Price.   Simultaneously with the delivery
of the Estimated Balance Sheet to the Purchaser, the Seller shall cause the
Company’s chief financial officer to prepare, deliver and certify to the
Purchaser, and the Purchaser shall have the right to reasonably consent or
object to, a statement setting forth the calculation of the Initial Purchase
Price using the Estimated Total Equity shown on the Estimated Balance Sheet.

 

Section 2.03.  Post-Closing Adjustment to Purchase Price.

 

(a)  Preparation of Closing Balance Sheet.  As promptly as practicable, but in
any event within sixty (60) calendar days following the Closing Date, the
Purchaser shall cause the Company to deliver to the Seller a balance sheet (the
“Closing Balance Sheet”), certified by the Company’s chief financial officer as
fairly presenting the financial position of the Company and its Subsidiaries as
of the end of the month prior to the Closing Date in conformity with GAAP
applied on a basis consistent with the preparation of the Financial Statements
and the Estimated Balance Sheet (excluding adjustments required by the
consummation of the Transactions) and setting forth a calculation of the Total
Equity as of the date of the Closing Balance Sheet.  Subject to

 

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Section 2.03(c), the Closing Balance Sheet and the calculation of Total Equity
delivered by the Purchaser to the Seller shall be deemed to be and will be
final, binding and conclusive on the Parties.

 

(b)  Calculation of Purchase Price.  Simultaneously with the delivery of the
Closing Balance Sheet to the Seller, the Company’s chief financial officer shall
prepare, deliver and certify to the Seller a written statement (the “Purchase
Price Statement”) setting forth the calculation of the Purchase Price using the
Total Equity shown on the Closing Balance Sheet.

 

(c)  Right to Review and Dispute.

 

(i)  During the thirty (30) calendar day period following the Seller’s receipt
of the Closing Balance Sheet and the Purchase Price Statement, the Seller shall
be permitted to review the working papers of the Company relating to the
preparation of the Closing Balance Sheet and the Purchase Price Statement and
the calculation of Total Equity and the Purchase Price shown on the Purchase
Price Statement.

 

(ii)  The Seller may dispute the preparation of the Closing Balance Sheet, the
Purchase Price Statement and/or the determination of Total Equity, and the
Purchase Price set forth thereon; provided, however, that the Seller must notify
the Purchaser in writing of each disputed item, specifying the amount thereof in
dispute and setting forth, in reasonable detail, the basis for such dispute,
within thirty (30) calendar days of the Company’s delivery of the Closing
Balance Sheet and the Purchase Price Statement to the Seller.  In the event
written notice of such a dispute is received by the Purchaser in a timely
manner, such a dispute will be resolved in accordance with the provisions of
Section 2.03(d) below.

 

(iii)  The Closing Balance Sheet, the Purchase Price Statement and the
calculation of Total Equity and the Purchase Price will be deemed final for the
purposes of this Article II upon the earliest to occur of (A) the failure of the
Seller to notify the Purchaser of a dispute in accordance with this Agreement
within thirty (30) calendar days of the Company’s delivery of the Closing
Balance Sheet and the Purchase Price Statement to the Seller, (B) the resolution
of all disputes in writing by the Seller and the Purchaser, (C) the resolution
of all disputes pursuant to Section 2.03(d) by the Purchaser’s accountants and
the Seller’s accountants, and (D) the resolution of all disputes pursuant to
Section 2.03(d) by an Independent Accounting Firm.  The Closing Balance Sheet
and the Total Equity, as deemed final pursuant to this Section 2.03(c)(iii), are
referred to herein as the “Final Closing Balance Sheet” and “Final Total
Equity”, respectively.

 

(d)  Resolution of Disputes Under This Section 2.03.

 

(i)  In the event that written notice of a dispute is received by the Purchaser
under Section 2.03(c) in a timely manner, the Purchaser and the Seller shall
attempt in good faith to resolve their dispute for a period of fifteen (15)
calendar days.  In the event that the Purchaser and the Seller are unable to
resolve such dispute within such period, the

 

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Purchaser’s accountants and the Seller’s accountants will attempt to reconcile
their differences, and any resolution by them as to any disputed amounts will be
final, binding and conclusive on the parties hereto.  If the Purchaser’s
accountants and the Seller’s accountants are unable to reach a resolution with
such effect within 30 calendar days after receipt of such written notice of
dispute under Section 2.03(c), the Purchaser’s accountants and the Seller’s
accountants will submit the items (together with their respective positions
thereon and the reasons therefor) remaining in dispute for resolution to the
Independent Accounting Firm.  The Independent Accounting Firm shall be
instructed to determine the appropriate amount of each disputed item in
accordance with GAAP applied on a consistent basis with the Financial Statements
and render a report to the Purchaser and the Seller within twenty (20) calendar
days after such submission; provided, however, that in no case may such
determination of any such disputed item be outside the range established by the
respective positions of the Purchaser’s accountants and the Seller’s
accountants.  The report of the Independent Accounting Firm as to the disputed
items will be conclusive as to each disputed item and will be final and binding
on the parties hereto.  In the event that the aggregate amount of the disputed
items as finally determined by the Independent Accounting Firm differs from, in
a manner detrimental to the Company, the aggregate amount of such disputed items
as set forth on the Closing Balance Sheet or the Purchase Price Statement, as
the case may be, by greater than ten percent (10%) of such disputed items, the
fees and expenses of the Independent Accounting Firm shall be borne by the
Purchaser and in all other circumstances, the fees and expenses of the
Independent Accounting Firm shall be borne by the Seller.

 

(ii)  The procedures for resolution of disputes concerning the Closing Balance
Sheet and the Purchase Price set forth in this Section 2.03(d) are intended to
be final and exclusive of any other contest or appeal in relation thereto, so
that when the Closing Balance Sheet and the Purchase Price Statement are deemed
final hereunder, neither party will be entitled to subject the Closing Balance
Sheet or the Purchase Price Statement or, such agreement or the report to any
court or tribunal.

 

(e)  Adjustment of Purchase Price and Payment of Adjustment Amount.

 

(i)                                     Calculation of Adjustment Amount. 
Within five (5) Business Days of the Purchase Price being deemed final
hereunder, in the event that the Purchase Price set forth in the Purchase Price
Statement (as finally determined in accordance with this Article II) is (A) less
than the Initial Purchase Price, the Seller shall pay to the Purchaser an amount
in cash equal to such shortfall by wire transfer of immediately available funds
(and/or full or partial disbursement of the Escrow Amount as described in clause
(ii) below); or (B) is greater than the Initial Purchase Price, the Purchaser
shall (1) together with the Seller, instruct the Escrow Agent to deliver to the
Seller the Escrow Amount and (2) deliver to the Seller an amount in cash equal
to such excess by wire transfer of immediately available funds.

 

(ii)                                  Treatment of Escrow Amount. For the
avoidance of doubt, to the extent that the shortfall described in clause
(i)(A) above is (A) greater than the Escrow Amount,

 

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the entire Escrow Amount shall be distributed to the Purchaser and the Seller
shall be required to pay to the Purchaser any additional amounts owed in cash,
or (B) less than the entire Escrow Amount, the Seller shall be entitled to
receive the distribution of the remaining Escrow Amount not disbursed to the
Purchaser.  If the amount caused by subtracting (1) the Initial Purchase Price
less the Escrow Amount from (2) the Purchase Price is positive, but less than
the Escrow Amount, then the Purchaser and the Seller shall instruct the Escrow
Agent to (I) deliver such difference to the Seller and (II) deliver the
remainder of the Escrow Amount to the Purchaser.

 

Section 2.04.  Deliveries.

 

(a)                                 On the date hereof, the Parties shall make
the following deliveries:

 

(i)                                     The Purchaser shall deliver to the
Seller (A) this Agreement, executed by the Purchaser, (B) the fully executed
Purchaser Guarantee, (C) the Wells Fargo Term Sheet and (D) the Escrow
Agreement, executed by the Purchaser.

 

(ii)                                  The Seller shall deliver to the Purchaser
(A) this Agreement, executed by the Seller, (B) the fully executed Seller
Guarantee, and (C) the Escrow Agreement, executed by the Seller.

 

(iii)                               The Purchaser and the Seller shall deliver
to the Escrow Agent the Escrow Agreement, executed by each of them.

 

(iv)                              The Purchaser shall deliver to the Escrow
Agent the Deposit, via wire transfer of immediately available funds.

 

(b)                                 On the Closing Date, the Parties shall make
the following deliveries:

 

(i)                                     the Purchaser shall deliver

 

(A)                               to the Seller (1) the Initial Purchase Price
less the Escrow Amount, via wire transfer of immediately available funds to one
or more accounts designated in writing by the Seller, and (2) each document or
certificate required to be delivered by the Purchaser in order to satisfy the
conditions to Closing of the Seller set forth in Section 3.02 below; and

 

(B)                               to the Escrow Agent, the Escrow Amount less
the Deposit; and

 

(ii)                                  the Seller shall (A), sell, assign,
transfer, convey and deliver to the Purchaser the Purchased Interests, together
with one or more duly executed stock certificates and such other documentation
as is required to evidence the Purchased Interests, and (B) deliver each
document or certificate required to be delivered by the Seller in order to
satisfy the conditions to Closing of the Purchaser set forth in Section 3.03
below.

 

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ARTICLE III

 

The Closing; Conditions to Closing

 

Section 3.01.  The Closing.  The consummation of the Transactions (the
“Closing”), will take place remotely via the electronic exchange of
fully-executed documents at 10:00 a.m. (New York City time), on or as soon as
practicably possible after the satisfaction of the conditions to Closing set
forth in Section 3.02 and 3.03 below, or at such other location or time as the
Parties may agree in writing (the date of the Closing being hereinafter referred
to as the “Closing Date”); provided that the Closing Date shall occur no later
than thirty (30) days after the receipt of the Seller Required Consents.

 

Section 3.02.  Conditions Precedent to the Obligations of the Seller.  The
obligations of the Seller to consummate the Transactions under the Transaction
Documents are expressly subject to the fulfillment of each of the following
conditions, unless waived by the Seller in writing at or before the Closing:

 

(a)                                 Representations and Warranties; Performance
of Agreements.

 

(i)                                     All of the representations and
warranties of the Purchaser set forth herein that are qualified as to
materiality shall be true and correct in all respects and all of the
representations and warranties of the Purchaser set forth herein that are not
qualified as to materiality shall be true and correct in all material respects,
in each case, on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date.

 

(ii)                                  The Purchaser shall have performed and
complied in all material respects with all of its covenants and other
obligations set forth in the Transaction Documents required to be performed or
complied with by the Purchaser at or before the Closing.

 

(iii)                               The Seller shall have received a certificate
of a senior executive or manager of the Purchaser, substantially in the form of
Exhibit A, as to the fulfillment of the conditions set forth in clauses (i) and
(ii) above, which certificate shall have the effect of a representation and
warranty of the Purchaser as to the matters set forth therein.

 

(b)                                 Purchaser Required Consents.  The Seller
shall have received copies of all of the Purchaser Required Consents (including
without limitation the consent of the SBA), which shall be in form and substance
reasonably satisfactory to the Seller and shall be in full force and effect as
of the Closing Date, and shall include, without limitation, the consent to the
transactions contemplated hereby of any counterparty under any agreements to
which CapitalSpring, the Purchaser Guarantor, or Purchaser is a party whose
consent is required to effect the transactions contemplated hereby.

 

(c)                                  No Actions.  Since the date of this
Agreement, there shall be no Action (A) challenging or seeking to restrain or
prohibit the Transactions or (B) seeking to obtain from the

 

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Seller, the Company or any of their Affiliates damages that are material in
relation to the Purchase Price.

 

(d)                                 Initial Purchase Price.  (i) The Seller
shall have received the Initial Purchase Price less the Escrow Amount and
(ii) the Escrow Agent shall have received the Escrow Amount less the Deposit.

 

(e)                                  Purchase Agreement.  The Purchaser shall
have executed and delivered this Agreement and all certificates and other
documents required to be delivered by the Purchaser in connection herewith.

 

(f)                                   Wells Fargo Release.  The Seller and the
Purchaser shall have obtained a release of all obligations of FirstCity, the
Seller and their Affiliates under the Wells Fargo Credit Documents.

 

(g)                                  Approval.  The Seller shall have received
the written approval of the board of directors of each of FirstCity and Seller
with respect to Agreement and the Transactions.

 

(h)                                 Escrow Agreement.  Each of the parties
hereto (other than the Seller) and the Escrow Agent shall have executed and
delivered the Escrow Agreement and such agreement shall be in full force and
effect.

 

(i)                                     Secretary’s Certificate.  The Seller
shall have received a certificate of the secretary of the Purchaser and of the
Purchaser Guarantor substantially in the form of Exhibit D with respect to
(i) the Organizational Documents of the Purchaser or the Purchaser Guarantor, as
applicable, (ii) the resolutions of the member of the Purchaser and the
Purchaser Guarantor, as applicable approving each Transaction Document to which
such Person is a party and the other documents to be delivered by that Person
under the Transaction Documents and the performance of the obligations of the
Purchaser and Purchaser Guarantor hereunder, and (iii) the names and true
signatures of the officers of the Purchaser or the Purchaser Guarantor
authorized to sign each Transaction Document to which it is a party and the
other documents to be delivered by it under the Transaction Documents.

 

(j)                                    Good Standing Certificate.  The Seller
shall have received a certificate of the Secretary of State of the jurisdiction
in which each of the Purchaser and the Purchaser Guarantor is organized, dated
as of a recent date, as to the good standing of each of the Purchaser and the
Purchaser Guarantor, and as to the Organizational Documents of the Purchaser and
the Purchaser Guarantor on file in the office of the Secretary of State.

 

(k)                                 Purchaser Guarantee.  The Purchaser
Guarantee shall be in full force and effect and enforceable in accordance with
its terms.

 

Section 3.03.  Conditions Precedent to the Obligations of the Purchaser.  The
obligations of the Purchaser to consummate the Transactions under the
Transaction Documents are expressly subject to the fulfillment of each of the
following conditions, unless waived by the Purchaser in writing, at or before
the Closing:

 

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(a)                                 Representations and Warranties; Performance
of Agreements.

 

(i)                                     All of the representations and
warranties of the Seller set forth in the Transaction Documents to which the
Seller is a party that are qualified as to materiality shall be true and correct
in all respects and all of the representations and warranties of the Seller set
forth in the Transaction Documents to which the Seller is a party that are not
qualified as to materiality shall be true and correct in all material respects,
in each case, on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date.

 

(ii)                                  Seller shall have performed and complied
with all of its covenants and other obligations contained in the Transaction
Documents to which the Seller is a party required to be performed or complied
with by Seller at or before the Closing.

 

(iii)                               The Purchaser shall have received a
certificate of a senior executive officer of Seller substantially in the form of
Exhibit C as to the fulfillment of the conditions set forth in clauses (i) and
(ii) above, which certificate shall have the effect of a representation and
warranty of the Seller as to the matters set forth therein.

