Exhibit 10.1

CREDIT AGREEMENT

by and between

NEWTEK BUSINESS SERVICES, INC.

as Borrower

and

CAPITAL ONE, NATIONAL ASSOCIATION

as Lender

Dated as of June 26, 2014

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TABLE OF CONTENTS

 

     Page  

SECTION 1.     DEFINITIONS

     1   

1.1

  Defined Terms      1   

1.2

  Other Definitional Provisions      17   

SECTION 2.     AMOUNT AND TERMS OF COMMITMENTS

     18   

2.1

  Commitments      18   

2.2

  Procedure for Borrowing      18   

2.3

  [Reserved]      18   

2.4

  Repayment of Loans; Evidence of Debt      18   

2.5

  Fees      19   

2.6

  Optional Prepayments      19   

2.7

  Mandatory Prepayments      19   

2.8

  [Reserved]      20   

2.9

  [Reserved]      20   

2.10

  Interest Rates and Payment Dates      20   

2.11

  Computation of Interest and Fees      20   

2.12

  [Reserved]      20   

2.13

  Payments      20   

2.14

  Requirements of Law      21   

2.15

  Taxes      22   

SECTION 3.     REPRESENTATIONS AND WARRANTIES

     24   

3.1

  Financial Condition      24   

3.2

  No Change      24   

3.3

  Corporate Existence; Compliance with Law      24   

3.4

  Corporate Power; Authorization; Enforceable Obligations      24   

3.5

  No Legal Bar      25   

3.6

  No Litigation      25   

3.7

  No Default      25   

3.8

  Ownership of Property; Liens      25   

3.9

  Intellectual Property      25   

3.10

  Taxes      26   

3.11

  Federal Reserve Regulations      26   

3.12

  Labor Matters      26   

3.13

  ERISA      26   

 

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TABLE OF CONTENTS

(continued)

 

     Page  

3.14

  Investment Company Act; Other Regulations      27   

3.15

  Subsidiaries      27   

3.16

  Use of Proceeds      27   

3.17

  Environmental Matters      27   

3.18

  Insurance      28   

3.19

  Accuracy of Information, etc.      28   

3.20

  Security Documents      28   

3.21

  Solvency      29   

3.22

  Patriot Act      29   

3.23

  Intentionally Omitted      29   

3.24

  Certified Capital Companies      29   

3.25

  Anti-Terrorism Laws      29   

SECTION 4.     CONDITIONS PRECEDENT

     29   

4.1

  Conditions to Initial Extension of Credit      29   

4.2

  Conditions to Each Extension of Credit      32   

SECTION 5.     AFFIRMATIVE COVENANTS

     32   

5.1

  Financial Statements      32   

5.2

  Certificates; Other Information      34   

5.3

  Payment of Obligations      35   

5.4

  Conduct of Business and Maintenance of Existence, etc.      35   

5.5

  Maintenance of Property; Insurance      35   

5.6

  Inspection of Property; Books and Records      35   

5.7

  Notices      36   

5.8

  Compliance with Laws      36   

5.9

  Environmental Laws      37   

5.10

  Bank Accounts      37   

5.11

  Additional Collateral, etc.      37   

5.12

  Further Assurances      38   

5.13

  Use of Proceeds      38   

5.14

  NSBF Overhead Payments      38   

5.15

  Minimum Cash Interest Payments      38   

5.16

  [Post Closing Items]      39   

 

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TABLE OF CONTENTS

(continued)

 

     Page  

SECTION 6.     FINANCIAL AND NEGATIVE COVENANTS

     39   

6.1

  Financial Covenants      39   

6.2

  Limitation on Indebtedness      40   

6.3

  Limitation on Liens      41   

6.4

  Limitation on Fundamental Changes      42   

6.5

  Limitation on Disposition of Property      42   

6.6

  Limitation on Restricted Payments      43   

6.7

  Off-Balance Sheet Financings      43   

6.8

  Limitation on Investments      44   

6.9

  Limitation on Transactions with Affiliates      44   

6.10

  Sale and Leaseback Transactions      45   

6.11

  Limitation on Changes in Fiscal Periods      45   

6.12

  Limitation on Negative Pledge Clauses      45   

6.13

  Limitation on Restrictions on Subsidiary Distributions      45   

6.14

  Limitation on Lines of Business      45   

6.15

  Anti-Terrorism Laws      45   

SECTION 7.     EVENTS OF DEFAULT

     46   

7.1

  Event of Default      46    SECTION 8.     MISCELLANEOUS      48   

8.1

  Amendments and Waivers      48   

8.2

  Notices      49   

8.3

  No Waiver; Cumulative Remedies      49   

8.4

  Survival of Representations and Warranties      49   

8.5

  Payment of Expenses      49   

8.6

  Successors and Assigns; Participations and Assignments      50   

8.7

  Set-off      51   

8.8

  Counterparts      51   

8.9

  Severability      51   

8.10

  Integration      51   

8.11

  GOVERNING LAW      51   

8.12

  Submission To Jurisdiction; Waivers      52   

 

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TABLE OF CONTENTS

(continued)

 

     Page  

8.13

  Acknowledgments      52   

8.14

  Confidentiality      52   

8.15

  Accounting Changes      53   

8.16

  Keepwell      53   

8.17

  WAIVERS OF JURY TRIAL      53   

 

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SCHEDULES:

1.1

   Unrestricted Subsidiaries

3.4

   Consents, Authorizations, Filings and Notices

3.6

   Litigation

3.8

   Real Property

3.9

   Intellectual Property

3.13

   ERISA

3.15

   Subsidiaries

3.17

   Environmental Matters

3.18

   Insurance

3.24

   Certified Capital Companies

6.2(d)

   Existing Indebtedness

6.3(f)

   Existing Liens

6.13

   Restrictions on Subsidiary Distributions

EXHIBITS:

A

   Form of Guarantee and Security Agreement

B

   Form of Compliance Certificate

C

   Form of Closing Certificate

D-1

   Form of Legal Opinion of Platte, Klarsfeld, Levine & Lachtman, LLP

D-2

   Form of Legal Opinion of O’Reilly & Mark, P.C.

E-1

   Form of Revolving Credit Note

E-2

   Form of Term Note

F

   Form of Borrowing Notice

G

   Form of Subordination Agreement

 

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CREDIT AGREEMENT, dated as of June 26, 2014, between NEWTEK BUSINESS SERVICES,
INC., a New York corporation (“Borrower”), and CAPITAL ONE, NATIONAL ASSOCIATION
(“Lender”).

W I T N E S S E T H:

WHEREAS, Borrower has requested that Lender extend credit, for the purposes
specified in this Agreement, in the form of (a) a Term Loan on the Closing Date
in the aggregate principal amount of $10,000,000 and (b) a Revolving Loan
facility in the maximum principal amount of up to $10,000,000 at any time
outstanding;

WHEREAS, Lender is willing to make such term loan credit facilities available
upon and subject to the terms and conditions hereinafter set forth;

NOW, THEREFORE, Lender is willing to extend such credit to Borrower on the terms
and subject to the conditions set forth herein and in the other Loan Documents,
in reliance upon the representations and warranties set forth herein and therein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged. Accordingly, the parties hereto agree as follows:

SECTION 1. DEFINITIONS

1.1 Defined Terms. As used in this Agreement, the terms listed in this
Section 1.1 shall have the respective meanings set forth in this Section 1.1.

“ACH Transactions” means any cash management or related services including the
automatic clearing house transfer of funds by Lender for the account of Borrower
or any of the other Loan Parties pursuant to agreement, overdrafts, or
otherwise.

“Affiliate”: as to any Person, any other Person that, directly or indirectly, is
in control of, is controlled by, or is under common control with, such Person.
For purposes of this definition, “control” of a Person means the power, directly
or indirectly, either to (a) vote 10% or more of the securities having ordinary
voting power for the election of directors (or persons performing similar
functions) of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise.

“Agreement”: this Credit Agreement, as amended, restated, supplemented or
otherwise modified from time to time.

“Anti-Terrorism Laws”: any Requirements of Law relating to terrorism, trade
sanctions programs and embargoes, import/export licensing, money laundering or
bribery, and any regulation, order, or directive promulgated, issued or enforced
pursuant to such Laws, all as amended, supplemented or replaced from time to
time.

“Applicable Margin”: means 2.50% per annum.

“Asset Sale”: any Disposition of Property or series of related Dispositions of
Property (excluding any such Disposition permitted by clause (a), (b), (c),
(d) or (h) of Section 6.5) which yields gross proceeds to any Loan Party (valued
at the initial principal amount thereof in the case of non-cash proceeds
consisting of notes or other debt securities and valued at fair market value in
the case of other non-cash proceeds) in excess of $100,000 individually or
$250,000 in the aggregate during the term of this Agreement.

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“Base Rate”: means a variable per annum rate, as of any date of determination,
equal to the rate of interest publicly announced from time to time by Lender as
its prime rate, which is a rate set by Lender based upon various factors
including Lender’s costs and desired return, general economic conditions, and
other factors, and is used as a reference point for pricing some loans. However,
Lender may price loans at, above, or below such announced rate and, accordingly,
Borrower acknowledges that the prime rate may not necessarily be the lowest rate
of interest charged by Lender to its customers. Any changes in the prime rate
shall take effect on the day specified in the public announcement of such change
or, if not so specified, on the day of the public announcement of such change.

“Black Box Lease Transaction”: the lease of phone equipment by CWH from Cisco
System Capital Corporation pursuant to that certain Agreement to Lease Equipment
No. 9855-MM001-0 by and between Cisco System Capital Corporation, as lessor, and
CWH, as lessee, as in effect on July 3, 2012.

“Board”: the Board of Governors of the Federal Reserve System of the United
States (or any successor thereto).

“Borrower”: as defined in the preamble hereto.

“Borrowing Notice”: with respect to any request for borrowing of Revolving Loans
hereunder, a notice from Borrower, substantially in the form of, and containing
the information prescribed by, Exhibit F, delivered to Lender.

“Business Day”: any day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.

“Capco”: the following certified capital companies that are Subsidiaries of
Borrower on the date hereof: (a) Wilshire New York Advisers II, LLC, a New York
limited liability company, (b) Wilshire New York Partners III, LLC, a New York
limited liability company, (c) Wilshire New York Partners IV, LLC, a New York
limited liability company, (d) Wilshire New York Partners V, LLC, a New York
limited liability company, (e) Wilshire Partners, LLC a Florida limited
liability company, (f) Wilshire Louisiana Bidco, LLC, a Louisiana limited
liability company, (g) Wilshire Louisiana Partners II, LLC, a Louisiana limited
liability company, (h) Wilshire Louisiana Partners III, LLC, a Louisiana limited
liability company, (i) Wilshire Louisiana Partners IV, LLC, a Louisiana limited
liability company, (j) Wilshire Colorado Partners, LLC, a Colorado limited
liability company, (k) Wilshire Alabama Partners, LLC, an Alabama limited
liability company, (l) Wilshire DC Partners, LLC, a limited liability company
formed under the laws of the District of Columbia and (m) Wilshire Texas
Partners I, LLC, a Texas limited liability company.

“Capital Lease Obligations”: with respect to any Person, the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations at any time shall be the capitalized amount thereof at such time
determined in accordance with GAAP (which capitalized amount, for the avoidance
of doubt, shall be the present value of the rent payments pursuant to the
capital lease discounted at the implicit interest rate).

“Capital Stock”: any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
classes of membership interests in a limited

 

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liability company, any and all classes of partnership interests in a
partnership, any and all equivalent ownership interests in a Person and any and
all warrants, rights or options to purchase any of the foregoing.

“Cash Equivalents”: as at any date of determination, (a) marketable securities
(i) issued or directly and unconditionally guaranteed as to interest and
principal by the United States of America or (ii) issued by any agency of the
United States of America the obligations of which are backed by the full faith
and credit of the United States of America, in each case maturing within one
year after such date; (b) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof or the District of Columbia, in each case
maturing within one year after such date and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody’s; (c) commercial paper maturing no more than one year from the date of
creation thereof and having, at the time of the acquisition thereof, a rating of
at least A 1 from S&P or at least P-1 from Moody’s; (d) certificates of deposit
or bankers’ acceptances maturing within one year after such date and issued or
accepted by Lender or by any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia that
(i) is at least “adequately capitalized” (as defined in the regulations of its
primary federal banking regulator), (ii) has Tier 1 capital (as defined in such
regulations) of not less than $500,000,000, and (iii) which certificates of
deposit or bankers’ acceptances have a rating of “A-” “A-3” or better by S&P or
Moody’s or another nationally recognized rating agency; (e) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (a) above entered into with a bank meeting the
qualifications described in clause (d) above; and (f) shares of any money market
mutual fund that has substantially all of its assets invested continuously in
the types of investments referred to above.

“CCC-NSBF Intercompany Debt”: book-entry Indebtedness of CCC to NSBF incurred by
CCC in the ordinary course of business consistent with past practices, incurred
by CCC in connection with the transfer by NSBF to CCC of assets acquired in
connection with the realization of collateral of obligors of SBA 7(a) loans and
the liquidation by CCC of such assets.

“CDS”: CDS Business Services, Inc., a Delaware corporation.

“Change of Control”: the occurrence of any of the following: (a) any person or
group of persons (within the meaning of the Securities Exchange Act of 1934, as
amended), other than the Permitted Investor, shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended) of 25% or more
of the issued and outstanding voting Capital Stock of Borrower, (b) during any
period of twelve consecutive calendar months, individuals who, at the beginning
of such period, constituted the board of directors of Borrower (together with
any new directors whose election by the board of directors of Borrower or whose
nomination for election by the stockholders of Borrower was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose elections or nomination for
election was previously so approved) cease for any reason other than death or
disability to constitute a majority of the directors then in office, (c) the
Permitted Investor shall cease to beneficially own at least 50% of the amount of
issued and outstanding voting Capital Stock of Borrower owned by such Permitted
Investor as of the Closing Date, (d) Mr. Barry Sloane shall cease to be the
chief executive officer of Borrower, or (e) Borrower shall fail to own the
number and percentage of Capital Stock of the other Loan Parties set forth on
Schedule 2 to the Guarantee and Security Agreement, or the number and percentage
of Capital Stock of Persons who hereafter become Loan Parties on the date such
Persons shall become Loan Parties.

“Closing Date”: June 26, 2014.

 

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“Code”: the United States Internal Revenue Code of 1986, as amended from time to
time.

“Collateral”: as defined in the Guarantee and Security Agreement.

“Combined EBITDA”: as to the Loan Parties for any period, the combined net
income (or loss) of the Loan Parties for such period, plus interest, taxes (or
less benefit), depreciation and amortization (in each case, determined, as to
each Loan Party, on a stand-alone basis and without regard to the combination or
consolidation of any Subsidiary or Affiliate otherwise permitted or required
under GAAP) but otherwise in accordance with GAAP (including, without
limitation, the elimination of all inter-Loan Party entries). For purposes of
determining Combined EBITDA, combined net income shall (a) be reduced by, to the
extent included in the statement of such combined net income for such period,
any extraordinary, unusual or non-recurring income or gains (including, whether
or not otherwise includable as a separate item in the statement of such combined
net income for such period, gains on the sales of assets outside of the ordinary
course of business), (b) exclude the effect of any minority interests, (c) be
increased by the amount of any non-cash compensation expense in respect of
stock-based compensation actually included in the determination of net income
(loss) in accordance with GAAP and (d) exclude equity earnings in any
Subsidiary.

“Combined Funded Debt Payments”: as to the Loan Parties for any period, the
aggregate amount of all scheduled payments of principal of Indebtedness
(including, without limitation, Capitalized Lease Obligations) of the Loan
Parties.

“Combined Indebtedness”: as to the Loan Parties, as at any date, the aggregate
amount of Indebtedness of the Loan Parties.

“Commitment”: the Lender’s Revolving Commitment and commitment to make the Term
Loan on the Closing Date.

“Commodity Account”: as defined in the UCC.

“Commodity Exchange Act”: the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as
amended from time to time, and any successor statute.

“Commonly Controlled Entity”: an entity, whether or not incorporated, that is
under common control with Borrower within the meaning of Section 4001 of ERISA
or is part of a group that includes Borrower and that is treated as a single
employer under Section 414 of the Code.

“Compliance Certificate”: a certificate duly executed by a Responsible Officer
of Borrower, substantially in the form of Exhibit B.

“Consolidated EBITDA”: as to Borrower or NSBF, as the case may be, for any
period, consolidated net income (or loss) of Borrower or NSBF, as the case may
be, for such period, determined on a consolidated basis, plus interest, taxes
(or less benefit), depreciation and amortization, in each case, determined in
accordance with GAAP. For purposes of determining the Consolidated EBITDA for
Borrower or NSBF, as the case may be, consolidated net income shall (a) be
reduced by the amount of income from tax credits, (b) be reduced by, to the
extent included in the statement of such consolidated net income for such
period, any extraordinary, unusual or non-recurring income or gains (including,
whether or not otherwise includable as a separate item in the statement of such
consolidated net income for such period, gains on the sales of assets outside of
the ordinary course of business), (c) be reduced (if a gain) or increased (if a
loss) by the net change in the fair market value of credits in lieu of cash and
notes payable in credits in lieu of cash, (d) exclude the effect of any minority
interests, and (e) increased by the amount of any non-cash compensation expense
in respect of stock-based compensation actually included in the determination of
net income (loss) in accordance with GAAP.

 

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“Contamination”: the presence or release or threat of release of Regulated
Substances in, on, under or emanating to or from the Properties, which pursuant
to Environmental Laws requires notification or reporting by a member of the
Newtek Group to a Governmental Authority, or which pursuant to Environmental
Laws requires the investigation, cleanup, removal, remediation, containment,
abatement of or other response action by such member of the Newtek Group or
which otherwise constitutes a violation of Environmental Laws by such member of
the Newtek Group or for which such member of the Newtek Group could reasonably
be expected to be liable, including, but not limited to, indoor air quality.

“Contractual Obligation”: as to any Person, any provision of any Security issued
by that Person or of any indenture, mortgage, deed of trust, contract,
undertaking, agreement (including any Material Contract) or other instrument to
which that Person is a party or by which it or any of its Properties is bound or
to which it or any of its Properties is subject.

“Covered Entity”: (a) each Loan Party and each Loan Party’s respective
Subsidiaries (if any), and any guarantors and pledgors of collateral, and
(b) each Person that, directly or indirectly, is in control of a Person
described in clause (a) above. For purposes of this definition, control of a
Person means the direct or indirect (x) ownership of, or power to vote, 25% or
more of the issued and outstanding equity interests having ordinary voting power
for the election of directors of such Person or other Persons performing similar
functions for such Person, or (y) power to direct or cause the direction of the
management and policies of such Person whether by ownership of equity interests,
contract or otherwise.

“CWH”: CrystalTech Web Hosting, Inc., a New York corporation.

“Default”: any event or condition which constitutes an Event of Default or which
upon notice, lapse of time or both (as provided in Section 7.1) would constitute
an Event of Default.

“Deposit Account”: as defined in the UCC.

“Derivatives Counterparty”: as defined in Section 6.6.

“Disposition”: with respect to any Property, any sale, lease, sale and
leaseback, assignment, conveyance, transfer, grant of restriction, issuance or
other disposition thereof (by way of merger, casualty, condemnation or
otherwise); and the terms “Dispose” and “Disposed of” shall have correlative
meanings.

