Exhibit
10.6


 


FALCON
FINANCIAL, LLC


FIFTH AMENDMENT TO


REVOLVING WAREHOUSE FINANCING
AGREEMENT


 


This FIFTH AMENDMENT TO REVOLVING WAREHOUSE
FINANCING AGREEMENT (this “Fifth Amendment”) is dated as of November
21, 2003 and entered into by and among Falcon Financial, LLC, SunAmerica Life
Insurance Company, Bank of New York (as successor to LaSalle National Bank) and
ABN AMRO Bank N.V., and is made with reference to the Revolving Warehouse
Financing Agreement dated as of January 7, 1998 by and among the parties hereto
(as amended, the “Warehouse Agreement”). 
Capitalized terms used herein without definition shall have the
respective meanings set forth in the Warehouse Agreement.


WHEREAS, the parties hereto have entered into
the First Amendment to Revolving Warehouse Financing Agreement as of March 25,
1998 (the “First Amendment”), which amended the Warehouse Agreement,
among other things to add new definitions to, and amend and restate existing
definitions in, Article I of the Warehouse Agreement for the purpose of
clarifying certain terms relating to the franchise loans eligible to be
financed under the Warehouse Agreement;


WHEREAS, the parties hereto have entered into
the Second Amendment to Revolving Warehouse Financing Agreement as of October
2, 1998 (the “Second Amendment”), which amended the Warehouse Agreement,
among other things to amend the recitals, add new definitions to, and amend and
restate existing definitions in, Article I of the Warehouse Agreement and amend
certain other sections of the Warehouse Agreement to provide for the financing
of mortgage loans under the Warehouse Agreement;


WHEREAS, the parties hereto have entered into
the Third Amendment to Revolving Warehouse Financing Agreement as of April 19,
1999 (the “Third Amendment”),
which amended the Warehouse Agreement, among other things to reflect the
increase in the working capital facility under the Senior Subordinated Loan
Agreement and the existence of the Junior Subordinated Loan Agreement;


WHEREAS, the parties hereto have entered into the
Fourth Amendment to Revolving Warehouse Financing Agreement as of October 29,
2001 (the “Fourth Amendment”),
which amended the Warehouse Agreement, among other things to temporarily
increase the Facility Limit and to set the Applicable Margin at 3%;


WHEREAS, Customer, SunAmerica and Goldman Sachs
Mortgage Company (“Goldman Sachs”)
have entered into that certain Agreement Relating to Receivables dated as of
October 27, 2003 (the “Receivables Agreement”)
pursuant to which Customer granted SunAmerica and Goldman Sachs certain rights
with respect to approving Customer’s origination 


 


 


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of Receivables
under the Warehouse Agreement and requiring Customer to make Partial
Prepayments of Invested Principal under the circumstances described therein;


WHEREAS, Customer intends to merge with and into
Falcon Financial Investment Trust, a Maryland real estate investment trust (“FFIT”), with FFIT as the surviving entity
(the “Merger”) and to transfer
certain assets to a newly-formed wholly-owned subsidiary of FFIT;


WHEREAS, immediately following the Merger, FFIT will make an initial public
offering of its common shares (the “IPO”;
the date of consummation of the IPO being the “IPO Date”) as described in the Registration Statement on Form
S-11 (Registration No. 333-108603) (the “Registration
Statement”);


WHEREAS, in the event the IPO occurs, Customer desires that the other parties
to the Warehouse Agreement agree to waive the Termination Events resulting from
the Merger and the IPO and that such parties consent to the substitution of
FFIT as the “Customer” with all the rights and obligations of Customer
thereunder;


WHEREAS, in the event the IPO occurs, the parties desire to reduce the
Applicable Margin to 2%, reduce the Advance Rate to 80% and provide for the
ability of Customer to borrow for general corporate purposes to the extent any
voluntary Partial Prepayments of Invested Principal reduce the Aggregate Amount
Outstanding below 80% of the Net Receivables Balance;


WHEREAS, the parties desire to further amend the Warehouse Agreement as
provided below;


WHEREAS, except as expressly set forth herein,
the parties hereto disclaim any intent to effect a novation or an
extinguishment or discharge of any liability or obligation under the Warehouse
Agreement arising prior to the date of this Fifth Amendment;


NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:


Section 1.                                          AGREEMENTS AND AMENDMENTS
EFFECTIVE AS OF THE DATE OF THIS FIFTH AMENDMENT


The following agreements and amendments to the
Warehouse Agreement will be effective, without further action of the parties,
on the date of this Fifth Amendment (unless otherwise specifically set forth
below).


1.1          Receivables Agreement. 
Attached hereto as Exhibit A is a copy of the Receivables
Agreement.  Facility Agent acknowledges
such agreement and consents to the application of Partial Prepayments of Invested
Principal pursuant to the terms of Section 2.4 thereof.


1.2          Fees.


A.            Extension Fee. 
Not later than the second Business Day after the date of this Fifth
Amendment, Customer shall pay the sum of $750,000 to each of SunAmerica and
Goldman Sachs by wire transfer of immediately available funds to the accounts
specified in the written instructions from each such party delivered to
Customer on the date hereof.


B.            Term Fees. 
Unless the Warehouse Agreement is terminated and all obligations of
Customer to the other parties thereto are paid and satisfied in full prior to
May 1, 2004, Customer shall pay on May 1, 2004 the sum of $1,500,000 to each of
SunAmerica and Goldman Sachs, by wire transfer of immediately available funds
to such account(s) as are specified by them not less than three Business Days
prior to May 1, 2004.  In addition,
unless the Warehouse Agreement is terminated and all obligations of Customer to
the other parties thereto are paid and satisfied in full prior to October 1,
2004, Customer shall pay on October 1, 2004 the sum of $750,000 to each of
SunAmerica and Goldman Sachs, by wire transfer of immediately available funds
to such account(s) as are specified by them not less than three Business Days
prior to October 1, 2004.


C.            Early Exit Fee. 
If the Warehouse Agreement is terminated and all obligations of Customer
to the other parties thereto are paid and satisfied in full prior to October 1,
2004 (an “Early Termination”), Customer shall pay on the date of such Early
Termination, the product of .50% multiplied by the Aggregate Principal Outstanding
immediately prior to such termination, payable one-half to SunAmerica and
one-half to Goldman Sachs, by wire transfer of immediately available funds to
such account(s) as are specified by them not less than three Business Days
prior to the date of such Early Termination; provided, however, that no such
fee shall become payable if such Early Termination occurs in connection with a
Securitization Transaction.


 


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1.3          Amendment of Existing Definitions.  Notwithstanding anything to the
contrary in the Receivables Agreement, Section 1.1 of the Warehouse Agreement
is amended by amending and restating the following definition in its entirety:


“‘Facility
Termination Date’ means October 1, 2004.”


1.4          Additional Definition. 
Section 1.1 of the Warehouse Agreement is amended by adding the
following definition in appropriate alphabetical order:


“‘Fifth Amendment’ means the Fifth Amendment to
this Agreement, dated as of November 21, 2003.”


1.5          Amendment to Section 2.2(b). 
Section 2.2(b) of the Warehouse Agreement is amended by adding the
following at the end thereof:


“Except for those
proposed Receivables set forth on Exhibit B to the Fifth Amendment, no
Receivable shall be originated, and no Investment of Principal with respect
thereto shall be made, after the date of the Fifth Amendment if Customer shall
not have retained an individual to be designated by Customer, with the consent
of SunAmerica, as a compliance consultant on the terms and conditions
reasonably satisfactory to SunAmerica; provided, however, that
notwithstanding the foregoing the Receivable to be originated to each of the
Persons on Exhibit B to the Fifth Amendment (and the applicable Investment of
Principal with respect thereto) may be made by Customer after the date of the
Fifth Amendment.”


