Exhibit 10.1

 

AMENDED AND RESTATED LOAN AGREEMENT

 

between

 

AMERICAN BUSINESS LENDING, INC.,

a Texas corporation,

 

as Borrower,

 

and

 

WELLS FARGO CAPITAL FINANCE, LLC,

a Delaware limited liability company,

 

as Lender

 

 

$25,000,000.00

 

January 31, 2012

 

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TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

1.

GENERAL TERMS

1

 

 

 

 

 

1.1

Defined

1

 

1.2

Accounting Principles

20

 

1.3

UCC Terms

20

 

1.4

Certain Matters of Construction

20

 

 

 

 

2.

AMOUNT AND TERMS OF LOAN

21

 

 

 

 

 

2.1

The Loans and Commitments

21

 

2.2

Notice of Borrowing; Disbursement of Advances

22

 

2.3

Interest Rate

23

 

2.4

Computation

23

 

2.5

Fees

24

 

2.6

Borrower’s Termination of Agreement

25

 

2.7

Overadvances

25

 

2.8

Crediting Payments

25

 

2.9

All Loans to Constitute One Loan

26

 

2.10

Loan Purpose

26

 

2.11

Term of Agreement; Survival of Certain Obligations

26

 

2.12

Payment Procedure

27

 

2.13

Collection of Borrower’s Loans and Payments

27

 

2.14

Collections; Lender’s Right to Notify Account Debtors

29

 

2.15

Application of Payments

29

 

2.16

Maintenance of Loan Account; Statement of Obligations

31

 

2.17

Business Days

31

 

2.18

Capital Requirements

31

 

2.19

Indemnification

32

 

2.20

LIBOR Pricing

32

 

2.21

Separate Tracking of Matters relating to Borrower Originated Loans, Gateway
Performing Loans and Gateway Non-Performing Loans

33

 

2.22

Restatement of Obligations

34

 

 

 

 

3.

SECURITY

35

 

 

 

 

 

3.1

Borrower’s Obligations

35

 

3.2

Further Assurances

35

 

 

 

 

4.

REPRESENTATIONS AND WARRANTIES

35

 

 

 

 

 

4.1

Corporate Existence

35

 

4.2

Corporate Power and Authorization

36

 

4.3

Ownership of Property; Permitted Liens

36

 

4.4

Capital Structure

36

 

4.5

Binding Obligations

36

 

4.6

No Legal Bar; No Lien

36

 

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TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

 

 

 

 

4.7

No Consent

36

 

4.8

Liabilities; Litigation

37

 

4.9

Taxes; Governmental Charges

37

 

4.10

Defaults

37

 

4.11

Use of Proceeds; Margin Stock

37

 

4.12

Compliance with the Law

37

 

4.13

ERISA

38

 

4.14

Complete Disclosure

38

 

4.15

Investment Company Act

38

 

4.16

No Financing of Corporate Takeovers

38

 

4.17

Location of Borrower

38

 

4.18

Use of Proceeds

38

 

4.19

Hazardous Materials

38

 

4.20

Insurance Policies

40

 

4.21

Schedule of Deposit Accounts

40

 

4.22

Labor Matters

40

 

4.23

Employment and Labor Agreements

40

 

4.24

Solvent Financial Condition

40

 

4.25

Brokers

40

 

4.26

True Sales of Notes Receivable

40

 

4.27

No Material Intellectual Property

41

 

4.28

Asset Purchase Agreement

41

 

4.29

Automatic Warranty and Reaffirmation of Warranties and Representations; Survival
of Warranties and Representations

41

 

 

 

 

5.

AFFIRMATIVE COVENANTS

42

 

 

 

 

 

5.1

Financial Statements and Reports and Other Data

42

 

5.2

Taxes and Other Liens

44

 

5.3

Maintenance

44

 

5.4

Further Assurances

44

 

5.5

Performance of Obligations

45

 

5.6

Insurance

45

 

5.7

Accounts and Records

46

 

5.8

Right of Inspection

46

 

5.9

Notice of Certain Events

46

 

5.10

ERISA Information and Compliance

46

 

5.11

Financial Covenants

47

 

5.12

Maintenance of Bad Debt Reserves

48

 

5.13

Charges; Liens

48

 

5.14

Communication With Accountants

49

 

5.15

Notes Receivable Documents

49

 

5.16

Subordination Agreement

49

 

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TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

 

 

 

6.

NEGATIVE COVENANTS

50

 

 

 

 

 

6.1

Debt

50

 

6.2

Loans and Distributions

50

 

6.3

Liens

50

 

6.4

Capital Expenditures

51

 

6.5

[Intentionally Omitted]

51

 

6.6

Capital Structure

51

 

6.7

Transactions with Affiliates

51

 

6.8

Change of Business

51

 

6.9

Name of Borrower

51

 

6.10

Location of Collateral

51

 

6.11

Proceeds of Loans

51

 

6.12

ERISA Compliance

51

 

6.13

Sale or Discount of Receivables

51

 

6.14

Payment on ASBA Note or FirstCity Debt

52

 

6.15

Payments on Subordinated Debt

52

 

6.16

Affiliates

52

 

6.17

Consulting and Brokerage Services

52

 

6.18

Modification of Asset Purchase Documents, Servicing Agreement, or FirstCity
Debt, or Payment Terms of Preferred Stock

53

 

6.19

Payment or Modification regarding Gateway Portfolio Purchase Agreement

53

 

 

 

 

7.

EVENTS OF DEFAULT

53

 

 

 

 

 

7.1

Events of Default

53

 

7.2

Termination of Agreement and Acceleration of the Obligations

56

 

7.3

Remedies

57

 

7.4

Notice of Sale or Other Action

59

 

7.5

Marshalling; Payments Set Aside

59

 

7.6

Effect of Multi-Party Agreement

59

 

 

 

 

8.

CONDITION PRECEDENT TO CLOSING DATE AND LENDING; CONDITIONS SUBSEQUENT

59

 

 

 

 

 

8.1

Closing Date

59

 

8.2

All Advances

62

 

 

 

 

9.

MISCELLANEOUS

63

 

 

 

 

 

9.1

Notices

63

 

9.2

Modification of Agreement; Sale of Interest

64

 

9.3

Lien Release Prior to Sale of SBA Guaranteed Notes Receivable

64

 

9.4

Fees and Expenses

64

 

9.5

Severability

64

 

iii

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TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

 

 

 

 

9.6

Waiver by Lender

64

 

9.7

Successors and Assigns

65

 

9.8

Conflict of Terms

65

 

9.9

Waivers by Borrower

65

 

9.10

Cumulative Rights

65

 

9.11

CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

65

 

9.12

Taxes, etc.

66

 

9.13

Governmental Regulation

66

 

9.14

Titles of Articles and Sections

66

 

9.15

Authorized Signatures

66

 

9.16

Confidentiality

67

 

9.17

Acknowledgment of Lender’s other Interests

67

 

9.18

Counterparts; Electronic Execution

67

 

9.19

Entire Agreement

68

 

9.20

Revival and Reinstatement of Obligations

68

 

9.21

Patriot Act Notice

68

 

9.22

Bank Product Providers

68

 

9.23

Borrower’s Waiver of Claims Arising Prior to Execution Date of Agreement

69

 

iv

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EXHIBITS AND SCHEDULES

 

Exhibit A

 

Form of Borrowing Base Certificate

Exhibit B

 

Form of Compliance Certificate

Exhibit C

 

Schedule of Documents

Exhibit D

 

Form of Note Sale Report

 

 

 

Schedule 1.1 (a)

 

Net Eligible Non-Guaranteed Notes Receivable

Schedule 1.1(b)

 

Net Eligible SBA Guaranteed Notes Receivable

Schedule 4.3(a)

 

Ownership of Real Property

Schedule 4.3(b)

 

Permitted Liens

Schedule 4.4

 

Capital Structure of Borrower

Schedule 4.8

 

Liabilities; Litigation

Schedule 4.20

 

Insurance Policies

Schedule 4.21

 

Schedule of Deposit Accounts

Schedule 4.23

 

Employment and Labor Agreements

Schedule 4.27

 

Intellectual Property

Schedule 7.1(q)

 

Key Employees

 

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AMENDED AND RESTATED LOAN AGREEMENT

 

THIS AMENDED AND RESTATED LOAN AGREEMENT (this “Agreement”) is made as of the
31st day of January, 2012, by and between AMERICAN BUSINESS LENDING, INC., a
Texas corporation with its principal offices located at 1420 West Mockingbird
Lane, Suite 540, Dallas, Texas 75247 (“Borrower”), and WELLS FARGO CAPITAL
FINANCE, LLC, formerly known as Wells Fargo Foothill, LLC, a Delaware limited
liability company having an office at 14241 Dallas Parkway, Suite 1300, Dallas,
Texas 75254 (“Lender”), with reference to the following facts:

 

RECITALS

 

A.            Lender and Borrower are parties to that certain Loan Agreement
dated as of December 15, 2006, as amended prior to the date hereof by the First
Amendment to Loan Agreement dated as of February 27, 2007, the Second Amendment
to Loan Agreement dated as of July 30, 2007, to be effective as of June 30,
2007, the Third Amendment to Loan Agreement dated as of February 18, 2009, to be
effective as of February 1, 2009, the Fourth Amendment to Loan Agreement dated
as of November 2, 2009, to be effective as of October 31, 2009, and the Fifth
Amendment to Loan Agreement dated as of November 17, 2010 (the “Original Loan
Agreement”) and certain other “Loan Documents” under and as defined therein
(collectively, the “Original Loan Documents”), pursuant to which Lender is
providing to Borrower a revolving credit facility in the maximum aggregate
principal amount of up to $25,000,000 on the terms and conditions set forth
therein to finance SBA 7(a) Loans (as hereinafter defined) made by Borrower.

 

B.            Borrower has requested that the Original Loan Documents be amended
and restated in order to, among other things (a) extend the period during which
it may borrow from Lender under the revolving credit facility for an additional
three years, and (b) modify certain other provisions of Original Loan Documents,
and Lender is willing to do so in accordance with the terms and conditions set
forth herein and in the other Loan Documents.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the terms and conditions set forth herein,
and for other good and valuable consideration, Borrower and Lender hereby agree,
and the Original Loan Agreement is hereby amended and restated in its entirety,
as follows:

 

1.                                      GENERAL TERMS

 

1.1           Defined.  As used in this Agreement, the following terms shall
have the following meanings, unless the context otherwise requires (terms
defined in the singular to have the same meaning when used in the plural and
visa versa):

 

“Accounts” shall mean all accounts, accounts receivable, other receivables,
contract rights, and notes (other than forms of obligations evidenced by chattel
paper, documents or instruments), whether now owned or hereafter acquired by
Borrower and whether or not earned by performance; provided, that the term
Accounts shall not include the Serviced ASBA Assets; and provided further, that
to the extent that such property is not part of the Collateral or

 

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ceases to be part of the Collateral, the provisions of this Agreement applicable
to Accounts shall not be applicable thereto.

 

“Accountant” shall have the meaning ascribed to that term in Section 5.1(a).

 

“Account Debtor” shall mean any Person who is or who may become obligated to
Borrower under, with respect to, or on account of, an Account.

 

“Acquired Gateway Loans” shall mean the “Loans” as defined in the Gateway
Portfolio Purchase Agreement.

 

“Affiliate” shall mean, as applied to any Person, any other Person who, directly
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person.  For purposes of this definition,
“control” means the possession, directly or indirectly, of the power to direct
the management and policies of a Person, whether through the ownership of Stock,
by contract, or otherwise; provided, however, that, in any event: (a) any Person
which owns directly or indirectly 10% or more of the securities having ordinary
voting power for the election of directors or other members of the governing
body of a Person or 10% or more of the partnership or other ownership interests
of a Person (other than as a limited partner of such Person) shall be deemed to
control such Person, (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person, and (c) each partnership or joint
venture in which a Person is a partner or joint venturer shall be deemed to be
an Affiliate of such Person.

 

“Agreement” shall mean this Loan Agreement, including all amendments,
modifications and supplements hereto and any appendices, exhibits or schedules
to any of the foregoing, and shall refer to the Agreement as the same may be in
effect at the time such reference becomes operative.

 

“Allocated Payment Portion” shall have the meaning ascribed to such term in
Section 2.13(c).

 

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

 

“ASBA Note” shall mean the Secured Note in the form of Exhibit 1.4 to the Asset
Purchase Agreement, executed by Borrower in favor of ASBA in an original
principal amount equal to the “Stated Amount” (as defined in the Asset Purchase
Agreement) to pay part of the purchase price under the Asset Purchase Agreement
and secured solely by the Serviced ASBA Assets.

 

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

 

“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,

 

2

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as “Sellers,” Borrower, as the “Purchaser,” FirstCity BLC, and FirstCity
Financial, 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.

 

“Asset Purchase Documents” shall mean the 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
consummation of the transactions contemplated by the Asset Purchase Agreement.

 

“Authorized Person” shall mean any of the President, the Chief Executive
Officer, Senior Vice President, Executive Vice President, and the Treasurer of
Borrower, and any other officer of Borrower from time to time designated in
writing by Borrower to Lender.

 

“Availability” shall mean, as of any date of determination, if such date is a
Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that Borrower is entitled to borrow as Revolving Loans under Section 2.1
(after giving effect to all then outstanding Obligations and all sublimits and
reserves applicable hereunder).

 

“Bank Product” shall mean any one or more of the following financial products or
accommodations extended to Borrower or its Subsidiaries by a Bank Product
Provider:  (a) credit cards, (b) credit card processing services, (c) debit
cards, (d) stored value cards, (e) purchase cards (including so-called
“procurement cards” or “P-cards”), (f) Cash Management Services, or
(g) transactions under Hedging Agreements.

 

“Bank Product Agreements” shall mean those agreements entered into from time to
time by Borrower or its Subsidiaries with a Bank Product Provider in connection
with the obtaining of any of the Bank Products.

 

“Bank Product Collateralization” means providing cash collateral (pursuant to
documentation reasonably satisfactory to Lender) to be held by Lender for the
benefit of the Bank Product Providers (other than the Hedging Providers) in an
amount determined by Lender as sufficient to satisfy the reasonably estimated
credit exposure with respect to the then existing Bank Product Obligations
(other than Hedging Obligations).

 

“Bank Product Obligations” shall mean (a) all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Borrower or
its Subsidiaries to any Bank Product Provider pursuant to or evidenced by a Bank
Product Agreement and irrespective of whether for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, (b) all Hedge Obligations, and (c) all amounts that Lender
is obligated to pay to a Bank Product Provider as a result of Lender purchasing
participations from, or executing indemnities or reimbursement obligations to, a
Bank Product Provider with respect to the Bank Products provided by such Bank
Product Provider to Borrower or its Subsidiaries.

 

“Bank Product Provider” shall mean Wells Fargo or any of its Affiliates.

 

3

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“Bank Product Reserve Amount” shall mean, as of any date of determination, the
Dollar amount of reserves that Lender has determined it is necessary or
desirable to establish (based upon the Bank Product Providers’ reasonable
determination of their credit exposure to Borrower and its Subsidiaries in
respect of Bank Product Obligations) for Bank Products then provided or
outstanding.

 

“Bankruptcy Code” shall mean the United States Bankruptcy Code, 11 U.S.C.
sections 101 et seq., as the same may be modified, amended or supplemented from
time to time.

 

“Base Rate” means the higher of (i) the LIBOR Rate in effect from time to time,
and (ii) the rate of interest announced, from time to time, within Wells Fargo
at its principal office in San Francisco as its “prime rate”, with the
understanding that the “prime rate” is one of Wells Fargo’s base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publications as Wells Fargo may designate.

 

“Base Rate Loan” means the portion of the Revolving Loans that bears interest at
a rate determined by reference to the Base Rate.

 

“Base Rate Margin” means three-quarters of one percent (0.75%) per annum.

 

“Board of Directors” means the board of directors (or comparable managers) of
Borrower or any committee thereof duly authorized to act on behalf of the board
of directors (or comparable managers).

 

“Borrower” shall mean American Business Lending, Inc., a Texas corporation, and
its successors and permitted assigns.

 

“Borrower Allocated Payments” shall mean the proceeds of any and all checks,
drafts, cash and other remittances received by Borrower in payment or on account
of payment, with respect to any of the Notes Receivable, after deducting such
portion that constitutes an Allocated Payment Portion, Servicing Fee (as defined
in the Multi-Party Agreement), FTA’s fee or SBA fee.

 

“Borrower Originated Cash Flow Loan or Partially Secured Loan” shall mean a
Borrower Originated Loan that was funded under Borrower’s underwriting
standards, but that does not qualify as a Borrower Originated Mixed Collateral
Loan or a Borrower Originated Real Estate Loan.

 

“Borrower Originated Loans” shall mean all Notes Receivable held by Borrower
other than the Acquired Gateway Loans.

 

“Borrower Originated Loans Borrowing Base” shall mean the amount by which
(A) the sum of (1) up to one hundred percent (100%) of the Net Eligible SBA
Guaranteed Notes Receivable that are Borrower Originated Loans, plus (2) up to
eighty percent (80%) of the Net Eligible Non-Guaranteed Notes Receivable that
are Borrower Originated Real Estate Loans, plus (3) up to seventy percent (70%)
of the Net Eligible Non-Guaranteed Notes Receivable that are

 

4

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Borrower Originated Mixed Collateral Loans, plus (4) up to sixty percent (60%)
of the Net Eligible Non-Guaranteed Notes Receivable that are Borrower Originated
Cash Flow Loan or Partially Secured Loans, exceeds (B) the sum of (1) the Bank
Product Reserve Amount with respect to Borrower Originated Loans, plus (2) the
aggregate amount, if any, of Note Sale Reserves then established and outstanding
with respect to Borrower Originated Loans, plus (3) the aggregate amount of any
other reserves established by Lender pursuant to Section 2.1(c) with respect to
Borrower Originated Loans.

 

“Borrower Originated Mixed Collateral Loan” shall mean a Borrower Originated
Loan that was funded under Borrower’s underwriting standards based upon being
secured by equipment or other tangible personal property having an appraised
value, or a combination of such equipment or other tangible personal property
and commercial real estate.

 

“Borrower Originated Real Estate Loan” shall mean a Borrower Originated Loan
that was funded under Borrower’s underwriting standards based upon being secured
by commercial real estate.

 

“Borrowing Base” shall mean the sum of (a) the Borrower Originated Loans
Borrowing Base plus (b) the Gateway Performing Loans Borrowing Base.

 

“Borrowing Base Certificate” shall mean the report by Borrower with respect to
calculation of the Maximum Commitment, to be substantially in the form attached
as Exhibit A hereto.

 

“Broker-Dealer Confirmation” shall mean, with respect to any sale of an SBA
Guaranteed Note Receivable, the written communication from a securities
broker-dealer to Borrower confirming the date on which all funds to be paid by
the purchaser of such SBA Guaranteed Note Receivable will be disbursed to FTA
for the account of Borrower.

 

“Business Day” shall mean a day other than a Saturday, Sunday or legal holiday
for commercial banks under the laws of the State of Texas or the State of
California, except that, if a determination of a Business Day shall relate to a
LIBOR Rate Loan, the term “Business Day” also shall exclude any day on which
banks are closed for dealings in Dollar deposits in the London interbank market.

 

“Capital Lease” shall mean a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.

 

“Capitalized Lease Obligation” shall mean that portion of the obligations under
a Capital Lease that is required to be capitalized in accordance with GAAP.

 

“Cash Management Services” means any cash management or related services,
including treasury, depository, return items, overdraft, controlled
disbursement, merchant store value cards, e-payables services, electronic funds
transfer, interstate depository network, automatic clearing house transfer
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) and other cash management
arrangements.

 

5

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“Change of Control” shall mean (a) Permitted Holders cease to directly or
indirectly own and control outstanding capital Stock of Borrower having at least
ninety-six (96%) of the votes for the election of members of the Board of
Directors, or (b) a majority of the members of the Board of Directors of
Borrower do not constitute Continuing Directors.

 

“Charges” shall mean all taxes, levies, assessments, charges, Liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations,
(c) the employees, payroll, income or gross receipts of Borrower, (d) the
ownership or use of any of the assets of Borrower, or (e) and any other aspect
of Borrower’s business.

 

“Closing Date” shall mean the first date on which all conditions precedent set
forth in Section 8.1 have been satisfied in a manner acceptable to Lender or
waived in writing by Lender as provided therein, which date shall be confirmed
by Lender to Borrower in writing upon request.

 

“Collateral” shall mean all of the property and interests in property described
in the Security Agreement and the other Security Documents and all other
property and interests in property which shall, from time to time, secure the
Obligations; provided, that the term Collateral shall not include any of the
Serviced ASBA Assets.

 

“Collateral Access Agreement” means a landlord waiver, bailee letter or
acknowledgement agreement of any lessor, lessee, warehouseman, processor,
consignee or other Person in possession of, having a Lien upon, or having rights
or interests in any  personal property Collateral (including, without
limitation, books and records), in each case, in form and substance satisfactory
to Lender.

 

“Collection Account” shall have the meaning ascribed to such term in
Section 2.13(b).

 

“Compliance Certificate” shall mean the certificate evidencing Borrower’s
compliance with the terms of this Agreement, to be substantially in the form
attached as Exhibit B hereto.

 

“Continuing Directors” shall mean (a) any member of the Board of Directors who
was a director (or comparable manager) of Borrower on the Closing Date, and
(b) any individual who becomes a member of the Board of Directors of Borrower
after the Closing Date if such individual was appointed or nominated for
election to the Board of Directors by a majority of the Continuing Directors,
but excluding any such individual originally proposed for election in opposition
to the Board of Directors in office at the Closing Date in an actual or
threatened election contest relating to the election of the directors (or
comparable managers) thereof and whose initial assumption of office resulted
from such contest or the settlement thereof.

 

“Default” shall mean any event that, with the passage of time, the giving of
notice or both, would become an Event of Default, unless cured or waived as
specifically provided in this Agreement.

 

“Defaulted Non-Guaranteed Notes Receivable” shall mean any Non-Guaranteed Notes
Receivable with respect to which either (a) any payment of interest, principal,
or other

 

6

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amount due thereunder from the Term Loan Debtor is more than 180 days past due,
or (b) Borrower is required to designate as a “liquidation account” in
accordance with SBA Rules and Regulations.

 

“Delinquent Non-Guaranteed Notes Receivable” shall mean any Non-Guaranteed Notes
Receivable with respect to which any payment of interest, principal, or other
amount due thereunder from the Term Loan Debtor is more than 61 days past due,
but which has not yet become a Defaulted Non-Guaranteed Notes Receivable.

 

“Designated Account” means account number [omitted] of Borrower maintained with
Borrower’s Designated Account Bank, or such other deposit account of Borrower
(located at a commercial depositary bank within the United States acceptable to
Lender) that has been designated as such, in writing, by Borrower to Lender.

 

“Designated Account Bank” means Wells Fargo Bank, N.A., ABA No. 121000248.

 

“Dollars” or $ shall mean lawful money of the United States of America.

 

“EBITDA” shall mean, with respect to any Person for any fiscal period, its
consolidated net earnings (or loss), minus extraordinary gains, plus interest
expense, income taxes, and depreciation and amortization for such period, as
determined in accordance with GAAP; provided, that solely for purposes of
calculating compliance with any of the financial covenants in Section 5.11, the
amount determined in accordance with GAAP shall be (a) increased by the positive
amount, if any, of the amortization of any premium earned over book value on any
sold SBA 7(a) Loan, and (b) increased or decreased, as the case may be, by the
amount of any loss or gain recognized as a result of any change in valuation of
any SBA 7(a) Loan based upon market conditions to the extent required by GAAP.

 

“Environmental Actions” shall mean any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication from any Governmental
Authority, or any third party involving violations of Environmental Laws or
releases of Hazardous Materials from (a) any assets, properties, or businesses
of Borrower, its Subsidiaries or predecessors in interest to Borrower or to any
of Borrower’s Subsidiaries, (b) from adjoining properties or businesses, or
(c) from or onto any facilities which received Hazardous Materials generated by
Borrower, its Subsidiaries or predecessors in interest to Borrower or to any of
Borrower’s Subsidiaries.

 

“Environmental Laws” shall mean any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy, or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on Borrower or its
Subsidiaries, relating to the environment, employee health and safety, or
Hazardous Materials, including CERCLA (Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 USC § 9601 et seq.); RCRA (Resource
Conservation and Recovery Act of 1976, 42 USC § 6901 et seq.); the Federal Water
Pollution Control Act, 33 USC § 1251 et

 

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seq; the Toxic Substances Control Act, 15 USC § 2601 et seq; the Clean Air Act,
42 USC § 7401 et seq.; the Safe Drinking Water Act, 42 USC § 300f et seq.; the
Oil Pollution Act of 1990, 33 USC § 2701 et seq.; the Emergency Planning and
Community Right-to-Know Act of 1986, 42 USC § 11001 et seq.; the Hazardous
Material Transportation Act, 49 USC § 1801 et seq.; and the Occupational Safety
and Health Act of 1970, 29 USC §651 et seq. (to the extent it regulates
occupational exposure to Hazardous Materials); any state and local or foreign
counterparts or equivalents, in each case as amended from time to time.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time.

 

“ERISA Affiliate” shall mean (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of Borrower or its
Subsidiaries under IRC Section 414(b), (b) any trade or business subject to
ERISA whose employees are treated as employed by the same employer as the
employees of Borrower or its Subsidiaries under IRC Section 414(c), (c) solely
for purposes of Section 302 of ERISA and Section 412 of the IRC, any
organization subject to ERISA that is a member of an affiliated service group of
which Borrower or any of its Subsidiaries are a member under IRC Section 414(m),
or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC,
any Person subject to ERISA that is a party to an arrangement with Borrower or
any of its Subsidiaries and whose employees are aggregated with the employees of
Borrower or its Subsidiaries under IRC Section 414(o).

 

“Event of Default” shall mean the occurrence of any of the events specified in
Section 7.1 hereof, provided that any requirement for notice or lapse of time or
any other condition precedent has been satisfied.