“Disqualified Stock”: with respect to any Person, any Capital Stock that, by its
terms (or by the terms of any Security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is exchangeable for Indebtedness of such Person, or is redeemable at the option
of the holder thereof, in whole or in part, on or prior to a date that is six
months after the Maturity Date.

“Dollars” and “$”: lawful currency of the United States of America.

“Domestic Subsidiary”: any Subsidiary of the Borrower organized under the laws
of any jurisdiction within the United States of America.

“EBITDA”: as to any Loan Party, the net income (or loss) of such Loan Party for
such period, plus interest, taxes (or less benefit), depreciation and
amortization (in each case, determined, as to such

 

5

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Loan Party, on a stand-alone basis and without regard to the combination or
consolidation of any Subsidiary or Affiliate otherwise permitted or required
under GAAP) but otherwise in accordance with GAAP; provided, that as long as the
Borrower prepares its financial statements on a segment reporting basis, for
purposes of determining EBITDA for UPS, EBITDA will be tested (consistent with
the financial covenants in the NSBF Credit Facility) on the basis of the results
of the Electronic Payment Processing segment of the Borrower.

“Eligible Assignee”: (a) Lender or an Affiliate of Lender, (b) a commercial
bank, (c) a finance company, insurance company, financial institution or fund,
in each case regularly engaged in making, purchasing, holding or otherwise
investing in loans and similar extensions of credit, or (d) a savings and loan
association or savings bank organized under the laws of the United States or any
State thereof.

“Environmental Complaint”: any written complaint, notice or other communication
by a Governmental Authority or third party, including, but not limited to an
employee, alleging a violation of or potential liability under Environmental
Laws, including, but not limited to any complaint, for natural resource damage,
contribution or indemnity for response costs, civil or administrative penalties,
criminal fines or penalties, or declaratory or equitable relief arising under
any Environmental Law or any order, notice of violation, citation, subpoena,
request for information or other written notice or demand of any type issued by
a Governmental Authority pursuant to any Environmental Law.

“Environmental Laws”: any and all laws, rules, orders, regulations, statutes,
ordinances, guidelines, codes, decrees, or other legally enforceable
requirements (including, without limitation, common law) of any international
authority, foreign government, the United States, or any state, local, municipal
or other Governmental Authority, regulating, relating to or imposing liability
or standards of conduct concerning protection of the environment or of human
health, or employee health and safety in the workplace, as has been, is now, or
may at any time hereafter be, in effect.

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

“Event of Default”: any of the events specified in Section 7.1, provided, that
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.

“Excluded Foreign Subsidiaries”: any Foreign Subsidiary whose Capital Stock, in
part, constitutes Excluded Foreign Subsidiary Capital Stock.

“Excluded Foreign Subsidiary Capital Stock”: as defined in the Guarantee and
Security Agreement.

“Existing CWH Facility”: the credit facilities provided to CWH and NSBF pursuant
to the Loan and Security Agreement, dated as of April 30, 2010, by and between
CWH and NSBF, as borrowers, and Capital One, National Association, as amended.

“Existing NBSI Credit Facility”: the credit facilities provided to Borrower
pursuant to the Credit Agreement, dated as of April 25, 2012, by and among
Borrower, as borrower, the lenders party thereto, and ABC Funding, LLC, as
administrative agent, as amended.

“FATCA”: Sections 1471 through 1474 of the Code as of the date of this
Agreement) and any current or future regulations or official interpretations
thereof and any agreements entered into pursuant to Section 1471(b)(1) of the
Code.

 

6

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“Fixed Charge Coverage Ratio”: as calculated as of the end of any calendar
quarter, Combined EBITDA for the previous four (4) fiscal quarters, less capital
expenditures during the previous four (4) fiscal quarters, divided by the sum of
(a) Combined Funded Debt Payments for the four (4) fiscal quarters subsequent to
such calendar quarter end, plus (b) the sum of the following amounts paid during
the previous four (4) fiscal quarters for (i) interest (including interest paid
hereunder), (ii) dividends and distributions, (iii) treasury stock redemptions,
and (iv) taxes; provided, that for the periods ending June 30,
2014, September 30, 2014, December 31, 2014 and March 31, 2015, interest
referred to in clause (b)(i) above shall be (x) reduced by an amount equal to
the interest expense paid pursuant to the Existing NBSI Credit Facility, and
(y) increased by a notional amount equal to the interest that would have been
payable under this Agreement at the then applicable Base Rate and Applicable
Margin assuming Revolving Loans in the principal amount of $10,000,000 were
outstanding on each day of the applicable previous four (4) fiscal quarters. For
the avoidance of doubt, the non-cash write-off of deferred financing costs and
debt discounts shall not be considered to be interest paid for purposes of
calculating the Fixed Charge Coverage Ratio.

“Fixed Charge Coverage Ratio—Unrelated Extensions of Credit”: as calculated as
of the end of any calendar quarter, Combined EBITDA for the previous four
(4) fiscal quarters, less capital expenditures during the previous four
(4) fiscal quarters, divided by the sum of (a) Combined Funded Debt Payments for
the four (4) fiscal quarters subsequent to such calendar quarter end, plus
(b) (i) interest (including interest paid hereunder), (ii) dividends and
distributions, (iii) treasury stock redemptions, (iv) taxes, and (v) the
aggregate amounts of Unrelated Extensions of Credit made by the Borrower and the
other Loan Parties during the previous four (4) fiscal quarters (but, excluding
any such Unrelated Extensions of Credit made by the Borrower and the other Loan
Parties prior to June 26, 2014); provided, that for the periods ending June 30,
2014, September 30, 2014, December 31, 2014 and March 31, 2015, interest
referred to in clause (b)(i) above shall be (x) reduced by an amount equal to
the interest expense paid pursuant to the Existing NBSI Credit Facility and
(y) increased by a notional amount equal to the interest that would have been
payable under this Agreement at the then applicable Base Rate and Applicable
Margin assuming Revolving Loans in the principal amount of $10,000,000 were
outstanding on each day of the applicable previous four (4) fiscal quarters. For
the avoidance of doubt, the non-cash write-off of deferred financing costs and
debt discounts shall not be considered to be interest paid for purposes of
calculating the Fixed Charge Coverage Ratio—Unrelated Extensions of Credit.

“Foreign Subsidiary”: any Subsidiary of the Borrower that is not a Domestic
Subsidiary.

“Funded Debt to EBITDA Ratio”: as of any date, the ratio of (i) Combined
Indebtedness as of such date to (ii) Combined EBITDA for the four
(4) consecutive fiscal quarters ending on the last day of the immediately
preceding fiscal quarter.

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

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

“Guarantee and Security Agreement”: the Guarantee and Security Agreement to be
executed and delivered by the Loan Parties, substantially in the form of Exhibit
A, as the same may be amended, restated, supplemented or otherwise modified from
time to time.

 

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“Guarantee Obligation”: as to any Person (the “guarantor”), any obligation,
contingent or otherwise, of (a) the guarantor or (b) another Person (including
any bank under a letter of credit) to induce the creation of which the guarantor
has issued a reimbursement, counterindemnity or similar obligation, in either
case guaranteeing or having the economic effect of guaranteeing any Indebtedness
or other obligation of any other Person (the “primary obligor”) in any manner,
whether directly or indirectly, and including any obligation, contingent or
otherwise, of the guarantor, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation or to purchase (or to advance or supply funds for the purchase
of) any security for the payment of such Indebtedness or other obligation,
(ii) to purchase or lease property, securities or services for the purpose of
assuring the owner of such Indebtedness or other obligation of the payment of
such Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Indebtedness or other
obligation or maintain solvency or net worth, (iv) as an account party in
respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation or (v) to otherwise assure or hold harmless the owner
of such Indebtedness or other obligation against loss in respect thereof;
provided, however, that the term “Guarantee Obligation” shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any obligation under a Guarantee Obligation of a guarantor 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 Obligation
is made and (B) the maximum amount for which such guarantor may be liable
pursuant to the terms of the instrument embodying such Guarantee Obligation,
unless such primary obligation and the maximum amount for which such guarantor
may be liable are not stated or determinable, in which case the amount of such
obligation shall be such guarantor’s maximum reasonably anticipated liability in
respect thereof as determined by Borrower in good faith.

“Guarantors” means each of Small Business Lending, Inc., UPS, PMT, CWH, Newtek
Insurance Agency, LLC and each other Person who from time to time becomes a
party to the Guarantee and Security Agreement either pursuant to the
requirements of this Agreement or the other Loan Documents, or otherwise.

“Hazardous Materials”: (i) any “hazardous substance” or “hazardous waste” as
defined in any Environmental Law, (ii) asbestos, (iii) polychlorinated
biphenyls, (iv) petroleum, its derivatives, by-products and other hydrocarbons,
(v) mold and (vii) any other pollutant, toxic, radioactive, caustic or otherwise
hazardous substance regulated under Environmental Laws.

“Hedge Agreements”: all interest rate or currency swaps, caps or collar
agreements, foreign exchange agreements, commodity contracts or similar
arrangements entered into by Borrower or its Subsidiaries providing for
protection against fluctuations in interest rates, currency exchange rates,
commodity prices or the exchange of nominal interest obligations, either
generally or under specific contingencies.

“Indebtedness”: as to any Person at any date, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of Property or services (other than trade
payables incurred in the ordinary course of such Person’s business and payable
in accordance with customary practices), (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to Property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such Property),
(e) all Capital Lease Obligations of such Person, (f) all obligations of such
Person, contingent or otherwise, as an account party or applicant under
acceptance, letter of credit or similar facilities, (g) all obligations of such
Person, contingent or otherwise, to purchase,

 

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redeem, retire or otherwise acquire for value any Capital Stock of such Person,
including, without limitation, the purchase or redemption of Disqualified Stock,
prior to the date that is six months after the Maturity Date, valued, in the
case of redeemable preferred stock, at the greater of its voluntary liquidation
preference and its involuntary liquidation preference plus accrued and unpaid
dividends, (h) all Guarantee Obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (g) above, (i) all
obligations of the kind referred to in clauses (a) through (h) above secured by
(or for which the holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any Lien on Property (including, without
limitation, accounts and contract rights) owned by such Person, whether or not
such Person has assumed or become liable for the payment of such obligation,
(j) (i) for the purposes of Section 7.1(f) only, all obligations of such Person
in respect of Hedge Agreements with Persons other than Lender or any of its
affiliates, and (ii) all obligations of such Person in respect of Hedge
Agreements with Lender or any of its affiliates, and (k) all obligations of such
Person in respect of ACH Transactions.

“Indemnified Liabilities”: as defined in Section 8.5.

“Indemnitee”: as defined in Section 8.5.

“Insolvency”: with respect to any Multiemployer Plan, the condition that such
Plan is insolvent within the meaning of Section 4245 of ERISA.

“Insolvent”: pertaining to a condition of Insolvency.

“Intellectual Property”: as defined in the Guarantee and Security Agreement.

“Interest Payment Date”: (a) with respect to Revolving Loans, the last day of
each month, and (b) with respect to the Term Loan, the last day of each calendar
quarter and any other date of any repayment or prepayment made in respect
thereof.

“Investments”: as defined in Section 6.8.

“Joint Venture”: any joint venture that is not a member of the Newtek Group.

“Lender”: as defined in the preamble hereto.

“Lien”: (a) any lien, mortgage, pledge, hypothecation, collateral assignment,
deposit arrangement, security interest, charge or encumbrance of any kind
(including any agreement to give any of the foregoing (unless such agreement is
entered into in connection with the full refinancing of the Obligations under
this Agreement and the obligation to give any of the foregoing takes effect
substantially concurrently with or after the payment in full of the
Obligations)), any conditional sale or other title retention agreement (and any
lease in the nature thereof) and any option, trust or other preferential
arrangement having the practical effect of any of the foregoing and (b) in the
case of Securities, any purchase option, call or similar right of a third party
with respect to such Securities.

“Loan”: the Term Loan and each Revolving Loan.

“Loan Documents”: this Agreement, the Security Documents, the Notes, the
Mortgages and each other agreement or document executed by a Loan Party and
delivered to Lender in connection with or pursuant to any of the foregoing.

“Loan Party”: each of the Borrower and the Guarantors.

 

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“Material Adverse Effect”: any change, occurrence, event, circumstance or
development that has had, or could reasonably be expected to have, a material
adverse effect upon (a) the business, assets, properties, financial condition,
stockholders’ equity, contingent liabilities, prospects, material agreements or
results of operations of any Loan Party, or (b) any Loan Party’s ability to pay
or perform the Obligations in accordance with the terms hereof or of the other
Loan Documents, or (c) the validity or enforceability of this Agreement or any
of the other Loan Documents or the rights and remedies of Lender hereunder or
thereunder.

“Material Environmental Amount”: an amount or amounts payable by any Loan Party
and/or any of their respective Subsidiaries in the aggregate in excess of
$50,000 for: costs to comply with any Environmental Law; costs of any
investigation, and any remediation, of any Regulated Substances; and
compensatory damages (including, without limitation damages to natural
resources), punitive damages, fines, and penalties pursuant to any Environmental
Law.

“Material Intellectual Property”: as defined in the Guarantee and Security
Agreement.

“Maturity Date”: June 25, 2018.

“Moody’s”: Moody’s Investors Service, Inc., a Delaware corporation, or any
successor thereof.

“Mortgages”: each of the mortgages and deeds of trust made by any Loan Party in
favor of, or for the benefit of, Lender, in form and substance reasonably
satisfactory to Lender, as the same may be amended, supplemented or otherwise
modified from time to time.

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

“Net Cash Proceeds”: (a) in connection with any Asset Sale or any Recovery
Event, the proceeds thereof in the form of cash and Cash Equivalents (including
any such proceeds received by way of deferred payment of principal pursuant to a
note or installment receivable or purchase price adjustment receivable or
otherwise, but only as and when received) of such Asset Sale or Recovery Event,
net of attorneys’ fees, accountants’ fees, investment banking fees, amounts
required to be applied to the repayment of Indebtedness secured by a Lien
expressly permitted hereunder on any asset which is the subject of such Asset
Sale or Recovery Event (other than any Lien pursuant to a Security Document) and
other customary fees and expenses actually incurred in connection therewith and
net of taxes paid or reasonably estimated to be payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements), including any amounts provided as a reserve, in
accordance with GAAP, against any liabilities under any indemnification
obligations or purchase price adjustment associated with such Asset Sale or
Recovery Event (provided, that to the extent and at the time any such amounts
are released from such reserve, such amounts shall constitute Net Cash Proceeds)
and (b) in connection with any issuance or sale of equity securities or debt
securities or instruments or the incurrence of loans, the cash proceeds received
from such issuance or incurrence, net of attorneys’ fees, investment banking
fees, accountants’ fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred in connection therewith.

“Net Loss”: with respect to any Person, for any period, the net loss, if any, of
such Person and its consolidated Subsidiaries for such period as determined in
accordance with GAAP.

“Newtek Group”: Borrower and each direct or indirect Subsidiary of Borrower; and
a “member” of the Newtek Group means any such Person.

 

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“Non-Excluded Taxes”: as defined in Section 2.15(a).

“Note”: the Term Note and the Revolving Credit Note.

“NSBF”: Newtek Small Business Finance, Inc., a New York corporation.

“NSBF Credit Facility”: the credit facilities provided to NSBF pursuant to
Amended and Restated Loan and Security Agreement, dated as of July 16, 2013, by
and between NSBF, as borrower, and Capital One, National Association as lender,
as amended, restated, supplemented or otherwise modified from time to time, and
any successor facility or facilities thereto.

“Obligations”: all existing and future debts, liabilities and obligations of
every kind or nature at any time owing by Borrower and the other Loan Parties,
or any of them, to Lender, whether under this Agreement, or any other existing
or future instrument, document or agreement, between or among Borrower and the
other Loan Parties, or any of them, or Lender, whether joint or several, related
or unrelated, primary or secondary, matured or contingent, due or to become due
(including debts, liabilities and obligations obtained by assignment), and
whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including, without limitation, all fees, charges
and disbursements of counsel to Lender) or otherwise (specifically including
interest accruing after the commencement of any bankruptcy, insolvency or
similar proceeding with respect to Borrower or any other Loan Party, whether or
not a claim for such post-commencement interest is allowed), including, without
limitation, debts, liabilities and obligations in respect of the Loans and any
extensions, modifications, substitutions, increases and renewals thereof; any
amount payable by Borrower or any other Loan Party or any Subsidiary of any Loan
Party pursuant to a Hedge Agreement or any ACH Transactions; the payment of all
amounts advanced by Lender to preserve, protect and enforce rights hereunder and
in the Collateral; and all expenses incurred by Lender. Without limiting the
generality of the foregoing, Obligations shall include any other debts,
liabilities or obligations owing to Lender in connection with any cash
management, or other services (including electronic funds transfers or automated
clearing house transactions) provided by Lender to Borrower or any other Loan
Party, as well as any other loan, advances or extension of credit, under any
existing or future loan agreement, promissory note, or other instrument,
document or agreement between or among Borrower or any other Loan Party, and
Lender.

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

“Patent Security Agreement”: the Patent Security Agreement, dated as of June 26,
2014, by and between the Borrower and Lender.

“Patriot Act”: as defined in Section 3.22.

“PBGC”: the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA (or any successor).

“Permitted Acquisition”: any acquisition of all or substantially all of the
assets or Capital Stock of any Person or any operating division thereof, or the
merger of any such Person or operating division with or into Borrower or any
Subsidiary of Borrower (and, (i) in the case of a merger with Borrower, with
Borrower being the surviving Person, and (ii) in the case of a merger with any
other Loan Party, with a Loan Party being the surviving Person).

 

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“Permitted Capcos”: collectively, Wilshire DC Partners, LLC, Wilshire Alabama
Partners, LLC, Wilshire Louisiana BIDCO, LLC, Wilshire Texas Partners I, LLC

“Permitted Investor”: (a) Mr. Barry Sloane and (b) his heirs, the legal
representatives of any of the foregoing and the trustees of bona fide trusts of
which any of the foregoing are the primary beneficiaries; provided, however,
that any such person referred to in clause (b) (other than Mr. Barry Sloane’s
spouse and lineal descendants, the legal representatives of any of the foregoing
and the trustees of bona fide trusts of which any of the foregoing are the
primary beneficiaries) shall cease to be a “Permitted Investor” upon the death
of Mr. Barry Sloane if such person is not the holder (and is not entitled under
the terms of distribution of Mr. Barry Sloane’s estate to become a holder) of
shares that would result in a Change of Control under clause (a) of the
definition of such term if such person were not a Permitted Investor.

“Permitted Joint Venture”: any Joint Venture (a) that is not a Loan Party, that
does not own Capital Stock in any Loan Party and no direct or indirect
Subsidiary or Joint Venture of which is a Loan Party, (b) all of the Capital
Stock (but only to the extent of a Loan Party’s interest in such Capital Stock),
of which is subject to the Liens granted to Lender, (c) with respect to which no
Loan Party shall be under any Contractual Obligation to make Investments in such
Joint Venture, Asset Sales to such Joint Venture or incur Guarantee Obligations
in respect of such Joint Venture, in each case not permitted hereunder, (d) the
business of which is of a type that is in compliance with Section 6.14 and
(e) approved by Lender.

“Person”: an individual, partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.

