Document:

EX-10.2 REVOLVING CREDIT AGREEMENT

 

Exhibit 10.2

REVOLVING CREDIT AGREEMENT

     THIS REVOLVING CREDIT AGREEMENT dated as of the 23rd day of June, 2005, among
AMERICA’S CAR MART, INC., an Arkansas corporation and TEXAS CAR-MART, INC., a Texas corporation
(separately and collectively, “Borrower”) and BANK OF OKLAHOMA, N.A. (“Bank”).

W I T N E S S E T H:

     WHEREAS, the Borrower has requested that the Bank make available to the Borrower a revolving
line of credit in an amount not to exceed $5,000,000 and which extensions of credit the Borrower
will use for refinancing existing indebtedness and for its working capital needs and general
business purposes;

     WHEREAS, the Bank has agreed to make available to the Borrower a revolving credit facility
upon the terms and conditions set forth in this Agreement;

     NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this
Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged,
the Bank and the Borrower hereby agree as follows:

     DEFINITIONS AND ACCOUNTING TERMS

     Section 1.01. Defined Terms. As used in this Agreement, the following terms have the
following meanings (terms defined in the singular to have the same meaning when used in the plural
and vice versa):

     “ACM-Texas” means AMERICA’S CAR-MART, INC., a Texas corporation (formerly known as Crown
Group, Inc.)

     “ACM-Texas Sub-Debt” means the revolving line of credit provided to the Borrower by ACM-Texas,
in an amount not to exceed Five Million and No/100 Dollars ($5,000,000).

     “ACM-Texas Sub-Debt Subordination Agreement” means the Subordination Agreement dated of even
date herewith relating to the ACM-Texas Sub-Debt entered into by and among ACM-Texas, Borrower, and
the Bank.

     “Adjusted Tangible Assets” means all assets of the Borrower except: (a) deferred assets, other
than prepaid items and deferred taxes, (b) patents, copyrights, trademarks, trade names,
franchises, goodwill and other similar intangibles; (c) restricted investments; (d) unamortized
debt discount; (e) assets of the Borrower constituting intercompany accounts (provided, that
receivables from Affiliates shall not be deemed intercompany accounts for purposes of this
definition); (f) assets located and notes and receivables due from obligors domiciled outside the
United States of America,

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Puerto Rico, or Canada; and (g) fixed assets to the extent of any write-up in the book value
thereof resulting from a revaluation effective after the Closing Date.

     “Adjusted Tangible Net Worth” means, at any date, the remainder of (a) the net book value
(after deducting related depreciation, obsolescence, amortization, valuation, and other proper
reserves as determined in accordance with GAAP) at which the Adjusted Tangible Assets would be
shown on a balance sheet of the Borrower at such date prepared in accordance with GAAP,
minus (b) the amount at which the Borrower’s liabilities would be shown on such balance
sheet in accordance with GAAP.

     “Affiliate” means any Person (1) which directly or indirectly controls, or is controlled by,
or is under common control with, the Borrower or a Subsidiary; (2) which directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of voting stock of the Borrower
or any Subsidiary; or (3) five percent (5%) or more of the voting stock of which is directly or
indirectly beneficially owned or held by the Borrower or a Subsidiary. The term “control”
(“Control”) means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.

     “Agreement” means this Revolving Credit Agreement, as amended, supplemented, or modified from
time to time.

     “Blocked Account Agreement” means that certain Blocked Account Agreement described in
Section 5.14.

     “Borrowing Base” means, as of the date of determination, (i) $2,000,000, plus (ii)
eighty percent (80%) of Borrower’s Eligible Inventory.

     “Borrowing Base Certificate” means each certificate from Borrower to Bank relating to the
Borrowing Base, substantially in the form of Exhibit “A” hereto.

     “Business Day” means any day other than a Saturday, Sunday, or other day on which commercial
Banks in Oklahoma are authorized or required to close under the laws of such State(s) and, if the
applicable day relates to LIBOR Loan, LIBOR Interest Period, or notice with respect to a LIBOR
Loan, a day on which dealings in Dollar deposits are also carried on in the London interbank market
and Banks are open for business in London.

     “Capital Lease” means all leases which have been or should be capitalized on the books of the
lessee in accordance with GAAP.

     “Certificate of Title” means the certificate of title or other evidence of ownership of any
Vehicle issued by the appropriate Division of Motor Vehicles or its counterpart in the jurisdiction
in which the Contract Debtor resides.

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     “Closing Date” means the date upon which this Agreement is executed and the conditions
precedent set forth in Section 3.01 are satisfied.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the
regulations and published interpretations thereof.

     “Collateral” means all property which is subject or is to be subject to the Lien granted by
the Security Agreement-Borrower and the Security Agreement-Colonial.

     “Colonial” means Colonial Auto Finance, Inc., an Arkansas corporation.

     “Colonial Sub-Debt” means the revolving line of credit provided to Borrower by Colonial as of
the Closing Date, in an amount not to exceed $3,000,000.

     “Colonial Sub-Debt Subordination Agreement” means the Subordination Agreement dated of even
date herewith relating to the Colonial Sub-Debt entered into by and among Colonial, Borrower, and
the Bank.

     “Commitment” means the Bank’s obligation to make Loans to the Borrower pursuant to Section
2.01 in the amount of $5,000,000.

     “Commonly Controlled Entity” means an entity, whether or not incorporated, which is under
common control with the Borrower within the meaning of the Code.