 

“Excess Availability” shall mean the amount, as of the date any determination
thereof is to be made, equal to Availability minus the aggregate amount, if any,
of all trade payables of Borrower aged in excess of historical levels with
respect thereto and all book overdrafts in excess of historical practices with
respect thereto, in each case as determined by Lender in the exercise of its
reasonable (from the perspective of a secured asset-based lender in the same or
similar circumstances) business judgment.

 

“FirstCity BLC” shall mean FirstCity Business Lending Corporation, a Texas
corporation.

 

“FirstCity Debt” shall have the meaning ascribed to such term in Section 8.1(r).

 

“FirstCity Financial” shall mean FirstCity Financial Corporation, a Delaware
corporation.

 

“FirstCity Guaranty” shall mean the Amended and Restated General Continuing
Limited Guaranty dated as of February 18, 2009, executed by FirstCity Financial
in favor of Lender with respect to the Obligations, subject to the “Guaranty
Limitation” set forth therein.

 

“FTA” shall mean Colson Services Corp., as fiscal and transfer agent for the SBA
and as the SBA’s agent to hold the original SBA 7(a) Loan Notes pursuant to the
Multi-Party Agreement, and as bailee for Lender for purposes of perfecting
Lender’s security interest in the

 

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original SBA 7(a) Loan Notes pursuant to the Multi-Party Agreement, or any other
Person designated by the SBA to perform the same or similar functions.

 

“GAAP” shall mean the generally accepted accounting principles in the United
States of America as in effect from time to time.

 

“Gateway Non-Performing Loans” shall mean those Acquired Gateway Loans that are
“Non-Performing Loans” as defined in the Gateway Portfolio Purchase Agreement.

 

“Gateway Non-Recourse Note” shall mean the Promissory Note in the form of
Exhibit E to the Gateway Portfolio Purchase Agreement, executed by Borrower in
favor of Gateway Seller in the amount of and to evidence the purchase price
payable by Borrower for the Gateway Non-Performing Loans, and payable solely
from payments collected by Borrower on the Gateway Non-Performing Loans.

 

“Gateway Performing Loans” shall mean those Acquired Gateway Loans that are
“Performing Loans” as defined in the Gateway Portfolio Purchase Agreement.

 

“Gateway Performing Loans Borrowing Base” shall mean the amount by which (A) up
to eighty percent (80%) of the Net Eligible Non-Guaranteed Notes Receivable that
are Gateway Performing Loans, exceeds (B) the sum of (1) the Bank Product
Reserve Amount with respect to Gateway Performing Loans, plus (2) the aggregate
amount, if any, of Note Sale Reserves then established and outstanding with
respect to Gateway Performing Loans, plus (3) the aggregate amount of any other
reserves established by Lender pursuant to Section 2.1(c) with respect to
Gateway Performing Loans.

 

“Gateway Portfolio Acquisition” shall mean the acquisition by Borrower of the
Acquired Gateway Loans pursuant to the Gateway Portfolio Purchase Agreement.

 

“Gateway Portfolio Purchase Agreement” shall mean that certain SBA Loan
Portfolio Purchase Agreement dated as of December 21, 2006 (as amended or
modified from time to time), pursuant to which Borrower acquired from Gateway
Seller all of the Acquired Gateway Loans.

 

“Gateway Seller” shall mean Prosperity Bank, as successor in interest by merger
to each of State Bank, a Texas banking association, Gateway National Bank, a
national banking association, and GNB Financial, n.a., a national banking
association.

 

“Governmental Authority” shall mean any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.

 

“Governmental Authorization” shall mean any permit, license, authorization,
consent order or consent decree of or from any Governmental Authority.

 

“Governmental Requirement” shall mean any law, statute, code, ordinance, order,
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization

 

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or other direction or requirement (including any of the foregoing which relate
to SBA Rules and Regulations, lender licensing, environmental standards or
controls, energy regulations and occupational, safety and health standards or
controls) of Governmental Authority that exercises jurisdiction over Borrower.

 

“Hazardous Materials” shall mean (a) substances that are defined or listed in,
or otherwise classified pursuant to, any applicable laws or regulations as
“hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic
substances,” or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP
toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.

 

“Hedging Agreement” shall mean a “swap agreement” as that term is defined in
Section 101(53B)(A) of the Bankruptcy Code.

 

“Hedging Obligations” means any and all obligations or liabilities, whether
absolute or contingent, due or to become due, now existing or hereafter arising,
of Borrower or its Subsidiaries arising under, owing pursuant to, or existing in
respect of Hedging Agreements entered into with one or more of the Bank Product
Providers.

 

“Hedging Provider” means Wells Fargo or any of its Affiliates.

 

“Highest Lawful Rate” shall mean the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received with respect to the Revolving Loans or on other Obligations,
as the case may be, under the law of the State of New York (or the law of any
other jurisdiction whose laws may be mandatorily applicable notwithstanding
other provisions of this Agreement), or law of the United States of America
applicable to Lender and the Transactions that would permit Lender to contract
for, charge, take, reserve or receive a greater amount of interest, than under
New York (or such other jurisdiction’s) law.

 

“Indebtedness” shall mean (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes, or other similar instruments
and all reimbursement or other obligations in respect of letters of credit,
bankers acceptances, interest rate swaps, or other financial products, (c) all
obligations under Capital Leases, (d) all obligations or liabilities of others
secured by a Lien on any asset a Person or its Subsidiaries, irrespective of
whether such obligation or liability is assumed, (e) all obligations for the
deferred purchase price of assets (other than trade debt incurred in the
ordinary course of business and repayable in accordance with customary trade
practices), (f) all obligations owing under Hedging Agreements, and (g) any
obligation of Borrower or its Subsidiaries guaranteeing or intended to guarantee
(whether directly or indirectly guaranteed, endorsed, co-made, discounted, or
sold with

 

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recourse) any obligation of any other Person that constitutes Indebtedness under
any of clauses (a) through (f) above.

 

“Indemnified Liabilities” shall have the meaning ascribed to such term in
Section 2.19.

 

“Indemnified Person” shall have the meaning ascribed to such term in
Section 2.19.

 

“Insolvency Proceeding” shall mean any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other state or
federal bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with creditors,
or proceedings seeking reorganization, arrangement, or other similar relief.

 

“Intangible Assets” shall mean, with respect to any Person, that portion of the
book value of all of such Person’s assets that would be treated as intangibles
under GAAP.

 

“Interest Period” means with respect to each LIBOR Rate Loan, a period
commencing on the first day of a calendar month and ending on the last day of
such calendar month.

 

“Lender” shall mean Wells Fargo Capital Finance, LLC, formerly known as Wells
Fargo Foothill, LLC, a Delaware limited liability company, together with its
successors and permitted assigns.

 

“Lender Account” shall mean an account at a bank designated by Lender from time
to time as the account into which Borrower shall make all payments to Lender
under this Agreement and the other Loan Documents; unless and until Lender
notifies Borrower to the contrary, the Lender Account shall be that certain
deposit account bearing account number [omitted] and maintained by Lender with
Wells Fargo Bank, N.A., San Francisco, CA, ABA No. 121000248.

 

“Lender Expenses” means all (a) reasonable costs or expenses (including taxes,
and insurance premiums) required to be paid by Borrower or its Subsidiaries
under any of the Loan Documents that are paid or incurred by Lender,
(b) reasonable fees or charges paid or incurred by Lender in connection with its
transactions with Borrower and its Subsidiaries, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filing, recording, publication, appraisal
(including periodic Collateral appraisals or business valuations to the extent
of the fees and charges (and up to the amount of any limitation) provided for in
Section 2.5(d)), real estate surveys, real estate title policies and
endorsements, and environmental audits, (c) Lender’s customary fees and charges
(as adjusted from time to time) with respect to the disbursement of funds (or
the receipt of funds) to or for the account of Borrower (whether by wire
transfer or otherwise), together with any out-of-pocket costs and expenses
incurred in connection therewith, (d) reasonable charges paid or incurred by
Lender resulting from the dishonor of checks, (e) reasonable costs and expenses
paid or incurred

 

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by Lender to correct any default or enforce any provision of the Loan Documents,
or in gaining possession of, maintaining, handling, preserving, storing,
shipping, selling, preparing for sale, or advertising to sell the Collateral, or
any portion thereof, irrespective of whether a sale is consummated,
(f) reasonable audit fees and expenses of Lender related to audit examinations
of Borrower’s books and records to the extent of the fees and charges (and up to
the amount of any limitation) provided for in Section 2.5(d), (g) reasonable
costs and expenses of third party claims or any other suit paid or incurred by
Lender in enforcing or defending the Loan Documents or in connection with the
transactions contemplated by the Loan Documents or Lender’s relationship with
Borrower, (h) Lender’s reasonable fees and expenses (including attorneys fees)
incurred in advising, structuring, drafting, reviewing, administering, or
amending the Loan Documents, (i) Lender’s reasonable fees, costs and expenses
(including travel, meals, and lodging) incurred in connection with visits,
inspections and appraisals conducted in accordance with Section 5.8, and
(j) Lender’s reasonable fees and expenses (including reasonable attorneys,
accountants, consultants, and other advisors fees and expenses) incurred in
terminating, enforcing (including attorneys, accountants, consultants, and other
advisors fees and expenses incurred in connection with a “workout,” a
“restructuring,” or an Insolvency Proceeding concerning Borrower or its
Subsidiaries or in exercising rights or remedies under the Loan Documents), or
defending the Loan Documents, irrespective of whether suit is brought, or in
taking any Remedial Action concerning the Collateral.

 

“LIBOR Rate” means the per annum rate appearing on Bloomberg L.P.’s (the
“Service”) Page BBAM1/(Official BBA USD Dollar Libor Fixings) (or on any
successor or substitute page of such Service, or any successor to or substitute
for such Service) 2 Business Days prior to the commencement of each month, for a
term of three (3) months, which determination shall be conclusive in the absence
of manifest error.

 

“LIBOR Rate Loan” means that portion of the Revolving Loans that bears interest
at a rate determined by reference to the LIBOR Rate.

 

“LIBOR Rate Margin” means three and one-half percent (3.50%) per annum.

 

“Lien” shall mean any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, and including but not limited
to the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes.  The term “Lien” shall include reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property.

 

“Loan Account” shall have the meaning ascribed to such term in Section 2.16.

 

“Loan Documents” shall mean this Agreement, the Omnibus Amendment and
Reaffirmation, the Security Documents, the Multi-Party Agreement, the Validity
Agreements, the FirstCity Guaranty, those other Original Loan Documents that are
not specifically being amended and restated or canceled in connection with this
Agreement, and all other agreements, instruments and documents, including notes,
guaranties, mortgages, deeds of trust, chattel mortgages, pledges, powers of
attorney, consents, assignments, contracts, notices, leases,

 

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financing statements, subordination agreements, trust account agreements, and
all other written matter whether heretofore, now, or hereafter executed by or on
behalf of Borrower or delivered to Lender, with respect to this Agreement.

 

“Loan Guaranty Agreement” shall mean any Loan Guaranty Agreement (Deferred
Participation) (SBA Form 750) or similar agreement in force and effect between
Borrower and the SBA from time to time (including, with respect to any SBA
Guaranteed Notes Receivable originated by a predecessor in interest of Borrower,
SBA’s consent to Borrower’s acquisition of such SBA Guaranteed Notes Receivable.

 

“Material Adverse Change” means (a) a material adverse change in the business,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of Borrower and its Subsidiaries, taken as a whole,
that can reasonably be expected in the exercise of reasonable business judgment
to result in a material impairment of the ability of Borrower’s and its
Subsidiaries’ ability to perform their respective obligations under the Loan
Documents to which each such Person is a party or of Lender’s ability to enforce
the Obligations or realize upon the Collateral, or (b) any impairment of the
enforceability or priority of Lender’s Liens with respect to the Collateral.

 

“Maximum Commitment” shall have the meaning ascribed to such term in
Section 2.1(b).

 

“Maximum Credit Line” shall mean $25,000,000, or such higher amount as Lender
may agree to in its sole discretion.

 

“Multi-Party Agreement” shall mean the Multi-Party Agreement by and among
Borrower, Lender, FTA, and the SBA, dated as of December 15, 2006, as the same
may be supplemented, modified, or amended from time to time.

 

“Net Eligible Non-Guaranteed Notes Receivable” shall mean, at any particular
time, the aggregate principal amount then outstanding of Non-Guaranteed Notes
Receivable conforming to the applicable requirements set forth in Schedule
1.1(a) as in effect at the time Borrower first makes a request for a Revolving
Loan with respect thereto or Lender is first granted a Lien therein.

 

“Net Eligible SBA Guaranteed Notes Receivable” shall mean, at any particular
time, the aggregate principal amount then outstanding of SBA Guaranteed Notes
Receivable conforming to the applicable requirements set forth in Schedule
1.1(b) as in effect at the time Borrower first makes a request for a Revolving
Loan with respect thereto or Lender is first granted a Lien therein.

 

“Net Sale Proceeds” shall mean the proceeds payable to or for the account of
Borrower from the sale of any SBA Guaranteed Notes Receivable, net of any fees
or commissions payable to FTA with respect thereto.  Net Sales Proceeds shall
not include any commissions payable to a broker-dealer with respect to any such
sale.

 

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“Non-Guaranteed Note Receivable” shall mean that portion of any Note Receivable
that is not guaranteed by the SBA and in which Lender has been granted a first
priority security interest pursuant to the Security Agreement.

 

“Non-Guaranteed Participation” shall mean a loan participation with respect to a
Note Receivable, sold by Borrower after the Original Closing Date pursuant to
documentation reasonably acceptable to Lender.

 

“Note Participation Amount” shall mean the proceeds payable to or for the
account of Borrower from the sale of any Non-Guaranteed Participation, which
shall be a cash amount equal to not less than 100% of the buyer’s or
participant’s share of the outstanding principal amount of the Participated Note
Receivable.

 

“Note Receivable” shall mean the obligation of any Term Loan Debtor to pay any
SBA 7(a) Loan made by Borrower to such Term Loan Debtor, whether or not
evidenced by a promissory note or other instrument; provided, that the term Note
Receivable shall not include any Serviced ASBA Asset; and provided further, that
upon Lender’s release of its Lien on a specific Note Receivable in connection
with the transfer by Borrower of such Note Receivable to the trustee pursuant to
a Securitization Transaction or the sale of a Non-Guaranteed Participation
therein, or any other release by Lender of its Lien therein, such obligation
shall cease to be considered a Note Receivable and the provisions of this
Agreement shall no longer be applicable thereto.

 

“Note Receivable Documents” shall mean, with respect to any Note Receivable, all
original documents, instruments, and chattel paper, executed or delivered to
Borrower by the applicable Term Loan Debtor and evidencing such Note Receivable.

 

“Note Sale Reserve” shall mean, for purposes of calculating the Maximum
Commitment, a reserve equal to one hundred percent (100%) of the outstanding
principal amount of any SBA Guaranteed Note Receivable proposed to be sold by
Borrower, which Lender may establish in the exercise of its reasonable (from the
perspective of a secured asset-based lender in the same or similar
circumstances) business judgment if it deems necessary or appropriate, as of the
close of Lender’s business on the Business Day immediately preceding the
proposed Settlement Date for such sale, to be maintained until the Business Day
on which the Net Sale Proceeds payable on account of such SBA Guaranteed Note
Receivable are credited against the Obligations pursuant to Section 2.13(b).

 

“Obligations” shall mean (a) all loans, advances, debts, principal, interest
(including any interest that, but for the commencement of an Insolvency
Proceeding, would have accrued), premiums, liabilities (including all amounts
charged to Borrower’s Loan Account pursuant hereto), obligations (including
indemnification obligations), fees, charges, costs, Lender Expenses (including
any fees or expenses that, but for the commencement of an Insolvency Proceeding,
would have accrued), lease payments, guaranties, covenants, and duties of any
kind and description owing by Borrower and its Subsidiaries to Lender pursuant
to or evidenced by the Loan Documents and irrespective of whether for the
payment of money, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and including all interest not
paid when due and all Lender Expenses that Borrower or its

 

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Subsidiaries are required to pay or reimburse by the Loan Documents, by law, or
otherwise, (b) all Bank Product Obligations, and (c) all “Obligations” under and
as defined in the Original Loan Agreement in existence as of or accrued through
the Closing Date.  Any reference in this Agreement or in the Loan Documents to
the Obligations shall include all amendments, changes, extensions,
modifications, renewals replacements, substitutions, and supplements, thereto
and thereof, as applicable, both prior and subsequent to any Insolvency
Proceeding.

 

“Omnibus Amendment and Reaffirmation” shall mean the Omnibus Amendment and
Reaffirmation of Loan Documents dated as of January 31, 2012, executed by
Lender, Borrower, FirstCity Financial, and each Validity Certifier, with respect
to the Security Agreement, the FirstCity Guaranty, the Validity Agreements and
those other Original Loan Documents that are not being amended and restated on
the Closing Date but will continue to be Loan Documents under this Agreement.

 

“Original Closing Date” shall mean the “Closing Date” under and as defined in
the Original Loan Agreement.

 

“Original Loan Agreement” shall have the meaning set forth in the Recitals to
this Agreement.

 

“Original Loan Documents” shall have the meaning set forth in the Recitals to
this Agreement.

 

“Overadvance” shall have the meaning ascribed to such term in Section 2.7.

 

“Participated Notes Receivable” shall mean the Non-Guaranteed Notes Receivable
in which Borrower has sold a Non-Guaranteed Participation.

 

“Permitted Holders” shall mean FirstCity BLC or another Subsidiary of FirstCity
Financial.

 

“Permitted Liens” shall mean (i) any Liens created pursuant to the Loan
Documents for the benefit of Lender to secure the Obligations; (ii) 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; (iii) 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; (iv) 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; (v) 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;
and (vi) those Liens disclosed on Schedule 4.3(b).

 

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“Person” shall mean any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other form of entity.

 

“Plan” shall mean, with respect to Borrower or any ERISA Affiliate, at any time,
an employee benefit plan, as defined in Section 3(3) of ERISA, which Borrower
maintains, contributes to, or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.

 

“Prepayment Fee” shall have the meaning ascribed to that term in Section 2.6.

 

“Projections” shall mean Borrower’s forecasted (a) balance sheets, (b) profit
and loss statements, and (c) cash flow statements, all prepared in a form
consistent with Borrower’s historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.

 

“Property” shall mean any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

 

“Record” means information that is inscribed on a tangible medium or which is
stored in an electronic or other medium and is retrievable in perceivable form.

 

“Release” shall mean any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Materials) or into or out of any
Property, including the movement of any Hazardous Material through the air,
soil, surface water, groundwater or property.

 

“Remedial Action” shall mean all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or
(d) conduct any other actions authorized by CERCLA (42 USC § 9601, et seq.).

 

“Reserve Percentage” means, on any day, for Lender, the maximum percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor Governmental Authority) for determining the reserve requirements
(including any basic, supplemental, marginal, or emergency reserves) that are in
effect on such date with respect to eurocurrency funding (currently referred to
as “eurocurrency liabilities”) of Lender, but so long as Lender is not required
or directed under applicable regulations to maintain such reserves, the Reserve
Percentage shall be zero.

 

“Revolving Loans” shall have the meaning ascribed to such term in Section 2.1.

 

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“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.

 

“SBA Guaranteed Note Receivable” shall mean that portion of any Note Receivable
that is actually guaranteed by the SBA and in which Lender has been granted a
first priority security interest as set forth in the Security Agreement.

 

“SBA Owned Notes Receivable” shall mean any SBA Guaranteed Notes Receivable that
are from time to time owned by SBA.

 

“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.

 

“SBA 7(a) Loans” shall mean any loans made by Borrower to small businesses and
partially guaranteed by SBA, all originated in accordance with the SBA Rules and
Regulations and pursuant to the authorization contained in Section 7(a) of the
SBA Act.  This term shall also include the Gateway Acquired Loans and other
loans made by a lender other than Borrower under the authorization contained in
Section 7(a) of the SBA Act and which are acquired by Borrower in a manner
permitted by this Agreement and SBA Rules and Regulations.

 

“SBA 7(a) Loan Notes” shall mean any promissory notes that at any time evidence
SBA 7(a) Loans.

 

“SBA Standard Operating Procedures and Official Notices” shall mean Public Law
85-536, as amended; those Rules and Regulations, as defined in CFR 13, Part 120,
“Business Loans” and CFR 13, Part 121, “Size Standards”; Standard Operating
Procedures, (SOP) 50-10 for loan processing, 50-50 for loan servicing and 50-51
for loan liquidation as may be published and or amended from time to time by the
SBA.

 

“Schedule of Documents” shall mean the schedule, including all appendices,
exhibits or schedules thereto, listing certain documents and information
required to be delivered in connection with this Agreement and the other Loan
Documents and the transactions contemplated hereunder and thereunder,
substantially in the form attached hereto as Exhibit C.

 

“Schedule of Eligible Notes Receivable” shall have the meaning ascribed to such
term in Section 5.1(c).

 

“Secondary Participation Agreement” shall mean any Secondary Participation
Guaranty Agreement (SBA Form 1086) or similar agreement among Borrower, the SBA,
and any purchaser or potential purchaser of any SBA Guaranteed Note Receivable
from time to time.

 

“Securitization Notes Receivable” shall mean the Non-Guaranteed Notes Receivable
sold by Borrower as part of a Securitization Transaction.

 

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“Securitization Transaction” shall mean any securitization transaction effected
after the Closing Date in a manner reasonably acceptable to Lender and through
documentation in form and substance reasonably acceptable to Lender, pursuant to
which Borrower sells all or a specific portion of its portfolio of
Non-Guaranteed Notes Receivable by pooling and transferring them to a trust that
issues and sells certificates representing, in aggregate, the entire beneficial
interest in such trust.

 

“Security Agreement” shall mean the Security Agreement dated as December 15,
2006, executed by Borrower for the benefit of Lender.

 

“Security Documents” shall mean the Security Agreement, mortgages, deeds of
trust, financing statements, and any and all other agreements or instruments now
or hereafter executed and delivered by Borrower or any other Person in
connection with, or as security for the payment or performance of the Revolving
Loans or any of the other Obligations, as such agreements may be amended or
supplemented from time to time.

 

“Serviced ASBA Assets” shall mean (i) the unguaranteed portions of any
SBA-guaranteed note receivable originated by ASBA and transferred to Borrower
pursuant to the Asset Purchase Agreement and being serviced as of the Original
Closing Date by Business Loan Center, Inc. as Subservicer pursuant to that
certain Lenders Service Provider Agreement, dated as of October 30, 2002,
between Business Loan Center, LLC and ASBA (as amended from time to time and
assigned by ASBA to Borrower as part of the Asset Purchase Documents), and
applicable SBA Rules and Regulations, 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 Borrower
pursuant to the Asset Purchase Agreement, and (iii) all proceeds of the property
described in clauses (i) and (ii) above.

 

“Servicer” shall mean FirstCity Servicing Corporation, as the provider of the
loan operations support services described in the Servicing Agreement, or such
successor provider of such services appointed with the written consent of both
Borrower and Lender.

 

“Servicer Account” shall have the meaning ascribed to such term in
Section 2.13(a).

 

“Servicing Agreement” shall mean the Loan Operations, Administrative and General
Services Agreement by and between Borrower, Lender, and FirstCity Servicing
Corporation, pursuant to which FirstCity Servicing Corporation will provide
certain loan operations and administrative and support services for Borrower’s
ongoing business operations.

 

“Settlement Date” shall mean the date specified for the settlement of the sale
of any SBA Guaranteed Note Receivable pursuant to a Broker-Dealer Confirmation.

 

“Sold Notes Receivable” shall mean the SBA Guaranteed Notes Receivable sold by
Borrower to purchasers in the secondary market.

 

“Solvent” shall mean, with respect to any Person, (a) the present fair value of
such Person’s assets is in excess of the total amount of such Person’s
liabilities (including formerly contingent liabilities that have become due),
(b) such Person is able to pay its debts as they

 

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become due, and (c) such Person does not have unreasonably small capital to
carry on its business.

 

“Stock” shall mean all shares, options, warrants, interests, participations, or
other equivalents (regardless of how designated) of or in a Person, whether
voting or nonvoting, including common stock, preferred stock, or any other
“equity security” (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the SEC under the Exchange Act).

 

“Subordinated Debt” shall mean (i) the FirstCity Debt, and (ii) any other
Indebtedness of Borrower that is subordinated in a manner satisfactory in form
and substance to Lender as to right and time of payment of principal and
interest thereon to any and all of the Obligations pursuant to a Subordination
Agreement.

 

“Subordination Agreement” shall mean a subordination agreement executed and
delivered by Borrower, Lender and the holder(s) of Subordinated Debt, providing
for (i) subordination to the Obligations of Subordinated Debt owing to such
holder(s), (ii) subordination to Lender’s Liens of any and all Liens securing
such Subordinated Debt, and (iii) such other matters in respect thereof,
including without limitation limitations in respect of the exercise of remedies
against Borrower or the Collateral, as may be required by Lender, all in form
and substance satisfactory to Lender.

 

“Subsidiary” shall mean, with respect to any Person, a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of Stock having ordinary voting power to
elect a majority of the board of directors (or appoint other comparable
managers) of such corporation, partnership, limited liability company, or other
entity.

 

“Tangible Net Worth” shall mean, as of any date of determination, the result of
(a) the sum of (i) Borrower’s total stockholder’s equity (including retained
earnings) plus (ii) Subordinated Debt, plus (iii) the FirstCity Debt, minus
(b) the sum of (i) all Intangible Assets of Borrower plus (ii) all amounts due
to Borrower (including its Subsidiaries) from its Affiliates.  Notwithstanding
any contrary treatment that may apply under GAAP, solely for purposes of the
definition of Tangible Net Worth and calculating compliance with certain
financial covenants in Section 5.11, (1) all assets acquired from ASBA pursuant
to the Asset Purchase Agreement and included in the assets of Borrower
(including the value of Borrower’s license to make SBA 7(a) Loans), and (2) the
value of Borrower’s Servicing Rights with respect to SBA 7(a) Loans owned or
serviced by Borrower, will be treated as tangible assets.

