Exhibit 10.01

$180,000,000

CREDIT AGREEMENT

dated as of

October 20, 2006

among

FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.

The Lenders Party Hereto

and

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

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J.P. MORGAN SECURITIES INC.,

as Sole Lead Arranger and Sole Bookrunner

 

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and

CALYON NEW YORK BRANCH

as Syndication Agent

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TABLE OF CONTENTS

 

          Page ARTICLE I Definitions    1

SECTION 1.01.

   Defined Terms    1

SECTION 1.02.

   Classification of Loans and Borrowings.    17

SECTION 1.03.

   Terms Generally.    17

SECTION 1.04.

   Accounting Terms; GAAP    17 ARTICLE II The Credits    17

SECTION 2.01.

   Commitments; Term-Out Option    17

SECTION 2.02.

   Loans and Borrowings    18

SECTION 2.03.

   Requests for Borrowings    18

SECTION 2.04.

   Funding of Borrowings    19

SECTION 2.05.

   Interest Elections    20

SECTION 2.06.

   Termination, Reduction and Increase of Commitments    21

SECTION 2.07.

   Repayment of Loans; Evidence of Debt    22

SECTION 2.08.

   Prepayment of Loans    23

SECTION 2.09.

   Fees    23

SECTION 2.10.

   Interest    24

SECTION 2.11.

   Alternate Rate of Interest    24

SECTION 2.12.

   Increased Costs    25

SECTION 2.13.

   Break Funding Payments    26

SECTION 2.14.

   Taxes    26

SECTION 2.15.

   Payments Generally; Pro Rata Treatment; Sharing of Set-offs    27

SECTION 2.16.

   Mitigation Obligations; Replacement of Lenders    29 ARTICLE III
Representations and Warranties    29

SECTION 3.01.

   Organization; Powers    29

SECTION 3.02.

   Authorization; Enforceability    30

SECTION 3.03.

   Governmental Approvals; No Conflicts    30

SECTION 3.04.

   Financial Condition; No Material Adverse Change    30

SECTION 3.05.

   Properties    31

SECTION 3.06.

   Litigation and Environmental Matters    31

SECTION 3.07.

   Compliance with Laws and Agreements    31

SECTION 3.08.

   Investment Company Status    31

SECTION 3.09.

   Taxes    32

SECTION 3.10.

   ERISA    32

SECTION 3.11.

   Disclosure    32

SECTION 3.12.

   Subsidiaries    32

SECTION 3.13.

   REIT Qualification    33

SECTION 3.14.

   Regulatory Matters Pertaining to FRB & Co.    33 ARTICLE IV Conditions    33

SECTION 4.01.

   Effective Date    33

SECTION 4.02.

   Each Credit Event    34

 

(i)

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ARTICLE V Affirmative Covenants    35

SECTION 5.01.

   Financial Statements; Other Information    35

SECTION 5.02.

   Notices of Material Events    37

SECTION 5.03.

   Existence; Conduct of Business    38

SECTION 5.04.

   Payment of Obligations    38

SECTION 5.05.

   Maintenance of Properties; Insurance    38

SECTION 5.06.

   Books and Records; Inspection Rights    38

SECTION 5.07.

   Compliance with Laws    38

SECTION 5.08.

   Use of Proceeds    38

SECTION 5.09.

   Further Assurances With Respect to Security Interests    38 ARTICLE VI
Negative Covenants    39

SECTION 6.01.

   Indebtedness    39

SECTION 6.02.

   Liens    40

SECTION 6.03.

   Mergers, Consolidations, Sale of Assets, etc.    41

SECTION 6.04.

   Restricted Payments    41

SECTION 6.05.

   Transactions with Affiliates    42

SECTION 6.06.

   Restrictive Agreements    42

SECTION 6.07.

   Subordinated Indebtedness    42

SECTION 6.08.

   Lines of Business    42

SECTION 6.09.

   Change in Fiscal Periods    43

SECTION 6.10.

   Tangible Net Worth    43

SECTION 6.11.

   Liquidity    43 ARTICLE VII Events of Default    43 ARTICLE VIII The
Administrative Agent    46 ARTICLE IX Miscellaneous    48

SECTION 9.01.

   Notices    48

SECTION 9.02.

   Waivers; Amendments    48

SECTION 9.03.

   Expenses; Indemnity; Damage Waiver.    50

SECTION 9.04.

   Successors and Assigns    51

SECTION 9.05.

   Survival    53

SECTION 9.06.

   Counterparts; Integration; Effectiveness    53

SECTION 9.07.

   Severability    54

SECTION 9.08.

   Right of Setoff    54

SECTION 9.09.

   Governing Law; Jurisdiction; Consent to Service of Process    54

SECTION 9.10.

   WAIVER OF JURY TRIAL    55

SECTION 9.11.

   Headings    55

SECTION 9.12.

   Confidentiality    55

SECTION 9.13.

   USA PATRIOT Act    56

 

(ii)

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SCHEDULES:

Schedule 2.01 — Commitments

Schedule 3.06 — Disclosed Matters

Schedule 3.12 — Subsidiaries

Schedule 6.01 — Existing Indebtedness

Schedule 6.02 — Existing Liens

Schedule 6.06 — Existing Restrictions

EXHIBITS:

Exhibit A — Form of Assignment and Assumption

Exhibit B — Form of Opinion of Borrower’s Counsel

Exhibit C — Form of Opinion of Special New York Counsel to JPMorgan Chase Bank,
N.A.

Exhibit D — Form of Security Agreement

Exhibit E — Form of Subordination Agreement

(iii)

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CREDIT AGREEMENT dated as of October 20, 2006 among FRIEDMAN, BILLINGS, RAMSEY
GROUP, INC., the LENDERS party hereto, and JPMORGAN CHASE BANK, N.A., as
Administrative Agent.

The parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have
the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

“Administrative Agent” means JPMCB, in its capacity as administrative agent for
the Lenders hereunder.

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

“Aggregate Deficit Amount” means, in relation to the Repo Transactions of any
Person, the sum of the respective Deficit Amounts (if any) for each such Repo
Transaction.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater
of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 0.50%. Any change in the Alternate Base Rate due
to a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime Rate
or the Federal Funds Effective Rate, respectively.

“Applicable Margin” means:

(a) with respect to any ABR Loan,

(i) for any day prior to the Term-Out Option becoming effective, 0.25% and

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(ii) for any day from and after the Term-Out Option becoming effective, 0.50%;
and

(b) with respect to any Eurodollar Loan,

(i) for any day prior to the Term-Out Option becoming effective, 1.25%; and

(ii) for any day from and after the Term-Out Option becoming effective, 1.50%.

“Applicable Percentage” means, with respect to any Lender, the percentage of the
total Commitments represented by such Lender’s Commitment. If the Commitments
have terminated or expired, the Applicable Percentages shall be determined based
upon the Commitments most recently in effect, giving effect to any assignments.

“Assets for Purposes of Assessing Liquidity” means, at any time, the sum of the
following assets of the Borrower (calculated on an unconsolidated basis) plus
(to the extent provided in clauses (h), (i) and (j) below) assets of any Special
Purpose Subsidiary and assets of other Persons deemed to constitute assets of
the Borrower at such time:

(a) (i) 50% of all equity securities held in the merchant banking portfolio
which are (x) registered or unregistered securities that are not subject to
volume or other trading restrictions under Rule 144 promulgated by the SEC (or
any successor or similar rule then in force), (y) listed on a recognized
national securities exchange and (z) otherwise not subject to statutory,
regulatory or contractual arrangements or other restrictions;

(ii) 80% of all equity securities held in the merchant banking portfolio which
(x) are securities that are not registered for resale but are of a class that is
listed on a recognized national securities exchange, (y) may be subject to
volume or other trading restrictions under Rule 144 referred to above but which
can be traded to “qualified institutional buyers” (as such term is defined in
Rule 144A promulgated by the SEC (or any successor or similar rule then in
force)) without volume or trading restrictions and (z) are otherwise not subject
to statutory, regulatory or contractual arrangements or other restrictions;

(iii) 100% of all other equity securities held in the merchant banking
portfolio; and

(iv) 100% of all debt securities (including loans) held in the merchant banking
portfolio;

(b) all loans and advances to, and other investments in, Subsidiaries (but
without duplication of any amount included under clause (j) below), provided
that this clause (b) shall include only 50% of (i) the aggregate principal
amount of temporary (i.e., not exceeding 45 days) subordinated loans supporting
underwritings by FBR & Co. and (ii) other subordinated loans supporting
underwritings by FBR & Co. but (in the case of this subclause (ii)) only during
the initial 45 days of such other loans;

(c) 4.5% of Eligible MBS;

 

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(d) (i) 10% of all asset-backed securities (other than Eligible MBS) rated “A”
(or equivalent) or better by Moody’s, S&P or Fitch and (ii) 40% of all
asset-backed securities (other than Eligible MBS) rated “BBB” (or equivalent) or
better by Moody’s, S&P or Fitch but below “A” (or equivalent) by Moody’s, S&P or
Fitch, provided that if at any time (x) securities of the types referred to in
subclauses (i) and (ii) above exceed 10% of the total assets of the Borrower at
such time, such excess shall be excluded from the calculation under this clause
(d) and shall be included in the calculation under clause (g) below and
(y) securities of the types referred to in subclause (ii) above exceed
$100,000,000, such excess shall be excluded from the calculation under this
clause (d) and shall be included in the calculation under clause (g) below;

(e) 5% of warehouse advances that are secured by Eligible Sub-Prime Loans;

(f) 5% of Eligible Sub-Prime Loans;

(g) all other assets of the Borrower (other than cash, Cash Equivalents and
assets of a type specified in clauses (a) through (f) above), including
long-term assets of the Borrower such as goodwill and other intangibles, plus
all amounts in respect of assets of a type specified in such clauses that are
required to be included under this clause (g); provided that, with respect to
sub-prime, whole mortgage loans that are subject to a “true sale” securitization
(but which, for accounting purposes, are required to be shown on the Borrower’s
balance sheet), the amount to be included for purposes of this clause (g) with
respect to such securitized assets shall be the value of such assets net of the
Indebtedness and/or other liabilities of such securitization as shown on the
balance sheet of the Borrower;

(h) (without duplication of the amount of any assets included under this
definition) all assets of any Special Purpose Subsidiary of the types specified
in clauses (c), (d), (e), (f) and (g) above, but only to the extent of the
applicable percentage specified in such clauses of the assets of such Special
Purpose Subsidiary of the respective types;

(i) (without duplication of the amount of any assets included under this
definition) all assets of any Person deemed under Section 6.01(d)(ii) to
constitute assets of the Borrower of the types specified in clauses (c), (d),
(e), (f) and (g) above, but only to the extent of the applicable percentage (as
specified in the relevant clause) of the assets of such Person of the respective
types; and

(j) with respect to the assets of any Person deemed under Section 6.01(d)(iii)
to constitute assets of the Borrower, an amount equal to the greater of (i) all
assets of such Person of the types specified in any of the foregoing clauses of
this definition, but only to the extent of the applicable percentage specified
in the relevant clause) of the assets of such Person of the respective types and
(ii) all loans and advances to, and other investments in, such Person.

As used in this definition, mortgage-backed securities and other asset-backed
securities shall be carried at fair value in accordance with GAAP, with
resulting charges or credits, as applicable, to shareholders’ equity.

 

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“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 9.04), and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.

“Assuming Lender” is defined in Section 2.06(c).

“Availability Period” means the period from and including the Effective Date to
but excluding the earlier of the Commitment Termination Date and the date of
termination of the Commitments.

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

“Borrower” means Friedman, Billings, Ramsey Group, Inc., a Virginia corporation.

“Borrowing” means Loans of the same Type, made, converted or continued on the
same date and, in the case of Eurodollar Loans, as to which a single Interest
Period is in effect.

“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03.

“Broker-Dealer Subsidiary” means any Subsidiary which is registered as a
broker-dealer with the SEC or operates a securities brokerage business outside
the United Stated and is subject to regulation or licensing as such under the
applicable local law.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.

“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.

“Cash Equivalents” means:

(a) direct obligations of, or obligations the principal of and interest on which
are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within 90 days
from the date of issuance thereof;

(b) investments in commercial paper maturing within 90 days from the date of
issuance thereof and having, at the date of acquisition thereof, the highest
credit ratings obtainable from S&P and from Moody’s;

 

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(c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within 90 days from the date of issuance thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the laws
of the United States of America or any State thereof and which has the highest
credit ratings obtainable from S&P and from Moody’s;

(d) fully collateralized repurchase agreements with a term of not more than 30
days for securities described in clause (a) above and entered into with a
financial institution satisfying the criteria described in clause (c) above; and

(e) money market funds that (i) comply with the criteria set forth in SEC Rule
2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa
by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.

“Change of Control” means: (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Exchange Act and the rules of the SEC thereunder as in effect on
the date hereof) (other than by the Permitted Holders) of Equity Interests
representing more than 25% of the aggregate ordinary voting power represented by
the issued and outstanding Equity Interests of the Borrower; (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the
Borrower by Persons who were neither (i) nominated by the board of directors of
the Borrower nor (ii) appointed by directors so nominated; or (c) the
acquisition of direct or indirect Control of the Borrower by any Person or group
(other than by the Permitted Holders).

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender (or, for purposes of
Section 2.12(b), by any lending office of such Lender or by such Lender’s
holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued after
the date of this Agreement.

“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans hereunder, expressed as an amount representing the maximum
aggregate amount of such Lender’s Credit Exposure hereunder, as such commitment
may be (a) reduced or increased from time to time pursuant to Section 2.06 and
(b) reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04. The initial amount of each Lender’s Commitment
is set forth on Schedule 2.01, or in the Assignment and Assumption (or, in the
case of any Assuming Lender, the agreement entered into by such Assuming Lender
under Section 2.06(c)) pursuant to which such Lender shall have assumed its
Commitment, as applicable. The initial aggregate amount of the Lenders’
Commitments is $180,000,000.

“Commitment Termination Date” means October 19, 2007.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

 

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“Credit Exposure” means, with respect to any Lender at any time, the aggregate
outstanding principal amount of such Lender’s Loans at such time.

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

“Deficit Amount” means, at any time in respect of a Repo Transaction of any
Person, the excess (if any) of (i) the aggregate amount of payment obligations
for which such Person is then liable under such Repo Transaction minus (ii) the
then aggregate value of the collateral then securing such payment obligations.

“Disclosed Matters” means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.

“Disqualified Mortgage Loan” means any mortgage loan that (a) (or any
characteristic of which or of the origination of which) triggers the thresholds
of Section 32 of Regulation Z of the Federal Reserve Board (12 C.F.R. §226.32),
(b) is a “high cost” or “high risk” loan under any applicable state, county or
municipal law or regulation, (c) is a “covered” or “threshold” loan under any
applicable state, county or municipal law or regulation, but only to the extent
that such law or regulation expressly exposes assignees of mortgage loans to
possible civil or criminal liability or damages, or would expose any Lender or
the Administrative Agent (whether or not as an assignee) to regulatory action or
enforcement proceedings, penalties or other sanctions, or would materially
impair the enforceability of such mortgage loan, or (d) (or any characteristic
of which or of the origination of which) contains any term or condition, or
involves any loan origination practice, that has been defined as “predatory”
under any such applicable federal, state, county or municipal law or regulation,
or that has been expressly categorized as an “unfair” or “deceptive” term,
condition or practice in any such applicable federal, state, county or municipal
law or regulation.

“DTC” means The Depository Trust Company.

“dollars” or “$” refers to lawful money of the United States of America.

“Effective Date” means the date hereof, provided that the conditions specified
in Section 4.01 are satisfied (or waived in accordance with Section 9.02).

“Effective Duration” means, with respect to any mortgage-backed security, an
estimate, expressed as a whole number or a fraction thereof, of the percentage
change in the price of such mortgage-backed security for a 100 basis point
change in the applicable rate for such mortgage-backed security, further
adjusted by a prepayment model, which estimates mortgage-backed security price
changes as a function of prepayment rate movements.

“Eligible MBS” means mortgage-backed securities (including any current principal
and interest receivable thereunder) (i) that are guaranteed as to principal and
interest by Freddie Mac,

 

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Fannie Mae or Ginnie Mae or are rated AAA by S&P, (ii) that are backed by a pool
or pools of undivided interests in residential mortgages, (iii) that have been
issued in a registered public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended (it being understood that
mortgage-backed securities issued in an offering pursuant to Rule 144A under
said Act do not qualify), (iv) that have an Effective Duration of not more than
4.0 and (v) the value of which is represented by the principal thereof and
accrued and unpaid interest thereon; provided that if at any time the aggregate
amount of Eligible MBS having an Effective Duration of more than 3.0 exceeds 20%
of the total value of Eligible MBS at such time, such excess shall be excluded
from the calculation of the value of Eligible MBS at such time for purposes of
clause (c) of the definition of “Assets for Purposes of Assessing Liquidity” in
this Section (and such excess shall be included in the calculation under
clause (g) of such definition).

