**Exhibit10.59**

 

THECOMPANY HAS REQUESTED AN ORDER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE“COMMISSION”) PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, ASAMENDED, GRANTING CONFIDENTIAL TREATMENT TO SELECTED PORTIONS.  ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVEBEEN OMITTED FROM THIS EXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THECOMMISSION.  OMITTED PORTIONS AREINDICATED IN THIS EXHIBIT WITH “*****”.

 

**INVESTMENT AGREEMENT**

 

THISINVESTMENT AGREEMENT (the “**Agreement**”)is made and entered into this 29th day of June 2010, to be effective as ofthe 1st day of April , 2010 (the “**Effective Date**”), by and between FCDiversified Holdings LLC, a Texas limited liability company (“**FC Diversified**”) and FirstCityServicing Corporation, a Texas corporation (“**Servicing**”),on the one hand, and Värde Investment Partners, L.P., a Delaware limitedpartnership (“**Värde**”), on the other hand(each of FC Diversified, Servicing and Värde, a “Party,” and collectively, the “**Parties**”).

 

**W I T N E SS E T H**

 

**WHEREAS**, FirstCity Affiliates may from time to timereceive invitations to participate in Investment Opportunities;

 

**WHEREAS**, the Parties intend that Värde and itsAffiliates will have the exclusive right to participate in all QualifiedInvestment Opportunities up to an amount equal to SEVEN HUNDRED FIFTY MILLIONAND NO/100 DOLLARS (U.S. $750,000,000.00) in the manner provided herein, whichparticipation will be within the sole and absolute discretion of Värde; and

 

**WHEREAS**, the Parties intend that Servicing willconduct and manage due diligence with respect to Investments on behalf of FCDiversified, Värde and each Acquisition Entity, as provided in this Agreement,in consideration of certain compensation set forth in this Agreement, providedthat such conduct and management shall not be a delegation of authority toServicing or any other FirstCity Affiliate regarding Värde’s decision as towhether or not to participate in a Qualified Investment Opportunity;

 

**NOW, THEREFORE**, in consideration of thecovenants and agreements herein contained, the Parties agree as follows:

 

**ARTICLE 1.****          ****DEFINITIONS.**

 

Asused in this Agreement, the following terms shall have the following meanings:

 

**“Acquisition”** means a transactioninvolving the direct or indirect acquisition of, or making of a loan or otherinvestment with respect to, an Investment by an Acquisition Entity, or anyother transaction which Värde and FC Diversified agree in writing is toconstitute an Acquisition.

 

**“Acquisition Entity”**means each entity formed byVärde or one or more Affiliates of Värde and a Prospective Acquirer for thepurpose of acquiring Investments.

 

**“Affiliate”** means with respect to anyPerson, any Person:

 

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(a)           which directly or indirectlythrough one or more intermediaries controls, or is controlled by, or is undercommon control with, such Person;

 

(b)           which beneficially owns orholds 50% or more of any class of the Voting Equity of such Person; or

 

(c)           of which 50% or more of theVoting Equity is beneficially owned or held by such Person.

 

Theterm “control” means the possession, directly or indirectly, of the power todirect or cause the direction of the management and policies of a Person,whether through the ownership of Voting Equity, other voting securities, bycontract or otherwise.

 

**“Agreed Budget”** has the meaning specifiedin Section 2.8.D.i. of this Agreement.

 

**“Agreement”** has the meaning specifiedin the introduction to this Agreement.

 

**“Bankruptcy Code”**meansTitle 11 of the United States Code, 11. U.S.C. §§ 101 et. seq.

 

**“Bid”** has the meaning specified in Section 2.8.D.of this Agreement.

 

**“Business Day”** means any day on whichbanks are open for business in Connecticut, Minnesota, and Texas.

 

**“Debtor Relief Law”**means applicable liquidation, conservatorship, receivership, bankruptcy,moratorium, rearrangement, insolvency, reorganization, or similar law,proceeding, or device, including, without limitation, the Bankruptcy Code,providing for the relief of debtors from time to time in effect and generallyaffecting the rights of creditors.

 

**“Dollar,” “dollar,” “$,” “U.S. dollar/Dollar,”** and **“USD”** each means the lawful currency of theUnited States of America.

 

**“Due Diligence Expenses”** shall mean and include alland only the following third party expenses incurred by any party hereto, tothe extent set forth in the Agreed Budget: (i) external legal and otherthird party and out-of-pocket expenses incurred for the benefit of theAcquisition Entity in connection with the review and analysis of theInvestments or incurred by the Parties or their Affiliates in connection withanalysis of the Qualified Investment Opportunity or negotiation with the Seller(but shall not include payroll expenses and overhead); and (ii) anyexternal legal or third party or out-of-pocket expenses incurred in connectionwith the Seller negotiations or preparation of definitive documentation(including, without limitation, if applicable, the purchase agreement).

 

**“Effective Date”** has the meaning specifiedin the introduction to this Agreement.

 

**“Excluded Investment”** means (a) anInvestment Opportunity involving an expected Investment Amount of less than theInvestment Threshold, (b) the acquisition of the stock or other equityownerships of a Person if the primary purpose of the acquisition is other thanthe 

 

InvestmentAgreement between FC Diversified Holdings LLC, FirstCity Servicing Corporation

andVärde Investment Partners, L.P. dated June 29, 2010

 

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acquisitionof distressed assets or investments, (c) any distressed loan portfolioinvestment opportunity presented to FC Diversified or a FirstCity Affiliate bya third-party investor, provided a FirstCity Affiliate is presentlyparticipating in such loan portfolio investment opportunity, (d) investmentsor loans made by American Business Lending, Inc., FirstCity DenverInvestment, Inc., FirstCity Denver Investment Corp. (or any otherFirstCity Affiliate formed with Crestone Principal Investors LLC or itsAffiliates), FirstCity Mexico, S.A. de C.V, FirstCity Investimentos Ltda., HMCSInvestment GmbH, HMCS Real Estate GmbH, MCS et Associes, SA, ServiciosIntegrales de Cobranza, S.A. Chile, UBN, SAS or any entity in which one or moreof those Persons own 50% or more of the equity interests of such entity,provided such distressed loan portfolios and similar assets is not offered oravailable to any other FirstCity Affiliate, (e) any product for whichVärde shall have delivered to FC Diversified a negative Transaction Response ora Värde Withdrawal Notice, or failed to deliver a Transaction Response on orbefore the Transaction Response Date, from and after the date of delivery ofsuch response or notice to FC Diversified, or after the Transaction ResponseDate, as applicable; provided that if any FirstCity Affiliate presents any suchExcluded Investment to Värde in a Transaction Notice, the Excluded Investmentincluded in the Transaction Notice shall constitute an Investment for allpurposes of this Agreement, but only as to that Investment Opportunity and anyresulting Acquisition related to that Investment Opportunity, (f) any realestate that is to be occupied by a FirstCity Affiliate for operational (asopposed to investment) purposes; and (g) Investment Opportunities that areexercised by one or more Key Principals solely for their personal account.

 

**“FC Diversified”** has the meaning specifiedin the introduction to this Agreement, and any permitted successors and assignsas provided herein.

 

“**FirstCity Affiliates**” means FC Diversified, Servicing,FirstCity Financial, the Key Principals, and any Affiliates of FC Diversified,Servicing, FirstCity Financial or the Key Principals.