 

(b)                                 Seller Required Consents.  The Purchaser
shall have received copies of all of the Seller Required Consents (including
without limitation the consent of the SBA and the consent of ASBA pursuant to
the ASBA Security Agreement), which shall be in form and substance reasonably
satisfactory to the Purchaser and shall be in full force and effect as of the
Closing Date, and shall include, without limitation, the consent to the
transactions contemplated hereby of any counterparty under any agreements to
which Seller or the Company is a party whose consent is required to effect the
transactions contemplated hereby.

 

(c)                                  Secretary’s Certificate.  The Purchaser
shall have received a certificate of the secretary of the Company, the Seller
and the Seller Guarantor, substantially in the form of Exhibit D with respect to
(i) the articles of incorporation of the Company, the Seller and the Seller
Guarantor, (ii) the bylaws of the Company, the Seller and the Seller Guarantor,
(iii) the resolutions of the board of directors and shareholders of the Company
and the Seller and of the executive committee of the board of directors of the
Seller Guarantor approving each Transaction Document to which the Company, the
Seller or the Seller Guarantor is a party and the other documents to be
delivered by them under the Transaction Documents and the performance of the
obligations of the Company, the Seller and the Seller Guarantor thereunder, and
(iv) the names and true signatures of the officers of the Company, the Seller
and the Seller Guarantor authorized to sign each Transaction Document to which
they are a party and the other documents to be delivered by them under the
Transaction Documents.

 

(d)                                 No Actions.  There shall be no (i) Action
(A) challenging or seeking to restrain or prohibit the Transactions, or
(B) seeking to (x) impose any material limitation on the ability of the
Purchaser to effectively exercise full rights of ownership of the Purchased
Interests, including the right to vote such Purchased Interests, (y) impose any
material limitation on the Purchaser’s or the Company’s operation of their
respective businesses, or (z) compel the Purchaser or the Company to dispose of
or hold separate any of their businesses or assets or (ii) Law in effect that

 

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has had or could reasonably be expected to have any of the consequences referred
to in clause (i) above.

 

(e)                                  Good Standing Certificate.  The Purchaser
shall have received a certificate of the Secretary of State or Comptroller’s
Office of the jurisdiction in which each of the Company, Seller and Seller
Guarantor is organized, dated as of a recent date, as to the good standing of
each of the Company, Seller and Seller Guarantor, and as to the charter
documents of the Company, Seller and Seller Guarantor.

 

(f)                                   Seller Guarantee.  The Seller Guarantee
shall be in full force and effect and enforceable in accordance with its terms.

 

(g)                                  Material Adverse Effect.  No Material
Adverse Effect shall have occurred and be continuing with respect to the
Company.

 

(h)                                 Purchase Agreement.  The Seller shall have
executed and delivered this Agreement and all certificates and other documents
required to be delivered by the Seller in connection herewith.

 

(i)                                     Employment and Non-Competition
Agreements.  The Key Officer shall have entered into the Key Officer Employment
Agreement, such agreement shall be in full force and effect on the Closing Date,
and the Key Officer shall not be under an incapacity or disability (as defined
in such written employment agreements without regard to any time periods
contained therein) as of the Closing Date.

 

(j)                                    FIRPTA.  The Purchaser shall have
received from the Company a certificate executed by the Company that, as of the
Closing Date, the Company is not a “foreign person” within the meaning of
Section 1445 of the Code and the Regulations thereunder, in form and substance
acceptable to counsel for the Purchaser.

 

(k)                                 Cancellation of Intercompany Debt. All
outstanding Debt between the Company and the Seller or any of its Affiliates,
including without limitation that certain Promissory Note, dated December 15,
2006, between the Company, as maker and FirstCity, as payee, as amended by the
First Amendment, Second Amendment and the Third Amendment shall have been
cancelled and any security interests thereunder shall have been terminated.

 

(l)                                     Termination of Existing Services
Agreement.  That certain Loan Operations, Administrative and General Services
Agreement, dated as of December 15, 2006, among FirstCity Servicing, the Company
and Wells Fargo Foothill, LLC shall have been terminated and be of no further
force and effect.

 

(m)                             Transition Servicing Agreement.  The Purchaser
shall have received an executed copy of the Transition Servicing Agreement, in
the form agreed to by the Seller and the Purchaser, which shall be delivered in
accordance with Section 2.01(e) and attached hereto as Exhibit E.

 

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(n)                                 Delivery of Stock Certificates and
Assignments.  Each of the stock certificates representing all of the Preferred
Stock and Common Stock held by the Seller immediately prior to the Closing Date
shall have been delivered to the Company along with assignments in form
reasonably acceptable to the Purchaser.

 

(o)                                 Escrow Agreement.  Each of the parties
hereto (other than the Purchaser) and the Escrow Agent shall have executed and
delivered the Escrow Agreement and such agreement shall be in full force and
effect.

 

(p)                                 No Events of Default.  No monetary events of
default shall have occurred or be continuing with respect to the ASBA Note or
Gateway Promissory Note.

 

(q)                                 Wells Fargo Credit Documents.  The Purchaser
shall have obtained an amendment to the Wells Fargo Credit Documents, on
substantially the terms set forth on Exhibit G (the “Wells Fargo Term Sheet”),
or the Purchaser shall have obtained a committed senior financing facility with
another lender of comparable size and reputation, on substantially similar terms
to those set forth in the Wells Fargo Term Sheet.

 

(r)                                    Pioneer Loan.  Prior to the Closing, the
Company shall have acquired the guaranteed portion of the Pioneer Loan from the
SBA and the Seller or its designated Affiliate shall have acquired the entire
Pioneer Loan in accordance with the procedures set forth on Exhibit I.

 

(s)                                   Financing.  The Purchaser, together with
its controlling Affiliates, shall have obtained third-party financing for the
purpose of consummating the Transactions in an aggregate amount sufficient to
(i) pay all of the cash consideration set forth in Section 2.01, (ii) provide
the Purchaser and the Company with sufficient working capital immediately
following the Closing, and (iii) otherwise permit the Purchaser to consummate
the Transactions, all on terms satisfactory to the Purchaser and such
controlling Affiliates.

 

(t)                                    Termination of Bank of Scotland Lien. 
Seller shall have delivered to Purchaser a UCC-3 Partial Termination Statement
with respect to the lien held by Bank of Scotland on the capital stock of the
Company.

 

ARTICLE IV

 

Representations and Warranties of
the Seller About the Company

 

The Seller represents and warrants to the Purchaser as of the date hereof and as
of the Closing Date as follows:

 

Section 4.01.  Existence and Power.  The Company (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas, (b) is duly qualified under the laws of, or is licensed to do business as
a foreign company in good standing in, each jurisdiction in which such
qualification or license is required to own, lease or license the Assets

 

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or to operate or carry on the Business and in which the failure to so qualify
would have a Material Adverse Effect on (i) the Business, properties,
operations, prospects or condition (financial or otherwise) of the Company,
taken as a whole, and (c) has all necessary corporate power and authority
required to own, lease or license the Assets, and to operate and carry on the
Business.  The Company has previously delivered to the Purchaser correct and
complete copies of the Organizational Documents of the Company.

 

Section 4.02.  Authorization; Binding Effect.  No other proceedings on the part
of the Seller or the Key Officers are necessary to approve and adopt the
Transaction Documents to which the Company is a party or to approve the
consummation of the Transactions.  Each of the Transaction Documents to which
the Company is or may become a party is, or, when executed and delivered in
accordance with this Agreement will be, legal, valid and binding obligations of
the Company enforceable against the Company in accordance with its terms except
as enforcement may be limited by applicable bankruptcy, insolvency or other Laws
affecting creditors’ rights generally or by legal principles of general
applicability governing the availability of equitable remedies.

 

Section 4.03.  Contravention.  Neither the execution, delivery and performance
of the Transaction Documents by the Seller or the Company nor the consummation
of the Transactions will (with or without notice or lapse of time or both)
(a) conflict with, violate or breach any provision of the Company’s certificate
of incorporation, bylaws, or other Organizational Documents, (b) conflict with,
violate or breach any Law by which the Company, the Business or any of the
Assets may be bound or affected, (c) conflict with, material breach or result in
a default under, result in the acceleration of, or give rise to a material
adverse change in the terms of or a right of termination, cancellation,
modification or acceleration or require any notice under any Material Contract,
(d) result in or require the creation or imposition of any Lien on any of the
Assets, or (e) otherwise result in a Material Adverse Effect on the Company.

 

Section 4.04.  Consents.  Except for the Consents set forth on Schedule 4.04, no
Consents are required in connection with (a) the due execution and delivery by
the Company of the Transaction Documents to which it is a party and the
performance of the Company’s obligations thereunder, or (b) the consummation of
the Transactions by the Company.  As of the Closing Date, all of such Consents
have been obtained and are in full force and effect.

 

Section 4.05.  Capitalization.

 

(a)                           Authorized, Issued and Outstanding Securities.  As
of the Closing Date (but prior to the consummation of the Transactions), the
authorized Securities of the Company consist of 3,000,000 shares of capital
stock, consisting of (i) 1,000,000 shares of Common Stock, of which 100,000 are
issued and outstanding, and (iv) 2,000,000 shares of Preferred Stock, of which
800,000 are issued and outstanding (collectively, the “Company Stock”).  All of
the issued and outstanding Company Stock has been duly authorized, validly
issued and are fully paid and non-assessable.  The Company has not violated the
Securities Act or any applicable Law in connection with the offer, sale or
issuance of any of its Securities to the Seller.  Other than the Company Stock,
the Company has no other Equity Securities.

 

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(b)                           Rights, Options, Warrants, Etc.  There are no
(i) Securities of the Company, (ii) statutory or contractual preemptive rights,
subscriptions, conversion rights, rights of first refusal or other similar
rights, or (iii) Contracts, commitments or understandings of any character, in
each case, that obligate the Company contingently or otherwise, to (A) issue,
sell or Transfer, or cause to be issued, sold or Transferred, any Securities of
the Company, (B) purchase, redeem, retire, defease or otherwise acquire any
Securities of the Company, or (C) that give any Person the right to receive any
benefits or rights substantially similar to any enjoyed by or accruing to
holders of any Securities of the Company, and no authorization for any of the
foregoing has been given.

 

(c)                            No Other Agreements.  There are no voting trusts,
stockholder agreements, investor rights agreements, proxies or any other
Contracts or understandings in effect with respect to the voting or Transfer of
any Securities of the Company or with respect to the management or governance of
the Company, except under the Wells Fargo Credit Documents, SBA Loan Guaranty
Agreement, the SBA Act or related rules and regulations, and as disclosed in
Schedule 4.05(c).

 

Section 4.06.  Financial Statements.  The Seller has delivered to the Purchaser
the Company’s audited financial statements as of December 31, 2010 and for the
fiscal year ended December 31, 2011 and its unaudited financial statements
(including balance sheet, income statement and statement of cash flows) for the
three-month periods ended June 30, 2012 and September 30, 2012 (collectively,
the “Financial Statements”).  The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated.  The Financial Statements fairly present
in all material respects the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein, subject in the
case of the unaudited Financial Statements to normal year-end audit adjustments.
Except as set forth in the Financial Statements, the Company has no material
liabilities or obligations, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent the date of the Financial
Statements, (ii) obligations under contracts and commitments incurred in the
ordinary course of business and (iii) liabilities and obligations of a type or
nature not required under generally accepted accounting principles to be
reflected in the Financial Statements, which, in all such cases, individually
and in the aggregate would not have a Material Adverse Effect on the Company. 
The Company maintains and will continue to maintain a standard system of
accounting established and administered in accordance with generally accepted
accounting principles.

 

Section 4.07.    Taxes.  There are no federal, state, county, local or foreign
Taxes due and payable by the Company which have not been timely paid.  There are
no accrued and unpaid federal, state, country, local or foreign Taxes of the
Company which are due, whether or not assessed or disputed.  There have been no
examinations or audits of any Tax Returns or reports by any applicable
Governmental Body.  The Company has duly and timely filed all federal, state,
county, local and foreign Tax Returns required to have been filed by it and
there are in effect no waivers of applicable statutes of limitations with
respect to Taxes for any year.

 

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Section 4.08.  Litigation.  Except as set forth on Schedule 4.08, to the
Seller’s Knowledge there is no Action pending, or to the Seller’s Knowledge,
threatened (a) against the Company, (b) that questions the validity of any of
the Transaction Documents or that involves or relates to any of the
Transactions, (c) affecting any of the Assets or the Business, or (d) that could
reasonably be expected to materially adversely affect the Purchaser’s or the
Company’s ability to conduct the Business after the Closing or the ownership or
use by the Company of the Assets after the Closing.

 

Section 4.09.  Permits; Compliance with Laws.

 

(a)                           Permits. Schedule 4.09(a) sets forth a correct and
complete list and description of all material Permits necessary to entitle or
permit the Company to use its corporate name, to own, lease, operate and use the
assets, and to carry on and conduct the Business.  The Company has all material
Permits necessary for the conduct of the Business (including without limitation
all Permits required to make and service the Portfolio Loans in each
jurisdiction in which the Company conducts the Business).  The Company is not in
default in any material respect under any of such Permits.

 

(b)                           Compliance with Laws.  The Company is not
violating and has not violated in any material respect any Law applicable to it
or any of its properties or Business.  To the Seller’s Knowledge, the Company is
not under investigation with respect to any material violation of any Laws.

 

(c)                            Governmental Approvals. All Governmental
Approvals necessary for the conduct of the Business have been duly obtained and
are in full force and effect.   There are no proceedings pending or, to the
Seller’s Knowledge, threatened that would result in the revocation, cancellation
or suspension, or any adverse modification, of any such Governmental Approval.

