Document:

Exhibit
10.60

 

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE
AGREEMENT (this “Agreement”),
dated as of June 29, 2010, is entered into by and among FirstCity
Financial Corporation, a Delaware corporation (the “Company”),
and Värde Investment Partners, L.P., a Delaware limited partnership (the “Investor”).

 

BACKGROUND

 

A.            The Company and the Investor are executing and delivering
this Agreement in reliance upon the exemption from registration afforded by Section 4(2) of
the Securities Act of 1933, as amended (the “Securities
Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United
States Securities and Exchange Commission (the “SEC”) under the Securities Act.

 

B.            The Investor wishes to purchase, and the Company wishes
to sell, upon the terms and conditions stated in this Agreement, that number of
shares of the common stock, par value $0.01 per share, of the Company (the “Common Stock”) as prescribed herein.

 

C.            The Common Stock issued pursuant to this Agreement is
referred to herein as the “Securities.”

 

NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the Company and the Investor agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1          Definitions.  In addition to the terms defined elsewhere in
this Agreement, the following terms have the meanings indicated:

 

“Affiliate” means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed under
Rule 144 under the Securities Act.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Business Day” means any day other than Saturday, Sunday, any
day which shall be a federal legal holiday in the United States or any day on
which national banking institutions in The State of New York are authorized or
required by law or other governmental action to close.

 

“Closing”
has the meaning set forth in Section 2.1(c).

 

“Closing Date”
has the meaning set forth in Section 2.1(c).

 

 

“Common Stock” has the meaning set forth in the Preamble.

 

“Company” has
the meaning set forth in the Preamble.

 

“Company Counsel” means Haley & Olson, P.C., counsel
to the Company.

 

“Contingent Obligation” has the meaning set forth in Section 3.1(x).

 

“Disclosure Materials” has the meaning set forth in Section 3.1(g).

 

“8-K Filing” has the meaning set forth in Section 4.5.

 

“Exchange Act” means the Securities Exchange Act of 1934, as
amended.

 

“GAAP” has the meaning set forth in Section 3.1(g).

 

“Indebtedness” has the meaning set forth in Section 3.1(x).

 

“Indemnified Party” has the meaning set forth in Section 5.3(c).

 

“Indemnifying Party” has the meaning set forth in Section 5.3(c).

 

“Insolvent” has the meaning set forth in Section 3.1(h).

 

“Investment”
has the meaning set forth in Section 2.1(a).

 

“Investor” has the meaning set forth in the Preamble.

 

“Lien” means any lien, charge, claim, security interest, encumbrance,
right of first refusal or other restriction.

 

“Losses” means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including, without limitation,
reasonable attorneys’ fees.

 

“Material Adverse Effect” means any event, circumstance,
change, occurrence or state of facts that (i) has a material adverse
effect on the business, financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole (other than events,
circumstances, changes, occurrences or any state of facts relating to (A) any
change in general economic conditions that affect the industries in which the
Company and its Subsidiaries conduct their business, so long as such changes or
conditions do not adversely affect the Company and its Subsidiaries, taken as a
whole, in a materially disproportionate manner relative to other similarly
situated participants in the industries or markets in which they operate, (B) 
general legal, regulatory, political, business, economic, financial or securities
market conditions in the United States or elsewhere (including fluctuations, in
and of themselves, in the price of the Common Stock), (C) the negotiation,
execution or the announcement of this Agreement, the undertaking and
performance or observance of the obligations contemplated by this Agreement or
necessary to consummate the transactions or the 

 

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consummation of any
transaction by the Company, including the impact thereof on relationships, contractual
or otherwise, with customers, suppliers, distributors, partners or employees, (D) acts
of war, insurrection, sabotage or terrorism, not having a disproportionate
effect on the Company and its Subsidiaries, taken as a whole, relative to other
participants in the industries or markets in which the Company and its
Subsidiaries operate, (E) changes in GAAP or the accounting rules or
regulations of the SEC, (F) the effect of incurring out-of-pocket expenses
in connection with negotiating, entering into, performing or consummating the
transactions contemplated by this Agreement, or (G) the failure, in and of
itself, by the Company to meet any internal or published projections, forecasts
or revenue or earnings predictions for any period ending on or after the date
of this Agreement (it being understood that the causes underlying such failure
may be considered in determining whether a Material Adverse Effect has occurred
or would reasonably be expected to occur)) or (ii) prevents the Company
from performing its obligations under this Agreement; provided, that “material”
and “materially” have correlative meanings.

 

“Material Permits” has the meaning set forth in Section 3.1(s).

 

“Options” means any outstanding rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.

 

“Person” has the
meaning set forth in Section 3.1(x).

 

“Piggyback
Registration” has the meaning set forth in Section 5.1(a).

 

“Previously Disclosed”
with regard to the Company means any information contained in any periodic or
current report filed with the SEC since January 1, 2009, or otherwise
disclosed in a specific section of this Agreement; provided that information
which, on its face, reasonably should indicate to the reader that it relates to
another provision of this Agreement, shall also be deemed to be Previously
Disclosed with respect to such other provision.

 

“Prior Disclosure”
has the meaning set forth in Section 3.2(f).

 

“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, a partial proceeding, such as a deposition), whether commenced or
threatened in writing.

 

“Purchase Price”
has the meaning set forth in Section 2.1(b).

 

“Registrable
Securities” means the Common Stock issued pursuant to the Transaction
Documents, together with any securities issued or issuable upon any stock
split, dividend or other distribution, recapitalization or similar event with
respect to the foregoing.

 

“Regulation D”
has the meaning set forth in the Preamble.

 

“SEC” has the meaning set forth in the Preamble.

 

“SEC Reports”
has the meaning set forth in Section 3.1(g).

 

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“Securities” has the meaning set forth in the Preamble.

 

“Securities Act” has the meaning set forth in the Preamble.

 

“Short Sales” has the meaning set forth in Section 3.2(i).

 

“Trading Day” means (i) a day on which the Common Stock is
traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if
the Common Stock is not listed or quoted on a Trading Market (other than the
OTC Bulletin Board), a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if
the Common Stock is not listed or quoted on any Trading Market, a day on which
the Common Stock is quoted in the over-the-counter market as reported by the
Pink Sheets LLC (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof,
then Trading Day shall mean a Business Day.

 

“Trading Market” means whichever of the New York Stock
Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the
NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which
the Common Stock is listed or quoted for trading on the date in question.

 

“Transaction” has the meaning set forth in Section 3.2(i).

 

“Transaction
Documents” means this Agreement, the schedules and exhibits
attached hereto, and the Transfer Agent Instructions.

 

“Transfer Agent” means American Stock Transfer & Trust
Company, or any successor transfer agent for the Company.

 

“Transfer Agent Instructions” means, with respect to the
Company, the Irrevocable Transfer Agent Instructions, in the form of Exhibit D,
executed by the Company and delivered to and acknowledged in writing by the
Transfer Agent.

 

ARTICLE II

PURCHASE AND SALE

 

2.1          Closing.

 

(a)           At the Closing (as
defined below), the Investor will purchase 150,000 shares of Common Stock (the “Investment”) as calculated pursuant to Section 2.1(b) below.

 

(b)            The purchase price
for the Common Stock constituting the Investment shall be $889,500.00 (the “Purchase Price”) reflecting the closing trading price of the
Common Stock on the Trading Day immediately preceding the date hereof of $5.93
per share.  At the Closing, the Company
shall issue to the Investor 150,000 shares of Common Stock.

 

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(c)           Subject to the terms
and conditions of this Agreement, the issuance, sale and purchase of the Common
Stock constituting the Investment shall take place at a closing (the “Closing”) to be held at a mutually agreeable location on the
date hereof, or at such other date and time as may be agreed upon by the
Company and the Investor (the date upon which the Closing occurs is referred to
herein as the “Closing Date”).

 

2.2          Closing
Deliveries.

 

(a)           At the Closing, the
Company shall deliver or cause to be delivered to the Investor the following:

 

(i)            a copy of the
Company’s irrevocable instructions to the Transfer Agent instructing the
Transfer Agent to deliver, on an expedited basis, one or more stock
certificates, free and clear of all restrictive and other legends (except as
expressly provided in Section 4.1(b) hereof), evidencing the
Investment registered in the name of the Investor;

 

(ii)           an executed copy of
the Investment Agreement, to be effective as of April 1, 2010, by and
among FC Diversified Holdings LLC, FirstCity Servicing Corporation and Värde;

 

(iii)          a legal opinion of
Company Counsel, in the form of Exhibit B, executed by such counsel
and delivered to the Investor; and

 

(iv)          a certificate of the
Secretary of the Company, dated as of the Closing Date, (a) certifying the
resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents
and the issuance of the Securities, (b) certifying the current versions of
the certificate of incorporation, as amended and by-laws of the Company and
(c) certifying as to the signatures and authority of persons signing the
Transaction Documents and related documents on behalf of the Company.

 

(b)           At the Closing, the
Investor shall deliver or cause to be delivered to the Company the Purchase
Price in United States dollars and in immediately available funds, by wire
transfer to an account designated in writing to the Investor by the Company for
such purpose.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

3.1          Representations and Warranties of the Company..
Except as Previously Disclosed, the Company hereby represents and warrants to
the Investor as follows:

 

(a)           Subsidiaries.  The Company owns or controls, directly or
indirectly, all of the capital stock or comparable equity interests of each of
its subsidiaries free and clear of any Lien other than Liens granted to Bank of
Scotland, plc and BoS (USA), Inc. which secure Indebtedness disclosed in
the SEC Reports and Schedule 3.1(h), and all issued and outstanding shares of capital
stock or comparable equity interest of each such subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights.

 

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(b)           Organization and
Qualification. The Company is an entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
with the requisite legal authority to own and use its properties and assets and
to carry on its business as currently conducted.  The Company is not in violation of any of the
provisions of its certificate or articles of incorporation, bylaws or other
organizational or charter documents.  The
Company is duly qualified to do business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case
may be, would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.