 

**“FirstCity Financial”**means FirstCityFinancial Corporation, a Delaware corporation.

 

**“FirstCity Withdrawal Notice”** has the meaning specifiedin Section 2.3(a) of this Agreement.

 

**“Incentive Fee”** has the meaning contained in Section 2.9of this Agreement.

 

**“Investment”** means the subject of anyInvestment Opportunity other than with respect to Excluded Investments.

 

**“Investment Amount”** means the aggregatecontributions made by the Prospective Acquirer and Värde or an Affiliate ofVärde to an Acquisition Entity in connection with an Investment, including theinitial Acquisition and subsequent contributions or loans made by the membersof the Acquisition Entity related to the Investment, not to include anyborrowing incurred by the Acquisition Entity upon the initial acquisition ofthe Investment.

 

**“Investment Opportunity”**means anopportunity to participate in single and bulk asset purchases of real estate,financial assets, equity or debt investments in entities or financialinstitutions and other potential investments reviewed by any FirstCityAffiliate.

 

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**“Investment Period”** means periods determined asfollows:

 

(i)            The initial “**Investment Period**” will be theperiod between the Effective Date and the earlier to occur of October 1,2010, the Termination Date or the date on which the aggregate amount of theInvestment Amounts first equals or exceeds $250,000,000.

 

(ii)           Each subsequent“**Investment Period**” will commence onthe date immediately following the end of the preceding Investment Period andwill end on the earlier to occur of the date that is six (6) months afterthe commencement date of such Investment Period, the Termination Date or thedate on which the aggregate amount of the Investment Amounts made after suchcommencement date first equals or exceeds $250,000,000. In no event will anInvestment Period extend beyond the Termination Date.

 

**“Investment Pool”** means all Investments acquired as the result ofAcquisitions made during an Investment Period.

 

**“Investment Threshold”** means $3,000,000.

 

“**Key Principals**” means James Sartain, James Moore, JamesHolmes, Terry DeWitt or Mark Horrell.

 

“**Material Adverse Circumstance**” means any event, condition,obligation, liability or circumstance or set of events, conditions,obligations, liabilities or circumstances or any change(s), including, withoutlimitation, changes in federal or state laws or regulations, which (i) has,had or would reasonably be expected to have any material adverse effect upon orchange in the profitability, validity or enforceability of this Agreement orthe transactions contemplated by this Agreement, taken as a whole, or (ii) hasbeen or would reasonably be expected to materially impair the ability of FCDiversified or Servicing to perform their respective obligations under thisagreement or the transactions contemplated hereby.

 

**“Monthly Retainer”** means a monthly paymentfrom Värde to Servicing in the amount of $200,000 per month through the Termination Date as compensationfor the right of first refusal in favor of Värde contained in Article 2 ofthis Agreement.

 

**“Notice(s)”** has the meaning specifiedin Section 6.9 of this Agreement.

 

**“Party”** and “**Parties**” have the meanings specifiedin the introduction to this Agreement.

 

**“Person”** means an individual,partnership, corporation (including a business trust), limited liabilitycompany, joint stock company, trust, unincorporated association, joint ventureor other entity, or a foreign or domestic state or political subdivisionthereof or any agency of such state or subdivision.

 

**“Prospective Acquirer”** has the meaning specifiedin Section 2.2(a) of this Agreement.

 

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**“Qualified Investment Opportunity”**means an Investment Opportunity with respect to an Investment.

 

**“Representing Party “** has the meaning specifiedin Article IV of this Agreement.

 

**“Seller”** means the seller of anInvestment in the case of an asset purchase, or the borrower, in the case of anInvestment that is a loan origination.

 

**“Servicing”** has the meaning specifiedin the introduction to this Agreement, and any permitted successors and assignsas provided herein.

 

**“Servicing Agreement”** has the meaning specifiedin Section 2.8.C. of this Agreement.

 

“**Stock Purchase Agreement**” means the Stock Purchase Agreementin the form attached hereto as Exhibit D.

 

**“Termination Date”** has the meaning specifiedin Section 2.1(c) of this Agreement.

 

**“Transaction Notice”** has the meaning specifiedin Section 2.2(a) of this Agreement.

 

**“Transaction Response”** has the meaning specifiedin Section 2.2(a) of this Agreement.

 

**“Transaction Response Date”** has the meaning specifiedin Section 2.2(a) of this Agreement.

 

**“****Värde****WithdrawalNotice”** has the meaning specified in Section 2.3(b) of thisAgreement.

 

**“****Värde****”** has themeaning specified in the introduction to this Agreement, and any permittedsuccessors and assigns as provided herein.

 

“**Voting Equity**” means securities of any class or classes of acorporation the holders of which are ordinarily, in the absence ofcontingencies, entitled to elect a majority of the corporate directors (orPersons performing similar functions) of such corporation or, in the case of aPerson which is not a corporation, securities or similar equity or partnershipinterests which entitle the holder thereof to elect, select or control themanagement or policies of such Person.  “VotingEquity” does not include warrants prior to the exercise of such warrants.

 

**ARTICLE 2.****          ****VÄRDE RIGHTOF FIRST REFUSAL.**

 

**Section 2.1****           ****General Scope.**

 

(a)           From theEffective Date through the Termination Date, no FirstCity Affiliate shallpurchase or otherwise acquire a direct or indirect interest in, any Investmentor hold discussions with any party other than a FirstCity Affiliate, Värde oran Affiliate of Värde regarding investment or co-investment in a QualifiedInvestment Opportunity, except in accordance with the terms of this Article 2or with an express written waiver from Värde.

 

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(b)           The terms of this Agreement are applicable toAcquisitions made on or after the Effective Date. Värde, FC Diversified andServicing acknowledge that the following acquisitions made after the EffectiveDate are Acquisitions pursuant to the terms and conditions of this Agreementfor all purposes: (a) the acquisition on May 25, 2010 of theIntervest Portfolio from Intervest National Bank and Intervest MortgageCorporation by VFC Partners 4, LLC; and (b) the acquisition on June 11,2010 by VFC Partners 5 LLC of the Waterfield Bank portfolio from the FederalDeposit Insurance Corporation as receiver of Waterfield Bank. Notwithstandinganything to the contrary herein, the purchase of the “Purchased Shares” asdefined in that certain Investment Agreement dated as of May 21, 2010 byand among Värde Investment Partners, L.P., Intervest BancsharesCorporation and FC Highway 6 Holdings LLC will not be subject to the terms ofthis Agreement.

 

(c)           The “**Termination Date**” means June 30,2015, but will be subject to consecutive automatic one-year extensions withoutany action on the part of the Parties on July 1 of each year beginning July 1,2015; provided, however, that the “**Termination Date,**” including any such extensions, may beaccelerated as provided in this Agreement or by the mutual written agreement ofthe Parties.

 

**Section 2.2****           ****Notice Procedures****.**

 

(a)           In the event that any FirstCity Affiliate (a “**Prospective Acquirer**”) shall obtain aQualified Investment Opportunity prior to the Termination Date, suchProspective Acquirer or Servicing shall promptly first give written notice toVärde by delivering a notice substantially in the form of Exhibit Ahereto containing the information set forth in Section 2.7 (the “**Transaction Notice**”). Thereafter, on orbefore the fifth (5th) Business Day after delivery of a dulycompleted Transaction Notice to Värde (the “**Transaction Response Date**”), together with all requiredsupporting information, Värde shall complete and return to the ProspectiveAcquirer or Servicing the cover page of the Transaction Notice (the “**Transaction Response**”) indicatingwhether Värde has an interest in the subject Investment Opportunity.  Upon execution of an affirmative TransactionResponse, Värde shall be responsible for payment of its pro rata share (basedon the investment percentages set forth in the Transaction Notice) of the DueDiligence Expenses incurred and contracted for with respect to the QualifiedInvestment Opportunity, subject to the terms and limitations expressly setforth in this Agreement.  Upon executionof an affirmative Transaction Response, regardless of whether of not theTermination Date has passed, unless and until Värde delivers a WithdrawalNotice in accordance with Section 2.3(b), no FirstCity Affiliate shallhold discussions with Persons other than Affiliates of Värde regarding suchQualified Investment Opportunity or participate in such Qualified InvestmentOpportunity other than as contemplated by the Transaction Notice. In the eventthat Värde fails to timely return the Transaction Response or Värde respondsnegatively in the Transaction Response, then Värde and any Affiliate of Värdeshall be free to proceed with the acquisition of the Qualified InvestmentOpportunity, directly or indirectly, either by itself or with any other Person,regardless of whether or not any FirstCity Affiliate pursues such QualifiedInvestment Opportunity.

