Document:

anthracite_ex10-2.htm

    Exhibit
10.2

     

    AMENDED
AND RESTATED PARENT GUARANTY AND INDEMNITY

     

    This
AMENDED AND RESTATED PARENT GUARANTY AND INDEMNITY (this “Guaranty”) is made as
of February 15, 2008, by ANTHRACITE CAPITAL, INC., a Maryland corporation
(“Guarantor”)
in favor of MORGAN STANLEY MORTGAGE SERVICING LTD. (“Security Trustee”),
as security trustee under the Loan Agreement (hereinafter
defined), and MORGAN STANLEY PRINCIPAL FUNDING INC., a Delaware corporation
(“Agent”; Agent
and Security Trustee being sometimes referred to each as a “Finance Party” and
collectively the “Finance Parties”), as
agent under the Loan Agreement.

     

     

    W
I T N E S S E T H:

     

    WHEREAS,
Security Trustee, Morgan Stanley Bank, a Utah corporation (“Original Agent”), and
AHR Capital MS Limited, a company incorporated in the Republic of Ireland with
Company Number 411989 (“Borrower”), and the
other parties thereto are party to that certain Multicurrency Revolving Facility
Agreement dated as of February 17, 2006 (the “Original Loan
Agreement”).

     

    WHEREAS,
Guarantor directly owns one hundred percent (100%) of the legal and beneficial
interest in Borrower.

     

    WHEREAS,
pursuant to that certain Parent Guaranty and Indemnity dated as of February 17,
2006 (the “Original
Guaranty”), made by Guarantor in favor of Security Trustee and Original
Agent, Guarantor, among other things, guaranteed the obligations of Borrower
under the Original Loan Agreement.

     

    WHEREAS,
pursuant to that certain Amended and Restated Multicurrency Revolving Facility
Agreement dated as of July 20, 2007, among Borrower, Security Trustee, Original
Agent and the other parties thereto (the “Existing Loan
Agreement”), the Original Loan Agreement was amended and restated to,
among other things, increase the maximum credit thereunder to
$300,000,000.

     

    WHEREAS,
pursuant to the Original Guaranty, Guarantor guaranteed the obligations under
the Existing Loan Agreement.

     

    WHEREAS,
on the date hereof, Original Agent has resigned as agent under the Existing Loan
Agreement and appointed Agent in its place.

     

    WHEREAS,
pursuant to that certain Second Amended and Restated Multicurrency Revolving
Facility Agreement dated as of the date hereof, among Borrower, Security
Trustee, Agent and the other parties thereto (as said agreement may be modified,
amended or restated from time to time, the “Loan Agreement”), the
Existing Loan Agreement was amended and restated to, among other things, extend
the term thereof and amend the pricing thereunder.

     

    WHEREAS,
it is a condition to the effectiveness of the Loan Agreement that Guarantor
execute and deliver this Guaranty for the benefit of the Finance Parties and, as
such, Guarantor desires to amend and restate the Original Guaranty in its
entirety as set forth herein and Security Trustee and Agent desire to accept
this Guaranty in lieu of the Original Guaranty.

     

    NOW, THEREFORE, in
consideration of the premises and the mutual promises and covenants contained in
this Guaranty, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree that from
and after the date hereof the terms and conditions of the Original Guaranty are
hereby superseded by the following terms and conditions:

     

    Section
1.         Capitalized
Terms.  All capitalized terms used herein and not otherwise
defined shall have the respective meanings ascribed to such terms in the Loan
Agreement. As used herein:

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “1934 Act” shall mean
the Securities and Exchange Act of 1934, as amended.

     

    “Affiliate” shall mean
with respect to any Person, any “affiliate” of such Person, as such term is
defined in the United States Bankruptcy Code of 1978, as amended from time to
time.

     

    “Capital Lease
Obligations” shall mean, for any Person, all obligations of such Person
to pay rent or other amounts under a lease of (or other agreement conveying the
right to use) Property to the extent such obligations are required to be
classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.

     

    “Cash Income” shall
mean, for any period, the sum of Net Income of the Guarantor and its
consolidated Subsidiaries and (a) Cash Interest Expense and (b) depreciation and
amortization; less (i) the net gain (or loss) on securities, (ii) the net gain
(or loss) on real estate held for sale, (iii) earnings (or loss) from equity
investments and unconsolidated joint ventures determined in accordance with
GAAP, plus cash distributions from equity investments, (iv) income (or expense)
attributable to the ineffectiveness of hedging transactions, (v) any benefit (or
provision) for income taxes for such period, (vi) interest amortization (or
accretion), (vii) incentive fees received (or paid) in the form of the
issuance of the Guarantor's common stock, and (viii) gains (or losses)
attributable to the impairment of assets under EITF 99-20.

     

    “Cash Interest
Expense” shall mean, for any period, total interest expense, both
expensed and capitalized, of Guarantor and its Subsidiaries for such period with
respect to the Total Indebtedness of Guarantor and its Subsidiaries (including,
without limitation, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers’ acceptance financing and net
costs under interest rate protection agreements), determined on a consolidated
cash basis for such period, and net of interest accretions, whether in favor or
against, with respect to debt.

     

    “Code” shall mean the
Internal Revenue Code of 1986, as amended from time to time.

     

    “Debt Service Coverage
Ratio”  shall mean, for the period of time for which
calculation is being made, the ratio of cash income before interest expense to
cash interest expense.

     

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

     

    “GAAP” shall mean
generally accepted accounting principles as in effect from time to time in the
United States.

     

    “Guarantee” shall
mean, as to any Person, any obligation of such Person directly or indirectly
guaranteeing any Indebtedness of any other Person or in any manner providing for
the payment of any Indebtedness of any other Person or otherwise protecting the
holder of such Indebtedness against loss (whether by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, or to take-or-pay or otherwise); provided that the term “Guarantee”
shall not include (i) endorsements for collection or deposit in the ordinary
course of business, or (ii) obligations to make servicing advances for
delinquent taxes and insurance or other obligations in respect of a Mortgaged
Property, to the extent required by Buyer.  The amount of any
Guarantee of a Person shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good
faith.  The terms “Guarantee” and “Guaranteed” used as
verbs shall have correlative meanings.

     

    “Indebtedness” shall
mean, for any Person:  (a) obligations created, issued or
incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of 

     

    
      
        
        

      

      
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      Property
to another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such Property from such Person); (b) obligations
of such Person to pay the deferred purchase or acquisition price of Property or
services, other than trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within 90 days of the date the
respective goods are delivered or the respective services are rendered;
(c) Indebtedness of others secured by a Lien on the Property of such
Person, whether or not the respective Indebtedness so secured has been assumed
by such Person; (d) obligations (contingent or otherwise) of such Person in
respect of letters of credit or similar instruments issued or accepted by banks
and other financial institutions for account of such Person; (e) Capital
Lease Obligations of such Person; (f) obligations of such Person under
repurchase agreements, sale/buy-back agreements or like arrangements; (g)
Indebtedness of others Guaranteed by such Person; (h) all obligations of
such Person incurred in connection with the acquisition or carrying of fixed
assets by such Person; and (i) Indebtedness of general partnerships of which
such Person is a general partner.

    

     

    “Intangible Assets”
shall mean the excess of the cost over book value of assets acquired, patents,
trademarks, trade names, copyrights, franchises and deferred charges (excluding
the value of any residual securities and the value of any owned or purchased
mortgage servicing rights).

     

    “Lien” shall mean any
mortgage, lien, pledge, charge, security interest or similar
encumbrance.

     

    “Liquid Assets” shall
mean cash, United States Treasury Bills, securities issues by an agency of, and
guaranteed by, the United States of America, in each case, that is unrestricted
and not subject to Liens.

     

    “Loan Documents” shall
mean the Original Loan Agreement, the Existing Loan Agreement, the Loan
Agreement and all documents and agreements executed by Borrower at any time in
connection with any of the foregoing, including without limitation, the Finance
Documents (as defined in the Loan Agreement).

     

    “Mark-to-Market
Indebtedness” means the portion of the Total Indebtedness of Guarantor
(which may be all of such Indebtedness) where the terms thereunder permit the
holder thereof to make a margin call, accelerate all or a part of such
Indebtedness and/or request the repayment in full or in part prior to the
applicable maturity date based on changes in the market value of the collateral
securing such Indebtedness.

     

    “Net Income” shall
mean, for any period, the net income of the Guarantor and its consolidated
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP.

     

    “Person” shall mean
any individual, corporation, company, voluntary association, partnership, joint
venture, limited liability company, trust, unincorporated association or
government (or any agency, instrumentality or political subdivision
thereof).

     

    “Property” shall mean
any right or interest in or to property of any kind whatsoever, whether real,
personal or mixed and whether tangible or intangible.

    

    “Subsidiary” shall
mean, with respect to any Person, any corporation, partnership or other entity
of which at least a majority of the securities or other ownership interests
having by the terms thereof ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions of such
corporation, partnership or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership or other entity shall have or might have voting
power by reason of the happening of any contingency) is at 

     

     

    
      
        
        

      

      
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      the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.

    

    

    “Tangible Net Worth”
shall mean, as of a particular date:

    

    (i)           all
amounts which would be included under stockholder's equity on a consolidated
balance sheet of Guarantor and its consolidated Subsidiaries at such date,
determined in accordance with GAAP, less

     

    (ii)           amounts
owing to Guarantor or any consolidated Subsidiary from Affiliates and (ii)
Intangible Assets on the consolidated balance sheet of Guarantor.

     

    “Total Indebtedness”
shall mean, for any period, the aggregate Indebtedness of Guarantor and its
consolidated Subsidiaries (excluding non-recourse Indebtedness) during such
period.

     

    Section
2.         Guaranty.

     

    (a)           Guarantor
hereby unconditionally and irrevocably guarantees to the Finance Parties the due
and punctual payment when due, whether at the stated due date, by acceleration
or otherwise, of any and all monetary obligations, indemnities, liabilities,
indebtedness and other amounts of every kind arising out of the Loan Documents,
all amounts in respect to indemnities provided for in the Loan Documents, and
all damages provided for in the Loan Documents, in respect of a failure or
refusal by Borrower to make any such payment, howsoever created, arising or
evidenced, voluntary or involuntary, whether direct or indirect, absolute or
contingent, now or hereafter existing or owing to Finance Parties (all the
foregoing obligations and undertakings (irrespective of the application of the
limited recourse language in Clause 35 of the Loan Agreement or clauses of
similar import in the other Finance Documents) collectively referred to
hereinafter as the “Guaranteed
Obligations”).

     

    (b)           This
Guaranty is an absolute and unconditional guaranty of payment when due under the
Loan Documents and not of collection of any indebtedness contained in or arising
under the Loan Documents.  This Guaranty is in no way conditioned upon
any attempt to collect from Borrower or upon any other event or contingency, and
shall be binding upon and enforceable against Guarantor without regard to the
validity or enforceability of the Loan Documents, or of any term
thereof.  If for any reason Borrower shall fail or be unable duly and
punctually to pay any such amount when due under the Loan Documents, Guarantor
will forthwith pay, if not already paid by Borrower, the same immediately upon
written demand.

