**Exhibit 10.57**

 

Execution Copy

 

 

REDUCING NOTE FACILITY AGREEMENT

 

 

among

 

 

FIRSTCITY COMMERCIAL CORPORATION

 

and

 

FH PARTNERS LLC

 

as Borrowers

 

 

and

 

 

FLBG CORPORATION

 

as a Guarantor

 

BANK OF SCOTLAND PLCAND BOS (USA) INC.

as Lenders,

 

with

 

BANK OF SCOTLAND PLC,

acting through its New York Branch,

as Agent and Collateral Agent

 

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Dated as of June 25, 2010

 

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REDUCING NOTE FACILITY AGREEMENT

 

REDUCINGNOTE FACILITY AGREEMENT, dated as of June 25, 2010 among FIRSTCITYCOMMERCIAL CORPORATION, a Texas corporation (“FC Commercial”), FHPARTNERS LLC, a Texas limited liability company (“FH Partners”) (FCCommercial and FH Partners each a “Borrower” and together, the “Borrowers”),FLBG CORPORATION, a Texas corporation, as Guarantor (“FLBG”), thefinancial institutions from time to time party hereto as Senior Lenders (the “SeniorLenders”), and BoS (USA) Inc., a Delaware corporation (“BoS (USA)”)(the“Subordinated Lender” and together with the Senior Lenders, the “Lenders”)and BANK OF SCOTLAND PLC, acting through its New York branch, as agent forLenders (in such capacity, “Agent”) and as collateral agent forLenders(in such capacity, “CollateralAgent”).

 

W I T N E S S E T H :

 

WHEREAS,the Borrowers’ Affiliate, FirstCity Financial Corporation, a Delaware corporation(“FCFC”), and the Lenders and the Agent are parties to a certainRevolving Credit Agreement dated as of November 12, 2004 (as the same hasbeen amended from time to time, the “Revolving Credit Agreement”);

 

WHEREAS,FH Partners and the Lenders and the Agent are parties to a certain RevolvingCredit Agreement dated as of August 26, 2005 (as the same has been amendedfrom to time to time, the “FH Partners Credit Agreement”) evidencingloans thereunder (such loans, together with the loans under the RevolvingCredit Agreement, collectively, the “Senior Loan”);

 

WHEREAS,FCFC and BoS (USA). are parties to a certain Subordinated Delayed Draw CreditAgreement dated as of September 5, 2007 (as the same has been amended fromtime to time, the “Subordinated Credit Agreement”) evidencing loansthereunder (the “Subordinated Loan”) (the Revolving Credit Agreement,the FH Partners Credit Agreement and the Subordinated Credit Agreementtogether, the “Existing Credit Agreements”);

 

WHEREAS,the Borrowers and FCFC have requested that the Lenders permit the ExistingCredit Agreements to be consolidated, amended and restated in their entirety bythis Agreement;

 

WHEREAS , it is the intent of the parties hereto thatthis Agreement shall be an amendment of the Existing Credit Agreements and nota novation thereof;

 

WHEREAS,the Lenders are willing to permit the Existing Credit Agreements to beconsolidated, amended and restated in their entirety by this Agreement andBorrowers hereby shall assume the obligations under the Existing CreditAgreements as consolidated, amended and restated in their entirety by thisAgreement; and

 

WHEREAS,the parties hereto agree that the Lenders shall have no obligation to provideany additional Loans or issue any new Letters of Credit under the ExistingCredit Agreements, under this Agreement or under any other agreement,instrument or Loan Documents, except for Loans to be made upon presentment ofthe existing Letters of Credit (as defined herein) as set forth in thisAgreement.

 

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NOW,THEREFORE, in consideration of the premises and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereto agree as follows:

 

Section 1.                                           DEFINITIONS.

 

(a)           Terms used in this Agreement which are defined inAnnex I hereto shall have the meanings specified in such Annex I hereto (unlessotherwise defined herein) and shall include in the singular number the pluraland in the plural number the singular.

 

(b)           Unless otherwise specified, each reference in thisAgreement or in any other Loan Document to a Loan Document shall mean such LoanDocument as the same may from time to time be amended, extended, restated,supplemented or otherwise modified.

 

(c)           All references to Sections in this Agreement or inAnnex I hereto shall be deemed references to Sections in this Agreement unlessotherwise specified.

 

(d)           As used in this Agreement and the other LoanDocuments, the terms “including” and “such as” are illustrative and notlimitative.

 

Section 2.                                           THE OUTSTANDINGLOANS.

 

2.1          The Outstanding Loans and Letters of Credit.

 

(a)           On and as of the date hereof, the outstandingprincipal balance of the loans (each a “Loan” and collectively the “Loans”)and Letters of Credit under the respective Existing Credit Agreements is asfollows:

 
| Revolving Credit Agreement     | -      |   | $      | 174,616,768.94 |   |
|--------------------------------|--------|--------|--------|----------------|--------|
|                           |   |   |   |           |
| LC Outstandings                | -      |   | $      | 22,350,000     |   |
|                           |   |   |   |           |
| FH Partners Credit  Agreement  | -      |   | $      | 46,641,875.14  |   |
|                           |   |   |   |           |
| Subordinated Credit  Agreement | -      |   | $      | 25,000,000     |   |
|                           |   |   |   |           |
| Total:                         |   |   | $      | 268,608,644.08 |   |

 

Onand as of the date hereof, the outstanding balance of Loans made in Euros is€19,673,574.44 (the equivalent of $24,605,372.65US Dollars).

 

Theexisting Loans under the respective Existing Credit Agreements will be amendedand restated pursuant to the terms of this Agreement.  The aggregate outstanding principal amount ofLoans made in Euros under this Agreement shall not exceed the equivalent of$27,500,000.  Unless otherwise providedherein, all Loans denominated in Euros shall be made, maintained and continuedas Eurocurrency Loans.

 

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(b)           The Lenders have no obligation under this Agreement,under the Existing Credit Agreements or under any other agreement, instrumentor Loan Documents to make any additional Loans to the Borrowers or to any Affiliatesof either Borrower, except as provided in Section 2A.4(b).

 

(c)           FCFC will have no obligation or liability forpayment of the Loans or any other obligations under this Agreement or theExisting Credit Agreements, except as set forth in and pursuant to the LimitedGuaranty.

 

2.2          The Notes.  Borrowers’ joint and several obligation topay the principal of, and interest on, the Loans of each Lender shall beevidenced by promissory notes payable to the order of such Lender, eachsubstantially in the form of Exhibit A-1, with respect to theSenior Loan (such note, the “Senior Note”), and Exhibit A-2,with respect to the Subordinated Loan. (such note, a “Subordinated Note”,and, together with the Senior Note, the “Notes”).

 

(a)           Each Note delivered to each Lender shall be: (i) datedthe Effective Date; (ii) in an original principal amount, with respect toeach Lender, as set forth on Schedule 2.2(a) hereto; and (iii) payablein full on the Maturity Date.

 

(b)           The Notes shall be, and hereby are, secured by theCollateral and the Security Documents.

 

(c)           For the avoidance of doubt,the Borrowers and the Lenders acknowledge that (i) the SubordinationAgreement, as amended on the date hereof, remains in full force and effect and (ii) paymentsto the Borrower under this Agreement shall be allocated among the Loans asdirected from time to time by the Agent in accordance with the SubordinationAgreement.

 

2.3          Mandatory Prepayments and Repayments of Loans.

 

(a)           On or before the end of each quarter, the Borrowersshall prepay the Loans in any amount necessary to reduce the Total Outstandingto the amount specified below for such quarter, as follows:

 
| September 30, 2010: |   | $ | 260,000,000 |   |
|--------------------------|--------|---|-------------|--------|
| December 31, 2010:  |   | $ | 250,000,000 |   |
| March 31, 2011:     |   | $ | 240,000,000 |   |
| June 30, 2011:      |   | $ | 225,000,000 |   |
| September 30, 2011: |   | $ | 205,000,000 |   |
| December 31, 2011:  |   | $ | 185,000,000 |   |
| March 31, 2012:     |   | $ | 165,000,000 |   |
| June 30, 2012:      |   | $ | 145,000,000 |   |
| September 30, 2012: |   | $ | 125,000,000 |   |
| December 31, 2012:  |   | $ | 100,000,000 |   |
| March 31, 2013:     |   | $ | 85,000,000  |   |

 

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(b)           Borrowers shall repay the unpaid principal amount ofall Loans, together with all unpaid interest thereon and all other fees andamounts due with respect thereto, in full on the Maturity Date.

 

(c)           In the event the aggregateoutstanding principal amount of Loans made in Euros under this Agreementexceeds the equivalent of $27,500,000, Borrowers shall prepay such Loans untilthe aggregate outstanding principal amount of Loans made in Euros under thisAgreement no longer exceeds the equivalent of $27,500,000.

 

(d)           No amounts prepaid or repaidin accordance with the provisions of this Section 2.3 may be reborrowed.

 

2.4          Voluntary Prepayments of Loans.  Borrowers may, upon not less than three (3) BusinessDays prior written notice to Agent (which notice Agent shall promptly transmitto Lenders in writing or by telephone, and if by telephone, confirmed as soonas possible thereafter in writing) prepay the Loans in whole at any time, orfrom time to time in part in amounts of not less than 250,000 units of therelevant currency equal to or greater than an amount of the Dollar Equivalentof which is $250,000 (and, if greater, in integral multiples of 50,000 units ofthe relevant currency), without premium or penalty; provided that at thetime of any such prepayment, Borrowers shall pay all interest accrued on theprincipal amount so prepaid and all other fees and amounts (including, withoutlimitation, the Upfront Fee and any breakage costs to Lenders) due hereunder orunder the Loan Documents.  All noticespursuant to this Section 2.4 shall be irrevocable and result in theprincipal amount of Loans specified therein becoming due and payable on theprepayment date specified therein.  In noevent may amounts prepaid under this Section 2.4 be reborrowed.

 

2.5          Currency Fluctuations, etc.

 

(a)           Not later than 1:00 p.m.,New York City time, on each Payment Date, Agent shall (i) determine theExchange Rate as of such date if at such time there are outstanding EurocurrencyLoans denominated in Euros and (ii) give notice thereof to Lenders andBorrowers.  The Exchange Rate sodetermined shall be effective on the first Business Day immediately followingthe relevant Borrowing Date or Payment Date (a “Reset Date”) and shallremain effective until the next succeeding Reset Date.

 

(b)           Not later than 5:00 p.m.,New York City time, on each Reset Date, Agent shall (i) determine theDollar Equivalent of the Eurocurrency Loans in Euros then outstanding (aftergiving effect to any Eurocurrency Loans to be made or repaid on such date) and (ii) notifyLenders and Borrowers of the results of each determination.

 

SECTION 2A.  LETTERS OF CREDIT

 

SECTION 2A.1.  Outstanding Letters of Credit.  Set forth on Schedule 2A.1 is a listof all irrevocable letters of credit (each a “Letter of Credit” andcollectively, the “Letters of Credit”) outstanding in connection withthe Existing Credit Agreements, setting forth the principal amount, beneficiaryand maturity date of each thereof.  TheLenders have no obligation under this Agreement, under the Existing CreditAgreements or under any other agreement, instrument or Loan Documents to issueadditional Letters of Credit.

 

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SECTION 2A.2.  No Extensions.  The parties acknowledge that, notwithstandingany contrary provision set forth in the Letters of Credit or any otheragreement, the Letters of Credit shall not be subject to any extension beyondtheir respective expiry dates.  Theparties further acknowledge that this Agreement shall constitute notice underany Letter of Credit that the expiry date of such Letter of Credit shall not beextended.

 

SECTION 2A.3.  Fees and Expenses.  (a) Borrowers agree to pay to Agent fordistribution to Senior Lenders (prorata, based upon their prorata shares of the LC Outstandings as determined in accordance with Section 2A.6)a non-refundable letter of credit fee with respect to each Letter of Creditequal to, per annum (calculated on the basis of a 360-day year and the actualnumber of days elapsed), (x) 3.5%, times (y) the Stated Amountof such Letter of Credit, such fee to be paid quarterly in advance on thefourth Business Day of each March, June, September and December thereafter(each a “Letter of Credit Fee”).  In addition, Borrowers further agree to pay tothe Issuer for its own account the Issuer’s standard, documentary andprocessing charges and all other administrative expenses of the Issuer inconnection with the maintenance of each Letter of Credit.

 

(b) If any Regulatory Change shall at any time (i) impose, modify or deemapplicable any reserve, special deposit or similar requirement against lettersof credit issued by the Issuer or participated in by any Lender or LenderAssignee, or (ii) subject letters of credit issued by the Issuer orparticipations therein held by any Lender or Lender Assignee to any assessmentor other cost or (iii) impose on the Issuer or any Lender or LenderAssignee any other or similar condition regarding any Letter of Credit, thecommitment or obligation of the Issuer to issue Letters of Credit hereunder orany Lender’s or Lender Assignee’s participation therein and the result of anyevent referred to in clause (i), (ii) or (iii) above shall be toincrease the cost to the Issuer or any Lender or Lender Assignee of agreeing toissue, issuing or maintaining any Letter of Credit or its participation thereinby an amount which the Issuer or such Lender or Lender Assignee shall deem tobe material (which increase in cost shall be the result of the reasonableallocation by the Issuer or such Lender or Lender Assignee of the aggregate ofsuch cost increases resulting from such events), then and in each caseupon demand from time to time by the Issuer or such Lender or Lender Assignee(furnished to Borrowers by Agent), provided such demand is made no later thansix months after such Issuer, Lender or Lender Assignee obtains knowledge ofsuch Regulatory Change, Borrowers shall promptly pay to Agent (for the accountof such Issuer, Lender or Lender Assignee, as the case may be) additionalamounts which shall be sufficient to compensate the Issuer (or such Lender orLender Assignee) for such increased cost from the date of such change, togetherwith interest on each such amount from the date demanded by the Issuer (or suchLender or Lender Assignee) until payment in full thereof (after as well asbefore judgment) at a rate per annum equal to the Applicable Rate from time totime in effect.  A certificate of theIssuer (or such Lender or Lender Assignee) submitted to Borrowers as to anyadditional amount or amounts (including calculations thereof, in reasonabledetail) shall, in the absence of manifest error, be conclusive and binding onBorrowers.  In determining such amount oramounts, the Issuer (or such Lender or Lender Assignee) may use any method ofaveraging and attribution as it (in its reasonable discretion) shall deemapplicable.

 

(c) The provisions of this Section 2A.3 and Section 2A.5 shall surviveany termination of this Agreement and the payment in full of the Loans and theLC Obligations.

 

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SECTION 2A.4.  Disbursements.  (a) The Issuer will notify Borrowers andAgent promptly of the presentment for payment of any Letter of Credit togetherwith notice of the date (the “Disbursement Date”) such payment shall bemade.  Subject to the terms andprovisions of such Letter of Credit and this Agreement, the Issuer shall makesuch payment to the beneficiary (or its designee) of such Letter of Credit.

 

(b) Prior to 11:00 a.m. Closing Office Time on the Disbursement Date, a Loanwill be deemed made by the Senior Lenders hereunder and evidenced by the SeniorNote to reimburse the Issuer to Agent at the Closing Office for all amountsdisbursed or to be disbursed by the Issuer on that day (the “Disbursement”)under such Letter of Credit (the “Reimbursement Obligation”); provided,however, that neither Borrowers nor Lenders shall be obligated to reimburse theIssuer for any wrongful Disbursement made by the Issuer under any Letter ofCredit as a result of acts or omissions constituting gross negligence orwillful misconduct on the part of the Issuer. Borrowers shall notify the Lenders if they object to the funding of anyLoan to pay a Reimbursement Obligation as a result of the gross negligence orwillful misconduct of the Issuer.

 

SECTION 2A.5.  Nature of Reimbursement Obligations.  Borrowers shall assume all risks of the acts,omissions, or misuse of any Letter of Credit by the beneficiary thereof.  Neither the Issuer (except to the extent ofits own gross negligence or willful misconduct), Agent nor any Lender shall beresponsible for:

 

(a) theform, validity, sufficiency, accuracy, genuineness, or legal effect of anyLetter of Credit or of any draft, demand or other document, instrument or otherpaper relating to, or presented under, any Letter of Credit, or any documentsubmitted by any party in connection with the application for and issuance ofany Letter of Credit, even if it should in fact prove to be in any or allrespects invalid, insufficient, inaccurate, fraudulent or forged;

 

(b) theform, validity, sufficiency, accuracy, genuineness, or legal effect of anyinstrument transferring or assigning or purporting to transfer or assign anyLetter of Credit or the rights or benefits thereunder or proceeds thereof inwhole or in part, which may prove to be invalid or ineffective for any reason;

 

(c) failureof the beneficiary to comply fully with conditions required in order to demandpayment under any Letter of Credit;

 

(d) errors,omissions, interruptions, or delays in transmission or delivery of anymessages, by mail, cable, telegraph, telex, telecopier or otherwise; or

 

(e) anyloss or delay in the transmission or otherwise of any document or draftrequired in order to make a Disbursement under any Letter of Credit or of theproceeds thereof.

 

Noneof the foregoing shall affect, impair, or prevent the vesting of any of therights or powers granted the Issuer, Agent or Lenders hereunder.  In furtherance and extension and not inlimitation or derogation of any of the foregoing, any action taken or omittedto be taken by the Issuer in good faith shall be binding upon Borrowers, Agent,Lenders and each Lender Assignee and shall not put the Issuer (except to theextent of its own gross negligence or willful misconduct), Agent or any Lenderor Lender Assignee under any resulting liability to Borrowers 

 

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norput the Issuer under any resulting liability to Agent or any Lender or LenderAssignee.  Nothing herein shallconstitute a waiver by Borrowers of any of its rights against any beneficiaryof any Letter of Credit.

 

2A.6  Other Senior Lenders’ Participation.  Each Letter of Credit is deemed issued onbehalf of the Senior Lenders (including the Issuer), prorata,based upon the percentage that each Senior Lender’s outstanding Loans andparticipations in Letters of Credit represents of all Senior Lenders’ Loans andparticipations in Letters of Credit), and each Senior Lender is deemed to haveirrevocably purchased from the Issuer a participation in such Letter of Creditequal to such Senior Lender’s prorata share of the StatedAmount.  Each Senior Lender shall, to theextent of such prorata share, promptly reimburse the Issuer forany Reimbursement Obligation which has not been promptly funded by a Loan bythe Senior Lenders in accordance with Section 2A.4(b).  For the avoidance of doubt, any such Loan tothe Issuer by Senior Lenders shall (notwithstanding that Borrowers may at thetime be the subject of a proceeding of the type described in Section 9.8)be treated as Loans made by the Senior Lenders to Borrowers for all purposes ofthis Agreement.

 

Section 3.                                           INTEREST.

 

3.1          Rate of Interest.  Subject to the provisions of Section 3.3,Borrowers agree, jointly and severally, to pay interest in respect of theunpaid principal amount of the Loans from the date hereof until maturity(whether by acceleration or otherwise) for each period from and including eachPayment Date to but excluding the immediately following Payment Date at a rateper annum equal to, at the Borrower’s option, either (x) the greater of (i) LIBORplus 350 basis points or (ii) 4.5%, or (y) the Base Rate plus 300basis points (such rate, the “Applicable Rate”).

 

3.2          Interest Payment Dates.  Interest on and prior to maturity in respectof each Loan shall be payable in arrears (i) on each Payment Date; (ii) uponany repayment or prepayment (to the extent accrued on the principal amount sorepaid or prepaid); and (iii) at maturity (whether by acceleration orotherwise) and, after maturity, on demand.

 

3.3          Past Due Rate.  Each Loan (and any overdue interest inrespect of each Loan) shall bear interest for each day on which an Event ofDefault exists (after as well as before judgment), payable on demand, at a rateper annum equal to 5% in excess of the Applicable Rate in effect on such day(such rate, the “Past-Due Rate”).

 

3.4          Capital Adequacy.  If any Lender shall have determined that theapplicability of any law, rule, regulation or guideline adopted after the datehereof, it being agreed that “adopted after the date hereof” shall includecompliance by a Lender or any lending office or holding company of a Lenderwith any Basel Law whether or not such Basel Law was in effect, applicable orphased in on or prior to or after the date hereof pursuant to or arising out ofthe July 1988 report of the Basel Committee on Banking Regulations andSupervisory Practices entitled “International Convergence of CapitalMeasurement and Capital Standards” or pursuant to or arising out of anyreport, agreement or convention of  anyinternational banking group adopted subsequent to such 1988 report (said laws,rules, regulations and guidelines pursuant to or arising out of such 1988report or any such subsequently adopted report, agreement or convention beingsometimes collectively herein referred to as “Basel Laws”), or theadoption after the date hereof 

 

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of any other law, rule, regulation or guidelineregarding capital adequacy (any such other law, rule, regulation or guidelinebeing sometimes herein referred to as “Other Laws”), or any change inany of the foregoing (after the date hereof in respect of Other Laws; before orafter the date hereof in respect of Basel Laws) or in the enforcement orinterpretation or administration of any of the foregoing (after the date hereofin respect of Other Laws; before or after the date hereof in respect of BaselLaws) by any Government Authority, central bank or comparable agency chargedwith the enforcement or interpretation or administration thereof, or complianceby any Lender (or any lending office of any Lender) or any holding company ofany Lender with any request or directive regarding capital adequacy (whether ornot having the force of law) of any such authority, central bank or comparableagency, has or would have the effect of reducing the rate of return on suchLender’s capital or on the capital of such Lender’s holding company, if any, asa consequence of its Loans or any of its obligations hereunder to a level belowthat which such Lender or such Lender’s holding company could have achieved butfor such applicability, adoption, change or compliance (taking into considerationsuch Lender’s policies and the policies of such Lender’s holding company withrespect to capital adequacy) by an amount deemed by such Lender to be material,then, upon demand by such Lender (or by Agent on such Lender’s behalf),Borrowers shall pay to such Lender from time to time such additional amount oramounts as will compensate such Lender or such Lender’s holding company for anysuch reduction suffered, together with interest on each such amount from thedate demanded until payment in full (after as well as before judgment) thereofat the Base Rate. Each Lender shall endeavor to give Borrowers notice of itsintention to require compensation under this Section 3.4 within areasonable time after the loan officer of such Lender with responsibility forthis Agreement becomes aware of its entitlement to such compensation under thisSection 3.4, but no failure to give any such notice shall affect orrelieve Borrowers of any of Borrowers’ obligations under this Section 3.4or under any other provision of this Agreement or any other Loan Document orresult in any obligation or liability of Agent or any Lender to Borrowers orany other Person.  A certificate of aLender as to the amount required to be paid by Borrowers under this Section 3.4and showing in reasonable detail the basis for the calculation thereof shall,absent manifest error, be final and conclusive (it being understood that in noevent shall any Lender be required to disclose in such certificate or otherwiseany non-public information). In determining such amount or amounts, a Lendermay use any method of averaging and attribution as it (in its sole and absolutediscretion) shall deem applicable.

 

3.5          Determination of Rate of Borrowing.  As soon as practicable after 10:00 A.M.(New York time) on each Eurocurrency Interest Determination Date, Agent shalldetermine (which determination shall, absent manifest error, be final,conclusive and binding upon all parties) the rate of interest (the “Rate ofBorrowing”) which shall be applicable to the Eurocurrency Loans for thenext succeeding Eurocurrency Interest Period and shall promptly give noticethereof in writing or by telephone (confirmed in writing) to Borrowers andLenders.

 

3.6          Substituted Rate of Borrowing.

 

(a)           In the event that on any Eurocurrency InterestDetermination Date any Lender shall have reasonably determined (whichdetermination shall be final and conclusive and binding upon all parties but,with respect to the following clauses (i), (ii)(y) and (ii)(z), shall bemade only after consultation with Agent on the date of such determination)that:

 

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(i)            by reason of any changesarising after the date of this Agreement affecting the interbank Eurocurrencymarket or affecting the position of such Lender in such market, adequate andfair means do not exist for ascertaining the applicable Rate of Borrowing byreference to LIBOR with respect to the Eurocurrency Loans as to which aninterest rate determination is then being made; or

 

(ii)           by reason of (x) therequirements of Regulation D, (y) any change after the date hereof in anyother applicable law or governmental rule, regulation or order (or anyinterpretation thereof and including the enactment of any new law orgovernmental rule, regulation or order) or (z) other circumstancesaffecting such Lender or the interbank Eurocurrency market or the position ofsuch Lender in such market (such as for example but not limited to a change inofficial reserve requirements or increased capital reserves required or imposedby any regulatory authority or entity (domestic or foreign) having jurisdictionover or with respect to such Lender to the extent not provided for in clause(ii)(x) above), LIBOR shall not represent the effective pricing to suchLender for U.S. dollar deposits of comparable amounts for the relevant periods;

 

then,and in any such event, Lender so affected shall on such date give notice ofsuch determination in writing or by telephone (confirmed in writing) toBorrowers and to Agent.  Thereafter,Borrowers shall pay to such Lender, upon written demand therefor, suchadditional amounts (in the form of an increased rate of, or a different methodof calculating, interest or otherwise as such Lender in its reasonablediscretion shall determine) as shall be required to cause such Lender toreceive interest with respect to its Eurocurrency Loan for the EurocurrencyInterest Period following such Eurocurrency Interest Determination Date and forany succeeding Eurocurrency Interest Period with respect to which such changesor requirements apply (each such period, an “Affected Interest Period”)at a rate per annum equal to 2.75% in excess of the effective pricing to suchLender for U.S. dollar deposits to make or maintain its Eurocurrency Loans,provided that in the case of any such determination pursuant to clause (ii)(x),the written notice from such Lender to Agent and Borrowers on the relevantEurocurrency Interest Determination Date shall specify (x) any such amounton account thereof theretofore incurred, and such amount shall be paid at suchtime and (y) the additional amount required to be paid with respect to therelevant Affected Interest Period (with such amount so stated to be final withrespect to the relevant Affected Interest Period) and such additional amountshall be paid at the same time, and together with, the interest otherwisepayable in respect of such Eurocurrency Loans for such Affected InterestPeriod.  A certificate as to additionalamounts owed any such Lender, showing in reasonable detail the basis for thecalculation thereof, submitted to Borrowers by such Lender through Agent shall,absent manifest error, be final and conclusive and binding upon all of theparties hereto.

 

(b)           In lieu of paying additional moneys to any Lenderaffected by Section (a), other than clause (ii)(x) thereof (any suchLender, together with any Lender affected by Section 3.7(a), an “AffectedLender”), Borrowers may (subject to Section 3.8), by giving notice inwriting or by telephone (confirmed in writing) to the Affected Lender, Agentand the other Lenders on such Eurocurrency Interest Determination Date, (x) requirethe Affected Lender to convert its Eurocurrency Loan then outstanding orrequested that is so affected into a Base Rate Loan on the first day of theAffected Interest Period, such notice to pertain only to the Loans of theAffected Lender and to have no effect on the obligations of the other Lendersto maintain 

 

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Eurocurrency Loans, or (y) terminate theobligations of Lenders to maintain Loans as, or convert Loans into,Eurocurrency Loans and in such event, on the first day of what would have beenthe next Eurocurrency Interest Period, all Eurocurrency Loans shall beoutstanding as Base Rate Loans.

 

3.7          Required Termination and Prepayment.

 

(a)           In the event that at any time any Affected Lendershall have reasonably determined (which determination shall be final andconclusive and binding upon all parties) that the continuation of its EurocurrencyLoans has become unlawful by compliance by such Lender in good faith with anylaw, governmental rule, regulation, guideline or order, the Affected Lendershall on such date give notice in writing or by telephone (confirmed inwriting) to Agent and Borrowers of such determination.  The obligation of the Affected Lender tomaintain its Eurocurrency Loan or Loans so affected shall be terminated andBorrowers shall forthwith and in any event no later than the earliest of (x) thetermination of the Eurocurrency Interest Period in effect at the time any suchdetermination pursuant to this Section 3.7(a) is made or (y) five(5) Business Days after receipt of notice from an Affected Lender underthis Section 3.7(a), take one of the actions specified in Section 3.7(b).  If by the earliest of (x) or (y) Borrowershave not exercised one of the options specified in Section 3.7(b),Borrowers shall be deemed to have exercised the option set forth in clause (iii) ofSection 3.7(b) and to have given the notice specified therein.

 

(b)           Upon receiving any notification provided in Section 3.7(a),Borrowers may (subject to Section 3.8) exercise one of the followingoptions:

 

(i)            If the determination by anAffected Bank relates only to Base Rate Loans then being requested by Borrowersto be converted to Eurocurrency Loans pursuant to a Notice of Conversion,Borrowers may, by giving notice in writing to Agent and Lenders prior to thedate on which such Eurocurrency Loan is to be converted, withdraw such Noticeof Conversion for all Lenders;

 

(ii)           Upon written notice toLenders, Borrowers may terminate the obligations of Lenders to maintain Loansas, or convert Loans into, Eurocurrency Loans and in such event, Borrowersshall, not later than the time specified in subsection 3.7(a), convert allEurocurrency Loans into Base Rate Loans by giving notice thereof to Agent andLenders.

 

(iii)          Borrowers may, by givingnotice in writing to the Affected Lender, Agent and the other Lenders requirethe Affected Lender to keep outstanding as a Base Rate Loan the Base Rate Loanwhich then have been converted, such notice to pertain only to the affectedBase Rate Loans of the Affected Lender and to have no effect on the obligationsof the other Lenders to maintain Eurocurrency Loans.

 

3.8          Compensation.  Borrowers shall compensate each Lender, uponwritten request by such Lender (which request shall be made through Agent andshall set forth the basis for requesting such amounts), for all losses,expenses and liabilities (including, without limitation, any interest paid bysuch Lender to lenders of funds borrowed by it to carry its Eurocurrency Loansto Borrowers, losses sustained by such Lender in connection with theliquidation or re-

 

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employmentof such funds and all other funding losses) which such Lender may sustain: (i) iffor any reason a conversion of any Eurocurrency Loan does not occur on a datespecified therefor pursuant to Section 3.6, 3.7 or 3.10, or any conversioninto a Eurocurrency Loan does not occur on the date specified therefor in Section 3.10,(ii) if for any reason any prepayment or repayment or conversion of any ofits Eurocurrency Loans occurs on a date which is not the last day of aEurocurrency Interest Period applicable thereto, (iii) if any prepayment,repayment or conversion of any of its Eurocurrency Loans occurs on such lastday of the Eurocurrency Interest Period applicable thereto in any amount inexcess of the amount notified to Agent in writing not less than three BusinessDays prior to such last day of such Eurocurrency Interest Period, (iv) ifany prepayment, repayment or conversion of any of its Eurocurrency Loans occurswithout at least three Business Days prior written notice thereof having beengiven to Agent, (v) if any prepayment or repayment of any of itsEurocurrency Loans is not made on any date specified in a notice thereof givenby Borrowers or if any prepayment or repayment contemplated or required by aWaterfall Certificate is not made on the Payment Date following the date suchWaterfall Certificate is delivered, or (vi) as a consequence of anydefault under this Agreement.

 

3.9          Eurocurrency Interest Period Determination.

 

(a)           Each Eurocurrency Interest Period for any Loan shallcommence on a Payment Date and expire on the succeeding Payment Date.

 

(b)           No Eurocurrency Interest Period in respect of anyLoan shall extend beyond its stated maturity date.