1.6          Amendments to Section 5.1.


A.            Effective as of the date of the Fourth
Amendment, Section 1.4 of the Fourth Amendment purporting to amend Section
5.1(k) of the Warehouse Agreement is deleted in its entirety and replaced with
Section 1.7 of this Fifth Amendment below.


B.            Section 5.1 of the Warehouse Agreement is amended by
inserting the following new paragraph immediately following paragraph (k):


“(l)          Credit Committee Consultant.  From the date of the Fifth Amendment until
the Facility Termination Date, Don Grigley (or, in the case of his death,
disability, incapacity or resignation, such other individual appointed by
Customer with the consent of SunAmerica) shall serve as a consultant to
Customer’s credit committee, advising such committee with respect to each
Receivable proposed to be originated by Customer.”


1.7          Amendment to Section 5.2(k). 
Section 5.2(k) of the Warehouse Agreement is amended effective as of the
date of the Fourth Amendment by deleting the reference to “$200,000” in clause
(b) and replacing it with a reference to “$400,000”.


1.8          Amendment
to Section 5.2(r).  Section 5.2(r) of the Warehouse Agreement is
amended and restated in its entirety as follows:


“(r)          Principal Balance of Receivables.  Except with SunAmerica’s express prior
written consent, Customer shall not submit any Receivable as an Eligible
Receivable hereunder, unless:


(i)            the original principal amount of
such Receivable together with the original principal amount of all other
Receivables owing by the Obligor and its Affiliates is less than $15,000,000;
and


(ii)           if the Receivable is a Large
Receivable (as defined below), Customer shall not submit an Investment of
Principal Request in an amount in excess of 70% of the original principal amount
of such Large Receivable; provided, however, that at any time when the
Aggregate Principal Outstanding is (or would be, after giving effect to the
Investment of Principal with respect to such Large Receivable) greater than
$80,000,000, Customer may, subject to the terms of this Agreement, submit an
Investment of Principal Request for such Large Receivable of up to (x) the
Advance Rate multiplied by (y) the lesser of (1) the original principal amount
of such Large Receivable and (2) 10% of the Net Receivables Balance (giving
effect to such Large Receivable).  For
purposes of the foregoing, a “Large Receivable” means a Receivable with an
original principal amount of $10,000,000 or more.”


1.9          Waiver Relating to Rating Agency
Downgrades.  SunAmerica,
Facility Agent, Paying Agent and Custodian acknowledge and agree that effective
on the date hereof, each such party waives the Termination Event pursuant to
Section 7.1(l) of the Warehouse Agreement arising out of the downgrades and
review for possible further downgrades by Moody’s Investors Service and Fitch
of Customer’s 2003 securitization, in each case as described in the most recent
draft of the Registration Statement delivered by Customer to SunAmerica on or
prior to the date hereof.


 


 


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Section 2.                                          AGREEMENTS AND
AMENDMENTS EFFECTIVE AS OF THE IPO DATE.


The following agreements
and amendments to the Warehouse Agreement will be effective, without further
action of the parties, on the IPO Date.


2.1          Waiver of Certain Termination Events Related
to Merger and IPO


A.            Without limiting Customer’s obligations
under Section 2.8(a) of the Warehouse Agreement, SunAmerica, Facility Agent,
Paying Agent and Custodian acknowledge and agree that effective upon the IPO
Date, each such party shall be deemed to have waived the following Termination
Events: (i) pursuant to Section 7.1(f) of the Warehouse Agreement, the breach
of the covenants set forth in Sections 5.2(e), 
5.2(i) and 5.2(l) of the Warehouse Agreement regarding changes to
Customer’s capital structure and transfers of Taxable Non-REIT Assets to a
Taxable REIT Subsidiary Entity (each as defined in Section 2.6 below) in
connection with the Merger, the IPO and FFIT’s existence as a REIT; (ii)
pursuant to Section 7.1(f) of the Warehouse Agreement, the breach of the
covenant set forth in Section 5.2(q) with respect to the change of Customer’s
Fiscal Year and fiscal quarters in connection with the IPO and FFIT’s existence
as a REIT; and (iii) pursuant to Section 7.1(r) of the Warehouse Agreement, the
Change of Control triggered by the Merger and the IPO.


B.            Notwithstanding anything to the contrary
set forth in Section 2.1A, the waivers set forth in Section 2.1A will expire
and be of no further force or effect if (i) the IPO is not consummated on or
prior to February 27, 2004, or (ii) after the date hereof, Customer amends the
Registration Statement in a manner that alters the terms of the common stock
(other than the price per share) offered pursuant thereto (it being understood
that for purposes of this clause (ii), a change in the total number of shares
offered shall not constitute an alteration of the terms of the common stock).


2.2          Consent to Assignment and Substitution. 
Effective upon consummation of the Merger, SunAmerica, Facility Agent,
Paying Agent and Custodian consent to the assignment by Falcon Financial, LLC
and the assumption by FFIT of all of the rights and obligations of Falcon
Financial, LLC under the Warehouse Agreement and the other Transaction
Documents by operation of law pursuant to the Merger and to the substitution of
FFIT as “Customer” under the Warehouse Agreement.


2.3          Repayment and Termination of Subordinated
Loan Agreements.  Customer shall use its
commercially reasonable best efforts to repay in full on the IPO Date (but in
any event Customer shall repay in full no later than the Business Day
immediately following the IPO Date) all principal, interest, fees and costs
then outstanding under each of the Senior Subordinated Loan Agreement and the
Junior Subordinated Loan Agreement and satisfy in full all other outstanding
obligations thereunder.  Following such
repayments in full, Customer and SunAmerica shall, and shall use their
commercially reasonable best efforts to cause the other parties to the Senior
Subordinated Loan Agreement and the Junior Subordinated Loan Agreement to,
terminate the Senior Subordinated Loan Agreement and the Junior Subordinated
Loan Agreement.


 


 


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2.4          UCC Filing Amendments. 
Pursuant to, but without limiting, Customer’s obligations under Section
2.8(a) and Section 7.1(s) of the Warehouse Agreement or any other obligation
thereunder relating to Customer’s maintenance of a first perfected security
interest in the Receivables and any other Warehouse Assets, not later than 5
Business Days after the effective date of the Merger (or such earlier date as
may be required to maintain a first perfected security interest therein),
Customer shall file, at its sole cost and expense, amendments to such UCC
financing statements as are required to be filed with respect to the
Receivables and any other Warehouse Assets to ensure the continued perfection
of the security interests described in Sections 2.8(a) and 7.1(s) of the
Warehouse Agreement following the Merger and the substitution of FFIT as the
“Customer” under the Warehouse Agreement. 
SunAmerica, Goldman Sachs and Facility Agent agree to cooperate with
Customer in all such UCC amendments.


2.5          Amendments to Existing Definitions. 
Section 1.1 of the Warehouse Agreement is amended by amending and
restating the following definitions in their entirety:


“‘Advance Rate’
means 80%.”


“‘Aggregate Principal Outstanding’ means , at
any time, the sum of the Outstanding Principal Invested less the sum of (x) the
aggregate amount of Collections received and applied to reduce such Aggregate
Principal Outstanding pursuant to Section 2.5 or 2.6, plus (y) without
duplication, Partial Prepayments of Invested Principal; provided that the
Aggregate Principal Outstanding shall be restored in the amount of any
Collections or Partial Prepayments of Invested Principal so received and
applied if at any time the distribution of any such Collections or Partial
Prepayments of Invested Principal is rescinded or must otherwise be returned
for any reason.”