     

    (c)           In
case any of the Loan Documents shall be terminated as a result of the rejection
thereof by any trustee, receiver, examiner, liquidator or liquidating agent of
Borrower or any of its properties in any bankruptcy, insolvency, reorganization,
arrangement, composition, readjustment, liquidation, dissolution, examinership,
winding-up or similar proceeding, Guarantor’s obligations hereunder shall
continue to the same extent as if such agreement had not been so
rejected.  Guarantor agrees that this Guaranty shall continue to be
effective or shall be, reinstated, as the case may be, if at any time payment to
any Finance Party of the Guaranteed Obligations or any part thereof is rescinded
or must otherwise be returned by such Finance Party upon the insolvency,
bankruptcy, examinership, liquidation, winding-up or reorganization of Borrower,
or otherwise, as though such payment to such Finance Party had not been
made.

     

    (d)           Without
duplication of the Guaranteed Obligations, Guarantor shall pay on demand all
reasonable costs, expenses and damages incurred (including, without limitation,
attorneys’ fees and disbursements) in connection with the enforcement of the
obligations of Guarantor under this Guaranty.

     

     

    
      
        
        

      

      
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    Section
3.        Obligations
Unconditional.  Guarantor hereby agrees that its obligations
under this Guaranty shall be continuing and unlimited, shall not be subject to
any non-compulsory counterclaim, set-off, deduction or defense (other than
payment) based upon any claim Guarantor may have against the Finance Parties or
Borrower or any other Person, and shall remain in full force and effect without
regard to, and shall not be released, discharged or in any way affected by any
circumstance or condition (whether or not Guarantor shall have any knowledge or
notice thereof) whatsoever that might constitute a legal or equitable discharge
or defense, and shall be unconditional, irrespective of:

     

    (i)           the
validity, enforceability, avoidance, novation or subordination of any of the
Guaranteed Obligations, the Loan Documents, this Guaranty, or any other document
relating thereto;

     

    (ii)          the
absence of any attempt by, or on behalf of, any Finance Party to collect, or to
take any other action to enforce, all or any part of the Guaranteed Obligations,
whether from or against Borrower, Guarantor, or any other Person or
entity;

     

    (iii)         the
election of any remedy by, or on behalf of, any Finance Party with respect to
all or any part of the Guaranteed Obligations;

     

    (iv)         the
waiver, rescission, compromise, acceleration, consent, extension, forbearance or
granting of any indulgence by, or on behalf of, any Finance Party with respect
to, or the amendment or modification of, or any release of any party from, any
of the terms and provisions of, any provision of the Loan Documents or any
related document;

     

    (v)          the
failure of any Finance Party to take any steps to perfect and maintain its
security interest in, or to preserve its rights to, any security or collateral,
if any, for the Guaranteed Obligations;

     

    (vi)         the
election by, or on behalf of, any Finance Party, in any proceeding instituted
under Chapter 11 of Title 11 of the United States Code (11 U.S.C. 101
et seq.) (the “Bankruptcy Code”), of
the application of Section 1111(b)(2) of the Bankruptcy Code;

     

    (vii)        the
disallowance, under Section 502 of the Bankruptcy Code or any other applicable
law, of all or any portion of the claims of any Finance Party for repayment of
all or any part of the Guaranteed Obligations or any expenses associated
therewith;

     

    (viii)       the
failure of any Finance Party to assert any claim or demand or to enforce any
right or remedy against Borrower or any other Person under the provisions of the
Loan Documents or any related document or other agreement or
otherwise;

     

    (ix)         any
change in respect of Borrower or Guarantor, including, without limitation, as a
result of any sale of assets, merger, consolidation, dissolution, liquidation,
recapitalization, or other change of legal form or status, whether or not
permitted under the Loan Documents;

     

    (x)          the
release, exchange, waiver or foreclosure of any security held by any Finance
Party for any of the Guaranteed Obligations or the invalidity or nonperfection
of any security interest securing the Guaranteed Obligations or this Guaranty,
or any other defect of any kind pertaining to the Guaranteed Obligations or any
guaranty or collateral security in respect thereof;

     

    (xi)         the
release or substitution of Borrower or Guarantor;

     

    (xii)        any
other circumstance that might otherwise, but for this specific agreement of
Guarantor to the contrary, result in a discharge of or the exoneration of
Guarantor hereunder, at law or in equity, it being the intent of the parties
hereto that the obligations of Guarantor hereunder shall be absolute and
unconditional under any and all circumstances; or

     

     

    
      
        
        

      

      
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    (xiii)       any
reduction occurring in, or other arrangement being made relating to the
Guaranteed Obligations as a result of any compromise, scheme of arrangement or
composition, made pursuant to any of the provisions of the Companies (Amendment)
Act 1990, as amended, of the Republic of Ireland or any analogous provisions or
made pursuant to any proceedings or actions whatsoever and whether or not
following the appointment of an administrator, administrative receiver, trustee,
liquidator, receiver or examiner or any similar officer or any analogous event
occurring under the laws of any jurisdiction relevant to Borrower or over all or
a substantial part of the assets of Borrower, and Guarantor hereby agrees with
and acknowledges to the Finance Parties that the amount recoverable by the
Finance Parties from Borrower and Guarantor hereunder will be and will continue
to be the full amount which would have been recoverable by the Finance Parties
from Borrower in respect of the Guaranteed Obligations had no such compromise,
scheme of arrangement or composition or event as aforesaid been entered
into.

     

    Section
4.         Enforcement.  The
Finance Parties may proceed directly against Guarantor to collect and recover
the full amount (or any portion) of the Guaranteed Obligations, without first
proceeding against Borrower or any other Person or entity, or against any
security or collateral for the Guaranteed Obligations.

     

    Section
5.         Waivers.

     

    (a)           Guarantor
hereby waives diligence, presentment, demand of payment, filing of claims with a
court in the event of receivership, liquidation, dissolution, examinership,
winding-up or similar proceedings or bankruptcy of Borrower or Guarantor,
protest or notice (except any applicable notices required to be given to
Borrower under the Loan Documents) with respect to the Guaranteed Obligations,
all setoffs and counterclaims and all presentments, demands for performance,
notices of nonperformance (except any applicable notices required to be given
under the Loan Documents), protests, notices of protest, notices of dishonor and
notices of acceptance of this Guaranty and all other demands (except any
applicable demands required to be given under the Loan Documents) whatsoever
(and shall not require that the same be made on Borrower or Guarantor as a
condition precedent to the obligations of Guarantor hereunder, except as
required by the Loan Documents), and covenants that this Guaranty will not be
discharged, except by complete payment (in cash) of the Guaranteed Obligations
and any other obligations contained herein and the termination of the Loan
Documents.  Guarantor further waives all notices of the existence,
creation or incurring of new or additional indebtedness, arising either from
loans extended to Borrower, any other Person under the Loan Documents, Guarantor
or otherwise under any related document.

     

    (b)           The
Finance Parties are hereby authorized, without notice or demand and without
affecting the liability of Guarantor hereunder, from time to time, (i) to
renew, extend, accelerate or otherwise change the time for payment of, or other
terms relating to, all or any part of the Guaranteed Obligations, or to
otherwise modify, amend or change the terms of the Loan Documents to which any
Finance Party is a party or any other related document; (ii) to accept
partial payments on all or any part of the Guaranteed Obligations; (iii) to
take and hold security or collateral for the payment of all or any part of the
Guaranteed Obligations, this Guaranty, or any other guaranties of all or any
part of the Guaranteed Obligations or other liabilities of Guarantor or
Borrower; (iv) to exchange, enforce, waive and release any such security or
collateral; (v) to apply such security or collateral and direct the order
or manner of sale thereof as in its discretion it may determine; and
(vi) to settle, release, exchange, enforce, waive, compromise, collect or
otherwise liquidate all or any part of the Guaranteed Obligations, and any
security or collateral for the Guaranteed Obligations.  Any of the
foregoing may be done in any manner, without affecting or impairing the
obligations of Guarantor hereunder.

     

    Section
6.         Setoff.  At
any time after all or any part of the Guaranteed Obligations have become due and
payable, any Finance Party may, without notice to Guarantor and regardless of
the acceptance of any security or collateral for the payment hereof, appropriate
and apply toward the payment 

     

     

    
      
        
        

      

      
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      of
all or any part of the Guaranteed Obligations (i) any indebtedness due or
to become due from any Finance Party or any of their respective Affiliates to
Guarantor, and (ii) any moneys, credits or other property belonging to
Guarantor at any time held by or coming into the possession of any Finance Party
or any of their respective Affiliates.

    

     

    Section
7.        Financial
Information.  Guarantor hereby assumes responsibility for
keeping itself informed of the financial condition of Borrower and any and all
endorsers and/or other guarantors of all or any part of the Guaranteed
Obligations, and of all other circumstances bearing upon the risk of nonpayment
of the Guaranteed Obligations (or any part thereof) that diligent inquiry would
reveal, and Guarantor hereby agrees that the Finance Parties shall have no duty
to advise Guarantor of information known to it regarding such condition or any
such circumstances.

     

    Section
8.         Representations and
Warranties.  Guarantor hereby represents and warrants to the
Finance Parties that as of the date hereof and throughout the term of this
Guaranty:

     

    (a)           Legal
Name.  The exact legal name of Guarantor is Anthracite Capital,
Inc. and except as disclosed in Guarantor’s public filings with the Securities
and Exchange Commission, Guarantor has not used any previous names, assumed
names or trade names.

     

    (b)           Existence.  Guarantor
(a) is a corporation duly organized and validly existing under the laws of
the jurisdiction of its organization, (b) has all requisite power, and has
all governmental licenses, authorizations, consents and approvals necessary to
own its assets and carry on its business as now being or as proposed to be
conducted, except where the lack of such licenses, authorizations, consents and
approvals would not be reasonably likely to have a Material Adverse Effect on
its Property, business or financial condition or prospects; and (c) is
qualified to do business, validly existing and is, to the extent determinable,
in good standing, in all other jurisdictions in which the nature of the business
conducted by it makes such qualification necessary, except where failure so to
qualify would not be reasonably likely (either individually or in the aggregate)
to have a material adverse effect on its business, operations, Property,
condition (financial or otherwise) or prospects.

     

    (c)           Guarantor
Information.  All information furnished to any Finance Party
regarding the assets and liabilities of Guarantor and its consolidated
Subsidiaries, if any, is true, correct and complete in all material respects and
remains unmodified in any material respect. There has been no material adverse
change in the business or financial condition of Guarantor (or the business or
consolidated financial condition of its Subsidiaries) since January 1,
2007.

     

    (d)           Action.  Guarantor
has all necessary power, authority and legal right to execute, deliver and
perform its obligations under this Guaranty; the execution, delivery and
performance by Guarantor has been duly authorized by all necessary action on its
part; and this Guaranty has been duly and validly executed and delivered by
Guarantor and constitutes a legal, valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with its terms except as
enforceability may be limited or varied by bankruptcy, insolvency,
reorganization, liquidation or other similar laws of general application
relating to enforcement of the rights of a creditor and by general equitable
principals.