 

(b)           Nothing in this Agreement,any Servicing Agreement or any organizational document with respect to anAcquisition Entity is or shall be intended to constitute a delegation of anyauthority to any FirstCity Affiliate by Värde or any Affiliate of Värde withrespect to the decision to participate in a Qualified Investment Opportunity,which decision shall be within the 

 

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sole and absolute discretion of Värde.  In no event will this Agreement be construedas a “sub-advisory agreement” as that term is used in the Investment CompanyAct of 1940.

 

**Section 2.3****           ****Due Diligence/Withdrawal.**

 

(a)           Notwithstandinganything to the contrary in Section 2.2 above, if after delivery of aTransaction Notice to Värde, for which Värde has timely returned (orsubsequently timely returns) a Transaction Response, the Prospective Acquirerdetermines through due diligence or otherwise that the Prospective Acquirer hasno further interest in pursuing the possible acquisition of such QualifiedInvestment Opportunity, the Prospective Acquirer or Servicing shall adviseVärde in writing that the Prospective Acquirer has withdrawn its interest inparticipating in the acquisition of the Investment, such notice to be in theform of Exhibit B hereto (a “**FirstCityWithdrawal Notice**”) and shall not thereafter acquire anyinterest in such Investment, except with Värde’s prior written consent. Uponreceiving a FirstCity Withdrawal Notice from any Prospective Acquirer orServicing, then (i) Värde shall be free to proceed with the QualifiedInvestment Opportunity, directly or indirectly, either by itself or with anyother Person and the determination of whether such Investment will be acquiredby an Acquisition Entity and/or serviced by Servicing will be made by Värde inits sole and absolute discretion, and (ii) if Värde or any Affiliate ofVärde acquires the subject Investment, such Investment will not be included inan Investment Pool and no Incentive Fee will be payable with respect to suchInvestment. The Prospective Acquirer shall have no responsibility for any DueDiligence Expenses contracted for by Värde or any Affiliate of Värde inconnection with such Investment after receipt of such FirstCity WithdrawalNotice.  If Värde or any Affiliate ofVärde acquires such Investment, Värde shall reimburse the Prospective Acquirerfor any Due Diligence Expenses paid or reimbursed by the Prospective Acquirerwith respect to such Investment in accordance with the applicable AgreedBudget.

 

(b)           Notwithstandinganything to the contrary in Section 2.2 above, if after Värde has timelyreturned a Transaction Response, Värde determines through due diligence orotherwise that Värde has no further interest in pursuing the QualifiedInvestment Opportunity, Värde shall advise the Prospective Acquirer orServicing in writing that it has withdrawn its interest in pursuing theQualified Investment Opportunity in the form of Exhibit C hereto (a“**Värde Withdrawal Notice**”)and shall not thereafter acquire any interest in such Investment, except withthe Prospective Acquirer’s prior written consent.****Värde shall have no responsibility for any Due DiligenceExpenses contracted for by any FirstCity Affiliate in connection with suchInvestment after receipt of such Värde Withdrawal Notice.  If any FirstCity Affiliate acquires suchInvestment, Servicing or FC Diversified shall reimburse Värde for any DueDiligence Expenses paid or reimbursed by Värde with respect to such Investmentin accordance with the applicable Agreed Budget.

 

(c)           Notwithstandinganything to the contrary in Section 2.2 or subparts (a) and (b) ofthis Section 2.3, neither Värde nor any Affiliate of Värde nor anyFirstCity Affiliate may withdraw from an offer to acquire an Investment (i) aftersubmission of a bid for the purchase of the Investment unless the Seller hasinformed the Prospective Acquirer that the Seller does not or will not acceptsuch bid, or (ii) after such bid has been accepted by the Seller unlessthe other Party consents in writing to the withdrawal.  Any withdrawal under this Section 2.3shall be effective upon the receipt by the other Party of the written notice ofwithdrawal or upon the date of such consent, as the case may be.  Any Party so electing to withdraw under thisSection 2.3

 

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agreesnot to hinder or compete in any way with the other Party’s efforts to proceedwith the acquisition of the Investment and further agrees that the remainingother Party may bid for the Investment on terms satisfactory to the remainingParty without the withdrawing Party’s participation.  Any Party electing to withdraw from a bid forthe acquisition of Investment shall pay its pro rata share (relative to itsequity percentage described in the Transaction Notice) of the Due Diligence Expensesfor all expenses incurred or accrued through the date of receipt by the otherParty of the written notice to withdraw or upon the date of such consent, asapplicable.

 

**Section 2.4****           ****Expenses**. Subject to Section 2.3, for any QualifiedInvestment Opportunities for which Värde has completed an affirmativeTransaction Response, each of Värde and FC Diversified agree to bear their prorata share (relative to their respective equity percentages described in theTransaction Notice) of the Due Diligence Expenses related to such InvestmentOpportunity.  Out-of-pocket Due DiligenceExpenses may be reimbursed to Servicing in full or in part, by the investingentities or the Acquisition Entity, in which case Servicing shall refund anyportion of such expenses previously reimbursed to it.  Except as it may otherwise be agreed betweenthe Parties, reimbursement of Servicing and refunds by Servicing for domestictransaction expenses previously reimbursed to it shall be in U.S. Dollars.

 

**Section 2.5****           ****Rejection/Deemed Rejection.**  IfVärde rejects the proposal contained in the Transaction Notice, fails todeliver a Transaction Response by the Transaction Response Date, or delivers aVärde Withdrawal Notice, the Prospective Acquirer or any other FirstCityAffiliate shall be free to proceed with the acquisition of the Investment (a “RejectedTransaction”) and may participate in the Investment Opportunity, directly orindirectly, either by itself or with any other Person.  The rejection by Värde of a TransactionNotice from any one Prospective Acquirer shall not be considered as or deemedto be a rejection by Värde of a Transaction Notice from any other ProspectiveAcquirer, nor shall Värde’s failure to deliver a Transaction Response ordelivery of a Värde Withdrawal Notice to Servicing or any one ProspectiveAcquirer be considered as or deemed to be a failure to deliver a TransactionResponse or delivery of a Värde Withdrawal Notice to any other ProspectiveAcquirer.

 

**Section 2.6****           ****Estoppel****.**

 

(a)           In the event that Värde indicates anaffirmative interest in an Investment by returning an affirmative TransactionResponse to a Prospective Acquirer, each Prospective Acquirer may rely on suchinterest or notice as indicating that Värde is not, either directly orindirectly, attempting to, and Värde agrees that neither Värde, nor any VärdeAffiliate will, acquire an interest in the subject Investment, unless theProspective Acquirer has delivered a FirstCity Withdrawal Notice pursuant to Section 2.3(a).

