Exhibit 10.16


 


EXECUTION
VERSION


GUARANTY


This Guaranty (this “Guaranty”), dated as of
August    , 2006, is by and among FirstCity Financial
Corporation, a Delaware corporation (“FirstCity”), Bidmex Holding, LLC, a Delaware
limited liability company (“Buyer”), Residencial Oeste 2, S. de R.L. de C.V., a
Mexican limited liability company (“Assignee”),
National Union Fire Insurance Company of Pittsburgh, P.A., a Pennsylvania
corporation (“National Union”), American
General Life Insurance Company, a Texas corporation (“American
General”) and American General Life and Accident Insurance
Company, a Tennessee corporation (“AGLAIC”
and, together with National Union and American General, “AIG”).  Buyer, Assignee and AIG shall be referred to
herein individually, as a “Beneficiary”
and, collectively as the “Beneficiaries.”


RECITALS:


A.            Contemporaneously with the execution
of this Guaranty, Strategic Mexican Investment Partners, L.P., a Texas limited
partnership (“SMIP”),
Buyer and AIG have entered into an Interest Purchase and Sale Agreement (the “Interest Purchase Agreement”), dated as
of even date herewith, by and among Buyer, the Delaware limited liability
companies listed on Exhibit A attached to the Interest Purchase Agreement (each
individually, a “Company,” and collectively,
the “Companies”), SMIP, Cargill Financial
Services International, Inc., a Delaware corporation (“Cargill”
and, together with SMIP, the “Sellers”).  The Sellers and the Companies shall be
collectively referred to as the “Seller Entities.”


B.            The Sellers are the sole members of
the Companies and collectively own beneficially and of record 100% of the
membership interests in each of the Companies, as set forth on Exhibit A
attached to the Interest Purchase Agreement (collectively, the “Membership Interests”).


C.            The Sellers desire to sell to Buyer,
and Buyer desires to purchase from the Sellers, 100% of the Membership
Interests on the terms and conditions set forth in the Interest Purchase
Agreement.


D.            Contemporaneously with the execution
of this Agreement and the Interest Purchase Agreement, Buyer has entered into
the Agreement for the Onerous Transfer of Loans and Litigious Rights, dated as
of even date herewith (the “Transfer of
Rights Agreement” and, together with the Interest
Purchase Agreement, the “Operative Agreements”)
among SMIP, Cargill, Assignee, Residencial Oeste, S. de R.L. de C.V. (“Assignor”), and AIG which provides,
among other things, for the purchase by Assignee from Assignor, and the sale,
assignment, and transfer by Assignor to Assignee, of an interest in certain
Loans, as defined in the Transfer of Rights Agreement; and


E.             In order to induce the Buyer and
AIG to enter into the Interest Purchase Agreement, in order to induce Assignee
and AIG to enter into the Transfer of Rights Agreement, in connection with and
as a condition to the closing of the transactions contemplated by the Operative
Agreements, and because FirstCity will be an indirect beneficiary of the
consummation of such transactions, FirstCity has agreed to enter into this
Guaranty.


AGREEMENTS:


NOW,
THEREFORE, in consideration of the premises and the mutual
covenants and agreements of the parties made in this Guaranty and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:









 



EXECUTION
VERSION


1.             Guaranty.  FirstCity hereby agrees with the
Beneficiaries to cause and enable SMIP to perform its obligations under the
Operative Agreements, and hereby guarantees irrevocably and unconditionally to
the Beneficiaries upon the terms of this Agreement that SMIP will well and
faithfully perform and fulfill everything required by the Operative Agreements
on its part to be performed and fulfilled, at the times and in the manner
provided in the Operative Agreements, and also that the payments provided for
in the Operative Agreements shall be promptly paid when due. FirstCity agrees
that if for any reason whatsoever SMIP shall fail or be unable duly, punctually
and fully to perform any such obligation under the Operative Agreements,
FirstCity shall perform each and every such obligation, or cause each such
obligation to be performed. FirstCity’s obligations shall be subject to any
Beneficiary (i) obtaining judgment against SMIP, which judgment may be sought
in a legal action pursuant to which both SMIP and FirstCity are co-defendants,
regarding the performance of any obligation for which such Beneficiary is
seeking FirstCity’s guaranty (the “Judgment”),
and (ii) to the extent FirstCity was not party to the relevant lawsuit,
providing FirstCity written notice of any failure of such performance
obligation and the entry of the Judgment. FirstCity shall cure such default
within five (5) business days after receipt of the notice and copy of the
Judgment; provided, however, that if FirstCity was
a co-defendant in the lawsuit pursuant to which the Judgment was obtained,
FirstCity shall cure the default of SMIP immediately upon SMIP’s failure to pay
such Judgment within five (5) business days of the date upon which such
Judgments was obtained. In addition, FirstCity agrees to reimburse such
Beneficiary on demand for any and all reasonable expenses (including reasonable
fees and expenses of counsel) incurred by such party in successfully enforcing
any rights under this Guaranty. In any case, FirstCity’s obligation for payment
related to any failure to perform by SMIP as set forth hereunder shall be
limited to the purchase price [or value in Dollars]
received by SMIP under the Operative Agreements.