     

    (e)           Litigation.  There
are no actions, suits, arbitrations, investigations (including, without
limitation, any of the foregoing which are pending or threatened in writing) or
other legal or arbitrable proceedings affecting Guarantor or Borrower or
affecting any of their respective Property before any Governmental Authority
that (i) questions or challenges the validity or enforceability of this Guaranty
or any action to be taken in connection with the transactions contemplated
hereby, (ii) makes a claim or claims against Guarantor or Borrower in an
aggregate amount greater than Five Million Dollars ($5,000,000),
(iii) which, individually or in the aggregate, if adversely determined,
could reasonably be likely to have a Material Adverse Effect, or (iv) requires
filing with the Securities and Exchange Commission in accordance with the 1934
Act or any rules thereunder which filing has not been made.

     

     

    
      
        
        

      

      
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    (f)           No
Breach.  The execution and delivery of this Guaranty does not
and will not conflict with or result in a breach of the articles of
incorporation or by-laws (or equivalent documents) of Guarantor or any
applicable law, rule or regulation, or any order, writ, injunction or decree of
any Governmental Authority, or any other material agreement or instrument to
which Guarantor is a party or by which it or any of its Property is bound or to
which it is subject, or constitute a default under any such material agreement
or instrument or result in the creation or imposition of any Lien upon any
Property of Guarantor pursuant to the terms of any such agreement or
instrument.

     

    (g)           Approvals.  No
authorizations, approvals or consents of, and no filings or registrations with,
any Governmental Authority or any securities exchange are necessary for the
execution, delivery or performance by Guarantor under this Guaranty for the
legality, validity or enforceability hereof.

     

    (h)           True and Complete
Disclosure.  The information, reports, financial statements,
exhibits and schedules furnished in writing by or on behalf of Guarantor to any
Finance Party in connection with the negotiation, preparation or delivery of
this Guaranty and the Loan Documents or included herein or therein or delivered
pursuant hereto or thereto, when taken as a whole, (x) do not contain any untrue
statement of material fact and (y) contain all statements of material fact
necessary to make the statements herein or therein, in light of the
circumstances under which they were made, true.  All written
information furnished after the date hereof by or on behalf of Guarantor to any
Finance Party in connection with this Guaranty or the other Loan Documents and
the transactions contemplated hereby and thereby, will be true, complete and
accurate in every material respect, or (in the case of projections) based on
reasonable estimates, on the date as of which such information is stated or
certified.  There is no fact known to the actual knowledge of a
Responsible Officer of Guarantor, after due inquiry, that could reasonably be
expected to have a Material Adverse Effect that has not been disclosed herein or
in a report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Finance Parties for use in connection with the
transactions contemplated hereby.

     

    (i)          
 Chief Executive
Office; Jurisdiction of Organization.  Guarantor’s chief
executive office is 40 East 52nd Street,
New York, NY 10022.  Guarantor’s jurisdiction of organization is
Maryland.

     

    (j)      
     Location of Books and
Records.  The location where Guarantor keeps its books and
records, including all computer tapes and records relating to the Collateral, is
its chief executive office.

     

    (k)           Intentionally
Omitted.

     

    (l)        
   Regulatory
Status.  Guarantor is not a “bank holding company” or a direct
or indirect subsidiary of a “bank holding company” as defined in the Bank
Holding Company Act of 1956, as amended, and Regulation Y thereunder of the
Board of Governors of the Federal Reserve System.

     

    (m)          Subsidiaries.  Exhibit B attached
hereto sets forth the name of each direct or indirect Subsidiary of
Guarantor.

     

    (n)           Taxes. Guarantor and
its Subsidiaries have filed all federal income tax returns and all other
material tax returns that are required to be filed by them and have paid all
taxes due pursuant to such returns or pursuant to any assessment received by any
of them, except for any such taxes as are being appropriately contested in good
faith by appropriate proceedings diligently conducted and with respect to which
adequate reserves have been provided.  The charges, accruals and
reserves on the books of Guarantor and its Subsidiaries in respect of taxes and
other governmental charges are, in the reasonable opinion of Guarantor,
adequate.

     

    (o)           No Default under Other
Agreements. No event or circumstance is outstanding which constitutes a
default under any agreement or instrument which is binding on Guarantor or any
of its 

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

      Subsidiaries
or to which its (or any of its Subsidiaries) assets are subject which might have
a Material Adverse Effect.

    

     

    (p)           Business
Affairs.

     

    (i)           The
business and affairs of Guarantor has at all times been, and will at all times
be, managed, controlled and conducted in its own name as an identifiable
business, separate, independent and identifiable from the business of any other
person;

     

    (ii)          The
records, books, accounts and minutes of Guarantor have at all times been, and
will continue at all future times to be, maintained separate and distinct from
those of any other person;

     

    (iii)         The
assets and liabilities and the funds of Guarantor have at all times been, and
will continue at all future times to be, kept separate and distinct from any
other person; and Guarantor has received, deposited, withdrawn, paid and
disbursed, and will at all future times receive, deposit, withdraw, pay and
disburse, all monies, funds and receivables in the ordinary course of its
business and in a manner separate and distinct from any other person;
and

     

    (iv)         All
dealings and transactions of Guarantor with all other persons have at all times
been and will continue at all times to be at arms-length.

     

    (q)           ERISA.  Guarantor
has not established any pension plan for employees which would cause Guarantor
to be subject to ERISA.

     

    Section
9.         Covenants of
Guarantor.  Guarantor covenants and agrees with the Finance
Parties that, until payment in full of all Guaranteed Obligations:

     

    (a)           Financial Statements,
Reports, etc.  Guarantor shall deliver to the Finance
Parties:

     

    (i)           as
soon as available and in any event within 45 days after the end of each of
the first three quarterly fiscal periods of each fiscal year of Guarantor, the
unaudited consolidated balance sheet of Guarantor and its consolidated
Subsidiaries as at the end of such period and the related unaudited consolidated
statement of income and retained earnings, consolidated statement of cash flows
and consolidated statement of equity for Guarantor and its consolidated
Subsidiaries for such period and the portion of the fiscal year through the end
of such period, setting forth in each case in comparative form the figures for
the previous year, accompanied by a certificate of a Responsible Officer of
Guarantor, which certificate shall state that said consolidated financial
statements fairly present the consolidated financial condition and results of
operations of Guarantor and its consolidated Subsidiaries in accordance with
GAAP, consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments);

     

    (ii)          as
soon as available and in any event within 90 days after the end of each
fiscal year of Guarantor, the consolidated balance sheet of Guarantor and its
consolidated Subsidiaries as at the end of such fiscal year and the related
consolidated statement of income and retained earnings, consolidated statement
of cash flows and consolidated statement of equity for Guarantor and its
consolidated Subsidiaries for such year, setting forth in each case in
comparative form the figures for the previous year, accompanied by an opinion
thereon of independent certified public accountants of recognized national
standing, which opinion shall not be qualified as to scope of audit or going
concern and shall state that said consolidated financial statements fairly
present the consolidated financial condition and results of operations of
Guarantor and its consolidated Subsidiaries as at the end of, and for, such
fiscal year in accordance with GAAP, and a certificate of such accountants
stating that, in making the examination necessary for their opinion, they
obtained no knowledge, except as specifically stated, of any
Default;

    
 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (iii)         within
15 Business Days after any Finance Party’s request, such other information
regarding the operation of any real property or the Collateral, or the financial
condition, operations, or business of Guarantor as may be requested by any
Finance Party, including all business plans prepared by or for
Guarantor;

     

    (iv)         upon
any Finance Party’s request, a copy of any financial or other report Guarantor
shall receive from any Collateral Obligor with respect to an item of Collateral
within 15 days after Guarantor’s receipt thereof.

     

    (v)           Guarantor
will furnish to the Finance Parties, at the time it furnishes each set of
financial statements pursuant to this Section 9(a), a certificate of a
Responsible Officer of Guarantor (i) stating that, to the best of such
Responsible Officer’s knowledge, Guarantor during such fiscal period or year has
observed or performed all of its covenants and other agreements, and satisfied
every condition, contained in the Loan Documents to be observed, performed or
satisfied by it, and that such Responsible Officer has obtained no knowledge of
any Default except as specified in such certificate (and, if any Default has
occurred and is continuing, describing the same in reasonable detail and
describing the action Guarantor has taken or proposes to take with respect
thereto) and (ii) showing in detail the calculations supporting such
Responsible Officer’s certification of Guarantor’s compliance with the
requirements of Sections 9(h), 9(i), 9(j), 9(l) and 9(m).

     

    (b)           Litigation.  Guarantor
will promptly, and in any event within ten (10) days after service of process on
any of the following, give to the Finance Parties notice of all litigation,
actions suits, arbitrations, investigations (including, without limitation, any
of the foregoing which are pending or threatened) or other legal or arbitrable
proceedings affecting Guarantor before any Governmental Authority that
(i) questions or challenges the validity or enforceability of this Guaranty
or any action to be taken in connection with the transactions contemplated
hereby, (ii) makes a claim or claims against Guarantor in an aggregate
amount greater than Five Million Dollars ($5,000,000), (iii) which,
individually or in the aggregate, if adversely determined could reasonably be
likely to have a Material Adverse Effect, or (iv) requires filing with the
Securities and Exchange Commission in accordance with the 1934 Act or any rules
thereunder which filing has not been made.

     

    (c)           Existence,
etc.  Guarantor will:

     

    (i)           preserve
and maintain its legal existence and all of its material rights, privileges,
licenses and franchises;

     

    (ii)          comply
with the requirements of all applicable laws, rules, regulations and orders of
Governmental Authorities (including, without limitation, all environmental laws,
all laws with respect to unfair and deceptive lending practices and predatory
lending practices) if failure to comply with such requirements would be
reasonably likely (either individually or in the aggregate) to have a material
adverse effect on its business, operations, Property, condition (financial or
otherwise) or prospects.

     

    (iii)         keep
adequate records and books of account, in which complete entries will be made in
accordance with GAAP consistently applied;

     

    (iv)         not
move its chief executive office from the address referred to in Section 8(i)
hereof unless it shall have provided the Finance Parties ten (10) days’ prior
written notice of such change;

     

    (v)         
pay and discharge all taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its Property prior to the
date on which penalties attach thereto, except for any such tax, assessment,
charge or levy the payment of which is being 

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

      contested
in good faith and by proper proceedings and against which adequate reserves are
being maintained; and

    

     

    (vi)         permit
representatives of the Finance Parties, during normal business hours, to
examine, copy and make extracts from its books and records, to inspect any of
its Properties, and to discuss its business and affairs with its officers, all
to the extent reasonably requested by any Finance Paty.

