Exhibit 10.2

 

LOGO [g70596ex10_2logo.jpg]   STERLING NATIONAL BANK

LOAN AND SECURITY AGREEMENT

BY AND AMONG

STERLING NATIONAL BANK,

as Administrative Agent and Collateral Agent

THE LENDERS PARTY HERETO

AND

CDS BUSINESS SERVICES, INC.,

as the Borrower

and

NEWTEK BUSINESS SERVICES CORP.,

as a Guarantor

DATED AS OF: August 27, 2015

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Table of Contents

 

1.

 

THE LOANS

     1     

1.1

 

Loans

     1     

1.2

 

Loan Account; Register

     2     

1.3

 

Interest

     2     

1.4

 

Payments; Maturity Date

     3     

1.5

 

Application of Payments in General

     4     

1.6

 

Monthly Statement and Automatic Charges

     4     

1.7

 

Fees

     4     

1.8

 

Computations of Interest and Fees

     4     

1.9

 

Increased Costs; Capital Requirements

     4     

1.10

 

Taxes

     5     

1.11

 

Reserved

     6     

1.12

 

Conditions to Loans

     6   

2.

 

GRANT OF SECURITY INTEREST AND COLLATERAL MATTERS

     6     

2.1

 

Grant of Security Interest

     6     

2.2

 

Deposits into Blocked Account

     6     

2.3

 

Reserved

     6     

2.4

 

Records

     6     

2.5

 

Legends

     7     

2.6

 

Inspection

     7     

2.7

 

Reserved

     7     

2.8

 

Search Reports and Credit Reports

     7     

2.9

 

Further Assurances

     7   

3.

 

REPRESENTATIONS AND WARRANTIES

     8     

3.1

 

Organization and Qualification

     8     

3.2

 

Authorization; Enforceability

     8     

3.3

 

Ownership; Subsidiaries

     8     

3.4

 

Title to Properties; Absence of Liens and Claims

     8     

3.5

 

Places of Business

     9     

3.6

 

Validity and Perfection of Security Interest

     9     

3.7

 

Governmental Approvals; No Conflicts

     9     

3.8

 

Permits

     9     

3.9

 

Litigation and Environmental Matters

     10     

3.10

 

Investment Company Status

     10     

3.11

 

Compliance with Law and Agreements

     10     

3.12

 

Financial Statements

     10     

3.13

 

Reserved

     10     

3.14

 

Title to Collateral

     10     

3.15

 

Location of Collateral

     10     

3.16

 

Taxes

     10     

3.17

 

Federal Reserve Regulations

     11     

3.18

 

Labor Matters

     11     

3.19

 

Insurance

     11     

3.20

 

Solvency

     11     

3.21

 

Disclosure

     11     

3.22

 

ERISA

     11     

3.23

 

Termination of Capital One Facility

     12   

4.

 

AFFIRMATIVE COVENANTS

     12     

4.1

 

Payments and Performance

     12   

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4.2

 

Books and Records; Inspection

     12     

4.3

 

Financial Statements and Reporting

     12     

4.4

 

Maintenance of Existence; Conduct of Business

     12     

4.5

 

Compliance with Law

     13     

4.6

 

Reserved

     13     

4.7

 

Solvency

     13     

4.8

 

Operating and Deposit Accounts

     13     

4.9

 

Payment of the Borrower Taxes, Accounts Payable and Other Obligations

     13     

4.10

 

Maintenance of Collateral

     13     

4.11

 

Insurance

     13     

4.12

 

Notification of Material Events

     14     

4.13

 

Lien Law

     14     

4.14

 

Environmental

     14     

4.15

 

Third Parties

     15     

4.16

 

Use of Proceeds

     15     

4.17

 

Requirements for Mortgage Loans

     15     

4.18

 

Mortgage Loan replacement/Cash Collateral Deposit

     15   

5.

 

NEGATIVE COVENANTS

     15     

5.1

 

Financial Covenants

     15     

5.2

 

Indebtedness

     15     

5.3

 

Liens

     16     

5.4

 

Fundamental Changes

     16     

5.5

 

Investments, Loans, Advances, Guarantees and Acquisitions

     17     

5.6

 

Asset Sales

     17     

5.7

 

Sale-and-Leaseback transactions

     18     

5.8

 

Restricted Payments

     18     

5.9

 

Transactions with Affiliates

     18     

5.10

 

Restrictive Agreements

     18     

5.11

 

Amendment of Material Documents

     18     

5.12

 

Lines of Business

     19     

5.13

 

Accounting Changes

     19     

5.14

 

Hedging Agreements

     19     

5.15

 

Mortgage Documents

     19   

6.

 

DEFAULT

     19     

6.1

 

Default

     19     

6.2

 

Acceleration

     21     

6.3

 

Other Remedies

     23     

6.4

 

Power of Attorney

     23     

6.5

 

Nonexclusive Remedies

     23     

6.6

 

Reassignment to the Borrower

     23   

7.

 

AGENT

     24     

7.1

 

Appointment, Authority and Duties of Agent

     24     

7.2

 

Agreements Regarding Collateral

     25     

7.3

 

Action Upon Default

     26     

7.4

 

Remittance of Payments and Collections

     26     

7.5

 

Ratable Sharing; Allocation

     27     

7.6

 

Defaulting Lenders

     28     

7.7

 

Replacement of Lenders

     28     

7.8

 

Indemnification of Agent Indemnitees

     28     

7.9

 

Limitation on Responsibilities of Agent

     28     

7.10

 

Successor Agent

     29     

7.11

 

Consents, Amendments and Waivers

     29     

7.12

 

Due Diligence and Non-Reliance

     30   

 

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7.13

 

Representations and Warranties of Lenders

     30     

7.14

 

The Required Lenders

     30     

7.15

 

Several Obligations

     31     

7.16

 

Agent in its Individual Capacity

     31     

7.17

 

No Third Party Beneficiaries

     31     

7.18

 

Notice of Transfer

     31   

8.

 

MISCELLANEOUS

     31     

8.1

 

Waivers

     31     

8.2

 

Severability

     31     

8.3

 

Deposit Collateral

     31     

8.4

 

Indemnification

     32     

8.5

 

Costs and Expenses

     32     

8.6

 

Counterparts

     32     

8.7

 

Complete Agreement

     32     

8.8

 

Binding Effect of Agreement

     32     

8.9

 

Amendments and Waivers

     32     

8.10

 

Assignment by Lenders

     33     

8.11

 

Terms of Agreement

     33     

8.12

 

Notices

     34     

8.13

 

Governing Law

     35     

8.14

 

Reproductions; Disclosures

     35     

8.15

 

Completing and Correcting this Agreement

     35     

8.16

 

ADDITIONAL WAIVERS

     35     

8.17

 

Jurisdiction and Venue

     35     

8.18

 

JURY WAIVER

     35     

8.19

 

Joint and Several

     36     

8.20

 

Construction

     36     

8.21

 

USA PATRIOT Act Notice

     36     

8.22

 

Foreign Asset Control Regulations

     36     

8.23

 

Electronic Execution of Documents

     36   

9.

 

GENERAL PROVISIONS RELATED TO NEWTEK

     37     

9.1

 

Taxes

     37     

9.2

 

Credit Reports and Disclosure

     37   

10.

 

NEWTEK’S REPRESENTATIONS AND WARRANTIES

     38     

10.1

 

Investment Company Status

     38     

10.2

 

Federal Reserve Regulations

     38     

10.3

 

Solvency

     38   

11.

 

NEWTEK AFFIRMATIVE COVENANTS

     38     

11.1

 

Payments and Performance

     38     

11.2

 

Books and Records; Inspection

     38     

11.3

 

Maintenance of Existence; Conduct of Business

     38     

11.4

 

Compliance with Law

     38     

11.5

 

Solvency

     38     

11.6

 

Operating and Deposit Accounts

     38     

11.7

 

Payment of Newtek Taxes, Accounts Payable and Other Obligations

     38     

11.8

 

Environmental

     39     

11.9

 

Third Parties

     39   

 

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EXHIBITS

A – Advance Request Package

SCHEDULES

 

3.1    Organization and Qualification 3.3    Ownership; Subsidiaries 3.4   
Title to Properties; Absence of Liens and Claims 3.5    Places of Business 3.9
   Litigation and Environmental Matters 3.15    Location of Collateral 3.19   
Insurance 5.2    Existing Indebtedness 5.5    Existing Investments

ANNEXES

1 - Definitions

2 - Terms and Conditions of Facility (including fees, financial reporting and
financial covenants)

 

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LOGO [g70596ex10_2pg01.jpg]   STERLING NATIONAL BANK

LOAN AND SECURITY AGREEMENT

This LOAN AND SECURITY AGREEMENT (this “Agreement”) is entered into at New York,
New York, as of August 27, 2015, by and among CDS BUSINESS SERVICES, INC., a
Delaware corporation, with its chief executive office located at 60 Hempstead
Avenue, 6th Floor, West Hempstead, New York 11552 (the “Borrower”), NEWTEK
BUSINESS SERVICES CORP., a Maryland corporation, with its chief executive office
located at 60 Hempstead Avenue, 6th Floor, West Hempstead, New York 11552
(“Newtek”), THE LENDERS PARTY HERETO (collectively, the “Lenders”) and STERLING
NATIONAL BANK, a national banking association, with an address of 500 Seventh
Avenue, New York, New York 10018-4603 (the “Agent”).

FOR VALUE RECEIVED, and in consideration of the granting by the Lenders of
financial accommodations to or for the benefit of the Borrower, including
without limitation respecting the Obligations, each Loan Party represents and
agrees with the Agent and the Lenders, as of the date hereof and as of the date
of each loan, credit and/or other financial accommodation, as follows:

1. THE LOANS

1.1 Loans. Subject to the terms and conditions of this Agreement and the other
Loan Documents, during the term of this Agreement, the Agent, absent the
occurrence of a Default or an Event of Default, may direct the Lenders, in its
sole and absolute discretion, to make advances to the Borrower (each a “Loan”
and collectively the “Loans”) in an amount not to exceed the lesser of (i) the
Maximum Facility Amount and (ii) the Maximum Availability, except as such amount
may be decreased by the Required Lenders in their sole reasonable discretion.
Within the foregoing limits and subject to the terms and conditions set forth
herein, the Borrower may borrow, repay and reborrow Loans.

A request for a Loan shall be made or shall be deemed to be made, each in the
following manner: the Borrower shall give the Agent not less than ten
(10) Business Days’ notice, no later than 12:30 p.m. on any Business Day, of its
request for a Loan, in which notice the Borrower shall specify the amount of the
proposed Loan and the proposed borrowing date; provided, however, that no such
request may be made at a time when there exists a Default or an Event of
Default. Each request for a Loan shall be accompanied by the items specified on
Exhibit A hereto (the “Advance Request Package”). In the event the Advance
Request Package is incomplete, or in the event that the Agent has questions
about the contents of the Advance Request Package, or in the event the Agent
otherwise determines, in its sole and absolute discretion, that there are
additional items that need to be submitted in addition to the Advance Request
Package, then the Agent shall so notify the Borrower within two (2) Business
Days of the Agent’s receipt of Borrower’s initial submission of said Advance
Request Package, whereupon the Agent and the Borrower shall endeavor in good
faith to resolve the foregoing anomalies. The Lenders shall have no obligation
to make any Loan unless and until the Agent is satisfied with the applicable
Advance Request Package in its sole and absolute discretion. Nothing contained
in the previous sentence shall be construed to alter, limit or waive the
discretionary nature of all Loans in general as set forth in the first paragraph
of this Section 1.1.

Each Lender agrees, severally to the extent of its Lending Amount and not
jointly with the other Lenders, upon the terms and subject to the conditions set
forth herein, to make Loans to the Borrower on any Business Day if the Agent has
agreed, in its sole and absolute discretion, to make such Loan. Each Loan shall
be funded by Lenders on a Pro Rata basis in accordance with their respective
Lending Amounts. Subject to its receipt of notice from Agent of a Loan, each
Lender shall timely honor its Lending Amount

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by funding its Pro Rata share of each Loan that is properly requested and that
the Borrower is entitled to receive under this Agreement. The Agent shall
endeavor to notify the Lenders of each request for a Loan (or deemed request),
by 1:30 p.m. on the proposed funding date. Each Lender shall deposit with Agent
an amount equal to its Pro Rata share of the Loan requested or deemed requested
by the Borrower at the Agent’s designated bank in immediately available funds
not later than 3:00 p.m. on the date of funding of such Loan, unless the Agent’s
notice to Lenders is received after 1:30 p.m. on the proposed funding date, in
which event Lenders shall deposit with Agent their respective Pro Rata shares of
the requested Loan on or before 11:00 a.m. of the next Business Day. Subject to
its receipt of such amounts from the Lenders, Agent shall make the proceeds of
the Loan received by it available to the Borrower by disbursing such proceeds in
accordance with the Borrower’s disbursement instructions set forth in the
applicable Loan Request. Neither the Agent nor any Lender shall have any
liability on account of any delay by any bank or other depository institution in
treating the proceeds of any Loan as collected funds or any delay in receipt, or
any loss, of funds that constitute a Loan, the wire transfer of which was
initiated by the Agent in accordance with wiring instructions provided to the
Agent. Unless the Agent shall have been notified in writing by a Lender prior to
the proposed time of funding that such Lender does not intend to deposit with
the Agent an amount equal such Lender’s Pro Rata share of the requested Loan,
Agent may assume that such Lender has deposited or promptly will deposit its
share with the Agent and the Agent may in its discretion, disburse a
corresponding amount to the Borrower on the applicable funding date. If a
Lender’s Pro Rata share of such Loan is not in fact deposited with the Agent,
then, if the Agent has disbursed to the Borrower an amount corresponding to such
share, then such Lender agrees to pay, and in addition the Borrower agrees to
repay, to the Agent forthwith on demand such corresponding amount, together with
interest thereon, for each day from the date such amount is disbursed by the
Agent to or for the benefit of the Borrower until the date such amount is paid
or repaid to the Agent, (a) in the case of the Borrower, at the interest rate
applicable to such Loan and (b) in the case of such Lender, at the Wall Street
Journal Prime Rate. If such Lender repays to the Agent such corresponding
amount, such amount so repaid shall constitute a Loan, and if both such Lender
and the Borrower shall have repaid such corresponding amount, Agent shall
promptly return to the Borrower such corresponding amount in same day funds. A
notice from Agent submitted to any Lender with respect to amounts owing under
this paragraph shall be conclusive, absent manifest error.

The Borrower hereby irrevocably authorizes the Agent to disburse the proceeds of
each Loan requested by the Borrower as follows: the proceeds of each Loan
requested under this Section 1.1 shall be disbursed by the Agent in lawful money
of the United States of America in immediately available funds, by credit to any
account of the Borrower at the Agent or by wire transfer or Automated Clearing
House (ACH) transfer to such bank accounts as may be agreed upon by the Borrower
and the Agent from time to time, or elsewhere if pursuant to a written direction
from the Borrower.

1.2 Loan Account; Register. An account of the Borrower shall be opened and
maintained at the Agent in which account (the “Loan Account”) all payments due
and payable to the Agent or any Lender shall be deposited by or on behalf of the
Borrower. The Agent shall also maintain a register (the “Register”), which shall
include a master account and a subsidiary account for each Lender and in which
accounts (taken together) shall be recorded (i) the date and amount of each Loan
made hereunder, (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 Agent from the Borrower or any other
Loan Party and each Lender’s Pro Rata share thereof. The Register shall be
available for inspection by the Borrower or any Lender at the offices of Agent
at any reasonable time and from time to time upon reasonable prior notice. No
failure of the Agent to make, and no error by the Agent in making, any entry in
such books will affect the Borrower’s obligation to repay the Obligations or
provide the basis for any claim against the Agent.

1.3 Interest.

 

  (a) Rate. All Loans and the outstanding amount of all other Obligations shall
bear interest, in the case of Loans, on the unpaid principal amount thereof from
the date such Loans are made and, in the case of such other Obligations, from
the date such other Obligations are due and payable until, in all cases, paid in
full, except as otherwise provided in clause (c) below, at the rate(s) set forth
in Section 1 of Annex 2.

 

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  (b) Payments. Interest accrued shall be payable in arrears (i) if accrued on
the principal amount of any Loan, at maturity (whether by acceleration or
otherwise) and on the first day of each month commencing on the first such day
following the making of such Loan and (ii) if accrued on any other Obligation,
on demand from and after the time such Obligation is due and payable (whether by
acceleration or otherwise).

 

  (c) Default Interest. Notwithstanding the rates of interest specified in
clause (a) above or elsewhere in any Loan Document, effective immediately upon
(A) the occurrence of any Event of Default under Sections 6.1(k) or 6.1(l) or
(B) the delivery of a notice by the Agent (which Agent may deliver in its
discretion or at the direction of the Required Lenders) to the Borrower during
the continuance of any other Event of Default and, in each case, for as long as
such Event of Default shall be continuing, the principal balance of all
Obligations (including any Obligation that bears interest by reference to the
rate applicable to any other Obligation) then due and payable shall bear
interest at a rate that is 3% per annum in excess of the interest rate otherwise
applicable to such Obligations from time to time, payable on demand or, in the
absence of demand, on the date that would otherwise be applicable.

 

  (d) Savings Clause. Anything herein to the contrary notwithstanding, the
obligations of the Borrower hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by the Agent for the benefit of the Lenders would be
contrary to the provisions of any Requirement of Law limiting the highest rate
of interest which may be lawfully contracted for, charged or received by the
Agent for the benefit of the Lenders, and in such event the Borrower shall pay
the Agent interest at the highest rate permitted by Requirements of Law
(“Maximum Lawful Rate”); provided, however, that if at any time thereafter the
rate of interest payable hereunder is less than the Maximum Lawful Rate, the
Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate
until such time as the total interest received by the Agent is equal to the
total interest that would have been received had the interest payable hereunder
been (but for the operation of this paragraph) the interest rate payable since
the Closing Date as otherwise provided in this Agreement.

1.4 Payments; Maturity Date. (a) In the case of each Loan with respect to which
the Referenced Mortgage Loan is a First Mortgage Loan, the Borrower hereby
unconditionally promises to pay to the Agent, for the benefit of the Lenders,
the then unpaid principal amount of said Loan, together with all accrued but
unpaid principal thereon, upon the earlier to occur of (i) the sale of the
Referenced Mortgage Loan, (ii) the repayment, whether by securitization or
otherwise, of the Referenced Mortgage Loan, (iii) the issuance of a temporary or
permanent certificate of occupancy for the real property encumbered by the
Referenced Mortgage Loan, and (iv) the 365th day after the making of the Loan.

(b) In the case of each Loan with respect to which the Referenced Mortgage Loan
is a Second Mortgage Loan, the Borrower hereby unconditionally promises to pay
to the Agent, for the benefit of the Lenders, the then unpaid principal amount
of said Loan, together with all accrued but unpaid principal thereon, upon the
earlier to occur of (i) the sale of the Referenced Mortgage Loan, (ii) the
repayment, whether by securitization or otherwise, of the Referenced Mortgage
Loan, (iii) the issuance of a temporary or permanent certificate of occupancy
for the real property encumbered by the Referenced Mortgage Loan, and
(iv) either (A) the 90th day after the making of the Loan or (B) the 365th day
after the making of the Loan if the first mortgage loan encumbering said real
property is fully satisfied so that the Referenced Mortgage Loan becomes an
Eligible First Mortgage Loan.

(c) [Intentionally Omitted].

 

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(d) Notwithstanding anything to the contrary contained in this Agreement, the
Borrower hereby unconditionally promises to pay to the Agent, for the benefit of
the Lenders, the then unpaid principal amount of all Loans, together with all
accrued interest thereon and all other amounts due and payable hereunder in
connection with the Loans, on the Maturity Date or such earlier date following
acceleration thereof or the termination of this Agreement. In addition, the
Lenders’ agreement to make Loans shall expire three (3) months prior to the
Maturity Date (and there shall be no further Loans) if, prior to said date,
either party has notified the other that it does not intend to extend or renew
this Agreement. Subject to payment of the fees set forth in Section 12(e) of
Annex 2, the Borrower may at any time upon thirty (30) days written notice to
the Agent cancel the Loan facility in its entirety and terminate this Agreement,
except for obligations which by their express terms survive any termination of
this Agreement.

1.5 Application of Payments in General. Upon the sale, assignment, transfer or
other disposition by the Borrower of any Mortgage Loan, the Agent shall apply
all payments received by it from the Borrower with respect to such Loan:
(i) until the occurrence and during the continuance of a Default or an Event of
Default, in satisfaction (A) first, of any fees, costs, or charges in connection
with the Obligations, (B) next, to accrued but unpaid interest with respect to
that particular Loan, and (C) next, to the principal amount of that particular
Loan; and (ii) upon and during the continuance of a Default or an Event of
Default, in such order, manner or sequence as Agent in its sole and absolute
discretion shall elect.

1.6 Monthly Statement and Automatic Charges. After the end of each month, the
Agent shall render to the Borrower a statement of the Loans showing the loan
balance and all applicable credits and debits; provided that the failure of the
Agent to so render shall in no event limit any Loan Party’s duties and
obligations under any Loan Document. Each statement shall be conclusive, binding
and final for all purposes, absent manifest error and deemed to have been
accepted by the Borrower and shall be binding upon the Borrower in respect of
the loan balance and all charges, debits and credits of whatsoever nature
contained therein respecting the Loans, unless the Borrower notifies the Agent
in writing of any discrepancy within twenty (20) days from the mailing by the
Agent to the Borrower of any such monthly statement. At the option of the Agent,
all payments in respect of any Obligation will automatically be debited from any
of the Borrower’s accounts, as elected by the Agent, including, but not limited
to, the Loan Account.

1.7 Fees. The Borrower shall pay to the Agent all of the fees set forth in
Section 12 of Annex 2 hereto.

1.8 Computations of Interest and Fees. All computations of interest and of fees
(other than flat fees) shall be made by the Agent on the basis of a year of 360
days for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest and fees are payable.
Each determination of an interest rate or the amount of a fee hereunder shall be
made by the Agent and shall be conclusive, binding and final for all purposes,
absent manifest error. All fees shall be (a) deemed to be an Obligation,
(b) fully earned on the earlier of (i) the date specified such fee is earned or
(ii) the date such fee is payable and (c) nonrefundable and shall not be subject
to reduction, rebate or proration whatsoever. For purposes of calculating
interest hereunder, all repayment items shall be credited to the Borrower’s
account three Business Days after receipt thereof by the Agent, subject to
reversal for any reason in the Agent’s sole reasonable discretion including, but
not limited to, dishonor or bankruptcy.

1.9 Increased Costs; Capital Requirements.

 

  (a)

Increased Costs. If at any time the Agent or any Lender determines that, after
the date hereof, the adoption of, or any change in or in the interpretation,
application or administration of, or compliance with, any law, statute, rule,
regulation or other similar Requirements of Law of any Governmental Authority
shall have the effect of (i) increasing the cost to the Agent or such Lender of
making, funding or maintaining any Loan or to agree to do so or of
participating, or agreeing to participate, in extensions of credit, or
(ii) imposing any other cost to the Agent or such Lender with respect to
compliance with its obligations under any Loan Document, then, upon demand by
the Agent or such Lender,

 

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  the Borrower shall pay to the Agent amounts sufficient to compensate the Agent
or such Lender for such increased cost. For purposes of this provision, the
Dodd-Frank Wall Street Reform and Consumer Protection Act and all rules,
regulations, orders, requests, guidelines and directives in connection therewith
are deemed to have been adopted and gone into effect after the date of this
Agreement.