 

(c)           Authorization;
Enforcement. The Company has the requisite corporate authority to enter
into and to consummate the transactions contemplated by each of the Transaction
Documents to which it is a party and otherwise to carry out its obligations
hereunder and thereunder.  The execution
and delivery of each of the Transaction Documents to which it is a party by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of the Company and no further consent or action is required by the Company, its
Board of Directors or its stockholders. 
Each of the Transaction Documents to which it is a party has been (or
upon delivery will be) duly executed by the Company and is, or when delivered
in accordance with the terms hereof, will constitute, the valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

 

(d)           No Conflicts.  The execution, delivery and performance by
the Company of the Transaction Documents to which it is a party and the
consummation by the Company of the transactions contemplated hereby and thereby
do not, and will not, (i) conflict with or violate any provision of the
Company’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any material agreement, credit facility, debt or other instrument
(evidencing a Company debt or otherwise) or other material understanding to
which the Company is a party or by which any property or asset of the Company
is bound, or affected, or (iii) result in a material violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company is subject (including,
assuming the accuracy of the representations and warranties of the Investor set
forth in Section 3.2 hereof, federal and state securities laws and
regulations and the rules and regulations of any self-regulatory organization
to which the Company or its securities are subject, including all applicable
Trading Markets), or by which any property or asset of the Company is bound or
affected.

 

(e)           The Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully 

 

6

 

paid
and nonassessable, free and clear of all Liens and will not be subject to
preemptive or similar rights of stockholders (other than those imposed by the
Investor).

 

(f)            Capitalization.  The aggregate number of shares and type of
all authorized, issued and outstanding classes of capital stock, options and
other securities of the Company (whether or not presently convertible into or
exercisable or exchangeable for shares of capital stock of the Company) is set
forth in Schedule 3.1(f) hereto.  All outstanding shares of capital stock are
duly authorized, validly issued, fully paid and nonassessable and have been
issued in compliance in all material respects with all applicable securities
laws.  Except as disclosed in Schedule 3.1(f) hereto,
the Company did not have outstanding on the date hereof any other options,
script rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or entered into any agreement giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common
Stock.  Except as set forth on Schedule
3.1(f) hereto, and except for customary adjustments as a result of
stock dividends, stock splits, combinations of shares, reorganizations, recapitalizations,
reclassifications or other similar events, there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) and the issuance and sale
of the Securities will not obligate the Company to issue shares of Common Stock
or other securities to any Person (other than the Investor) and will not result
in a right of any holder of securities to adjust the exercise, conversion,
exchange or reset price under such securities. 
To the knowledge of the Company, except as disclosed in the SEC Reports
and any Schedules 13D or 13G filed with the SEC pursuant to Rule 13d-1 of
the Exchange Act by reporting persons or in Schedule 3.1(f) hereto,
no Person or group of related Persons beneficially owns (as determined pursuant
to Rule 13d-3 under the Exchange Act), or has the right to acquire, by
agreement with or by obligation binding upon the Company, beneficial ownership
of in excess of 5% of the outstanding Common Stock.

 

(g)                           SEC
Reports; Financial Statements. 
Except as set forth on Schedule 3.1(g), the Company has filed all
reports required to be filed by it under the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the 12 months preceding the
date hereof on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension.  Such reports required to be
filed by the Company under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, together with any materials filed or furnished by the
Company under the Exchange Act, whether or not any such reports were required
being collectively referred to herein as the “SEC Reports”
and, together with this Agreement and the Schedules to this Agreement, the “Disclosure Materials.” 
As of their respective dates (or, if amended or superseded by a filing
prior to the Closing Date, then on the date of such filing), the SEC Reports
filed by the Company complied in all material respects with the requirements of
the Securities Act and the Exchange Act and the rules and regulations of
the SEC promulgated thereunder, and none of the SEC Reports, when filed (or, if
amended or superseded by a filing prior to the Closing Date, then on the date
of such filing) by the Company, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. 
The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the SEC with respect thereto as in effect at the
time of filing (or, if amended or 

 

7

 

superseded
by a filing prior to the Closing Date, then on the date of such filing).  Such financial statements have been prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise
specified in such financial statements and the notes thereto, and except that
unaudited financial statements may not contain all footnotes required by GAAP
or may be condensed or summary statements, and fairly present in all material
respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, year-end audit adjustments.  All material agreements to which the Company
or any Subsidiary is a party or to which the property or assets of the Company
or any Subsidiary are subject are included as part of or identified in the SEC
Reports, to the extent such agreements are required to be included or
identified pursuant to the rules and regulations of the SEC.

 

(h)           Material Changes;
Undisclosed Events, Liabilities or Developments; Solvency.   Since the date of the latest audited
financial statements included within the SEC Reports, except as disclosed in
the SEC Reports or in Schedule 3.1(h) hereto, (i) there has
been no event, occurrence or development that, individually or in the
aggregate, has had or that would result in a Material Adverse Effect,
(ii) the Company has not incurred any material liabilities other than
(A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to
be reflected in the Company’s financial statements pursuant to GAAP or not
required to be disclosed in filings made with the SEC, (iii) the Company
has not altered its method of accounting or changed its auditors, except as
disclosed in its SEC Reports, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders, in
their capacities as such, or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, except as disclosed in its
SEC Reports, and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock-based
plans.  The Company has not taken any
steps to seek protection pursuant to any bankruptcy law nor does the Company
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact that
would reasonably lead a creditor to do so. 
The Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing will not be Insolvent
(as defined below).  For purposes of this
Section 3.1(h), “Insolvent”
means (i) the present fair saleable value of the Company’s assets is less
than the amount required to pay the Company’s total Indebtedness (as defined in
Section 3.1(x)), (ii) the Company is unable to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to
incur or believes that it will incur debts that would be beyond its ability to
pay as such debts mature, or (iv) the Company has unreasonably small
capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted.

 

(i)            Absence of
Litigation.  Except as disclosed in
the SEC Reports, there is no action, suit, claim, or Proceeding, or, to the
Company’s knowledge, inquiry or investigation, before or by any court, public
board, government agency, self-regulatory organization or body pending or, to
the knowledge of the Company, threatened against or affecting the Company that
could, individually or in the aggregate, have a Material Adverse Effect.

 

8

 

(j)            Compliance.  The Company is not in default under or in
violation of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the Company
under), nor has the Company received written notice of a claim that it is in
default under or that it is in violation of, any material indenture, loan or
credit agreement or any other material agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not such
default or violation has been waived). 
The Company is in material compliance with all orders of any court,
arbitrator or governmental body.  The
Company is in material compliance with all statutes, rules or regulations
of any governmental authority.

 

(k)           Title to Assets.  The Company does not own any real
property.  The Company has good and
marketable title in all personal property owned by it that is material to the
business of the Company free and clear of all Liens, except for Liens held by
Bank of Scotland and BoS (USA), Inc. to secure Indebtedness as disclosed
in the SEC Reports and in Schedule 3.1(h). 
Any real property and facilities held under lease by the Company is held
by it under valid, subsisting and enforceable leases with which the Company is
in material compliance.

 

(l)            No General
Solicitation; Placement Agent’s Fees. 
Neither the Company, nor any of its Affiliates, nor any Person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities.  The
Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or brokers’ commission (other than for persons engaged
by the Investor or its investment advisor) relating to or arising out of the
issuance of the Securities pursuant to this Agreement.  The Company shall pay, and hold the Investor
harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in
connection with any such claim for fees arising out of the issuance of the
Securities pursuant to this Agreement.

 

(m)            Private Placement; Investment Company.  Neither the Company nor any of its Affiliates
nor, any Person acting on the Company’s behalf has, directly or indirectly, at
any time within the past six months, made any offer or sale of any security or
solicitation of any offer to buy any security under circumstances that would
(i) eliminate the availability of the exemption from registration under
Regulation D under the Securities Act in connection with the offer and
sale by the Company of the Securities as contemplated hereby or (ii) cause
the offering of the Securities pursuant to the Transaction Documents to be
integrated with prior offerings by the Company for purposes of any applicable
law, regulation or stockholder approval provisions, including, without
limitation, under the rules and regulations of any Trading Market.  Assuming the accuracy of the representations
and warranties of the Investor set forth in Section 3.2, no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Investor as contemplated hereby. The sale and
issuance of the Securities hereunder does not contravene the rules and
regulations of any Trading Market on which the Common Stock is listed or
quoted.  The Company is not required to
be registered as, and is not an Affiliate of, an “investment company” within
the meaning of the Investment Company Act of 1940, as amended.

 

(n)           Listing and
Maintenance Requirements.  The
Company has not, in the 12 months preceding the date hereof, received notice
(written or oral) from any Trading Market on which the Common Stock is or has
been listed or quoted to the effect that the Company is not in 

 

9

 

compliance
with the listing or maintenance requirements of such Trading Market.  The Company is, and has no reason to believe
that it will not in the foreseeable future continue to be, in compliance with
all such listing and maintenance requirements.

 

(o)           Registration
Rights.  Except as described in Schedule
3.1(o), the Company has not granted or agreed to grant to any Person any
rights (including “piggy-back” registration rights) to have any securities of
the Company registered with the SEC or any other governmental authority that
have not expired or been satisfied or waived.

 

(p)           Application of
Takeover Protections.  The Company
and its Board of Directors have taken all necessary action, if any, to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s charter documents or the laws of
its state of incorporation that is or could become applicable to the Investor
as a result of the Investor and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including, without
limitation, as a result of the Company’s issuance of the Securities and the
Investor’s ownership of the Securities. 
The Company’s charter documents prohibit any Person from acquiring five
percent (5%) or more of the Common Stock.

 

(q)           Acknowledgment
Regarding Investors’ Purchase of Securities.  Based upon the assumption that the
transactions contemplated by this Agreement are consummated in all material
respects in conformity with the Transaction Documents, the Company acknowledges
and agrees that the Investor is acting solely in the capacity of an arm’s
length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby.  The
Company further acknowledges that the Investor is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement and the transactions contemplated hereby and any advice given by
the Investor or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to the Investor’s purchase of the Securities.  The Company further represents to the
Investor that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its advisors and representatives.

 

(r)            Insurance.  The Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses and locations in which
the Company is engaged.

 

(s)            Regulatory
Permits.  The Company possesses all
material certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
business as presently conducted and described in the SEC Reports (“Material Permits”) and the Company has not
received any written notice of proceedings relating to the revocation or
modification of any Material Permit.