     “Contracts” means all of the Borrower’s and Colonial’s now owned and hereafter acquired loan
agreements, accounts, installment sale contracts, instruments, notes, documents, chattel paper, and
all other forms of obligations owing to the Borrower or Colonial, including Vehicle Contracts and
any collateral for any of the foregoing, including all rights under any and all Security Documents
and merchandise returned to or repossessed by the Borrower or Colonial.

     “Debt” means all liabilities, obligations, and indebtedness of the Borrower to any Person, of
any kind or nature, now or hereafter owing, arising, due or payable, howsoever evidenced, created,
incurred, acquired, or owing, whether primary, secondary, direct or indirect, contingent, fixed, or
otherwise, and including, without in any way limiting the generality of the foregoing: (i) the
Borrower’s liabilities and obligations to trade creditors; (ii) all Obligations; (iii) all
obligations and liabilities to any Person secured by a Lien on the Borrower’s Property, even though
the Borrower shall not have assumed or become liable for the payment thereof; provided,
however, that all such obligations and liabilities which are limited in recourse to such
Property shall be included in Debt only to the extent of the book value of such property as would
be shown on a balance sheet of the Borrower prepared in accordance with GAAP; (iv) all obligations
and liabilities created or arising under any lease or conditional sale or other title retention
agreement with respect to Property used or acquired by the Borrower, even if the rights and
remedies of the lessor, seller, or lender thereunder are limited to repossession of such Property;
provided, however, that all such obligations and liabilities which are limited in
recourse to such Property shall be included in Debt only to the extent of the book value of such
property as would be shown on a balance sheet of the Borrower prepared in

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accordance with GAAP; (v)
all accrued pension fund and other employee benefit plan obligations and liabilities; (vi) all
obligations and liabilities under Guaranties; (vii) Subordinated Debt; (viii) the ACM-Texas
Sub-Debt; (ix) the Colonial Sub-Debt; and (x) deferred tax liabilities.

     “Debt For Borrowed Money” means, as to any Person, Debt for borrowed money or as evidenced by
notes, bonds, debentures or similar evidences of any such Debt of such Person, the deferred and
unpaid purchase price of any property or business (other than trade accounts payable incurred in
the ordinary course of business and constituting current liabilities) and all obligations under
Capital Leases.

     “Default” means any of the events specified in Section 8.01, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other condition, has been
satisfied.

     “Distribution” means, in respect of any corporation: (a) the payment or making of any dividend
or other distribution of Property in respect of capital stock (or any options or warrants for such
stock) of such corporation, other than distributions in capital stock (or any options or warrants
for such stock); or (b) the redemption or other acquisition by such corporation of any capital
stock (or any options or warrants for such stock) of such corporation unless accomplished through
the issuance of capital stock or as permitted pursuant to Section 6.06.

     “Dollars” and the sign “$” mean lawful money of the United States of America.

     “EBITDA” shall be defined as net income in accordance with GAAP, less the decrease in loan
loss reserves, plus the sum of interest expense, depreciation, amortization, income taxes, and
other non-cash expenses (including increases to loan loss reserves) less any capital distributions,
except distributions to Colonial or to ACM-Texas for simultaneous distribution to Colonial, which
distributions shall be used to reduce obligations of Colonial to Bank.

     “Eligible Inventory” means the Inventory of Borrower which the Bank, in its reasonable
discretion, deems eligible (which shall be presumed unless the Bank expressly states otherwise from
time to time) and which, without limiting the Bank’s discretionary rights, satisfy as of the date
of determination all of the following requirements as determined by the Bank in its reasonable
discretion:

               (a) the Inventory strictly complies with all of the Borrower’s warranties and representations
contained herein;

               (b) the Inventory was obtained in the ordinary course of the Borrower’s business; and

               (c) the Inventory is not subject to any Lien, except liens in favor of Bank, or adverse claim.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time, and the regulations and published interpretations thereof.

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     “Event of Default” means any of the events specified in Section 8.01, provided that
any requirement for the giving of notice, the lapse of time, or both, or any other condition, has
been satisfied.

     “Fixed Charges” shall be defined as the sum of interest expense and income taxes plus
scheduled principal payments on Debt for Borrowed Money (other than the Revolving Credit Loans and
outstanding loans under the ACM-Texas Sub-Debt and the Colonial Sub-Debt) plus Capital
Expenditures (except those financed with the proceeds of any Debt for Borrowed Money as permitted
hereunder) plus Distributions other than those to ACM-Texas, in each instance with respect
to the applicable period.

     “Funded Debt” means all outstanding Debt For Borrowed Money.

     “GAAP” means generally accepted accounting principles in the United States.

     “Guarantor” means, separately and collectively, ACM-Texas and Colonial.

     “Guaranty” means, separately and collectively, the Guaranty Agreements in substantially the
form of Exhibit “B-1” and “B-2” to be delivered by the Guarantor under the terms of
this Agreement.

     “Interest Period” means, with respect to any LIBOR Loan, the period commencing on the date
such Loan is made and ending, as the Borrower may select, pursuant to Section 2.04, on the
numerically corresponding day in the first, second, third, sixth, ninth, or twelfth calendar month
thereafter, except that each such Interest Period that commences on the last Business Day of a
calendar month (or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month; provided that all of the foregoing provisions relating to Interest
Periods are subject to the following:

     (a) No Interest Period may extend beyond the Termination Date; and

     (b) If an Interest Period would end on a day that is not a Business Day, such Interest
Period shall be extended to the next Business Day unless such Business Day would fall in the
next calendar month, in which event such Interest Period shall end on the immediately
preceding Business Day.