“‘Applicable Margin’
means, prior to May 1, 2004, 2%, and thereafter 2.5%.”


“‘Change of Control’ means (a) the sale,
transfer, or other disposition of all or substantially all of Customer’s assets
(excluding any such action taken in connection with any Securitization
Transaction or sale of Receivables in the ordinary course of Customer’s
business); or (b) the consummation of a merger or consolidation of Customer
with or into another entity or any other corporate reorganization, if more than
50% of the combined voting power of the continuing or surviving entity’s stock
outstanding immediately after such merger, consolidation or such other
reorganization is owned, directly or indirectly, by Persons who were not
stockholders of Customer immediately prior to such merger, consolidation or
other reorganization.”


“‘Fiscal Year’ means the fiscal year of
Customer and its Subsidiaries ending on December 31 of each calendar year.”


“‘Indebtedness’
means, with respect to any Person on a consolidated basis: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
the issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of 


 


 


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Property or services, other than trade accounts
payable (other than for borrowed money) arising, and accrued expenses incurred,
in the ordinary course of business, so long as such trade accounts payable are
payable within 90 days of the date the respective goods are delivered or the
respective services are rendered; (c) indebtedness of others secured by a Lien
on the Property of such Person, whether or not the respective Indebtedness so
secured has been assumed by such Person; (d) obligations (contingent or
otherwise) of such Person in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for
the account of such Person; (e) Capital Lease Obligations of such Person; (f)
obligations of such Person under repurchase agreements, sale/buy-back
agreements or like arrangements; (g) indebtedness of others subject to a
Guaranty by such Person; and (h) indebtedness of general partnerships of which
such Person is a general partner.”


“‘Partial Prepayments of Invested Principal’
means amounts paid from time to time in reduction of the Aggregate Principal
Outstanding pursuant to the requirements of Section 2.9(c) or made voluntarily
by Customer pursuant to Section 2.9(d) or Section 2.13.”


“‘Permitted Tax
Distributions’ means a declaration or payment of any dividend or the making
of any distribution by Customer equal to the greater of: (a) the amount
determined by Customer’s Board of Directors to be necessary to permit Customer
to distribute to its shareholders with respect to any calendar year (whether
made during such year or after the end thereof) 100% of the “real estate
investment trust taxable income” of Customer within the meaning of Code Section
857(b)(2), determined without regard to deductions for dividends paid; or (b)
the amount that is determined by Customer’s Board of Directors to be necessary
either to maintain Customer’s status as a REIT under the Code for any calendar
year or to enable Customer to avoid the payment of any tax for any calendar
year that could be avoided by reason of a distribution by Customer to its shareholders,
with such distributions to be made as and when determined by Customer’s Board
of Directors, whether during or after the end of the relevant calendar year.”


2.6          Additional Definitions. 
Section 1.1 of the Warehouse Agreement is amended by adding the
following definitions in appropriate alphabetical order:


“‘Capital Lease
Obligations’ means, for any Person, all obligations of such Person to pay
rent or other amounts under a lease of (or other agreement conveying the right
to use) Property to the extent such obligations are required to be classified
and accounted for as a capital lease on a balance sheet of such Person under
GAAP, and, for purposes of this Agreement, the amount of such obligations shall
be the capitalized amount thereof, determined in accordance with GAAP.”


“‘Consolidated Net
Income’ means, for Customer and its Subsidiaries on a consolidated basis,
for any period, the consolidated net income of such Persons for such period as
determined in accordance with GAAP, excluding, however, any net gains or losses
attributable to changes in the value of hedge positions maintained in the
ordinary course of business by Customer and its Subsidiaries, including
pursuant to the Hedge Agreement.”


“‘Consolidated Net
Worth’ means, for Customer and its Subsidiaries on a consolidated basis, as
of a particular date: (a) all amounts which would be included under capital on
a balance sheet of such Person at such date, determined in accordance with
GAAP; less (b) (i) amounts 


 


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owing to such Person from Affiliates, or from
officers, employees, shareholders or other Persons similarly affiliated with
such Person, (ii) intangible assets and (iii) deferred tax liabilities.”


“‘Consolidated Total
Debt’ means, as at any date of determination, the aggregate stated balance
sheet amount of all Indebtedness of Customer and its Subsidiaries, determined
on a consolidated basis, in accordance with GAAP.”


“Excess Principal” means the remainder of (x)
the product of (1) the Advance Rate, multiplied by (2) the Net Receivables
Balance, minus (y) the Aggregate Principal Outstanding; provided, that for
purposes of calculating available Excess Principal, the Aggregate Principal
Outstanding will be reduced by Partial Prepayments of Invested Principal only
to the extent made on a voluntary basis by Customer pursuant to Section 2.9(d)
hereof (and will not be reduced by any Partial Prepayments of Invested
Principal required pursuant to this Agreement or Section 2.4 of the Receivables
Agreement).”


“‘FFIT’ means Falcon Financial Investment
Trust, a Maryland real estate investment trust.”


“‘Fiscal Quarter’
means a fiscal quarter of any Fiscal Year; provided, however, that for purposes
of the Financial Condition Covenants, the first fiscal quarter after the IPO
shall be deemed to commence on the IPO Date and end on the last day of the
then-current fiscal quarter of the Fiscal Year.”


“‘IPO’ means the initial public offering of
FFIT’s common shares as described in the Registration Statement on Form S-11
(Registration No. 333-108603).”


“‘IPO Date’ means the date of consummation of
the IPO.”


“Prepayment Tranche Request’ is defined in
Section 2.9(e).”


“‘Property’ means
any right or interest in or to property of any kind whatsoever, whether real, personal
or mixed and whether tangible or intangible.”


“‘Receivables Agreement” means that certain
Agreement Relating to Receivables dated as of October 27, 2003 among Customer,
SunAmerica and Goldman Sachs Mortgage Company.”


“‘REIT’ means a domestic trust or corporation
that qualifies as a real estate investment trust under the provisions of
Section 856, et. seq. of the Code.”


“‘Revolving Hedge
Facility’ means a revolving credit facility for the sole purpose of
satisfying Customer’s obligations to fund any Margin Excess (as defined in the
Hedge Agreement) pursuant to the Hedge Agreement.”


“‘Taxable Non-REIT Assets’ means Property of
Customer that Customer’s Board of Director’s determines is necessary to
transfer to a Subsidiary or a grantor trust of which such Subsidiary is the
sole beneficiary (a ‘Taxable REIT Subsidiary Entity’) in order to
establish or maintain FFIT’s status as a REIT under the Code, together with any
other Property principally associated with Customer’s servicing and loan
underwriting business, including, without


 


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limitation, leases, equipment, employment arrangements
and cash, but excluding any Property the transfer of which would constitute a
breach by Customer of Section 5.2(n) hereof.”


2.7          Amendments to Sections 2.2(b), 4.2(b)(iv) and
Form of Investment of Principal Request.  Each of
Sections 2.2(b), 4.2(b)(iv) and item (v) of Exhibit A-1 (Form of Investment of
Principal Request) of the Warehouse Agreement are amended by deleting each reference
to “92%” and replacing it with a reference to “80%”.


2.8          Amendment to Section 2.2(b). 
Section 2.2(b) of the Warehouse Agreement is amended by adding the
following sentence to the end of such Section:


“No Receivable
shall be originated, and no Investment of Principal with respect thereto shall
be made after the date that either Vernon Schwartz or David Karp ceases to be
employed by Customer, for any reason other than such individual’s death,
disability or incapacity, as an executive officer of Customer in the same or
similar capacity and with the same decision making authority as of the date of
the Fifth Amendment.”