 

(c)           Subject to Section 3.9(e), if Agent shall nothave received written notice from Borrowers on or prior to 11:00 a.m.(Closing Office time) at least three Business Days prior to a Payment Date thatBorrowers have elected to convert all or a portion of Loans outstanding asEurocurrency Loans to Base Rate Loans in accordance with the other provisionsof this Agreement, Borrowers shall be deemed to have elected to have such Loans(or portion thereof, as the case may be) continued as Eurocurrency Loans for anew Eurocurrency Interest Period.

 

(d)           Unless the Majority Lenders specifically agree inwriting, no Eurocurrency Interest Period may be selected at any time that aDefault or Event of Default exists and Borrowers shall be deemed to haveelected to convert such Eurocurrency Loans into Base Rate Loans.

 

(e)           Borrowers shall not be permitted to maintain asEurocurrency Loans any Loans if the outstanding amount of such Loans to bemaintained as Eurocurrency Loans is less than 1,000,000 units of the relevantcurrency, and an amount the Dollar Equivalent of which is equal to or greaterthan $1,000,000, or an integral multiple of 100,000 units of the relevantcurrency in excess thereof.

 

3.10        Conversions.  Borrowers shall have the option to convert,on any Payment Date, all or any portion of Loans from Base Rate Loans toEurocurrency Loans or (provided that such Loan was made in Dollars) fromEurocurrency Loans to Base Rate Loans; provided that (i) after givingeffect to any such conversion the amount outstanding as a Eurocurrency Loans,if any, shall be equal to $1,000,000 or an integral multiple of $100,000 inexcess thereof, and the 

 

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amountoutstanding as Base Rate Loans, if any, shall not be less than $20,000; and (ii) unlessthe Majority Lenders specifically agree in writing, no conversion toEurocurrency Loans shall be permitted at any time that a Default or Event ofDefault exists.  Each such conversionshall be effected by Borrowers giving Agent written notice thereof (a “Noticeof Conversion”) on or prior to 11:00 a.m. (Closing Office time) at leastthree (3) Business Days prior to a Payment Date, specifying the amount ofLoans to be converted.

 

Section 4.              FEE.  Borrowers agree to pay to Agent, for theratable account of each Lender (based upon their pro rata shares of theoutstanding Loans) an upfront fee (the “Upfront Fee”) in the amount of$2,025,000, which fee shall be due and payable in full as follows:

 

(a)           Agent and Lenders acknowledge the payments of theamount of $682,500 to the Agent on March 26, 2010, which amount shall be acredit against the Upfront Fee;

 

(b)           On the Effective Date, the amount of $675,000; and

 

(c)           On the first day of July, August, September andOctober 2010, the amount of $166,875.

 

Section 5.                                           PAYMENTS;PERMITTED DISTRIBUTIONS.

 

5.1          Currency of Payments.  All payments of principal and interest onLoans and under the Notes shall be made to Agent in immediately available fundsin the currency of the applicable Loan for which payment is being made.

 

5.2          Payments on Non-Business Days.  Whenever any payment to be made hereunder orunder the Notes shall be stated to be due on a day which is not a Business Day,the due date thereof shall be extended to the next succeeding Business Day andinterest shall be payable at the applicable rate during such extension.  Borrowers hereby authorize and direct Agentand each Lender to charge any account of a Borrower maintained at any office ofAgent or such Lender with the amount of any principal, interest or fee when thesame becomes due and payable under the terms hereof or of the Notes; provided,however, that neither Agent nor any Lender shall be under any obligationto charge any such account.

 

5.3          Payment Date and Distribution of Funds.

 

(a)           After giving effect to any mandatory prepaymentowing or that will become due and payable on or before the last day of calendarmonth in which the Payment Date in question occurs pursuant to Section 2.3(a) ofthis Agreement and except following the occurrence and during the continuationof an Event of Default, in which case the distribution of Cash Flow shall be controlledby the Agent, all funds in the Cash Flow Cash Collateral Account, the CashCollateral Account-Servicing and the FCI Distribution Account (“Cash Flow”)shall be distributed by Borrowers or the Agent on the fourth to last BusinessDay of each month (each, a “Payment Date”) pursuant to the distributionstatement prepared by Borrowers and approved in writing by Agent (or at anyother times as may be agreed upon from time to time by Borrowers, Agent andLenders) in accordance with the following priority and amounts and applied asfollows and as illustrated in Schedule 5.3(a) to this Agreement:

 

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(i)            First, to thepayment to Agent, for the account of Lenders (subject to Section 2.2(c) ofthis Agreement), of all interest on the Loans which is then due and payable andany Letter of Credit Fee payable pursuant to Section 2A.3(a) orUpfront Fee payable pursuant to Section 4;

 

(ii)           Second, to thepayment to Agent, for the account of Lenders, an amount equal to all of anyfees, late charges and other fees and expenses (other than those paid in Section 5.3(a)(i) above),including in respect of a Cold Back-up Servicer under Section 7.20 of thisAgreement, which are then due and payable to Agent and/or Lenders under thisAgreement or any of the other Loan Documents or which will become so due andpayable on or before the last day of the calendar month in which the PaymentDate in question occurs;

 

(iii)          Third, to FCCommercial as requested by it to fund the FC Commercial Protective AdvanceAccount up to the maximum amount of $1,000,000 or such greater amount approvedin writing by the Agent and Lenders, and to FHP as requested by it to fund theFH Protective Advance Account up to the maximum amount of $1,000,000 or suchgreater amount approved in writing by the Agent and the Lenders.

 

(iv)          Fourth, to thepayment to FC Servicing, of the following Overhead Allowance amounts during thefollowing periods:

 
| **Period**                   | ** ** | **Amount** | ** **          |
|------------------------------|------------|------------|---------------------|
|                         |       |       |                |
| May, 2010 – April, 2011 |       | $          | 1,500,000 per month |   |
|                         |       |       |                |
| May, 2011 – April, 2012 |       | $          | 1,029,676 per month |   |
|                         |       |       |                |
| May, 2012 – April, 2013 |       | $          | 715,636 per month   |   |

 

(v)           Fifth, to thepayment (the “Leak-Through Allowance”) to Borrowers of twenty percent(20%) of all remaining Cash Flow until aggregate payments under this Section 5.3(a)(v) equalTwenty-five Million Dollars ($25,000,000), and thereafter no further amounts asa Leak-Through Allowance; and

 

(vi)          Sixth, to thepayment to Agent, for the account of Lenders.

 

5.4          Net Payments; Application.

 

(a)           All payments hereunder and under the Loan Documents(including, without limitation, repayments and prepayments pursuant to Section 2)shall be made by Borrowers to Agent, except as otherwise provided in thisAgreement in freely transferable U.S. dollars, and in same day funds at theClosing Office without setoff or counterclaim and in such amounts as may benecessary in order that all such payments (after (i) withholding for or onaccount of any present or future taxes, levies, imposts, duties or othersimilar charges of whatsoever nature imposed on the amounts described above byany government or any political subdivision or taxing authority thereof, otherthan any tax (other than such taxes referred to in clause (ii) below)imposed on a Lender pursuant to the income tax laws of the jurisdiction wheresuch Lender’s principal or lending office or offices are located (collectively,the “Taxes”) and (ii) 

 

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deduction of an amount equal to any taxes on ormeasured by the net income payable to such Lender with respect to the amount bywhich the payments required to be made by this Section 5.4 exceed theamount otherwise specified to be paid under this Agreement and the Notes) shallnot be less than the amounts otherwise specified to be paid under thisAgreement and the Notes.  With respect toeach such deduction or withholding imposed in respect of any payment by or onbehalf of Borrowers, Borrowers shall promptly (and in no event later than 30days thereafter) furnish to Agent such certificates, receipts and otherdocuments as may be required to establish any tax credit, exemption orreduction in rate to which any Lender or holder of a Note may be entitled.  Each Lender, other than a Lender organizedand existing under the laws of the United States of America or any politicalsubdivision thereof, agrees to furnish Borrowers, as soon as practicable afterany written request of Borrowers to such effect, any executed form reasonablyrequested by Borrowers such as IRS Form W-8BEN or W-8ECI, and any otherapplicable form as to such Lender’s entitlement, if any, to exemption from, ora reduced rate of, or its subjection to, United States withholding tax onamounts payable to it hereunder by Borrowers or under the Notes of Borrowersand each such Lender undertakes to use its best efforts promptly to notifyBorrowers of any material change in any information, statement or form sofurnished to Borrowers; provided, however, that any failure onthe part of any Lender to furnish any such information, statements or formsshall in no way affect the obligations of Borrowers or the rights of any Lenderunder the terms of this Agreement or of the Notes.

 

5.5          Distribution by Agent.  All payments received by Agent on behalf ofLenders on account of principal and interest under this Agreement or the Notesor on account of any fees payable for the account of Lenders shall be promptlydistributed by Agent to Lenders (in the type of funds received by Agent) asfollows: (i) if in respect of principal of any Loans made to Borrowers,then to each Lender in accordance with the Subordination Agreement; (ii) ifin respect of interest on the Loans, then to each Lender in accordance with theSubordination Agreement; (iii) if in respect of fees, then to Lenders inaccordance with their entitlement thereto (based on each Lender’s share of theUpfront Fee); and (iv) if in respect of a payment under Section 3other than an interest payment hereof, to each Lender in accordance with itsentitlement thereto.  For the avoidanceof doubt, none of the Borrowers, FCFC or the Guarantors shall have anyliability to the Agent or the Lenders arising from the manner in which thefunds are allocated among the Lenders by the Agent.

 

Section 6.                                           CONDITIONSPRECEDENT TO EFFECTIVENESS

 

ThisAgreement shall become effective on the date hereof (the “Effective Date”)when each of the parties hereto has signed and delivered the same as hereinrequired and each of the following conditions have been satisfied to thesatisfaction of Agent (or waived by Agent in writing):

 

6.1          Default, etc.  On the Effective Date (both before and aftergiving effect to the occurrence of the Effective Date assuming such Date hasoccurred) there shall exist no Default or Event of Default and allrepresentations and warranties made by the Loan Parties herein or in the otherLoan Documents or otherwise by the Loan Parties in writing in connectionherewith or therewith shall be true and correct in all material respects withthe same effect as though such representations and warranties have been made atand as of such time.

 

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6.2          Notes.  Agent shall have received for each of Lendersthe Notes, each duly executed and completed by Borrowers.

 

6.3          Supporting Documents of Borrowers.  There shall have been delivered to Agent(with sufficient copies for each of the Lenders) such information and copies ofdocuments (if any), approvals (if any) and records (certified whereappropriate) of corporate and legal proceedings (if any) in addition to thoselisted on the Closing Checklist as Agent or any Lender may have reasonablyrequested relating to the Loan Parties’ entering into and performance of theLoan Documents or any other agreements or documents related thereto or contemplatedthereby.

 

6.4          Officer’s Certificate.  There shall have been delivered to Agent(with sufficient copies for each of Lenders) a certificate of an ExecutiveOfficer of each Borrower certifying, as of the Effective Date, compliance withthe conditions of Section 6.1 and the absence of any Material AdverseChanges of the type referred to in Section 6.8.

 

6.5          Certifications; Financial Statements.  Borrowers shall have delivered to Agent suchfinancial statements and certifications of financial statements as Agent mayhave requested, which statements shall include, in any event, month endfinancial statements of the type required by Section 7.1(a) andcertified by the CFO as of the most recent month ending no later than ninety(90) days prior to the Effective Date and the annual audited financialstatements required for FCFC for the Fiscal Year most recently ended (or theprior Fiscal Year, if less than 105 days have passed since the end of a FiscalYear) accompanied by the certifications required by Section 7.1(d).

 

6.6          Approvals and Consents.  All orders, permissions, consents, approvals,licenses, authorizations and validations of, and filings, recordings andregistrations with, and exemptions by (all of the foregoing, “RequisiteConsents”), any Government Authority, or any other Person, required toauthorize or required in connection with the execution, delivery andperformance of this Agreement or the other Loan Documents and the transactionscontemplated hereby and thereby by any Loan Party shall have been obtained(and, if so requested, furnished to Agent, with sufficient copies for Lenders).

 

6.7          Legal Opinions.  Agent shall havereceived legal opinions (in sufficient counterparts for each of Lenders) datedthe Effective Date from Haley & Olson P.C., counsel to Borrowers andeach other Loan Party, in form and substance satisfactory to Agent.

 

6.8          Adverse Change.  There shall have been, in Agent’s opinion, noMaterial Adverse Change since December 31, 2009.  Neither Agent nor any Loan Party shall havebecome aware of any previously undisclosed information with respect to any LoanParty which, in Agent’s opinion, would have a Material Adverse Effect

 

6.9          Change in Law; No Opposition.  (i) No change shall have occurred inapplicable law or in applicable regulations thereunder or in theinterpretations thereof by any Governmental Authority which, in the opinion ofany Lender, would make it illegal for such Lender to make one or more Loanshereunder; and (ii) no suit, action or proceeding shall be pending orthreatened before or by any Governmental Authority seeking to restrain orprohibit the making of any Loan or the consummation of the transactionscontemplated hereby.

 

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6.10        All Proceedings to be Satisfactory.   All corporate, partnership, limited liabilitycompany and legal proceedings and all instruments, documents and papers inconnection with the transactions contemplated by this Agreement and the otherLoan Documents and the other documents referred to herein shall be satisfactoryin form and substance to Agent, and Agent and each Lender shall have receivedall such information and copies of all documents which Agent or such Lender mayreasonably have requested in connection herewith, such documents whereappropriate to be certified by proper corporate officials or governmentalauthorities.

 

6.11        Checklist Documents.  The documentation set forth on the ClosingChecklist (Schedule 6.11), including, without limitation, theGuaranties, Pledge Agreements and Security Agreements, related confirmationslisted thereon, the Subordination Agreement and the Back-Up ServicingAgreement, satisfactory to Agent in form and substance, shall have beendelivered to Agent, and such other actions referred to on such Schedule and insuch documentation shall have been taken.

 

6.12        Intercompany Security Agreements.  Each Primary Obligor shall have delivered (i) intercompanysecurity agreements (or confirmations thereof) in form and substancesatisfactory to Agent securing each such Person’s obligations under its PledgedNote together with such other documents and instruments relating thereto andrecords of company proceedings and (ii) if requested by Agent, legalopinions, as Agent may reasonably request.

 

6.13        UCC Statements.  Lien search results confirming the absence ofany perfected Liens prior to Lenders’ and of any other Liens other than Lienspermitted hereunder shall have been delivered to Agent and all actions withrespect to the Liens created by the Security Documents as are necessary orappropriate to perfect such Liens shall have been taken.

 

6.14        Fees and Expenses.  The fees referred to in Section 4 ofthis Agreement and the legal fees and expenses of Agent’s New York counsel and(if any) local or special counsel in connection with the transactionscontemplated by this Agreement shall have been paid in full.

 

6.15        Release by FCFC.  Borrowers shall have caused the execution anddelivery by FCFC and its Affiliates to the Lenders of a release in form, scopeand substance satisfactory to the Lenders (the “Release”).

 

6.16        Collateral Assignment of Service Bureau.  FC Servicing and the Lenders shall haveexecuted and delivered a collateral assignment of that certain InformationTechnology Services Agreement, dated February 7, 2006, between FidelityInformation Services, Inc. and FC Servicing (the “ITSA Agreement”),such collateral assignment to be in form, scope and substance satisfactory tothe Lenders.

 

6.17        Valuation Certificate.  Borrowers shall have delivered to the Lendersa Valuation Certificate in the form of Schedule 6.17 (the “ValuationCertificate”) signed by the Treasurer of the Borrowers which will set forththe Aggregate Net Present Equity Value of each Borrower and Portfolio Entity.

 

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Section 7.                                           AFFIRMATIVECOVENANTS.

 

EachBorrower and FLBG warrants, represents and covenants to the Lenders and Agentthat, so long as this Agreement is in effect and until all of the Loans, togetherwith interest and all other obligations (including Deemed Disbursements andReimbursement Obligations and fees and disbursements in connection therewith)are paid in full,  each Borrower will(unless it shall have first procured the written consent of the MajorityLenders to do otherwise) (i) perform the obligations set forth in this Section 7,(ii) cause each Primary Obligor, Wholly-Owned Subsidiary and other LoanParty to perform the obligations set forth in this Section 7 which areapplicable to such Person and (iii) exercise commercially reasonableefforts to cause each Material Portfolio Entity to perform the obligations setforth in this Section 7 which are applicable to such Person.

 

7.1          Financial Statements.  Each Borrower will furnish to Agent and eachLender:

 

(a)           As soon as available and in any event withinforty-five (45) days after the close of each calendar month, as at the end ofsuch month and for the period commencing at the end of the previous Fiscal Yearand ending with the end of such month, a consolidated and consolidating balancesheet of FC Commercial and the other members of the Consolidated Group, and therelated statement of operations for such period, all certified by the CFO ofeach Borrower and of each other member of the Consolidated Group as beingprepared in accordance with GAAP and to present fairly the financial positionand results of operation of such Person for such period;

 

(b)           As soon as available but not later than one hundredfive (105) days after the close of each Fiscal Year of FC Commercial, as at theend of and for the Fiscal Year just closed, an audited consolidated balancesheet of FC Commercial and the other members of the Consolidated Group, therelated statement of operations (including income statement) and areconciliation of capital for such year, all certified on an unqualified basisby a firm of independent certified public accountants selected by Borrowers andacceptable to Agent in Agent’s sole and absolute discretion;

 

(c)           As soon as available but not later than one hundredfive (105) days after the close of each Fiscal Year of FC Commercial, as at theend of and for the Fiscal Year just closed, an unaudited consolidating balancesheet of FC Commercial and the other members of the Consolidated Group, therelated statements of operations (including income statement) and areconciliation of capital for such year, prepared by the CFO of each Borrower;

 

(d)           Concurrently with the delivery of the financialstatements described in subsection (b) above, a certificate of theaforesaid independent certified public accountants certifying to Agent thatbased upon their examination of the affairs of FCFC, performed in connectionwith the preparation of said financial statements, FCFC is in compliance withthe covenants set forth in the Limited Guaranty, or, if FCFC is not incompliance, the nature of the noncompliance therewith;

 

(e)           Concurrently with delivery to its stockholders,copies of all financial and other information delivered by FCFC or a Borrower,as the case may be, to such Persons, including without limitation, its proxystatements and annual reports to stockholders. Within two (2) Business Days after delivery to the SEC by FCFC or aBorrower, as the case may be, which 

 

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in all cases shall be on a timely basis inaccordance with the applicable document and the Securities Laws, copies of allreports and other filings filed by FCFC or a Borrower, as the case may be withthe SEC, including without limitation, all reports on Forms 10K, 10Q or 8Kpromulgated under the Securities Exchange Act of 1934, as amended, and allregistration statements filed under the Securities Act of 1933, as amended;

 

(f)            Concurrently with delivery of the financialstatements required pursuant to Section 7.1(a) and (b) hereof, acertificate executed by the President, Treasurer or CFO of each Borrower that (A) noEvent of Default or Default has occurred and is continuing under thisAgreement, (B) each Borrower is in compliance with the covenants set forthin Section 8.17 hereof; and (C) no event of default and no event orcondition which, with the passage of time or the giving of notice or both,would constitute an event of default has occurred and is continuing under anyother Indebtedness Instrument (“Other Indebtedness Instrument UnmaturedDefault”) or, if an Event of Default or Default has occurred under thisAgreement or an event of default or Other Indebtedness Instrument UnmaturedDefault has occurred under any other Indebtedness Instrument, setting forth thedetails of such event and the action which each Borrower proposes to take withrespect thereto;

 

(g)           Promptly upon receipt thereof, copies of alldetailed financial reports and Management Letters, if any, submitted to any memberof the Consolidated Group by the Auditors, in connection with each annual orinterim audit of their respective books by such Auditors;

 

(h)           As soon as possible and in any event (A) withinthirty (30) days after a Loan Party, or any of the respective ERISA Affiliatesof any Loan Party, knows that any Termination Event described in clause (i) ofthe definition of Termination Event with respect to any Pension Plan hasoccurred or is expected to occur and (B) within ten (10) days after aLoan Party or any of its ERISA Affiliates knows that any other TerminationEvent with respect to any Pension Plan has occurred or is expected to occur, astatement of the CFO of FLBG and of each Borrower describing such TerminationEvent and the action, if any, which the affected Loan Party or ERISA Affiliateproposes to take with respect thereto;

 

(i)            Promptly and in any event within five (5) BusinessDays after receipt thereof by a Loan Party or any of its ERISA Affiliates fromthe PBGC, copies of each notice received by such Person of the PBGC’s intentionto terminate any Pension Plan or to have a trustee appointed to administer anyPension Plan, any notice of noncompliance issued by the PBGC with respect to aproposed standard termination of a Pension Plan, and any notice issued by thePBGC with respect to a proposed distress termination of a Pension Plan;

 

(j)            Promptly and in any event within thirty (30) daysafter the filing thereof with the IRS, copies of each Schedule B(Actuarial Information) to the annual report (Form 5500 Series) withrespect to each Pension Plan;

 

(k)           Promptly and in any event within five (5) BusinessDays after receipt thereof by a Loan Party or any of its ERISA Affiliates froma Multiemployer Plan sponsor, a copy of each notice received by such Personconcerning (x) the imposition or amount of withdrawal liability underSubtitle E of Title IV of ERISA or (y) any determination by a 

 

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Multiemployer Plan sponsor that such MultiemployerPlan is, or is expected to be, in “reorganization” (within the meaning of Section 4241of ERISA) or “insolvent” (within the meaning of Section 4245 of ERISA), orhas incurred or is expected to incur an “accumulated funding deficiency”(within the meaning of Section 302 of ERISA or Section 412 of theCode);

 

(l)            Upon request of Agent made from time to time, a copyof any Pension Plan sponsored, contributed to, participated in or maintained bya Borrower or any ERISA Affiliate; and

 

(m)          With reasonable promptness, such other informationrespecting the business, properties, operations, prospects or condition(financial or otherwise) of any member of the Consolidated Group and any otherPrimary Obligor and, to the extent reasonably available, any other RelatedEntity as Agent or any Lender may from time to time in writing reasonablyrequest provided,****that neitherBorrower shall be required to furnish to Agent or any Lender any suchinformation relating to a Portfolio Entity if (i) the Charter Documentsof, or Shareholder Agreement relating to, such Person, in each case as ineffect on the date of formation of such Person, prohibit such disclosure and (ii) noticeof such prohibition on disclosure is provided to Agent within five days offormation of such Person (any such restriction, a “Disclosure Restriction”).

 

7.2          Other Required Notices and Covenants.

 

(a)           Each Borrower and FLBG shall notify Agent promptlyafter obtaining knowledge of:

 

(i)            except as otherwisepreviously disclosed, any event or occurrence which Borrower has determinedcould have a Material Adverse Effect as a result of a loss or decline in valueof the Assets of a Borrower, FLBG, any other Primary Obligor, any PortfolioEntity or any Related Entity due to casualty or any other adverse occurrenceand the estimated (or actual, if available) amount of such loss or decline;

 

(ii)           the institution of (x) anysuit or administrative proceeding which if determined adversely to a Borrower,FLBG, any other Primary Obligor, any Portfolio Entity or any Related Entity isreasonably likely to or could reasonably be expected to result in a MaterialAdverse Effect, and (y) any other suit or administrative proceedingagainst a Borrower, FLBG, any other Primary Obligor or any Portfolio Entity inwhich the uninsured amount involved is $750,000 or more, such notice to begiven on or prior to the end of the calendar month in which the applicableevent occurs;

 

(iii)          a Borrower, FLBG any otherPrimary Obligor or any Material Portfolio Entity becoming subject to anyCharge, restriction, judgment, decree or order which could reasonably beexpected to materially adversely affect the operations, financial conditions orbusiness of such Person, or any other Portfolio Entity or any Related Entitybecoming subject to any Charge, restriction, judgment, decree or order if thesame could reasonably be expected to materially adversely affect theoperations, financial conditions or business of a Borrower, FLBG, any otherPrimary Obligor, or any Material Portfolio Entity;

 

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(iv)          the commencement of anylockout, strike or walkout relating to any labor contract to which a Borrower,FLBG, any other Primary Obligor, any Portfolio Entity or any Related Entity isa party, if the same could reasonably be expected to have a Material AdverseEffect;

 

(v)           except as otherwisepreviously disclosed, any event or occurrence in respect of a Borrower, FLBG,any other Primary Obligor, any Portfolio Entity or any Related Entity whichcould reasonably be expected to have a Material Adverse Effect;

 

(vi)          the occurrence of (x) adefault by a Borrower, FLBG, FCFC, any other Primary Obligor, any PortfolioEntity, any Related Entity or any other Loan Party under any agreement,document or instrument to which such Person is a party which could reasonablybe expected to have a Material Adverse Effect, or (y) any default by aBorrower, FLBG, FCFC, any other Primary Obligor or any other Loan Party whichcould reasonably be expected to materially and adversely affect any such Person’sability to perform its respective obligations under the Loan Documents;

 

(vii)         the filing of a petition byor against a Borrower, FLBG, any other Primary Obligor, any Portfolio Entity,any Related Entity or any other Loan Party under any section or chapter of theUnited States Bankruptcy Code or any similar law or regulation or if any suchPerson shall make an assignment for the benefit of its creditors or if any caseor proceeding is filed by or against any such Person for its dissolution orliquidation;

 

(viii)        the making of an applicationfor the appointment of a receiver, trustee or custodian for any of the Assetsof a Borrower, FLBG, any other Primary Obligor, any Material Portfolio Entity,any Related Entity or any other Loan Party, other than a Non-Default VoluntaryCustodial Arrangement;

 

(ix)          the exercise by any holderof any option, warrant or right to purchase any Equity Interest in a Borrower,FLBG, any other Primary Obligor or any Material Portfolio Entity;

 

(x)           the issuance or sale of anySecurities by a Borrower, FLBG, any other Primary Obligor or any PortfolioEntity, whether or not permitted pursuant to the terms hereof; and

 

(xi)          the occurrence of the REO Post—25% Time.

 

(b)           On the 20th day of eachmonth, each Borrower shall deliver to Agent (i) Waterfall Certificates inrespect of each Asset Pool and Portfolio Entity, certified by an ExecutiveOfficer of each Borrower; and (ii) a Summary Waterfall Certificate inrespect of all Asset Pools; and (iii) a report in the form attached heretoas Exhibit B setting forth the computation of the AggregateUndistributed Funds of all Portfolio Entities.

 

(c)           (i)  Each Borrowershall give Agent notice that a Portfolio Entity has become a Material PortfolioEntity (due to the amount of Assets contributed to it on the date of itsformation or an increase in Assets thereafter) within thirty (30) days of suchPerson becoming a Material Portfolio Entity.

 

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(ii)           Each Borrower shall giveAgent notice that an Immaterial Entity has ceased to constitute an ImmaterialEntity (due to an increase in the fair market value of its assets or suchcompany engaging in any business) within thirty (30) days of such Personceasing to constitute an Immaterial Entity and shall promptly deliver to Lendera revised Schedule 10.34 to reflect such change.

 

(iii)          Each Borrower shall giveAgent notice of the dissolution or full liquidation of, or the suspension ordiscontinuation of business by, any Portfolio Entity, not less than thirty (30)days prior to such dissolution, liquidation, suspension or discontinuation.

 

(d)           On or before the fourth to last Business Day of eachmonth, each Borrower shall deliver to Agent a Portfolio Protection ExpenseReport in the form of Schedule 7.2(d) hereto (the “Portfolio ProtectionExpense Report”) showing as of the close of business on the last BusinessDay of the preceding calendar month the balances of the FC CommercialProtective Advance Account, the FH Protective Advance Account and the FCIDistribution Account, the aggregate amount retained by Portfolio Entities topay Portfolio Protection Expenses not theretofore paid, the aggregate amount ofPortfolio Protection Expenses theretofore paid and the aggregate amount ofPortfolio Protection Expenses withheld (in the aggregate) by such Personsduring the immediately preceding calendar month.  Borrower shall provide to the Agent suchother information with respect thereto as Agent may reasonably request.

 

(e)           Each Borrower shall give Agent notice of thetransfer of any property by a Portfolio Entity to one of its REO Affiliateswithin thirty (30) days of any such transfer and such other information asAgent may request with respect thereto promptly following such request.

 

(f)            On or before the fourth to last Business Day of eachmonth, Borrower shall deliver to Agent a Valuation Certificate signed by theTreasurer of the Borrowers.

 

(g)           Each Borrower shall give Agent notice of theoccurrence of an Adverse Waterfall Event within thirty days of such occurrence.

 

(h)           If a Borrower at any time has knowledge of anyservicer default, servicing termination event, amortization event or similarevent or condition occurring or existing under any agreement relating to thesecuritization of Assets of any Primary Obligor or other Loan Party orsecuritization entity established by any Primary Obligor or other Loan Party,such Borrower shall immediately notify Agent thereof.

 

(i)            Borrower shall notify Agent if the amount ofAggregate Undistributed Funds at any time exceeds $5,000,000.

 

7.3          Payment of Charges.

 

(a)           Other than charges payable by First X or First B,Each Borrower, each Primary Obligor, each Material Portfolio Entity, and eachWholly-Owned Subsidiary other than any REO Affiliate shall pay promptly whendue and discharge all Charges.  In theevent a Borrower, any Primary Obligor, any Material Portfolio Entity or anyWholly-Owned Subsidiary other than an REO Affiliate, at any time or timeshereafter, shall fail to pay the Charges or to 

 

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obtain such discharges as required herein, suchBorrower shall so advise Agent thereof in writing.  Agent may, without waiving or releasing anyobligation, covenant or agreement of either Borrower or any Event of Default orDefault, in its sole and absolute discretion, at any time or times thereafter,make such payment, or any part thereof, or obtain such discharge and take anyother action with respect thereto which Agent deems advisable.  All sums so paid by Agent and any expensesrelating thereto, including reasonable attorneys’ fees, court costs, expensesand other charges, shall be part of the Obligations, payable by Borrowers toAgent on demand.  Notwithstanding theforegoing, a Borrower, any Primary Obligor, any Material Portfolio Entity orany Wholly-Owned Subsidiary may permit or suffer the Charges to attach to itsAssets on the conditions that: (i) such Borrower or the applicable PrimaryObligor, Material Portfolio Entity or Wholly-Owned Subsidiary, in good faith,shall be contesting the same in an appropriate proceeding diligently pursued; (ii) enforcementthereof against any Assets of such Borrower or any applicable MaterialPortfolio Entity or Wholly-Owned Subsidiary shall be stayed; and (iii) appropriatereserves therefor shall have been established on the Records of such Borroweror the applicable Primary Obligor, Material Portfolio Entity or Wholly-OwnedSubsidiary in accordance with GAAP.

