**EXHIBIT 10.40**

 

**CONDITIONAL WAIVER AGREEMENTREGARDING EVENT OF DEFAULT**

 

THIS CONDITIONAL WAIVER AGREEMENT REGARDING EVENT OF DEFAULT (this “ConditionalWaiver”) is entered into as of September 30, 2008, by and between AMERICANBUSINESS LENDING, INC., a Texas corporation (“Borrower”), and WELLSFARGO FOOTHILL, LLC, a Delaware limited liability company (“Lender”),with reference to the following facts, which shall be construed as part of thisConditional Waiver:

 

**RECITALS**

 

A.            Borrower and Lender have entered into thatcertain Loan Agreement dated as of December 15, 2006, as amended by thatcertain First Amendment to Loan Agreement dated as of February 27, 2007,and that certain Second Amendment to Loan Agreement entered into as of July 30,2007 to be effective as of June 30, 2007 (as amended or modified from timeto time, the “Loan Agreement”), pursuant to which Lender is providingfinancial accommodations to or for the benefit of Borrower upon the terms andconditions contained therein. Unless otherwise defined herein, capitalizedterms or matters of construction defined or established in the Loan Agreementshall be applied herein as defined or established therein.

 

B.            Borrower has requested that Lender waive an existingEvent of Default under the Loan Agreement, and Lender is willing to do so tothe extent provided in, and subject to the terms and conditions of, this ConditionalWaiver.

 

**AGREEMENT**

 

NOW, THEREFORE, in consideration of the continued performance byBorrower of its promises and obligations under the Loan Agreement and the otherLoan Documents, and for other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, Borrower and Lender hereby agreeas follows:

 

# 1.             Ratification and Incorporation of LoanAgreement and Other Loan Documents. Except to the extent waived under this Conditional Waiver, (a) Borrowerhereby acknowledges, confirms, and ratifies all of the terms and conditions setforth in, and all of its obligations under, the Loan Agreement and the otherLoan Documents, and (b) all of terms and conditions set forth in the LoanAgreement and the other Loan Documents are incorporated herein by thisreference as if set forth in full herein.

#  

# 2.             Borrower’s Acknowledgement and Lender’s ConditionalWaiver of an Event of Default.Borrower acknowledges that, immediately prior to the effectiveness of this ConditionalWaiver, an Event of Default has occurred and is continuing due to Borrower’sfailure to meet the minimum Tangible Net Worth test under **Section 5.11(a) **ofthe Loan Agreement as of the end of its fiscal quarter ended September 30,2008 (the “Applicable Default”). Lender hereby waives the ApplicableDefault; provided, however, that an express condition precedentto the effectiveness of such waiver is Borrower’s maintaining, on aconsolidated basis with Borrower’s Subsidiaries, Tangible Net Worth of not lessthan $6,000,000 as of the end of such fiscal quarter after taking into accountany dividends paid or accrued.

 

1

----

 

# 3.             Conditions Precedent. Notwithstanding any other provision of thisConditional Waiver, this Conditional Waiver shall be of no force or effect, andLender shall not have any obligations hereunder, until the following conditionshave been satisfied:

#  

## 3.1            Execution of Conditional Waiver. Lender shall have received this ConditionalWaiver, duly executed by Borrower and Lender.

##  

## 3.2            No Default or Event of Default. No Default or Event of Default shall haveoccurred and be continuing, except for the Applicable Default.

##  

# 4.             Representations and Warranties re LoanAgreement. Borrower herebyrepresents and warrants that the representations and warranties contained inthe Loan Agreement were true and correct in all material respects when madeand, except to the extent that (a) a particular representation or warrantyby its terms expressly applies only to an earlier date, or (b) Borrowerhas previously advised Lender in writing as contemplated under the LoanAgreement, are true and correct in all material respects as of the date hereof.Borrower hereby further represents and warrants that no event has occurred andis continuing, or would result from the transactions contemplated under this ConditionalWaiver, that constitutes or would constitute a Default or an Event of Default,except for the Applicable Default.

#  

# 5.             Miscellaneous.

#  

## 5.1            Headings. The various headings of this Conditional Waiver are inserted forconvenience of reference only and shall not affect the meaning orinterpretation of this Conditional Waiver or any provisions hereof.

##  

## 5.2            Counterparts. This Conditional Waiver may be executed bythe parties hereto in several counterparts, each of which shall be deemed to bean original and all of which together shall be deemed to be one and the sameinstrument. Delivery of an executed counterpart of a signature page tothis Conditional Waiver by facsimile transmission shall be effective asdelivery of a manually executed counterpart thereof.

##  

## 5.3            Interpretation. No provision of this Conditional Waiver shallbe construed against or interpreted to the disadvantage of any party hereto byany court or other governmental or judicial authority by reason of such party’shaving or being deemed to have structured, drafted or dictated such provision.

##  

## 5.4            Complete Agreement. This Conditional Waiver constitutes thecomplete agreement between the parties with respect to the subject matterhereof, and supersedes any prior written or oral agreements, writings,communications or understandings of the parties with respect thereto.

##  

## 5.5            Governing Law. This Conditional Waiver shall be governedby, and construed and enforced in accordance with, the laws of the State of NewYork applicable to contracts made and performed in such state, without regardto the principles thereof regarding conflict of laws.

##  

## 5.6            Effect. Upon the effectiveness of this Conditional Waiver, each reference inthe Loan Agreement to “this Agreement,” “hereunder,” “hereof” or words of likeimport shall mean and be a reference to the Loan Agreement as amended herebyand each 

 

2

----

 

## referencein the other Loan Documents to the Loan Agreement, “thereunder,” “thereof,” orwords of like import shall mean and be a reference to the Loan Agreement as affectedby the conditional waiver contained herein.

##  

## 5.7            Conflict of Terms. In the event of any inconsistency betweenthe provisions of this Conditional Waiver and any provision of the LoanAgreement, the terms and provisions of this Conditional Waiver shall govern andcontrol.

##  

## 5.8            No Novation or Waiver. Except as specifically set forth in this ConditionalWaiver, the execution, delivery and effectiveness of this Conditional Waiver shallnot (a) limit, impair, constitute a waiver by, or otherwise affect anyright, power or remedy of, Lender under the Loan Agreement or any other LoanDocument, (b) constitute a waiver of any provision in the Loan Agreementor in any of the other Loan Documents or of any Default or Event of Defaultthat may have occurred and be continuing, or (c) alter, modify, amend orin any way affect any of the terms, conditions, obligations, covenants oragreements contained in the Loan Agreement or in any of the other LoanDocuments, all of which are ratified and affirmed in all respects and shallcontinue in full force and effect.

##  

[THE REMAINDER OFTHIS PAGE IS INTENTIONALLY BLANK]

 

3

----

 

IN WITNESS WHEREOF, the parties hereto have executedthis Conditional Waiver Agreement Regarding Event Of Default as of the day andyear first above written.

 
|   | **AMERICAN BUSINESS LENDING, INC.**, |
|--------|--------------------------------------|
|   | a Texas corporation                  |
|   |                                 |
|   | By:                                  |   |
|   | Charles P. Bell, Jr.            |
|   | Chief Executive Officer              |
|   |                                 |
|   | **WELLS FARGO FOOTHILL, LLC,**       |
|   | a Delaware limited liability company |
|   |                                 |
|   | By:                                  |   |
|   | Laurel L. Varney                     |
|   | Vice President                       |
|   |                                 |

 

[Signature Page toConditional Waiver Agreement Regarding Event Of Default]

 

----