2.9          Amendments to Section 2.2(c).


A.            The second sentence of Section 2.2(c) is
amended by adding the following proviso to the end of such sentence:


“; provided, any
Investment of Principal with respect to Excess Principal may be used for any
general corporate purpose of Customer, including working capital requirements.”


B.            The sixth sentence of Section 2.2(c) is
amended by adding the phrase “with respect to which a Receivable is to be
acquired with the proceeds thereof” after the phrase “Prior to any Investment
of Principal”.


C.            The seventh sentence of Section 2.2(c) is
amended and restated in its entirety as follows:


“Upon and subject to the
terms and conditions and in reliance on the representations and warranties set
forth herein, Facility Agent shall cause, in the case of Amsterdam only if
Amsterdam agrees to make the Investment of Principal, the applicable
Purchaser(s) to deposit, or, if applicable, SunAmerica shall deposit on the
requested Funding Date as set forth in the Investment of Principal Request or a
postponement notice, as the case may be, in immediately available funds, an
amount equal to the requested Investment of Principal: (x) for any Investment
of Principal with respect to which a Receivable is to be acquired with the
proceeds thereof, to Escrow Agent’s account as set forth in the Escrow
Agreement, and (y) for any Investment of Principal with respect to Excess
Principal, to Customer’s account designated for such purpose in the relevant
Investment of Principal Request.”


2.10        Amendment to Section 2.2(e). 
Section 2.2(e) of the Warehouse Agreement is amended and restated as
follows:


 


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“(e)         Each Investment of Principal with
respect to which Receivables are to be acquired with the proceeds thereof shall
be in a minimum amount of $1,000,000 and in any amount in excess thereof.  Each such Investment of Principal shall be
in an amount not in excess of the sum of (i) the Advance Rate multiplied by the
face amount of the Eligible Receivable to be acquired with the proceeds of such
Investment of Principal and (ii) the maximum available amount of Excess
Principal.  Each Investment of Principal
with respect to Excess Principal that is not made in connection with an
acquisition of Receivables shall be in a minimum amount of $5,000,000 (or, in
the case the maximum available amount of Excess Principal is less than
$5,000,000, such lesser amount) and in any amount in excess thereof up to
maximum available amount of Excess Principal.”


2.11        Amendment to Section 2.2(g). 
Section 2.2(g) of the Warehouse Agreement is amended by adding the
following phrase at the end of the first sentence thereof:


“or pursuant to
any other Partial Prepayments of Invested Principal”


2.12        Amendment to Section 2.3(e). 
Section 2.3(e) of the Warehouse Agreement is amended by deleting it in
its entirety and replacing it with “[Intentionally Omitted.]”.


2.13        Amendment to Section 2.9. 
Section 2.9 of the Warehouse Agreement is amended by (i) inserting the
phrase “Except as provided in Sections 2.9(c) or (d),” immediately prior to the
word “any” in the first line of paragraph (b) thereof and (ii) inserting the
following new paragraphs immediately following paragraph (b):


“(c)  Customer shall pay mandatory Partial
Prepayments of Invested Principal directly to Facility Agent for application
against the Aggregate Principal Outstanding on the date of such payment as
follows: (i) not later than one Business Day following the IPO, in an amount
not less than the amount by which the Aggregate Principal Outstanding exceeds
80% of the Net Receivables Balance; (ii) at such time and in such amount as may
be required pursuant to Section 2.4 of the Receivables Agreement; and (iii)
except as provided in clause (i) of this Section 2.9(c), on any date that the
Aggregate Principal Outstanding exceeds 80% of the Net Receivables Balance
(other than in connection with any Defaulted Receivable which must be
repurchased within the time period specified in Section 7.1(c)).  Notwithstanding anything in Section 2.5 or
2.6 of this Agreement to the contrary, all payments made pursuant to this
Section 2.9(c) shall be applied by the Facility Agent to reduce the Aggregate
Principal Outstanding.  In connection
with any such mandatory prepayment pursuant to this Section 2.9(c), except in
the case of a prepayment not in excess of $25,000,000 that is made on the
second Business Day following the receipt of a Deficiency Notice pursuant to
the requirements of Section 2.4 of the Receivables Agreement, an Early
Collection Fee shall become due and owing unless Customer makes such payment on
an Interest Payment Date or the last day of a Modified Tranche Period.


(d)  Customer may make voluntary Partial
Prepayments of Invested Principal to the Facility Agent for application against
the Aggregate Principal Outstanding on the date of such payment (i) not later
than one Business Day following the IPO, (ii) on any Interest Payment Date,
(iii) on the last day of any Modified Tranche Period, or (iv) in connection


 


 


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with a voluntary
termination of the obligations to make Investments of Principal and a payment
of all outstanding obligations under this Agreement and the other Transaction
Documents.  In connection with any such
prepayment pursuant to this Section 2.9(d), an Early Collection Fee shall
become due and owing if such prepayments are not made on an Interest Payment
Date or the last day of a Modified Tranche Period.  Notwithstanding anything in Section 2.5 or 2.6 of this Agreement
to the contrary, all payments made pursuant to this Section 2.9(d) shall,
unless otherwise requested by Customer in the written notice specifying the
prepayment, be applied by the Facility Agent to reduce the Aggregate Principal
Outstanding.


(e)  If Customer believes in good faith that an
event giving rise to a mandatory prepayment described in Section 2.9(c) or a
voluntary prepayment pursuant to Section 2.9(d) will take place on a date that
is not an Interest Payment Date, Customer shall give written notice (a “Prepayment Tranche Request”) to SunAmerica,
Facility Agent and Custodian at least three (3) Business Days prior to the
Interest Payment Date preceding such event requesting a Modified Tranche Period
commencing on such Interest Payment Date to and including the Business Day that
the anticipated date of the relevant event is expected to occur, and specifying
the amount of the Aggregate Principal Outstanding to be allocated to such
Modified Tranche Period.  If such
Modified Tranche Period is available and SunAmerica has not determined in its
sole discretion that such Modified Tranche Period is undesirable, the
Prepayment Tranche Request shall constitute irrevocable notice of an election
of such Modified Tranche Period.  If the
anticipated date of the relevant event changes from the date set forth in any
Prepayment Tranche Request, Customer shall, at least three (3) Business Days
prior to the end of the Modified Tranche Period, deliver a new Prepayment
Tranche Request requesting a Modified Tranche Period to commence upon the
expiration of the Tranche Period then in effect.”


2.14        Amendments to Section 2.11.


A.            Paragraph (b) of Section 2.11 of the
Warehouse Agreement is amended by deleting the reference to “8%” and replacing
it with a reference to “20%”.


B.            Section 2.11 of the Warehouse Agreement
is amended by inserting a new paragraph immediately following paragraph (e):


“(f)          Quarterly Financials and Compliance
Certificate.  As soon as available, and
in any event within 45 days after the end of each Fiscal Quarter, Customer
shall deliver to SunAmerica (i) a consolidated balance sheet of Customer and
its Subsidiaries as of the end of such quarter, (ii) a consolidated statement
of income and cash flow of Customer and its Subsidiaries for the period
commencing at the end of the previous quarter (or in the case of the first
Fiscal Quarter following the IPO, commencing on the IPO Date) and ending with
the end of such quarter, and (iii) a consolidated statement of income and cash
flow of Customer and its Subsidiaries for the period commencing on the IPO Date
and ending with the end of such quarter, all in reasonable detail and duly
certified by the chief financial officer of Customer.  Together with each set of quarterly financials pursuant to this
paragraph (f), Customer shall deliver to SunAmerica a certificate of its chief
financial officer (1) stating that no Termination Event has occurred and is
continuing or, if a


 


10

















 


Termination Event has
occurred and is continuing, a statement as to the nature thereof and the action
that Customer has taken and proposes to take with respect thereto, and (2)
setting forth the computations used by Customer in determining compliance with
the financial condition covenants set forth in Section 5.1(n).”