 

“Term Loan Debtor” shall mean any Person, other than the SBA, who is or may
become obligated to Borrower under an SBA 7(a) Loan.

 

“Termination Date” shall mean the earliest of: (a) January 31, 2015 (unless a
later date is agreed to in writing by Borrower and Lender); (b) the date that
Borrower elects to terminate this Agreement and repays the Obligations in full
in accordance with the terms of Section 2.6; and (c) the date Lender elects to
terminate Borrower’s right to receive Revolving Loans in accordance with
Section 7.2.

 

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“Transactions” shall mean the transactions provided for in and contemplated by
this Agreement and the other Loan Documents.

 

“UCC” shall mean the Uniform Commercial Code (or any successor statute), as in
effect from time to time, of the State of New York; provided, however, that in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection, priority, or remedies with respect to Lender’s Liens on
any Collateral is governed by the Uniform Commercial Code as enacted and in
effect in a jurisdiction other than the State of New York, the term “UCC” shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority, or remedies.

 

“Validity Agreement” shall mean a Validity Agreement executed and delivered by a
Validity Certifier, in form and substance satisfactory to Lender.

 

“Validity Certifier” shall mean each of the Chief Executive Officer, the
President, and the Treasurer of Borrower.

 

“Wells Fargo” shall mean Wells Fargo Bank, National Association, a national
banking association.

 

1.2           Accounting Principles.  Where the character or amount of any asset
or liability or item of income or expense is required to be determined or other
accounting computation is required to be made for the purposes of this
Agreement, this shall be done in accordance with GAAP, except where such
principles are inconsistent with the specific requirements of this Agreement
(such as with respect to the calculations of Tangible Net Worth or EBITDA solely
for purposes of calculating compliance with certain financial covenants in
Section 5.11).

 

1.3           UCC Terms.  Any terms used in this Agreement that are defined in
the UCC shall be construed and defined as set forth in the UCC unless otherwise
defined herein; provided however, that to the extent that the UCC is used to
define any term herein and such term is defined differently in different
Articles of the UCC, the definition of such term contained in Article 9 shall
govern.  All UCC definitions referenced in Section 1.1 or this Section 1.3 are
incorporated herein by reference.

 

1.4           Certain Matters of Construction.  Unless the context of this
Agreement or any other Loan Document clearly requires otherwise, references to
the plural include the singular, references to the singular include the plural,
the term “including” is not limiting, and the term “or” has, except where
otherwise indicated, the inclusive meaning represented by the phrase “and/or.” 
The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this
Agreement or any other Loan Document refer to this Agreement or such other Loan
Document, as the case may be, as a whole and not to any particular provision of
this Agreement or such other Loan Document, as the case may be.  Section,
subsection, clause, schedule, and exhibit references herein are to this
Agreement unless otherwise specified.  Any reference in this Agreement or in the
other Loan Documents to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any

 

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restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein).  The words “asset” and “property” shall be construed to have
the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts, and contract
rights.  Any reference herein or in any other Loan Document to the satisfaction,
repayment, or payment in full of the Obligations shall mean the repayment in
Dollars in full in cash or immediately available funds (or, in the case of
obligations with respect to Bank Products (other than Hedge Obligations),
providing Bank Product Collateralization) of all of the Obligations (including
the payment of any termination amount then applicable (or which would or could
become applicable as a result of the repayment of the other Obligations) under
Hedging Agreements provided by Hedging Providers) other than (a) unasserted
contingent indemnification Obligations, (b) any Bank Product Obligations (other
than Hedging Obligations) that, at such time, are allowed by the applicable Bank
Product Provider to remain outstanding without being required to be repaid or
cash collateralized, and (c) any Hedging Obligations that, at such time, are
allowed by the applicable Hedging Provider to remain outstanding without being
required to be repaid.  Any reference herein to any Person shall be construed to
include such Person’s successors and assigns.  Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.

 

2.                                      AMOUNT AND TERMS OF LOAN

 

2.1           The Loans and Commitments.

 

(a)           General.  Subject to the terms and conditions set forth herein and
relying on the representations and warranties contained in this Agreement,
Lender hereby agrees that it will make available to Borrower, from time to time
prior to the Termination Date and so long as no Default or Event of Default has
occurred and is continuing, advances pursuant to Section 2.2 (collectively, the
“Revolving Loans”), and Borrower may make borrowings, payments, and reborrowings
in respect thereof.  All “Revolving Loans” outstanding under the Original Loan
Agreement immediately before the effectiveness of this Agreement will be deemed
to be Revolving Loans hereunder.  If Lender makes advances to Borrower from such
line of credit, all advances shall be repayable as provided in Sections 2.12 and
2.13, and shall be used by Borrower only for the purposes specified in
Section 2.10 and consistent with all applicable laws and statutes.

 

(b)           Maximum Commitment.  The aggregate outstanding principal amount of
the Revolving Loans made to Borrower at any one time (the “Maximum Commitment”)
shall not exceed the lesser of:

 

(i)            the Maximum Credit Line; or

 

(ii)           the Borrowing Base.

 

(c)           Reserves.  Anything to the contrary in this Section 2.1
notwithstanding, Lender shall have the right to establish reserves in such
amounts, and with respect to such

 

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matters, as Lender in the exercise of its reasonable (from the perspective of a
secured asset-based lender in the same or similar circumstances) business
judgment shall deem necessary or appropriate or in the event of a Material
Adverse Change, against the amount of Revolving Loans available hereunder,
including reserves with respect to (i) sums that Borrower is required to pay
(such as taxes, assessments, insurance premiums, or, in the case of leased
assets, rents or other amounts payable under such leases) and has failed to pay
under any Section of this Agreement or any other Loan Document, and (ii) amounts
owing by Borrower to any Person to the extent secured by a Lien on, or trust
over, any of the Collateral (other than any existing Permitted Lien set forth on
Schedule 4.3(b) that is specifically identified thereon as entitled to have
priority over Lender’s Liens), which Lien or trust Lender, in the exercise of
its reasonable (from the perspective of a secured asset-based lender in the same
or similar circumstances) business judgment, believes likely would have a
priority superior to Lender’s Liens (such as Liens or trusts in favor of
landlords, warehousemen, carriers, mechanics, materialmen, laborers, or
suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes
where given priority under applicable law) in and to such item of the
Collateral.  Lender will use reasonable efforts to inform Borrower of any such
reserves within five Business Days after establishing same; provided, that
Lender shall have no liability for any delay or failure in doing so and any
delay or failure to do so shall not impair any of Lender’s rights or Borrower’s
obligations under the Loan Documents.  In addition to the foregoing, Lender and
its real estate valuation advisor shall have the right to determine the value of
any property securing an SBA 7(a) Loan during each calendar quarter for the
purpose of redetermining the fair market value of the collateral securing such
SBA 7(a) Loan and, as a result, redetermining the appropriate advance rate for
the Non-Guaranteed Note Receivable portion thereof.

 

2.2           Notice of Borrowing; Disbursement of Advances.

 

(a)           Notice.  The amount and date of each advance hereunder shall be
designated by Borrower’s execution of and delivery to Lender of a Borrowing Base
Certificate that includes Borrower’s request for a new advance, by no later than
10:00 a.m. (California Time) on the proposed funding date.

 

(b)           Disbursement.  Upon receipt of a Borrowing Base Certificate
pursuant to Section 2.2(a) and satisfaction of all of the other conditions
precedent set forth in Article 8, subject to the provisions of, and satisfaction
of the conditions set forth in, Section 2.1, Lender shall, on or after the
Closing Date, make advances to Borrower (including the amount of all “Revolving
Loans” outstanding under the Original Loan Agreement immediately before the
effectiveness of this Agreement) on a revolving basis up to a maximum aggregate
outstanding principal amount equal to the Maximum Commitment.

 

(c)           Designated Account.  Lender is authorized to make the Revolving
Loans under this Agreement based upon telephonic or other instructions received
from anyone purporting to be an Authorized Person, or without instructions if
pursuant to Section 2.12.  Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of receiving
the proceeds of the Advances requested by Borrower and made by Lender
hereunder.  Unless otherwise agreed by Lender and Borrower, any Revolving Loan
requested by Borrower and made by Lender hereunder shall be made to the
Designated Account.

 

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2.3           Interest Rate.

 

(a)           Except as provided to the contrary in Section 2.20(a), Borrower
shall pay interest to Lender (i) monthly in arrears commencing on the first
Business Day of the month next succeeding the month in which the Closing Date
falls, and on the first Business Day of each subsequent calendar month, (ii) on
the Termination Date, and (iii) if any interest accrues or remains payable after
the Termination Date, or during the continuance of an Event of Default, upon
demand by Lender.

 

(b)           Interest shall accrue on the Revolving Loans at a rate equal to
(i) in the case of a LIBOR Rate Loan, at a per annum rate equal to the sum of
(A) the LIBOR Rate for the applicable Interest Period plus (B) the LIBOR Rate
Margin; (ii) in the case of a Base Rate Loan, at a floating per annum rate equal
to the Base Rate plus the Base Rate Margin; and (iii) otherwise, at a floating
per annum rate equal to the Base Rate plus the Base Rate Margin.

 

(c)           All computations of interest shall be made by Lender on the basis
of a 360 day year, in each case for the actual number of days occurring in the
period for which such interest is payable.  In the event the Base Rate is
changed from time to time hereafter, the rates of interest hereunder based upon
the Base Rate automatically and immediately shall be increased or decreased by
an amount equal to such change in the Base Rate.  Each determination by Lender
of an interest rate hereunder shall be conclusive and binding for all purposes,
absent manifest error or bad faith.

 

(d)           After and during the continuation of an Event of Default beyond
the applicable cure period, and at the sole discretion of Lender, the interest
rate on the Revolving Loans shall be increased by four percentage points (4.0%)
per annum above the rate that would otherwise apply pursuant to Section 2.3(b). 
To the extent that any change in the Highest Lawful Rate would affect the
interest rate in effect hereunder, then the interest rate hereunder shall be
adjusted on the effective date of such change in order to reflect such change in
the Highest Lawful Rate.

 

2.4           Computation.

 

(a)           In no event shall the interest rate(s) on the Revolving Loans
exceed the Highest Lawful Rate.  In the event that the interest rate(s) on the
Revolving Loans would, without giving effect to the previous sentence, exceed
the Highest Lawful Rate under the terms of this Agreement, then, should any
interest payable hereunder thereafter fall below the Highest Lawful Rate,
interest shall continue to accrue at the Highest Lawful Rate until such time as
Lender has received an amount of interest equal to what Lender would have
received but for the operation of this Section 2.4(a), at which time the
interest payable shall again accrue at the rate(s) otherwise provided for under
Section 2.3 until such rate(s) under Section 2.3 again exceeds the Highest
Lawful Rate, in which event the terms of this Section 2.4(a) shall again apply.

 

(b)           In the event that at maturity or final payment of the Revolving
Loans, the total amount of interest paid or accrued thereon is, due to the
operation of Section 2.4(a), less than the total amount of interest which would
have accrued if the rate(s) otherwise provided for

 

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under Section 2.3 had at all times been in effect, then Borrower agrees, to the
fullest extent permitted by law, to pay to Lender an amount equal to the
difference between (a) the lesser of (i) the amount of interest which would have
accrued on the Revolving Loans if the Highest Lawful Rate had at all times been
in effect or (ii) the amount of interest which would have accrued on the
Revolving Loans if the rate(s) otherwise provided for under Section 2.3 had at
all times been in effect, and (b) the amount of interest otherwise accrued on
the Revolving Loans in accordance with the provisions of Section 2.3 and this
Section 2.4.

 

2.5           Fees.

 

(a)           Closing Fee.  Borrower agrees to pay to Lender as consideration
for Lender agreeing to enter into this Agreement a closing fee, which Borrower
acknowledges shall have been fully earned and non-refundable by Lender on the
Closing Date, in an amount equal to One Hundred Eighty-Seven Thousand Five
Hundred Dollars ($187,500) (i.e., three-quarters of one percent (0.75%) of the
Maximum Credit Line as of the Closing Date).  Such closing fee shall be due and
payable in 12 equal monthly installments of Fifteen Thousand Six Hundred
Twenty-Five Dollars ($15,625) each, starting on the first Business Day of the
calendar month immediately following the Closing Date and continuing on the
first Business Day of each of the 11 immediately succeeding calendar months;
provided, however, that upon the termination of this Agreement for any reason,
the entire unpaid amount of the closing fee shall be immediately due and
payable.

 

(b)           Unused Credit Line Fee.  Borrower agrees to pay to Lender, in
arrears on the first Business Day of each month and on the Termination Date, a
facility fee for Borrower’s non-use of the available Maximum Credit Line in an
amount equal to one-quarter of one percent (0.25%) per annum of the average
daily difference during the month in question (or portion thereof) between
(i) the Maximum Credit Line and (ii) the aggregate outstanding principal amount
of the Revolving Loans for such month (or portion thereof).

 

(c)           Loan Administration Fees.  Borrower agrees to pay to Lender, in
arrears on the first Business Day of each month for the prior month (or portion
thereof), and on the Termination Date, a fully-earned and non-refundable monthly
loan administration fee of One Thousand Five Hundred Dollars ($1,500) for each
month (or portion thereof) that this Agreement is in effect.

 

(d)           Audit, Appraisal and Valuation Charges; Establishment of
Electronic Collateral Reporting.  Borrower agrees to pay Lender audit,
appraisal, and valuation fees and charges as follows (i) a fee of $1,100 per
day, per auditor, plus reasonable out-of-pocket expenses for each financial
audit of Borrower performed by personnel employed or contracted by Lender, which
audits shall be conducted at Borrower’s expense as frequently as Lender shall
determine (provided that so long as no Default or Event of Default has occurred
and is continuing, Borrower will not be charged for more than three financial
audits in any calendar year), (ii) a fee of $1,500 per day per appraiser, plus
reasonable out-of-pocket expenses, for each appraisal of the Collateral, or any
portion thereof, or to assess Borrower’s or its Subsidiaries’ Collateral or
business valuation, performed by personnel employed by or contracted by Lender
(provided that so long as no Default or Event of Default has occurred and is
continuing, Borrower will not be charged for more than three appraisals in any
calendar year), and (iii) the

 

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actual charges paid or incurred by Lender if it elects to employ the services of
one or more third Persons (A) to perform any of the work described in clauses
(i) or (ii) above for which Borrower is liable, or (B) to perform the quarterly
real estate valuations referred to in Section 2.1(c).

 

2.6           Borrower’s Termination of Agreement.  Upon at least 90 days prior
written notice to Lender, Borrower may, at its option, terminate only the
entirety of this Agreement and not any single section thereof.  In order for
such termination by Borrower to become effective, Borrower shall, on or before
such termination date, pay in full all of the then outstanding Obligations;
provided, that if Borrower terminates this Agreement within any of the time
periods listed below, or if this Agreement is terminated pursuant to
Section 7.2, then Borrower shall also pay to Lender, as liquidated damages for
the loss of the bargain and not as a penalty, a prepayment premium equal to the
following amounts (the “Prepayment Fee”):

 

If Prepayment is Made
Between the Following
Dates, Inclusive:

 

The Premium Shall Be:

 

 

 

Closing Date to January 31, 2013

 

Three percent (3.0%) of the Maximum Credit Line

 

 

 

February 1, 2013 to January 30, 2015

 

Two percent (2.0%) of the Maximum Credit Line

 

provided, however, that the applicable Prepayment Fee would not be payable by
Borrower if (a) Lender requests in writing that Borrower obtain alternative
financing for any reason other than the occurrence of a Default or an Event of
Default and, within 90 days of such request by Lender, Borrower terminates this
Agreement and repays all of the outstanding Obligations in full, or (b) Lender’s
loan facility is fully utilized and Borrower has given Lender written notice of
its desire to increase the Maximum Credit Line by a commercially reasonable
amount under the same terms and conditions provided by Lender as of the Closing
Date (including a proportional incremental closing fee based on the amount of
such increase in the Maximum Credit Line), and Lender declines to provide such
increase in the Maximum Credit Line.

 

2.7           Overadvances.  If, at any time or for any reason, the amount of
Obligations (other than Bank Product Obligations) owed by Borrower to Lender
pursuant to Section 2.1 is greater than either the Dollar or percentage
limitations set forth in Section 2.1, (an “Overadvance”), Borrower promptly
shall pay to Lender, in cash, the amount of such excess, which amount shall be
used by Lender to reduce the Obligations in accordance with the priorities set
forth in Section 2.15.  In addition, Borrower hereby promises to pay the
Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full to Lender as and when due and payable under the terms of this
Agreement and the other Loan Documents.

 

2.8           Crediting Payments.  The receipt of any payment item by Lender
(whether from transfers to Lender from the Servicer Account, from the Collection
Account, or otherwise) shall not be considered a payment on account unless such
payment item is a wire transfer of immediately available federal funds made to
the Lender Account or unless and until such payment item is honored when
presented for payment.  Should any payment item not be honored

 

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when presented for payment, then Borrower shall be deemed not to have made such
payment and interest shall be calculated accordingly.  Anything to the contrary
contained herein notwithstanding, any payment item shall be deemed received by
Lender only if it is received into the Lender Account on a Business Day on or
before 11:00 a.m. (California time).  If any payment item is received into the
Lender Account on a day that is not a Business Day or after 11:00 a.m.
(California time) on a Business Day, it shall be deemed to have been received by
Lender as of the opening of business on the immediately following Business Day
and any applicable interest or fee shall continue to accrue until such following
Business Day.

 

2.9           All Loans to Constitute One Loan.  Notwithstanding the limitations
on the Maximum Credit Line set forth in Section 2.1, all advances made by Lender
to Borrower under this Agreement and the other Loan Documents shall constitute
one loan to Borrower and all Obligations of Borrower under this Agreement and
the other Loan Documents shall constitute one general obligation of Borrower
secured by Lender’s security interest in all the Collateral and by all other
security interests, Liens, claims and encumbrances heretofore, now, or at any
time hereafter granted to or obtained by Lender with respect to any property or
assets of Borrower.  All of the rights of Lender set forth in this Agreement
shall apply to any modification of or supplement to this Agreement and the other
Loan Documents.

 

2.10         Loan Purpose.  Borrower shall use the advances provided for
hereunder solely for the purpose of paying fees and expenses in connection with
the closing of this Agreement and financing SBA 7(a) Loans made by Borrower. 
Borrower’s use of such advances shall be only for legal purposes permitted by
Borrower’s organizational documents or otherwise authorized by appropriate
corporate action, consistent with the Multi-Party Agreement and all applicable
laws, statutes and regulations.

 

2.11         Term of Agreement; Survival of Certain Obligations.  Subject to
Lender’s right to cease making advances to Borrower, as set forth in Section 7.2
or as otherwise specifically set forth in this Agreement, the provisions of this
Agreement shall be in effect until the Termination Date; provided, that in the
event of a prepayment of the entire principal amount then outstanding under the
Revolving Loans prior to the Termination Date, Borrower shall simultaneously
therewith pay to Lender, in immediately available funds, all outstanding
Obligations in full, in accordance with the terms of the agreements creating and
instruments evidencing such Obligations, together with the Prepayment Fee, if
any, payable pursuant to Section 2.6; and provided further, that from and after
any Termination Date until payment in full of the Obligations, Lender shall
retain all rights and remedies provided under this Agreement and each of the
other Loan Documents.  Except as otherwise expressly provided for in this
Agreement and in the other Loan Documents, no termination or cancellation
(regardless of cause or procedure) of this Agreement or the other Loan Documents
shall in any way affect or impair the powers, obligations, duties, rights, and
liabilities of Borrower or Lender relating to (a) any transaction or event
occurring prior to such termination or cancellation, (b) the Collateral, or
(c) any of the undertakings, agreements, covenants, warranties and
representations of Borrower or Lender contained in this Agreement or the other
Loan Documents.  All such undertakings, agreements, covenants, warranties and
representations shall survive such termination or cancellation and be effective
until the payment in full of the Obligations, at which time Lender shall take
all reasonable steps deemed necessary by Borrower to effect the release of
Lender’s Liens;

 

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provided, that all indemnity claims of Lender under the Loan Documents shall
survive such full and final payment.

 

2.12         Payment Procedure.  Except as otherwise provided in Section 2.13,
all payments to Lender shall be payable at Lender’s address set forth above or
at such other place or places as Lender may designate from time to time in
writing to Borrower.  That portion of the Obligations consisting of:

 

(a)           interest payable pursuant to this Agreement shall be due on the
first Business Day of each month (for the preceding month), and shall be charged
through the last calendar day of each month;

 

(b)           costs, fees and expenses payable pursuant to this Agreement shall
be payable as and when provided in this Agreement and, if not specified, on
demand;

 

(c)           principal payable pursuant to this Agreement shall be due and
payable to the extent and on the date of any collections of the Collateral or
from any other source, to the extent consisting of cleared funds, except to the
extent such collections are applied to other Obligations; and

 

(d)           the balance of the Obligations, if any, shall be payable as and
when provided in this Agreement or the other Loan Documents and, if not
specified, on the Termination Date.

 

Except as otherwise expressly provided herein, all payments by Borrower shall be
made to the Lender Account in accordance with and shall be credited as provided
in Section 2.8.  Borrower hereby authorizes Lender, from time to time without
prior notice to Borrower, to charge the above payments and all other payments
due and payable with respect to the Obligations (including all fees and costs
provided for in Section 2.20 and any amounts due and payable to any Bank Product
Provider in respect of Bank Products) to Borrower’s Loan Account, which amounts
thereafter shall constitute Revolving Loans hereunder and shall accrue interest
at the rate then applicable to Revolving Loans hereunder.  Any interest not paid
when due shall be compounded by being charged to Borrower’s Loan Account and
shall thereafter constitute Revolving Loans hereunder and shall accrue interest
at the rate then applicable to Revolving Loans hereunder.

 

2.13         Collection of Borrower’s Loans and Payments.

 

(a)           Servicer Account.  Borrower shall, or shall cause Servicer to,
maintain a depository account, at Wells Fargo or another depository reasonably
acceptable to Lender, in Borrower’s capacity as servicer for the purchasers or
beneficiaries of the Sold Notes Receivable, the Securitization Notes Receivable,
the Participated Notes Receivable, and the SBA Owned Notes Receivables, and, to
the extent of Borrower’s retained interest in any such Notes Receivable, Lender
(the “Servicer Account”).  The agreement(s) governing the Servicer Account must
be in form and substance reasonably satisfactory to Lender and Borrower. 
Borrower shall deposit in the Servicer Account any and all checks, drafts, cash
and other remittances received by Borrower in payment or on account of payment,
with respect to any of the Notes Receivable; provided, that (i) Borrower shall
(A) cause each purchaser of a Sold Note Receivable to instruct

 

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FTA to deposit by wire transfer to the Collection Account all Net Sale Proceeds
for such Sold Note Receivable upon the receipt thereof by FTA, and (B) cause the
depository holding the Collection Account to advise Borrower and Lender of such
deposit, and (ii) Borrower shall cause payment of all Note Participation Amounts
to be made directly to the Collection Account.  The deposits made in the
Servicer Account shall be deposited in precisely the form received, except for
the endorsements of Borrower where necessary to permit the collection of any
such payments, which endorsements Borrower hereby agrees to make.  All checks,
drafts, cash and other remittances received by Borrower with respect to the
Serviced ASBA Assets shall not be deposited in the Servicer Account, but shall
instead be deposited in separate accounts maintained by Borrower for the benefit
of ASBA.

 

(b)           Collection Account; Transfers to Lender Account.  Borrower shall
establish a bank account in Borrower’s name with the same bank or institution at
which the Servicer Account is located, from which Lender alone has power of
access and withdrawal except to such limited extent as may otherwise be provided
in the agreement(s) governing such account, which must be in form and substance
reasonably satisfactory to Lender and Borrower (the “Collection Account”). 
Borrower shall, or shall cause Servicer to, transfer to the Collection Account
from the Servicer Account all Borrower Allocated Payments within one Business
Day of receipt of cleared funds.  The agreement governing the Collection Account
will provide for the transfer on each Business Day, in immediately available
funds, of all available funds in the Collection Account to the Lender Account. 
Any such funds transferred to the Lender Account shall be credited against the
Obligations in accordance with Section 2.8.

 

(c)           Allocation of Payments Received.  Promptly after becoming
available and in any event within five Business Days after the end of each
month, or more frequently as may be reasonably requested by Lender (and, if an
Event of Default has occurred and is continuing, such request may be made as
often as daily), Borrower shall, or shall cause Servicer to, deliver to Lender
information detailing, with respect to each deposit made into the Servicer
Account, the specific Note Receivable to which such deposit relates and (i) the
amount, if any, of such deposit that relates to a Sold Note Receivable and that
Borrower has determined is payable to FTA for the benefit of the purchaser of
such Sold Note Receivable, (ii) the amount, if any, of such deposit that relates
to a Securitization Note Receivable and that Borrower has determined must be
transferred to the trustee or holders of the certificates issued pursuant to a
Securitization Transaction, (iii) the amount, if any, of such deposit that
relates to a Participated Note Receivable and that Borrower has determined is
payable to the purchaser of such Participated Note Receivable, (iv) the amount,
if any, of such deposit that relates to a SBA Owned Note Receivable and that
Borrower has determined is payable to SBA (any such amount described in clauses
(i), (ii), (iii), or (iv) above being the “Allocated Payment Portion”), and
(v) the amount of such deposit that relates to Borrower’s retained interest in a
Note Receivable and that Borrower has determined is payable to Borrower.  The
portion payable to Borrower of each amount originally deposited in the Servicer
Account and constituting a Borrower Allocated Payment shall be held by Borrower
for the benefit of Lender, and Borrower shall, or shall cause Servicer to, cause
any such portion to be transferred to the Collection Account within one Business
Day after receipt of cleared funds.