     

    (d)           Prohibition of Fundamental
Changes.  Guarantor shall not enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation, winding up or dissolution) or sell all or
substantially all of its assets; provided, that Guarantor may enter into a
merger or consolidation if (a) the surviving or resulting entity shall be a
corporation or partnership organized under the laws of the United States or any
state thereof; (b) such entity shall expressly assume by written agreement,
in form and substance satisfactory to the Finance Parties in their sole and
absolute discretion, the performance of all of the duties and obligations under
this Guaranty; and (c) such entity shall be at least as creditworthy as
Guarantor (or either, as applicable), as determined by the Finance Parties in
their sole and absolute discretion; and, provided, further, that if after giving
effect thereto, no Default would exist hereunder.

     

    (e)           Notices.  Guarantor
shall give notice to the Finance Parties promptly upon receipt or knowledge of
the occurrence of any Default.

     

    (f)           Limitation on
Liens.  Guarantor will defend the Collateral against, and will
take such other action as is necessary to remove, any Lien, security interest or
claim on or to the Collateral, other than the security interests created under
the Loan Documents, and Guarantor will defend the right, title and interest of
the Finance Parties in and to any of the Collateral against the claims and
demands of all persons whomsoever.

     

    (g)           Limitation on
Distributions.  During the continuation of any Default,
Guarantor shall not make any payment on account of, or set apart assets for, a
sinking or other analogous fund for the purchase, redemption, defeasance,
retirement or other acquisition of any equity or partnership interest of
Guarantor, whether now or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of Guarantor.

     

    (h)           Maintenance Tangible Net
Worth. On any date, Guarantor shall not have a Tangible Net Worth less
than the sum of Four Hundred Million Dollars ($400,000,000) and seventy-five
percent (75%) of any equity offering proceeds accepted by Guarantor from and
after the date of this Guaranty.

     

    (i)           Maintenance of Ratio of
Total Indebtedness to Tangible Net Worth. Guarantor’s ratio of Total
Indebtedness to Tangible Net Worth shall not at any time be greater than
3:1.

     

    (j)           Minimum Liquidity.
Guarantor’s Liquid Assets shall not at any time to be less than five percent
(5%) of its Mark-to-Market Indebtedness; provided that Guarantor shall not be in
breach of this covenant if (i) such breach occurred prior to March 31, 2008 and
such breach was cured within seven (7) days after the occurrence thereof; and
(ii) Guarantor’s Liquid Assets exceed Twenty-Five Million Dollars ($25,000,000)
at the time of such breach and at all times during the seven (7) day cure period
referenced in (i) above.

     

    (k)           Net Income. For any
period of two consecutive fiscal quarters, Guarantor’s Net Income shall not be
less than $1.00.

     

    (l)           Changes in Tangible Net
Worth. On any date, Guarantor’s Tangible Net Worth shall not have
decreased by (i) twenty percent (20%) or more from Guarantor’s Tangible Net
Worth as of the last Business Day in the third (3rd) month preceding such date;
or (ii) forty percent (40%) or more from 

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

      Guarantor’s
Tangible Net Worth as of the last Business Day in the twelfth (12th) month
preceding such date.

    

     

    (m)           Debt Service Coverage
Ratio. Guarantor’s Debt Service Coverage Ratio for any calendar quarter
shall not be less than 1.4:1.

     

    (n)           ERISA. Guarantor
shall not establish any pension plan for employees which would cause Guarantor
to be subject to ERISA.

     

    (o)           Required Filings.
Guarantor shall promptly provide the Finance Parties with copies of all
documents which Guarantor or any Affiliate of Guarantor is required to file with
the Securities and Exchange Commission in accordance with the 1934 Act or any
rules thereunder or otherwise distributed to its shareholders.

     

    (p)           Examples of
Calculations. Attached hereto as Exhibit A is an
example setting forth the calculation of the covenants described in Sections
9(h) through and including 9(m). Such example is for purposes of illustration
only and does not purport to describe every circumstance in which such
calculations might be performed.

     

    Section
10.       No Marshalling;
Reinstatement.  Guarantor consents and agrees that neither the
Finance Parties nor any Person or entity acting for or on behalf of the Finance
Parties shall be under any obligation to marshal any assets in favor of
Guarantor or against or in payment of any or all of the Guaranteed
Obligations.  Guarantor further agrees that, to the extent that
Borrower, Guarantor or any other guarantor of all or any part of the Guaranteed
Obligations makes a payment or payments to any Finance Party, or any Finance
Party receives any proceeds of collateral, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to Borrower, Guarantor, such other
guarantor or any other Person or entity, under any domestic or foreign
bankruptcy law, state or federal law, common law or equitable cause, or other
provisions of applicable law relating to liquidation, bankruptcy,
administration, examinership, insolvency or creditor's right’ generally, then,
to the extent of such payment or repayment, the part of the Guaranteed
Obligations which has been paid, reduced or satisfied by such amount shall be
reinstated and continued in full force and effect as of the time immediately
preceding such initial payment, reduction or satisfaction.

     

    Section
11.       Subrogation.  Guarantor
(i) shall have no right of subrogation with respect to the Guaranteed
Obligations prior to payment in full of all Guaranteed Obligations, and
(ii) waives any right to enforce any remedy which Guarantor now or may
hereafter have against Borrower, any endorser or any guarantor of all or any
part of the Guaranteed Obligations or any other Person or entity, and Guarantor
waives any benefit of, and any right to participate in, any security or
collateral given to any Finance Party to secure the payment of all or any part
of the Guaranteed Obligations.

     

    Section
12.       Enforcement; Amendments;
Waivers.  No delay on the part of any Finance Party in the
exercise of any right or remedy arising under this Guaranty, the Loan Documents,
any other related document, or otherwise with respect to all or any part of the
Guaranteed Obligations, shall operate as a waiver thereof, and no single or
partial exercise by any Finance Party of any such right or remedy shall preclude
any further exercise thereof. No modification or waiver of any of the provisions
of this Guaranty shall be binding upon any Finance Party, except as expressly
set forth in a writing duly signed and delivered by such Finance
Party.  Failure by any Finance Party at any time or times hereafter to
require strict performance by Borrower, Guarantor, any other guarantor of all or
any part of the Guaranteed Obligations or any other Person or entity of any of
the provisions, warranties, terms and conditions contained in the Loan Documents
or any other related document now or at any time or times hereafter executed and
delivered to any Finance Party shall not waive, affect or diminish any right of
such Finance Party at any time or times hereafter to demand strict performance
thereof.  Any determination by a court of competent jurisdiction which
has become final by appeal or lapse of time for appeal of the 

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

      amount
of the Guaranteed Obligations owing by Guarantor or Borrower to the Finance
Parties shall be conclusive and binding on Guarantor irrespective of whether
Guarantor was a party to the suit or action in which such determination was
made.

    

     

    Section
13.       Effectiveness;
Termination.  This Guaranty shall become effective upon its
execution by Guarantor and shall continue in full force and effect and may not
be terminated or otherwise revoked, but shall be terminated upon the termination
of the Loan Documents and payment in full of the Guaranteed Obligations (in
cash), without further action of the parties, subject to the provisions of this
Guaranty which provisions expressly survive termination (including, without
limitation, the second sentence of Section 10 of this Guaranty).  If,
notwithstanding the foregoing, Guarantor shall have any right under applicable
law to terminate or revoke this Guaranty, Guarantor agrees that, except as
provided in the preceding sentence, such termination or revocation shall not be
effective until a written notice of such revocation or termination, specifically
referring hereto, signed by Guarantor is actually received by the Finance
Parties.  Such notice shall not affect the right and power of any
Finance Party to enforce rights arising prior to receipt of the
notice.

     

    Section
14.       Successors and
Assigns.  This Guaranty shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, except that Guarantor may not assign or otherwise transfer any of its
rights or obligations hereunder (and any attempted assignment or transfer by
Guarantor shall be null and void).  Nothing in this Guaranty,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
and, to the extent expressly contemplated hereby, the Affiliates of the Finance
Parties) any legal or equitable right, remedy or claim under or by reason of
this Guaranty.

     

    Section
15.       Governing
Law.  This Guaranty shall be governed by New York law without
reference to choice of law doctrine.

     

    Section
16.       Submission to Jurisdiction;
Waivers.  GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY:

     

    (a)           SUBMITS FOR ITSELF AND ITS PROPERTY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY, OR FOR RECOGNITION
AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF ENGLAND, COURTS OF THE STATE OF NEW YORK, THE
FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND APPELLATE COURTS FROM ANY THEREOF;

     

    (b)           CONSENTS THAT ANY SUCH ACTION OR
PROCEEDING MAY BE BROUGHT IN SUCH COURTS, AND TO THE EXTENT PERMITTED BY LAW,
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE
SAME;

     

    (c)           AGREES THAT SERVICE OF PROCESS IN ANY
SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL),
POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH
OTHER ADDRESS OF WHICH ANY FINANCE PARTY SHALL HAVE BEEN NOTIFIED;
AND

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (d)           AGREES THAT NOTHING HEREIN SHALL
AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER
JURISDICTION.

     

    Section
17.      Waiver of Jury
Trial.  GUARANTOR AND EACH FINANCE PARTY HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.

     

    Section
18.       Notices.  All
notices, requests and other communications concerning this Guaranty shall be
given or made in writing (including, without limitation, by telex or telecopy)
delivered to Guarantor at the “Address for Notices” specified below its name on
the signature page hereof and delivered to the Finance Parties as
follows:

     

    Morgan
Stanley Mortgage Servicing Ltd.

    20
Cabot Square

    Canary
Wharf, London

    United
Kingdom, E14 4QW

    Attention:
Louis Mensah

    Telephone:
+44 20 677 3041

    Facsimile:
+44 20 7056 0242

    

    

    and

    

    Morgan
Stanley Principal Funding Inc.

    1585
Broadway

    New
York, New York 10036

    Attention:  Louis
Mensah

    Telephone:
+44 20 677 3041

    Facsimile:  +44
20 7056 0242

    

    With
copies to:

    

    Morgan
Stanley SPG Warehouse Group

    1221
Avenue of Americas, 27th
Floor

    New
York, New York 10020

    Attention:
Andrew Neuberger

    Telephone:
+1 212 762 6401

    Facsimile:
+1 212 507 4137

    

    Morgan
Stanley Law Division

    1221
Avenue of the Americas, 5th
Floor

    New
York, New York 10020

    Attention:
Su Sun Bai, Esq.

    Telephone:
+1 212 761 4729

    Facsimile:
+1212 507 5834

    

    Clifford
Chance US LLP

    31
West 52nd
Street

    New
York, New York 10019

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

     

    Attention:
David C. Djaha, Esq.

    Telephone:
+1 212 878 8158

    Facsimile:
+1 212 878 8375

    

    or,
as to any party, at such other address as shall be designated by such party in a
written notice to each other party. All such communications shall be deemed to
have been duly given when transmitted by telex or telecopy or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.

    

    Section
19.       Entire Agreement;
Severability.  This Guaranty contains the final agreement with
respect to the matters contained herein by Guarantor and may not be contradicted
by evidence of prior or contemporaneous agreements, or subsequent oral
agreements, between Guarantor the Finance Parties.  If any of the
provisions of this Guaranty shall be held invalid or unenforceable, this
Guaranty shall be construed as if not containing such provisions, and the rights
and obligations of the parties hereto shall be construed and enforced
accordingly.