2.15        Amendment to Section 3.1. 
Section 3.1(a)  of the Warehouse
Agreement is amended by amending and restating the first sentence thereof in
its entirety as follows:


“Customer is a Maryland
real estate investment trust duly organized, validly existing and subsisting
under the laws of the State of Maryland.”


2.16        Amendments to Section 4.2. 
Paragraphs (c), (d) and (e) of Section 4.2 of the Warehouse Agreement
are amended by adding the following clause to the beginning of each such
paragraph:


“With respect to each
Investment of Principal for which Receivables are to be acquired with the
proceeds thereof,”


2.17        Amendment to Section 5.1.  Section 5.1 of the Warehouse
Agreement is amended by inserting the following new paragraph immediately
following paragraph (m):


“(n)         Financial
Condition Covenants.  Customer shall at
all times comply with the following financial condition covenants (collectively,
the “Financial Condition Covenants”):


(i)            Minimum Consolidated Net Worth.  Customer shall not permit Consolidated Net
Worth at any time to be less than the sum of (a) 80% of the net proceeds to
Customer of the IPO, plus (b) 75% of the net proceeds to Customer of any
subsequent sale or issuance of any equity securities of Customer or its
Subsidiaries.


(ii)           Minimum Consolidated Net Income.  Customer shall not permit Consolidated Net
Income, as of the end of any Fiscal Quarter, to be less than negative $500,000;
provided, however, that as of the end of the first Fiscal Quarter of Fiscal
Year 2004, Customer’s Consolidated Net Income shall not be less than negative
$2,000,000.


(iii)          Maximum Leverage Ratio.  Customer shall not permit the ratio of (x)
Consolidated Total Debt to (y) Consolidated Net Worth to exceed 5:1 at any
time.”


2.18        Amendments to Section 5.2.


A.            Subparagraph (i) of Section 5.2(e) of the
Warehouse Agreement is amended by amending and restating such subparagraph in
its entirety as follows:


“(i)          Customer
and its Subsidiaries may make and own Investments in (1) Eligible Investments,
(2) mortgage backed securities, including, without limitation, private label
mortgage pass through certificates and obligations of Fannie Mae and Freddie
Mac, and (3) investments pursuant to the Hedge Agreement.”


 


11

















 


B.            Subparagraph (ii) of Section 5.2(e) of
the Warehouse Agreement is amended by amending and restating such subparagraph
in its entirety as follows:


“(ii)         Customer
may (a) make intercompany loans to the extent expressly permitted in this
Agreement and (b) transfer Taxable Non-REIT Assets to a Taxable REIT Subsidiary
Entity.”


C.            Subparagraph (vi) of Section 5.2(f) of
the Warehouse Agreement is amended by deleting the reference to “$500,000” and
replacing it with a reference to “$1,000,000”.


D.            Paragraph (f) of Section 5.2 of the
Warehouse Agreement is further amended by deleting the “and” at the end of
subparagraph (vii), and adding two new subparagraphs immediately following
subparagraph (viii):


“(ix)         Customer and its Subsidiaries may
become and remain liable with respect to Indebtedness of not more than $10
million pursuant to the Revolving Hedge Facility; and


(x)            Customer may become and remain liable
with respect to the lease obligations of any Subsidiary that are otherwise
permitted under Section 5.2(k) hereof.”


E.             Section 5.2(i) of the Warehouse Agreement
is amended by deleting the “and” at the end of subparagraph (iii), adding “and”
at the end of subparagraph (iv), and adding a new subparagraph (v):


“(v)         Customer may transfer Taxable Non-REIT
Assets to a Taxable REIT Subsidiary Entity.”


F.             Section 5.2(l) of the Warehouse Agreement
is amended by inserting the phrase “and transfers by Customer of Taxable
Non-REIT Assets to a Taxable REIT Subsidiary Entity” immediately following the
phrase “contemplated by this Agreement” in the second line thereof.


G.            Section 5.2(p) of the Warehouse Agreement
is amended and restated in its entirety as follows:


“(p)         Conduct of Business.  Except as otherwise expressly permitted
hereunder, Customer shall not, and shall not permit any of its Subsidiaries to,
engage in any business other than (i) those necessary for, incident to,
connected with, or arising out of the acquisition and servicing of Eligible
Receivables and pursuant to Sale/Leaseback Transactions and the making of
Investments permitted pursuant to Section 5.2(e), and (ii) such other lines of
business as may be consented to by SunAmerica. 
Notwithstanding the foregoing, and except for the conduct of the
servicing and loan underwriting business by the Taxable REIT Subsidiary Entity,
no Subsidiary of Customer shall engage in any business except as contemplated
by the Securitization Transaction to which it is a party.”


2.19        Amendment to Section 7.1.


A.            Section 7.1(a) of the Warehouse Agreement
is amended and restated as follows:


 


 


12

















 


“(a)         Customer
shall fail to make any payment or deposit to be made by it hereunder when due
(including pursuant to Section 2.9(c) hereof) or under any Transaction Document
when due; or”


B.            Section 7.1(t) of the Warehouse Agreement
is amended and restated as follows:


“(t)           Customer fails to comply with any of
the Financial Condition Covenants in accordance with Section 5.1(n).”


Section
3.                                          AMENDMENTS EFFECTIVE AS
OF THE TERMINATION OF THE SUBORDINATED LOAN AGREEMENTS.


The following amendments
to the Warehouse Agreement will be effective, without further action of the
parties, upon satisfaction of the covenants set forth in Section 2.3 of this
Fifth Amendment.


3.1          Amendments to Section 2.5(c).


A.            Paragraph (c) of Section 2.5 of the
Warehouse Agreement is amended by deleting subparagraphs (viii), (ix), (x) and
(xi).


B.            Subparagraph (xii) of Section 2.5(c) of
the Warehouse Agreement is amended as follows: (i) by renaming such
subparagraph “(viii),”; and (ii) deleting the word “twelfth” and replacing it
with “eighth.”


3.2          Amendments to Section 2.6(b).


A.            Paragraph (b) of Section 2.6 of the
Warehouse Agreement is amended by deleting subparagraphs (vii), (viii), (ix),
(x), (xi), (xii), (xiii) and (xiv).


B.            Subparagraph (xv) of Section 2.6(c) of
the Warehouse Agreement is amended as follows: (i) by renaming such
subparagraph “(vii),”; and (ii) deleting the word “fifteenth” and replacing it
with “seventh.”