2.             Representations
and Warranties of Guarantor. 
FirstCity hereby represents and warrants to each Beneficiary as set
forth below:


(a)           The
execution and delivery of this Guaranty and the performance by FirstCity of its
obligations hereunder have been duly and validly authorized by all necessary
corporate action, and no other proceedings on the part of FirstCity are
necessary to authorize the execution and delivery of this Guaranty and the
performance by FirstCity of its obligations hereunder.


(b)           This
Guaranty has been duly executed and delivered by FirstCity, and constitutes a
valid and binding obligation of FirstCity enforceable against FirstCity in
accordance with its terms.


(c)           None
of the execution, delivery or performance of this Guaranty by FirstCity will
(i) require any consent or approval that has not been obtained under; (ii)
require notice that has not been given under; or (iii) violate, conflict with,
breach, constitute a default (or an event which, with notice or lapse of time
or both, would violate, conflict with, breach, or constitute a default) under
or result in the termination of its charter, bylaws or other constituent
documents.


(d)           As
of the date hereof, FirstCity has sufficient liquidity to satisfy its
obligations under this Guaranty, and will maintain at least such amount of
liquidity until the termination of this Guaranty as provided in Section 3
hereof.


3.             Continuing
Guaranty.  This Guaranty is a continuing one and shall remain in
full force and effect until the indefeasible payment and satisfaction in full
of the payment obligations of SMIP under the Operative Documents, and shall be
binding upon, inure to the benefit of and be enforceable by, the parties hereto
and their respective successors and permitted transferees and assigns.



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EXECUTION
VERSION


4.             Amendments
and Waivers.


(a)           No
amendment or waiver of any provision of this Guaranty shall be valid and
binding unless it is in writing and signed, in the case of an amendment, by
FirstCity and each of the Beneficiaries, or in the case of waiver, by the party
against whom the waiver is sought to be enforced.  No waiver by a party of any breach or
violation of, or default under, this Guaranty shall be deemed to extend to any
prior or subsequent breach, violation or default hereunder or to affect in any
way any rights arising by virtue of any such prior or subsequent
occurrence.  No delay or omission by any
party in exercising any right, power or remedy under this Guaranty shall
operate as a waiver thereof.


(b)           To
the fullest extent permitted by law, except as otherwise provided herein,
FirstCity waives presentment to, demand of payment from and protest to the
Beneficiaries, and also  waives notice of
acceptance of its guarantee and notice of protest for nonpayment.


5.             Counterparts. This Guaranty may be
executed in any number of counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument. This Guaranty shall become effective when duly executed by each
party hereto.


6.             Notices.  Any notice
required to be given to a party shall be in writing and should be sufficiently
given if delivered in person or sent by telecopy or by certified or express
mail, postage prepaid, to the following addresses and addressees unless
otherwise advised in writing by the relevant party:


If to FirstCity:


FirstCity Financial
Corporation


6400 Imperial Drive
(Delivery only)


Waco, Texas 76712


P.O. Box 8216


Waco, Texas 76714-8216


Attn:  Legal Department


Facsimile: 254-761-2953


with copy to:


Haynes and Boone, LLP


901 Main Street, Suite
3100


Dallas, Texas  75202


Attn:  Paul H. Amiel


Facsimile: 214-200-0555



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EXECUTION
VERSION


If to Buyer, Assignee or AIG:


Bidmex Holding, LLC


c/o FirstCity Mexico,
Inc.