 

(d)           Application of Borrower Allocated Payments.  Subject to
Section 2.13(b), all Borrower Allocated Payments shall be applied to the
outstanding Obligations in the order in

 

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which they are deposited in the Collection Account.  Prior to deposit into the
Collection Account or the Servicer Account in the manner required by this
Agreement, Borrower shall not commingle any Borrower Allocated Payments with any
of its other funds or property, but shall hold them separate and apart therefrom
in trust and for the account of, and as the property of, Lender.  Subject to the
provisions of Section 2.14 hereof and the Multi-Party Agreement, Lender may
revoke the collection rights of Borrower by either giving notice of its
assignment of, and lien on, the Collateral to the Term Loan Debtors or giving
notice of such revocation to Borrower.

 

(e)           Borrower as Servicer.  Borrower shall, or shall cause Servicer to,
at Borrower’s own expense service all of the Notes Receivable, including (i) the
billing, posting and maintaining of complete records applicable thereto, and
(ii) subject to applicable SBA Rules and Regulations, the taking of such action
with respect thereto as Borrower may deem advisable.  Borrower agrees to pay to
Lender any and all reasonable fees, costs and expenses incurred in connection
with opening and maintaining the Collection Account, the Servicer Account, and
any other collection arrangement described above.

 

2.14         Collections; Lender’s Right to Notify Account Debtors.  Subject to
the Multi-Party Agreement, obtaining the SBA’s prior written consent and
applicable SBA Rules and Regulations, and the rights of purchasers of the
Serviced ASBA Assets, the Sold Notes Receivable, the Securitization Notes
Receivable and the Participated Notes Receivable, and the rights of ASBA and
other third parties with respect to the Serviced ASBA Assets, Borrower hereby:

 

(a)           authorizes Lender, now and at any time or times hereafter, whether
or not a Default or an Event of Default has occurred, to open Borrower’s mail
and collect any and all amounts due to Borrower from Account Debtors; provided,
that Lender shall use commercially reasonable efforts not to open Borrower’s
private, personal or confidential mail that does not, on its face, relate to the
Collateral or the Account Debtors;

 

(b)           authorizes Lender, at any time after the occurrence of a Default
or an Event of Default, (i) to notify any or all Account Debtors that the
Accounts have been assigned to Lender and that Lender has a security interest
therein (and Borrower agrees that any such notice, in Lender’s sole discretion,
may be sent on Borrower’s stationery and, upon request of Lender, Borrower shall
co-sign such notice with Lender) and (ii) to direct such Account Debtors to make
all payments due from them to Borrower upon the Accounts directly to Lender or
to the Collection Account or the Servicer Account; and

 

(c)           irrevocably makes, constitutes and appoints Lender (and all
Persons designated by Lender for that purpose) as Borrower’s true and lawful
attorney (and agent-in-fact) to endorse Borrower’s name on any checks, notes,
drafts, or any other form of payment relating to the Collateral or proceeds of
the Collateral that come into Lender’s possession or under Lender’s control.

 

2.15         Application of Payments.  Except to the extent otherwise
specifically provided in Section 2.13(c) or some other provision of the Loan
Documents, all payments by or for the account of Borrower (other than payments
received while no Default or Event of Default has occurred and is continuing and
which relate to the payment of principal or interest of specific

 

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Obligations or which relate to the payment of specific fees), and all proceeds
of Notes Receivable or other Collateral received by Lender, shall be applied as
follows:

 

(a)           first, to pay any Lender Expenses then due under the Loan
Documents, until paid in full,

 

(b)           second, to pay any fees (other than Lender Expenses) then due to
Lender under the Loan Documents until paid in full,

 

(c)           third, to pay interest due in respect of the Revolving Loans until
paid in full,

 

(d)           fourth, so long as no Event of Default has occurred and is
continuing, and at Lender’s election (which election Lender agrees will not be
made if an Overadvance would be created thereby), to pay the Bank Product
Providers based upon amounts then certified by the applicable Bank Product
Provider to Lender (in form and substance satisfactory to Lender) to be due and
payable to such Bank Product Provider on account of Bank Product Obligations,

 

(e)           fifth, so long as no Event of Default has occurred and is
continuing, to pay the principal of all Revolving Loans until paid in full,

 

(f)            sixth, if an Event of Default has occurred and is continuing,
ratably (i) to pay the principal of all Revolving Loans until paid in full, and
(ii) for the ratable benefit of the Bank Product Providers, as cash collateral
to be held by Lender in an amount up to the Bank Product Reserve Amount
established prior to the occurrence of, and not in contemplation of, the subject
Event of Default, until all Bank Product Obligations have been paid in full or
the cash collateral amount has been exhausted (which cash collateral may be
released by Lender to the applicable Bank Product Provider and applied by such
Bank Product Provider to the payment or reimbursement of any amounts due and
payable with respect to Bank Product Obligations owed to the applicable Bank
Product Provider as and when such amounts first become due and payable and, if
and at such time as all such Bank Product Obligations are paid or otherwise
satisfied in full, the cash collateral held by Lender in respect of such Bank
Product Obligations shall be reapplied pursuant to this Section 2.15, beginning
with clause (a) hereof),

 

(g)           seventh, if an Event of Default has occurred and is continuing, to
pay any other Obligations (including the provision of amounts to be held by
Lender for the ratable benefit of the Bank Product Providers, as cash collateral
to be held by Lender in an amount up to the amount then certified by the
applicable Bank Product Provider to Lender (in form and substance satisfactory
to Lender) to be the amount necessary to secure all Bank Product Obligations)
until paid in full (which cash collateral may be released by Lender to the
applicable Bank Product Provider and applied by such Bank Product Provider to
the payment or reimbursement of any amounts due and payable with respect to Bank
Product Obligations owed to the applicable Bank Product Provider as and when
such amounts first become due and payable and, if and at such time as all such
Bank Product Obligations are paid or otherwise satisfied in full, the cash
collateral held by Lender in respect of such Bank Product Obligations shall be
reapplied pursuant to this Section 2.15, beginning with clause (a) hereof), and

 

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(h)           eighth, to Borrower (to be wired to the Designated Account) or
such other Person entitled thereto under applicable laws.

 

2.16         Maintenance of Loan Account; Statement of Obligations.  Lender
shall maintain an account on its books in the name of Borrower (the “Loan
Account”) on which Borrower will be charged with all Revolving Loans made by
Lender to Borrower or for Borrower’s account, and with all other payment
Obligations (except for Bank Product Obligations) hereunder or under the other
Loan Documents, including, accrued interest, fees and expenses, and Lender
Expenses.  In accordance with Section 2.8, the Loan Account will be credited
with all payments received by Lender from Borrower or for Borrower’s account,
including all amounts received in the Lender Account.  Lender shall render to
Borrower on a monthly basis written statements (which may be transmitted
electronically) regarding the Loan Account, including principal, interest, fees,
and including an itemization of all charges and expenses constituting Lender
Expenses owing, and such statements, absent manifest error, shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and Lender unless, within 30 days after receipt thereof
by Borrower, Borrower shall deliver to Lender written objection thereto
describing the error or errors contained in any such statements.

 

2.17         Business Days.  If any payment on the Revolving Loans or any other
payment due hereunder becomes due and payable on a day other than a Business
Day, then for all purposes of the Loan Documents, the maturity of such payment
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension.

 

2.18         Capital Requirements.  If, after the date hereof, Lender determines
that (i) the adoption of or change in any law, rule, regulation or guideline
regarding capital or reserve requirements for banks or bank holding companies,
or any change in the interpretation, implementation or application thereof by
any Governmental Authority charged with the administration thereof, or
(ii) compliance by Lender or its parent bank holding company with any guideline,
request, or directive of any such entity regarding capital adequacy (whether or
not having the force of law), has the effect of reducing the return on Lender’s
or such holding company’s capital as a consequence of Lender’s commitments
hereunder to a level below that which Lender or such holding company could have
achieved but for such adoption, change, or compliance (taking into consideration
Lender’s or such holding company’s then existing policies with respect to
capital adequacy and assuming the full utilization of such entity’s capital) by
any amount deemed by Lender to be material, then Lender may notify Borrower
thereof.  Following receipt of such notice (a “Cost Notice”), Borrower agrees to
pay Lender on demand the amount of such reduction of return of capital as and
when such reduction is determined, payable within 90 days after presentation by
Lender of a statement in the amount and setting forth in reasonable detail
Lender’s calculation thereof and the assumptions upon which such calculation was
based (which statement shall be deemed true and correct absent manifest error). 
In determining such amount, Lender may use any reasonable averaging and
attribution methods.  If Borrower’s payment of such amount results in the
occurrence of an Event of Default under Section 5.11 that would not have
occurred but for the payment of such amount, then Lender shall waive such Event
of Default.  Notwithstanding the foregoing, if Borrower receives a Cost Notice
after the first anniversary of the Closing Date that relates to events that are
not equally applicable to substantially all banks located in the continental
United States of America, and if Borrower

 

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provides written notice (a “Replacement Notice”) to Lender within 30 days after
receiving such Cost Notice, Borrower may thereafter terminate this Agreement and
pay all of the Obligations within 60 days of the date of such Replacement Notice
without payment of any Prepayment Fee; provided, however, that if Lender
withdraws the Cost Notice within 30 days of its receipt of the Replacement
Notice, Borrower shall not be entitled to terminate this Agreement without
payment of any Prepayment Fee that might otherwise be applicable.

 

2.19         Indemnification.  Borrower shall pay, indemnify, defend, and hold
Lender and Lender’s Affiliates, and each of their respective officers,
directors, employees, agents, and attorneys-in-fact (each, an “Indemnified
Person”) harmless (to the fullest extent permitted by applicable law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them (a) in connection
with or as a result of or related to the execution, delivery, enforcement,
performance, or administration of the Original Loan Agreement, the Original Loan
Documents, this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby, and (b) with respect to any investigation,
litigation, or proceeding related to the Original Loan Agreement, the Original
Loan Documents, this Agreement, any other Loan Document, or the use of the
proceeds of the credit provided hereunder (irrespective of whether any
Indemnified Person is a party thereto), or any act, omission, event, or
circumstance in any manner related thereto (all the foregoing, collectively, the
“Indemnified Liabilities”).  The foregoing to the contrary notwithstanding,
Borrower shall have no obligation to any Indemnified Person under this
Section 2.19 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have either (i) resulted from the gross
negligence or willful misconduct of such Indemnified Person, or (ii) arisen in
connection with a suit, action or other legal proceeding in which (A) the
Borrower alleges a breach by such Indemnified Person of its express obligations
under this Agreement or the other Loan Documents, and (B) such court has entered
a final, non-appealable judgment or order in favor of Borrower containing a
specific finding that Borrower is the prevailing party with respect to such
alleged breach.  This provision shall survive the termination of this Agreement
and the repayment of the Obligations.  If any Indemnified Person makes any
payment to any other Indemnified Person with respect to an Indemnified Liability
as to which Borrower was required to indemnify the Indemnified Person receiving
such payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrower with respect thereto.  WITHOUT
LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH
RESPECT TO INDEMNIFIED LIABILITIES WHICH ARE IN WHOLE OR IN PART CAUSED BY OR
ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY
OTHER PERSON.

 

2.20         LIBOR Pricing.

 

(a)           Interest and Interest Payment Dates.  Except as otherwise provided
in Section 2.20(d)(ii), interest on all of the Revolving Loans shall be charged
at a rate of interest based upon the LIBOR Rate.  Interest on LIBOR Rate Loans
shall be payable on the earliest of (i) the first calendar day after the last
day of the Interest Period applicable thereto, (ii) the occurrence of an Event
of Default in consequence of which Lender has elected to accelerate the

 

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maturity of all or any portion of the Obligations, or (iii) termination of this
Agreement pursuant to the terms hereof.

 

(b)           [Intentionally Omitted].

 

(c)           [Intentionally Omitted].

 

(d)           Special Provisions Applicable to LIBOR Rate.

 

(i)            The LIBOR Rate may be adjusted by Lender on a prospective basis
to take into account any additional or increased costs to Lender of maintaining
or obtaining any eurodollar deposits or increased costs due to changes in
applicable law occurring subsequent to the commencement of the then applicable
Interest Period, including changes in tax laws (except changes of general
applicability in corporate income tax laws) and changes in the reserve
requirements imposed by the Board of Governors of the Federal Reserve System (or
any successor), which additional or increased costs would increase the cost of
funding loans bearing interest based upon the LIBOR Rate.  In any such event,
Lender shall give Borrower notice of such a determination and adjustment and,
upon its receipt of the notice from Lender, Borrower may, by notice to Lender
(A) require Lender to furnish to Borrower a statement setting forth the basis
for adjusting such LIBOR Rate and the method for determining the amount of such
adjustment, or (B) repay the LIBOR Rate Loans with respect to which such
adjustment is made.

 

(ii)           In the event that any change in market conditions or any law,
regulation, treaty, or directive, or any change therein or in the interpretation
of application thereof, shall at any time after the date hereof, in the
reasonable opinion of Lender, make it unlawful or impractical for Lender to fund
or maintain LIBOR Rate Loans or to continue such funding or maintaining, or to
determine or charge interest rates based upon the LIBOR Rate, Lender shall give
notice of such changed circumstances to Borrower and (A) in the case of any
LIBOR Rate Loans that are outstanding, the date specified in Lender’s notice
shall be deemed to be the last day of the Interest Period of such LIBOR Rate
Loans, and interest upon the LIBOR Rate Loans thereafter shall accrue interest
at the rate then applicable to Base Rate Loans, and (B) all Revolving Loans
shall funded and maintained as Base Rate Loans until Lender determines that it
would no longer be unlawful or impractical to fund or maintain LIBOR Rate Loans
or to determine or charge interest rates based upon the LIBOR Rate.

 

(e)           No Requirement of Matched Funding.  Anything to the contrary
contained herein notwithstanding, Lender is not required actually to acquire
eurodollar deposits to fund or otherwise match fund any Obligation as to which
interest accrues based upon the LIBOR Rate.  The provisions of this
Section shall apply as if Lender had match funded any Obligation as to which
interest is accruing at based upon the LIBOR Rate by acquiring eurodollar
deposits for each Interest Period in the amount of the LIBOR Rate Loans.

 

2.21         Separate Tracking of Matters relating to Borrower Originated Loans,
Gateway Performing Loans and Gateway Non-Performing Loans.  Borrower and Lender
wish to track separately for certain purposes the status of the Borrower
Originated Loans and the Gateway Performing Loans, and the respective portions
of the Borrowing Base, the Revolving Loans and the other Obligations relating to
the Borrower Originated Loans and the Gateway Performing

 

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Loans.  In addition, Borrower and Lender wish to exclude the Gateway
Non-Performing Loans from most of the provisions applicable to the Borrower
Originated Loans and the Gateway Performing Loans.  In furtherance of this
purpose, and notwithstanding any other provision in this Agreement or any other
Loan Document:

 

(a)           Whenever Borrower is required to deliver to Lender a Borrowing
Base Certificate or other report with respect to Notes Receivable, Borrower
shall prepare and deliver separate certificates for both the Borrower Originated
Loans Borrowing Base and the Gateway Performing Loans Borrowing Base or separate
reports for with respect to the Borrower Originated Loans and the Gateway
Performing Loans, as the case may be.

 

(b)           Borrower has established account [omitted] at Wells Fargo to be
used as a separate Collection Account for the proceeds of all Borrower Allocated
Payments relating to the Gateway Performing Loans, and Borrower shall, or shall
cause Servicer to, transfer from the Servicer Account to such separate
Collection Account all Borrower Allocated Payments relating to the Gateway
Performing Loans.

 

(c)           Borrower has established account [omitted] at Wells Fargo to be
used as a separate Collection Account for the proceeds of all Borrower Allocated
Payments relating to the Borrower Originated Loans, and Borrower shall, or shall
cause Servicer to, transfer from the Servicer Account to such separate
Collection Account all Borrower Allocated Payments relating to the Borrower
Originated Loans.

 

(d)           The Gateway Non-Performing Loans shall not constitute Notes
Receivable, and neither the Gateway Non-Performing Loans or any proceeds thereof
shall constitute Collateral under this Agreement or any other Loan Document. 
Any and all checks, drafts, cash and other remittances received by Borrower with
respect to the Gateway Non-Performing Loans shall be received by Borrower for
the benefit of Gateway Seller and, to the extent deposited in the Servicer
Account, be treated as an Allocated Payment Portion payable by Borrower to the
Gateway Seller as provided for in the Gateway Portfolio Purchase Agreement.

 

2.22         Restatement of Obligations.  Borrower and Lender hereby acknowledge
and agree that upon satisfaction or waiver in writing of all conditions
precedent set forth in Section 8.1:

 

(a)           this Agreement shall amend, restate and supersede in its entirety
the Original Loan Agreement;

 

(b)           those other Loan Documents that amend and restate any of the
Original Loan Documents shall amend, restate and supersede such other Original
Loan Documents;

 

(c)           those Original Loan Documents that are not being amended and
restated or canceled by the Loan Documents shall remain in full force and
effect;

 

(d)           the Loan Documents do not constitute an accord and satisfaction or
a novation of the obligations of Borrower under the Original Loan Agreement and
the other Original Loan Documents;

 

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(e)           the outstanding “Revolving Loans” under the Original Loan
Agreement shall become Revolving Loans under this Agreement;

 

(f)            the outstanding “Obligations” under the Original Loan Agreement
in existence or accrued through the Closing Date shall become Obligations under
this Agreement;

 

(g)           the Lender’s Liens granted under the Original Loan Documents will
continue to secure the Obligations under this Agreement and the other Loan
Documents; and

 

(h)           (i) amounts in respect of interest, fees, and other amounts
payable to or for the account of Lender shall be calculated in accordance with
the provisions of the Original Loan Agreement with respect to any period (or
portion thereof) ending prior to the Closing Date, and (ii) amounts in respect
of interest, fees, and other amounts payable to or for the account of Lender
shall be calculated in accordance with this Agreement with respect to any period
(or portion thereof) commencing on or after the Closing Date.

 

3.             SECURITY

 

3.1           Borrower’s Obligations.  The Obligations of Borrower to pay all
sums due to Lender and to perform all other covenants and agreements under this
Agreement and the other Loan Documents to which Borrower is a party, shall be
secured to the extent provided by the Security Documents.

 

3.2           Further Assurances.  Provided that such action would not violate
applicable SBA Rules and Regulations, Borrower shall, at its sole cost and
expense, execute and deliver to Lender all such further documents, instruments
and agreements and agree to perform all such other acts which may be reasonably
required in the opinion of Lender to enable Lender to exercise and enforce its
rights as the secured party or beneficiary under the Security Documents.  To the
extent permitted by applicable law, Borrower hereby authorizes Lender to file
financing statements and continuation statements with respect to the security
interests granted under the Security Documents in favor of Lender and to execute
such financing statements and continuation statements on behalf of Borrower.

 

4.             REPRESENTATIONS AND WARRANTIES

 

In order to induce Lender to provide the financial accommodations to Borrower
provided for herein and in the other Loan Documents, Borrower makes the
following warranties and representations to Lender, each of which will be
correct and true as of the Closing Date and on the date that each advance is
requested by Borrower:

 

4.1           Corporate Existence.  Borrower (i) is a corporation duly
organized, legally existing and in good standing under the laws of the State of
Texas, (ii) is duly qualified or licensed to do business in all other
jurisdictions wherein the business transacted by it makes such qualification
necessary, except where the failure to so qualify could not reasonably be
expected to result in a Material Adverse Change; (iii) has the requisite power
and authority and the legal right to conduct its business as now, heretofore and
proposed to be conducted; and (iv) is in compliance with its Certificate of
Formation and By-Laws.

 

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4.2           Corporate Power and Authorization.  Borrower is duly authorized
and empowered to borrow the Revolving Loans; and Borrower is duly authorized and
empowered to execute, deliver and perform this Agreement and the other Loan
Documents to which it is a party; and all corporate action on Borrower’s part
requisite for the due execution, delivery and performance of this Agreement and
the other Loan Documents to which it is a party has been duly and effectively
taken.

 

4.3           Ownership of Property; Permitted Liens.

 

(a)           Except as set forth in Schedule 4.3(a), and except for fixtures
and improvements, or real estate that Borrower has received in connection with
the enforcement of its rights under any Note Receivable, in which Borrower has
good and indefeasible title, Borrower does not own any real property and is not
a lessor or lessee under any lease other than those leases that have been
previously disclosed to Lender.

 

(b)           Except for the Permitted Liens, no Property of Borrower pledged to
Lender hereunder is subject to any Lien.

 

4.4           Capital Structure.  The number and nature of all outstanding
securities of Borrower is set forth on Schedule 4.4.  All such shares have been
duly issued and are fully paid and non-assessable.  There are not outstanding
any options to purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, or any securities or obligations
convertible into, or any powers of attorney relating to, shares of the capital
Stock of Borrower, except as set forth on Schedule 4.4.  Except as set forth on
Schedule 4.4, there are no outstanding agreements or instruments known to
Borrower that are binding upon any of Borrower’s shareholders relating to the
ownership of its shares of capital Stock.

 

4.5           Binding Obligations.  This Agreement does, and the other Loan
Documents to which Borrower is a party upon their creation, issuance, execution
and delivery will, constitute valid and binding obligations of Borrower,
enforceable in accordance with their terms except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors’ rights generally or by principles of equity
pertaining to the availability of equitable remedies.

 

4.6           No Legal Bar; No Lien.

 

(a)           This Agreement and each of the other Loan Documents to which
Borrower is a party do not and will not violate any provisions of its
Certificate of Formation or By-Laws, or any contract, agreement, instrument or
Governmental Requirement to which Borrower is subject.

 

(b)           Neither the execution, delivery, nor performance of this Agreement
or the other Loan Documents shall create, or constitute cause for the creation
of, any Lien on any asset of Borrower, other than the Liens granted in favor of
Lender.

 

4.7           No Consent.  Except for the consent of the SBA provided under the
Multi-Party Agreement, Borrower’s execution, delivery and performance of this
Agreement and each of the Loan Documents to which it is a party do not require
the consent or approval of any other Person

 

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(unless such consent has otherwise been obtained), including any regulatory
authority or governmental body of the United States of America or any state
thereof or any political subdivision of the United States of America or any
state thereof.

 

4.8           Liabilities; Litigation.  Borrower does not have, as of the
Closing Date, any material (individually or in the aggregate) liabilities,
direct or contingent, except as disclosed in Schedule 4.8.  Except as disclosed
in Schedule 4.8, as of the Closing Date, there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the actual knowledge of Borrower, threatened against or
affecting Borrower that could reasonably be expected to result in a Material
Adverse Change.

 

4.9           Taxes; Governmental Charges.  As of the Closing Date or the date
each advance is requested by Borrower, as applicable, Borrower has filed all tax
returns and reports required to be filed prior to such date and has paid all
taxes, assessments, fees and other governmental charges levied upon it or its
income which are due and payable, including interest and penalties, or has
provided adequate reserves for the payment thereof.

 

4.10         Defaults.  Borrower is not in default nor has any event or
circumstance occurred which, but for the passage of time or the giving of
notice, or both, would constitute a default under any loan or credit agreement,
indenture, mortgage, deed of trust, security agreement or other agreement or
instrument evidencing or pertaining to any debt of Borrower, or under any
material agreement or instrument to which Borrower is a party or by which it is
bound or which could reasonably be expected to result in a Material Adverse
Change.  No Default or Event of Default hereunder has occurred and is
continuing.

 

4.11         Use of Proceeds; Margin Stock.  The proceeds of the Revolving Loans
will be used by Borrower for the purposes set forth in Section 2.10.  None of
such proceeds will be used for the purpose of purchasing or carrying any “margin
stock” as defined in Regulation U of the Board of Governors of the Federal
Reserve System (12 C.F.R. Part 221), or for the purpose of reducing or retiring
any indebtedness which was originally incurred to purchase or carry a margin
stock or for any other purpose which might constitute this transaction a
“purpose credit” within the meaning of such Regulation U.  Borrower is not
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stocks.  Neither Borrower nor any Person acting on behalf of
Borrower has taken or will take any action which might cause this Agreement or
any of the other Loan Documents to violate Regulations T, U or X, or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be in
effect.

 

4.12         Compliance with the Law.

 

(a)           Borrower is not in violation of any Governmental Requirement.

 

(b)           Borrower has not failed to obtain any license, permit, franchise
or other governmental authorization necessary to the conduct of its business,
which violation or failure could reasonably be expected to result in a Material
Adverse Change.  Without limiting the generality of the foregoing, Borrower has
obtained the Loan Guaranty Agreement and has

 

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complied and will continue to comply with all statutory, and other regulatory
requirements necessary to obtain and maintain the Loan Guaranty Agreement.

 

4.13         ERISA.  Borrower is in compliance in all material respects with the
applicable provisions of ERISA, and no “reportable event,” as such term is
defined in Section 4043 of ERISA, has occurred with respect to any Plan of
Borrower.

 

4.14         Complete Disclosure.  All factual information furnished by or on
behalf of Borrower or its Subsidiaries in writing to Lender (including all
information contained in the Schedules hereto or in the other Loan Documents)
for purposes of or in connection with this Agreement, the other Loan Documents,
or any transaction contemplated herein or therein is, and all other such factual
information hereafter furnished by or on behalf of Borrower or its Subsidiaries
in writing to Lender will be, true and accurate, in all material respects, on
the date as of which such information is dated or certified and not incomplete
by omitting to state any fact necessary to make such information (taken as a
whole) not misleading at such time in light of the circumstances under which
such information was provided.

 

4.15         Investment Company Act.  Borrower is not an “investment company” or
a company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended.

 

4.16         No Financing of Corporate Takeovers.  No proceeds of any advances
hereunder will be used to acquire any security in any transaction which is
subject to Sections 13 or 14 of the Securities Exchange Act of 1934, including,
Sections 13(d) and 14(d) thereof.