 

Section 4.10.  Absence of Certain Changes or Events.  Since the date of the
Company’s most recent Financial Statements: (a) there has not occurred any
event, fact, circumstance or change that has had or which could reasonably be
expected to have a Material Adverse Effect on the Company or the Business,
(b) the Company has conducted the Business in the ordinary course consistent
with past practice, and (c) except as specifically set forth in Schedule 4.10
hereto, the Company has not:

 

(i)                                     (A) Transferred any of the Assets other
than in the ordinary course of business consistent with past practice,
(B) caused or permitted any of the Assets to become subject to any Liens other
than Permitted Liens, (C) purchased or acquired any Securities or otherwise made
or acquired any investment in any Person (not including a loan pursuant to a
Portfolio Loan), or (D) incorporated or formed any Subsidiary, or merged, or
consolidated with or into, or entered into any business combination, with any
Person;

 

(ii)                                  (A) incurred any Debt (other than
borrowings under the Wells Fargo Credit Documents) or guaranteed any obligation
of any Person, or (B) waived, released,

 

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canceled, settled, written off or compromised any Debt, obligation, claim or
other right owed to the Company, or (C) made any loan or advance to any Person
other than pursuant to a Portfolio Loan;

 

(iii)                               (A) entered into any Contract or transaction
with any of its Affiliates, or (B) made or declared any Restricted Payment;

 

(iv)                              suffered, or has taken or omitted to take any
action that could reasonably be expected to cause the Company to suffer, an
event of default with respect to any of the Business or give rise to a right of
termination with respect to all or any portion thereof;

 

(v)                                 (A) paid or agreed to pay any bonus, extra
compensation, pension or severance pay, (B) increased the benefits payable under
the Company’s or its Benefit Plans, or (C) otherwise increased the wage, salary
or compensation (of any nature) or benefits to any of its directors, officers or
employees, earning more than $125,000 per year, provided that the Company shall
be permitted to pay performance bonuses for fiscal year 2012, in an amount per
person not to exceed $35,000, to non-executive employees who were employed by
the Company as of December 31, 2012;

 

(vi)                              (A) written down or written up (or failed to
write down or write up in accordance with GAAP consistent with past practice)
the value of any accounts receivable, (B) revalued of any of the Assets, or
(C) increased or changed any assumptions underlying, or methods of calculating,
any bad debt, contingency or other reserves;

 

(vii)                           allowed any Permit to lapse or terminate or
failed to renew any material Permit that is scheduled to terminate or expire
within 60 calendar days after the Closing Date;

 

(viii)                        taken any action that would cause a Portfolio Loan
to become impaired or otherwise result in an event of default under any
Portfolio Credit Document;

 

(ix)                              suffered any damage, destruction or casualty
loss (whether or not covered by insurance) or any material operating or other
loss or any taking of any of the Assets, by condemnation or eminent domain;

 

(x)                                 failed to remit in compliance with SBA
Rules and Regulations any amounts due and payable to the Transfer Agent with
respect to the guaranteed portion of any Portfolio Loan prior to the Closing
Date; or

 

(xi)                              entered into, or authorized, any Contract to
do any of the foregoing.

 

Section 4.11.  Assets; Property.  The Company has the legal and valid title to
or leasehold interest in, and right to use, all of the properties and assets,
tangible or intangible, including, without limitation, Leaseholds, Equipment,
Fixtures, Contract rights (excluding any rights of the Company under the
Portfolio Credit Documents or Non-Recourse Asset Documents), Owned

 

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Intellectual Property and personal property, used in or necessary for the
conduct of the Business, which assets and properties, for avoidance of doubt, do
not include any Portfolio Loans, any Portfolio Credit Documents, any
Non-Recourse Assets or Non-Recourse Asset Documents (such properties and assets
other than the Portfolio Loans and the Non-Recourse Assets and the Portfolio
Credit Documents and Non-Recourse Asset Documents, being the “Assets”) free and
clear of all Liens, except for Permitted Liens.  No assets, properties, rights
or interests, other than the Assets, are required for the Company to conduct
their business and operations as currently conducted or as proposed to be
conducted.  The Assets and the Portfolio Loans comprise all assets and
properties reflected in the Financial Statements, except for Portfolio Loans and
assets and properties sold or otherwise disposed of since the date of the most
recent Financial Statements in the ordinary course of business consistent with
past practice.  The Company does not own any Real Property.

 

Section 4.12.  Material Contracts.

 

(a)                           Schedule of Material Contracts.  Schedule
4.12(a) consists of the contents of the Datasite as of the date hereof.  On the
date that is two (2) Business Days prior to the Closing, the Seller shall
prepare a DVD-ROM (or similar physical file storage medium) containing the
contents of such Datasite as of such date (the “DataSite Download Date”). Such
Schedule 4.12(a) contains (and as of the Closing Date, shall contain) all
Contracts of the following types to which the Company is a party or a
beneficiary or by which any of its properties are bound, excepting documents
included in the Loan Files (“Material Contracts”):

 

(i)                                     Pooling and Servicing Documents;

 

(ii)                                  Wells Fargo Credit Documents;

 

(iii)                               Asset Purchase Documents;

 

(iv)                              the Gateway Portfolio Purchase Agreement and
Gateway Promissory Note;

 

(v)                                 deposit agreements, indentures, mortgages,
pledge agreements, security agreements, deeds of trust, conditional sale
agreements or other Contracts granting a Lien on the Assets, Non-Recourse Assets
or Portfolio Loans to any Person;

 

(vi)                              credit agreements, guarantees, indentures,
loan agreements, purchase agreements, bonds, capitalized leases, bonds,
debentures, notes, foreign exchange or other hedging arrangements, interest rate
swaps, investments and other evidences of Company Debt providing for or relating
to Debt in respect of which the Company is in any manner directly or
contingently obligated or liable;

 

(vii)                           Contracts under which the Company has, directly
or indirectly, purchased or acquired any Securities or otherwise made any
advance, loan, extension of credit or capital contribution to, or other
investment in, any Person other than a Portfolio Loan, and all joint venture,
partnership and limited liability company Contracts;

 

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(viii)                        custody arrangements, administration agreements,
transfer agent agreements, accounting agreements, clearing agreements, revenue
and fee sharing agreements, and similar agreements;

 

(ix)                              licenses and arrangements pursuant to which
the Company is permitted by any Person to use any Intellectual Property (the
“Licensed Intellectual Property”) that is material to the conduct of the
Business or permits any Person to use any Owned Intellectual Property;

 

(x)                                 joint venture, partnership, limited
liability company, acquisition or divestiture agreements, finder’s agreements or
other similar agreements;

 

(xi)                              agreements or legally binding commitments
between the Company, on the one hand, and any Affiliate of the Seller or any
Affiliate of the Company not Controlled by the Company, on the other;

 

(xii)                           leases of Real Property;

 

(xiii)                        Contracts (A) for the sale or Transfer by the
Company, or for the purchase or other acquisition by the Company, of Assets,
including, without limitation, purchase orders, goods, materials, supplies,
machinery, capital assets or services or capital expenditures or research and
development, and (B) granting any Person any right of first refusal, right of
first offer, buy-sell or economically preferential right or other similar
rights, to purchase any of the Assets;

 

(xiv)                       Contracts which (A) require the Company to deal on
an exclusive basis with any Person, (B) restrict or purport to restrict the
Company from doing any kind of business or from doing business with any Person
or in any geographic area or from competing with any Person, (C) require the
Company to maintain the confidentiality of any matter, and (D) require the
Company to indemnify any Person;

 

(xv)                          (A) employment, retainer, severance, separation,
non-competition, non-solicitation, agency, bonus, profit-sharing, compensation,
stock option, pension, retirement, deferred compensation and consulting
Contracts with, and any other plans, trusts, funds, agreements or arrangements
for the benefit of, current and former employees, officers, directors, sales
representatives, agents, consultants and independent contractors, (B) Contracts
with any labor union or other collective bargaining group, and (C) Contracts
setting forth the terms of or otherwise relating to Benefit Plans;

 

(xvi)                       (A) Contracts with any shareholder, director,
officer or other Affiliate of the Company, (B) shareholders’ agreements,
investor rights agreements, registration rights agreements, voting agreements
and other similar agreements relating to the Company’s Equity Securities, and
(C) proxies, voting trusts, or powers of attorney to act on behalf of the
Company;

 

(xvii)                    Contracts with any Governmental Body;

 

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(xviii)                 Contracts not made in the ordinary course of business
consistent with past practice or which would have a Material Adverse Effect on
the Company;

 

(xix)                       other Contracts to which the Company is a party, or
by or to which it or any of its Assets or the Business is bound or subject,
which has an aggregate future liability, benefit or right to payment to any
Person in excess of $100,000 or which are otherwise material to the Business;
and

 

(xx)                          all amendments, waivers, modifications and
supplements to the foregoing.

 

(b)                           Copies of Material Contracts.  Prior to the date
of this Agreement, the Company has made available to the Purchaser for
inspection all Material Contracts through Purchaser’s access to the DataSite.

 

(c)                            Breach.

 

(i)                                     Each of the Material Contracts (A) has
been duly authorized, executed and delivered by the Company and, to the Seller’s
Knowledge, the other parties thereto, and the Company has not received any
written notice or claim (or, to the Seller’s Knowledge, any other notice or
claim) that any Material Contract is not in full force and effect, and
(B) constitutes the legal, valid and binding obligation of the Company and, to
the Seller’s Knowledge, the other parties thereto, enforceable against the
Company and, to the Seller’s Knowledge, the other parties thereto in accordance
with the terms of each such Material Contract except as enforcement may be
limited by applicable bankruptcy, insolvency or other Laws affecting creditors’
rights generally or by legal principles of general applicability governing the
availability of equitable remedies.

 

(ii)                                  Except as set forth on Schedule
4.12(c)(ii), there exists no material breach or default (or event which with or
without the lapse of time or the giving of notice, or both would constitute a
material breach or default) under the Material Contracts by the Company, or the
other parties thereto, and neither the Company nor, to the Seller’s Knowledge,
any other party to any Material Contract has given any notice of any material
breach or default thereunder.  The Company has not given or received any written
notice (or, to the Seller’s Knowledge, any other notice) that any party to any
Material Contract intends to terminate, amend or modify any Material Contract.

 

(iii)                               Except as disclosed on Schedule
4.12(c)(iii), the consummation of the Transactions will not cause (A) any of the
Material Contracts to cease to be in full force and effect, (B) the material
breach of any terms or conditions of any Material Contract, (C) the forfeiture
or impairment of any material rights under any Material Contract or (D) any
material penalty or other material adverse consequence under any Material
Contract.

 

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(d)                           Liens.  Schedule 4.12(d) sets forth a correct and
complete list and description of all of the Liens affecting or attaching to the
Assets, the Portfolio Loans, the Non-Recourse Assets, the Portfolio Credit
Documents and the Non-Recourse Asset Documents, except Permitted Liens.

 

Section 4.13.  Portfolio Loans.  With respect to the Portfolio Loans, Portfolio
Credit Documents, and Collateral:

 

(a)                           All of the Portfolio Credit Documents in the
possession of the Company are included in the Loan Files.  The outstanding
principal amount(s) of the Portfolio Loans and the principal amount(s) of the
Unfunded Portfolio Loan Commitments (if any) are accurately stated on Schedule
4.13(a).

 

(b)                           Except as set forth on Section (b) of Exhibit H,
the Company is the sole owner of all of both (i) the Unguaranteed Portions of
the Portfolio Loans and (ii) the Guaranteed Portions of the Portfolio Loans
indicated on the Performing Loan Schedule and Non-Performing Loan Schedule as
being owned by the Company, all of which are free and clear of all Liens of
whatsoever kind or nature except Permitted Liens.  No Guaranteed Portion of any
Portfolio Loan has been sold to any Person other than (x) to the SBA or
(y) pursuant to a Secondary Participation Guaranty Agreement.

 

(c)                            The Company has not effected or received the
benefit of any setoff against any obligor under any of the Portfolio Loan
Agreements.

 

(d)                           Each Portfolio Loan is (i) an interest-bearing
loan, (ii) issued in accordance with Section 7(a) of the SBA Act and the SBA
Authorization and Loan Agreement, (iii) originated and serviced by the Company
in accordance with SBA rules and regulations, (iv) evidenced by promissory notes
reflecting the interest rate required under and security documents granting
Liens on collateral as required under the SBA Authorization and Loan Agreement,
and (v) a loan for which an SBA guarantee is in effect in the percentage and
dollar amount set forth in Exhibit H. The SBA guarantee on each Portfolio Loan
is valid and enforceable against the SBA and, if presented upon a default in the
underlying Portfolio Loan, will be honored by the SBA without denial or repair
(other than any denial or repair arising solely from the actions of the Company
or the Purchaser after the Closing Date).  The Company has in its possession the
originals of all documents or instruments constituting the Portfolio Credit
Documents, and the Portfolio Credit Documents are the only agreements between,
and contain the complete terms of the agreement between, the Debtors under the
Portfolio Loans, on the one hand, and the Company (or any
predecessor-in-interest), on the other hand, regarding the Portfolio Loans and
the Collateral.

 

(e)                            All Records are materially true and correct and
accurately reflect all information set forth therein as of the date thereof,
including the Principal Balance, the status thereof and all transactions
relating thereto, all holdbacks, deposits or other sums due and owing by Seller
to others with respect thereto, and all payments, credits and adjustments
required to be applied to the balance thereof.

 

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(f)                             The Performing Loan Schedule and the
Non-Performing Loan Schedule are accurate as of the date thereon and, as
updated, shall accurately reflect the information therein including, without
limitation, accurately reflecting as of the date thereon and as updated the
Principal Balance of and the accrued and unpaid interest owing on each Portfolio
Loan.

 

(g)                            Except as listed on Schedule 4.13(g), no Debtor
is in monetary default under the terms of any Portfolio Credit Document nor is
any Debtor, to the Seller’s Knowledge, projected to be in monetary default under
any Portfolio Credit Document in the next ninety (90) days and, except in
accordance with SBA rules, regulations or authorization, neither the Company,
nor Seller, nor any of their Affiliates nor any prior holder of a Portfolio Loan
has (i) modified the Portfolio Loan or any Portfolio Credit Document in any
material adverse respect; (ii) satisfied, canceled, or subordinated any
Collateral, in whole or in part, from the stated lien therein; or (iii) executed
any instrument of release, cancellation, modification, or satisfaction relating
to a Portfolio Loan.

 

(h)

 

(i)                                     Except as indicated on Schedule
4.13(h)(i), no Debtor of a Portfolio Loan secured by a first lien on Real
Property is permitted to self-insure physical damage insurance relating to the
Collateral in excess of deductibles permitted in accordance with the related
Portfolio Credit Document.  Collateral constituting Real Property must carry
physical damage insurance to the extent of the replacement value of improvements
thereon as of the date of the Portfolio Loan.

 

(ii)                                  Except as indicated on Schedule
4.13(h)(ii), the Company has received insurance certificates showing all
insurance coverage required to be procured by the Debtors pursuant to the
Portfolio Credit Documents and such insurance is in full force and effect in
accordance with such requirements or Company has, after it has received notice
of termination of insurance coverage, obtained force-placed insurance through
the servicing agreement with FirstCity Servicing which will be required to be
replaced on the Closing Date unless force-placed coverage is continued under the
terms of the Transition Servicing Agreement; Company and Seller will provide a
listing of all force-placed insurance covering Collateral within ten (10) days
prior to the Closing Date and an updated list as of the Closing Date; Company
will bear the risk of loss as to any Collateral not covered by insurance after
the Closing Date.  On the Closing Date, or if the Transition Servicing Agreement
provides for continued force-placed coverage, then on termination of the
Transition Servicing Agreement or through the term of the Transition Servicing
Agreement in the event that such coverage is to be provided under that contract,
all such force-placed coverage shall be cancelled.

 

(i)                               All checks, drafts, notes, monies, and other
payments received by or on behalf of Company on account of any Portfolio Loan
have been credited against the appropriate Principal Balance in accordance with
the Company’s ordinary course of business, and there are no unapplied payments,
receipts, or unidentified cash balances held by Company or FirstCity Servicing
other than in the ordinary course of business.

 

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(j)                              Neither the Company nor any Seller has assumed
any liability for any maintenance agreement or otherwise agreed to maintain or
service any Collateral. Neither the Company nor any Seller has any obligation to
provide liability or physical damage insurance under any Portfolio Credit
Document.

 

(k)                           All Debtor payments are required to be paid to the
Company at the Company’s offices.