 

  (b) Increased Capital Requirements. If at any time the Agent or any Lender
determines that, after the date hereof, the adoption of, or any change in or in
the interpretation, application or administration of, or compliance with, any
Requirement of Law from any Governmental Authority regarding capital adequacy,
reserves, special deposits, compulsory loans, insurance charges against property
of, deposits with or for the account of, Obligations owing to, or other credit
extended or participated in by, the Agent or such Lender or any similar
requirement shall have the effect of reducing the rate of return on the capital
of the Agent or such Lender (or any Person controlling the Agent or such Lender)
as a consequence of its obligations under or with respect to any Loan Document
to a level below that which, taking into account the capital adequacy policies
of the Agent, such Lender or Person, the Agent, such Lender or Person could have
achieved but for such adoption or change, then, upon demand from time to time by
the Agent, the Borrower shall pay to the Agent amounts sufficient to compensate
the Agent, such Lender or Person for such reduction.

 

  (c) Compensation Certificate. Each demand for compensation under this
Section 1.9 shall be accompanied by a certificate of the Agent or the applicable
Lender claiming such compensation, setting forth in reasonable detail the
computation of the amounts to be paid hereunder, which certificate shall be
conclusive, binding and final for all purposes, absent manifest error. In
determining such amount, the Agent and any Lender may use any reasonable
averaging and attribution methods.

1.10 Taxes.

 

  (a) Payments Free and Clear of Taxes. Except as otherwise provided in this
Section 1.10, each payment by the Borrower under any Loan Document shall be made
free and clear of all present or future taxes, levies, imposts, deductions,
charges or withholdings and all liabilities with respect thereto (and without
deduction for any of them) (collectively, the “Taxes”) other than for taxes
measured by net income (including branch profits taxes) and franchise taxes
imposed in lieu of net income taxes, in each case imposed on the Agent or any
Lender as a result of a present or former connection between the Agent or such
Lender and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than
such connection arising solely from the Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or enforced,
any Loan Document).

 

  (b) Gross-Up. If any Taxes shall be required by law to be deducted from or in
respect of any amount payable under any Loan Document to the Agent or any Lender
(i) such amount shall be increased as necessary to ensure that, after all
required deductions for Taxes are made (including deductions applicable to any
increases to any amount under this Section 1.10), the Agent or such Lender
receives the amount it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall timely
pay the full amount deducted to the relevant taxing authority or other authority
in accordance with applicable Requirements of Law.

 

  (c)

Other Taxes. The Borrower agrees to pay (and authorizes the Agent to pay in the
Borrower’s name to the extent the Borrower fails to do so) on prior to the date
when due, any stamp, documentary, excise or property tax, charges or similar
levies imposed by any applicable Requirement of Law or Governmental Authority
and all liabilities with respect thereto (including by reason of any delay in
payment thereof), in each case arising from

 

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  the execution, delivery or registration of, or otherwise with respect to, any
Loan Document or any transaction contemplated therein (collectively, “Other
Taxes”). Within thirty (30) days after the date of any payment of Taxes or Other
Taxes by the Borrower, the Borrower shall furnish to the Agent the original or a
certified copy of a receipt evidencing payment thereof.

 

  (d) Indemnification. The Borrower and each Guarantor shall jointly and
severally reimburse and indemnify, within thirty (30) days after receipt of
demand therefor, the Indemnitees for all Taxes and Other Taxes (including any
Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this
Section 1.10) paid by such Indemnitee and any liabilities arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. A certificate of any Indemnitee claiming any compensation
under this clause (d), setting forth in reasonable detail the computation of the
amounts to be paid thereunder and delivered to the Borrower shall be conclusive,
binding and final for all purposes, absent manifest error. In determining such
amount, an Indemnitee may use any reasonable averaging and attribution methods.

1.11 Reserved.

1.12 Conditions to Loans. Without limiting the discretionary nature of any Loan
hereunder, the Agent’s and each Lender’s obligation to make Loans shall be
subject to the fulfillment by the Borrower on or before the date thereof of the
following conditions precedent:

 

  (a) Representations and Warranties True, Complete and Correct. Each
representation and warranty of any Loan Party contained herein and in any
agreement or instrument furnished to the Agent shall be true, complete and
correct in all material respects as of the date of said Loan (except for
representations which by their terms relate to a different date, in which case
said representations and warranties shall continue to have been true, complete
and correct in all material respects as of said date); and

 

  (b) No Material Adverse Change. There shall have been no Material Adverse
Effect since the Closing Date; and

 

  (c) No Default. There shall have occurred no Event of Default or any condition
or event which would upon notice or lapse of time, or both, constitute an Event
of Default.

2. GRANT OF SECURITY INTEREST AND COLLATERAL MATTERS

2.1 Grant of Security Interest. In consideration of the Agent and each Lender
extending credit and other financial accommodations to or for the benefit of the
Borrower, whether under this Agreement or otherwise and whether evidenced by
notes or not, the Borrower hereby grants to the Agent, for the benefit of the
Lenders, a first priority security interest in, a lien on and pledge and
assignment of the Collateral owned by the Borrower. The security interest
granted by this Agreement is given to and shall be held by the Agent, for the
benefit of the Lenders, as security for the payment and performance of all
Obligations, including, without limitation, all amounts outstanding pursuant to
the Loan Documents.

2.2 Deposits into Blocked Account. The Borrower shall cause all payments
received by the Borrower with respect to all Mortgage Loans (including, but not
limited to, principal, interest, fees, expenses, and the proceeds of assignment,
sale or securitization to be deposited directly into the Blocked Account.

2.3 Reserved.

2.4 Records. The Borrower shall maintain its books and records relating to the
Collateral segregated from all the Borrower’s other books and records in a
manner satisfactory to the Agent; and shall deliver to the Agent from time to
time promptly at its request all notes, mortgages, deeds of trust, prior,
superseded

 

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and consolidated notes, prior assignments of notes and mortgages, in each case
duly indorsed for transfer or accompanied by transfer powers executed in blank,
all as the Agent may specify, together with such other original documents of
title, contracts, chattel paper, instruments and any other writings relating
thereto, and other evidence of performance of contracts; and the Borrower will
deliver to the Agent promptly at the Agent’s request from time to time
additional copies of any or all of the foregoing, and such other information
with respect to any of the Collateral as the Agent may in its sole discretion
deem to be necessary or effectual to evidence any Loan hereunder or the Agent’s
security interest in the Collateral.

2.5 Legends. The Borrower shall promptly make, stamp or record such entries or
legends on the Borrower’s tangible books and records or on any of the tangible
Collateral (including, without limitation, chattel paper) as Agent shall request
from time to time to indicate and disclose that Agent has a security interest in
such Collateral.

2.6 Inspection. The Agent, or its representatives, at such times as are set
forth in Section 2 of Annex 2, shall have the right at the sole cost and expense
of the Borrower, and the Borrower will permit the Agent and/or its
representatives: (a) to examine, check, make copies of or extracts from any of
the Borrower’s books, records and files (including, without limitation, orders
and original correspondence); (b) to perform field exams or otherwise inspect
and examine the Collateral and to check, test or appraise the same as to age,
quality, quantity, value and condition; and (c) to verify the Collateral or any
portion or portions thereof or the Borrower’s compliance with the provisions of
this Agreement. The costs of such field exams and inspections shall consist of a
per-person auditor charge as are set forth in Section 2 of Annex 2 or the actual
costs if such auditor is retained by the Agent. The Borrower hereby irrevocably
authorizes and directs all accountants and auditors employed or engaged by the
Borrower at any time during the term of this Agreement and all data processing
centers or other persons having information relevant to the Borrower’s financial
condition to deliver copies of all materials in their possession to the Agent
upon the Agent’s request therefor.

2.7 Reserved.

2.8 Search Reports and Credit Reports. The Agent shall have the right, prior to
the date of this Agreement and from time to time thereafter as Agent may
determine in its reasonable discretion, to order UCC search results under all
names used by the Borrower or any Guarantor during the prior five (5) years,
from each jurisdiction where any Collateral is located, from the State, if any,
where the Borrower or such Guarantor is organized and registered, the State
where the Borrower’s or any Guarantor’s chief executive office is located and
all other locations deemed necessary by the Agent, all at the expense of the
Borrower. The Agent is authorized to make all inquires the Agent deems necessary
to verify the accuracy of the information in respect of the Borrower or any
Guarantor contained in the Loan Documents and to determine the credit worthiness
of such party. The Borrower and each Guarantor authorize any Person or credit
reporting agency to give to the Agent any information it may have on such party.
The Borrower and each Guarantor authorize the Agent to answer questions about
such party’s credit experience with the Agent.

2.9 Further Assurances. The Borrower and each Guarantor will, at the request of
the Agent, from time to time, at its own cost and expense, execute and deliver
to the Agent such documents, and take or cause to be taken, all such other or
further action, as the Agent may request in order to effect and confirm or vest
in the Agent and the Lenders all rights contemplated by this Agreement and the
other Loan Documents (including, without limitation, to correct clerical errors)
or to vest more fully in or assure to the Agent the security interest in the
Collateral granted to the Agent by this Agreement or to comply with applicable
statute or law and to facilitate the collection of the Collateral (including,
without limitation, the execution of stock transfer orders and stock powers,
endorsement of promissory notes and instruments and notifications to obligors on
the Collateral). To the extent permitted by Requirements of Law, the Borrower
authorizes the Agent to file financing statements, continuation statements or
amendments with respect to the Borrower or any Subsidiary as may be reasonably
required by Agent, and any such financing statements, continuation statements or
amendments may be filed at any time in any jurisdiction. The Agent may at any
time and from time to time file financing statements, continuation statements
and amendments thereto with respect to the Borrower or any Subsidiary as may be
reasonably required by

 

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Agent which contain any information required by the Code for the sufficiency or
filing office acceptance of any financing statement, continuation statement or
amendment, including the description of the Collateral as “all assets” or “all
property”, the type of organization and any organization identification number
issued to the Borrower. The Borrower agrees to furnish any such information to
Agent promptly upon request. In addition, the Borrower shall at any time and
from time to time take such steps as Agent may reasonably request for Agent
(i) to obtain control of any Collateral comprised of deposit accounts,
electronic chattel paper, letter of credit rights or investment property, with
any agreements establishing control to be in form and substance satisfactory to
Agent, (ii) to obtain collateral or absolute assignments of all notes, mortgages
or deeds of trust constituting Collateral, together with all affidavits and
other instruments reasonably required to permit the registration and recordation
of any Collateral into the Agent’s name, all in form and substance satisfactory
to the Agent in its sole and absolute discretion, as well as to obtain all
surveys, title insurance policies and other instruments reasonably requested by
the Agent in connection with such notes, mortgages or deeds of trust, and
(iii) otherwise to insure the continued perfection and priority of Agent’s
security interest in any of the Collateral and the preservation of its rights
therein. The Borrower hereby constitutes the Agent as its attorney-in-fact to
execute, if necessary, and file all filings required or so requested for the
foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; and such power, being coupled with an interest, shall be irrevocable
until this Agreement terminates in accordance with its terms, all Obligations
are irrevocably paid in full and the Collateral is released.

3. REPRESENTATIONS AND WARRANTIES

In order to induce the Agent and each Lender to enter into this Agreement and to
extend the credit herein provided for, the Borrower and each Guarantor hereby
jointly and severally represent and warrant to the Agent and each Lender that:

3.1 Organization and Qualification. The Borrower, each Guarantor and each
Subsidiary 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 own its property and to carry on its business as now conducted
currently proposed to be 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. The name
of the Borrower, each Guarantor and each Subsidiary is as set forth on the
signature page hereto and the Borrower and each Subsidiary shall not change such
name, conduct its business in any other name or take title to the Collateral in
any other name while this Agreement remains in effect. Neither the Borrower nor
any Guarantor has had any name, or conducted business under any name in any
jurisdiction, other than its name set forth on the signature page hereto, during
the past five years except as set forth on Schedule 3.1 hereto.

3.2 Authorization; Enforceability. The Transactions are within the corporate,
limited liability company, partnership or other analogous powers of the Borrower
and each Guarantor to the extent it is a party thereto and have been duly
authorized by all necessary corporate, limited liability company, partnership or
other analogous equity holder action, if required. Each Loan Document has been
duly executed and delivered by the Borrower and each Guarantor to the extent it
is a party thereto and constitutes a legal, valid and binding obligation
thereof, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally.

3.3 Ownership; Subsidiaries. The Stock of the Borrower is owned beneficially and
of record as set forth on Schedule 3.3. As of the Effective Date, neither the
Borrower nor Newtek has any Subsidiaries except as set forth on Schedule 3.3.

3.4 Title to Properties; Absence of Liens and Claims. Except as set forth on
Schedule 3.4,

 

  (a)

The Borrower, each Guarantor and each Subsidiary has good title to, or valid
leasehold interests in, all real and personal property material to its business,
except for minor

 

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  defects in title that do not interfere with its ability to conduct its
business as currently conducted or contemplated to be conducted or to utilize
such properties for their intended purposes.

 

  (b) The Borrower, each Guarantor and each Subsidiary owns, or is entitled to
use, all trademarks, trade names, copyrights, patents and other intellectual
property material to its business, and the use thereof by such Person 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.

 

  (c) Neither the Borrower nor any Guarantor owns any real property.

 

  (d) No Collateral is in the possession of any Person asserting any claim
thereto or security interest therein other than the Agent or its designee.

3.5 Places of Business. The Borrower’s and Newtek’s respective chief executive
office is accurately set forth in the preamble to this Agreement. Schedule 3.5
hereto lists each location existing on the date hereof where (i) the Borrower’s
books and records (including computer printouts and programs) are maintained and
(ii) any tangible Collateral is stored or located.

3.6 Validity and Perfection of Security Interest. This Agreement is effective to
create in favor of the Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Collateral and when (i) financing
statements in appropriate form, properly describing the collateral and
identifying the Borrower as debtor and identifying the Agent as the secured
party are filed in the office of the secretary of state of the jurisdiction of
organization of the Borrower or such other office specified by the Code as
necessary for perfection, (ii) the Agent obtains control of Collateral
consisting of investment property and possession of Collateral consisting of
instruments and (iii) appropriate documents with respect to Patents, Trademarks
and Copyrights, if any, are filed in the United States Patent and Trademark
Office or the United States Copyright Office, as the case may be, the security
interest granted to the Agent shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Borrower in such
Collateral, in each case prior and superior in right to any other Person, other
than with respect to Permitted Liens.

3.7 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) the filing of financing statements and
other documents contemplated by Section 3.6 (and appropriate amendments and
continuations of financing statements that may be required under the Code to
maintain the perfection and priority of the Liens of the Agent on the
Collateral) and (ii) such as have been obtained or made and are in full force
and effect, (b) will not violate any Requirement of Law or the Organizational
Documents of the Borrower or any order of any Governmental Authority applicable
to any of them, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Borrower or its assets, or give
rise to a right thereunder to require any payment to be made by the Borrower,
and (d) will not result in the creation or imposition of any Lien on any asset
of the Borrower (other than Liens in favor of the Agent).

3.8 Permits. The Borrower possesses or has the right to use, and is in
compliance with, all Permits and other rights that are material to the conduct
of its business and knows of no conflict with the valid rights of others which
could reasonably be expected to have a Material Adverse Effect. To the best
knowledge of the Borrower, no event has occurred which permits or, after notice,
lapse of time (or both) or any other condition, could reasonably be expected to
permit, the revocation or termination of any such franchise, license or other
right which revocation or termination could reasonably be expected to have a
Material Adverse Effect.

 

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3.9 Litigation and Environmental Matters. Except as set forth on Schedule 3.9:

 

  (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 or
Newtek, threatened against or affecting the Borrower or any Guarantor (i) that,
if adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect or (ii) that involve any Loan
Document or the Transactions.

 

  (b) Neither the Borrower nor any Guarantor has (i) failed to comply with any
Environmental Law or to obtain, maintain or comply with any Permit or other
approval required under any Environmental Law, (ii) become subject to any
Environmental Liability, (iii) received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any Environmental
Liability.

Since the date of this Agreement, there has been no change in the status of the
matters contemplated in this Section 3.9 that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material Adverse
Effect.

3.10 Investment Company Status. The Borrower is not an “investment company” as
defined in, or subject to regulation under, the Investment Company Act of 1940,
as amended.

3.11 Compliance with Law and Agreements. The Borrower 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. No default under any such indenture, agreement or other
instrument has occurred and is continuing or would result from the incurrence of
the obligations of the Loan Parties under the Loan Documents or from the grant
or perfection of the Liens granted to the Agent under this Agreement.

3.12 Financial Statements. The Borrower has heretofore furnished to the Agent
the financial statements as indicated in Section 3 of Annex 2 Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Borrower any other entities
reflected therein as of such dates and for the indicated periods in accordance
with GAAP (subject to normal year-end audit adjustments and the absence of
footnotes in the case of quarterly statements) and are consistent with the books
and records of the Borrower and each Guarantor (which books and records are
correct and complete). Since January 1, 2015, the Borrower and each Guarantor
has conducted its respective business only in the ordinary course and there has
been no Material Adverse Change.

3.13 Reserved.

3.14 Title to Collateral. The Borrower has good and valid rights in and title to
the Collateral in which it purports to grant a security interest hereunder and
has full power and authority to grant to the Agent, for the benefit of the
Lenders, a Lien on such Collateral pursuant hereto and to execute, deliver and
perform its obligations with respect to the Collateral in accordance with the
terms of this Agreement, without the consent or approval of any other Person
other than any consent or approval which has been obtained. The Collateral owned
or held by or on behalf of the Borrower is so owned or held by it free and clear
of any Lien, except for Permitted Liens. The Lien of the Agent on the Collateral
is and shall be prior to any other Lien on any of the Collateral, other than
Permitted Liens which by operation of law have priority over such Lien.

3.15 Location of Collateral. Except as set forth on Schedule 3.15, no Collateral
is in the possession of, or under the control of, any Person other than the
Borrower or the Agent.

3.16 Taxes. The Borrower and each Guarantor have 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 by the relevant due date all Loan Party Taxes required to have
been paid by it.

 

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3.17 Federal Reserve Regulations. Neither the Borrower nor any of the Guarantors
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of buying or carrying Margin Stock. None of
the Collateral is used or was acquired primarily for personal, family or
household purposes.

3.18 Labor Matters. As of the date hereof, there are no strikes, lockouts or
slowdowns against the Borrower or any Guarantor pending or, to the knowledge of
the Borrower, threatened. The hours worked by and payments made to employees of
the Borrower and each Guarantor have not been in violation of the Fair Labor
Standards Act or any other applicable Federal, state, local or foreign law
dealing with such matters. All material payments due from the Borrower or any
Subsidiary, or for which any claim may be made against the Borrower or any
Subsidiary, on account of wages and employee health and welfare insurance and
other benefits, have been paid or, to the extent required by GAAP, accrued as a
liability on the books of the Borrower or such Subsidiary. The consummation of
the Transactions will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which the Borrower or any Subsidiary is a party or by which it is bound.

3.19 Insurance. Schedule 3.19 sets forth a description of all insurance
maintained by or on behalf of the Borrower and the Guarantors as of the date
hereof. As of the date hereof, all premiums in respect of such insurance that
are due and payable have been paid.

3.20 Solvency. After giving effect to the transactions contemplated by this
Agreement, and before and after giving effect to the making of each Loan, the
Borrower is Solvent. No transfer of property has been or will be made by the
Borrower and no obligation has been or will be incurred by the Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of the Borrower.

3.21 Disclosure. The Borrower has disclosed to the Agent all agreements,
instruments and corporate or other restrictions to which the Borrower or any
Guarantor is subject, and all other matters known to it, that, individually,
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 or any Guarantor to the Agent in
connection with the negotiation of the Loan Documents or delivered thereunder
(as modified or supplemented by other written 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 and there can be no assurance that actual results will comport with such
projections.

3.22 ERISA. Each Plan applicable to the Borrower or any Guarantor is in
compliance in all material respects with the applicable provisions of ERISA, the
Tax Code and other federal or state Laws. Each Plan that is intended to qualify
under Section 401(a) of the Tax Code has received a favorable determination
letter from the IRS or an application for such a letter is currently being
processed by the IRS with respect thereto and, to the best knowledge of the
Borrower and Newtek, nothing has occurred which would prevent, or cause the loss
of, such qualification. The Borrower, each Guarantor, and each ERISA Affiliate
(if any) have made all required contributions to each Plan subject to
Section 412 of the Tax Code, and no application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Tax Code has
been made with respect to any Plan. No Lien imposed under the Tax Code or ERISA
exists or is likely to arise on account of any Plan. There are no pending or, to
the best knowledge of the Borrower and Newtek, threatened claims, actions or
lawsuits, or action by any Governmental Authority, with respect to any Plan that
could reasonably be expected to have a Material Adverse Effect. There has been
no prohibited transaction or violation of the fiduciary responsibility rules
with respect to any Plan that has resulted or could reasonably be expected to
result in a Material Adverse Effect. (i) No ERISA Event has occurred or is
reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension
Liability; (iii) neither any the Borrower nor any ERISA Affiliate has incurred,
or reasonably expects to incur, any liability under Title IV of ERISA with
respect to any Pension Plan (other than premiums due and not delinquent under
Section 4007 of ERISA and other than periodic contribution

 

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requirements); (iv) neither the Borrower nor any ERISA Affiliate has incurred,
or reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Sections 4069 or 4212(c) of ERISA, which in
each case could reasonably be expected to have a Material Adverse Effect.

3.23 Termination of Capital One Facility. Newtek has caused the direct loan
facility with Capital One, National Association, established pursuant to that
certain Credit Agreement, dated as of June 26, 2014, by and between Newtek and
Capital One, National Association, to be terminated and all liens and security
interests in and to the property and assets of Newtek in favor of Capital One,
other than its pledge of the equity interests in Newtek Small Business Finance,
LLC (“NSBF”) owned by Newtek and the promissory notes due from NSBF to Newtek,
to be terminated of record including, but not limited to, by way of amendment to
that certain UCC-1 financing statement No. #0000000181514512 filed on
November 10, 2014 in the Office of the Maryland State Department of Assessments
and Taxation.

4. AFFIRMATIVE COVENANTS

Until the principal of and interest on each Loan and all fees and other amounts
payable under the Loan Documents shall have been paid in full, the Borrower
agrees to comply with the covenants set forth in this Article 4.

4.1 Payments and Performance. The Borrower will duly and punctually pay all
payment Obligations and will duly and punctually perform all other Obligations
on its part to be performed under the Loan Documents.

4.2 Books and Records; Inspection. The Borrower will, and will cause each of the
Guarantors and Subsidiaries to, at all times keep proper books of account in
which full, true and correct entries will be made of its transactions in
accordance with generally accepted accounting principles, consistently applied
and which are, in the opinion of a Certified Public Accountant acceptable to
Agent, adequate to determine fairly the financial condition and the results of
operations of the Borrower and each Guarantor. The Borrower will, and will cause
each of the Guarantors and Subsidiaries to, at all reasonable times and upon
reasonable notice make its books and records available in its offices for
inspection, examination and duplication by the Agent and the Agent’s
representatives and will permit the Agent and the Agent’s representatives to
(i) inspect the Collateral and all of its properties, (ii) discuss its affairs,
finances and condition with its officers and independent accountants and
(iii) perform any field examination, Collateral analysis or other business
analysis or audit relating to the Borrower or any Guarantor or Subsidiary at
such reasonable times and as often as reasonably requested (and in any event not
less frequently than specified in Section 2 of Annex 2); provided that, if no
Event of Default exists, the Borrower shall be responsible only for reasonable
fees and expenses in connection with any such examination, Collateral analysis
or other business analysis or audit as specified in Section 2 of Annex 2. The
Borrower will from time to time furnish the Agent with such information and
statements as the Agent may request in its sole discretion with respect to the
Obligations or the Agent’s security interest in the Collateral. The Borrower
shall, during the term of this Agreement, keep the Agent currently and
accurately informed in writing of each location where such the Borrower’s
records relating to its accounts and contract rights are kept and each of its
places of business, and shall not remove such records to another location,
change the location of its chief executive office or open or close, move or
change any existing or new place of business without the prior written consent
of the Agent.