 

(t)            Transactions
With Affiliates and Employees. 
Except as set forth or incorporated by reference in the Company’s SEC
Reports, none of the officers, directors or employees of the Company is
presently a party to any transaction with the Company that would be 

 

10

 

required
to be reported on Form 10-K by Item 13 thereof pursuant to Regulation S-K
Item 404(a) (other than for ordinary course services as employees,
officers or directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the Company’s knowledge, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.

 

(u)           Internal
Accounting Controls.  The Company
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

 

(v)           Sarbanes-Oxley
Act. The Company is in compliance in all material respects with applicable
requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and
regulations promulgated by the SEC thereunder.

 

(w)          Foreign Corrupt
Practices.  The Company, nor to the
knowledge of the Company, any director, officer, agent, employee or other
Person acting on behalf of the Company has, in the course of its actions for,
or on behalf of, the Company (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to
any foreign or domestic government official or employee or to any foreign or
domestic political parties or campaigns from corporate funds; (iii) violated
or is in violation in any material respect of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.

 

(x)           Indebtedness.  Except as disclosed in the SEC Reports or in
Schedule 3.1(h), the Company (i) does not have any outstanding
Indebtedness (as defined below), (ii) is not in violation of any term of
or is in default under any material contract, agreement or instrument relating
to any Indebtedness, and (iii) is not a party to any contract, agreement
or instrument relating to any Indebtedness, the performance of which, in the
judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect.    For purposes of this
Agreement:  (x) “Indebtedness” of any Person means, without duplication
(A) all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services
(other than trade payables entered into in the ordinary course of business), (C) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either
case with respect to any property or assets acquired with the proceeds 

 

11

 

of
such indebtedness (even though the rights and remedies of the seller or bank
under such agreement in the event of default are limited to repossession or
sale of such property), (F) all monetary obligations under any leasing or
similar arrangement which, in connection with generally accepted accounting
principles, consistently applied for the periods covered thereby, is classified
as a capital lease, (G) all indebtedness referred to in clauses (A) through
(F) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property
or assets (including accounts and contract rights) owned by any Person, even
though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any Person, any direct
or indirect liability, contingent or otherwise, of that Person with respect to
any indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the
primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect
thereto; and (z) “Person” means
an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, a government or any
department or agency thereof and any other legal entity.

 

(y)           Tax Status.  The Company (i) has made or filed all
foreign, federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set
aside on its books provision reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply.  There are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.

 

3.2          Representations
and Warranties of the Investor.  The
Investor hereby represents and warrants to the Company as follows:

 

(a)           Organization;
Authority.  The Investor is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate, partnership or
other power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. 
The purchase by the Investor of the Securities hereunder has been duly
authorized by all necessary corporate, partnership or other action on the part
of the Investor.  This Agreement has been
duly executed and delivered by the Investor and constitutes the valid and
binding obligation of the Investor, enforceable against it in accordance with
its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

 

12

 

(b)           No Public Sale or
Distribution.  The Investor is
(i) acquiring the Common Stock in the ordinary course of business for its
own account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered under
the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws, and the Investor
does not have a present arrangement to effect any distribution of the Securities
to or through any person or entity; provided, however,
that by making the representations herein, the Investor does not agree to hold
any of the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or pursuant
to a registration statement or an exemption under the Securities Act.

 

(c)           Investor Status.  At the time the Investor was offered the
Securities, it was, at the date hereof it is, and on the Closing Date it will
be an “accredited investor” as defined in Rule 501(a) under the
Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act.  The Investor is not
a registered broker dealer registered under Section 15(a) of the
Exchange Act, or a member of the Financial Industry Regulatory Authority, Inc.
or an entity engaged in the business of being a broker dealer.  Except as otherwise disclosed in writing to
the Company on Exhibit A-2 (attached hereto) on or prior to the
date of this Agreement, the Investor is not affiliated with any broker dealer
registered under Section 15(a) of the Exchange Act, or a member of
the Financial Industry Regulatory Authority, Inc. or an entity engaged in
the business of being a broker dealer.

 

(d)         General Solicitation. 
The Investor is not purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media, broadcast over
television or radio, disseminated over the Internet or presented at any seminar
or any other general solicitation or general advertisement.

 

(e)           Experience of the
Investor.  The Investor, either alone
or together with its representatives has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the merits
and risks of the prospective investment in the Securities, and has so evaluated
the merits and risks of such investment. 
The Investor understands that it must bear the economic risk of this
investment in the Securities indefinitely, and is able to bear such risk and is
able to afford a complete loss of such investment.

 

(f)            Access to
Information.  The Investor
acknowledges that it has reviewed the Disclosure Materials and has been
afforded:  (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information (other than material nonpublic
information) about the Company and its financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment; (iii) has been provided, subject to a
confidentiality agreement, a copy of the Reducing Note Facility Agreement to be
entered into among Bank of Scotland, plc, as agent, collateral agent and
lender, BoS (USA), Inc., as lender, FirstCity Commercial Corporation and
FH Partners, LLC, as borrowers, and FLBG Corporation, as guarantor, of even
date with this Agreement, and the Limited Guaranty Agreement executed by
Company in favor of Bank of Scotland, plc, as agent for the benefit of the
lenders, also of even date with this Agreement (the “Prior
Disclosure”); and (iv) the opportunity to obtain such
additional information 

 

13

 

that
the Company possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with respect to the
investment.  Neither such inquiries nor
any other investigation conducted by or on behalf of the Investor or its
representatives or counsel shall modify, amend or affect the Investor’s right
to rely on the truth, accuracy and completeness of the Disclosure Materials and
the Company’s representations and warranties contained in the Transaction
Documents.  The Investor acknowledges
receipt of copies of the SEC Reports and the Prior Disclosure.

 

(g)           No Governmental
Review.  The Investor understands
that no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement of
the Securities or the fairness or suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of the
offering of the Securities.

 

(h)           No Conflicts.  The execution, delivery and performance by
the Investor of this Agreement and the consummation by the Investor of the
transactions contemplated hereby will not (i) result in a violation of the
organizational documents of the Investor or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Investor is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to the Investor, except in the
case of clauses (ii) and (iii) above, for such that are not material
and do not otherwise affect the ability of the Investor to consummate the
transactions contemplated hereby.

 

(i)            Prohibited
Transactions; Confidentiality. 
Neither the Investor, directly or indirectly, nor any Person acting on
behalf of or pursuant to any understanding with the Investor, has engaged in
any purchases or sales in the securities, including derivatives, of the Company
(including, without limitation, any Short Sales (a “Transaction”)
involving any of the Company’s securities) since the time that the Investor was
first contacted by the Company or any other Person regarding an investment in
the Company.  The Investor covenants that
neither it nor any Person acting on its behalf or pursuant to any understanding
with the Investor will engage, directly or indirectly, in any Transactions in
the securities of the Company (including Short Sales) prior to the time the
transactions contemplated by this Agreement are publicly disclosed.  “Short Sales”
include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act and all types of direct
and indirect stock pledges, forward sale contracts, options, puts, calls, short
sales, swaps, derivatives and similar arrangements (including on a total return
basis), and sales and other transactions through non-U.S. broker-dealers or
foreign regulated brokers.

 

(j)            Restricted
Securities.  The Investor understands
that the Securities are characterized as “restricted securities” under the U.S.
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances.

 

14

 

(k)           Legends.                It is understood that, except as
provided in Section 4.1(b) of this Agreement, certificates
evidencing such Securities may bear the legend set forth in Section 4.1(b).

 

(l)            No Legal, Tax or
Investment Advice.  The Investor
understands that nothing in this Agreement or any other materials presented by
or on behalf of the Company to the Investor in connection with the purchase of
the Securities constitutes legal, tax or investment advice.  The Investor has consulted such legal, tax
and investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Securities.

 

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

 

4.1          Transfer
Restrictions.

 

(a)           The Investor
covenants that the Securities will only be disposed of pursuant to an effective
registration statement under, and in compliance with the requirements of, the
Securities Act or pursuant to an available exemption from the registration
requirements of the Securities Act, and in compliance with any applicable state
securities laws.  In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company, or pursuant to Rule 144 of the Securities
Act, the Company may require the transferor to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that
such transfer does not require registration under the Securities Act.  Notwithstanding the foregoing, the Company
hereby consents to and agrees to register on the books of the Company and with
its Transfer Agent, without any such legal opinion, except to the extent that
the Transfer Agent requests such legal opinion, any transfer of Securities by the
Investor to an Affiliate of the Investor, provided that the transferee
certifies to the Company that it is an “accredited investor” as defined in Rule 501(a) under
the Securities Act and provided that such Affiliate does not request any
removal of any existing legends on any certificate evidencing the Securities.

 

(b)           The Investor agrees
to the imprinting, until no longer required by this Section 4.1(b),
of the following legend on any certificate evidencing any of the Securities:

 

THESE SECURITIES HAVE NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY
APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.

 

15

 

Certificates evidencing the
Securities shall not be required to contain such legend or any other legend (i) while
a registration statement covering the resale of the Securities is effective
under the Securities Act, (ii) when any Securities are eligible for sale
pursuant to Rule 144 of the Securities Act, or (iii) if the holder
provides the Company with a legal opinion (and the documents upon which the
legal opinion is based) reasonably acceptable to the Company to the effect that
the legend is not required under applicable requirements of the Securities Act
(including controlling judicial interpretations and pronouncements issued by
the staff of the SEC).

 

4.2          Furnishing
of Information.  Until the date that
the Investor may sell all of the Securities under Rule 144 of the
Securities Act (or any successor provision), the Company covenants to use its
commercially reasonable efforts to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act.

 

4.3          Integration.  The Company shall not, and shall use its
commercially reasonable efforts to ensure that no Affiliate thereof shall,
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in Section 2 of the Securities Act) that would
be integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities
to the Investor or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market.

 

4.4          Reservation
of Securities.  The Company shall
maintain a reserve from its duly authorized shares of Common Stock for issuance
pursuant to the Transaction Documents in such amount as may be required to
fulfill its obligations to issue such Securities under the Transaction
Documents.  In the event that at any time
the then authorized shares of Common Stock are insufficient for the Company to
satisfy its obligations to issue such Securities under the Transaction
Documents, the Company shall promptly take such actions as may be required to
increase the number of authorized shares.