 

4.17         Location of Borrower.  Borrower’s principal place of business and
chief executive offices are located at the address stated in the preamble of
this Agreement; provided, that after the Closing Date such principal place of
business and chief executive offices may be relocated if Borrower complies with
the requirements of Section 6.10.

 

4.18         Use of Proceeds.  Borrower’s use of the proceeds of any advances
and re-advances made by Lender to Borrower pursuant to this Agreement are, and
will continue to be, legal and proper corporate uses duly authorized by its
Board of Directors and permitted under Section 2.10, and such uses are
consistent with all applicable laws and statutes, as in effect as of the date
hereof.

 

4.19         Hazardous Materials.

 

(a)           The operations of Borrower comply in all material respects with
all Environmental Laws.

 

(b)           Borrower has obtained all material Governmental Authorizations
under Environmental Laws necessary to its operations, and all such Governmental
Authorizations are in good standing in all material respects, and Borrower is in
compliance with all material terms and conditions of such Governmental
Authorizations.

 

(c)           (i)  Borrower has not received (A) any notice or claim to the
effect that it is or could reasonably be expected to be subject to a material
liability to any Person as a result of

 

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the Release or threatened Release of any Hazardous Materials or (B) any letter
or request for information under Section 104 of CERCLA (42 U.S.C. §§ 9604 et
seq.) or comparable state laws, and (ii) to Borrower’s knowledge, none of its
operations is the subject of any federal or state investigation evaluating
whether any remedial action is needed to respond to a Release or threatened
Release of any Hazardous Material at any Property.

 

(d)           None of the operations of Borrower is the subject of any pending
judicial or administrative proceeding alleging the violation of or liability
under any Environmental Laws which if adversely determined could reasonably be
expected to result in a Material Adverse Change.

 

(e)           Borrower is not subject to any outstanding written order or
agreement with any Governmental Authority or private party (other than lease
agreements entered into in the ordinary course of business containing standard
provisions relating to environmental matters) respecting (i) any liabilities
which have arisen or may arise under any Environmental Laws or (ii) any
Environmental Actions.

 

(f)            Neither Borrower nor, to the actual knowledge of Borrower, any
former owner or operator of any Property owned or operated by Borrower, has
filed any notice under any Environmental Law indicating past or present
treatment, storage, or disposal of Hazardous Materials at any Property owned or
operated by Borrower, and none of the operations of Borrower involves the
generation, transportation, treatment or disposal of hazardous waste, as defined
under 40 C.F.R. Parts 260 270 or any state equivalent (other than hazardous
materials used in the ordinary course of business, the use of which is not
reasonably likely to materially adversely affect any Property), and neither
Borrower nor, to the actual knowledge of Borrower, any predecessor in title to
Borrower or any third party at any time occupying any Property owned or operated
by Borrower has at any time used, generated, disposed of, stored, transported to
or from, released or threatened the release of any Hazardous Materials, in any
form, quantity or concentration on, from, under or affecting such Property in a
manner that could reasonably be expected to result in the liability of or a
material claim against Borrower in an amount exceeding $100,000.

 

(g)           Borrower has not filed any notice or report of a Release of any
Hazardous Materials that could reasonably be expected to give rise to an
Environmental Action that could reasonably be expected to result in a Material
Adverse Change and, to the actual knowledge of Borrower, no Hazardous Materials
exist on, under or about any Property owned or operated by Borrower in a manner
that could reasonably be expected to give rise to an Environmental Action that
could reasonably be expected to result in a Material Adverse Change.

 

(h)           Neither Borrower nor, to the actual knowledge of Borrower, any
former owner or operator of any Property owned or operated by Borrower, has
disposed of any Hazardous Materials in a manner that could reasonably be
expected to give rise to an Environmental Action that could reasonably be
expected to result in a Material Adverse Change.

 

(i)            To the actual knowledge of Borrower, no underground storage tanks
or surface impoundments are on or at any Property owned or used by Borrower,
which could

 

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reasonably be expected to give rise to any Environmental Action materially
adversely effecting such Property.

 

(j)            No Lien in favor of any Governmental Authority for (i) any
liability under Environmental Laws, or (ii) damages arising from or costs
incurred by such Governmental Authority in response to a Release has been filed
or attached to any Property owned or used by Borrower.

 

4.20         Insurance Policies.  Schedule 4.20 lists all insurance of any
nature maintained for current occurrences by Borrower, as well as a summary of
the terms of such insurance.  All of such policies are in full force and effect
and provide coverage of such risks and for such amounts as is customarily
maintained for businesses of the scope and size of Borrower.

 

4.21         Schedule of Deposit Accounts.  Schedule 4.21 lists all banks and
other financial institutions at which Borrower maintains or will maintain
deposit and/or other accounts, and such exhibit correctly identifies the name
and address of each depository, the name in which the account is held, the
purpose of the account, and the complete account number.

 

4.22         Labor Matters.  There are no labor disputes against Borrower
pending or, to Borrower’s knowledge, overtly threatened, that could reasonably
be expected to result in a Material Adverse Change.  Hours worked by and payment
made to the employees of Borrower have not been in violation of the Fair Labor
Standards Act or any other applicable law dealing with such matters, which
violation could reasonably be expected to result in a Material Adverse Change. 
All payments due from Borrower on account of employee health and welfare
insurance which could reasonably be expected to result in a Material Adverse
Change if not paid will be paid or, if not due, will be accrued as a liability
on the books of Borrower.

 

4.23         Employment and Labor Agreements.  Except as listed in Schedule
4.23, there are no employment agreements and no agreements for the payment of
deferred compensation, severance, or change in control pay covering the officers
and managers of Borrower, and there are no collective bargaining agreements or
other labor agreements covering any employees of Borrower.  A true and complete
copy of each such agreement has been furnished to Lender.

 

4.24         Solvent Financial Condition.  Borrower is now and, immediately
after giving effect to the consummation of the transactions contemplated and the
advances to be made hereunder, will be, Solvent.

 

4.25         Brokers.  There are no claims for brokerage commissions, finder’s
fees or investment banking fees in connection with the transactions contemplated
by this Agreement.  Borrower agrees to indemnify, defend, and hold Lender
harmless from and against any claim of any broker or finder arising out of
Borrower’s obtaining financing from Lender under this Agreement.

 

4.26         True Sales of Notes Receivable.  Borrower now intends and at all
times will intend that its transfers of Sold Notes Receivable, Securitization
Notes Receivable, and Participated Notes Receivable to the purchasers thereof
constitute true sales and not financing devices, except as otherwise disclosed
to and consented to by Lender and SBA.  The foregoing

 

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shall not preclude Borrower from adopting any contrary position for tax or
accounting purposes to the extent permitted by GAAP and applicable law.

 

4.27         No Material Intellectual Property.  Borrower does not hold or own,
or employ in its business operations, any material rights in, to, or under
copyrights, copyright licenses, patents, patent licenses, trademarks, trademark
licenses, or tradenames (collectively, “Intellectual Property”), except as set
forth on Schedule 4.27.  Borrower is not a party to or the subject of any
agreement or dispute respecting Intellectual Property which, if resolved
unfavorably to Borrower, could reasonably be expected to result in a Material
Adverse Change.

 

4.28         Asset Purchase Agreement.  As of the Original Closing Date,
Borrower had delivered to Lender a complete and correct copy of the Asset
Purchase Agreement and the other Asset Purchase Documents (including all
schedules, exhibits, amendments, supplements, modifications, assignments and all
other documents delivered pursuant thereto or in connection therewith).  Neither
Borrower nor, to the best of Borrower’s knowledge, any other Person party
thereto, is in default in the performance or compliance with any provisions
thereof, except where such default could not reasonably be expected to result in
a Material Adverse Change.  Each of the Asset Purchase Documents complies with,
and the transactions contemplated by the Asset Purchase Agreement have been
consummated in accordance with, all applicable laws.  Each of the Asset Purchase
Documents was in full force and effect as of the Original Closing Date and has
not been terminated, rescinded or withdrawn.  All requisite approvals by
governmental authorities having jurisdiction over Borrower and, to the best of
Borrower’s knowledge, all requisite approvals by governmental authorities having
jurisdiction over any other Person that is a party to any of the Asset Purchase
Documents, have been obtained, and no such approvals with respect to Borrower
and, to the best of Borrower’s knowledge, no such approvals with respect to any
other Person, impose any conditions to the consummation of the transactions
contemplated by the Asset Purchase Documents or to the conduct by Borrower of
its business thereafter, except for compliance with applicable SBA Rules and
Regulations.  To the best of Borrower’s knowledge, none of the representations
or warranties of the “Sellers” (as defined in the Asset Purchase Agreement) in
any of the Asset Purchase Documents contains any untrue statement of a material
fact or omits any fact necessary to make the statements therein not misleading. 
Each of the representations and warranties given by Borrower in Article 3 of the
Asset Purchase Agreement and in Article III of the “Security Agreement” (as
defined in the Asset Purchase Agreement) is true and correct in all material
respects.  Notwithstanding anything contained in any Asset Purchase Document to
the contrary, such representations and warranties of Borrower are incorporated
into this Agreement by this Section 4.28 and shall, solely for purposes of this
Agreement and the benefit of Lender, survive the “Closing Date” (as defined in
the Asset Purchase Agreement); provided, however, that any breach of such
representations and warranties or any other representation, warranty or covenant
provided for or contained in this Section 4.28 shall only be a Default or Event
of Default under this Agreement if such breach results or could reasonably be
expected to result in a Material Adverse Change.

 

4.29         Automatic Warranty and Reaffirmation of Warranties and
Representations; Survival of Warranties and Representations.  Each request for
an advance made by Borrower pursuant to this Agreement or the other Loan
Documents shall constitute (a) a warranty and representation by Borrower to
Lender that there does not then exist a Default or an Event of Default, except
as otherwise disclosed in writing by Borrower to Lender, and (b) a reaffirmation

 

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as of the date of said request of the representations and warranties of Borrower
contained in Sections 4.1 through and including 4.28.  All representations and
warranties of Borrower contained in this Agreement and the other Loan Documents
shall survive the execution, delivery and acceptance thereof by the parties
thereto and the closing of the transactions described therein or related
thereto.

 

References in this Article 4 to the “actual knowledge” of Borrower shall refer
only to the actual knowledge of an Authorized Person of Borrower and shall not
be construed to the knowledge of any other officer, agent or employee of
Borrower or any Affiliate thereof, or to impose upon any Authorized Person of
Borrower any duty to investigate the matter to which such actual knowledge, or
the absence thereof, pertains.

 

5.             AFFIRMATIVE COVENANTS

 

Borrower will at all times comply with the covenants contained in this
Article 5, from the date hereof and for so long as any part of the Obligations
is outstanding.

 

5.1           Financial Statements and Reports and Other Data.  Borrower will
promptly furnish to Lender from time to time upon request such information
regarding the business affairs and financial condition of Borrower as Lender may
reasonably request, which information shall be certified by the Treasurer of
Borrower to be true and correct in all material respects as of the date
provided.  The information that may be requested by Lender includes the
following reports:

 

(a)           Annual Reports.

 

(i)            Promptly after becoming available and in any event within 90 days
after the close of each fiscal year of Borrower, Borrower shall provide to
Lender audited fiscal year end financial statements of Borrower and its
consolidated Subsidiaries, prepared on a consolidated basis with supporting
consolidating schedules by KPMG, LLP, or other independent public accountants
selected by Borrower and reasonably acceptable to Lender (the “Accountant”),
showing the balance sheet as at the end of such year, the income statement for
such year, and the statement of cash flows for such year, setting forth in each
case in comparative form (for periods for which available) the corresponding
figures for the preceding fiscal year, accompanied by the related report of the
Accountant, which report shall be to the effect that such statements have been
prepared in accordance with GAAP consistently followed throughout the period
indicated except for such changes in such principles with which the Accountant
shall have concurred; and

 

(ii)           As soon as available, but not later than 30 days prior to the
close of each fiscal year, beginning with the fiscal year ending December 31,
2011, Borrower’s Projections for the following fiscal year;

 

(b)           Monthly Reports.

 

(i)            Promptly after becoming available and in any event within 30 days
after the end of each month in each fiscal year of Borrower, Borrower shall
provide to Lender unaudited internally prepared financial statements of Borrower
and its consolidated Subsidiaries, prepared on a consolidated basis with
supporting consolidating schedules, that are reasonably

 

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satisfactory to Lender in scope and detail and which include, but are not
limited to, the balance sheets as at the end of such period, and the income
statements for such month and for the period from the beginning of the fiscal
year to the close of such month, setting forth in each case in comparative form
the corresponding figures from the comparable periods for the prior year,
certified by the Chief Executive Officer or Senior Vice President of Borrower to
have been prepared in accordance with GAAP consistently followed throughout the
period indicated except to the extent stated therein, subject to normal changes
resulting from year-end adjustments;

 

(ii)           At the time of each delivery of the monthly financial statements
referred to in Section 5.1(b)(i) that also coincides with the end of a fiscal
quarter of Borrower, a Compliance Certificate duly and properly executed and
completed by the Chief Executive Officer or Senior Vice President of Borrower;

 

(iii)          Promptly after becoming available and in any event by the tenth
Business Day after the end of each month in each fiscal year of Borrower, loan
agings, loan loss reports, and such other information as Lender shall reasonably
request with respect to the Notes Receivable; and

 

(iv)          Promptly after becoming available and in any event by the tenth
Business Day after the end of each month in each fiscal year of Borrower, all
audit reports prepared by Borrower with respect to any Term Loan Debtor.

 

(c)           Schedule of Eligible Notes Receivable.  Accompanying each request
for a Revolving Loan hereunder, and in any event no less frequently than
monthly, Borrower shall provide Lender with a report listing, by name of obligor
and other identifying information ordinarily employed by Borrower, each of the
Notes Receivable then constituting the Net Eligible SBA Guaranteed Notes
Receivable and the Net Eligible Non-Guaranteed Notes Receivable, as well as all
other Notes Receivable being serviced by Borrower, along with the outstanding
principal amount, payment schedule, and collection and delinquency history
thereof, and such other collateral information as reasonably requested by Lender
(each a “Schedule of Eligible Notes Receivable”).

 

(d)           Other Reports.

 

(i)            Audit Reports.  Promptly upon receipt thereof, one copy of each
management letter or other report submitted to Borrower by its accountants in
connection with any annual, interim or special audit made by them of the books
of Borrower.

 

(ii)           Borrowing Base Certificate.  Together with any request for an
advance and in any event no less frequently than on a monthly basis, Borrower
shall deliver to Lender a Borrowing Base Certificate.

 

(iii)          Reports Respecting Sale of SBA Guaranteed Notes Receivable.  No
later than 2:00 p.m. (Central Time) of the Business Day immediately prior to any
Settlement Date, Borrower shall deliver to Lender a Note Sale Report in
substantially the form of Exhibit D, accompanied by the “Confirmation of Trade”
(sometimes called a “Notice of Trade”) reflecting the anticipated sale of the
subject SBA Guaranteed Note Receivable and all instructions of Borrower to the
purchaser or FTA with respect thereto.  On or before the 15th day

 

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of the month following the Settlement Date for such sale, Borrower shall provide
Lender with a copy of FTA’s “Notice of SBA Form 1086 Execution” with respect to
such sale and a copy of Secondary Participation Agreement executed by Borrower
with respect to such sale.

 

(iv)          SEC Filings.  Promptly after the filing by Borrower with the SEC
of any report on Form 10Q or 10K, or any other material corporate disclosure,
Borrower shall deliver a copy of such filing to Lender.

 

(v)           Regulatory Reviews.  Promptly upon receipt thereof, Borrower shall
deliver to Lender a copy of any review, exam or audit by SBA with respect to
Borrower or its operations, except to the extent that such delivery would
violate any applicable Governmental Requirement.

 

(vi)          Other Data.  Promptly upon receipt thereof, copies of such other
financial or other data as Lender may, in its sole discretion, reasonably
request.

 

5.2           Taxes and Other Liens.  Borrower will pay and discharge promptly
when due all taxes, assessments and governmental charges or levies imposed upon
it or upon its income as well as all claims of any kind (including claims for
labor, materials, supplies and rent) which, if unpaid, might become a Lien upon
any or all of its Property; provided, that Borrower shall not be required to pay
any such tax, assessment, charge, levy or claim to the extent that the amount,
applicability or validity thereof shall currently be contested in good faith by
appropriate proceedings diligently conducted by or on behalf of Borrower in
compliance with Section 5.13(b).

 

5.3           Maintenance.

 

(a)           Borrower shall (i) maintain its corporate existence, rights and
franchises; and (ii) observe and comply with all Governmental Requirements.

 

(b)           Borrower shall maintain in full force and good standing all
licenses, permits, franchises or other governmental authorizations necessary to
the conduct of its business, the failure to maintain could reasonably be
expected to result in a Material Adverse Change.  Without limiting the
generality of the foregoing, Borrower shall continue to comply with all
statutory and other regulatory requirements necessary to maintain in full force
and good standing the Loan Guaranty Agreement, to the extent such requirements
have not been waived or become inapplicable pursuant to the terms of the
Multi-Party Agreement.

 

5.4           Further Assurances.  Borrower will promptly cure any defects in
the creation, execution or delivery of this Agreement or the other the Loan
Documents.  Provided that such action would not violate applicable SBA Rules and
Regulations, Borrower, at its expense, will promptly execute and deliver to
Lender upon request all such other and further documents, agreements and
instruments as shall reasonably be necessary in compliance with or
accomplishment of the covenants and agreements of Borrower in this Agreement or
the other Loan Documents, or to further evidence and more fully describe the
collateral intended as security for the Obligations, or to correct any omissions
in this Agreement or the other Loan Documents, or more fully to state the
security obligations set out herein or in any of the Loan Documents, or to
perfect, protect or preserve any Liens created pursuant to this Agreement or

 

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any of the other Loan Documents, or to make any recordings, to file any notices,
or obtain any consents (other than consents of SBA that SBA is unwilling to
give), all as may be deemed necessary or appropriate in connection therewith by
Lender in its sole and absolute discretion.

 

5.5           Performance of Obligations.  Borrower will pay and perform the
Obligations according to the terms thereof.  To the fullest extent permitted by
applicable law, Borrower will do and perform every act and discharge all of the
obligations provided to be performed and discharged by it under this Agreement
or the other Loan Documents at the time or times and in the manner specified.

 

5.6           Insurance.

 

(a)           At Borrower’s expense, Borrower will maintain insurance respecting
its assets wherever located covering loss or damage by fire, theft, explosion,
and all other hazards and risks as ordinarily are insured against by other
Persons engaged in the same or similar businesses.  Borrower also shall maintain
business interruption and public liability insurance, and insurance against
larceny, embezzlement, and criminal misappropriation.  All such policies of
insurance shall be in such amounts and with such insurance companies as are
reasonably satisfactory to Lender.  Borrower shall deliver copies of all such
policies to Lender with a satisfactory lender’s loss payable endorsement naming
Lender as sole loss payee or additional insured, as appropriate.  Each policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever.

 

(b)           Borrower shall give Lender prompt notice of any loss covered by
such insurance.  So long as a Default or Event of Default has occurred and is
continuing, Lender shall have the exclusive right to adjust any losses payable
under any such insurance policies without any liability to Borrower whatsoever
in respect of such adjustments.  Any monies received as payment for any loss
under any insurance policy mentioned above (other than liability insurance
policies) or as payment of any award or compensation for condemnation or taking
by eminent domain, shall be paid over to Lender to be applied at the option of
Lender either to the prepayment of the Obligations or shall be disbursed to
Borrower under staged payment terms reasonably satisfactory to Lender for
application to the cost of repairs, replacements, or restorations.  Any such
repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items of
property destroyed prior to such damage or destruction.

 

(c)           Borrower will not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section 5.6, unless Lender is included thereon as named insured with the
loss payable to Lender under a lender’s loss payable endorsement or its
equivalent.  Borrower immediately shall notify Lender whenever such separate
insurance is taken out, specifying the insurer thereunder and full particulars
as to the policies evidencing the same, and copies of such policies promptly
shall be provided to Lender.

 

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(d)           Borrower will require each Term Loan Debtor to maintain insurance
in accordance with any applicable SBA Rules and Regulations and Borrower’s
operating guidelines.

 

5.7           Accounts and Records.  Borrower will keep books of record and
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities, in accordance with
GAAP, consistently applied except only for changes in accounting principles or
practices with which Borrower’s Accountant concurs.

 

5.8           Right of Inspection.  Lender (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter, but
subject to Section 2.5(d), (i) during regular business hours to inspect the
Borrower’s books and records, or the Servicer’s books and records relating to
the Collateral, and to make copies or abstracts thereof, (ii) from time to time,
to communicate directly with any and all Term Loan Debtors to verify the
existence and terms of the SBA 7(a) Loan of such Term Loan Debtors, and
(iii) from time to time, to check, test, and appraise the Collateral, or any
portion thereof, in order to verify Borrower’s and its Subsidiaries’ financial
condition or the amount, quality, value, condition of, or any other matter
relating to, the Collateral, and Borrower shall, or shall cause Servicer to,
permit any designated representative of Lender to visit and inspect any of the
properties of Borrower or Servicer to inspect and to discuss Borrower’s finances
and properties and Collateral, upon reasonable notice and at such reasonable
times during normal business hours and as often as may be reasonably requested.

 

5.9           Notice of Certain Events.  Borrower shall promptly notify Lender
if it learns of the occurrence of: (i) any event which constitutes a Default or
an Event of Default, together with a detailed statement by a responsible officer
of Borrower of the steps being taken to cure the effect of such Default or Event
of Default; or (ii) the receipt of any notice from, or the taking of any other
action by, the holder of any promissory note, debenture or other evidence of
Indebtedness of Borrower or of any security (as defined in the Securities Act of
1933, as amended) of Borrower with respect to a claimed default, together with a
detailed statement by a responsible officer of Borrower specifying the notice
given or other action taken by such holder and the nature of the claimed default
and what action Borrower is taking or proposes to take with respect thereto; or
(iii) any legal, judicial or regulatory proceedings affecting Borrower or any of
the Collateral in which the amount involved is in excess of $100,000 and is not
covered by insurance or which, if adversely determined, could reasonably be
expected to result in a Material Adverse Change; or (iv) any dispute between
Borrower and any governmental or regulatory body, any Term Loan Debtor, or any
other Person which, if adversely determined, could reasonably be expected to
result in a Material Adverse Change; or (v) any event that causes Borrower to no
longer be Solvent or that could reasonably be expected to result in a Change of
Control; or (vi) any material change in SBA Rules and Regulations; or (vii) any
other event or condition, including any event or condition affecting the credit
of a Term Loan Debtor, that could reasonably be expected to result in a Material
Adverse Change.

 

5.10         ERISA Information and Compliance.  Borrower will promptly furnish
to Lender (i) after the filing thereof with the United States Secretary of Labor
or the Pension Benefit Guaranty Corporation, copies of each annual and other
report with respect to each Plan or any trust created thereunder, and
(ii) immediately upon becoming aware of the occurrence of any “reportable
event,” as such term is defined in Section 4043 of ERISA, or of any “prohibited

 

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transaction,” as such term is defined in Section 4975 of the Internal Revenue
Code of 1954, as amended, in connection with any Plan or any trust created
thereunder, a written notice signed by an Authorized Person specifying the
nature thereof, what action Borrower is taking or, proposes to take with respect
thereto, and, when known, any action taken by the Internal Revenue Service with
respect thereto.  Borrower will fund all current service pension liabilities as
they are incurred under the provisions of all Plans from time to time in effect
for the benefit of its employees, and comply with all applicable provisions of
ERISA.

 

5.11         Financial Covenants.  From and after the Closing Date and until the
Obligations are fully satisfied, Borrower shall:

 

(a)           Minimum Tangible Net Worth.  As of the end of each fiscal quarter,
maintain, on a consolidated basis with Borrower’s Subsidiaries, and after taking
into account any dividends paid or accrued, Tangible Net Worth of not less than
$6,500,000 plus 100% of the sum of the positive amounts, if any, of Borrower’s
net income for each of the Fiscal Quarters ending after September 30, 2011
through the date of measurement, minus 100% of the sum of the negative amounts,
if any, of Borrower’s net income for each of the Fiscal Quarters ending after
September 30, 2011 through the date of measurement.

 

(b)           Maximum Indebtedness to Tangible Net Worth Ratio.  As of the end
of each fiscal quarter, maintain, on a consolidated basis with Borrower’s
Subsidiaries, a maximum ratio of (i) Indebtedness (excluding the FirstCity Debt,
the ASBA Note, the Gateway Non-Recourse Note, and Subordinated Debt) to
(ii) Tangible Net Worth, of not more than 5.00 to 1.00.

 

(c)           Maximum Delinquent and Defaulted Notes Percentage.  As of the end
of each fiscal month, not cause or allow the ratio (expressed as a percentage)
of (i) the sum of (A) Delinquent Non-Guaranteed Notes Receivable and
(B) Defaulted Non-Guaranteed Notes Receivable, to (ii) Non-Guaranteed Notes
Receivable (each measured by the respective aggregate outstanding principal
amounts of all Non-Guaranteed Notes Receivable in each category, whether or not
eligible for inclusion in the Borrowing Base), to be more than eight percent
(8.0%).

 

(d)           Maximum Loan Charge-Off Percentage.  As of the end of each fiscal
quarter, not cause or allow the ratio (expressed as a percentage) of (i) loan
losses for the 12-month period then ending, to (ii) the average amount of all
Non-Guaranteed Notes Receivable outstanding during such 12-month period
(measured by the aggregate outstanding principal amount of all Non-Guaranteed
Notes Receivable, whether or not eligible for inclusion in the Borrowing Base),
to be more than five percent (5.0%).