3.3          Amendments to Section 3.1.


A.            Section 3.1 of the Warehouse Agreement is
amended by adding the following clause at the beginning thereof:


“Except as expressly set
forth below,”


B.            Paragraph (v) of Section 3.1 of the
Warehouse Agreement is amended by amending and restating such paragraph in its
entirety as follows:


“(v)         Subordinated Notes.  Customer represents and warrants, but only
at all times prior to repayment in full by Customer of the Senior Subordinated
Loan Agreement and the Junior Subordinated Loan Agreement and the satisfaction
in full all other outstanding obligations thereunder, that: (i) Customer has
the corporate power and authority to issue 


 


 


13

















 


the Subordinated Notes
and the Subordinated Notes are the legally valid and binding obligations of
Customer enforceable in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditor’s rights generally or by equitable
principles relating to enforceability; (ii) the subordination provisions of the
Senior Subordinated Loan Agreement and Junior Subordinated Loan Agreement,
respectively, will be enforceable against the holders thereof or Persons party
thereto, as applicable, and all Customer Obligations are within the definition
of “Senior Loan Obligations” included in such provisions; and (iii) the
aggregate principal amount of Senior Subordinated Notes available pursuant to
the Senior Subordinated Loan Agreement is $19,300,000, together with the
aggregate principal amount of the Senior Interest Capitalization Notes
delivered pursuant to the Senior Subordinated Loan Agreement and the aggregate
principal amount of the Junior Subordinated Note available pursuant to the
Junior Subordinated Loan Agreement is $500,000, together with the aggregate
principal amount of the Junior Interest Capitalization Note delivered pursuant
to the Junior Subordinated Loan Agreement.”


3.4          Amendment to Section 3.2.  Section 3.2 of the Warehouse
Agreement is amended by adding the following at the end thereof:


“, provided, however,
that the representations and warranties of Customer in Section 3.1(v) will be
deemed to have been so certified only on each such day prior to repayment in
full by Customer of the Senior Subordinated Loan Agreement and the Junior
Subordinated Loan Agreement and the satisfaction in full all other outstanding
obligations thereunder.”


3.5          Amendments to Section 5.2.


A.            Paragraph (a) of Section 5.2 of the
Warehouse Agreement is amended by deleting the reference following subparagraph
(iii) to “Liens incurred pursuant to the Senior Subordinated Loan Agreement”.


B.            Paragraph (c) of Section 5.2 of the
Warehouse Agreement is amended by deleting the reference to “ and the Senior
Subordinated Loan Agreement,” following the first clause of the sentence.


C.            Paragraph (f) of Section 5.2 of the
Warehouse Agreement is amended as follows: (i) by deleting subparagraph (v)
thereof; and (ii) renaming subparagraphs (vi), (vii), (viii), (ix) and (x)  as “(v)”, “(vi)”, “(vii)”, “(viii)” and
“(ix)”, respectively.


D.            Paragraph (h) of Section 5.2 of the
Warehouse Agreement is amended and restated in its entirety as follows:


“(h)         Restricted Junior Payments.  Customer shall not, and shall not permit any
of its Subsidiaries to, make any Restricted Junior Payment, except that
Customer may make Permitted Tax Distributions.”


 


 


14

















 


3.6          Amendment to Section 7.1.  Section 7.1 of the Warehouse
Agreement is amended by deleting the following parenthetical clause to the
introductory clause of Section 7.1 immediately following the phrase “shall
constitute a ‘Termination Event’”:


“(provided, that notwithstanding
the following provisions of this Section 7.1 and in light of the subordinated
position of the obligations under the Junior Subordinated Loan Agreement, an
Event of Default under the Junior Subordinated Loan Agreement, including but
not limited to a failure to make a scheduled interest payment when due, shall
not constitute a Termination Event hereunder):”


Section 4.              MISCELLANEOUS.


4.1          Reference to and effect on the
Warehouse Agreement and other documents relating to the Warehouse Agreement.


A.            On and after the date hereof, each
reference in the Warehouse Agreement to “this Agreement”, “hereunder”,
“hereof”, “herein” or words of like import referring to the Warehouse
Agreement, and each reference in any other document relating to the Warehouse
Agreement to the “Warehouse Agreement”, “thereunder”, “thereof”, or words of
like import referring to the Warehouse Agreement shall mean and be a reference
to the Warehouse Agreement as amended by the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment and this Fifth Amendment.


B.            Except as specifically amended by the
First Amendment, the Second Amendment, the Third Amendment, the Fourth
Amendment and this Fifth Amendment, the Warehouse Agreement and any other
documents relating to the Warehouse Agreement shall remain in full force and
effect and are hereby ratified and confirmed.


C.            The execution, delivery and performance
of the First Amendment, the Second Amendment, the Third Amendment, the Fourth
Amendment and this Fifth Amendment shall not, except as expressly provided
therein and herein, constitute a waiver of any provision of, or operate as a
waiver of any right, power or remedy of the parties under, the Warehouse
Agreement or any other document relating to the Warehouse Agreement.


4.2          Execution in Counterparts.  This Fifth Amendment may be
executed in any number of counterparts, and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts taken together shall constitute
but one and the same instrument.


4.3          Headings.  Section and subsection headings
in this Fifth Amendment are included herein for convenience of reference only
and shall not constitute a part of this Fifth Amendment for any other purpose
or be given any substantive effect.


4.4          Further Assurances.  The parties to this Fifth
Amendment agree to execute and deliver any additional information, documents or
agreements contemplated hereby and/or necessary or appropriate to effect and
perform the actions contemplated hereby and to amend each of the Transaction
Documents, including the Paying Agent Agreement, as is necessary to conform
such documents to the amendments to the Warehouse Agreement set forth herein.


 


 


15

















 


4.5          Applicable Law.  THIS FIFTH AMENDMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND ALL OTHER ASPECTS HEREOF SHALL
BE DEEMED TO BE MADE UNDER, SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.


[Remainder of page
intentionally left blank]


 


16

















 


IN WITNESS WHEREOF, the parties hereto have caused this
Fifth Amendment to be executed by their respective duly authorized officers as
of the date first above written.


 


	
  FALCON
  FINANCIAL, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ David A. Karp

  
	
   

  	
   

  	
  Name:  David A. Karp

  
	
   

  	
   

  	
  Title:  President

  



 


 


 


	
  SUNAMERICA
  LIFE INSURANCE COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  AIG Global Investment
  Corp.

  
	
  Its:

  	
   

  	
  Investment Advisor

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Thomas Denkler

  
	
   

  	
   

  	
  Name:  Thomas
  Denkler

  
	
   

  	
   

  	
  Title:  Vice
  President

  



 


 


 


	
  THE
  BANK OF NEW YORK, as Paying Agent and Custodian

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Diane Pickett

  
	
   

  	
   

  	
  Name:  Diane Pickett

  
	
   

  	
   

  	
  Title:  Vice President

  



 


 


 


	
  ABN
  AMRO BANK N.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Patricia M. Luken

  
	
   

  	
   

  	
  Name:  Patricia M. Luken

  
	
   

  	
   

  	
  Title:  Group Vice President

  



 


 


	
  By:

  	
   

  	
  /s/ Nancy C. Beese

  
	
   

  	
   

  	
  Name:  Nancy C. Beese

  
	
   

  	
   

  	
  Title:  Group Vice President

  



 


 


 


S-1

















 


                ACKNOWLEDGED
AND AGREED as of
the date first above written pursuant to Section 2 of the Participation
Agreement dated as of January 7, 1998 between SunAmerica Life Insurance Company
and the undersigned.


 


	
  GOLDMAN
  SACHS MORTGAGE COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  GOLDMAN SACHS REAL ESTATE FUNDING CORP., its general
  partner

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Peter C. Aberg

  
	
   

  	
   

  	
  Name:  Peter C. Aberg

  
	
   

  	
   

  	
  Title:  Vice President

  



 


 


S-2

















 


EXHIBIT A


 


RECEIVABLES AGREEMENT


 


(See Attached)


 


 


 

















 


FALCON
FINANCIAL, LLC


 


AGREEMENT
RELATING TO RECEIVABLES


 


This AGREEMENT RELATING TO RECEIVABLES (“Agreement”)
is dated as of October 27, 2003 and entered into by and among Falcon Financial,
LLC (“Company”),
SunAmerica Life Insurance Company (“SunAmerica”), and Goldman Sachs Mortgage
Company (“Goldman
Sachs”; and together with SunAmerica, the “Lenders”).  Capitalized terms used herein without
definition have the meanings set forth in Section 5.