4.3 Financial Statements and Reporting. The Borrower will furnish to Agent and
each Lender the financial statements and reports set forth in Section 13 of
Annex 2 hereto.

4.4 Maintenance of Existence; Conduct of Business. The Borrower will, and will
cause each of the Guarantors and Subsidiaries to, maintain its existence in good
standing and shall do or cause to be done all things necessary to preserve and
keep in full force and effect its legal existence and all rights, Permits,
privileges and franchises material to the conduct of its business.

 

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4.5 Compliance with Law. The Borrower will, and will cause each of the
Guarantors and Subsidiaries to, comply with all laws, rules, regulations and
orders of any Governmental Authority applicable to it or its property, except
where the failure to do so could not reasonably be expected to have a Material
Adverse Effect.

4.6 Reserved.

4.7 Solvency. The Borrower will remain Solvent during the term of this
Agreement.

4.8 Operating and Deposit Accounts. The Borrower shall maintain with the Agent
the accounts set forth in Section 4 of Annex 2.

4.9 Payment of the Borrower Taxes, Accounts Payable and Other Obligations. The
Borrower will, and will cause each of the Guarantors and Subsidiaries to, pay,
before the same shall become delinquent or in default, its obligations,
including Loan Party Taxes, except and only to the extent that (a) the validity
or amount thereof is being contested in good faith by appropriate proceedings
diligently conducted, (b) the Borrower or such Guarantor or 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. The Agent may, at
its option, from time to time, discharge any taxes, liens or encumbrances of any
of the Collateral, and the Borrower will pay to the Agent on demand or the Agent
in its sole discretion may charge to the Borrower all amounts so paid or
incurred by it.

4.10 Maintenance of Collateral. The Borrower will keep the Collateral and all of
its other tangible Property in good repair, working order and condition
(ordinary wear and tear excepted). The Borrower will immediately notify the
Agent of any loss or damage to, or any occurrence which could reasonably be
expected to materially adversely affect the value of, any Collateral. The Agent
may, at its option, from time to time, take any action that the Agent may deem
proper to repair, maintain or preserve any of the Collateral without affecting
any of its rights or remedies provided herein or as a secured party under the
Code, and the Borrower will pay to the Agent on demand or the Agent in its sole
discretion may charge to the Borrower all amounts so paid or incurred by it,
which amount shall be added to the amount of the indebtedness secured by the
Collateral.

4.11 Insurance. The Borrower will maintain in full force and effect property
insurance on all Collateral and any other property of the Borrower, if any, and
maintain insurance against such risks of liability (including business
interruption insurance) as specified in Section 5 of Annex 2. Such insurance
policies shall name the Agent, for the benefit of the Lenders, as an additional
insured with respect to liability coverage and lender loss payee with respect to
casualty and business interruption coverage, as applicable, and shall provide
that, with respect to property claims affecting the Collateral, no loss shall be
adjusted thereunder without the Agent’s approval. In addition, all such policies
shall provide that they may not be canceled without first giving at least thirty
(30) days’ written notice of cancellation to the Agent and shall contain a
standard lender’s loss payable endorsement acceptable to the Agent. The Borrower
shall provide to the Agent, promptly upon Agent’s request, evidence of such
insurance and of the annual renewal of each such policy. In the event that the
Borrower fails to provide evidence of such insurance, the Agent may, at its
option, obtain such insurance and charge the cost thereof to the Borrower, which
amount shall be added to the amount of the indebtedness secured hereby, shall be
payable on demand and shall be secured by the Collateral. At the option of the
Agent, all insurance proceeds received from any loss or damage to any of the
Collateral including, without limitation, inventory and Accounts Receivable
shall be applied either to the replacement or repair thereof or as a payment on
account of the Obligations. From and after the occurrence of an Event of
Default, the Agent is authorized to cancel any insurance maintained hereunder
and apply any returned or unearned premiums, all of which are hereby assigned to
the Agent, as a payment on account of the Obligations.

 

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4.12 Notification of Material Events. The Borrower will furnish to the Agent
prompt written notice of the following:

 

  (a) the occurrence of any Default or Event of 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, any
Guarantor, or any Affiliate thereof (or any of their respective Property), which
action, suit or proceeding, if determined adversely to such Borrower, Guarantor
or Affiliate, could reasonably be expected to have a Material Adverse Effect;

 

  (c) the occurrence of any ERISA Event;

 

  (d) the occurrence of any damage in an amount equal to or greater than $50,000
to any portion of any Collateral or the commencement of any action or proceeding
for the taking of any Collateral having a value equal to or greater than $50,000
or any part thereof or interest therein under power of eminent domain or by
condemnation or similar proceeding;

 

  (e) any suspension of business, assignment for the benefit of creditors,
dissolution, petition in receivership or under any chapter of the United States
Bankruptcy Code, as amended from time to time, by or against any Mortgage
Debtor, any Mortgage Debtor’s becoming insolvent or unable to pay its debts as
they mature or any other act of the same or different nature amounting to a
business failure of which the Borrower has knowledge;

 

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

 

  (g) any dispute, allowance or settlement with any Mortgage Debtor relating to
an amount in excess of $25,000.

Each notice delivered under this Section 4.12 shall be accompanied by a
statement of the chief financial officer or other executive officer of the
Borrower setting forth in reasonable detail a description of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.

4.13 Lien Law. If any account or general intangible included in the Collateral
represents money owing pursuant to any contract for the improvement of real
property or for a public improvement for purposes of the Lien Law of the State
of New York (the “Lien Law”), the Borrower shall comply with the filing
requirements of the Lien Law and (i) give Agent notice of such fact;
(ii) receive and hold any money advanced by Agent with respect to such account
or general intangible as a trust fund to be applied to the payment of trust
claims as such term is defined in the Lien Law (Section 71 or otherwise); and
(iii) until such trust claim is paid, not use or permit the use of any such
money for any purpose other than the payment of such trust claims.

4.14 Environmental. The Borrower shall, and shall cause each of the Guarantors
and Subsidiaries to, use and operate all of their respective facilities and
property in compliance with all Environmental Laws, keep all necessary Permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance therewith, and handle
all Hazardous Materials in compliance with all applicable Environmental Laws.
The Borrower agrees to indemnify and hold each Indemnitee harmless from all
liability, loss, cost, damage and expense, including attorneys’ fees and costs
of litigation, arising from any violation by the Borrower, any Guarantor, or any
Mortgage Debtor of any Environmental Law (including those arising from any lien
by any Federal, state or local government arising from the presence of Hazardous
Materials) or from the presence of Hazardous Materials located on or emanating
from any of the premises owned or controlled by the Borrower, any Guarantor, any
Mortgage Debtor, or any Subsidiary. The Borrower further agrees to reimburse the
Agent or any Lender

 

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upon demand for any costs incurred by the Agent or such Lender in connection
with the foregoing, which amount shall be added to the amount of the
indebtedness secured by the Collateral. The Borrower agrees that its obligations
hereunder shall survive the repayment of all Obligations.

4.15 Third Parties. The Borrower acknowledges and agrees that the Agent shall
have no duty to, and shall not be deemed to have assumed any liability or
responsibility to, the Borrower or any third Person for the correctness,
validity or genuineness of any instruments or documents that may be released or
endorsed to the Borrower by the Agent (all of which shall be without recourse to
the Agent); and the Agent, by accepting a Lien on the Collateral, or by
releasing any Collateral to the Borrower, shall have no duty to, and shall not
be deemed to have assumed any obligation or liability to, any supplier, Mortgage
Debtor or any other third party, and the Borrower agrees to indemnify and defend
the Agent against and hold it harmless from any claim or proceeding arising out
of the foregoing.

4.16 Use of Proceeds. The proceeds of the Loans shall be used to finance the
general corporate purposes of the Borrower in the ordinary course of business.
No portion of any loan shall be used for (i) the purpose of purchasing or
carrying any “margin security” or “margin stock” as such terms are used in
Regulations U and X of the Board of Governors of the Federal Reserve System, 12
C.F.R. 221 and 224 or (ii) primarily personal, family or household purposes.

4.17 Requirements for Mortgage Loans. Each Mortgage Loan shall either be an
Eligible First Mortgage Loan or an Eligible Second Mortgage Loan. The amount of
any advance by the Lenders with respect to an Eligible Mortgage Loan that is (or
becomes, by virtue of the repayment of a prior mortgage loan) an Eligible First
Mortgage Loan shall not exceed the lesser of (i) $4,500,000 and (ii) 81% of the
Appraised Value of the real property encumbered by said Eligible First Mortgage
Loan. The amount of any advance by the Lenders with respect to an Eligible
Second Mortgage Loan shall not exceed the lesser of (i) $3,600,000 and (ii) 45%
of the Appraised Value of the real property encumbered by said Eligible Second
Mortgage Loan. Notwithstanding the foregoing, the amount of any advance by the
Lenders with respect to all Eligible Mortgage Loans encumbering any particular
real property shall at no time exceed the sum of (i) 81% of the Appraised Value
said real property during the 90-day period following the initial advance and
(ii) 45% of the Appraised Value of said real property thereafter.

4.18 Mortgage Loan Replacement/Cash Collateral Deposit. In the event any
Borrowing Base Certificate indicates that the Eligible Mortgage Loan Ratio has
not been met, within ten (10) Business Days after delivery of the most recent
Borrowing Base Certificate, the Borrower shall (i) cause to be assigned to the
Agent as collateral security for all Obligations (by executing and delivering
such assignments and instruments as the Agent shall reasonably request)
additional Eligible Mortgage Loans, (ii) deposit with Agent additional cash
collateral, and/or (iii) repay the outstanding balance of Loans so that, had
said assignments, deposits and/or repayments been made as of the last day of the
period covered by said Borrowing Base Certificate, the Eligible Mortgage Loan
Ratio would have been met.

5. NEGATIVE COVENANTS

Until the principal of and interest on each Loan and all fees and other amounts
payable under the Loan Documents shall have been paid in full, the Borrower
agrees to comply with the covenants set forth in this Article 5.

5.1 Financial Covenants. Until the principal of and interest on each Loan and
all fees and other amounts payable under the Loan Documents shall have been paid
in full, the Borrower agrees to comply with the financial covenants set forth in
Section 14 of Annex 2 hereto.

5.2 Indebtedness. The Borrower will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist any Indebtedness, except:

 

  (a) Indebtedness under the Loan Documents;

 

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  (b) Indebtedness existing on the date hereof and set forth in Schedule 5.2 and
subject to a Subordination Agreement, but not any extensions, renewals or
replacements of any such Indebtedness; provided that, with respect to any such
Indebtedness, the Borrower shall, no later than thirty (30) days following the
Closing Date, deliver to the Agent, all in form and substance acceptable to the
Agent, (i) an amendment to each promissory note evidencing such Indebtedness
that provides that (1) the maturity date of the related Indebtedness shall be no
earlier than six months following the Maturity Date and (2) the holder of such
Indebtedness shall not be permitted at any time prior to maturity thereof to
exercise, collect on or otherwise enforce any call provision, put right or
similar provision and (ii) evidence that all loan agreements, security
agreements and promissory notes with respect to such Indebtedness (1) contains
the legend required by the related Subordination Agreement and (2) has been
revised (A) to permit the Obligations and security interest granted in the
Collateral hereunder and (B) so the representations, covenants and defaults
thereunder are no more restrictive than the representations, covenants and
Events of Default contained in the Loan Documents;

 

  (c) unsecured Indebtedness by the Borrower to Newtek or any Affiliate of
Newtek that is incurred after the date hereof and subject to a Subordination
Agreement;

 

  (d) Indebtedness of the Borrower or any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and extensions, renewals and replacements of
any such Indebtedness that do not increase the outstanding principal amount
thereof, provided that (A) such Indebtedness is incurred prior to or within 90
days after such acquisition or the completion of such construction or
improvement and (B) the aggregate principal amount of Indebtedness permitted by
this clause (d) shall not exceed $150,000 at any time outstanding;

 

  (e) Indebtedness under the Revolving Loan Agreement; and

 

  (f) Guaranties in favor of the Agent for the benefit of the Lenders.

For the avoidance of doubt, there are no restrictions on equity investments in
the Borrower so long as such equity investments do not result in a Change of
Control of Borrower.

5.3 Liens. The Borrower will not, and will not permit any Subsidiary 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) Permitted Liens; and

 

  (b) Liens created under the Loan Documents.

5.4 Fundamental Changes. The Borrower will not nor will it 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, or all or substantially all of the equity
securities of any of the Subsidiaries (in each case, whether now owned or
hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto, no Event of Default shall
have occurred:

 

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

 

  (b) any Subsidiary may merge into any other Subsidiary; and

 

  (c) any Subsidiary may sell, transfer, lease or otherwise dispose of its
assets to the Borrower.

 

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Without limiting the restriction set forth in Section 5.5 below, upon, following
the written consent of the Agent, any Person becoming a direct or indirect
Subsidiary of the Borrower will provide the Agent with written notice thereof
setting forth information in reasonable detail describing all of the assets of
such Person and shall (a) cause any such Person to execute and deliver to the
Agent a joinder agreement in form and substance acceptable to the Agent, causing
such Subsidiary to become a party to this Agreement, as a Borrower or Guarantor,
as the Agent may direct, and (b) deliver such other documentation as the Agent
may reasonably request in connection with the foregoing, including, without
limitation, authorization to file appropriate UCC-1 financing statements,
collateral access agreements, blocked account agreements, certified resolutions
and other organizational and authorizing documents of such Person and favorable
opinions of counsel to such Person (which shall cover, among other things, the
legality, validity, binding effect and enforceability of the documentation
referred to above), all in form, content and scope reasonably satisfactory to
Agent.

5.5 Investments, Loans, Advances, Guarantees and Acquisitions. The Borrower will
not, and will not permit any of the Subsidiaries to, purchase, hold or acquire
(including pursuant to any merger, other than a merger permitted by Section 5.4)
any Stock, evidences of Indebtedness or other securities (including any option,
warrant or other right to acquire any of the foregoing) of, make or permit to
exist any loans or advances to, guarantee any obligations of, or make or permit
to exist any investment or any other interest in, any other Person, or purchase
or otherwise acquire (in one transaction or a series of transactions (including
pursuant to any merger)) any assets of any other Person constituting a business
unit, except:

 

  (a) Permitted Investments;

 

  (b) investments existing on the date hereof and set forth in Schedule 5.5;

 

  (c) Investments consisting of extensions of credit in the nature of accounts
receivable arising from the grant of trade credit in the ordinary course of
business;

 

  (d) loans and advances to officers, directors and employees of the Borrower or
any Subsidiary in the ordinary course of the business of the Borrower and its
Subsidiaries as presently conducted in compliance with all Requirements of Law
(including, to the extent applicable, the Sarbanes-Oxley Act of 2002, as
amended) in an aggregate principal amount not to exceed $5,000 at any time
outstanding; and

 

  (e) investments made by the Borrower in the equity securities of any Domestic
Subsidiary and made by any Domestic Subsidiary in the equity securities of any
other Domestic Subsidiary provided that (i) any such equity securities owned by
the Borrower or any Domestic Subsidiary shall become Collateral pursuant to this
Agreement.

5.6 Asset Sales. The Borrower will not, and will not permit any of the
Subsidiaries to, sell, transfer, lease or otherwise dispose of (including
pursuant to a merger, other than a merger permitted by Section 5.4) any assets
or Stock nor will the Borrower issue, or permit any of the Subsidiaries to
issue, any additional shares of its equity securities, except:

 

  (a) sales, transfers, leases and other dispositions of inventory, used or
surplus equipment and Permitted Investments, in each case in the ordinary course
of business and other assets having a value not in excess of $5,000 in any
fiscal year;

 

  (b) sales, transfers, leases and other dispositions made by the Borrower to
any Subsidiary and made by any Subsidiary to the Borrower or any other
Subsidiary;

 

  (c) dispositions of fixed or capital assets to the extent that (i) such
property is exchanged for credit against the purchase price of other replacement
fixed or capital assets or (ii) the proceeds of such disposition are reasonably
promptly applied to the purchase price of such fixed or capital assets;

 

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  (d) Reserved; and

 

  (e) dispositions of assets having a value not in excess of $50,000 in any
fiscal year that are worn out or no longer used or useful in the conduct of
business.

5.7 Sale-and-Leaseback Transactions. The Borrower will not, and will not permit
any of the Subsidiaries to, enter into any arrangement, directly or indirectly,
with any Person whereby it shall sell or transfer any Property used or useful in
its business, whether now owned or hereafter acquired, and thereafter rent or
lease such Property or other Property that it intends to use for substantially
the same purpose or purposes as the Property being sold or transferred.

5.8 Restricted Payments. The Borrower will not, and will not permit any of the
Subsidiaries to, (i) declare or make, or agree to pay for or make, directly or
indirectly, any Restricted Payment, (ii) be or become liable in respect of any
obligation (contingent or otherwise) to purchase, redeem, retire, acquire or
make any other payment in respect of its equity securities or any option,
warrant or other right to acquire any such shares of equity securities or
(iii) create, issue or permit to be outstanding any class of Stock the terms of
which conflict, in any manner, with the restrictions set forth in clauses (i) or
(ii) above. Notwithstanding the foregoing or anything in this Agreement to the
contrary, Borrower and its Subsidiaries may pay dividends and/or distributions,
as applicable, to its shareholders so long as no Event of Default exists or has
occurred and is continuing and the payment of such dividends and/or
distributions would not cause Borrower or the applicable Subsidiary to be in
violation of any other of its obligations hereunder.

5.9 Transactions with Affiliates. The Borrower will not, and will not permit any
of the Subsidiaries to, sell, transfer, lease or otherwise dispose of (including
pursuant to a merger, other than a merger permitted by Section 5.4) any property
or assets to, or purchase, lease or otherwise acquire (including pursuant to a
merger) any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except 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 arms-length basis from
unrelated third parties.

5.10 Restrictive Agreements. The Borrower will not, and will not permit any of
the 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 or any Subsidiary 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 equity securities or to make or repay loans or advances to
the Borrower or Subsidiary or to guarantee Indebtedness of the Borrower or any
Subsidiary, provided that (i) the foregoing shall not apply to restrictions and
conditions imposed by law or by this Agreement, (ii) the foregoing shall not
apply to 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, (iii) clause (a) of this Section 5.10 shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the Property securing such Indebtedness and (iv) clause (a) of
this Section 5.10 shall not apply to customary provisions in leases restricting
the assignment thereof.

5.11 Amendment of Material Documents. The Borrower will not, and will not permit
any of the Subsidiaries to, amend, modify or waive any of its rights under its
Organizational Documents, other than immaterial amendments, modifications or
waivers that would not reasonably be expected to adversely affect the Agent or
any Lender. In furtherance of the foregoing, the Borrower will not change its
name, its type of organization or jurisdiction of organization without
(x) giving the Agent at least thirty (30) days prior written notice thereof and
(y) taking all actions required to maintain the perfection and priority of the
Lien of the Agent on all Collateral.

 

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5.12 Lines of Business. The Borrower will not, nor will it permit any of the
Subsidiaries to, engage in any business other than the business in which it is
engaged on the date hereof and any business reasonably similar, complimentary,
ancillary or related thereto.

5.13 Accounting Changes. The Borrower will not, nor will it permit any of the
Subsidiaries to, make or permit any change in (a) accounting policies or
reporting practices except as required or permitted by GAAP or (b) its
respective fiscal year.

5.14 Hedging Agreements. The Borrower will not, and will not permit any of the
Subsidiaries to, enter into any Hedging Agreement, other than Hedging Agreements
entered into in the ordinary course of business to hedge or mitigate risks to
which the Borrower or any Subsidiary is exposed in the conduct of its business
or the management of its liabilities.

5.15 Mortgage Documents. Without the prior written consent of the Agent, the
Borrower will not, and will not permit any of the Subsidiaries to, amend any
note, mortgage or other instrument or agreement constituting Collateral, waive
or extend the time of performance of any provision thereof, or otherwise fail to
enforce the provisions of each such note, mortgage or other instrument or
agreement in accordance with the terms thereof, where any such amendment,
waiver, extension or failure to enforce (each a “Forbearance”) could,
individually or in the aggregate with all other Forbearances, reasonably be
expected to have a Material Adverse Effect.