 

(l)                               All Collateral consisting of Real Property is
secured by a Portfolio Credit Document which is a valid and subsisting first
priority lien, or where provided by the SBA Authorization and Loan Agreement or
as set forth in a subordination agreement executed in accordance with SBA
Rules and Regulations and with appropriate approval, is a valid and subsisting
subordinate lien, except for the liens for real estate taxes and special
assessments not yet due and payable or which are shown on Exhibit H, platted
utility easements common to the subdivision or property in which the Real
Property is located, or other Permitted Liens.

 

(m)                       Each of the Portfolio Credit Documents entered into by
the Company with respect to a Portfolio Loan it originated is a genuine, legal,
valid and binding obligation of each of the Debtors thereto, enforceable in
accordance with its terms, subject only to any limitations imposed by applicable
bankruptcy, insolvency, reorganization, moratorium or other Laws affecting the
enforcement of creditors’ rights generally.  The Portfolio Credit Documents
entered into by the Company with respect to Portfolio Loans it originated are,
in all manners, what they purport to be and arose out of a bona fide transaction
in the ordinary course of business of the Company or a prior holder of such
Portfolio Loans.

 

(n)                           Each Portfolio Credit Document originated by the
Company was in compliance with the requirements of applicable Law at the time
that it was originated and was legally sufficient in the jurisdiction where
executed and in which the Collateral is located and any Portfolio Credit
Documents which are required to be recorded or should be recorded are recorded,
as applicable.  To the Seller’s Knowledge, there are no defects or deficiencies
in any Portfolio Credit Document which would cause or allow any Debtor to avoid
liability thereunder or create any right of set-off, counterclaim or defense to
the enforcement thereof.

 

(o)                           The Company and, to the Seller’s Knowledge, any
prior holder(s) of the Portfolio Loans, have materially complied with all the
terms, provisions, and conditions of the Portfolio Credit Documents applicable
to such Person.

 

(p)                           No Portfolio Credit Document or Portfolio Loan
originated by the Company is subject to any defense, set-off, or counterclaim to
the payment of the amount of the Principal Balance thereof or any payment due
thereunder as a result of any action by Company.

 

(q)                           For any Collateral constituting Real Estate, there
is no pending proceeding for the total or partial condemnation of all or any
portion thereof and, to the Seller’s Knowledge, such Real Estate is undamaged by
waste, fire, earthquake or earth movement, wind storm, flood, tornado, or other
casualty so as to materially adversely affect the value of the Real Estate as
Collateral for a Portfolio Loan or the use for which such Real Estate was
intended.

 

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(r)                              The Company has not advanced any funds or
induced, solicited, or knowingly received any advance of funds by any party
other than a Debtor, directly or indirectly, for the payment of any amount
required to be paid under the Portfolio Credit Documents.

 

(s)                             For each Portfolio Loan originated by the
Company, and, to the Seller’s Knowledge, for each Portfolio Loan acquired by the
Company, the Company, or the owner of the Portfolio Loan at the time the loan
was originated, acquired a title insurance policy in the name of the Company or
the prior owner of the Portfolio Loan, in an amount equal to the lesser of
(x) the appraised value (as of the date the applicable Portfolio Loan was made)
of the Real Property that secures the Portfolio Loans, or (y) the Principal
Balance of the Portfolio Loan (as of the date the applicable Portfolio Loan was
made), and which insures that: (i) the Company has a first recorded lien, or
other subordinate lien as required or allowed by the SBA Authorization and Loan
Agreement or as set forth in a subordination agreement executed in accordance
with SBA Rules and Regulations and with appropriate approval, on the Real
Property which constitutes a portion of the Collateral; and (ii) to the Seller’s
Knowledge, all improvements on Real Property which constitutes a portion of the
Collateral and is included for purposes of determining the appraised value of
any Collateral that is Real Property lie wholly within the boundaries and
building restriction lines of such Real Property and no improvement on adjoining
properties encroach upon such Real Property.

 

(t)                              All Portfolio Loans meet, or are exempt from,
applicable Laws pertaining to usury and no Loan is usurious.

 

(u)                           Except for those Portfolio Loans as disclosed in
Exhibit H hereof, the proceeds of all Portfolio Loans have been fully disbursed
and there is no requirement for future advances under any Portfolio Credit
Document.  There are no outstanding costs, fees, or expenses incurred in making,
closing, recording, or servicing any Portfolio Loan, other than fees owed to the
Transfer Agent or the SBA under the Secondary Participation Guaranty Agreements,
the yearly fee owed to the SBA under Section 7(a)(23) of the SBA Act and routine
costs and expenses in connection with servicing the Portfolio Loans.

 

(v)                           All collection and servicing practices utilized by
the Company have been in all material respects in accordance with applicable
Law. The Company possesses and will possess at Closing all of the Records for
each Portfolio Loan.

 

(w)                         The Loan Files contain all material documents
relating to or in connection with all Portfolio Loans and all Pending Loans,
including without limitation a copy of each note or other instrument evidencing
each Portfolio Loan or Pending Loan and any secondary sales documents related to
each Portfolio Loan or Pending Loan.

 

Section 4.14.  Intellectual Property.

 

(a)                           Schedule 4.14(a) lists all Intellectual Property
owned by the Company that is material to the Business (the “Owned Intellectual
Property”) and all other material Intellectual Property not owned by the Company
in which the Company has an interest, whether as licensee, licensor,
sublicensee, sublicensor or otherwise that is used by the Company and/or is
necessary

 

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to conduct the Business (the “Licensed Intellectual Property”).  The Owned
Intellectual Property and the Licensed Intellectual Property (collectively, the
“Company Intellectual Property”) constitute all Intellectual Property used or
held for use by or in connection with the Business, or that is necessary for the
conduct of or otherwise material to the Business.

 

(b)                           The Company owns or has a valid license to use the
Company Intellectual Property, free and clear from any Liens other than
Permitted Liens and free from any requirement of any past, present or future
royalty payments, license fees, charges or other payments, or conditions or
restrictions whatsoever.

 

(c)                            The Company is in compliance with all applicable
contractual and legal requirements pertaining to data protection or information
privacy and security, including any privacy policy concerning the collection or
use of such data or information used in the Business.  The Company has
implemented, through its servicing agreement with FirstCity Servicing which will
continue through the term of the Transition Servicing Agreement commercially
reasonable backup and disaster recovery arrangements to ensure the continued
operation of the Business in the event of a disaster or business interruption.

 

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Section 4.15.  Insurance.  The Company, all of the Assets and the Business are
covered by valid and currently effective insurance policies or binders of
insurance, including, without limitation, general liability insurance, property
insurance, workers’ compensation insurance and business interruption insurance,
issued in favor of the Company, in each case, with financially sound and
reputable insurance companies and in such types and amounts and covering such
risks as are consistent with customary practices and standards of companies
engaged in business and operations substantially similar to those of the
Company.  The Company is not in default with respect to its obligations under
any insurance policy maintained by any of them, and all premiums thereunder will
have been timely paid in full for all periods up to and through the Closing
Date.  The Company has in effect, and is the named insured under and/or
beneficiary of, all fidelity bonds, insurance policies or other required
policies set forth in the Portfolio Credit Documents.

 

Section 4.16.  Books and Records.  The records and books of account of the
Company are accurate, correct and complete in all respects, have been maintained
in accordance with good business practices, including the maintenance of an
adequate system of financial controls, accurately reflect the transactions and
other information purported to be contained therein and are reflected accurately
in all respects in the Financial Statements.  Correct and complete copies of all
of the Company’s books and records have been provided to the Purchaser or its
representatives.  The minute books of the Company, copies of which have been
delivered to the Purchaser or its representatives prior to the date of this
Agreement, contain accurate records of all meetings and accurately reflect all
corporate action of the Shareholders and the Board of Directors (including
committees) of the Company.  The stock books and ledgers of the Company, copies
of which have been delivered to the Purchaser or the Purchaser’s representatives
prior to the date of this Agreement, correctly record all transfers and
issuances of all Securities of the Company, and contain all canceled and unused
stock certificates of the Company.

 

Section 4.17.  Environmental Matters.  Except as could not reasonably be
expected to have a Material Adverse Effect on the Company, (a) the Company is
and has been in compliance with all Environmental Laws; (b) there has been no
release, or to the Seller’s Knowledge threatened release, of any Hazardous
Material on, upon, into or from any site currently or heretofore owned, leased
or otherwise used by the Company; (c) there has been no Hazardous Material
generated by the Company that have been disposed of or come to rest at any site
that has been included in any published U.S. federal, state or local “superfund”
site list or any other similar list of hazardous or toxic waste sites published
by any governmental authority in the United States; and (d) there are no
underground storage tanks located on, no polychlorinated biphenyls (“PCBs”) or
PCB-containing equipment used or stored on, and no hazardous waste as defined by
the Resource Conservation and Recovery Act, as amended, stored on, any site
owned or operated by the Company, except for the storage of hazardous waste in
compliance with Environmental Laws.  Seller has not received notice that any
Collateral securing any Portfolio Loan has been contaminated with, exposed to or
is subject to liability for any Hazardous Material, the presence of which
(A) requires any reporting, investigation or remediation under any Environmental
Laws; (B) causes or threatens to cause a nuisance on any adjacent property or
poses or threatens to pose a hazard to the health or safety of the persons on
the Collateral or

 

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adjacent property; or (C) which, if it emanated or migrated from the Collateral,
could constitute a trespass.  The Company has made available to the Purchaser
true and complete copies of all material environmental records, reports,
notifications, certificates of need, permits, pending permit applications,
correspondence, engineering studies, and environmental studies or assessments.

 

Section 4.18.  Employees; ERISA.

 

(a)                           Schedule of Employees.  Schedule 4.18(a) sets
forth a correct and complete list and description of all of the employees of,
and consultants and independent contractors to, the Company and each employee’s
place of employment, compensation, bonuses, deferred or contingent compensation,
pension, accrued vacation, accrued sick pay, severance, “golden parachute” and
other like benefits and term of employment, in effect as of the date of this
Agreement.

 

(b)                           Employment Agreements.  The Company has not
entered into, and is not bound by, any (i) employment, consulting or severance
Contract with any of its directors, officers or employees other than those
agreements disclosed to the Purchaser as Material Contracts, or (ii) collective
bargaining agreements with its employees. None of the Company’s employees is
subject to any non-compete, non-disclosure, confidentiality, employment,
consulting or similar agreements relating to, affecting or in conflict with the
Company’s conduct of the Business.  The Company has entered into normal and
customary non-competition and non-solicitation agreements with all former
officers and other members of management of the Company.

 

(c)                            Benefit Plans.  Schedule 4.18(c) sets forth a
correct and complete list of all Benefit Plans of the Company, true, correct and
complete copies of which have been delivered to the Purchaser or its
representatives prior to the date of this Agreement.

 

(d)                           Plan Qualifications.  Each of the Company’s
Benefit Plans which is an “employee pension benefit plan” (as defined in
Section 3(2) of ERISA) and intended to qualify under Section 401(a) of the Code
has received a favorable determination letter from the Internal Revenue Service
that the Benefit Plan is qualified and that its related trust has been
determined to be exempt from taxation under Section 501(a) of the Code.  No
events or circumstances have occurred (other than changes for which the remedial
amendment period under Section 401(b) of the Code has not expired) since the
date of such letters that will materially adversely affect the qualification or
exemption of such Benefit Plan.  No Benefit Plan sponsored by the Company is
under audit, nor, to the Seller’s Knowledge, is any such audit pending.

 

(e)                            Workers’ Compensation.  There are no liabilities
to any of the Company’s employees relating to workers’ compensation benefits
that are not fully insured against by third-party insurance carriers.

 

(f)                             WARN Act.  The Company has not laid off or
involuntarily dismissed (other than for cause) any employees within the six
months immediately prior to the Closing Date.  The Company has not, within the
90 days immediately prior to the Closing Date, taken any action or

 

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actions which would, independently of the Transactions, result in a plant
closing or mass layoff within the meaning of the WARN Act.

 

Section 4.19.  Certain Business Relationships with the Company.

 

(a)                           Certain Transactions or Arrangements.  Except as
set forth on Schedule 4.19(a), no partner, shareholder, member, manager,
officer, director, employee or other Affiliate of the Seller or the Company, nor
any spouse, former spouse, parent, sibling or child of any such Person or
Affiliate thereof, (i) is, or has been during the twelve (12)-month period
immediately preceding the date of this Agreement, involved in any business
arrangement, relationship or transaction with the Company, other than an
employment relationship, (ii) is, or has been during the 12-month period
immediately preceding the date of this Agreement, a party to any Contract with
the Company, or (iii) will after the Closing have any interest in any of the
Assets.  Each transaction or arrangement set forth on Schedule 4.19(a) has been
conducted at all times on arm’s length commercial terms.

 

(b)                           No Other Related Party Transactions.  Except as
set forth on Schedule 4.19(b), no Seller nor any partner, shareholder, member,
manager, officer, director, employee or other Affiliate of any Seller or the
Company, nor any spouse, former spouse, parent, sibling or child of any such
Person or Affiliate thereof, owns, holds or possesses, directly or indirectly,
any financial or other interest in, or is a partner, shareholder, member,
manager, officer, director, employee or other Affiliate of, (i) any Person that
is a supplier, vendor, client, customer, lessor, lessee, lender, Debtor, or
competitor of the Company or the Business, or (ii) any other business which
engages in any transactions or other business relationships with the Company.

 

Section 4.20.  Undisclosed Liabilities.  The Company does not have any
obligation or liability, whether accrued, absolute, contingent or otherwise,
except (a) to the extent fully and specifically reflected or reserved for on the
Company’s most recent Financial Statements, (b) obligations or liabilities
incurred since the date of the Company’s most recent Financial Statements in the
normal and ordinary course of business of the Company consistent with past
practice, and not in violation of the Transaction Documents, which obligations
do not exceed $50,000 in the aggregate, or (c) the obligations under the
Non-Recourse Loans.

 

Section 4.21.  Subsidiaries.  The Company has no Subsidiaries and the Company
does not own or hold any Securities in any Person, other than to the extent
provided in any of the Portfolio Credit Documents or as set forth on Schedule
4.21.

 

Section 4.22.  Pending Loans.  With respect to any loans to be made by the
Company for which a binding commitment on behalf of the Company has been made
and funding is pending, each of which is set forth on Schedule 4.22 (“Pending
Loans”), (a) the Company has acted at all times in the ordinary course of
business with respect to such Pending Loans, in compliance with all applicable
Law and (b) the Company is not aware of any fact with respect to such Pending
Loans that could result in an event of default or other impairment with respect
to such Pending Loans once funded.

 

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Section 4.23.  Non-Recourse Assets. With respect to the Non-Recourse Assets, all
of the Non-Recourse Asset Documents for each Non-Recourse Asset in the
possession of the Company are included in the Loan File for that Non-Recourse
Asset.

 

Section 4.24  Disclosure.  To the Seller’s Knowledge, there are no facts
pertaining to the Seller, the Company, any of their Affiliates, the Assets or
the Business which could reasonably be expected to have a Material Adverse
Effect on the Company or the Seller which have not been disclosed in this
Agreement.