 

(b)           In the event that Prospective Acquirer orServicing submits a Transaction Notice to Värde, Värde may rely on suchTransaction Notice as indicating that no FirstCity Affiliate is directly orindirectly, attempting to, and FirstCity agrees that no FirstCity Affiliatewill, acquire an interest in the subject Investment, unless the TransactionNotice has been, or is deemed to be, rejected pursuant to Section 2.2(a) orVärde has delivered a Värde Withdrawal Notice pursuant to Section 2.3(b).

 

**Section 2.7****           ****Terms of Transaction Notice.**  TheTransaction Notice shall describe, in reasonable detail, the subject Investmentand shall set forth the terms relating to the Qualified Investment Opportunity,and in addition: (a) an investment percentage in the Qualified

 

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Investment Opportunity tobe acquired by the Prospective Acquirer (through the Acquisition Entity), whichinvestment percentage shall not be less than 5% or more than 25% unlessotherwise agreed by Värde; and (b) other material terms related to theQualified Investment Opportunity then known by Servicing.

 

**Section 2.8****           ****Terms of Acquisition.**** **The Acquisition of any Investment pursuant toa Transaction Notice will be subject to the following terms and conditions:

 

A.    Acquisition Entities. EachAcquisition Entity will be a Delaware limited liability company, or other formof entity agreed to by Värde and FC Diversified, which will be formed pursuantto a mutually agreed form of limited liability company agreement. EachAcquisition Entity will establish a collection account at a bank approved byVärde**.**

 

B.    Transaction Notice.  The Acquisition will be pursuant to the termsset forth in the Transaction Notice, except as mutually agreed in writing bythe Parties.

 

C.    Servicing Agreement. Servicing andeach Acquisition Entity will enter into a mutually agreed form of ServicingAgreement (each, a “**Servicing Agreement**”).

 

D.    Developmentof Bid.  TheParties agree to work together in good faith to determine the amount of, and tosubmit to the Seller a bid for or offer to purchase any Investment (a “**Bid**”) for which Värde has submitted anaffirmative Transaction Response.  TheParties agree to take the following actions in connection with any Bid:

 

i.              Värde,Servicing and FC Diversified, or the Prospective Acquirer if other than FCDiversified, in the event that a FirstCity Affiliate is contemplated to investin the Investment Opportunity, will endeavor to mutually agree to develop andrevise, as needed the Agreed Budget. In addition, Servicing will promptlyprovide to Värde when available, copies of any sale or other transactionalmaterials related to the Qualified Investment Opportunity, and Servicing willprovide and update Värde with estimates of Due Diligence Expenses to beincurred in connection with the subject Investment (the “Agreed Budget”). Anyrevisions to the Agreed Budget must be approved in writing by Värde.

 

ii.             The Partieswill obtain from the Seller additional information necessary to make apreliminary pricing decision for the Bid. The Parties shall share with eachother all such information obtained from the Seller and will cooperate in goodfaith to make a preliminary determination of the amount of the Bid and willotherwise cooperate and work in good faith together during the due diligenceprocess.

 

iii.            Based upon thepreliminary pricing for the Bid, Värde and FC Diversified, or the ProspectiveAcquirer if other than FC Diversified, will determine if there needs to be anyadjustment of the ownership percentages as set forth in the Transaction Notice.

 

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iv.            Servicing willkeep Värde apprised as to the identity and cost of third party serviceproviders proposed to be utilized in connection with the implementation of theAsset Business Plan.

 

v.             Upon conclusionof final due diligence, Värde and FC Diversified, or the Prospective Acquirerif other than FC Diversified, will evaluate the results. A conclusion will bereached by the Parties as to which course of action to pursue: (i) submitthe Bid based on final due diligence results, or (ii) decline to submitany Bid. At this time, or at any time prior thereto, if Värde or FCDiversified, or the Prospective Acquirer if other than FC Diversified, does notagree with the course of action to pursue, then it may opt by written notice tothe other Parties not to participate further, in the Investment Opportunitysubject to and in accordance with Section 2.3 of this Agreement.

 

vi.            Upon concludingthe final due diligence, negotiating the investment amounts for each Party (inthe event a FirstCity Affiliate is participating as an investor in theInvestment Opportunity), and an affirmative decision by the Parties to make theBid, the Bid will be made to the Seller. The Bid will be made subject to theterms of the bid package or other conditions made by or agreed with the Sellerand will have such other terms, provisions, pricing and conditions as theParties shall mutually agree.

 

**Section 2.9****           ****Incentive Fee**. Provided the aggregateamount of the Investment Amounts, for one more Investment Pools, equals orexceeds $250,000,000, Värde agrees that it will pay or cause to be paid to FCDiversified an amount (the “Incentive Fee”) equal to *****(1) ofall distributions (“Member Distributions”) paid to the members of theAcquisition Entity or Acquisition Entities with respect to each Investment Poolafter such members have received (i) a return of all capital contributionsmade with respect to the Investments in such Investment Pool plus(ii) *****(1) per annum return thereon.  The Incentive Fee will be paid quarterly inarrears on each April 15, July 15, October 15 andJanuary 15.  For the sake of clarity, to theextent that there have been Member Distributions prior to the date on which theaggregate amount of the Investment Amounts for such Investment Pool(s) equalsor exceeds $250,000,000, then the first payment of the Incentive Fee shallinclude payment of any deferred Incentive Fee with respect to such MemberDistributions. All Incentive Fee payments hereunder shall be made by wiretransfer or ACH of immediately available U.S. funds to an account or accountsdesignated by FC Diversified.  In theevent that the due date of any payment is not a Business Day, then the due dateof the payment shall be the next Business Day.

 

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(1)  THE COMPANY HAS REQUESTED AN ORDERFROM THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) PURSUANT TO RULE24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, GRANTING CONFIDENTIALTREATMENT TO SELECTED PORTIONS. ACCORDINGLY, THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THISEXHIBIT, AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION.  OMITTED PORTIONS ARE INDICATED IN THISEXHIBIT WITH “*****”.

 

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**ARTICLE 3.****          ****PORTFOLIODUE DILIGENCE; MONTHLY RETAINER AND TRANSACTION EXPENSES.**

 

**Section 3.1****           ****Identification of Qualified InvestmentOpportunities; Due Diligence**.

 

(a)           From the Effective Date through theTermination Date, Servicing will use commercially reasonable efforts toidentify and present to Värde Qualified Investment Opportunities.

 

(b)           With respect to QualifiedInvestment Opportunities that are subject to an accepted Transaction Notice,Servicing agrees to conduct due diligence with respect to the subject QualifiedInvestment Opportunity for the benefit of FC Diversified, Värde (but subject toSection 2.2(b)) and the respective Acquisition Entity in a diligentmanner.  Such due diligence duty shallinclude such responsible investigation as FC Diversified and Värde shall deemappropriate to satisfy the investment objectives of FC Diversified and Värde,as shall be expressed from time to time. Servicing shall make availablesufficient personnel having appropriate training, skill and experience toconduct and direct all such due diligence on Qualified Investment Opportunities.  Servicing shall cause any materialinformation available to Servicing with respect to such Qualified InvestmentOpportunities to be made available to the other Parties on a timely basis andeach Party shall make any due diligence findings by such Party with respect tosuch Qualified Investment Opportunities available to the other Parties on atimely basis.