“Plan”: at a particular time, any employee benefit plan that is covered by ERISA
and in respect of which Borrower or a Commonly Controlled Entity is (or, if such
plan were terminated at such time, would under Section 4069 of ERISA be deemed
to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledged Stock”: as defined in the Guarantee and Security Agreement

“PMT”: PMTWorks Payroll, LLC, a New York limited liability company.

“PMT ACH Accounts”: demand deposit accounts maintained by PMT at Lender or
another bank the sole purpose of which is the deposit of funds of payroll
services customers of PMT in order to facilitate PMT’s ACH transfers relating to
such payroll services.

“Pro Forma Balance Sheet”: as defined in Section 3.1(a).

“Projections”: as defined in Section 5.2(c).

“Property”: any right or interest in or to property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible, including,
without limitation, Capital Stock. When such term is used in Section 3.17, the
term “Property” or “Properties” refers to any real property owned, leased or
operated by the Newtek Group.

“Recovery Event”: any settlement of or payment in respect of any property or
casualty insurance claim or any condemnation proceeding relating to any lost,
destroyed, damaged or condemned, as applicable, asset, equipment or other
property of a Loan Party in an annual amount greater than $10,000 individually
or $25,000 in the aggregate.

 

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“Regulated Substances”: any substance, material or waste, regardless of its form
or nature, defined under Environmental Laws as a “hazardous substance,”
“pollutant,” “pollution,” “contaminant,” “hazardous or toxic substance,”
“extremely hazardous substance,” “toxic chemical,” “toxic substance,” “toxic
waste,” “hazardous waste,” “special handling waste,” “industrial waste,”
“residual waste,” “solid waste,” “municipal waste,” “mixed waste,” “infectious
waste,” “chemotherapeutic waste,” “medical waste,” or “regulated substance” or
any other material, substance or waste, regardless of its form or nature, which
otherwise is regulated by Environmental Laws, including, but not limited to
petroleum, mold, or asbestos.

“Regulation T”: Regulation T of the Board as in effect from time to time.

“Regulation U”: Regulation U of the Board as in effect from time to time.

“Regulation X”: Regulation X of the Board as in effect from time to time.

“Reorganization”: with respect to any Multiemployer Plan, the condition that
such plan is in reorganization within the meaning of Section 4241 of ERISA.

“Reportable Compliance Event”: any Covered Entity becomes a Sanctioned Person,
or is charged by indictment, criminal complaint or similar charging instrument,
arraigned, or custodially detained in connection with any Anti-Terrorism Law or
any predicate crime to any Anti-Terrorism Law, or has knowledge of facts or
circumstances to the effect that it is reasonably likely that any aspect of its
operations is in actual or probable violation of any Anti-Terrorism Law.

“Reportable Event”: any of the events set forth in Section 4043(c) of ERISA,
other than those events as to which the thirty day notice period is waived under
subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. § 4043.

“Required Environmental Permits”: any and all permits, licenses, approvals,
registrations, notifications, exemptions and other authorizations required under
any Environmental Law to lease, occupy or maintain the Properties or otherwise
own or operate the business of each member of the Newtek Group.

“Requirement of Law”: as to any Person, the certificate of incorporation and
by-laws or other organizational or governing documents of such Person, and any
law, treaty, rule or regulation or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its Property or to which such Person or any of its Property is
subject.

“Responsible Officer”: the chief executive officer, president or chief financial
officer of Borrower, but in any event, with respect to financial matters, the
chief financial officer of Borrower.

“Restricted Payments”: as defined in Section 6.6.

“Restricted Subsidiary”: each Domestic Subsidiary of Borrower that is not an
Unrestricted Subsidiary.

“Revolving Availability Period”: means the period from the Closing Date to but
excluding the Revolving Commitment Termination Date.

“Revolving Commitment”: means the commitment of Lender to make Revolving Loans
to Borrower hereunder in an amount up to the Revolving Commitment Amount.

 

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“Revolving Commitment Amount”: means $10,000,000.

“Revolving Commitment Termination Date”: means the earliest of (i) the Maturity
Date, (ii) the date on which the Revolving Commitment is terminated pursuant to
Section 7.1, and (iii) the date on which all amounts outstanding under this
Agreement have been declared or have automatically become due and payable
(whether by acceleration or otherwise).

“Revolving Credit Exposure”: means the outstanding principal amount of Lender’s
Revolving Loans at any time.

“Revolving Credit Note”: means that certain promissory note, dated of even date
herewith, made by Borrower to the order of Lender evidencing the Revolving Loans
up to the Revolving Commitment Amount, substantially in the form of Exhibit E-1.

“Revolving Loan”: means an advance made by Lender to Borrower pursuant to
Section 2.1 under its Revolving Commitment.

“Sanctioned Country”: a country subject to a sanctions program maintained under
any Anti-Terrorism Law.

“Sanctioned Person”: any individual person, group, regime, entity or thing
listed or otherwise recognized as a specially designated, prohibited, sanctioned
or debarred person, group, regime, entity or thing, or subject to any
limitations or prohibitions (including but not limited to the blocking of
property or rejection of transactions), under any Anti-Terrorism Law.

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

“SBA 7(a) Loans”: any loans made by the Borrower or any of its Subsidiaries to
small businesses and partially guaranteed by the SBA, all originated in
accordance with the SBA Rules and Regulations and pursuant to the authorization
contained in Section 7(a) of the SBA Act.

“SBA Act”: the Small Business Act of 1953, as the same may be amended from time
to time

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

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

“SEC”: the Securities and Exchange Commission (or successors thereto or an
analogous Governmental Authority).

“Securitization Guaranty”: the Guaranty Agreement, dated as of December 22,
2010, by and between Borrower and Newtek Small Business Loan Trust 2010-1 and
acknowledged by U.S. Bank National Association, as amended, restated or
otherwise modified from time to time with the consent of Lender; provided, that
any termination of the Securitization Guaranty by the Borrower without the
payment of material compensation therefor shall not require the consent of the
Lender.

 

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“Security”: any Capital Stock, Stock Equivalent, voting trust certificate, bond,
debenture, note or other evidence of Indebtedness, whether secured, unsecured,
convertible or subordinated, or any certificate of interest, share or
participation in, any temporary or interim certificate for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing, but shall not include any evidence of the Obligations.

“Security Documents”: the collective reference to the Guarantee and Security
Agreement, the Trademark Security Agreement, the Mortgages and all other
security documents hereafter delivered to Lender granting a Lien on any Property
of any Person to secure the obligations and liabilities of any Loan Party under
any Loan Document.

“Single Employer Plan”: any Plan that is covered by Title IV of ERISA, but which
is not a Multiemployer Plan.

“Software”: any and all computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source code
or object code; databases and compilations, including any and all data and
collections of data, whether machine readable or otherwise; descriptions,
flow-charts and other work product used to design, plan, organize and develop
any of the foregoing, screens, user interfaces, report formats, firmware,
development tools, templates, menus, buttons and icons; and all documentation
including user manuals and other training documentation related to any of the
foregoing.

“Solvent”: with respect to any Person, as of any date of determination, (a) the
amount of the “present fair saleable value” of the assets (including rights of
contribution) of such Person will, as of such date, exceed the amount of all
“liabilities of such Person, contingent or otherwise”, as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets (including rights of contribution) of such Person
will, as of such date, be greater than the amount that will be required to pay
the liability of such Person on its debts as such debts become absolute and
matured, (c) such Person will not have, as of such date, an unreasonably small
amount of capital with which to conduct its business, and (d) such Person will
be able to pay its debts as they mature. For purposes of this definition,
(i) “debt” means liability on a “claim”, and (ii) “claim” means any (x) right to
payment, whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured or (y) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

“Specified Swap Obligation”: means, with respect to any Loan Party, any
obligation to pay or perform under any agreement, contract or transaction that
constitutes a “swap” within the meaning of section 1a(47) of the Commodity
Exchange Act or any rules or regulations promulgated thereunder.

“Sterling”: Sterling National Bank.

“Sterling Facility”: the credit facilities provided to CDS pursuant to the
Sterling Loan Agreement in an aggregate amount not to exceed $15,000,000.

 

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“Sterling Loan Agreement”: the Loan and Security Agreement, dated as of
February 28, 2011, by and between CDS, as borrower, the lenders party thereto
and Sterling, as administrative agent and collateral agent, as amended,
restated, supplemented or otherwise modified from time to time.

“Sterling Loan Documents”: the “Loan Documents” as defined under the Sterling
Loan Agreement.

“S&P”: Standard & Poor’s Rating Services, or any successor thereof.

“Subordinated Debt”: any Indebtedness of any Loan Party or any of their
respective Subsidiaries, which by its terms is subordinated to the Obligations
pursuant to Subordination Documents.

“Subordination Documents: a subordination agreement substantially in the form of
Exhibit G, as the same may be amended, modified or supplemented by Lender from
time to time, and such other subordination related documents and agreements as
Lender may reasonably request.

“Subsidiary”: as to any Person, a corporation, partnership, limited liability
company or other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, directly or indirectly
through one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a “Subsidiary” or to “Subsidiaries” in this
Agreement shall refer to each direct or indirect Subsidiary or Subsidiaries of
Borrower.

“Synthetic Lease”: as defined in Section 6.7.

“Term Loan”: means the term loan made by Lender to Borrower hereunder on the
Closing Date in the original principal amount of $10,000,000.

“Term Note”: means that certain promissory note, dated of even date herewith,
made by Borrower to the order of Lender evidencing the Term Loan, substantially
in the form of Exhibit E-2.

“Trademark Security Agreement”: the Trademark Security Agreement, dated as of
June 26, 2014, by and between the Borrower and Lender.

“Transferee”: as defined in Section 8.14.

“UCC”: the Uniform Commercial Code as in effect from time to time in the State
of New York.

“Unguaranteed Interest Sale Agreement”: the Unguaranteed Interest Sale and
Assignment Agreement, dated as of December 29, 2011, by and between NSBF and
Newtek ABS.

“Unrelated Extension of Credit”: any loan, advance or other extension of credit
of any kind or nature whatsoever made by any Loan Party to a Person that is not
a Loan Party (including, but not limited to, NSBF).

“Unrestricted Subsidiaries”: the Subsidiaries of Borrower set forth on Schedule
1.1.

“UPS”: Universal Processing Services of Wisconsin, LLC, a New York limited
liability company.

 

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“Wholly-Owned Subsidiary”: with respect to any Person, any Subsidiary of such
Person, all of the Capital Stock of which (other than director’s qualifying
shares, as may be required by law) is owned by such Person, either directly or
indirectly through one or more Wholly-Owned Subsidiaries of such Person.

“Wilshire Documents”: the Loan Agreement dated as of August 18, 2011 by and
between PMT and Wilshire New York Partners V, LLC, and the Security Agreement
dated as of August 18, 2011 by and between PMT and Wilshire New York Partners V,
LLC.

“Wilshire Waiver”: the Amended and Restated Subordination and Consent Agreement,
dated as of June 26, 2014, by and between Lender and Wilshire New York Partners
V, LLC.

1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all
terms defined in this Agreement shall have the defined meanings when used in the
other Loan Documents or any certificate or other document made or delivered
pursuant hereto or thereto.

(b) As used herein and in the other Loan Documents, and any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms relating
to the Newtek Group not defined in Section 1.1 and accounting terms partly
defined in Section 1.1, to the extent not defined, shall have the respective
meanings given to them under GAAP.

(c) If any change in the accounting principles used in the preparation of the
most recent financial statements referred to in Section 5.1 is hereafter
required or permitted by the rules, regulations, pronouncements and opinions of
the Financial Accounting Standards Board or the American Institute of Certified
Public Accountants (or any successors thereto) and such change is adopted by
Borrower with the agreement of Borrower’s accountants and results in a change in
any of the calculations required under this Agreement that would not have
resulted had such accounting change not occurred, the parties hereto agree to
enter into negotiations in order to amend such provisions so as to equitably
reflect such change such that the criteria for evaluating compliance with such
covenants by the Newtek Group shall be the same after such change as if such
change had not been made; provided, however, that no change in GAAP that would
affect a calculation that measures compliance with any covenant contained in
Section 6 shall be given effect until such provisions are amended to reflect
such changes in GAAP. Notwithstanding the foregoing, when determining the
amounts of Capital Lease Obligations, such determination shall be made in
accordance with GAAP; provided, however, that any liability with respect to
leases that are in effect and characterized as operating leases under FASB ASC
840 as in effect as of the date of this Agreement but characterized as capital
leases following changes to FASB ASC 840 after such date shall be classified as
operating leases and shall not be included within the definition of Capital
Lease Obligations.

(d) The words “hereof”, “herein” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and Section, Schedule and Exhibit
references are to this Agreement unless otherwise specified.

(e) The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms.

(f) All calculations of financial ratios set forth in Section 6.1 shall be
calculated to the same number of decimal places as the relevant ratios are
expressed in and shall be rounded upward if the number in the decimal place
immediately following the last calculated decimal place is five or greater. For
example, if the relevant ratio is to be calculated to the hundredth decimal
place and the calculation of the ratio is 5.126, the ratio will be rounded up to
5.13.

 

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SECTION 2. AMOUNT AND TERMS OF COMMITMENTS

2.1 Commitments. (a) On the terms and subject to the conditions hereof, Lender
agrees to make Revolving Loans to Borrower, from time to time during the
Revolving Availability Period, in an aggregate principal amount at any time
outstanding not to exceed the Revolving Commitment. During the Revolving
Availability Period, Borrower shall be entitled to borrow, prepay and reborrow
Revolving Loans in accordance with the terms and conditions of this Agreement;
provided, however, that Borrower may not borrow or reborrow unless the
conditions set forth in Section 4.2 are satisfied at the time of such borrowing.
Unless previously terminated, the Revolving Commitment shall terminate on the
Revolving Commitment Termination Date.

(b) On the terms and subject to the conditions hereof, Lender agrees to make a
term loan to Borrower on the Closing Date in an amount equal to the Term Loan
Amount.

2.2 Procedure for Borrowing. (a) On the Closing Date, Lender shall make
available to Borrower at an account designated by Borrower an amount in
immediately available funds equal to the Term Loan Amount.

(b) Borrower may request funding of Revolving Loans by delivering to Lender a
Borrowing Notice (which Borrowing Notice must be received by Lender prior to
10:00 A.M., New York City time, one (1) Business Day prior to requested funding
date of such Revolving Loans) (i) requesting that Lender make Revolving Loans on
such funding date and (ii) specifying the aggregate principal amount of the
Revolving Loans requested to be made on such date; provided, however, that no
Revolving Loans may be borrowed on or after the Revolving Commitment Termination
Date. Following receipt of such Borrowing Notice, not later than 12:00 Noon, New
York City time, on the applicable Revolving Loan funding date, Lender shall make
available to Borrower at an account designated by Borrower in such Borrowing
Notice an amount in immediately available funds equal to the Revolving Loans to
be made by Lender.

2.3 [Reserved]

2.4 Repayment of Loans; Evidence of Debt. (a) Borrower hereby unconditionally
promises to pay to Lender the principal amount of each Loan on the Maturity Date
(or on such earlier date on which the Loans become due and payable pursuant to
Section 7.1). Borrower hereby further agrees to pay interest on the unpaid
principal amount of the Loans from time to time outstanding from the date hereof
until payment in full thereof at the rate per annum, and on the dates, set forth
in Section 2.10.

(b) Lender shall maintain on its books and records in accordance with its usual
practice an account or accounts evidencing indebtedness of Borrower to Lender
resulting from each Loan of Lender from time to time, including, without
limitation, the amounts of principal and interest payable and paid to Lender
from time to time under this Agreement. The accounts of Lender maintained
pursuant to Section 2.4(b) shall, to the extent permitted by applicable law and
except for manifest error, be conclusive evidence of the existence and amounts
of the obligations of Borrower therein recorded; provided, however, that the
failure of Lender to maintain any such account, or any error therein, shall not
in any manner affect the obligation of Borrower to repay (with applicable
interest) the Loans made by Lender in accordance with the terms of this
Agreement.

 

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2.5 Fees. (a) On the Closing Date, Borrower shall to pay to Lender a
fully-earned and non-refundable facility fee of $200,000.00.

(b) Borrower unconditionally shall pay to Lender an unused line fee, which shall
accrue at the rate of 0.375% per annum on the average daily amount of the unused
Revolving Commitment during the Revolving Availability Period. For purposes of
computing the unused line fee, the Revolving Commitment shall be deemed used to
the extent of the Revolving Credit Exposure. Accrued commitment fees shall be
calculated and paid quarterly in arrears on the last day of each March, June,
September and December, commencing on the last day of the first such month after
the Closing Date and on the Revolving Commitment Termination Date (and if later,
the date the Revolving Loans are repaid in their entirety); provided, that any
such commitment fees accruing after the Revolving Commitment Termination Date
shall be payable on demand.

(c) Borrower unconditionally shall pay to Lender a late charge equal to five
percent (5%) of any and all payments of principal or interest on the Loans that
are not paid within fifteen (15) days of the due date. Such late charge shall be
due and payable regardless of whether Lender has accelerated the Obligations, or
the Obligations automatically shall become due and payable. Borrower agrees that
any late fee payable to Lender is a reasonable estimate of Lender’s damages and
is not a penalty.

2.6 Optional Prepayments. (a) Borrower may at any time and from time to time
prepay the Loans, in whole or in part, without premium or penalty, upon
irrevocable written notice delivered to Lender by 12:00 p.m. (New York City
time) at least two (2) Business Days prior thereto, which notice shall specify
the date and amount of such prepayment. If any such notice is given (except in
connection with a proposed refinancing), the amount specified in such notice
shall be due and payable on the date specified therein, together with accrued
interest to such date on the amount prepaid. Partial prepayments of Loans shall
be in an aggregate principal amount of $500,000 or a whole multiple of $250,000
in excess thereof. Optional prepayments of Loans shall be applied as set forth
in Section 2.13(d). Optional prepayments of the Term Loan shall be applied to
the installments of principal in respect of the Term Loan in the inverse order
of maturity.

(b) Upon at least three (3) Business Days’ prior written notice (or telephonic
notice promptly confirmed in writing) from Borrower to Lender (which notice
shall be irrevocable), Borrower may permanently reduce or terminate the
Revolving Commitment Amount, without premium or penalty; provided, however, that
no such reduction or termination shall be permitted which would reduce the
Revolving Commitment Amount to an amount less than the outstanding Revolving
Credit Exposure.

2.7 Mandatory Prepayments. (a) If any Indebtedness (other than Indebtedness
permitted under Section 6.2) shall be incurred by Borrower, then on the date of
such incurrence, the Loans shall be prepaid by an amount equal to the amount of
the Net Cash Proceeds of such issuance or incurrence and applied to the
Obligations as set forth in Section 2.13(d). The provisions of this Section do
not constitute a consent to the incurrence of any such Indebtedness.

(b) If on any date any Loan Party shall receive Net Cash Proceeds from any Asset
Sale, Recovery Event, or the sale (to any Person other than a Loan Party) of any
Capital Stock or any other equity securities, debt securities, or instruments or
the incurrence of loans not permitted by this Agreement, then, within 5 Business
Days of receipt of such Net Cash Proceeds, the Obligations shall be prepaid by
an amount equal to the amount of such Net Cash Proceeds and applied to the
Obligations as set forth in Section 2.13(d). The provisions of this Section do
not constitute Lender’s consent to the consummation of any Disposition not
permitted by Section 6.5.