 

ARTICLE V

 

Representations and Warranties of Seller About Seller

 

The Seller represents and warrants to the Purchaser as of the date hereof and as
of the Closing Date as follows:

 

Section 5.01.  Existence and Power.  The Seller (a) is a Texas corporation which
is  validly existing and in good standing under the laws of the jurisdiction of
its organization and (b) has all corporate power and authority to execute and
deliver each of the Transaction Documents to which it is a party, to consummate
the Transactions and to perform its obligations under the Transaction Documents,
except in the case of clauses (a) and (b) where the failure to have such status
or authority would not materially and adversely affect the ability of the Seller
to perform its obligations under the Transactions Documents or to consummate the
Transactions.

 

Section 5.02.  Authorization; Binding Effect.  The execution and delivery by the
Seller of each of the Transaction Documents to which the Seller is a party, the
performance by the Seller of its obligations under such Transaction Documents
and the consummation of the Transactions by the Seller has been duly authorized
by all necessary corporate action on the part of the Seller.  No other
proceedings on the part of the Seller are necessary to approve and adopt the
Transaction Documents or to approve the consummation of the Transactions.  Each
of the Transaction Documents to which the Seller is or may become a party is,
or, when executed and delivered in accordance with this Agreement will be, a
legal, valid and binding obligation of the Seller enforceable against the Seller
in accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency or other Laws affecting creditors’ rights generally or by
legal principles of general applicability governing the availability of
equitable remedies.

 

Section 5.03.  Contravention.  Neither the execution, delivery and performance
of the Transaction Documents by the Seller nor the consummation of the
Transactions by the Seller will (with or without notice or lapse of time or
both) (a) conflict with, violate or breach any provision of the Seller’s
Organizational Documents (if applicable), (b) assuming the receipt of all of the
Seller Required Consents prior to the Closing, conflict with, violate or breach
any Law by which the Seller or any of its material assets or properties may be
bound or affected, or (c) assuming the receipt of all of the Seller Required
Consents prior to Closing, conflict with, breach or result in a default under,
result in the acceleration of, or give rise to a change in the terms of or a
right of termination, cancellation, modification or acceleration or require any
notice under, any material Contract to which the Seller is a party or by which
the Seller or any of their respective assets or properties may be bound or
affected, except with respect to clauses (b) or (c), for such violations,
breaches, conflicts, other events which would not materially and adversely
affect the

 

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ability of the Seller to perform its obligations under the Transaction Documents
or to consummate the Transactions.

 

Section 5.04.  Consents.  Except for the Consents set forth on Schedule 4.04, no
material Consents are required or advisable in connection with (a) the due
execution and delivery by the Seller of the Transaction Documents and the
performance of the Seller’s obligations thereunder, (b) the consummation of the
Transactions by the Seller, (c) the exercise by the Purchaser of its rights and
remedies under the Transaction Documents, and (d) the conduct of the Business or
the ownership or use of the Assets by the Company immediately following the
Closing Date.  As of the Closing Date, all of the Seller Required Consents will
have been obtained and will be in full force and effect.

 

Section 5.05.  Litigation.  There is no Action against the Seller or, to the
Seller’s Knowledge, any other Person, that involves any of the Transactions or
any Asset owned, licensed, leased or used by the Company or the Seller that,
individually or in the aggregate, if determined adversely the Company or the
Seller, could reasonably be expected to have a material adverse effect on the
Seller’s ability to consummate the Transactions to which they are a party or
perform their respective obligations under the Transaction Documents to which
they are a party.

 

Section 5.06.  Title to Securities.  The Seller is the sole record, legal and
beneficial owners of the Purchased Interests, and have good and marketable title
to the Purchased Interests, free and clear of all Liens that will not be
released at Closing, Transfer restrictions, rights of first refusal or first
offer, options, voting trusts, voting Contracts and restrictions of any nature
whatsoever.  Upon consummation of the Closing, the Purchaser shall become the
sole record legal and beneficial owner of the Purchased Interests and good and
marketable title to the Purchased Interests will pass to the Purchaser, free and
clear of any Liens, Transfer restrictions, rights of first refusal or first
offer, options, voting trusts, voting Contracts and restrictions of any nature. 
The Purchased Interests are the only Securities of any kind, debt or equity, of
the Company owned by the Seller or by any other Person.

 

Section 5.07.  Sophisticated Seller; Adequate Information; Securities Laws.  The
Seller is a sophisticated seller with respect to the Purchased Interests and has
such knowledge and experience in financial and business matters that the Seller
is capable of evaluating the merits and risks of such sale, is aware of and has
considered the financial risks and financial hazards of selling the Purchased
Interests on the terms set forth in the Transaction Documents and is willing to
forego through such sale the potential for future economic gain that might be
realized from the Purchased Interests.  The Seller has adequate information
concerning the business and financial condition of the Company and such other
matters with respect to the Company as a reasonable person would consider in
evaluating the Transactions, including, without limitation, all information
necessary to determine the fair market value of the Purchased Interests, to make
an informed decision regarding the sale of the Purchased Interests to the
Purchaser hereunder.   The Seller has evaluated the merits and risks of selling
the Purchased Interests on the terms set forth in the Transaction Documents, and
has independently, without reliance upon the Purchaser and based on such
information as the Seller deemed appropriate, made the analysis and decision to

 

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enter into this Agreement, the other Transaction Documents and to sell the
Purchased Interests to the Purchaser.  The Seller has not offered to sell any
portion of the Purchased Interests or any interest therein in a manner which
violates any applicable securities law or would require the sale hereunder to be
registered under the Securities Act.

 

Section 5.08.  Transactions With the Company.  Except as set forth on Schedule
5.08 hereof, neither the Seller nor any of the Seller’s Affiliates is, nor has
the Seller or any of the Seller’s Affiliates been during the 12-month period
immediately preceding the date of this Agreement, (a) involved in any business
arrangement, relationship or transaction with the Company or any of its
Affiliates, or (b) a party to any Contract with the Company or any of its
Affiliates.  Each transaction, arrangement or Contract set forth on Schedule
5.08 has been conducted at all times, and/or was negotiated, on arm’s length
commercial terms.

 

Section 5.09.  Brokers, Finders.  Other than Mr. Timothy Terry, the fees and
expenses of whom shall be borne in accordance with Section 10.07, neither the
Company nor the Seller has retained any broker or finder in connection with the
Transactions, and is not obligated and has not agreed to pay any brokerage or
finder’s commission, fee or similar compensation for which the Purchaser or the
Company may be liable.

 

Section 5.10.  Solvency.  As of the date of this Agreement, and as of the
Closing Date, before and after giving effect to the Transactions, the Seller is,
and will be, Solvent.

 

Section 5.11.  Seller Guarantee.  Concurrently with the execution of this
Agreement, the Seller Guarantor has delivered to Purchaser the Seller
Guarantee.  The Seller Guarantee is in full force and effect and is the valid,
binding and enforceable obligation of the Seller Guarantor except as enforcement
may be limited by applicable bankruptcy, insolvency or other Laws affecting
creditors’ rights generally or by legal principles of general applicability
governing the availability of equitable remedies, and no event has occurred
which, with or without notice, lapse of time or both, would constitute a default
on the part of the Seller Guarantor under such Seller Guarantee.

 

ARTICLE VI

 

Representations and Warranties of the Purchaser

 

The Purchaser represents and warrants to the Seller as of the date hereof and as
of the Closing Date as follows:

 

Section 6.01.  Existence and Power.  The Purchaser (a) is a Delaware limited
liability company, validly existing and in good standing under the laws of the
jurisdiction of its organization, and (b) has all necessary limited liability
company power to execute and deliver each of the Transaction Documents and to
consummate the Transactions and to perform its obligations under the Transaction
Documents, except in the case of clauses (a) and (b) where the failure to have
such status or authority would not materially and adversely affect the ability
of

 

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the Purchaser to perform its obligations under the Transaction Documents or to
consummate the Transactions.

 

Section 6.02.  Authorization; Binding Effect.  The execution and delivery by the
Purchaser of each of the Transaction Documents to which the Purchaser is a
party, the performance by the Purchaser of its obligations under such
Transaction Documents and the consummation of the Transactions by the Purchaser
has been duly authorized by all necessary limited liability company action on
the part of the Purchaser. No other proceedings on the part of Purchaser are
necessary to approve and adopt the Transaction Documents or to approve the
consummation of the Transactions.   Each of the Transaction Documents to which
the Purchaser is or may become a party is, or, when executed and delivered in
accordance with this Agreement will be, legal, valid and binding obligations of
the Purchaser enforceable against the Purchaser in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy, insolvency or
other Laws affecting creditors’ rights generally or by legal principles of
general applicability governing the availability of equitable remedies.

 

Section 6.03.  Contravention.  Neither the execution, delivery and performance
of the Transaction Documents by the Purchaser nor the consummation of the
Transactions by the Purchaser will (with or without notice or lapse of time or
both) (a) conflict with, violate or breach any provision of the Purchaser’s
Organizational Documents, (b) assuming the receipt of all of the Purchaser
Required Consents prior to the Closing, conflict with, violate or breach any Law
by which the Purchaser or any of its material assets or properties, are bound or
affected, or (c) assuming the receipt of all of the Purchaser Required Consents
prior to the Closing, conflict with, breach or result in a default under, result
in the acceleration of, or give rise to a change in the terms of or a right of
termination, cancellation, modification or acceleration or require any notice
under any material Contract to which the Purchaser is a party or by which the
Purchaser or any of its material assets or properties, are bound or affected,
except with respect to clauses (b) or (c), for such violations, breaches,
defaults, other events which would not materially and adversely affect the
ability of the Purchaser to perform its obligations under the Transaction
Documents or to consummate the Transactions.

 

Section 6.04.  Consents.  Except for the Purchaser Required Consents set forth
on Schedule 6.04, no material Consents are required on behalf of the Purchaser
in connection with (a) the due execution and delivery by the Purchaser of the
Transaction Documents and the performance of the Purchaser’s obligations
thereunder, and (b) the consummation of the Transactions by the Purchaser,
except, in each case, for those Purchaser Required Consents, the absence of
which would not materially and adversely affect the ability of the Purchaser to
perform its obligations under the Transaction Documents.  As of the Closing
Date, all of the Purchaser Required Consents shall have been obtained.

 

Section 6.05.  Litigation.  There is no Action against the Purchaser or, to the
Purchaser’s Knowledge, any other Person (not including the Company or the
Seller), that involves any of the Transactions or any material asset or property
owned, licensed, leased or used by the Purchaser that, individually or in the
aggregate, if determined adversely to the Purchaser, would materially

 

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and adversely affect the ability of the Purchaser to perform its obligations
under the Transaction Documents or to consummate the Transactions.

 

Section 6.06.  Investment Representations.

 

(a)                                 Purchase for Own Account.  The Purchaser is
acquiring the Purchased Interests hereunder for its own account, not as a
nominee or agent, and not with a view to the distribution of any part thereof in
violation of applicable securities Laws.

 

(b)                                 No Registration.  The Purchaser understands
and acknowledges that the Purchased Interests are not and are not being
registered under the Securities Act or any state securities laws.  The Purchaser
understands that the Purchased Interests cannot be sold unless they are
subsequently registered under the Securities Act and applicable state securities
laws or an exemption from such registration is available.  The Purchaser
understands that there is no public or other market for the Purchased Interests
and that no such public or other market is expected to develop.

 

(c)                                  Accredited Investor; Sophisticated
Purchaser; Economic Wherewithal.  The Purchaser is an “accredited investor” as
defined in Rule 501(a) of the Securities Act.  The Purchaser, alone or in
connection with its financial, legal and other advisers, is sufficiently
experienced in financial and business matters to be capable of analyzing and
evaluating the merits and risks of an investment in the Purchased Interests, and
to make an informed decision relating thereto, and otherwise to protect its own
interests with respect to the investment in the Purchased Interests.  The
Purchaser’s financial situation is such that the Purchaser can afford to bear
the economic risk of holding the Purchased Interests for an indefinite period of
time, has adequate means for providing for its current needs and personal
contingencies, and can afford to suffer the complete loss of the Purchaser’s
investment in the Purchased Interests.

 

(d)                                 No Reliance.  The Purchaser has made its own
independent evaluation of the Business, results of operations, prospects,
condition (financial or otherwise) or assets of the Company and its investment
in the Purchased Interests and has not relied on the Seller, or any of their
Affiliates, accountants, counsel or other representatives in connection with the
Purchaser’s investment in the Purchased Interests except for the Purchaser’s
reliance on the express representations of the Seller and its Affiliates
hereunder or in the other Transaction Documents.  The Purchaser understands that
neither the Seller, nor any of its Affiliates, accountants, counsel or other
representatives is acting as the Purchaser’s broker or advisor in connection
with the Purchaser’s investment in the Purchased Interests. The Purchaser
acknowledges that it has been provided adequate access to the personnel,
properties, assets, premises, books and records, and other documents and data of
the Company for such purpose.

 

Section 6.07.  Brokers, Finders.  Other than (a) Mr. Timothy Terry, the fees and
expenses of whom shall be borne in accordance with Section 10.07, and
(b) Milestone Capital, the fees and expenses of which shall be paid by
Purchaser, the Purchaser has not retained any broker or finder in connection
with the Transactions, and is not obligated and has not agreed to pay any
brokerage or finder’s commission, fee or similar compensation for which the
Seller or the Company may be liable.

 

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Section 6.08.  Disclosure.  To the knowledge of the Purchaser, there are no
facts pertaining to the Purchaser or its Affiliates which could reasonably be
expected to have a Material Adverse Effect on the Purchaser and which have not
been disclosed in this Agreement.

 

Section 6.09.  Purchaser Guarantee.    Concurrently with the execution of this
Agreement, the Purchaser Guarantor has delivered to the Seller the Purchaser
Guarantee.  The Purchaser Guarantee is in full force and effect and is the
valid, binding and enforceable obligation of the Purchaser Guarantor except as
enforcement may be limited by applicable bankruptcy, insolvency or other Laws
affecting creditors’ rights generally or by legal principles of general
applicability governing the availability of equitable remedies, and no event has
occurred which, with or without notice, lapse of time or both, would constitute
a default on the part of the Purchaser Guarantor under such Purchaser Guarantee.

 

ARTICLE VII

 

Covenants of the Seller and Purchaser

 

Section 7.01.  Conduct of Business Pending Closing.  The Seller agrees that,
from the date of this Agreement through the earlier to occur of (x) the Closing
Date, and (y) the date on which this Agreement is terminated in accordance with
the provisions of Section 9.01 hereof, the Seller shall cause the Company to:

 

(a)                                 Conduct of Business.  Conduct its business
in a manner consistent with the past practice of the Company and the Company
shall not engage in any transactions out of the ordinary course of business
consistent with past practice, except as contemplated by this Agreement.

 

(b)                                 Payment of Obligations.  Promptly and timely
pay and discharge in the ordinary course of the Company’s business consistent
with past practice, all Taxes and other obligations assessed, levied or imposed
upon, or required to be withheld by, or otherwise owing by, the Company, or with
respect to the Assets or the Business and shall not incur, assume, guarantee or
otherwise become liable for any additional Debt.