“Eligible Sub-Prime Loan” means a sub-prime, whole mortgage loan that (a) is
secured by a mortgage covering improved real property containing a one-, two-,
three- or four-family residence that is not a mobile home or manufactured
housing, (b) is not eligible for purchase by Fannie Mae or Freddie Mac under any
of their prime mortgage loan purchase programs, (c) conforms to market
underwriting standards and is eligible for inclusion in a pool backing
asset-backed securities rated by Moody’s and S&P in accordance with such ratings
agencies’ respective published criteria therefore, (d) at purchase is not
evidenced by a promissory note dated older than 180 days, (e) has not been held
by the Borrower for more than 180 days, (f) is not a Disqualified Mortgage Loan,
(g) is a performing loan (i.e., no payment in respect of such loan is overdue by
more than 30 days) and (h) is not included in an on-balance sheet
securitization.

“Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.

“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
equity interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

 

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“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with the Borrower, is treated as a single employer under
Section 414(b) or (c) of the IRC or, solely for purposes of Section 302 of ERISA
and Section 412 of the IRC, is treated as a single employer under Section 414 of
the IRC.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the IRC or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the IRC or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

“Examining Authority” means, with respect to any Person, the organization
designated by the SEC as the Examining Authority for such Person as provided in
paragraph (c)(12) of the Net Capital Rule.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender or
any other recipient of any payment to be made by or on account of any obligation
of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured
by) its net income by the United States of America (or any political subdivision
thereof, including, without limitation, any State of the United States of
America and any political subdivision of such State), or by the jurisdiction
under the laws of which such recipient is organized (or any political
subdivision thereof) or in which its principal office is located (or any
political subdivision thereof) or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes imposed by
the United States of America (or any political subdivision thereof, including,
without limitation, any State of the United States of America and any political
subdivision of such State), or any similar tax imposed by any other jurisdiction
in which the Borrower is located (or any political subdivision thereof) and
(c) in the case of a Foreign Lender (other than an assignee pursuant to a
request by the Borrower under Section 2.16(b)), any withholding tax that is
imposed

 

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on amounts payable to such Foreign Lender at the time such Foreign Lender
becomes a party to this Agreement (or designates a new lending office) or is
attributable to such Foreign Lender’s failure to comply with Section 2.14(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment), to
receive additional amounts from the Borrower with respect to such withholding
tax pursuant to Section 2.14(a).

“Fannie Mae” means the Federal National Mortgage Association.

“FBR & Co.” means Friedman, Billings, Ramsey & Co., Inc., a Delaware
corporation.

“FBR Asset” means FBR Asset Investment Corporation, a Virginia corporation.

“FBRCMC” means FBR Capital Markets Corporation, a Virginia corporation.

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.

“Financial Officer” means the chief financial officer, chief accounting officer,
treasurer or controller of the Borrower.

“Fitch” means Fitch Ratings.

“FOCUS Report” means the Financial and Operational Combined Uniform Single
Report (Form X-17a-5) required to be filed with the SEC or a national securities
exchange, or any report that is required in lieu of such report.

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

“Freddie Mac” means the Federal Home Loan Mortgage Corporation.

“GAAP” means generally accepted accounting principles in the United States of
America.

“Ginnie Mae” means the Government National Mortgage Association.

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

 

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“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the “primary obligor”) in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. Notwithstanding
anything herein to the contrary, “Guarantee” shall not include any Swap
Agreement of the Borrower in the nature of a market value swap or total return
swap with respect to assets of a Special Purpose Subsidiary.

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others,
(h) all Capital Lease Obligations of such Person, (i) all obligations,
contingent or otherwise, of such Person as an account party in respect of
letters of credit and letters of guaranty and (j) all obligations, contingent or
otherwise, of such Person in respect of bankers’ acceptances. The Indebtedness
of any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor. Anything to the
contrary herein notwithstanding, the Indebtedness of any Person shall include
the Aggregate Deficit Amount for the Repo Transactions of such Person (but shall
not include any other obligation or liability of such Person arising from such
Repo Transactions).

 

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“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.05.

“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of
each January, April, July and October and (b) with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months’ duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months’ duration after
the first day of such Interest Period.

“Interest Period” means, with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and, in
the case of a Borrowing, thereafter shall be the effective date of the most
recent conversion or continuation of such Borrowing.

“IRC” means the Internal Revenue Code of 1986, as amended from time to time.

“JPMCB” means JPMorgan Chase Bank, N.A.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that
shall have become a party hereto pursuant to an instrument executed by such
Person pursuant to Section 2.06(c) or an Assignment and Assumption, other than
any such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Page 3750 of the Telerate Service (or on any
successor or substitute page of such Service, or any successor to or substitute
for such Service, providing rate quotations comparable to those currently
provided on such page of such Service, as determined by the Administrative Agent
from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London interbank market) at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, as the rate for dollar deposits with a maturity comparable to
such Interest Period. In the event that such rate is not available at such time
for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing
for such Interest Period shall be the rate at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period.

 

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“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

“Loan Documents” means, collectively, this Agreement, the promissory notes (if
any) executed and delivered pursuant to Section 2.07(e) and the Security
Documents.

“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.

“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, operations, prospects or condition, financial or otherwise, of the
Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower
to perform any of its obligations under this Agreement and the other Loan
Documents or (c) the validity or enforceability of this Agreement and the other
Loan Documents or of the rights of or benefits available to the Lenders
hereunder and thereunder.

“Material Indebtedness” means Indebtedness (other than the Loans), or
obligations in respect of one or more Swap Agreements, of any one or more of the
Borrower and its Subsidiaries in an aggregate principal amount exceeding
$25,000,000. For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of the Borrower or any Subsidiary in respect of
(a) any Swap Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that the Borrower or such Subsidiary would be
required to pay if such Swap Agreement were terminated at such time and (b) any
Repo Transactions thereof at any time shall be the Aggregate Deficit Amount for
such Repo Transactions at such time.

“Maturity Date” means the Commitment Termination Date or, if the Term-Out Option
shall have exercised and become effective, the Term-Out Maturity Date.

“Moody’s” means Moody’s Investors Service, Inc.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.

“NASD” means the National Association of Securities Dealers, Inc., or any other
self-regulatory organization that succeeds to the functions thereof.

“Net Capital Rule” means Rule 15c3-1 of the General Rules and Regulations as
promulgated by the SEC under the Exchange Act (17 C.F.R. §240.15c3-1), as such
Rule may be amended from time to time, or any rule or regulation of the SEC
which replaces Rule 15c3-1.

 

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“NYSE” means the New York Stock Exchange, Inc.

“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made under this Agreement or any other Loan Document from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.

“Participant” has the meaning set forth in Section 9.04.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

“Permitted Encumbrances” means:

(a) Liens imposed by law for taxes that are not yet due or are being contested
in compliance with Section 5.04;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 30 days or are being
contested in compliance with Section 5.04;

(c) pledges and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other social security
laws or regulations;

(d) deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;

(e) judgment liens in respect of judgments that do not constitute an Event of
Default under clause (k) of Article VII; and

(f) easements, zoning restrictions, rights-of-way and similar encumbrances on
real property imposed by law or arising in the ordinary course of business that
do not secure any monetary obligations and do not materially detract from the
value of the affected property or interfere with the ordinary conduct of
business of the Borrower;

provided that the term “Permitted Encumbrances” shall not include any Lien
securing Indebtedness.

“Permitted Holders” means Eric F. Billings and any Permitted Transferee thereof.

“Permitted Transferee” means, with respect to any individual, (a) such
individual’s spouse, parents, immediate family members, descendants, heirs,
executors, administrators, testamentary trustees, legatees or beneficiaries and
(b) a trust, the beneficiaries of which, or a corporation or partnership, the
stockholders or partners of which, are such individual and/or his or her spouse,
parents, immediate family members and/or descendants.

 

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“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the IRC or
Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Pre-Merger FBR” means Friedman, Billings, Ramsey Group, Inc., a Virginia
corporation (as constituted prior to the merger with FBR Asset).

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMCB as its prime rate in effect at its principal office in
New York City; each change in the Prime Rate shall be effective from and
including the date such change is publicly announced as being effective.

“Qualifying Long-Term Indebtedness” means, at any time, unsecured Indebtedness
of the Borrower with a remaining term of greater than one year to the extent the
same should be set forth on a balance sheet of the Borrower (excluding items
which appear solely in the footnotes thereto) in accordance with GAAP; provided
that all such Indebtedness shall be subordinated in right of payment to the
payment of all principal, interest and other amounts payable under this
Agreement and the other Loan Documents on terms not less favorable to the
Lenders than those set forth in Exhibit E.

“Register” has the meaning set forth in Section 9.04.

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.

“Repo Transaction” means any repurchase agreement, reverse repurchase agreement,
sale buyback or buy sellback agreement or securities lending and borrowing
agreement.

“Required Lenders” means, at any time, Lenders having Credit Exposures and
unused Commitments representing more than 50% of the sum of the total Credit
Exposures and unused Commitments at such time.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interests in the
Borrower or any Subsidiary, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of
any such Equity Interests in the Borrower or any option, warrant or other right
to acquire any such Equity Interests in the Borrower.

 

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“SEC” means the Securities and Exchange Commission, or any regulatory body that
succeeds to the functions thereof.

“Security Agreement” means a Security Agreement substantially in the form of
Exhibit D between the Borrower and the Administrative Agent.

“Security Documents” means, collectively, the Security Agreement, any security
or similar agreement entered into pursuant to Section 5.09 in favor of the
Administrative Agent, all Uniform Commercial Code financing statements required
by the terms of any such agreement to be filed with respect to the security
interests created pursuant thereto, and any subordination or similar agreement
entered into pursuant to Section 6.01 in favor of the Administrative Agent or
the Lenders.

“SIPA” means the Securities Investor Protection Act of 1970, as amended from
time to time.

“SIPC” means the Securities Investor Protection Corporation established pursuant
to SIPA or any other corporation that succeeds to the functions thereof.

“S&P” means Standard & Poor’s Ratings Services.

“Special Purpose Subsidiaries” means (a) Georgetown Funding Company, LLC,
(b) Arlington Funding Company, LLC and (c) any other special purpose vehicle
sponsored by the Borrower or a wholly-owned, direct or indirect Subsidiary of
the Borrower for the purpose of financing solely mortgage loans, receivables of
a type commonly securitized, mortgage-backed securities and/or other
asset-backed securities (but only if the accounts of such vehicle would be
consolidated with those of the Borrower in the Borrower’s consolidated financial
statements), provided that, prior to the formation of any such vehicle under
this clause (c), the Borrower shall notify the Administrative Agent thereof.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.

“Subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or

 

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more than 50% of the ordinary voting power or, in the case of a partnership,
more than 50% of the general partnership interests are, as of such date, owned,
controlled or held, or (b) that is, as of such date, otherwise Controlled, by
the parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent. Unless otherwise specified, any reference to a
“Subsidiary” shall be a reference to a Subsidiary of the Borrower.
Notwithstanding anything herein to the contrary, solely for purposes of Sections
3.12 and 6.06, “Subsidiary” shall not include any Special Purpose Subsidiary.

“Subordinated Indebtedness” of any Person means any Indebtedness of such Person
that by its terms (or the terms of the applicable subordination agreement) is
subordinated in right of payment to any other Indebtedness or other obligations
of such Person.

“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement involving, or settled
by reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or the
Subsidiaries shall be a Swap Agreement.

“Tangible Net Worth” means, for the Borrower (determined on an unconsolidated
basis in accordance with GAAP), the sum of (a) shareholders’ equity of the
Borrower minus (b) goodwill (including goodwill recorded as a result of the
merger of Pre-Merger FRB and FBR Asset).

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

“Term-Out Maturity Date” means October 17, 2008.

“Term-Out Option” means the option of the Borrower to extend the maturity of the
Loans pursuant to Section 2.01(b).

“Transactions” means the execution, delivery and performance by the Borrower of
this Agreement and the other Loan Documents, the borrowing of Loans and the use
of the proceeds thereof.

“TRS Holdings” means FBR TRS Holdings, Inc., a Virginia corporation.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

“U.S. Broker-Dealer Subsidiary” means any Subsidiary which is registered as a
broker-dealer with the SEC.

 

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“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.02. Classification of Loans and Borrowings. For purposes of this
Agreement, Loans or Borrowings may be classified and referred to by Type (e.g.,
a “Eurodollar Loan” or a “Eurodollar Borrowing”, respectively).

SECTION 1.03. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”.
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) 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.

SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Borrower notifies the Administrative Agent that the Borrower requests an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

ARTICLE II

THE CREDITS

SECTION 2.01. Commitments; Term-Out Option. (a) Subject to the terms and
conditions set forth herein, each Lender agrees to make Loans to the Borrower
from time to time during the Availability Period in an aggregate principal
amount that will not result in (i) such Lender’s Credit Exposure exceeding such
Lender’s Commitment or (ii) the total Credit Exposures exceeding the total
Commitments. Within the foregoing limits and subject to the terms and conditions
set forth herein, the Borrower may borrow, prepay and reborrow Loans.

 

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(b) The Borrower may, by notice to the Administrative Agent (which shall
promptly notify the Lenders) not less than 30 days prior to the Commitment
Termination Date, extend the Maturity Date for all Loans outstanding at the
opening of business on the Commitment Termination Date to the Term-Out Maturity
Date; provided that such extension shall not be effective unless (i) no Default
shall have occurred and be continuing on each of the date of the notice
requesting such extension and on the Commitment Termination Date; (ii) the
representations and warranties of the Borrower set forth in this Agreement shall
be true and complete on and as of the date of such notice and the Commitment
Termination Date with the same force and effect as if made on and as of each
such date (or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date); and (iii) the
Borrower shall have furnished to the Administrative Agent a certificate of a
Financial Officer dated as of the Commitment Termination Date confirming
compliance with the conditions set forth in clauses (i) and (ii) above.

SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments of the Lenders are several and no
Lender shall be responsible for any other Lender’s failure to make Loans as
required.

(b) Subject to Section 2.11, each Borrowing shall be comprised entirely of ABR
Loans or Eurodollar Loans as the Borrower may request in accordance herewith.
Each Lender at its option may make any Eurodollar Loan by causing any domestic
or foreign branch or Affiliate of such Lender to make such Loan; provided that
any exercise of such option shall not affect the obligation of the Borrower to
repay such Loan in accordance with the terms of this Agreement.

(c) At the commencement of each Interest Period for any Eurodollar Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$1,000,000 and not less than $10,000,000. At the time that each ABR Borrowing is
made, such Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 and not less than $10,000,000; provided that an ABR
Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the total Commitments. Borrowings of more than one Type may be
outstanding at the same time; provided that there shall not at any time be more
than a total of five Eurodollar Borrowings outstanding.

(d) Notwithstanding any other provision of this Agreement, the Borrower shall
not be entitled to request, or to elect to convert or continue, any Borrowing if
the Interest Period requested with respect thereto would end after the Maturity
Date.

SECTION 2.03. Requests for Borrowings. To request a Borrowing, the Borrower
shall notify the Administrative Agent of such request by telephone (a) in the
case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time,
three Business Days before the date of the proposed Borrowing or (b) in the case
of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the date
of the proposed Borrowing. Each such telephonic Borrowing

 

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Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.02:

(i) the aggregate amount of the requested Borrowing;

(ii) the date of such Borrowing, which shall be a Business Day;

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;

(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”; and

(v) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.04.

If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month’s duration. Promptly following
receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender’s Loan to be made as part of the requested Borrowing.

SECTION 2.04. Funding of Borrowings. (a) Each Lender shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 5:00 p.m., New York City time, to the account of
the Administrative Agent most recently designated by it for such purpose by
notice to the Lenders. The Administrative Agent will make such Loans available
to the Borrower by promptly crediting the amounts so received, in like funds, to
an account of the Borrower maintained with the Administrative Agent in
New York City and designated by the Borrower in the applicable Borrowing
Request.

(b) Unless the Administrative Agent shall have received notice from a Lender
prior to the proposed date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender’s share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available
on such date in accordance with paragraph (a) of this Section and may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable
Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to
but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrower, the interest rate
applicable to ABR Loans. If such Lender pays such amount to the Administrative
Agent, then such amount shall constitute such Lender’s Loan included in such
Borrowing.

 

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SECTION 2.05. Interest Elections. (a) Each Borrowing initially shall be of the
Type specified in the applicable Borrowing Request and, in the case of a
Eurodollar Borrowing, shall have an initial Interest Period as specified (or
deemed specified) in such Borrowing Request. Thereafter, the Borrower may elect
to convert such Borrowing to a different Type or to continue such Borrowing and,
in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all
as provided in this Section. The Borrower may elect different options with
respect to different portions of the affected Borrowing, in which case each such
portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing.

(b) To make an election pursuant to this Section, the Borrower shall notify the
Administrative Agent of such election by telephone by the time that a Borrowing
Request would be required under Section 2.03 if the Borrower were requesting a
Borrowing of the Type resulting from such election to be made on the effective
date of such election. Each such telephonic Interest Election Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Interest Election Request in a form approved
by the Administrative Agent and signed by the Borrower.

(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii) and (iv) below shall
be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
to be applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender’s portion of each resulting Borrowing.