6. DEFAULT

6.1 Default. “Event of Default” shall mean the occurrence of one or more of any
of the following events:

 

  (a) default in respect of any Obligation to pay in full and when due (whether
by acceleration or otherwise) any installment of principal or interest under any
Loan Document which is not cured (or waived in writing by Agent) within three
(3) Business Days of the occurrence thereof; or

 

  (b) default in respect of any Obligation other than as described in (a),
above, which is not cured (or waived in writing by Agent) within five
(5) Business Days of the occurrence thereof; or

 

  (c) default in respect of any debt, liability, obligation, covenant or
undertaking of the Borrower, any Guarantor or any Subsidiary to any Person
(other than Agent, any Lender or any Lender Affiliate) that gives such Person
the right to accelerate any Indebtedness in the principal amount of $100,000 or
more; or

 

  (d) any statement, representation or warranty heretofore, now or hereafter
made by the Borrower, any Guarantor or any Subsidiary in connection with this
Agreement or in any supporting financial statement of the Borrower, any
Guarantor or any Subsidiary shall be false or misleading in any material respect
when made or deemed made; or

 

  (e) the liquidation, termination or dissolution of the Borrower or any
Guarantor, or the merger or consolidation of any such entity into another
entity, or its ceasing to carry on actively its present business or the
appointment of a receiver for its property, in each case without the prior
written consent of the Agent, which consent may be granted or withheld by the
Agent in its sole discretion; or

 

  (f) any default or event of default in respect of any other instrument or
agreement executed and delivered by the Borrower and/or Newtek in connection
with the Revolving Loan Agreement, which default or event of default is not
cured (or waived in writing by the “Agent” thereunder) within five (5) Business
Days of the occurrence thereof;

 

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  (g) any Guarantor repudiates or purports to revoke the Guarantor’s Guaranty,
or fails to perform any obligation under such Guaranty; or

 

  (h) Reserved; or

 

  (i) an event of default or termination event (however defined) occurs under
any derivative, foreign exchange, or similar transaction or arrangement entered
into between the Borrower and the Agent or any Agent Affiliate; or

 

  (j) a Change of Control shall occur; or

 

  (k) the Borrower or any Guarantor becomes insolvent or admits in a writing an
inability to pay debts as they mature, or the Borrower or any Guarantor makes an
assignment for the benefit of creditors; or the Borrower or any Guarantor
applies for or consents to the appointment of any receiver, trustee, or similar
officer for the benefit of the Borrower or any Guarantor, or for any of their
respective properties; or any receiver, trustee or similar officer is appointed
without the application or consent of the Borrower or any Guarantor; or any
judgment, writ, warrant of attachment or execution or similar process is issued
or levied against a substantial part of the property of the Borrower or any
Guarantor; or

 

  (l) the Borrower or any Guarantor files a petition under any chapter of the
United States Bankruptcy Code or under the laws of any other jurisdiction naming
the Borrower or such Guarantor as debtor; or any such petition is instituted
against the Borrower or any Guarantor; or the Borrower or any Guarantor
institutes (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, debt arrangement, dissolution,
liquidation or similar proceeding under the laws of any jurisdiction; or any
such proceeding is instituted (by petition, application or otherwise) against
the Borrower or any Guarantor; or

 

  (m) any levy, lien (including, without limitation, a mechanics lien), seizure,
attachment, execution or similar process shall be issued or levied on any of the
property of the Borrower, in each case other than a Permitted Lien, which is not
is not cured (or waived in writing by Agent) within five (5) Business Days of
the occurrence thereof; or

 

  (n) this Agreement or any other Loan Document, or any provision thereof, shall
for any reason cease to be in full force and effect in accordance with its terms
or the Borrower or any Guarantor shall so assert in writing; or

 

  (o) the Agent’s security interest in any of the Collateral fails to be a first
priority security interest, subject only to Permitted Liens; or

 

  (p) an arbitration award, judgment, or decree or order for the payment of
money in an amount in excess of $100,000 which is not insured or subject to
indemnity, is entered against the Borrower which is not immediately stayed or
appealed; or

 

  (q) the Borrower or any Guarantor is in default with respect to any material
bond, debenture, note or other evidence of material indebtedness issued by the
Borrower or such Guarantor that is held by any third Person other than the
Agent, or under any material instrument under which any such evidence of
indebtedness has been issued or by which it is governed, unless such default is
cured within five (5) Business Days of the occurrence thereof or has been waived
by the holder of such indebtedness; or

 

  (r) the Borrower or any Guarantor is in breach of any material lease or other
material contract, and the applicable grace or cure period, if any, has expired,
unless such default is cured within five (5) Business Days of the occurrence
thereof or has been waived by the counterparty thereto; or

 

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  (s) the Borrower or any Guarantor liquidates, dissolves, terminates or
suspends its business operations or otherwise fails to operate its business in
the ordinary course, or merges with another Person; or sells or attempts to sell
all or substantially all of its assets; or

 

  (t) the Borrower fails to pay any indebtedness or obligation owed to the Agent
which is unrelated to this Agreement or the Revolving Loan Agreement as it
becomes due and payable, which failure is not remedied or waived within five
(5) business days of the occurrence thereof; or

 

  (u) the Borrower engages in any act prohibited by any Subordination Agreement,
or makes any payment on Subordinated Indebtedness (as defined in the
Subordination Agreement) that the Subordinated Creditor was not contractually
entitled to receive, and the same is not cured or waived in writing within five
(5) Business Days of the occurrence thereof; or

 

  (v) any director, officer or owner of at least 15% of the issued and
outstanding Stock of the Borrower or Newtek is indicted for a felony offence
under state or federal law, or the Borrower or Newtek hires an officer or
appoints a director who has been convicted of any such felony offense, or a
Person becomes an owner of at least 15% of the Stock of the Borrower or Newtek
who has been convicted of any such felony offense; or

 

  (w) any ERISA Event, which the Agent or Required Lenders in good faith believe
to constitute sufficient grounds for termination of any Plan or for the
appointment of a trustee to administer any Plan, has occurred and is continuing
thirty (30) days after the Borrower gives the Agent a written notice of the
ERISA Event; or a trustee is appointed by an appropriate court to administer any
Plan; or the PBGC institutes proceedings to terminate or appoint a trustee to
administer any Plan; or the Borrower, Newtek or any ERISA Affiliate files for a
distress termination of any Plan under Title IV of ERISA; or the Borrower, any
Guarantor, any Subsidiary, or any ERISA Affiliate fails to make any quarterly
Plan contribution required under Section 4.12(m) of the Tax Code, which the
Agent or Required Lenders in good faith believe may, either by itself or in
combination with other failures, result in the imposition of a Lien on the
Borrower’s or any Guarantor’s or Subsidiary’s assets in favor of the Plan; or
any withdrawal, partial withdrawal, reorganization or other event occurs with
respect to a Multiemployer Plan which could reasonably be expected to result in
a material liability by the Borrower or any Guarantor or Subsidiary to the
Multiemployer Plan under Title IV of ERISA; or

 

  (x) the occurrence of such a change in the condition, affairs (financial or
otherwise) or operations of the Borrower, or the occurrence of any other event
or circumstance, such that the Agent or Required Lenders, in their sole
reasonable judgment, deems that it is insecure or that the prospects for timely
or full payment or performance of any obligation of the Borrower to the Agent or
the Lenders has been or may be impaired.

6.2 Acceleration. If an Event of Default shall occur, at the election of the
Agent or Required Lenders, but automatically in the case of an Event of Default
under Sections 6.1(k) and 6.1(l) above, all Obligations shall become immediately
due and payable without notice or demand. The Agent is hereby authorized, at its
election or the election of Required Lenders, after an Event of Default, without
any further demand or notice except to such extent as notice may be required by
Requirements of Law, to take possession and/or sell or otherwise dispose of all
or any of the Collateral at public or private sale; and the Agent may also
exercise any and all other rights and remedies of a secured party under the Code
or which are otherwise accorded to it in equity or at law, all as Agent may
determine, and such exercise of rights in compliance with the requirements of
law will not be considered adversely to affect the commercial reasonableness of
any sale or other disposition of the Collateral. If notice of a sale or other
action by the Agent is required by Requirements of Law, unless the Collateral is
perishable or threatens to decline

 

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speedily in value or is of a type customarily sold on a recognized market, the
Borrower and each Guarantor and Subsidiary agree that ten (10) days’ written
notice to the Borrower and such Guarantor, or the shortest period of written
notice permitted by such law, whichever is smaller, shall be sufficient notice;
and that to the extent permitted by law, the Agent, Agent Affiliates, its
officers, attorneys and agents may bid and become purchasers at any such sale,
if public, and may purchase at any private sale any of the Collateral that is of
a type customarily sold on a recognized market or which is the subject of widely
distributed standard price quotations. Any sale (public or private) shall be
without warranty and free from any right of redemption, which the Borrower and
each Guarantor and Subsidiary hereby waive and release. No purchaser at any sale
(public or private) shall be responsible for the application of the purchase
money. The proceeds of any collection or of any sale or disposition of the
Collateral held pursuant to this Agreement shall be applied towards the
Obligations in such order and manner as the Agent determines in its sole and
absolute discretion, any statute, custom or usage to the contrary
notwithstanding and the Agent shall have the unrestricted right from time to
time to change any application already made of the proceeds of any of the
Collateral to any of the Obligations, as the Agent in its sole discretion may
determine. Any balance of the net proceeds of sale remaining after paying all
Obligations of the Borrower to the Agent shall be returned to the Borrower or
such other Person as may be legally entitled thereto; and if there is a
deficiency, the Borrower shall be responsible for repayment of the same, with
interest. Upon demand by the Agent, the Borrower shall assemble the Collateral
and make it available to the Agent at a place designated by the Agent which is
reasonably convenient to the Agent and the Borrower. The Borrower, each
Guarantor and each Subsidiary hereby acknowledge that: (i) the Agent and each
Lender have extended credit and other financial accommodations to the Borrower
upon reliance of the Borrower’s, each Guarantor’s and each Subsidiary’s granting
the Agent the rights and remedies contained in this Agreement including without
limitation the right to take immediate possession of the Collateral upon the
occurrence of an Event of Default; and (ii) the Borrower, each Guarantor and
each Subsidiary hereby acknowledge that the Agent is entitled to equitable and
injunctive relief to enforce any of its rights and remedies hereunder or under
the Code. Accordingly, the Borrower, each Guarantor and each Subsidiary hereby
waive any defense to such equitable or injunctive relief based upon any
allegation of the absence of irreparable harm to the Agent or any Lender. The
Agent may, following acceleration for any reason, apply for the appointment of a
receiver of the Collateral (to which appointment the Borrower, each Guarantor
and each Subsidiary hereby consent) without the necessity of posting a bond or
other form of security (which the Borrower, each Guarantor and each Subsidiary
hereby waive).

The Borrower, each Guarantor and each Subsidiary hereby acknowledge that any
exercise by the Agent of the Agent’s rights upon an Event of Default may be
subject to compliance by the Agent with any Requirement of Law of any
Governmental Authority, and may impose, without limitation, any of the foregoing
restricting the sale of securities. The Agent, in its sole discretion at any
such sale, may restrict the prospective bidders or purchasers as to their
number, nature of business and investment intentions, and may impose, without
limitation, a requirement that the Persons making such purchases represent and
agree, to the satisfaction of the Agent, that they are purchasing the Collateral
for their own account, for investment, and not with a view to the distribution
or resale thereof.

The Agent shall not be required to marshal any present or future security for
(including but not limited to this Agreement and the Collateral subject to the
security interest created hereby), or Guarantees of, the Obligations or any of
them, or to resort to such security or Guarantees in any particular order; and
all of its rights hereunder and in respect of such securities and Guaranties
shall be cumulative and in addition to all other rights, however existing or
arising. To the extent that they lawfully may do so, the Borrower, each
Guarantor and each Subsidiary hereby agree that it will not invoke any law
relating to the marshaling of collateral which might cause delay in or impede
the enforcement of the Agent’s rights under this Agreement or under any other
instrument evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
guaranteed, and to the extent that they lawfully may do so, the Borrower, each
Guarantor and each Subsidiary hereby irrevocably waive the benefits of all such
laws. Except as required by Requirements of Law, the Agent shall have no duty as
to the collection or protection of the Collateral or any income thereon, nor as
to the preservation of rights against prior parties, nor as to the preservation
of any rights pertaining thereto beyond the safe custody thereof.

 

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6.3 Other Remedies. Without limiting the foregoing, at any time that an Event of
Default exists or has occurred and is continuing, the Agent may in its
discretion (or shall at the direction of Required Lenders), enforce the rights
of the Borrower against any Mortgage Debtor, secondary obligor or other obligor
in respect of any of the Obligations. Without limiting the generality of the
foregoing, the Agent may in its discretion (or shall at the direction of
Required Lenders), at any such time (i) notify, or direct the Borrower to
notify, any or all Mortgage Debtors, secondary obligors or other obligors in
respect thereof that one or more items of Collateral have been assigned to the
Agent and that the Agent has a security interest therein and the Agent may
direct, or notify the Borrower to direct, any or all Mortgage Debtors, secondary
obligors and other obligors to make payment directly to the Agent, (ii) direct
the Borrower to immediately deliver to the Agent all agreements and other
documents relating to any Collateral, (iii) demand, collect or enforce payment
of any notes, mortgages or other instruments or agreements constituting
Collateral or such other obligations, but without any duty to do so, and the
Agent and the Lenders shall not be liable for any failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action the Agent may deem necessary
or desirable for the protection of its interests and the interests of the
Lenders. At any time that an Event of Default exists or has occurred and is
continuing, at the Agent’s direction, all invoices and statements sent to any
Mortgage Debtor shall state that the applicable items of Collateral have been
assigned to the Agent and are payable directly and only to the Agent; and, to
the extent not already delivered, the Borrower shall deliver to the Agent such
originals of documents evidencing the Borrower’s interest in Collateral as the
Agent may require (so long as such originals have not been previously filed with
an applicable Governmental Authority) and as permitted by applicable
Requirements of Law. The Borrower shall immediately comply with any notice or
direction given by the Agent pursuant to this Section 6.3.

6.4 Power of Attorney. The Borrower hereby irrevocably constitutes and appoints
the Agent as the Borrower’s true and lawful attorney, with full power of
substitution, at the sole cost and expense of the Borrower but for the sole
benefit of the Agent and the Lenders, upon the occurrence of an Event of
Default, to convert the Collateral into cash; to use pursuant to a royalty free
license all of the Borrower’s intellectual property; to enforce collection of
the Collateral, either in its own name or in the name of the Borrower,
including, without limitation, executing releases or waivers, compromising or
settling with any Mortgage Debtors and prosecuting, defending, compromising or
releasing any action relating to the Collateral; to receive, open and dispose of
all mail addressed to the Borrower and to take therefrom any remittances or
proceeds of Collateral in which the Agent has a security interest; to notify
Post Office authorities to change the address for delivery of mail addressed to
the Borrower to such address as the Agent shall designate; to endorse the name
of the Borrower in favor of the Agent upon any and all checks, drafts, money
orders, notes, acceptances or other instruments of the same or different nature;
to sign and endorse the name of the Borrower on and to receive as secured party
any of the Collateral; to sign the name of the Borrower on any notice of the
Mortgage Debtors or on verification of the Collateral; and to sign, if
necessary, and file or record on behalf of the Borrower any financing or other
statement in order to perfect or protect the Agent’s security interest. The
Agent shall not be obliged to do any of the acts or exercise any of the powers
hereinabove authorized, but if the Agent elects to do any such act or exercise
any such power, it shall not be accountable for more than it actually receives
as a result of such exercise of power, and it shall not be responsible to the
Borrower except for its own gross negligence or willful misconduct. All powers
conferred upon the Agent by this Agreement, being coupled with an interest,
shall be irrevocable so long as any Obligation of the Borrower or surety to the
Agent shall remain unpaid or the Agent is obligated under this Agreement to
extend any credit to the Borrower.

6.5 Nonexclusive Remedies. All of the Agent’s rights and remedies not only under
the provisions of this Agreement but also under any other agreement or
transaction shall be cumulative and not alternative or exclusive, and may be
exercised by the Agent at such time or times and in such order of preference as
the Agent in its sole discretion may determine.

6.6 Reassignment to the Borrower. Whenever the Agent deems it desirable that any
legal action be instituted with respect to any Collateral or that any other
action be taken in any attempt to effectuate collection of any Collateral, the
Agent may reassign the item in question to the Borrower (and if the Agent shall
execute any such reassignment, it shall automatically be deemed to be without
warranty or recourse to the Agent in any event) and require the Borrower to
proceed with such legal or other action at the Borrower’s sole liability, cost
and expense, in which event all amounts collected by the Borrower on such item
shall nevertheless be subject to the Agent’s security interest.

 

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7. AGENT

7.1 Appointment, Authority and Duties of Agent.

 

  (a) Each Lender hereby irrevocably appoints and designates Sterling National
Bank as agent to act as herein specified. The Agent may, and each Lender by its
becoming a party to this Agreement or execution of an Assignment and Acceptance
shall be deemed irrevocably to have authorized Agent to, enter into all Loan
Documents to which the Agent is or is intended to be a party and all amendments
hereto, for its benefit and the Pro Rata benefit of Lenders and, except as
otherwise provided in this Article 7, to exercise such rights and powers under
this Agreement and the other Loan Documents as are specifically delegated to the
Agent by the terms hereof and thereof, together with such other rights and
powers as are reasonably incidental thereto. Each Lender agrees that any action
taken by the Agent or the Required Lenders in accordance with the provisions of
this Agreement or the other Loan Documents, and the exercise by the Agent or the
Required Lenders of any of the powers set forth herein or therein, together with
such other powers as are reasonably incidental thereto, shall be authorized and
binding upon all Lenders. Without limiting the generality of the foregoing, the
Agent shall have the sole and exclusive right and authority to (a) act as the
disbursing and collecting agent for Lenders with respect to all payments and
collections arising in connection with this Agreement and the other Loan
Documents; (b) execute and deliver as agent each Loan Document and accept
delivery of each such agreement by any Loan Party or any other Person; (c) act
as collateral agent for the Lenders for purposes of the perfection of all
security interests and Liens created by this Agreement or the Loan Documents
and, subject to the direction of the Required Lenders, for all other purposes
stated therein, provided that the Agent hereby appoints, authorizes and directs
each Lender to act as a collateral sub-agent for the Agent and the other Lenders
for purposes of the perfection of all security interests and Liens with respect
to the Borrower’s Deposit Accounts maintained with, and all cash held by, such
Lender; (d) subject to the direction of the Required Lenders, manage, supervise
or otherwise deal with the Collateral; and (e) except as may be otherwise
specifically restricted by the terms of this Agreement and subject to the
direction of the Required Lenders, exercise all remedies given to the Agent with
respect to any of the Collateral under the Loan Documents relating thereto,
Requirements of Law or otherwise. The duties of the Agent shall be ministerial
and administrative in nature, and the Agent shall not have by reason of this
Agreement or any other Loan Document a fiduciary relationship with any Lender
(or any Lender’s participants). Unless and until its authority to do so is
revoked in writing by Required Lenders, the Agent alone shall be authorized to
determine whether to fund a Loan and to exercise its own credit judgment in
connection therewith, which determinations and judgments, if exercised in good
faith, shall exonerate the Agent from any liability to Lenders or any other
Person for any errors in judgment.

 

  (b) The Agent (which term, as used in this sentence, shall include references
to the Agent’s officers, directors, employees, attorneys, agents and Affiliates
and to the officers, directors, employees, attorneys and agents of the Agent’s
Affiliates) shall not: (i) have any duties or responsibilities except those
expressly set forth in this Agreement and the other Loan Documents or (ii) be
required to take, initiate or conduct any litigation, foreclosure or collection
proceedings hereunder or under any of the other Loan Documents except to the
extent directed to do so by the Required Lenders during the continuance of any
Event of Default. The conferral upon the Agent of any right hereunder shall not
imply a duty on the Agent’s part to exercise any such right unless instructed to
do so by the Required Lenders in accordance with this Agreement.

 

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  (c) The Agent may perform any of its duties by or through its agents and
employees and may employ one or more Agent Professionals and shall not be
responsible for the negligence or misconduct of any such Agent Professionals
selected by it with reasonable care. The Borrower shall promptly (and in any
event, on demand) reimburse the Agent for all reasonable expenses incurred by
the Agent pursuant to any of the provisions hereof or of any of the other Loan
Documents or in the execution of any of the Agent’s duties hereby or thereby
created or in the exercise of any right or power herein or therein imposed or
conferred upon it or Lenders (excluding, however, general overhead expenses),
and each Lender agrees promptly to pay to the Agent, on demand, such Lender’s
Pro Rata share of any such reimbursement for expenses that is not timely made by
the Borrower to the Agent.

 

  (d) The rights, remedies, powers and privileges conferred upon the Agent
hereunder and under the other Loan Documents may be exercised by the Agent
without the necessity of the joinder of any other parties unless otherwise
required by Requirements of Law. If the Agent shall request instructions from
the Required Lenders with respect to any act or action (including the failure to
act) in connection with this Agreement or any of the other Loan Documents, the
Agent shall be entitled to refrain from such act or taking such action unless
and until the Agent shall have received instructions from the Required Lenders;
and the Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder or under any of the Loan Documents pursuant to
or in accordance with the instructions of the Required Lenders except for the
Agent’s own gross negligence or willful misconduct in connection with any action
taken by it. Notwithstanding anything to the contrary contained in this
Agreement, the Agent shall not be required to take any action that is in its
opinion contrary to any Requirement of Law or the terms of any of the Loan
Documents or that would in its reasonable opinion subject it or any of its
officers, employees or directors to personal liability.

 

  (e) The Agent shall be entitled to rely, and shall be fully protected in so
relying, upon any certification, notice or other communication (including any
thereof by telephone, telex, telegram, telecopier message or cable) believed by
it to be genuine and correct and to have been signed, sent or made by or on
behalf of the proper Person or Persons, and upon advice and statements of Agent
Professionals.

 

  (f) The Agent shall promptly, upon receipt thereof, forward to each Lender
(i) copies of any significant written notices, reports, certificates and other
information received by the Agent from any Loan Party (but only if and to the
extent such Loan Party is not required by the terms of the Loan Documents to
supply such information directly to Lenders) and (ii) copies of the results of
any field audits by the Agent with respect to the Borrower. The Agent shall have
no liability to any Lender for any errors in or omissions from any field audit
or other examination of the Borrower or the Collateral, unless such error or
omission was the direct result of the Agent’s willful misconduct.

7.2 Agreements Regarding Collateral.

 

  (a) The Lenders hereby irrevocably authorize the Agent to release any Lien
with respect to any Collateral (i) upon the payment to the Agent of the proceeds
of assignment into securitization, payoff, or similar transaction with respect
to said Collateral, (ii) upon Full Payment of the Obligations, (iii) that is the
subject of an asset sale permitted pursuant to Section 5.6 above, or (iv) with
the written consent of all Lenders. The Agent shall have no obligation
whatsoever to any of the Lenders to assure that any of the Collateral exists or
is owned by the Borrower or is cared for, protected or insured or has been
encumbered, or that the Agent’s Liens have been properly, sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority or to exercise any duty of care with respect to any of the
Collateral.

 

  (b) The Agent and the Lenders each hereby appoint each other Lender as agent
for the purpose of perfecting Liens (for the benefit of the Lenders) in any
Collateral that, in accordance with the Code or any other Requirements of Law,
can be perfected only by possession. Should any Lender obtain possession of any
such Collateral, such Lender shall notify the Agent thereof, and, promptly upon
the Agent’s request therefor, shall deliver such Collateral to the Agent or
otherwise deal with such Collateral in accordance with the Agent’s instructions.

 

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7.3 Action Upon Default. The Agent shall not be deemed to have knowledge of the
occurrence of a Default or an Event of Default unless it has received written
notice from a Lender or the Borrower specifying the occurrence and nature of
such Default or Event of Default. If the Agent shall receive such a notice of a
Default or an Event of Default or shall otherwise acquire actual knowledge of
any Default or Event of Default, the Agent shall promptly notify the Lenders in
writing and the Agent shall take such action and assert such rights under this
Agreement and the other Loan Documents, or shall refrain from taking such action
and asserting such rights, as the Required Lenders shall direct from time to
time. If any Lender shall receive a notice of a Default or an Event of Default
or shall otherwise acquire actual knowledge of any Default or Event of Default,
such Lender shall promptly notify the Agent and the other Lenders in writing. In
no event shall the Required Lenders, without the prior written consent of each
Lender, direct the Agent to accelerate and demand payment of the Loans held by
one Lender without accelerating and demanding payment of all other Loans. Each
Lender agrees that, except as otherwise provided in any of the Loan Documents or
with the written consent of the Agent and the Required Lenders, it will not take
any legal action or institute any action or proceeding against any Loan Party
with respect to any of the Obligations or Collateral or accelerate or otherwise
enforce its portion of the Obligations.

7.4 Remittance of Payments and Collections.

 

  (a) All payments by any Lender to the Agent shall be made not later than the
time set forth elsewhere in this Agreement on the Business Day such payment is
due; provided, however, that if such payment is due on demand by the Agent and
such demand is made on the paying Lender after 1:30 p.m. on such Business Day,
then payment shall be made by 11:00 a.m. on the next Business Day. Payment by
the Agent to any Lender shall be made by wire transfer, promptly following the
Agent’s receipt of funds for the account of such Lender and in the type of funds
received by the Agent; provided, however, that if the Agent receives such funds
at or prior to 12:00 noon, the Agent shall pay such funds to such Lender by 4:00
p.m. on such Business Day, but if the Agent receives such funds after 12:00
noon, the Agent shall pay such funds to such Lender by 4:00 p.m. on the next
Business Day.

 

  (b) With respect to the payment of any funds from the Agent to a Lender or
from a Lender to the Agent, the party failing to make full payment when due
pursuant to the terms hereof shall, on demand by the other party, pay such
amount together with interest thereon at the Wall Street Journal Prime Rate. In
no event shall the Borrower be entitled to receive any credit for any interest
paid by the Agent to any Lender, or by any Lender to the Agent, at the Wall
Street Journal Prime Rate as provided herein.

 

  (c) If the Agent pays any amount to a Lender in the belief that a related
payment has been or will be received by the Agent from a Loan Party and such
related payment is not received by the Agent, then the Agent shall be entitled
to recover such amount from each Lender that receives such amount. If the Agent
determines at any time that any amount received by it under this Agreement or
any of the other Loan Documents must be returned to a Loan Party or paid to any
other Person pursuant to any Requirement of Law, court order or otherwise, then,
notwithstanding any other term or condition of this Agreement or any of the
other Loan Documents, the Agent shall not be required to distribute such amount
to any Lender.

 

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7.5 Ratable Sharing; Allocation.