 

4.5          Securities  Laws Disclosure; Publicity.  Following execution of this Agreement the
Company shall, within the time period required by the rules and
regulations of the SEC, file a Current Report on Form 8-K with the SEC
(the “8-K Filing”) describing the terms of
the transactions contemplated by the Transaction Documents and including as
exhibits to such Current Report on Form 8-K the Transaction Documents
(including the schedules and the name, and address of the Investor and the
amount of Securities purchased). 
Thereafter, the Company shall timely file any filings and notices
required by the SEC or applicable law with respect to the transactions contemplated
hereby.

 

ARTICLE V

REGISTRATION RIGHTS

 

5.1          Piggyback
Registration.

 

(a)           If at any time the
Company shall determine to prepare and file with the SEC a registration
statement relating to an offering for its own account or the account of others
under the 

 

16

 

Securities
Act of any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or its then equivalents relating
to equity securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with stock
option or other employee benefit plans, and the Investor is not then eligible
to sell all of its Registrable Securities under Rule 144 of the Securities
Act, the Company shall send to the Investor written notice of such
determination and, if within ten (10) days after receipt of such notice,
the Investor shall so request in writing (which request shall specify the
Registrable Securities intended to be disposed of by the Investor), the Company
will cause the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Investor,
to the extent required to permit the disposition of the Registrable Securities
so to be registered (a “Piggyback Registration”),
provided that if at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of all of
such securities, the Company may, at its election, give written notice of such
determination to the Investor and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay expenses in accordance with the terms hereof), and (ii) in
the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities being registered pursuant to this Section 5.1
for the same period as the delay in registering such other securities.

 

(b)           In the case of an
underwritten public offering, if the managing underwriter(s) or
underwriter(s) should object to the inclusion of the Registrable
Securities in such registration statement, then if the Company after
consultation with the managing underwriter should reasonably determine that the
inclusion of such Registrable Securities would materially adversely affect the
offering contemplated in such registration statement, and based on such
determination recommends inclusion in such registration statement of fewer or none
of the Registrable Securities of the Investor, then (x) the number of
Registrable Securities of the Investor included in such registration statement
shall be reduced if the Company after consultation with the underwriter(s) recommends
the inclusion of fewer Registrable Securities, or (y) none of the
Registrable Securities of the Investor shall be included in such registration
statement if the Company after consultation with the underwriter(s) recommends
the inclusion of none of such Registrable Securities; provided,
however, that if securities are being offered for the account of
other persons or entities as well as the Company, such reduction shall not
represent a greater fraction of the number of Registrable Securities intended
to be offered by the Investor than the fraction of similar reductions imposed
on such other persons or entities (other than the Company).

 

(c)           Notwithstanding the
registration obligations set forth in this Section 5.1, in the
event the SEC informs the Company that all of the Registrable Securities then
outstanding cannot, as a result of the application of Rule 415 of the
Securities Act, be registered for resale as a secondary offering on a single
registration statement, the Company agrees to promptly (a) inform the
Investor thereof and use its commercially reasonable efforts to file amendments
to the initial registration statement as required by the SEC and/or (b) withdraw
the initial registration statement and file a new registration statement, in
either case covering the maximum number of Registrable Securities permitted to
be registered by the SEC, on Form S-3, Form S-1 or such other form
available to the Company to register for resale the Registrable Securities as a
secondary offering; provided, that prior 

 

17

 

to
filing such amendment or new registration statement, the Company shall be
obligated to use its commercially reasonable efforts to advocate with the SEC
for the registration of all of the Registrable Securities in accordance with
the SEC guidance, including without limitation, Compliance and Disclosure
Interpretation 612.09.  Notwithstanding
any other provision of this Agreement, if any SEC guidance sets forth a
limitation of the number of Registrable Securities or other shares of Common
Stock permitted to be registered on a particular Registration Statement as a
secondary offering (and notwithstanding that the Company used diligent efforts
to advocate with the SEC for the registration of all or a greater number of
Registrable Securities), the number of Registrable Securities or other shares
of Common Stock to be registered on such registration statement will be reduced
on a pro rata basis. In the event the Company amends the initial registration
statement or files a new registration statement, as the case may be, under
clauses (a) or (b) above, the Company will use its commercially
reasonable efforts to file with the SEC, as promptly as allowed by SEC or SEC
guidance provided to the Company or to registrants of securities in general,
one or more registration statements on Form S-3, Form S-1 or such
other form available to the Company to register for resale those Registrable
Securities that were not registered for resale on the initial registration
statement, as amended, or the new registration statement.

 

5.2          Registration
Expenses.  The Company shall pay all
fees and expenses incident to the performance of or compliance with
Article V of this Agreement by the Company, including without limitation
(a) all registration and filing fees and expenses, including without
limitation those related to filings with the SEC, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities), (c) messenger, telephone and delivery expenses,
(d) fees and disbursements of counsel for the Company, (e) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, and
(f) all listing fees to be paid by the Company to the Trading Market.

 

5.3          Indemnification

 

(a)           Indemnification
by the Company.  The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
the Investor, and its Affiliates and each of their respective officers,
directors, partners, employees and agents, and each Person who controls the
Investor within the meaning of the Exchange Act and the rules and
regulations promulgated thereunder, to the fullest extent permitted by
applicable law, from and against any and all Losses, as incurred, arising out
of or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, (ii) any
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (iii) any cause of action, suit or claim
brought or made against such Indemnified Party (as defined in Section 5.3(c) below)
by a third party arising out of the transactions contemplated by this Agreement
(unless, and only to the extent that, such action, suit or claim is based,
including in part, upon a breach of the Investor’s representations, warranties
or covenants under the Transaction Documents or any conduct by the Investor
that constitutes fraud, gross negligence or willful misconduct) or (iv) any
untrue or alleged untrue statement of a material fact contained in a
registration statement or prospectus filed by the Company pursuant to Section 5.1
or in any amendment or supplement thereto or in any Company preliminary
prospectus, or arising 

 

18

 

out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except to the
extent, but only to the extent, that (A) such untrue statements, alleged
untrue statements, omissions or alleged omissions are based solely upon
information regarding the Investor furnished in writing to the Company by the
Investor for use therein, or to the extent that such information relates to the
Investor or the Investor’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved by the Investor in writing
expressly for use in the registration statement, or (B) with respect to
any prospectus, if the untrue statement or omission of material fact contained
in such prospectus was corrected on a timely basis in the prospectus, as then
amended or supplemented, if such corrected prospectus was timely made available
by the Company to the Investor, and the Investor seeking indemnity hereunder
was advised in writing not to use the incorrect prospectus prior to the use
giving rise to Losses.

 

(b)           Indemnification
by the Investor.  The Investor shall
indemnify and hold harmless the Company and its Affiliates and each of their
respective officers, directors, partners, employees and agents, and each Person
who controls the Company within the meaning of the Exchange Act and the rules and
regulations promulgated thereunder, to the fullest extent permitted by
applicable law, from and against all Losses (as determined by a court of
competent jurisdiction in a final judgment not subject to appeal or review)
arising solely out of any untrue statement of a material fact contained in any
registration statement, any prospectus, or in any amendment or supplement
thereto, or arising out of or relating to any omission of a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, but
only to the extent that (i) such untrue statements or omissions are based
solely upon information regarding the Investor furnished to the Company by the
Investor in writing expressly for use therein, or to the extent that such
information relates to the Investor or the Investor’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by the Investor expressly for use in the registration statement (it
being understood that the information provided by the Investor to the Company
in Exhibits  A-1, A-2 and A-3 and the Plan of
Distribution set forth on Exhibit C, as the same may be modified by
the Investor and other information provided by the Investor to the Company in
or pursuant to the Transaction Documents constitutes information reviewed and
expressly approved by the Investor in writing expressly for use in the
registration statement), such prospectus or in any amendment or supplement
thereto.  In no event shall the liability
of the Investor hereunder be greater in amount than the dollar amount of the
net proceeds received by the Investor upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

 

(c)           Conduct of
Indemnification Proceedings.  If any
Proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an “Indemnified Party”),
such Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”)
in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal 

 

19

 

or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.

 

An Indemnified Party shall
have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party or Parties unless:  (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party
shall have failed promptly to assume the defense of such Proceeding and to
employ counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (iii) the named parties to any such Proceeding (including
any impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a conflict
of interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
the reasonable fees and expenses of separate counsel shall be at the expense of
the Indemnifying Party).  It shall be
understood, however, that the Indemnifying Party shall not, in connection with
any one such Proceeding (including separate Proceedings that have been or will
be consolidated before a single judge) be liable for the fees and expenses of
more than one separate firm of attorneys at any time for all Indemnified
Parties, which firm shall be appointed by a majority of the Indemnified
Parties.  The Indemnifying Party shall
not be liable for any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party
from all liability on claims that are the subject matter of such Proceeding.

 

All reasonable fees and
expenses of the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be paid
to the Indemnified Party, as incurred, within 20 Trading Days of written notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).

 

(d)           Contribution.  If a claim for indemnification under Section 5.3(a) or (b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. 
The relative fault of such Indemnifying Party and Indemnified Party shall
be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission of a material fact, has been taken or made by,
or relates to information supplied by, such Indemnifying Party or Indemnified
Party, and the parties’ relative intent, knowledge, access to 

 

20

 

information
and opportunity to correct or prevent such action, statement or omission.  The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5.3(c), any reasonable attorneys’ or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees
or expenses if the indemnification provided for in this Section was
available to such party in accordance with its terms.

 

The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section 5.3(d) were
determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the
immediately preceding paragraph.  Notwithstanding
the provisions of this Section 5.3(d), the Investor shall not be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by the Investor from the sale of the
Registrable Securities subject to the Proceeding exceed the amount of any
damages that the Investor has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.  No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.

 

The indemnity and
contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.

 

5.4          Dispositions.  The Investor agrees that it will comply with
the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to the registration
statement and shall sell its Registrable Securities in accordance with the Plan
of Distribution set forth in the prospectus.