 

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2.8 [Reserved]

2.9 [Reserved]

2.10 Interest Rates and Payment Dates. (a) Each Loan shall bear interest at a
rate per annum equal to the Base Rate in effect from time to time, plus the
Applicable Margin.

(b) If all or a portion of (i) the principal amount of any Loan shall not be
paid when due (whether at the stated maturity, by acceleration or otherwise),
all outstanding Loans (whether or not overdue) (to the extent legally permitted)
shall bear interest at a rate per annum that is equal to the rate that would
otherwise be applicable thereto pursuant to paragraph (a) of this Section 2.10
plus 4% and (ii) any interest payable on any Loan, fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a rate
per annum equal to the rate then applicable to Loans plus 4%, in each case, with
respect to clauses (i) and (ii) above, from the date of such non-payment until
such amount is paid in full.

(c) Interest shall be payable in arrears on each Interest Payment Date;
provided, that interest accruing pursuant to paragraph (b) of this Section shall
be payable from time to time on demand.

(d) Notwithstanding anything to the contrary set forth in this Section 2.10, if
a court of competent jurisdiction determines in a final order that the rate of
interest payable hereunder exceeds the highest rate of interest permissible
under law (the “Maximum Lawful Rate”), then so long as the Maximum Lawful Rate
would be so exceeded, the rate of interest payable hereunder shall be equal to
the Maximum Lawful Rate; provided, however, that if at any time thereafter the
rate of interest payable hereunder is less than the Maximum Lawful Rate,
Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate
until such time as the total interest received by Lender is equal to the total
interest which would have been received had the interest rate payable hereunder
been (but for the operation of this paragraph) the interest rate payable since
the Closing Date as otherwise provided in this Agreement. Thereafter, interest
hereunder shall be paid at the rate of interest and in the manner provided in
this Section, unless and until the rate of interest again exceeds the Maximum
Lawful Rate, and at that time this paragraph shall again apply. In no event
shall the total interest received by Lender pursuant to the terms hereof exceed
the amount which Lender could lawfully have received had the interest due
hereunder been calculated for the full term hereof at the Maximum Lawful Rate.
If, notwithstanding the provisions of this Section 2.10(d), a court of competent
jurisdiction shall finally determine that Lender have received interest
hereunder in excess of the Maximum Lawful Rate, Lender shall refund any excess
to Borrower or as a court of competent jurisdiction may otherwise order.

2.11 Computation of Interest and Fees. Interest, fees and other amounts payable
pursuant hereto shall be calculated on the basis of a 360-day year for the
actual days elapsed.

2.12 [Reserved]

2.13 Payments. (a) The outstanding principal amount of all Revolving Loans shall
be due and payable (together with accrued and unpaid interest thereon) on the
Revolving Commitment Termination Date. Prior to the Revolving Commitment
Termination Date, interest on the outstanding principal amount of Revolving
Loans shall be payable quarterly in arrears on each applicable Interest Payment
Date.

(b) The outstanding principal amount of the Term Loan shall be due and payable
in equal quarterly installments of $416,666.66 (together with accrued and unpaid
interest thereon) on each

 

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March 31, June 30, September 30 and December 31 commencing on the last day of
the first such month after the Closing Date, with a final payment of all
outstanding principal and accrued and unpaid interest on the Term Loan due and
payable on the Maturity Date.

(c) All payments (including prepayments) to be made by Borrower hereunder,
whether on account of principal, interest, fees or otherwise, shall be made
without setoff or counterclaim and shall be made prior to 12:00 p.m., New York
City time, on the due date thereof to the relevant Lender at an account
designated by Lender hereunder, in Dollars and in immediately available funds.
Any payment made by Borrower after 12:00 p.m., New York City time, on any
Business Day shall be deemed to have been on the next following Business Day. If
any payment hereunder becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business Day. In the
case of any extension of any payment of principal pursuant to the preceding
sentence, interest thereon shall be payable at the then applicable rate during
such extension.

(d) (A) after the occurrence and during the continuance of an Event of Default
specified in Section 7.1(a), Section 7.1(b) or Section 7.1(l), (B) after the
occurrence and during the continuance of an Event of Default specified in
Section 7.1(j) with respect to a material portion of the Collateral, (C) after
the occurrence and during the continuance of any other Event of Default not
specified in subclause (A) or (B) above and the acceleration of the Obligations
pursuant to Section 7.1, or (D) in connection with any prepayments made pursuant
to Section 2.6 or 2.7, all payments in respect of the Obligations and all
proceeds of the Collateral shall be applied against the Obligations in the
following order:

 

  (i) first, to pay incurred and unpaid fees, expenses and indemnities of Lender
under the Loan Documents;

 

  (ii) second, to pay interest then due and payable in respect of the Loans;

 

  (iii) third, to pay installments of principal in respect of the Term Loan in
the inverse order of their maturity;

 

  (iv) fourth, to pay principal in respect of outstanding Revolving Loans; and

 

  (v) fifth, to pay all other Obligations.

(e) The order of priority set forth in clauses (i) through (v) of
Section 2.13(d) may at any time and from time to time be changed by the Lender
without necessity of notice to or consent of or approval by Borrower, or any
other Person.

2.14 Requirements of Law. (a) If Lender shall have determined that the adoption
of or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by Lender or any corporation
controlling Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any Governmental Authority made
subsequent to the date hereof shall have the effect of reducing the rate of
return on Lender’s or such corporation’s capital as a consequence of its
obligations hereunder to a level below that which Lender or such corporation
could have achieved but for such adoption, change or compliance (taking into
consideration Lender’s or such corporation’s policies with respect to capital
adequacy as in effect as of the date of this Agreement) by an amount deemed by
Lender to be material, then from time to time, after submission by Lender to
Borrower of a written request therefor, Borrower shall pay to Lender such
additional amount or amounts as will compensate Lender or such corporation for
such reduction; provided, that Borrower shall not be required to compensate
Lender pursuant to this paragraph for any

 

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amounts incurred more than six months prior to the date that Lender notifies
Borrower of Lender’s intention to claim compensation therefor; and provided,
further that, if the circumstances giving rise to such claim have a retroactive
effect, then such six-month period shall be extended to include the period of
such retroactive effect.

(b) A certificate as to any additional amounts payable pursuant to this Section
submitted by Lender to Borrower shall be conclusive in the absence of manifest
error. The obligations of Borrower pursuant to this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.

(c) Failure or delay on the part of Lender to demand compensation pursuant to
this Section 2.14 shall not constitute a waiver of Lender’s right to demand such
compensation; provided, that Borrower shall not be under any obligation to
compensate Lender under clause (a) of this Section 2.14 for increased costs or
reductions with respect to any period prior to the date that is 180 days prior
to such request if Lender knew or could reasonably have been expected to know of
the circumstances giving rise to such increased costs or reductions and of the
fact that such circumstances would result in a claim for increased compensation
by reason of such increased costs or reductions; provided, further, that the
foregoing limitation shall not apply to any increased costs or reductions
arising out of the retroactive application of any change in any Requirement of
Law within such 180-day period. The protection of this Section 2.14 shall be
available to Lender regardless of any possible contention of the invalidity or
inapplicability of the change in any Requirement of Law that shall have occurred
or been imposed. Notwithstanding anything herein to the contrary, the Dodd-Frank
Wall Street Reform and Consumer Protection Act, and all requests, rules,
guidelines and directives promulgated thereunder, all requests, rules,
guidelines or directives promulgated by the Bank for International Settlements,
the Basel Committee on Banking Supervision (or any successor or similar
authority) or the United States regulatory authorities, in each case pursuant to
Basel III, are in each case deemed to have been introduced or adopted after the
date hereof, regardless of the date enacted, adopted, issued or implemented for
all purposes under or in connection with this Agreement (including this
Section 2.14) and any taxes imposed thereby (other than taxes described in
Section 2.15) shall be deemed to be the adoption of or a change in a Requirement
of Law regarding capital adequacy.

2.15 Taxes. (a) All payments made by Borrower under this Agreement shall be made
free and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding net
income taxes and franchise taxes (imposed in lieu of net income taxes) imposed
on Lender as a result of a present or former connection between Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from Lender’s having executed, delivered or performed
its obligations or received a payment under, or enforced, this Agreement or any
other Loan Document). If any such non-excluded taxes, levies, imposts, duties,
charges, fees, deductions or withholdings (“Non-Excluded Taxes”) or any Other
Taxes are required to be withheld from any amounts payable to Lender hereunder,
the amounts so payable to Lender shall be increased to the extent necessary to
yield to Lender (after payment of all Non-Excluded Taxes and Other Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement; provided, however, that Borrower shall not
be required to increase any such amounts payable to Lender with respect to any
Non-Excluded Taxes (i) that are attributable to Lender’s failure to deliver the
forms required by paragraph (d) of this Section, unless such failure is solely a
result of a change in any Requirement of Law occurring after the date hereof or
(ii) that are United States withholding taxes (including FATCA) imposed on
amounts payable to Lender at the time Lender becomes a party to this Agreement,
except to the extent that Lender’s assignor (if any) was entitled, at the time
of assignment, to receive additional amounts from Borrower with respect to such
Non-Excluded Taxes pursuant to this paragraph (a).

 

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

(c) (i) Whenever any Non-Excluded Taxes or Other Taxes are payable by Borrower,
as promptly as possible thereafter Borrower shall send to Lender a certified
copy of an original official receipt received by Borrower showing payment
thereof. If Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due
to the appropriate taxing authority or fails to remit to Lender the required
receipts or other required documentary evidence, Borrower shall indemnify Lender
for any incremental taxes, interest or penalties that may become payable by
Lender as a result of any such failure. The agreements in this Section shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.

(ii) Unless otherwise excluded under the proviso in Section 2.15(a), Borrower
agrees to indemnify Lender for, and hold Lender harmless against, (1) the full
amount of Non-Excluded Taxes or Other Taxes (including any Non-Excluded Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section 2.15) paid by Lender and (2) any liability (including additions to
tax, penalties, interest and expenses) arising therefrom or with respect
thereto, in each case whether or not such Non-Excluded Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
The indemnification payment under this Section 2.15(c) shall be made within
thirty (30) days after the date Lender makes a written demand therefor.

(d) If requested by Borrower, Lender (and each Transferee) shall deliver to
Borrower (or, in the case of a Participant, to Lender) two copies of U.S.
Internal Revenue Service Form W-9, certifying that Lender is exempt from U.S.
federal backup withholding tax. Such forms shall be delivered on or before the
date Lender becomes a party to this Agreement (or, in the case of any
Participant, on or before the date such Participant purchases the related
participation). In addition, if requested by Borrower, Lender shall deliver such
forms promptly upon the obsolescence or invalidity of any form previously
delivered by Lender. Lender shall promptly notify Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to Borrower (or any other form of certification adopted by
the U.S. taxing authorities for such purpose).

(e) If Lender reasonably determines that it has received a refund of any
Non-Excluded Taxes or Other Taxes as to which it has been indemnified by
Borrower or with respect to which Borrower has paid additional amounts pursuant
to this Section 2.15, it shall pay over such refund to Borrower (but only to the
extent of indemnity payments made, or additional amounts paid, by Borrower under
this Section 2.15 with respect to the Non-Excluded Taxes or Other Taxes giving
rise to such refund), net of all out-of-pocket expenses of Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that Borrower, upon the request of
Lender, agrees to repay the amount paid over to Borrower (plus, any penalties,
interest or other charges imposed by the relevant Governmental Authority) to
Lender in the event Lender is required to repay such refund to such Governmental
Authority. This paragraph shall not be construed to require Lender to claim any
tax refund or make available its tax returns (or any other information relating
to its taxes which it deems confidential) or disclose any information relating
to its tax affairs or any computations in respect thereof or require Lender to
do anything that would prejudice its ability to benefit from any other refunds,
credits, reliefs, remissions or repayments to which it may be entitled.

 

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SECTION 3. REPRESENTATIONS AND WARRANTIES

To induce Lender to enter into this Agreement and to make the Loans, Borrower
hereby represents and warrants to Lender, as of the date hereof and as of the
date of any extension of credit hereunder, that:

3.1 Financial Condition. Any financial statements previously delivered pursuant
to Lender (a) present fairly in all material respects the financial condition
and results of operations and cash flows of the applicable Persons as of such
dates and for such periods and (b) disclose all material liabilities, direct or
contingent, of the applicable Persons as of the dates thereof in accordance with
GAAP. Such financial statements were prepared in accordance with GAAP applied on
a consistent basis except for the absence of footnotes and year-end adjustments
for any financial statements other than those prepared for a fiscal year end.
Borrower and its Subsidiaries do not have any Guarantee Obligations, contingent
liabilities and liabilities for taxes, or any long-term leases or unusual
forward or long-term commitments, including, without limitation, any interest
rate or foreign currency swap or exchange transaction or other obligation in
respect of derivatives, that are not reflected in the most recent financial
statements referred to in this paragraph. During the period from December 31,
2013 to and including the date hereof there has been no Disposition by the
Newtek Group of any material part of its business or Property.

3.2 No Change. Since December 31, 2013 there has been no development or event
that has had or could reasonably be expected to have a Material Adverse Effect.

3.3 Corporate Existence; Compliance with Law. Each Loan Party (a) is duly formed
or organized, as applicable, validly existing and in good standing under the
laws of the jurisdiction of its formation or organization, as applicable,
(b) has the limited liability company or corporate, as applicable, power and
authority, and the legal right, to own and operate its Property, to lease the
Property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign limited liability company
or corporation, as applicable, and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of Property or the conduct
of its business requires such qualification except to the extent such failure to
qualify could not reasonably be expected to have a Material Adverse Effect and
(d) is in compliance with all material Requirements of Law.

3.4 Corporate Power; Authorization; Enforceable Obligations. Each Loan Party has
the limited liability company or corporate, as applicable, power and authority,
and the legal right, to make, deliver and perform the Loan Documents to which it
is a party and, in the case of Borrower, to borrow hereunder. Each Loan Party
has taken all necessary limited liability company or corporate, as applicable,
action to authorize the execution, delivery and performance of the Loan
Documents to which it is a party, in the case of Borrower, the borrowings on the
terms and conditions of this Agreement. No consent or authorization of, filing
with, notice to or other act by or in respect of, any Governmental Authority or
any other Person is required in connection with the borrowings hereunder or the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the other Loan Documents, except (i) consents, authorizations, filings
and notices described in Schedule 3.4, which consents, authorizations, filings
and notices have been obtained or made and are in full force and effect and
(ii) the filings referred to in Section 3.20. Each Loan Document has been duly
executed and delivered on behalf of each Loan Party that is a party thereto.
This Agreement constitutes, and each other Loan Document upon execution will
constitute, a legal, valid and binding obligation of each Loan Party that is a
party thereto, enforceable against each such Loan Party in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

 

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3.5 No Legal Bar. The execution, delivery and performance of this Agreement and
the other Loan Documents, the borrowings hereunder and the use of the proceeds
thereof will not violate any Requirement of Law or any Contractual Obligation of
any member of the Newtek Group and will not result in, or require, the creation
or imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation (other
than the Liens created by the Security Documents). No Requirement of Law or
Contractual Obligation applicable to any Loan Party could reasonably be expected
to have a Material Adverse Effect.

3.6 No Litigation. No litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of any
member of the Newtek Group, threatened by or against any member of the Newtek
Group or against any of their respective properties or revenues, where the
matter in controversy exceeds $50,000, other than as set forth in Schedule 3.6.

3.7 No Default. No member of the Newtek Group is in default under or with
respect to any of its Contractual Obligations in any respect that could
reasonably be expected to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.

3.8 Ownership of Property; Liens. Each of Borrower and its Restricted
Subsidiaries has title in fee simple to, or a valid leasehold interest in, all
its real property, and good title to, or a valid leasehold interest in, all its
other Property, and none of such Property is subject to any Lien except as
permitted by Section 6.3. Set forth on Schedule 3.8 is a list of the real
properties owned by any Loan Party as of the date hereof, as to which Lender
shall be granted a Lien pursuant to one or more Mortgages. No lien or other
encumbrance authorized or allowed by Environmental Laws exists against the
Properties.

3.9 Intellectual Property. Each member of the Newtek Group owns, or licenses
pursuant to a valid and enforceable written agreement, all Intellectual Property
and Software necessary and sufficient for the conduct of its businesses as
currently conducted and proposed to be conducted. Except as set forth on
Schedule 3.9, as of the date hereof, no Person has contested any right, title or
interest of any Loan Party in or relating to any Material Intellectual Property
or challenged the ownership, use, validity or enforceability of any Material
Intellectual Property of any Loan Party, nor does any Loan Party know of any
valid basis for any such claim. Except as set forth on Schedule 3.9, as of the
date hereof, there are no pending (or, to the knowledge of any Borrower,
threatened) actions, investigations, suits, proceedings, audits, claims,
demands, orders or disputes with respect to any such infringement,
misappropriation, dilution, violation, impairment, contest or challenge relating
to any Material Intellectual Property. Except as set forth on Schedule 3.9, as
of the date hereof, no judgment or order regarding any such infringement,
misappropriation, dilution, violation, impairment, contest or challenge has been
rendered by any competent Governmental Authority, and no settlement agreement or
similar contract has been entered into by any member of the Newtek Group with
respect to any such infringement, misappropriation, dilution, violation,
impairment, contest or challenge wherein such settlement agreement or similar
contract would materially impact the operation and conduct of the business of
any member of the Newtek Group in a negative manner or otherwise result in a
Material Adverse Effect, and no member of the Newtek Group has any reason to
know of any valid basis for any claim for or based on any such infringement,
misappropriation, dilution, violation, impairment, contest or challenge. The
operation and conduct of the businesses of any member of the Newtek Group
(including, without limitation, the use or practice of any Intellectual Property
and Software therein) does not misappropriate, dilute, violate or otherwise
impair any Intellectual Property owned by any other Person. As of the date
hereof, no Person has been or is infringing, misappropriating, diluting,
violating or otherwise impairing any Intellectual

 

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Property of any Loan Party which would materially impact the operation and
conduct of the business of any Loan Party in a negative manner or otherwise
result in a Material Adverse Effect except as set forth on Schedule 3.9.

3.10 Taxes. Each member of the Newtek Group has filed or caused to be filed all
Federal, state and other material tax returns that are required to be filed and
has paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its Property and all other taxes, fees or
other charges imposed on it or any of its Property by any Governmental Authority
(other than any amount or validity of which are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the members of the
Newtek Group) and no tax Lien has been filed, and, to the knowledge of any
member of the Newtek Group, no claim is being asserted, with respect to any such
tax, fee or other charge.

3.11 Federal Reserve Regulations.

(a) No Loan Party 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.

(b) No part of the proceeds of any Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, for purchasing
or carrying Margin Stock or for the purpose of purchasing, carrying or trading
in any securities under such circumstances as to involve any Loan Party in a
violation of Regulation X or to involve any broker or dealer in a violation of
Regulation T. No Indebtedness being reduced or retired out of the proceeds of
any Loans was or will be incurred for the purpose of purchasing or carrying any
Margin Stock. None of the transactions contemplated by this Agreement will
violate or result in the violation of any of the provisions of the regulations
of the Board, including Regulation T, U or X.