 

  (a) If any Lender shall obtain any payment or reduction (including any amounts
received as adequate protection of a bank account deposit treated as cash
collateral under the United States Bankruptcy Code) of any Obligation of the
Borrower (whether voluntary, involuntary, through the exercise of any right of
set-off or otherwise) in excess of its Pro Rata share of payments or reductions
on account of such Obligations obtained by all of the Lenders, such Lender shall
forthwith (i) notify the other Lenders and the Agent of such receipt and
(ii) purchase from the other Lenders such participations in the affected
Obligations as shall be necessary to cause such purchasing Lender to share the
excess payment or reduction, net of costs incurred in connection therewith, on a
Pro Rata basis; provided that if all or any portion of such excess payment or
reduction is thereafter recovered from such purchasing Lender or additional
costs are incurred, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery or such additional costs, but without
interest. The Borrower agrees that any Lender so purchasing a participation from
another Lender pursuant to this Section 7.5(a) may, to the fullest extent
permitted by Requirements of Law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.

 

  (b) At any time that an Event of Default exists or the Agent receives a
payment or Collateral proceeds in an amount that is insufficient to pay all
amounts then due and payable to the Agent and the Lenders, all monies to be
applied to the Obligations shall be allocated among Agent and such of the
Lenders as are entitled thereto (and, with respect to monies allocated to
Lenders, on a Pro Rata basis unless otherwise provided herein): (i) first, to
the Agent to pay the amount of expenses that have not been reimbursed to the
Agent by the Borrower or the Lenders, together with interest accrued thereon at
the rate applicable to the Loans, until Full Payment of all such Obligations;
(ii) second, to the Agent to pay principal and accrued interest on any portion
of the Loans which the Agent may have advanced on behalf of any Lender and for
which the Agent has not been reimbursed by such Lender or the Borrower, until
Full Payment of all such Obligations; (iii) third, to the extent that the Agent
has not received from any Lender a payment as required by Section 1.13, to the
Agent to pay all such required payments from each Lender, until Full Payment of
all such Obligations; (iv) fourth, to Agent to pay any claims that have not been
paid pursuant to any indemnity of Agent Indemnitees by any Loan Party or the
Lenders, in each case together with interest accrued thereon at the rate
applicable to Loans, until Full Payment of all such Obligations; (v) fifth, to
the Agent to pay any fees due and payable to the Agent, until Full Payment of
all such Obligations; (vi) sixth, to each Lender, ratably, for any claims such
Lender has paid to the Agent Indemnitees pursuant to its indemnity of Agent
Indemnitees and any expenses such Lender has reimbursed to the Agent or such
Lender has incurred, to the extent that such Lender has not been reimbursed by
the Loan Parties therefor; (vii) seventh, to the Lenders in payment of the
unpaid principal and accrued interest in respect of the Loans and other
Obligations in any way relating to the Loan Documents then outstanding, in such
order of application as shall be designated by the Agent (acting at the
direction or with the consent of the Required Lenders); and (viii) eighth, to
Sterling National Bank or any Affiliate of Sterling National Bank in payment of
any other Obligations owed to such Person and secured by the Collateral
hereunder. The allocations set forth in this paragraph are solely to determine
the rights and priorities of the Agent and the Lenders as among themselves and
may be changed by the Agent and the Lenders without notice to or the consent or
approval of the Borrower or any other Person.

 

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7.6 Defaulting Lenders. If a Lender becomes a Defaulting Lender then, until such
time as such Defaulting Lender has, as applicable, funded its Pro Rata share of
the applicable Loan and made payment in full to the Agent of all amounts
otherwise necessary to cease to be a Defaulting Lender such Defaulting Lender
shall not (i) have the right to vote regarding any issue on which voting is
required or advisable under this Agreement or any other Loan Document (it being
understood and agreed that this provision takes precedence over any other
provision in this Agreement or the other Loan Documents which, on its face, may
require the consent of all Lenders, other than to the extent expressly provided
in Section 7.11) and, with respect to any such Defaulting Lender, the amount of
the Loans held by such Lender shall not be counted as outstanding for purposes
of determining “Required Lenders” hereunder or (ii) be entitled to receive any
payments of principal, interest, or fees from the Borrower, the Agent or the
other Lenders, as applicable, in respect of its Loans or Lending Amounts and
Agent may, but shall not be required, to apply such payments to such Defaulting
Lender’s obligations hereunder, at such time, and in such order, as Agent may
elect in its sole discretion.

7.7 Replacement of Lenders. If (a) any Lender shall become a Defaulting Lender
or (b) a Lender refuses to consent to an amendment, modification or waiver of
this Agreement that, pursuant to Section 7.11 requires consent of 100% of the
Lenders or 100% of the affected Lenders and the consent of the Required Lenders
has been obtained with respect to such amendment, modification or waiver, then
the Agent may, but shall have no obligation to, replace such Lender (the
“Affected Lender”), or cause such Affected Lender to be replaced, with another
lender satisfying the requirements of an assignee Lender under Section 8.10, by
having the Affected Lender sell and assign all of its rights and obligations
under this Agreement and the other Loan Documents to the replacement Lender
pursuant to an Assignment and Acceptance. Upon receipt by any Affected Lender of
a written notice from the Agent stating that the Agent is exercising the
replacement right set forth in this Section 7.7, such affected Lender shall sell
and assign all of its rights and obligations under this Agreement and the other
Loan Documents to the replacement Lender pursuant to an Assignment and
Acceptance for a purchase price equal to all amounts owed to (less amounts owed,
if any, by) the Affected Lender hereunder or under any other Loan Document as of
the date of such assignment.

7.8 Indemnification of Agent Indemnitees. Each Lender agrees to indemnify and
defend the Agent Indemnitees (to the extent not reimbursed by the Borrower, but
without limiting the indemnification obligations of the Loan Parties under any
of the Loan Documents), on a Pro Rata basis, and to hold each of the Agent
Indemnitees harmless from and against, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, awards, costs (including
remedial response costs), charges, expenses and disbursements of any kind or
nature (including reasonable attorneys’, accountants’, consultants’, or
paralegals’ fees and expenses) which may be imposed on, incurred by or asserted
against any of the Agent Indemnitees in any way related to or arising out of any
of the Loan Documents or referred to herein or therein or the transactions
contemplated thereby; provided that no Lender shall be liable for any of the
foregoing to the extent it arises from the gross negligence or willful
misconduct of the party to be indemnified. The foregoing indemnity shall survive
the payment of the Obligations and the termination of this Agreement.

7.9 Limitation on Responsibilities of Agent. The Agent shall not be liable to
the Lenders for any action taken or omitted to be taken under or in connection
with this Agreement or the other Loan Documents except as a result and to the
extent of losses caused by the Agent’s actual gross negligence or willful
misconduct. The Agent does not assume any responsibility for any failure or
delay in performance or breach by any Loan Party or any Lender of its
obligations under this Agreement or any of the other Loan Documents. The Agent
does not make to the Lenders, and no Lender makes to the Agent or the other
Lenders, any express or implied warranty, representation or guarantee with
respect to the Obligations, the Collateral, the Loan Documents or any Loan
Party. Neither the Agent nor any of its officers, directors, employees,
attorneys or agents shall be responsible to the Lenders, and no Lender nor any
of its agents, attorneys or employees shall be responsible to the Agent or the
other Lenders, for: (i) any recitals, statements, information, representations
or warranties by or on behalf of any Loan Party contained in any of the Loan
Documents or in any certificate or other document furnished pursuant to the
terms hereof; (ii) the execution, validity, genuineness, effectiveness or
enforceability of any of the Loan Documents; (iii) the genuineness,
enforceability, collectability, value, sufficiency, location or existence of

 

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any Collateral, or the validity, extent, perfection or priority of any Lien
therein; (iv) the validity, enforceability or collectability of any the
Obligations; or (v) the assets, liabilities, financial condition, results of
operations, business, creditworthiness or legal status of any Loan Party or any
Mortgage Debtor. Neither the Agent nor any of its officers, directors,
employees, attorneys or agents shall have any obligation to any Lender to
ascertain or inquire into the existence of any Default or Event of Default, the
observance or performance by any Loan Party of any of the duties or agreements
of such Loan Party under any of the Loan Documents or the satisfaction of any
conditions precedent contained in any of the Loan Documents.

7.10 Successor Agent. Subject to the appointment and acceptance of a successor
Agent as provided below, the Agent may resign at any time by giving at least 30
days written notice thereof to each Lender and the Borrower. Upon receipt of any
notice of such resignation, the Required Lenders, after prior consultation with
(but without having to obtain consent of) each Lender, shall have the right to
appoint a successor Agent which shall be (i) a Lender, (ii) a United States
based affiliate of a Lender, or (iii) a commercial bank that is organized under
the laws of the United States or of any State thereof and has a combined capital
surplus of at least $100,000,000 and, provided no Default or Event of Default
then exists, is reasonably acceptable to the Borrower (and for purposes hereof,
any successor to Sterling National Bank shall be deemed acceptable to the
Borrower). If no successor agent is appointed prior to the effective date of the
resignation of the Agent, then the Agent may appoint, after consultation with
the Lenders and the Borrower, a successor agent from among the Lenders. Upon the
acceptance by a successor Agent of an appointment to serve as Agent hereunder,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent without further act,
deed or conveyance, and the retiring Agent shall be discharged from its duties
and obligations hereunder. Notwithstanding anything to the contrary contained in
this Agreement, any successor by merger or acquisition of the stock or assets of
Sterling National Bank shall continue to be the Agent hereunder without further
act on the part of the parties hereto.

7.11 Consents, Amendments and Waivers.

 

  (a) No amendment or modification of any provision of this Agreement or any of
the other Loan Documents, nor any waiver of any Default or Event of Default,
shall be effective without the prior written agreement or consent of the
Required Lenders; provided, however, that

(i) without the prior written consent of the Agent, no amendment or waiver shall
be effective with respect to any provision in any of the Loan Documents
(including this Article 7) to the extent such provision relates to the rights,
duties, immunities, exculpation, indemnification or discretion of the Agent;

(ii) without the prior written consent of the Agent, no amendment or waiver with
respect to the definition of “Defaulting Lender” (except to be more inclusive of
the facts and circumstances which cause a Lender to become a Defaulting Lender)
shall be effective;

(iii) without the prior written consent of each affected Lender (including any
Defaulting Lender), no amendment or waiver shall be effective that would
(1) increase or otherwise modify any Lending Amount of such Lender (other than
to reduce such Lender’s Lending Amount on a proportionate basis with the same
Lending Amounts of other Lenders); (2) alter (other than to increase) the rate
of interest or fees payable in respect of any Obligations owed to such Lender;
(3) waive or defer collection of any interest or fee payable to such Lender;
(4) subordinate the payment of any Obligations owed to such Lender to the
payment of any Indebtedness; or (5) extend the Maturity Date (which consent, for
the avoidance of doubt, is not required in connection with any automatic
extension of the Maturity Date); and

(iv) without the prior written consent of all Lenders (except a Defaulting
Lender), no amendment or waiver shall be effective that would (1) waive any
Default or Event of Default if the Default or Event of Default relates to the
Borrower’s failure to observe or perform any

 

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covenant that may not be amended without the unanimous written consent of the
Lenders (and, where so provided hereinafter, the written consent of the Agent)
as hereinafter set forth, (2) alter the provisions of Section 1.3(d),
Section 1.9, Section 2.1 (except to add to the categories of property of the
Borrower constituting Collateral), Section 7.5, this Section 7.11, Section 8.4
or Section 8.9, (3) amend the definitions of “Pro Rata” or “Required Lenders”
(and the other defined terms used in such definitions), or any provision of this
Agreement obligating the Agent to take certain actions at the direction of the
Required Lenders, or any provision of any of the Loan Documents regarding the
Pro Rata treatment or obligations of Lenders, (4) subordinate the priority of
any Liens granted to the Agent under any of the Loan Documents to consensual,
non-statutory Liens granted after the Closing Date to any other Person, except
as currently provided in or contemplated by the Loan Documents (including a
subordination in favor of the holders of Permitted Liens that are permitted to
have priority over the Agent’s Liens), or (5) release any Loan Party from
liability for any of the Obligations.

 

  (b) The Borrower will not, directly or indirectly, pay or cause to be paid any
remuneration or other thing of value, whether by way of supplemental or
additional interest, fee or otherwise, to any Lender (in its capacity as a
Lender hereunder) as consideration for or as an inducement to the consent to or
agreement by such Lender with any waiver or amendment of any of the terms and
provisions of this Agreement or any of the other Loan Documents to the extent
that the agreement of all Lenders to any such waiver or amendment is required,
unless such remuneration or thing of value is concurrently paid, on the same
terms, on a Pro Rata or other mutually agreed upon basis to all Lenders;
provided, however, that the Borrower may contract to pay a fee only to those
Lenders who actually vote in writing to approve any waiver or amendment of the
terms and provisions of this Agreement or any of the other Loan Documents to the
extent that such waiver or amendment may be implemented by vote of the Required
Lenders and such waiver or amendment is in fact approved.

7.12 Due Diligence and Non-Reliance. Each Lender hereby acknowledges and
represents that it has, independently and without reliance upon the Agent or the
other Lenders, and based upon such documents, information and analyses as it has
deemed appropriate, made its own credit analysis of each Loan Party and its own
decision to enter into this Agreement and to fund the Loans to be made by it
hereunder, and each Lender has made such inquiries concerning the Loan
Documents, the Collateral and each Loan Party as such Lender feels necessary and
appropriate, and has taken such care on its own behalf as would have been the
case had it entered into the other Loan Documents without the intervention or
participation of the other Lenders or the Agent. Each Lender also hereby
acknowledges that it will, independently and without reliance upon the other
Lenders or the Agent, and based upon such financial statements, documents and
information as it deems appropriate at the time, continue to make and rely upon
its own credit decisions in making Loans and in taking or refraining to take any
other action under this Agreement or any of the other Loan Documents.

7.13 Representations and Warranties of Lenders. Each Lender represents and
warrants to the Borrower, the Agent and the other Lenders that (a) it has the
power to enter into and perform its obligations under the Loan Documents, (b) it
has taken all necessary action to authorize its execution and performance of the
Loan Documents to which it is a party and (c) none of the consideration used by
it to make or fund its Loans or to participate in any other transactions under
this Agreement constitutes for any purpose of ERISA or Section 4975 of the Tax
Code assets of any “plan” as defined in Section 3(3) of ERISA or Section 4975 of
the Tax Code and the rights and interests of such Lender in and under the Loan
Documents shall not constitute plan assets under ERISA.

7.14 The Required Lenders. As to any provisions of this Agreement or the other
Loan Documents under which action may or is required to be taken upon direction
or approval of the Required Lenders, the direction or approval of the Required
Lenders shall be binding upon each Lender to the same extent and with the same
effect as if each Lender joined therein. Notwithstanding anything to the
contrary contained in this Agreement, the Borrower shall not be deemed to be a
beneficiary of, or be entitled to enforce, sue upon or assert as a defense to
any of the Obligations, any provisions of this Agreement that requires the Agent
or any Lender to act, or conditions their authority to act, upon the direction
or consent of the Required Lenders; and any action taken by the Agent or any
Lender that requires the consent or direction of the Required Lenders as a
condition to taking such action shall, insofar as the Borrower is concerned, be
presumed to have been taken with the requisite consent or direction of the
Required Lenders.

 

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7.15 Several Obligations. The obligations of each Lender under this Agreement
and the other Loan Documents are several and neither the Agent nor any Lender
shall be responsible for the performance by the other Lenders of its obligations
hereunder or thereunder. Notwithstanding any liability of the Lenders stated to
be joint and several to third Persons under any of the Loan Documents, such
liability shall be shared, as among Lenders, Pro Rata. Nothing contained in this
Agreement and no action taken by the Lenders pursuant hereto shall be deemed to
constitute the Lenders to be a partnership, association, joint venture or any
other kind of entity.

7.16 Agent in its Individual Capacity. With respect to its obligation to lend
under this Agreement, the Loans made by it and each promissory note issued to
it, the Agent shall have the same rights and powers hereunder and under the
other Loan Documents as any other Lender and may exercise the same as though it
were not performing the duties specified herein, and the terms “Lenders,”
“Required Lenders,” or any similar term shall, unless the context clearly
otherwise indicates, include the Agent in its capacity as a Lender. The Agent
and its Affiliates may each accept deposits from, maintain deposits or credit
balances for, invest in, lend money to, act as trustee under indentures of,
serve as financial advisor to, and generally engage in any kind of business with
the Borrower or any other Loan Party, or any Affiliate of the Borrower or any
other Loan Party, as if it were any other bank and without any duty to account
therefor (or for any fees or other consideration received in connection
therewith) to the other Lenders. Sterling National Bank and its Affiliates may
receive information regarding the Borrower or any of the Borrower’s Affiliates
and Mortgage Debtors (including information that may be subject to
confidentiality obligations in favor of the Borrower or any of its Affiliates)
and Lenders acknowledge that neither the Agent nor Sterling National Bank shall
be under any obligation to provide such information to Lenders to the extent
acquired by Sterling National Bank in its individual capacity and not as Agent
hereunder.

7.17 No Third Party Beneficiaries. Except with respect to Section 7.13, this
Article 7 is not intended to confer any rights or benefits upon the Borrower or
any other Person except the Lenders and the Agent, and, except with respect to
Section 7.13, no Person (including the Borrower) other than Lenders and the
Agent shall have any right to enforce any of the provisions of this Article.

7.18 Notice of Transfer. The Agent may deem and treat a Lender party to this
Agreement as the owner of such Lender’s portion of the Loans for all purposes,
unless and until an executed Assignment and Acceptance has been received by the
Agent.

8. MISCELLANEOUS

8.1 Waivers. The Borrower, each Guarantor and each Subsidiary hereby waive
notice of intent to accelerate, notice of acceleration, notice of nonpayment,
demand, presentment, protest or notice of protest of the Obligations, and all
other notices, consents to any renewals or extensions of time of payment
thereof, and generally waive any and all suretyship defenses and defenses in the
nature thereof; provided, however, that Newtek does not waive the requirement
that demand be made upon it in accordance with the Guaranty for payment of its
obligations under this Agreement.

8.2 Severability. If any provision of this Agreement or portion of such
provision or the application thereof to any Person or circumstance shall to any
extent be held invalid or unenforceable, the remainder of this Agreement (or the
remainder of such provision) and the application thereof to other persons or
circumstances shall not be affected thereby.

8.3 Deposit Collateral. The Borrower, each Guarantor and each Subsidiary hereby
grant to the Agent and any Agent Affiliate a continuing lien and security
interest in any and all deposits or other sums at any time credited by or due
from the Agent or any Agent Affiliate to the Borrower, any Guarantor or any
Subsidiary, as the case may be, and any cash, securities, instruments or other
property of the Borrower, each Subsidiary and each Guarantor in the possession
of the Agent or any Agent Affiliate, whether for safekeeping or otherwise, or in
transit to or from the Agent or any Agent Affiliate (regardless of the reason
the Agent or Agent Affiliate had received the same or whether the Agent or Agent
Affiliate has

 

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conditionally released the same) as security for the full and punctual payment
and performance of all of the liabilities and obligations of the Borrower to the
Agent or any Agent Affiliate and such deposits and other sums may be applied or
set off against such liabilities and obligations of the Loan Parties to the
Agent or any Agent Affiliate at any time, whether or not such are then due,
whether or not demand has been made and whether or not other collateral is then
available to the Agent or any Agent Affiliate.

8.4 Indemnification. The Borrower shall indemnify, defend and hold each
Indemnitee harmless of and from any claim brought or threatened against any
Indemnitee by any Loan Party or endorser of the Obligations, or any other Person
(as well as from reasonable attorneys’ fees and expenses in connection
therewith) on account of the Agent’s or any Lender’s relationship with any Loan
Party or endorser of the Obligations (each of which may be defended,
compromised, settled or pursued by the Indemnitee with counsel of the
Indemnitee’s election, but at the expense of the Borrower), except for any claim
arising out of the gross negligence or willful misconduct of such Indemnitee.
The within indemnification shall survive payment of the Obligations, and/or any
termination, release or discharge executed by the Agent or any Lender in favor
of any Loan Party.

8.5 Costs and Expenses. The Borrower shall pay to the Agent on demand any and
all costs and expenses (including, without limitation, reasonable attorneys’
fees and disbursements, court costs, litigation and other expenses) incurred or
paid by the Agent in the preparation of this Agreement and in establishing,
maintaining, protecting or enforcing any of the Agent’s rights or the
Obligations, including, without limitation, any and all such costs and expenses
incurred or paid by the Agent (a) in defending the Agent’s security interest in,
title or right to the Collateral or in collecting or attempting to collect or
enforcing or attempting to enforce payment of the Obligations and (b) in any
bankruptcy or other proceeding related to any Loan Party. In addition, the
Borrower shall pay to the Agent on demand, for the benefit of the Lenders any
and all costs and expenses (including, without limitation, reasonable attorneys’
fees and disbursements, court costs, litigation and other expenses) incurred or
paid by each Lender (a) in collecting or attempting to collect or enforcing or
attempting to enforce payment of the Obligations and (b) in any bankruptcy or
other proceeding related to any Loan Party.

8.6 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be an original, but all of which, taken together, shall
constitute but one agreement. Any party to a Loan Document may rely on
signatures of the parties thereto or in any notice or communication delivered
pursuant thereto which are transmitted by facsimile or other electronic means as
fully as if manually signed.

8.7 Complete Agreement. This Agreement and the other Loan Documents constitute
the entire agreement and understanding between and among the parties hereto
relating to the subject matter hereof, and supersede all prior and
contemporaneous proposals, negotiations, agreements and understandings among the
parties hereto with respect to such subject matter.

8.8 Binding Effect of Agreement. This Agreement shall be binding upon and inure
to the benefit of the respective heirs, executors, administrators, legal
representatives, successors and assigns of the parties hereto, and shall remain
in full force and effect (and the Agent shall be entitled to rely thereon) until
released in writing by the Agent. Subject to Section 7.10, the Agent may
transfer and assign this Agreement and deliver the Collateral to the assignee,
who shall thereupon have all of the rights of the Agent; and the Agent shall
then be relieved and discharged of any responsibility or liability with respect
to this Agreement and the Collateral. Neither the Borrower nor any Guarantor nor
any Subsidiary may assign or transfer any of its rights or delegate any of its
obligations under this Agreement. Except as expressly provided herein or in the
other Loan Documents, nothing, expressed or implied, is intended to confer upon
any party, other than the parties hereto, any rights, remedies, obligations or
liabilities under or by reason of this Agreement or the other Loan Documents.

8.9 Amendments and Waivers. No amendment or waiver of this Agreement or any
other Loan Document or any provision hereof or thereof, and no consent to any
departure by any Loan Party therefrom, shall be effective unless the same shall
be in writing and signed by the Agent and the Lenders (or, where otherwise
expressly permitted pursuant to Section 7.11, the Required Lenders in lieu of
the

 

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Agent and the Lenders), the Borrower and Newtek, and each such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. No course of dealing and no delay or omission on the part of
the Agent in exercising any right hereunder shall operate as a waiver of such
right or any other right and waiver on any one or more occasions shall not be
construed as a bar to or waiver of any right or remedy of the Agent on any
future occasion. The rights, remedies, powers and privileges herein provided or
provided in the other Loan Documents are cumulative and not exclusive of any
rights, remedies powers and privileges provided by law. Without limiting the
generality of the foregoing, to the extent permitted by law, the making of a
Loan shall not be construed as a waiver of any Event of Default, regardless of
whether the Agent or any Lender may have had notice or knowledge of such Event
of Default at the time.