 

ARTICLE VI

MISCELLANEOUS

 

6.1          Termination.  This Agreement may be terminated by the
Company or the Investor, by written notice to the other parties, if the Closing
has not been consummated by June 30, 2010; provided that no such
termination will affect the right of any party to sue for any breach by the
other party.

 

6.2          Fees
and Expenses.  Except as expressly
set forth in the Transaction Documents to the contrary, each party shall pay
the fees and expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement.  The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in
connection with the sale and issuance of the applicable Securities.

 

6.3          Entire
Agreement.  The Transaction
Documents, together with the Exhibits and Schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules. 
At or after the Closing, and without further consideration, the Company
will execute 

 

21

 

and
deliver to the Investor such further documents as may be reasonably requested
in order to give practical effect to the intention of the parties under the
Transaction Documents.

 

6.4          Notices.  Any notice, request, instruction or other
document to be given hereunder by any party to the other will be in writing and
will be deemed to have been duly given (a) on the date of delivery if
delivered personally or by telecopy or facsimile, upon confirmation of receipt,
(b) on the first business day following the date of dispatch if delivered
by a recognized next-day courier service, or (c) on the third business day
following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice.

 

·                                          If to the
Investor:

 

Värde Investment Partners,
L.P.

8500 Normandale Lake Blvd., Suite 1500

Minneapolis, MN 55437

Attn: Christopher N. Giles

Tel: 952-646-2062

Fax: 952-893-9613

Email: cgiles@varde.com

 

with a copy to (which copy
alone shall not constitute notice):

 

Andrew P. Lee

Leonard, Street and Deinard

Professional Association

150 S. Fifth Street

Minneapolis, MN  55402 

Telephone No.: 612-335-1881

Fax No.: 612-335-1657

E-Mail Address: andrew.lee@Leonard.com

 

 

·                                          If to the
Company:

 

FirstCity Financial
Corporation

6400 Imperial Drive (Delivery only)

Waco, TX 76714-8216

P.O. Box 8216 (mail)

 

22

 

Waco, TX 76712 

Attn: James T. Sartain 

Tel: 254-761-2800

Fax: 254-761-2950

Email: jsartain@fcfc.com

 

with a copy to (which copy
alone shall not constitute notice):

 

Brian
D. Barnard

Haynes and Boone, LLP

201 Main Street, Suite 2200

Fort Worth, Texas 76102

Telephone No.: 817-347-6605

Fax No.: 817-348-2303

E-Mail Address: brian.barnard@haynesboone.com

 

6.5          Amendments;
Waivers.  No provision of this
Agreement may be waived or amended except in a written instrument signed, in
the case of an amendment, by the Company and the Investor or, in the case of a
waiver, by the party against whom enforcement of any such waiver is
sought.  No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder in
any manner impair the exercise of any such right.

 

6.6          Construction.  The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.  The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

 

6.7          Successors
and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns.  The Company may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Investor.  The
Investor may assign its rights under this Agreement to any Person to whom the
Investor assigns or transfers any Securities, provided (i) such transferor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company after such assignment, (ii) the
Company is furnished with written notice of (x) the name and address of
such transferee or assignee and (y) the Registrable Securities with
respect to which such registration rights are being transferred or assigned, (iii) following
such transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, (iv) such transferee agrees in writing to be bound,
with respect to the transferred Securities, by the provisions hereof that apply
to the “Investor” and (v) such transfer shall have been made in accordance
with the applicable requirements of this Agreement and with all laws applicable
thereto.

 

23

 

6.8                               No Third-Party Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except that each Indemnified Party is an intended third party
beneficiary of Section 5.3 and (in each case) may enforce the
provisions of such Section directly against the parties with obligations
thereunder.

 

6.9                               Governing Law.  This Agreement shall be
governed by, enforced under, and construed in accordance with the laws of the
State of Texas without regard to conflict of law principles.  Any and all disputes arising under or related
to this Agreement, or the obligations contained herein, shall be brought only in
a federal or state court of competent jurisdiction in McLennan County, Texas.

 

6.10                        Survival.  Each of the representations and warranties
set forth in this Agreement shall survive the Closing under this Agreement but
only for a period of twelve (12) months following the Closing Date (or until
final resolution of any claim or action arising from the breach of any such
representation and warranty, if notice of such breach was provided prior to the
end of such period) and thereafter shall expire and have no further force and
effect; provided that the representations and warranties in Sections 3.1(a),
3.1(b), 3.1(c), 3.1(e), 3.1(f), 3.2(a), 3.2(b) and 3.2(c) shall
survive indefinitely and the representations and warranties in Section 3.1(y) shall
survive until the expiration of the applicable statutory periods of
limitations.  Except as otherwise
provided herein, all covenants and agreements contained herein shall survive
for the duration of any statutes of limitations applicable thereto or until, by
their respective terms, they are no longer operative.

 

6.11                        Execution.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. 
In the event that any signature is delivered by facsimile transmission
or email attachment, such signature shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or email-attached signature page were
an original thereof.

 

6.12                        Severability.  If any provision of this Agreement is held to
be invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

 

6.13                        Replacement of Securities.  If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and the execution by the holder
thereof of a customary lost certificate affidavit of that fact and an agreement
to indemnify and hold harmless the Company for any losses in connection therewith.  The applicants for a new certificate or
instrument under such 

 

24

 

circumstances
shall also pay any reasonable third-party costs associated with the issuance of
such replacement Securities.

 

6.14                              Remedies.  In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
Investor and the Company will be entitled to seek specific performance under
the Transaction Documents.  The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agree to waive in any action for specific performance of
any such obligation (other than in connection with any action for a temporary
restraining order) the defense that a remedy at law would be adequate.

 

SIGNATURE
PAGE TO FOLLOW

 

25

 

IN WITNESS WHEREOF, the
parties hereto have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.

 

	
   

  	
  FIRSTCITY
  FINANCIAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VÄRDE
  INVESTMENT PARTNERS, L.P.

  
	
   

  	
  By
  Värde Investment Partners G.P., LLC, Its General Partner

  
	
   

  	
  By
  Värde Partners, L.P., Its Managing Member

  
	
   

  	
  By
  Värde Partners, Inc., Its General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

SIGNATURE
PAGE

 

 

Exhibit A

 

INSTRUCTION SHEET FOR INVESTOR

 

(to
be read in conjunction with the entire Securities Purchase Agreement)

 

A.                                    Complete the
following items in the Securities Purchase Agreement:

 

1.                                      Complete and
execute the Investor Signature Page.  The
Agreement must be executed by an individual authorized to bind the Investor.

 

2.                                      Exhibit A-1
- Stock Certificate Questionnaire:

 

Provide the information
requested by the Stock Certificate Questionnaire;

 

3.                                      Exhibit A-2
- Registration Statement Questionnaire:

 

Provide the information
requested by the Registration Statement Questionnaire.

 

4.                                      Exhibit A-3
- Investor Certificate:

 

Provide the information
requested by the Investor Certificate.

 

5.                                      Return, via
facsimile, the signed Securities Purchase Agreement including the properly
completed Exhibits A-1 through A-3, to:

 

Facsimile:

Telephone:

Attn:

 

6.                                      After
completing instruction number five (5) above, deliver the original signed
Securities Purchase Agreement including the properly completed Exhibits A-1
through A-3 to:

 

Address:

 

B.                                    Instructions
regarding the wire transfer of funds for the purchase of the Securities will be
telecopied to the Investor by the Company at a later date.

 

 

Exhibit A-1

 

FIRSTCITY FINANCIAL CORPORATION

 

STOCK CERTIFICATE QUESTIONNAIRE

 

 

	
   

  	
   

  	
  Please provide us with the
  following information:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  The exact name that the
  Securities are to be registered in (this is the name that will appear on the
  stock certificate(s)). You may use a nominee name if appropriate:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  The relationship between
  the Investor of the Securities and the Registered Holder listed in response
  to item 1 above:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  The mailing address,
  telephone and telecopy number and email address of the Registered Holder
  listed in response to item 1 above:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  The Tax Identification
  Number of the Registered Holder listed in response to item 1 above:

  	
   

  	
   

  

 

 

Exhibit A-2

 

FIRSTCITY FINANCIAL CORPORATION

 

REGISTRATION STATEMENT QUESTIONNAIRE

 

In connection with the
Registration Statement, please provide us with the following information
regarding the Investor.

 

1.                                        Please state your organization’s name exactly
as it should appear in the Registration Statement:

 

 

Except as
set forth below, your organization does not hold any equity securities of the
Company on behalf of another person or entity.

 

State any
exceptions here:

 

 

If the Investor is not a
natural person, please identify the natural person or persons who will have
voting and investment control over the Securities owned by the Investor:

 

 

2.  Address of your organization:

 

 

Telephone: 

 

Fax:  

 

Contact
Person:  

 

3.  Have you or your organization had any
position, office or other material relationship within the past three years
with the Company or its affiliates? 
(Include any relationships involving you or any of your affiliates, officers,
directors, or principal equity holders (5% or more) that has held any 

 

 

position or office
or has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three years.)

 

o  Yes                          
o  No

 

If
yes, please indicate the nature of any such relationship below:

 

4.  Are you the beneficial owner of any other
securities of the Company?  (Include any
equity securities that you beneficially own or have a right to acquire within
60 days after the date hereof, and as to which you have sole voting power,
shared voting power, sole investment power or shared investment power.)

 

o  Yes                          
o  No

 

If
yes, please describe the nature and amount of such ownership as of a recent
date.

 

5.  Except as set forth below, you wish that all
the shares of the Company’s common stock beneficially owned by you or that you
have the right to acquire from the Company be offered for your account in the
Registration Statement.

 

State any
exceptions here:

 

6.  Have you made or are you aware of any
arrangements relating to the distribution of the shares of the Company pursuant
to the Registration Statement?

 

o  Yes                          
o  No

 

If
yes, please describe the nature and amount of such arrangements.