3.12 Labor Matters. There are no strikes or other labor disputes against any
member of the Newtek Group pending or, to the knowledge of any Loan Party,
threatened that (individually or in the aggregate) could reasonably be expected
to have a Material Adverse Effect. Hours worked by and payment made to employees
of any member of the Newtek Group have not been in violation of the Fair Labor
Standards Act or any other applicable Requirement of Law dealing with such
matters that (individually or in the aggregate) could reasonably be expected to
have a Material Adverse Effect. All payments due from any member of the Newtek
Group on account of employee health and welfare insurance that (individually or
in the aggregate) could reasonably be expected to have a Material Adverse Effect
if not paid have been paid or accrued as a liability on the books of such member
of the Newtek Group.

3.13 ERISA. Neither a Reportable Event nor an “accumulated funding deficiency”
(within the meaning of Section 412 of the Code or Section 302 of ERISA) has
occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and, except as
set forth on Schedule 3.13, each Plan has complied in all material respects with
the applicable provisions of ERISA and the Code. No termination of a Single
Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has
arisen, during such five-year period. The present value of all accrued benefits
under each Single Employer Plan (based on those assumptions used to fund such
Plans) did not, as of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of the assets of
such Plan allocable to such accrued benefits by a material amount. Neither
Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan that has resulted or could reasonably be
expected to result in a material liability under ERISA, and neither Borrower nor
any Commonly

 

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Controlled Entity would become subject to any material liability under ERISA if
Borrower or any such Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the valuation date most closely preceding the date
on which this representation is made or deemed made. No such Multiemployer Plan
is in Reorganization or Insolvent.

3.14 Investment Company Act; Other Regulations. No Loan Party is an “investment
company”, or a company “controlled” by an “investment company”, within the
meaning of the Investment Company Act of 1940, as amended. No Loan Party is
subject to regulation under any Requirement of Law (other than Regulation X of
the Board) which limits its ability to incur Indebtedness.

3.15 Subsidiaries. (a) The Subsidiaries listed on Schedule 3.15 constitute all
the Subsidiaries of Borrower at the date hereof. Schedule 3.15 sets forth as of
the Closing Date the name and jurisdiction of formation of each such Subsidiary
and, as to each such Subsidiary, the percentage of each class of Capital Stock
owned by each Loan Party.

(b) Except as listed on Schedule 3.15, there are no outstanding subscriptions,
options, warrants, calls, rights or other agreements or commitments (other than
stock options or restricted shares awards granted to employees or directors and
directors’ qualifying shares) of any nature relating to any Capital Stock of
Borrower or any of its Subsidiaries.

3.16 Use of Proceeds. The proceeds of the Loans shall be used to refinance
amounts outstanding under the Existing CWH Facility, the Existing NBSI Credit
Facility and for working capital and other general corporate purposes of the
Borrower.

3.17 Environmental Matters. Except as set forth on Schedule 3.17:

(a) No member of the Newtek Group has received any Environmental Complaint,
whether directed or issued to any member of the Newtek Group or pertaining to
any operation or occupancy of the Properties, their business or any formerly
owned, operated or leased property, and none have any reason to believe that
they might receive an Environmental Complaint.

(b) To the knowledge of the members of the Newtek Group, the members of the
Newtek Group and their Properties are and have been in compliance with all
applicable Environmental Laws.

(c) To the knowledge of the members of the Newtek Group, there are no Regulated
Substances present at, on, in, under or emanating from, or emanating to, the
Properties or any portion thereof or any formerly owned, operated or leased
property, which has resulted or could result in Contamination or otherwise give
rise to an Environmental Complaint.

(d) The members of the Newtek Group have all Required Environmental Permits to
lease, occupy, or maintain the Properties, and otherwise conduct their business
and operations. To the knowledge of the members of the Newtek Group, all such
Required Environmental Permits are in full force and effect and each member of
the Newtek Group is in and has been in compliance with such Required
Environmental Permits.

(e) To the knowledge of the members of the Newtek Group, no structures,
improvements, equipment, fixtures, aboveground or underground storage tanks
located on the Properties contain or use, except in compliance with
Environmental Laws and Required Environmental Permits, Regulated Substances or
otherwise are operated or maintained except in compliance with Environmental
Laws and Required Environmental Permits.

 

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(f) To the knowledge of the members of the Newtek Group, no facility or site to
which they, either directly or indirectly by a third party, have sent Regulated
Substances for storage, treatment, disposal or other management has been or is
being operated in violation of Environmental Laws or is identified or proposed
to be identified pursuant to Environmental Laws on any list of contaminated
properties or other properties which pursuant to Environmental Laws are the
subject of an investigation, cleanup, removal, remediation or other response
action by a Governmental Authority.

(g) No member of the Newtek Group has received any written request for
information, or been notified that it is a potentially responsible party under
or relating to the federal Comprehensive Environmental Response, Compensation,
and Liability Act or any similar Environmental Law, or with respect to any
Regulated Substances.

(h) No member of the Newtek Group has entered into or agreed to any consent
decree, order, or settlement or other agreement, or is subject to any judgment,
decree, or order or other agreement, in any judicial, administrative, arbitral,
or other forum for dispute resolution, relating to compliance with or liability
under any Environmental Law.

(i) No member of the Newtek Group has to its knowledge assumed or retained, by
contract or operation of law, any liabilities of any kind, fixed or contingent,
known or unknown, under any Environmental Law or with respect to any Regulated
Substances.

3.18 Insurance. Schedule 3.18 sets forth a true, complete and correct
description of all insurance maintained by or on behalf of the Loan Parties as
of the Closing Date. As of the Closing Date, such insurance is in full force and
effect and all premiums (or, if applicable, all installments thereof due on or
before the Closing Date) have been duly paid and such insurance is provided in
such amounts and covering such risks and liabilities (and with such deductibles,
retentions and exclusions) as are in accordance with normal and prudent industry
practice. None of the Loan Parties has any reason to believe that it will not be
able to (a) maintain (or obtain when and as required) the insurance coverage
required to be maintained under the Loan Documents or (b) renew its existing
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers.

3.19 Accuracy of Information, etc. No statement or information contained in this
Agreement, any other Loan Document or any other document, certificate or
statement furnished to Lender or any of them, by or on behalf of any Loan Party
for use in connection with the transactions contemplated by this Agreement or
the other Loan Documents taken as a whole, contained as of the date such
statement, information, document or certificate was so furnished, any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements contained herein or therein not misleading. The
projections and pro forma financial information contained in the materials
referenced above are based upon good faith estimates and assumptions believed by
management of Borrower to be reasonable at the time made, it being recognized by
Lender that such financial information as it relates to future events is not to
be viewed as fact and that actual results during the period or periods covered
by such financial information may differ from the projected results set forth
therein by a material amount. There is no fact known to any Loan Party that
could reasonably be expected to have a Material Adverse Effect that has not been
expressly disclosed herein, in the other Loan Documents or in any other
documents, certificates and statements furnished to Lender for use in connection
with the transactions contemplated hereby and by the other Loan Documents.

3.20 Security Documents. The Guarantee and Security Agreement is effective to
create in favor of Lender a legal, valid and enforceable security interest in
the Collateral described therein and proceeds thereof. In the case of the
Pledged Stock described in the Guarantee and Security Agreement, when any stock
certificates representing such Pledged Stock are delivered to Lender, and in

 

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the case of the other Collateral described in the Guarantee and Security
Agreement, when financing statements in appropriate form are filed in the
offices specified on Schedule 3 to the Guarantee and Security Agreement (which
financing statements have been duly completed and delivered to and authorized to
be filed by Lender) and such other filings as are specified on Schedule 3 to the
Guarantee and Security Agreement have been completed (all of which filings have
been duly completed), the Guarantee and Security Agreement shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest
of the Loan Parties in such Collateral and the proceeds thereof, as security for
the Obligations (as defined in the Guarantee and Security Agreement), in each
case prior and superior in right to any other Person (except, in the case of
Collateral other than Pledged Stock, Liens permitted by Section 6.3).

3.21 Solvency. Each Loan Party is, and after giving effect to the incurrence of
all Indebtedness and obligations being incurred in connection herewith will be
and will continue to be, Solvent.

3.22 Patriot Act. To the extent applicable, each Loan Party is in compliance, in
all material respects, with the (i) Trading with the Enemy Act, as amended, and
each of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (ii) Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act (USA Patriot Act of 2001) (the “Patriot Act”). No part of
the proceeds of any Loan will be used, 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.

3.23 Intentionally Omitted.

3.24 Certified Capital Companies. The Capcos listed on Schedule 3.24 constitute
all the Capcos of Borrower. Schedule 3.24 sets forth (a) the certified status of
each Capco with respect to applicable state laws and regulations and (b) the
percentage of funds of each Capco that have been invested in accordance with
applicable state laws and regulations.

3.25 Anti-Terrorism Laws. No Covered Entity is a Sanctioned Person, and no
Covered Entity, either in its own right or through any third party, (a) has any
of its assets in a Sanctioned Country or in the possession, custody or control
of a Sanctioned Person in violation of any Anti-Terrorism Law, (b) does business
in or with, or derives any of its income from investments in or transactions
with, any Sanctioned Country or Sanctioned Person in violation of any
Anti-Terrorism Law; or (c) engages in any dealings or transactions prohibited by
any Anti-Terrorism Law.

SECTION 4. CONDITIONS PRECEDENT

4.1 Conditions to Initial Extension of Credit. The agreement of Lender to make
the Term Loan and any initial Revolving Loan requested to be made by it
hereunder on the Closing Date are subject to the satisfaction, prior to or
concurrently with the making of such extensions of credit on the Closing Date,
of the following conditions precedent:

(a) Loan Documents. Lender shall have received (i) this Agreement, executed and
delivered by a duly authorized officer of Borrower, (ii) the Guarantee and
Security Agreement, executed and delivered by a duly authorized officer of each
Loan Party, (iii) each of the Notes, executed and delivered by a duly authorized
officer of Borrower, (iv) the Trademark Security Agreement, executed

 

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and delivered by a duly authorized officer of Borrower, (v) the Patent Security
Agreement, executed and delivery by a duly authorized officer of Borrower, and
(v) each additional document listed on Lender’s closing checklist previously
delivered to the Loan Parties.

(b) Waiver to Existing Credit Facility. Lender shall have received the Wilshire
Waiver, executed and delivered by a duly authorized officer of each of PMTWorks
Payroll LLC and Wilshire New York Partners V, LLC.

(c) Payoff of Existing NBSI Credit Facility. Copies of duly executed payoff
letters, in form and substance satisfactory to Lender, with respect to the
Existing NBSI Credit Facility, together with (a) UCC 3 or other appropriate
termination statements, in form and substance satisfactory to Lender, releasing
all liens securing obligations under the Existing NBSI Credit Facility upon any
of the personal property of the Loan Parties or their Subsidiaries, and (b) any
other releases, terminations or other documents reasonably required by the
Lender to evidence the payoff of Indebtedness owed by Borrower pursuant to the
Existing NBSI Credit Facility and the termination of the Subordination and
Intercreditor Agreement dated April 25, 2012, as amended, among Lender, NSBF,
the Loan Parties, and the other parties to the Existing NBSI Credit Facility.

(d) Payoff of Existing CWH Facility. The payoff of all Indebtedness owned by CWH
and the other obligors under the Existing CWH Facility.

(e) Approvals. All governmental and third party approvals (including regulatory
approvals, landlords’ and other consents) necessary in connection with the
continuing operations of the Loan Parties and the transactions contemplated
hereby shall have been obtained and be in full force and effect, and all
applicable waiting periods shall have expired without any action being taken or
threatened by any competent authority which would restrain, prevent or otherwise
impose adverse conditions on the transactions contemplated hereby.

(f) Related Agreements. Lender shall have received (in a form reasonably
satisfactory to Lender), true and correct copies, certified as to authenticity
by the Loan Parties, of such documents or instruments as may be reasonably
requested by Lender, including, without limitation, a copy of any debt
instrument, Guarantee and Security Agreement or other contract to which any Loan
Party may be a party.

(g) Fees. Lender shall have received all fees required to be paid, and all
expenses for which invoices have been presented (including reasonable fees,
disbursements and other charges of counsel to Lender), on or before the Closing
Date. All such amounts will be paid with proceeds of Loans made on the Closing
Date and will be reflected in the funding instructions given by the Borrower to
Lender on or before the Closing Date.

(h) Lien Searches. Lender shall have received the results of a recent lien
search in each of the jurisdictions in which Uniform Commercial Code financing
statements or other filings or recordations should be made to evidence or
perfect security interests in all assets of the Loan Parties, and such search
shall reveal no liens on any of the assets of the Loan Parties, except for Liens
permitted by Section 6.3.

(i) Closing Certificate. Lender shall have received a certificate of each Loan
Party, dated as of the Closing Date, substantially in the form of Exhibit C,
with appropriate insertions and attachments.

 

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(j) Legal Opinions. Lender shall have received the following executed legal
opinions: (i) the legal opinion of Platte, Klarsfeld, Levine & Lachtman, LLP,
New York counsel of the Loan Parties, substantially in the form of Exhibit D-1,
and (ii) the legal opinion of O’Reilly & Mark, P.C., District of Columbia
counsel of the Loan Parties, substantially in the form of Exhibit D-2.

(k) Pledged Stock; Stock Powers; Pledged Notes. Lender shall have received
(i) all certificates, instruments and other documents representing all Pledged
Stock pledged pursuant to the Guarantee and Security Agreement and stock powers
for such certificates, instruments and other documents executed in blank by the
pledgor thereof, and (ii) each promissory note pledged pursuant to the Guarantee
and Security Agreement endorsed (without recourse) in blank (or accompanied by
an executed transfer form in blank satisfactory to Lender) by the pledgor
thereof.

(l) Filings, Registrations and Recordings. Each document (including, without
limitation, any Uniform Commercial Code financing statements) required by the
Security Documents or under law or requested by Lender to be filed, registered
or recorded in order to create in favor of Lender a perfected Lien on the
Collateral described therein, prior and superior in right to any other Person
(other than with respect to Liens expressly permitted by Section 6.3), shall
have been filed, registered or recorded or shall have been delivered to Lender
be in proper form for filing, registration or recordation.

(m) Insurance. Lender shall have received insurance certificates satisfying the
requirements of Section 5.3 of the Guarantee and Security Agreement.

(n) Full Disclosure. Lender not becoming aware prior to the Closing Date of any
information or other matter (including any matter relating to financial models
and underlying assumptions relating to the Closing Date Projections) affecting
any member of the Newtek Group or the transactions contemplated hereby that in
their judgment is inconsistent in a material and adverse manner with any such
information or other matter disclosed to them prior to the Closing Date.

(o) Material Adverse Effect. Since December 31, 2013 there shall not have
occurred any event, change or condition that, individually or in the aggregate,
has had, or could reasonably be expected to have, a Material Adverse Effect.

(p) Due Diligence. Lender shall have completed its business, legal and
collateral due diligence, including a quality of earnings analysis, with respect
to each Loan Party and the results thereof shall be acceptable to Lender. Lender
shall have received completed reference checks with respect to senior management
and board members of each Loan Party and the results thereof shall be acceptable
to Lender.

(q) Landlord Waivers. The Loan Parties shall obtain collateral access agreements
or landlord waivers from the landlord or lessor of each of their respective
leased real property including, without limitation, the following locations:
(a) 212 W. 35th Street, New York, NY 10123, (b) 60 Hempstead Avenue, West
Hempstead, NY 11552, (c) 1125 W. Pinnacle Peak, Phoenix, AZ 85027, (d) 737 West
Washington Street, Suite 2275, West Allis, WI 53214, (e) 8521 E. Princess Drive,
Phoenix, AZ 85255 and (f) 301 Mexico Street, Suites H3-A and H4-A, Brownsville,
TX 78520.

(r) Patriot Act. Lender shall have received all documentation and other
information requested by Lender and required by regulatory authorities under
applicable “know your customer” and anti-money laundering rules and regulations,
including, without limitation, the Patriot Act.

 

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4.2 Conditions to Each Extension of Credit. The agreement of Lender to make the
Term Loan, any Revolving Loan or other extension of credit requested to be made
by it hereunder on any date (including, without limitation, its initial
extension of credit) is subject to the satisfaction of the following conditions
precedent:

(a) Representations and Warranties. Each of the representations and warranties
made by any Loan Party in or pursuant to the Loan Documents shall be true and
correct on and as of the Closing Date and shall be true and correct in all
material respects on and as of the date of such Revolving Loan or other
extension of credit with the same effect as though made on and as of such date,
except to the extent such representations and warranties expressly relate to an
earlier date, in which case such representations and warranties shall have been
true and correct in all material respects as of such earlier date.

(b) No Default. No Default or Event of Default shall have occurred and be
continuing on such date or after giving effect to the extensions of credit
requested to be made on such date.

(c) Pro Forma Compliance. Borrower shall be in pro forma compliance with the
financial covenants set forth in Section 6.1.

Each borrowing by Borrower hereunder shall constitute a representation and
warranty by Borrower as of the date of such extension of credit that the
conditions contained in this Section 4.2 have been satisfied.