8.10 Assignment by Lenders.

 

  (a) Each 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
Lending Amount and the Loans at the time owing to it); provided that, except in
the case of an assignment to an Affiliate of the Lender or an Approved Fund,
such assignment is subject to the prior written consent of the Agent (which
consent shall not be unreasonably withheld). Each such partial assignment shall
be in a minimum principal amount of $100,000 (unless otherwise agreed by the
Agent in its sole discretion) and integral multiples of $50,000 in excess of
that amount; Subject to notification of an assignment, the assignee shall be a
party hereto and, to the extent of the interest assigned, have the rights and
obligations of the assigning Lender under this Agreement, and such Lender shall,
to the extent of the interest assigned, be released from its obligations under
this Agreement (and, in the case of an assignment covering all of the Lender’s
rights and obligations under this Agreement, the Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Section 2.9,
Section 2.10 and Section 8.4). Each Loan Party hereby agrees to execute any
amendment and/or any other document that may be necessary to effectuate such an
assignment. Any assignment or transfer by the Lender of rights or obligations
under this Agreement that does not comply with this paragraph shall be treated
for purposes of this Agreement as a sale by the Lender of a participation in
such rights and obligations in accordance with paragraph (b) of this
Section 8.10.

 

  (b) Each Lender may, without the consent of the Agent or the Borrower, sell
participations to one or more banks or other entities in all or a portion of the
Lender’s rights and obligations under this Agreement (including all or a portion
of its Lending Amount and the Loans owing to it); provided that (i) such
Lender’s obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Agent and the Borrower shall
continue to deal solely and directly with the Lender in connection with the
Lender’s rights and obligations under this Agreement.

 

  (c) Each Lender may at any time, without the consent of the Agent or the
Borrower, pledge or assign a security interest in all or any portion of its
rights under this Agreement to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank; provided
that no such pledge or assignment of a security interest shall release such
Lender from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto

8.11 Terms of Agreement. This Agreement shall continue in full force and effect
so long as any Obligations or obligation of any Loan Party to the Agent shall be
outstanding, or the Agent shall have any obligation to extend any financial
accommodation hereunder, and is supplementary to each and every other agreement
between or among any Loan Parties and the Agent and shall not be so construed as
to limit or otherwise derogate from any of the rights or remedies of the Agent
or any of the liabilities, obligations or undertakings of or among any Loan
Parties under any such agreement, nor shall any contemporaneous or subsequent
agreement between or among any Loan Parties and the Agent be

 

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construed to limit or otherwise derogate from any of the rights or remedies of
the Agent or any of the liabilities, obligations or undertakings of or among any
Loan Parties hereunder, unless such other agreement specifically refers to this
Agreement and expressly so provides.

8.12 Notices. Unless otherwise specifically provided herein, any notice
delivered under this Agreement shall be in writing addressed to the respective
party as set forth below and may be personally served, sent by facsimile
transmission or sent by overnight courier service or certified or registered
United States mail and shall be deemed to have been given (a) if delivered in
person, when delivered; (b) if delivered by facsimile transmission or electronic
mail, on the date of transmission if transmitted on a Business Day before 4:00
p.m. or, if not, on the next succeeding Business Day (provided that, in either
case, the sender shall have received from the recipient a confirmation of
transmission (in addition to any electronic confirmation of receipt generated by
the facsimile or electronic mail system); (c) if delivered by overnight courier,
one business day after delivery to such courier properly addressed and with
shipping charges paid; or (d) if by United States mail, three business days
after deposit in the United States mail, registered or certified mail, postage
prepaid, return receipt requested, and properly addressed.

Notices shall be addressed as follows:

If to the Agent, to:

Sterling National Bank

500 Seventh Avenue

New York, New York 10018-4603

Attention: Neal Landerer

Fax No.: (212) 382-3442

With a copy to:

Lowenstein Sandler LLP

1251 Avenue of the Americas, 17th Floor

New York, New York 10020

Attention: Lowell A. Citron, Esq.

Fax No.: (973) 422-6809

If to the Borrower, to:

CDS Business Services, Inc.

60 Hempstead Avenue, 6th Floor

West Hempstead, New York 11552

Attention: Jennifer Eddelson

Fax No.: (516) 546-3820

With a copy to:

Newtek Business Services Corp.

Legal Department

212 West 35th Street, Second Floor

New York, NY 10001

Fax No.: (212) 356-9542

If to Newtek:

Newtek Business Services Corp.

212 West 35th Street, Second Floor

New York, NY 10001

Attention: Barry Sloane, Chief Executive Officer

Fax No.: (866) 339-7027

 

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With a copy to:

Newtek Business Services Corp.

Legal Department

212 West 35th Street, Second Floor

New York, NY 10001

Fax No.: (212) 273-8293

or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 8.12. Notwithstanding the foregoing, any notice,
request or demand by any Loan Party to or upon the Agent to make a Loan shall
not be effective until received.

8.13 Governing Law. This Agreement has been executed or completed and/or is to
be performed in New York, and it and all transactions thereunder or pursuant
thereto shall be governed as to interpretation, validity, effect, rights, duties
and remedies of the parties thereunder and in all other respects by the laws of
New York, without giving effect to the conflicts of laws principles thereof, but
including Sections 5-1401 and 5-1402 of the General Obligations Law.

8.14 Reproductions; Disclosures. This Agreement and all documents which have
been or may be hereinafter furnished by any Loan Party to the Agent or any
Lender may be reproduced by the Agent or such Lender by any photographic,
photostatic, microfilm, xerographic or similar process, and any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made in the regular course of
business). The Agent and each Lender may refer to any Loan Party and this
financing transaction in general terms in connection with any marketing material
undertaken by the Agent or such Lender. No Loan Party shall issue any press
releases or other disclosure regarding this financing transaction without the
prior written consent of the Agent and each affected Lender.

8.15 Completing and Correcting this Agreement. Each Loan Party authorizes the
Agent to fill in any blank spaces and to otherwise complete this Agreement and
to correct any patent errors herein.

8.16 ADDITIONAL WAIVERS. IN ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR
ARISING OUT OF THIS AGREEMENT, EACH LOAN PARTY WAIVES (i) THE RIGHT TO INTERPOSE
ANY SET-OFF OR COUNTERCLAIM OF ANY NATURE OR DESCRIPTION, (ii) ANY OBJECTION
BASED ON FORUM NON CONVENIENS OR VENUE AND (iii) ANY CLAIM FOR CONSEQUENTIAL,
PUNITIVE OR SPECIAL DAMAGES.

8.17 Jurisdiction and Venue. Each Loan Party irrevocably submits to the
nonexclusive jurisdiction of any Federal or state court sitting in New York
County, New York over any suit, action or proceeding arising out of or relating
to this Agreement. Each Loan Party irrevocably waives, to the fullest extent it
may effectively do so under Requirements of Law, any objection it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that the same has been brought in an
inconvenient forum. Each Loan Party hereby consents to any and all process which
may be served in any such suit, action or proceeding, (i) by mailing a copy
thereof by certified mail, postage prepaid, return receipt requested, and by
first class mail to such Loan Party’s address shown in this Agreement or as
notified to the Agent in accordance with the terms of this Agreement or (ii) by
serving the same upon such Loan Party in any other manner otherwise permitted by
law, and agrees that such service shall in every respect be deemed effective
service on such Loan Party.

8.18 JURY WAIVER. EACH LOAN PARTY, THE AGENT AND EACH LENDER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY, AND AFTER AN OPPORTUNITY TO CONSULT WITH LEGAL
COUNSEL, HEREBY (A) WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING IN CONNECTION WITH THIS AGREEMENT, THE OBLIGATIONS, ALL MATTERS
CONTEMPLATED HEREBY AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND (B) AGREE
NOT TO SEEK TO CONSOLIDATE ANY SUCH ACTION

 

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WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE, OR HAS NOT BEEN, WAIVED.
EACH LOAN PARTY CERTIFIES THAT NEITHER THE AGENT, NOR ANY LENDER, NOR ANY OF
THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR COUNSEL HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT THE AGENT WOULD NOT IN THE EVENT OF ANY SUCH PROCEEDING SEEK
TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.

8.19 Joint and Several. All joint obligations of the Loan Parties (or any group
of Loan Parties) shall be joint and several (whether or not expressly stated
herein), and such obligation and liability on the part of each Loan Party shall
in no way be affected by any extensions, renewals and forbearance granted by the
Agent or any Lender to any Loan Party, failure of the Agent to give any Loan
Party notice of borrowing or any other notice, any failure of the Agent to
pursue or preserve its rights against any Loan Party, the release by the Agent
of any Collateral now or thereafter acquired from any Loan Party, and such
agreement by each Loan Party to pay upon any notice issued pursuant thereto is
unconditional and unaffected by prior recourse by the Agent to any other Loan
Party or any Collateral for such Loan Party’s Obligations or the lack thereof.

8.20 Construction. Each party to a Loan Document has been represented by counsel
in connection with the Loan Documents and the transactions contemplated thereby
and has participated jointly with the other parties in the negotiation and
drafting of this Agreement and the other Loan Documents. In the event an
ambiguity or question of intent or interpretation arises, this Agreement and the
other Loan Documents shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any provisions of this Agreement.

8.21 USA PATRIOT Act Notice. The Agent hereby notifies the Loan Parties that
pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)), as amended from time to time (the “Patriot
Act”), it is required to obtain, verify and record information that identifies
each Loan Party, which information includes the name and address of each Loan
Party and other information that will allow the Agent to identify each Loan
Party in accordance with the Patriot Act. Each Loan Party represents, warrants
and covenants in favor of the Agent and each Lender that it is in compliance, in
all material respects, with the Patriot Act. No part of the proceeds of the
Loans will be used by the Borrower, directly or indirectly, for any payments to
any governmental official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain any improper
advantage, in violation of the United States Foreign Corrupt Practices Act of
1977, as amended.

8.22 Foreign Asset Control Regulations. Neither the Loans nor the use of the
proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. §
1 et seq., as amended) (the “Trading with the Enemy Act”) or any of the foreign
assets control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or
any enabling legislation or executive order relating thereto (including, without
limitation (a) Executive Order 13224 of September 21, 2001 Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore,
none of the Loan Parties and none of or their Affiliates (a) is or will become a
“blocked person” as described in the Executive Order, the Trading With the Enemy
Act or the Foreign Assets Control Regulations or (b) engages or will engage in
any dealings or transactions, or be otherwise associated, with any such “blocked
person” or in any manner violative of any such order.

8.23 Electronic Execution of Documents. The words “execution,” “signed,”
“signature,” and words of like import in any Loan Document shall be deemed to
include electronic signatures or the keeping of records in electronic form, each
of which shall be of the same legal effect, validity or enforceability as a
manually executed signature or the use of a paper-based recordkeeping system, as
the case may be, to the extent and as provided for in any Requirement of Law,
including the Federal Electronic Signatures in Global and National Commerce Act,
the New York State Electronic Signatures and Records Act, or any other similar
state laws based on the Uniform Electronic Transactions Act.

 

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9. GENERAL PROVISIONS RELATED TO NEWTEK

9.1 Taxes.

 

  (a) Payments Free and Clear of Taxes. Except as otherwise provided in this
Section 9.1, each payment by Newtek under any Loan Document shall be made free
and clear of all present or future Taxes, other than for taxes measured by net
income (including branch profits taxes) and franchise taxes imposed in lieu of
net income taxes, in each case imposed on the Agent or any Lender as a result of
a present or former connection between the Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than such connection
arising solely from the Agent or such Lender having executed, delivered or
performed its obligations or received a payment under, or enforced, any Loan
Document).

 

  (b) Gross-Up. If any Taxes shall be required by law to be deducted from or in
respect of any amount payable under any Loan Document to the Agent or any Lender
(i) such amount shall be increased as necessary to ensure that, after all
required deductions for Taxes are made (including deductions applicable to any
increases to any amount under this Section 9.1), the Agent or such Lender
receives the amount it would have received had no such deductions been made,
(ii) Newtek shall make such deductions and (iii) Newtek shall timely pay the
full amount deducted to the relevant taxing authority or other authority in
accordance with applicable Requirements of Law.

 

  (c) Other Taxes. In addition, Newtek agrees to pay, and authorizes the Agent
to pay in its name to the extent Newtek fails to do so on prior to the date when
due, any Other Taxes. Within thirty (30) days after the date of any payment of
Taxes or Other Taxes by Newtek, the Borrower shall furnish to the Agent, the
original or a certified copy of a receipt evidencing payment thereof.

 

  (d) Indemnification. Newtek shall reimburse and indemnify, within thirty
(30) days after receipt of demand therefor the Indemnitees for all Taxes and
Other Taxes (including any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 9.1) paid by such Indemnitee and any
liabilities arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. A certificate of any
Indemnitee claiming any compensation under this clause (d), setting forth in
reasonable detail the computation of the amounts to be paid thereunder and
delivered to the Borrower shall be conclusive, binding and final for all
purposes, absent manifest error. In determining such amount, an Indemnitee may
use any reasonable averaging and attribution methods.

9.2 Credit Reports and Disclosure. The Agent is authorized to make all inquires
the Agent deems necessary to verify the accuracy of the information in respect
of Newtek contained in the Loan Documents and to determine the credit worthiness
of Newtek. Newtek authorizes any Person or credit reporting agency to give to
the Agent any information it may have on Newtek. Newtek authorizes the Agent to
answer questions about Newtek’s credit experience with the Agent. The Agent and
each Lender may refer to Newtek and this financing transaction in general terms
in connection with any marketing material undertaken by the Agent or such
Lender. Unless required to do so by applicable law, Newtek shall not issue any
press releases or other disclosure regarding this financing transaction without
the prior written consent of the Agent and each affected Lender.

 

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10. NEWTEK’S REPRESENTATIONS AND WARRANTIES

In order to induce the Agent and each Lender to enter into this Agreement and to
extend the credit herein provided for, Newtek represents and warrants to the
Agent and each Lender that:

10.1 Investment Company Status. Newtek is in full compliance with the Investment
Company Act of 1940, as amended.

10.2 Federal Reserve Regulations. Newtek is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of buying or carrying Margin Stock. None of the Collateral is used or was
acquired primarily for personal, family or household purposes.

10.3 Solvency. After giving effect to the transactions contemplated by this
Agreement, and before and after giving effect to the making of each Loan, Newtek
is Solvent. No transfer of property has been or will be made by Newtek and no
obligation has been or will be incurred by Newtek in connection with the
transactions contemplated by this Agreement or the other Loan Documents with the
intent to hinder, delay, or defraud either present or future creditors of
Newtek.

11. NEWTEK AFFIRMATIVE COVENANTS

Until the principal of and interest on each Loan and all fees and other amounts
payable under the Loan Documents shall have been paid in full, Newtek agrees to
comply with the covenants set forth in this Article 11 that are applicable to
Newtek.

11.1 Payments and Performance. Newtek will duly and punctually pay all payment
Obligations in accordance with the Guaranty and will duly and punctually perform
all other Obligations on its part to be performed under the Loan Documents.

11.2 Books and Records; Inspection. Newtek will at all times keep proper books
of account in which full, true and correct entries will be made of its
transactions in accordance with GAAP, consistently applied and which are, in the
opinion of a Certified Public Accountant acceptable to Agent, adequate to
determine fairly the financial condition and the results of operations of
Newtek. Newtek will at all reasonable times and upon reasonable notice make its
books and records available in its offices for inspection, examination and
duplication by the Agent and the Agent’s representatives and will permit the
Agent and the Agent’s representatives to discuss its affairs, finances and
condition with its officers and independent accountants

11.3 Maintenance of Existence; Conduct of Business. Newtek will maintain its
existence in good standing and shall do or cause to be done all things necessary
to preserve and keep in full force and effect its legal existence and all
rights, Permits, privileges and franchises material to the conduct of its
business.

11.4 Compliance with Law. Newtek will comply with all laws, rules, regulations
and orders of any Governmental Authority applicable to it or its property,
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect.

11.5 Solvency. Newtek will remain Solvent during the term of this Agreement.

11.6 Operating and Deposit Accounts. Newtek shall maintain with the Agent the
accounts set forth in Section 4 of Annex 2.

11.7 Payment of Newtek Taxes, Accounts Payable and Other Obligations. Newtek
will pay, before the same shall become delinquent or in default, its
obligations, including Loan Party Taxes, except and only to the extent that
(a) the validity or amount thereof is being contested in good faith by
appropriate proceedings diligently conducted, (b) Newtek 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.

 

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11.8 Environmental. Newtek shall use and operate all of its facilities and
property in compliance with all Environmental Laws, keep all necessary Permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance therewith, and handle
all Hazardous Materials in compliance with all applicable Environmental Laws.
Newtek agrees to indemnify and hold each Indemnitee harmless from all liability,
loss, cost, damage and expense, including attorneys’ fees and costs of
litigation, arising from any violation by Newtek of any Environmental Law
(including those arising from any lien by any Federal, state or local government
arising from the presence of Hazardous Materials) or from the presence of
Hazardous Materials located on or emanating from any of the premises owned or
controlled by Newtek. Newtek agrees that its obligations hereunder shall be
continuous and shall survive the repayment of all Obligations.

11.9 Third Parties. Newtek acknowledges and agrees that the Agent shall have no
duty to, and shall not be deemed to have assumed any liability or responsibility
to, Newtek or any third Person for the correctness, validity or genuineness of
any instruments or documents that may be released or endorsed to Newtek by the
Agent (all of which shall be without recourse to the Agent) or for the
existence, character, quantity, quality, condition, value or delivery of any
goods purporting to be represented by any such documents; and the Agent, by
accepting a Lien on the Collateral, or by releasing any Collateral to Newtek,
shall have no duty to, and shall not be deemed to have assumed any obligation or
liability to, any supplier, Mortgage Debtor or any other third party, and Newtek
agrees to indemnify and defend the Agent against and hold it harmless from any
claim or proceeding arising out of the foregoing.

(Remainder of Page Intentionally Left Blank)

 

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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed on their behalf as of the date set forth in the first paragraph hereof.

 

BORROWER: CDS BUSINESS SERVICES, INC.     Witness By:  

/s/ Barry Sloane

   

/s/ Robert Fraley

Name:   Barry Sloane     Title:   Chief Executive Officer     Acknowledged and
Agreed to:     GUARANTOR     NEWTEK BUSINESS SERVICES CORP.     Witness By:  

/s/ Barry Sloane

   

/s/ Robert Fraley

Name:   Barry Sloane     Title:   Chief Executive Officer     Accepted:    
ADMINISTRATIVE AGENT, COLLATERAL AGENT AND LENDER:     STERLING NATIONAL BANK,  
  Lending Amount: Up to $35,000,000 as Agent and a Lender     By:  

/s/ Leonard Rudolph

    Name:   Leonard Rudolph     Title:   Senior Vice President    

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EXHIBIT A

ADVANCE REQUEST PACKAGE

For each Mortgage Loan intended to be Collateral for an Advance:

 

1. Note

 

2. Mortgage or deed of Trust

 

3. Allonge to Mortgage Note

 

4. Assignment of Mortgage or Deed of Trust in recordable form

 

5. Phase I Environmental Report

 

6. MAI Appraisal of Property

 

7. All other instruments and agreements executed and delivered in connection
with the foregoing

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Annex 1

Definitions

The following terms are defined in the corresponding sections:

 

Defined Term

 

Section

Affected Lender   7.7 Agreement   Preamble Amendments and Waivers   8.9
Authorized Person   1.8 Borrower   Preamble Agent   Preamble Collateral
Management Fee   Annex 2 Deposit Collateral   8.3 Event of Default   6.1
Executive Order   8.22 Financial Statements   3.12 Foreign Asset Control
Regulations   8.22 Guarantor(s)   Annex 2 Lenders   Preamble Lien Law   4.14
Loan Account   1.2 Loans   1.1 Loan Documents   1.1 Maturity Date   Annex 2
Maximum Facility Amount   Annex 2 Maximum Lawful Rate   1.3(d) NSBF   3.23 Other
Taxes   1.14(c) Patriot Act   8.21 Register   1.2 Security Deposit   Annex 2
Taxes   1.14(a) Trading with the Enemy Act   8.22

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Defined Terms. As used in this Agreement, the following terms have the following
meanings:

“Affiliate” shall mean with respect to any Person, (a) any Person which,
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Person, or (b) any Person
who is a director or officer (i) of such Person, (ii) of any subsidiary of such
Person, or (iii) any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or indirect,
(ix) to vote 10% or more of the Stock or other form of ownership interest having
ordinary voting power for the election of directors (or the comparable
equivalent) of such Person, or (y) to director or cause the direction of the
management and policies of such Person whether by contract or otherwise. Control
may be by ownership, contract or otherwise.

“Agent Indemnitees” shall mean the Agent and its Affiliates and all of Agent’s
and each of its Affiliates’ present and future officers, directors, agents,
employees and attorneys

“Agent Affiliate” shall mean any Affiliate of the Agent or the Agent, including,
without limitation, or any of its banking or lending affiliates, or any bank
acting as a participant under any loan arrangement between the Agent and any
Loan Party, or any third party acting on the Agent’s behalf.

“Agent Professionals” shall mean attorneys, accountants, appraisers, business
valuation experts, environmental engineers or consultants, turnaround
consultants and other professionals or experts retained by Agent or any Agent
Affiliate.

“Appraised Value” shall mean, with respect to any real property encumbered by a
Mortgage Loan, the fair market value of said real property set forth on a
Qualified Appraisal thereof.

“Approved Fund” shall mean any Person (other than a natural person) that is
engaged in making, purchasing, holding or investing in bank loans and similar
extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages the Lender.

“Assignment and Acceptance” shall mean an assignment and acceptance entered into
by a Lender and an assignee and accepted by the Agent.

“Blocked Account” means, if as and when requested by Agent, an account
established in the name of the Borrower and maintained at the Agent.

“Blocked Account Agreement” means that certain Blocked Account Agreement of even
date herewith executed and delivered by the Borrower and the Agent governing the
Blocked Account.

“Borrowing Base Certificate” means a certificate, executed and delivered by the
chief financial officer of the Borrower, in the form approved by the Agent from
time to time.

“Business Day” shall mean any day of the year that is not a Saturday, Sunday or
a day on which banks are required or authorized by law to close in New York
City.

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

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“Cash Collateral Account” shall mean a demand deposit, money market or other
account established by the Borrower at the Agent, which account shall be subject
to the Agent’s Liens for the benefit of the Lenders.

“CDC” shall mean a Certified Development Company as defined in 13 CFR §120.820.

“Change in Control” shall mean (a) any sale, conveyance, assignment or other
transfer, directly or indirectly, of any ownership interest in the Borrower so
that Newtek directly or indirectly no longer holds a controlling interest in the
Borrower or the sale of more than fifty percent (50%) of the assets of the
Borrower or (b) that either Barry Sloane ceases to be involved in the day-to-day
operations of Newtek or Peter Downs ceases to be involved in the day-to-day
operations of one or more of Newtek’s Affiliates, each performing functions
substantially similar to the functions performed on the date hereof, and a
successor thereto acceptable to the Agent, has not commenced such functions
within 120 days thereof.

“Closing Date” shall mean the date upon or after the execution of this Agreement
on which all of the conditions precedent to the making of the initial Loan shall
have been satisfied or waived.

“Code” shall mean the Uniform Commercial Code of any applicable jurisdiction
and, if the applicable jurisdiction shall not have any Uniform Commercial Code,
the Uniform Commercial Code as in effect in the State of New York; provided
that, if by reason of mandatory provisions of law, perfection, or the effect of
perfection or non-perfection, of a security interest in any Collateral or the
availability of any remedy under the Loan Documents is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York, “Uniform
Commercial Code” means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or effect of perfection or non-perfection or availability of such remedy, as the
case may be.