 

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(e) If the Borrower fails to deliver a timely Interest Election Request with
respect to a Eurodollar Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein, at
the end of such Interest Period such Borrowing shall be converted to an ABR
Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing and the Administrative Agent, at the request of
the Required Lenders, so notifies the Borrower, then, so long as an Event of
Default is continuing (i) no outstanding Borrowing may be converted to or
continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.

SECTION 2.06. Termination, Reduction and Increase of Commitments. (a) Unless
previously terminated, the Commitments shall terminate on the Commitment
Termination Date.

(b) The Borrower may at any time terminate, or from time to time reduce, the
Commitments; provided that (i) each reduction of the Commitments shall be in an
amount that is an integral multiple of $5,000,000 and not less than $25,000,000
and (ii) the Borrower shall not terminate or reduce the Commitments if, after
giving effect to any concurrent prepayment of the Loans in accordance with
Section 2.08, the total Credit Exposures would exceed the total Commitments. The
Borrower shall notify the Administrative Agent of any election to terminate or
reduce the Commitments under this paragraph at least three Business Days prior
to the effective date of such termination or reduction, specifying such election
and the effective date thereof. Promptly following receipt of any notice, the
Administrative Agent shall advise the Lenders of the contents thereof. Each such
notice delivered by the Borrower shall be irrevocable; provided that a notice of
termination of the Commitments delivered by the Borrower may state that such
notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments
shall be permanent. Each reduction of the Commitments shall be made ratably
among the Lenders in accordance with their respective Commitments.

(c) The Borrower may, at any time by notice to the Administrative Agent, propose
an increase in the total Commitments hereunder (each such proposed increase
being a “Commitment Increase”) either by having a Lender increase its Commitment
then in effect (each an “Increasing Lender”) or by adding as a Lender with a new
Commitment hereunder a Person which is not then a Lender (each an
“Assuming Lender”) in each case with the approval of the Administrative Agent
(not to be unreasonably withheld), which notice shall specify the name of each
Increasing Lender and/or Assuming Lender, as applicable, the amount of the
Commitment Increase and the portion thereof being assumed by each such
Increasing Lender or Assuming Lender, and the date on which such Commitment
Increase is to be effective (the “Commitment Increase Date”) (which shall be a
Business Day at least three Business Days after delivery of such notice and 30
days prior to the Commitment Termination Date); provided that:

(i) the minimum amount of the increase of the Commitment of any Increasing
Lender, and the minimum amount of the Commitment of any Assuming Lender, as part
of any Commitment Increase shall be in an amount that is an integral multiple of
$5,000,000 and not less than $10,000,000;

 

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(ii) immediately after giving effect to any Commitment Increase, the total
Commitments hereunder shall not exceed $300,000,000;

(iii) no Default shall have occurred and be continuing on the relevant
Commitment Increase Date or shall result from any Commitment Increase; and

(iv) the representations and warranties of the Borrower set forth in this
Agreement and the other Loan Documents shall be true and correct on and as of
the relevant Commitment Increase Date as if made on and as of such date (or, if
any such representation or warranty is expressly stated to have been made as of
a specific date, as of such specific date).

Each Commitment Increase (and the increase of the Commitment of each Increasing
Lender and/or the new Commitment of each Assuming Lender, as applicable,
resulting therefrom) shall become effective as of the relevant Commitment
Increase Date upon receipt by the Administrative Agent, on or prior to
9:00 a.m., New York City time, on such Commitment Increase Date, of (A) a
certificate of a duly authorized officer of the Borrower stating that the
conditions with respect to such Commitment Increase under this paragraph
(c) have been satisfied and (B) an agreement, in form and substance satisfactory
to the Borrower and the Administrative Agent, pursuant to which, effective as of
such Commitment Increase Date, the Commitment of each such Increasing Lender
shall be increased or each such Assuming Lender, as applicable, shall undertake
a Commitment, duly executed by such Increasing Lender or Assuming Lender, as the
case may be, and the Borrower and acknowledged by the Administrative Agent. Upon
the Administrative Agent’s receipt of a fully executed agreement from each
Increasing Lender and/or Assuming Lender referred to in clause (B) above,
together with the certificate referred to in clause (A) above, the
Administrative Agent shall record the information contained in each such
agreement in the Register and give prompt notice of the relevant Commitment
Increase to the Borrower and the Lenders (including, if applicable, each
Assuming Lender). On each Commitment Increase Date the Borrower shall
simultaneously (i) prepay in full the outstanding Loans (if any) held by the
Lenders immediately prior to giving effect to the relevant Commitment Increase,
(ii) if the Borrower shall have so requested in accordance with this Agreement,
borrow new Loans from all Lenders (including, if applicable, any Assuming
Lender) such that, after giving effect thereto, the Loans are held ratably by
the Lenders in accordance with their respective Commitments (after giving effect
to such Commitment Increase) and (iii) pay to the Lenders the amounts, if any,
payable under Section 2.13.

SECTION 2.07. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender the then unpaid principal amount of each Loan on the Maturity Date.

(b) Each Lender shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness of the Borrower to such Lender resulting
from each Loan made by such Lender, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.

(c) The Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Type thereof and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Administrative Agent hereunder
for the account of the Lenders and each Lender’s share thereof.

 

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(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c)
of this Section shall be prima facie evidence of the existence and amounts of
the obligations recorded therein; provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.

(e) Any Lender may request that Loans made by it be evidenced by a promissory
note. In such event, the Borrower shall prepare, execute and deliver to such
Lender a promissory note payable to the order of such Lender (or, if requested
by such Lender, to such Lender and its registered assigns) and in a form
approved by the Administrative Agent. Thereafter, the Loans evidenced by such
promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more promissory
notes in such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).

SECTION 2.08. Prepayment of Loans. (a) The Borrower shall have the right at any
time and from time to time to prepay any Borrowing in whole or in part, subject
to prior notice in accordance with paragraph (b) of this Section.

(b) The Borrower shall notify the Administrative Agent by telephone (confirmed
by telecopy) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three
Business Days before the date of prepayment or (ii) in the case of prepayment of
an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business
Day before the date of prepayment. Each such notice shall be irrevocable and
shall specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid; provided that, if a notice of prepayment is given
in connection with a conditional notice of termination of the Commitments as
contemplated by Section 2.06, then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.06. Promptly
following receipt of any such notice relating to a Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof. Each partial prepayment
of any Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.10.

SECTION 2.09. Fees. (a) The Borrower agrees to pay to the Administrative Agent
for the account of each Lender a commitment fee, which shall accrue at a rate of
0.20% per annum on the average daily unused amount of the Commitment of such
Lender during the period from and including the Effective Date to but excluding
the date on which such Commitment terminates. Accrued commitment fees shall be
payable in arrears on the last day of January, April, July and October of each
year and on the date on which the Commitments terminate, commencing on the first
such date to occur after the date hereof. All commitment fees shall be computed
on the basis of a year of 360 days and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).

 

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(b) The Borrower agrees to pay to the Administrative Agent, for its own account,
an administration fee in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.

(c) All fees payable hereunder shall be paid on the dates due, in immediately
available funds, to the Administrative Agent for distribution, in the case of
commitment fees, to the Lenders. Fees paid shall not be refundable under any
circumstances.

SECTION 2.10. Interest. (a) The Loans comprising each ABR Borrowing shall bear
interest at the Alternate Base Rate plus the Applicable Margin.

(b) The Loans comprising each Eurodollar Borrowing shall bear interest, in the
case of a Eurodollar Loan, at the Adjusted LIBO Rate for the Interest Period in
effect for such Borrowing plus the Applicable Margin.

(c) Notwithstanding the foregoing, if any principal of or interest on any Loan
or any fee or other amount payable by the Borrower hereunder is not paid when
due, whether at stated maturity, upon acceleration or otherwise, such overdue
amount shall bear interest, after as well as before judgment, at a rate per
annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.

(d) Accrued interest on each Loan shall be payable in arrears on each Interest
Payment Date for such Loan, upon the termination of the Commitments and (if the
Term-Out Option shall be exercised) upon the Maturity Date; provided that
(i) interest accrued pursuant to paragraph (c) of this Section shall be payable
on demand, (ii) in the event of any repayment or prepayment of any Loan (other
than a prepayment of an ABR Loan prior to the end of the Availability Period),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment and (iii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion.

(e) All interest hereunder shall be computed on the basis of a year of 360 days,
except that interest computed by reference to the Alternate Base Rate at times
when the Alternate Base Rate is based on the Prime Rate shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and in each case shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate
or LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.

SECTION 2.11. Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such
Interest Period; or

 

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(b) the Administrative Agent is advised by the Required Lenders that the
Adjusted LIBO Rate for such Interest Period will not adequately and fairly
reflect the cost to such Lenders of making or maintaining their Loans included
in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.

SECTION 2.12. Increased Costs. (a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate); or

(ii) impose on any Lender or the London interbank market any other condition
affecting this Agreement or Eurodollar Loans made by such Lender;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender hereunder (whether of principal, interest or
otherwise), then the Borrower will pay to such Lender such additional amount or
amounts as will compensate such Lender for such additional costs incurred or
reduction suffered.

(b) If any Lender determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such
Lender’s capital or on the capital of such Lender’s holding company, if any, as
a consequence of this Agreement or the Loans made by such Lender to a level
below that which such Lender or such Lender’s holding company could have
achieved but for such Change in Law (taking into consideration such Lender’s
policies and the policies of such Lender’s holding company with respect to
capital adequacy), then from time to time the Borrower will pay to such Lender
such additional amount or amounts as will compensate such Lender or such
Lender’s holding company for any such reduction suffered.

(c) A certificate of a Lender setting forth the amount or amounts necessary to
compensate such Lender or its holding company, as the case may be, as specified
in paragraph (a) or (b) of this Section shall be delivered to the Borrower and
shall be conclusive absent manifest error. The Borrower shall pay such Lender
the amount shown as due on any such certificate within 10 days after receipt
thereof.

(d) Failure or delay on the part of any Lender to demand compensation pursuant
to this Section shall not constitute a waiver of such Lender’s right to demand
such compensation; provided that the Borrower shall not be required to
compensate a Lender pursuant to this Section

 

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for any increased costs or reductions incurred more than 270 days prior to the
date that such Lender notifies the Borrower of the Change in Law giving rise to
such increased costs or reductions and of such Lender’s intention to claim
compensation therefor; provided further that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 270-day period
referred to above shall be extended to include the period of retroactive effect
thereof.

SECTION 2.13. Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default),
(b) the conversion of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto, (c) the failure to borrow, convert, continue
or prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under
Section 2.08(b) and is revoked in accordance therewith) or (d) the assignment of
any Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Borrower pursuant to Section 2.16, then,
in any such event, the Borrower shall compensate each Lender for the loss, cost
and expense attributable to such event. In the case of a Eurodollar Loan, such
loss, cost or expense to any Lender shall be deemed to include an amount
determined by such Lender to be the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would
bid were it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the eurodollar market. A
certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

SECTION 2.14. Taxes. (a) Any and all payments by or on account of any obligation
of the Borrower hereunder or under any other Loan Document shall be made free
and clear of and without deduction for any Indemnified Taxes or Other Taxes;
provided that if the Borrower shall be required to deduct any Indemnified Taxes
or Other Taxes from such payments, then (i) the sum payable shall be increased
as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent or the Lenders (as the case may be) shall receive an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions and (iii) the Borrower shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.

(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

(c) The Borrower shall indemnify the Administrative Agent and each Lender,
within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender
(as the case may be) on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes
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this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender, or by the Administrative Agent
on its own behalf or on behalf of a Lender, shall be conclusive absent manifest
error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes
by the Borrower to a Governmental Authority, the Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.

(e) Any Foreign Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which the Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate.

(f) If the Administrative Agent or a Lender determines, in its sole discretion,
that it has received a refund of any Taxes or Other Taxes as to which it has
been indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts pursuant to this Section, it shall pay over such refund to
the Borrower (but only to the extent of indemnity payments made, or additional
amounts paid, by the Borrower under this Section with respect to the Taxes or
Other Taxes giving rise to such refund), net of all out-of-pocket expenses of
the Administrative Agent or such Lender and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund); provided that the Borrower, upon the request of the Administrative
Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent or such Lender in the event the
Administrative Agent or such Lender is required to repay such refund to such
Governmental Authority. This Section shall not be construed to require the
Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the
Borrower or any other Person.

SECTION 2.15. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a) The Borrower shall make each payment required to be made by it hereunder
(whether of principal, interest, fees or other amounts payable under
Section 2.12, 2.13 or 2.14 or otherwise) or under any other Loan Document prior
to 12:00 noon, New York City time, on the date when due, in immediately
available funds, without set-off or counterclaim. Any amounts received after
such time on any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the
Administrative Agent at its offices to an account designated by the
Administrative Agent for such purposes, except that payments pursuant to
Sections 2.12, 2.13, 2.14 and 9.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on

 

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a day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder and under the other Loan Document shall be made in dollars.

(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, interest and fees
then due hereunder, such funds shall be applied (i) first, towards payment of
interest and fees then due hereunder, ratably among the parties entitled thereto
in accordance with the amounts of interest and fees then due to such parties,
and (ii) second, towards payment of principal then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal then
due to such parties.

(c) If any Lender shall, by exercising any right of set-off or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of
its Loans resulting in such Lender receiving payment of a greater proportion of
the aggregate amount of its Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
of other Lenders to the extent necessary so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the aggregate
amount of principal of and accrued interest on their respective Loans; provided
that (i) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded
and the purchase price restored to the extent of such recovery, without
interest, and (ii) the provisions of this paragraph shall not be construed to
apply to any payment made by the Borrower pursuant to and in accordance with the
express terms of this Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Loans to any assignee or participant, other than to the Borrower or any
Subsidiary or Affiliate thereof (as to which the provisions of this paragraph
shall apply). The Borrower consents to the foregoing and agrees, to the extent
it may effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.

(d) Unless the Administrative Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Administrative Agent for
the account of the Lenders hereunder that the Borrower will not make such
payment, the Administrative Agent may assume that the Borrower has made such
payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders the amount due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders severally
agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.

(e) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.04(b) or 2.15(d), then the Administrative Agent may, in
its discretion (notwithstanding any contrary provision hereof), apply any
amounts thereafter received by the Administrative Agent for the account of such
Lender to satisfy such Lender’s obligations under such Sections until all such
unsatisfied obligations are fully paid.

 

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SECTION 2.16. Mitigation Obligations; Replacement of Lenders. (a) If any Lender
requests compensation under Section 2.12, or if the Borrower is required to pay
any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.14, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.12 or 2.14, as the case may be, in the future and
(ii) would not subject such Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to
pay all reasonable costs and expenses incurred by any Lender in connection with
any such designation or assignment.

(b) If any Lender requests compensation under Section 2.12, or if the Borrower
is required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.14, or if any
Lender defaults in its obligation to fund Loans hereunder, then the Borrower
may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
shall have received the prior written consent of the Administrative Agent, which
consent shall not unreasonably be withheld, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans, accrued
interest thereon, accrued fees and all other amounts payable to it hereunder,
from the assignee (to the extent of such outstanding principal and accrued
interest and fees) or the Borrower (in the case of all other amounts) and
(iii) in the case of any such assignment resulting from a claim for compensation
under Section 2.12 or payments required to be made pursuant to Section 2.14,
such assignment will result in a reduction in such compensation or payments. A
Lender shall not be required to make any such assignment and delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and delegation
cease to apply.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders that:

SECTION 3.01. Organization; Powers. Each of the Borrower and its Subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority to carry
on its business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.

 

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SECTION 3.02. Authorization; Enforceability. The Transactions are within the
Borrower’s corporate powers and have been duly authorized by all necessary
corporate and, if required, stockholder action. Each of this Agreement and the
other Loan Documents has been duly executed and delivered by the Borrower and
constitutes a legal, valid and binding obligation of the Borrower, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority, except (i) such as have been obtained or
made and are in full force and effect and (ii) filings and recordings in respect
of the Liens created pursuant to the Security Documents, (b) will not violate
any applicable law or regulation or the charter, by-laws or other organizational
documents of the Borrower or any of its Subsidiaries or any order of any
Governmental Authority, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or its assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any of its Subsidiaries, and (d) except
for the Liens created pursuant to the Security Documents, will not result in the
creation or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.

SECTION 3.04. Financial Condition; No Material Adverse Change.

(a) The Borrower has heretofore furnished to the Lenders (i) the consolidated
balance sheet and statements of operations, changes in shareholders’ equity and
cash flows of the Borrower as of and for the fiscal year ended
December 31, 2005, reported on by PricewaterhouseCoopers LLP, (ii) the
consolidated balance sheet and statements of operations, changes in
shareholders’ equity and cash flows of the Borrower as of and for the fiscal
quarter ended June 30, 2006, certified by the chief financial officer of the
Borrower and (iii) the consolidating balance sheet and statements of operations,
changes in shareholders’ equity and cash flows of each of the Borrower and its
Subsidiaries as of and for the fiscal year ended December 31, 2005 and the
fiscal quarter ended June 30, 2006, in each case certified by the chief
financial officer of the Borrower. Such financial statements as at
December 31, 2005 and June 30, 2006 present fairly (in the case of said
consolidated statements), in all material respects, the consolidated financial
position and consolidated results of operations and cash flows of the Borrower
and its consolidated Subsidiaries and (in the case of said consolidating
financial statements) the respective unconsolidated financial position of each
of the Borrower and its Subsidiaries and the unconsolidated results of their
respective operations, as of such dates and for such periods in accordance with
GAAP, subject (in the case of each financial statement as at June 30, 2006 and
each consolidating financial statement referred to above) to year-end audit
adjustments and the absence of footnotes. Except as referred to or reflected or
provided in such balance sheets (or the related footnotes) as at
December 31, 2005, in the Borrower’s report on Form 10-K for the fiscal year
ended December 31, 2005 or in the Borrower’s report on Form 10-Q for the fiscal
quarter ended June 30, 2006, none of the Borrower nor any of its Subsidiaries
has on the Effective Date any material contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments that are required to be disclosed by
GAAP or in such reports on Form 10-K or 10-Q.