 

7.4          Insurance.  Each Borrower, FLBG, each Primary Obligor,each Portfolio Entity (other than any Foreign Portfolio Entity), each REOAffiliate and each Wholly-Owned Subsidiary at each of such respective Person’ssole cost and expense, shall keep and maintain: (i) policies of insuranceagainst all hazards and risks ordinarily insured against by other owners orusers of properties in similar business or as reasonably requested in writingby Agent; and (ii) public liability insurance relating to such Person’sownership and use of its Assets; provided, however, no suchPerson shall be required to maintain the insurance referred to in clause (i) asto any Asset if the Net Present Value of the Asset is less than $100,000.  All such policies of insurance shall be inform, with insurers and in such amounts as may be satisfactory to Agent.  Each Borrower shall deliver to Agent theoriginal (or certified) copy of each policy of insurance and evidence ofpayment of all premiums for each such policy. Such policies of insurance of each Borrower, Primary Obligors andWholly-Owned Subsidiaries (except those of public liability) shall contain anendorsement, in form and substance acceptable to Agent, showing losses payableto Agent for the ratable benefit of Lenders (excluding any losses payable tothe lenders under any Approved Portfolio Leverage Arrangement).  Such endorsement or an independent instrumentfurnished to Agent, shall provide that all insurance companies will give Agentat least thirty (30) days prior written notice before any such policy orpolicies of insurance shall be altered or canceled and that no act or defaultof a Borrower or any other Person shall affect the right of Agent for theratable benefit of Lenders, to recover under such policy or policies ofinsurance in case of loss or damage (excluding any losses payable to the lendersunder any Approved Portfolio Leverage Arrangement).  Upon request by Agent and, whether or notsuch request is made, upon the occurrence of an Event of Default or Default,each Borrower hereby directs all insurers under such policies of insurance(except those of public liability) to pay all proceeds payable thereunderdirectly to Agent (excluding any losses payable to the lenders under anyApproved Portfolio Leverage Arrangement). Upon request by Agent and upon the occurrence of an Event of Default orDefault, each Borrower, irrevocably, appoints Agent (and all officers,employees or agents designated by Agent) as such Borrower’s true and lawfulagent and attorney-in-fact for the purpose of making, settling and adjustingclaims under such policies of insurance, endorsing the name of such Borrower onany check, draft, instrument or other item of payment for the proceeds of suchpolicies of insurance and for making all 

 

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determinations and decisions with respect to suchpolicies of insurance.  In the event aBorrower, any Primary Obligor, any Portfolio Entity, any REO Affiliate or anyWholly-Owned Subsidiary at any time or times hereafter shall fail to obtain ormaintain any of the policies of insurance required above or to pay any premiumin whole or in part relating thereto, then Agent, without waiving or releasingany obligation, covenant or agreement of a Borrower or any Event of Default orDefault, may at any time or times thereafter (but shall be under no obligationto do so) obtain and maintain such policies of insurance and pay such premiumand take any other action with respect thereto which Agent deemsadvisable.  All sums so disbursed byAgent, including reasonable attorneys’ fees, court costs, expenses and othercharges relating thereto, shall be part of the Obligations, payable byBorrowers to Agent on demand.  Agentshall also be named as an additional insured with respect to each Borrower’s,each Primary Obligor’s and each Wholly-Owned Subsidiary’s liability insurance.

 

7.5          Maintenance of Records.  Each Borrower will keep, and will cause FLBG,each other Primary Obligor and each Wholly-Owned Subsidiary other than REOAffiliates to keep, at all times books of record and account in which full,true and correct entries will be made of all dealings or transactions inrelation to its business and affairs, and each such Person will provide, andwill cause each such other Person to provide, adequate protection against lossor damage to such books of record and account.

 

7.6          Preservation of Existence.  Each Borrower, FLBG, each other PrimaryObligor, each Material Portfolio Entity, and each Subsidiary of a Borrowerother than an Immaterial Entity, REO Affiliate or a Harbor Debtor, willmaintain and preserve its respective corporate, limited liability company orpartnership existence, rights, privileges and franchises in its jurisdiction oforganization, and qualify and remain qualified to do business in, and maintainits rights, privileges and franchises in each other jurisdiction which in theopinion of the respective board of directors, manager, general partner or othergoverning Person thereof continue to be advantageous to it and shall comply inall material respects with all applicable Legal Requirements.  Without limiting the generality of theforegoing, each Borrower agrees to (and to cause each such other Person to)qualify to do business as a foreign corporation in each jurisdiction where thenature of its business and the operations conducted by it therein require it tobe so qualified; provided that notwithstanding the foregoing, Agent and Lendersacknowledge that it is contemplated that the Borrowers, Primary Obligors andPortfolio Entities will be liquidating their assets and that a Primary Obligoror any Portfolio Entity may be dissolved or merged into another Primary Obligoror Portfolio Entity upon the liquidation of all assets of any such Person thatcan be reasonably expected to be collected or sold.

 

7.7          Preservation of Assets.  Each Borrower, FLBG and each other PrimaryObligor will keep its property material to the conduct of its business in goodrepair, working order and condition and from time to time make all needful andproper repairs, renewals, replacements, extensions, additions, betterments andimprovements thereto, so that the business carried on by it may be conducted atall times in accordance with prudent business management.

 

7.8          Inspection of Books and Assets.  Each Borrower, FLBG and each other PrimaryObligor shall permit Agent, Lenders and each of their respectiverepresentatives reasonable access during normal business hours to itsproperties and personnel, and shall disclose and make available to Agent andLenders all books, papers and records relating to the Assets, stock 

 

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ownership, properties, operations, obligations, andliabilities of each Borrower, FLBG, each other Primary Obligor and theirrespective Subsidiaries (and shall use commercially reasonable efforts to causeeach other Portfolio Entity to do the same), including, but not limited to, allbooks of account (including the general ledger), tax records, minute books ofmeetings of boards of directors (and any committees thereof) and shareholders,organizational documents, bylaws, material contracts and agreements, filingswith any regulatory authority, accountants’ work papers (other than those thatare the property of its independent outside auditors), litigation files, loanfiles, plans affecting employees, and any other business or prospects in whichLenders may have a reasonable interest in connection with the Loans, providedthat such access shall be reasonably related to the transactions contemplatedhereby and not unduly interfere with normal operations, and provided furtherthat in the event that any of the foregoing are in the control of any thirdparty, each Borrower, FLBG and each other Primary Obligor shall use itsreasonable best efforts to cause such third party to provide access to suchmaterials to Agent and Lenders who shall request the same.  In the event that a Borrower, FLBG or anyother Primary Obligor is prohibited by law from providing any of the accessreferred to in the preceding sentence to Agent and Lenders, it shall use itscommercially reasonable efforts to obtain waivers thereof promptly so as topermit such access.  Each Borrower, FLBGand each other Primary Obligor shall make the directors, officers, employeesand agents and authorized representatives (including counsel and independent publicaccountants) of such Borrower, FLBG, other Primary Obligor, and theirrespective Subsidiaries (and shall use its commercially reasonable efforts tocause each other Portfolio Entity to do the same) to confer with Agent andLenders and their respective representatives, provided that (i) suchaccess shall be reasonably related to the transactions contemplated hereby andnot unduly interfere with normal operations and (ii) unless a Default orEvent of Default exists, counsel to Borrowers, FLBG and each other PrimaryObligor shall be permitted to be present at any meeting among Borrowers’, FLBG’sor such Primary Obligor’s independent public accountants and Agent or Lenders.

 

7.9          Payment of Indebtedness.  Each Borrower, FLBG, each other PrimaryObligor, each Material Portfolio Entity and, subject to the final sentence ofthis Section 7.9, each Wholly-Owned Subsidiary will duly and punctuallypay, or cause to be paid, the principal of and the interest on all Indebtednessheretofore or hereafter incurred or assumed by such Person, when and as thesame shall become due and payable, provided that neither a Borrower, norany Primary Obligor, any Wholly-Owned Subsidiary or any Material PortfolioEntity shall be required to pay any Indebtedness (other than Indebtednessincurred under this Agreement or any other Loan Document) while the same isbeing contested by it in good faith and by appropriate proceedings so long aseach Borrower or such Primary Obligor or Wholly-Owned Subsidiary or MaterialPortfolio Entity (as the case may be) shall have set aside on its booksappropriate reserves in accordance with GAAP with respect thereto and title toany property of each Borrower or the applicable Primary Obligor or Wholly-OwnedSubsidiary or Material Portfolio Entity is not jeopardized.  The provisions of this Section 7.9 donot relate to Indebtedness of FC Capital or other Wholly-Owned Subsidiarieswhich are REO Affiliates.

 

7.10        Further Assurances.  Each Borrower, FLBG, each other PrimaryObligor, each Wholly-Owned Subsidiary and each other Loan Party will, and willcause each of its respective Subsidiaries to, make, execute or endorse, andacknowledge and deliver or file, all such vouchers, invoices, notices, andcertifications and additional agreements, undertakings, conveyances, transfers,assignments, or further assurances, and take any and all such other 

 

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action, as Agent or any Lender may, from time totime, deem necessary or proper in connection with this Agreement, theobligations of such Person hereunder or under the Notes or any of the otherLoan Documents to which such Person is a party, or for the better assuring andconfirming unto Collateral Agent or Agent on behalf of Lenders, with the firstpriority, all or any part of the security for the Obligations.

 

7.11        Notice of Default.  Forthwith and in any event within five (5) daysafter a Borrower shall have obtained knowledge of the existence of a Default orEvent of Default, such Borrower will deliver to Agent a certificate signed byan Executive Officer of such Borrower setting forth the details of such event,the period of existence thereof, and what action such Borrower proposes to takewith respect thereto.

 

7.12        Reserves.  Each Borrower, FLBG, each other PrimaryObligor and, subject to the last sentence of this Section 7.12, eachWholly-Owned Subsidiary, will set up on its books of its earnings, reserves forbad debt in accordance with GAAP and in an aggregate amount deemed adequate inthe judgment of such Person and accepted by the outside auditors in theirannual audits and each Borrower shall use its commercially reasonable effortsto cause each other Material Portfolio Entity to do the same.  The provisions of this Section 7.12shall not apply to any Wholly-Owned Subsidiary which is an REO Affiliate, orany Immaterial Entity.

 

7.13        Representation and Warranties; Covenants as to OtherPersons, Amendment of Schedules.

 

(a)           To the extent any representation or warrantycontained herein refers to an event or state of facts which exists on or afterthe date hereof, on or after the Execution Date or on or after the EffectiveDate or on or after the date of any Loan and which exists during the termhereof or at the time of any or each Loan hereunder, to the extent not alreadya covenant, said representation or warranty shall be deemed to be anaffirmative covenant by each Borrower to take all actions, omit to take suchactions or cause such actions to be taken which shall be necessary or desirableto cause such representation or warranty to be true and accurate at all timesduring the term hereof.  To the extentany representation, warranty or covenant herein (including the covenants setforth in Section 8 and in this Section 7) relates to any PrimaryObligor, other Subsidiary or any other Loan Party, it shall be deemed to be acovenant of each Borrower to cause such Person to comply with or otherwiseperform such representation, warranty or covenant, whether or not a Borrowerhas the legal, corporate or other ability to cause such compliance orperformance.  To the extent anyrepresentation, warranty or covenant herein (including the covenants set forthin Section 8 and in this Section 7) relates to any Person other thana Primary Obligor, other Subsidiary or any other Loan Party it shall be deemedto be a covenant of each Borrower to exercise commercially reasonable effortsto cause such Person to comply with or otherwise perform such representation,warranty or covenant, whether or not a Borrower has the legal, corporate orother ability to cause such compliance or performance.

 

(b)           No delivery of any new or supplemented Schedule tothis Agreement (whether or not such delivery is required by this Agreement orany other Loan Document) shall waive or cure any Default or Event of Defaultwhich would occur absent such delivery (other than a Default or Event ofDefault arising solely from the breach of an obligation to deliver such 

 

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Schedule and other than as may be set forth inwriting in a consent or amendment (if any) pursuant to which any such new orsupplemented Schedule is delivered).

 

7.14        Perform Obligations.  Each Borrower, FLBG and each other Loan Partyshall duly and punctually pay and perform each of its obligations under theLoan Documents to which it is a party, in accordance with the terms hereof andthereof.

 

7.15        Cooperation.  At Agent’s request, each Borrower will meetfrom time to time with (and provide then available financial information to)other financial institutions to which any Lender may wish to grantparticipations in the Loans, including potential Lender Assignees and potentialPurchasing Lenders.

 

7.16        Approvals and Consents.  In the event that any approval, consent ornon-objection need be obtained by a Borrower, FLBG, any other Primary Obligoror other Loan Party from, or a notice or other filing need be filed by aBorrower or any such other Person, with, any Governmental Authority inconnection with the execution, delivery and performance of this Agreement orany Loan Document by a Borrower or any such other Person, each Borrower andFLBG shall take and cause such other Person (as applicable) to take, allactions reasonably necessary to obtain any such approval, consent ornon-objection or file such notice or other filing as promptly as practicable,and Lenders agree to cooperate with Borrowers and FLBG in obtaining or filingthe same.

 

7.17        Payment of Dividends from Primary Obligors andSubsidiaries.  Infurtherance and not in limitation of other provisions hereof (including Section 8.22)regarding required distributions, to the extent necessary to enable it to makepayments of the Obligations in accordance with the terms hereof, unlessprohibited by applicable law, each Borrower shall cause dividends to be paid toit by each Primary Obligor and each other Wholly-Owned Subsidiary of a Borrower(whether in existence as of the date hereof or hereafter formed or acquired) inamounts which are sufficient to enable Borrowers to satisfy their payment obligationsunder the terms hereof.

 

7.18        Stay, Extension and Usury Laws.  Each Borrower covenants (to the extent thatit may lawfully do so) that it shall not at any time insist upon, plead, or inany manner whatsoever claim or take the benefit or advantage of, any stay,extension or usury law or other law which would prohibit or forgive it frompaying all or any portion of the principal of, premium, if any, or interest onthe Notes, wherever enacted, now or at any time hereafter in force, or whichmay affect the covenants or the performance of its obligations under the Notes,and each Borrower (to the extent it may lawfully do so) hereby expressly waivesall benefits or advantages of any such law.

 

7.19        Compliance with Laws.  Each Borrower shall comply with, and shallcause each Primary Obligor, each other Subsidiary and each other Loan Party tocomply with, and shall exercise commercially reasonable efforts to cause eachPortfolio Entity to comply with, all laws, rules, regulations and governmentalorders (federal, state and local), including all Environmental Laws, havingapplicability to it or to the business or businesses at any time conducted byit, where the failure to so comply would have, or could reasonably be expectedto have, a Material Adverse Effect.

 

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7.20        Back-Up Servicer.  The Borrowers shall reimburse the Lenders foramounts up to $12,000 paid by the Lenders to a Cold Back-Up Servicer selectedby the Lenders to act as a back-up servicer to FC Servicing, and the Borrowersshall use commercially reasonable efforts to cooperate with, and provide allinformation reasonably requested by, such Cold Back-Up Servicer selected by theLenders, all subject to and as contemplated by the back-up servicing agreemententered into as of the date hereof by Borrowers and Cold Back-Up Servicer andassigned as collateral to the Collateral Agent. The Borrowers shall cooperate with, and permit, Lenders to designate areplacement for any Cold Back-Up Servicer

 

Section 8.                                           NEGATIVECOVENANTS.

 

EachBorrower and FLBG warrants and represents to and covenants to Lenders and Agentthat, so long as this Agreement is in effect and all of the Loans, togetherwith interest and all other obligations incurred hereunder are paid in full,each Borrower will perform the obligations set forth in this Section 8(unless it shall have first procured the written consent of the MajorityLenders to do otherwise), and, except as provided in the following paragraph,will cause each Primary Obligor, Subsidiary, and other Loan Party to, and willuse commercially reasonable efforts to cause each Portfolio Entity-50% andother Material Portfolio Entity to, perform the obligations set forth in this Section 8which are applicable to such Person (unless it shall have first procured thewritten consent of the Majority Lenders to do otherwise).

 

Forthe purposes of this Section 8, the terms Primary Obligor, Subsidiary,Loan Party, Related Entity, Portfolio Entity and Portfolio Entity-50% shall notmean or include any Crestone Portfolio Entities or any Person owned by aCrestone Portfolio Entity, FC Capital (or any of its Subsidiaries), MSC,Servicios Integrales de Cobranze, S.A. Chile, UBN, SAS or any Portfolio Entityin which MCS and/or UBN, SAS owns 50% or more of the equity interests of suchentity; provided that Borrowers will provide notice to Agent of any event,occurrence or action by any such Person that would otherwise constitute abreach of this Section 8 and Agent and Lenders may prohibit such event,occurrence or action if such event, occurrence or action would, in the opinionof the Lenders, have a Material Adverse Effect on the Borrowers.

 

8.1          Amend Charter Documents; Engage in Same Type ofBusiness.

 

(a)           None of either Borrower, any Primary Obligor, anySubsidiary or any Portfolio Entity-50% shall (i) make or consent to any change: (i) in its CharterDocuments, in any Shareholder Agreement or in its capital structure or (ii) makeany change in any of its business objectives, purposes and operations,including by undertaking additional business activities or (iii) waive anymaterial right under its Charter Documents or any Shareholder Agreement.  None of either Borrower, any Primary Obligor,any Subsidiary or any Portfolio Entity-50% shall engage in any business not of the same general type as thoseconducted by it on the Execution Date or, in the case of a newly formed entity,any business not of the same general type as those conducted by a Borrower, anyPrimary Obligor, any Portfolio Entity-50% or any other Subsidiary (as the casemay be) on the Execution Date. Without limiting the foregoing, no Subsidiarywhich is a Portfolio Entity and no Portfolio Entity-50%  shall engage in any business other than purchasingAsset Pools in accordance with the terms hereof and causing such Asset Pools tobe serviced in accordance with Section 8.24.

 

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(b)           None of either Borrower, any Subsidiary or anyPortfolio Entity-50% shall enter into any Shareholder Agreement after theExecution Date other than a Permitted Shareholder Agreement.

 

8.2          Liens.  None of either Borrower, any Subsidiary(other than an REO Affiliate) or any Portfolio Entity-50%, will grant,contract, create, incur, assume or suffer or permit to exist any Lien upon orwith respect to, or by transfer or otherwise subject to the prior payment ofany indebtedness (other than the Loans), any of its Assets, whether now ownedor hereafter acquired, except (i) Permitted Liens or (ii)  in thecase of an REO Affiliate, Liens in favor of its REO Owner and non-consensualCharges.

 

8.3          Other Indebtedness.  None of either Borrower, any Subsidiary orany Portfolio Entity-50% will contract, create, incur, assume or suffer toexist any Indebtedness, except:

 

(i)            the Loans and theobligations of a Borrower in respect of the LC Obligations;

 

(ii)           other Indebtedness existingon the Effective Date listed on Schedule 10.19 to this Agreement;

 

(iii)          Indebtedness of anyPortfolio Entity incurred under Approved Portfolio Leverage Arrangements;

 

(iv)          Indebtedness of anyPortfolio Entity to which no proceeds of any Loans were, directly orindirectly, advanced or contributed;

 

(v)           unsecured trade payablesincurred in the ordinary course of business;

 

(vi)          in the case of any REOAffiliates, Indebtedness owed to its REO Owner and trade payables incurredin the ordinary course of business and, to the extent constituting Indebtedness,Charges incurred by such REO Affiliate;

 

(vii)         Indebtedness to the extentpermitted by Section 8.12(a)(i)-(iii);

 

(viii)        Indebtedness of PortfolioEntities in respect of loans permitted to be made by FC Servicing and FirstCityMexico, S.A. de C.V. pursuant to Section 8.12(a)(v);

 

(ix)          Indebtedness of anySubsidiary or Portfolio Entity-50% payable to a Borrower or a Wholly-OwnedSubsidiary;

 

(x)           Guaranty Equivalents to theextent permitted under Section 8.12(b);

 

(xi)          Indebtedness of FirstCity DenverInvestment Corp. payable to FC Commercial related to loans made by FCCommercial to enable FC Denver Investment Corp. to fund loans to CrestonePortfolio Entities under the Crestone Facility; and

 

(xii)         Up to $5,000,000 inaggregate principal Indebtedness incurred by FCS Creamer, Ltd., FCSLancaster, Ltd., FCS Wood Ltd., FCS Wildhorse Ltd. and Brazos 

 

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River Partnership One, L.P. or other REOAffiliates to finance developmental expenses of real property owned by suchentities.

 

8.4          Sell Assets.  None of either Borrower, any Subsidiary orany Portfolio Entity-50% shall assign, sell or transfer any of its Assets toany Person, other than in the ordinary course of business and for fair andadequate consideration (and, in the case of Assets constituting EquityInterests, only to the extent permitted by Section 8.8(a)); provided thatthe foregoing shall not restrict (i) an REO Affiliate from transferringits Assets to the Person which owns all of its equity interests or to any otherPerson which is not a Subsidiary or Affiliate of either Borrower or such REOAffiliate or (ii) any Person which owns all of the equity interests in anREO Affiliate from transferring distressed notes secured by real estate (andsuch real estate security) to such REO Affiliate.

 

8.5          Attachment.  None of either Borrower, any Subsidiary orany Portfolio Entity-50% shall permit or suffer any levy, attachment, seizure,or restraint to be made of, upon or affecting any of its Assets or permit anyof its Assets to be subject to a writ of distress, if the same would have aMaterial Adverse Effect.

 

8.6          Receiver.  None of either Borrower, any Subsidiary orany Portfolio Entity-50% shall permit or suffer any receiver, trustee orassignee for the benefit of creditors, or any other custodian to be appointedto take possession of all or any of its Assets, or for all or any of its Assetsto come within the possession of any receiver, trustee, assignee for thebenefit of creditors or custodian, other than a custodian pursuant to aNon-Default Voluntary Custodial Arrangement, if the same would have a MaterialAdverse Effect.

 

8.7          Mergers, Acquisitions.  None of either Borrower, any Primary Obligor(other than FLBG) or any Material Portfolio Entity shall wind up, liquidate ordissolve its affairs or merge or consolidate with, be acquired by or acquirethe stock or assets of or make any investment in (other than a capitalcontribution to provide for payment of Portfolio Protection Expenses), any Person,whether by merger, consolidation, purchase of stock or assets or otherwise, orcreate any new Subsidiary other than an REO Affiliate (or agree to do any ofthe foregoing at any future time) or fail to maintain its corporate,partnership or limited liability company or other formal existence, providedthat notwithstanding the foregoing, Agent and Lenders acknowledge that it iscontemplated that the Borrowers, Primary Obligors and Portfolio Entities willbe liquidating their assets and that any Primary Obligor or any PortfolioEntity may be dissolved or merged into another Primary Obligor or PortfolioEntity upon the liquidation of all assets of any such Person that can bereasonably expected to be collected or sold.

 

8.8          Stock Transfers.

 

(a)           Except (i) as permitted pursuant to Section 8.8(b),(ii) for the sale of Equity Interests in a Subsidiary for fair marketprice, the proceeds of which are distributed pursuant to Section 5.3hereof, (iii) with respect to quotas issued to FirstCity Chile II inconnection with direct and indirect contributions of capital from distributionsor dividends from NPL Fund Two, Private Investment Fund, or (iv) foroptions, warrants or other rights to purchase Equity Interests in a Borrowerpursuant to plans or instruments described in Schedule 10.5(c) asamended from time to time with Majority Lenders’ written consent and for EquityInterests in a 

 

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Borrower issued upon exercise thereof, none of anyBorrower, any Subsidiary or any Portfolio entity-50% shall (x) grant anyoption, warrant or other right to purchase any Equity Interest in a Borrower,any Subsidiary or any Portfolio Entity-50% or (y) issue any other EquityInterests, or (ii) transfer any Equity Interests (whether its own orEquity Interests issued by any Person other than itself) without, in each case,the prior written consent of Majority Lenders.

 

(b)           Notwithstanding anything to the contrary containedherein, each Borrower shall have the right to offer and sell equity Securitiesof such Borrower under the following terms and conditions: (x) suchBorrower shall deliver notice to Agent, within twenty-four (24) hours of anyfiling with the SEC; (y) such Borrower shall fully and timely comply withall Securities Laws and with all terms and provisions of the underwritingagreement pursuant to which such Securities are offered for sale; and (z) theprospectus and all other selling materials used by such Borrower in suchoffering shall not contain any misstatement of material fact or omit to stateany fact which would render the statements contained therein false ormisleading.

 

8.9          Adverse Transactions.  None of either Borrower, any Subsidiary orany Portfolio Entity-50% shall enter into any transaction which materially andadversely affects its ability to perform its obligations under the LoanDocuments or to pay any other Indebtedness.

 

8.10        Investments.

 

(a)           Subject to the further limitations set forth inSections 8.10(b) and (c), after the Execution Date, neither Borrower,any Subsidiary or any Portfolio Entity-50% shall make any investment in EquityInterests of any Person other than (i) investments in Equity Interestsowned as of the date of this Agreement, (ii) direct or indirectcontributions by Primary Obligors to capital of Portfolio Entities to be usedby such entities (a) to pay development expenses related to real estate or(b) to pay Portfolio Protection Expenses, (iii) investments by anysuch Person (other than by a Portfolio Entity) in the ordinary course of businessor (iv) with respect to quotas issued by FirstCity Chile II in connectionwith direct and indirect contributions of capital from distributions ordividends from NPL Fund Two, Private Investment Fund.

 

(b)           As used in Sections 8.10(a) and (c) “investment”shall include, but not be limited to contributions to the capital of a Person.

 

(c)           In furtherance, and not in limitation, of otherrestrictions herein and in the other Loan Documents on contributions, loans,gifts, investments and Guaranty Equivalents, none of Borrower, any Subsidiaryor any Portfolio Entity-50% shall make capital contributions, loans or giftsto, investments in or enter into or issue any Guaranty Equivalent with respectto the obligations of any entity identified on Schedule 10.37 or any otherImmaterial Entity at any time during the term hereof.

 

8.11        Dividends.  Neither Borrower will, and neither Borrowerwill permit any Subsidiary or any Portfolio Entity-50% to, authorize, declare,or pay any dividends or return any capital to its stockholders as such orauthorize or make any other distribution, payments or delivery of property orcash to its stockholders as such, or redeem, retire, purchase or otherwiseacquire, directly or indirectly, for a consideration any shares of any class ofits capital stock now or hereafter outstanding or any options, warrants orother securities (now or hereafter 

 

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outstanding) convertible into or exercisable for anyequity or other securities of a Borrower, any Subsidiary or any PortfolioEntity-50% or set aside funds for any of the foregoing and neither Borrowerwill permit any Subsidiary or any Portfolio Entity-50% to purchase any EquityInterests of a Borrower, or set aside funds for any of the foregoing (any suchauthorization, declaration, payment, dividend, return of capital, distribution,delivery, redemption, retirement, purchase, acquisition or setting aside offunds, a “Dividend”), provided, that (i) any Subsidiary orPortfolio Entity-50% may declare or pay Dividends to a Borrower or anyWholly-Owned Subsidiary and (ii) any Subsidiary or Portfolio Entity-50%may pay cash Dividends to holders of its shares of stock, partnershipinterests, limited liability company interests or similar equity interestsgenerally so long as the Borrower or its respective Subsidiaries which own suchequity interests in the Person paying such Dividends receives at least itsproportionate share thereof (based on its relative holdings of such equityinterests in the Person paying such Dividends).

 

8.12        Loan; Guaranty Debt.

 

(a)           Except as set forth on Schedule 8.12(a), noneof either Borrower, any Subsidiary or any Portfolio Entity-50% shall make anyloan to any Person, or otherwise invest in or acquire any note, bond, otherdebt instruments or obligations of or issued by any Person except (i) theacceptance by FH Partners, a Subsidiary or a Portfolio Entity-50% of a notefrom its 100% owned REO Affiliate evidencing the deferred purchase price of amortgage note sold to such REO Affiliate by FH Partners, such Subsidiary orPortfolio Entity-50% or a portion of the purchase price for the real propertyin the event that the REO Affiliate acquires the real property (1) at aforeclosure sale or through a foreclosure proceeding, (2) from themortgagor in either full or partial satisfaction of the related debt, or (3) bypurchase from FH Partners, the Subsidiary or Portfolio Entity-50%; (ii) theacceptance by an REO Affiliate, a Latin American Acquisition Entity or aEuropean Acquisition Entity of a note from the transferee of real property soldby such REO Affiliate, Latin American Acquisition Entity or EuropeanAcquisition Entity (as the case may be) in the ordinary course of businessevidencing a portion of the deferred purchase price of such property; (iii) inthe case of FC Servicing and FirstCity Mexico, S.A. de C.V., short termservicer advances in the ordinary course of business with respect to portfolioswhich they are servicing in aggregate principal amount at any one time outstandingnot in excess of $5,000,000, on a combined basis; and (iv) direct orindirect loans by Primary Obligors to Subsidiaries and Portfolio Entities to beused by such entities (a) to pay development expenses related to realestate or (b) to pay Portfolio Protection Expenses; (v) SBA Loansmade by ABL in accordance with the SBA Rules and Regulations; and (vi) loansmade by FC Commercial to FirstCity Denver Investment Corp. to enable FirstCityDenver Investment Corp. to fund loans to Crestone Portfolio Entities under theCrestone Facility for Portfolio Protection Expenses.

 

(b)           Except as set forth on Schedule 8.12(b), noneof either Borrower, any Subsidiary or any Portfolio Entity-50% shall enter intoor issue any Guaranty Equivalents.

 

8.13        Issue Power of Attorney.  Except pursuant to the other provisions ofthis Agreement or the Security Documents to which Agent is a party, none ofeither Borrower, any Subsidiary or any Portfolio Entity-50% shall issue anypower of attorney or other contract or agreement giving any Person power orcontrol over the day-to-day operations of any such Person’s business; providedthat,  any Primary Obligor, anyPortfolio Entity, FirstCity do Brazil, Ltda., FirstCity Argentina Corporation,First South America LLC, FirstCity Recovery S.A., 

 

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FirstCity Mexico, S.A. de C.V. and ServiciosEfectivos de Recuperacion, S. de R.L. de C.V. shall have the right to grantpowers of attorney necessary to conduct business outside the United States, topursue or consummate asset acquisitions outside the United States and tocollect or liquidate Assets or pursue litigation related Assets outside theUnited States, which are undertaken in the ordinary course of such respectivecompany’s business.

 

8.14        Amendment of Credit Agreements.   None of either Borrower, any Subsidiary orany Portfolio Entity-50% shall amend, modify or extend (or agree to amend,modify or extend or give any notice of any sort the result of which wouldamend, modify or extend (whether or not, without limitation, any such extensionwould occur pursuant to a renewal or extension option contained therein or anyother term thereof)) any note, credit agreement, security agreement or otherdocument, instrument or agreement evidencing or securing Indebtedness of suchentity; provided that a Borrower, any Subsidiary or any PortfolioEntity-50% may extend the term of any credit facilities or loans permittedunder the terms of this Agreement under financial terms no more onerous than thoseprovided for in the applicable existing credit facility or then-existing marketcredit terms.

 

8.15        Payments for Consent.  None of either Borrower or any Subsidiary orany Portfolio Entity-50% shall, directly or indirectly, pay or cause to be paidany consideration, whether by way of interest, fee or otherwise, to any Lenderas an inducement to any consent, waiver or amendment of any of the terms orprovisions of any Loan Document unless such consideration is paid to allLenders.