     “Lending Office” means the Lending Office of the Bank (or of an affiliate of the Bank)
designated for such type of Loan on the signature pages hereof or such other office of the Bank (or
of an affiliate of the Bank) as that Bank may from time to time specify to the Borrower as the
office at which its Loans of such type are to be made and maintained.

     “LIBOR Loan” means any Loan when and to the extent that the interest rate therefor is
determined by reference to the LIBOR Rate.

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     “LIBOR Rate” means a fluctuating interest rate per annum (rounded upward, if necessary, to the
nearest 1/100 of 1%) as in effect from time to time, which interest rate per annum shall at all
times be equal to the London Interbank Offered Rate per annum set forth in the “Money Rates”
section of the Wall Street Journal on the day the Interest Rate Election Notice is received by Bank
for thirty (30) day interest periods, as elected by Borrower in the Interest Rate Election Notice.
If Borrower fails to make a subsequent election within two (2) Business Days prior to the end of
an applicable period, the rate shall automatically revert to the Prime Rate. If the information is
unavailable from such service, the rate shall be determined by the Bank from information supplied
to Bank by a nationally recognized reporting service for similar information acceptable to Bank.
Bank shall promptly confirm to Borrower in writing the LIBOR Rate.

     “Lien” means any mortgage, deed of trust, pledge, security interest, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), of preference, priority,
or other security agreement or preferential arrangement, charge, or encumbrance of any kind or
nature whatsoever (including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction to evidence any of the foregoing).

     “Loan” means a Revolving Credit Loan.

     “Loan Document(s)” means this Agreement, the Note, the Security Agreement-Borrower, the
Security Agreement-Colonial, and the Guaranty.

     “Material Adverse Effect” means a material adverse change in, or a material adverse effect
upon, the operations, business, properties, condition (financial or otherwise) or prospects of the
Borrower or the Collateral.

     “Multiemployer Plan” means a Plan described in Section 4001(a)(3) of ERISA.

     “Note” means the promissory note described in Section 2.06 hereof.

     “Obligations” means all present and future loans, advances, liabilities, obligations,
covenants, duties, and debts owing by the Borrower to the Bank arising under or pursuant to this
Agreement or any of the other Loan Documents, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of credit, opening of a letter of credit,
acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment from others, and any participation by the Bank in
the Borrower’s debts owing to others), absolute or contingent, due or to become due, primary or
secondary, as principal or guarantor, and including, without limitation, all principal, interest,
charges, expenses, fees, attorneys’ fees, filing fees and any other sums chargeable to the Borrower
hereunder or under any of the other Loan Documents.

     “PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all
of its functions under ERISA.

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     “Payment Account” means each bank account established pursuant to Section 5.14, to
which the funds of the Borrower are deposited or credited, and which is maintained in the name of
the Borrower on terms acceptable to the Bank.

     “Person” means an individual, partnership, corporation, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental authority, or other entity of
whatever nature.

     “Plan” means any pension plan which is covered by Title IV of ERISA and in respect of which
the Borrower or a Commonly Controlled Entity is an “employer” as defined in Section 3(5) of ERISA.

     “Prime Loan” means any Loan when and to the extent that the interest rate therefor is
determined by reference to the Prime Rate.

     “Prime Rate” means a fluctuating interest rate per annum as in effect from time to time, which
interest rate per annum shall at all times be equal to the rate of interest announced publicly from
time to time (whether or not charges in each instance), by JP Morgan Chase Bank (“Rate Bank”), as
its base rate or general reference rate. Each change in the Prime Rate (or any component thereof)
shall become effective hereunder without notice to Maker (which notice is hereby expressly waived
by Maker), on the effective date of each such change. Should the Rate Bank abolish or abandon the
practice of announcing or publishing a Prime Rate, then the Prime Rate used during the remaining
term of this Note shall be that interest rate or other general reference rate then in effect at the
Rate Bank which, from time to time, in the reasonable judgment of Bank, most effectively
approximates the initial definition of the “Prime Rate.” Borrower acknowledges that Bank may, from
time to time, extend credit to other borrowers at rates of interest varying from, and having no
relationship to, the Prime Rate. The rate of interest payable upon the indebtedness evidenced by
the Note shall not, however, at any time exceed maximum rate of interest permitted under the laws
of the State of Arkansas for loans of the type and character evidenced by the Note.

     “Principal Office” means the Bank’s office at P.O. Box 2300, Tulsa, Oklahoma 74192.

     “Prohibited Transaction” means any transaction set forth in Section 406 of ERISA or Section
4975 of the Code.

     “Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as
amended or supplemented from time to time.

     “Reportable Event” means any of the events set forth in Section 4043 of ERISA.

     “Revolving Credit Loans” means an advance of funds under Section 2.01.

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     “Security Agreement-Borrower” means the Security Agreement of each Borrower in substantially
the form of Exhibit “C-1” and Exhibit “C-2”, to be delivered by the Borrower under
the terms of this Agreement.

     “Security Agreement-Colonial” means the Security Agreement of Colonial in substantially the
form of Exhibit “C-3”, to be delivered by Colonial under the terms of this Agreement.