 

(c)                                  Material Contracts.  Perform and observe
all of the terms and provisions of each Material Contract to be performed or
observed by it, enforce each Material Contract in accordance with its terms and
not enter into or terminate any Material Contracts or make any material
amendments or modifications to any Material Contracts, other than in the
ordinary course of business consistent with past practice except as contemplated
by this Agreement. In addition, the Company shall not amend or modify any terms
or provisions of its Organizational Documents.

 

(d)                                 Amendments to Certain Contracts.  Not
terminate, amend, modify, supplement or change the SBA Authorization and Loan
Agreement or any Portfolio Credit Document (except for amendments,
modifications, supplements or changes made in accordance with SBA Rules and
Regulations), Pooling and Servicing Document, Secondary Participation Guaranty
Agreement, or Wells Fargo Credit Document  without the prior written consent of
the Purchaser,

 

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and any purported amendment, modification, supplement or change made without
such prior written consent shall be null and void and of no force and effect.

 

(e)                                  Representations and Warranties;
Conditions.  Not engage in any practice, take any action, fail to take any
action or enter into any transaction that (i) could reasonably be expected to
(A) cause any of the representations and warranties of the Seller contained in
the Transaction Documents, to be untrue, inaccurate or incorrect in any material
respect on the Closing Date, (B) result in any of the conditions set forth in
Section 3.03 not being satisfied on or prior to the Termination Date or
(ii) result in the conversion of outstanding Equity Securities of the Company
into Equity Securities of the Seller.

 

(f)                                   Sale of Assets; Liens.  Not (i) Transfer
any of the Assets, (ii) dispose of, or trade in, any material portion of the
Equipment or Fixtures, or (iii) create, incur, assume, or suffer to exist any
Lien upon or with respect to any of the Assets.

 

(g)                                  Servicing.  Continue to service the
Portfolio Loans consistent with past practices and procedures.

 

(h)                                 Compensation.  Not increase the aggregate
amount of compensation of the directors, officers or employees of the Company,
including, without limitation, base salaries and bonuses of all types, whether
paid or accrued, except in the ordinary course of business consistent with past
practice.

 

(i)                                     Compliance With Laws.  Comply in all
material respects with all Laws applicable to the Company, the Business or the
Assets.

 

(j)                                    Maintenance of Existence.  Preserve and
maintain its corporate existence and good standing in the jurisdiction of its
incorporation, and qualify and cause it to remain qualified and duly licensed to
conduct the Business as a foreign corporation in each jurisdiction in which such
qualification and/or licensing is required.

 

(k)                                 Maintenance of Records.  Keep adequate
records and books of account reflecting all its financial transactions, keep
minute books containing accurate records of all meetings and accurately
reflecting all corporate action of its shareholders and its board of directors
(including committees) and keep stock books and ledgers correctly recording all
transfers and issuances of all Securities of the Company.

 

(l)                                     Maintenance of Assets.  Maintain, keep
and preserve the Assets in good working order and condition, ordinary wear and
tear excepted.

 

Section 7.02.  Access to Information; Cooperation.

 

(a)  Access to Information.

 

(i)  The Seller understands and acknowledges that the Purchaser has not
completed its examination of the Company, the Assets and the Business and
therefore

 

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requires continuous access to the Company, the Assets and the Business, from the
date of this Agreement through the earlier to occur of (x) the Closing Date and
(y) the date on which this Agreement is terminated in accordance with the
provisions of Section 9.01 hereof.

 

(ii)  The Seller agrees that during the period from the date of this Agreement
through the earlier to occur of (x) the Closing Date and (y) the date on which
this Agreement is terminated in accordance with the provisions of Section 9.01
hereof, the Seller shall, and the Seller shall cause the Company to, and the
Seller shall cause the respective Affiliates, directors, officers, employees,
accountants, counsel, consultants, investment bankers and other representatives
of the Company and Seller to:

 

(A)  give the Purchaser and its authorized representatives, including, without
limitation, investors, lenders, consultants and advisors, and respective
authorized employees, accountants, counsel and other representatives of any of
the foregoing (I) access to all offices, personnel (including the Persons
responsible for the preparation of Tax Returns), facilities, properties, books,
Contracts, commitments and Records of or relating to the Company, including,
without limitation, the Assets and the Business, and (II) such financial and
operating data and other information with respect to the Business and the Assets
as any of them may from time to time reasonably request; and

 

(B)  permit the Purchaser and its authorized representatives, including, without
limitation, investors, lenders, consultants and advisors, and respective
authorized employees, accountants, counsel and other representatives of any of
the foregoing to make such inspections thereof as any of them may request.

 

(b)  Cooperation. The Seller agrees that during the period from the date of this
Agreement through the earlier to occur of (x) the Closing Date and (y) the date
on which this Agreement is terminated in accordance with the provisions of
Section 9.01 hereof, the Seller shall, and the Seller shall cause the Company
to, and the Seller shall cause the respective Affiliates, directors, officers,
employees, accountants, counsel, consultants, investment bankers and other
representatives of the Seller and the Company to, cooperate with the Purchaser
and its representatives in carrying out the Transactions.  In furtherance of the
foregoing, the Seller shall, and shall cause each of its Affiliates, officers,
counsel and employees to, use its best efforts to negotiate and deliver the
Transition Servicing Agreement during the required time period set forth in
Section 2.01(e).

 

Section 7.03.  Disclosure Schedules.

 

(a)  Updating of Disclosure Schedules and Exhibits.  The Seller agrees that
during the period from the date of this Agreement through the earlier to occur
of (x) the Closing Date and (y) the date on which this Agreement is terminated
in accordance with the provisions of Section 9.01 hereof, the Company shall
promptly notify the Purchaser of (i) any and all information, facts, events,
circumstances, issues or other matters that existed as of the date of this
Agreement that should have been set forth or described in the schedules or
exhibits to this Agreement

 

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required or provided for under Articles IV or V of this Agreement as of the date
of this Agreement by delivery of appropriate updates to the Schedules and
Exhibits attached to this Agreement or new Schedules setting forth such
information, facts, events, circumstances, issues or other matters (the “Initial
Schedule Updates”), and (ii) any and all information, facts, events,
circumstances, issues or other matters arising after the date of this Agreement
which, if existing on the date of this Agreement, would have been required to be
set forth or described in the schedules to this Agreement required or provided
for under Articles IV and V hereof, in each case, by delivery of appropriate
updates to the Schedules and Exhibits attached to this Agreement or new
Schedules setting forth such information, facts, events, circumstances, issues
or other matters (the “Pre-Closing Schedule Updates”), in each case, no later
than two (2) Business Days prior to the scheduled Closing Date (any such updates
to the Schedules or new Schedules being referred to herein as “Schedule
Updates”).

 

(b)  Effect of Schedule Updates.  In the event that the Seller delivers any
Schedule Updates to the Purchaser in accordance with the provisions of
Section 7.03(a) above, then such Schedule Updates shall not be (i) deemed to be
attached to this Agreement or become a part of this Agreement, or (ii) given
effect for any purposes under this Agreement, unless such Schedule Updates shall
be accepted by the Purchaser in its reasonable good faith discretion.  In the
event that the Schedule Updates are accepted by the Purchaser, then upon such
acceptance, (i) such Schedule Updates shall be deemed to be attached to this
Agreement and become a part of this Agreement, (ii) all references to the
Schedules in this Agreement shall refer to the Schedules as updated by such
Initial Schedule Updates, and (iii) such Schedule Updates shall be given effect
for all purposes under this Agreement, including, without limitation, for
determining whether the conditions to Closing set forth in Section 3.03 have
been satisfied and for determining whether a Purchaser Indemnified Person is
entitled to indemnification pursuant to Article VIII hereunder.  Notwithstanding
the foregoing, the Seller shall have the right to enter into Material Contracts
of the type described in Section 4.12 in the ordinary course of business during
the period between the date hereof and the Datasite Download Date, and any such
Material Contracts entered into in the ordinary course of business by the Seller
shall be deemed attached to, and become part of, this Agreement without any
further action or agreement by the Purchaser.

 

(c)  Datasite.  The Seller shall not cause the Company to update or modify the
Datasite at any time following the Datasite Download Date.

 

Section 7.04.  Reporting Requirements.  The Seller agrees that during the period
from the date of this Agreement through the earlier to occur of (x) the Closing
Date and (y) the date on which this Agreement is terminated in accordance with
the provisions of Section 9.01 hereof, the Seller shall, and shall cause the
Company to:

 

(a)  Monthly Financial Statements.  Prepare and promptly (and in any event not
later than 25 calendar days following the end of the month to which a statement
relates) deliver to the Purchaser monthly financial statements for the Company
as well as a reasonably detailed back-up schedule therefor.  These monthly
financial statements will be prepared in accordance with GAAP and in a manner
consistent with the basis of presentation used in the financial statements

 

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referred to in Section 4.06 and will fairly present the financial condition and
results of operations of the Company as of and for the periods indicated;

 

(b)  Notice of Litigation.  Promptly after the commencement of each such matter,
deliver notice of all Actions affecting the Seller, the Company or any of the
Assets or the Business that, if adversely determined, would reasonably be
expected to have a Material Adverse Effect on the Company; and

 

(c)  General Information.  Deliver such other information with respect to the
condition or operations, financial or otherwise, or prospects of the Company,
the Business or the Assets as the Purchaser may from time to time reasonably
request.

 

Section 7.05.  No Solicitation of Purchase or Sale.

 

(a)  No Solicitation.  In order to induce the Purchaser to pursue the
Transactions and to incur the costs and expenses necessary to evaluate and
complete the Transactions, the Seller agree that during the period from the date
of this Agreement through the earlier to occur of (x) the Closing Date, and
(y) the date on which this Agreement is terminated in accordance with the
provisions of Section 9.01 hereof, the Seller shall not, the Seller shall cause
the Company not to, directly or indirectly, subject to the fiduciary duties of
the Company’s directors, (i) solicit, initiate, assist or accept any offer,
inquiry or proposal for, entertain any offer, inquiry or proposal to enter into,
take any other action designed to facilitate or encourage (including by way of
furnishing any information), any inquiries or the making of any proposal, in any
case, which constitutes a Competing Transaction, (ii) provide information to any
other Person (other than in the ordinary course of business consistent with past
practice) regarding the Company, the Assets, the Business, their liabilities or
a Competing Transaction or permit any other Person to conduct a due diligence
review of the Company, the Assets, the Business or their liabilities,
(iii) initiate, participate in, continue or conduct any discussions or
negotiations regarding any Competing Transaction, or (iv) enter into any
Contract, arrangement, understanding or commitment with respect to any Competing
Transaction.

 

(b)  Termination of Discussions.  Immediately following the execution and
delivery of this Agreement, the Seller shall notify each other Person with which
the Seller may, during the preceding sixty (60) days, have been engaged in any
discussions or negotiations with respect to a Competing Transaction, that
(i) the Seller has entered into this Agreement with the Purchaser, and (ii) all
such discussions or negotiations are terminated, effective immediately.  The
Seller shall request that all such Persons return all information relating to
the Company, the Business and the Assets theretofore provided to such Person or
its representatives.

 

(c)  Notice of Competing Transaction.  The Seller shall promptly (but in any
event within one business day) advise the Purchaser in writing of any offer,
contact, communication or request for information relating to any Competing
Transaction, the material terms and conditions of such offer, contact,
communication or request and the Competing Transaction and the identity of the
Person making such offer, contact, communication or request.

 

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(d)  Board Approval. Prior to the termination of this Agreement in accordance
with the provisions of Section 9.01, the Seller shall not allow the board of
directors of the Company nor any committee thereof to approve or recommend, or
propose to approve or recommend, any Competing Transaction.

 

Section 7.06.   Public Announcements; Confidentiality.

 

(a)  Public Announcement.  On or prior to the Closing Date, the Seller and the
Purchaser shall jointly agree to a public announcement with respect to the
Transactions (the “Public Announcement”) provided that in the event that the
Seller and the Purchaser cannot agree as to the language of the Public
Announcement the Seller will not make any disclosure other than as is required
under the securities laws, and the Seller will advise the Purchaser of the
disclosure FirstCity intends to make in any securities filings required to be
made by the Seller or its Affiliates and will provide the Purchaser an
opportunity to submit any comments it may have to such disclosure, provided that
the Seller shall make such disclosure as the Seller deems is required by the
securities laws in its own judgment and discretion.  Except for (i) the Public
Announcement, (ii) the disclosure by the Seller in its discretion as is required
by securities laws.  and (iii) general communications to the Company’s
employees, lenders, creditors, or others having business or financial
relationships with the Company prior to the Closing, the Seller and the
Purchaser (and each of their respective Affiliates, managers, members, partners,
shareholders, directors, officers, employees, representatives and agents) shall
not make any public disclosure of any kind concerning the Transactions.  For the
avoidance of doubt, the Purchaser shall have the right to make substantially
similar disclosures to those of the Seller described in this Section 7.06.

 

(b)  Confidential Information.

 

(i)  With respect to the Confidential Information, prior to the Termination Date
and, in the event that the Closing is completed, after the Closing Date, and
with respect to the Purchaser Confidential Information, at all times, the Seller
agrees not to, and agrees to cause its Affiliates, members, partners,
shareholders, directors, officers, employees and agents and any investment
banker, financial advisor, attorney, accountant, representative, and any other
Person acting on behalf of the Seller or the Company (“Representatives”) not to,
directly or indirectly, disclose, reveal, divulge, publish or otherwise make
known, any of the Confidential Information or any Purchaser Confidential
Information to any Person for any reason or purpose whatsoever, or use any of
the Confidential Information or any Purchaser Confidential Information for any
reason or purpose whatsoever at any time from and after the date hereof. In
addition, the Seller agrees to treat the Confidential Information or any
Purchaser Confidential Information as confidential at all times.  The Seller
agrees to be fully responsible for any breach of this Section by any of its
Representatives.

 

(ii)  Notwithstanding the provisions of clause (i) above, if the Seller or any
of its Representatives is required to disclose any Confidential Information or
any Purchaser Confidential Information after the Closing Date pursuant to any
applicable Law, subpoena, court order, similar judicial process, regulatory
agency or stock exchange rule,

 

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the Seller shall promptly notify the Purchaser of any such requirement so that
the Purchaser may seek an appropriate protective order or waive compliance with
the provisions of this Section.  The Seller shall reasonably cooperate with the
Purchaser to obtain such a protective order.  If such order is not obtained, or
the Purchaser waives compliance with the provisions of this Section, the Seller
shall disclose only that portion of the Confidential Information or any
Purchaser Confidential Information which it is advised by counsel that it is
legally required to so disclose and will exercise commercially reasonable
efforts to obtain written assurance that confidential treatment will be accorded
the information so disclosed.