 

8.16        Limitations on Dividends and Other PaymentRestrictions Affecting Subsidiaries.  Except as herein provided, neither Borrowershall, and each Borrower shall not permit any Subsidiary, or any PortfolioEntity-50% to, create, assume or otherwise cause or suffer to exist or tobecome effective any consensual encumbrance or restriction on the ability ofany such Person to:

 

(i)            pay any dividends or makeany other distribution on its Stock or other Equity Interests to a Borrower orany of its Subsidiaries;

 

(ii)           make payments on or inrespect to any Indebtedness owed to a Borrower, any Subsidiary; or

 

(iii)          make loans or advances to aBorrower or any of its Subsidiaries or to guarantee Indebtedness of a Borroweror any of its Subsidiaries;

 

otherthan, in the case of (i), (ii) and (iii),

 

(1)           restrictions with respect toa Subsidiary other than a Portfolio Entity, a Primary Obligor or an REOAffiliate imposed pursuant to an agreement which has been entered into for thesale or disposition of all or substantially all the assets (which term mayinclude the capital stock) of such Subsidiary provided that such restrictionsterminate upon the closing of such sale or disposition or termination of suchagreement;

 

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(2)           to the extent the sameresult in a restriction of non-cash in-kind distributions of such assets,restrictions on the transfer by any Subsidiary other than a Portfolio Entity, aPrimary Obligor or an REO Affiliate of non-cash assets which are subject toPermitted Liens;

 

(3)           restrictions existing underany agreement which refinances or replaces any of the agreements containing therestrictions in clauses (1) or (5), provided that the terms and conditionsof any such restrictions are not materially less favorable to the Lenders ormaterially more burdensome to the applicable Person bound thereby than thoseunder the agreement evidencing or relating to the Indebtedness refinanced orreplaced;

 

(4)           Permitted Restrictions onpayment of dividends by a Subsidiary of a Borrower under a loan agreementlisted on Schedule 10.19 to which such Subsidiary is a party;

 

(5)           restrictions under thisAgreement;

 

(6)           Permitted Restrictionsimposed under Approved Portfolio Leverage Arrangements;

 

(7)           Permitted Restrictions onthe payment of dividends by a Portfolio Entity-50% under credit agreementsunder which such Portfolio Entity-50% is a borrower; and

 

(8)           restrictions of the paymentof dividends by ABL as set forth in the ABL Facility Agreement and restrictionsof the ability of ABL to make payments on indebtedness outstanding under theABL Capital Note as set forth in the subordination agreement referred totherein.

 

andother than in the case of (iii), a consensual encumbrance or restriction on theability of any Subsidiary other than a Wholly-Owned Subsidiary or any PortfolioEntity-50% to make a loan or advance to or guarantee Indebtedness of a Borroweror any of its Subsidiaries.

 

8.17        Financial Covenants.  In the event that any Financial Statementrequired to be delivered pursuant to Section 7.1(a) or Section 7.1(b) orany certificate required to be delivered pursuant to Section 7.1(f) hereof(in the case of any such certificate required in connection with monthlyfinancial statements, at the end of any month which is also a fiscal quarter enddate) is not delivered within 10 days after the date required therefor pursuantto such Section, each Borrower shall be deemed to be in default of this Section 8.17for purposes of Section 9.3 hereof.

 

8.18        Accounting Changes.  None of either Borrower, any Subsidiary orany Portfolio Entity-50% will make any significant change in (x) accountingtreatment and reporting practices except as permitted or required by GAAP orLegal Requirements or (y) unless Agent consents thereto in writing (whichconsent shall not be unreasonably withheld), its Fiscal Year; provided thatin any such case, if any such change would affect any computation required by Section 8.17hereof or any amount required to be paid by Section 2.3 hereof,appropriate amendment shall 

 

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have been made to this Agreement with respectthereto (or, in the case of change required at such time by a LegalRequirement, appropriate amendment is made to this Agreement contemporaneouswith such change and, and if such amendment is not made, each Borrower shall bedeemed in default under Section 8.17).

 

8.19        Related Transactions.  Neither Borrower has and neither Borrowershall, and neither Borrower shall permit any Subsidiary or any PortfolioEntity-50% to, enter into any transactions with any Affiliate or Associate,including, without limitation, agreements for the purchase, sale or exchange ofproperty or the rendering of any services to or by any Affiliate or Associateof a Borrower or any Parent, or enter into, assume or suffer to exist anyemployment, management, administration, advisory or consulting contract withany Affiliate or Associate of a Borrower or any Parent or, in each of theforegoing cases, with any officer, director or partner of any Affiliate orAssociate of a Borrower or any Parent or modify any Fee Agreement unless, inany such case, such transaction (a) is otherwise not in violation of thisAgreement or any other Loan Document and (b) is in the ordinary course ofits business and is upon fair and reasonable terms no less favorable to aBorrower, such Subsidiary or such Portfolio Entity-50% (as the case may be)than such Person would obtain in a comparable arm’s-length transaction with aPerson not an Affiliate or Associate; provided, that the foregoing shallnot restrict a Subsidiary from entering into a transaction contemplated by thedefinition of “REO Affiliate” to sell real estate (or distressed notessecured by real estate) to its wholly owned REO Affiliate.

 

8.20        Leasebacks.  None of either Borrower, any Subsidiary orany Portfolio Entity-50% will enter into any arrangement with any bank,insurance company or other lender or investor providing for the leasing to anyof the foregoing Persons of real property (i) which at the time has beenor is to be sold or transferred by any of the foregoing Persons to such lenderor investor, or (ii) which has been or is being acquired from anotherPerson by such lender or investor or on which one or more buildings orfacilities have been or are to be constructed by such lender or investor forthe purpose of leasing such property to a Borrower, any Subsidiary  or any Portfolio Entity-50%.

 

8.21        Compliance with ERISA.  Neither Borrower nor any Subsidiary (each, an“Applicable Person”) will (i) terminate, or permit any of itsSubsidiaries to terminate, any Pension Plan so as to result in any material (inthe opinion of Agent or the Majority Lenders) liability of any such Person orSubsidiary to the PBGC, (ii) permit to exist the occurrence of any ReportableEvent (as defined in Section 4043 of ERISA), or any other event orcondition, which presents a material (in the opinion of Agent or the MajorityLenders) risk of such a termination by the PBGC of any Pension Plan, (iii) allow,or permit any of its Subsidiaries to allow, the aggregate amount of “benefitliabilities” (within the meaning of Section 4001(a)(16) of ERISA) underall Pension Plans of which any Applicable Person or any ERISA Affiliate is a “contributingsponsor” (within the meaning of Section 4001(a)(13) of ERISA) to exceed$100,000, (iv) allow, or permit any of its Subsidiaries to allow, any Planto incur an “accumulated funding deficiency” (within the meaning of Section 302of ERISA or Section 412 of the Code), whether or not waived, (v) engage,or permit any of its Subsidiaries or any Plan to engage, in any “prohibitedtransaction” (within the meaning of Section 406 of ERISA or Section 4975of the Code) resulting in any material (in the opinion of Agent or the MajorityLenders and considered by itself or together with all other such liabilities ofa Borrower and all ERISA Affiliates) liability to any Applicable Person or anyERISA Affiliate, (vi) allow, or permit any of 

 

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its Subsidiary to allow, any Plan to fail to complywith the applicable provisions of ERISA and the Code in any material respect, (vii) fail,or permit any of its Subsidiaries to fail, to make any required contribution toany Multiemployer Plan, or (viii) completely or partially withdraw, orpermit any of its Subsidiaries to completely or partially withdraw, from aMultiemployer Plan, if such complete or partial withdrawal will result in anymaterial (in the opinion of Agent or the Majority Lenders) withdrawal liabilityunder Title IV of ERISA.  No Loan Partyor Subsidiary, other than a Borrower and Subsidiaries that are not PortfolioEntities has or shall at any time have any employees.

 

8.22        Distributions to Primary Obligors and a Borrower.

 

(a)           Each calendar month, each Borrower shall (i) causeeach Portfolio Entity and each REO Affiliate to distribute to a PrimaryObligor, on or prior the Payment Date occurring in such month, the PortfolioEntity Proceeds, and (ii) cause each such Primary Obligor to pay to suchBorrower, upon receipt, each such Dividend received by such Primary Obligorunder clause (i) above by prepaying the applicable Pledged Note orintercompany receivable and, if no amount then remains outstanding thereunder,by distributing any remaining portion of such distribution as a Dividend (inaccordance with Section 8.11) to such Borrower.

 

(b)           Each Borrower shall cause each amount required to bedistributed or paid to such Borrower or any Primary Obligor pursuant to this Section 8.22to be distributed or paid to such Borrower or such Primary Obligor by depositor wire transfer directly to the Cash Flow Cash Collateral Account.

 

8.23        Capital Expenditures.  Neither Borrower will make any CapitalExpenditures and neither Borrower will permit any of its Subsidiaries to makeany Capital Expenditures without the prior written consent of the Lenders,except that Borrowers and their Subsidiaries may make Capital Expenditures inan aggregate amount (excluding the capitalization of insurance premiums) not inexcess of $2,000,000, net of any reimbursement for Capital Expenditures made toRegional Rail, LLC, East Penn Railroad LLC or Middletown & New JerseyRailroad, LLC and other Persons owned by the Crestone Portfolio Entities duringeach fiscal year.

 

8.24        Servicing.

 

(a)           Each Borrower shall ensure that FC Servicing or MinnServicing is the servicer for each Subsidiary and Portfolio Entity-50% which isa US Person, except as to (a) ABL, which will service all loans originatedor acquired by ABL, (b) each Crestone Portfolio Entity, whose assets willbe serviced by FirstCity Crestone LLC, and (c) each Person owned by theCrestone Portfolio Entities.

 

(b)           Each Borrower shall (i) cause FC Servicing todeposit all fee income and all other funds received by it not constituting ServicingRestricted Funds to the Cash Collateral Account-Servicing upon receipt of eachsuch amount and (ii) cause Minn Servicing to distribute to FC Servicingall fee income and all other funds received by it not constituting ServicingRestricted Funds by wiring all such amounts directly to the Cash CollateralAccount-Servicing upon receipt of each such amount.

 

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8.25        Portfolio Entity Ownership.  In furtherance and not in limitation of Section 8.8(a),each Borrower shall ensure (x) that there is no change in the percentageof Equity Interests issued by any Portfolio Entity and owned by any Subsidiaryfrom that reflected on Schedule 10.5(b); provided that Equity Interestsin a Portfolio Entity may be sold for a fair market price, the proceeds ofwhich are distributed pursuant to Section 5.3.

 

8.26        Activities of Portfolio Entity.  In furtherance and not in limitation of theother restrictions set forth in this Agreement, each Borrower shall ensure thatno Subsidiary which is a Portfolio Entity and no Portfolio Entity-50% engagesin any activity other than owning Asset Pools and shall have no Assets otherthan such Asset Pools, collections thereon and interests in REO Affiliates ofwhich it is the REO Owner, or the ownership of Incidental Equity Interests, provided,that (i) a Subsidiary or a Portfolio Entity-50% doing business outside theUnited States may own the type of assets an REO Affiliate would own (if it hadan REO Affiliate of which it were the REO Owner); (ii) each REO Affiliateshall be formed in respect of a specific REO Owner and shall not hold assetsother than from such REO Owner; (iii) ABL may originate and service SBALoans in accordance with the SBA Rules and Regulations; and (iv) CrestonePortfolio Entities and Person owned by Crestone Portfolio Entities may continueto engage in the activities in which they are presently engaging.

 

Section 9.                                           EVENTS OFDEFAULT.

 

Uponthe occurrence of any of the following specified events (each an “Event ofDefault”):

 

9.1          Principal and Interest.  Borrowers shall fail to make due and punctualpayment of any principal, interest or other amount due hereunder or under anyNote or any other Loan Document; provided, that the failure to make anyinterest payment when due shall not constitute an Event of Default if suchinterest payment is made within three (3) days of the date when due and aBorrower has not been late in making any other interest payment on any Notemore than once in the preceding twelve (12) months; or

 

9.2          Representations and Warranties.  Any representation, warranty, statement,report or certificate made or delivered by a Borrower or any other Loan Partyor any officer, director, manager or authorized employee or agent thereofherein or in any other Loan Document or otherwise in writing by such Person inconnection with any of the foregoing or in any certificate, report or otherstatement furnished pursuant to or in connection with any of the foregoing,shall be breached or shall prove to be untrue in any material respect; or

 

9.3          Negative and Certain Other Covenants.  A Borrower shall fail to perform or observe,or shall fail to cause (or as to a Portfolio Entity-50% use its commerciallyreasonable efforts to cause) any Subsidiary, Portfolio Entity-50% or any otherLoan Party or other Person covered thereby to perform or observe, any term,covenant or agreement to be performed or observed by a Borrower or suchSubsidiary, Portfolio Entity-50%, Loan Party or other Person, as the case maybe, pursuant to Section 7.11 or Section 8; or

 

9.4          Other Covenants.  A Borrower shall fail to perform or observe,or shall fail to cause Subsidiary, Portfolio Entity, other Loan Party or otherPerson covered thereby to perform 

 

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or observe, any term, covenant or agreement to beperformed or observed by a Borrower or such Subsidiary, Portfolio Entity, otherLoan Party or other Person, as the case may be, pursuant to any of theprovisions of this Agreement, including, without limitation, Section 2.3(other than those referred to in Sections 9.1, 9.2 or 9.3) or any other LoanDocument and such default (which shall be capable of cure) shall continueunremedied for a period of thirty (30) days, after the earlier of the date onwhich (x) Agent or any Lender gives each Borrower notice thereof, or (y) aBorrower obtains knowledge of such default; or

 

9.5          Other Indebtedness of Borrower.  Any Applicable Indebtedness of a Borrower (i) shallbe declared to be or shall become due and payable prior to the stated maturitythereof or (ii) shall not be paid as and when the same becomes due andpayable; or any other event of default shall occur and be continuing under anyother Indebtedness Instrument (other than a Loan Document) relating to anyIndebtedness of a Borrower in excess of $15,000,000 and, if a cure period isapplicable thereto, such default shall not be cured within fifteen (15) daysafter the occurrence thereof; or

 

9.6          Other Indebtedness of other Loan Parties.

 

AnyApplicable Indebtedness of any Primary Obligor or other Loan Party (i) shallbe declared to be or shall become due and payable prior to the stated maturitythereof or (ii) shall not be paid as and when the same becomes due andpayable; or any other event of default shall occur and be continuing under anyother Indebtedness Instrument (other than a Loan Document) relating to anyIndebtedness of such Person in excess of $15,000,000 and, if a cure period isapplicable thereto, such default shall not be cured within fifteen (15) daysafter the occurrence thereof; or

 

9.7          Guaranty.  The breach by FCFC or any Guarantor of anyterm or provision of, or the occurrence of any default under, any Guaranty orother agreement, instrument or document delivered in connection therewith to whichFCFC or such guarantor is a party, which breach or default is in the opinion ofAgent, material, or any other such breach or default (other than such amaterial breach or default) occurs and is not cured within the time, if any,specified therefor therein or fifteen (15) days thereafter, if no such time isspecified or such time is less than fifteen (15) days; or if any such Guarantyis at any time not in full force and effect; or if FCFC or any Guarantor shallassert that it is not liable with respect to any Guaranty to which it is aparty;

 

9.8          Insolvency.  (i) A Borrower, any Primary Obligor orany other Loan Party (Borrower and each of the other foregoing Persons being a “Section 9.8Entity”) shall make an assignment for the benefit of creditors or acomposition with creditors; or (ii) any Section 9.8 Entity shalladmit in writing its inability to pay its debts as they mature, shall file apetition in bankruptcy, shall be adjudicated insolvent or bankrupt, shallpetition or apply to any tribunal for the appointment of any receiver,liquidator, trustee or custodian of or for it or any of its Assets; or(iii) any application is made by any other Person for the appointment ofany receiver, liquidator, trustee or custodian for any Section 9.8 Entityor for any of the Assets of any Section 9.8 Entity; or (iv) any Section 9.8Entity shall commence any proceedings relating to it under any bankruptcy,reorganization, arrangement, readjustment of debt, receivership, dissolution orliquidation law or statute of any jurisdiction, whether now or hereafter ineffect; or (v) there shall be commenced against any Section 9.8Entity any such proceeding which shall remain 

 

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undismissed for a period of sixty (60) days or more,or any order, judgment or decree approving the petition in any such proceedingshall be entered; or (vi) any Section 9.8 Entity shall by any act orfailure to act indicate its consent to, approval of or acquiescence in, anysuch proceeding or in the appointment of any receiver, liquidator, trustee orcustodian (other than a custodian under Non-Default Voluntary CustodialArrangements) of or for it or any of its Assets, or shall suffer any suchappointment to exist; or (vii) any Section 9.8 Entity shall take anyaction for the purpose of effecting any of the foregoing; or any court ofcompetent jurisdiction shall assume jurisdiction with respect to any suchproceeding or a receiver or trustee or other officer or representative of acourt or of creditors, or any court, governmental officer or agency, shallunder color of legal authority, take and hold possession of any substantialpart of the property or Assets of any Section 9.8 Entity; or(viii) any Section 9.8 Entity shall become insolvent (howsoever suchinsolvency may be evidenced) or shall be unable to pay its debts as they mature(except that the occurrence of any condition set forth in this clause (viii) withrespect to FC Mexico, so long as FC Mexico is paying its debts as they mature,shall not constitute an Event of Default under this Section 9.8 unless theoccurrence of any such condition with respect to FC Mexico is an Event ofDefault under any other clause of this Section 9.8); or

 

9.9          Security Documents.  The breach by a Borrower or any other LoanParty of any term or provision of, or the occurrence of any default under, anySecurity Document or other Loan Document (other than this Agreement) or otheragreement, instrument or document delivered in connection therewith to whichsuch Person is a party, which breach or default is in the opinion of Agent,material, or any other such breach or default (other than such a materialbreach or default) occurs and is not cured within the time, if any, specifiedtherefor therein or fifteen days thereafter, if no such time is specified orsuch time is less than fifteen (15) days; or if any such Security Document orLoan Document is at any time not in full force and effect; or any of theSecurity Documents shall fail to grant to Agent on behalf of Lenders the Liens(if any) intended to be created thereby; or if any Loan Party shall assert thatit is not liable with respect to any Security Document to which it is a party;or FCFC or any Primary Obligor shall assert that it is not liable as aguarantor under the Guaranty to which it is party; or

 

9.10        Notice of Charge.  Except as expressly permitted pursuant to Section 7.3,if a notice of any Charge is filed of record with respect to all or any of theAssets of a Borrower, any Primary Obligor, any Material Portfolio Entity or anyWholly-Owned Subsidiary (other than any REO Affiliate); or

 

9.11        Judgments.

 

(a)           Any final non-appealable judgment for the payment ofmoney in excess of $1,000,000 (after giving effect to any amount covered byinsurance as to which the insurer shall not have denied or questioned itsobligation to pay) shall be rendered against a Borrower or any Primary Obligorand the same shall remain in effect for a period of ten (10) days afterentry of such judgment; or

 

(b)           Final judgment for the payment of money in excess of$1,000,000 shall be rendered against a Borrower or any Primary Obligor, and thesame shall remain undischarged for a period of thirty (30) days during whichexecution shall not be effectively stayed or diligently contested in good faithby appropriate proceedings; or

 

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(c)           If for the purpose of obtaining judgment in anycourt it is necessary to convert a sum due from a Borrower in the currencyexpressed to be payable herein (the “specified currency”) into anothercurrency, the parties hereto agree, to the fullest extent that they mayeffectively do so, that the rate of exchange used shall be that at which inaccordance with normal banking procedures Agent could purchase the specifiedcurrency with other such currency at Agent’s New York branch on the BusinessDay that is on or immediately following the day on which final judgment isentered.  The obligations of a Borrowerin respect of any sum due to any Lender or Agent hereunder shall,notwithstanding any judgment in a currency other than the specified currency,be discharged only to the extent that on the Business Day following receipt bysuch Lender or Agent, as the case may be, of any sum adjudged to be so due insuch other currency such Lender or Agent as the case may be, may in accordancewith normal banking procedures purchase the specified currency with such othercurrency.  If the amount of the specifiedcurrency so purchased is less than the sum originally due to such Lender orAgent, as the case may be, in the specified currency, each Borrower agrees, tothe fullest extent it may effectively do so, as a separate obligation andnotwithstanding any such judgment, to indemnify such Lender or Agent, as thecase may be, against such loss, and if the amount of the specified currency sopurchased exceeds the sum originally due to any Lender or Agent, as the casemay be, in the specified currency, such Lender or Agent, as the case may be,agrees to remit such excess to the appropriate Borrower.

 

9.12        Stock Issuance or Transfer.  Except as expressly permitted pursuant to theterms hereof, if any Subsidiary or Portfolio Entity-50% issues to (except uponformation of a Person permitted by this Agreement) or transfers to any Personany Stock or other Equity Interests; or

 

9.13        ERISA.  Any ERISA Affiliate of a Borrower or of anyother Applicable Person under Section 8.21 which is not a Subsidiary of aBorrower or such Applicable Person shall fail in the performance or observanceof any term, provision or agreement with respect to a Plan or MultiemployerPlan set forth in Section 8.21 as if such ERISA Affiliate were aSubsidiary of a Borrower or an Applicable Person; or

 

9.14        Material Effect Defaults.  To the extent that the same does not constitutean Event of Default under any other provision of this Section 9, a defaultby a Borrower or any Primary Obligor shall occur under any agreement, documentor instrument (other than this Agreement or any of the other Loan Documents)now or hereafter existing, to which a Borrower or any Primary Obligor is aparty and the effect of such default could reasonably be expected to have aMaterial Adverse Effect; or

 

9.15        Change in Control.  A Change in Control shall occur (for purposeshereof, a “Change in Control” shall mean the occurrence of any of thefollowing events after the date hereof:  (i) any“person” or “group” (as such terms are used in Sections 13(d) and 14(d) ofthe Securities Exchange Act of 1934, as amended (the “Exchange Act”)), is or becomes the “beneficial owner” (asdefined in Rules 13d-3 and 13d-5 under the Exchange Act), directly, orindirectly, of more than fifty percent (50%) of the aggregate voting power ofall classes of Capital Stock of a Borrower or of FCFC entitled to vote generallyin an election of directors; (ii) a Borrower or FCFC is merged with orinto another corporation or another corporation is merged with or into aBorrower or FCFC with the effect that immediately after such transaction thestockholders of such Borrower or FCFC, as the case may be, immediately prior tosuch 

 

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transaction hold less than a majority in interest ofthe total voting power entitled to vote in the election of directors, managersor trustees of the entity surviving the transaction; or (iii) to theextent not otherwise then constituting an Event of Default, all orsubstantially all of the Assets of a Borrower, FCFC or another Primary Obligorare sold to any person or persons (as an entirety in one transaction or aseries of related transactions).  Forpurposes of this Section 9.15, “Capital Stock” of any Personmeans any and all shares, interests, participations or other equivalents in theequity (however designated) of such Person and any rights (other than debtsecurities convertible into an equity interest), warrants or options to acquirean equity interest in such Person); or

 

9.16        Management.  If, without the prior written consent ofLenders, a Key Employee ceases to be employed full-time with FC Servicing, aBorrower or FC, such occurrence shall be an Event of Default unless FCServicing, such Borrower or FC, as the case may be, employs a replacementofficer having the duties of such Key Employee acceptable to Lenders in theirreasonable discretion within sixty (60) days after such Key Employee ceases tobe employed; or

 

9.17        Court Orders.  To the extent not otherwise constituting anEvent of Default, if a Borrower, any Primary Obligor or any other Loan Party isenjoined, restrained or in any way prevented by court order from conducting allor any material part of its business or affairs and such Person consents (byaction, inaction or otherwise) to such order or such order remains in effectfor a period of thirty (30) days; or

 

9.18        Dissolution.  If a Borrower, any Primary Obligor or anyother Loan Party shall dissolve, fully liquidate or suspend or discontinue itsbusiness; then, and in any such event, and at any time thereafter, if any Eventof Default shall then be continuing, Agent may (and shall, if instructed inwriting by the Majority Lenders) by written notice to each Borrower declare theprincipal of and accrued interest on the Loans of each Borrower to be,whereupon the same shall forthwith become, due and payable without presentment,demand, protest or other notice of any kind, all of which are hereby waived byeach Borrower; provided that if any Event of Default described in Section 9.8shall occur with respect to a Borrower, the result which would otherwise occuronly upon the giving of written notice by Agent to each Borrower as hereindescribed shall occur automatically, without the giving of any such notice;further provided that notwithstanding the foregoing, Agent and Lendersacknowledge that it is contemplated that the Borrowers, Primary Obligors andPortfolio Entities will be liquidating their assets and that any PrimaryObligor or Portfolio Entity may be dissolved or merged into another PrimaryObligor or Portfolio Entity upon the liquidation of all assets of any suchPerson that can reasonably be expected to be collected or sold.

 

Section 10.                                    GENERALREPRESENTATIONS AND WARRANTIES AND RELATED COVENANTS.

 

Inorder to induce Lenders to enter into this Agreement, to maintain the Loans andto maintain the Letters of Credit, provided for herein, each Loan Party partyhereto makes the following representations, covenants and warranties, both asof the Execution Date and (after giving effect to the transactions contemplatedhereby to occur on the Effective Date) as of the Effective Date (unlessotherwise specified), which representations, covenants and warranties 

 

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shallsurvive the execution and delivery of this Agreement and the other documentsand instruments referred to herein:

 

10.1        Organization.

 

(a)           Each Borrower, Primary Obligor, and FLBG is and atall times hereafter shall be a corporation or limited liability company, as thecase may be, duly organized and validly existing and in good standing under thelaws of its jurisdiction or organization and qualified or licensed to dobusiness and in good standing in all states in which the laws thereof requiresuch Borrower to be so qualified and/or licensed and in which the failure to soqualify could have a Material Adverse Effect, including, without limitation,the State of Texas.  Schedule10.1(a) identifieseach jurisdiction in which a Borrower has qualified or been licensed to dobusiness and describes the nature and current status of any such qualificationor license.

 

(b)           Each Primary Obligor and each Portfolio Entity andeach other Loan Party is a corporation or limited liability company or alimited partnership, duly organized and validly existing and in good standingunder the laws of the state or foreign jurisdiction of its organization.

 

(c)           Each Primary Obligor and other Loan Party is and atall times hereafter shall be qualified or licensed to do business and in goodstanding in all states in which the laws thereof require such Primary Obligorand such other Loan Party to be so qualified and/or licensed.

 

(d)           Each Portfolio Entity is and at all times hereaftershall be qualified or licensed to do business and in good standing in allstates in which the laws thereof require such Portfolio Entity to be soqualified and/or licensed and in which the failure to so qualify could have aMaterial Adverse Effect.  Schedule10.1(d) identifies each jurisdiction in which each Primary Obligor,Portfolio Entity, Related Entity and each other Loan Party has qualified orbeen licensed to do business and describes the nature and current status of anysuch qualification or license.

 

(e)           Schedule 10.1(e) lists all ShareholderAgreements to which a Borrower, any Subsidiary, any Portfolio Entity-50% or anyother holder of any Equity Interest in a Pledged Entity is a party.

 

10.2        Entity Power.

 

(a)           Each Borrower has the right, power and capacity andis duly authorized and empowered to enter into, execute, deliver and performthis Agreement and the other Loan Documents to which it is a party.

 

(b)           Each Primary Obligor and each other Loan Party hasthe right, power and capacity and is duly authorized and empowered to enterinto, execute, deliver and perform those Loan Documents  to which it is a party.

 

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10.3        Violation of Charter Documents.

 

(a)           The execution, delivery and/or performance by eachBorrower of this Agreement and the other Loan Documents to which it is a partyand the consummation of the transactions contemplated hereby have been dulyauthorized by all necessary corporate and shareholder action and none of suchexecution, delivery, performance or consummation shall, by the lapse of time,the giving of notice or otherwise, constitute a violation of any LegalRequirement or a breach of any provision contained in the Charter Documents ofa Borrower, or contained in any agreement, instrument or document to which aBorrower is now or hereafter a party or by which it or any of its Assets is ormay become bound, other than agreements, instruments or documents that areimmaterial to a Borrower and the breach of which could not have a MaterialAdverse Effect.

 

(b)           The execution, delivery and/or performance by eachPrimary Obligor and other Loan Party of each Loan Document to which it is aparty and the consummation of each such Person of the transactions contemplatedhereby have been duly authorized by all necessary corporate, partnership orlimited liability company action (as the case may be) and other action by theholders of the Equity Interests thereof and none of such execution, delivery,performance or consummation shall, by the lapse of time, the giving of noticeor otherwise, constitute a violation of any Legal Requirement or a breach ofany provision contained in the Charter Documents of such Primary Obligor orsuch other Loan Party, or contained in any agreement, instrument or document towhich such Primary Obligor or such other Loan Party is now or hereafter a partyor by which it or any of its Assets is or may become bound, other than agreements,instruments or documents that are immaterial to such Primary Obligor and otherLoan Party and the breach of which could not have a Material Adverse Effect.

 

10.4        Enforceability.

 

(a)           This Agreement and the other Loan Documents to whicha Borrower is a party are and will be the legal, valid and binding agreementsof each Borrower, enforceable in accordance with their respective terms, exceptas enforcement thereof may be subject to the effect of applicable bankruptcy,insolvency, reorganization, moratorium or similar laws affecting creditors’rights generally, and to general principles of equity (regardless of whethersuch enforcement is sought in a proceeding in equity or at law); and

 

(b)           Those other Loan Documents to which each other LoanParty is a party are and will be the legal, valid and binding agreements ofsuch Loan Party, enforceable in accordance with their respective terms, exceptas enforcement thereof may be subject to the effect of applicable bankruptcy,insolvency, reorganization, moratorium or similar laws affecting creditors’rights generally, and to general principles of equity (regardless of whethersuch enforcement is sought in a proceeding in equity or at law).

 

10.5        Ownership.

 

(a)           Schedule 10.5(a) sets forth all classesof Stock of each Borrower, as of December 31, 2009, the shareholdersthereof (other than members of the general public), addresses of eachshareholder, and number of shares owned by each Shareholder as of such date;

 

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(b)           Schedule 10.5(b) sets forth all classesof Stock and/or other Equity Interests (other than options, warrants and rightsto acquire Stock or other Equity Interests) issued by each Primary Obligor,each Portfolio Entity and each Related Entity, the shareholders and otherequity holders thereof, and the addresses, number of shares and/or partnershipinterests owned by each Shareholder or equity holder.

 

(c)           Schedule  10.5(c) setsforth all options, warrants and other rights to acquire Stock or other EquityInterests of each Borrower, any Primary Obligor, any Portfolio Entity, anyRelated Entity and any other Pledged Entity, the nature of such option, warrantor right and the conditions for the exercise thereof.  Lenders hereby expressly consent to the transfer,issuance or conveyance of Stock and/or other Equity Interests of each Borrowerin accordance with such options, warrants and rights; provided that thesame does not result in a Change of Control.

 

(d)           All Equity Interests of each Borrower, each PrimaryObligor, each Portfolio Entity, each Related Entity and each other Loan Partyhave been duly and validly issued, are fully paid and are non-assessable.

 

10.6        Fictitious Names.

 

(a)           Each of the fictitious names, if any, used by aBorrower during the five (5) year period preceding the Execution Date isset forth on Schedule 10.6 attached hereto (as amended from time totime) and none of such fictitious names are registered trademarks or tradenameswith the U.S. Patent and Trademark Office, except as set forth in Schedule10.6;

 

(b)           Each of the fictitious names, if any, used by eachPrimary Obligor, Material Portfolio Entity and any other Loan Party, during thefive (5) year period preceding the Execution Date is set forth on Schedule10.6 attached hereto (as amended from time to time), and none of suchfictitious names are registered trademarks or trade names with the U.S. Patentand Trademark Office; provided that, variations on the corporate name ofany Primary Obligor, Portfolio Entity or any other Loan Party in states whereused solely for qualifying to do business therein shall and have been excludedfrom such schedule, with Lender’s consent and approval.