     “Subordinated Debt” means all debt of the Borrower which (a) is subordinated to the
Obligations pursuant to a written subordination agreement the terms of which are satisfactory to
the Bank in its sole and absolute discretion and (b) has a then-remaining term to maturity in
excess of twelve (12) months. Subordinated Debt includes the ACM-Texas Sub-Debt and the Colonial
Sub-Debt.

     “Subsidiary” means, as to the Borrower, a corporation of which shares of stock having ordinary
voting power (other than stock having such power only by reason of the happening of a contingency)
to elect a majority of the board of directors or other managers of such corporation are at the time
owned, or the management of which is otherwise controlled, directly, or indirectly through one or
more intermediaries, or both, by the Borrower.

     “Termination Date” means April 30, 2006.

     “Vehicle” means any new or used, two-axled, automobile or light-duty truck, together with all
accessions, parts and equipment sold or financed in connection therewith.

     “Vehicle Contract” means a Contract which arises from an installment sale of a Vehicle.

     Section 1.02. Accounting Terms. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP consistent with those applied in the preparation of the financial
statements referred to in Section 4.04, and all financial data submitted pursuant to this Agreement
shall be prepared in accordance with such principles.

Article 2

AMOUNT AND TERMS OF THE LOANS

     Section 2.01. Revolving Credit. The Bank agrees, on the terms and conditions hereinafter set
forth, to make the Revolving Credit Loans to the Borrower from time to time during the period from
the date of this Agreement up to but not including the Termination Date in an aggregate principal
amount not to exceed at any time outstanding the Commitment provided, that the aggregate
outstanding principal amount of advances at any time outstanding shall not exceed the lesser of:
(i) the amount of the Commitment; or (ii) the Borrowing Base. Such Borrowing Base shall be
computed on a monthly basis, and Borrower agrees to provide Bank, on or before the 20th
of each month with regard to the immediately preceding month (or more frequently as reasonably
required by Bank from time to time), all information requested in connection therewith, including
without limitation the Borrowing Base Certificate. In the event that the Borrowing Base is less
than the

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principal amount outstanding under the Note, the Borrower shall immediately notify Bank of
such situation and shall, within five (5) Business Days of the imbalance, either (i) reduce the
amount of the outstanding balances to bring such amounts within the formulas prescribed, or (ii)
provide additional Eligible Inventory, without any additional advance being made by the Bank with
respect thereto, necessary to comply with the formulas required herein. Within the limits of the
Commitment, the Borrower may borrow, repay and reborrow under this Section 2.01. On such
terms and conditions, the Loans may be outstanding as Prime Loans or LIBOR Loans. Each type of
Loan shall be made and maintained at the Bank’s Lending Office for such type of Loan.

     Section 2.02. Notice and Manner of Borrowing. The Borrower shall give the Bank irrevocable
written notice of any Revolving Credit Loans under this Agreement, not later than 12:00 noon
(central time) on the requested funding date before each Revolving Credit Loan, specifying: (1)
the date of such Loan; (2) the amount of such Loan; (3) the type of Loan; and (4) in the case of a
LIBOR Loan, the duration of the Interest Period applicable thereto. Not later than 2:00p.m.
(Central time) on the date of such Revolving Credit Loan, and upon fulfillment of the applicable
conditions set forth in Article 3, the Bank will make such Revolving Credit Loans available
to the Borrower in immediately available funds by crediting the amount thereof to the Borrower’s
account with the Bank.

     Section 2.03. Interest. The Borrower shall pay interest to the Bank on the outstanding and
unpaid principal amount of the Bank’s Revolving Credit Loans made under this Agreement at a rate
per annum, as follows:

     (1) For a Prime Loan at the Adjusted Prime Rate; and

     (2) For a LIBOR Loan at the Adjusted LIBOR Rate.

     The Adjusted Prime Rate and Adjusted LIBOR Rate shall be determined in accordance with the
following:

	 	 	 	 	 
	                    Borrower’s Ratio of	 	Adjusted	 	Adjusted
	                    Funded Debt to EBITDA	 	LIBOR Rate	 	Prime Rate
	< 2.0
	 	LIBOR Rate plus 3.0%	 	Prime Rate plus 0.0%
	3 2.0 < 2.25
	 	LIBOR Rate plus 3.25%	 	Prime Rate plus .25%
	3 2.25 < 2.50
	 	LIBOR Rate plus 3.50%	 	Prime Rate plus .50%
	> 2.50
	 	LIBOR Rate plus 3.75%	 	Prime Rate plus .75%

     Any change in the interest rate based on the Prime Rate resulting from a change in the
Prime Rate shall be effective as of the opening of business on the day on which such change in the
Prime Rate becomes effective. The ratio of Funded Debt to EBITDA shall be calculated based upon the
immediately preceding twelve (12) consecutive full months.

     Interest on each Prime Loan and LIBOR Loan shall be calculated on the basis of the actual
number of days elapsed.

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     Interest on the Loans shall be paid in immediately available funds to the Bank at its
Principal Office as follows:

     (1) For each Prime Loan on the first day of each month commencing the first such date
after such Loan and at maturity for such Loan; and

     (2) For each LIBOR Loan, on the last day of the Interest Period with respect thereto
and, in the case of an Interest Period greater than three months, at three (3) month
intervals after the first day of such Interest Period.

     Section 2.04. Interest Rate Determination. The Bank shall give prompt notice to the Borrower
of the applicable interest rate determined by the Bank pursuant to the terms of this Agreement.