     

    [SIGNATURE
PAGE FOLLOWS]

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    
      

       

      IN
WITNESS WHEREOF, this Guaranty has been duly executed by Guarantor as an
instrument under seal as of the day and year first set forth above.

       

       

      

       

      
        	
                GUARANTOR

              	
                Address for
      Notices:

              	 
      
	 	 	 
	
                ANTHRACITE
      CAPITAL, INC.

              	 
      	 
      
	
                a
      Maryland corporation

              	
                40
      East 52nd
      Street

              	 
      
	 
      	
                New
      York, NY  10022

              	 
      
	
                By:

              	
                /s/
      Richard Shea

              	 
      	
                Attention:
      Mr. Richard Shea

              	 
      
	 
      	
                Name:

              	
                Richard
      Shea

              	
                Telecopier
      No.: +1 212 754 8758

              	 
      
	 
      	
                Title:

              	
                President
      and Chief Operating Officer

              	
                Telephone
      No.: +1 212 754 5579

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                With
      a copy to:

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                Latham
      & Watkins LLP

              	 
      
	 
      	 
      	
                885
      Third Avenue

              	 
      
	 
      	 
      	
                New
      York, New York 10022

              	 
      
	 
      	 
      	
                Attention:
      David M. Stewart, Esq. (039089-0069)

              	 
      
	 
      	 
      	
                Facsimile
      No.: +1 212 751 4864

              	 
      
	 
      	 
      	
                Telephone
      No.: +1 212 906 1832

              	 
      
	 
      	 
      	 
      	 
      

      

      

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

       

      

        Exhibit
A

        Examples of Calculations of
the Covenants Described in Sections 9(h) through and including
9(m)

        

        Schedule
1 to Compliance Certificate

        

        Anthracite
Capital, Inc. and its consolidated subsidiaries

        (in
thousands of dollars)

        For
Quarter Ended September 30, 2007

        Date
Prepared:  November 15, 2007

        

        
          	
                  MAINTENANCE
      OF TANGIBLE NET WORTH:

                	 
      
	
                   

                  FINANCIAL
      COVENANT:

                   

                	 
      
	
                  Base
      Tangible Net Worth

                	
                  $400,000

                
	
                  Plus:
      75% any equity raised by the Guarantor since the Guaranty
    date

                	
                  -

                
	
                  Minimum
      Tangible Net Worth Required

                	
                  $400,000

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                  Shareholder’s
      equity at September 30, 2007

                	 
      	
                  $593,460

                
	
                  Deduct:  Amounts
      due from affiliates

                  Deduct:
      Intangible assets

                	 
      	
                  -

                  -

                
	 
      	 
      	 
      
	
                  Tangible
      Net Worth

                	 
      	
                  $593,460

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                  TANGIBLE
      NET WORTH IS IN EXCESS OF FINANCIAL COVENANT

                	 
      
	 
      	 
      
	 
      	 
      
	
                  MAINTENANCE
      OF RATIO OF RECOURSE DEBT TO TANGIBLE NET WORTH:

                	 
      
	 
      	 
      
	
                  Total
      borrowings at September 30, 2007

                	
                  $4,267,675

                
	
                  Deduct:  Borrowings
      secured by commercial mortgage loan pools

                	
                  (1,230,251)

                
	
                  Deduct:  CDO’s

                	
                  (1,814,231)

                
	
                  Total
      recourse debt at September 30, 2007

                	
                  $1,223,194

                
	 
      	 
      
	
                  Tangible
      net worth at September 30, 2007

                	
                  $593,460

                
	 
      	 
      
	
                  Ratio
      of recourse debt to tangible net worth

                	
                  2.1
      to 1

                
	 
      	 
      
	
                  FINANCIAL
      COVENANT:

                	 
      
	 
      	 
      
	
                  Ratio
      of its Recourse Debt to Tangible Net Worth to not be greater than 3:0
      to 1:0.

                
	 
      	 
      
	
                  RATIO
      OF RECOURSE DEBT TO TANGIBLE NET WORTH IS IN BOUNDS OF
      COVENANT

                
	 
      	 
      
	
                  MAINTENANCE
      OF LIQUIDITY:

                	 
      
	
                  FINANCIAL
      COVENANT:

                	 
      
	
                  Total
      Mark-to-Market Indebtedness

                	
                  $729,109

                
	
                  Minimum
      Liquidity (5% of
      Mark-to-Market Indebtedness)

                	
                  $36,455

                
	 
      	 
      
	 
      	 
      

        

         

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        
 

        
          	
                  Liquid
      Assets at September 30, 2007

                	
                  $122,185

                
	 
      	 
      
	
                  LIQUIDITY
      IS IN EXCESS OF FINANCIAL COVENANT

                
	 
      	 
      
	
                  NET
      INCOME:

                	 
      
	
                  FINANCIAL
      COVENANT:

                	 
      
	
                  Minimum
      Net Income for two consecutive fiscal quarters > one
    dollar

                	
                  $1

                
	 
      	
                  $15,386

                
	
                  Net
      Income as of 9/30/07

                	
                  $23,777

                
	
                  Net
      Income as of 6/30/07

                	
                  $39,163

                
	
                  Total
      Net Income

                	 
      
	 
      
	
                  NET
      INCOME IS IN EXCESS OF FINANCIAL COVENANT

                
	 
      	 
      
	
                  CHANGES
      IN TANGIBLE NET WORTH:

                	 
      
	
                  (i)

                	 
      
	
                  Tangible
      Net Worth 9/30/07

                	
                  $593,460

                
	
                  Tangible
      Net Worth 6/30/07

                	
                  $794,742

                
	
                  %
      Change in Tangible Net Worth

                	
                  -25%

                
	 
      	 
      
	
                  (ii)

                	 
      
	
                  Tangible
      Net Worth 9/30/07

                	
                  $593,460

                
	
                  Tangible
      Net Worth 9/30/06

                	
                  $652,166

                
	
                  %
      Change in Tangible Net Worth

                	
                  -9%

                
	 
      	 
      
	
                  FINANCIAL
      COVENANT:

                	 
      
	
                  Tangible
      Net Worth shall decrease by:

                	 
      
	
                  (i)
      20% or more from Tangible Net Worth as of the last Business Day
      in

                	 
      
	
                  the
      third month preceding such date;

                	 
      
	
                  (ii)
      40% or more from Tangible Net Worth as of the last Business Day
      in

                	 
      
	
                  the
      twelfth month preceding such date

                	 
      
	 
      	 
      
	 
      	 
      
	
                  DEBT
      SERVICE COVERAGE:

                	 
      
	
                  Consolidated
      Net Income Before Preferred Stock Dividends

                	
                  $15,386

                
	 
      	
                  Plus:

                	
                  Depreciation
      and amortization

                	
                  –

                
	 
      	 
      	
                  Recourse
      Cash interest expense

                	
                  21,029

                
	 
      	 
      	
                  Net
      (Gain) Loss on real estate held for sale

                	
                  –

                
	 
      	 
      	
                  Net
      (Gain) Loss on securities

                	
                  5,766

                
	 
      	 
      	
                  Income
      taxes

                	
                  –

                
	 
      	 
      	
                  GAAP
      Earning from Equity Investments

                	
                  (6,611)

                

        

        

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

        
 

        
          	 
      	 
      	
                  Loss
      on Impairment of Assets (EITF 99-20)

                	
                  2,938

                
	 
      	 
      	
                  Incentive
      Fee- paid in stock

                	
                  497

                
	 
      	 
      	
                  Hedge
      Ineffectiveness

                	
                  107

                
	 
      	 
      	
                  Interest
      Accretion (Amortization)

                	
                  (3,485)

                
	 
      	 
      	
                  Cash
      Distributions from Equity Investments

                	
                  3,070

                
	 
      	
                  FUNDS
      FROM OPERATIONS

                	
                  38,697

                
	 
      	 
      	
                  Recourse
      Cash interest expense

                	
                  21,029

                
	 
      	 
      	
                  DSCR

                	
                  1.8
      to 1

                
	
                  FINANCIAL
      COVENANT:

                	 
      	 
      
	
                  Ratio
      to be greater than 1.40 to 1.0

                	 
      
	 
      
	
                  DSCR
      RATIO IS IN EXCESS OF FINANCIAL
COVENANT

                

        

        

      

      
         

         

        

        

        

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

        

        Exhibit
B

        Subsidiaries
of Guarantor

        

        Anthracite
Capital MS Limited

         

        Anthracite
Capital BOFA Limited

         

        Anthracite
Funding, LLC

         

        Anthracite
CDO Depositor, LLC

         

        Anthracite
CDO I Ltd.

         

        Anthracite
CDO I Corp.

         

        Anthracite
CDO II Depositor, LLC

         

        Anthracite
CDO II Ltd.

         

        Anthracite
CDO II Corp.

         

        Anthracite
CDO III Depositor, LLC

         

        Anthracite
CDO III Ltd.

         

        Anthracite
CDO III Corp.

         

        Anthracite
2004-HY1 Depositor, LLC

         

        Anthracite
2004-HY1 Ltd.

         

        Anthracite
2004-HY1 Corp.

         

        Anthracite
2005-HY2 Depositor, LLC

         

        Anthracite
2005-HY2 Ltd.

         

        Anthracite
2005-HY2 Corp.

         

        Anthracite
Capital Limited

         

        Anthracite
Capital DB Limited

         

        Anthracite
Funding ML, LLCfirsthand_ex4a.htm

    Appendix
      B

    

    AGREEMENT
      AND PLAN OF REORGANIZATION

    

    This
      AGREEMENT AND PLAN OF REORGANIZATION (“Agreement”) is made as of this ___ day of
      February, 2008 by and between Firsthand Technology Value Fund (the “Acquiring
      Fund”) and Firsthand Technology Innovators Fund (the “Acquired Fund”), each of
      which is a series of Firsthand Funds, a Delaware statutory trust (the
“Trust”).

    

    WHEREAS,
      the Trust is an open-end management investment company registered with the
      Securities and Exchange Commission (the “SEC”) under the Investment Company Act
      of 1940, as amended (the “1940 Act”);

    

    WHEREAS,
      the parties desire that the Fund Assets and Liabilities (as defined below)
      of
      the Acquired Fund be conveyed to and acquired and assumed by the Acquiring
      Fund
      in exchange for shares of equal U.S. dollar value of the Acquiring Fund which
      shall thereafter promptly be distributed to the shareholders of the Acquired
      Fund in connection with its liquidation as described in this Agreement (such
      acquisition and assumption of the Acquired Fund’s Fund Assets and Liabilities by
      the Acquiring Fund shall be referred to as the  “TIF Reorganization”);
      and

    

    WHEREAS,
      the parties intend that the TIF Reorganization qualify as a “reorganization,”
within the meaning of Section 368(a) of the Internal Revenue Code of 1986,
      as amended (the “Code”), and that the Acquiring Fund and the Acquired Fund will
      each be a “party to a reorganization,” within the meaning of Section 368(b)
      of the Code, with respect to the TIF Reorganization.