 

(e)           Minimum Net Interest Coverage regarding Total Portfolio.  As of
the end of each fiscal quarter, have a ratio of (i) interest and servicing fees
earned for the three-month period then ended with respect to the portfolio of
Gateway Performing Loans and any other Notes Receivable originated or acquired
by Borrower (except for the Serviced ASBA Assets), to (ii) the sum of (A) fees
charged by the Servicer under the Servicing Agreement for such three-month
period with respect to the servicing of the portfolio of Gateway Performing
Loans and any other Notes Receivable originated or acquired by Borrower (except
for the Serviced ASBA

 

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Assets), plus (B) the cost of any dedicated servicing staff and any legal costs
for such three-month period with respect to the portfolio of Gateway Performing
Loans and any other Notes Receivable originated or acquired by Borrower (except
for the Serviced ASBA Assets), plus (C) the interest costs under this Agreement
for such three-month period, of not less than 1.25 to 1.00.

 

5.12         Maintenance of Bad Debt Reserves.  Borrower shall maintain on its
books, as of the end of each fiscal quarter, a bad debt reserve consistent with
GAAP and Borrower’s historical performance with respect to any Notes Receivable
originated or acquired by Borrower.

 

5.13         Charges; Liens.

 

(a)           Borrower shall pay promptly when due, all of the Charges, and
promptly discharge any Liens, encumbrances or other claims against the
Collateral; provided, that Borrower shall not be required to take such steps
with respect to Collateral consisting of the underlying collateral for the SBA
7(a) Loans granted to Borrower to secure the obligations of the Term Loan
Debtors.  Except for Liens in favor of Lender and any other Permitted Liens, if
Borrower, at any time or times hereafter, shall fail to pay any Charges when due
or promptly obtain the discharge of such Charges or of any Lien, claim or
encumbrance asserted against the Collateral, subject to the provisions of
Section 5.13(b) below, Lender may, without waiving or releasing any obligation
or liability of Borrower hereunder or any Event of Default, in its sole
discretion, at any time or times thereafter, make such payment, or any part
thereof, or obtain such discharge and take any other action with respect thereto
which Lender deems advisable; provided, that Lender shall not be entitled to
take such steps with respect to Collateral consisting of the underlying
collateral for the SBA 7(a) Loans granted to Borrower to secure the obligations
of the Term Loan Debtors.  All sums so paid by Lender and any expenses,
including reasonable attorneys’ fees, court costs, expenses and other reasonable
charges relating thereto, shall be payable, upon demand, by Borrower to Lender
and shall be additional Obligations hereunder secured by the Collateral.

 

(b)           Borrower may in good faith contest, by proper legal actions or
proceedings, the validity or amount of any Charges or claims, and provided that
Borrower gives Lender advance notice of its intention to contest the validity or
amount of any such Charge or claim, Lender will forebear from making any payment
or otherwise obtaining the discharge of such Charge or claim if at the time of
the commencement of any such action or proceeding, and during the pendency
thereof (i) no Event of Default shall have occurred and be continuing,
(ii) reserves with respect thereto are maintained on the books of Borrower in an
amount reasonably acceptable to Lender, (iii) such contest operates to suspend
collection of the contested Charges or claims and is maintained and prosecuted
continuously with diligence, (iv) none of the Collateral will be subject to
forfeiture or loss of any Lien in favor of Lender by reason of the institution
or prosecution of such contest, (v) no Lien that may reasonably be expected to
prime the Liens of Lender shall exist for such Charges or claims during such
action or proceeding, (vi) Borrower shall promptly pay or discharge such
contested Charges and all additional charges, interests, penalties and expenses,
if any, and shall deliver to Lender evidence reasonably acceptable to Lender of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to Borrower, and (vii) Lender has not advised Borrower in
writing that Lender

 

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reasonably believes that non-payment or non-discharge thereof could reasonably
be expected to result in a Material Adverse Change.

 

5.14         Communication With Accountants.  Borrower shall cooperate with
Lender to permit reasonable access to Accountant and authorizes Accountant to
disclose to Lender any and all financial statements and other supporting
financial data, including matters relating to the conduct of the annual audit
and copies of any management letter with respect to Borrower’s business, pending
litigation, financial condition and other affairs.

 

5.15         Notes Receivable Documents.  Pursuant to the Multi-Party Agreement,
Borrower shall deliver to FTA all original SBA 7(a) Loan Notes, with all
necessary endorsements, within five Business Days of the execution or delivery
to Borrower thereof, and shall identify such SBA 7(a) Loan Notes to FTA as being
pledged to Lender under this Agreement and the Security Agreement.  Borrower
shall simultaneously deliver to Lender a copy of such SBA 7(a) Loan Notes.  If
requested by Lender, each original SBA 7(a) Loan Note shall bear a legend on the
first page stating “WELLS FARGO CAPITAL FINANCE, LLC HAS A SECURITY INTEREST IN
AN INTEREST IN THIS NOTE.”  Subject to the provisions of the Multi-Party
Agreement with respect to SBA’s rights and duties with respect to the Notes, if
possession of any original SBA 7(a) Loan Note is released by FTA to Borrower or
any other Person acting on Borrower’s behalf prior to the termination of
Lender’s Lien thereon, Borrower shall take, and shall cause any such third-party
in possession of such original SBA 7(a) Loan Note to take, such steps necessary
or reasonably requested by Lender to maintain at all times the continuous
perfection of such Lien, and if such SBA 7(a) Loan Note is in the possession of
Borrower, Borrower shall hold such SBA 7(a) Loan Note in trust for Lender.  On
or before the fifteenth day of each month, Borrower shall deliver to Lender
copies of the following additional Notes Receivable Documents, to the extent
applicable, with respect to each Note Receivable funded by Borrower during the
prior calendar month, whether or not required to be delivered to FTA: the loan
agreement; the security agreement; the mortgage or deed of trust; personal
guaranties; and to the extent required by SBA Rules and Regulations or
Borrower’s underwriting standards, for any Note Receivable secured by real
property where such real property is part of the primary collateral for the
indebtedness owing to Borrower, (a) a copy of a fully paid mortgagee’s policy of
title insurance issued by an insurer acceptable to SBA and evidencing that
Borrower is beneficiary of mortgagee’s title insurance insuring Borrower’s Lien
on such real property as a valid and enforceable Lien in an amount not less than
amount of the indebtedness to Borrower secured thereby, (b) an environmental
site assessment report with respect to such real property prepared by a
credentialed environmental consultant acceptable to SBA, (c) if requested by
Lender, a boundary survey of such real property prepared by a surveyor
acceptable to SBA, certified to Borrower, and (d) such other information,
documentation, opinions and certifications with respect to such real property as
may be reasonably requested by Lender; provided, that Lender may require
Borrower to deliver copies of such Notes Receivable Documents on a more frequent
basis or to deliver copies of other Notes Receivable Documents.  Borrower and
Lender shall at all times comply with the terms and conditions of the
Multi-Party Agreement and the Loan Guaranty Agreement.

 

5.16         Subordination Agreement.  Prior to incurring any Subordinated Debt,
Borrower shall cause to be delivered to Lender a Subordination Agreement from
each holder of such Subordinated Debt.

 

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6.             NEGATIVE COVENANTS

 

Without Lender’s prior written consent, which Lender may or may not in its sole
discretion give, Borrower covenants that it shall not:

 

6.1           Debt.  Create, incur, assume or have outstanding any Indebtedness,
except for: (i) Indebtedness owing to Lender; (ii) Indebtedness incurred by
Borrower in the ordinary course of business (including pursuant to applicable
SBA Rules and Regulations), other than Indebtedness for borrowed money;
(iii) Indebtedness to ASBA under the ASBA Note, (iv) Indebtedness to FirstCity
Financial with respect to the FirstCity Debt, and (v) Subordinated Debt
acceptable to Lender.

 

6.2           Loans and Distributions.  Make any loans, dividends or other
distributions, payments, or advances of money and/or extensions of credit to any
Persons, including officers, directors, employees, stockholders, or Affiliates
and Subsidiaries of Borrower, other than (a) reasonable advances made in the
ordinary course of business on account of salary, commissions, and routine
travel and business expenses, (b) loans made in the ordinary course of business
to Term Loan Debtors, (c) payments to ASBA required to be made under the ASBA
Note or the ASBA Security Agreement, so long as such payments are made solely
from the proceeds of the Serviced ASBA Assets, (d) payments to FirstCity
Financial of regularly scheduled monthly payments of interest with respect to
the FirstCity Debt, (e) payments to FirstCity Financial for corporate overhead
expenses charged to Borrower in amounts not exceeding those permitted under
Section 4.16 of the Asset Purchase Agreement or to FirstCity Servicing
Corporation for services provided under the Servicing Agreement, each as in
effect on the Original Closing Date, and (f) out of funds legally available
therefor and to the extent, if any, permitted by the written consents of both
Lender and SBA, the regularly scheduled dividends to which the holders of
Borrower’s Series A Preferred Stock are entitled pursuant to Borrower’s
Certificate of Formation as in effect on February 27, 2007, so long as in the
case of any payment described in clauses (d), (e), or (f) above (i) no Default
or Event of Default shall have occurred and be continuing or would occur as a
result thereof, and (ii)  such payment is permitted under applicable SBA
Rules and Regulations.

 

6.3           Liens.  Except as otherwise expressly permitted herein or in the
other Loan Documents, encumber, pledge, mortgage, or grant a security interest
in (except for Permitted Liens), or assign, sell (except for the sale of SBA
Guaranteed Notes Receivable, the sale of Non-Guaranteed Participations in
Participated Notes Receivable, the sale to SBA of the Non-Guaranteed Note
Receivable portion of any Note Receivable with respect to which SBA also holds
the SBA Guaranteed Note Receivable portion thereof, and pursuant to any
Securitization Transaction, each to the extent permitted by Section 6.13, and
the sale of other property in the ordinary course of business), lease or
otherwise dispose of or transfer, whether by sale, merger, consolidation,
liquidation, dissolution, or otherwise, any of the Collateral; provided, that
the foregoing shall not prohibit Borrower from dealing with the Collateral
consisting of the underlying collateral for the SBA 7(a) Loans granted to
Borrower to secure the obligations of the Term Loan Debtors in the ordinary
course of its business and in accordance with SBA Rules and Regulations.

 

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6.4           Capital Expenditures.  Make capital expenditures (including
Capitalized Leases Obligations) during any fiscal year of Borrower which, in the
aggregate, exceed $200,000 in any fiscal year.

 

6.5           [Intentionally Omitted].

 

6.6           Capital Structure.  Make any material change in Borrower’s capital
structure or in any of its business objectives, purposes and operations which
might in any way adversely affect the repayment of the Obligations; provided,
that Lender will not unreasonably withhold its consent to changes in Borrower’s
operations required by SBA.

 

6.7           Transactions with Affiliates.  Except to the extent permitted by
Section 6.2, enter into, or be a party to, any transaction with any Affiliate or
stockholder of Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower’s business and upon fair and reasonable
terms which are no less favorable to Borrower than would be obtained in a
comparable arm’s length transaction with a Person not an Affiliate or
stockholder of Borrower.

 

6.8           Change of Business.  Enter into any new business or make any
material change in any of Borrower’s business objectives, purposes, underwriting
standards or other operations, except to the extent required by SBA.

 

6.9           Name of Borrower.  Use any corporate name (other than its own) or
any fictitious name, tradestyle or “d/b/a”.

 

6.10         Location of Collateral.  Stop keeping its books and records or the
Collateral at either the location listed in the preamble to this Agreement or
the offices of FirstCity BLC at 6400 Imperial Drive, Waco, Texas 76712, or keep
any of such books and records and/or the Collateral at any other office(s) or
location(s) unless (i) Borrower gives Lender written notice thereof and of the
new location of said books and records at least 30 days prior thereto and
(ii) the other office or location is within the continental United States of
America.

 

6.11         Proceeds of Loans.  Permit the proceeds of any of the Revolving
Loans to be used for any purpose other than those permitted by Section 2.10
hereof.

 

6.12         ERISA Compliance.  At any time permit any Plan in which Borrower is
a participant to:

 

(a)           engage in any “prohibited transaction” as such term is defined in
Section 4975 of the Internal Revenue Code of 1954, as amended;

 

(b)           incur any “accumulated funding deficiency” as such term is defined
in Section 302 of ERISA; or

 

(c)           terminate any such Plan in a manner which could result in the
imposition of a Lien on the Property of Borrower pursuant to Section 4068 of
ERISA.

 

6.13         Sale or Discount of Receivables.  Discount or sell any portion of
its Notes Receivable or its Accounts; provided, that Borrower may sell to SBA
the SBA Guaranteed Notes

 

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Receivable, sell to SBA the Non-Guaranteed Note Receivable portion of any Note
Receivable with respect to which SBA also holds the SBA Guaranteed Note
Receivable portion thereof, or otherwise dispose of Notes Receivable or the
collateral therefor, in each case to the extent required by SBA in accordance
with SBA Rules and Regulations; and provided further, that so long as no Event
of Default shall have occurred and be continuing, Borrower may:

 

(a)           sell SBA Guaranteed Notes Receivable to the extent that such sales
are made (i) at par or at a premium, (ii) on ordinary business terms, (iii) by
or through the FTA, (iv) in full conformity with all applicable SBA Rules and
Regulations and other governing law, and (v) in accordance with the Settlement
Date reporting requirements of Section 5.1(d)(iii);

 

(b)           sell Non-Guaranteed Participations in Participated Notes
Receivable, so long as (i) the Note Participation Amount generated from any such
sale is at least equal to the amount of any Revolving Loan made by Lender with
respect to the applicable Participated Note Receivable, and (ii) either (A) the
corresponding SBA Guaranteed Note Receivable has been or is simultaneously being
sold pursuant to Section 6.13(a), or (B) Borrower otherwise simultaneous repays
the full amount of any Revolving Loan made by Lender with respect to such SBA
Guaranteed Note Receivable (in which event Lender will release its Lien
therein); and

 

(c)           sell Non-Guaranteed Notes Receivable pursuant to a Securitization
Transaction, to the extent that such sales are made (i) in full conformity with
all applicable SBA Rules and Regulations and other governing law, and (ii) on
terms (including with respect to the amount and timing of payment of the
purchase price therefor) and in a manner reasonably acceptable to Lender.

 

6.14         Payment on ASBA Note or FirstCity Debt.  Make (a) any payment of
principal or interest on, or any other payment or distribution with respect to,
the ASBA Note except out of the ASBA Serviced Assets to the extent required by
the Asset Purchase Agreement and the ASBA Note or the ASBA Security Agreement,
or (ii) any payment of principal or interest on, or any other payment or
distribution with respect to, the FirstCity Debt except to the extent permitted
by Section 6.2.

 

6.15         Payments on Subordinated Debt.  Pay any Subordinated Debt or make
any payment of principal or interest thereof or interest thereon or any other
payment or distribution in respect thereof except as may be specifically
permitted under the applicable Subordination Agreement with respect to such
Subordinated Debt.  All Subordinated Debt shall have a maturity date after the
Termination Date and shall be unsecured and subordinated to Lender in
liquidation and repayment on terms that are acceptable to Lender.

 

6.16         Affiliates.  Hereafter create any Affiliate or Subsidiary or divest
itself of any material assets by transferring them to any Affiliate or
Subsidiary, except to the extent required in connection with a Securitization
Transaction.

 

6.17         Consulting and Brokerage Services.  Provide, or enter into any
contract or agreement to provide, or allow any Affiliate or Subsidiary of
Borrower to provide, or enter into any contract or agreement to provide, to any
Term Note Debtor or purchaser of Notes Receivable, any advisory, consulting,
brokerage, or similar services, other than (a) the advisory

 

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or consulting services, if any, Borrower provides in the ordinary course of
business to prospective and actual Term Note Debtors or purchasers of SBA
Guaranteed Notes Receivable in connection with (i) the marketing, structuring,
documentation, and closing of Note Receivable transactions, (ii) the servicing
of any Notes Receivable, and (iii) general business advice, and (b) consulting
services provided to Term Loan Debtors or prospective borrowers in the ordinary
course of business that result in (i) a referral by Borrower to another funding
source that is not an Affiliate or Subsidiary of Borrower, and (ii) the receipt
by Borrower of a reasonable referral fee in an arm’s-length relationship with
such other funding source.  Notwithstanding any provision herein seemingly to
the contrary, there is no prohibition upon FirstCity Financial or its Affiliates
other than Borrower providing, in the ordinary course of its business, brokerage
or consulting services provided to Term Loan Debtors or prospective borrowers in
the ordinary course of business that result in (i) a referral by FirstCity
Financial or its Affiliates other than Borrower to Borrower or another funding
source that is not an Affiliate or Subsidiary of Borrower, and (ii) the receipt
by FirstCity Financial or its Affiliates other than Borrower of a reasonable
referral fee in an arm’s-length relationship with Borrower or such other funding
source.

 

6.18         Modification of Asset Purchase Documents, Servicing Agreement, or
FirstCity Debt, or Payment Terms of Preferred Stock.  Amend, modify or waive, or
agree to amend, modify or waive, (a) any provision of the Asset Purchase
Agreement, the ASBA Note, or any of the other Asset Purchase Documents, or any
right or obligation of Borrower thereunder, if such amendment, modification or
waiver would have the effect of (i) changing the non-recourse nature of
Borrower’s obligations or providing any additional collateral therefor,
(ii) increasing the amount or accelerating the timing of any amounts payable by
Borrower, or (iii) otherwise increasing in a material manner the liabilities or
obligations of Borrower, (b) any provision of the Servicing Agreement or any
right or obligation of Borrower with respect thereto, (c) any provision with
respect to the FirstCity Debt or any right or obligation of Borrower with
respect thereto, or (d) any provision of Borrower’s Certificate of Formation if
such amendment, modification or waiver would have the effect of increasing or
accelerating the payment of dividends with respect to Borrower’s Series A
Preferred Stock.

 

6.19         Payment or Modification regarding Gateway Portfolio Purchase
Agreement.  (a) Make any payment of principal or interest on, or any other
payment or distribution with respect to, the Gateway Non-Recourse Note except
out of the payments on the Gateway Non-Performing Loans to the extent required
by the Gateway Portfolio Purchase Agreement; or (b) amend, modify or waive, or
agree to amend, modify or waive, (i) any provision of the Gateway Portfolio
Purchase Agreement, the Gateway Non-Recourse Note, or any of the other documents
executed in connection with the Gateway Portfolio Acquisition, or any right or
obligation of Borrower thereunder, if such amendment, modification or waiver
would have the effect of (A) changing the non-recourse nature of Borrower’s
obligations or providing any collateral therefor, (B) increasing the amount or
accelerating the timing of any amounts payable by Borrower, or (C) otherwise
increasing in a material manner the liabilities or obligations of Borrower.

 

7.             EVENTS OF DEFAULT

 

7.1           Events of Default.  Any of the following events shall be
considered an “Event of Default” as that term is used herein:

 

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(a)           Payments.  Borrower or any of its Subsidiaries fails to pay when
due and payable, or when declared due and payable, all or any portion of the
Obligations (whether of principal, interest (including any interest which, but
for the provisions of the Bankruptcy Code, would have accrued on such amounts),
fees and charges, reimbursement of expenses, or other amounts constituting
Obligations); or

 

(b)           Other Covenant Defaults.  Borrower or any of its Subsidiaries
fails to perform, keep, or observe any covenant or other provision contained in
(i) (A) Sections 5.1(a), 5.1(b)(i), 5.1(b)(iv), 5.1(d)(i), 5.4 or 5.10 or
(B) any other section or subsection of this Agreement or the other Loan
Documents except for a section or subsection of this Agreement or such other
Loan Documents, as applicable, that is dealt with expressly elsewhere in this
Section 7.1 (including through clause (ii)(B) below) and such failure or neglect
described in this clause (i) is not cured within three Business Days after the
date on which such failure or neglect first occurs, or (ii) (A) Section 8.2,
(B) Article 5 except for any section or subsection of Article 5 that is dealt
with expressly elsewhere in this Section 7.1, or (C) Article 6 or any comparable
provision to such article that is contained in any of the other Loan Documents;
or

 

(c)           Seizure of Assets.  Any material portion of Borrower’s or any of
its Subsidiaries’ assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any third Person; or

 

(d)           Voluntary Insolvency Proceeding.  An Insolvency Proceeding is
commenced by Borrower or any of its Subsidiaries; or

 

(e)           Involuntary Insolvency Proceeding.  An Insolvency Proceeding is
commenced against Borrower, or any of its Subsidiaries, and any of the following
events occur:  (a) Borrower or the Subsidiary consents to the institution of
such Insolvency Proceeding against it, (b) the petition commencing the
Insolvency Proceeding is not timely controverted; provided, however, that,
during the pendency of such period, Lender shall be relieved of its obligations
to extend credit hereunder, (c) the petition commencing the Insolvency
Proceeding is not dismissed within 60 calendar days of the date of the filing
thereof; provided, however, that, during the pendency of such period, Lender
shall be relieved of its obligations to extend credit hereunder, (d) an interim
trustee is appointed to take possession of all or any substantial portion of the
properties or assets of, or to operate all or any substantial portion of the
business of, Borrower or any of its Subsidiaries, or (e) an order for relief
shall have been entered therein; or

 

(f)            Discontinuance of Business.  Borrower or any of its Subsidiaries
ceases to conduct its business as now conducted or is enjoined, restrained or in
any way prevented by court order from conducting all or any material part of its
business affairs; or

 

(g)           Notice of Levy.  A notice of Lien, levy, or assessment is filed of
record with respect to any of Borrower’s or any of its Subsidiaries’ assets
having a value in excess of $100,000 by the United States, or any department,
agency, or instrumentality thereof, or by any state, county, municipal, or
governmental agency, or if any taxes or debts owing at any time hereafter to any
one or more of such entities becomes a Lien, whether choate or otherwise, upon
any of Borrower’s or any of its Subsidiaries’ assets and the same is not paid
before such payment is delinquent; or

 

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(h)           Judgments.  A judgment or other claim becomes a Lien or
encumbrance upon any material portion of Borrower’s or any of its Subsidiaries’
assets; or

 

(i)            Default under Material Agreements.  There is a default with
respect to any material agreement to which Borrower or any of its Subsidiaries
is a party and such default (a) occurs at the final maturity of the obligations
thereunder, or (b) results in a right by the other party thereto, irrespective
of whether exercised, to accelerate the maturity of Borrower’s or its
Subsidiaries’ obligations thereunder, to terminate such agreement, or to refuse
to renew such agreement pursuant to an automatic renewal right therein; or if
there is a default in or an involuntary early termination of one or more Hedging
Agreements to which Borrower or any of its Subsidiaries is a party; or

 

(j)            Prohibited Payments.  Borrower or any of its Subsidiaries makes
any payment on account of Indebtedness that has been contractually subordinated
in right of payment to the payment of the Obligations, except to the extent such
payment is permitted by the terms of the subordination provisions applicable to
such Indebtedness; or

 

(k)           Representations and Warranties. Any representation or warranty
made by Borrower herein or in any other Loan Document or in any certificate,
request or other document furnished pursuant to or under this Agreement or any
other Loan Document proves to have been incorrect in any material respect as of
the date when made (including as of the date provided by Section 8.2 upon
Borrower’s acceptance of the proceeds of an advance); or

 

(l)            Termination of Validity Agreements.  The obligations of any
Validity Certifier under its Validity Agreement is limited or terminated by
operation of law or by such Validity Certifier thereunder; or

 

(m)          Failure of Perfection of Liens.  This Agreement or any other Loan
Document that purports to create a Lien, shall, for any reason, fail or cease to
create a valid and perfected and, except to the extent permitted by the terms
hereof or thereof, first priority Lien on or security interest in the Collateral
covered hereby or thereby; or

 

(n)           Invalidity of Loan Documents.  Any provision of any Loan Document
shall at any time for any reason be declared to be null and void, or the
validity or enforceability thereof shall be contested by Borrower or any of its
Subsidiaries, or a proceeding shall be commenced by Borrower or any of its
Subsidiaries, or by any Governmental Authority having jurisdiction over
Borrower, seeking to establish the invalidity or unenforceability thereof, or
Borrower or any of its Subsidiaries shall deny that Borrower or such Subsidiary
has any liability or obligation purported to be created under any Loan Document;
or

 

(o)           Change of Control.  The occurrence of a Change of Control; or

 

(p)           Material Adverse Change.  The occurrence of a Material Adverse
Change; or

 

(q)           Departure of Key Employees.  Any of the employees of Borrower
listed on Schedule 7.1(q) hereto shall cease to be employed in such individual’s
current capacity with

 

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Borrower and a replacement satisfactory to Lender shall not be hired within 45
days of such termination of employment; or

 

(r)            Default under Agreement with SBA.  Borrower shall be in default,
after the expiration of any applicable notice, grace or cure periods, in any
material respect of its servicing or any other obligations under the Multi-Party
Agreement or under any Loan Guaranty Agreement; or

 

(s)           Default under Securitization Transaction.  Borrower shall be in
default, after the expiration of any applicable notice, grace or cure periods,
in any material respect of its servicing or any other obligations under any
Securitization Transaction; or

 

(t)            Default under Non-Guaranteed Participation.  Borrower shall be in
default, after the expiration of any applicable notice, grace or cure periods,
in any material respect of its servicing or any other obligations under a
Non-Guaranteed Participation; or

 

(u)           Default under Asset Purchase Agreement.  Borrower shall be in
default, after the expiration of any applicable notice, grace or cure periods,
in any material respect of its obligations under the Asset Purchase Agreement,
and such default could reasonably be expected to result in a Material Adverse
Change; or

 

(v)           Default under Servicing Agreement.  Borrower or FirstCity
Servicing Corporation shall be in default, after the expiration of any
applicable notice, grace or cure periods, in any material respect of its
respective obligations under the Serving Agreement; or

 

(w)          Default under Gateway Portfolio Purchase Agreement.  Borrower shall
be in default, after the expiration of any applicable notice, grace or cure
periods, in any material respect of its obligations under the Gateway Portfolio
Purchase Agreement, and such default could reasonably be expected to result in a
Material Adverse Change; or

 

(x)            Default under or Termination of FirstCity Guaranty.  FirstCity
Financial shall be in default, after the expiration of any applicable notice,
grace or cure periods, in any material respect of its obligations under the
FirstCity Guaranty, or the FirstCity Guaranty is limited or terminated by
operation of law or by FirstCity Financial.

