**Exhibit 10.16**

 

***EXECUTIONVERSION***

**GUARANTY**

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

## **RECITALS:**

A.            Contemporaneously with the executionof this Guaranty, Strategic Mexican Investment Partners, L.P., a Texas limitedpartnership (“***SMIP***”),Buyer and AIG have entered into an Interest Purchase and Sale Agreement (the “***Interest Purchase Agreement***”), dated asof even date herewith, by and among Buyer, the Delaware limited liabilitycompanies listed on Exhibit A attached to the Interest Purchase Agreement (eachindividually, a “***Company***,” and collectively,the “***Companies***”), SMIP, Cargill FinancialServices International, Inc., a Delaware corporation (“***Cargill***”and, together with SMIP, the “***Sellers***”).  The Sellers and the Companies shall becollectively referred to as the “***Seller Entities***.”

B.            The Sellers are the sole members ofthe Companies and collectively own beneficially and of record 100% of themembership interests in each of the Companies, as set forth on Exhibit Aattached 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 MembershipInterests on the terms and conditions set forth in the Interest PurchaseAgreement.

D.            Contemporaneously with the executionof this Agreement and the Interest Purchase Agreement, Buyer has entered intothe Agreement for the Onerous Transfer of Loans and Litigious Rights, dated asof even date herewith (the **“*Transfer ofRights Agreement”*** and, together with the InterestPurchase 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 certainLoans, as defined in the Transfer of Rights Agreement; and

E.             In order to induce the Buyer andAIG to enter into the Interest Purchase Agreement, in order to induce Assigneeand AIG to enter into the Transfer of Rights Agreement, in connection with andas a condition to the closing of the transactions contemplated by the OperativeAgreements, and because FirstCity will be an indirect beneficiary of theconsummation of such transactions, FirstCity has agreed to enter into thisGuaranty.

## **AGREEMENTS:**

**NOW,THEREFORE**, in consideration of the premises and the mutualcovenants and agreements of the parties made in this Guaranty and other goodand valuable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties hereto agree as follows:

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***EXECUTIONVERSION***

1.**            ****Guaranty.**  FirstCity hereby agrees with theBeneficiaries to cause and enable SMIP to perform its obligations under theOperative Agreements, and hereby guarantees irrevocably and unconditionally tothe Beneficiaries upon the terms of this Agreement that SMIP will well andfaithfully perform and fulfill everything required by the Operative Agreementson its part to be performed and fulfilled, at the times and in the mannerprovided in the Operative Agreements, and also that the payments provided forin the Operative Agreements shall be promptly paid when due. FirstCity agreesthat if for any reason whatsoever SMIP shall fail or be unable duly, punctuallyand fully to perform any such obligation under the Operative Agreements,FirstCity shall perform each and every such obligation, or cause each suchobligation to be performed. FirstCity’s obligations shall be subject to anyBeneficiary (i) obtaining judgment against SMIP, which judgment may be soughtin a legal action pursuant to which both SMIP and FirstCity are co-defendants,regarding the performance of any obligation for which such Beneficiary isseeking 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 performanceobligation and the entry of the Judgment. FirstCity shall cure such defaultwithin five (5) business days after receipt of the notice and copy of theJudgment; *provided, however*, that if FirstCity wasa 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 paysuch Judgment within five (5) business days of the date upon which suchJudgments was obtained. In addition, FirstCity agrees to reimburse suchBeneficiary on demand for any and all reasonable expenses (including reasonablefees and expenses of counsel) incurred by such party in successfully enforcingany rights under this Guaranty. In any case, FirstCity’s obligation for paymentrelated to any failure to perform by SMIP as set forth hereunder shall belimited to the purchase price *[or value in Dollars]*received by SMIP under the Operative Agreements.

2.             **Representationsand Warranties of Guarantor**. FirstCity hereby represents and warrants to each Beneficiary as setforth below:

(a)           Theexecution and delivery of this Guaranty and the performance by FirstCity of itsobligations hereunder have been duly and validly authorized by all necessarycorporate action, and no other proceedings on the part of FirstCity arenecessary to authorize the execution and delivery of this Guaranty and theperformance by FirstCity of its obligations hereunder.

(b)           ThisGuaranty has been duly executed and delivered by FirstCity, and constitutes avalid and binding obligation of FirstCity enforceable against FirstCity inaccordance with its terms.