“Collateral” shall mean all right, title and interest of the Borrower in and to
each of the following items, whether now owned or existing or hereafter created,
acquired or arising, and wherever located from time to time:

 

  (i) accounts;

 

  (ii) chattel paper;

 

  (iii) goods;

 

  (iv) inventory;

 

  (v) equipment;

 

  (vi) fixtures;

 

  (vii) farm products;

 

  (viii) instruments;

 

  (ix) investment property;

 

  (x) documents;

 

  (xi) commercial tort claims;

 

  (xii) deposit accounts and money;

 

  (xiii) letter-of-credit rights;

 

  (xiv) general intangibles;

 

  (xv) supporting obligations;

 

  (xvi) vehicles;

 

  (xvii) real property;

 

  (xviii) to the extent not listed above, all other personal property and real
property;

 

  (xix) health-care insurance receivables;

 

  (xx) money; and

 

  (xxi) all proceeds and products of the foregoing.

 

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“Contractual Obligation” shall mean, with respect to any Person, any provision
of any security issued by such Person or of any document or undertaking (other
than a Loan Document) to which such Person is a party or by which it or any of
its property is bound or to which any of its property is subject.

“Copyrights” shall mean all of the following now owned or hereafter acquired by
the Borrower: (i) all copyright rights in any work subject to the copyright laws
of the United States or any other country, whether as author, assignee,
transferee or otherwise, and (ii) all registrations and applications for
registration of any such copyright in the United States or any other country,
including registrations, recordings, supplemental registrations and pending
applications for registration in the United States Copyright Office.

“Debt Service Coverage Ratio” shall mean, with respect to a Mortgage Debtor, the
ratio of (i) the Mortgage Debtor’s earnings before interest, taxes, depreciation
and amortization to (ii) total current (i.e., principal and interest due within
one (1) year) portion of Indebtedness of the Mortgage Debtor (including, but not
limited to, Indebtedness represented by a Mortgage Loan).

“Default” shall mean any Event of Default and any event that, with the passing
of time or the giving of notice, or both, would become an Event of Default.

“Defaulting Lender” shall mean any Lender (a) that for any reason fails or
refuses to (i) fund its Pro Rata share of any Loan in violation of this
Agreement or (ii) make any other payment of any nature to Agent under any
applicable term hereof or the other Loan Documents, (b) against which any
bankruptcy, insolvency, reorganization, debt arrangement, dissolution,
liquidation or similar proceeding under the laws of any jurisdiction shall have
occurred and be continuing, (c) that has notified the Borrower, the Agent, or
any other Lender in writing that it does not intend to comply with any of its
funding obligations under this Agreement or has made a public statement to the
effect that it does not intend to comply with its funding obligations under this
Agreement or any other agreement in which it commits or is obligated to extend
credit or (d) that has become or is insolvent, as reasonably determined by the
Agent in consultation with the Borrower.

“Document” means a document of title, as defined in Section 1-201 of the Code.

“Dollars” and the sign “$” each mean the lawful money of the United States of
America.

“Domestic Subsidiary” shall mean any Subsidiary that is not a “controlled
foreign corporation” within the meaning of Section 957 of the Tax Code.

“Eligibility Criteria” shall mean, with respect to a Mortgage Loan:

(a) the Mortgage Debtor shall have been in existence not less than two
(2) years;

(b) the Mortgage Debtor’s Debt Service Coverage Ratio equals or exceeds 1.20 to
1:00 as of the end of the most recent four fiscal quarter period then ended;

(c) the principal amount of all Indebtedness of the Mortgage Debtor secured by
mortgages and/or deeds of trust (including, but not limited to, any Mortgage
Loans) does not exceed (i) $9,000,000 in the case of mortgages or deeds of trust
encumbering real property of the Mortgage Debtor that is multi-use or
hospitality property, and (ii) $7,000,000 in the case of mortgages or deeds of
trust encumbering all other real property;

(d) neither the Mortgage Debtor nor any guarantor or principal owner of the
Mortgage Debtor is currently a debtor in any bankruptcy or similar proceeding;

(e) at least one owner of the Mortgage Debtor or guarantor of the Mortgage Loan
has a FICO score exceeding 650;

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(f) [intentionally omitted];

(g) the Mortgage Loan meets all requirements of the SBA for a “Section 504”
loan, and the SBA has issued a loan authorization with respect thereto;

(h) the real property encumbered by the Mortgage Loan is not a leasehold estate;

(i) the Mortgage Loan is not a construction loan;

(j) the Mortgage Loan provides for regular monthly installments and is not more
than two (2) installments past due;

(k) if the Mortgage Loan is a First Mortgage Loan, all instruments and
agreements executed and delivered in connection therewith are dated not more
than 365 days from the applicable Funding Date;

(k) if the Mortgage Loan is a Second Mortgage Loan, all instruments and
agreements executed and delivered in connection therewith are dated not more
than 90 days from the applicable Funding Date;

(l) an appraisal of the Mortgaged Property, together with an environmental
conditions report regarding the Mortgaged Property, have been delivered to the
Agent, and each shall have been determined by the Agent to be satisfactory to
Agent based upon review by Agent’s independent third party appraiser and
environmental consultant; and

(m) the Mortgage Loan meets such other criteria as the Agent may establish or
impose in its sole reasonable judgment.

“Eligible First Mortgage Loan” shall mean an Eligible Mortgage Loan that is also
a First Mortgage Loan.

“Eligible Second Mortgage Loan” shall mean an Eligible Mortgage Loan that is
also a Second Mortgage Loan; provided that the real property encumbered by said
Eligible Mortgage Loan is also encumbered by an Eligible First Mortgage Loan.

“Eligible Mortgage Loan” shall mean a Mortgage Loan that meets the Eligibility
Criteria.

“Environmental Laws” shall mean all Requirements of Law and Permits imposing
liability or standards of conduct for or relating to the regulation and
protection of human health, safety, the environment and natural resources,
including CERCLA, the SWDA, the Hazardous Materials Transportation Act (49
U.S.C. §§ 5101 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. §§ 136 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601
et seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. §§ 1251 et seq.), the Occupational Safety and
Health Act (29 U.S.C. §§ 651 et seq.), the Safe Drinking Water Act (42 U.S.C.
§§ 300(f) et seq.), all regulations promulgated under any of the foregoing, all
analogous Requirements of Law and Permits and any environmental transfer of
ownership notification or approval statutes, including the Industrial Site
Recovery Act (N.J. Stat. Ann. §§ 13:1K-6 et seq.).

“Environmental Liabilities” shall mean all liabilities (including costs of
Remedial Actions, natural resource damages and costs, fines, penalties,
indemnities and expenses of investigation and feasibility studies) that may be
imposed on, incurred by or asserted against the Borrower or Newtek as a result
of, or related to, any claim, suit, action, investigation, proceeding or demand
by any Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute or common law or otherwise, arising
under any Environmental Law or in connection with any environmental, health or
safety condition or with any Release and resulting from the ownership, lease,
sublease or other operation or occupation of property by any Group Member,
whether on, prior to or after the date hereof.

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“ERISA” shall mean the United States Employee Retirement Income Security Act of
1974, as amended.

“ERISA Affiliate” shall mean, collectively, the Borrower, Newtek and any Person
under common control, or treated as a single employer, with the Borrower or
Newtek, within the meaning of Section 414(b), (c), (m) or (o) of the Tax Code.

“ERISA Event” shall mean any of the following: (a) a reportable event described
in Section 4043(b) of ERISA (or, unless the 30-day notice requirement has been
duly waived under the applicable regulations, Section 4043(c) of ERISA) with
respect to a Title IV Plan, (b) the withdrawal of any ERISA Affiliate from a
Title IV Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA, (c) the
complete or partial withdrawal of any ERISA Affiliate from any Multiemployer
Plan, (d) with respect to any Multiemployer Plan, the filing of a notice of
reorganization, insolvency or termination (or treatment of a plan amendment as
termination) under Section 4041A of ERISA, (e) the filing of a notice of intent
to terminate a Title IV Plan (or treatment of a plan amendment as termination)
under Section 4041 of ERISA, (f) the institution of proceedings to terminate a
Title IV Plan or Multiemployer Plan by the PBGC, (g) the failure to make any
required contribution to any Title IV Plan or Multiemployer Plan when due,
(h) the imposition of a lien under Section 412 of the Tax Code or Section 302 or
4068 of ERISA on any property (or rights to property, whether real or personal)
of any ERISA Affiliate, (i) the failure of a Plan or any trust thereunder
intended to qualify for tax exempt status under Section 401 or 501 of the Tax
Code or other Requirements of Law to qualify thereunder and (j) any other event
or condition that might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan or Multiemployer Plan or for the imposition of any
liability upon any ERISA Affiliate under Title IV of ERISA other than for PBGC
premiums due but not delinquent.

“First Mortgage Loan” shall mean a Mortgage Loan that is secured by a first
priority mortgage or deed of trust on real property.

“Full Payment” shall mean (a) with respect to any of the Obligations, the full,
final and indefeasible payment in full, in cash and in United States dollars, of
such Obligations, including all interest, fees and other charges payable in
connection therewith under any of the Loan Documents, whether such interest,
fees or other charges accrue or are incurred prior to or during the pendency of
an insolvency or similar proceeding and whether or not any of the same are
allowed or recoverable in any bankruptcy case pursuant to Section 506 of the
United States Bankruptcy Code or otherwise, and (b) with respect to any
Obligations that are contingent in nature, such as a right of the Agent or a
Lender to indemnification by any Loan Party, the depositing of cash with the
Agent in an amount equal to 100% of such Obligations or, if such Obligations are
unliquidated in amount and represent a claim which has been overtly asserted (or
is reasonably probable of assertion) against the Agent or a Lender and for which
an indemnity has been provided by the Borrower in any of the Loan Documents, in
an amount that is equal to such claim or the Agent’s good faith estimate of such
claim.

“GAAP” shall mean generally accepted accounting principles in the United States
of America, as in effect from time to time, set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants, in the statements and pronouncements of the
Financial Accounting Standards Board and in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession that are applicable to the circumstances as of the date of
determination.

“Governmental Authority” shall mean any nation, sovereign or government, any
state or other political subdivision thereof, any agency, authority or
instrumentality thereof and any entity or authority exercising executive,
legislative, taxing, judicial, regulatory or administrative functions of or
pertaining to

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government, including any central bank, stock exchange, regulatory body,
arbitrator, public sector entity, supra-national entity (including the European
Union and the European Central Bank) and any self-regulatory organization
(including the National Association of Insurance Commissioners).

“Guarantor(s)” shall mean those Persons described as such in Section 8 of Annex
2.

“Guaranty” shall mean any guaranty executed by a Guarantor in favor of the Agent
for the benefit of the Lenders (if more than one, the “Guaranties”).

“Hazardous Material” shall mean any substance, material or waste that is
classified, regulated or otherwise characterized under any Environmental Law as
hazardous, toxic, a contaminant or a pollutant or by other words of similar
meaning or regulatory effect, including petroleum or any fraction thereof,
asbestos, polychlorinated biphenyls and radioactive substances.

“Hedging Agreement” shall mean any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity price hedging arrangement and
other hedging agreements (including, without limitation, all “swap agreements”
as defined in 11 U.S.C. § 101).

“Indebtedness” shall mean (A) all indebtedness for borrowed money or for the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), and all obligations under
leases which are or should be, under GAAP, recorded as capital leases, in
respect of which a Person is directly or contingently liable as borrower,
guarantor, endorser or otherwise, or in respect of which a Person otherwise
assures a creditor against loss; (B) all obligations for borrowed money or for
the deferred purchase price of property or services secured by (or for which the
holder has an existing right, contingent or otherwise, to be secured by) any
Lien upon property (including without limitation accounts receivable and
contract rights) owned by a Person, whether or not such Person has assumed or
become liable for the payment thereof; (C) indebtedness evidenced by bonds,
debentures, notes or other similar instruments; (D) obligations and liabilities
directly or indirectly guaranteed by such Person; (E) obligations or liabilities
created or arising under any conditional sales contract or other title retention
agreement with respect to property used and/or acquired by such Person; (F) all
obligations of such Person in respect of letters of credit or bankers’
acceptances; (G) all obligations, contingent or otherwise of such Person as an
account party or applicant in respect of letters of credit; and (H) all other
liabilities and obligations which would be classified in accordance with GAAP as
indebtedness on a balance sheet or to which reference should be made in
footnotes thereto. The amount of any guarantee shall be deemed to be the lower
of (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such guarantee is made and (b) the maximum amount
for which the Person giving such guarantee may be liable pursuant to the terms
of the agreement embodying such guarantee unless such primary obligation and the
maximum amount for which such Person may be liable are not stated or
determinable, in which case the amount of such guarantee shall be such Person’s
maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith.

“Indemnitees” shall mean the Agent Indemnitees and the Lender Indemnitees.

“Ineligible First Mortgage Loan” means an Eligible First Mortgage Loan that
ceases to meet the Eligibility Criteria.

“Ineligible Second Mortgage Loan” means an Eligible Second Mortgage Loan that
ceases to meet the Eligibility Criteria.

“Lender Indemnitees” shall mean the Lenders, the Lenders’ Affiliates, and all of
their respective present and future officers, directors, employees, agents and
attorneys.

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“Lending Amount” shall mean, at any date for any Lender, the obligation of such
Lender to make Loans pursuant to the terms and conditions of this Agreement,
which shall not exceed the principal amount set forth opposite such Lender’s
name under the heading “Lending Amount” on the signature pages of this Agreement
or the principal amount set forth in the Assignment and Acceptance by which it
became a Lender, as modified from time to time pursuant to the terms of this
Agreement or to give effect to any applicable Assignment and Acceptance.

“Lending Amounts” means the aggregate principal amount of the Lending Amounts of
all Lenders, the maximum amount of which on any date shall be $35,000,000.

“Lending Laws” shall mean any statute, law, regulation or ordinance issued by
any Governmental Authority which pertains to any present or future business
conducted by the Borrower, including, but not limited to Regulation Z of the
Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II, federal
and state usury statutes, the Fair Debt Collection Practices Act, the Florida
Documentary Tax Stamp statute or any other federal, state of local law or
regulation, as each shall be amended from time to time.

“Lien” shall mean any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, security interest, encumbrance, charge, claim,
restriction on transfer or similar restriction or other security arrangement of
any kind or nature whatsoever, including, without limitation, any conditional
sale or other title retention agreement and any capital or financing lease
having substantially the same economic effect as any of the foregoing.

“Loan Documents” shall mean this Agreement, the Notes (if any), any security
agreements, pledge agreements or guaranties and any and all other documents,
amendments or renewals executed and delivered in connection with any of the
foregoing.

“Loan Party” shall mean the Borrower and all Guarantors, including, without
limitation, Newtek.

“Loan Party Taxes” shall mean any and all current or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority, including, without limitation, income taxes, real and personal
property taxes, assessments and charges and all franchise, income, unemployment,
retirement benefits, withholding, sales, F.I.C.A. and other taxes.

“Managing Person” shall mean with respect to any Person that is (i) a
corporation, its board of directors, (ii) a limited liability company, its board
of control, managing member or members, (iii) a limited partnership, its general
partner, (iv) a general partnership or a limited liability partnership, its
managing partner or executive committee or (v) any other Person, the managing
body thereof or other Person analogous to the foregoing.

“Material Adverse Effect” shall mean any act, omission, event or undertaking
which, singly or together with one or more other acts, omissions, events or
undertakings, could reasonably be expected to have a materially adverse effect
upon (1) the business, assets, properties, liabilities, condition (financial or
otherwise), results of operations or business prospects of the Borrower or
Newtek or (2) the ability of any Loan Party to perform its obligations in a
timely manner under this Agreement and the other agreements and instruments
executed and delivered in connection herewith.

“Maturity Date” is defined in Section 9 of Annex 2.

“Maximum Availability” shall mean, at any time, the Maximum Facility Amount less
the aggregate principal amount of Loans outstanding at that time.

“Mortgage Debtor” shall mean any Person obligated on a Mortgage Loan.

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“Mortgage Loan” shall mean a loan made by the Borrower to a Person which is
secured by a lien on real property.

“Multiemployer Plan” shall mean any employee benefit plan of the type described
in Section 4001(a)(3) of ERISA, to which the Borrower, Newtek or any ERISA
Affiliate makes or is obligated to make contributions, or during the preceding
five plan years, has made or been obligated to make contributions.

“Newtek” shall mean Newtek Business Services Corp., a Maryland corporation.

“Note” shall mean any promissory note evidencing a Loan.

“Obligation(s)” shall mean, without limitation, (a) all loans, advances,
indebtedness, bankers’ acceptances, notes, reimbursement obligations,
liabilities, rate swap transactions, basis swaps, forward rate transactions,
commodity swaps, commodity options, equity or equity index swaps, equity or
equity index options, bond options, interest rate options, foreign exchange
transactions, cap transactions, floor transactions, collar transactions, forward
transactions, currency swap transactions, cross-currency rate swap transaction,
currency options and amounts, liquidated or unliquidated, owing by any Loan
Party to the Agent, Sterling National Bank or any Agent Affiliate at any time,
of each and every kind, nature and description, whether arising under this
Agreement, any of the Loan Documents or otherwise, and whether secured or
unsecured, direct or indirect (that is, whether the same are due directly by the
Borrower to the Agent or any Agent Affiliate; or are due indirectly by the
Borrower to the Agent or any Agent Affiliate as endorser, guarantor or other
surety, or as obligor of any obligations due third persons which have been
endorsed or assigned to the Agent or any Agent Affiliate, or otherwise),
absolute or contingent, due or to become due, now existing or hereafter arising
or contracted, including, without limitation, payment when due of all amounts
outstanding respecting any of the Loan Documents and (b) all loans, advances,
indebtedness, bankers’ acceptances, notes, reimbursement obligations,
liabilities, rate swap transactions, basis swaps, forward rate transactions,
commodity swaps, commodity options, equity or equity index swaps, equity or
equity index options, bond options, interest rate options, foreign exchange
transactions, cap transactions, floor transactions, collar transactions, forward
transactions, currency swap transactions, cross-currency rate swap transaction,
currency options and amounts, liquidated or unliquidated, owing the Borrower to
any other Lender, of each and every kind, nature and description, arising under
this Agreement or any of the Loan Documents, and whether secured or unsecured,
direct or indirect (that is, whether the same are due directly by the Borrower
the Lender; or are due indirectly by any Loan Party to the Lender as endorser,
guarantor or other surety, or as obligor of any obligations due third persons
which have been endorsed or assigned to the Lender, or otherwise), absolute or
contingent, due or to become due, now existing or hereafter arising or
contracted. Said term shall also include all interest and other charges
chargeable to the Borrower or due from the Borrower to the Agent or any Agent
Affiliate from time to time and all costs and expenses referred to in this
Agreement.

“Organizational Documents” shall mean as to any Person which is (i) a
corporation, the certificate or articles of incorporation and by-laws of such
Person, (ii) a limited liability company, the articles of organization or
certificate of formation and limited liability company agreement or similar
agreement of such Person, (iii) a partnership, the partnership agreement or
similar agreement of such Person and, in the case of a limited partnership, the
certificate of limited partnership, or (iv) any other form of entity or
organization, the organizational documents analogous to the foregoing.

“Patents” shall mean all of the following now owned or hereafter acquired by the
Borrower: (i) all letters patent of the United States or any other country, all
registrations and recordings thereof, and all applications for letters patent of
the United States or any other country, including registrations, recordings and
pending applications in the United States Patent and Trademark Office or any
similar offices in any other country and (ii) all reissues, continuations,
divisions, continuations-in-part, renewals or extensions thereof, and the
inventions disclosed or claimed therein, including the right to make, use or
sell the inventions disclosed or claimed therein.

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“PBGC” shall mean the United States Pension Benefit Guaranty Corporation and any
successor thereto.

“Pension Plan” shall mean any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by any Loan Party or
any ERISA Affiliate or to which any Loan Party or any ERISA Affiliate
contributes or has an obligation to contribute, or in the case of a multiple
employer or other plan described in Section 4064(a) of ERISA, has made
contributions at any time during the immediately preceding five plan years.

“Permit” shall mean, with respect to any Person, any permit, approval,
authorization, license, registration, certificate, concession, grant, franchise,
variance or permission from, and any other Contractual Obligations with, any
Governmental Authority, in each case whether or not having the force of law and
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.

“Permitted Investments” shall mean:

(a) Eligible Mortgage Loans;

(b) “Eligible Client Advances” as defined in, and permitted under, the Revolving
Loan Agreement;

(c) 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 that such obligations are backed by the full faith
and credit of the United States of America), in each case measuring within one
year from the date of acquisition thereof;

(d) investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, the highest credit
rating obtainable from Standard & Poor’s Financial Services LLC, a subsidiary of
The McGraw-Hill Companies, Inc., or any successor thereto, or from Moody’s
Investors Service, Inc. or any successor thereto;

(e) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within 180 days from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, the Agent or any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof that has a
combined capital and surplus and undivided profits of not less than
$250,000,000; and

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

“Permitted Liens” shall mean (A) Liens securing the Obligations hereunder,
(B) Liens for taxes not yet due and payable, that remain payable without penalty
or that are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves or other appropriate
provisions are maintained in accordance with GAAP, (C) Liens of warehousemen and
bailees for customary storage charges and fees, (D) purchase-money Liens
covering solely equipment constituting capital assets owned or leased by the
Borrower and the proceeds thereof and securing not more than $3,000 in purchase
money Indebtedness, (E) Liens of a collecting bank on items in the course of
collection arising under Section 4-208 of the Code, (F) pledges or cash deposits
made in the ordinary course of business (i) in connection with workers’
compensation, unemployment insurance or other types of social security benefits
(other than any Lien imposed by ERISA), (ii) to secure the performance of bids,
tenders, leases (other than capital leases) sales or other trade contracts
(other than for the repayment of borrowed money) or (iii) made in lieu of, or to
secure the performance of, surety, customs, reclamation or

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performance bonds (in each case not related to judgments or litigation),
(G) judgment liens (other than for the payment of taxes, assessments or other
governmental charges) securing judgments and other proceedings not constituting
an Event of Default under Section 6.1(k) or Section 6.1(p) and pledges or cash
deposits made in lieu of, or to secure the performance of, judgment or appeal
bonds in respect of such judgments and proceedings, (H) unexercised statutory or
common law bankers’ and brokers’ liens and (I) Liens of landlords and mortgagees
of landlords (arising by statute on fixtures and movable tangible property
located on the real property leased or subleased from such landlord for amounts
not yet due, that remain payable without penalty or that are being contested in
good faith by appropriate proceedings diligently conducted and for which
adequate reserves or other appropriate provisions are maintained in accordance
with GAAP, (K) Liens in favor of the Agent, (L) Liens granted in connection with
the Revolving Loan Agreement, or (M) liens that are subject to a Subordination
Agreement.

“Plan” shall mean any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by the Borrower or Newtek or, with respect to
any such plan that is subject to Section 412 of the Tax Code or Title IV of
ERISA, any ERISA Affiliate.

“Person” or “party” shall mean individuals, partnerships, corporations, limited
liability companies and all other entities.

“Pro Rata” shall mean, with respect to any Lender on any date, a percentage
(expressed as a decimal, rounded to the second decimal place) arrived at by
dividing the amount of the total Lending Amounts of such Lender on such date by
the aggregate amount of the Lending Amounts of all Lenders on such date
(regardless of whether or not any of such Lending Amounts have been terminated
on or before such date).

“Property” shall mean all types of real, personal, tangible, intangible or mixed
property.

“Qualified Appraisal” means, with respect to any real property encumbered by an
Eligible Mortgage Loan, an appraisal of said property prepared by an MAI
appraiser and in form and substance (i) required by the SBA in order to qualify
said Eligible Mortgage Loan for an SBA guaranty and (ii) otherwise satisfactory
to the Agent in the Agent’s sole discretion.

“Referenced Mortgage Loan” shall mean an Eligible Mortgage Loan offered by the
Borrower as Collateral for a Loan.

“Release” shall mean any release, threatened release, spill, emission, leaking,
pumping, pouring, emitting, emptying, escape, injection, deposit, disposal,
discharge, dispersal, dumping, leaching or migration of Hazardous Material into
or through the environment.