 

7.2           Termination of Agreement and Acceleration of the Obligations. 
During any period of grace afforded Borrower under this Article 7 after which an
act or omission of Borrower will become an Event of Default, Lender shall have
no obligation to make any Revolving Loan hereunder.  Upon the occurrence and
continuation of an Event of Default, all of the Obligations (other than the Bank
Product Obligations) may, at the option of Lender and without demand, notice, or
legal process of any kind, be declared, and immediately shall become, due and
payable, and Lender, at its option, may terminate this Agreement; provided, that
all of the Obligations (other than the Bank Product Obligations) shall
immediately become due and payable, and this Agreement shall be terminated upon
the occurrence and continuation of an Event of Default set forth in
Section 7.1(d) or Section 7.1(e); and further provided, that Lender’s rights and
remedies under this Agreement shall survive any such termination.

 

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7.3           Remedies.  Upon the occurrence and at any time during the
continuance of any Event of Default specified in Section 7.1, and subject at all
times to Lender’s compliance with all applicable terms of the Multi-Party
Agreement and applicable SBA Rules and Regulations, including those relating to
the exercise of remedies or the transfer of authority for collection, servicing,
and liquidation of Notes Receivable, Lender shall have the following rights and
remedies:

 

(a)           Rights of Setoff.  Upon the occurrence and during the continuance
of any Event of Default, Lender and each subsequent holder of the Obligations is
hereby authorized by Borrower at any time and from time to time, without notice
to Borrower (any such notice being expressly waived by Borrower), to setoff and
to appropriate and, to the extent permitted by applicable law, to apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by Lender or any subsequent
holder of the Obligations to or for the credit or the account of Borrower
against any and all of the Obligations of Borrower, irrespective of whether or
not the Lender or any subsequent holder of the Obligations shall have made any
demand under this Agreement or under any other Loan Documents and although such
obligations may be unmatured; provided, that Lender shall have no right of
setoff, either by contract or operation of law, with respect to funds deposited
or held in the Servicer Account.  Lender and any subsequent holder of the
Obligation agrees promptly to notify Borrower in writing after any such setoff
and application, provided that the failure to give such notice shall not affect
the validity of such setoff and application.  The rights of Lender or any
subsequent holder of the Obligations under this Section 7.3(a) are in addition
to other rights and remedies (including other rights of setoff) now or hereafter
granted under applicable law which Lender or any subsequent holder of the
Obligations may have.

 

(b)           Notes Receivable and Accounts.  The right to: (i) monitor, manage,
and transfer the collection, servicing, and liquidation of any or all of Notes
Receivable and Borrower’s relationship with Term Note Debtors with respect to
the applicable Notes Receivable and the collateral therefor; (ii) unless and
until the SBA takes over or transfers to another SBA-participating lender,
designated by the SBA and acceptable to Lender, the collection, servicing and
liquidation functions of the Notes Receivable in accordance with the Multi-Party
Agreement, enforce and demand payment of the Accounts and the Notes Receivable,
in accordance with their terms, by legal proceedings or otherwise;
(iii) exercise all of Borrower’s rights and remedies with respect to the
collection of the Accounts and Notes Receivable; (iv) settle, adjust,
compromise, extend, or renew the Accounts and Notes Receivable; (v) settle,
adjust or compromise any legal proceedings brought to collect the Accounts and
Notes Receivable; (vi) if permitted by applicable law, sell or assign the
Accounts and Notes Receivable upon such terms, for such amounts and at such time
or times as Lender deems advisable; (vii) discharge and release the Accounts or
Notes Receivable; (viii) take control, in any manner, of any items of payment;
(ix) prepare, file and sign Borrower’s name on any Proof of Claim in Bankruptcy
or similar document against any Account Debtor or Term Loan Debtor; (x) prepare,
file and sign Borrower’s name on any notice of lien, assignment or satisfaction
of lien or similar document in connection with the Accounts or Notes Receivable;
(xi) do all acts and things necessary, in Lender’s sole discretion, to fulfill
Borrower’s obligations under this Agreement; (xii) endorse the name of Borrower
upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to the Accounts or Notes Receivable; (xiii) open Borrower’s
mail and collect any and all amounts due Borrower from Account Debtors and Term
Loan Debtors; and (xiv) use

 

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the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts and Notes Receivable, to
which Borrower has access;

 

(c)           Sell Collateral.  The right to: (i) require Borrower to assemble
the Collateral, to the extent Borrower has the legal right to do so, and make it
available to Lender at a place to be designated by Lender, in its sole
discretion; (ii) sell or to otherwise dispose of all or any Collateral at public
or private sale or sales, with such notice as may be required by law, in lots or
in bulk, for cash or on credit, all as Lender, in its sole discretion, may deem
advisable; (iii) adjourn such sales from time to time with or without notice;
and (iv) conduct such sales on Borrower’s premises or elsewhere and use
Borrower’s premises without charge for such sales for such time or times as
Lender may see fit.  Lender is hereby granted a license or other right to use,
without charge, Borrower’s labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower’s rights under all licenses and
all franchise agreements shall inure to Lender’s benefit.  Lender shall have the
right to sell, lease or otherwise dispose of the Collateral, or any part
thereof, for cash, credit or any combination thereof, and Lender may purchase
all or any part of the Collateral at public or, if permitted by law, private
sale and, in lieu of actual payment of such purchase price, may setoff the
amount of such price against the Obligations.  The proceeds realized from the
sale of any Collateral shall be applied first to the reasonable out-of-pocket
costs, expenses and attorneys’ fees and expenses incurred by Lender for
collection and for acquisition, completion, protection, removal, storage, sale
and delivery of the Collateral; second to interest due upon any of the
Obligations; and third to the principal of the Obligations.  If any deficiency
shall arise, Borrower shall remain liable to Lender therefor;

 

(d)           Servicing of SBA Loans.  The right, directly or through its
designee approved in writing by SBA in its sole discretion, to monitor, manage,
and service any or all of the Notes Receivable, including the Sold Notes
Receivable, the Participated Notes Receivable, and the SBA Owned Notes
Receivable, and Borrower’s relationship with its Term Loan Debtors with respect
to the applicable Notes Receivable and the collateral therefor; provided, that
Lender, or such designee, shall have been approved by the SBA (as a
participating lender under the SBA Act, as described in 13 CFR section
120.302.1, or otherwise) to perform such functions.  Upon the transfer of the
servicing obligations of Borrower’s Notes Receivable from Borrower to Lender or
such approved designee, Borrower shall immediately deliver to Lender or such
approved designee all loan documents then held by Borrower or any other Person
relating to all of the outstanding Notes Receivable.  Borrower consents to any
action taken by Lender or such approved designee pursuant to this
Section 7.3(d), and agrees that such action shall not release or relieve
Borrower of its obligations to Lender whether arising under this Agreement, or
any of the other Loan Documents.  In carrying out the provisions of this
Section 7.3(d), Lender or such approved designee may rely and act upon any
notice or instruction given to Lender or its designee by the SBA, and in so
doing, neither Lender nor such designee shall incur any liability or obligation
to Borrower by reason thereof;

 

(e)           Termination of Bank Products. The right to notify and direct any
Bank Product Provider to terminate the provision of any Bank Products being
provide to Borrower; and

 

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(f)            UCC Remedies.  In addition to any other rights and remedies
contained in this Agreement and in all of the other Loan Documents, all of the
rights and remedies of a secured party under the UCC or other applicable law,
all of which rights and remedies shall be cumulative and non-exclusive, to the
extent permitted by law.

 

7.4           Notice of Sale or Other Action.  Any notice required to be given
by Lender of a sale, lease, other disposition of the Collateral or any other
intended action by Lender, if given at least 10 Business Days prior to such
proposed action, shall constitute commercially reasonable and fair notice
thereof to Borrower.

 

7.5           Marshalling; Payments Set Aside.  Lender shall be under no
obligation to marshal any assets in favor of Borrower or any other party or
against or in payment of any or all of the Obligations.  To the extent that
Borrower makes a payment or payments to Lender or Lender enforces its security
interests or exercises its rights of set-off, and such payment or payments or
the proceeds of such enforcement or set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set-aside and/or
required to be repaid to a trustee, receiver or any other party under the
Bankruptcy Code, or any state or federal law, common law or equitable cause,
then to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or set-off had not
occurred.

 

7.6           Effect of Multi-Party Agreement.  Notwithstanding any other
provision of this Article 7, all rights and remedies of Lender under this
Article 7 shall be subject to the provisions of the Multi-Party Agreement.

 

8.                                      CONDITION PRECEDENT TO CLOSING DATE AND
LENDING; CONDITIONS SUBSEQUENT

 

The occurrence of the Closing Date and the obligations of Lender to make
Revolving Loans pursuant to this Agreement are subject to the conditions
precedent stated in this Article 8.

 

8.1           Closing Date.  The occurrence of the Closing Date is subject to
the satisfaction of each of the following conditions precedent:

 

(a)           Closing Date.  The Closing Date shall occur on or before
January 31, 2012.

 

(b)           Closing Documents.  Borrower shall have executed and delivered to
Lender this Agreement and the Omnibus Amendment and Reaffirmation.  In addition,
Lender shall have received such documents, instruments and agreements and other
Loan Documents as Lender shall request in connection with the closing of the
Transactions contemplated by this Agreement, including all documents,
instruments, agreements and schedules listed in the Schedule of Documents, each
in form and substance satisfactory to Lender.

 

(c)           Secretary’s Certificate of Borrower.  Certificate of the Secretary
of Borrower, with respect to the authority of Borrower to enter into this
Agreement and the other Loan Documents to which it is a party, and to consummate
all transactions contemplated hereby,

 

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and the authority and incumbency of the each officer executing any of the Loan
Documents on behalf of Borrower.

 

(d)           Secretary’s Certificate of FirstCity Financial.  Certificate of
the Secretary or an Assistant Secretary of FirstCity Financial, with respect to
the authority of FirstCity Financial to execute the Loan Documents to which it
is a party its, and the authority and incumbency of the officer executing any of
such Loan Documents on behalf of FirstCity Financial.

 

(e)           Opinion of Borrower’s Counsel.  Lender shall have received from
counsel for Borrower a written opinion in form and substance reasonably
acceptable to Lender as to such matters as Lender may require, including
opinions regarding (i) the validity, creation, attachment and perfection of the
Liens under the Security Documents, (ii) Borrower’s corporate authorization to
enter into the Transactions contemplated by this Agreement, (iii) Borrower’s
compliance with all Governmental Requirements, (iv) the existence of litigation
against Borrower that, if determined adversely to Borrower, could reasonably be
expected to result in a Material Adverse Change, and (v) as to such other
matters which in the reasonable judgment of Lender may materially impact the
legal and credit risks associated with the Transactions.

 

(f)            Opinion of FirstCity Financial’s Counsel.  Lender shall have
received from counsel for FirstCity Financial a written opinion in form and
substance reasonably acceptable to Lender as to such matters as Lender may
require, including FirstCity Financial’s corporate authorization to enter into
the Transactions contemplated by this Agreement.

 

(g)           Capitalization Documents and Pro Forma Balance Sheet.  Lender
shall have received copies of all documents relating to the formation and
capitalization of Borrower, as well as a pro forma balance sheet dated as of the
Closing Date reflecting Borrower’s financial position after giving effect to the
closing of this Agreement, all of which shall be acceptable to Lender.

 

(h)           Recordings.  The Security Documents, or other notices related
thereto if necessary or appropriate, shall have been duly delivered to the
appropriate offices for filing or recording, and Lender shall have received
confirmations of receipt thereof from the appropriate filing or recording
offices.

 

(i)            Fees and Lender Expenses.  Lender shall have received the fees
described in Section 2.5 due on the Closing Date, if any, and reimbursement of
all Lender Expenses incurred through the Closing Date.

 

(j)            Due Diligence.  Lender shall have completed its updated business,
legal, and collateral due diligence, the results of which shall be satisfactory
to Lender.

 

(k)           Reference Checks.  Lender shall have received completed updated
reference checks with respect to Borrower’s senior management, the results of
which are satisfactory to Lender in its sole discretion.

 

(l)            Borrower’s Guidelines and Operations Manual.  Borrower shall have
delivered to Lender Borrower’s written operating guidelines and written
operations manuals,

 

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detailing Borrower’s business development and underwriting processes, valuation
guidelines, credit granting procedures, loan documentation, and procedures for
packaging and SBA approval, loan closing and servicing, collections,
account/portfolio administration, and liquidation, and such materials shall be
in a form reasonably satisfactory to Lender.

 

(m)          Borrower’s Credit Request and Field Examination Forms.  Borrower
shall have delivered to Lender Borrower’s standard forms of credit request, loan
report and analysis, and field examination/site visit report, and such materials
shall be in a form reasonably satisfactory to Lender.

 

(n)           Borrower’s Form Loan Documents.  Borrower shall have submitted to
Lender the standard form loan agreement, security agreement, note, deed of
trust, guaranty, subordination agreement, and other form loan documents employed
by Borrower (including, where applicable, standard forms prescribed or supplied
by the SBA), and all such loan documents shall be reasonably satisfactory to
Lender and its counsel.

 

(o)           SBA Approval; Loan Guaranty Agreement.  Borrower shall have
provided Lender with a copy of (i) the Loan Guaranty Agreement between SBA and
Borrower and (ii) SBA’s written consent to Borrower’s entering into this
Agreement and the other Loan Documents.  Borrower shall have received all other
licenses, approvals or evidence of other actions required by any Governmental
Authority in connection with the execution and delivery by Borrower of this
Agreement or any other Loan Document or with the consummation of the
Transactions.

 

(p)           Operational Collateral Monitoring System.  Borrower shall be
maintaining an operational collateral monitoring system acceptable to Lender.

 

(q)           Minimum Tangible Net Worth.  Borrower shall have a Tangible Net
Worth of not less than $6,500,000.

 

(r)            Commitment for FirstCity Debt.  Borrower shall have a binding
written commitment from FirstCity Financial for FirstCity Financial to provide
Borrower after the Original Closing Date with not less than $4,000,000 of
additional debt financing to be funded on a basis and pursuant to terms and
conditions acceptable to Lender (the “FirstCity Debt”), which FirstCity Debt
shall be evidenced, payable, and subordinated to payment of the Obligations in a
manner satisfactory in from and substance to Lender.  In addition, Borrower
shall have provided Lender with evidence that FirstCity Financial’s commitment
to provide, and the maturity of, the FirstCity Debt has been extended to a date
no earlier than March 31, 2015.

 

(s)           Maintenance of Operational Accounting System.  Borrower shall be
maintaining, or shall be provided by Servicer pursuant to the Servicing
Agreement with, an operational accounting and general ledger system acceptable
to Lender.

 

(t)            Maintenance of Operational Loan Servicing System.  Borrower shall
be maintaining, or shall be provided by Servicer pursuant to the Servicing
Agreement with, an operational loan servicing system acceptable to Lender.

 

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(u)           Other.  Lender shall have received such other documents as it may
reasonably have requested at any time at or prior to the Closing Date.

 

8.2           All Advances.  The obligation of Lender to make Revolving Loans
under this Agreement is subject to the following further conditions precedent:

 

(a)           Borrowing Base Certificate.  Before each advance, Lender shall
have received a Borrowing Base Certificate, and a Schedule of Eligible Notes
Receivable, each of which shall be true and correct and shall be duly and
properly executed and completed by an Authorized Person.

 

(b)           Possession of Notes Receivable Documents.  All original SBA
7(a) Loan Notes shall have been physically delivered to the possession of FTA
and copies of the Notes Receivable Documents shall have been delivered to
Lender, to the extent and as set forth in Section 5.15.

 

(c)           No Default.  No Default or Event of Default shall have occurred
and be continuing or would result from the funding of the advance.

 

(d)           Representations and Warranties.  All of the representations and
warranties of Borrower contained herein shall be correct in all material
respects as of the date of each such advance as though made on and as of such
date, except (i) to the extent that any such representation or warranty
expressly relates to an earlier date, and (ii) for changes therein permitted or
contemplated by this Agreement.  All of the representations and warranties of
Borrower contained in any of the other Loan Documents shall be correct in all
material respects as of the date delivered, except to the extent that any such
representation or warranty expressly relates to an earlier date.

 

(e)           No Material Adverse Change.  No Material Adverse Change shall have
occurred.

 

(f)            No Injunction.  No injunction, writ, restraining order, or other
order of any nature prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any Governmental Authority
against Borrower, Lender, or any of their Affiliates.

 

(g)           Escrow Arrangements Regarding Concurrent Fundings.  To the extent
that, pursuant to the proviso contained in either paragraph A of Schedule
1.1(a) or paragraph A of Schedule 1.1(b), the requested advance is being made
based upon new loans by Borrower that have not yet actually been disbursed to
the Term Loan Debtor, the conditions of and escrow arrangements for the
disbursement of such new loans shall be satisfactory in form and substance to
Lender.

 

The acceptance by Borrower of the proceeds of any advance hereunder shall be
deemed to constitute, as of the date of such acceptance, (i) a representation
and warranty by Borrower that the conditions in this Section 8.2 have been
satisfied, and (ii) a confirmation by Borrower of the granting and continuance
of Lender’s Lien pursuant hereto.

 

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9.                                      MISCELLANEOUS

 

9.1           Notices.  Except as otherwise provided herein, whenever this
Agreement provides that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by another, or whenever any of the parties desires to give or
serve upon another any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be delivered (i) in person with receipt
acknowledged, or (ii) by facsimile with receipt confirmed, or (iii) by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

 

(a)           If to Lender, at:

 

Wells Fargo Capital Finance, LLC
14241 Dallas Parkway, Suite 1300

Dallas, Texas  75254

Attention:  Loan Portfolio Manager — American Business Lending

Facsimile:  (972) 387-5775

 

With copies to:

 

McDermott Will & Emery LLP

275 Middlefield Road, Suite 100

Menlo Park, California  94025

Attention:  Dick M. Okada, Esq.

Facsimile:  (650) 815-7401

 

(b)           If to Borrower, at:

 

American Business Lending, Inc.

1420 West Mockingbird Lane, Suite 540

Dallas, Texas  75247

Attention:  Charles Bell and Kathy S. McNair

Facsimile:  (214) 580-8661

 

With copies to:

 

FirstCity Business Lending Corporation

(Mailing Address)

P.O. Box 8216

Waco, Texas  76714-8216

 

(Overnight Deliveries Only)

6400 Imperial Drive

Waco, Texas  76712

Attn:  Legal Department

Facsimile:  (254) 761-2953

 

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or at such other address as may be substituted by notice given as herein
provided.  The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice.  Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered or
sent by facsimile, with receipt acknowledged or confirmed, or upon receipt or
the date delivery is rejected by the addressee in the case of certified or
registered United States mail.  Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to the persons designated above to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.

 

9.2           Modification of Agreement; Sale of Interest.  This Agreement and
the other Loan Documents may not be modified, altered or amended, except by an
agreement in writing signed by Borrower and Lender, and, to the extent required
by the Multi-Party Agreement, consented to by SBA.  Borrower may not sell,
assign or transfer this Agreement, or the other Loan Documents or any portion
thereof, including Borrower’s rights, title, interests, remedies, powers, or
duties hereunder or thereunder.  Borrower hereby consents to Lender’s
participation, sale, assignment, transfer or other disposition, at any time or
times hereafter, of this Agreement, or the other Loan Documents, or of any
portion hereof or thereof, including Lender’s rights, title, interests,
remedies, powers, or duties hereunder or thereunder, subject to the provisions
of the Multi-Party Agreement.

 

9.3           Lien Release Prior to Sale of SBA Guaranteed Notes Receivable. 
Lender’s security interest in any SBA Guaranteed Note Receivable shall be deemed
to be automatically released on any Settlement Date established with respect to
such SBA Guaranteed Note Receivable (or other date of settlement established
pursuant to any applicable Broker-Dealer Confirmation) concurrently with the
receipt by FTA of the purchase price therefor.  Notwithstanding any release of a
security interest by Lender under this Section 9.3, Lender shall not release,
but rather shall retain without interruption, its security interest in and to
the Net Sale Proceeds of such sale.

 

9.4           Fees and Expenses.  Borrower shall reimburse Lender for Lender
Expenses.

 

9.5           Severability.  In the event that any one or more of the provisions
contained in this Agreement or in any other Loan Documents shall, for any
reason, be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other Loan Document.

 

9.6           Waiver by Lender.  Lender’s failure, at any time or times
hereafter, to require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of Lender thereafter to
demand strict compliance and performance.  Any suspension or waiver by Lender of
an Event of Default by Borrower under this Agreement or the other Loan Documents
shall not suspend, waive or affect any other Event of Default by Borrower under
this Agreement or the other Loan Documents, whether the same is prior or
subsequent thereto and whether of the same or of a different type.  None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or the other Loan Documents and no Event of Default
by Borrower under this Agreement or the

 

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other Loan Documents shall be deemed to have been suspended or waived by Lender,
unless such suspension or waiver is by an instrument in writing signed by an
officer of Lender and directed to Borrower specifying such suspension or waiver.

 

9.7           Successors and Assigns.  All covenants and agreements by or on
behalf of Borrower contained in this Agreement or any other Loan Documents shall
bind its successors and assigns and shall inure to the benefit of Lender. 
Borrower shall not, however, have the right to assign its rights under this
Agreement or any interest herein, without the prior written consent of Lender
and SBA.

 

9.8           Conflict of Terms.  The other Loan Documents and all Schedules and
Exhibits hereto are incorporated in this Agreement by this reference thereto. 
Except as otherwise provided in this Agreement and except as otherwise provided
in the other Loan Documents by specific reference to the applicable provision of
this Agreement, if any provision contained in this Agreement is in conflict
with, or inconsistent with, any provision in the other Loan Documents, the
provision contained in this Agreement shall govern and control.  Notwithstanding
the foregoing, in the event any provision of this Agreement (including all
documents incorporated by reference herein) conflicts or is inconsistent with
the Multi-Party Agreement, the relevant provisions of the Multi-Party Agreement
shall be controlling.

 

9.9           Waivers by Borrower.  Except as otherwise provided herein,
Borrower waives, to the extent permitted by applicable law:  (a) presentment,
demand and protest and notice of presentment, protest, default, non-payment,
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by Lender on which Borrower may in any way
be liable and hereby ratifies and confirms whatever Lender may do in this
regard; (b) all rights to notice of a hearing prior to Lender’s taking
possession or control of, or to Lender’s replevy, attachment or levy upon, the
Collateral or any bond or security which might be required by any court prior to
allowing Lender to exercise any of Lender’s remedies; and (c) the benefit of all
valuation, appraisement and exemption laws.  Borrower acknowledges that it has
been advised by counsel with respect to this Agreement and the transactions
evidenced by this Agreement.

 

9.10         Cumulative Rights.  The rights and remedies of Lender under this
Agreement and each other Loan Document shall be cumulative, and the exercise or
partial exercise of any such right or remedy shall not preclude the exercise of
any other right or remedy.

 

9.11         CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

 

(a)           THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

 

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(b)           THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW
YORK, STATE OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER’S OPTION, IN
THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH ACTION OR WHERE
SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  BORROWER AND LENDER WAIVE, TO
THE EXTENT PERMITTED UNDER APPLICABLE LAWS, ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 9.11(b).

 

(c)           BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS.  BORROWER AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

9.12         Taxes, etc.  Any taxes (excluding income taxes) payable or ruled
payable by federal or state authority in respect of the Revolving Loans, this
Agreement or the other Loan Documents shall be paid by Borrower, together with
interest and penalties, if any.

 

9.13         Governmental Regulation.  Anything contained in this Agreement to
the contrary notwithstanding, Lender shall not be obligated to extend credit to
Borrower in an amount in violation of any limitation or prohibition provided by
any applicable statute or regulation.

 

9.14         Titles of Articles and Sections.  All titles or headings to
articles and sections or other divisions of this Agreement or the exhibits
hereto are only for the convenience of the parties and shall not be construed to
have any effect or meaning with respect to the other content of such articles,
sections or other divisions, such other content being controlling as to the
agreement between the parties hereto.

 

9.15         Authorized Signatures.  Until Lender is notified by Borrower to the
contrary in writing as provided by Section 9.1, the signature upon this
Agreement or any of the other Loan Documents of an individual designated in
Borrower’s incumbency resolutions of even date herewith shall bind Borrower and
be deemed to be the act of Borrower affixed pursuant to and in accordance with
resolutions duly adopted by Borrower’s Board of Directors.

 

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9.16         Confidentiality.  Lender agrees that material, non-public
information regarding Borrower and its Subsidiaries, their operations, assets,
and existing and contemplated business plans shall be treated by Lender in a
confidential manner, and shall not be disclosed by Lender to Persons who are not
parties to this Agreement, except:  (a) to attorneys for and other advisors,
accountants, auditors, and consultants to Lender, (b) to Subsidiaries and
Affiliates of Lender (including the Bank Product Providers), provided that any
such Subsidiary or Affiliate shall have agreed to receive such information
hereunder subject to the terms of this Section 9.16, (c) as may be required by
statute, decision, or judicial or administrative order, rule, or regulation,
(d) as may be agreed to in advance by Borrower or its Subsidiaries or as
requested or required by any Governmental Authority pursuant to any subpoena or
other legal process, (e) as to any such information that is or becomes generally
available to the public (other than as a result of prohibited disclosure by
Lender), (f) in connection with any assignment, prospective assignment, sale,
prospective sale, participation or prospective participations, or pledge or
prospective pledge of Lender’s interest under this Agreement, provided that any
such assignee, prospective assignee, purchaser, prospective purchaser,
participant, prospective participant, pledgee, or prospective pledgee shall have
agreed in writing to receive such information hereunder subject to the terms of
this Section 9.16, and (g) in connection with any litigation or other adversary
proceeding involving parties hereto which such litigation or adversary
proceeding involves claims related to the rights or duties of such parties under
this Agreement or the other Loan Documents.  The provisions of this Section 9.16
shall survive for two years after the payment in full of the Obligations. 
Anything contained herein or in any other Loan Document to the contrary
notwithstanding, the obligations of confidentiality contained herein and
therein, as they relate to the transactions contemplated hereby, shall not apply
to the federal tax structure or federal tax treatment of such transactions, and
each party hereto (and any employee, representative, or agent of any party
hereto) may disclose to any and all Persons, without limitation of any kind, the
federal tax structure and federal tax treatment of such transactions (including
all written materials related to such tax structure and tax treatment).  The
preceding sentence is intended to cause the transactions contemplated hereby to
not be treated as having been offered under conditions of confidentiality for
purposes of Section 1.6011-4(b)(3) (or any successor provision) of the Treasury
Regulations promulgated under Section 6011 of the IRC, and shall be construed in
a manner consistent with such purpose.  In addition, each party hereto
acknowledges that it has no proprietary or exclusive rights to the tax structure
of the transactions contemplated hereby or any tax matter or tax idea related
thereto.