 

**Section 3.2****           ****Monthly Retainer; Payments by Värde**.  Värdeagrees that, from the Effective Date through the Termination Date, Värde willpay Servicing the Monthly Retainer as compensation for the right of firstrefusal in favor of Värde contained in Article 2 of this Agreement.  The Monthly Retainer for the periodcommencing on the Effective Date and ending on May 31, 2010 in the amountof $400,000 and the Monthly Retainer for June 2010 in the amount of$200,000 shall be paid to Servicing simultaneously with the execution of thisAgreement; thereafter, the Monthly Retainer to be paid by Värde to Servicingshall be due and paid in arrears on or before the fifth (5th) day of eachmonth.  The Monthly Retainer shall bepaid in U.S. Dollars.  In addition, Värdeshall reimburse Servicing for any Due Diligence Expenses incurred andcontracted for with respect to the Qualified Investment Opportunity as setforth in Section 2.4, which reimbursement shall be due to Servicing withinthirty (30) days of date of invoice and provided such invoice containsreasonable supporting information.  Allpayments due to Servicing hereunder shall be made by wire transfer or ACH of immediatelyavailable U.S. funds to an account or accounts designated by Servicing.  In the event that the due date of any paymentis not a day upon which banks are open in the United States, then the due dateof the payment shall be the next Business Day.

 

**ARTICLE 4.****          ****CERTAINCOVENANTS, REPRESENTATIONS AND WARRANTIES.**

 

Each Party as a “**Representing Party**” makes the following representationsand warranties to the other Parties as of the date first written above and asof the Effective Date and covenants that the following representations andwarranties will be continually reaffirmed and remain true and correct at alltimes during the term of this Agreement:

 

(a)           Organization and Standing.  The Representing Party is a dulyorganized and validly legal entity under the laws of its state of organizationas first described above and in good standing under the laws of such state withall requisite power and authority to own and operate its properties and assetsand to conduct the businesses in which it is engaged or proposes to engage.

 

(b)           Power and Authority.  The Representing Party has allrequisite power and authority to execute, deliver and carry out the terms andprovisions of this Agreement, and the 

 

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Representing Party has duly and properly taken allnecessary action to permit and authorize the execution, delivery andperformance of this Agreement.  ThisAgreement has been duly authorized, executed and delivered by the RepresentingParty, and constitutes a legal, valid and binding obligation of theRepresenting Party, enforceable against it in accordance with its terms,subject to the effect, if any, of general principles of equity.

 

(c)           Compliance with OtherInstruments.  The Representing Party is not in violationof, or in default under, any terms of its organizational documents, or anyagreement or instrument to which it is a party or by which it is bound or towhich any of its properties or assets are subject, or any judgment, decree,order, statute, rule or governmental regulation applicable to it, whichviolation or default would have a material adverse effect on the RepresentingParty or its ability to perform its duties under this Agreement.  The execution, delivery and performance ofthis Agreement, the consummation of the transactions contemplated herein andthe compliance with the terms and provisions hereof, will not contravene anymaterial provision of law, statute, rule or regulation to which theRepresenting Party or any Affiliate of the Representing Party is subject or anymaterial judgment, decree, franchise, order, governmental regulation or permitapplicable to the Representing Party or any Affiliate of the Representing Partyand will not violate, conflict with or result in any breach of any of theterms, covenants, conditions or provisions of, or constitute a default under,or result in the creation or imposition of any lien, mortgage, pledge orencumbrance upon any of the property or assets of the Representing Party or anyAffiliate of the Representing Party pursuant to the terms of any indenture,mortgage, deed of trust, agreement or other instrument to which theRepresenting Party or any Affiliate of the Representing Party is a party or bywhich it or its properties or assets are bound or may be subject.

 

(d)           Compliance with Laws.  The Representing Party has dulycomplied with, and its assets, business operations and leaseholds are incompliance in all material respects with, the provisions of all federal, stateand local laws, rules and regulations applicable to the Representing Partyand its assets or the conduct of its businesses.

 

(e)           Litigation.  There are no actions, suits,proceedings or investigations pending, or to the knowledge of the RepresentingParty, threatened against or affecting the Representing Party, any Affiliate ofthe Representing Party, or their property or assets, nor is there anyoutstanding judgment, order, writ, injunction, decree or award affecting theRepresenting Party or any Affiliate of the Representing Party before any courtor before any federal, state, municipal or other governmental department,commission, board, bureau or agency, which, either separately or in theaggregate, could have a material adverse effect on the Representing Party orits ability to perform its duties under this Agreement.

 

(f)            No MateriallyAdverse Contracts, Etc.  Neither the Representing Party nor anyAffiliate of the Representing Party is obligated under any contract oragreement or under any law, regulation or decree, which materially andadversely affects its ability to perform its obligations under this Agreement.

 

**ARTICLE 5.****          ****DEFAULT;REMEDIES.**

 

**Section 5.1****           **An “**Event of Default**”shall exist on the part of a Party if any of the following occurs:

 

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(i)              Payment Default.  If a Party or any Affiliate of a Party failsto make any payment required to be made under this Agreement within three (3) BusinessDays after written notice of nonpayment by the Party hereunder to whom suchpayment is required to be made.

 

(ii)             CovenantDefaults. Other than subparts (iv), (v) and (vi) ofthis Article 5, if a Party or an Affiliate of a Party fails fully andtimely to perform or observe any non-monetary covenant, agreement, or warrantycontained in this Agreement for thirty (30) calendar days following theoccurrence of such failure.

 

(iii)            Warranties orRepresentations. If any statement or representation made by or onbehalf of a Party or an Affiliate of a Party in this Agreement or any otheritem furnished to another Party pursuant to this Agreement, is false,misleading, or incorrect in any material respect as of the date made orreaffirmed.

 

(iv)           Insolvency. If a Partybecomes insolvent or otherwise generally unable to pay its debts as and whenthey become due or payable.

 

(v)             InvoluntaryProceedings. If a case is commenced or a petition is filedagainst a Party under any Debtor Relief Law or if a receiver, conservator,liquidator, or trustee of a Party or of any material asset of a Party isappointed by court order and such order remains in effect for more than thirty(30) days, or if any material asset of a Party is sequestered by court orderand such order remains in effect for more than thirty (30) days.

 

(vi)            VoluntaryProceedings. If a Party voluntarily seeks, consents to, oracquiesces in the benefit of any provision of any Debtor Relief Law, whethernow or hereafter in effect, consents to the filing of any petition against itunder such law, makes an assignment for the benefit of its creditors, admits inwriting its inability to pay its debts generally as they become due, orconsents to or suffers the appointment of a receiver, trustee, liquidator, orconservator for it or any part of its assets.

 

(vii)           Key Principals. If any KeyPrincipal (or any replacement(s) approved by Värde in writing, whichapproval shall not be unreasonably withheld, conditioned or delayed) shall failto have a material managerial or administrative role in the transactionscontemplated by this Agreement.

 

(viii)          AffirmativeMisconduct. The occurrence of fraud, intentionalmisrepresentation, theft or criminal conduct on the part of any FirstCityAffiliate in connection with performance of its duties or obligations underthis Agreement or the transactions contemplated by this Agreement.

 

(ix)          Affirmative Misconductwith Conditions. The occurrence of fraud,intentional misrepresentation, theft or criminal conduct on the part of anyFirstCity Affiliate in connection with performance of its duties or obligationsunder this Agreement or the transactions contemplated by this Agreement,provided that (A) such fraud, intentional misrepresentation, theft orcriminal conduct results in financial loss to Värde or any Affiliate of Värdeof $250,000.00 or more, (B) a FirstCity Affiliate does not reimburse Värdefor such financial loss within ten (10) days following notice from Värdeto FC Diversified, and (C) such fraud, intentional misrepresentation,theft or criminal conduct continues following notice from Värde to FCDiversified; provided, however, that the preceding subparts (B) and (C) shallnot apply to the

 

13

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extent that the fraud, intentionalmisrepresentation, theft or criminal conduct was conceived by, or conductedwith the knowledge of, any Key Principal.