 

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(b) Since December 31, 2005, there has been no material adverse change in the
business, assets, operations, prospects or condition, financial or otherwise, of
the Borrower and its Subsidiaries, taken as a whole.

SECTION 3.05. Properties. (a) Each of the Borrower and its Subsidiaries has good
title to, or valid leasehold interests in, all its real and personal property
material to its business, except for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes. The Liens granted by the
Security Documents constitute valid perfected first priority Liens on the
properties and assets covered by the Security Documents, subject to no prior or
equal Lien except those Liens permitted by Section 6.02.

(b) Each of the Borrower and its Subsidiaries owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by the Borrower and its
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions,
suits or proceedings by or before any arbitrator or Governmental Authority
pending against or, to the knowledge of the Borrower, threatened against or
affecting the Borrower or any of its Subsidiaries (i) as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (other than the Disclosed Matters) or
(ii) that involve this Agreement or the Transactions.

(b) Except for the Disclosed Matters and except with respect to any other
matters that, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect, neither the Borrower nor any of its
Subsidiaries (i) has failed to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability,
(iii) has received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.

(c) Since the date of this Agreement, there has been no change in the status of
the Disclosed Matters that, individually or in the aggregate, has resulted in,
or materially increased the likelihood of, a Material Adverse Effect.

SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and its
Subsidiaries is in compliance with all laws, regulations and orders of any
Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.

SECTION 3.08. Investment Company Status. Neither the Borrower nor any of its
Subsidiaries is required to register as an “investment company” as defined in
the Investment Company Act of 1940.

 

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SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has timely filed
or caused to be filed all Tax returns and reports required to have been filed
and has paid or caused to be paid all Taxes required to have been paid by it,
except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable, has
set aside on its books adequate reserves or (b) to the extent that the failure
to do so could not reasonably be expected to result in a Material Adverse
Effect.

SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $25,000,000 the fair market value of the assets of such Plan, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $25,000,000 the fair
market value of the assets of all such underfunded Plans.

SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other written information furnished by or on behalf of the Borrower to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement and the other Loan Documents or delivered hereunder or thereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.

SECTION 3.12. Subsidiaries. Set forth in Schedule 3.12 is a complete and correct
list of all of the Subsidiaries of the Borrower as of the date hereof, together
with, for each such Subsidiary, (a) the jurisdiction of organization of such
Subsidiary, (b) each Person holding Equity Interests of such Subsidiary and
(c) the nature of the Equity Interests held by each such Person and the
percentage of ownership of such Subsidiary represented by such Equity Interests.
Except as disclosed in Schedule 3.12, as of the date hereof, (i) each of the
Borrower and its Subsidiaries owns, free and clear of Liens (other than Liens
created pursuant to the Security Documents), and has the unencumbered right to
vote, all outstanding Equity Interests in each Person shown to be held by it in
Schedule 3.12, (ii) all of the issued and outstanding capital stock of each such
Person organized as a corporation is validly issued, fully paid and
nonassessable and (iii) there are no outstanding subscriptions, options,
warrants, commitments, preemptive rights or agreements of any kind (including
any shareholders’ or voting trust agreements) for the issuance, sale,
registration or voting of, or securities convertible into, any additional shares
of capital stock of any class of, or partnership or other ownership interests of
any type in, any Subsidiary.

 

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SECTION 3.13. REIT Qualification. The Borrower has elected to be taxed as a
“real estate investment trust” under the IRC. The Borrower has qualified as a
“real estate investment trust” under the IRC for its taxable year ended
December 31, 2004. The Borrower’s present and contemplated operations, assets
and income will enable the Borrower to meet the requirements for qualification
and taxation as a “real estate investment trust” under the IRC.

SECTION 3.14. Regulatory Matters Pertaining to FRB & Co. FBR & Co. is a
registered broker-dealer in each jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so register
except to the extent that failure to so register does not and is not reasonably
likely to have a Material Adverse Effect. FBR & Co. is a member in good standing
of the NASD and is duly registered as a broker-dealer with the SEC. The
Examining Authority for FBR & Co. is the NASD.

ARTICLE IV

CONDITIONS

SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans
hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 9.02):

(a) The Administrative Agent (or its counsel) shall have received from each
party hereto either (i) a counterpart of this Agreement signed on behalf of such
party or (ii) written evidence satisfactory to the Administrative Agent (which
may include telecopy transmission of a signed signature page of this Agreement)
that such party has signed a counterpart of this Agreement.

(b) The Administrative Agent shall have received a favorable written opinion
(addressed to the Administrative Agent and the Lenders and dated the Effective
Date) of Hunton & Williams LLP, counsel for the Borrower, substantially in the
form of Exhibit B, and covering such other matters relating to the Borrower,
this Agreement or the Transactions as the Required Lenders shall reasonably
request (and the Borrower hereby requests such counsel to deliver such opinion).

(c) The Administrative Agent shall have received a favorable written opinion
(addressed to the Administrative Agent and the Lenders and dated the Effective
Date) of Milbank, Tweed, Hadley & McCloy LLP, special New York counsel to JPMCB,
substantially in the form of Exhibit C (and JPMCB hereby instructs such counsel
to deliver such opinion to the Lenders).

(d) The Administrative Agent shall have received such documents and certificates
as the Administrative Agent or its counsel may reasonably request relating to
the organization, existence and good standing of the Borrower, the authorization
of the Transactions and any other legal matters relating to the Borrower, this
Agreement or the Transactions, all in form and substance satisfactory to the
Administrative Agent and its counsel.

 

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(e) The Administrative Agent shall have received a certificate, dated the
Effective Date and signed by the President, a Vice President or a Financial
Officer of the Borrower, confirming compliance with the conditions set forth in
clauses (a) and (b) of Section 4.02.

(f) The Administrative Agent shall have received all fees and other amounts due
and payable on or prior to the Effective Date, including, to the extent
invoiced, reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by the Borrower hereunder.

(g) The Administrative Agent shall have received evidence that, to the extent
required to be subordinated pursuant to Section 6.01, any Indebtedness owing by
the Borrower and outstanding on the date hereof shall be subordinated to the
payment of the Loans and all obligations under this Agreement and the other Loan
Documents on terms not less favorable to the Lenders than those set forth in
Exhibit E.

(h) The Administrative Agent (or its counsel) shall have received from each
party to the Security Agreement a counterpart of the Security Agreement signed
on behalf of such party, together with (i) certificates, if any, representing
the Pledged Equity (as defined in the Security Agreement) accompanied by undated
stock powers executed in blank and instruments evidencing the Pledged Debt (as
defined in the Security Agreement) indorsed in blank, and (ii) each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by the Security Documents or under law or reasonably requested by the
Administrative Agent to be filed, registered or recorded in order to create in
favor of the Administrative Agent, for the benefit of the Lenders, a perfected
Lien on the property of the Borrower subject to the security interests under the
Security Agreement, subject to no other Liens, which shall have been delivered
to the Administrative Agent in proper form for filing, registration or
recordation. In addition, the Administrative Agent shall have received the
results of recent lien searches in each relevant jurisdiction with respect to
the Borrower, and such searches shall reveal no Liens on any of the assets of
the Borrower of the types covered by the Security Agreement.

(i) The Administrative Agent shall have received evidence that all principal,
interest, fees and other amounts payable under the Credit Agreement dated as of
July 21, 2005, as amended, between the Borrower, the lenders party thereto and
JPMCB, as administrative agent, that are accrued to the Effective Date and/or
unpaid have been paid in full and all commitments of such lenders thereunder
have expired.

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on
October 20, 2006 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).

SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on
the occasion of any Borrowing is subject to the satisfaction of the following
conditions:

(a) the representations and warranties of the Borrower set forth in this
Agreement and in the other Loan Documents shall be true and correct on and as of
the date of such Borrowing (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such specific
date); and

 

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(b) at the time of and immediately after giving effect to such Borrowing, no
Default shall have occurred and be continuing.

Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrower on the date thereof as to the matters specified in clauses (a)
and (b) of this Section.

ARTICLE V

AFFIRMATIVE COVENANTS

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full, the Borrower covenants and agrees with the Lenders that:

SECTION 5.01. Financial Statements; Other Information. The Borrower will furnish
to the Administrative Agent and each Lender:

(a) within five Business Days of the earlier of (i) the date on which the same
shall have been filed with the SEC and (ii) the date the same are required to be
filed with the SEC (without regard to any extension of the SEC’s filing
requirements), the audited consolidated balance sheet and related statements of
operations, changes in shareholders’ equity and cash flows of the Borrower as of
the end of and for each fiscal year of the Borrower, setting forth in each case
in comparative form the figures for the previous fiscal year, all reported on by
PricewaterhouseCoopers LLP or other independent public accountants of recognized
national standing (without a “going concern” or like qualification or exception
and without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;

(b) within five Business Days of the earlier of (i) the date on which the same
shall have been filed with the SEC and (ii) the date the same are required to be
filed with the SEC (without regard to any extension of the SEC’s filing
requirements), the audited consolidated balance sheet and related statements of
operations, changes in shareholders’ equity and cash flows of each U.S.
Broker-Dealer Subsidiary as of the end of and for each fiscal year of such U.S.
Broker-Dealer Subsidiary, all reported on by PricewaterhouseCoopers LLP or other
independent public accountants of recognized national standing (without a “going
concern” or like qualification or exception and without any qualification or
exception as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial
condition and results of operations of such U.S. Broker-Dealer Subsidiary and
its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;

 

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(c) on or before the date by which the financial statements referred to in
clause (a) of this Section are required to be delivered, the audited
consolidated balance sheet and related statements of operations, changes in
shareholders’ equity and cash flows of FBRCMC as of the end of and for each
fiscal year of FBRCMC, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by PricewaterhouseCoopers
LLP or other independent public accountants of recognized national standing
(without a “going concern” or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect that
such consolidated financial statements present fairly in all material respects
the financial condition and results of operations of FBRCMC and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied;

(d) within five Business Days of the earlier of (i) the date on which the same
shall have been filed with the SEC and (ii) the date the same are required to be
filed with the SEC (without regard to any extension of the SEC’s filing
requirements), the consolidated balance sheet and related statements of
operations, changes in shareholders’ equity and cash flows of the Borrower as of
the end of and for each of the first three fiscal quarters of each fiscal year
of the Borrower and the then elapsed portion of each such fiscal year, setting
forth in each case in comparative form the figures for the corresponding period
or periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by the chief financial officer of the
Borrower as presenting fairly in all material respects the consolidated
financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;

(e) on or before the date by which the financial statements referred to in
clause (d) of this Section are required to be delivered, the consolidated
balance sheet and related statements of operations, changes in shareholders’
equity and cash flows of FBRCMC as of the end of and for each of the first three
fiscal quarters of each fiscal year of FBRCMC and the then elapsed portion of
each such fiscal year, setting forth in each case in comparative form the
figures for the corresponding period or periods of (or, in the case of the
balance sheet, as of the end of) the previous fiscal year, all certified by the
chief financial officer of the Borrower as presenting fairly in all material
respects the consolidated financial condition and results of operations of
FBRCMC and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied, subject to normal year-end audit adjustments and
the absence of footnotes;

(f) on or before the respective dates by which the financial statements
respectively referred to in clauses (a) and (d) of this Section are required to
be delivered, the consolidating balance sheet and related statements of
operations of each of the Borrower and its Subsidiaries as of the end of and for
each of the fiscal quarters of each fiscal year of the Borrower and the then
elapsed portion of each such fiscal year, all certified by the chief financial
officer of the Borrower as presenting fairly in all material respects the
respective individual unconsolidated financial condition and results of
operations of each of the Borrower and its Subsidiaries in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;

 

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(g) concurrently with any delivery of financial statements under clause (a) or
(d) of this Section (but without duplication), a certificate of a Financial
Officer of the Borrower (i) certifying as to whether a Default has occurred and,
if a Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with Sections 6.01, 6.05, 6.10
and 6.11 and (iii) stating whether any change in GAAP or in the application
thereof has occurred since the date of the audited financial statements referred
to in Section 3.04 and, if any such change has occurred, specifying the effect
of such change on the financial statements accompanying such certificate;

(h) within five Business Days after the filing thereof with the SEC or a
national securities exchange, as applicable, the FOCUS Report of FBR & Co. for
each calendar quarter and fiscal year;

(i) promptly after the same become publicly available, copies of all periodic
reports and proxy statements and all other material documents filed by the
Borrower or any Subsidiary with the SEC or the NYSE, any other national
securities, any commodities exchange or any self-regulatory organization, or
distributed by the Borrower to its shareholders generally, as the case may be;
and

(j) promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of the Borrower or any
Subsidiary, or compliance with the terms of this Agreement and the other Loan
Documents, as the Administrative Agent or any Lender may reasonably request.

SECTION 5.02. Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any action, suit or proceeding by or before
any arbitrator or Governmental Authority against or affecting the Borrower or
any Affiliate thereof that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;

(c) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and its Subsidiaries in an aggregate amount exceeding
$25,000,000; and

(d) any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.

 

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SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause
each of its Subsidiaries to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business (including, in the case of any Broker-Dealer Subsidiary, all
registrations, licenses, memberships and other authorizations with respect to
its activities); provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 6.03.

SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of
its Subsidiaries to, pay its obligations, including Tax liabilities, that, if
not paid, could result in a Material Adverse Effect before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) the Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will
cause each of its Subsidiaries to, (a) keep and maintain all property material
to the conduct of its business in good working order and condition, ordinary
wear and tear excepted, and (b) maintain, with financially sound and reputable
insurance companies, insurance in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations.

SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and will
cause each of its Subsidiaries to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities. The Borrower will, and will cause
each of its Subsidiaries to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and
inspect its properties, to examine and make extracts from its books and records,
and to discuss its affairs, finances and condition with its officers and
independent accountants, all at such reasonable times and as often as reasonably
requested.

SECTION 5.07. Compliance with Laws. The Borrower will, and will cause each of
its Subsidiaries to, comply with all laws, rules, regulations (including the Net
Capital Rules) and orders of any Governmental Authority applicable to it or its
property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.08. Use of Proceeds. The proceeds of the Loans will be used only for
general corporate purposes of the Borrower. No part of the proceeds of any Loan
will be used, whether directly or indirectly, for any purpose that entails a
violation of any of the Regulations of the Board, including Regulations T, U and
X.

SECTION 5.09. Further Assurances With Respect to Security Interests. In the
event that after the date hereof the Borrower shall form or acquire any new
directly owned

 

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Subsidiary or any existing directly owned Subsidiary shall issue additional
Equity Interests, the Borrower agrees forthwith to deliver to the Administrative
Agent pursuant to the Security Agreement the certificates evidencing such Equity
Interests, accompanied by undated stock powers executed in blank and to take
such other action as the Administrative Agent shall request to perfect the
security interest created therein pursuant to the Security Agreement. The
Borrower agrees that, upon the incurrence of any Indebtedness of any Subsidiary
owing to the Borrower having a term to maturity of greater than one year, such
Indebtedness shall be evidenced by a promissory note and the Borrower shall
forthwith deliver such note to the Administrative Agent pursuant to the Security
Agreement. Without limiting the foregoing, the Borrower will take such action
from time to time as shall reasonably be requested by the Administrative Agent
to effectuate the purposes and objectives of the Loan Documents.