     Section 2.05. Unused Portion Fee. The Borrower agrees to pay to the Bank a commitment fee on
the average daily unused portion of the Bank’s Commitment from the date of this Agreement until the
Termination Date at the rate of one-tenth of one percent (1/10 of 1%) per annum, payable on the
last day of each quarter during the term of the Bank’s Commitment, commencing the first quarter end
following the date of this Agreement, and ending on the Termination Date. Further, no Unused
Portion Fees will be paid for any given month during which the average monthly revolving balance
exceeds $3,100,000 during each quarter the Unused Portion Fee is billed.

     Section 2.06. Note. The Loan made by the Bank under this Agreement shall be evidenced by, and
repaid with interest in accordance with, a promissory note of the Borrower to Bank in the amount of
the Commitment, in form and content as set forth on Exhibit “D” hereto, duly
completed, dated the date of this Agreement, and payable to the Bank for the account of its
applicable Lending Office, such Note to represent the obligation of the Borrower to repay the Loan.
The Bank is hereby authorized by the Borrower to endorse on the schedule attached to the Note held
by it the amount and type of each Revolving Credit Loan and each renewal, conversion, and payment
of principal amount received by the Bank for the account of its applicable Lending Office on
account of its Revolving Credit Loans, which endorsement shall, in the absence of manifest error,
be conclusive as to the outstanding balance of the Revolving Credit Loans made by the Bank;
provided, however, that the failure to make such notation with respect to any Revolving Credit Loan
or renewal, conversion, or payment shall not limit or otherwise affect the obligations of the
Borrower under this Agreement or the Note held by the Bank.

     The aggregate principal balance and all accrued interest of all Loans shall be repaid on the
Termination Date.

     Section 2.07. Method of Payment. The Borrower shall make each payment under this Agreement
and under the Note not later than 5:00 p.m. (Central time) on the date when due in lawful money of
the United States to the Bank at its Principal Office for the account of the applicable Lending
Office of the Bank in immediately available funds. The Borrower hereby authorizes the Bank, if and
to the extent payment is not made when due under this Agreement or under the Note, to charge from
time to time against any account of the Borrower with the Bank any amount as due.

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Whenever any
payment to be made under this Agreement or under the Note shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of the payment of interest and the
commitment fee, as the case may be, except, in the case of a LIBOR Loan, if the result of such
extension would be to extend such payment into another calendar month, such payment shall be made
on the immediately preceding Business Day.

     Section 2.8. Use of Proceeds. The proceeds of the Loan hereunder shall be used by the
Borrower to finance working capital requirements and repay certain existing indebtedness. The
Borrower will not, directly or indirectly, use any part of such proceeds for the purpose of
purchasing
or carrying any margin stock within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System or to extend credit to any Persons for the purpose of purchasing or
carrying any such margin stock, or for any purpose which violates, or is inconsistent with,
Regulation X of such Board of Governors.

     Section 2.9. Illegality. Notwithstanding any other provision in this Agreement, if the Bank
determines that any applicable law, rule, or regulation, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or compliance by the
Bank (or its Lending Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank, or comparable agency shall make it unlawful or impossible for
the Bank (or its Lending Office) to maintain or fund its LIBOR Loans, then upon notice to the
Borrower by the Bank the outstanding principal amount of all LIBOR Loans, together with interest
accrued thereon, and any other amounts payable to the Bank under this Agreement shall be repaid (a)
immediately upon demand of the Bank if such change or compliance with such request, in the judgment
of the Bank, requires immediate repayment, or (b) at the expiration of the last Interest Period to
expire before the effective date of any such change or request.

     Section 2.10. Disaster. Notwithstanding anything to the contrary herein, if the Bank
determines (which determination shall be conclusive) that the relevant rates of interest referred
to in the definition of LIBOR Rate upon the basis of which the rate of interest for any such type
of Loan is to be determined do not accurately cover the cost to the Bank of making or maintaining
such type of Loans, then the Bank shall forthwith give notice thereof to the Borrower, whereupon
(a) the obligation of the Bank to make LIBOR Loans shall be suspended until the Bank notifies the
Borrower that the circumstances giving rise to such suspension no longer exist, and (b) the
Borrower shall repay in full the then outstanding principal amount of each LIBOR Loan together with
accrued interest thereon, on the last day of the then current Interest Period applicable to such
Loan.

     Section 2.11. Increased Cost. From time to time upon notice to the Borrower from the Bank the
Borrower shall pay to the Bank such amounts as the Bank may determine to be necessary to compensate
the Bank for any costs incurred by the Bank which the Bank reasonably determines are attributable
to its making or maintaining any LIBOR Loan hereunder or its obligation to make any such Loan
hereunder, or any reduction in any amount receivable by the Bank under this Agreement or its Note
in respect of any such Loans or such obligation (such increases in costs and reductions in amounts
receivable being herein called “Additional Costs”), resulting from any change after the date

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of
this Agreement in U.S. federal, state, municipal, or foreign laws or regulations (including
Regulation D), or the adoption or making after such date of any interpretations, directives, or
requirements applying to a class of Bank including the Bank of or under U.S. federal, state,
municipal, or foreign laws or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or administration thereof
(“Regulatory Change”), which: (1) changes the basis of taxation of any amounts payable to the Bank
under this Agreement or its Note in respect of any of such Loans (other than taxes imposed on the
overall net income of the Bank or of its Lending Office for any of such Loans by the jurisdiction
where the Principal Office or such Lending Office is located); or (2) imposes or modifies any
reserve, special deposit, compulsory loan, or similar requirements relating to any extensions of
credit or other assets of, or any deposits with or other liabilities of, the Bank pertaining to
this Agreement
(including any of such Loans or any deposits referred to in the definition of LIBOR Rate); or
(3) imposes any other condition affecting this Agreement or its Note (or any of such extensions of
credit or liabilities). The Bank will notify the Borrower of any event occurring after the date of
this Agreement which will entitle the Bank to compensation pursuant to this Section 2.11 as
promptly as practicable after it obtains knowledge thereof and determines to request such
compensation.