 

 

7.              FINRA Matters

 

(a)                                 State below whether (i) you
or any associate or affiliate of yours are a member of the FINRA, a controlling shareholder of a FINRA member, a person
associated with a member,
a direct or indirect affiliate of
a member, or an underwriter or related person with respect
to the proposed offering; (ii) you or any associate
or affiliate of yours owns any
stock or other securities of any FINRA member
not purchased in the open market; or (iii) you or any associate or affiliate of yours has made any outstanding subordinated
loans to any FINRA member. If you
are a general or limited partnership, a no answer asserts that no such
relationship exists for you as well as for each of your general or limited
partners.

 

	
  Yes:

  	
   

  	
  No:

  	
   

  
	
  o

  	
   

  	
  o

  	
   

  

 

If
“yes,” please identify the FINRA member
and describe your relationship, including, in the case of a general or limited
partner, the name of the partner:

 

 

If
you answer “no” to Question 7(a), you need not respond to Question 7(b).

 

(b)                                 State below
whether you or any associate or affiliate of yours has been an
underwriter, or a controlling
person or member of any investment banking or brokerage firm which has been or
might be an underwriter for securities of the Corporation or any affiliate thereof including, but not
limited to, the common stock now being registered.

 

	
  Yes:

  	
   

  	
  No:

  	
   

  
	
  o

  	
   

  	
  o

  	
   

  

 

If
“yes,” please identify the FINRA member
and describe your relationship, including, in the case of a general or limited
partner, the name of the partner.

 

 

ACKNOWLEDGEMENT

 

The
undersigned hereby agrees to notify the Company promptly of any changes in the
foregoing information which should be made as a result of any developments,
including the passage of time.  The
undersigned also agrees to provide the Company and the Company’s counsel any
and all such further information regarding the undersigned promptly upon
request in connection with the preparation, filing, amending, and supplementing
of the Registration Statement (or any prospectus contained therein).  The undersigned hereby consents to the use of
all such information in the Registration Statement.

 

The
undersigned understands and acknowledges that the Company will rely on the
information set forth herein for purposes of the preparation and filing of the
Registration Statement.

 

The
undersigned understands that the undersigned may be subject to serious civil
and criminal liabilities if the Registration Statement, when it becomes
effective, either contains an untrue statement of a material fact or omits to
state a material fact required to be stated in the Registration Statement or
necessary to make the statements in the Registration Statement not
misleading.  The undersigned represents
and warrants that all information it provides to the Company and its counsel is
currently accurate and complete and will be accurate and complete at the time
the Registration Statement becomes effective and at all times subsequent
thereto, and agrees to notify the Company immediately of any misstatement of a
material fact in the Registration Statement, and of the omission of any
material fact necessary to make the statements contained therein not
misleading.

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name and Title of Signatory

  

 

 

 

Exhibit A-3

 

FIRSTCITY
FINANCIAL CORPORATION

 

CERTIFICATE FOR CORPORATE, PARTNERSHIP, LIMITED LIABILITY
COMPANY, 

TRUST, FOUNDATION AND JOINT INVESTORS

 

If the Investor is a
corporation, partnership, limited liability company, trust, pension plan,
foundation, joint Investor (other than a married couple) or other entity, an
authorized officer, partner, or trustee must complete, date and sign this
Certificate.

 

CERTIFICATE

 

The undersigned certifies
that the representations and responses below are true and accurate:

 

(a)                                 The Investor
has been duly formed and is validly existing and has full power and authority
to invest in the Company.  The person
signing on behalf of the undersigned has the authority to execute and deliver
the Securities Purchase Agreement on behalf of the Investor and to take other
actions with respect thereto.

 

(b)                                 Indicate the
form of entity of the undersigned:

 

o                                    Limited Partnership

 

o                                    General Partnership

 

o                                    Limited Liability Company

 

o                                    Corporation

 

o                                    Revocable Trust
(identify each grantor and indicate under what circumstances the trust is
revocable by the grantor): 

 

(Continue on a separate
piece of paper, if necessary.)

 

o                                    Other type of Trust
(indicate type of trust and, for trusts other than pension trusts, name the
grantors and beneficiaries):

 

	
  (Continue on a separate
  piece of paper, if necessary.)

  

 

o                                    Other form of
organization (indicate form of organization (

                                                                                                                                                                                                                    
).

 

(c)                                  Indicate the
approximate date the undersigned entity was formed:                                             .

 

 

(d)                                 In order for
the Company to offer and sell the Securities in conformance with state and
federal securities laws, the following information must be obtained regarding
your investor status.  Please initial
each category applicable to you as an investor in the Company.

 

o                                    1.                                      A bank as
defined in Section 3(a)(2) of the Securities Act, or any savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or fiduciary capacity;

 

o                                    2.                                      A broker or
dealer registered pursuant to Section 15 of the Securities Exchange Act of
1934;

 

o                                    3.                                      An insurance
company as defined in Section 2(13) of the Securities Act;

 

o                                    4.                                      An investment
company registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of that Act;

 

o                                    5.                                      A Small
Business Investment Company licensed by the U.S.  Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958;

 

o                                    6.                                      A plan
established and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political subdivisions, for the
benefit of its employees, if such plan has total assets in excess of
$5,000,000;

 

o                                    7.                                      An employee
benefit plan within the meaning of the Employee Retirement Income Security Act
of 1974, if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment advisor, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are
accredited investors;

 

o                                    8.                                      A private
business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940;

 

o                                    9.                                      Any partnership
or corporation or any organization described in Section 501(c)(3) of the
Internal Revenue Code or similar business trust, not formed for the specific
purpose of acquiring the Shares, with total assets in excess of $5,000,000;

 

o                                    10.                               A trust, with
total assets in excess of $5,000,000, not formed for the specific purpose of
acquiring the Shares, whose purchase is directed by a sophisticated person as
described in Rule 506(b)(2)(ii) of the Exchange Act;

 

o                                    11.                               An entity in
which all of the equity owners qualify under any of the above
subparagraphs.  If the undersigned
belongs to this investor category only, list the equity owners of the
undersigned, and the investor category which each such equity owner satisfies:

 

 

	
   

  	
   

  
	
   

  	
  (Continue on a separate
  piece of paper, if necessary.)

  

 

Please set forth in the
space provided below the (i) states, if any, in the U.S. in which you
maintained your principal office during the past two years and the dates during
which you maintained your office in each state, (ii) state(s), if any, in
which you are incorporated or otherwise organized and (iii) state(s), if
any, in which you pay income taxes.

 

 

Dated:                                   ,
2010

 

 

	
   

  	
   

  
	
  Print Name of Investor

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
  (Signature and title of
  authorized officer, partner or trustee)

  	
   

  

 

 

Exhibit B

 

OPINION OF COMPANY COUNSEL

 

 

Exhibit C

 

PLAN OF DISTRIBUTION

 

The selling stockholders
may, from time to time, sell any or all of their shares of common stock on any
stock exchange, market or trading facility on which the shares are traded or in
private transactions.  These sales may be
at fixed or negotiated prices.  The
selling stockholders may use any one or more of the following methods when
selling shares:

 

·                  ordinary brokerage transactions and
transactions in which the broker-dealer solicits purchasers;

 

·                  block trades in which the broker-dealer will
attempt to sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;

 

·                  purchases by a broker-dealer as principal and
resale by the broker-dealer for its account;

 

·                  an exchange distribution in accordance with
the rules of the applicable exchange;

 

·                  privately negotiated transactions;

 

·                  short sales;

 

·                  broker-dealers may agree with the selling
stockholders to sell a specified number of such shares at a stipulated price
per share;

 

·                  a combination of any such methods of sale;
and

 

·                  any other method permitted pursuant to
applicable law.

 

The selling stockholders may
also sell shares under Rule 144 under the Securities Act, if available, rather
than under this prospectus.

 

Broker-dealers engaged by
the selling stockholders may arrange for other brokers-dealers to participate
in sales.  Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated.  The selling
stockholders do not expect these commissions and discounts to exceed what is
customary in the types of transactions involved.  Any profits on the resale of shares of common
stock by a broker-dealer acting as principal might be deemed to be underwriting
discounts or commissions under the Securities Act.  Discounts, concessions, commissions and
similar selling expenses, if any, attributable to the sale of shares will be
borne by a selling stockholder.  The
selling stockholders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of the shares if liabilities
are imposed on that person under the Securities Act.

 

The selling stockholders may
from time to time pledge or grant a security interest in some or all of the
shares of common stock owned by them and, if they default in the performance of
their secured obligations, the pledgees or secured parties may offer and sell
the shares of common stock

 

 

from time to time under this
prospectus after we have filed a supplement to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933
supplementing or amending the list of selling stockholders to include the
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus.

 

The selling stockholders
also may transfer the shares of common stock in other circumstances, in which
case the transferees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus and may sell the
shares of common stock from time to time under this prospectus after we have
filed a supplement to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act of 1933 supplementing or amending the list of
selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus.

 

The selling stockholders and
any broker-dealers or agents that are involved in selling the shares of common
stock may be deemed to be “underwriters” within the meaning of the Securities
Act in connection with such sales.  In
such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares of common stock purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.

 

We are required to pay all
fees and expenses incident to the registration of the shares of common
stock.  We have agreed to indemnify the
selling stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.

 

The selling stockholders
have advised us that they have not entered into any agreements, understandings
or arrangements with any underwriters or broker-dealers regarding the sale of
their shares of common stock, nor is there an underwriter or coordinating
broker acting in connection with a proposed sale of shares of common stock by
any selling stockholder.  If we are
notified by any selling stockholder that any material arrangement has been
entered into with a broker-dealer for the sale of shares of common stock, if
required, we will file a supplement to this prospectus.  If the selling stockholders use this
prospectus for any sale of the shares of common stock, they will be subject to
the prospectus delivery requirements of the Securities Act.

 

The anti-manipulation rules
of Regulation M under the Securities Exchange Act of 1934 may apply to sales of
our common stock and activities of the selling stockholders.

 

 

Exhibit D

 

COMPANY TRANSFER AGENT INSTRUCTIONS

 

American Stock Transfer
& Trust Company

[Address]

Attention:  [              ]

 

Ladies and Gentlemen:

 

Reference is made to that certain
Securities Purchase Agreement, dated as of June      ,
2010 (the “Agreement”), by and among
FirstCity Financial Corporation, a Delaware corporation (the “Company”), and Värde Investment Partners, L.P., a Delaware
limited partnership (the “Holder”),
pursuant to which the Company is issuing to the Holder shares (the “Common Shares”) of Common Stock of the Company, par value
$0.01 per share (the “Common Stock”).