ARTICLE VI

NEGATIVE COVENANTS

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full, the
Borrower covenants and agrees with the Lenders that:

SECTION 6.01. Indebtedness. The Borrower will not, and will not permit TRS
Holdings to, create, incur, assume or permit to exist any Indebtedness, except:

(a) Indebtedness created hereunder and the other Loan Documents;

(b) Indebtedness existing on the date hereof and set forth in Schedule 6.01;

(c) Indebtedness of the Borrower owing to any Subsidiary; provided that any such
Indebtedness which shall on the date of its incurrence have a term to maturity
of greater than one year shall (i) be subordinated in right of payment to the
payment of all principal, interest and other amounts payable under this
Agreement and the other Loan Documents on terms not less favorable to the
Lenders than those set forth in Exhibit E and (ii) not mature (nor contain any
amortization or prepayment requirements) earlier than six months after the
Term-Out Maturity Date;

(d) (i) Indebtedness of the Borrower in respect of, and any other obligations or
liabilities of the Borrower arising from, Repo Transactions entered into the
ordinary course of business of the Borrower; (ii) Guarantees, entered into in
the ordinary course of business of the Borrower, of Repo Transactions of others
(other than any entity covered under clause (iii) below), provided that the
assets subject to such Repo Transactions so guaranteed by the Borrower shall be
deemed to constitute assets of the Borrower for purposes of, and shall
accordingly be included in, the definition of “Assets for Purposes of Assessing
Liquidity” (but only to the extent provided in clause (i) of such definition);
and (iii) Guarantees, entered into in the ordinary course of business of the
Borrower, of Repo Transactions or other obligations of MHC I, a qualified “real
estate investment trust” under the IRC ( a “Qualified REIT”) and a Subsidiary of
the Borrower, and of any other Subsidiary of the Borrower which is a Qualified
REIT, provided that, so long as any such

 

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Guarantee shall be in effect, all assets of such Subsidiary shall be deemed to
constitute assets of the Borrower for purposes of, and shall accordingly be
included in, the definition of “Assets for Purposes of Assessing Liquidity” (but
only to the extent provided in clause (j) of such definition);

(e) Indebtedness of the Borrower incurred in the ordinary course of its business
to finance the acquisition of Eligible MBS, asset-backed securities, warehouse
advances or Eligible Sub-Prime Loans, in each case, of the type described in
clauses (c), (d), (e) and (f), respectively, of the definition of “Assets for
Purposes of Assessing Liquidity”;

(f) Indebtedness of the Borrower (other than any Guarantee by the Borrower of
the Indebtedness of any other Person) which shall on the date of its incurrence
have a term to maturity of greater than one year; provided that such
Indebtedness shall (i) be subordinated in right of payment to the payment of all
principal, interest and other amounts payable under this Agreement and the other
Loan Documents on terms not less favorable to the Lenders than those set forth
in Exhibit E and (ii) not mature (nor contain any amortization or prepayment
requirements) earlier than six months after the Term-Out Maturity Date;

(g) unsecured Indebtedness of the Borrower (other than (i) any Guarantee by the
Borrower of the Indebtedness of any other Person and (ii) Indebtedness owing to
any Subsidiary) in addition to the Indebtedness permitted under clauses (a)
through (f) of this Section; provided that the aggregate amount of all such
Indebtedness outstanding pursuant to this clause (g) shall not at any time
exceed $100,000,000; and

(h) unsecured Indebtedness of TRS Holdings incurred in the ordinary course of
its business and consistent with its past practices; provided that the aggregate
amount of all such Indebtedness (other than any such Indebtedness owing to the
Borrower) outstanding pursuant to this clause (h) shall not at any time exceed
$5,000,000.

SECTION 6.02. Liens. The Borrower will not, and will not permit TRS Holdings to,
create, incur, assume or permit to exist any Lien on any property or asset now
owned or hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect of any thereof, except:

(a) Liens created pursuant to the Loan Documents;

(b) Permitted Encumbrances;

(c) any Lien on any property of the Borrower or TRS Holdings existing on the
date hereof and set forth in Schedule 6.02; provided that (i) such Lien shall
not apply to any other property of the Borrower or TRS Holdings and (ii) such
Lien shall secure only those obligations which it secures on the date hereof and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;

(d) (i) Liens on any property of the Borrower securing Indebtedness, other
obligations or liabilities permitted under Section 6.01(d) and (ii) Liens on
Eligible MBS, asset-backed securities, warehouse advances or Eligible Sub-Prime
Loans of the Borrower being financed with the Indebtedness permitted under
Section 6.01(e), provided that no

 

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such Lien shall extend to any property of the Borrower other than (as
applicable) the property subject to the relevant Repo Transaction or such
Eligible MBS, asset-backed securities, warehouse advances or Eligible Sub-Prime
Loans; and

(e) Liens on cash or Cash Equivalents of the Borrower securing obligations of
the Borrower in respect of Swap Agreements entered into in the ordinary course
of business and not for speculative purposes.

SECTION 6.03. Mergers, Consolidations, Sale of Assets, etc. The Borrower will
not, and will not permit any Subsidiary to, merge into or consolidate with any
other Person, or permit any other Person to merge into or consolidate with it,
or sell, transfer, lease or otherwise dispose of (in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired), or liquidate or dissolve, except that, if at the
time thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing:

(a) any Person may merge into the Borrower in a transaction in which the
Borrower is the surviving corporation;

(b) any Person may merge into any Subsidiary in a transaction in which the
surviving entity is a Subsidiary;

(c) any Subsidiary (other than TRS Holdings) may sell, transfer, lease or
otherwise dispose of its assets to the Borrower or to another Subsidiary; and

(d) any Subsidiary may liquidate or dissolve if the Borrower determines in good
faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the Lenders.

SECTION 6.04. Restricted Payments. The Borrower will not declare or make, or
agree to pay or make, directly or indirectly, any Restricted Payment, except:

(a) the Borrower may declare and pay dividends with respect to its Equity
Interests payable solely in additional shares of its common stock;

(b) the Borrower may declare and pay cash dividends in such amounts (but not
more than such amounts) and at such times as shall be necessary to meet the
requirements for qualification and taxation as a “real estate investment trust”
under the IRC;

(c) so long as no Default shall have occurred and be continuing or would result
therefrom, the Borrower may declare and pay cash dividends during any calendar
year in an aggregate amount not at any time exceeding the difference (if
positive) between (i) 110% of the Borrower’s “REIT taxable income” (determined
in accordance with the IRC) for the calendar year most recently ended, less
(ii) the aggregate amount of any dividends declared and paid under
Section 6.04(b) during such calendar year; and

(d) so long as no Default shall have occurred and be continuing or would result
therefrom, the Borrower may make Restricted Payments, provided that the
aggregate

 

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amount of such Restricted Payments made pursuant to this clause (d) during the
period commencing on the date hereof and ending on the date of any such
Restricted Payment shall not exceed 5% of the shareholders’ equity of the
Borrower (determined on an unconsolidated basis in accordance with GAAP) as of
the last day of the fiscal quarter most recently ended.

SECTION 6.05. Transactions with Affiliates. The Borrower will not, and will not
permit any of its Subsidiaries to, sell, lease or otherwise transfer any
property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such Subsidiary than could
be obtained on an arm’s-length basis from unrelated third parties,
(b) transactions between or among the Borrower and its wholly-owned Subsidiaries
not involving any other Affiliate and (c) any Restricted Payment permitted by
Section 6.04.

SECTION 6.06. Restrictive Agreements. The Borrower will not, and will not permit
any of its Subsidiaries to, directly or indirectly, enter into, incur or permit
to exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of the Borrower to create, incur or permit to
exist any Lien upon any of its property or assets or (b) the ability of any
Subsidiary to pay dividends or other distributions with respect to any shares of
its capital stock or to make or repay loans or advances to the Borrower or to
Guarantee Indebtedness of the Borrower; provided that the foregoing shall not
apply to (i) restrictions and conditions imposed by law or by the Loan
Documents, (ii) restrictions and conditions existing on the date hereof
identified on Schedule 6.06 (but shall apply to any extension or renewal of, or
any amendment or modification expanding the scope of, any such restriction or
condition), (iii) customary restrictions and conditions contained in agreements
relating to the sale of a Subsidiary pending such sale, provided that such
restrictions and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder and (iv) (in the case of clause (a) above)
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement (other than the Liens created pursuant
to the Security Documents) if such restrictions or conditions apply only to the
property or assets securing such Indebtedness and customary provisions in leases
and other contracts restricting the assignment thereof.

SECTION 6.07. Subordinated Indebtedness. The Borrower will not purchase, redeem,
retire or otherwise acquire for value, or set apart any money for a sinking,
defeasance or other analogous fund for the purchase, redemption, retirement or
other acquisition of, or make any voluntary payment or prepayment of the
principal of or interest on, or any other amount owing in respect of, any
Subordinated Indebtedness, except for regularly scheduled payments, prepayments
or redemptions of principal and interest in respect thereof required pursuant to
the instruments evidencing such Subordinated Indebtedness.

SECTION 6.08. Lines of Business. The Borrower will not, and will not permit any
of its Subsidiaries to, engage to any material extent in any business other than
the businesses of the type conducted by the Borrower and its Subsidiaries on the
date of execution of this Agreement and businesses reasonably related thereto;
provided that nothing in this Section 6.08 shall prevent the Borrower from
acquiring or engaging in, or prevent the Borrower from permitting any of its
Subsidiaries to acquire or engage in, any business or businesses that provide
financial products or financial services, or create financial assets, that are
used in the business of the type conducted by the Borrower and its Subsidiaries
on the date of execution of this Agreement and businesses reasonably related
thereto.

 

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SECTION 6.09. Change in Fiscal Periods. The Borrower will not change its fiscal
quarters and fiscal year from that in effect on the date hereof.

SECTION 6.10. Tangible Net Worth. The Borrower will not at any time permit
Tangible Net Worth to be less than the sum of (a) $1,000,000,000 plus (b) 75% of
the aggregate net proceeds received by the Borrower in respect of any issuance
of Equity Interests by the Borrower after September 30, 2006.

SECTION 6.11. Liquidity. The Borrower will not at any time permit the sum of
(a) shareholders’ equity of the Borrower at such time (calculated on an
unconsolidated basis in accordance with GAAP) plus (b) Qualifying Long-Term
Indebtedness at such time to be less than Assets for Purposes of Assessing
Liquidity at such time.

ARTICLE VII

EVENTS OF DEFAULT

If any of the following events (“Events of Default”) shall occur:

(a) the Borrower shall fail to pay any principal of any Loan when and as the
same shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment thereof or otherwise;

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in clause (a) of this Article)
payable under this Agreement or under any other Loan Document, when and as the
same shall become due and payable, and such failure shall continue unremedied
for a period of three Business Days;

(c) any representation or warranty made or deemed made by or on behalf of the
Borrower in or in connection with this Agreement or any other Loan Document or
any amendment or modification hereof or thereof or waiver hereunder or
thereunder, or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with this Agreement or any other Loan
Document or any amendment or modification hereof or thereof or waiver hereunder
or thereunder, shall prove to have been incorrect in any material respect when
made or deemed made;

(d) the Borrower shall fail to observe or perform any covenant, condition or
agreement contained in Section 5.02, 5.03 (with respect to the Borrower’s
existence) or 5.08 or in Article VI;

(e) the Borrower shall fail to observe or perform any covenant, condition or
agreement contained in this Agreement or any other Loan Document (other than
those specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 30 days after notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender);

 

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(f) the Borrower or any Subsidiary shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material
Indebtedness, when and as the same shall become due and payable, and all grace
periods with respect thereto have expired;

(g) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of any Material Indebtedness or any trustee or agent on its or their behalf to
cause any Material Indebtedness to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled maturity;
provided that this clause (g) shall not apply to secured Indebtedness that
becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Indebtedness;

(h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the Borrower or any Subsidiary or its debts, or of a substantial part
of its assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Subsidiary or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue undismissed for
60 days or an order or decree approving or ordering any of the foregoing shall
be entered;

(i) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding
or file any petition seeking liquidation, reorganization or other relief under
any Federal, state or foreign bankruptcy, insolvency, receivership or similar
law now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in clause (h) of this Article, (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Subsidiary or for a substantial part of its assets,
(iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the benefit
of creditors or (vi) take any action for the purpose of effecting any of the
foregoing;

(j) the Borrower or any Subsidiary shall become unable, admit in writing its
inability or fail generally to pay its debts as they become due;

(k) one or more judgments for the payment of money in an aggregate amount in
excess of $25,000,000 shall be rendered against the Borrower or any Subsidiary
(or any combination thereof) and the same shall remain undischarged for a period
of 30 consecutive days during which execution shall not be effectively stayed,
or any action shall be legally taken by a judgment creditor to attach or levy
upon any assets of the Borrower or any Subsidiary to enforce any such judgment;

 

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(l) an ERISA Event shall have occurred that, in the opinion of the Required
Lenders, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in liability of the Borrower and its
Subsidiaries in an aggregate amount exceeding $25,000,000;

(m) a Change of Control shall occur;

(n) any U.S. Broker-Dealer Subsidiary shall cease to be a member organization of
the NASD or any national securities exchange or shall fail to maintain its
registration as a broker-dealer with the SEC, in either case for a period of
10 days; or SIPC shall apply for a protective decree with respect to any U.S.
Broker-Dealer Subsidiary as provided in the SIPA and such application shall
remain undismissed for a period of five days; or any self-regulatory
organization or Governmental Authority shall revoke the membership therein of
any Broker-Dealer Subsidiary and such membership shall not be reinstated within
10 days of such suspension;

(o) the Borrower shall cease at any time to own directly 100% of the capital
stock of TRS Holdings, or TRS Holdings shall cease to own directly at least 60%
of the capital stock of FBRCMC, or FBRCMC shall cease at any time to own,
directly or indirectly, 100% of capital stock of FBR & Co. Inc.;

(p) the Borrower shall cease at any time to meet the requirements for
qualification and taxation as a “real estate investment trust” under the IRC; or

(q) the Liens created by the Security Documents shall at any time not constitute
a valid and perfected Lien on the property intended to be covered thereby in
favor of the Administrative Agent, free and clear of all other Liens (other than
Liens permitted under Section 6.02), or, except for expiration in accordance
with the express terms thereof, any of the Loan Documents shall for any reason
cease to be in full force and effect or to be valid and binding on the Borrower,
or the validity or enforceability thereof shall be contested by the Borrower;

then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower; and
in case of any event with respect to the Borrower described in clause (h) or (i)
of this Article, the Commitments shall automatically terminate and the principal
of the Loans then outstanding, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.

 

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ARTICLE VIII

THE ADMINISTRATIVE AGENT

Each of the Lenders hereby irrevocably appoints the Administrative Agent as its
agent hereunder and under the other Loan Documents and authorizes the
Administrative Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Administrative Agent by the terms hereof and
thereof, together with such actions and powers as are reasonably incidental
thereto.

The bank serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein and in the other Loan Documents. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated hereby and by the other
Loan Documents that the Administrative Agent is required to exercise in writing
as directed by the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 9.02), and (c) except as expressly set forth herein and in the other
Loan Documents, the Administrative Agent shall not have any duty to disclose,
and shall not be liable for the failure to disclose, any information relating to
the Borrower or any of its Subsidiaries that is communicated to or obtained by
the bank serving as Administrative Agent or any of its Affiliates in any
capacity. The Administrative Agent shall not be liable for any action taken or
not taken by it with the consent or at the request of the Required Lenders (or
such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02) or in the absence of its own gross
negligence or willful misconduct. The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Lender, and the
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement or any other Loan Document, (ii) the contents of
any certificate, report or other document delivered hereunder or thereunder or
in connection herewith or therewith, (iii) the performance or observance of any
of the covenants, agreements or other terms or conditions set forth herein or in
any other Loan Document, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement, any other Loan Document or any other agreement,
instrument or document, or (v) the satisfaction of any condition set forth in
Article IV or elsewhere herein, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document

 

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or other writing believed by it to be genuine and to have been signed or sent by
the proper Person. The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon. The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

The Administrative Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.

Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by
notifying the Lenders and the Borrower. Upon any such resignation, the Required
Lenders shall have the right, with the approval of the Borrower, which approval
shall not be unreasonably withheld, to appoint a successor. If no successor
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Administrative Agent gives
notice of its resignation, then the retiring Administrative Agent may, on behalf
of the Lenders, appoint a successor Administrative Agent which shall be a bank
with an office in New York, New York, or an Affiliate of any such bank. Upon the
acceptance of its appointment as Administrative Agent hereunder by a successor,
such successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Loan Documents. The fees payable by the Borrower
to a successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor.
After the Administrative Agent’s resignation hereunder, the provisions of this
Article and Section 9.03 shall continue in effect for the benefit of such
retiring Administrative Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document, any
related agreement or any document furnished hereunder or thereunder.

Notwithstanding anything herein to the contrary, the Sole Bookrunner and the
Sole Lead Arranger and the Syndication Agent named on the cover page of this
Agreement shall not have any duties or liabilities under this Agreement or any
other Loan Document, except in their capacity, if any, as Lenders.

 

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ARTICLE IX

MISCELLANEOUS

SECTION 9.01. Notices. (a) Except in the case of notices and other
communications expressly permitted to be given by telephone (and subject to
paragraph (b) of this Section), all notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopy, as
follows:

(i) if to the Borrower, to it at Friedman, Billings Ramsey Group, Inc., 1001
Nineteenth Street North, Arlington, Virginia 22209, Attention of Kurt R.
Harrington, Senior Vice President & Chief Financial Officer (Telephone No. (703)
312-9647; Telecopy No. (703) 312-9780);

(ii) if to the Administrative Agent, to JPMorgan Chase Bank, N.A., 1111 Fannin
Street, 10th Floor, Houston, Texas 77002-8069, Attention of Loan and Agency
Services (Telephone No. (713) 750-3560; Telecopy No. (713) 750-2223), with a
copy to JPMorgan Chase Bank, N.A., 277 Park Avenue, New York 10172, Attention of
Thomas H. Mulligan (Telephone No. (212) 622-8620; Telecopy No. (646) 534-1720);
and

(iii) if to any other Lender, to it at its address (or telecopy number) set
forth in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders hereunder may be delivered
or furnished by electronic communications pursuant to procedures approved by the
Administrative Agent; provided that the foregoing shall not apply to notices
pursuant to Article II unless otherwise agreed by the Administrative Agent and
the applicable Lender. The Administrative Agent or the Borrower may, in its
discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or
communications.