 

Section 7.07.  Non-Solicitation.  The Seller agrees for a period of two
(2) years following the Closing Date, neither the Seller nor any of its
Affiliates will, in any manner, directly or indirectly:

 

(a)                                 solicit, hire, induce or attempt to induce,
or assist others to solicit, hire, induce or attempt to induce, any employee,
contractor, consultant or agent of the Company, the Purchaser or any of their
Affiliates to either (A) leave his or her employment, consulting or other
position or business relationship with the Purchaser or any of its Subsidiaries,
or (B) breach his or her employment, consulting or other agreement with the
Purchaser or any of its Subsidiaries; provided, however, that the foregoing
provision shall not prohibit the Seller from hiring any such employee,
contractor, consultant or agent (x) through general advertising that is not
targeted directly at the Purchaser or any of its Subsidiaries, or (y) whose
employment or business relationship with the Purchaser or any of its
Subsidiaries is terminated by the Purchaser or any of its Subsidiaries, as the
case may be; or

 

(b)                                 solicit, induce or attempt to induce or
assist others to solicit, induce or attempt to induce, any customer, contractor,
client or financing source associated with the Company’s, the Purchaser’s or
their Affiliates’ businesses to terminate its, his or her relationship or
association with the Company, the Purchaser or any of their Affiliates, or in
any manner, directly or indirectly, interfere with any business relationship
between the Company, the Purchaser or any of their Affiliates, on the one hand
and any such Person, on the other hand.

 

(c)                                  Enforcement.  Notwithstanding any other
provision of the Transaction Documents, if, at the time of enforcement of any
provision of this Section, a court should hold that the duration or scope
restrictions stated herein are unreasonable or unenforceable under circumstances
then existing, the Parties agree that the maximum duration or scope permitted by
applicable Law under such circumstances will be substituted for the stated
duration or scope.  Whenever possible, each provision of this Section will be
interpreted in such manner as to be effective and valid under applicable law. 
If the provisions of this Section are held unenforceable to any extent in any
jurisdiction, such holding shall not impair the enforceability of this
Section in any other jurisdiction.

 

Section 7.08.  Seller Guarantee.  The Seller Guarantor will take all action
necessary (a) to cause the Seller to perform its obligations under this
Agreement and to consummate the sale of the Purchased Interests on the terms and
conditions set forth in this Agreement as promptly as reasonably practicable
following execution of this Agreement, (b) to ensure that, prior to the

 

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Closing Date, the Company shall not conduct any business or make any investments
other than as specifically contemplated by this Agreement, and (c) to cause the
Seller to perform its obligations under Article VIII of this Agreement and to
ensure that the Seller has sufficient funds to perform those obligations.  The
Seller Guarantor hereby waives diligence, presentment, demand of performance,
filing of any claim, any right to require any proceeding first against the
Seller, protest, notice and all demands whatsoever in connection with the
performance of its obligations set forth in this Section 7.08.

 

Section 7.09.  Purchaser Guarantee.  Subject to the satisfaction of the
condition set forth in Section 3.03(s), the Purchaser Guarantor shall take all
action necessary (a) to cause the Purchaser to perform its obligations under
this Agreement and to consummate the purchase of the Purchased Interests on the
terms and conditions set forth in this Agreement and (b) to cause the Purchaser
to perform its obligations under Article VIII of this Agreement.  The Purchaser
Guarantor hereby waives diligence, presentment, demand of performance, filing of
any claim, any right to require any proceeding first against the Purchaser,
protest, notice and all demands whatsoever in connection with the performance of
its obligations set forth in this Section 7.09.

 

Section 7.10.  Instructions to Escrow Agent. Each Party shall deliver such
instructions to the Escrow Agent at such times and in the manner required to be
delivered in accordance with this Agreement and the Escrow Agreement.  Each
Party acknowledges that failure to deliver an instruction to the Escrow Agent in
accordance herewith shall constitute a material breach of this Agreement.

 

ARTICLE VIII

 

Indemnification

 

Section 8.01.  Indemnification.

 

(a)                                 Indemnification by the Seller.  Subject to
the limitations set forth in this Article VIII, the Seller shall indemnify and
defend the Purchaser Indemnified Persons against, and hold each Purchaser
Indemnified Person harmless from, any and all Losses that the Purchaser
Indemnified Persons have incurred, suffered or sustained arising out of,
relating to, based upon, in connection with or due to:

 

(i)                                     any inaccuracy or breach of any of the
representations and warranties of the Seller, the Company or any of their
Affiliates contained in this Agreement, any other Transaction Document or in any
certificate delivered thereunder;

 

(ii)                                  the nonfulfillment or breach of any
covenant, undertaking, agreement or other obligation (other than those relating
to any representations or warranties) of the Seller or the Company (to the
extent such nonfulfillment or breach occurs prior to the Closing Date) or any of
their Affiliates contained in this Agreement, any other Transaction Document or
in any certificate delivered thereunder;

 

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(iii)                               any broker’s, finder’s or consultant’s fees
payable to any Person retained, consulted or hired by the Company, the Seller or
any of their Affiliates in connection with any Transaction Document, any
document to be delivered thereunder or the Transactions, including without
limitation the fees and expenses of Mr. Timothy Terry (the “Finder’s Fee”),
provided that the Seller’s liability with respect to the Finder’s Fee shall not
exceed the lesser of (A) $50,000.00 or (B) 50% of the Finder’s Fee;

 

(iv)                              any Taxes related to (A) the operation of the
Business by the Company prior to the Closing Date, (B) actions, omissions or
failures to act by the Company prior to the Closing Date, (C) the ownership by
the Company of the Assets prior to the Closing Date, (D) any distributions,
dividends or other payments from the Company to the Seller or any of their
Affiliates, or (E) income recognized as a result of the sale of the Purchased
Interests;

 

(v)                                 any (A) denial (full or partial) or
attempted denial, repair or other impairment by the SBA of its guaranty of any
Portfolio Loan, (B) refusal by the SBA to purchase all or any portion of its
guaranty of any Portfolio Loan, or (C) request, suggestion or requirement by the
SBA that the Company cancel all or a portion of any guaranty of any Portfolio
Loan or repurchase all or any portion of the guaranteed portion of a Portfolio
Loan from any Person, in each case as a result of, arising from, or in any way
relating to, the actions, inactions or operations of the Seller or the Company,
any Related Party or any predecessor-in-interest thereto prior to the Closing
Date;

 

(vi)                              any threatened, pending or actual action or
proceeding by the SBA against the Company seeking to recover amounts paid to any
Person on the guaranteed portion of any Portfolio Loan as a result of, arising
from, or in any way relating to, the actions, inactions or operations of the
Seller or the Company, any Related Party or any predecessor-in-interest thereto
prior to the Closing Date; or

 

(vii)                           any threatened, pending or actual action or
proceeding by any Person seeking recovery on the SBA guaranty of any Portfolio
Loan, in each case as a result of, arising from, or in any way relating to, the
actions, inactions or operations of the Seller or the Company, any Related Party
or any predecessor-in-interest thereto prior to the Closing Date.

 

(b)                                 Indemnification by the Purchaser.  Subject
to the limitations set forth in this Article VII, the Purchaser will indemnify
and defend the Seller Indemnified Persons against and hold each Seller
Indemnified Person harmless from any and all Losses that the Seller Indemnified
Persons have incurred, suffered or sustained arising out of, relating to, based
upon, in connection with or due to:

 

(i)                                     any inaccuracy or breach of any of the
representations and warranties of the Purchaser contained in this Agreement or
in any other Transaction Document;

 

(ii)                                  which are attributable to the period, or
which arise out of the Purchaser’s actions or failure to act following the
Closing Date; or

 

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(iii)                               the nonfulfillment or breach of any
covenant, undertaking, agreement or other obligation of the Purchaser or any of
its Affiliates contained in any Transaction Document.

 

Section 8.02.  Survival of Indemnification.  The representations and warranties,
of the Parties contained in this Agreement, the other Transaction Documents or
in any document delivered pursuant thereto and the rights to indemnification
under this Agreement with respect thereto will survive the Closing Date and any
investigation at any time made by or on behalf of the Purchaser or any other
Party for a period of thirty-six (36) months after the Closing Date and will be
effective with respect to any inaccuracy therein or breach thereof, notice of
which has been given within such thirty-six (36) month period, provided that,
Section 4.01 (Existence and Power), 4.02 (Authorization; Binding Effect),
Section 4.03 (Contravention), Section 4.05 (Capitalization), Section 4.07
(Taxes), Section 5.01 (Existence and Power of the Seller), Section 5.02
(Authorization and Binding Effect with respect to the Seller), Section 5.03
(Contravention with respect to the Seller) and Section 5.06 (Title to
Securities) (the “Fundamental Representations”) shall survive until the
conclusion of the applicable statute of limitations. The covenants and
agreements of the Parties contained in this Agreement shall survive according to
their respective terms.  For the avoidance of doubt, the right to recover Losses
with respect to the matters set forth in Section 8.01(a)(ii)-(vii) shall survive
irrespective of the survival of the representations and warranties of the
Parties set forth herein.

 

Section 8.03.  Certain Limitations; Allocation of Liability.  The Party making a
claim under this Article VIII is referred to as the “Indemnified Party” and the
Party against whom such claims are asserted under this Article VIII is referred
to as the “Indemnifying Party”. The indemnification provided for in this
Article VIII shall be subject to the following limitations:

 

(a)                                 Indemnification Threshold.  No Purchaser
Indemnified Person or Seller Indemnified Person will be entitled to
indemnification for any Losses under Section 8.01(a) or 8.01(b) unless and until
the aggregate amount of Losses suffered, sustained, or incurred by all of the
Purchaser Indemnified Persons or the Seller Indemnified Persons, as the case may
be, exceeds the Threshold Amount, calculated on a cumulative basis and not per
item basis, and then such party will be entitled to recover such Losses from the
first dollar of such Losses and not merely the excess of such Losses above the
Threshold Amount; provided, however, that with respect to indemnification
pursuant to Section 8.01(a)(vi)-(x) the Purchaser Indemnified Persons shall be
entitled to recover any such Losses from the first dollar of such Losses without
any threshold, basket or deductible of any kind, and any such payments shall
count towards the Threshold Amount.

 

(b)                                 Indemnification Cap. The Seller shall not be
liable to the Purchaser Indemnified Parties pursuant to Section 8.01(a)(i), and
the Purchaser shall not be liable to the Seller Indemnified Parties pursuant to
Section 8.01(b)(i), for any Losses that are in excess of Five Million Dollars
($5,000,000.00) (the “Indemnification Cap”), provided that, for the avoidance of
doubt, the foregoing Indemnification Cap shall not apply to any Losses arising
under Section 8.01(a)(ii)-(vii) or under Section 8.01(a)(i) with respect to the
Fundamental Representations.

 

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(c)                                  Repurchase Right.  To the extent that the
Purchaser seeks indemnification from the Seller pursuant to Sections
8.01(a)(v)-(vii) for Losses relating to a Portfolio Loan, so long as the amount
of such Losses do not exceed the total outstanding balance of such Portfolio
Loan, the Seller shall have the right, in lieu of making the indemnification
payments required hereunder (and without reference to the Threshold Amount or
the Indemnification Cap), to purchase the entire guaranteed and unguaranteed
portion of such Portfolio Loan from the Company (the “Repurchase Right”) for an
amount equal to the full balance of such Portfolio Loan (the “Repurchase
Consideration”).  In order to be effective, the Seller must (i) notify Purchaser
and the Company of the exercise of the Repurchase Right no later than thirty
(30) Business Days following receipt of a request for indemnification, and
(ii) deliver to the Company the Repurchase Consideration, by wire transfer of
immediately available funds, no later than thirty (30) additional Business Days
following the exercise of the Repurchase Right.  Upon receipt by the Company of
the Repurchase Consideration, the Purchaser shall cause the Company to transfer
the purchased Portfolio Loan, together with all documentation related thereto,
to Seller as soon as practicable, but in no event later than ten (10) Business
Days following receipt of such consideration.  The Repurchase Right shall not be
deemed effective if (x) the amount of Losses with respect to such Portfolio Loan
exceeds its outstanding balance, (y) the Company is unable to acquire 100% of
such Portfolio Loan or (z) the Company is not able to terminate any outstanding
participation, guarantee or other encumbrance with respect to such Portfolio
Loan or is otherwise prohibited by Law or contract from transferring such
Portfolio Loan to the Seller. In the event that the Company cannot transfer a
Portfolio Loan to the Seller but have received the Repurchase Consideration from
Seller, the Purchaser shall cause the Company to refund such Repurchase
Consideration to the Seller no later than three (3) Business Days after the
Company has confirmed that such transfer cannot take place.

 

(d)                                 Payments by an Indemnifying Party pursuant
to Section 8.01(a) or Section 8.01(b), as the case may be, in respect of any
Loss shall be (i) limited to the amount of any liability or damage that remains
after deducting therefrom any insurance proceeds and any indemnity, contribution
or other similar payment received or reasonably expected to be received by the
Indemnified Party (or the Company) in respect of any such claim. The Indemnified
Party shall use its commercially reasonable efforts to recover under insurance
policies or indemnity, contribution or other similar agreements for any Losses
prior to seeking indemnification under this Agreement and (ii) reduced by an
amount equal to any Tax benefit realized or reasonably expected to be realized
as a result of such Loss by the Indemnified Party.

 

(e)                                  Each Indemnified Party shall take, and
cause its Affiliates to take, all reasonable steps to mitigate any Loss upon
becoming aware of any event or circumstance that would be reasonably expected
to, or does, give rise thereto, including incurring costs only to the minimum
extent necessary to remedy the breach that gives rise to such Loss.

 

Section 8.04.  Fraud Exception.  Notwithstanding any provision contained in this
Article VIII to the contrary, in the event any Loss or failure to discover a
fact or condition by a Purchaser Indemnified Person is due to, arises from, or
is in connection with, fraud, intentional misrepresentation, grossly negligent
misrepresentation or willful misconduct by the Seller or any Person acting on
their behalf, such Purchaser Indemnified Person will be entitled to recover any

 

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such Losses from the Seller, without regard to any of the time limitations,
dollar thresholds or dollar limitations set forth above, and will be entitled to
recover the full amount of such Losses from the first dollar of any such Loss.