(c)           Noneof 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 timeor both, would violate, conflict with, breach, or constitute a default) underor result in the termination of its charter, bylaws or other constituentdocuments.

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

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

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***EXECUTIONVERSION***

4.             **Amendmentsand Waivers**.

(a)           Noamendment or waiver of any provision of this Guaranty shall be valid andbinding unless it is in writing and signed, in the case of an amendment, byFirstCity and each of the Beneficiaries, or in the case of waiver, by the partyagainst whom the waiver is sought to be enforced.  No waiver by a party of any breach orviolation of, or default under, this Guaranty shall be deemed to extend to anyprior or subsequent breach, violation or default hereunder or to affect in anyway any rights arising by virtue of any such prior or subsequentoccurrence.  No delay or omission by anyparty in exercising any right, power or remedy under this Guaranty shalloperate as a waiver thereof.

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

5.             **Counterparts**. This Guaranty may beexecuted in any number of counterparts, each of which will be deemed anoriginal, but all of which together will constitute one and the sameinstrument. This Guaranty shall become effective when duly executed by eachparty hereto.

6.             **Notices.**  Any noticerequired to be given to a party shall be in writing and should be sufficientlygiven if delivered in person or sent by telecopy or by certified or expressmail, postage prepaid, to the following addresses and addressees unlessotherwise advised in writing by the relevant party:

If to FirstCity:

FirstCity FinancialCorporation

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, Suite3100

Dallas, Texas  75202

Attn:  Paul H. Amiel

Facsimile: 214-200-0555

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***EXECUTIONVERSION***

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 InvestmentGroup

599 Lexington Avenue,25th Floor

New York, New York 10022

Attn:  Afsar Farman-Farmaian, Esq.,

General Counsel, AIGCapital 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 agreethat all correspondence is conclusively presumed to be received by the otherparties on the date actually received as evidenced by a date and time stamp orsimilar notation made by each receiving party, respectively, unless the sendingparty has other reasonable proof of the date of receipt by each receivingparty, 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 (withoutgiving effect to any choice of law or conflict of law provision or rule thatwould cause the application of the laws of any other jurisdiction), and anydispute hereunder shall be subject to resolution solely in any court ofcompetent jurisdiction in the States of New York.

8.             **Jurisdiction and Venue; Service of Process**. Each of the parties hereto hereby irrevocably andunconditionally submits, for itself and its property, to the exclusivejurisdiction of the courts of the State of New York and any appellate courtthereof, in any action or proceeding arising out of or relating to thisGuaranty or any of the transactions contemplated hereby or for recognition orenforcement of any judgment relating thereto, and each of the parties herebyirrevocably and unconditionally (a) agrees not to commence any such actionexcept in such court, (b) agrees that any claim in respect of any such actionor 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 anyobjection which it may now or hereafter have to venue of any such action orproceeding in any such New York state court, and (d) waives, to the fullestextent permitted by law, the defense of any inconvenient forum to themaintenance

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***EXECUTIONVERSION***

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

9.             **Severability**. Any term orprovision of this Guaranty that is invalid or unenforceable in any jurisdictionshall, as to that jurisdiction, be ineffective to the extent of such invalidityor unenforceability without rendering invalid or unenforceable the remainingterms and provisions of this Guaranty or affecting the validity orenforceability of any terms or provisions of this Guaranty in any otherjurisdiction so long as the economic or legal substance of the transactionscontemplated hereby is not affected in any manner adverse to any party. Noparty hereto shall assert, and each party shall cause its respective affiliatesnot to assert, that this Guaranty or any part hereof is invalid, illegal or unenforceable.

10.           **NoAssignment    .**  This Guaranty may not be assigned by anyparty without the prior written consent of the other parties hereto.

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

 

***[the remainder of this page is intentionally left blank-signature page follows this page]***

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***EXECUTIONVERSION***

**INWITNESS WHEREOF**,the parties to this Guaranty have caused this Guaranty to be duly executed asof the day and year first above written.
|            | **GUARANTOR:**                       |
|------------|--------------------------------------|
| ** ** | ** **                           |
| ** ** | **FIRSTCITY  FINANCIAL CORPORATION** |
| ** ** | ** **                           |
| ** ** | ** **                           |
|       | By:                                  |   |   |
|       |                                 |   Name: |   |   |
|       |                                 |   Title: |   |   |
|            |                                      |  |  |  |  |

 

ThisGuaranty 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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***EXECUTIONVERSION***

 
|            | **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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