(c) Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.

SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative
Agent or any Lender in exercising any right or power hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Administrative Agent and
the Lenders hereunder are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of this
Agreement or consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) of this
Section, and then such waiver or consent shall be

 

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effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan shall not
be construed as a waiver of any Default, regardless of whether the
Administrative Agent or any Lender may have had notice or knowledge of such
Default at the time.

(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders; provided that no
such agreement shall:

(i) increase the Commitment of any Lender without the written consent of such
Lender;

(ii) reduce the principal amount of any Loan or reduce the rate of interest
thereon, or reduce any fees payable hereunder, without the written consent of
each Lender affected thereby;

(iii) postpone the scheduled date of payment of the principal amount of any
Loan, or any interest thereon, or any fees payable hereunder, or reduce the
amount of, waive or excuse any such payment, or postpone the scheduled date of
expiration of any Commitment, without the written consent of each Lender
affected thereby;

(iv) change Section 2.15(b) or (c) in a manner that would alter the pro rata
sharing of payments required thereby, or alter the pro rata treatment
requirements hereunder with respect to Borrowings, payments, prepayments or
reductions of Commitments, in any such case, without the written consent of each
Lender;

(v) change any of the provisions of this Section or the definition of “Required
Lenders” or any other provision hereof specifying the number or percentage of
Lenders required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender; or

(vi) change clause (o) of Article VII, without the consent of Lenders having
Credit Exposures and unused Commitments representing not less than 75% of the
sum of the total Credit Exposures and unused Commitments;

provided further that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Administrative Agent hereunder and under the other
Loan Documents without the prior written consent of the Administrative Agent.

Except as otherwise provided in this Section with respect to this Agreement, the
Administrative Agent may, with the prior consent of the Required Lenders (but
not otherwise), consent to any modification, supplement or waiver under any of
the Security Documents; provided that, without the prior consent of each Lender,
the Administrative Agent shall not (except as provided herein or in the Security
Documents) release all or substantially all of the collateral or otherwise
terminate all or substantially all of the Liens under any Security Document
providing for collateral security, except that no such consent shall be
required, and the Administrative Agent is hereby authorized, to release any Lien
covering property that is the subject of either a disposition of property
permitted hereunder or a disposition to which the Required Lenders have
consented.

 

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SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay
(i) all reasonable out-of-pocket expenses incurred by the Administrative Agent
and its Affiliates, including the reasonable fees, charges and disbursements of
counsel for the Administrative Agent, in connection with the syndication of the
credit facilities provided for herein, the preparation and administration of
this Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated) and (ii) all out-of-pocket
expenses incurred by the Administrative Agent or any Lender, including the fees,
charges and disbursements of any counsel for the Administrative Agent or any
Lender, in connection with the enforcement or protection of its rights in
connection with this Agreement, including its rights under this Section, and the
other Loan Documents or in connection with the Loans made hereunder, including
all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or in connection with this Agreement or
any other Loan Document; and (iii) and all reasonable costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Security Document or any other document referred to therein.

(b) The Borrower shall indemnify the Administrative Agent and each Lender, and
each Related Party of any of the foregoing Persons (each such Person being
called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including the
fees, charges and disbursements of any counsel for any Indemnitee, incurred by
or asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement, any other Loan
Document or any agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or thereunder or
the consummation of the Transactions or any other transactions contemplated
hereby or thereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any
actual or alleged presence or release of Hazardous Materials on or from any
property owned or operated by the Borrower or any of its Subsidiaries, or any
Environmental Liability related in any way to the Borrower or any of its
Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation
or proceeding relating to any of the foregoing, whether based on contract, tort
or any other theory and regardless of whether any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence, bad faith or willful
misconduct of such Indemnitee.

(c) To the extent that the Borrower fails to pay any amount required to be paid
by it to the Administrative Agent under paragraph (a) or (b) of this Section,
each Lender severally agrees to pay to the Administrative Agent such Lender’s
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent in its capacity as such.

 

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(d) To the extent permitted by applicable law, the Borrower shall not assert,
and hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby, the Transactions, any Loan or the use of the proceeds thereof.

(e) All amounts due under this Section shall be payable promptly but not later
than 10 days after written demand therefor.

SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that (i) the Borrower
may not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender (and any attempted assignment
or transfer by the Borrower without such consent shall be null and void) and
(ii) no Lender may assign or otherwise transfer its rights or obligations
hereunder except in accordance with this Section. Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby,
Participants (to the extent provided in paragraph (c) of this Section) and, to
the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.

(b)(i) Subject to the conditions set forth in paragraph (b)(ii) below, any
Lender may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it) with the prior written consent (such
consent not to be unreasonably withheld) of:

(A) the Borrower, provided that no consent of the Borrower shall be required for
an assignment to a Lender, an Affiliate of a Lender or, if an Event of Default
has occurred and is continuing, any other assignee; and

(B) the Administrative Agent, provided that no consent of the Administrative
Agent shall be required for an assignment to a Lender.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans, the amount of the Commitment or Loans of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, provided that no such
consent of the Borrower shall be required if an Event of Default has occurred
and is continuing;

(B) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement;

 

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(C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; and

(D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv)
of this Section, from and after the effective date specified in each Assignment
and Assumption the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning
Lender’s rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of
Sections 2.12, 2.13, 2.14 and 9.03). Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
Section shall be treated for purposes of this Agreement as a sale by such Lender
of a participation in such rights and obligations in accordance with
paragraph (c) of this Section.

(iv) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans owing to, each Lender pursuant to the terms hereof from time to time (the
“Register”). The entries in the Register shall be conclusive absent manifest
error, and the Borrower, the Administrative Agent and the Lenders may treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary. The Register shall be available for inspection by the Borrower and
any Lender, at any reasonable time and from time to time upon reasonable prior
notice.

(v) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this paragraph.

(c)(i) Any Lender may, without the consent of the Borrower and the
Administrative Agent, sell participations to one or more banks or other entities
(a “Participant”) in all or a portion of such Lender’s rights and obligations
under this Agreement and the other Loan Documents (including all or a portion of
its Commitment and the Loans owing to it); provided that (A) such Lender’s
obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this

 

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Agreement and the other Loan Documents. Any agreement or instrument pursuant to
which a Lender sells such a participation shall provide that such Lender shall
retain the sole right to enforce this Agreement and the other Loan Documents and
to approve any amendment, modification or waiver of any provision of this
Agreement and the other Loan Documents; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 9.02(b) that affects such Participant. Subject to
paragraph (c)(ii) of this Section, the Borrower agrees that each Participant
shall be entitled to the benefits of Sections 2.12, 2.13 and 2.14 to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to paragraph (b) of this Section. To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 9.08 as though it
were a Lender, provided that such Participant agrees to be subject to
Section 2.15(c) as though it were a Lender.

(ii) A Participant shall not be entitled to receive any greater payment under
Section 2.12 or 2.14 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the Borrower’s prior
written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.14 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 2.14(e) as
though it were a Lender.

(d) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including without limitation any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

SECTION 9.05. Survival. All covenants, agreements, representations and
warranties made by the Borrower herein and in the other Loan Documents and in
the certificates or other instruments delivered in connection with or pursuant
to this Agreement and the other Loan Documents shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement and the other Loan Documents and the making of any
Loans, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Administrative Agent or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid and so long as the Commitments have not expired or terminated. The
provisions of Sections 2.12, 2.13, 2.14 and 9.03 and Article VIII shall survive
and remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans or the termination
of this Agreement or any provision hereof.

SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement, the other
Loan Documents and any separate letter agreements with respect to fees payable
to the Administrative Agent constitute the entire contract among the parties
relating to the

 

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subject matter hereof and thereof and supersede any and all previous agreements
and understandings, oral or written, relating to the subject matter hereof and
thereof. Except as provided in Section 4.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.

SECTION 9.07. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other obligations at any time owing by such
Lender or Affiliate to or for the credit or the account of the Borrower against
any of and all the obligations of the Borrower now or hereafter existing under
this Agreement and the other Loan Documents held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) which such Lender may have.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.

(b) The Borrower hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of the Supreme Court of the State
of New York sitting in New York County and of the United States District Court
of the Southern District of New York, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement and the
other Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent
or any Lender may otherwise have to bring any action or proceeding relating to
this Agreement or any other Loan Document against the Borrower or its properties
in the courts of any jurisdiction.

(c) The Borrower hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement and any other Loan Document in any court
referred to in paragraph (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

 

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(d) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 9.01. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

SECTION 9.12. Confidentiality. Each of the Administrative Agent and the Lenders
agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or under any other
Loan Document or the enforcement of rights hereunder or thereunder, (f) subject
to an agreement containing provisions substantially the same as those of this
Section, to (i) any assignee of or Participant in, or any prospective assignee
of or Participant in, any of its rights or obligations under this Agreement or
(ii) any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to the Borrower and its obligations, (g) with
the consent of the Borrower or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or
(ii) becomes available to the Administrative Agent or any Lender on a
nonconfidential basis from a source other than the Borrower. For the purposes of
this Section, “Information” means all information received from the Borrower
relating to the Borrower or its business, other than any such information that
is available to the Administrative Agent or any Lender on a nonconfidential
basis prior to disclosure by the Borrower; provided that, in the case of
information received from the Borrower after the date hereof, such information
is clearly identified at the time of delivery as confidential. Any Person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

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SECTION 9.13. USA PATRIOT Act. Each Lender hereby notifies the Borrower that
pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)), such Lender may be required to obtain,
verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will
allow such Lender to identify the Borrower in accordance with said Act.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

 

FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. By  

/s/ Kurt Harrington

 

Name:   Kurt Harrington Title:   CFO U.S. Federal Tax Identification No.:
54-1873198

 

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JPMORGAN CHASE BANK, N.A.,

individually and as Administrative Agent,

By  

/s/ Thomas H. Mulligan

 

Name:   Thomas H. Mulligan Title:   Managing Director

 

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CALYON NEW YORK BRANCH By  

/s/ Ken Riccardi

 

Name:   Ken Riccardi Title:   Director

 

CALYON NEW YORK BRANCH By  

/s/ Walter Jay Buckley

 

Name:   Walter Jay Buckley Title:   Managing Director

 

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BANK OF AMERICA, N.A. By  

/s/ Maryanne Fitzmaurice

 

Name:   Maryanne Fitzmaurice Title:   Senior Vice President

 

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THE BANK OF NEW YORK By  

/s/ Terence Law

 

Name:   Terence Law Title:   Vice President

 

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SOVEREIGN BANK By  

/s/ Kenneth Ahrens

 

Name:   Kenneth Ahrens Title:   Senior Vice President

 

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DRESDNER BANK AG, NEW YORK

AND GRAND CAYMAN BRANCHES

By  

/s/ Sascha Kiaus

 

Name:   Sascha Kiaus Title:   Managing Director

 

By  

/s/ Brian Smith

 

Name:   Brian Smith Title:   Managing Director

 

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CHEVY CHASE BANK, F.S.B. By  

/s/ R.L. Amador

 

Name:   R.L. Amador Title:   Group Vice President

 

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PNC BANK, NATIONAL ASSOCIATION By  

/s/ Kirk Seagers

 

Name:   Kirk Seagers Title:   Vice President

 

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SCHEDULE 2.01

Commitments

 

Name of Lender

   Commitment ($)

JPMORGAN CHASE BANK, N.A.

   $ 35,000,000

CALYON NEW YORK BRANCH

   $ 35,000,000

BANK OF AMERICA, N.A.

   $ 25,000,000

THE BANK OF NEW YORK

   $ 25,000,000

SOVEREIGN BANK

   $ 25,000,000

DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES

   $ 15,000,000

CHEVY CHASE BANK, F.S.B.

   $ 10,000,000

PNC BANK, NATIONAL ASSOCIATION

   $ 10,000,000

TOTAL

   $ 180,000,000

Schedule 2.01 to Credit Agreement

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

SCHEDULE 3.06

Disclosed Matters

1. Putative Class Action Securities Lawsuits. The Borrower and certain current
and former senior officers and directors have been named in a series of putative
class action securities lawsuits filed in the second quarter of 2005, all of
which are pending in the United States District Court for the Southern District
of New York. These cases have been consolidated under the name In re FBR Inc.
Securities Litig. A consolidated amended complaint has been filed asserting
claims under the Securities Exchange Act of 1934 and alleging misstatements and
omissions concerning (i) the SEC and NASD investigations described below
relating to the involvement of Friedman, Billings, Ramsey & Co., Inc. (“FBR &
Co.”), a subsidiary of Borrower, in the private investment in public equity on
behalf of CompuDyne, Inc. in October 2001 and (ii) the alleged conduct of the
Borrower and certain of the Borrower’s officers and employees in allegedly
facilitating certain sales of CompuDyne shares. The Borrower is contesting these
lawsuits vigorously.

2. Shareholders’ Derivative Action. The Borrower has been named a nominal
defendant, and certain current and former senior officers and directors have
been named as defendants, in three shareholders’ derivative actions. Two of
these actions, brought by Lemon Bay Partners LLC and Walter Boyle, are pending
in the United States District Court for the Southern District of New York and
have been consolidated, for pre-trial purposes only, with the pending putative
class action securities lawsuits under the name In re FBR Securities and
Derivative Litig. The third, brought by Gary Walter and Harry Goodstadt, has
been filed in the Circuit Court for Arlington County, Virginia. All three cases
claim that certain of the Borrower’s current and former officers and directors
breached their duties to the Borrower based on allegations substantially similar
to those in In re FBR Inc. Securities Litig. described above. The Borrower has
not responded to any of these complaints and no discovery has commenced. The
Borrower’s Board of Directors has established a special committee whose
jurisdiction includes the Boyle and Walter/Goodstadt matters as well as
consideration of shareholder demand letters which contain similar allegations,
and the special committee has been authorized to make final decisions whether
such litigation is in the Borrower’s best interests.

3. Regulatory Matters.

(a) On April 26, 2005, the Borrower announced that its broker-dealer subsidiary,
FBR & Co., proposed settlement to the staffs of the SEC and the NASD’s
Department of Market Regulation to resolve ongoing investigations by the SEC and
NASD staffs. The proposed settlement concerns alleged insider trading,
violations of antifraud provisions of the federal securities laws and applicable
NASD rules and other charges concerning the FBR & Co.’s trading in a FBR & Co.
account and the offering of a private investment in public equity on behalf of a
public company in October 2001.

In the settlement offers, without admitting or denying any wrongdoing, FBR & Co.
proposed to pay $3,500,000 to the SEC and $4,000,000 to the NASD and consent to
injunctions, censure and additional undertakings to improve its administrative
and compliance procedures. By agreement dated July 20, 2006, Borrower has agreed
to indemnify FBR & Co. against these fines.

Schedule 3.06 to Credit Agreement

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

The proposed settlement is subject to review and approval by the SEC and the
NASD, respectively, which may accept, reject or impose further conditions or
other modifications to some or all of the terms of the proposed settlements.
There are no assurances regarding the SEC’s and NASD’s consideration or
determination of any offer of settlement, and no settlement is final unless and
until approved by the SEC or NASD, as applicable.

(b) One of the Borrower’s investment adviser subsidiaries, Money Management
Associates, Inc. (“MMA”), is involved in an investigation by the SEC with regard
to the adequacy of disclosure of risks concerning the strategy of a sub-advisor
to a now-closed bond fund. The SEC staff has advised MMA that it is considering
recommending that the SEC bring a civil action/and or institute a public
administrative proceeding against MMA and one of its officers (who is not an
officer of the Borrower) for violating and/or aiding and abetting violations of
the federal securities laws. MMA and its officer have made a Wells submission
and, if necessary, intend to defend vigorously any charges brought by the SEC.
Based on management’s review with counsel, resolution of this matter is not
expected to have a material adverse effect on the Borrower’s financial condition
or results of operations. It is possible that the SEC may initiate proceedings
as a result of its investigations, and any such proceedings could result in
adverse judgments, injunctions, fines, penalties or other relief against MMA or
one or more of its officers or employees.

4. Sub-Prime Mortgage Loan Originator.

Borrower’s subsidiary, First NLC Financial Services, LLC (“First NLC”), has been
named in a putative class action in the U.S. District Court for the Northern
District of Illinois (Cerda v. First NLC Financial Services, LLC ), which
alleges violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.
First NLC is contesting this lawsuit vigorously.