6400 Imperial Drive
(Delivery only)


Waco, Texas 76712


P.O. Box 8216


Waco, Texas 76714-8216


Attn:  Legal Department


Facsimile: 254-761-2953


with a copy to:


AIG Global Investment
Group


599 Lexington Avenue,
25th Floor


New York, New York 10022


Attn:  Afsar Farman-Farmaian, Esq.,


General Counsel, AIG
Capital Recovery Group


Facsimile: 866-729-7836


and


Goodwin Procter LLP


599 Lexington Avenue


New York, NY 10022


Attn:  Andrew Weidhaas/Alyssa Grikscheit


Facsimile:  (212) 355-3333


The parties agree
that all correspondence is conclusively presumed to be received by the other
parties on the date actually received as evidenced by a date and time stamp or
similar notation made by each receiving party, respectively, unless the sending
party has other reasonable proof of the date of receipt by each receiving
party, respectively (e.g., fax transmittal confirmation, return receipt,
overnight mail receipt).


7.             Governing Laws. 
This Guaranty shall be governed by, and construed in accordance with,
the internal laws of the State of New York, United States of America (without
giving effect to any choice of law or conflict of law provision or rule that
would cause the application of the laws of any other jurisdiction), and any
dispute hereunder shall be subject to resolution solely in any court of
competent jurisdiction in the States of New York.


8.             Jurisdiction and Venue; Service of Process. Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of the courts of the State of New York and any appellate court
thereof, in any action or proceeding arising out of or relating to this
Guaranty or any of the transactions contemplated hereby or for recognition or
enforcement of any judgment relating thereto, and each of the parties hereby
irrevocably and unconditionally (a) agrees not to commence any such action
except in such court, (b) agrees that any claim in respect of any such action
or proceeding may be heard and determined in such New York state court, (c)
waives, to the fullest extent it may legally and effectively do so any
objection which it may now or hereafter have to venue of any such action or
proceeding in any such New York state court, and (d) waives, to the fullest
extent permitted by law, the defense of any inconvenient forum to the
maintenance



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EXECUTION
VERSION


of such
action or proceeding in any such New York state court.  Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Each of the parties
hereto irrevocably consents to service of process in any such action or
proceeding in the manner provided for notices in Section 6 hereof; provided,
however, that nothing in this Guaranty shall affect the right of any
party hereto to serve process in any other manner permitted by law.


9.             Severability. Any term or
provision of this Guaranty that is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Guaranty or affecting the validity or
enforceability of any terms or provisions of this Guaranty in any other
jurisdiction so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. No
party hereto shall assert, and each party shall cause its respective affiliates
not to assert, that this Guaranty or any part hereof is invalid, illegal or unenforceable.


10.           No
Assignment    .  This Guaranty may not be assigned by any
party without the prior written consent of the other parties hereto.


11.           Amendment.  This Guaranty may be modified or amended in
part or in its entirety only by the signed, written agreement of the parties.


 


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EXECUTION
VERSION


IN
WITNESS WHEREOF,
the parties to this Guaranty have caused this Guaranty to be duly executed as
of the day and year first above written.


	
  

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  FIRSTCITY
  FINANCIAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
    Name:

  	
   

  	
   

  
	
   

  	
   

  	
    Title:

  	
   

  	
   

  
						



 


This
Guaranty is accepted as of the date first above written.


	
  

  	
  BUYER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BIDMEX
  HOLDING, LLC

  	
   

  
	
   

  	
  By: FirstCity
  Mexico, Inc., its manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ASSIGNEE:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RESIDENCIAL
  OESTE 2, S. DE R.L. DE C.V.

  	
   

  
	
   

  	
  By: FirstCity
  Mexico, Inc., its manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AIG:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NATIONAL
  UNION FIRE INSURANCE

  COMPANY OF PITTSBURGH, PA.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  AIG Global Investment Corp.,

  
	
   

  	
   

  	
  its investment adviser

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
										



 



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EXECUTION
VERSION


 


	
  

  	
  AMERICAN
  GENERAL LIFE INSURANCE

  COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  AIG Global Investment Corp.,

  
	
   

  	
   

  	
  its investment adviser

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
							



 


 


	
  

  	
  AMERICAN
  GENERAL LIFE AND ACCIDENT

  INSURANCE COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  AIG Global Investment Corp.,

  
	
   

  	
   

  	
  its investment adviser

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
							



 



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