 

ARTICLE IX

 

Termination and Expenses

 

Section 9.01.  Termination.  The obligations of the Parties to consummate the
Transactions under the Transaction Documents may be terminated at any time prior
to the Closing by:

 

(a)                                 the mutual written consent of Seller and
Purchaser;

 

(b)                                 the Seller, if (i) the Closing shall not
have occurred on or prior to the Termination Date, unless such failure to
consummate the Transactions is the result of a breach of any Transaction
Document by Seller, (ii) the Purchaser shall have breached in any material
respect any of its representations, warranties, covenants or other agreements
contained in the Transaction Documents, which breach (A) would give rise to the
failure of a condition set forth in Section 3.02, and (B) cannot be or has not
been cured by the earlier to occur of (x) the date which is thirty (30) days
after the giving of written notice by the Seller to the Purchaser specifying
such breach, and (y) the Termination Date, (iii) the Seller has delivered a
Seller SBA-Related Termination Notice in accordance with Section 2.01(c),
(iv) the Seller has delivered a Seller Financing Restructure Termination Notice
in accordance with Section 2.01(d), (v) the Seller has delivered a Seller
Servicing Termination Notice in accordance with Section 2.01(e), or (vi) the
Seller has delivered a Seller Key Employee Agreement Termination Notice in
accordance with Section 2.01(f); or

 

(c)                                  the Purchaser, if (i) the Closing shall not
have occurred on or prior to the Termination Date, unless such failure to
consummate the Transactions is the result of a material breach of any
Transaction Document by the Purchaser, (ii) if the Seller shall have breached
any of its representations, warranties, covenants or other agreements contained
in the Transaction Documents, which breach (A) would give rise to the failure of
a condition set forth in Section 3.03, and (B) cannot be or has not been cured
by the earlier to occur of (x) the date which is thirty (30) days after the
giving of written notice by the Purchaser to the Seller specifying such breach,
and (y) the Termination Date, (iii) Purchaser has provided a Purchaser DD
Termination Notice in accordance with Section 2.01(b), or (iv) the Purchaser and
the Seller cannot resolve the objection of the Purchaser pursuant to
Section 2.02(a)(ii);

 

(d)                                 the Seller or the Purchaser if (i) any Law
shall have been enacted, adopted, issued or promulgated which, prohibits the
Transactions or adversely impairs the conduct or operation of the Business by
the Company immediately after the Closing, (ii) any Governmental Body shall have
issued an order, decree or ruling or taken any other action, which permanently
restrains, enjoins or otherwise prohibits the Transactions, and such order,
decree, ruling or other

 

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action shall have become final and non-appealable, or (iii) the SBA provides
written notice of its denial of the application for change of control;

 

(e)                                  the Purchaser or the Seller, if, as of the
Termination Date, each of the conditions to Closing set forth in Section 3.02
and Section 3.03 have been satisfied or waived other than the condition set
forth in Section 3.03(s) (Financing); or

 

(f)                                   the Purchaser or the Seller, if as of
February 28, 2013, Purchaser shall have failed to obtain the consent of the
Member Committee of the manager of CapitalSpring to consummate the Transactions.

 

Any such termination shall be in writing delivered to the other Parties (which
writing includes a Purchaser DD Termination Notice, a Seller SBA-Related
Termination Notice, a Seller Financing Restructure Related Termination Notice, a
Seller Servicing Termination Notice, or a Seller Key Employee Agreement
Termination Notice) in accordance with the provisions of Section 10.01 hereof.

 

Section 9.02.  Effect of Termination.  In the event of a termination of this
Agreement under Section 9.01, this Agreement shall become void and of no further
force or effect, except for the provisions of Section 9.03.  Except as set forth
in the provisions of this Article IX, upon termination of this Agreement, no
Party shall have any liability to the other Party of any kind or nature
whatsoever; provided that neither the termination of this Agreement, nor
anything contained in this Section 9.02, will be deemed to release any Party
from any liability due to, or prevent the other Party from exercising their
rights and remedies under this Agreement with respect to the breach by any such
Party of the covenants or agreements of such Party in this Agreement prior to
the date of such termination and provided, further, that if each of the
conditions to Closing set forth in Section 3.02 and Section 3.03 has been
satisfied or waived on or prior to the Termination Date, and no breach of any
covenant or other agreement hereunder has occurred as of such time, then each of
the Seller and the Purchaser shall be required to consummate the Transactions
unless this Agreement is terminated pursuant to Section 9.01.

 

Section 9.03.  Treatment of Deposit.  The Seller shall be entitled to receive
the Deposit if: (a) each of the conditions to Closing set forth in Section 3.03
have been satisfied or waived other than Section 3.03(b) if the failure of the
SBA to consent to the transaction is due to the failure of the Purchaser to
submit an application to the SBA or the failure of the SBA to consent to a
submitted application is only due to the capitalization and/or financing
structure of the Purchaser, or Section 3.03(s) (Financing); (b) the Purchaser
terminated this Agreement as a result of the failure of the Parties to resolve
any objection(s) of the Purchaser to the computation of the Estimated Total
Equity under Section 2.02(a)(ii) and the objection(s) of the Purchaser were not
based on reasonable positions supportable by GAAP and consistent with prior
positions taken by the Company; (c) this Agreement is terminated pursuant to
Section 9.01(b)(ii); (d) this Agreement is terminated pursuant to
Section 9.01(e); or (e) this Agreement is terminated pursuant to
Section 9.01(f).  The Purchaser shall be entitled to receive the Deposit if this
Agreement is terminated pursuant to any other Section or subsection of this
Article IX.

 

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ARTICLE X

 

Miscellaneous

 

Section 10.01.  Notices.  All notices, requests, demands and other
communications to any Party or given under any this Agreement shall be in
writing and delivered personally, by overnight delivery or courier, by
registered mail, by e-mail or by facsimile (with confirmation received) to the
Parties at the address, e-mail address or facsimile number specified for such
Parties on the signature pages hereto (or at such other address, e-mail address
or facsimile number as may be specified by a Party in writing given at least
five (5) Business Days prior thereto).  All notices, requests, demands and other
communications will be deemed delivered when actually received.

 

Section 10.02.  Counterparts.  This Agreement may be executed simultaneously in
one or more counterparts, and by different Parties in separate counterparts,
each of which when executed will be deemed an original, but all of which taken
together will constitute one and the same instrument.  A signed copy of this
Agreement delivered by facsimile, e-mail or other means of electronic
transmission shall be deemed to have the same legal effect as delivery of an
original signed copy of this Agreement.

 

Section 10.03.  Amendment of Agreement.  This Agreement may not be amended,
modified or waived except by an instrument in writing signed on behalf of each
of the Parties.

 

Section 10.04.  Successors and Assigns; Assignability.  This Agreement shall be
binding upon and inures to the benefit of and is enforceable by the respective
successors and permitted assigns of the Parties.  This Agreement may not be
assigned by any Party without the prior written consent of all other Parties,
except for the assignment of all or any part of the rights and obligations of
the Purchaser under this Agreement, which may be freely assigned by the
Purchaser to an Affiliate of the Purchaser prior to the Closing Date.  Any
assignment or attempted assignment (i) in contravention of this Section 10.04
will be void ab initio and (ii) will not relieve the assigning Party of any
obligation under this Agreement

 

Section 10.05.  Governing Law.  This Agreement will be governed by, and
construed in accordance with, the laws of the state of Texas applicable to
contracts executed in and to be performed entirely within that state, without
reference to conflicts of laws provisions.

 

Section 10.06.  Integration.  The Transaction Documents contain and constitute
the entire agreement of the Parties with respect to the subject matter hereof
and supersedes all prior negotiations, agreements and understandings, whether
written or oral, of the Parties.

 

Section 10.07.  Fees and Expenses.  Each Party shall bear its own costs and
expenses with respect to the Transactions and the negotiation, execution and
delivery of the Transaction Documents, including expenses of counsel. 
Notwithstanding the foregoing, at the Closing, solely with respect to the
finder’s fee of Mr. Timothy Terry, such fees shall be borne jointly by Purchaser
and Seller as follows: Seller shall pay an amount equal to the lesser of
(a) $50,000.00 or (b) 50% of Mr. Terry’s total finder’s fee, and the remainder
of such finder’s fee shall be borne

 

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by Purchaser.  If the Closing does not occur, the fees and expenses of Mr. Terry
shall be borne solely by Purchaser.

 

Section 10.08.  Severability.  If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law, or public
policy, all other conditions and provisions of this Agreement will nevertheless
remain in full force and effect Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.

 

Section 10.09.  Further Assurances.  In order to (a) carry out more effectively
the purposes of each Transaction Document, (b) enable the Purchaser to exercise
and enforce its rights and remedies and collect any payments and proceeds under
each Transaction Document to which the Purchaser is a party and (c) transfer,
preserve, protect and confirm to the Purchaser the rights granted or now or
hereafter intended to be granted to the Purchaser under each Transaction
Document to which the Purchaser is a party or under each other instrument
executed in connection with any Transaction Document to which the Seller is or
may become a party, promptly upon the reasonable request by the Purchaser or the
Seller, the Parties shall (i) correct any defect or error that may be discovered
in any Transaction Document or in the execution, delivery, acknowledgment or
recordation of any Transaction Document and (ii) execute, acknowledge, deliver,
record, file and register, any and all such further transfers, certificates,
assurances and other instruments, in each case, as such requesting Party may
reasonably require from time to time.

 

Section 10.10.  No Third-Party Rights.  Except as provided in Article VIII, this
Agreement is not intended, and will not be construed, to create any rights in
any parties other than the Parties, and no Person may assert any rights as
third-party beneficiary hereunder.

 

Section 10.11.  Submission to Jurisdiction.  The Parties hereby (a) agree that
any Action with respect to any Transaction Document may be brought only in the
courts of the State of Delaware or of the United States of America for the
Western District of Texas, (b) accepts for itself and in respect of its
property, generally and unconditionally, the exclusive jurisdiction of such
courts, (c) irrevocably waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any Action in
those jurisdictions, and (d) irrevocably consents to the service of process of
any of the courts referred to above in any Action by the mailing of copies of
the process to the Parties as provided in Section 10.01.  Service effected as
provided in this manner will become effective ten calendar days after the
mailing of the process.

 

Section 10.12.  Waiver of Jury Trial.  The Parties hereby waive any right to a
trial by jury in any Action to enforce or defend any right under any Transaction
Document or any amendment, instrument, document or agreement delivered or to be
delivered in connection with any Transaction Document and agrees that any Action
will be tried before a court and not before a jury.

 

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Section 10.13.  No Waiver; Remedies.  No failure or delay by any Party in
exercising any right, power or privilege under this Agreement will operate as a
waiver of the right, power or privilege.  A single or partial exercise of any
right, power or privilege will not preclude any other or further exercise of the
right, power or privilege or the exercise of any other right, power or
privilege.  Except as expressly provided for herein, the rights and remedies
provided in the Transaction Documents will be cumulative and not exclusive of
any rights or remedies provided by law.

 

Section 10.14.  Interpretation.  As used in this Agreement, references to the
singular will include the plural and vice versa and references to the masculine
gender will include the feminine and neuter genders and vice versa, as
appropriate.  Unless otherwise expressly provided in this Agreement (a) the
words “hereof”, “herein” and “hereunder” and words of similar import when used
in this Agreement will refer to this Agreement as a whole and not to any
particular provision of this Agreement and (b) article, section, subsection,
schedule and exhibit references are references with respect to this Agreement
unless otherwise specified.  Unless the context otherwise requires, the term
“including” will mean “including, without limitation.”  The headings in this
Agreement and in the Schedules are included for convenience of reference only
and will not affect in any way the meaning or interpretation of this Agreement.
References in this Agreement to any law or regulation will refer to such laws
and regulations as from time to time amended and to any laws or regulations
successor thereto.

 

Section 10.15.  Ambiguities.  This Agreement was negotiated between legal
counsel for the Parties and any ambiguity in this Agreement shall not be
construed against the Party who drafted this Agreement.

 

Section 10.16.  Incorporation of Schedules and Exhibits.  The Schedules and
Exhibits hereto are incorporated into this Agreement and will be deemed a part
hereof as if set forth herein in full.  References to “this Agreement” and the
words “herein”, “hereof” and words of similar import refer to this Agreement
(including the Schedules and Exhibits) as an entirety.  In the event of any
conflict between the provisions of this Agreement and any Schedule or Exhibit,
the provisions of this Agreement will control.  Capitalized terms used in the
Schedules have the meanings assigned to them in this Agreement.  The
Section references referred to in the Schedules are to Sections of this
Agreement, unless otherwise expressly indicated.

 

[Signature Page Follows]

 

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

 

 

SELLER:

 

 

 

Address for Notices:

FIRSTCITY BUSINESS LENDING CORPORATION

 

 

 

 

6400 Imperial Drive (delivery only)

By:

/s/ James C. Holmes

Waco, Texas 76710

Name:

James C. Holmes

P.O. Box 8216 (mail)

Title:

Executive Vice President

Waco, Texas 76714-8216

 

254-761-2953 (telecopier)

 

254-761-2953 (phone)

 

 

 

 

 

With a copy to: 

 

 

 

 

 

Haley & Olson, P.C.

 

Triangle Tower, Suite 600

 

510 N. Valley Mills Dr.

 

Waco, Texas 76710

 

Phone :

254-751-8519

 

Fax :

254-776-6823

 

 

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PURCHASER:

 

 

 

Address for Notices:

CS ABL HOLDINGS, LLC

c/o CapitalSpring Finance Company, LLC

 

950 Third Avenue, 24th Floor

 

Attention: Pierrette A. Bradshaw,

By:

/s/ Chris Unrath

General Counsel

Name:

Chris Unrath

Telephone No.:

(212) 981-0146

Title:

Authorized Person

Facsimile No.:

(212) 981-0159

 

 

 

 

 

With a copy to:

 

Richards Kibbe & Orbe LLP

 

One World Financial Center

 

Attention: Jahan Sharifi

 

Telephone No.:

(212) 530-1826

 

Facsimile No.:

(212) 530-1801

 

 

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EXHIBIT A

 

Form of Purchaser Officer’s Certificate

 

68

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EXHIBIT B

 

Form of Key Officer Employment Agreement

 

[To come]

 

69

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EXHIBIT C

 

Form of Seller Officer’s Certificate

 

70

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EXHIBIT D

 

Form of Secretary’s Certificate

 

71

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EXHIBIT E

 

Form of Transition Servicing Agreement

 

[To come]

 

72

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EXHIBIT F

 

Escrow Agreement

 

73

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EXHIBIT G

 

Wells Fargo Term Sheet

 

74

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EXHIBIT H

 

Portfolio Loan Schedule

 

Form of Portfolio Loan Schedule is located on the Datasite.

 

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EXHIBIT I

 

Pioneer Loan Acquisition Procedure

 

The procedure for the acquisition of the Pioneer Loan will be as follows:

 

1.              On or before the Closing Date, the Seller, or its designated
Affiliate, and the Company will enter into a loan sale agreement in form
acceptable to the Company, the Seller and the Purchaser.

2.              Upon execution of the loan sale agreement, the Seller or its
designated Affiliate will wire funds into the ABL Collection Account in an
amount represented by the total of (a) the SBA guaranteed portion, (b) the ABL
unguaranteed portion, (c) the capitalized legal fees, and (d) any FAS costs;
with the amount of the sum of (a) through (d) decreased by any discounts and
reserves held on the books of ABL.  As of 19 December 2012, this total was
$1,125,910.28.

3.              Upon receipt of the wired funds as described in step 2, the
Company will immediately wire to the SBA the amount of those funds designated
for the repurchase of the SBA guaranteed portion.

4.              The Company will make the additional book entries to pay the
debt off in full on the Company’s books.

5.              The Company will endorse the original note to the Seller and
deliver the original note and all related Portfolio Credit Documents and the
Loan File to the Seller or its designated Affiliate.

6.              The Company will prepare (or cause to be prepared by counsel)
and execute transfers to the designated Affiliate of the Seller of all Portfolio
Credit Documents, UCCs financing statement any all other collateral documents.

 

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