Schedule 3.06 to Credit Agreement

 

- 2 -

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

SCHEDULE 3.12

Subsidiaries

 

Name

 

Jurisdiction

 

Person holding

equity interests

 

Nature of equity

interests

  Percentage
ownership   FBR TRS Holdings, Inc. [“TRS”]   Virginia   Borrower   Stock   100 %
FBR Securitization, Inc.   Delaware   TRS   Stock   100 % FBR Bancorp, Inc.
[“Banc”]   Delaware   TRS   Stock   100 % FBR Capital Markets Corporation [“CM”]
  Virginia   TRS   Stock   72.6 % Money Management Advisers, Inc.   Delaware  
Banc   Stock   100 % FNLC Financial Services, Inc.   Delaware   TRS   Stock  
100 % First NLC Financial Services, Inc.   Delaware   FNLC Financial Services,
Inc.   Stock   100 % First NLC Financial Services, LLC   Florida  
FNLC Financial Services, Inc.   Member Interests   100 % First NLC, Inc.  
Minnesota   First NLC Financial Services, LLC   Stock   100 % NLC, Inc.  
Tennessee   First NLC Financial Services, LLC   Stock   100 % MHC I, Inc.  
Delaware   Borrower   Stock   100 % FBR Trust Investments, LLC   Delaware   MHC
I, Inc.   Member Interests   100 % FBR Asset Management Holdings, Inc.
(“Holdings”)   Virginia   CM   Stock   100 % FBR Investment Management, Inc.
(“Management”)   Delaware   Holdings   Stock   100 % FBR Fund Advisers, Inc.  
Delaware   Holdings   Stock   100 % FBR Capital Markets Holdings, Inc.
(“Capital”)   Delaware   CM   Stock   100 % Friedman, Billings, Ramsey & Co.,
Inc. (“FBR & Co.”)   Delaware   Capital   Stock   100 % FBRC Ltd.  
Cayman Islands   FBR & Co. Management  

Stock

Stock

  99
1 %
% FBR Capital Markets PT, Inc.   Virginia   CM   Stock   100 % Friedman,
Billings, Ramsey International, Ltd.   England   Capital   Stock   100 % FBR
Investment Services, Inc.   Delaware   TRS   Stock   100 % FBR CCP Ltd. (“CCP”)
  Cayman Islands  

Borrower

Management

 

Stock

Stock

  66.67
33.33 %
%

Schedule 3.12 to Credit Agreement

 

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

Name

 

Jurisdiction

 

Person holding
equity interests

 

Nature of equity

interests

  Percentage
ownership   FBR Investments, L.L.C.   Virginia   CCP   Membership Interests  
100 % FBR Capital Crossover Partners, LLC   Delaware   CCP   Membership
Interests   100 % RNR II (FBR Employees) L.P.   Delaware   FBR Capital Crossover
Partners, LLC   GP Interests   85.009 % FBR Arbitrage Management Company, LLC  
Delaware   Management   Membership Interests   100 % FBR Ashton Management
Company, LLC   Delaware   Management   Membership Interests   100 % FBR Ashton
Income Fund, LLC   Delaware   Management   Management Interests   100 %* FBR
Ashton Income Fund Management Company LLC   Delaware   Management   Membership
Interests   100 %* Dawnay Day Lander Management, LLC   Delaware   Management  
Membership Interests   100 % FBR Financial Fund Partners Management Company, LLC
  Delaware   Management   Membership Interests   100 % FBR Financial Fund
Partners, L.L.C.   Delaware   FBR Financial Fund Partners Management Company,
LLC   Special Limited Partner Interests   100 % FBR Future Financial Fund
Management Company, LLC   Delaware   Management   Membership Interests   100 %
FBR Future Financial Fund, L.P.   Delaware   FBR Future Financial Fund
Management Company, LLC   General Partnership Interests   100 %* FBR Financial
Fund Management, L.L.C.   Delaware   Management   Membership Interests   100 %
FBR Financial Services Partners, L.P.   Delaware   FBR Financial Fund
Management, L.L.C.   General Partnership Interests   100 %* FBR Genomic, LLC  
Delaware   Management   Membership Interests   100 % FBR Infinity II Venture
Partners Ltd. Management Company, LLC   Delaware   Management   Management
Interest   100 %* FBR Pegasus Fund of Funds Management Company, LLC   Delaware  
Management   Membership Interests   100 % FBR Pegasus Fund of Funds, L.L.C.  
Delaware   FBR Pegasus Fund Management Company, LLC   Managing Member Interests
  100 %* FBR Pegasus Fund of Funds, Ltd.   Bermuda   Management   Management
Interests   100 %* FBR Private Equity Fund Management Company, LLC   Delaware  
Management   Membership Interests   100 % FBR Special Situations Fund, L.P.  
Delaware   FBR Private Equity Fund Management Company, LLC   General Partnership
Interests   100 %* FBR Wolf Brook Management Company, LLC   Delaware  
Management   Membership Interests   100 %

Schedule 3.12 to Credit Agreement

 

- 2 -

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

Name

 

Jurisdiction

 

Person holding
equity interests

 

Nature of equity

interests

  Percentage
ownership   FBR Wolf Brook, Limited Partnership   Maryland   FBR Weston
Management Company, LLC   General Partnership Interests   100 %* FBR Wolf Brook
Ltd.   British Virgin Islands   Management   Management Interests   100 %* FBR
Multi-Strategy Management Company, LLC   Delaware   Management   Membership
Interests   100 % FBR Multi-Strategy Fund, LLC   Delaware   FBR Multi-Strategy
Management Company, LLC   Managing Member Interests   100 %* FBR Life Science
Master Fund, Ltd.   British Virgin Islands   Management   Management Shares  
100 %* FBR Life Sciences Fund, Ltd.   Bermuda   Management   Management Shares  
100 %* FBR Biotech Fund Management Company, LLC   Delaware   Management  
Membership Interests   100 % FBR Life Sciences Fund, LLC   Delaware   FBR
Biotech Fund Management Company, LLC   Managing Member Interests   100 %* FBR
TVP Management Company, LLC (“TVP”)   Delaware   Management   Membership
Interests   100 % FBR Technology Venture Partners, L.P.   Delaware   TVP  
General Partner Interests   100 %* FBR Technology Venture Partners II (Q.P.),
L.P.   Delaware   TVP   General Partner Interests   100 %* FBR/TVP II Employee
Fund, L.P.   Delaware   TVP   General Partner Interests   100 %* FBR Technology
Venture Partners II, L.L.C.   Delaware   TVP   General Partner Interests   100
%* FBR Technology Venture Partners II, L.P.   Delaware   TVP   General Partner
Interests   100 %* FBR/TVP II Employee Fund II, L.P.   Delaware   TVP   General
Partner Interests   100 %* FBR TVP II Employee Fund III, L.P.   Delaware   TVP  
General Partner Interests   100 %* FBR Genomic Employees Fund I-A, L.P.  
Delaware   Management   General Partner Interests   100 %* FBR Genomic Employees
Fund I-B, L.P.   Delaware   Management   General Partner Interests   100 %*

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

* Represents % of relevant class or type of interest

Schedule 3.12 to Credit Agreement

 

- 3 -

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

SCHEDULE 6.01

Existing Indebtedness

1. TRS Holdings is a direct obligor with respect to certain trust preferred
securities (the “Trust Preferred Securities”) which, as of September 30, 2006,
have a balance of $317,500,000.00.

2. In connection with the issuance of the Trust Preferred Securities, TRS
Holdings loaned to Borrower the proceeds of each such issuance.

3. Borrower guarantee of TRS Holdings’ obligations with respect to the Trust
Preferred Securities.

Schedule 6.06 to Credit Agreement

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

SCHEDULE 6.02

Existing Liens

None.

Schedule 6.06 to Credit Agreement

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

SCHEDULE 6.06

Existing Restrictions

None.

Schedule 6.06 to Credit Agreement

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

EXHIBIT A

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto
are hereby agreed to and incorporated herein by reference and made a part of
this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit, guarantees, and swingline
loans included in such facilities) and (ii) to the extent permitted to be
assigned under applicable law, all claims, suits, causes of action and any other
right of the Assignor (in its capacity as a Lender) against any Person, whether
known or unknown, arising under or in connection with the Credit Agreement, any
other documents or instruments delivered pursuant thereto or the loan
transactions governed thereby or in any way based on or related to any of the
foregoing, including contract claims, tort claims, malpractice claims, statutory
claims and all other claims at law or in equity related to the rights and
obligations sold and assigned pursuant to clause (i) above (the rights and
obligations sold and assigned pursuant to clauses (i) and (ii) above being
referred to herein collectively as the “Assigned Interest”). Such sale and
assignment is without recourse to the Assignor and, except as expressly provided
in this Assignment and Assumption, without representation or warranty by the
Assignor.

 

1.    Assignor:   

 

2.    Assignee:   

 

      [and is an Affiliate of [identify Lender]1] 3.    Borrower(s):   

 

4.   

Administrative Agent: JPMorgan Chase Bank, N.A., as the administrative

                                             agent under the Credit Agreement

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

1 Select as applicable.

Assignment and Assumption

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

5.   Credit Agreement:   Credit Agreement dated as of October 20, 2006 among
Friedman, Billings, Ramsey Group, Inc., the Lenders parties thereto, and
JPMorgan Chase Bank, N.A., as Administrative Agent 6.   Assigned Interest:  

 

Aggregate Amount of

Commitment/Loans

for all Lenders

  

Amount of

Commitment/Loans

Assigned

  

Percentage Assigned

of

Commitment/Loans2

$

  

$

  

%

$

  

$

  

%

$

  

$

  

%

Effective Date:                          , 20         [TO BE INSERTED BY
ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF
TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR [NAME OF ASSIGNOR] By:  

 

Title:   ASSIGNEE [NAME OF ASSIGNEE] By:  

 

Title:  

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

2 Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder.

 

Assignment and Assumption

- 2 -

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

Consented to and Accepted:

JPMORGAN CHASE BANK, N.A.,

    as Administrative Agent

By  

 

Title:   [Consented to:]3 FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. By  

 

Title:  

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

3 To be added only if the consent of the Borrower is required by the terms of
the Credit Agreement.

 

Assignment and Assumption

- 3 -

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

ANNEX 1 to

Assignment and Assumption

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal
and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim and (iii) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any other Loan Document or any collateral thereunder, (iii) the
financial condition of the Borrower, any of its Subsidiaries or Affiliates or
any other Person obligated in respect of the Credit Agreement or any other Loan
Document or (iv) the performance or observance by the Borrower, any of its
Subsidiaries or Affiliates or any other Person of any of their respective
obligations under the Credit Agreement and the other Loan Documents.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be
satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 5.01 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if it is a Foreign Lender,
attached to (or delivered with) this Assignment and Assumption is any
documentation required to be delivered by it pursuant to the terms of the Credit
Agreement, duly completed and executed by the Assignee; and (b) agrees that
(i) it will, independently and without reliance on the Administrative Agent, the
Assignor or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents, and (ii) it will perform
in accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.

2. Payments. From and after the Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

Assignment and Assumption

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

3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of New York.

 

Assignment and Assumption

- 2 -

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

EXHIBIT B

[Form of Opinion of Counsel for the Borrower]

October 20, 2006

To the Lenders and the Administrative

Agent referred to below

c/o JPMorgan Chase Bank, N.A.

as Administrative Agent

270 Park Avenue

New York, New York 10017

Friedman, Billings, Ramsey Group, Inc.

Ladies and Gentlemen:

We have acted as counsel for Friedman, Billings, Ramsey Group, Inc., a Virginia
corporation (the “Borrower”), in connection with the Credit Agreement dated as
of October 20, 2006 (the “Credit Agreement”), among the Borrower, the banks and
other financial institutions identified therein as Lenders, and JPMorgan Chase
Bank, N.A., as Administrative Agent. This opinion is being delivered, at the
request of the Borrower, pursuant to Section 4.01(b) of the Credit Agreement.
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings assigned in the Credit Agreement.

In rendering the opinions set forth below, we have examined and relied on
originals or copies, certified or otherwise identified to our satisfaction, of
the following:

(a) the Amended and Restated Articles of Incorporation of the Borrower, as duly
filed with the State Corporation Commission of the Commonwealth of Virginia;

(b) the Borrower’s Bylaws;

(c) the Credit Agreement;

(d) the Security Agreement dated as of October 20, 2006 (the “Security
Agreement” among the Borrower, the banks and other financing institutions
identified in the Credit Agreement as Lenders, and JPMorgan Chase Bank, N.A., as
Administrative Agent;

(e) the promissory notes, if any, issued on the date hereof pursuant to the
Credit Agreement (such promissory notes, if any, together with the Credit
Agreement and the Security Agreement, collectively, the “Credit Documents”); and

(f) a UCC-1 financing statement in the form annexed hereto as Exhibit A (naming
Friedman, Billings, Ramsey Group, Inc. as debtor) (the “Financing Statement”) to
be filed in the UCC records of the State Corporation Commission of the
Commonwealth of Virginia (the “Virginia Filing Office”).

Opinion of Counsel for the Borrower

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

We also have examined originals or copies, certified or otherwise identified to
our satisfaction, of such other documents, corporate records, certificates of
public officials and other instruments as we have deemed necessary or advisable
for purposes of this opinion. Whenever the phrases “to our knowledge” or “known
to us” are used herein, such phrases refer to the actual knowledge of the
attorneys of this firm who are involved in the representation of the Borrower in
this transaction (including the partner of this firm who coordinates this firm’s
general representation of the Borrower).

For purposes of the opinions expressed below, we have assumed:

(a) the authenticity of all documents submitted to us as originals;

(b) the conformity to the originals of all documents submitted to us as
certified or photostatic copies;

(c) the due authorization, execution and delivery by the Administrative Agent
and each Lender of the Credit Documents, the validity and binding effect thereof
upon the Administrative Agent and each Lender and the enforceability of the
obligations of the Administrative Agent and each Lender thereunder;

(d) with respect to the opinion expressed in Paragraph 4 (c), the Transactions
do not and will not violate the financial covenants contained in Section 1004 of
the Senior Indenture listed as item 1 on Schedule 1 attached hereto;

(e) with respect to the opinion expressed in Paragraph 6 below:

(i) during its taxable year ending December 31, 2005 and subsequent taxable
years, the Borrower will operate in such a manner that makes and will continue
to make the representations as to factual matters contained in the certificate,
dated October 20, 2006 and executed by a duly appointed officer of the Borrower,
a copy of which is attached as Exhibit A hereto (the “Officer’s REIT
Certificate”), true for such years;

(ii) the Borrower will not make any amendments to its organizational documents
after the date of this opinion that would affect its qualification as a real
estate investment trust (“REIT”) for any taxable year; and

(iii) no action will be taken by the Borrower or any of its Subsidiaries after
the date hereof that would have the effect of altering the facts upon which the
opinions set forth below are based; and

(f) with respect to the opinion expressed in Paragraph 5(a) below, the accuracy
of the factual representations contained in the certificate dated October 20,
2006 and executed by a duly appointed officer of the Borrower, a copy of which
is attached as Exhibit B hereto (the “Officer’s Investment Company
Certificate”), without independent investigation.

In connection with the opinion rendered in Paragraph 6 below, we also have
relied upon the correctness of the factual representations contained in the
Officer’s REIT Certificate. Where such factual representations involve terms
defined in the Internal Revenue Code of 1986, as

 

Opinion of Counsel for the Borrower

- 2 -

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

amended (the “Code”), the Treasury regulations thereunder (the “Regulations”),
published rulings of the Internal Revenue Service (the “Service”), or other
relevant authority, we have reviewed with the individuals making such
representations the relevant provisions of the Code, the applicable Regulations,
and published administrative interpretations thereof. After reasonable inquiry,
we are not aware of any facts inconsistent with the representations set forth in
the Officer’s REIT Certificate.

Upon the basis of the foregoing, and subject to the qualifications and
assumptions set forth herein, we are of the opinion that:

1. The Borrower (a) is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Virginia and (b) has all
requisite corporate power and authority to carry on its business as described in
the most recently filed Annual Report on Form 10-K and Quarterly Report on Form
10-Q of the Borrower filed with the United States Securities and Exchange
Commission (the “Current SEC Reports”). The Borrower has all legal right, power
and authority under the laws of the Commonwealth of Virginia to qualify as a
REIT under the Code.

2. The Transactions are within the Borrower’s corporate powers and have been
duly authorized by all necessary corporate action.

3. Each of the Credit Documents has been duly executed and delivered by the
Borrower and constitutes a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or other similar laws relating to or affecting the rights
of creditors generally, and except as the enforceability of any Credit Document
is subject to the application of general principles of equity (regardless of
whether considered in a proceeding in equity or at law), including without
limitation (a) the possible unavailability of specific performance, injunctive
relief or any other equitable remedy and (b) concepts of unconscionability
materiality, reasonableness, good faith and fair dealing.

4. The Transactions do not and will not (a) require any consent or approval of,
registration or filing with, or any other action by, any Governmental Authority
of the Commonwealth of Virginia, the State of New York, or the United States of
America, except such as have been obtained or made and are in full force and
effect, (b) violate the articles or certificate of incorporation or bylaws of
the Borrower, any material provision of any statutory law or regulation of the
Commonwealth of Virginia, the State of New York or the United States of America,
or any order of any Governmental Authority known to us binding on the Borrower,
(c) violate or result in a breach in any respect of any provision of, or
constitute (with due notice or lapse of time or both) a default under, or
(except for the Liens under the Security Agreement) result in the creation or
imposition of any Lien upon any assets of the Borrower or any Subsidiary
pursuant to any agreement described on Schedule 1 attached hereto.