SECTION 5. AFFIRMATIVE COVENANTS

Borrower hereby agrees that, so long as the Commitments remain in effect or any
Obligations are owing to Lender hereunder, Borrower shall, and shall cause each
of its Subsidiaries, to:

5.1 Financial Statements. Maintain a system of accounting established and
administered with sound business practices to permit preparation of financial
statements in accordance with GAAP and to provide the information required to be
delivered to Lender hereunder, and furnish to Lender:

(a) as soon as available, but in any event within 90 days (105 days in the event
that Borrower shall be entitled to the extension of time, under Rule 12b-25
under the Securities Exchange Act of 1934, as amended, to file its Annual Report
on Form 10-K) after the end of each fiscal year of Borrower (commencing with the
fiscal year ending December 31, 2014), a copy of the audited consolidated and
consolidating balance sheets of Borrower and its consolidated Subsidiaries as at
the end of such year and the related audited consolidated and consolidating cash
flows statements and statements (including statements, other than with respect
to the balance sheets and cash flows statements, on a business segment basis) of
income and retained earnings for such year, setting forth in each case in
comparative form the figures as of the end of and for the previous year,
reported on without a “going concern” or like qualification or exception, or
qualification arising out of the scope of the audit, by McGladrey LLP or such
other independent certified public accountants of nationally recognized standing
(unless otherwise approved by Lender in its discretion exercised reasonably);

(b) as soon as available, but in any event not later than 45 days (50 days in
the event that Borrower shall be entitled to the extension of time, under Rule
12b-25 under the Securities Exchange Act of 1934, as amended to file its
Quarterly Report on Form 10-Q) after the end of each of the four quarterly
periods of each fiscal year (other than the last fiscal quarter in any fiscal
year) of Borrower (commencing with the first fiscal quarter ending after the
Closing Date), (i) the unaudited consolidated and consolidating balance sheets
of Borrower and its consolidated Subsidiaries as at the end of such quarter and
the related unaudited consolidated and consolidating statements of income and of
cash flows

 

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for such quarter and the portion of the fiscal year through the end of such
quarter, (ii) the unaudited consolidated and consolidating statements of income
and cash flows of Borrower and its consolidated Subsidiaries for such quarter,
setting forth in comparative form the figures for the corresponding period in
the prior year and on a trailing twelve month basis, and (iii) the consolidated
and consolidating income statements of Borrower and its consolidated
Subsidiaries by business segment as currently reported by Borrower, in each
case, certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments);

(c) as soon as available, but in any event within 90 days after the end of each
fiscal year of Borrower (commencing with the fiscal year ending December 31,
2014), a copy of the audited combined and combining (as to each Loan Party, on a
stand-alone basis and without regard to the combination or consolidation of any
Subsidiary or Affiliate otherwise permitted or required under GAAP, but
otherwise in accordance with GAAP), balance sheets of Borrower and the other
Loan Parties as at the end of such year and the related audited combined and
combining (as to each Loan Party, on a stand-alone basis and without regard to
the combination or consolidation of any Subsidiary or Affiliate, but otherwise
in accordance with GAAP) cash flows statements and statements of income and
retained earnings for such year, setting forth in each case in comparative form
the figures as of the end of and for the previous year, with such combined
financial statements reported on without a “going concern” or like qualification
or exception, or qualification arising out of the scope of the audit, by
McGladrey LLP or such other independent certified public accountants of
nationally recognized standing (unless otherwise approved by Lender in its
discretion exercised reasonably); and

(d) as soon as available, but in any event not later than 45 days after the end
of each of the four quarterly periods of each fiscal year (other than the last
fiscal quarter in any fiscal year) of Borrower (commencing with the first fiscal
quarter ending after the Closing Date), (i) the unaudited combined and combining
(as to each Loan Party, on a stand-alone basis and without regard to the
combination or consolidation of any Subsidiary or Affiliate, but otherwise in
accordance with GAAP) balance sheets of Borrower and the other Loan Parties as
at the end of such quarter and the related unaudited combined and combining (as
to each Loan Party, on a stand-alone basis and without regard to the combination
or consolidation of any Subsidiary or Affiliate, but otherwise in accordance
with GAAP) statements of income and of cash flows for such quarter and the
portion of the fiscal year through the end of such quarter, and (ii) the
unaudited combined and combining statements of income and cash flows of Borrower
and the other Loan Parties for such quarter, setting forth in comparative form
the figures for the corresponding period in the prior year and on a trailing
twelve month basis (subject to normal year-end audit adjustments);

(e) as soon as available, but in any event within 90 days after the end of each
fiscal year of NSBF (commencing with the fiscal year ended December 31, 2014), a
copy of the audited consolidated and consolidating balance sheets of NSBF and
its consolidated Subsidiaries as at the end of such year and the related audited
consolidated and consolidating cash flows statements and statements of income
and retained earnings for such year, setting forth in each case in comparative
form the figures as of the end of and for the previous year, reported on without
a “going concern” or like qualification or exception, or qualification arising
out of the scope of the audit, by McGladrey LLP or such other independent
certified public accountants of nationally recognized standing (unless otherwise
approved by Lender in its discretion exercised reasonably);

(f) as soon as available, but in any event within 45 days after the end of after
the end of each of the four quarterly periods of each fiscal year of NSBF
(commencing with the first fiscal quarter ending after the Closing Date),
(i) the unaudited consolidated and consolidating balance sheets of NSBF and its
consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated and consolidating statements of income and of cash flows
for such quarter and the portion of

 

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the fiscal year through the end of such quarter, (ii) the unaudited consolidated
and consolidating statements of income and cash flows of NSBF and its
consolidated Subsidiaries for such quarter, setting forth in comparative form
the figures for the corresponding period in the prior year and on a trailing
twelve month basis, and (iii) the consolidated and consolidating income
statements of NSBF and its consolidated Subsidiaries, in each case, certified by
a Responsible Officer as being fairly stated in all material respects (subject
to normal year-end audit adjustments);

(g) as soon as available, but in any event not later than (i) 45 days after the
end of each of the first three quarterly periods of each fiscal year of Borrower
and (ii) 90 days after the end of the last fiscal quarter of each fiscal year of
Borrower (in the case of each of clauses (i) and (ii), commencing with the
fiscal quarter ended March 31, 2014), the unrestricted cash balance at the end
of such quarter (including a breakout of cash at each of the Capcos and its
qualified businesses);

(h) as soon as available, but in any event not later than 90 days after the end
of each fiscal year of Borrower, the actual results of operations of Borrower
for such fiscal year, compared to the Projections for such fiscal year;

all such financial statements to be in a form acceptable to Lender and complete
and correct in all material respects and to be prepared in reasonable detail
(including such detail as may be necessary to independently calculate all
financial covenants in Section 6.1) and in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein).

5.2 Certificates; Other Information. Furnish to Lender:

(a) concurrently with the delivery of any financial statements pursuant to
Section 5.1(a) or (b) (commencing with the financial statements to be delivered
pursuant to Section 5.1(b) for the fiscal quarter ending September 30, 2014), a
Compliance Certificate (x) stating that, to the best of such Responsible
Officer’s knowledge, each Loan Party during such period has observed or
performed all of its covenants and other agreements, and satisfied every
condition, contained in this Agreement and the other Loan Documents to which it
is a party to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate and (y) containing all information and
calculations necessary for determining compliance by the members of the Newtek
Group with the provisions of this Agreement referred to therein as of the last
day of the fiscal month, fiscal quarter or fiscal year of Borrower, as the case
may be;

(b) as soon as available, and in any event no later than 90 days after the end
of each fiscal year of Borrower, a projected pro forma income statement for four
(4) quarters of the then current fiscal year, on a consolidated and business
segment basis for the Newtek Group, and copies of all budgets and financial
projections provided to the board of directors of Borrower, and, as soon as
available, significant revisions, if any, of such budget and projections with
respect to such fiscal year (collectively, the “Projections”), which Projections
shall in each case be accompanied by a certificate of a Responsible Officer
stating that such Projections are based on reasonable estimates, information and
assumptions and that such Responsible Officer has no reason to believe that such
Projections are incorrect or misleading in any material respect;

(c) within 5 Business Days after receipt thereof by any Loan Party, copies of
all management letters, exception reports or other letters or reports received
by such Loan Party from its independent registered public accountants, including
the comment letter submitted by such accountants to management in connection
with any audit;

 

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(d) copies of any reports filed with any federal, state or local Governmental
Authority as Lender may from time to time request;

(e) within 5 Business Days after the same are sent, copies of all financial
statements and reports that Borrower sends to the holders of any class of its
debt securities or public equity securities and, within five days after the same
are filed, copies of all financial statements and reports that Borrower may make
to, or file with, the SEC;

(f) within 5 Business Days after the end of each fiscal year of Borrower,
commencing on the first of such dates to occur after the date hereof, an updated
Schedule 3.24 supplementing the information set forth therein since the date of
the most recent Schedule 3.24 delivered pursuant to this clause (f) (or, in the
case of the first such updated Schedule 3.24 so delivered, since the Closing
Date);

(g) as soon as available, copies of the quarterly report distributed to
management;

(h) intentionally omitted;

(i) promptly, such additional financial and other information as Lender may from
time to time reasonably request.

5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all (a) taxes,
assessments, fees and other governmental charges upon any Loan Party, or upon
any of their respective Property, income or franchises, and (b) other material
obligations of whatever nature, except, in each case where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the appropriate member of the Newtek Group.

5.4 Conduct of Business and Maintenance of Existence, etc. (a) Preserve, renew
and keep in full force and effect its corporate or other existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business, except, in each case, as
otherwise permitted by Section 6.4; and (b) comply with all Contractual
Obligations and Requirements of Law, except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.

5.5 Maintenance of Property; Insurance. (a) Keep all Property and systems useful
and necessary in its business in good working order and condition, ordinary wear
and tear excepted and (b) maintain with financially sound and reputable
insurance companies insurance as required pursuant to the Guarantee and Security
Agreement.

5.6 Inspection of Property; Books and Records. (a) Keep proper books of records
and account in which full, true and correct entries in conformity with GAAP and
all Requirements of Law shall be made of all dealings and transactions in
relation to its business and activities, and (b) permit Lender in its sole
discretion to visit and inspect any of its properties and examine and make
abstracts from any of its books and records at any reasonable time and to
discuss the business, operations, properties and financial and other condition
of any member of the Newtek Group with officers and employees of such member of
the Newtek Group and with its independent certified public accountants (an
“Inspection”); provided, that unless a Default or Event of Default shall be
continuing, there shall be no more than two Inspections at Borrower’s expense
during any calendar year.

 

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5.7 Notices. Promptly give notice to Lender of:

(a) the occurrence of any Default or Event of Default;

(b) any (i) default or event of default under any Contractual Obligation of any
member of the Newtek Group, (ii) litigation, investigation or proceeding which
may exist at any time between any member of the Newtek Group and any
Governmental Authority, (iii) development, event, or condition that,
individually or in the aggregate with other developments, events or conditions,
could reasonably be expected to result in the payment by the members of the
Newtek Group, in the aggregate, of a Material Environmental Amount; and
(iv) notice that any Governmental Authority may deny any application for an
Required Environmental Permit sought by, or revoke or refuse to renew any
Required Environmental Permit held by, any member of the Newtek Group;

(c) any litigation or proceeding brought against any member of the Newtek Group
in which the amount involved, individually or in the aggregate, is $50,000 or
more or in which injunctive or similar relief is sought;

(d) the following events, as soon as possible and in any event within 10 days
after any Loan Party knows or has reason to know thereof: (i) the occurrence of
any Reportable Event with respect to any Plan, a failure to make any required
contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan
or any withdrawal from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or the taking of any
other action by the PBGC or Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the termination,
Reorganization or Insolvency of, any Plan;

(e) upon any officer of any Loan Party obtaining knowledge of any Environmental
Complaint respect to, or if any officer of any Loan Party becomes aware of
(i) the existence or alleged existence of a violation of any applicable
Environmental Law as to any member of the Newtek Group, (ii) any release by
member of the Newtek Group of any Hazardous Materials into the environment,
(iii) the commencement of any cleanup of any Hazardous Materials, (iv) any
pending legislative or threatened proceeding for the termination, suspension or
non-renewal of any Required Environmental Permit of any member of the Newtek
Group, or (v) any Property of any member of the Newtek Group that is or will be
subject to a Lien imposed pursuant to any Environmental Law, a certificate of a
Responsible Officer specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by such
holder or Person, and what action the applicable Credit Party has taken, is
taking or proposes to take with respect thereto;

(f) receipt of any official correspondence received from any Governmental
Authority in connection with any Capco (to the extent disclosure of such
correspondence is not prohibited by any applicable regulatory body); and

(g) any development or event that has had or could reasonably be expected to
have a Material Adverse Effect.

Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action Borrower or the relevant Subsidiary proposes to take
with respect thereto.

5.8 Compliance with Laws. Comply with all Anti-Terrorism Laws, and comply with
all other applicable Requirements of Law except to the extent that failure to so
comply with such other applicable Requirements of Law (other than Environmental
Laws, which is addressed in Section 5.9), could not reasonably be expected to
have a Material Adverse Effect or result in any Lien upon any of the assets of
any such Person.

 

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5.9 Environmental Laws. (a) Comply with, and ensure compliance by all tenants
and subtenants, if any, with, all applicable Environmental Laws, and obtain and
comply with and maintain, and ensure that all tenants and subtenants obtain and
comply with and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws.

(b) Conduct and complete all investigations, studies, sampling and testing, and
all remedial, removal and other actions required of any member of the Newtek
Group under Environmental Laws and promptly comply with all lawful orders and
directives of all Governmental Authorities regarding Environmental Laws
applicable to the Properties of any member of the Newtek Group.

5.10 Bank Accounts. Each Loan Party will maintain all of its primary deposit
accounts with Lender. No Loan Party will directly or indirectly, establish any
new bank account (other than PMT with regard to PMT ACH Accounts) without prior
written notice to Lender and unless Lender, such Loan Party and the bank at
which the account is to be opened enter into a control agreement regarding such
bank account pursuant to which such bank acknowledges the security interest of
Lender in such bank account, agrees to comply with instructions originated by
Lender directing disposition of the funds in such bank account without further
consent from such Loan Party, and agrees to subordinate and limit any security
interest such bank may have in such bank account on terms satisfactory to
Lender.

5.11 Additional Collateral, etc. (a) With respect to any Property acquired after
the Closing Date by any Loan Party (other than (x) any Property described in
paragraph (b) or paragraph (c) of this Section, (y) any Property subject to a
Lien expressly permitted by Section 6.3(g) and (z) Property acquired by an
Excluded Foreign Subsidiary or Unrestricted Subsidiary) as to which Lender does
not have a perfected Lien, promptly, (i) execute and deliver to Lender such
amendments to the Guarantee and Security Agreement or such other documents as
Lender reasonably deems necessary or advisable to Guarantee the Obligations and
grant to Lender a security interest in such Property and (ii) take all actions
necessary or advisable to grant to Lender a perfected security interest (subject
to Liens expressly permitted by Section 6.3) in such Property, including without
limitation, the filing of Uniform Commercial Code financing statements in such
jurisdictions as may be required by the Guarantee and Security Agreement or by
law or as may be requested by Lender.

(b) With respect to any fee interest in any real property having a value
(together with improvements thereof) of at least $250,000 acquired after the
Closing Date by any Loan Party (other than any such real property owned by an
Excluded Foreign Subsidiary or Unrestricted Subsidiary or subject to a Lien
expressly permitted by Section 6.3(g)), promptly, (i) execute and deliver a
Mortgage in favor of Lender covering such real property, (ii) if requested by
Lender, provide Lender with (x) title and extended coverage insurance covering
such real property in an amount at least equal to the purchase price of such
real property (or such other amount as shall be reasonably specified by Lender)
as well as a current ALTA survey thereof, together with a surveyor’s certificate
and (y) any consents or estoppels reasonably deemed necessary or advisable by
Lender in connection with such Mortgage, each of the foregoing in form and
substance reasonably satisfactory to Lender, (iii) if requested by Lender,
deliver to Lender legal opinions relating to the matters described above, which
opinions shall be in form and substance, and from counsel, reasonably
satisfactory to Lender and (iv) such other certificates, documents, instruments
and agreements as Lender shall reasonably request.

(c) With respect to any new Subsidiary (other than an Excluded Foreign
Subsidiary) created or acquired after the Closing Date (which, for the purposes
of this paragraph, shall include any existing Subsidiary that ceases to be an
Excluded Foreign Subsidiary or Unrestricted

 

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Subsidiary) by any Loan Party, promptly, (i) execute and deliver to Lender such
amendments to the Guarantee and Security Agreement as Lender reasonably deems
necessary or advisable to grant to Lender a perfected security interest in the
Capital Stock of such new Subsidiary that is owned by such Loan Party (other
than an Unrestricted Subsidiary), (ii) deliver to Lender the certificates
representing such Capital Stock, together with undated stock powers, in blank,
executed and delivered by a duly authorized officer of such Loan Party,
(iii) cause such new Subsidiary (A) to become a party to the Guarantee and
Security Agreement and (B) to take such actions necessary or advisable to grant
to Lender a perfected security interest (subject to Liens expressly permitted by
Section 6.3) in the Collateral described in the Guarantee and Security Agreement
with respect to such new Subsidiary, including, without limitation, the filing
of Uniform Commercial Code financing statements in such jurisdictions as may be
required by the Guarantee and Security Agreement or by law or as may be
requested by Lender, (iv) if requested by Lender, deliver to Lender legal
opinions relating to the matters described above, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to Lender, and
(v) and (iv) such other certificates, documents, instruments and agreements as
Lender shall reasonably request.

5.12 Further Assurances. From time to time execute and deliver, or cause to be
executed and delivered, such additional instruments, certificates or documents,
and take such actions, as Lender may reasonably request for the purposes of
implementing or effectuating the provisions of this Agreement and the other Loan
Documents, or of more fully perfecting or renewing the rights of Lender with
respect to the Collateral (or with respect to any additions thereto or
replacements or proceeds thereof or with respect to any other property or assets
hereafter acquired by any Loan Party which may be deemed to be part of the
Collateral) pursuant hereto or thereto. Upon the exercise by Lender of any
power, right, privilege or remedy pursuant to this Agreement or the other Loan
Documents which requires any consent, approval, recording, qualification or
authorization of any Governmental Authority, Borrower will execute and deliver,
or will cause the execution and delivery of, all applications, certifications,
instruments and other documents and papers that Lender may be required to obtain
from any member of the Newtek Group for such governmental consent, approval,
recording, qualification or authorization.

5.13 Use of Proceeds. Borrower will use the proceeds of all Loans to refinance
amounts outstanding under the Existing CWH Facility, the Existing NBSI Credit
Facility and for working capital and other general corporate purposes of the
Borrower and its Subsidiaries. No part of the proceeds of any Loan will be used,
whether directly or indirectly, for any purpose that would violate any rule or
regulation of the Board, including Regulations T, U or X.

5.14 NSBF Overhead Payments. Upon the occurrence and during the continuance of
an Event of Default, Borrower will (a) cease, and will cause each of its
Subsidiaries (other than NSBF) and the other Loan Parties, to cease, making any
and all payments of corporate and other overhead expenses of NSBF, (b) cause
NSBF to pay directly, immediately as and when such corporate and overhead
expenses are due and payable, 100% of NSBF’s corporate and other overhead
expenses; provided, that in the event that for any fiscal quarter, the amount of
corporate and other overhead expenses so paid by NSBF shall be less than the
greater of (x) 15% of Borrower’s and its Subsidiaries’ aggregate corporate and
overhead expenses during such fiscal quarter or (y) $400,000, then Borrower will
cause NSBF to pay to Borrower, within 45 days after the last day of such fiscal
quarter, an amount equal to such shortfall.

5.15 Minimum Cash Interest Payments. Borrower will cause, and will cause each of
the other Loan Parties to cause, (a) each Unrelated Extension of Credit to, by
its terms, require quarterly cash interest to be paid on the outstanding
principal amount thereof at a per annum rate of interest (calculated on the
basis of a 365-day or a 360-day year, in each case for the actual number of days
elapsed) at least equal to 15%, and (b) the obligor on each Unrelated Extension
of Credit to pay quarterly payments of cash interest on the outstanding
principal amount thereof at per annum rate of interest

 

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(calculated on the basis of a 365-day or a 360-day year, in each case for the
actual number of days elapsed) at least equal to 15%; provided, that Borrower
may make loans to the Capcos in an aggregate principal amount not to exceed
$125,000 during each fiscal year of Borrower without compliance with the
requirements of this Section 5.15.

5.16 Post Closing Items. No later than July 31, 2014:

(a) the Loan Parties shall furnish to the Lender such information as to any
account receivable or other amount that arises out of a contract or contracts
with any Governmental Authority, including without limitation, the United States
of America or any State, or any department, agency, or instrumentality thereof
and, at the request of the Lender, execute any instruments or take any steps
reasonably required by Lender in order that all moneys due or to become due
under such contract or contracts shall be assigned to the Lender under the
Assignment of Claims Act (31 USC §3727) or other applicable law.

(b) the Borrower shall release all Liens granted by PMT to the Borrower, and the
Borrower and PMT shall terminate the Security Agreement, effective October 1,
2013 by and between PMT and Borrower, all in form and substance reasonably
satisfactory to the Lender.