 


WHEREAS, Company is the borrower under the
Revolving Warehouse Financing Agreement dated as of January 7, 1998 by and
among Company, SunAmerica, LaSalle National Bank and ABN AMRO Bank N.V. (as
amended, “Warehouse
Agreement”).


 


WHEREAS, Company is the borrower under the
Amended and Restated Senior Subordinated Loan Agreement dated as of January 7,
1998 by and among Company and the Lenders (as amended, “Senior Subordinated  Loan Agreement”).


 


WHEREAS, Lenders provide credit support on
behalf of Company relating to the Warehouse Agreement under the terms of the
Master Agreement and the Participation Agreement dated as of January 7, 1998 by
and between Lenders.


 


WHEREAS, unless extended, the term of Warehouse
Agreement expires on October 27, 2003 and Company desires to extend the term of
the Warehouse Agreement until May 1, 2004, and that Lenders consent to such
extension.


 


WHEREAS, subject to Company’s covenants and
agreements set forth in this Agreement, Lenders consent to such extension of
the Warehouse Agreement.


 


                NOW, THEREFORE, in consideration of the
foregoing and the mutual covenants and agreements set forth herein, the parties
hereto agree as follows:


 


Section 5.              Consent of Lenders to Origination of
Receivables.


Company shall not,
without the approval of Lenders pursuant to this Section 1, originate any
Receivable.


5.1          Submission of Receivable Proposal. 
Prior to originating any Receivable, Company will (i) certify that such
Receivable, if and when originated, will comply with the Loan Origination
Guidelines as then in effect, and (ii) submit to Lenders a Preliminary Due
Diligence Package.


5.2          Review of Receivable Proposal. 
Upon Lenders’ receipt of a complete Preliminary Due Diligence Package,
Lenders will have the right to request, within three (3) Business Days,
additional diligence materials as Lenders may reasonably specify on a
Supplemental Due Diligence List.


 


A-1

















 


5.3          Approval of Receivables.


A.            Upon Lenders’ receipt of all of the
Diligence Materials or waiver thereof, Lenders, within five (5) Business Days,
will notify Company of their (i) approval of the origination of the Receivable
on the terms and conditions set forth in the Diligence Materials (an “Approval”), (ii) conditional approval of
the origination of the Receivable (a “Conditional
Approval”), subject to Company’s compliance with the terms and
conditions set forth in such notice (the “Approval
Requirements”), or (iii) disapproval of the origination of the
Receivable (a “Disapproval”), in
each case such Approval, Conditional Approval or Disapproval to be made in
Lenders’ good faith discretion. 
Lenders’ failure to respond to Company within five (5) Business Days
following receipt of all Diligence Materials or written waiver thereof will be
deemed to be a Disapproval of origination of such Receivable.


B.            Upon receipt of an Approval, Company may
(but will not be required to) originate such Receivable, but only on the terms
and conditions set forth in the Diligence Materials.


C.            Upon receipt of a Conditional Approval, Company
will, within 30 days (or such longer or shorter time as expressly set forth in
the Approval Requirements), satisfy each of the Approval Requirements and
deliver to Lenders evidence thereof satisfactory to Lenders in their good faith
discretion.  Upon satisfaction of each
Approval Requirement within the applicable time frame, Lenders will be deemed
to have given Approval to originate the Receivable.  If Company fails to satisfy each of the Approval Requirements
within the applicable time frame, Company will not originate such Receivable
without again complying de novo with
the requirements of this Section 1, unless Lenders have otherwise agreed in
writing.


D.            Company will not submit a Receivable for
origination to an Obligor that was the subject of a Disapproval at any time
within 180 days following such Disapproval, unless Lenders have otherwise
agreed in writing.


Section 6.              Deficient Receivables; Mandatory Reduction of
Invested Principal.


6.1          Basis of Receivables. 
Company will allocate to each Receivable a basis (the “Basis”) which, at the time of the
origination of the Receivable by Company, will be equal to its principal
balance; provided, that the Basis of any Receivable which is acquired from a
third party will be the purchase price paid by Company.  The Basis of each Receivable will be reduced
by any payment (or other return) of principal thereon to the extent such
payment or other return reduces the Invested Principal related to such
Receivable under the Warehouse Agreement.


6.2          Changes in Underwriting Issues. 
With respect to each Receivable, Company will monitor, by making
reasonable inquiries and exercising reasonable care and diligence under the
circumstances, the continuing creditworthiness of Obligor and the status of the
Related Security.  Company will provide
prompt written notice to Lenders of any material change in the actual or
potential risks with respect to the timely and complete satisfaction of
Obligor’s obligations relating to the Receivable under the Contracts related
thereto.


6.3          Deficiency. 
If Lenders determine in their good faith sole discretion that the
aggregate present value of the Receivables is less than the sum of (x) the
aggregate Basis, plus (y) all accrued and unpaid interest on the Aggregate
Principal Outstanding, then a “Deficiency”
will be


 


 


A-2

















 


deemed to exist. 
Lenders will provide written notice to Company (a “Deficiency Notice”) setting forth the
aggregate present value of the Receivables as so determined by Lenders, which
may, in the sole discretion of Lenders, be determined by applying the
Deficiency pro rata to all Receivables or to specific Receivables (the
aggregate Basis of Receivables after application of the Deficiency being the “Aggregated Adjusted Basis”).  Thereafter, for purposes of determining the
existence of a Deficiency, the Basis of each Receivable will be deemed to be
the Basis as so adjusted (the “Adjusted Basis”).  Company will cooperate with Lenders in their
assessment of a potential Deficiency and their determination of Aggregate
Adjusted Basis (including but not limited to providing all information and
documentation in the possession or under the control of Company regarding the
Receivables and Related Security as requested by Lenders).


6.4          Mandatory Prepayment of Aggregate Principal
Outstanding.  Company will make, within two Business Days
after receipt of a Deficiency Notice, a prepayment of the Aggregate Principal
Outstanding such that the Aggregate Principal Outstanding will be no greater
than the product of (x) the Advance Rate, multiplied by (y) the Aggregate
Adjusted Basis.  Such prepayment will be
allocated, in the sole discretion of Lenders, either to reduce the Invested
Principal of all Receivables on a pro rata basis or to reduce the Invested
Principal of specific Receivables.  The
Deficiency Notice will include the Lenders’ direction with respect to the
allocation of any such  prepayment.


Section 7.              Extension of Facility Termination Date. 
Concurrently with the execution hereof, SunAmerica will issue a Restart
Notice that extends the Facility Termination Date until May 1, 2004.


Section
8.              Miscellaneous.


8.1          Remedies for Breach.  Company
acknowledges that, in the sole discretion of Lenders, the following will
constitute a Termination Event pursuant to Section 7.1(o) of the Warehouse
Agreement: (i) failure by Company to make any required prepayment of Aggregate
Principal Outstanding pursuant to and within the time period specified in
Section 2.4; or (ii) any other material breach of this Agreement by Company
that remains uncured more than 15 days following receipt of written notice
thereof given by Lenders.  The foregoing
remedy is in addition to any other rights of remedies available to Lenders
under applicable law with respect to such breach by Company.