 

In connection with the
consummation of the transactions contemplated by the Agreement, this letter
shall serve as our irrevocable authorization and direction to you:

 

(i) to issue an aggregate of
[               ]
shares of our Common Stock in the names and denominations set forth on Annex I
attached hereto. The certificates should bear the legend set forth on Annex II
attached hereto and “stop transfer” instructions should be placed against their
subsequent transfer.  Kindly deliver the
certificates to the respective delivery addresses set forth on Annex I via hand
delivery or overnight courier.  We
confirm that these shares will be validly issued, fully paid and non-assessable
upon issuance; and

 

(ii) to issue (provided that
you are the transfer agent of the Company at such time) certificates for shares
of Common Stock upon transfer or resale of the Common Shares and receipt by you of certificate(s) for the Common Shares
so transferred or sold (duly endorsed or accompanied by stock powers duly
endorsed, in each case with signatures guaranteed and otherwise in form
eligible for transfer).

 

You acknowledge and agree
that so long as you have previously received (a) written confirmation from
the Company’s legal counsel that either (i) a registration statement
covering resales of the Common Shares has been declared effective by the
Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “Securities Act”), or (ii) the Common Shares are
eligible for sale in conformity with Rule 144 under the Securities Act (“Rule 144”) and (b) if
applicable, a copy of such registration statement, then, unless otherwise
required by law, within three (3) business days of your receipt of
certificates representing the Common Shares, you shall issue the certificates
representing the Common Shares to the Holder or its transferees, as the case
may be, registered in the names of such Holder or transferees, as the case may
be, and such certificates shall not bear any legend restricting transfer of the
Common Shares thereby and should not be subject to any stop-transfer
restriction.  Any certificates tendered
for transfer shall be endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect transfer.

 

 

A form of written
confirmation from the Company’s outside legal counsel that a registration
statement covering resales of the Common Shares has been declared effective by
the SEC under the Securities Act is attached hereto as Annex II.

 

Please be advised that the
Holder is relying upon this letter as an inducement to enter into the Agreement
and, accordingly, the Holder is a third party beneficiary to these
instructions.

 

Please execute this letter
in the space indicated to acknowledge your agreement to act in accordance with
these instructions.  Should you have any
questions concerning this matter, please contact our
counsel, Brian D. Barnard at (817) 347-6605.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  FIRSTCITY
  FINANCIAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

THE
FOREGOING INSTRUCTIONS ARE

ACKNOWLEDGED
AND AGREED TO

this
        day of                      ,
2010

 

 

	
  AMERICAN
  STOCK TRANSFER & TRUST COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Enclosures

  	
   

  

 

 

ANNEX I

 

SCHEDULE OF INVESTORS

 

 

ANNEX II

 

FORM
OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT

 

American Stock Transfer
& Trust Company

[Address]

Attention:  [              ]

 

Re:                             FirstCity
Financial Corporation

 

Ladies and Gentlemen:

 

We are counsel to FirstCity
Financial Corporation, a Delaware corporation (the “Company”), and have represented the Company in connection
with that certain Securities Purchase Agreement, dated as of June      ,
2010 (the “Securities Purchase Agreement”),
entered into by and among the Company and Värde Investment Partners, L.P., a
Delaware limited partnership (the “Purchaser”),
pursuant to which the Company issued to the Purchaser shares of Common Stock of
the Company, par value $0.01 per share (the “Common
Shares”).  Pursuant to the
Securities Purchase Agreement, the Company agreed to register the resale of the
Common Shares (the “Registrable
Securities”) under the Securities Act of 1933, as amended (the “Securities Act”). In connection
with the Company’s obligations under the Securities Purchase Agreement, on [                    ],
the Company filed a Registration Statement on Form S-3 (File No. 333-                    ])
(the “Registration Statement”)
with the Securities and Exchange Commission (the “Commission”) relating to the Registrable Securities which
names the Purchaser as a selling shareholder thereunder.

 

In connection with the
foregoing, we advise you that a member of the SEC’s staff has advised us by
telephone that the SEC has entered an order declaring the Registration
Statement effective under the Securities Act at [ 
            ]  [a.m.][p.m.] on
[                    ],
and we have no knowledge, after telephonic inquiry of a member of the staff,
that any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the
Commission and the Registrable Securities are available for resale under the
Securities Act pursuant to the Registration Statement.

 

This letter shall serve as
our standing notice to you that the Common Shares may be freely transferred by
the Purchaser pursuant to the Registration Statement so long as the Purchaser
certifies that it will comply with the plan of distribution description in
connection with sales or transfers of the Common Shares set forth in the
Registration Statement and with the prospectus delivery requirements of the
Securities Act, to the extent such delivery requirement are applicable. You
need not require further letters from us to effect any future legend-free
issuance or reissuance of shares of the Common Shares to the Purchaser or the
transferees of the Purchaser, as the case may be, as contemplated by the
Company’s Irrevocable Transfer Agent Instructions dated
                    .

 

 

Schedule 3.1(f)

 

Capitalization

 

The authorized capital stock
of the Company consists of 100,000,000 shares of the common stock, par value
$0.01 per share, of the Company (the “Common Stock”)
and 98,000,000 shares of preferred stock, par value $0.01 per share, of the
Company (the “Preferred Stock”).  As of the close of business on June 28, 2010,
there were 10,508,824 shares of Common Stock outstanding (and 1,500,000 shares
of treasury stock) and no shares of Preferred Stock outstanding.

 

At the close of business on
June 28, 2010, there were (i) 865,400 options for Common Stock outstanding and
(ii) 28,890 shares of restricted stock outstanding.

 

 

Schedule 3.1(g)

 

SEC
Reports; Financial Statements

 

Form 8-K filed on March 31,
2010, related to acquisition on December 11, 2009, by the Company, through a
majority-owned subsidiary, of 87.45% of the common stock of BEI Holding
Corporation was not timely filed.

 

 

2

 

Schedule 3.1(h)

 

Material
Changes; Undisclosed Events, Liabilities or Developments; Solvency.

 

On
June 25, 2010, FirstCity Commercial Corporation and FH Partners
LLC, indirect subsidiaries of the Company, as borrowers, FLBG Corporation, a
direct subsidiary of the Company, as guarantor, and Bank of Scotland Plc,
acting through its New York Branch, as agent, and the financial institutions
party thereto as lenders (the “Lenders”) entered in a Reducing Note Facility
Agreement (the “Reducing Note Facility Agreement”), which amended and
restated the following loan facilities provided by the Lenders to the Company
and FH Partners LLC:

 

(a)
that certain Revolving Credit Agreement dated as of November 12, 2004, among
the Company, the Lenders and the Agent (as amended from time to time, the “Revolving
Credit Agreement”);

 

(b)
that certain Revolving Credit Agreement dated as of August 26, 2005, among FH
Partners LLC, the Lenders and the Agent (as amended from to time to time, the “FH
Partners Credit Agreement”);

 

(c)
that certain Subordinated Delayed Draw Credit Agreement dated as of September
5, 2007, between the Company and BoS (USA), Inc. (as amended from time to time,
the “Subordinated Credit Agreement”) (the Revolving Credit Agreement,
the FH Partners Credit Agreement and the Subordinated Credit Agreement
together, the “Existing Credit Agreements”);

 

On
June 25, 2010, the Company executed a Limited Guaranty Agreement guaranteeing
the payment of up to 75,000,000 plus an amount equal to any losses
incurred by Lenders arising from the failure of the Guarantor to pay federal
income taxes as required in Section 10(q) of the Limited Guaranty Agreement
which result in a levy or other enforcement proceeding by the United States
Internal Revenue Servicer that reduces the cash flow from or results in a loss
of collateral or security interests or pledges securing the guarantied
obligations (and any expenses of the Collateral Agent and Lenders related to
defense of the Collateral from any such enforcement proceedings) under Reducing Note Facility Agreement,
in favor of Bank of Scotland Plc, acting through its New York Branch, as Agent
(in such capacity, and including its successors and assigns in such capacity,
the “Agent”), for the benefit of the lenders (the “Lenders”) from
time to time party to the Reducing Note Facility Agreement referred to below.

 

3

 

Schedule 3.1(o)

 

Registration
Rights

 

NoneExhibit 10.61

 

RESTRICTED
STOCK AWARD AGREEMENT

 

FIRSTCITY
FINANCIAL CORPORATION

2010 STOCK
OPTION AND AWARD PLAN

 

1.             Grant
of Award.  Pursuant to the FirstCity
Financial Corporation 2010 Stock Option and Award Plan (the “Plan”) of FirstCity Financial Corporation,
a Delaware corporation (“FIRSTCITY”),
FIRSTCITY grants to

 

 

(the “Participant”),

 

effective
as of
                              ,
2010 (the “Date of Grant”),  an award of
                                          
(        ) shares of Restricted Stock
(the “Awarded Shares”), subject to the terms and conditions of this
Agreement.

 

2.             Subject to Plan. 
This Agreement is subject to the terms and conditions of the Plan, and
the terms of the Plan shall control to the extent not otherwise inconsistent
with the provisions of this Agreement. 
To the extent the terms of the Plan are inconsistent with the provisions
of this Agreement, the Plan shall control. 
The capitalized terms used herein that are defined in the Plan shall
have the meanings assigned to them in the Plan. 
This Agreement is subject to any rules promulgated pursuant to the
Plan by the Board or the Committee and communicated to the Participant in
writing.

 

3.             Vesting.  Except as specifically provided in this
Agreement, including, without limitation, the limitations set forth in Section 2,
the Awarded Shares shall vest as follows:
                                                                                                                                                                            ,
provided the Participant is employed by (or, if the Participant is a Director,
is providing services to) FIRSTCITY or a Subsidiary on that date.  Notwithstanding the foregoing, the Awarded Shares
shall immediately become one hundred percent (100%) vested on the first to
occur of (i) the Participant’s termination of service due to his or her
death or Disability or (ii) a Change in Control.