(c) to the extent that any of the Pledged Stock or Pledged Notes (as defined in
the Guarantee and Security Agreement) listed on Schedule 2 to the Guarantee and
Security Agreement shall not be in the possession of the Lender, at the request
of the Lender, the Loan Parties shall deliver such new or replacement notes,
certificates and other agreements, allonges, stock powers, and instruments, and
take such steps, reasonably required by Lender so that the Lender shall have
perfected its Liens therein by possession (within the meaning of the UCC) of
such Pledged Stock and Pledged Notes.

(d) the Loan Parties shall cause its insurance companies to remove the following
entities as having any interest, as an additional insured, loss payee, or
otherwise, in any of the insurance policies of the Loan Parties: ABC Funding
LLC, Goldman Sachs Specialty Lending Group L.P., and Lakeland Bank.

(e) the Loan Parties shall obtain collateral access agreements or landlord
waivers, in form and substance reasonably satisfactory to the Lender, from the
landlord or lessor of each of their respective leased real property including,
without limitation, the following locations: (a) 60 Hempstead Avenue, West
Hempstead, NY 11552, and (b) 6737 West Washington Street, Suite 2275, West
Allis, WI 53214.

SECTION 6. FINANCIAL AND NEGATIVE COVENANTS

I. FINANCIAL COVENANTS

6.1 Financial Covenants. (a) Borrower hereby agrees that, so long as the
Commitments remain in effect or any Loan or other amount is owing to Lender
hereunder:

 

  (i) Fixed Charge Coverage Ratio. Borrower shall maintain (A) a Fixed Charge
Coverage Ratio as of the last day of each fiscal quarter of at least 1.50 to
1.00 and (B) a Fixed Charge Coverage Ratio-Unrelated Extensions of Credit as of
the last day of each fiscal quarter of at least 1.10 to 1.00.

 

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  (ii) Minimum EBITDA.

(A) Borrower shall have, on the last day of each fiscal quarter, Consolidated
EBITDA for the four fiscal quarters ending on such day of not less $10,500,000;

(B) CWH shall have, on the last day of each fiscal quarter, EBITDA for the four
fiscal quarters ending on such day of not less $4,000,000;

(C) UPS shall have, on the last day of each fiscal quarter, EBITDA for the four
fiscal quarters ending on such day of not less $6,800,000; and

(D) NSBF shall have, on the last day of each fiscal quarter, Consolidated EBITDA
for the four fiscal quarters ending on such day of not less $8,000,000.

 

  (iii) Funded Debt to EBITDA Ratio. Borrower shall not permit its Funded Debt
to EBITDA Ratio at any time to exceed 2.00 to 1.00.

 

  (iv) Unrestricted Cash Balances. The Borrower and its consolidated
Subsidiaries shall at all times (a) maintain at least $4,000,000 in unrestricted
cash balances and Cash Equivalents and (b) have at least $4,000,000 in
unrestricted cash balances and Cash Equivalents on the consolidated balance
sheet of Borrower and its consolidated Subsidiaries.

II. NEGATIVE COVENANTS

Borrower hereby agrees that, so long as the Commitments remain in effect or any
Obligations are owing to Lender hereunder, Borrower shall not, nor shall it
permit any of its Restricted Subsidiaries to, directly or indirectly:

6.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness owed to another Person, except:

(a) Indebtedness of any Loan Party pursuant to any Loan Document;

(b) [Reserved];

(c) Indebtedness including, without limitation, Capital Lease Obligations, in an
aggregate principal amount not to exceed $100,000 at any one time outstanding
secured by Liens permitted by Section 6.3(g);

(d) Indebtedness outstanding on the date hereof and listed on Schedule 6.2(d)
and any refinancings, refundings, renewals or extensions thereof (without any
increase in the principal amount thereof or any shortening of the maturity of
any principal amount thereof);

(e) Guarantees by a Loan Party of Indebtedness of another Loan Party with
respect to Indebtedness otherwise permitted to be incurred pursuant to this
Section 6.2;

(f) Indebtedness of a Loan Party to another Loan Party; provided that, both
immediately before and immediately after the incurrence of such Indebtedness, no
Default or Event of Default shall have occurred and be continuing, and such
Indebtedness is at all times fully subordinated to the Obligations pursuant to
Subordination Documents.

 

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(g) Indebtedness consisting of intercompany loans by Borrower to NSBF; provided,
that, both immediately before and immediately after the incurrence of such
Indebtedness, no Default or Event of Default shall have occurred and be
continuing, and such Indebtedness is at all times fully subordinated to the
Obligations pursuant to Subordination Documents;

(h) Indebtedness consisting of the guarantee by Borrower, pursuant to that
certain Guaranty of Borrower dated February 28, 2011, of the Indebtedness of CDS
in favor of Sterling National Bank pursuant to the Sterling Loan Documents in an
aggregate amount not to exceed $15,000,000;

(i) Guarantees provided by Borrower pursuant to the Securitization Guaranty in
an aggregate amount not to exceed $1,600,000;

(j) Indebtedness consisting of the guarantee by the Loan Parties of the
Indebtedness of NSBF pursuant to the NSBF Credit Facility;

(k) Indebtedness in connection with the Black Box Lease Transaction in an amount
not to exceed $512,472.70;

(l) Indebtedness consisting of an intercompany loan in an aggregate amount of
$500,000 owed by PMT to Wilshire New York Partners V, LLC pursuant to the
Wilshire Documents, which is subordinated to the Obligations pursuant to
Subordination Documents;

(m) Indebtedness attributable to the sale of SBA 7(a) Loans in connection with
securitization transactions consistent with past practices, to the extent such
transactions must be accounted for as such pursuant to GAAP notwithstanding the
true sale of such assets; and

(n) Indebtedness consisting of an intercompany loan made by Borrower to PMT in
an aggregate principal amount of $435,000 which is subordinated to the
Obligations pursuant to Subordination Documents.

6.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon
any of its Property, whether now owned or hereafter acquired, except for:

(a) Liens for taxes not yet due or which are being contested in good faith by
appropriate proceedings, provided, that adequate reserves with respect thereto
are maintained on the books of the applicable Person in conformity with GAAP;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other
like Liens arising in the ordinary course of business which are not yet due or
that are being contested in good faith by appropriate proceedings, provided,
that adequate reserves with respect thereto are maintained on the books of the
applicable Person in conformity with GAAP;

(c) pledges or deposits in connection with workers’ compensation, unemployment
insurance and other social security legislation;

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

(e) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business that, in the aggregate, are not
substantial in amount and which do not in any case materially detract from the
value of the Property subject thereto or materially interfere with the ordinary
conduct of the business of the applicable Person;

 

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(f) Liens in existence on the date hereof listed on Schedule 6.3(f), securing
Indebtedness permitted by Section 6.2(d), provided, that no such Lien is spread
to cover any additional Property after the Closing Date and that the amount of
Indebtedness secured thereby is not increased;

(g) Liens securing Indebtedness of Borrower or any Restricted Subsidiary
incurred pursuant to Section 6.2(c) to finance the acquisition of fixed or
capital assets, provided, that (i) such Liens shall be created within 60 days of
the acquisition of such fixed or capital assets, (ii) such Liens do not at any
time encumber any Property other than the Property financed by such
Indebtedness, and (iii) the amount of Indebtedness secured thereby is not
increased and (iv) the amount of Indebtedness initially secured thereby is not
less than 80%, or more than 100% of the purchase price of such fixed or capital
asset;

(h) Liens in favor of Lender granted pursuant to any Loan Document;

(i) any interest or title of a lessor under any lease (including, without
limitation, operating leases and UCC financing statements filed by lessors to
evidence such operating leases) entered into by Borrower or any Restricted
Subsidiary in the ordinary course of its business and covering only the assets
so leased;

(j) Liens securing Indebtedness permitted by Section 6.2 (j), (l) and (n),
subject in the case of 6.2(m) to the provisions of Section 5.16(b);

(k) [Reserved]; and

(l) rights of licencees under licenses granted by Borrower or any Restricted
Subsidiary in the ordinary course of business.

6.4 Limitation on Fundamental Changes. Enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or Dispose of all or substantially all of its
Property or business, except that:

(a) any member of the Newtek Group may merge into or consolidate with any other
member of the Newtek Group; provided, however, that, in the case of any such
merger or consolidation involving (i) Borrower, the surviving Person of, or the
Person formed by such merger or consolidation shall be Borrower, and (ii) any
other Loan Party, the surviving Person of, or the Person formed by such merger
or consolidation shall be a Loan Party; and

(b) any Restricted Subsidiary of any of the Loan Parties may Dispose of any or
all of its assets (upon voluntary liquidation or otherwise) to one or more Loan
Parties.

6.5 Limitation on Disposition of Property. Dispose of any of its Property
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Restricted Subsidiary,
issue or sell any shares of such Restricted Subsidiary’s Capital Stock to any
Person, except:

(a) the Disposition of obsolete or worn out property in the ordinary course of
business;

 

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(b) the sale of inventory in the ordinary course of business;

(c) Dispositions permitted by Section 6.4(b);

(d) the sale or issuance of any Restricted Subsidiary’s Capital Stock to a Loan
Party;

(e) the Disposition of other assets having a fair market value not to exceed
$100,000 in the aggregate for any fiscal year of Borrower;

(f) any Recovery Event, provided, that the requirements of Section 2.7(b) are
complied with in connection therewith;

(g) Dispositions of any line of business other than (i) NSBF, Small Business
Lending, Inc. or any portion of the Small Business Finance segment of Borrower,
or (ii) UPS or any portion of the Electronic Payment Processing segment of
Borrower, or (iii) CWH or any portion of the Managed Technology Solutions
segment of Borrower; provided, that (i) each such Disposition is at fair market
value, (ii) immediately prior to and immediately after each such Disposition, no
Default or Event of Default shall have occurred and shall be continuing
(including, that Borrower and each other applicable Person shall be in
compliance with Section 6 of this Agreement), and (iii) the Net Cash Proceeds of
each such Disposition will be used to prepay the Loans and as required by
Section 2.7(b); and

(h) Dispositions of accounts receivable (other than current payroll advances) in
the ordinary course of business solely in connection with the collection or
compromise thereof.

6.6 Limitation on Restricted Payments. Declare or pay any dividend on, or make
any payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of, any Capital Stock of any Loan Party or any Restricted Subsidiary, whether
now or hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
any Loan Party or any Restricted Subsidiary, or enter into any derivatives or
other transaction with any financial institution, commodities or stock exchange
or clearinghouse (a “Derivatives Counterparty”) obligating any Loan Party or any
Restricted Subsidiary to make payments to such Derivatives Counterparty as a
result of any change in market value of any such Capital Stock (collectively,
“Restricted Payments”), except that:

(a) any Restricted Subsidiary may make Restricted Payments to Borrower or to
another Loan Party;

(b) Any Loan Party may make Restricted Payments to any other Loan Party.

6.7 Off-Balance Sheet Financings. Engage in any off-balance sheet transaction
(i.e., the liabilities in respect of which do not appear on the liability side
of the balance sheet, with such balance sheet prepared in accordance with GAAP)
providing the functional equivalent of borrowed money (including asset
securitizations, sale/leasebacks or Synthetic Leases). For purposes of this
Section 6.7, (a) “Synthetic Lease” shall mean any lease transaction under which
the parties intend that (i) the lease will be treated as an “operating lease” by
the lessee pursuant to Statement of Financial Accounting Standards No. 13, as
amended, or appropriate successor thereto, and (ii) the lessee will be entitled
to various tax benefits ordinarily available to owners (as opposed to lessees)
of like property and (b) the amount of any lease which is not a capital lease in
accordance with GAAP is the aggregate amount of minimum lease payments due
pursuant to such lease for any non-cancelable portion of its term.

 

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6.8 Limitation on Investments. Make any advance, loan, extension of credit (by
way of guaranty or otherwise) or capital contribution to, or purchase any
Capital Stock, bonds, notes, debentures or other debt securities of, or any
assets constituting an ongoing business from, or make any other investment in,
any other Person (all of the foregoing, “Investments”; for the avoidance of
doubt, Investments shall be limited to any advance, loan, extension of credit,
capital contribution or purchase made directly by a Loan Party), except:

(a) extensions of trade credit in the ordinary course of business;

(b) Investments in Cash Equivalents;

(c) Investments by Borrower or any of its Restricted Subsidiaries in any Loan
Party to the extent permitted by Section 6.2(f);

(d) a loan by Borrower to Business Connect, LLC in an amount equal to $50,000
evidenced by that certain Promissory Note, effective on March 27, 2014, of
Business Connect, LLC payable to the order of Borrower;

(e) loans by Borrower to CDS in an aggregate amount not to exceed $2,000,000 at
any one time outstanding; provided, that (1) each such loan shall have a final
maturity date, and shall actually be paid in full, no later than 15 days after
the date such loan shall have been made and (2) the terms and conditions of each
such loan (including, without limitation, any subordination of such loan to
Sterling National Bank or any other Person), shall be subject to the prior
approval of Lender in its sole discretion;

(f) Investments by Borrower in NSBF to the extent permitted by Section 6.2(g);

(g) loans by Borrower to the Permitted Capcos in an aggregate amount not to
exceed $6,000,000 at any one time outstanding; provided, that (1) each such loan
shall have a final maturity date, and shall actually be paid in full, no later
than 30 days after the date such loan shall have been made and (2) the terms and
conditions of each such loan, shall be subject to the prior approval of Lender
in its sole discretion;

(h) loans and advances to employees of any Loan Party or any of their Restricted
Subsidiaries in the ordinary course of business (including, without limitation,
for travel, entertainment and relocation expenses) in an aggregate amount for
the Loan Parties and their Restricted Subsidiaries not to exceed $100,000 at any
one time outstanding;

(i) in addition to Investments otherwise expressly permitted by this Section,
Investments by any Loan Party or any of their Restricted Subsidiaries in an
aggregate amount (valued at cost) net of returns of capital not to exceed
$100,000 during the term of this Agreement; and

(j) Permitted Joint Ventures.

6.9 Limitation on Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of
Property, the rendering of any service or the payment of any management,
advisory or similar fees, with any Affiliate (other than a Loan Party) unless
such transaction is (a) otherwise permitted under this Agreement, and (b) upon
fair and reasonable terms no less favorable to such Loan Party or such
Restricted Subsidiary, as the case may be, than it would obtain in a comparable
arm’s length transaction with a Person that is not an Affiliate.

 

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6.10 Sale and Leaseback Transactions. Directly or indirectly, enter into any
arrangement with any Person whereby in a substantially contemporaneous
transaction Borrower or any of its Restricted Subsidiaries sells or transfers
all or substantially all of its right, title and interest in an asset and, in
connection therewith, acquires or leases back the right to use such asset.

6.11 Limitation on Changes in Fiscal Periods. Permit the fiscal year of
Borrower, any other Loan Party, or NSBF to end on a day other than December 31
or change the method of determining fiscal quarters for each of the Borrower,
the other Loan Parties, and NSBF.

6.12 Limitation on Negative Pledge Clauses. Enter into or suffer to exist or
become effective any agreement that prohibits or limits the ability of any Loan
Party or any Restricted Subsidiary, to create, incur, assume or suffer to exist
any Lien upon any of its Property or revenues, whether now owned or hereafter
acquired, to secure the Obligations or, in the case of any guarantor, its
obligations under the Guarantee and Security Agreement, other than (a) this
Agreement and the other Loan Documents, (b) any agreements governing any
purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in
which case, any prohibition or limitation shall only be effective against the
assets financed thereby), (c) customary restrictions and conditions contained in
agreements relating to the sale of a Restricted Subsidiary or any assets of any
Loan Party or any Restricted Subsidiary pending such sale, provided, that such
restrictions and conditions apply only to the Restricted Subsidiary or assets
that are to be sold and such sale is permitted hereunder, (d) 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
or assets securing such Indebtedness and (e) customary provisions in leases,
licenses, sub-leases and sub-licenses and other contracts restricting the
assignment thereof.

6.13 Limitation on Restrictions on Subsidiary Distributions. Enter into or
suffer to exist or become effective any consensual encumbrance or restriction
(other than in effect on the date of this Agreement and set forth in Schedule
6.13) on the ability of any Restricted Subsidiary, NSBF or CDS to (a) make
Restricted Payments in respect of any or its Capital Stock held by, or pay any
Indebtedness owed to, the Loan Parties or any other Restricted Subsidiary,
(b) make Investments in the Loan Parties or any other Restricted Subsidiary or
(c) transfer any of its assets to the Loan Parties or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of (i) any restrictions existing under the Loan Documents, (ii) any
restrictions with respect to a Restricted Subsidiary imposed pursuant to an
agreement that has been entered into in connection with the Disposition of all
or substantially all of the Capital Stock or assets of such Restricted
Subsidiary and (iii) restrictions and conditions imposed on any Foreign
Subsidiary by the terms of any Indebtedness of such Foreign Subsidiary permitted
to be incurred hereunder.

6.14 Limitation on Lines of Business. Enter into any business, either directly
or through any Restricted Subsidiary, except for those businesses in which the
applicable Loan Party or Restricted Subsidiary is engaged on the date of this
Agreement or that are reasonably related thereto.

6.15 Anti-Terrorism Laws. No Covered Entity will become a Sanctioned Person,
(b) no Covered Entity, either in its own right or through any third party, will
(A) have any of its assets in a Sanctioned Country or in the possession, custody
or control of a Sanctioned Person in violation of any Anti-Terrorism Law; (B) do
business in or with, or derive any of its income from investments in or
transactions with, any Sanctioned Country or Sanctioned Person in violation of
any Anti-Terrorism Law; (C) engage in any dealings or transactions prohibited by
any Anti-Terrorism Law or (D) use the Loans to fund any operations in, finance
any investments or activities in, or, make any payments to, a Sanctioned Country
or Sanctioned Person in violation of any Anti-Terrorism Law, (c) the funds used
to repay the Obligations will not be derived from any unlawful activity,
(d) each Covered Entity shall comply with all Anti-Terrorism Laws, and
(e) Borrower shall promptly notify Lender in writing upon the occurrence of a
Reportable Compliance Event.