5. Neither the Borrower nor any of its Subsidiaries is required to register as
an “investment company” as defined in the Investment Company Act of 1940, as
amended.

6. The Borrower qualified to be taxed as a REIT pursuant to sections 856 through
860 of the Code for its taxable year ended December 31, 2005, and the Borrower’s
organization and current and proposed method of operation will enable it to
continue to qualify as a REIT for its taxable year ending December 31, 2006, and
in the future.

 

Opinion of Counsel for the Borrower

- 3 -

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

7. The Security Agreement creates in favor of the Administrative Agent for the
benefit of the Administrative Agent and the Lenders a valid security interest
enforceable against the Borrower in those items and types of Collateral in which
a security interest may be created pursuant to the provisions of the Uniform
Commercial Code as in effect on the date hereof in the State of New York (the
“New York UCC”, and such Collateral, the “UCC Collateral”), as security for the
Secured Obligations.

8. Assuming that the Administrative Agent has taken the pledge of the Pledged
Equity and the Pledged Debt (as defined in the Security Agreement) in good faith
and without notice of any adverse claim within the meaning of Article 8 of the
New York UCC, the execution and delivery of the Security Agreement by the
Borrower and the delivery to, and the continuous possession by, the
Administrative Agent of the certificates representing the Pledged Equity and the
instruments representing the Pledged Debt, endorsed in blank or accompanied by
an effective instrument of transfer, will create in favor of the Administrative
Agent a perfected security interest in such Pledged Equity and Pledged Debt,
provided that in the case of the issuance of additional shares or other
distributions in respect of the Pledged Equity and the Pledged Debt of
additional instruments, the security interest in such additional shares or
instruments will be perfected only if possession of such additional shares or
instruments is obtained in accordance with the provisions of Article 8 and
Article 9 of the New York UCC.

9. The Financing Statement is in proper form for filing in the UCC records of
the Virginia Filing Office. The filing of the Financing Statement in the
Virginia Filing Office will be sufficient to perfect the security interest
created by the Security Agreement in the UCC Collateral, to the extent that a
security interest therein may be perfected by the filing of a financing
statement under the New York UCC (the “Filing Collateral”), except that we
express no opinion in this Paragraph 10 as to (and the term “Filing Collateral”
does not include) any UCC Collateral that is a fixture, farm products, or “as
extracted collateral” (as each such term is defined in the New York UCC) or
timber. We call your attention to the fact that a security interest in certain
items or types of the UCC Collateral may not be perfected by filing a financing
statement in the Virginia Filing Office. The Filing Office is the only office in
which a financing statement must be filed under the New York UCC in order to
perfect the security interest in the Filing Collateral.

The foregoing opinions are also subject to the following comments and
qualifications:

(a) The enforceability of provisions in the Credit Documents to the effect that
terms may not be waived or modified except in writing may be limited under
certain circumstances.

(b) The enforceability of Section 9.03 (and any similar provision in any of the
other Credit Documents) may be limited by laws limiting the enforceability of
provisions exculpating or exempting a party from, or requiring indemnification
of a party for, liability for its own action or inaction, to the extent the
action or inaction involves gross negligence, recklessness, willful misconduct
or unlawful conduct.

 

Opinion of Counsel for the Borrower

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(c) We express no opinion as to (i) the effect of the laws of any jurisdiction
in which any Lender is located (other than New York and Virginia) that limits
the interest, fees or other charges it may impose for the loan or use of money
or other credit, (ii) Section 9.08 of the Credit Agreement (and any similar
provision in any of the other Credit Documents), (iii) the last sentence of each
of Sections 2.15(c) and 9.04(c)(i) of the Credit Agreement, (iv) the first
sentence of Section 9.09(b) of the Credit Agreement (and any similar provision
in any of the other Credit Documents), insofar as such sentence relates to the
subject-matter jurisdiction of the United States District Court for the Southern
District of New York to adjudicate any controversy related to the Credit
Agreement or (iv) the waiver of inconvenient forum set forth in Section 9.09(c)
of the Credit Agreement (and any similar provision in any of the other Credit
Documents) with respect to proceedings in the United States District Court for
the Southern District of New York.

(d) We express no opinion whether the Loans made under the Credit Agreement
comply with any statutory, regulatory or other loan limits applicable to any
Lender, or comply with any statutes, laws, rules or regulations which prescribe
permissible and lawful investments for any Lender.

(e) We express no opinion with respect to the enforceability of any waiver of a
trial by jury (other than under the laws of New York), the waiver of any right
to have service of process made in the manner presented by applicable law and
the waiver of any requirement to have an agent for service of process appointed
or the enforceability of the waiver of any right that would result in the
restriction of the Borrower’s access to courts or to legal or equitable remedies
otherwise available to the Borrower.

(f) Except as expressly provided in Paragraph 6, we express no opinion with
respect any law or regulation relating to federal, state or local taxation,
federal or state environmental regulation, labor laws, intellectual property
laws, antitrust laws or those relating to zoning, land use or subdivision laws,
ERISA and similar matters or any Federal or state securities laws or
regulations.

(g) We express no opinion with respect to the enforceability of any right to
receive interest on interest (other than under the laws of New York).

(h) We express no opinion as to whether a Virginia court or a federal court
applying Virginia choice of law rules would select the laws of the State of New
York to govern the Credit Agreement.

(i) With respect to our opinion expressed in Paragraph 6 above, we will not
review on a continuing basis the Borrower’s compliance with the documents or
assumptions set forth herein relating to such opinion, or the representations
set forth in the Officer’s REIT Certificate. Accordingly, no assurance can be
given that the actual results of the Borrower’s operations for its 2006 and
subsequent taxable years will satisfy the requirements for qualification and
taxation as a REIT. Our opinion is based on current provisions of the Code and
the Regulations, published administrative interpretations thereof, and published
court decisions. The Service has not issued Regulations or administrative
interpretations with respect to various provisions of the Code relating to REIT
qualification. No assurance can be given that the law will not change in a way
that will prevent the Borrower from qualifying as a REIT.

 

Opinion of Counsel for the Borrower

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(j) We express no opinion as to the validity, perfection or enforceability of a
security interest arising out of any transaction not subject to Article 9 of the
Uniform Commercial Code as in effect on the date hereof in the Commonwealth of
Virginia (the “Virginia UCC”), or Article 9 of the New York UCC, including those
described in §§ 9 109© and (d) of the New York UCC.

(k) We express no opinion with respect to any “commercial tort claim,”
“letter-of-credit-right,” collateral arising from a “consumer transaction,” a
“health-care-insurance-receivable,” an “agricultural lien,” “farm products” or
“as extracted collateral,” or any “manufactured home collateral” (as those terms
are defined in Article 9 of the New York UCC), collateral subject to a
certificate of title, goods consigned by or to the Borrower, documents or goods
covered by documents, electronic chattel paper (other than perfection by filing
as set forth in Paragraph 7), or standing timber.

(l) Under § 9 315 of the New York UCC, the continuation of perfection of a
security interest in proceeds is limited to the extent set forth in such
section.

(m) Under § 9 316 of the New York UCC, the continuation of perfection of a
security interest following a change in the jurisdiction, the laws of which
govern perfection, the effect of perfection and non-perfection and priority, is
limited to the extent set forth in such section.

(n) In the case of property that becomes Collateral after the date hereof,
Section 552 of the Federal Bankruptcy Code limits the extent to which property
acquired by a debtor after the commencement of a case under the Federal
Bankruptcy Code may be subject to a security interest arising from a security
agreement entered into by the debtor before the commencement of such a case.

(o) The Financing Statement might become ineffective due to events that cause it
to be “seriously misleading” under §§ 9 506 through § 9 508 of the New York UCC
and the Virginia UCC.

(p) We note that the rights of the Administrative Agent for the benefit of
itself and the Lenders against account debtors will be subject to the terms of
the assigned account, chattel paper or general intangible, to dealings between
such account debtor and the Borrower, and to the other limitations provided in
§§ 9 403, 9 404, 9 405 and 9 406 of the New York UCC, and will be subject to
defenses as provided in § 9 404 of the New York UCC.

(q) We express no opinion as to the effect of any prohibitions against
assignment that may be contained in any account, lease agreement, promissory
note, chattel paper, payment intangible, health-care receivable or
letter-of-credit-right included in the Collateral. We note that prohibitions on
assignment contained in any account, lease agreement, promissory note, chattel
paper, payment intangible, health-care-insurance-receivable and
letter-of-credit-right are subject to the limitations contained in §§ 9 406, 9
407, 9 408 and 9 409 of the New York UCC.

(r) We express no opinion as to the effectiveness of the security interest of
Administrative Agent for the benefit of itself and the Lenders as to any rights
(including rights of payment) under any account or other obligation on which the
United States government or any other federal, state, local, foreign or other
government or any agency, department or subdivision thereof is an obligor.

 

Opinion of Counsel for the Borrower

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(s) We express no opinion as to whether provisions in the Credit Documents
granting an absolute assignment of rights or interests will be construed as
effecting an absolute assignment rather than a collateral assignment or security
interest.

(t) We note that pursuant to §§ 9-203(f) and (g) and §§ 9-308(d) and (e) of the
New York UCC, (i) perfection of a security interest in collateral also perfects
a security interest in any supporting obligation (as defined in Article 9 of the
New York UCC) for such collateral and (ii) perfection of a security interest in
a right to payment or performance also perfects a security interest in any
security interest, mortgage or other lien on personal or real property securing
such right to payment or performance (a “Supporting Lien”). Except to the extent
that any such supporting obligation or Supporting Lien constitutes UCC
Collateral or Filing Collateral, we express no opinion as to the creation or
perfection, respectively, of a security interest therein.

(u) We express no opinion with respect to the enforceability of a security
interest in any security entitlement credited to a securities account or any
commodity contract credited to a commodities account.

(v) We express no opinion as to the enforceability of any security interest in
goods that are not manufactured in accordance with the provisions of the federal
Fair Labor Standards Act.

(w) For the purposes of the opinions in Paragraphs 7 and 8, we have assumed that
value has been given within the meaning of § 9-203(b)(1) of the New York UCC and
the Virginia UCC, and at the time of the filing of the Financing Statement and
at or after the time value was given the Borrower has or acquires, and continues
to have, rights in the Collateral or the power to transfer rights in the
Collateral to a secured party within the meaning of § 9-203(b)(2) of the New
York UCC and the Virginia UCC.

(x) For the purposes of the opinions in Paragraph 9, we also have assumed that
the Financing Statement correctly states (i) the name of the secured party (as
required by Section 9-503(a) of the Virginia UCC), (ii) the mailing address of
the debtor and an address of the secured party from which information concerning
such financing statements can be obtained, and (iii) the debtor’s state
organizational identification number (if any) and, if included, its federal
employee identification number.

(y) We express no opinion with respect to the Borrower’s title to or rights in
any property, including any Collateral, and we express no opinion with respect
to the priority of any assignment, lien, security interest or other interest.

(z) We note that a portion of the Collateral and is represented by shares of a
Cayman Islands subsidiary of the Borrower. We express no opinion on the effect
of the laws of the Cayman Islands on any of the matters referenced herein.

We are members of the bar of the Commonwealth of Virginia and the State of New
York and the foregoing opinion is limited to the laws of the Commonwealth of
Virginia and the State of New York and the Federal laws of the United States of
America. This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you

 

Opinion of Counsel for the Borrower

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for any other purpose or relied upon by any other Person (other than your
successors and assigns as Lenders and Persons that acquire participations in
your Loans) without our prior written consent.

Very truly yours,

 

Opinion of Counsel for the Borrower

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Schedule 1

1. Revolving Subordinated Loan Agreement between FBR & Co. and Custodial Trust
Company, dated August 4, 1998.

2. Securities Purchase Agreement, dated as of January 10, 2005, by and among
Friedman, Billings, Ramsey Group, Inc., FNLC Financial Services, Inc., NLC
Financial Services, LLC, Neal S. Henschel, Jeffrey M. Henschel, Benjamin
Henschel, Andrew Henschel and Sun Mortgage Partners, L.P.

 

Opinion of Counsel for the Borrower

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EXHIBIT C

[Form of Opinion of Special New York Counsel to JPMCB]

October 20, 2006

To the Lenders and the Administrative

Agent referred to below

c/o JPMorgan Chase Bank, N.A.,

as Administrative Agent

270 Park Avenue

New York, New York 10017

Ladies and Gentlemen:

We have acted as special New York counsel to JPMorgan Chase Bank, N.A. (“JPMCB”)
in connection with the Credit Agreement dated as of October 20, 2006 (the
“Credit Agreement”) among Friedman, Billings, Ramsey Group, Inc. (the
“Borrower”), the entities referred to as “Lenders” in the Credit Agreement (the
“Lenders”) and the Administrative Agent. Terms defined in the Credit Agreement
have the same respective defined meanings when used herein.

In rendering the opinions expressed below, we have examined executed
counterparts of the Credit Agreement and Security Agreement (collectively, the
“Credit Documents”). In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity with authentic original documents of all documents submitted to
us as copies. When relevant facts were not independently established, we have
relied upon representations made in or pursuant to the Credit Documents. We have
also assumed that each of the Credit Documents has been duly authorized,
executed and delivered by, and (except, to the extent set forth below as to the
Borrower) constitute legal, valid, binding and enforceable obligations of, all
of the parties thereto, that all signatories thereto have been duly authorized,
and that all such parties are duly organized and validly existing and have the
power and authority (corporate or other) to execute, deliver and perform the
same.

Based upon and subject to the foregoing and subject also to the comments and
qualifications set forth below, and having considered such questions of law as
we have deemed necessary as a basis for the opinions expressed below, we are of
the opinion that each of the Credit Documents constitutes a legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or other similar
laws relating to or affecting the rights of creditors generally and except as
the enforceability of the Credit Documents is subject to the application of
general principles of equity (regardless of whether considered in a proceeding
in equity or at law), including without limitation (a) the possible
unavailability of specific performance, injunctive relief or any other equitable
remedy and (b) concepts of materiality, reasonableness, good faith and fair
dealing.

Opinion of Special New York Counsel to JPMCB

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The foregoing opinions are subject to the following comments and qualifications:

(A) The enforceability of Section 9.03 of the Credit Agreement (and any similar
provisions in any of the other Credit Documents) may be limited by laws limiting
the enforceability of provisions exculpating or exempting a party from, or
requiring indemnification of a party for, liability for its own action or
inaction, to the extent the action or inaction involves gross negligence,
recklessness, willful misconduct or unlawful conduct.

(B) The enforceability of provisions in the Credit Documents to the effect that
terms may not be waived or modified except in writing may be limited under
certain circumstances.

(C) We express no opinion as to (i) the effect of the laws of any jurisdiction
in which any Lender is located (other than the State of New York) that limit the
interest, fees or other charges such Lender may impose for the loan or use of
money or other credit, (ii) the last sentence of Sections 2.15(c) and 9.04(c)(i)
of the Credit Agreement, (iii) Section 9.08 of the Credit Agreement, (iv) the
first sentence of Section 9.09(b) of the Credit Agreement (and any similar
provisions in any of the other Credit Documents), insofar as each such sentence
relates to the subject-matter jurisdiction of the United States District Court
for the Southern District of New York to adjudicate any controversy related to
any of the Credit Documents or (vi) the waiver of inconvenient forum set forth
in Section 10.09(c) of the Credit Agreement (and any similar provisions in any
of the other Credit Documents) with respect to proceedings in the United States
District Court for the Southern District of New York.

(D) We wish to point out that the obligations of the Borrower, and the rights
and remedies of the Secured Parties (as defined in the Security Agreement),
under the Security Agreement may be subject to possible limitations upon the
exercise of remedial or procedural provisions contained therein; provided that
such limitations do not, in our opinion (but subject to the other comments and
qualifications set forth in this opinion letter), make the remedies and
procedures that will be afforded to the Administrative Agent inadequate for the
practical realization of the substantive benefits purported to be provided by
the Security Agreement.

(E) We wish to point out that the acquisition by the Borrower after the initial
extension of credit under the Credit Agreement of an interest in property that
becomes subject to the Lien of the Security Agreement may constitute a voidable
preference under Section 547 of the United States Bankruptcy Code.

(F) We express no opinion as to the existence of, or the right, title or
interest of the Borrower in, to or under, any of the Collateral (as defined in
the Security Agreement), and we express no opinion as to the creation,
perfection or priority of any security interests in, or other Lien on, the
Collateral (as defined in the Security Agreement).

The foregoing opinions are limited to matters involving the Federal laws of the
United States of America and the law of the State of New York, and we do not
express any opinion as to the laws of any other jurisdiction.

Opinion of Special New York Counsel to JPMCB

 

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At the request of our client, this opinion letter is, pursuant to
Section 4.01(c) of the Credit Agreement, provided to you by us in our capacity
as special New York counsel to JPMCB and may not be relied upon by any other
person or for any purpose other than in connection with the transactions
contemplated by the Credit Documents without our prior written consent in each
instance.

Very truly yours,

WJM/MJB

Opinion of Special New York Counsel to JPMCB

 

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EXHIBIT D

Form of Security Agreement

see attached

Security Agreement

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EXHIBIT E

Form of Subordination Agreement

see attached

Subordination Agreement