     Determinations by the Bank for purposes of this Section 2.11 of the effect of any
Regulatory Change on its costs of making or maintaining Loans or on amounts receivable by it in
respect of Loans, and of the additional amounts required to compensate any the Bank in respect of
any Additional Costs, shall be conclusive, provided that such determinations are made on a
reasonable basis.

     Section 2.12. Risk-Based Capital. In the event that the Bank determines that (1) compliance
with any judicial, administrative, or other governmental interpretation of any law or regulation or
(2) compliance by the Bank or any corporation controlling the Bank with any guideline or request
from any central bank or other governmental authority (whether or not having the force of law) has
the effect of requiring an increase in the amount of capital required or expected to be maintained
by the Bank or any corporation controlling the Bank, and the Bank reasonably determines that such
increase is based upon its obligations hereunder, and other similar obligations, the Borrower shall
pay to the Bank such additional amount as shall be reasonably determined by the Bank to be the
amount attributable to the Bank’s obligations to the Borrower hereunder. The Bank will notify the
Borrower of any event occurring after the date of this Agreement that will entitle the Bank to
compensation pursuant to this Section 2.12 as promptly as practicable after it obtains
knowledge thereof and determines to request such compensation.

     Determinations by the Bank for purposes of this Section 2.12 of the effect of any
increase in the amount of capital required to be maintained by the Bank and of the amount
attributable to the Bank’s obligations to the Borrower hereunder shall be conclusive, provided that
such determinations are made on a reasonable basis.

     Section 2.13. Funding Loss Indemnification. Upon notice to the Borrower from the Bank the
Borrower shall pay to the Bank such amount or amounts as shall be sufficient (in the reasonable
opinion of the Bank) to compensate it for any loss, cost, or expense incurred as a result of:

12

 

     (3) Any payment of a LIBOR Loan on a date other than the last day of the Interest
Period for such Loan including, but not limited to acceleration of the Loans by the Bank
pursuant to Section 8.01; or

     (4) Any failure by the Borrower to borrow or convert, as the case may be, a LIBOR Loan
on the date for borrowing or conversion, as the case may be, specified in the relevant
notice under Section 2.02.

     Section 2.14. Termination Fee. The Borrower may terminate this Agreement at any time upon not
less than ten (10) Business Day’s notice to Bank of such intention, provided, that all monetary
obligations (e.g. payment of Note) and any indemnification shall continue; and provided further
that Borrower agrees to pay to the Bank a termination fee in an aggregate amount equal to
$10,000 in the event the credit facility is terminated for any reason prior to six (6) months
from the execution date hereof; provided, that no termination fee shall be payable for any
prepayment if the Borrower is required to make any payments under Sections 2.11 and/or
2.12.

     Section 2.15. Audit Fees. The Borrower agrees to pay to the Bank all costs and fees
reasonably incurred by the Bank’s internal auditors in connection with quarterly audits of the
Borrower performed by such auditors during the term of this Agreement; provided that, prior
to the occurrence of an Event of Default, the Bank shall not be entitled to reimbursement for any
such costs and fees incurred in connection with audits in an amount greater than $5,000 during any
year (with each year beginning on the Closing Date or an anniversary date thereof and ending twelve
(12) months thereafter) of this Agreement. A pro-rata portion of the audit fee shall be payable in
arrears on the first day of each month commencing with the month immediately following the Closing
Date. Notwithstanding the foregoing, upon the occurrence of any Event of Default, the Borrower
shall pay all of the Bank’s costs incurred in connection with the verification, audit, and
inspection of the Collateral without regard to the foregoing limitations.

     Section 2.16. Right to Cure. The Bank may, in its discretion, pay any amount or do any act
required of the Borrower hereunder or under any other Loan Document in order to preserve, protect,
maintain or enforce the Obligations, the Collateral or the Bank’s Liens therein, which the Borrower
fails to pay or do, including, without limitation, payment of any judgment against the Borrower,
any insurance premium, any landlord’s claim, any other Lien upon or with respect to the Collateral.
All payments that the Bank makes under this Section 2.16 and all out-of-pocket costs and
expenses that the Bank pays or incurs in connection with any action taken by it hereunder shall be
charged to the Borrower’s Loan Account as a Revolving Credit Loan. Any payment made or other
action taken by the Bank under this Section 2.16 shall be without prejudice to any right to
assert an Event of Default hereunder.