 

**Section 5.2****           ****Remedies**.

 

(a)           Upon the occurrence of an Event of Default onthe part of FC Diversified or Servicing, in addition to any other remediesavailable to Värde hereunder, Värde may accelerate the Termination Date.  In addition, if the Event of Default ispursuant to subpart (ix) of Article and Värde shall have no furtherobligation to pay the Incentive Fee or the Monthly Retainer.

 

(b)           Upon the occurrence of an Event of Default onthe part of Värde, in addition to any other remedies available to FCDiversified and Servicing hereunder, FC Diversified may accelerate theTermination Date.

 

(c)           Upon the acceleration ofthe Termination Date, with or without cause, all rights, covenants, agreementsrepresentations and warranties shall survive, except to the extent such rights,covenants, agreements representations and warranties expressly terminate on theTermination Date.  All rights, covenants,agreements representations and warranties shall survive the creation of eachAcquisition Entity and the closing of the acquisition of each Investment.

 

(d)           In addition to the matters specified inSections 5.2(a) and 5.2(b), each Party to this Agreement shall have allremedies available to it by applicable statute or at common law, including,without limitation all equitable rights and remedies, provided that no party tothis Agreement shall be liable for any punitive, consequential or specialdamages.  In the event that any partypursues its rights and remedies under this Agreement, the prevailing party shallbe entitled to recover all reasonable costs and expenses (including reasonableattorneys’ fees and disbursements) incurred in its successful prosecution ordefense of any claim or action.  FCDiversified, Servicing and Värde acknowledge that a breach of a provision(s) ofthis Agreement hereof will cause irreparable harm to the other party, for whichthere may be no adequate remedy at law and for which the ascertainment ofdamages would be difficult. Therefore, the non-breaching party shall beentitled, in addition to, and without having to prove the inadequacy of, otherremedies at law (including without limitation damages for prior breacheshereof), to specific performance of this Agreement, as well as injunctiverelief (without being required to post bond or other security).

 

**Section 5.3****           ****Acceleration of Termination Date Without Causeor Material Adverse Change.**

 

(a)           Prior to June 30,2011, Värde may accelerate the Termination Date without cause by providing onehundred eighty (180) days prior written notice to FC Diversified and Servicing,which acceleration shall be effective upon the later of (i) the date thatis one hundred eighty (180) days after the receipt of the notice of suchacceleration by FC Diversified and Servicing, and (ii) such later date asis specified in the notice, but not later than December 31, 2011.  In addition, commencing November 1,2011, any Party may accelerate the Termination Date without cause by providingnot less than sixty (60) days prior written notice to the other Parties.

 

(b)           Värde mayaccelerate the Termination Date upon the occurrence of a Material AdverseCircumstance by providing sixty (60) days prior written notice to FCDiversified and Servicing of the occurrence of a Material Adverse Circumstance,which acceleration shall be

 

14

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effectiveupon the later of (i) the date that is sixty (60) days after the receiptof the notice of such acceleration by FC Diversified and Servicing, and (ii) suchlater date as is specified in the notice.

 

(c)           Except as provided in the last sentence of Section 5.2(a),Värde shall remain liable for and continue to pay Incentive Fees as to anyAcquisition made prior to the Termination Date, when such Incentive Fees wouldbe payable under this Agreement, notwithstanding the termination of thisAgreement pursuant to subparts (a) or (b) of this Section 5.3.  The Monthly Retainer payable to Servicingwill be paid through the accelerated Termination Date.

 

**Section 5.4****           ****Indemnification.**

 

(a)           Each Party, as the “**Indemnifying Party**” will indemnify,defend and hold harmless the other Parties and their successors and assigns (asthe “**Indemnified Parties**”)from and against any and all actual costs, expenses, losses, claims (includingclaims of third parties), damages, and liabilities to the extent that suchactual cost, expense, loss, claim, damage, or liability arose as a directresult of the Indemnifying Party’s breach of the terms, covenants orundertakings on the part of this Agreement which, if true or proven, wouldconstitute such a breach, or as a direct result of any negligence, grossnegligence or other willful misconduct of the Indemnifying Party (“**Indemnified Claims**”).

 

(b)           The Indemnifying Partyshall be entitled to participate in the Indemnified Claim at their own expenseand, except as otherwise provided below, to the extent Indemnifying Party sodesires, they may assume the defense thereof with counsel mutually satisfactoryto the Indemnifying Party and the Indemnified Parties. After notice from theIndemnifying Party to the Indemnified Parties of its election to assume thedefense thereof, Indemnifying Party shall not be liable to IndemnifiedParties under this Agreement or otherwise for any expenses subsequentlyincurred by Indemnified Parties in connection with the defense of suchIndemnified Claim other than reasonable costs of investigation, payment fortime spent by Indemnified Parties as provided herein or as otherwise providedherein. Indemnified Party shall have the right to employ its own counsel insuch Indemnified Claim, but all expenses related thereto incurred after noticefrom Indemnifying Party of its assumption of the defense shall be atIndemnified Party’s expense unless: (i) the employment of counsel byIndemnified Party has been authorized by the Indemnifying Party, (ii) IndemnifiedParty has provided an opinion of counsel reasonably satisfactory toIndemnifying Party to the effect that there may be a conflict of interestbetween Indemnified Party and Indemnifying Party in the defense of theIndemnified Claim, or (iii) Indemnifying Party shall not have employedcounsel promptly to assume the defense of such Indemnified Claim.

 

(c)           Indemnification under thisSection 5.4 will include reasonable fees and expenses of external counseland expenses of litigation and is in addition to any other remedy available tothe Indemnified Party under this Agreement. If an Indemnifying Party will have made any indemnity payments pursuantto this Section 5.4 and the Indemnified Party thereafter collects any ofsuch amounts from others, the Indemnified Party will promptly repay suchamounts to the Indemnifying Party, without interest.  Under no circumstances shall an IndemnifyingParty hereunder be liable to the Indemnified Party where the Indemnified Party’slosses are due entirely to the Indemnified Party’s own gross negligence orwillful misconduct.  Indemnitor shall notsettle any Indemnified Claim in any manner that would impose any admission,fine,

 

15

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damages, penalty or limitation on, or otherwiseadversely affect, the Indemnified Party without Indemnified Party’s writtenconsent.

 

**ARTICLE 6.****          ****MISCELLANEOUS.**

 

**Section 6.1****           ****Effective Date**.  ThisAgreement shall become effective as of the Effective Date.  It is a condition to the effective deliveryof this Agreement that the Stock Purchase Agreement be fully executed anddelivered by all parties thereto.

 

**Section 6.2****           ****Confidentiality**.  TheParties agree that the terms of this Agreement and the transactions describedherein are confidential (the “**ConfidentialInformation**”). The Parties each agrees that they shall notdisclose any Confidential Information other than (1) to Affiliates andinvestors having a reasonable basis to receive the Confidential Information andwho are advised of the confidential nature of the Confidential Information, (2) employees,representatives, managers, officers, directors attorneys, and accountants ofthe Parties and their Affiliates and investors, (2) as may be required bylaw (including tax reporting) or by a court of law, and (3) to the extentsuch information is in the public domain. The Parties shall direct each oftheir representatives to comply with the terms of this Section 6.2 andshall be responsible for any breaches thereof. No Party will use another Party’s name in any advertising or promotionalmaterials without the prior written consent of the Party whose name is proposedto be used.

 

**Section 6.3****           ****Amendments**. This Agreement may not be amended or modified andthe provisions hereof may not be waived without the prior written consent ofall the Parties.