    

    NOW,
      THEREFORE, in accordance with the terms and conditions described herein, the
      Acquired Fund and Acquiring Fund shall be consolidated as follows:

    

    
      	
              1.  

            	
              Conveyance
                of Fund
                Assets and Liabilities of the Acquired
                Fund.

            

    

    

    
      	
              (a)  

            	
              Except
                as provided below, at the Effective Time of the Reorganization (as
                defined
                in Section 8) all assets of every kind, and all interests, rights,
                privileges and powers of the Acquired Fund (the “Fund Assets”), subject to
                all liabilities of the Acquired Fund existing as of the Effective
                Time of
                the Reorganization (the “Liabilities”), shall be transferred by the
                Acquired Fund to the Acquiring Fund and shall be accepted and assumed
                by
                the Acquiring Fund, as more particularly set forth in this Agreement,
                such
                that at and after the Effective Time of the Reorganization:  (i)
                all Fund Assets of the Acquired Fund shall become the assets of the
                Acquiring Fund; and (ii) all Liabilities of the Acquired Fund shall
                attach
                to the Acquiring Fund, enforceable against the Acquiring Fund to
                the same
                extent as if originally incurred by the Acquiring
                Fund.

            

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      	
              (b)  

            	
              It
                is understood and agreed that the Fund Assets shall include all property
                and assets of any nature whatsoever, including, without limitation,
                all
                cash, cash equivalents, securities, claims (whether absolute or
                contingent, known or unknown, accrued or unaccrued) and receivables
                (including dividend and interest receivables) owned or exercisable
                by the
                Acquired Fund, and any deferred or prepaid expenses shown as an asset
                on
                the Acquired Fund’s books and that the Liabilities of the Acquired Fund
                shall include all liabilities, whether known or unknown, accrued
                or
                unaccrued, absolute or contingent, in all cases, existing at the
                Effective
                Time of the Reorganization.

            

    

    

    
      	
              (c)  

            	
              It
                is understood and agreed that the Acquired Fund may sell any of the
                securities or other assets it holds prior to the Effective Time of
                the
                Reorganization but will not, without the prior approval of the Acquiring
                Fund, acquire any additional securities other than securities that
                the
                Acquiring Fund is permitted to purchase in accordance with its stated
                investment objective and policies.  At least ten (10) business
                days prior to the Closing Date (as defined in Section 8), the Acquiring
                Fund will advise the Acquired Fund of any investments held by the
                Acquired
                Fund that the Acquiring Fund would not be permitted to hold, pursuant
                to
                its stated investment objective and policies or otherwise.  The
                Acquired Fund, if requested by the Acquiring Fund, will dispose of
                any
                such securities prior to the Closing Date to the extent practicable
                and
                consistent with applicable legal requirements.  In addition, if
                it is determined that the investment portfolios of the Acquired Fund
                and
                the Acquiring Fund, when aggregated, would contain investments exceeding
                certain percentage limitations applicable to the Acquiring Fund,
                then the
                Acquired Fund, if requested by the Acquiring Fund, will dispose of
                a
                sufficient amount of such investments as may be necessary to avoid
                violating such limitations as of the Effective Time of the
                Reorganization.  The Acquired Fund will endeavor to discharge
                all of its known liabilities and obligations prior to the Closing
                Date.

            

    

    

    
      	
              (d)  

            	
              The
                Fund Assets shall be transferred and conveyed to the Acquiring Fund
                on the
                following basis:

            

    

    

    
      	
            	
              (1)  

            	
              In
                exchange for the transfer of the Fund Assets, the Acquiring Fund
                shall
                simultaneously issue to the Acquired Fund at the Effective Time of
                the
                Reorganization full and fractional shares of the Acquiring Fund having
                an
                aggregate net asset value equal to the net value of the Fund Assets
                minus
                Liabilities so conveyed and assumed, all determined in accordance
                with
                this Agreement.  In this regard, the number of full and
                fractional shares of the Acquiring Fund delivered to the Acquired
                Fund
                shall be determined by dividing the value of the Fund Assets minus
                Liabilities, computed in the manner and as of the time and date set
                forth
                in this Agreement, by the net asset value of one Acquiring Fund share
                of
                computed in the manner and as of the time and date set forth in this
                Agreement.

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	
            	
              (2)  

            	
              The
                net asset value of shares to be delivered by the Acquiring Fund,
                and the
                net value of the Fund Assets minus Liabilities to be conveyed by
                the
                Acquired Fund and assumed by the Acquiring Fund, shall, in each case,
                be
                determined as of the Valuation Time as defined in Section
                3.  The net asset value of shares of the Acquiring Fund shall be
                computed in accordance with its then current valuation
                procedures.  In determining the value of the Fund Assets, each
                security to be included in the Fund Assets shall be priced in accordance
                with the Acquiring Fund’s then current valuation
                procedures.

            

    

    

    
      	
              2.  

            	
              Liquidation
                of the
                Acquired Fund.  At the Effective Time of the
                Reorganization, the Acquired Fund shall make a liquidating distribution
                to
                its shareholders as follows:  Shareholders of record of the
                Acquired Fund shall be credited with full and fractional shares of
                the
                shares that are issued by the Acquiring Fund in connection with the
                TIF
                Reorganization corresponding to the Acquired Fund shares that are
                held of
                record by the shareholder at the Effective Time of the
                Reorganization.  Each such shareholder also shall have the right
                to receive any unpaid dividends or other distributions which were
                declared
                before the Effective Time of the Reorganization with respect to the
                Acquired Fund shares that are held of record by the shareholder at
                the
                Effective Time of the Reorganization, and the Trust shall record
                on its
                books the ownership of the Acquiring Fund shares by such shareholders
                (the
                “Transferor Record Holders”).  All of the issued and outstanding
                shares of the Acquired Fund at the Effective Time of the Reorganization
                shall be redeemed and canceled on the books of the Trust at such
                time.  As soon as reasonably possible after the Effective Time
                of the Reorganization, the Trust shall wind up the affairs of the
                Acquired
                Fund and shall file any final regulatory reports, including but not
                limited to any Form N-SAR and Rule 24f-2 filings, with respect to the
                Acquired Fund, and also shall take all other steps as are necessary
                and
                proper to effect the termination or declassification of the Acquired
                Fund
                in accordance with all applicable laws.  Subject to the
                provisions of this Agreement at an appropriate time as determined
                by the
                officers of the Trust, upon the advice of counsel, the Acquired Fund
                will
                be dissolved and unwound under the laws of the State of
                Delaware.

            

    

    

    
      	
              3.  

            	
              Valuation
                Time.  The “Valuation Time” shall be the time as of which
                the net asset value of shares of the Acquired Fund and the Acquiring
                Fund
                are determined pursuant to their respective valuation procedures
                on the
                Closing Date or such earlier or later time as may be mutually agreed
                to in
                writing by the parties hereto.

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	
              4.  

            	
              Certain
                Representations, Warranties and Agreements of the Trust on behalf
                of the
                Acquired Fund.  The Trust, on behalf of itself and, where
                appropriate, on behalf of the Acquired Fund, represents and warrants
                as
                follows:

            

    

    

    
      	
              (a)  

            	
              The
                Acquired Fund is duly organized as a series of the Trust, which is
                a
                business trust duly formed, validly existing and in good standing
                under
                the laws of the State of Delaware.  The Trust is registered with
                the SEC as an open-end management investment company under the 1940
                Act,
                and such registration is in full force and
                effect.

            

    

    

    
      	
              (b)  

            	
              The
                Trust has the power to own all of the Acquired Fund’s properties and
                assets and to consummate the transactions contemplated herein, on
                behalf
                of the Acquired Fund and has or will have at the Effective Time of
                the
                Reorganization all necessary federal, state and local authorizations
                to
                carry on its business as now being conducted and to consummate the
                transactions contemplated by this
                Agreement.

            

    

    

    
      	
              (c)  

            	
              This
                Agreement has been duly authorized by the Board of Trustees of the
                Trust
                on behalf of the Acquired Fund, and has been executed and delivered
                by
                duly authorized officers of the Trust, and represents a valid and
                binding
                contract, enforceable in accordance with its terms, subject as to
                enforcement to bankruptcy, insolvency, reorganization, arrangement,
                moratorium, and other similar laws of general applicability relating
                to or
                affecting creditors’ rights and to general equity
                principles.  The execution and delivery of this Agreement does
                not, and, subject to the approval of shareholders referred to in
                Section
                7, the consummation of the transactions contemplated by this Agreement
                will not, violate the Amended and Restated Declaration of Trust or
                the
                By-Laws of the Trust, or any material agreement or arrangement to
                which
                the Trust is a party or by which it is
                bound.

            

    

    

    
      	
              (d)  

            	
              The
                Acquired Fund has elected to qualify and has qualified as a regulated
                investment company under Part I of Subchapter M of Subtitle A, Chapter
                1,
                of the Code, as of and since its formulation; and it qualifies and
                shall
                continue to qualify as a regulated investment company for its taxable
                year
                ending upon its liquidation.

            

    

    

    
      	
              (e)  

            	
              The
                Trust has valued, and will continue to value, the portfolio securities
                and
                other assets of the Acquired Fund in accordance with applicable legal
                requirements.

            

    

    

    
      	
              (f)  

            	
              The
                combined proxy statement/prospectus and form of proxy included within
                the
                Trust’s registration statement on Form N-14 (the “N-14 Registration
                Statement”) from its effective date with the SEC through the time of the
                shareholder meeting referred to in Section 7 and the Effective Time
                of the
                Reorganization, insofar as they relate to the Trust or the Acquired
                Fund
                (i) shall comply in all material respects with the provisions of the
                Securities Act of 1933, as amended (the “1933 Act”), the Securities
                Exchange Act of 1934, as amended (the “1934 Act”) and the 1940 Act, the
                rules and regulations thereunder, and applicable state securities
                laws,
                and (ii) shall not contain any untrue statement of a material fact
                or omit
                to state a material fact required to be stated therein or necessary
                to
                make the statements made therein not
                misleading.

            

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      	
              (g)  

            	
              All
                of the issued and outstanding shares of the Acquired Fund have been
                validly issued and are fully paid and non-assessable, and were offered
                for
                sale and sold in conformity with the registration requirements of
                all
                applicable federal and state securities
                laws.

            

    

    

    
      	
              (h)  

            	
              The
                Trust shall operate the business of the Acquired Fund in the ordinary
                course between the date hereof and the Effective Time of the
                Reorganization, except that the Trust shall complete all measures
                in
                respect of the Acquired Fund prior to the Effective Time of the
                Reorganization to ensure that the TIF Reorganization qualifies as
                a
                “reorganization” within the meaning of Section 368(a) of the Code,
                regardless of whether such measures are in the ordinary
                course.  It is understood that such ordinary course of business
                will include the declaration and payment of customary dividends and
                distributions and any other dividends and distributions deemed advisable
                in anticipation of the TIF Reorganization.  Notwithstanding
                anything herein to the contrary, the Trust shall take all appropriate
                action necessary in order for the Trust to receive the opinion(s)
                provided
                for in Sections 9(f) and 10(d).