 

10.7        Title.

 

(a)           Schedule 10.7 is a true, accurate andcomplete list of all Liens relating to the Collateral on the Execution Date andEffective Date.

 

(b)           Each of First X and First B shall at all times ownfee title to its respective holdings of real estate subject to no liens otherthan the Permitted Liens.

 

(c)           Each Borrower, each Primary Obligor, PortfolioEntity and other Loan Party shall at all times have indefeasible andmerchantable title to and ownership of all of its Assets except to the extentthe failure to do so could not reasonably be expected to have a MaterialAdverse Effect.

 

10.8        Financial Warranty.  Except as set forth on Schedule 10.8,each Borrower (a) is paying its debts as they mature, (b) ownsproperty which, at a fair valuation, is greater than the 

 

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sum of its debt, and (c) has capital sufficientto carry on its business and transactions and all businesses and transactionsin which it is about to engage. Except as set forth on Schedule 10.8,each Primary Obligor and each Material Portfolio Entity: (i) is paying itsrespective debts as they mature, (ii) owns property which, at a fairvaluation, is greater than the sum of its debt and (iii) has capitalsufficient to carry on its business and transactions and all businesses andtransactions in which it is about to engage.

 

10.9        Proceedings.  Except as set forth on Schedule 10.9,there are no actions or proceedings which are pending or threatened against aBorrower, any Primary Obligor, any Material Portfolio Entity or any other LoanParty which could reasonably be expected to have a Material AdverseEffect.  None of the actions orproceedings referred to on Schedule 10.9 could have a Material AdverseEffect.

 

10.10      Government Contracts.  Except as set forth on Schedule 10.10,neither Borrower, nor any Primary Obligor, Material Portfolio Entity or otherLoan Party is a party to any government contracts.

 

10.11      Adequate Licenses.  Each Borrower, and each Primary Obligor,Portfolio Entity and other Loan Party possesses adequate Assets, licenses,patents, copyrights, trademarks and trade names to continue to conduct itsbusiness as previously conducted by it and as contemplated in the foreseeablefuture except such licenses, patents, copyrights, trademarks and trade namesthe failure of which to obtain could not be reasonably expected to have aMaterial Adverse Effect.

 

10.12      Government Permits; Approvals and Consents.

 

(a)           Except for matters which could not result in aMaterial Adverse Effect, each Borrower and each Primary Obligor, each PortfolioEntity  and each other Loan Party has beenand is in good standing with respect to and has obtained all governmentalpermits, certificates, consents and franchises necessary to continue to conductits business as previously conducted prior to the date hereof and prior to theExecution Date and to own or lease and operate its properties as now owned orleased by it.  None of said permits,certificates, consents or franchises contain any term, provision, condition orlimitation more burdensome than such as are generally applicable to Personsengaged in the same or similar business as the applicable Person.

 

(b)           Except for those consents and other items set forthon Schedule 10.12, neither Borrower, nor any Primary Obligor, MaterialPortfolio Entity or other Loan Party requires the approval, consent, waiver,order, permission, license, authorization, registration or validation of, orfiling with or exemption by, any Government Authority or any other Person(including but not limited to shareholders, partners, members, equity owners,holders of Indebtedness Instruments, or any owner of any lien upon the Assetsof any one or more of them or their Affiliates) for the execution and deliveryof, and the consummation of the transactions contemplated by, this Agreementand the other Loan Documents, including but not limited to the borrowing of anyLoans, the pledge of the Collateral, and the payment and performance of allObligations.  Each Borrower and eachother Primary Obligor, Material Portfolio Entity and other Loan Party havereceived the consents and other items described on Schedule 10.12 andhas 

 

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delivered a copy thereof to Agent, which consentsare in full force and effect, unmodified and unamended on the date hereof andon the Execution Date.

 

10.13      Charge; Restrictions.

 

(a)           On the Execution Date and on the Effective Date,neither Borrower, nor any Primary Obligor nor any Portfolio Entity or any otherLoan Party is a party to (nor are any of such Person’s Assets otherwise subjectto) any contract or agreement or restriction, judgment, decree or order thatcould have a Material Adverse Effect.

 

(b)           On the Execution Date and on the Effective Date,none of either Borrower, nor any Primary Obligor, Material Portfolio Entity, orany other Loan Party is subject to (nor are any such Person’s Assets otherwisesubject to) any Charge (other than Charges owed by First B or First X).

 

10.14      Compliance with Laws.  Except for matters which could not result ina Material Adverse Effect, neither Borrower, nor any Primary Obligor nor anyPortfolio Entity  nor any other LoanParty is in violation of any applicable statute, regulation, order or ordinanceof the United States of America, of any state, city, town, municipality, countyor of any other jurisdiction, or of any agency thereof, including the FederalReserve Board, in any respect.

 

10.15      Compliance with Indebtedness Instruments.  Other than those defaults set forth on Schedule10.15, neither Borrower is in default under any Indebtedness Instrument orany other material agreement to which it is a party.  Other than those defaults set forth on Schedule10.15, no Primary Obligor, Material Portfolio Entity, or any other LoanParty is in default under any Indebtedness Instrument.

 

10.16      Financials.  The Financial Statements delivered by eachBorrower, any Primary Obligor, Material Portfolio Entity or any other LoanParty to Agent, fairly and accurately present the Assets, liabilities andfinancial conditions and results of operations of such Borrower, and such otherPersons described therein as of and for the periods ending on such dates andhave been prepared in accordance with GAAP applied on a basis consistentlyfollowed in all material respects throughout the periods involved.

 

10.17      Tax Returns.  Each Borrower and each other member of theConsolidated Group has filed or caused to be filed all tax returns which arerequired to be filed, and has paid all Charges shown to be due and payable onsaid returns or on any assessments made against it or any of its property, andall other Charges imposed on it or any of its properties by any GovernmentalAuthority, except for Charges arising at any time after the Effective Date,which a Borrower is disputing in accordance with the final sentence of Section 7.3.

 

10.18      No Material Adverse Change.  Except as set forth in Schedule 10.18,since December 31, 2009, no event or circumstance has occurred that had,has or could reasonably be expected to have a Material Adverse Effect.

 

10.19      No Indebtedness.  None of either Borrower, any Primary Obligor,Portfolio Entity, Wholly-Owned Subsidiary or other Loan Party (i) has anyIndebtedness except for Indebtedness described in Schedule 10.19, Schedule10.20 and Schedule 8.12(a) and except for 

 

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Indebtedness permitted by this Agreement which(other than in the case of MCS, any Latin American Acquisition Entity  or any European Acquisition Entity ) isreflected in the most recent Financial Statements delivered pursuant to 7.1(a) or(b) (except for any such Indebtedness permitted by this Agreement (x) incurredsince such most recent Financial Statements were delivered, or (y) constitutingunsecured trade payables arising in the ordinary course of business since thedates reflected in the December 31, 2009 Financial Statements that is notIndebtedness for borrowed money or Indebtedness of any REO Affiliate to its REOParent evidenced by a note payable to such REO Parent and in each case, only tothe extent, if any, not required by GAAP to be reflected in FinancialStatements) or (ii) has guaranteed any indebtedness or entered into orissued any Guaranty Equivalent (other than as a result of the endorsement ofany instrument of items of payment for deposit or collection in the ordinarycourse of business or as otherwise expressly permitted pursuant to the termshereof) in respect of the obligations of any Person.

 

10.20      Affiliate Notes.  Attached hereto as Schedule 10.20 is atrue, accurate and complete schedule of all promissory notes made by any Affiliatepayable to the order of a Borrower, a Wholly-Owned Subsidiary, a PortfolioEntity or a Related Entity, other than the Pledged Notes and the ExcludedNotes.

 

10.21      No Liability on Lenders or Agent.  None of the execution, delivery andperformance by a Borrower or any other Loan Party of this Agreement and/or theother Loan Documents will impose on or subject any of the Lenders or the Agentto any liability, whether fixed or contingent, in respect of any EnvironmentalLaw, whether relating to the operation of a Borrower’s business orotherwise.  None of the Lenders’ or theAgent’s exercise of any of the rights or remedies described in this Agreementor in any of the other Loan Documents shall constitute a breach of anyprovision contained in any agreement, instrument or document concerning theassignment or license of, or the payment of royalties for, any patents, patentrights, trade names, trademarks, trade secrets, know-how, copyrights or anyother form of intellectual property now or at any time or times hereafterprotected as such by any applicable law.

 

10.22      Affiliates.  Schedule 10.22 attached hereto is atrue, accurate and complete schedule of each Borrower’s Affiliates as of theEffective Date, together with a description of such Borrower’s relationship toeach such Affiliate.

 

10.23      Real Property; Environmental Issues.  Except as set forth on Schedule 10.23,neither Borrower, any Loan Party, any Primary Obligor, any Portfolio Entity orany Related Entity other than First X, First B, FCS Creamer, Ltd., FCSWood Ltd., and FCS Wildhorse Ltd., FCS Lancaster Ltd., the Crestone PortfolioEntities and Persons owned by the Crestone Portfolio Entities, Brazos RiverPartnership One, L.P., any REO Affiliate, any Latin American Acquisition Entityor European Acquisition Entity now owns or, in the case of US Persons, leasesor at any time in the five (5) years preceding the Execution Date hasowned or leased any real property. Neither Borrower, any Primary Obligor, any Portfolio Entity, any RelatedEntity, any Immaterial Entity, or any other Loan Party has received a summons,citation, notice, or directive from the Environmental Protection Agency or anyother Governmental Authority concerning any action or omission resulting in thereleasing, or otherwise disposing of hazardous waste or hazardous substancesinto the environment with respect to any real property.

 

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10.24      Investment Company Act and Public Utility HoldingCompany Act.  NeitherBorrower nor any Primary Obligor nor any other Loan Party or the entering intoof any Loan Documents, nor the issuance of the Notes is subject to any of theprovisions of the Investment Company Act of 1940, as amended.  Neither Borrower, nor any Primary Obligor orany other Loan Party is a “holding company” as defined in the Public UtilityHolding Company Act of 1935, as amended, or subject to any other federal orstate statute or regulation limiting its ability to incur Indebtedness formoney borrowed.

 

10.25      Disclosure.  Neither this Agreement nor any other LoanDocument nor any statement, list, certificate or other document or information,nor any schedules to this Agreement or any other Loan Document, delivered or tobe delivered to Lenders or Agent, contains or will contain any untrue statementof a material fact or omits or will omit to state a material fact necessary tomake statements contained herein or therein, in light of the circumstances inwhich they are made, not misleading. Copies of all documents delivered to Lenders and/or Agent pursuant tothis Section 10 or any other provision of this Agreement are true, correctand complete copies thereof and include all amendments, restatements,supplements and other modifications thereto and thereof.

 

10.26      Qualification.

 

(a)           Solely by reason of (and without regard to any otheractivities of Lenders and/or Agent in any state in which Assets of the aBorrower, any Primary Obligor, any Portfolio Entity, any Related Entity orother Loan Party are located) the entering into and performance of thisAgreement, the Notes, the other Loan Documents and the documents, instrumentsand agreements delivered in connection therewith by Lenders and/or Agent willnot constitute doing business by Lenders and/or Agent in any of such states orresult in any liability of Lenders and/or Agent for taxes or other governmentalcharges; and qualification by Lenders and/or Agent to do business in suchjurisdiction is not necessary in connection with, and the failure to so qualifywill not affect, the enforcement of, or exercise of any rights or remediesunder, any of such documents.

 

(b)           No “business activity,” “doing business” or similarreport or notice is required to be filed by the Lenders and/or Agent in anysuch jurisdiction in connection with the Loans or the transactions contemplatedby this Agreement or any other Loan Document, and the failure to file any suchreport or notice will not affect the enforcement of, or the exercise of anyrights or remedies under, this Agreement or any of the other Loan Documents.

 

(c)           SEC Filings.  The Borrowers have filed and made availableto the Agent and Lenders each form, registration statement, schedule, report,proxy statement and document required to be filed by FCFC with the SEC sinceJanuary 1, 2006 (collectively, the “SEC Reports”).  Exceptas set forth on Schedule 10.26, the SEC Reports (i) at the timefiled, complied in all material respects with the applicable requirements ofthe Securities Laws and (ii) did not at the time they were filed (or if amendedor superseded by a filing prior to the date of this Agreement, then on the dateof such filing) contain any untrue statement of a material fact or omit tostate a material fact required to be stated in the SEC Reports or necessary inorder to make the statements therein, in the light of the circumstances underwhich they were made, not misleading. FCFC is the only Loan Party required to file pursuant to the ExchangeAct.  Since 

 

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January 1, 2006, FCFC has made all filings withthe SEC in a timely manner (except as set forth on Schedule 10.26, eachof which filing deficiencies was subsequently cured in a manner that broughtFCFC into full compliance with law) as required by law and no event has occurredthat requires an additional filing or any amendment to a prior filing, whichhas not been made or filed.

 

10.27      Federal Reserve Margin Regulations; Use of Proceeds

 

(a)           Neither Borrower, any Primary Obligor, any PortfolioEntity, any Related Entity or any other Loan Party or member of theConsolidated Group or Subsidiary of any of the foregoing is engagedprincipally, or as one of its important activities, in the business ofextending credit for the purpose of purchasing or carrying any margin stock (withinthe meaning of Regulation U of the Board of Governors of the Federal ReserveSystem).  No part of the proceeds of anyLoan will be used to purchase or carry any such margin stock or to extendcredit to others for the purpose of purchasing or carrying any such marginstock.

 

(b)           Neither the Loans nor the use of proceeds therefromwill result in a violation of any of the foreign assets control regulations ofthe United States Treasury Department (31 CFR, Subtitle B, Chapter V, asamended), or any ruling issued thereunder or any enabling legislation orPresidential Executive Order in connection therewith.

 

10.28      Intellectual Property.  All patents, trademarks, registeredcopyrights and trade names of a Borrower, each Primary Obligor, each MaterialPortfolio Entity and each other Loan Party are listed in Schedule 10.28to this Agreement; all of those so listed are in full force and effect.  If any member of the Consolidated Group atany time acquires, establishes, invents or develops any patent, trademark, copyrightor trade name that is or becomes material to such Person’s business oroperations, it will promptly notify Agent of same and take such action as Agentshall request to grant to Collateral Agent or Agent on behalf of Lenders aperfected, first priority security interest in same.

 

10.29      Compliance with ERISA.  No Loan Party or Subsidiary, other than FCServicing or a Borrower and Subsidiaries that are not Portfolio Entities has orshall at any time have any employees.  Schedule10.29 describes the Pension Plans to which Borrower or any ERISA Affiliatesmay have obligations.  Each Loan Partyand each ERISA Affiliate and each Plan and the trusts maintained pursuant tosuch plans are in compliance in all material respects with the presentlyapplicable provisions of Sections 401 through and including 417 of the Code andof ERISA and (i) no event which constitutes a Reportable Event as definedin Section 4043 of ERISA has occurred and is continuing with respect toany Plan which is or was covered by Title IV of ERISA, (ii) no Plan whichis subject to Part 3 of Subtitle B of Title 1 of ERISA has incurred any “accumulatedfunding deficiency” (within the meaning of Section 302 of ERISA or Section 412of the Code) whether or not waived, and (iii) no written notice ofliability has been received with respect to any Loan Party or any Subsidiaryfor any “prohibited transaction” (within the meaning of Section 4975 ofthe Code or Section 406 of ERISA), nor has any such prohibited transactionresulting in liability to any Loan Party or ERISA Affiliate occurred.

 

Neitherany Loan Party nor any ERISA Affiliate (i) has incurred any liability tothe PBGC (or any successor thereto under ERISA), or to any trustee of a trustestablished under

 

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Section 4049of ERISA, in connection with any Plan (other than liability for premiums under Section 4007or ERISA), (ii) has incurred any withdrawal liability under Subtitle E ofTitle IV of ERISA in connection with any Plan which is a Multiemployer Plan,nor (iii) has contributed or has been obligated to contribute on or after September 26,1980, to any “multiemployer plan” (within the meaning of Section 3(37) ofERISA) which is subject to Title IV of ERISA.

 

Theconsummation of the transactions contemplated by this Agreement (i) willnot give rise to any liability on behalf of any Loan Party or any ERISAAffiliate under Title IV of ERISA to the PBGC (other than ordinary and usualPBGC premium liability), to the trustee of a trust established pursuant to Section 4049of ERISA, or to any Multiemployer Plan, and (ii) will not constitute a “prohibitedtransaction” under Section 406 of ERISA or Section 4975 of the Code.

 

10.30      The Security Documents.

 

(a)           Each Security Document heretofore delivered grants,and each Security Document hereafter delivered when delivered will grant a Lienin the properties or rights intended to be covered thereby (the “Collateral”)which (i) will constitute a valid and enforceable security interest underthe Uniform Commercial Code of the State (x) in which the Collateral islocated and (y) by which any Security Document is governed (as applicable,the “UCC”), (ii) will be entitled to all of the rights, benefitsand priorities provided by the UCC, and (iii) when such Security Documentsor financing statements with respect thereto are filed and recorded as requiredby the UCC, will be superior and prior to the rights of all third Persons nowexisting or hereafter arising whether by way of mortgage, pledge, lien, securityinterest, encumbrance or otherwise, except for Permitted Liens, and willprovide Agent and Lenders the first priority. All such action as is necessary in law has been taken, or prior to theEffective Date will have been taken, to establish and perfect the securityinterest of Agent and Lenders in the Collateral and to entitle Lenders or Agenton behalf of Lenders to exercise the rights and remedies provided in each ofthe Security Documents and the UCC, as applicable, and no filing, recording,registration or giving of notice or other action is required in connectiontherewith except such as has been made or given or will have been made or givenprior to such dates.  All filing andother fees and all recording or other tax payable with respect to the recordingof any of the Security Documents and UCC financing statements have been paid orprovided for.

 

(b)           In furtherance (and not in limitation) of Section 10.30(a),after giving effect to the Pledge Agreements and Security Agreements listed on Schedule10.30(b), each Borrower and each Primary Obligor will have grantedCollateral Agent a Lien of the first priority on (x) each Pledged Note andon each other note, instrument or other evidence of indebtedness, other thanany Excluded Note, in which it has any right, title or interest; and (y) eachEquity Interest, other than Equity Interests in Excluded Entities, in which ithas any right, title or interest, including, without limitation, each EquityInterest issued to it by any Portfolio Entity acquiring any Asset Pool.

 

10.31      Other Loan Documents.  All representations and warranties containedin the other Loan Documents are true and correct.

 

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10.32      Fee Agreements.  Attached hereto as Schedule 10.32is a true, accurate and complete schedule, as of the Effective Date, of all FeeAgreements to which a Borrower or any Primary Obligor, or Material PortfolioEntity is a party.

 

10.33      Securitization Agreements.  Attached hereto as Schedule 10.33 is atrue, accurate and complete schedule as of the Execution Date of all sales andservicing agreements and similar agreements relating to securitizations towhich a Borrower, any Primary Obligor or any other Subsidiary of a Borrower isa party.

 

10.34      Immaterial Entities.  Schedule 10.34 lists each Affiliate ofa Borrower that does not engage in any business and that has assets of with afair market value of less than $100,000. The aggregate fair market value of Assets of all entities listed on Schedule10.34 does not exceed $1,500,000.

 

10.35      Waterfall Restrictions.  No loan agreement or other borrowingarrangement of any Portfolio Entity contains any provision (x) pursuant towhich such agreement or arrangement would cross-default to a loan agreement orother borrowing arrangement of any other Portfolio Entity or to a differentloan agreement or other borrowing arrangement of such Portfolio Entity or (y) whichwould in any way restrict, reduce or prohibit distributions by a PortfolioEntity on account of any event or condition with respect to any Affiliate ofsuch Portfolio Entity or with respect to that Portfolio Entity under any otherborrowing or credit arrangement.

 

10.36      Wholly Owned Subsidiary Interests.  Attached as Schedule 10.36 hereto is atrue and complete list, as of the Effective Date, of each Wholly-OwnedSubsidiary which owns Equity Interests issued by any other Person other than anREO Affiliate of such Wholly-Owned Subsidiary,

 

10.37      REO Affiliates.  Attached as Schedule 10.37 hereto is atrue and complete list, as of the Effective Date, of each REO Affiliate.

 

10.38      Material Portfolio Entities.  Attached hereto as Schedule 10.38 is atrue and complete list, as of the Effective Date, of each Material PortfolioEntity.

 

Section 11.                                    AGENT.

 

11.1        Appointment.  Lenders hereby irrevocably appoint Bank ofScotland plc, acting through its New York branch, to act as Agent hereunderAgent (in such capacity, the “Agent”), and as Collateral Agent, subjectto the Collateral Agency Agreement (in such capacity, the “Collateral Agent”),“Assignee” and “Secured Party” (or in any other similarrepresentative capacity designated in any Security Document) under the SecurityDocuments.  Each Lender herebyirrevocably authorizes, and each holder of any Note by the acceptance of such Noteshall be deemed irrevocably to authorize, Agent to take such action on itsbehalf under the provisions of this Agreement, the Notes, the SecurityDocuments, the other Loan Documents and any other instruments and agreementsreferred to therein and to exercise such powers thereunder as are specificallydelegated to or required of it by the terms thereof and such other powers asare reasonably incidental thereto; provided that Agent shall not takeany action to realize upon any security interest in any of the Collateral, orrelease any substantial portion of the Collateral, 

 

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without the consent of the Majority Lenders.  Agent may perform any of its duties under anyof the Loan Documents by or through its agents or employees.

 

11.2        Nature of Duties.  Agent shall have no duties orresponsibilities except those expressly set forth in the Loan Documents.  Neither Agent nor any of its officers,directors, employees or agents shall be liable to any Lender for any actiontaken or omitted by it under any of the Loan Documents, or in connectiontherewith unless caused by its or their gross negligence or willfulmisconduct.  Nothing in the LoanDocuments, expressed or implied, is intended to or shall be so construed as toimpose upon Agent any obligations in respect of the Loan Documents except asexpressly set forth therein.  The dutiesof Agent under the Loan Documents shall be mechanical and administrative innature and Agent shall not have by reason of its duties under the LoanDocuments a fiduciary relationship in respect of any Lender.  Agent agrees to deliver promptly to eachLender (i) copies of notices received by it pursuant to Sections 7.1, 7.2and 7.11 of this Agreement, and (ii) copies of all documents required tobe delivered hereunder by a Borrower to Lenders directly but that are not sodelivered to any Lender (but were delivered to Agent) if such Lender notifiesAgent that it has not received such document or documents, specifying same.

 

11.3        Lack of Reliance.  Independently and without reliance on Agent,each Lender to the extent it deems appropriate has made and shall continue tomake (i) its own independent investigation of the financial condition andaffairs of the Loan Parties in connection with the making and the continuanceof the Loans hereunder and the taking or not taking of any action in connectionherewith, (ii) its own appraisal of the creditworthiness of the LoanParties and (iii) its own independent investigation and appraisal of theCollateral; and, except as expressly provided in the Loan Documents, Agentshall have no duty or responsibility, either initially or on a continuingbasis, to provide any Lender with any credit or other information with respectthereto, whether coming into its possession before the date hereof or at anytime or times thereafter.  Agent shallnot be responsible to any Lender for any recitals, statements, representationsor warranties herein or in any certificate or other document delivered inconnection herewith or for the authorization, execution, effectiveness,genuineness, validity, enforceability, perfection, collectibility, orsufficiency of any of the Loan Documents, the financial condition of the LoanParties or the condition of any of the Collateral, or be required to make anyinquiry concerning either the performance or observance of any of the terms,provisions or conditions of any of the Loan Documents, the financial conditionof the Loan Parties or the existence or possible existence of any Event of Defaultor Default.

 

11.4        Certain Rights.  If Agent requests instructions from Lendersor Majority Lenders with respect to any interpretation, act or action(including failure to act in connection with this Agreement or any of the otherLoan Documents) Agent shall be entitled to refrain from such act or taking suchactions unless and until it shall have received instructions from Lenders orthe Majority Lenders, as the case may be; and Agent shall not incur liabilityto any Person by so refraining.  Withoutlimiting the foregoing, no Lender shall have any right of action whatsoeveragainst Agent as a result of Agent acting or refraining from acting hereunderor under any of the other Loan Documents in accordance with the instructions ofthe Majority Lenders (as to matters requiring the consent of the MajorityLenders) or all Lenders (as to matters requiring the consent of allLenders).  Agent shall be fully justifiedin failing or refusing to take any action under any Loan Document unless, if itrequests, it shall first be indemnified to its satisfaction by Lenders 

 

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against any and all liability and expense which maybe incurred by it by reason of taking, continuing to take or not taking anysuch action.

 

11.5        Reliance.  Agent shall be entitled to rely upon anywritten notice or any telephone message believed by it to be genuine or correctand to have been signed, sent or made by the proper Person, and, with respectto all legal matters pertaining to the Loan Documents and its dutiesthereunder, upon advice of counsel selected by it.

 

11.6        Indemnification.  Tothe extent Agent is not reimbursed or indemnified by the Borrowers, Lenderswill reimburse and/or indemnify Agent, in proportion to the aggregate amount oftheir respective Loans outstanding under this Agreement, for and against anyand all liabilities, obligations, losses, damages, penalties, actions,judgments, suits, costs, expenses or disbursements of any kind or naturewhatsoever which may be imposed on, incurred or sustained by or assertedagainst Agent, acting pursuant hereto or any of the other Loan Documents in itscapacity provided for in this Section 11, in any way relating to orarising out of this Agreement, or any of the other Loan Documents, provided,however, that no Lender shall be liable for any portion of suchliabilities, obligations, losses, damages, penalties, actions, judgments,suits, costs, expenses or disbursements resulting from Agent’s gross negligenceor willful misconduct.  The obligationsof Lenders under this Section 11.6 shall survive the repayment of theNotes and the Loans and the termination of this Agreement and the other LoanDocuments.

 

11.7        Agent, Individually.  With respect to its obligations under thisAgreement, the Loans made by it and any Note issued to or held by it, Agentshall have and may exercise the same rights and powers hereunder and is subjectto the same obligations and liabilities as and to the extent set forth hereinfor any other Lender or holder of a Note. The terms “Lender”, “holders of Notes” or any similar termsshall, unless the context clearly otherwise indicates, not exclude Agent in itsindividual capacity as a Lender or holder of a Note.  Agent may accept deposits from, lend moneyto, and generally engage in any kind of banking, trust or other business withthe Loan Parties and their Subsidiaries as if it were not acting pursuanthereto, and may accept fees and other consideration from the Loan Parties andtheir Subsidiaries for services as Agent in connection with this Agreement andthe other Loan Documents and for services otherwise than as Agent withouthaving to account for the same to Lenders.

 

11.8        Holders of Notes.  Agent may deem and treat the payee of anyNote as the owner thereof for all purposes hereof unless and until a writtennotice of the assignment or transfer thereof shall have been received byAgent.  Any request, authority or consentof any Person, who at the time of making such request or of giving suchauthority or consent is the payee of any Note, shall be conclusive and bindingon any subsequent holder, transferee, assignee or payee of such Note or of anyNote or Notes issued in exchange therefor.

 

11.9        Resignation.  Agent may resign at any time from theperformance of all its functions and duties hereunder and under the other LoanDocuments by giving thirty (30) days prior written notice to each Borrower andeach Lender.  Such resignation shall takeeffect upon the expiration of such 30-day period or upon the earlier appointmentof a successor.  Notwithstanding any suchresignation, the provisions of Sections 11.6 and 12.3 shall inure also to thebenefit of each Agent who has so resigned with respect to the period it servedas Agent.  In case of the resignation ofAgent, the Majority Lenders, with the prior consent of Borrowers, 

 

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which consent may not be unreasonably withheld, mayappoint a successor by a written instrument signed by the MajorityLenders.  Any successor shall execute anddeliver to Agent an instrument accepting such appointment, and thereupon suchsuccessor, without further act, shall become vested with all the estates,properties, rights, powers, duties and trusts of Agent hereunder and with likeeffect as if originally named as “Agent” herein and therein, and upon request,the predecessor Agent shall take all actions and execute all documentsnecessary to give effect to the foregoing. In the event Agent’s resignation becomes effective at a time when nosuccessor has been named, all notices, other communications and paymentshereunder required to be given by or to Agent shall be sufficiently given ifgiven by the Majority Lenders (or all Lenders, if the consent of all Lenders isrequired therefor hereunder) or to each Lender, as the case may be.  In such event, all powers specificallydelegated to Agent may be exercised by the Majority Lenders and the MajorityLenders shall be entitled to all rights of Agent hereunder.

 

11.10      Reimbursement.  Without limiting the provisions of Section 11.6,Lenders and Agent hereby agree that Agent shall not be obligated to makeavailable to any Person any sum which Agent is expecting to receive for theaccount of that Person until Agent has determined that it has received that sum.  Agent may, however, disburse funds prior todetermining that the sums which Agent expects to receive have been finally andunconditionally paid to Agent, if Agent wishes to do so.  If and to the extent that Agent does disbursefunds and it later becomes apparent that Agent did not then receive a paymentin an amount equal to the sum paid out, then any Person to whom Agent made thefunds available shall, on demand from Agent:

 

(a)           refund Agent the sum paid to that Person; and

 

(b)           reimburse Agent for the additional amount certifiedby Agent as being necessary to indemnify Agent against any funding or othercost, loss, expense or liability sustained or incurred by Agent as a result ofpaying out the sums before receiving it; provided, however, thatif such funds were made available to any Lender, such additional amount shallbe limited to interest on the sum to be repaid, for each day from the date suchamount was disbursed until the date repaid to Agent, at (for the first three (3) days)the customary rate set by Agent for correction of errors among banks, andthereafter at the Base Rate (or, if greater and in respect of a Loan, the ratefrom time to time prevailing on such Loan).

 

Section 12.                                    MISCELLANEOUS.

 

12.1        Calculations and Financial Data.  Calculations hereunder (including, withoutlimitation, calculations used in determining, or in any certificate of any LoanParty delivered reflecting compliance by any Loan Party with the provisions ofthis Agreement) shall be made and financial data required hereby shall beprepared both as to classification of items and as to amount in accordance withGAAP, consistent with the audited Financial Statements described in Section 10.16;providedthat for purposes of Section 8.17 no effect shallbe given to any change in GAAP from those in effect on December 31, 2009.

 

12.2        Amendment and Waiver.  Except as otherwise provided, no provision ofany of the Loan Documents may be changed, waived, discharged or terminatedorally, but only by an instrument in writing signed by the Majority Lenders (orAgent on their behalf) and, if a Borrower is a party thereto, such Borrower,except that waivers of provisions relating to a Loan 

 

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Party’s performance or non-performance of its obligationshereunder or thereunder need not be signed by such Loan Party or any other LoanParty; providedhowever that the written consent of Agent shallalso be required to change, waive, discharge or terminate provisions of Section 11and the written consent of the Issuing Bank shall also be required to change,waive, discharge or terminate provisions of Section 2A; and providedfurther that without the consent of all of Lenders (or Agent on theirbehalf) no change, waiver, discharge or termination may be made that wouldincrease the amount of any Loans of any Lender, decrease the principal of anyLoan; decrease the interest rate payable on any Loan; decrease the amount ofany fee; extend the Maturity Date of any Loan; change the definition of “MajorityLenders” or modify this Section 12.2. Any such change, waiver, discharge or termination shall be effectiveonly in the specific instance and for the specific purposes for which made orgiven.