 


8.2          Amendment.  No amendment, modification,
termination or waiver of any provision of this Agreement, or consent to any
departure by Company therefrom, will be effective without the written consent
of the Lenders.


 


8.3          Successors and Assigns. 
This Agreement will be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns.  Neither Company’s rights or obligations
hereunder nor any interest therein may be assigned or delegated by Company
without the prior written consent of Lenders.


 


8.4          No Waiver; Cumulative Remedies.  No failure
or delay on the part of either Lender in the exercise of any power, right or
privilege hereunder will impair such power, right or privilege


 


 


A-3

















 


or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other power, right or
privilege.  All rights and remedies
existing under this Agreement are cumulative to, and not exclusive of, any
rights or remedies otherwise available.


 


8.5          Notices.  Unless otherwise specifically provided
herein, any notice or other communication herein required or permitted to be
given will be in writing and may be personally served, telecopied or sent by
United States mail or courier service and will be deemed to have been given
when delivered in person or by courier service, upon receipt of telecopy, or
four (4) Business Days after depositing it in the United States mail,
registered or certified, with postage prepaid and properly addressed.  For the purposes hereof, the address of each
party hereto will be as set forth under such party’s name on the signature pages
hereof or such other address as may be designated by such party in a written
notice delivered to the other parties hereto.


 


8.6          Execution in Counterpart.  This
Agreement may be executed in any number of counterparts, and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts taken together
shall constitute but one and the same instrument.


 


8.7          Headings. 
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.


 


8.8          Further Assurances. 
The parties agree to execute and deliver any additional information, documents
or agreements contemplated hereby and/or necessary or appropriate to effect and
perform the actions contemplated hereby, including but not limited to any
amendments to the Company’s operating agreement or the Senior Subordinated Loan
Agreement as may be necessary to effectuate the covenants and agreements set
forth herein.


 


8.9          Applicable Law. 
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND
ALL OTHER ASPECTS HEREOF SHALL BE DEEMED TO BE MADE UNDER, SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.


 


Section
9.              Definitions.


9.1          Terms Defined in Warehouse Agreement. 
The following terms have the respective meanings set forth in the
Warehouse Agreement:


Advance Rate


Aggregate Principal Outstanding


Business Day


Contract


 


 


A-4

















 


Hedge Agreement


Interest Payment Date


Invested Principal


Loan Origination Guidelines


Master Agreement


Obligor


Receivable


Related Security


Restart Notice


9.2          Additional Definitions.


“Appraisal” means an appraisal of any Related Security prepared by a
licensed appraiser in accordance with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation, in compliance with the requirements
of Title 11 of the Financial Institution Reform, Recovery and Enforcement Act
and utilizing customary valuation methods such as the income, sales/market or
cost approaches, as any of the same may be updated by recertification from time
to time by the appraiser performing such appraisal.


 


“Diligence Materials” means the Preliminary Due Diligence Package
together with the materials requested in the Supplemental Due Diligence List.


 


“Preliminary Due Diligence Package” means, with respect to any proposed
Receivables, the following due diligence information relating to the applicable
Obligor and the Related Security to be provided by Company to Lenders pursuant
to this Agreement:


 


(i)            a summary memorandum outlining the
proposed Receivable, including potential transaction benefits and all material
underwriting risks, all Underwriting Issues and all other characteristics of
the proposed Receivable and the Obligor that a prudent lender would consider
material;


(ii)           all Contracts, or current drafts
thereof, including without limitation, financing agreements, promissory notes,
mortgages and other loan documents (but excluding secretaries’ and officers’
closing certificates and similar immaterial closing documents) under which such
Receivable is proposed to arise and by which a security interest in the assets
collateralizing such Receivable is proposed to be granted and perfected, in
each case marked to show cumulative changes from Company’s standard form of
such Contract;


(iii)          the charter and other organizational
documents of Obligor;


 


 


A-5

















 


(iv)          the agreements, instruments and
documents with respect to claims on or liens against the assets or properties
of Obligor purporting to secure payment of the Receivable;


(v)           current rent roll, if applicable;


(vi)          cash flow pro-forma, plus historical
information, if available;


(vii)         indicative debt service coverage
ratios;


(viii)        indicative loan-to-value ratio;


(ix)           Company’s, any affiliate’s or any of
their respective officers or directors relationship with Obligor or any
affiliate;


(x)            if applicable, Phase I environmental
report (including asbestos and lead paint report);


(xi)           if applicable, engineering and
structural reports;


(xii)          third party reports, to the extent
available and applicable, including:


(a)           current Appraisal;


(b)           Phase II or other follow-up
environmental report if recommended in Phase I;


(c)           seismic reports; and


(d)           operations and maintenance plan with
respect to asbestos containing materials;


(xiii)         to the extent applicable, a list that
specifically identifies any Contracts or other documents that relate to the
Receivable or Related Security but are not in Company’s possession (e.g., a
document relevant to the summary memorandum referenced clause (i) above but
which is in the possession of the master servicer); and


(xiv)        insurance documentation satisfactory to
Lenders in their sole discretion.


“Supplemental Due Diligence List” means, with respect to any proposed
Receivable, information or deliveries concerning the Obligor and/or the Related
Security that Lenders may request in addition to the Preliminary Due Diligence
Package including without limitation a credit approval memorandum representing
the final terms of the underlying Receivable, a final updated loan-to-value
ratio computation and a final debt service coverage ratio computation for such
proposed Receivable.


 


“Underwriting Issues” means with respect to any proposed Receivable,
all information that has come to Company’s attention, based on the making of
reasonable inquiries and the exercise of


 


 


A-6

















 


 reasonable care and diligence
under the circumstances, which would be considered a materially “negative”
factor (either separately or in the aggregate with other information), or a
material defect in loan documentation or closing deliveries, to a reasonable
institutional lender in determining whether to originate or acquire the
Receivable in question.


 


[remainder of page
intentionally left blank]


 


 


A-7

















 


IN
WITNESS WHEREOF,
the parties hereto have caused this Agreement Relating to Receivables to be
executed by their respective duly authorized officers as of the date first
above written.


 


	
  COMPANY:

  
	
  FALCON FINANCIAL, LLC

  
	
   

  
	
   

  
	
  By: 

  	
  /s/  David A. Karp

  
	
   

  	
  Name:  David A. Karp

  
	
   

  	
  Title:  President

  
	
  Address:

  



 


 


	
  SUNAMERICA:

  
	
   

  	
   

  	
   

  
	
  SUNAMERICA
  LIFE INSURANCE COMPANY

  
	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  AIG
  Global Investment Corp.

  
	
  Its:

  	
   

  	
  Investment
  Advisor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Thomas Denkler

  
	
   

  	
   

  	
  Name:  Thomas Denkler

  
	
   

  	
   

  	
  Title:  Vice President

  
	
  Address:

  



 


 


	
  GOLDMAN
  SACHS:

  
	
   

  	
   

  	
   

  
	
  GOLDMAN
  SACHS MORTGAGE COMPANY

  
	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  GOLDMAN SACHS REAL ESTATE FUNDING CORP., its general
  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Peter C. Aberg

  
	
   

  	
   

  	
  Name:  Peter C. Aberg

  
	
   

  	
   

  	
  Title:  Vice President

  
	
  Address:

  



 


 

















 


EXHIBIT B


 


RECEIVABLES APPROVED
PRIOR TO APPOINTMENT OF CONSULTANT


 


 


Eddy’s Toyota


Pete Kirill (Schilly Investments)


Yosemite Harley-Davidson


Michael Holley