            

    

    

    
      	
              (i)  

            	
              At
                the Effective Time of the Reorganization, the Acquired Fund will
                have good
                and marketable title to the Fund Assets and full right, power and
                authority to assign, deliver and otherwise transfer such
                assets.

            

    

    

    
      	
            	
              (j)  

            	
              At
                the Effective Time of the Reorganization, all federal and other tax
                returns and reports of the Acquired Fund required by law to have
                been
                filed by such time shall have been filed, and all federal and other
                taxes
                shall have been paid so far as due, or provision shall have been
                made for
                the payment thereof and, to the best knowledge of management of the
                Trust,
                no such return or report shall be currently under audit and no assessment
                shall have been asserted with respect to such returns or
                reports.

            

    

     

    
      	
            	
              (k)  

            	
              Except
                as otherwise disclosed in writing to and accepted by the Trust, on
                behalf
                of the Acquiring Fund, no litigation or administrative proceeding
                or
                investigation of or before any court or governmental body is presently
                pending or, to its knowledge, threatened against the Acquired Fund
                or any
                of its properties or assets that, if adversely determined, would
                materially and adversely affect its financial condition or the conduct
                of
                its business.  The Trust, on behalf of the Acquired Fund, knows
                of no facts which might form the basis for the institution of such
                proceedings and is not a party to or subject to the provisions of
                any
                order, decree or judgment of any court or governmental body which
                materially and adversely affects its business or its ability to consummate
                the transactions herein contemplated;
                and

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	
              (l)  

            	
              Since
                December 31, 2007, there has not been any material adverse change
                in the
                Acquired Fund’s financial condition, assets, liabilities or business,
                other than changes occurring in the ordinary course of business,
                or any
                incurrence by the Acquired Fund of indebtedness maturing more than
                one
                year from the date such indebtedness was incurred, except as otherwise
                disclosed to and accepted by the Acquiring Fund.  For the
                purposes of this subparagraph (l), a decline in net asset value per
                share
                of Acquired Fund shares due to declines in market values of securities
                held by the Acquired Fund, the discharge of Acquired Fund liabilities,
                or
                the redemption of Acquired Fund shares by shareholders of the Acquired
                Fund shall not constitute a material adverse
                change.

            

    

     

    
      	
              5.  

            	
              Certain
                Representations, Warranties and Agreements of the Trust on Behalf
                of the
                Acquiring Fund.  The Trust, on behalf of itself and where
                appropriate, on behalf of the Acquiring Fund, represents and warrants
                as
                follows:

            

    

    

    
      	
              (a)  

            	
              The
                Acquiring Fund is duly organized as a series of the Trust which is
                a
                business trust duly formed, validly existing and in good standing
                under
                the laws of the State of Delaware and is registered with the SEC
                as an
                open-end management investment company under the 1940 Act and such
                registration is in full force and
                effect.

            

    

    

    
      	
              (b)  

            	
              The
                Trust has the power to own all of its properties and assets and to
                consummate the transactions contemplated herein, and has or will
                have at
                the Effective Time of the Reorganization all necessary federal, state
                and
                local authorizations to carry on its business as now being conducted
                and
                to consummate the transactions contemplated by this
                Agreement.

            

    

    

    
      	
              (c)  

            	
              This
                Agreement has been duly authorized by the Board of Trustees of the
                Trust
                on behalf of the Acquiring Fund, and executed and delivered by duly
                authorized officers of the Trust, and represents a valid and binding
                contract, enforceable in accordance with its terms, subject as to
                enforcement to bankruptcy, insolvency, reorganization, arrangement,
                moratorium and other similar laws of general applicability relating
                to or
                affecting creditors’ rights and to general equity
                principles.  The execution and delivery of this Agreement does
                not, and the consummation of the transactions contemplated by this
                Agreement will not, violate the Amended and Restated Declaration
                of Trust
                of the Trust or any material agreement or arrangement to which it
                is a
                party or by which it is bound.

            

    

    

    
      	
              (d)  

            	
              The
                Acquiring Fund has elected to qualify and has qualified as a regulated
                investment company under Part I of Subchapter M of Subtitle A, Chapter
                1,
                of the Code, as of and since its formation; and it qualifies and
                shall
                continue to qualify as a regulated investment company for its current
                taxable year.

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      	
              (e)  

            	
              The
                Trust has valued, and will continue to value, the portfolio securities
                and
                other assets of the Acquiring Fund in accordance with applicable
                legal
                requirements.

            

    

    

    
      	
              (f)  

            	
              The
                N-14 Registration Statement from its effective date with the SEC
                through
                the time of the shareholder meeting referred to in Section 7 and
                at the
                Effective Time of the Reorganization, insofar as it relates to the
                Trust
                or the Acquiring Fund (i) shall comply in all material respects with
                the provisions of the 1933 Act, the 1934 Act and the 1940 Act, the
                rules
                and regulations thereunder, and state securities laws, and (ii) shall
                not
                contain any untrue statement of a material fact or omit to state
                a
                material fact required to be stated therein or necessary to make
                the
                statements made therein not
                misleading.

            

    

    

    
      	
              (g)  

            	
              The
                shares of the Acquiring Fund to be issued and delivered to the Acquired
                Fund for the account of the shareholders of the Acquired Fund, pursuant
                to
                the terms hereof, shall have been duly authorized as of the Effective
                Time
                of the Reorganization and, when so issued and delivered, shall be
                duly and
                validly issued, fully paid and non-assessable, and no shareholder
                of the
                Acquiring Fund shall have any preemptive right of subscription or
                purchase
                in respect thereto.

            

    

    

    
      	
              (h)  

            	
              All
                of the issued and outstanding shares of the Acquiring Fund have been
                validly issued and are fully paid and non-assessable, and were offered
                for
                sale and sold in conformity with the registration requirements of
                all
                applicable federal and state securities
                laws.

            

    

    

    
      	
              (i)  

            	
              The
                Trust shall operate the business of the Acquiring Fund in the ordinary
                course between the date hereof and the Effective Time of the
                Reorganization, it being understood that such ordinary course of
                business
                will include the declaration and payment of customary dividends and
                distributions and any other dividends and distributions deemed advisable
                in anticipation of the TIF Reorganization.  Notwithstanding
                anything herein to the contrary, the Trust shall take all appropriate
                action necessary in order for the Trust to receive the opinion(s)
                provided
                for in Sections 9(f) and 10(d).

            

    

     

    
      	
              (j)  

            	
              At
                the Effective Time of the Reorganization, all federal and other tax
                returns and reports of the Acquiring Fund required by law to have
                been
                filed by such time shall have been filed, and all federal and other
                taxes
                shall have been paid so far as due, or provision shall have been
                made for
                the payment thereof and, to the best knowledge of management of the
                Trust,
                no such return or report shall be currently under audit and no assessment
                shall have been asserted with respect to such returns or
                reports.

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      	
              (k)  

            	
              Except
                as otherwise disclosed in writing to and accepted by the Trust on
                behalf
                of the Acquired Fund, no litigation or administrative proceeding
                or
                investigation of or before any court or governmental body is presently
                pending or to the Acquiring Fund’s knowledge, threatened against the
                Trust, on behalf of the Acquiring Fund, or any of the Acquiring Fund’s
                properties or assets that, if adversely determined, would materially
                and
                adversely affect the Acquiring Fund’s financial condition or the conduct
                of its business.  The Trust, on behalf of the Acquiring Fund,
                knows of no facts which might form the basis for the institution
                of such
                proceedings and is not a party to or subject to the provisions of
                any
                order, decree or judgment of any court or governmental body which
                materially and adversely affects the Acquiring Fund’s business or its
                ability to consummate the transactions herein
                contemplated.

            

    

    

    
      	
              (l)  

            	
              Since
                December 31, 2007, there has not been any material adverse change
                in the
                Acquiring Fund’s financial condition, assets, liabilities or business,
                other than changes occurring in the ordinary course of business,
                or any
                incurrence by the Acquiring Fund of indebtedness maturing more than
                one
                year from the date such indebtedness was incurred, except as otherwise
                disclosed to an accepted by the Acquired Fund.  For purposes of
                this subparagraph (l), a decline in net asset value per share of
                the
                Acquiring Fund shares due to declines in market values of securities
                held
                by the Acquiring Fund, the discharge of Acquiring Fund liabilities,
                or the
                redemption of Acquiring Fund shares by shareholders of the Acquiring
                Fund,
                shall not constitute a material adverse
                change.

            

    

    

    
      	
              6.  

            	
              Regulatory
                Filings.  The Trust will file the N-14 Registration
                Statement with the SEC.

            

    

    

    
      	
              7.  

            	
              Shareholder
                Action.  After the effective date of the N-14
                Registration Statement, the Trust shall hold a meeting of the shareholders
                of the Acquired Fund for the purpose of considering and voting
                upon:

            

    

    

    
      	
              (a)  

            	
              approval
                of this Agreement and the TIF Reorganization contemplated hereby;
                and

            

    

    

    
      	
              (b)  

            	
              such
                other matters as may be determined by the Board of Trustees of
                theTrust.

            

    

    

    
      	
              8.  

            	
              Closing
                Date,
                Effective Time of the Reorganization.  The “Closing Date”
                shall be May __, 2008, or such earlier or later dates as the parties
                shall
                agree.  Delivery of the Fund Assets and the shares of the
                Acquiring Fund to be issued pursuant to Section 1 and the liquidation
                of
                the Acquired Fund pursuant to Section 2 shall occur on the day following
                the Closing Date, whether or not such day is a business day, or on
                such
                other date, and at such place and time, as may be mutually agreed,
                by the
                parties hereto.  The date and time at which such actions are
                taken are referred to herein as the “Effective Time of the
                Reorganization.”  To the extent any Fund Assets are, for any
                reason, not transferred at the Effective Time of the Reorganization,
                the
                Trust shall cause such Fund Assets to be transferred in accordance
                with
                this Agreement at the earliest practicable date
                thereafter.

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	
              9.  

            	
              Conditions
                to the
                Trust’s Obligations on Behalf of the Acquiring Fund.  The
                obligations of the Trust, on behalf of the Acquiring Fund, hereunder
                shall
                be subject to the following conditions
                precedent:

            

    

    

    
      	
              (a)  

            	
              This
                Agreement and the TIF Reorganization shall have been approved by
                the Board
                of Trustees of the Trust and by a requisite vote of the shareholders
                of
                the Acquired Fund in the manner required by the Trust’s Amended and
                Restated Declaration of Trust, By-Laws, applicable law and this
                Agreement.

            

    

    

    
      	
              (b)  

            	
              All
                representations and warranties of the Trust made in this Agreement
                shall
                be true and correct in all material respects as if made at and as
                of the
                Valuation Time and the Effective Time of the
                Reorganization.