 

12.3        Expenses; Indemnification.

 

(a)           Whether or not the transactions hereby contemplatedshall be consummated, each Borrower and FLBG, jointly and severally agree topay all out-of-pocket costs and expenses of (x) Agent incurred inconnection with the preparation, execution, delivery, negotiationadministration, filing and recording of, and (y) Agent and Lendersincurred in connection with the amendment (including any waiver or consent) ormodification of (including any amendment, waiver, consent or modification atany time requested by a Borrower, whether or not same is finalized orexecuted), any failure of a Borrower to perform or observe any provision of,and enforcement of or preservation of any rights under, this Agreement, theother Loan Documents, the making and repayment of the Loans, and the payment ofall interest and fees, including, without limitation, (A) the fees andexpenses of Sullivan & Worcester LLP, counsel for Agent, and anyspecial or local counsel retained by Agent or Lenders, and with respect toenforcement, the reasonable fees and expenses of counsel for Agent or anyLender, (B) the reasonable fees and expenses of accountants, otherconsultants, appraisers and other professionals retained by Agent in connectionwith the transactions contemplated hereunder, and (C) printing, travel,title insurance, mortgage recording, filing, communication and signing taxesand costs.

 

(b)           Each Borrower and FLBG, jointly and severally, agrees to pay, and to saveAgent and Lenders harmless from (x) all present and future stamp, filingand other similar taxes, fees or charges (including interest and penalties, ifany), which may be payable in connection with the Loan Documents or theissuance of the Notes or any modification of any of the foregoing, and (y) allfinder’s and broker’s fees in connection with the transactions contemplated bythis Agreement or the other Loan Documents.

 

(c)           Each Borrower and FLBG,jointly and severally, agrees to indemnify, pay and hold harmless Agent, eachLender, any Lender Assignee and each holder of a Note and their respectivepresent and future officers, directors, employees and agents (collectively, the“Indemnified Parties”) from and against all liability, losses, damagesand expenses (including, without limitation, legal fees and expenses) arisingout of, or in any way connected with, or as a result of (i) the executionand delivery of this Agreement or the other Loan Documents or the documents ortransactions contemplated hereby and thereby or the performance by the partieshereto or thereto of their respective obligations hereunder and thereunder orrelating thereto; or (ii) any claim, action, suit, investigation orproceeding (in each case, regardless of whether or not 

 

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the Indemnified Party is aparty thereto or target thereof) in any way relating to a Borrower, any PrimaryObligor, any Portfolio Entity, any Related Entity or Subsidiary of any thereofor any Collateral or any Affiliate of a Borrower or any Subsidiary of any suchAffiliate or in any way relating to any of the foregoing Persons or any otherLoan Party, or any Affiliate of any of the foregoing in respect of thisAgreement, any other Loan Documents or any other document or transaction inconnection herewith or therewith or relating hereto or thereto; or (iii) anyactual or alleged violation by a Borrower, any Primary Obligor, any PortfolioEntity, any Related Entity, any Loan Party, any Affiliate of any of theforegoing Persons or any Subsidiary of any of the foregoing Persons (or anypredecessor in interest of any of them) of any Environmental Law; providedthat neither FLBG nor either Borrower shall be liable to an Indemnified Partyfor any portion of such liabilities, losses, damages and expenses sustained orincurred as a direct result of the gross negligence or willful misconduct ofAgent, any Lender or such Indemnified Party. Each Lender shall endeavor to give each Borrower and FLBG notice of anymaterial claim, action, suit or proceeding (if not restricted by applicablelaw, regulation or Government Authority from so doing or unless the same wouldbe inconsistent with a request from a Government Authority) referred to inclause (ii) which has been filed against such Lender within a reasonabletime after the loan officer of such Lender with responsibility for this Agreementbecomes aware of the same, but no failure to give any such notice shall affect,or relieve a Borrower or FLBG of, any of such Borrower’s or FLBG’s obligationsunder this Section 12.3 or under any other provision of this Agreement orany other Loan Document or result in any obligation or liability of Agent orany Lender to a Borrower or FLBG or any other Person.

 

(d)           All obligations provided for in this Section 12.3****andSections 3.4, 5.2 and 11.6 shall survive any termination of this Agreement andthe Loans and the payment in full of the Obligations.

 

12.4        Benefits of Agreement; Descriptive Headings.

 

(a)           This Agreement shall be binding upon and inure tothe benefit of and be enforceable by the parties hereto and their respectivesuccessors and assigns, and, in particular, shall inure to the benefit of theholders from time to time of the Notes; provided, however, thatno Loan Party that is party hereto may assign or transfer any of its rights orobligations hereunder without the prior written consent of Agent and Lendersand any such purported assignment or transfer shall be void.  In furtherance of the foregoing, each Lendershall be entitled at any time to grant participations in the whole or any partof its rights and/or obligations under this Agreement, the Loan Documents orany Loan or Note to any Person; provided, however, that no LenderAssignee shall be permitted by the terms of its participation agreement withthe relevant Lender to require such Lender to take or omit to take any actionhereunder except to the extent that if Lender Assignee were a Lender hereunder,its consent to taking or omitting to take such action would be required by theterms of the second proviso of Section 12.2 hereto.  No such participation pursuant to this Section 12.4(a) shallrelieve any Lender from its obligations hereunder and a Borrower need dealsolely with Agent and Lenders with respect to waivers, modifications andconsents to this Agreement, the Loan Documents or the Notes.  Any such participant is referred to in thisAgreement as a “Lender Assignee”. Each Borrower agrees that the provisions of Sections 3.4, 5.4 and 12.3shall run to the benefit of each Lender Assignee and its participations orinterests herein, and any Lender may enforce such provisions on behalf of anysuch Lender Assignee; provided, however, that if any Lendergrants a participation in the 

 

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whole or any part of its rights and/or obligationspursuant to this Section 12.4(a), then the amounts that a Borrower isrequired to pay pursuant to this Agreement (including, without limitation,additional amounts made pursuant to Section 5.4) shall not exceed theamounts that a Borrower would have been required to pay to such Lender pursuantto this Agreement had such Lender not granted such participation.  Each Borrower hereby further agrees that anysuch Lender Assignee may, to the fullest extent permitted by applicable law,exercise the right of setoff with respect to such participation (and in an amountup to the amount of such participation) as fully as if such Lender Assigneewere the direct creditor of a Borrower. Upon the grant of a participation in accordance with the foregoing, eachBorrower shall execute such documents and do such acts as any Lender mayreasonably request to effect such assignment. Any Lender may furnish any information concerning the Loan Parties inits possession from time to time to Lender Assignees (including prospectiveLender Assignees) and prospective Purchasing Lenders.  Each Lender shall notify each Borrower of anyparticipation granted by it pursuant to this Section 12.4(a) butneither the approval of a Borrower nor that of any other Loan Party shall berequired for any such participation. Neither Borrower shall be responsible for any due diligence costs orlegal expenses of such Lender Assignees in connection with their entering intosuch participation.

 

(b)           The descriptive headings of the various provisionsof this Agreement and the other Loan Documents are inserted for convenience ofreference only and shall not be deemed to affect the meaning or construction ofany of the provisions hereof.

 

(c)           Any Lender may at any time assign to any otherLender or any affiliate of any Lender, or (subject to obtaining the priorwritten consent of each Borrower (but no other Loan Party), such consent not tobe unreasonably withheld) to one or more additional banks or financialinstitutions (“Purchasing Lenders”), all or any part of its Loans andcorresponding Note pursuant to a Transfer Supplement (“Transfer Supplement”),the form and substance satisfactory to Agent; provided, however,that each such assignment shall be for an amount not less than $1,000,000 (or,if Lender’s Loan at the time is less, such amount) and integral multiples of$500,000 above such amount, or such other amount or multiple to which Agent mayconsent.  Upon (i) such execution ofsuch Transfer Supplement, (ii) delivery of an executed copy thereof toeach Borrower and Agent, (iii) payment by such Purchasing Lender to suchtransferor Lender of an amount equal to the purchase price agreed between suchtransferor Lender and such Purchasing Lender, (iv) payment by thePurchasing Lender to Agent of a $3,000 processing fee, and (v) any consentof a Borrower required by the first sentence of this Section 12.4(c), suchPurchasing Lender shall for all purposes be a Lender party to this Agreementand shall have all the rights and obligations of a Lender under this Agreementto the same extent as if it were an original party hereto and thereto with thepercentage share of the Loans set forth in Schedule I to such TransferSupplement, and no further consent or action by a Borrower, any other LoanParty, Lenders or Agent shall be required. Such Transfer Supplement shall be deemed to amend this Agreement to theextent, and only to the extent, necessary to reflect the addition of suchPurchasing Lender and the resulting adjustment of the percentage of the Notesand Loans (and related rights and obligations) held by the transferor Lenderand the Purchasing Lender arising from the purchase by such Purchasing Lenderof all or a portion of the rights and obligations of such transferor Lenderpursuant to the Transfer Supplement. Upon the consummation of any transfer to a Purchasing Lender pursuant tothis Section 12.4(c), the transferor Lender, Agent and each Borrower shallmake appropriate arrangements so that, if required, a replacement Note or 

 

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Notes (dated the same date as the Note or Notesbeing replaced) is issued to such Purchasing Lender and a new Note or Notes(dated the same date as the Note or Notes being replaced) or, as appropriate, areplacement Note or Notes (dated the same date as the Note or Notes beingreplaced) is issued to such Purchasing Lender, in each case in principalamounts reflecting their  outstandingLoans, as adjusted pursuant to such Transfer Supplement.

 

(d)           Notwithstanding anything to the contrary containedherein or in any of the Loan Documents, unless Agent, a Borrower or a Lenderotherwise requests with respect to any specific exhibit, exhibits to thisAgreement shall not be required to be attached to the execution or any othercopy of this Agreement, and any references in this Agreement or the other LoanDocuments to such exhibits as “Exhibits hereto,” “Exhibits to this Agreement”or words of similar effect shall be deemed to refer to such exhibit as executedby the parties thereto and delivered on the Effective Date.

 

12.5        Notices, Requests, Demands, etc.  Except as otherwise expressly providedherein, all notices, requests, demands or other communications to or upon therespective parties hereto shall be deemed to have been duly given or made whendelivered if sent by Federal Express or other similar overnight deliveryservice, or three (3) Business Days after mailing (when mailed, postageprepaid, by registered or certified mail, return receipt requested) or (in thecase of telex, telegraphic, telecopier or cable notice) when delivered to thetelex, telegraph, telecopier or cable company, or (in the case of telex ortelecopier notice sent over a telex or telecopier owned or operated by a partyhereto or electronic mail) when sent; in each case addressed as follows, exceptthat notices and communications to Agent pursuant to Section 2 and Section 9shall not be effective until received by Agent: (i) if to Agent, at theClosing Office, (ii) if to a Lender, at the address specified with itssignature below or (if a Purchasing Lender) on the applicable TransferSupplement, and (iii) if to a Loan Party, at its address specified withits signature below (Attention: President), or to such other addresses as anyof the parties hereto may hereafter specify to the others in writing, providedthat communications with respect to a change of address shall be deemed to beeffective when actually received.

 

12.6        Governing Law.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTSSHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATEOF NEW YORK WITHOUT REFERENCE TO THE EXTENT LAWFUL TO CHOICE OF LAW DOCTRINETHAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION,except (as to any other Loan Document) to the extent specifically set forthotherwise in that Loan Document.

 

12.7        Counterparts; Telecopies.  This Agreement and the other Loan Documentsmay be executed in any number of counterparts, and by the different partieshereto and thereto on the same or separate counterparts, each of which when soexecuted and delivered shall be deemed to be an original; all the counterpartsfor each such Loan Document shall together constitute one and the sameagreement.  Telecopied signatures heretoand to the other Loan Documents shall be of the same force and effect as anoriginal of a manually signed copy.

 

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12.8        Waiver; Remedies Cumulative; Payment of Claims; FullRecourse.

 

(a)           No failure or delay on the part of Agent or anyLender in exercising any right, power or privilege under this Agreement or anyother Loan Document, and no course of dealing between a Borrower, any PrimaryObligor, any Portfolio Entity, any Related Entity or any other Loan Party orany Subsidiary thereof and Agent or any Lender shall operate as a waiverthereof; nor shall any single or partial exercise of any right, power orprivilege hereunder preclude any other or further exercise thereof or theexercise of any other right, power or privilege.  No notice to or demand on a Borrower, anyPrimary Obligor, any Portfolio Entity, any Related Entity or any other LoanParty or any Subsidiary thereof in any case shall entitle such Person to anyother or further notice or demand in similar or other circumstances orconstitute a waiver of the right of Agent or any Lender to any other or furtheraction in any circumstances without notice or demand.

 

(b)           The rights and remedies herein expressly providedare cumulative and not exclusive of any rights or remedies which Agent or anyLender would otherwise have pursuant to such documents or at law or equity.

 

(c)           In furtherance and not in limitation of the otherrights and remedies of Agent and the Lenders, upon the occurrence of an Eventof Default or Default, Agent, in its sole and absolute discretion, withoutwaiving or releasing any covenant, agreement or other obligation of a Borroweror any Default or Event of Default, may at any time or times hereafter, butshall be under no obligation to, pay, acquire and/or accept an assignment ofany security interest, lien, encumbrance or claim asserted by any Personagainst the Assets of a Borrower, or any Primary Obligor, or any Wholly-OwnedSubsidiary.  All sums paid by Agent inrespect thereof and all reasonable costs and expenses (including, withoutlimitation, fees and expenses of counsel to Agent) relating thereto incurred byAgent or for which Agent becomes obligated on account thereof shall be part ofthe Obligations payable by a Borrower to Agent on demand and any amount notpaid on demand shall bear interest at the Past Due Rate.

 

(d)           Each Borrower’s obligations to pay principal,interest, fees and other amounts when due under this Agreement and the otherLoan Documents is absolute and unconditional and a full recourse obligation ofeach Borrower, notwithstanding any fact or circumstance and, without limitingthe generality of the foregoing, whether or not there are funds available inthe Cash Flow Cash Collateral Account for application to any such obligation.

 

12.9        Acknowledgement of Consents.  Notwithstanding anything to the contrary inthis Agreement or any other Loan Document, Agent and Lenders hereby acknowledgeand agree that any document of consent or waiver referred to on Schedule12.9 shall remain in full force and effect with respect to this Agreement.

 

12.10      Recoveries; Pro Rata Sharing.

 

(a)           Any Recoveries (after deduction and payment of all expensesand costs permitted by this Agreement, the Security Documents or applicablelaw) shall be applied pro rata against the Loans held by Lenders untilsatisfaction in full of all amounts due thereunder.

 

(b)           Lenders agree among themselves that, with respect toall sums received by Lenders applicable to the payment of the principal of orinterest on the Notes (except as 

 

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otherwise provided in Section 3.4, 5.4 or 5.5),equitable adjustment will be made between Lenders so that, in effect, all suchsums shall be shared ratably by each of Lenders (in accordance with theoutstanding principal amount of their respective applicable Loans) whetherreceived by voluntary payment, by realization upon security, by the exercise ofthe right of set-off or banker’s lien, by counterclaim or cross-action or bythe enforcement of any or all of the Notes or otherwise.  If any Lender receives any payment on itsNotes of a sum or sums in excess of its pro rata portion (except as otherwiseprovided in Section 3.4, 5.4 or 5.5), then such Lender receiving suchexcess payment shall purchase for cash from the other Lenders with outstandingLoans to a Borrower an interest in their Note or Notes in such amount as shallresult in a ratable participation by all of Lenders in the aggregate unpaidamount of applicable Notes then outstanding; provided, however,that if all or any portion of such excess payment is thereafter recovered bysuch Lender, the purchase shall be rescinded and the purchase price restored tothe extent of such recovery, but without interest.  Each Borrower hereby agrees that any Lenderso purchasing a participation from another Lender pursuant to this Section 12.10(b) may,to the fullest extent permitted by law, exercise all its rights of payment(including the right of setoff) with respect to such participation as fully asif such Lender were the direct creditor of a Borrower in the amount of suchparticipation.  The foregoing Section 12.10(b) shallin all events be subject to the Subordination Agreement.

 

12.11      Jurisdiction.  EACH BORROWER AND FLBG HEREBY AGREES THAT ANYLEGAL ACTION OR PROCEEDING AGAINST IT WITH RESPECT TO THIS AGREEMENT, THE NOTESOR ANY OF THE OTHER LOAN DOCUMENTS OR THE DOCUMENTS DELIVERED IN CONNECTIONHEREWITH OR THEREWITH MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEWYORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORKAS AGENT OR ANY LENDER MAY ELECT, AND, BY EXECUTION AND DELIVERY HEREOF,EACH BORROWER AND FLBG ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITSPROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAIDCOURTS AND AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE, UNLESS WAIVED BYAGENT AND THE MAJORITY LENDERS IN WRITING, WITH RESPECT TO ANY ACTION ORPROCEEDING BROUGHT BY IT AGAINST AGENT OR ANY LENDER AND ANY QUESTIONS RELATINGTO USURY.  EACH BORROWER AGREES THATSECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEWYORK SHALL APPLY TO THE LOAN DOCUMENTS AND WAIVES ANY RIGHT TO STAY OR TODISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUMNONCONVENIENS.  EACHBORROWER AND FLBG HEREBY IRREVOCABLY CONSENTS THAT ALL PROCESS SERVED ORBROUGHT AGAINST A BORROWER WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCHCOURT IN NEW YORK SHALL BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT IFSENT BY REGISTERED MAIL, OR (IF PERMITTED BY LAW) BY FEDERAL EXPRESS OR OTHERSIMILAR OVERNIGHT COURIER SERVICE, TO SUCH LOAN PARTY AT ITS ADDRESS SET FORTHBELOW ITS SIGNATURE TO THIS AGREEMENT (OR SUCH OTHER ADDRESS AS AGENT ISNOTIFIED OF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 12.5).  NOTHING HEREIN SHALL AFFECT THE RIGHT OFAGENT OR LENDERS TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR 

 

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SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TOBRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHERJURISDICTION.

 

12.12      Severability.  If any provision of this Agreement shall beheld or deemed to be or shall, in fact, be illegal, inoperative orunenforceable, the same shall not affect any other provision or provisionsherein contained or render the same invalid, inoperative or unenforceable toany extent whatever.

 

12.13      Right of Set-off.  In addition to any rights now or hereaftergranted under applicable law or otherwise and not by way of limitation of anysuch rights, upon the occurrence of an Event of Default each of Lenders ishereby authorized at any time or from time to time, without notice to any LoanParty or to any other Person, any such notice being hereby expressly waived, toset-off and to appropriate and apply any and all deposits (general or special,time or demand, provisional or final) and any other indebtedness at any timeheld or owing by such Lender to or for the credit or the account of such LoanParty against and on account of the obligations and liabilities of such LoanParty now or hereafter existing under any of the Loan Documents irrespective ofwhether or not any demand shall have been made thereunder and although saidobligations, liabilities or claims, or any of them, shall be contingent orunmatured.  Lender or Lenders exercisingany rights granted under this Section 12.13 shall thereafter notify theaffected Loan Party and Agent of such action; providedthat thefailure to give such notice shall not affect the validity of such set-off andapplication.

 

12.14      No Third Party Beneficiaries.  This Agreement is solely for the benefit ofAgent and Lenders and each Borrower and the respective successors and assignsof Agent and Lenders and nothing contained herein shall be deemed to conferupon anyone other than a Borrower any right to insist on or to enforce theperformance or observance of any of the obligations of Agent or Lenderscontained herein.  All conditions to theobligations of Lenders to make Loans hereunder are imposed solely andexclusively for the benefit of Lenders and their respective successors and assignsand no other Person shall have standing to require satisfaction of suchconditions in accordance with their terms and no other Person shall under anycircumstances be deemed to be beneficiary of such conditions.

 

12.15      Survival; Integration.

 

(a)           Each of the representations, warranties, terms,covenants, agreements and conditions contained in this Agreement shallspecifically survive the execution and delivery of this Agreement and the otherLoan Documents and the making of the Loans and shall, unless otherwiseexpressly provided, continue in full force and effect until the Loans togetherwith interest thereon, the fees and compensation of Agent, and all other sumspayable hereunder or thereunder have been indefeasibly paid in full.

 

(b)           This Agreement, together with the other LoanDocuments, comprises the complete and integrated agreement of the parties onthe subject matter hereof and thereof and supersedes  all prior agreements, written or oral, on thesubject matter hereof and thereof.  Inthe event of any direct conflict between the provisions of this Agreement andthose of any other Loan Document, the provisions of this Agreement shallcontrol and govern; provided that the inclusion of supplemental rightsor remedies in favor of Agent or Lenders in any other Loan 

 

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Document shall not be deemed a conflict with thisAgreement.  Each Loan Document wasdrafted with the joint participation of the respective parties thereto andshall be construed neither against nor in favor of any party, but rather inaccordance with the fair meaning thereof.

 

12.16      Domicile of Loans.  Any Lender may make, maintain or transfer anyof its Loans hereunder to, or for the account of, any branch office, subsidiaryor affiliate of such Lender.

 

12.17      No Usury.  It is expressly stipulated and agreed to bethe intent of Agent, Lenders and Borrowers to comply at all times withapplicable usury laws.  If at any timesuch laws would ever render usurious any amount called for under any of theLoan Documents, then it is the express intention of the parties hereto thatsuch excess amount be immediately credited on the applicable Notes, or if theapplicable Notes have been fully paid, refunded by Lenders (pro rata inaccordance with their respective principal amount of the affected Loans), toBorrowers (and Borrowers shall accept such refund) and the provisions hereofand thereof be immediately deemed to be reformed to comply with the thenapplicable laws, without the necessity of the execution of any furtherdocuments, but so as to permit the recovery to the fullest amount otherwisecalled for hereunder and thereunder.  Anysuch crediting or refunding shall not cure or waive any default by Borrowersunder the Loan Documents.  If at any timefollowing any such reduction to the interest rate payable by Borrowers thereremains unpaid any principal amounts under the Notes and the maximum interestrate permitted by applicable law is increased or eliminated, then the interestrate payable to Lenders shall be readjusted, to the full extent permitted byapplicable law, so that the total amount of interest thereunder payable byBorrowers to Lenders shall be equal to the amount of interest which would havebeen paid by Borrowers without giving effect to applicable usury laws.  Each Borrower agrees, however, that indetermining whether or not any interest payable under the Notes or any of theother Loan Documents exceeds the highest rate permitted by law, anynon-principal payment (except payments specifically stated in the Notes or suchother Loan Documents to be “interest”), including fees and commissions and allother sums payable hereunder or thereunder or in connection herewith ortherewith, shall be deemed, to the full extent permitted by law, to be anexpense, fee, premium or penalty rather than interest.

 

12.18      Waiver of Jury Trial.  EACH BORROWER, FLBG, AGENT AND EACH LENDERHEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVETO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER,OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSEOF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), ORACTIONS OF A BORROWER, ANY PARTNER THEREOF, ANY OTHER LOAN PARTY, AGENT ORLENDERS.  THIS PROVISION IS A MATERIALINDUCEMENT FOR AGENT AND LENDERS ENTERING INTO THIS AGREEMENT AND THE OTHERLOAN DOCUMENTS.

 

12.19      Waiver by Borrower.  EXCEPT AS OTHERWISE PROVIDED FOR IN THISAGREEMENT OR REQUIRED BY LAW, EACH BORROWER AND FLBG WAIVES (A) PRESENTMENT,DEMAND AND PROTEST, NOTICE OF PROTEST, NOTICE OF PRESENTMENT, DEFAULT,NON-PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OFANY OR ALL COMMERCIAL PAPER, 

 

61

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ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS,CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY ANY OF LENDERS AND/OR AGENT ONWHICH A BORROWER MAY IN ANY WAY BE LIABLE; (B) ALL RIGHTS TO NOTICEAND A HEARING PRIOR TO AGENT’S TAKING POSSESSION OR CONTROL OF, OR TO  REPLEVY, ATTACHMENT OR LEVY UPON THECOLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIORTO ALLOWING ANY OF LENDERS AND/OR AGENT TO EXERCISE ANY OF ITS RESPECTIVEREMEDIES; AND (C) THE BENEFIT OF ALL VALUATION, APPRAISEMENT, EXTENSION ANDEXEMPTION LAWS.

 

12.20      Waiver of Marshaling.  All rights of marshaling of Assets of aBorrower, including any such right with respect to the Collateral, are herebywaived by each Borrower.

 

12.21      Waiver of Claims; Release by Borrowers.

 

(a)           Each Borrower and FLBG releases Lenders and Agentfrom any and all causes of action or claims which a Borrower may now orhereafter have for any asserted loss or damage to a Borrower claimed to becaused by or arising from any act or omission to act on the part of any Lendersand/or Agent, their respective officers, agents or employees, except, in thecase of any Lender or Agent, the willful misconduct or gross negligence of suchLender or Agent (as the case may be).

 

(b)           Each Borrower and FLBG hereby acknowledges, agreesand affirms, as of the Execution Date and as of the Effective Date, that itpossesses no claims, defenses, offsets, recoupment or counterclaims of any kindor nature against or with respect to the enforcement of this Agreement, anyother Loan Document or any amendments thereto, or any of the Existing CreditAgreements, as amended, or documents delivered pursuant thereto (collectively,the “Claims”), nor does aBorrower and FLBG now have knowledge of any facts that would or might give riseto any Claims.  If facts now exist whichwould or could give rise to any Claim against or with respect to theenforcement of this Agreement or any other Loan Document, as may have beenamended by the amendments thereto, or any of the Existing Credit Agreements, asamended, or documents delivered pursuant thereto, each Borrower and FLBG herebyunconditionally, irrevocably and unequivocally waives and fully releases anyand all such Claims as if such Claims were the subject of a lawsuit,adjudicated to final judgment from which no appeal could be taken and thereindismissed with prejudice.

 

12.22      Confidentiality.  Agent and each Lender, severally and withrespect to itself only, covenants and agrees that any information obtained byAgent or such Lender pursuant to this Agreement shall be held in confidence (itbeing understood that documents provided to Agent hereunder may in all cases bedistributed by Agent to Lenders) except that Agent or such Lender may disclosesuch information (i) to its officers, directors, employees, agents,counsel, accountants, auditors, advisors or representatives, (ii) to theextent such information has become available to the public other than as aresult of a disclosure by or through Agent or such Lender, (iii) to theextent such information was available to Agent or such Lender in a capacityother than Agent or Lender hereunder or on a nonconfidential basis prior to itsdisclosure to Agent or such Lender hereunder, (iv) with the consent ofeach Borrower, (v) to actual or prospective Lender Assignees or PurchasingLenders or (vi) to the extent Agent or such Lender should be (A) 

 

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required in connection with any legal or regulatoryproceeding or (B) requested by any Government Authority to disclose suchinformation.

 

Section 13.                                    FINAL AGREEMENT.

 

**THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINALAGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE MATTERS COVERED HEREBYAND THEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUSOR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.**

 

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THEPARTIES.

 

Section 14.                                    NON-COVEREDENTITIES.

 

Notwithstandingany other provision of this Agreement, no provision of this Agreement shall beapplicable to FC Investment Holdings Corporation, FC Diversified Holdings LLC,FC Highway 6 Holdings LLC, FC Imperial Holdings LLC, VFC Partners 4 LLC, VFCPartners 5 LLC, FC Capital or any of their subsidiaries or other entities inwhich such Persons own any equity interest and no such Person shall be aPrimary Obligor, Subsidiary, Loan Party, Portfolio Entity, PortfolioEntity-50%, Affiliate, Associate, Guarantor, Immaterial Entity, Parent,Pledged Entity, Related Entity or Wholly-Owned Subsidiary for any purpose ofthis Agreement.  In addition, this Agreement shall not be applicable orrefer to FirstCity Financial Corporation or FC Servicing except to the extentexpressly provided herein by reference to FirstCity Financial Corporation orFCFC, in the former case, and FirstCity Servicing Corporation or FC Servicing,in the latter case.

 

[remainder of page intentionally left blank]

 

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INWITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executedand delivered by their respective duly authorized officers as of the date firstabove written.

 

 
|   | FIRSTCITY  COMMERCIAL CORPORATION               |
|--------|-------------------------------------------------|
|   | a  Texas corporation, as Borrower               |
|   |                                            |
|   |                                            |
|   | By:                                             |   |
|   | Title:                                          |   |
|   |                                            |
|   |                                            |
|   | 6400 Imperial Drive  (delivery only)            |
|   | Waco, Texas 76710                               |
|   |                                            |
|   | P.O. Box 8216 (mail)                       |
|   | Waco, Texas 76714-8216                          |
|   |                                            |
|   | 254-761-2953  (telecopier)                      |
|   | jholmes@fcfc.com  (electronic mail)             |
|   |                                            |
|   | FH  PARTNERS LLC                                |
|   | a  Texas limited liability company, as Borrower |
|   |                                            |
|   |                                            |
|   | By:                                             |   |
|   | Title:                                          |   |
|   |                                            |
|   |                                            |
|   | 6400 Imperial Drive  (delivery only)            |
|   | Waco, Texas 76710                               |
|   |                                            |
|   | P.O. Box 8216 (mail)                       |
|   | Waco, Texas 76714-8216                          |
|   |                                            |
|   | 254-761-2953  (telecopier)                      |
|   | jholmes@fcfc.com  (electronic mail)             |

 

*[signature page to Reducing Note Facility Agreement]*

 

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|   | FLBG  CORPORATION                                                                                                           |
|--------|-----------------------------------------------------------------------------------------------------------------------------|
|   | a  Texas corporation, as Guarantor                                                                                          |
|   |                                                                                                                        |
|   |                                                                                                                        |
|   | By:                                                                                                                         |   |
|   | Title:                                                                                                                      |   |
|   |                                                                                                                        |
|   |                                                                                                                        |
|   | 6400 Imperial Drive  (delivery only)                                                                                        |
|   | Waco, Texas 76710                                                                                                           |
|   |                                                                                                                        |
|   | P.O. Box 8216 (mail)                                                                                                   |
|   | Waco, Texas 76714-8216                                                                                                      |
|   |                                                                                                                        |
|   | 254-761-2953  (telecopier)                                                                                                  |
|   | jholmes@fcfc.com  (electronic mail)                                                                                         |
|   |                                                                                                                        |
|   |                                                                                                                        |
|   | BANK  OF SCOTLAND PLC, acting through its New York branch, individually as Senior  Lender and as Collateral Agent and Agent |
|   |                                                                                                                        |
|   |                                                                                                                        |
|   | By:                                                                                                                         |   |
|   | Title:                                                                                                                      |   |
|   |                                                                                                                        |
|   |                                                                                                                        |
|   | BOS  (USA) INC.                                                                                                             |
|   | a  Delaware corporation, as Subordinated Lender                                                                             |
|   |                                                                                                                        |
|   |                                                                                                                        |
|   | By:                                                                                                                         |   |
|   | Title:                                                                                                                      |   |

 

*[signature page to Reducing Note Facility Agreement]*

 

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**EXHIBITS**

 

Annex I                                  Definitions

 

Exhibit A-1Senior Note

Exhibit A-2Subordinated Note

Exhibit B - Report Setting Forth the Computation of the AggregateUndistributed Funds of all Portfolio Entities.