 

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SECTION 7. EVENTS OF DEFAULT

7.1 Event of Default. If any of the following events shall occur and be
continuing:

(a) Borrower shall fail to pay any principal of any Loan when due in accordance
with the terms hereof;

(b) Borrower or any other Loan Party shall fail to pay any interest on any Loan
or any other amount payable hereunder or under any other Loan Document, within
three business days after any such interest or other amount becomes when due in
accordance with the terms hereof or thereof;

(c) Any representation or warranty made or deemed made by any Loan Party herein
or in any other Loan Document or that is contained in any certificate, document
or financial or other statement furnished by it at any time under or in
connection with this Agreement or any such other Loan Document shall prove to
have been inaccurate in any material respect on or as of the date made or deemed
made or furnished (or in any respect if such representation, warranty,
certification or statement is by its terms already qualified as to materiality);

(d) Any Loan Party shall default in the observance or performance of any
agreement contained in Sections 5 or 6, or in Section 5 of the Guarantee and
Security Agreement or (ii) an “Event of Default” under and as defined in any
Mortgage or other Security Document shall have occurred and be continuing;

(e) Any Loan Party shall default in the observance or performance of any other
agreement contained in this Agreement or any other Loan Document (other than as
provided in paragraphs (a) through (d) of this Section, and such default shall
continue unremedied for a period of 15 days after the earlier of (i) the date on
which a Responsible Officer of such Loan Party becomes aware of such failure and
(ii) the date on which written notice thereof shall have been given to Borrower
by Lender;

(f) Any member of the Newtek Group, including, without limitation, CDS, NSBF and
CCC, shall (i) default in making any payment of any principal of any
Indebtedness (including, without limitation, Indebtedness under the NSBF Credit
Facility, the Sterling Credit Facility, any Guarantee Obligation and any other
Indebtedness of CDS NSBF and CCC, but excluding the Loans and CCC-NSBF
Intercompany Debt) on the scheduled or original due date with respect thereto;
or (ii) default in making any payment of any interest on any such Indebtedness
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness was created; or (iii) default in the observance or
performance of any other agreement or condition relating to such Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder
or beneficiary) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or to become subject to
or mandatory offer to purchase by the obligor thereunder or (in the case of any
such Indebtedness constituting a Guarantee Obligation) to become payable;
provided, that a default, event or condition described in clause (i), (ii) or
(iii) of this paragraph (f), other than in respect of the NSBF Credit Facility,
the Sterling Credit Facility, or any other Indebtedness of NSBF, CDS or CCC,
shall not at any time constitute an Event of Default unless, at such time, one
or more defaults, events or conditions of the type described in clauses (i),
(ii) or (iii) of this paragraph (f) shall have occurred and be continuing with
respect to Indebtedness the outstanding principal amount of which exceeds,
individually or in the aggregate, $150,000;

 

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(g) (i) Any Loan Party shall commence any case, proceeding or other action
(A) under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or any Loan Party shall make a general
assignment for the benefit of its creditors; or (ii) there shall be commenced
against any Loan Party any case, proceeding or other action of a nature referred
to in clause (i) above that (A) results in the entry of an order for relief or
any such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 30 days; or (iii) there shall be commenced against any
Loan Party any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets that results in the entry of an order for any
such relief that shall not have been vacated, discharged, or stayed or bonded
pending appeal within 30 days from the entry thereof; or (iv) any Loan Party
shall take any corporate action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause (i), (ii),
or (iii) above; or (v) any Loan Party shall generally not, or shall be unable
to, or shall admit in writing its inability to, pay its debts as they become
due;

(h) (i) Any Person shall engage in any “prohibited transaction” (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any
“accumulated funding deficiency” (as defined in Section 302 of ERISA), whether
or not waived, shall exist with respect to any Plan, or any Lien in favor of the
PBGC or a Plan shall arise on the assets of any Loan Party or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee is,
in the reasonable opinion of Lender, likely to result in the termination of such
Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) Borrower or any Commonly
Controlled Entity shall, or in the reasonable opinion of Lender shall be likely
to, incur any liability in connection with a withdrawal from, or the Insolvency
or Reorganization of, a Multiemployer Plan or (vi) any other event or condition
shall occur or exist with respect to a Plan; and in each case in clauses
(i) through (vi) above, such event or condition, together with all other such
events or conditions, if any, could, in the sole judgment of Lender, reasonably
be expected to have a Material Adverse Effect;

(i) One or more judgments or decrees shall be entered against any Loan Party
involving for any Loan Party taken as a whole a liability (not fully covered by
insurance as to which the relevant insurance company has acknowledged coverage)
of $50,000 or more, and all such judgments or decrees shall not have been paid,
vacated, discharged, stayed or bonded pending appeal within 30 days from the
entry thereof;

(j) Any of the Security Documents shall cease, for any reason (other than by
reason of the express release thereof pursuant to the terms thereof), to be in
full force and effect, or any Loan Party or any Affiliate of any Borrower shall
so assert, or any Lien created by any of the Security Documents shall cease to
be enforceable and of the same effect and priority purported to be created
thereby;

 

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(k) Any provision of any Loan Document after delivery thereof shall cease, for
any reason (other than by reason of the express release thereof pursuant to the
terms thereof), to be in full force and effect, or the legal, valid and binding
agreement of any party thereto, or any Loan Party or any Affiliate of any Loan
Party shall so assert;

(l) The occurrence of a Material Adverse Effect; or

(m) Any Change of Control shall occur;

then, and in any such event, Lender may (A) terminate the Revolving Commitment,
(B) declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the other Loan Documents to be due and
payable forthwith, whereupon the same shall immediately become due and payable,
(C) exercise all remedies contained in any other Loan Document, and (D) exercise
any other remedies available at law or in equity; provided, that if such event
is an Event of Default specified in clause (i) or (ii) of paragraph (g) above
with respect to any Loan Party, the Revolving Commitment shall immediately and
automatically terminate and the Loans hereunder (with accrued interest thereon)
and all other Obligations owing under this Agreement and the other Loan
Documents shall immediately become due and payable

SECTION 8.

MISCELLANEOUS

8.1 Amendments and Waivers. Neither this Agreement or any other Loan Document,
nor any terms hereof or thereof may be amended, supplemented or modified except
in accordance with the provisions of this Section 8.1. Lender and each Loan
Party party to the relevant Loan Document may, from time to time, (a) enter into
written amendments, supplements or modifications hereto and to the other Loan
Documents (including amendments and restatements hereof or thereof) for the
purpose of adding any provisions to this Agreement or the other Loan Documents
or changing in any manner the rights of Lender or of the Loan Parties hereunder
or thereunder or (b) waive, on such terms and conditions as may be specified in
the instrument of waiver, any of the requirements of this Agreement or the other
Loan Documents or any Default or Event of Default and its consequences. Any such
waiver and any such amendment, supplement or modification shall be binding upon
such Loan Parties and Lender and any future holders of the Loans. In the case of
any waiver, the Loan Parties and Lender shall be restored to their former
position and rights hereunder and under the other Loan Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon. Any such waiver,
amendment, supplement or modification shall be effected by a written instrument
signed by the parties required to sign pursuant to the foregoing provisions of
this Section; provided, that delivery of an executed signature page of any such
instrument by facsimile transmission shall be effective as delivery of a
manually executed counterpart thereof.

 

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8.2 Notices. All notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telecopy), and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered, or three Business Days after being deposited in the mail,
postage prepaid, or, in the case of telecopy notice, when received, addressed in
the case of Borrower and Lender, as follows:

 

Borrower:   Newtek Business Services, Inc.   212 W. 35th Street, 2nd Floor   New
York, NY 10001   Attention:   Chief Executive Officer   Telecopy:   212-356-9542
  Telephone: 212-356-9550 Lender:   Capital One, National Association   1001
Avenue of the Americas   New York, NY 10018   Attention: James Wohn and Patrick
J. McCarthy   Telecopier: (212) 398-7155   with copy to:   Troutman Sanders LLP
  The Chrysler Building   405 Lexington Avenue   New York, NY 10174   Attention:
William D. Freedman, Esq.   Telecopier: (212) 704-5935

provided, that any notice, request or demand to or upon Lender shall not be
effective until received.

8.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of Lender, any right, remedy, power or privilege
hereunder or under the other Loan Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.

8.4 Survival of Representations and Warranties. All representations and
warranties made herein, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans and other extensions of credit hereunder.

8.5 Payment of Expenses. Borrower agrees (a) to pay or reimburse Lender for all
of its reasonable out-of-pocket costs and expenses incurred in connection with
the development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the other Loan Documents and any other
documents prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements and other charges of
counsel to Lender, (b) to pay or reimburse Lender for all of its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any other documents
prepared in connection herewith or therewith, including, without limitation, the
fees and disbursements of counsel to Lender, (c) to pay, indemnify, or reimburse
Lender for, and hold Lender harmless from, any and all search, recording and
filing fees, financial examination and collateral appraisal fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other taxes (except for Other Taxes), if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this

 

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Agreement, the other Loan Documents and any such other documents and (d) to pay,
indemnify or reimburse Lender and its affiliates and their respective officers,
directors, trustees, employees, advisors, agents and controlling persons (each,
an “Indemnitee”) for, and hold each Indemnitee harmless from and against any and
all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the other Loan Documents and any such other
documents, including, without limitation, any of the foregoing relating to the
use of proceeds of the Loans or the violation of, noncompliance with or
liability under, any Environmental Law applicable to the operations of any Loan
Party or any of their Subsidiaries or any of their Properties and the fees and
disbursements and other charges of legal counsel in connection with claims,
actions or proceedings by any Indemnitee against Borrower or any other Loan
Party hereunder or any of the other Loan Documents (all the foregoing in this
clause (d), collectively, the “Indemnified Liabilities”), provided, that
Borrower shall have no obligation hereunder to any Indemnitee with respect to
Indemnified Liabilities to the extent such Indemnified Liabilities are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted primarily from the gross negligence or willful misconduct of such
Indemnitee. No Indemnitee shall be liable for any damages arising from the use
by unauthorized persons of Information or other materials sent through
electronic, telecommunications or other information transmission systems that
are intercepted by such persons or for any special, indirect, consequential or
punitive damages in connection with the Obligations. Without limiting the
foregoing, and to the extent permitted by applicable law, Borrower agrees not to
assert and to cause its Subsidiaries not to assert, and hereby waives and agrees
to cause its Subsidiaries so to waive, all rights for contribution or any other
rights of recovery with respect to all claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature, under or related to Environmental Laws, that any of them might have by
statute or otherwise against any Indemnitee. All amounts due under this Section
shall be payable not later than 30 days after written demand therefor.
Statements payable by Borrower pursuant to this Section shall be submitted to
Borrower at the address of Borrower set forth in Section 8.2, or to such other
Person or address as may be hereafter designated by Borrower in a notice to
Lender. The agreements in this Section shall survive repayment of the Loans and
all other amounts payable hereunder.

8.6 Successors and Assigns; Participations and Assignments. (a) This Agreement
shall be binding upon and inure to the benefit of Borrower, Lender, all future
holders of the Loans and their respective successors and assigns, except that
Borrower may not assign or transfer any of its rights or obligations under this
Agreement or any other Loan Document without the prior written consent of
Lender. Borrower acknowledges and agrees that Lender may at any time, and from
time to time, (i) sell participating interests in the Loans, and Lender’s rights
hereunder to other Eligible Assignees, financial institutions or other Persons,
and (ii) sell, transfer, or assign the Loans and Lender’s rights hereunder, to
any one or more additional Eligible Assignees, financial institutions or other
Persons, subject (as to Lender’s rights under this clause (a)) to Borrower’s
written consent, which consent shall not be unreasonably withheld or delayed;
provided, that, no consent under this clause (a) shall be required if an Event
of Default exists at the time of such sale, transfer or assignment.

(b) Borrower also agrees that each participant shall be entitled to the benefits
of Sections 2.15 and 2.16 with respect to its participation in the Commitments
and the Loans outstanding from time to time as if such participant were Lender;
provided, that in the case of Section 2.16, such Participant shall have complied
with the requirements of said Section, and provided, further, that no
participant shall be entitled to receive any greater amount pursuant to any such
Section than Lender would have been entitled to receive in respect of the amount
of the participation transferred by Lender to such Participant had no such
transfer occurred.

 

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(c) Upon any assignment, the assignee of Lender shall have the rights and
obligations of Lender hereunder with regard to the Commitments and/or Loans that
are the subject of such assignment, and the assignor thereunder shall be
released from its obligations under this Agreement. On or prior to the effective
date of any such assignment, Borrower, at its own expense, upon request, shall
execute and deliver to Lender (in exchange for the Note of the assigning Lender)
a new Note to the order of the assignee in an amount equal to the Commitment
and/or Loans, as the case may be, assumed or acquired by it pursuant to such
assignment and, if the assignor has retained a Commitment and/or Loans, as the
case may be, upon request, a Note to the order of the a in an amount equal to
the Commitment and/or Loans, as the case may be, retained by it hereunder. Such
new Note or Notes shall be dated the Closing Date and shall otherwise be in the
form of the Note or Notes replaced thereby.

(d) For avoidance of doubt, the parties to this Agreement acknowledge that the
provisions of this Section concerning assignments of Loans and Notes relate only
to absolute assignments and that such provisions do not prohibit assignments
creating security interests in Loans and Notes, including, without limitation,
any pledge or assignment by Lender of any Loan or Note to any Federal Reserve
Bank in accordance with applicable law.

8.7 Set-off. In addition to any rights and remedies of Lender provided by law,
Lender shall have the right, without prior notice to Borrower, any such notice
being expressly waived Borrower to the extent permitted by applicable law, upon
any amount becoming due and payable by Borrower hereunder (whether at the stated
maturity, by acceleration or otherwise), to set off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by Lender or any
branch or agency thereof to or for the credit or the account of Borrower. Lender
agrees promptly to notify Borrower after any such setoff and application,
provided, that the failure to give such notice shall not affect the validity of
such setoff and application.

8.8 Counterparts. This Agreement may be executed by one or more of the parties
to this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page of this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and Lender.

8.9 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

8.10 Integration. This Agreement and the other Loan Documents represent the
entire agreement of Borrower and Lender with respect to the subject matter
hereof and thereof, and there are no promises, undertakings, representations or
warranties by Lender relative to subject matter hereof not expressly set forth
or referred to herein or in the other Loan Documents.

8.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

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8.12 Submission To Jurisdiction; Waivers. Borrower hereby irrevocably and
unconditionally:

(a) submits for itself and its Property in any legal action or proceeding
relating to this Agreement and the other Loan Documents to which it is a party,
or for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;

(b) consents that any such action or proceeding may be brought in such courts
and waives any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to Borrower at its address
set forth in Section 8.2 or at such other address of which Lender shall have
been notified pursuant thereto;

(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any right it may have
to claim or recover in any legal action or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.

8.13 Acknowledgments. Borrower hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of
this Agreement and the other Loan Documents;

(b) Lender does not have any fiduciary relationship with or duty to Borrower or
any other Loan Party arising out of or in connection with this Agreement or any
of the other Loan Documents, and the relationship between Lender, on one hand,
and Borrower, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and

(c) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby among
Borrower and Lender.

8.14 Confidentiality. Lender agrees to keep confidential all non-public
information provided to it by any Loan Party pursuant to this Agreement that is
designated by such Loan Party as confidential; provided, that nothing herein
shall prevent Lender from disclosing any such information (a) to any affiliate
of Lender, (b) to any Participant or Assignee (each, a “Transferee”) or
prospective Transferee that agrees to comply with the provisions of this Section
or substantially equivalent provisions, (c) to any of its employees, directors,
agents, attorneys, accountants and other professional advisors, (d) to any of
its investors and potential investors, (e) upon the request or demand of any
Governmental Authority having jurisdiction over it, (f) in response to any order
of any court or other Governmental Authority or as may otherwise be required
pursuant to any Requirement of Law, (g) in connection with any litigation or
similar proceeding, (h) that has been publicly disclosed other than in breach of
this Section, (i) to the National Association of Insurance Commissioners or any
similar organization or any nationally recognized rating agency that requires
access to information about Lender’s investment

 

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portfolio in connection with ratings issued with respect to Lender or (i) in
connection with the exercise of any remedy hereunder or under any other Loan
Document; provided, further, that any investors and potential investors that
receive any non-public information pursuant to clause (c) of this Section 8.14
may disclose such information to the same extent permitted in the case of Lender
pursuant to clauses (e) and (i) of this Section 8.14. Notwithstanding anything
herein to the contrary, any party subject to confidentiality obligations
hereunder or under any other related document (and any employee, representative
or other agent of such party) may disclose to any and all persons, without
limitation of any kind, such party’s U.S. federal income tax treatment and tax
structure of the transactions contemplated by this Agreement relating to such
party and all materials of any kind (including opinions or other tax analyses)
that are provided to it relating to such tax treatment and tax structure.
However, no such party shall disclose any information relating to such tax
treatment or tax structure to the extent nondisclosure is reasonably necessary
in order to comply with applicable securities laws.

8.15 Accounting Changes. In the event that any “Accounting Change” (as defined
below) shall occur and such change results in a change in the method of
calculation of financial covenants, standards or terms in this Agreement, then
Borrower and Lender agree to enter into negotiations in order to amend such
provisions of this Agreement so as to equitably reflect such Accounting Change
with the desired result that the criteria for evaluating Borrower’s financial
condition shall be the same after such Accounting Change as if such Accounting
Change had not been made. Until such time as such an amendment shall have been
executed and delivered by Borrower and Lender all financial covenants, standards
and terms in this Agreement shall continue to be calculated or construed as if
such Accounting Change had not occurred. “Accounting Change” refers to any
change in accounting principles required by the promulgation of any rule,
regulation, pronouncement or opinion by the Financial Accounting Standards Board
of the American Institute of Certified Public Accountants or, if applicable, the
SEC.

8.16 Keepwell. Borrower hereby absolutely, unconditionally and irrevocably
undertakes to provide such funds or other support as may be needed from time to
time by each other Loan Party to honor all of its Obligations in respect of
Specified Swap Obligations. The obligations of Borrower under this Section 8.16
shall remain in full force and effect until a discharge of all of the
Obligations in accordance with the terms of the applicable documents and
agreements in respect thereof. Borrower intends that this Section 8.16
constitute, and this Section 8.16 shall be deemed to constitute, a “keepwell,
support, or other agreement” for the benefit of each other Loan Party for all
purposes of the Commodity Exchange Act.

8.17 Consent by Lender. To the extent that any of the terms and provisions of
the loan documents evidencing the NSBF Credit Facility (but without regard to
any successor facility or facilities thereto as to which the Lender shall not be
the lender under the NSBF Credit Facility) may be violated by the execution,
delivery and performance of this Agreement and or any of the other Loan
Documents, Lender hereby waives such violations.

8.18 WAIVERS OF JURY TRIAL. BORROWER AND LENDER EACH HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

[SIGNATURE PAGES FOLLOW]

 

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

 

NEWTEK BUSINESS SERVICES, INC.,

as Borrower

By:  

/s/ Barry Sloane

  Name:   Barry Sloane   Title:   Chief Executive Officer

[SIGNATURE PAGE TO CREDIT AGREEMENT]

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CAPITAL ONE, NATIONAL ASSOCIATION,

as Lender

By:  

/s/ Patrick McCarthy

  Name:   Patrick McCarthy   Title:   Vice President

[SIGNATURE PAGE TO CREDIT AGREEMENT]

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Schedule 1.1

Unrestricted Subsidiaries

Automated Merchant Services, Inc.

Business Connect, LLC

CCC Real Estate Co. LLC

CDS Business Services, Inc.

Exponential Business Development Co., Inc.

First Bankcard Alliance of Alabama, LLC

Fortress Data Management, LLC

Newtek Asset Backed Securities, LLC

Newtek Small Business Finance, Inc.

Secure CyberGateway Services, LLC

Solar Processing Solutions, LLC

Summit Systems and Design, LLC

The Texas Whitestone Group, LLC

Where Eagles Fly, LLC

The Whitestone Group, LLC

Wilshire Alabama Partners, LLC

Wilshire Colorado Partners, LLC

Wilshire DC Partners, LLC

Wilshire Holdings I, Inc.

Wilshire Holdings II, Inc.

Wilshire Louisiana Bidco, LLC

Wilshire Louisiana Capital Management Fund, LLC

Wilshire Louisiana Partners II, LLC

Wilshire Louisiana Partners III, LLC

Wilshire Louisiana Partners IV, LLC

Wilshire New York Advisers II, LLC

Wilshire New York Partners III, LLC

Wilshire New York Partners IV, LLC

Wilshire New York Partners V, LLC

Wilshire Partners, LLC

Wilshire Texas Partners I, LLC

and any company (other than CDS) which becomes a subsidiary of any of the
foregoing