 

9.17         Acknowledgment of Lender’s other Interests.  Borrower acknowledges
that Lender or its Affiliates does now, and may in the future, hold equity
interests or other investments in or loans to other entities or businesses that
are also in the business of making loans guaranteed by SBA and that may
otherwise compete with the business of Borrower, and that certain of Lender’s
Affiliates themselves make loans guaranteed by SBA and that may otherwise
compete with the business of Borrower.

 

9.18         Counterparts; Electronic Execution.  This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement.  Delivery of an executed counterpart of this Agreement by
telefacsimile or other electronic method of transmission shall be equally as
effective as delivery of an original executed counterpart of this Agreement. 
Any party delivering

 

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an executed counterpart of this Agreement by telefacsimile or other electronic
method of transmission also shall deliver an original executed counterpart of
this Agreement but the failure to deliver an original executed counterpart shall
not affect the validity, enforceability, and binding effect of this Agreement. 
The foregoing shall apply to each other Loan Document mutatis mutandis.

 

9.19         Entire Agreement.  This Agreement, the Security Documents, the
Multi-Party Agreement, and the other Loan Documents represent the final
agreement between the parties with respect to the subject matter hereof and may
not be contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties.  There are no unwritten oral agreements between the
parties.  The foregoing to the contrary notwithstanding, all Bank Product
Agreements, if any, are independent agreements governed by the written
provisions of such Bank Product Agreements, which will remain in full force and
effect, unaffected by any repayment, prepayments, acceleration, reduction,
increase, or change in the terms of any credit extended hereunder, except as
otherwise expressly provided in such Bank Product Agreement.

 

9.20         Revival and Reinstatement of Obligations.  If the incurrence or
payment of the Obligations by Borrower or the transfer to Lender of any property
should for any reason subsequently be declared to be void or voidable under any
state or federal law relating to creditors’ rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, or other
voidable or recoverable payments of money or transfers of property
(collectively, a “Voidable Transfer”), and if Lender is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Lender is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of Lender
related thereto, the liability of Borrower automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.

 

9.21         Patriot Act Notice.  Lender hereby notifies Borrower that, pursuant
to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56, signed
into law October 26, 2001 (the “Patriot Act”), Lender is required to obtain,
verify and record information that identifies the Borrower, which information
includes the name and address of Borrower and other information that will allow
Lender to identify Borrower in accordance with the Patriot Act.  In addition, if
Lender is required by law or regulation or internal policies to do so, it shall
have the right to periodically conduct (a) Patriot Act searches, OFAC/PEP
searches, and customary individual background checks for the Borrower and
FirstCity Financial and (b) OFAC/PEP searches and customary individual
background checks for the senior management and key principals of Borrower and
FirstCity Financial, and Borrower agrees to cooperate in respect of the conduct
of such searches and further agrees that the reasonable costs and charges for
such searches shall constitute Lender Expenses hereunder and be for the account
of Borrower.

 

9.22         Bank Product Providers.  Each Bank Product Provider shall be deemed
a third party beneficiary hereof and of the provisions of the other Loan
Documents for purposes of any reference in a Loan Document to the parties for
whom Lender is acting.  Lender hereby agrees to act as agent for such Bank
Product Providers and, by virtue of entering into a Bank Product Agreement, the
applicable Bank Product Provider shall be automatically deemed to have appointed
Lender as its agent and to have accepted the benefits of the Loan Documents; it
being

 

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understood and agreed that the rights and benefits of each Bank Product Provider
under the Loan Documents consist exclusively of such Bank Product Provider’s
being a beneficiary of the Liens and security interests (and, if applicable,
guarantees) granted to Lender and the right to share in payments and collections
out of the Collateral as more fully set forth herein.  In addition, each Bank
Product Provider, by virtue of entering into a Bank Product Agreement, shall be
automatically deemed to have agreed that Lender shall have the right, but shall
have no obligation, to establish, maintain, relax, or release reserves in
respect of the Bank Product Obligations and that if reserves are established
there is no obligation on the part of Lender to determine or insure whether the
amount of any such reserve is appropriate or not.  In connection with any such
distribution of payments or proceeds of Collateral, Lender shall be entitled to
assume no amounts are due or owing to any Bank Product Provider unless such Bank
Product Provider has provided a written certification (setting forth a
reasonably detailed calculation) to Lender as to the amounts that are due and
owing to it and such written certification is received by Lender a reasonable
period of time prior to the making of such distribution.  Lender shall have no
obligation to calculate the amount due and payable with respect to any Bank
Products, but may rely upon the written certification of the amount due and
payable from the relevant Bank Product Provider.  In the absence of an updated
certification, Lender shall be entitled to assume that the amount due and
payable to the relevant Bank Product Provider is the amount last certified to
Lender by such Bank Product Provider as being due and payable (less any
distributions made to such Bank Product Provider on account thereof).  Borrower
may obtain Bank Products from any Bank Product Provider, although Borrower is
not required to do so.  Borrower acknowledges and agrees that no Bank Product
Provider has committed to provide any Bank Products and that the providing of
Bank Products by any Bank Product Provider is in the sole and absolute
discretion of such Bank Product Provider.  Notwithstanding anything to the
contrary in this Agreement or any other Loan Document, no provider or holder of
any Bank Product shall have any voting or approval rights hereunder (or be
deemed a Lender) solely by virtue of its status as the provider or holder of
such agreements or products or the Obligations owing thereunder, nor shall the
consent of any such provider or holder be required for any matter hereunder or
under any of the other Loan Documents, including as to any matter relating to
the Collateral or the release of Collateral or any guarantor.  Any provision to
the contrary contained elsewhere in this Agreement or in any other Loan Document
notwithstanding, Lender shall not have any duties or responsibilities to any
Bank Product Provider, except those expressly set forth herein or in the other
Loan Documents, nor shall Lender have or be deemed to have any fiduciary
relationship with any Bank Product Provider, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against
Lender.  Without limiting the generality of the foregoing, the use of the term
“agent” in this Agreement or the other Loan Documents with reference to Lender
is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law.  Instead, such
term is used merely as a matter of market custom, and is intended to create or
reflect only a representative relationship between independent contracting
parties.

 

9.23         Borrower’s Waiver of Claims Arising Prior to Execution Date of
Agreement.  In consideration of Lender entering into this Agreement, Borrower,
on behalf of itself, its Subsidiaries and its other Affiliates, hereby waives,
releases, remises and forever discharges Lender and each other Indemnified
Person from any and all claims, suits, actions, investigations, proceedings or
demands, whether based in contract, tort, implied or express warranty, strict

 

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liability, criminal or civil statute or common law of any kind or character,
known or unknown (collectively, the “Claims”), which Borrower ever had, now has
or might hereafter have against Lender or any other Indemnified Person based on
any acts or omissions of Lender or any other Indemnified Person on or prior to
the Closing Date.  Borrower hereby waives and relinquishes for itself, its
Subsidiaries and its other Affiliates all of the rights and benefits each such
Person has, or may have, with respect to the Claims released under Section 1542
of the California Civil Code or any other similar statute.  Section 1542 of the
California Civil Code states as follows:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

 

Borrower has been advised by counsel with respect to the release contained in
this Section 9.23.

 

[REST OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be
duly executed as of the date first above written.

 

 

BORROWER:

 

 

 

AMERICAN BUSINESS LENDING, INC.,

 

a Texas corporation

 

 

 

 

 

 

 

By:

 

 

 

Charles P. Bell, Jr.

 

 

Chief Executive Officer

 

 

 

 

 

 

 

LENDER:

 

 

 

WELLS FARGO CAPITAL FINANCE, LLC,

 

a Delaware limited liability company

 

 

 

 

 

 

 

By:

 

 

 

Pamela A. Wozniak

 

 

Vice President

 

SIGNATURE PAGE TO LOAN AGREEMENT

 

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ACKNOWLEDGMENT OF INSTRUMENTS

 

STATE OF

)

 

 

)

SS.

COUNTY OF

)

 

 

On                                                      before me, the
undersigned notary public in and for said state, personally appeared
                                                , personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument, the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

 

WITNESS my hand and official seal.

 

 

Signature

 

 

(Seal)

 

--------------------------------------------------------------------------------

 

ACKNOWLEDGMENT OF INSTRUMENTS

 

STATE OF

)

 

 

)

SS.

COUNTY OF

)

 

 

On                                                      before me, the
undersigned notary public in and for said state, personally appeared
                                                , personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument, the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

 

WITNESS my hand and official seal.

 

 

Signature

 

 

(Seal)

 

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Schedule 1.1(a)

 

Net Eligible Non-Guaranteed Notes Receivable

 

Upon delivery to Lender of a Schedule of Eligible Notes Receivable, Lender shall
determine, in its sole discretion, which Non-Guaranteed Notes Receivable, if
any, satisfy the following requirements with respect to a Non-Guaranteed Note
Receivable and the applicable Note Receivable to which it relates (collectively,
in each instance, a “Loan”) and consequently are “Net Eligible Non-Guaranteed
Notes Receivable” for purposes of determining the amounts to be advanced
pursuant to Section 2.1:

 

A.1          All conditions precedent to the effectiveness of the SBA guaranty
with respect to the Loan have been met, and either (i) the Loan has been fully
disbursed by Borrower to or for the account of the Term Loan Debtor, or (ii) in
the event the Loan has been made with respect to any Loan that has not been
fully or partially funded, only that portion of such Loan that has actually been
funded and disbursed by Borrower to or for the account of the Term Loan Debtor
shall be eligible under this paragraph A.1; provided, that at the discretion of
Lender, the disbursement requirements of this paragraph A.1 may be deemed
satisfied on the condition subsequent that the subject disbursements are
actually made to the Term Loan Debtor on the same Business Day as the date of
the advance made by Lender; provided, that if such Non-Guaranteed Note
Receivable is included in the Gateway Performing Loans, then the requirements of
this paragraph A.1 shall be replaced by the requirements of paragraph A.2 below;

 

A.2          If such Non-Guaranteed Note Receivable is included in the Gateway
Performing Loans, then to the best of Borrower’s knowledge, all conditions
precedent to the effectiveness of the SBA guaranty with respect to the Loan have
been met, and either (i)  the Loan has been fully disbursed for the account of
the Term Loan Debtor, or (ii) in the event the Loan has been made with respect
to any Loan that has not been fully or partially funded, only that portion of
such Loan that has actually been funded and disbursed to or for the account of
the Term Loan Debtor shall be eligible under this paragraph A.2; provided, that
at the discretion of Lender, the disbursement requirements of this paragraph A.2
may be deemed satisfied on the condition subsequent that the subject
disbursements are actually made to the Term Loan Debtor on the same Business Day
as the date of the advance made by Lender;

 

B.            Borrower has perfected its security interests and liens in all
underlying collateral for the Loan required to be obtained as a condition of
obtaining the SBA guaranty with respect thereto; provided, that at the
discretion of Lender, the perfection requirements of this paragraph B may be
deemed satisfied if escrow arrangements reasonably acceptable to Lender are in
place to insure that all steps necessary for such perfection will be promptly
accomplished; provided, that if such Non-Guaranteed Note Receivable is included
in the Gateway Performing Loans, then the requirements of this paragraph B shall
not apply;

 

C.            The Loan conforms to all requirements of the SBA applicable to the
initial approval and guaranty of the SBA;

 

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D.            No event or condition has occurred that would release the SBA from
its obligations to Borrower with respect to the Loan or any recovery with
respect thereto has occurred, and the SBA has not rejected the Loan or the Note
Receivable Documents in any respect;

 

E.             Not later than five Business Days after the issuance of the Loan,
the subject original SBA 7(a) Loan Notes are in the physical possession of FTA
and have been identified to FTA as being pledged to Lender under the Loan
Agreement and the Security Agreement; provided, that if such Non-Guaranteed Note
Receivable is included in the Gateway Performing Loans, then such requirements
shall be satisfied if, as of the Closing Date, the subject original SBA
7(a) Loan Notes are in the physical possession of FTA and have been identified
to FTA as being pledged to Lender under the Loan Agreement and the Security
Agreement;

 

F.             The Loan conforms in all material respects to Borrower’s written
credit and underwriting guidelines, copies of which have been previously
delivered to Lender; provided, that if such Non-Guaranteed Note Receivable is
included in the Gateway Performing Loans, then the requirements of this
paragraph F shall not apply;

 

G.            (i) If the outstanding principal amount of any Non-Guaranteed Note
Receivable exceeds $1,000,000, then the excess shall be ineligible; and (b) if
the outstanding principal amount of any Non-Guaranteed Note Receivable that is
included in the Gateway Performing Loans exceeds twenty-five percent (25%) of
the original combined principal amount of such Non-Guaranteed Note Receivable
and the corresponding SBA Guaranteed Note Receivable, then the excess shall be
ineligible;

 

H.            The Non-Guaranteed Note Receivable does not exceed seven and
one-half percent (7.5%) of Net Eligible Non-Guaranteed Notes Receivable at such
time; provided, that such Non-Guaranteed Note Receivable will be ineligible only
to the extent of such excess;

 

I.              The Non-Guaranteed Note Receivable does not cause the portion of
Net Eligible Non-Guaranteed Notes Receivable owed by Term Loan Debtors whose
business activities fall within a single industry, as defined by the Standard
Industrial Classification/NAIC classification (six-digit NAIC codes) then in
effect, to exceed thirty percent (30%) of the total Net Eligible Non-Guaranteed
Notes Receivable; provided, that such Non-Guaranteed Note Receivable will be
ineligible only to the extent of such excess; and provided further, that if such
Non-Guaranteed Note Receivable is included in the Gateway Performing Loans, then
the requirements of this paragraph I shall not apply;

 

J.1         If the Non-Guaranteed Note Receivable is a Borrower Originated Mixed
Collateral Loan, then such Non-Guaranteed Note Receivable does not cause the
portion of Net Eligible Non-Guaranteed Notes Receivable that are Borrower
Originated Mixed Collateral Loans to exceed twenty percent (20%) of the total
Net Eligible Non-Guaranteed Notes Receivable that are Borrower Originated Loans;
provided, that such Non-Guaranteed Note Receivable will be ineligible only to
the extent of such excess;

 

J.2         If the Non-Guaranteed Note Receivable is a Borrower Originated Cash
Flow Loan or Partially Secured Loan, then such Non-Guaranteed Note Receivable
does not cause the

 

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portion of Net Eligible Non-Guaranteed Notes Receivable that are Borrower
Originated Cash Flow Loan or Partially Secured Loans to exceed ten percent (10%)
of the total Net Eligible Non-Guaranteed Notes Receivable that are Borrower
Originated Loans; provided, that such Non-Guaranteed Note Receivable will be
ineligible only to the extent of such excess;

 

K.            The aggregate amount of the Non-Guaranteed Note Receivable and
Guaranteed Note Receivable portions of such Loan corresponding to any commercial
real estate collateral for such Loan does not exceed Lender’s estimate of the
value of such commercial real estate; provided, that such Non-Guaranteed Note
Receivable will be ineligible only to the extent of such excess; and provided
further, that if such Non-Guaranteed Note Receivable is included in the Gateway
Performing Loans, then the requirements of this paragraph K shall not apply;

 

L.             The Term Loan Debtor is neither the United States of America nor
any subdivision, department, or agency thereof, except to the extent that
Borrower has delivered to Lender all documents necessary to comply with the
Federal Assignment of Claims Act of 1940, as amended from time to time;

 

M.           The Term Loan Debtor is not a state or subdivision, department, or
agency thereof, unless Borrower gives prompt notice to Lender of any Notes
Receivable with respect to these entities;

 

N.            The Term Loan Debtor is not insolvent or the subject of an
Insolvency Proceeding; provided, that such Non-Guaranteed Note Receivable will
not be ineligible solely because of this paragraph N if such Term Loan Debtor is
continuing to operate its business as a debtor-in-possession under the
Bankruptcy Code and all payments under the subject Note Receivable are being
paid on a current basis pursuant to authorization of the court in which such
Insolvency Proceeding is pending;

 

O.            No payment of interest and principal, or other amount due under
the Loan is more than 61 days past due;

 

P.             The Loan is a valid, legally enforceable obligation of the Term
Loan Debtor and is not subject to any offset or other defense on the part of
such Term Loan Debtor or to any claim on the part of the Term Loan Debtor
denying liability;

 

Q.            The subject Note Receivable is subject to no lien or security
interest, except for the security interest of Lender, and the Non-Guaranteed
Note Receivable portion thereof is not subject to a Non-Guaranteed
Participation;

 

R.            The Loan is evidenced by legal documentation in form and substance
satisfactory to Lender; provided, that (i) legal documentation that conforms in
all material respects to forms provided by the SBA, standard forms of mortgages
or deeds of trust provided by Borrower’s local counsel for use in specific
jurisdictions, or other forms of documents previously approved by Lender shall
be presumed to be satisfactory to Lender, and (ii) any Loan evidenced by legal
documentation that does not satisfy clause (i) above must have been reviewed by
Borrower’s legal counsel for legal sufficiency and the perfection of Borrower’s
liens in any collateral thereunder, with the written results of such review
being satisfactory to Lender; and provided

 

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further, that if such Non-Guaranteed Note Receivable is included in the Gateway
Performing Loans, then the requirements of this paragraph R shall not apply;

 

S.             The Loan does not arise out of transactions with an employee,
officer, agent, director, stockholder, or Affiliate of Borrower or any Affiliate
of any thereof;

 

T.            With respect to the Non-Guaranteed Note Receivable, Borrower has
made or reaffirmed the warranties and representations set forth in the Loan
Agreement at the time of its most recent request for a Revolving Loan, including
the representations and warranties included in the Schedule of Eligible Notes
Receivable accompanying such request;

 

U.            The Loan has not been turned over to the SBA or any other Person
for servicing or collection; and

 

V.            The Loan and the respective rights of the SBA, Lender, Borrower,
and FTA with respect thereto are subject to the terms of the Multi-Party
Agreement or such other agreement with SBA and Borrower which Lender, in its
sole discretion, deems acceptable.

 

Notwithstanding any other provision of this Schedule or the Loan Agreement,
(1) Lender shall retain the right, in its sole discretion, to establish specific
reserves in such amounts as Lender deems necessary for material changes in the
expected recovery of the Collateral, and (2) Lender shall retain the right to
independently underwrite all SBA 7(a) Loans in excess of $3,500,000 for the
purpose of determining whether and to what extent the Non-Guaranteed Note
Receivable portion thereof would constitute Net Eligible Non-Guaranteed Notes
Receivable hereunder, and any such determination by Lender shall take precedence
over any conflicting size or concentration limit set forth in paragraphs G, H,
or I of this Schedule 1.1(a).

 

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Schedule 1.1(b)

 

Net Eligible SBA Guaranteed Notes Receivable

 

Upon delivery to Lender of a Schedule of Eligible Notes Receivable, Lender shall
determine, in its sole discretion, which SBA Guaranteed Notes Receivable, if
any, satisfy the following requirements with respect to a SBA Guaranteed Note
Receivable and the applicable Note Receivable to which it relates (collectively,
in each instance, a “Loan”) and consequently are “Net Eligible SBA Guaranteed
Notes Receivable” for purposes of determining the amounts to be advanced
pursuant to Section 2.1:

 

A.            All conditions precedent to the effectiveness of the SBA guaranty
with respect to the Loan have been met, and either (i) the Loan has been fully
disbursed by Borrower to or for the account of the Term Loan Debtor, or (ii) in
the event the Loan has been made with respect to any Loan that has not been
fully or partially funded, only that portion of such Loan that has actually been
funded and disbursed by Borrower to or for the account of the Term Loan Debtor
shall be eligible under this paragraph A; provided, that at the discretion of
Lender, the disbursement requirements of this paragraph A may be deemed
satisfied on the condition subsequent that the subject disbursements are
actually made to the Term Loan Debtor on the same Business Day as the date of
the advance made by Lender;

 

B.            Borrower has perfected its security interests and liens in all
underlying collateral for the Loan required to be obtained as a condition of
obtaining the SBA guaranty with respect thereto, but the SBA guaranteed portion
thereof has not yet been sold by Borrower; provided, that at the discretion of
Lender, the perfection requirements of this paragraph B may be deemed satisfied
if escrow arrangements reasonably acceptable to Lender are in place to insure
that all steps necessary for such perfection will be promptly accomplished;

 

C.            The Loan conforms to all requirements of the SBA applicable to the
initial approval and guaranty of the SBA;

 

D.            No event or condition has occurred that would release the SBA from
its obligations to Borrower with respect to the Loan or any recovery with
respect thereto has occurred, and the SBA has not rejected the Loan or the Note
Receivable Documents in any respect;

 

E.             Not later than five Business Days after the issuance of the Loan,
the subject original SBA 7(a) Loan Notes are in the physical possession of FTA
and have been identified to FTA as being pledged to Lender under the Loan
Agreement and the Security Agreement;

 

F.             The Loan conforms in all material respects to Borrower’s written
credit and underwriting guidelines, copies of which have been previously
delivered to Lender;

 

G.1        If the outstanding principal amount of any Guaranteed Note Receivable
with respect to a Borrower Originated Cash Flow Loan or Partially Secured Loan
exceeds $2,000,000, then the excess shall be ineligible;

 

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G.2        If the outstanding principal amount of any Guaranteed Note Receivable
with respect to a Borrower Originated Mixed Collateral Loan exceeds $3,000,000,
then the excess shall be ineligible;

 

G.3        If the outstanding principal amount of any Guaranteed Note Receivable
with respect to a Borrower Originated Real Estate Loan exceeds $4,500,000, then
the excess shall be ineligible;

 

H.            The Term Loan Debtor is neither the United States of America nor
any subdivision, department, or agency thereof, except to the extent that
Borrower has delivered to Lender all documents necessary to comply with the
Federal Assignment of Claims Act of 1940, as amended from time to time;

 

I.              The Term Loan Debtor is not a state or subdivision, department,
or agency thereof, unless Borrower gives prompt notice to Lender of any Notes
Receivable with respect to these entities;

 

J.             The Term Loan Debtor is not insolvent or the subject of an
insolvency proceeding or a case commenced under the Bankruptcy Code; provided,
that such SBA Guaranteed Note Receivable will not be ineligible solely because
of this paragraph J if such Term Loan Debtor is continuing to operate its
business as a debtor-in-possession under the Bankruptcy Code and all payments
under the subject Note Receivable are being paid on a current basis pursuant to
authorization of the court in which such Insolvency Proceeding is pending;

 

K.            The Loan is a valid, legally enforceable obligation of the Term
Loan Debtor and is not subject to any offset or other defense on the part of
such Term Loan Debtor or to any claim on the part of the Term Loan Debtor
denying liability;

 

L.             The subject Note Receivable is subject to no lien or security
interest, except for the security interest of Lender, and the Non-Guaranteed
Note Receivable portion thereof is not subject to a Non-Guaranteed
Participation;

 

M.           The Loan is evidenced by legal documentation in form and substance
satisfactory to Lender; provided, that (i) legal documentation that conforms in
all material respects to forms provided by the SBA, standard forms of mortgages
or deeds of trust provided by Borrower’s local counsel for use in specific
jurisdictions, or other forms of documents previously approved by Lender shall
be presumed to be satisfactory to Lender, and (ii) any Loan evidenced by legal
documentation that does not satisfy clause (i) above must have been reviewed by
Borrower’s legal counsel for legal sufficiency and the perfection of Borrower’s
liens in any collateral thereunder, with the written results of such review
being satisfactory to Lender;

 

N.            The Loan does not arise out of transactions with an employee,
officer, agent, director, stockholder, or Affiliate of Borrower or any Affiliate
of any thereof;

 

O.            With respect to the SBA Guaranteed Note Receivable, Borrower has
made or reaffirmed the warranties and representations set forth in the Loan
Agreement at the time of its most recent request for a Revolving Loan, including
the representations and warranties included in the Schedule of Eligible Notes
Receivable accompanying such request;

 

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P.             The Loan has not been turned over to the SBA or any other Person
for servicing or collection; and

 

Q.            The Loan and the respective rights of the SBA, Lender, Borrower,
and FTA with respect thereto are subject to the terms of the Multi-Party
Agreement or such other agreement with SBA and Borrower which Lender, in its
sole discretion, deems acceptable.

 

Notwithstanding any other provision of this Schedule or the Loan Agreement,
(1) Lender shall retain the right, in its sole discretion, to establish specific
reserves in such amounts as Lender deems necessary for material changes in the
expected recovery of the Collateral, and (2) Lender shall retain the right to
independently underwrite all SBA 7(a) Loans in excess of $3,500,000 for the
purpose of determining whether and to what extent the SBA Guaranteed Note
Receivable portion thereof would constitute Net Eligible SBA Guaranteed Notes
Receivable hereunder, and any such determination by Lender shall take precedence
over any conflicting size or concentration limit set forth in paragraphs G.3 of
this Schedule 1.1(b).

 

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