Exhibit C- Form of Asset Pool Acquisition Certificate

Exhibit D- Eligible Asset Pool

Exhibit E- Permitted Shareholder Agreements/Arrangements

Exhibit F- Net Present Value

 

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**LIST OF SCHEDULES**

 
| Schedule  2.2(a) -   |   | Original  Principal Amount                                                                                                                                                               |
|---------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Schedule  2A.1 -          |   | Outstanding  Letters of Credit                                                                                                                                                           |
| Schedule  5.3(a) -   |   | Distribution  of Funds                                                                                                                                                                   |
| Schedule  6.11 -          |   | Closing  Checklist                                                                                                                                                                       |
| Schedule  7.2(d)          |   | Portfolio  Protection Report                                                                                                                                                             |
| Schedule  8.12(a) -  |   | Loan;  Guaranty Debt                                                                                                                                                                     |
| Schedule  8.12(b) -  |   | Guaranty  Equivalents                                                                                                                                                                    |
| Schedule  10.1(a) -  |   | Organization  of Borrower                                                                                                                                                                |
| Schedule  10.1(d) -  |   | Organization  of Each Primary Obligor, Portfolio Entity, Related Entity and Each Other Loan  Party                                                                                       |
| Schedule  10.1(e) -  |   | Shareholder  Agreements                                                                                                                                                                  |
| Schedule  10.5(a) -  |   | Classes  of Stock of Borrower                                                                                                                                                            |
| Schedule  10.5(b) -  |   | Classes  of Stock and/or Other Equity Interests Issued by Each Primary Obligor, Each  Portfolio Entity and Each Related Entity, the Shareholders and Other Equity  Holders               |
| Schedule  10.5(c) -  |   | Options,  Warrants and Other Rights to Acquire Stock or Other Equity Interests of  Borrower, any Primary Obligor, any Portfolio Entity, any Related Entity and  any Other Pledged Entity |
| Schedule  10.6 -          |   | Fictitious  Names                                                                                                                                                                        |
| Schedule  10.7 -          |   | Liens  Relating to the Collateral                                                                                                                                                        |
| Schedule  10.8 -          |   | Financial  Warranty                                                                                                                                                                      |
| Schedule  10.9 -          |   | Proceedings                                                                                                                                                                              |
| Schedule  10.10 -         |   | Government  Contracts                                                                                                                                                                    |
| Schedule  10.12 -         |   | Government  Permits; Approvals and Consents                                                                                                                                              |
| Schedule  10.15 -         |   | Defaults  under any Indebtedness Instrument                                                                                                                                              |
| Schedule  10.18 -         |   | Material  Adverse Change                                                                                                                                                                 |
| Schedule  10.19 -         |   | Indebtedness  Existing on the Effective Date                                                                                                                                             |
| Schedule  10.20 -         |   | Affiliate  Notes                                                                                                                                                                         |
| Schedule  10.22 -         |   | Affiliates                                                                                                                                                                               |
| Schedule  10.23 -         |   | Real  Property; Environmental Issues                                                                                                                                                     |
| Schedule  10.26(c) - |   | SEC  Filings                                                                                                                                                                             |
| Schedule  10.28 -         |   | Intellectual  Property                                                                                                                                                                   |
| Schedule  10.29 -         |   | Compliance  with ERISA                                                                                                                                                                   |
| Schedule  10.30(b) - |   | Pledge  Agreements and Security Agreements                                                                                                                                               |
| Schedule  10.32 -         |   | Fee  Agreements                                                                                                                                                                          |
| Schedule  10.33 -         |   | Securitization  Agreements                                                                                                                                                               |
| Schedule  10.34 -         |   | Immaterial  Entity                                                                                                                                                                       |
| Schedule  10.36 -         |   | Wholly  Owned Subsidiary Interests                                                                                                                                                       |
| Schedule  10.37 -         |   | REO  Affiliates                                                                                                                                                                          |
| Schedule  10.38 -         |   | Material  Portfolio Entities                                                                                                                                                             |
| Schedule  12.9 -          |   | Consents  Which Remain in Effect                                                                                                                                                         |

 

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ANNEX I

 

DEFINITIONS

 

Asused in the Reducing Note Facility Agreement to which this Annex I is annexed,the following terms shall have the meanings herein specified or as specified inthe Section of such Agreement or in such other document herein referenced:

 

“ABL”shall mean American Business Lending, Inc., a Texas corporation.

 

“ABLCapital Note” shall mean that certain Promissory Note by ABL to the orderof Borrower, dated December 15, 2006, in the maximum principal amount of$4,000,000.

 

“ABLFacility” shall mean that certain Loan Agreement between ABL and WellsFargo Foothill, LLC, dated as of December 15, 2006, together with the “LoanDocuments” as therein defined, as the same may be amended, restated orotherwise modified from time to time with the prior written consent of theLenders.

 

“AdverseWaterfall Event” shall mean with respect to any Portfolio Entity owningmore than one Asset Pool or Assets in addition to those contained in itsinitial Asset Pool, that any lender to such Portfolio Entity has for any reasondiverted (whether to make up for a shortfall with respect to any other pool orasset or otherwise) any portion of collections from any Asset Pool of suchPortfolio Entity to a different  asset orasset pool (or waterfall with respect thereto) of such Portfolio Entity orotherwise subsidized any other such asset or asset pool with collections fromany Asset Pool or otherwise restricted distributions from, or reduced waterfallamounts arising from, collections of any Asset Pool on account of any conditionor occurrence other than a condition or occurrence arising directly from suchAsset Pool.

 

“AffectedInterest Period” — Section 3.6(a)

 

“AffectedLender” — Section 3.6(a)

 

“Affiliate”shall mean any Person (i) in which Borrower and/or any Parent,individually, jointly and/or severally, now or at any time or times hereafter,have an equity or other ownership interest equal to or in excess of twenty—fivepercent (25%) of the total equity of or other ownership interests in suchPerson, and/or (ii) which directly or indirectly through one or moreintermediaries controls or is controlled by, or is under common control witheither or both Borrowers and/or (iii) which is an officer or director ofeither Borrower or any Primary Obligor. For purposes of this definition, “control” shall mean the possession,directly or indirectly, of the power to direct or cause the direction of themanagement and policies of a Person, whether through the ownership of Stock, bycontract or otherwise, and in any case shall include direct or indirectownership (beneficially or of record) of, or direct or indirect power to vote,25% or more of the outstanding shares of any class of capital stock of suchPerson (or in the case of a Person that is not a corporation, 25% or more ofany class of equity interest). Notwithstanding the foregoing, none of the Harbor Debtors shall bedeemed to be an Affiliate for the purposes of this Agreement other than Section 8.20.  “Affiliate” shall not include any Non-CoveredEntity.

 

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“Agent”— introductory paragraph.

 

“Aggregate Net Present Equity Value” shall mean the sum of theNet Present Equity Value of each Portfolio Entity.

 

“AggregateUndistributed Funds” shall mean, on any date of determination, the sum ofthe amounts determined by multiplying (i) the FC Percentage of eachPortfolio Entity, times (ii) the amount of funds held by such PortfolioEntity (which for purposes of this definition shall include the operating fundsof the general partner of any limited partnership which is the PortfolioEntity) which are not (w) held in a lockbox account, nor (x) held bysuch Portfolio Entity for the payment (a) of indebtedness to a PermittedPortfolio Company Creditor of such Portfolio Entity due within the next 30 daysor (b) Portfolio Protection Expenses, nor (y) retained by a PortfolioCompany Creditor thereof pursuant to a covenant under a loan agreement betweensuch creditor and such Portfolio Entity as in effect on the Execution Date, ofwhich Agent has been given written notice, nor (z) held by ABL.

 

“Agreement”or “Loan Agreement” shall mean this Reducing Note Facility Agreement, asit may from time to time be amended, extended, restated, supplemented orotherwise modified.

 

“ApplicableIndebtedness” of any Person shall mean all Indebtedness of such Personother than trade payables incurred in the ordinary course of business which arenot evidenced by an Indebtedness Instrument.

 

“ApplicablePerson” — Section 8.21.

 

“ApplicableRate” — Section 3.1.

 

“ApprovedPortfolio Leverage Arrangement” shall mean (i) each borrowingarrangement between a Portfolio Entity and a financial institution existing asof the Effective Date and (ii) each future borrowing arrangement between aPortfolio Entity and a financial institution on terms and conditions reasonablysatisfactory to Agent (as indicated in writing by Agent). Without limiting thescope of Agent’s discretion pursuant to the preceding sentence,  (i) no borrowing arrangement shall bedeemed an Approved Portfolio Leverage Arrangement if such arrangement cross–defaultsto a credit arrangement of any other Portfolio Entity or contains anyprovisions which would in any way restrict, reduce or prohibit distributions bya Portfolio Entity on account of any event or condition with respect to anyAffiliate of such Portfolio Entity; and (ii) references herein to anApproved Portfolio Leverage Arrangement shall be limited to such borrowingarrangements governed by the terms of the loan agreement and other documents inthe form delivered to Agent at the time such arrangements were approved byAgent, as amended, supplemented or otherwise modified with the written consentof Agent.

 

“Asset”shall mean any real, personal and intangible property of a Person, including,without limitation, accounts, chattel paper, contract rights, letters ofcredit, instruments and documents, equipment , general intangibles, inventory,leases, options, licenses, real property, and Equity Interests issued by anyother Person whether now existing or hereafter acquired or arising.

 

2

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“AssetPool” shall mean (x) in connection with the acquisition thereof by anEligible Portfolio Entity or the origination of an Asset by a CrestonePortfolio Entity, a portfolio of loans or one or more Assets described in anAsset Pool Acquisition Certificate, and (y) in all other contexts, allAssets of a Portfolio Entity.

 

“AssetPool Acquisition Certificate” shall mean a certificate from an ExecutiveOfficer of Borrower in the form of Exhibit C to the Agreement, towhich is attached (as contemplated by the form of such certificate) the assetpurchase agreement relating to the Assets proposed to be purchased, and, if notpreviously provided to Agent or if amended, restated or otherwise modifiedsince previously provided, the Charter Documents for the purchasing PortfolioEntity and any Shareholders Agreement entered into or proposed to be enteredinto by the holders of the Equity Interests of such Portfolio Entity.

 

“Associate”,when used to indicate a relationship with a Person, shall mean (i) anotherPerson (other than a Loan Party or a Subsidiary thereof) of which such Personis an officer or partner or is, directly or indirectly, the beneficial owner of10 percent or more of any class of equity securities, (ii) any trust orother estate in which such Person has a substantial beneficial interest or asto which such Person or an immediate member of his family serves as trustee orin a similar capacity, and (iii) any relative or spouse of such Person orany relative of such spouse.  “Associate”shall not include any Non-Covered Entity.

 

“Auditors”shall mean KPMG LLP or other independent certified public accountants ofrecognized standing selected by Borrowers and FLBG and satisfactory to Agent.

 

“Back-UpServicing Agreement” shall mean the Back-Up Servicing Agreement, dated asof the date hereof, between FC Servicing and the Cold Back-Up Servicer.

 

“Base”— Section 8.17(a).

 

“BaseRate” — shall mean, for any day, the higher of (x) the fluctuatinginterest rate per annum, in effect from time to time, established by Bank ofScotland Plc in New York as its base, prime or reference rate for U.S. domesticcommercial loans in Dollars, (y) the Federal Funds Rate in effect on suchday plus 1% or (z) one-month LIBOR plus 1%.  Any change in the interest rate resultingfrom a change in the Base Rate shall be effective as of the opening of businesson the day on which such change becomes effective; it is understood and agreedthat the aforesaid rates and the Base Rate are reference rates only and do notnecessarily represent the lowest or best rate actually charged to any customer.

 

“BaseRate Loan” — shall mean any Loan during any period that it bears interestdetermined by reference to the Base Rate.

 

“BaselLaws” — Section 3.4.

 

“Borrower”and “Borrowers” — introductory paragraph.

 

“BorrowerPledge Agreements” shall mean (i) the Pledge Agreement, dated as ofthe date hereof, by and between FC Commercial and Collateral Agent and (ii) thePledge Agreement, dated as of the date hereof, by and between FH Partners andCollateral Agent.

 

3

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“BoS(USA)” — introductory paragraph.

 

“BusinessDay” shall mean any day that is not a Saturday, Sunday or legal holiday inthe State of New York,  the State ofTexas, the State of Connecticut (or any other State where the CFCCA ismaintained) or a day on which banking institutions chartered by the State ofNew York, the State of Texas, the State of Connecticut (or any other Statewhere the CFCCA is maintained) or the United States are legally required orauthorized to close, and, when used in connection with LIBOR, means any suchBusiness Day which is also a day on which deposits in Dollars and Euros may bedealt in on the London interbank market.

 

“CapitalExpenditures” shall mean, with respect to any Person, all expenditures bysuch Person which should be capitalized in accordance with GAAP, including allpurchases of property, plant and equipment, and including all such expenditureswith respect to fixed or capital Assets (including, without limitation,expenditures for maintenance and repairs which should be capitalized in accordance with GAAP) and the amount ofobligations under Capitalized Leases incurred by such Person.

 

“CapitalStock” — Section 9.15.

 

“CapitalizedLease” shall mean any lease which is, or is required under GAAP to be,capitalized on the balance sheet of the lessee at such time, and “CapitalizedLease Obligation” of any Person at any time shall mean the aggregate amount ofrental expenses which is, or is required under GAAP to be, capitalized on thebooks of such Person under Capitalized Leases.

 

“CashCollateral Account-Servicing” shall mean shall mean the account at theDepositary specified in the Cash Collateral Agreement-Servicing and in theletter agreement between the Collateral Agent and the Depositary relatingthereto or such other account, if any, which is specified in a cash collateralagreement (in form and substance satisfactory to Agent) between FC Servicingand Collateral Agent and related letter agreement (in form and substancesatisfactory to the Collateral Agent) between the Collateral Agent and thedepositary bank with respect to such other account.

 

“CashFlow” — Section 5.3(a).

 

“CashFlow Cash Collateral Account” and “CFCCA” shall mean the account atthe Depositary specified by account number in the Cash Collateral Agreement andin the letter agreement between the Collateral Agent and the Depositaryrelating thereto or such other account, if any, which is specified by accountnumber in a cash collateral agreement (in form and substance satisfactory toAgent) between Borrower and Collateral Agent and letter agreement (in form andsubstance satisfactory to the Collateral Agent) between the Collateral Agentand the depositary bank with respect to such other account.

 

“CFO”,as to any Loan Party shall mean such Loan Party’s chief financial officer.

 

“Changein Control” — Section 9.15.

 

“Charges”shall mean all national, Federal, state, county, city, municipal and/or othergovernmental (or any instrumentality, division, agency, body or departmentthereof, including 

 

4

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withoutlimitation the PBGC) taxes, levies, assessments, charges, liens, claims orencumbrances upon and/or relating to the Obligations, a Person’s Assets, aPerson’s business, a Person’s ownership and/or use of any of its Assets, aPerson’s income and/or gross receipts and/or a Person’s ownership and/or use ofany of its Assets.

 

“CharterDocument” shall mean (i) with respect to a corporation: itscertificate or articles of incorporation or association and its by–laws orcomparable documents under non–US laws; (ii) with respect to apartnership: its partnership agreement, certificate of partnership (if a limitedpartnership) and its certificate of doing business under an assumed name (if ageneral partnership); (iii) with respect to a trust, its trust agreementor declaration of trust; and (iv) with respect to a limited liabilitycompany, its certificate of formation and operating agreement or analogousdocuments; in each case, with such other similar documents as Agent shallrequest or specify.

 

“Claims”— Section 12.21(b).

 

“ClosingChecklist” shall mean the Closing Checklist in the form of Schedule 6.11to the Agreement.

 

“ClosingOffice” shall mean the office of Agent at 1095 Avenue of the Americas, NewYork, New York 10036 or such other office as may be designated in writing toBorrowers by Agent.

 

“ClosingOffice Time” shall mean the local time in effect at the Closing Office.

 

“Code”shall mean the Internal Revenue Code of 1986, as the same may be amended fromtime to time.

 

“ColdBack-up Servicer” shall mean (1) an entity engaged principally inproviding data collection in connection with servicing loan portfolios andother investment vehicles or (2) a banking institution.

 

“Collateral”— Section 10.30.

 

“CollateralAgency Agreement” shall mean that certain Collateral Agency Agreement,dated as of the date hereof, between Agent, Collateral Agent, Lenders andBorrowers.

 

“CollateralAgent” shall mean Agent in its capacity as agent under one or more of theSecurity Documents and its successor and assigns (Agent, in such capacity,being sometimes referred to herein and in other Loan Documents as the “CollateralAgent” is such capacity he is only referred to as the Collateral Agent andsometimes as the “Agent”).

 

“CollateralAssignment of Contract” — shall mean the Collateral Assignment of Contract,dated as of the date hereof, made by FC Servicing to Collateral Agent.

 

“ConsolidatedGroup” shall mean FC Commercial and its consolidated Subsidiaries, otherthan the Harbor Debtors.

 

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“CrestoneFacility” shall mean a $32 million line of credit provided by FirstCityDenver Investment Corp. to Crestone Portfolio Entities used for the acquisitionand origination of Assets and payment of expenses related to those Assets whichis secured by a first priority lien on all assets of the Crestone PortfolioEntities and a $2 million line of credit to be provided by FirstCity DenverInvestment Corp. to FirstCity Crestone LLC to be used exclusively for workingcapital purposes.

 

“CrestoneNotes” shall mean the promissory notes issued from time to time under theCrestone Facility, as the same may be amended, restated or otherwise modifiedfrom time to time with the prior written consent of the Lenders.

 

“CrestonePortfolio Entity” shall mean FC Crestone 07 Corp., FC Crestone Colorado 07LLC, FC Crestone 08 Corp., FC Crestone 09 Corp., FC Crestone 2009 Corp. and FCCrestone 2010 Corp.

 

“Default”shall mean any event which with notice or lapse of time, or both, would becomean Event of Default.

 

“Disbursement” — Section 2A.4(b).

 

“Disbursement Date” — Section 2A.4(a).

 

“DisclosureRestriction” — Section 7.1 (m).

 

“Dividend”— Section 8.11.

 

“DollarEquivalent” shall mean, on any date of determination, with respect to anyamount in Euros, the equivalent in Dollars of such amount, determined by Agentusing the Exchange Rate then in effect.

 

“Dollars”,“U.S. $”, “$” and “U.S. dollars” shall mean the lawfulcurrency of the United States of America.

 

“EffectiveDate” — Section 6.

 

“EligibleAsset Pool” shall mean an Asset Pool, held by a Portfolio Entity from anEligible Seller for an all cash purchase price, which (unless Agent in itsdiscretion otherwise consents in writing) conforms in every respect with therequirements of Exhibit D to the Agreement.

 

“EligiblePortfolio Entity” shall mean a partnership, corporation, trust, or limitedliability company or, if not formed in the United States, a similar foreignorganized entity which is a Portfolio Entity of which (i) if suchPortfolio Entity is a US Person, not less than 50% of each class of EquityInterests is owned directly or indirectly by Borrower or a Primary Obligor, (ii) noEquity Interests thereof owned directly or indirectly by Borrower or a PrimaryObligor are pledged to any Person other than Agent, for the benefit of theLenders, provided that the Equity Interests of a Crestone Portfolio Entity maybe pledged to secure the Crestone Facility, so long as the Crestone Notes anddocuments securing the Crestone Facility are assigned to Agent to secure 

 

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theobligations of Borrower herein, (iii) the Charter Documents andShareholder Agreements result in Permitted Shareholder Arrangements, (iv) whichhas no Indebtedness other than Indebtedness under an Indebtedness Instrument (a) pursuantto Approved Portfolio Leverage Arrangements, or with respect to ABL, the ABLFacility, (b) incurred to pay development expenses related to real estate,or (c) loaned to it by the owners of the Equity Interests of the PortfolioEntity to pay Property Improvement Expenses, and (vi) in respect of whichno Disclosure Restriction exists.

 

“EnvironmentalLaws” shall mean all laws, common law, statutes, rules andregulations, and all judgments, decrees, franchises, orders or permits, issued,promulgated, approved or entered thereunder by any Government Authority relatingto pollution or protection of the environment or occupational health andsafety, including, without limitation, those relating to emissions, discharges,releases or threatened releases of any waste, pollutant, chemical, hazardousmaterial, hazardous substance, toxic substance, hazardous waste, special waste,petroleum or petroleum–derived substance or waste, or any constituent of anysuch pollutant material, substance or waste, into the environment (including,without limitation, ambient air, surface water, ground water, land surface orsubsurface strata) or otherwise relating to the manufacture, processing,distribution, use, treatment, storage, disposal, transport or handling of anywaste, pollutant, chemical, hazardous material, hazardous substance, toxicsubstance, hazardous waste, special waste, petroleum or petroleum–derivedsubstance or waste.

 

“EquityInterests” shall mean any equity interests issued by any Person, including,without limitation, Stock (including, without limitation, common stock andpreferred stock), partnership interests or limited liability company interests,any other securities convertible into, or exercisable for, any of the foregoingor other securities of such Person, and options and warrants or other rights toacquire any of the foregoing.

 

“ERISA”shall mean the Employee Retirement Income Security Act of 1974, as amended fromtime to time.

 

“ERISAAffiliate” shall mean any Person which is from time to time a member of acontrolled group or a group under common control with any Loan Party within themeaning of Sections 414(b), 414(c), 414(m) or 414(o) of the Code or Section 4001(a)(14)of ERISA.

 

“Euros”shall mean the single currency of the European Union as constituted by theTreaty on the European Union.

 

“EurocurrencyInterest Determination Date” shall mean the date as of which LIBOR isdetermined, which shall be two Business Days prior to the commencement of aEurocurrency Interest Period.

 

“EurocurrencyInterest Period” shall mean, with respect to each Eurocurrency Loan, theinterest period applicable pursuant to Section 3.9(a) hereof.

 

“EurocurrencyLoan” shall mean a Loan during any period that it bears interest determinedby reference to LIBOR.

 

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“EuropeanAcquisition Entity” shall mean a Foreign Portfolio Entity which hasacquired Assets that originated in Europe.

 

“Eventof Default” shall mean each of the Events of Default defined in Section 9.

 

“ExchangeAct” — Section 9.15.

 

“ExchangeRate” shall mean with respect to Euros on a particular date, the rate atwhich Euros may be exchanged into Dollars in London on a spot basis, as setforth on the display page of the Reuters System applicable to Euros twoBusiness Days prior to such date as reasonably determined by Agent.  In the event that such rate does not appearon any Reuters display page, the Exchange Rate with respect to Euros shall bedetermined by reference to such other publicly available service for displayingexchange rates as may be agreed upon by Agent and Borrower or, in the absenceof such agreement, such Exchange Rate shall instead be determined by referenceto Agent’s spot rate of exchange quoted to prime banks in London in the Londoninterbank market where its foreign currency exchange operations in respect toEuros are then being conducted, at or about noon, local time, two Business Daysprior to such date for the purchase of Dollars with Euros, for delivery on aspot basis; provided, however, that if at the time of such determination, forany reason, no such rate is being quoted and no other methods for determiningthe Exchange Rate can be determined as set forth above, Agent may use anyreasonable method it deems applicable to determine such rate, and suchdetermination shall be conclusive absent manifest error.

 

“ExcludedEntities” shall mean each Person listed on Schedule I—(EE).

 

“ExcludedNotes” shall mean those notes listed on Schedule I—(EN).

 

“ExecutionDate” shall mean the date on which all parties to this Agreement shall havesigned a copy this Agreement (whether the same or different copies) and shallhave delivered the same to Agent.

 

“ExecutiveOfficer” shall mean the President of Borrower, the CFO of Borrower or anySenior Vice President of a Borrower.

 

“ExistingCredit Agreements” — Recitals.

 

“FCCapital” shall mean FC Capital Corp., a New York corporation.

 

“FCCommercial” shall mean FirstCity Commercial Corporation, a Texascorporation.

 

“FCMexico” shall mean FirstCity Mexico, Inc., a Texas corporation.

 

“FCPercentage” (x) with respect to any Portfolio Entity or any otherPerson shall mean the percentage of outstanding shares of stock, limitedliability company interests or partnership interests (or, in the case of anon-US entity, similar equity interests) of such Portfolio Entity or Personowned directly or indirectly by FLBG or FC Servicing, (y) with respect toany Asset Pool or any Asset owned by an Portfolio Entity, the FC Percentagewith respect to such Portfolio 

 

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Entity,and (z) with respect to any Asset Pool or any Asset owned by any REOAffiliate, the FC Percentage of the Portfolio Entity which is the parent of theREO Affiliate.

 

“FCHoldings Real Property Financing Loans” shall mean the FCS Lancaster Loan.

 

“FCServicing” shall mean FirstCity Servicing, Inc., a Texas corporation.

 

“FCFC”— Recitals.

 

“FCIDistribution Account” shall mean account number FR76 3000 4008 1800 01219939 227 maintained by FCI at BNP Paribas for deposit of Portfolio EntityProceeds of European Acquisition Entities and any distributions from MCS.

 

“FCM”shall mean FirstCity Mexico, S.A. de C.V.

 

“FCSLancaster Loan” shall mean that certain loan in an original principalamount not in excess of $2,200,000.00 made by FC Holdings to FCS Lancaster, Ltd.on or about December 29, 2005.

 

“FeeAgreements” shall mean any partnership agreement, management agreement,consulting agreement, or other agreement pursuant to which Borrower, anyPrimary Obligor or any Related Entity is to be paid fees, distributions, allocations,expense reimbursements, consideration, salary or other compensation inconsideration for providing management, personnel or services, in any formwhatsoever, from any Affiliate or from any other Person.  Services to be rendered under Fee Agreementsmay include, but not be limited to consulting, collecting revenues, payingoperating expenses not paid directly by others, and providing clerical andbookkeeping services.

 

“FHPartners” — Recitals.

 

“FHPartners Credit Agreement” — Recitals.

 

“FinancialStatements” shall mean, with respect to any Person, the statement offinancial position (balance sheet) and the statement of earnings, cash flow,and stockholders’ (or partners’ or members) equity of such Person.

 

“FirstB” shall mean First B Realty L.P., a Texas limited partnership.

 

“FirstX” shall mean First X Realty L.P., a Texas limited partnership.

 

“FiscalYear” shall mean each January 1 to December 31 period.  “Fiscal Year” followed by a year means theFiscal Year with its Fiscal Year–End in such calendar year.

 

“FLBG”— Introductory paragraph.

 

“ForeignPortfolio Entity” shall mean a Portfolio Entity domiciled in or with aprincipal place of business in a country other than the United States or whichhas acquired Assets located outside of the United States.

 

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“GAAP”shall mean generally accepted accounting principles (as promulgated by theFinancial Accounting Standards Board or any successor entity) in the UnitedStates provided, that when with respect to a Person which is not a USPerson, GAAP shall mean the equivalent in such Person’s jurisdiction oforganization.

 

“GovernmentAuthority” shall mean any nation or government, any state or politicalsubdivision thereof, any agency, authority, regulatory body, bureau, centralbank, commission, department or instrumentality of any of the foregoing or anyother entity exercising executive, legislative, judicial, regulatory oradministrative functions of or pertaining to government.

 

“Guarantor”shall mean each Primary Obligor and any other Person which is a guarantor underany Guaranty.  “Guarantor” shall notinclude any Non-Covered Entity.

 

“Guaranty”shall mean any one or more of the guaranties delivered pursuant to Section 6and each other guaranty agreement delivered in respect of the Obligations, aseach such agreement may be from time to time amended, extended, restated,supplemented or otherwise modified.

 

“GuarantyEquivalent” shall mean any agreement, document or instrument pursuant towhich a Person directly or indirectly guarantees, becomes surety for, endorses,assumes, agrees to indemnify the obligee of any other Person against, orotherwise agrees, becomes or remains liable (contingently or otherwise) for,such obligation, other than (i) by endorsements of instruments in theordinary course of business or (ii) indemnification of sellers of assetsrelated to breaches of confidential agreements and obligations related toperformance of purchase and sale agreements in the conduct of the Asset acquisitionbusiness.  Without limitation, a GuarantyEquivalent shall be deemed to exist if a Person agrees, becomes or remainsliable (contingently or otherwise), directly or indirectly: (i) topurchase or assume, or to supply funds for the payment, purchase orsatisfaction of, an obligation; (ii) to make any loan, advance, capitalcontribution or other investment in, or a purchase or lease of any property orservices from, a Person; (iii) to maintain the solvency of such Person; (iv) toenable such Person to meet any other financial condition; (v) to enablesuch Person to satisfy any obligation or to make any payment; (vi) toassure the holder of an obligation against loss; (vii) to purchase orlease property or services from such Person regardless of the non–delivery ofor failure to furnish of such property or services; or (viii) in respectof any other transaction the effect of which is to assure the payment orperformance (or payment of damages or other remedy in the event of nonpaymentor nonperformance) of any obligation.

 

“HarborDebtors” shall mean, collectively, (i) Harbor Financial MortgageCorp., (ii) NAF, Inc. (f/k/a New America Financial, Inc.), (iii) HamiltonFinancial Services Corp., (iv) Community National Mortgage Corp., (v) CalCap, Inc.and (vi) Harbor Financial Group, Inc, and any Subsidiary of any suchPerson.

 

“ImmaterialEntity” shall mean each Person listed on Schedule 10.37; provided,that if any such Person engages in business or has assets with an aggregatefair market value of $100,000 or more, such Person shall cease to constitute anImmaterial Entity.  “Immaterial Entity”shall not include any Non-Covered Entity.

 

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“IncidentalEquity Interests” shall mean Equity Interests in a Person acquired by aPortfolio Entity or Related Entity in settlement of collection of an asset inthe portfolio of such Portfolio Entity or Related Entity if such EquityInterests so acquired (i) constitute Equity Interests in a Person engagedin a business unrelated to the business of the Consolidated Group and suchPerson is not Borrower or an Affiliate of Borrower or a Person in which or inan Affiliate of which any other Equity Interest is owned by Borrower, anyPrimary Obligor or any Related Entity at the time such Equity Interest is soacquired; and (ii) have a value of less than $500,000.

 

“Indebtedness”shall mean, with respect to any Person (without duplication): (i) allobligations on account of money borrowed by, or credit extended to or on behalfof, or for or on account of deposits with or advances to, such Person; (ii) allobligations of such Person evidenced by bonds, debentures,  notes or similar instruments; (iii) allobligations of such Person for the deferred purchase price of property orservices other than trade payables incurred in the ordinary course of businessand on terms customary in the trade; (iv) all obligations secured by aLien on property owned by such Person (whether or not assumed); and allobligations of such Person under Capitalized Leases (without regard to anylimitation of the rights and remedies of the holder of such Lien or the lessorunder such Capitalized Lease to repossession or sale of such property); (v) theface amount of all letters of credit issued for the account of such Person and,without duplication, the unreimbursed amount of all drafts drawn thereunder,and all other obligations of such Person associated with such letters of creditor draws thereon; (vi) all obligations of such Person in respect ofacceptances or similar obligations issued for the account of such Person; (vii) allobligations of such Person under a project financing or similar arrangement; (viii) allobligations of such Person under any interest rate or currency protectionagreement, interest rate or currency future, interest rate or currency option,interest rate or currency swap or cap or other interest rate or currency hedgeagreement; and (ix) all obligations and liabilities with respect tounfunded vested benefits under any “employee benefit plan” or with respect towithdrawal liabilities incurred under ERISA by Borrower or any ERISA Affiliateto a “multiemployer plan”, as such terms are defined under the EmployeeRetirement Income Security Act of 1974.