Article 3

CONDITIONS PRECEDENT

     Section 3.01. Conditions Precedent to Initial Loan. The obligation of the Bank to make its
initial Loan to the Borrower is subject to the conditions precedent that the Bank shall have
received

13

 

on or before the day of such Loan each of the following, in form and substance
satisfactory to the Bank and its counsel:

     (1) Note. The Note duly executed by the Borrower;

     (2) Security Agreement-Borrower. A Security Agreement duly executed by the Borrower
together with (a) Financing Statements (Form UCC-1) to be duly filed under the Uniform
Commercial Code of all jurisdictions necessary or, in the opinion of the Bank, desirable to
perfect the security interest created by the Security Agreement; and (b) chattel checks
identifying all of the financing statements on file with respect to the Borrower in all
jurisdictions referred to under (a), indicating that no party claims an interest in any of
the Collateral;

     (3) Security Agreement-Colonial. A Security Agreement duly executed by Colonial
together with (a) Financing Statements (Form UCC-1) to be duly filed under the Uniform
Commercial Code of all jurisdictions necessary or, in the opinion of the Bank, desirable to
perfect the security interest created by the Security Agreement; and (b) chattel checks
identifying all of the financing statements on file with respect to Colonial in all
jurisdictions referred to under (a), indicating that no party claims an interest in any of
the Collateral;

     (4) Evidence of all corporate action by the Borrower. Certified (as of the date of
this Agreement) copies of all corporate action taken by the Borrower, including resolutions
of its Board of Directors, authorizing the execution, delivery, and performance of the Loan
Documents to which it is a party and each other document to be delivered pursuant to this
Agreement;

     (5) Incumbency and signature certificate of Borrower. A certificate (dated as of the
date of this Agreement) of the Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to sign the Loan Documents to which it
is a party and the other documents to be delivered by the Borrower under this agreement;

     (6) Opinion of counsel for Borrower. A favorable opinion of counsel for the Borrower,
in substantially the form of Exhibit “E”, and as to such other matters as the Bank
may reasonably request;

     (7) Guaranty. The Guaranty duly executed by the Guarantor;

     (8) Evidence of all corporate action by Guarantor. Certified (as of the date of this
Agreement) copies of all corporate action taken by the Guarantor, including resolutions of
its Board of Directors, authorizing the execution, delivery, and performance of the
Guaranty;

14

 

     (9) Incumbency and signature certificate of Guarantor. A certificate (dated as of the
date of this Agreement) of the Secretary of the Guarantor certifying the names and true
signatures of the officers of the Guarantor authorized to sign the Guaranty; and

     (10) Opinion of counsel for Guarantor. A favorable opinion of counsel for the
Guarantor, in substantially the form of Exhibit “F”, and as to such other matters as
the Bank may reasonably request.

     Section 3.02. Conditions Precedent to All Loans. The obligation of the Bank to make each Loan
(including the initial Loan) shall be subject to the further conditions precedent that on the date
of such Loan:

     (1) The following statements shall be true and correct:

     (a) The representations and warranties contained in Article 4 of this
Agreement, in Section 8 of the Security Agreement, and in Sections 24
through 29 of
the Guaranty are correct in all material respects on and as of the date of such
Loans as though made on and as of such date other than any such representation or
warranty which relates to a specified prior date and except to the extent the Bank
has been notified in writing by the Borrower that any representation or warranty is
not correct and the Bank has explicitly waived in writing compliance with such
representation or warranty; and

     (b) No Default or Event of Default has occurred and is continuing, or would
result from such Loans.

Article 4

REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants to the Bank that:

     Section 4.01. Incorporation, Good Standing, and Due Qualification. Borrower and each of its
respective Subsidiaries, is a corporation duly incorporated, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation; has the corporate power and authority to
own its assets and to transact the business in which it is now engaged or proposed to be engaged
in; and is duly qualified as a foreign corporation and in good standing under the laws of each
other jurisdiction in which such qualification is required.

     Section 4.02. Corporate Power and Authority. The execution, delivery, and performance by the
Borrower of the Loan documents to which it is a party have been duly authorized by all necessary
corporate action and do not and will not (1) require any consent or approval of the stockholders of
such corporation; (2) contravene such corporation’s charter or bylaws; (3) violate any provision of
any law, rule, regulation (including, without limitation, Regulations U and X of the Board of
Governors of the Federal Reserve System), order, writ, judgment, injunction, decree,

15

 

determination,
or award presently in effect having applicability to such corporation; (4) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any other agreement, lease,
or instrument to which such corporation is a party or by which it or its properties may be bound or
affected; (5) result in, or require, the creation or imposition of any Lien except as contemplated
by this Agreement, upon or with respect to any of the properties now owned or hereafter acquired by
such corporation; and (6) cause such corporation to be in default under any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination, or award or any such
indenture, agreement, lease, or instrument.

     Section 4.03. Legally Enforceable Agreement. This Agreement is, and each of the other Loan
Documents when delivered under this Agreement will be legal, valid, and binding obligations of the
Borrower enforceable against the Borrower in accordance with their respective terms, except to the
extent that such enforcement may be limited by applicable bankruptcy, insolvency, and other similar
laws affecting creditors’ rights generally.

     Section 4.04. Financial Statements. The interim balance sheet of the Borrower as of February
28, 2005, and the related statement of operations for the ten (10) month period then ended,
copies of which have been furnished to the Bank, are complete and correct and fairly present
the financial condition of the Borrower as of such date and the results of the operations of the
Borrower for the period covered by such statements, all in accordance with GAAP consistently
applied (except for the absence of footnotes for interim financial statements and subject to
year-end adjustments in the case of the interim financial statements), and since February 28, 2005,
there has been no material adverse change in the condition (financial or otherwise), business, or
operations of the Borrower. There are no liabilities of the Borrower or any Subsidiary, fixed or
contingent, which are material and are not reflected in the financial statements or in the notes
thereto, other than liabilities arising in the ordinary course of business since February 28, 2005.
No information, exhibit, or report furnished by the Borrower to the Bank in connection with the
negotiation of this Agreement contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statement contained therein not materially
misleading.