 

**Section 6.4****           ****Transferability of Agreement**.  ThisAgreement shall be binding upon the Parties and their respective successors andpermitted assigns. No interest in this Agreement shall be transferable withoutthe written consent of all the other Parties, except that (i) Värde mayassign its interest in this Agreement to Värde or any Affiliate of Värdewithout such written consent, (ii) Värde may not unreasonably withhold,condition or delay consent to an assignment by FC Diversified of its interestin this Agreement to a FirstCity Affiliate, and (iii) Värde may notunreasonably withhold, condition or delay consent to an assignment by Servicingof its rights, duties and obligations under this Agreement to another directlyor indirectly wholly-owned subsidiary of FirstCity Financial Corporation.  No assignment of this Agreement shall relieveany Party of any liability or responsibility for the covenants, agreements,representations or warranties of such Party under this Agreement.

 

**Section 6.5****           ****Governing Law; Jurisdiction; Venue**. This Agreement and any questions concerningthe interpretation or enforcement thereof shall be governed by and construed inaccordance with the laws of the State of Minnesota (the “**Governing State**”).  The Parties each hereby irrevocably submit tothe jurisdiction of any state or federal court sitting in the Governing Stateover any suit, action or proceeding arising out of or relating to thisAgreement. The Parties irrevocably waives, to the fullest extent permitted bylaw, any objection that the Parties may now or hereafter have to the laying ofvenue of any such suit, action or proceeding brought in any such court and anyclaims that any such suit, action or proceeding brought in any such court hasbeen brought in an inconvenient forum.

 

**Section 6.6****           ****Enforceability of Agreement**. Should any one or more of the provisions of this Agreement be determinedto be illegal or unenforceable, all other provisions, nevertheless, shallremain effective and binding on the Parties.

 

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**Section 6.7****           ****Nature of Obligations**.  Theobligations of all the Parties shall be considered to be several and not jointobligations.

 

**Section 6.8****           ****Titles**.  Titles ofthe Sections of this Agreement are merely for convenience in reading and shallnot be construed to alter, modify or interpret the meaning of the provisionsunder said titles.

 

**Section 6.9****           ****Notices****.**

 

(a)           Unless otherwise required or provided by thisAgreement, all demands, notices, approvals and other communications hereunder(individually and collectively, “**Notice(s)**”)shall be in writing and shall be served personally, delivered by facsimile orsent by a national overnight delivery or courier company, or by United Statesregistered or certified mail, postage prepaid return receipt requested, andaddressed as set forth below.  Any suchNotices shall be deemed delivered upon delivery or refusal to accept deliveryas indicated in writing by the Person attempting to make personal service, onthe United States Postal Service return receipt, or by similar written advicefrom the overnight delivery company; provided, however, that if any such Noticeshall be sent by telecopier to the telecopier number, if any, set forth above,such Notice shall be deemed given at the time and on the date of machinetransmittal (except if sent after 5:00 p.m. recipient’s time, then thenotice shall be given at 9:00 a.m. on the next Business Day) if the sendingparty receives a written send verification on its machine and sends a duplicateNotice on the same day or the next Business Day by personal service, registeredor certified United States mail, or overnight delivery in the manner describedabove. Each party hereto shall make an ordinary, good faith effort to ensurethat it will accept or receive Notices that are given in accordance with this Section 6.9,and that any Person to be given Notice actually receives such Notice. Any partyto whom Notices are to be sent pursuant to this Loan Agreement may from time totime change its address and/or facsimile number for future communicationhereunder by giving Notice in the manner prescribed herein to all otherParties, provided that the address and/or facsimile number change shall not beeffective until five (5) Business Days after the Notice of change has beengiven.

 
| If  to FC Diversified or any FirstCity Affiliate: |   | If  to Servicing:                    |
|---------------------------------------------------|--------|--------------------------------------|
|                                              |   |                                 |
| FC  Diversified Holdings LLC                      |   | FirstCity  Servicing Corporation     |
| P.  O. Box 8216 (mail)                            |   | P.  O. Box 8216 (mail)               |
| Waco,  Texas 76714-8216                           |   | Waco,  Texas 76714-8216              |
| 6400  Imperial Drive (delivery only)              |   | 6400  Imperial Drive (delivery only) |
| Attention:  Legal Department                 |   | Attention:  James C. Holmes     |
| Facsimile  No.:  (254) 761-2953              |   | Facsimile  No.:  (254) 761-2953 |
|                                              |   |                                 |
| E-mail  address if specified herein:              |   | E-mail  address if specified herein: |
| jholmes@fcfc.com                                  |   | jholmes@fcfc.com                     |

 
| If  to Värde: |   | With  a Copy to: |
|--------------------|--------|------------------|

 

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| Värde  Investment Partners, L.P.                  |   | Leonard,  Street and Deinard                         |
|--------------------------------------------------------|--------|------------------------------------------------------|
| c/o Värde Partners, L.P.                          |   | Professional  Association                            |
| 8500 Normandale Lake Blvd.                             |   | 150  South Fifth Street, Suite 2300             |
| Suite 1500                                        |   | Minneapolis,  MN 55402                               |
| Minneapolis,  MN 55437                                 |   | Attention: Andrew Lee                                |
| Attention: Christopher  N. Giles and Jeffrey Thuringer |   | Facsimile  No.:  (612) 335-1657                 |
| Facsimile  No.:  (952) 893-9613                   |   |                                                 |
|                                                   |   | Copies  not required for electronic mail deliveries. |
| E-mail  address if specified herein:                   |   |                                                 |
| cgiles@varde.com  and jthuringer@varde.com             |   |                                                 |

 

(b)           Notwithstanding anythingto the contrary herein, delivery of Transaction Notices, Transaction Reponses,FirstCity Withdrawal Notices and Värde Withdrawal Notices may be made byelectronic mail if delivered to the e-mail address(es) specified in Section 6.9(a).  Such materials shall be deemed received onthe later of: (i) the same Business Day of transmittal, as shown on thesender’s confirmation of transmittal, if the transmittal time is shown as 2PMCentral Time or earlier, or (ii) the Business Day following the day shownon the sender’s confirmation of transmittal, if the transmittal time is shownas being after 2PM Central Time, or (iii) the next Business Day, if thetransmittal day shown on the sender’s confirmation of transmittal is not aBusiness Day.

 

**Section 6.10****        ****Not a Partnership or Joint Venture**.  ThisAgreement is not intended to evidence or create a partnership or joint venturerelationship between any of the Parties

 

**Section 6.11****        ****Independent Activities**.

 

(a)           Except as provided in Section 2.2(a) ofthis Agreement, neither this Agreement nor any obligation undertaken pursuanthereto shall prohibit or restrict Värde or Affiliates of Värde from engagingin, or advising other parties in connection with, any investments, businessactivities or projects of any kind, regardless of whether or not suchinvestments, business activities or projects are competitive with theactivities of any FirstCity Affiliate.

 

(b)           Nothing in this Agreementis intended to restrict any FirstCity Affiliate from raising capital in aFirstCity Affiliate through debt or equity.

 

**Section 6.12****        ****Entire Agreement**. This Agreement shall constitute the full andentire understanding and agreement of the Parties and there are no further orother agreements or undertakings written or oral, in effect between the Partiesrelating to the subject matter hereof unless expressly referred to herein. Allprior negotiations, agreements, representations, warranties, statements andundertakings concerning the subject matter hereof between the Parties aresuperseded by this Agreement.

 

**Section 6.13****        ****Execution in Counterparts**. This Agreement may be executed in any number ofcounterparts and by different Parties in separate counterparts, each of whichwhen so 

 

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executed and delivered shall be deemed to be an original and all ofwhich taken together shall constitute one and the same instrument.

 

**[End of Page - Signature Page to Follow]**

 

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INWITNESS WHEREOF, the undersigned have executed this Agreement as of the datefirst above written.