 

“IndebtednessInstrument” shall mean any note, mortgage, indenture, chattel mortgage,deed of trust, loan agreement, hypothecation agreement, Guaranty Equivalent,pledge agreement, security agreement, financing statement or other document,instrument or agreement evidencing or securing the payment of or otherwiserelating to the borrowing of monies. Indebtedness Instruments shall include, but not be limited to the LoanDocuments.

 

“IndemnifiedParty” — Section 12.3(c).

 

“IRS”shall mean the Internal Revenue Service of the United States.

 

“Issuer”shall mean the Bank of Scotland in its capacity as a Lender hereunder and notin its capacity as Agent.  References tothe Lenders in this Agreement and the other Loan Documents (when used to referto Bank of Scotland) shall (without duplication) include such Lender as Issuer.

 

“ITSAAgreement” — Section 6.16.

 

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“KeyEmployee” shall mean James Sartain, James Holmes and James Moore, or anyPerson who the Lenders may hereafter approve as a replacement for any suchPerson or prior replacement from time to time as Key Employees; at no timeshall there be more than three (3) Key Employees.

 

“LatinAmerican Acquisition Entity” shall mean a Foreign Portfolio Entity whichhas acquired Assets that originated in a Latin American country.

 

“LCObligations” shall mean the aggregate amount (without duplication) of allLC Outstandings.

 

“LCOutstandings” shall mean the aggregate Stated Amount (as reduced from timeto time) of all Letters of Credit issued hereunder and outstanding at any pointin time.

 

“Leak-ThroughAllowance” — Section 5.3(a)(vi).

 

“LegalRequirements” shall mean, with respect to any Person, all laws, common law,statutes, rules and regulations of any Government Authority to which suchPerson or any of its assets is subject or any judgment, decree, franchise,order or permit of any Government Authority applicable to such Person or any ofits assets.

 

“LenderAssignee” — Section 12.4(a).

 

“Lenders”— introductory paragraph.

 

“Letterof Credit” shall mean a letter of credit issued pursuant to Section 2A.1(a).

 

“Letterof Credit Fee”  — Section 2A.3(a).

 

“LIBOR”shall mean, for each Eurocurrency Interest Period, (x) the per annum rateof interest at which U.S. Dollar or Euro deposits in the amount of the outstandingprincipal balance of the Loan are or would be offered for such EurocurrencyInterest Period in the London interbank market at 11:00 A.M. London timetwo Business Days prior to the start of such Eurocurrency Interest Period aspublished by the British Bankers’ Association as the “Interest Settlement Rate”for such period, divided by (y) a percentage equal to 100% minus the thenstated maximum rate of all reserve requirements (including without limitationany marginal, emergency, supplemental, special or other reserves required byapplicable law) applicable to any member bank of the Federal Reserve System inthe United States in respect of Eurocurrency funding or liabilities.

 

“Lien”shall mean any mortgage, deed of trust, security deed, pledge, securityinterest, encumbrance, lien or other charge of any kind or any other agreementor arrangement having the effect of conferring security (including anyagreement to give any of the foregoing, any assignment or lease in the naturethereof, and any conditional sale or other title retention agreement), any lienarising by operation of law, and the filing of or agreement to give anyfinancing statement under the Uniform Commercial Code of any jurisdiction (orany similar or  comparable law of anyjurisdiction that has not enacted the Uniform Commercial Code).

 

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“Limited Guaranty” shall mean the Limited Guaranty Agreement dated theClosing Date executed by FCFC in favor of the Lenders.

 

“LimitedGuaranty Agreement” shall mean that certain Limited Guaranty Agreement,made of the date hereof, by FCFC in favor of Agent.

 

“LoanCommitment” shall mean as to each Lender, the amount set forth opposite itsname on Schedule 2.1 under the heading “Loan Commitment” as such amount may bemodified by the provisions of any Transfer Supplement from time to time enteredinto and as the same may from time to time be reduced or terminated pursuant toSection 2.8(b) , Section 9 or any other Section of theAgreement.

 

“LoanDocuments” shall mean, individually and collectively, this Agreement, theNotes, the Letters of Credit, the Guaranties, the Pledge Agreements, theSecurity Agreements, the other Security Documents and all other instruments andagreements heretofore or from time to time hereafter executed by or on behalfof Borrowers, any Primary Obligor, any Related Entity or any other Loan Partyin connection herewith or therewith, in each case as amended, extended,restated, supplemented or otherwise modified from time to time.  Without limiting the generality of theforegoing, each amendment to (or constituting part of) this Agreement or anyother Loan Document and each instrument and agreement (including, withoutlimitation, consents or waivers, but excluding any amendment, consent or waiverexecuted prior to the Effective Date) executed in connection with any LoanDocument shall be deemed to be a Loan Document for all purposes of theAgreement and the other Loan Documents.

 

“LoanParty” shall mean, individually and collectively, Borrowers, each PrimaryObligor and each other Person, which has executed any Security Document as a pledgoror grantor of collateral thereunder.  “LoanParty” shall not include any Non-Covered Entity.

 

“Loan(s)”— Section 2.1(a).

 

“LoansOutstandings” as of any particular date shall mean the aggregateoutstanding principal amount of Loans as of such date in Dollars, afterconverting all Loans outstanding in Euros to the Dollar Equivalent, based onthe Exchange Rate as determined on the immediately preceding Reset Date.

 

“MajorityLenders” as of a particular date shall mean the holders of at least 51% ofthe aggregate unpaid principal amount of all Loans at the particular timeoutstanding.

 

“ManagementLetter” shall mean any correspondence or report submitted by the Auditorsto a Loan Party’s chief executive officer, its Board of Directors or anycommittee thereof containing comments and suggestions concerning a Loan Party’saccounting procedures and systems based upon the work done by the Auditorsduring their annual or other audit.

 

“MaterialAdverse Change” shall mean a material adverse change in (i) the business,properties, operations, prospects or condition (financial or otherwise) ofBorrower, the Primary Obligors, Portfolio Entities and the Related Entities,taken as a whole or (ii)  the ability of Borrower or any other Loan Partyto perform, or of Agent to enforce, any of the Obligations.

 

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“MaterialAdverse Effect” shall mean an effect that would result in a MaterialAdverse Change.

 

“MaterialPortfolio Entity” shall mean each Portfolio Entity, each Person listed on ScheduleI—(MPE) and each other Portfolio Entity (other than a Foreign Portfolio Entity)with a Net Present Equity Value of $5,000,000 or more.  Each such Person, which at any time constitutes a Material Portfolio Entity shallcontinue to constitute a Material Portfolio Entity until the time (if any) whenBorrower sends to Agent written notice (a “Redesignation Notice”)executed by an Executive Officer of Borrower certifying, as to such Person thatthe Net Present Equity Value of such Person (the “Subject MPE”) is below$5,000,000 and has been below $5,000,000 for the preceding period of 90consecutive days or more, and requesting that such Subject MPE no longerconstitute a Material Portfolio Entity.  Provided that Borrower provides such additional information, if any,that Agent may request with respect to such Subject MPE and that Agent has notgiven Borrower notice that it disputes such redesignation of such SubjectMPE  within 30 days after receiving suchRedesignation Notice or, if later, within 30 days after Agent receivedadditional information (if any) requested by it with respect to such requestedredesignation, the Subject MPE shall cease to constitute a Material PortfolioEntity (until, the time, if any, that such Subject MPE  again satisfies the criteria applicable toMaterial Portfolio Entities).

 

“MaturityDate” shall mean June 25, 2013.

 

“MCS”shall mean MCS et Associes S.A.

 

“MinnServicing” shall mean FirstCity Serving of Minnesota, Inc.

 

“MultiemployerPlan” shall mean any employee benefit plan which is a “multiemployer plan”within the meaning of Section 3(37) of ERISA and to which any Loan Partyor any ERISA Affiliate of either Borrower contributes or has been obligated tocontribute.

 

“MultipartyPledge Agreement “ — shall mean that certain Pledge Agreement, dated as ofthe date hereof, by and between FC Europe, FC International, FC Mexico, FLBG,FLBG Holdings Investment LP, FLBG Holdings GP Corp., FLBG Holdings Corp. andCollateral Agent.

 

“NetCollections” with respect to a Portfolio Entity for any applicable periodshall mean the gross aggregate amount received during such period by thePortfolio Entity on account of the Assets of the Portfolio Entity (including,in addition, amounts received by any REO Affiliate of such Portfolio Entity) orcollateral therefor, and including amounts received on account of such Assetsprior to the commencement of such period which were paid to or for the benefitof such Portfolio Entity during such period, reduced by (a) amounts which werepaid directly to the Permitted Portfolio Company Creditor of such PortfolioEntity under an Approved Portfolio Leverage Arrangement or amounts which wereremitted to such Creditor, in either case pursuant to the requirements of suchApproved Portfolio Leverage Arrangement, which, in any such case, have not beenreleased by such Creditor to (or for the benefit of) such Portfolio Entity(and/or any REO Affiliate thereof), (b) servicing fees, custodial fees andlockbox bank fees related to such Assets paid by such Portfolio Entity duringsuch period, (c) escrow payments or deposits 

 

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madeby any obligor related to an Asset, (d) reasonable accounting and legalfees paid by the Portfolio Entity related to the operation of the PortfolioEntity, and (e) Portfolio Protection Expenses related to the Assets of thePortfolio Entity or its related REO Affiliate.

 

“NetPresent Equity Value” shall mean, with respect to any Person, the amountdetermined by multiplying (x) the FC Percentage in respect of such Personand (y) the amount by which (A) the Net Present Value of the Assetsof such Person exceeds (B) the sum of (i) outstanding Indebtedness ofsuch Person under any Approved Portfolio Leverage Arrangements and (ii) indebtednessfor money borrowed by, or for any monetary judgment rendered against, suchPerson; in the case of the determination of the Net Present Equity Value of anREO Affiliate the outstanding Indebtedness of the REO Owner under any ApprovedPortfolio Leverage Arrangements shall be allocated proportionately between theREO Affiliate and the REO Owner.

 

“NetPresent Value” as to any Asset or Asset Pool, the net present value of allreasonably projected future collections from such Asset(s) reduced by reasonableand necessary collection expenses and discounted using the “ASR NPV” discountrate assignments utilized by the Portfolio Entity in making such determinationsfor each Asset as set forth on Exhibit F to the Agreement, asadjusted from time to time with the approval of Agent; all of whichdeterminations must be reasonably satisfactory to Agent.

 

“Non-CoveredEntity” shall mean FC Investment Holdings Corporation, FC DiversifiedHoldings LLC, FC Highway 6 Holdings LLC, FC Imperial Holdings LLC, VFC Partners4 LLC, VFC Partners 5 LLC, FC Capital Corp. or any of their subsidiaries orother entities in which such persons own any equity interest.

 

“Non-DefaultVoluntary Custodial Arrangement” shall mean an arrangement to perfect alien in favor of Agent or the holder of a different Permitted Lien, in eachcase, on certain specified Assets of a Person entered into voluntarily by aPortfolio Entity or Related Entity at a time when no Default or Event ofDefault has occurred and is continuing.

 

“Notes”— Section 2.2.

 

“Noticeof Conversion” — Section 3.10

 

“Obligations”shall mean (x) with respect to each Loan Party other than Borrower, allobligations of such Loan Party with respect to the repayment or performance ofany obligations (monetary or otherwise) of Borrower arising under or inconnection with this Agreement, the Notes or any other Loan Document, and (y) withrespect to Borrower, all obligations of Borrower with respect to the repaymentor performance of obligations (monetary or otherwise) arising under or inconnection with this Agreement, Letters of Credit, the Notes or any other LoanDocument.

 

“OtherIndebtedness Instrument Unmatured Default” — Section 7.1(f).

 

“OtherLaws” — Section 3.4.

 

“OverheadAllowance” — Section 5.6(a).

 

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“Parent”shall mean any Person now or at any time hereafter owning or controlling (aloneor with Borrower, any Subsidiary and/or any other Person) at least a majorityof the issued and outstanding Stock or other ownership interest of Borrower orany Subsidiary.  For purposes of thisdefinition, “control” shall have the same meaning ascribed to such term in thedefinition of “Affiliate”. Notwithstanding the forgoing, no Person shall be a Parent which is not aParent of Borrower or a 51% or more owned subsidiary, directly or indirectly,of Borrower.  “Parent” shall not includeany Non-Covered Entity.

 

“Past–DueRate” — Section 3.3.

 

“PaymentDate” — Section 5.3.

 

“PBGC”shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002of ERISA.

 

“PensionPlan” shall mean any employee pension benefit plan subject to Title IV ofERISA and maintained by any Loan Party or any ERISA Affiliate of any Loan Partyor any such plan to which any Loan Party or any ERISA Affiliate is or has beenrequired to contribute on behalf of any of its employees, other than aMultiemployer Plan.

 

“PermittedLiens” shall mean (i) any liens created pursuant to the Loan Documentsin favor of Agent for the benefit of Lenders and Agent to secure theObligations; (ii)  liens for Charges which are not yet due and payable, orclaims and unfunded liabilities under ERISA not yet due and payable or whichare being contested in good faith by appropriate proceedings diligentlypursued; (iii) liens arising in connection with worker’s compensation,unemployment insurance, old age pensions and social security benefits which arenot overdue or are being contested in good faith by appropriate proceedingsdiligently pursued, provided that in the case of any such contest anyproceedings commenced for the enforcement of such lien shall have been dulysuspended and such provision for the payment of such lien has been made on thebooks of Borrower (or the applicable Affiliate) as may be required by GAAP; (iv) liensincurred in the ordinary course of business to secure the performance ofstatutory obligations arising in connection with progress payments or advancepayments due under contracts with the United States Government or any agencythereof entered into in the ordinary course of business; (v) any lienssecuring Indebtedness of Borrower (or any Affiliate) to any Persons in anamount not greater than $250,000 for each such Person, provided the aggregateamount of Indebtedness secured by all such liens shall not exceed $500,000; (vi) Chargesrelating to Assets of First B and First X; (vii) as to any Affiliate,other than Borrower, a Primary Obligor or a Portfolio Entity, purchase moneyliens securing permitted indebtedness incurred in connection with theacquisition of Assets and other indebtedness incurred under the creditagreement under which such permitted indebtedness to acquire such Assets wasincurred so long as such liens encumber only the Assets acquired, (viii) asto any Affiliate, other than Borrower or a Primary Obligor or a PortfolioEntity, liens relating to permitted Indebtedness incurred in connection withthe warehousing of Assets or the securitization of Assets, so long as suchliens encumber only the Assets warehoused or securitized; (ix) those liensdisclosed on Schedule (PL); (x) liens on Assets of a PortfolioEntity in favor of the Person providing financing under an Approved PortfolioLeverage Arrangement in respect of the acquisition of Assets acquired pursuantto such Approved Portfolio Leverage Arrangement to the extent such liens arerequired by, and secure 

 

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onlyobligations under, such Approved Portfolio Leverage Arrangement; and (xi) lienson real property of a Portfolio Entity or an REO Affiliate in favor of a Personproviding financing of development expenses related to such real property whichis permitted under Section 8.3(x).

 

“PermittedPortfolio Company Creditor” shall mean those creditors of a PortfolioEntity which have provided loans pursuant to Approved Portfolio LeveragedArrangement.

 

“PermittedRestrictions” on the payment of dividends by a Person shall mean provisions(i) of an Approved Portfolio Leverage Arrangement, or (ii) of a loanagreement, as in effect when first entered into, to which such Person is aparty as borrower which prohibit such Person from paying dividends for eitherof the following reasons:

 

(x)           the funds from being distributed arerequired to satisfy a leverage or required reserve amount covenant (but only ifsuch covenant would not reasonably be expected to significantly impair suchPerson’s ability to pay dividends if anticipated cash flows are received as andwhen anticipated and in approximately the amounts anticipated); and

 

(y)           such dividends are restricted whenthere exists an event of default of a customary type to be found in suchagreements and that also permits the relevant lender to accelerate the maturityof indebtedness outstanding under such agreement.

 

“PermittedShareholder Agreement” shall mean a Shareholder Agreement with termspermitted by Exhibit E.

 

“PermittedShareholder Arrangements” shall mean arrangements which would arise from aPermitted Shareholder Agreement.

 

“Person”shall mean and include an individual, a partnership, a corporation (including abusiness trust), a joint stock company, a limited liability company, a trust,an unincorporated association, a joint venture or other entity or a governmentor an agency or political subdivision thereof.

 

“Plan”shall mean any “employee benefit plan” (within the meaning of Section 3(3) ofERISA) maintained by any Loan Party or any ERISA Affiliate or any such plan towhich any Loan Party or any ERISA Affiliate is or has been required tocontribute on behalf of any of its employees, other than a Multiemployer Plan.

 

“PledgeAgreement” means each of (or, as the context requires, any of) the BorrowerPledge Agreements, Multiparty Pledge Agreement, Collateral Assignment ofContract and any other pledge agreement made for the benefit of the Lenders bythe Borrowers or the Affiliates.

 

“PledgedEntity” shall mean any Person any Equity Interest in which has been pledgedto Agent to secure the Obligations.  “PledgedEntity” shall not include any Non-Covered Entity.

 

“PledgedNotes” shall mean those certain promissory notes listed on Schedule I—(PN)and any other promissory notes which have been delivered to Agent and in whichthe Collateral Agent holds a perfected security interest of the first prioritypursuant to a Pledge Agreement to which the Collateral Agent is party.

 

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“PortfolioEntity” shall mean any entity (other than an REO Affiliate or an ImmaterialEntity) in which Borrower or a Primary Obligor is directly or indirectly anequity owner and which was formed for the purpose of acquiring Asset Pools,including FHP, and shall also include Bosque Leasing, L.P. (which is owned byBosque Asset Corp. and Bosque GP Corp.). “Portfolio Entity” shall not include any Non-Covered Entity.

 

“PortfolioEntity—50%” shall mean any Portfolio Entity of which Borrower or anySubsidiary directly or indirectly owns exactly 50% of the voting interests orany class of other Equity Interests of such Portfolio Entity.  “Portfolio Entity-50%” shall not include anyNon-Covered Entity.

 

“PortfolioEntity Proceeds” for any Portfolio Entity in respect of any Payment Dateshall mean the sum of (I) the FC Percentage of the Net Collections, plus (II) anyproceeds from a sale or transfer of any Equity Interests issued by suchPortfolio Entity to FC Commercial or other Wholly Owned Subsidiary, asapplicable, plus (III) the FC Percentage of any proceeds of a sale ortransfer of any Equity Interests issued by any REO Affiliate related to suchPortfolio Entity; (it being understood that any reference in this definition toany sale or transfer of Equity Interests issued by any Portfolio Entity or REOAffiliate shall not be construed to affect or modify any prohibition thereof orrequirement for the obtaining of any consent relating thereto set forthelsewhere in this Agreement).

 

“PortfolioProtection Expense Report” — Section 7.2(d).

 

“PortfolioProtection Expenses” with respect to a Portfolio Entity shall mean expensesor other amounts which (w) such Portfolio Entity has reasonably determinedare necessary to advance to one of its REO Affiliates for reasonable andnecessary expenses to preserve or protect real property owned by such REOAffiliate, or (x) constitute reasonable and customary, necessary leasingcommissions, reasonable and necessary tenant improvement costs paid by suchPortfolio Entity or REO Affiliate pursuant to a written lease or capitalimprovements to such property required in order for the property to be soleased, or (y) such Portfolio Entity has reasonably determined arenecessary to protect other Assets securing indebtedness owed to such PortfolioEntity, or (z) constitute obligor funding obligations, such expenses orother amounts to constitute Portfolio Protection Expenses when amounts thereforare retained by such Portfolio Entity or REO Affiliate or, if earlier, whensuch expenses or other amounts are paid.

 

“PrimaryObligor” shall mean any of (i) FC International; (ii) FC Mexico; (iii) FCEurope; and (iv) any other Guarantor and Primary Obligors shall mean allof the foregoing collectively.  “PrimaryObligor” shall not include any Non-Covered Entity.

 

“PurchasingLenders” — Section 12.4(c).

 

“Rateof Borrowing” — Section 3.5.

 

“Records”shall mean all books, records, computer records, computer software, ledgercards, programs and other computer materials, customer and supplier lists,invoices, orders and other property and general intangibles at any timeevidencing or relating to Assets.

 

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“Recoveries”shall mean any funds, or substitution of receipts or collateral, received bythe Lenders or Agent (a) from the sale, collection or other disposition ofCollateral pursuant to the Security Documents, or (b) from anydistribution to any of the Lenders or Agent, or abandonment to any of them, orsubstitute Liens or payment given to any of them pursuant to events orproceedings of the nature referred to in Section 9.8 of the Agreement, orotherwise, which distribution or abandonment pertains to the Collateral.

 

“RegulatoryChange” means, relative to any Lender, Collateral Agent or Agent, anychange after the Effective Date in any (or the adoption after the EffectiveDate of any new):

 

(a)           United StatesFederal, state or local law or foreign law applicable to Agent, CollateralAgent or Lender; or

 

(b)           regulation,interpretation, directive, or request (whether or not having the force of law)applying to Agent or any Lender of any Government Authority charged with theinterpretation or administration of any law referred to in clause (a) orof any fiscal, monetary, central bank or other authority having jurisdictionover Agent, Collateral Agent or Lender.

 

“Reimbursement Obligation” Section 2A.4(g).

 

“RelatedEntity” shall mean each entity identified on Schedule  I—(RE), as well as, subject to the finalsentence of this definition, any other entity, other than a Primary Obligor,Portfolio Entity, or Immaterial Entity, any Equity Interest of which is ownedby Borrower, any Primary Obligor, any Portfolio Entity, any Immaterial Entityor any other Related Entity. Notwithstanding the foregoing, no ImmaterialEntity or any Harbor Debtor shall constitute a Related Entity.  “Related Entity” shall not include anyNon-Covered Entity.

 

“Release”— Section 6.15.

 

“REOAffiliate” shall mean a Person, other than Borrower, a Primary Obligor or aMaterial Portfolio Entity, which is a corporation, limited liability company orpartnership 100% of the Equity Interests in which are owned by a PortfolioEntity (the “REO Owner”) (or, in the case of such an entity which is alimited partnership, 100% of the limited partnership interest of which is ownedby the REO Owner and 100% of the interest in the general partner is owned bythe REO Owner), which Person has been established solely to acquire, from theREO Owner or a seller from which the Portfolio Entity is acquiring otherAssets, title to (and owns no Assets other than) parcels of real property (ordistressed notes secured by real property for purposes of obtaining title toreal property securing such loans) in exchange for, with respect to each suchparcel, a promissory note in a principal amount no less than 96% of the value(as reasonably determined by the REO Owner and the REO Affiliate) of theproperty; provided  that no Personshall constitute or continue to constitute an REO Affiliate if (A) suchPerson acquires property from any Person other than (x) the REO Owner or aPerson from whom the REO Owner is acquiring other Assets, or (y) in thecase where it has acquired a note from the REO Owner solely for purposes ofacquiring title to the real property securing such note, the obligor of suchnote; or (B) engages in any business other than business incidental toowning and selling the parcels of real property so acquired by such REO Affiliate.

 

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“REOExcess Value Adjustment” shall mean the amount, if any, by which the NetPresent Equity Value of all REO Affiliates exceeds 25% of the Aggregate NetPresent Equity Value.

 

“REOPost—25% Time” shall mean any time on or after the Net Present Equity Valueof all REO Affiliates exceeds 25% of the Aggregate Net Present Equity Value,until two Business Days after Borrower gives Agent written notice along withevidence satisfactory to Agent that such Net Present Equity Value of Assets ofREO Affiliates no longer so exceeds 25 % of the Aggregate Net Present EquityValue.

 

“ReportableEvent” shall mean a Reportable Event described in Section 4043 ofERISA and the regulations issued thereunder.

 

“RequisiteConsents” — Section 6.6.

 

“ResetDate” — Section 2.5.

 

“RevolvingCredit Agreement” — Recitals.

 

“SBA”shall mean the United States Small Business Administration or any other federalagency administering the SBA Act.

 

“SBAAct” shall mean the Small Business Act of 1953, as in effect from time totime.

 

“SBALoans” shall mean any loans made by ABL to small businesses and partiallyguaranteed by SBA, all originated in accordance with the SBA Rules andRegulations and pursuant to the authorization contained in Section 7(a) ofthe SBA Act.

 

“SBARules and Regulations” shall mean the SBA Act, any other legislationbinding on the SBA relating to financial transactions, and any loan guarantyagreement and rules and regulations promulgated from time to time underthe SBA Act, and any SBA Standard Operating Procedures and Official Notices,all as from time to time in effect.

 

“SEC”shall mean the Securities and Exchange Commission.

 

“SECReports” — Section 10.26(c).

 

“Securities”shall have the meaning ascribed to that term in the Securities Act of 1934.

 

“SecuritiesLaws” shall mean all applicable Federal and state securities laws andregulations promulgated pursuant thereto.

 

“SecurityAgreements” shall mean any one or more of the security agreements deliveredpursuant to Section 6C and each other security agreement heretofore orfrom time to time hereafter delivered in respect of the Obligations, as eachsuch agreement may be from time to time amended, extended, restated,supplemented or otherwise modified.

 

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“SecurityDocuments” shall be the collective reference to (x) each of theagreements referred to in Section 6 (or on the Closing Checklist referredto therein) pursuant to which Collateral is or was granted or is or wasintended to be granted, directly or indirectly, to Agent on behalf of theLenders, (y) each agreement entered into after the Execution Date pursuantto which any collateral is or was granted or is or was intended to be granted,directly or indirectly, to Agent on behalf of the Lenders and any other Person(if any) sharing an interest in such collateral, and (z) all amendments,supplements or other modifications to such agreements or replacementsthereof.  Without limiting the generalityof the foregoing, each Security Agreement, each Pledge Agreement, each cashcollateral agreement securing any Obligation, each depositary bankacknowledgement relating to any bank account of any Loan Party, each otheragreement pursuant to which any obligations are subordinated to any of theObligations (whether pursuant to a subordination agreement, subordinationprovisions in any other agreement or instrument or otherwise), each PledgedNote, and each security agreement securing the obligations under any PledgedNote shall constitute Security Documents. However, as to a Loan Party, the term “Security Document” shall notinclude any such document as to which such Loan Party is released from all itsobligations thereunder by Agent or the Lenders in accordance with the termshereof or thereof.

 

“ServicingRestricted Funds” means funds received by FC Servicing or Minn Servicing inthe ordinary course of such company’s servicing business for the account ofPersons other than FC Servicing, Minn Servicing, Borrower or any otherSubsidiary of Borrower.

 

“SeniorLender” — introductory paragraph.

 

“SeniorLoan” — recitals.

 

“SeniorNote” — Section 2.2.

 

“ShareholderAgreement” shall mean any agreement (other than a certificate ofincorporation, customary by–laws, a limited liability company formationcertificate or a partnership formation certificate but including resolutions ofany Person owning any Equity Interests in such Person) among any holders ofEquity Interests issued by Borrower, any Primary Obligor or any Related Entityrelating to the management of any such Person or any of the rights orprivileges of any holders of Equity Interests of any such Person.

 

“StatedAmount” shall mean, as to each Letter of Credit, the maximum amount payablethereunder to the beneficiary thereof upon compliance with the terms andconditions stated therein, as such amount may be reduced from time to time.

 

“Stock”shall mean all shares and other Equity Interests issued by a corporation,whether voting or non–voting, including but not limited to, common stock,warrants, preferred stock, convertible debentures, and all agreements,instruments and documents convertible, in whole or in part, into any one ormore or all of the foregoing.

 

“SubordinatedCredit Agreement” — Recitals.

 

“SubordinatedLender” — Introductory paragraph.

 

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“SubordinatedLoan” — Recitals.

 

“SubordinatedNote” — Section 2.2.

 

“SubordinationAgreement” shall mean the Subordination Agreement dated as of October 31,2007 by and among BoS (USA), the Agent and FC, as amended and restated on thedate hereof.

 

“Subsidiary”of any Person (the “First Person”) shall mean any other Person more than50% of the indicia of equity rights (whether capital stock or otherwise) ofwhich is at the time owned, directly or indirectly by the First Person and/orby one or more of such First Person’s Subsidiaries other than the HarborDebtors and Immaterial Entities.  Unlessotherwise indicated, references to Subsidiaries shall refer to Subsidiaries ofBorrower.  “Subsidiary” shall not includeany Non-Covered Entity.

 

“SummaryWaterfall Certificate” shall mean a certificate in a form approved by Agentwhich sets forth summary information as to all Waterfall Certificates beingdelivered on or about the same day as such certificate

 

“TangibleNet Worth”, at any time, shall mean the total of shareholders’ equity(including capital stock (both common and preferred), additional paid–incapital and retained earnings after deducting treasury stock of a Person), lessthe sum of the total amount of any intangible Assets, which, for purposes ofthis definition, shall include, without limitation, general intangibles and, ifapplicable, all accounts receivable not incurred in the ordinary course ofbusiness from any Affiliate of such Person or any loans to directors orofficers of any Affiliate of such Person, unamortized deferred charges and goodwill, all as determined in accordance with GAAP.

 

“Taxes”— Section 5.4.

 

“TerminationEvent” shall mean (i) a Reportable Event described in Section 4043of ERISA and the regulations issued thereunder (other than a Reportable Eventnot subject to the provision for 30–day notice to the PBGC under suchregulations), or (ii) the withdrawal of any Loan Party or any of its ERISAAffiliates from a Pension Plan during a plan year in which it was a “substantialemployer” as defined in Section 4001(a)(2) of ERISA, or (iii) theissuance of a notice of intent to terminate a Pension Plan or the treatment ofa Pension Plan amendment as a termination under Section 4041 of ERISA, or (iv) receiptby any Loan Party or any ERISA Affiliate of notice of the PBGC’s intention toterminate any Pension Plan or to have a trustee or the PBGC appointed toadminister any Pension Plan or (v) any other event or condition whichmight constitute grounds under Section 4042 of ERISA for the terminationof, or the appointment of a trustee to administer, any Pension Plan.

 

“TotalOutstandings” as of a particular date shall mean the sum of (i) LoansOutstandings on such date and (ii) LC Obligations on such date.

 

“TransferSupplement” — Section 12.4(c).

 

“Transfer”shall mean any sale, conveyance, lease or other disposition (and “Transferred”,“Transferring” and other variations thereof shall have correlative meanings).

 

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“UCC”— Section 10.30.

 

“UnitedStates”, “US” or “U.S.” shall mean the United States ofAmerica.

 

“UpfrontFee” — Section 4.4.

 

“USPerson” shall mean a Person formed under the laws of the United States, anyof the 50 states or the District of Columbia or any territory of the UnitedStates.

 

“ValuationCertificate” — Section 6.18.

 

“WaterfallCertificate” in respect of any Payment Date shall mean a completed made byFLBG in a form approved by Agent which sets forth information with respect toNet Collections of an Asset Pool during the preceding period to which suchcertificate is applicable and such other information as Agent shall require.

 

“WaveLitigation” shall mean *FH Partners LLCv. Superior Funding, Inc., Wave Tec Pools, Inc., Nations Pool Supply, Inc.,Jason B. Herring and Kimberly McCormick aka Kimberly Herring*.

 

“Wholly-OwnedSubsidiary” shall mean any Subsidiary of Borrower of which all of theoutstanding shares of stock, limited liability company interests or partnershipinterests (as the case may be) are owned by Borrower and/or one or more whollyowned direct or indirect Subsidiaries of Borrower.  “Wholly-Owned Subsidiary” shall not includeany Non-Covered Entity.

 

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