 

4.             Forfeiture
and Disgorgement.  The Awarded Shares
that are not vested in accordance with Section 3 shall be forfeited
upon the Participant’s termination of service for any reason other than due to
his death or Disability.  Upon
forfeiture, all of the Participant’s rights with respect to the forfeited
Awarded Shares shall cease and terminate without any further obligations on the
part of FIRSTCITY. Upon forfeiture of the Awarded Shares, the forfeited Awarded
Shares shall be transferred to FIRSTCITY without further action  by the Participant.

 

5.             Restrictions
on Awarded Shares.  Subject to the
provisions of the Plan and the terms of this Agreement, from the Date of Grant
until the date the Awarded Shares are vested in accordance with Section 3
and are no longer subject to forfeiture in accordance with Section 4
(the “Restriction Period”), the
Participant shall not be permitted to sell, transfer, pledge, assign or
otherwise encumber or dispose of any of the Awarded Shares.  Except for these limitations, the Committee
may in its sole discretion, remove any or all of the restrictions on such
Awarded Shares whenever it may determine that, by reason of changes in
applicable laws or changes in circumstances after the date of this Agreement,
such action is appropriate.

 

 

6.             Legend.  The following legend shall be placed on all
certificates representing Awarded Shares:

 

On the face of the certificate:

 

“Transfer of this stock is restricted in accordance with
conditions printed on the reverse of this certificate.”

 

On the reverse:

 

“The shares of stock evidenced by this certificate are
subject to and transferable only in accordance with the terms and conditions of
that certain FirstCity Financial Corporation 2010 Stock Option and Award Plan,
a copy of which is on file at the principal office of FIRSTCITY in Waco, Texas
and that certain Restricted Stock Award Agreement dated as of                           ,
2010, by and between FIRSTCITY and
                                  .  No transfer or pledge of the shares evidenced
hereby may be made except in accordance with and subject to the provisions of
said Plan and Award Agreement.  By
acceptance of this certificate, any holder, transferee or pledgee hereof agrees
to be bound by all of the provisions of said Plan and Award Agreement.”

 

The following legend shall be inserted on a certificate
evidencing Shares issued under the Plan if the shares were not issued in a
transaction registered under the applicable federal and state securities laws:

 

“Shares of stock represented by this certificate have
been acquired by the holder for investment and not for resale, transfer or
distribution, have been issued pursuant to exemptions from the registration
requirements of applicable state and federal securities laws, and may not be
offered for sale, sold or transferred other than pursuant to effective
registration under such laws, or in transactions otherwise in compliance with
such laws, and upon evidence satisfactory to FIRSTCITY of compliance with such
laws, as to which FIRSTCITY may rely upon an opinion of counsel satisfactory to
FIRSTCITY.”

 

All Awarded Shares owned by the Participant shall be subject
to the terms of this Agreement and shall be represented by a certificate or
certificates bearing the foregoing legend.

 

7.             Delivery
of Certificates.  Upon a grant of
Restricted Stock, a stock certificate (or certificates) representing the number
of Shares of Restricted Stock granted to the Participant shall be registered in
the Participant’s account or retained in the physical possession of FIRSTCITY
until such Awarded Shares are free of restriction under this Agreement.  Certificates for Awarded Shares shall be
delivered to the Participant promptly after, and only after, the Restriction
Period has expired without forfeiture pursuant to Section 4.   In connection with the issuance of a
certificate for Restricted Stock, the Participant shall endorse such
certificate in blank or execute a stock power in a form satisfactory to
FIRSTCITY in blank and deliver such certificate and executed stock power to
FIRSTCITY.

 

8.             Voting.  Subject to Section 4 and Section 5
above, the Participant, as record holder of the Awarded Shares, has all of the
rights of a stockholder of FIRSTCITY, including the right to vote the shares, 

 

2

 

and the right to receive any dividends thereon; provided,
however, that this Section 8 shall not create any voting
right where the holders of such Awarded Shares otherwise have no such right.

 

9.             Adjustment
of Number of Awarded Shares and Related Matters.  The number of Awarded Shares shall be subject
to adjustment in accordance with Sections 4.3, 12.1-12.4 and Section 13 of
the Plan.

 

10.          Participant’s
Representations.  Notwithstanding any
of the provisions hereof, the Participant hereby agrees that he will not
acquire any Awarded Shares, and that FIRSTCITY will not be obligated to issue
any Awarded Shares to the Participant hereunder, if the issuance of such shares
shall constitute a violation by the Participant or FIRSTCITY of any provision
of any law or regulation of any governmental authority.  Any determination in this connection by
FIRSTCITY shall be final, binding, and conclusive.  The obligations of FIRSTCITY and the rights
of the Participant are subject to all applicable laws, rules, and regulations.

 

11.          The
Participant’s Acknowledgments.  The
Participant  acknowledges receipt of a
copy of the Plan which is annexed hereto, and represents that he is familiar
with the terms and provisions thereof, and hereby accepts these Awarded Shares
subject to all of the terms and provisions thereof.  The Participant hereby agrees to accept as
binding, conclusive, and final all decisions or interpretations of the
Committee or the Board, as appropriate, upon any questions arising under this
Agreement.

 

12.          Specific
Performance. The parties acknowledge that remedies at law will be
inadequate remedies for breach of this Agreement and consequently agree that
this Agreement shall be enforceable by specific performance.  The remedy of specific performance shall be
cumulative of all of the rights and remedies at law or in equity of the parties
under this Agreement.

 

13.          Law
Governing.  This Agreement shall be
governed by, construed, and enforced in accordance with the laws of the State
of Delaware (excluding any conflict of laws rule or principle of Delaware
law that might refer the governance, construction, or interpretation of this
Agreement to the laws of another state).

 

14.          No
Right to Continue Service or Employment. 
Nothing herein shall be construed to confer upon the Participant the
right to continue in the employ or to provide services to FIRSTCITY or any
Subsidiary, whether as an Employee or as an Director, or interfere with or
restrict in any way the right of FIRSTCITY or any Subsidiary to discharge the
Participant as an Employee or Director at any time.

 

15.          Legal
Construction.  In the event that any one
or more of the terms, provisions, or agreements that are contained in this
Agreement shall be held by a court of competent jurisdiction to be invalid,
illegal, or unenforceable in any respect for any reason, the invalid, illegal,
or unenforceable term, provision, or agreement shall not affect any other term,
provision, or agreement that is contained in this Agreement and this Agreement
shall be construed in all respects as if the invalid, illegal, or unenforceable
term, provision, or agreement had never been contained herein.

 

16.          Covenants
and Agreements as Independent Agreements. 
Each of the covenants and agreements that are set forth in this
Agreement shall be construed as a covenant and agreement independent of any
other provision of this Agreement.  The
existence of any claim or cause of action of the Participant against FIRSTCITY,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by FIRSTCITY of the covenants and agreements that
are set forth in this Agreement.

 

17.          Entire
Agreement.  This Agreement supersedes
any and all other prior understandings and agreements, either oral or in
writing, between the parties with respect to the subject matter hereof and
constitutes the sole and only agreements between the parties with respect to
the said subject matter.  All prior
negotiations and agreements between the parties with respect to the subject
matter hereof are merged into this 

 

3

 

Agreement.  Each
party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, orally or otherwise, have been made by any party or by
anyone acting on behalf of any party, which are not embodied in this Agreement
or the Plan and that any agreement, statement or promise that is not contained
in this Agreement or the Plan shall not be valid or binding or of any force or
effect.

 

18.          Counterparts.  This Agreement may be executed in separate
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.

 

19.          Parties
Bound.  The terms, provisions, and
agreements that are contained in this Agreement shall apply to, be binding
upon, and inure to the benefit of the parties and their respective heirs,
executors, administrators, legal representatives, and permitted successors and
assigns, subject to the limitation on assignment expressly set forth
herein.  No person or entity shall be
permitted to acquire any Awarded Shares without first executing and delivering
an agreement in the form satisfactory to FIRSTCITY making such person or entity
subject to the restrictions on transfer contained herein.

 

20.          Waiver.   Neither the failure nor any delay on the
part of any party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any right, remedy, power or privilege, nor shall any
waiver of any right, remedy, power, or privilege with respect to any occurrence
be construed as a waiver of such right, remedy, power or privilege with respect
to any other occurrence.

 

21.          Modification.  No change or modification of this Agreement
shall be valid or binding upon the parties unless the change or modification is
in writing and signed by the parties. 
Notwithstanding the preceding sentence, FIRSTCITY may amend the Plan to the
extent permitted by the Plan.

 

22.          Headings.  The headings that are used in this Agreement
are used for reference and convenience purposes only and do not constitute
substantive matters to be considered in construing the terms and provisions of
this Agreement.

 

23.          Gender
and Number.  Words of any gender used
in this Agreement shall be held and construed to include any other gender, and
words in the singular number shall be held to include the plural, and vice
versa, unless the context requires otherwise.

 

24.          Notice.  Any notice required or permitted to be
delivered hereunder shall be deemed to be delivered only when actually received
by FIRSTCITY or by the Participant, as the case may be, at the addresses set
forth below, or at such other addresses as they have theretofore specified by
written notice delivered in accordance herewith:

 

a.             Notice
to FIRSTCITY shall be addressed and delivered as follows:

 

FirstCity Financial Corporation

 

 

Attn:

Facsimile:

 

b.             Notice
to the Participant shall be addressed and delivered as set forth on the
signature page.

 

4

 

25.          Tax
Requirements.  The
Participant is hereby advised to consult immediately with his own tax advisor
regarding the tax consequences of this Agreement, the method and timing for
filing an election to include this Agreement in income under Section 83(b) of
the Code, and the tax consequences of such election.  By execution of this Agreement, the
Participant agrees that if the Participant makes such an election, the
Participant shall provide FIRSTCITY with written notice of such election in
accordance with the regulations promulgated under Section 83(b) of
the Code.

 

*******************

 

5

 

IN WITNESS WHEREOF, FIRSTCITY has caused this Agreement
to be executed by its duly authorized officer, and the Participant, to evidence
his consent and approval of all the terms hereof, has duly executed this
Agreement, as of the date specified in Section 1 hereof.

 

 

	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
  FIRSTCITY FINANCIAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

6

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