 

 
|   |   | **FC DIVERSIFIED HOLDINGS LLC**                                                                           |
|--------|--------|-----------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                      |
|   |   | By:                                                                                                       |   |
|   |   | Name:                                                                                                     |   |
|   |   | Title:                                                                                                    |   |
|   |   |                                                                                                      |
|   |   |                                                                                                      |
|   |   | **FIRSTCITY SERVICING CORPORATION**                                                                       |
|   |   |                                                                                                      |
|   |   | By:                                                                                                       |   |
|   |   | Name:                                                                                                     |   |
|   |   | Title:                                                                                                    |   |
|   |   |                                                                                                      |
|   |   |                                                                                                      |
|   |   | **VÄRDE  INVESTMENT PARTNERS, L.P.**, a Delaware limited  partnership                                |
|   |   |                                                                                                      |
|   |   | By:  Värde Investment Partners G.P., LLC, a Delaware limited liability company,  its General Partner |
|   |   |                                                                                                      |
|   |   | By:  Värde Partners, L.P., a Delaware limited partnership, its Managing Member                       |
|   |   |                                                                                                      |
|   |   | By:  Värde Partners, Inc., a Delaware corporation, its General Partner                          |
|   |   |                                                                                                      |
|   |   |                                                                                                      |
|   |   | By:                                                                                                       |   |
|   |   | Name:                                                                                                     |   |
|   |   | Its:                                                                                                      |   |

 

20

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**EXHIBIT A**

 

**TRANSACTION NOTICE**

 

FCSC#

PACKAGE NAME

BID DATE

BOOK/REO VALUE

NO. OF ASSETS

ASSET TYPE

ESTIMATED CLOSING DATE

VÄRDEPARTICIPATION (75% to 95%)

FIRSTCITY PARTICIPATION (5% to 25%)

COLLECTION FEE

 

NOTICEDATE:                                      20

 

TO:                                                                           VärdeInvestment Partners, L.P.

c/o Värde Partners, L.P.

8500 Normandale Lake Blvd., Suite 1500

Minneapolis, MN 55437

Attention:  Christopher N. Giles

 

VIAFACSIMILE:               (952) 893-9613

 

FROM:                                                       FirstCityServicing Corporation

 

Attachedhereto is information regarding an Investment Opportunity (as such term isdefined in that certain Investment Agreement effective as of April 1, 2010(the “Agreement”) between FC Diversified Holdings LLC, FirstCity ServicingCorporation and Värde Investment Partners, L.P. **[**                                              ,as the Prospective Acquirer, has received the Investment Opportunity andintends to participate as an investor as set forth in this Transaction Notice. *Insert and complete if a FirstCity Affiliate will be participating inthe Investment Opportunity.***]**

 

Pleaseindicate in the space below whether you have an interest in the subjectInvestment Opportunity.

 
|   |   | **FirstCity Servicing Corporation** |
|--------|--------|-------------------------------------|
|   |   |                                |
|   |   | By:                                 |   |
|   |   | Name:                               |   |
|   |   | Title:                              |   |
|   |   | Date:                               |   |

 

21

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o                                                            Yes, we have aninterest in pursuing the Investment Opportunity and will be responsible forpayment of our pro rata share of the due diligence expense as set forth in theAgreement.

 

o                                                            No, we do nothave any interest in the subject Investment Opportunity.

 

 
|   |   | **VÄRDE  INVESTMENT PARTNERS, L.P.**, a Delaware limited partnership                                 |
|--------|--------|-----------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                      |
|   |   | By:  Värde Investment Partners G.P., LLC, a Delaware limited liability company,  its General Partner |
|   |   |                                                                                                      |
|   |   | By:  Värde Partners, L.P., a Delaware limited partnership, its Managing Member                       |
|   |   |                                                                                                      |
|   |   | By:  Värde Partners, Inc., a Delaware corporation, its General Partner                          |
|   |   |                                                                                                      |
|   |   |                                                                                                      |
|   |   | By:                                                                                                       |   |
|   |   | Name:                                                                                                     |   |
|   |   | Its:                                                                                                      |   |

 

22

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**EXHIBIT B**

 

**FIRSTCITY WITHDRAWAL NOTICE**

 

JHC#

PACKAGE NAME

BID DATE

 

NOTICEDATE:                                      20

 

TO:                                                                           VärdeInvestment Partners, L.P.

c/o Värde Partners, L.P.

8500 Normandale Lake Blvd., Suite 1500

Minneapolis, MN 55437

Attention:  Christopher N. Giles

 

VIAFACSIMILE:               (952) 893-9613

 

FROM:

 

FirstCityServicing Corporation submitted to you a Transaction Notice with respect to theabove referenced package for which you sent an affirmative TransactionResponse. FC Diversified Holdings LLC and its Affiliates have determined thatthey have no further interest in pursuing the possible acquisition of theInvestment Opportunity and provide this Withdrawal Notice to you pursuant to Section 2.3(a) ofthat certain Investment Agreement dated effective as of April 1, 2010,between FC Diversified Holdings LLC, FirstCity Servicing Corporation, and VärdeInvestment Partners, L.P.  Neither FCDiversified Holdings LLC, FirstCity Servicing Corporation, nor any FirstCityAffiliate will be responsible for any Due Diligence Expenses contracted for byVärde or any Affiliate of Värde after your receipt of this Withdrawal Notice.

 
|   |   |   |   |
|--------|--------|--------|--------|
|   |   |   |   |
|   |   | By:    |   |
|   |   | Name:  |   |
|   |   | Title: |   |
|   |   | Date:  |   |

 

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**EXHIBIT C**

 

**VÄRDE****WITHDRAWAL NOTICE**

 

FCSC#

PACKAGE NAME

BID DATE

 

NOTICEDATE:                                      20

 

TO:                                                                           FirstCityServices Corporation

P.O. Box 8216 (mail)

Waco,Texas  76714-8216

6400Imperial Drive (delivery only)

Attention:   LegalDepartment

 

VIAFACIMILE: (254) 761-2953

 

FROM:                                                       VärdeInvestment Partners, L.P.

 

FirstCityServicing Corporation submitted to Värde Investment Partners, L.P. (“Värde”) aTransaction Notice with respect to the above referenced package for which Värdesent an affirmative Transaction Response. Värde has determined that it has no further interest in pursuing thepossible acquisition of the Investment Opportunity and provides this WithdrawalNotice to you pursuant to Section 2.3(b) of that certain InvestmentAgreement effective as of April 1, 2010, between FC Diversified HoldingsLLC, FirstCity Servicing Corporation and Värde Investment Partners, L.P.

 

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Värdewill not be responsible for any Due Diligence Expenses contracted for by anyFirstCity Affiliate after your receipt of this withdrawal notice.

 

 
|   |   | **VÄRDE  INVESTMENT PARTNERS, L.P.**, a Delaware limited  partnership                                |
|--------|--------|-----------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                      |
|   |   | By:  Värde Investment Partners G.P., LLC, a Delaware limited liability company,  its General Partner |
|   |   |                                                                                                      |
|   |   | By:  Värde Partners, L.P., a Delaware limited partnership, its Managing Member                       |
|   |   |                                                                                                      |
|   |   | By:  Värde Partners, Inc., a Delaware corporation, its General Partner                          |
|   |   |                                                                                                      |
|   |   |                                                                                                      |
|   |   | By:                                                                                                       |   |
|   |   | Name:                                                                                                     |   |
|   |   | Its:                                                                                                      |   |

 

25

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**EXHIBIT D**

 

**FORM OF STOCK PURCHASE AGREEMENT**

 

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