“Remedial Action” shall mean all actions required by applicable Environmental
Laws to (a) clean up, remove, treat or in any other way address any Hazardous
Material in the indoor or outdoor environment, (b) prevent or minimize any
Release so that a Hazardous Material does not migrate or endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment or
(c) perform pre-remedial studies and investigations and post-remedial monitoring
and care with respect to any Hazardous Material.

“Replacement First Mortgage Loan” shall mean an Eligible First Mortgage Loan
that has been assigned to Agent pursuant to Section 4.18 hereof.

“Replacement Second Mortgage Loan” shall mean an Eligible Second Mortgage Loan
that has been assigned to Agent pursuant to Section 4.18 hereof.

“Required Lenders” shall mean, at any date of determination thereof, Lenders
(excluding any Defaulting Lender at such time) having Lending Amounts
representing at least 50.1% of the aggregate Lending Amounts at such time
(excluding the Lending Amounts of any Defaulting Lender at such time);

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provided, however, that if all of the Lending Amounts have been terminated, the
term “Required Lenders” shall mean Lenders (excluding any Defaulting Lender at
such time) holding Loans representing at least 50.1% of the aggregate principal
amount of Loans outstanding at such time (excluding Loans held by any Defaulting
Lender at such time); provided further, that at any date of determination on
which there are no more than two Lenders, the term “Required Lenders” shall mean
all Lenders on such date.

“Requirements of Law” shall mean, with respect to any Person, collectively, the
common law and all federal, state, local, foreign, multinational or
international laws, statutes, codes, treaties, standards, rules and regulations,
guidelines, ordinances, orders, judgments, writs, injunctions, decrees
(including administrative or judicial precedents or authorities) and the
interpretation or administration thereof by, and other determinations,
directives, requirements or requests of, any Governmental Authority, in each
case whether or not having the force of law and that are applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.

“Restricted Payment” shall mean, as to any Person, any dividend or other
distribution by such Person (whether in cash, securities or other property) with
respect to any shares of any class of equity securities of such Person, 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 shares or any option,
warrant or other right to acquire any such shares.

“Revolving Loan Agreement” shall mean that certain Loan and Security Agreement,
dated as of February 28, 2011 (as the same may be amended, extended,
supplemented, modified and restated from time to time) by and among the
Borrower, the lenders party thereto, and Sterling National Bank, as agent.

“SBA” shall mean the United States Small Business Administration.

“Second Mortgage Loan” shall mean a Mortgage Loan that is secured by a second
priority mortgage or deed of trust on real property

“Solvent” shall mean, with respect to any Person on a particular date, that on
such date (a) the fair value of the property of such Person is greater than the
total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person’s ability to pay such debts and
liabilities as they mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person’s property would constitute unreasonably small capital. The amount
of contingent liabilities at any time shall be computed as the amount that, in
the light of all the facts and circumstances existing at such time, represents
the amount that would reasonably be expected to become an actual or matured
liability.

“Stock” shall mean all shares of capital stock (whether denominated as common
stock or preferred stock), equity interests, beneficial, partnership or
membership interests, joint venture interests, participations or other ownership
or profit interests in or equivalents (regardless of how designated) of or in a
Person (other than an individual), whether voting or non-voting.

“Subordination Agreement” shall mean a subordination agreement satisfactory in
form and substance to the Agent and executed by a subordinated creditor in favor
of the Agent (if more than one, the “Subordination Agreements”).

“Subsidiary” shall mean, with respect to any Person, any corporation,
partnership, joint venture, limited liability company, association or other
entity, the management of which is, directly or indirectly, controlled by, or of
which an aggregate of more than 50% of the outstanding Voting Stock is, at the
time, owned or controlled directly or indirectly by, such Person or one or more
Subsidiaries of such Person. Unless otherwise indicated, references to a
“Subsidiary” mean a Subsidiary of the Borrower.

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“Tax Code” shall mean the U.S. Internal Revenue Code of 1986, as amended.

“Title IV Plan” shall mean a Pension Plan or Plan.

“Trademarks” shall mean all of the following now owned or hereafter acquired by
the Borrower: (a) all trademarks, service marks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, trade
dress, logos, other source or business identifiers, designs and general
intangibles of like nature, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all registration and recording
applications filed in connection therewith, including registrations and
registration applications in the United States Patent and Trademark Office, any
State of the United States or any similar offices in any other country or any
political subdivision thereof, and all extensions or renewals thereof, (b) all
goodwill associated therewith or symbolized thereby and (c) all other assets,
rights and interests that uniquely reflect or embody such goodwill.

“Transactions” shall mean (a) the execution, delivery and performance by each
Loan Party of each Loan Document to which it is a party, (b) the making of the
Loans and (c) the use of the proceeds of the Loans.

“Voting Stock” shall mean Stock of any Person having ordinary power to vote in
the Managing Persons or other controlling Persons, of such Person (irrespective
of whether, at the time, Stock of any other class or classes of such entity
shall have or might have voting power by reason of the occurrence of any
contingency).

“Wall Street Journal Prime Rate” shall mean the highest rate published from time
to time by the Wall Street Journal as the “prime rate,” or, in the event the
Wall Street Journal ceases publication of the prime rate, the base, reference or
other rate then designated by the Agent, in its sole and absolute discretion,
for general commercial loan reference purposes, it being understood that such
rate is a reference rate, not necessarily the lowest, established from time to
time, which serves as the basis upon which effective interest rates are
calculated for loans making reference thereto.

Accounting Terms and Principles and GAAP. All accounting determinations required
to be made pursuant hereto shall, unless expressly otherwise provided herein, be
made in accordance with GAAP. No change in the accounting principles used in the
preparation of any financial statement hereafter adopted by the Borrower shall
be given effect if such change would affect a calculation that measures
compliance with any provision of this unless the Borrower and the Agent agree to
modify such provisions to reflect such changes in GAAP and, unless such
provisions are modified, all financial statements, Agreement, certificates and
similar documents provided hereunder shall be provided together with a
reconciliation between the calculations and amounts set forth therein before and
after giving effect to such change in GAAP.

Certain References. Unless otherwise expressly indicated, references (i) in this
Agreement to an Exhibit, Annex, Schedule, Article, Section or clause refer to
the appropriate Exhibit, Annex or Schedule to, or Article, Section or clause in,
this Agreement and (ii) in any Loan Document, to (A) any agreement shall
include, without limitation, all exhibits, schedules, appendixes and annexes to
such agreement and, unless not undertaken in accordance with the terms thereof,
any modification to any term of such agreement, (B) any statute shall be to such
statute as modified from time to time and to any successor legislation thereto,
in each case as in effect at the time any such reference is operative and
(C) any time of day shall be a reference to New York time. Titles of articles,
sections, clauses, exhibits, schedules and annexes contained in any Loan
Document are without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto. Unless otherwise
expressly indicated, the meaning of any term defined (including by reference) in
any Loan Document shall be equally applicable to both the singular and plural
forms of such term.

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Code Terms All terms which are not defined herein but which are defined in the
Code shall have the meanings given to them in the applicable Code.

Interpretation and Certain Terms. Except as set forth in any Loan Document, all
accounting terms not specifically defined herein shall be construed in
accordance with GAAP (except for the term “property,” which shall be interpreted
as broadly as possible, including, in any case, cash, securities, other assets,
rights under Contractual Obligations and Permits and any right or interest in
any property). The terms “herein,” “hereof” and similar terms refer to this
Agreement as a whole. In the computation of periods of time from a specified
date to a later specified date in any Loan Document, the terms “from” means
“from and including” and the words “to” and “until” each mean “to but excluding”
and the word “through” means “to and including.” In any other case, the term
“including” when used in any Loan Document means “including without limitation.”
The term “documents” means all writings, however evidenced and whether in
physical or electronic form, including all documents, instruments, agreements,
notices, demands, certificates, forms, financial statements, opinions and
reports. The term “incur” means incur, create, make, issue, assume or otherwise
become directly or indirectly liable in respect of or responsible for, in each
case whether directly or indirectly, and the terms “incurrence” and “incurred”
and similar derivatives shall have correlative meanings.

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ANNEX 2

SCHEDULE OF FACILITY INFORMATION

 

1. Interest Rate (Section 1.3(a))

In the case of all Obligations, including Loans, a rate per annum equal to the
Wall Street Journal Prime Rate; provided, however, if an Event of Default shall
have occurred and be continuing, the rate per annum shall be the Wall Street
Journal Prime Rate plus three percent (3%) during the continuance of said Event
of Default.

 

2. Inspections (Sections 2.6 and 4.2)

Frequency: Provided that no Event of Default has occurred, (i) field
examinations and Collateral audits and analyses will not be conducted more than
three (3) times in any twelve-month period at the Borrower’s expense and
(ii) additional field examinations and Collateral audits and analyses may be
conducted at the Lenders’ expense. After the occurrence and during the
continuance of an Event of Default, there shall be no limit on the number of
field examinations and Collateral audits and analyses that may be conducted at
the Borrower’s expense.

Cost: $1,000 per day plus out-of-pocket expenses if such auditor is an employee
of Agent. Actual costs plus out-of-pocket expenses if such auditor is retained
by the Agent.

 

3. Financial Statements (Section 3.12)

Consolidated balance sheet and statements of income, stockholders’ equity and
cash flows of each of the Borrower and Newtek (i) as of and for the fiscal years
ended December 31, 2012, December 31, 2013 and December 31, 2014, in each case
audited with an unqualified opinion), reviewed by J.H. Cohn LLP and/or McGladrey
LLP, as the case may be, each independent certified public accountants (the
“Financial Statements”) and (ii) as of and for the fiscal quarter ended
March 31, 2015, certified by the chief financial officer of the Borrower.

 

4. Operating and Deposit Accounts (Section 4.8)

The Borrower shall maintain with the Agent at all times non-interest bearing
deposits (the “Security Deposit”) having net collected balances (including any
cash collateral provided by Newtek to secure the Guaranty and then-maintained
with the Agent), equal to at least the greater of (i) $1,000,000 and (ii) 10% of
the outstanding principal balance of all Loans. In the event that, at any time
during a fiscal quarter of the Borrower, said deposits do not equal said minimum
amount, then the Borrower shall pay to the Agent, for the benefit of the
Lenders, a fee equal to one-eighth of one percent (0.125%) of the highest
principal balance of all Loans outstanding at any time during such fiscal
quarter within fifteen (15) days after the end of said fiscal quarter.

 

5. Reserved

 

6. Reserved

 

7. Reserved

 

8. Guarantor(s)

Newtek Business Services Corp.

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9. Maturity Date:

August 26, 2018. Without modifying, limiting or waiving the provisions of
Section 1.1 in any way, the Lenders may, in their sole and absolute discretion,
give the Borrower not less than six months’ notice prior to terminating the
making of Loans hereunder effective as of the first or second anniversary
hereof.

 

10. Maximum Facility Amount

$35,000,000.00 (thirty five million dollars); provided that such amount shall
from time to time be reduced dollar-for-dollar by the amount by which
$20,000,000.00 (twenty million dollars) exceeds the portion of the facility
participated to one or more participants.

 

11. Reserved

 

12. Fees

 

  (a) Closing Fee. At the time of the execution and delivery of this Agreement,
the Borrower shall pay to the Agent, for the account of the Lenders, a closing
fee equal to one percent of the Maximum Facility Amount available at the initial
closing of the transactions contemplated by this Agreement. Such closing fee
shall be deemed fully earned upon execution of this Agreement by the Borrower.
Such fee shall be in addition to, and not in substitution for, all costs and
expenses payable by the Borrower under the Loan Documents.

 

  (b) Unused Line Fee. The Borrower shall pay to the Agent, for the benefit of
the Lenders, monthly in arrears, on the first day of each month, an unused line
fee, chargeable to the Borrower’s Loan Account, equal to 25 basis points (0.25%)
per annum of the daily average amount by which the Maximum Facility Amount
exceeds the outstanding principal balance of the Loans.

 

  (c) Reserved.

 

  (d) Reserved

 

  (e) Termination Fee. If the Borrower shall terminate this Agreement for any
reason other than as a result of a material breach of this Agreement by the
Agent or any of the Lenders or the Obligations hereunder shall be accelerated
following an Event of Default, in each case, prior to the Maturity Date, the
Borrower shall pay to the Agent, for the benefit of the Lenders, an early
termination fee in an amount equal to the applicable “Required Percentage” (as
set forth below) multiplied by the Maximum Facility Amount as of the time of the
termination triggering the Termination Fee. For purposes hereof, the “Required
Percentage” shall mean (a) one-half of one percent (0.5%) if this Agreement
terminates at any time on or before the first anniversary hereof and
(b) one-quarter of one percent (0.25%) if this Agreement terminates at any time
after the first anniversary hereof but on or before the second anniversary
hereof.

 

13. Reporting

The Borrower will furnish to the Agent and each Lender:

 

  (a)

as soon as available to the Borrower, but in any event within ninety (90) days
after the close of each fiscal year, the audited consolidated balance sheet of
the Borrower, Newtek and their respective consolidated subsidiaries and related
statements of income, stockholders’ or owners’ equity and cash flows as of the
end of and for such year, setting

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  forth in each case in comparative form the figures for the previous fiscal
year, all reported on (without a “going concern” or like qualification or
exception and without any qualification or exception as to the scope of such
audit), prepared by J.H. Cohn LLP or other independent certified public
accountants of recognized standing selected by the Borrower and reasonably
acceptable to the Agent and stating that such financial statements present
fairly in all material respects the financial condition and results of
operations of the Borrower, Newtek and their consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied; provided that
solely with respect to Newtek (and not the Borrower), the requirements with
respect to the delivery of information set forth in this paragraph shall be
deemed to be satisfied by delivery to the Agent and each Lender of a copy of
Newtek’s filed Form 10-K (or any successor or comparable forms) with the
Securities and Exchange Commission (or any successor thereto) as at the end of
and for any applicable fiscal year;

 

  (b) as soon as available, but in any event within sixty (60) days after the
end of each of the first three fiscal quarters of the Borrower’s and Newtek’s
fiscal year, the Borrower’s and Newtek’s consolidated balance sheet and related
statements of income, stockholders’ or owners’ equity and cash flows as of the
end of and for such fiscal quarter and the portion of the fiscal year then
elapsed, setting forth in each case in comparative form the figures for the
corresponding period or periods of the previous fiscal year, certified by the
chief financial officer of the Borrower and Newtek as presenting fairly in all
material respects the financial condition and results of operations of the
Borrower and Newtek and their respective Subsidiaries on a consolidating basis
in accordance with GAAP consistently applied, subject to normal year end audit
adjustments and the absence of footnotes; provided that solely with respect to
Newtek (and not the Borrower), the requirements with respect to the delivery of
information set forth in this paragraph shall be deemed to be satisfied by
delivery to the Agent and each Lender of a copy of Newtek’s filed Form 10-Q (or
any successor or comparable forms) with the Securities and Exchange Commission
(or any successor thereto) as at the end of and for any applicable fiscal
quarter;

 

  (c) as soon as available to the Borrower, but in any event within thirty
(30) days after the end of each calendar month, its consolidated balance sheet
and related statements of income, stockholders’ or owners’ equity and cash flows
as of the end of and for such month and the portion of the fiscal year then
elapsed, setting forth in each case in comparative form the figures for the
corresponding period or periods of the previous fiscal year, certified by the
chief financial officer of the Borrower as presenting 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, subject to normal year-end audit adjustments and the
absence of footnotes;

 

  (d) concurrently with any delivery of financial statements under clauses (a),
(b) and (c) above, a certificate of the chief financial officer of the Borrower
in a form mutually acceptable to the Agent and 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 the financial covenants set forth in Section 14 of this Annex
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 3.12 and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate;

 

  (e) upon Lender’s reasonable request, access to the Borrower’s records,
including, without limitation, a list of the then-effective access codes to the
Borrower’s computerized files containing information regarding the Collateral;

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  (f) together with each delivery of financial statements pursuant to clause
(a) above, a discussion and analysis of the financial condition and results of
operations of the Borrower and its consolidated Subsidiaries for the fiscal year
covered by such financial statements and discussing the reasons for any
significant variations from the projections referred to in paragraph (g), below,
for such fiscal year;

 

  (g) within ninety (90) days after the close of each fiscal year, a projected
consolidated balance sheet and related statements of income, stockholders’ or
owners’ equity and cash flows of the Borrower and its consolidated Subsidiaries,
as of the end of such period and for the current fiscal year, giving effect to
projected Loans and representing the Borrower’s good faith estimate of its and
its consolidated Subsidiaries’ future financial performance and prepared on the
basis of assumptions believed by the Borrower to be fair and reasonable in light
of current business conditions at the time such projections are prepared (which
assumptions shall be set forth therein;

 

  (h) as soon as available to the Borrower, but in any event within thirty
(30) days after the end of each calendar month, (A) a detailed aging of all
Mortgage Loans, clearly designating as such each Mortgage Loan that is an
Eligible First Mortgage Loan as of the end of said month, each Mortgage Loan
that is an Eligible Second Mortgage Loan as of the end of said month, and all
Ineligible First Mortgage Loans and Ineligible Second Mortgage Loans, together
with (B) a Borrowing Base Certificate dated as of the end of said month setting
forth detailed calculations showing compliance with the financial covenants set
forth in section 14, below;

 

  (i) reserved;

 

  (j) reserved;

 

  (k) as soon as available, but not later than thirty (30) days after the filing
of same with the Internal Revenue Service or analogous state Governmental
Authority, a copy of the federal and state income tax returns of the Borrower
for the most recently completed tax year, together with all schedules and
supporting documentation, all in the form filed with the Internal Revenue
Service or such analogous state Governmental Authority and, in the event the
Borrower shall file an application for extension of the time to file an income
tax return with respect to any such tax return, the Borrower agrees to furnish
to the Agent and each Lender a copy of same, not later than thirty (30) days
after such application for an extension is filed;

 

  (l) reserved;

 

  (m) as soon as available to the Borrower, but in any event within five
(5) days after receipt by the Borrower, a copy of any “management letter”
provided to the Borrower by its accountants; and

 

  (n) promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of the Borrower or any
of its Subsidiaries, or compliance with the terms of the Loan Documents, as the
Agent may reasonably request.

 

14. Financial Covenants

Definitions. The following definitions shall apply to this Section of this
Annex:

“Eligible Mortgage Loan Ratio” shall mean, as of any date of determination, the
ratio of:

(i) the sum of 90% of the outstanding principal amount of (A) all First Mortgage
Loans that are Eligible First Mortgage Loans as of said date, plus (B) all
Second Mortgage Loans that

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are Eligible Second Mortgage Loans as of said date, plus (C) all Replacement
First Mortgage Loans as of said date, plus (D) all Replacement Second Mortgage
Loans as of said date, plus (E) cash collateral deposited with the Agent
pursuant to Section 4.18 hereof; to

(ii) Total Debt of the Borrower as of such date.

“Guarantor Leverage Ratio” shall mean the ratio, as of any date of
determination, of (i) the sum of (x) Total Debt as of such date minus (y) the
following non-cash items on the balance sheet (I) Notes Payable-Credits in lieu
of cash and (2) Liability on SBA Loans Transferred, to (ii) Newtek Tangible Net
Worth as of such date.

“Indebtedness” shall mean (A) all indebtedness for borrowed money or for the
deferred purchase price of property or services, and all obligations under
leases which are or should be recorded as capital leases, in respect of which a
Person is directly or contingently liable as borrower, guarantor, endorser or
otherwise, or in respect of which a Person otherwise assures a creditor against
loss; (B) all obligations for borrowed money or for the deferred purchase price
of property or services secured by (or for which the holder has an existing
right, contingent or otherwise, to be secured by) any lien upon property
(including without limitation accounts receivable and contract rights) owned by
a Person, whether or not such Person has assumed or become liable for the
payment thereof; (C) indebtedness evidenced by bonds, debentures, notes or other
similar instruments; (D) obligations and liabilities directly or indirectly
guaranteed by such Person; (E) obligations or liabilities created or arising
under any conditional sales contract or other title retention agreement with
respect to property used and/or acquired by such Person; (F) all obligations of
such Person in respect of bankers’ acceptance; (G) all obligations, contingent
or otherwise of such Person as an account party or applicant in respect of
letters of credit; and (H) all other liabilities and obligations which would be
classified in accordance with GAAP as indebtedness on a balance sheet or to
which reference should be made in footnotes thereto.

“Intangible Assets” shall mean, as of the date of determination thereof, assets
that in accordance with GAAP are properly classifiable as intangible assets,
including, but not limited to, goodwill, franchises, licenses, patents,
trademarks, trade names and copyrights.

“Leverage Ratio” shall mean the ratio as of (i) Total Debt (other than
Subordinated Indebtedness) as of such date to (ii) Tangible Net Worth as of such
date.

“Newtek Tangible Net Worth” shall mean, as of any date of determination, total
equity less (i) intangible assets (net of accumulated amortization) and
(ii) goodwill.

“Subordinated Indebtedness” shall mean, as of the date of determination thereof,
all Indebtedness (including accrued but unpaid interest thereon) which has been
subordinated in writing to the Obligations on terms and conditions acceptable to
the Agent.

“Tangible Net Worth” shall mean, as of the date of determination thereof,
(a) the sum of (i) Subordinated Indebtedness plus (ii) the amount of the
Guarantor Cash Collateral plus (iii) Total Assets, excluding all Intangible
Assets (other than deferred financing) and all obligations owed from Affiliates
or any employee, officer or owner of the Borrower, (b) less Total Liabilities
other than Subordinated Indebtedness.

“Target TNW Amount” shall mean, as to the Borrower: $2,250,000 as of the Closing
Date; and $4,750,000 at all times after the aggregate original principal amount
of all Loans under this Agreement equals or exceeds $7,000,000 (whether or not,
at any time thereafter, said aggregate principal amount is reduced below
$7,000,000 pursuant to repayments of Loans).

“Total Assets” shall mean, as of the date of determination thereof, the total
assets of the Borrower which would be classified in accordance with GAAP as
assets on a balance sheet or to which reference should be made in footnotes
thereto, all calculated with respect to the Borrower.

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“Total Debt” shall mean, as at any date of determination, the aggregate stated
balance sheet amount of all Indebtedness of the Borrower or Guarantor, as
applicable.

“Total Liabilities” shall mean, as of the date of determination thereof, the
total liabilities and obligations of the Borrower which would be classified in
accordance with GAAP as liabilities on a balance sheet or to which reference
should be made in footnotes thereto, all calculated with respect to the
Borrower.

Financial Covenants.

(a) The Borrower will not at any time or during any fiscal period (as
applicable) fail to be in compliance with any of the following financial
covenants:

(i) Leverage Ratio. The Borrower shall not permit the Leverage Ratio to be
greater than 7.00 to 1.00 at any time.

(ii) Tangible Net Worth. The Borrower shall not permit its Tangible Net Worth to
be less than the Target TNW Amount at any time.

(iii) Eligible Mortgage Loan Ratio. The Borrower shall maintain an Eligible
Mortgage Loan Ratio of at least 1.00 to 1.00

(b) Newtek will not at any time or during any fiscal period (as applicable) fail
to be in compliance with any of the following financial covenants:

(i) Guarantor Leverage Ratio. Newtek shall not permit the Guarantor Leverage
Ratio to be greater than 1.00 to 1.00 at any time, or any more restrictive ratio
required to maintain the status of the Guarantor as a qualified “business
development corporation.”

(ii) Net Loss. Newtek shall (i) as of the end of each of the first three fiscal
quarters of each fiscal year, suffer no loss in excess of $50,000 in the
aggregate for the then-elapsed portion of such fiscal year and (ii) suffer no
after-tax loss as of and for the end of each fiscal year, in each case as
determined in accordance with GAAP.