            

    

    

    
      	
              (c)  

            	
              The
                Trust shall have delivered to the Trust a statement of assets and
                liabilities of the Acquired Fund, showing the tax basis of such assets
                for
                federal income tax purposes by lot and the holding periods of such
                assets,
                as of the Valuation Time.

            

    

    

    
      	
              (d)  

            	
              The
                Trust shall have duly executed and delivered to the Trust such bills
                of
                sale, assignments, certificates and other instruments of transfer
                (“Transfer Documents”) as the Trust may deem necessary or desirable to
                transfer all of the Acquired Fund’s rights, title and interest in and to
                the Fund Assets.

            

    

    

    
      	
              (e)  

            	
              The
                Trust shall have delivered a certificate executed in its name by
                an
                appropriate officer, dated as of the Closing Date, to the effect
                that the
                representations and warranties of the Trust on behalf of the Acquired
                Fund
                made in this Agreement are true and correct at and as of the Valuation
                Time and that, to the best of its knowledge, the Fund Assets include
                only
                assets which the Acquiring Fund may properly acquire under its investment
                objective, policies and limitations and may otherwise be lawfully
                acquired
                by the Acquiring Fund.

            

    

    

    
      	
              (f)  

            	
              The
                Trust shall have received an opinion of Paul, Hastings, Janofsky
&
                Walker LLP, upon which the Acquiring Fund and its shareholders may
                rely,
                in form and substance reasonably satisfactory to the Trust based
                upon
                representations made in certificates provided by the Trust, and/or
                its
                affiliates and/or principal shareholders of the Acquiring Fund and/or
                the
                Acquired Fund to Paul, Hastings, Janofsky & Walker LLP and dated as of
                the Closing Date, substantially to the effect that the TIF Reorganization
                will qualify as a “reorganization” within the meaning of Section 368(a) of
                the Code, and the Acquiring Fund and the Acquired Fund will each
                be a
                “party to a reorganization”, within the meaning of Section 368(b) of the
                Code, with respect to the TIF
                Reorganization.

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	
              (g)  

            	
              The
                N-14 Registration Statement shall have become effective and no stop
                order
                suspending the effectiveness shall have been instituted, or to the
                knowledge of the Trust, contemplated by the
                SEC.

            

    

    

    
      	
              (h)  

            	
              No
                action, suit or other proceeding shall be threatened or pending before
                any
                court or governmental agency in which it is sought to restrain or
                prohibit, or obtain damages or other relief in connection with, this
                Agreement or the transactions contemplated
                herein.

            

    

    

    
      	
              (i)  

            	
              The
                SEC shall not have issued any unfavorable advisory report under Section
                25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin
                consummation of the transactions contemplated by this Agreement under
                Section 25(c) of the 1940 Act.

            

    

    

    
      	
              (j)  

            	
              The
                Trust on behalf of the Acquired Fund shall have performed and complied
                in
                all material respects with each of its agreements and covenants required
                by this Agreement to be performed or complied with by it prior to
                or at
                the Valuation Time and the Effective Time of the
                Reorganization.

            

    

    

    
      	
              (k)  

            	
              The
                Trust shall have received a duly executed instrument whereby the
                Acquiring
                Fund assumes all of the liabilities of the Acquired
                Fund.

            

    

    

    
      	
              (l)  

            	
              Except
                to the extent prohibited by Rule 19b-1 under the 1940 Act, prior
                to the
                Valuation Time, the Acquired Fund shall have declared a dividend
                or
                dividends, with a record date and ex-dividend date prior to the Valuation
                Time, which, together with all previous dividends, shall have the
                effect
                of distributing to its shareholders all of its previously undistributed
                (i) “investment company taxable income” within the meaning of Section
                852(b) of the Code (determined without regarding Section 852(b)(2)(D)
                of
                the Code), (ii) excess of (A) the amount specified in Section
                852(a)(1)(B)(i) of the Code over (B) the amount specified in Section
                852(a)(1)(B)(ii) of the Code, and (iii) “net capital gain” (within the
                meaning of Section 1222(11) of the Code), if any, realized in taxable
                periods or years ending on or before Effective
                Time.

            

    

    

    
      	
              10.  

            	
              Conditions
                to the
                Trust’s Obligations on Behalf of the Acquired Fund.  The
                obligations of the Trust, on behalf of the Acquired Fund, hereunder
                shall
                be subject to the following conditions
                precedent:

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	
              (a)  

            	
              This
                Agreement and the TIF Reorganization shall have been approved by
                the Board
                of Trustees of the Trust on behalf of the Acquiring
                Fund.

            

    

    

    
      	
              (b)  

            	
              All
                representations and warranties of the Trust made in this Agreement
                shall
                be true and correct in all material respects as if made at and as
                of the
                Valuation Time and the Effective Time of the
                Reorganization.

            

    

    

    
      	
              (c)  

            	
              The
                Trust shall have delivered a certificate executed in its name by
                an
                appropriate officer, dated as of the Closing Date, to the effect
                that the
                representations and warranties of the Acquiring Fund made in this
                Agreement are true and correct at and as of the Valuation
                Time.

            

    

    

    
      	
              (d)  

            	
              The
                Trust shall have received an opinion of Paul, Hastings, Janofsky
&
                Walker LLP, upon which the Acquired Fund and its shareholders may
                rely, in
                form and substance reasonably satisfactory to the Trust, based upon
                representations made in certificates provided by the Trust, and/or
                its
                affiliates and/or principal shareholders of the Acquiring Fund and/or
                the
                Acquired Fund to Paul, Hastings, Janofsky & Walker LLP, and dated as
                of the Closing Date, substantially to the effect that, for federal
                income
                tax purposes, the TIF Reorganization will qualify as a “reorganization”
                within the meaning of Section 368(a) of the Code, and the Acquiring
                Fund
                and the Acquired Fund will each be a “party to a reorganization,” within
                the meaning of Section 368(b) of the Code, with respect to the TIF
                Reorganization.

            

    

    

    
      	
              (e)  

            	
              The
                N-14 Registration Statement shall have become effective and no stop
                order
                suspending such effectiveness shall have been instituted or, to the
                knowledge of the Trust, contemplated by the
                SEC.

            

    

    

    
      	
              (f)  

            	
              No
                action, suit or other proceeding shall be threatened or pending before
                any
                court or governmental agency in which it is sought to restrain or
                prohibit
                or obtain damages or other relief in connection with this Agreement
                or the
                transactions contemplated herein.

            

    

    

    
      	
              (g)  

            	
              The
                SEC shall not have issued any unfavorable advisory report under Section
                25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin
                consummation of the transactions contemplated by this Agreement under
                Section 25(c) of the 1940 Act.

            

    

    

    
      	
              (h)  

            	
              The
                Trust on behalf of the Acquiring Fund shall have performed and complied
                in
                all material respects with each of its agreements and covenants required
                by this Agreement to be performed or complied with by it prior to
                or at
                the Valuation Time and the Effective Time of the
                Reorganization.

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    
      	
              11.  

            	
              Tax
                Matters

            

    

    

    
      	
              (a)  

            	
              The
                Trust hereby represents and warrants on behalf of the Acquiring Fund
                and
                the Acquired Fund that each shall use its best efforts to cause the
                TIF
                Reorganization to qualify, and will not (whether before or after
                consummation of the TIF Reorganization) take any actions that could
                prevent the TIF Reorganization from qualifying, as a “reorganization”
                under the provisions of Section 368 of the
                Code.

            

    

    

    
      	
              (b)  

            	
              Except
                where otherwise required by law, the parties shall not take a position
                on
                any tax returns inconsistent with the treatment of the TIF Reorganization
                for tax purposes as a “reorganization,” within the meaning of Section
                368(a) of the Code and the Acquiring Fund and the Acquired Fund will
                comply with the record keeping and information filing requirements
                of
                Section 1.368-3 of the Treasury Regulation in accordance
                therewith.

            

    

    

    
      	
              12.  

            	
              Survival
                of
                Representations and Warranties.  The representations and
                warranties of the Trust on behalf of the Acquiring Fund and the Trust
                on
                behalf of the Acquired Fund set forth in this Agreement shall survive
                the
                delivery of the Fund Assets to the Acquiring Fund and the issuance
                of the
                shares of the Acquiring Fund at the Effective Time of the Reorganization
                to the Acquired Fund’s
                shareholders.

            

    

    

    
      	
              13.  

            	
              Termination
                of
                Agreement.  This Agreement may be terminated by a party
                at or, in the case of Subsection 13(c), below, at any time prior
                to, the
                Effective Time of the Reorganization by a vote of a majority of its
                Board
                members as provided below:

            

    

    

    
      	
              (a)  

            	
              By
                the Trust on behalf of the Acquiring Fund if the conditions set forth
                in
                Section 9 are not satisfied as specified in said
                Section;

            

    

    

    
      	
              (b)  

            	
              By
                the Trust on behalf of the Acquired Fund if the conditions set forth
                in
                Section 10 are not satisfied as specified in said Section;
                and

            

    

    

    
      	
              (c)  

            	
              By
                resolution of the Trust’s Board of Trustees if circumstances should
                develop that, in its opinion, make proceeding with the agreement
                inadvisable.

            

    

    

    
      	
              14.  

            	
              Governing
                Law.  This Agreement and the transactions contemplated
                hereby shall be governed, construed and enforced in accordance with
                the
                laws of the State of Delaware, except to the extent preempted by
                federal
                law.

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    
      	
              15.  

            	
              Brokerage
                Fees and
                Expenses.

            

    

    

    
      	
              (a)  

            	
              The
                Trust represents and warrants that there are no brokers or finders
                entitled to receive any payments in connection with the transactions
                provided for herein.

            

    

    

    
      	
              (b)  

            	
              Firsthand
                Capital Management, Inc. will be responsible for the expenses related
                to
                entering into and carrying out the provisions of this Agreement,
                whether
                or not the transactions contemplated hereby are
                consummated.

            

    

    

    
      	
              16.  

            	
              Amendments.  This
                Agreement may be amended, modified or supplemented in such manner
                as may
                be mutually agreed upon in writing by the authorized officers of
                the
                Trust; provided, however, that following the meeting of the shareholders
                of the Acquired Fund, no such amendment may have the effect of changing
                the provisions for determining the number of shares of the Acquiring
                Fund
                to be issued to the Transferor Record Holders under this Agreement
                to the
                detriment of such Transferor Record Holders, or otherwise materially
                and
                adversely affecting the Acquired Fund, without the Acquired Fund
                obtaining
                its shareholders’ further approval.

            

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      by
      their duly authorized officers designated below as of the date first written
      above.

    

    

    
      	 	
              FIRSTHAND
                FUNDS

              On
                behalf of Firsthand Technology Innovators Fund

              
              

               

              By:
                 ________________________________                                
                

               

              Name:  Kevin
                Landis

              Title:  President

              
              

               

               

            
	 	
              FIRSTHAND
                FUNDS

              On
                behalf of Firsthand Technology Value Fund

              
              

               

              By:
                 ________________________________                                
                

               

              Name:  Kevin
                Landis

              Title:  President

              
              

            

    

     

    
      
        
        

      

      13

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