     Section 4.05. Labor Disputes and Acts of God. Neither the business nor the properties of the
Borrower are affected by any fire, explosion, accident, strike, lockout, or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance), which materially and adversely affect the business or the
operation of the Borrower.

     Section 4.06. Other Agreements. Neither the Borrower nor any Subsidiary is a party to any
material indenture, loan, or credit agreement, or to any material lease or other agreement or
instrument or subject to any charter or corporate restriction which is likely to have a material
adverse effect on the business, properties, assets, operations, or conditions, financial or
otherwise, of the Borrower or any Subsidiary or the ability of the Borrower to carry out its
obligations under the Loan Documents to which it is a party. Neither the Borrower nor any
Subsidiary is in default in any respect in the performance, observance, or fulfillment of any of
the obligations, covenants, or conditions contained in any agreement or instrument material to its
business to which it is a party.

16

 

     Section 4.07. Litigation. There is no pending or to the Borrower’s knowledge threatened
action or proceeding against or affecting the Borrower or any of its Subsidiaries before any court,
governmental agency, or arbitrator, which is likely to, in any one case or in the aggregate,
materially adversely affect the financial condition, operations, properties, or business of the
Borrower or any Subsidiary or the ability of the Borrower to perform its obligations under the Loan
Documents to which it is a party.

     Section 4.08. No Defaults on Outstanding Judgments or Orders. The Borrower and its
Subsidiaries have satisfied all judgments, and neither the Borrower nor any Subsidiary is in
default with respect to any judgment, writ, injunction, decree, rule, or regulation of any court,
arbitrator, or federal, state, municipal, or other governmental authority, commission, board,
bureau, agency, or instrumentality, domestic or foreign; provided that non-compliance with the
foregoing shall not constitute a Default if such non-compliance does not have a material adverse
effect on the financial condition or operation of the Borrower.

     Section 4.09. Ownership and Liens. The Borrower and each Subsidiary have title to, or valid
leasehold interests in, all of their properties and assets (except for those assets for which the
company has not yet paid, but has included such obligation in its accounts payable or accrued
liabilities), real and personal, including the properties and assets and leasehold interests
reflected in the financial statements referred to in Section 4.04 (other than any
properties or assets disposed of in the ordinary course of business), and none of the material
properties or assets owned by the Borrower or any Subsidiary and none of their leasehold interests
is subject to any Lien, except such as may be permitted pursuant to Section 6.01 of this
Agreement.

     Section 4.10. Subsidiaries and Ownership of Stock. Set forth in Exhibit “G” is a
complete and accurate list of the Subsidiaries of the Borrower, showing the jurisdiction of
incorporation of each and showing the percentage of the Borrower’s ownership of the outstanding
stock of each Subsidiary. All of the outstanding capital stock of each such Subsidiary has been
validly issued, is fully paid and nonassessable, and is owned by the Borrower free and clear of all
Liens.

     Section 4.11. ERISA. Each Plan is in compliance in the material respects with all applicable
provisions of ERISA. Neither a Reportable Event nor a Prohibited Transaction has occurred and is
continuing with respect to any Plan; no notice of intent to terminate a Plan has been filed, nor
has any Plan been terminated; no circumstances exist which constitute grounds entitling the PBGC to
institute proceedings to terminate, or appoint a trustee to administer, a Plan, nor has the PBGC
instituted any such proceedings; neither the Borrower nor any Commonly Controlled Entity has
completely or partially withdrawn from a Multiemployer Plan; the Borrower and each Commonly
Controlled Entity have met their minimum funding requirements under ERISA with respect to all of
their Plans and the present value of all vested benefits under each Plan does not exceed the fair
market value of all Plan assets allocable to such benefits, as determined on the most recent
valuation date of the Plan and in accordance with the provisions of ERISA; and neither the Borrower
nor any Commonly Controlled Entity has incurred any liability to the PBGC under ERISA which has
resulted or could reasonably be expected to result in a material adverse effect on the financial
condition of the Borrower.

17

 

     Section 4.12. Operation of Business. The Borrower and each of its Subsidiaries possess all
licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto,
to conduct their respective businesses substantially as now conducted and as presently proposed to
be conducted, the absence of which could reasonably be expected to cause a Material Adverse Effect
and the Borrower and each of its Subsidiaries are not in violation of any valid rights of others
with respect to any of the foregoing which could reasonably be expected to cause a Material Adverse
Effect.

     Section 4.13. Taxes. The Borrower and each of its Subsidiaries and the Guarantor have filed
all tax returns (federal, state, and local) required to be filed and have paid all taxes,
assessments, and governmental charges and levies thereon to be due, including interest and
penalties. Notwithstanding the foregoing, Bank acknowledges that Borrower is currently being
audited by the Internal Revenue Service; and in connection therewith, Borrower represents to Bank
that to the best of its knowledge, that as of the date hereof, the Internal Revenue Service has
neither contested nor led Borrower to believe it will contest any of the amounts on the Borrower’s
tax returns for the periods being audited that are financially material to Borrower.

     Section 4.14. Debt. Exhibit “H” is a complete and correct list as of the Closing Date
of all credit agreements, indentures, guaranties, Capital Leases, and other investments,
agreements, and
arrangements presently in effect and in excess of $250,000 in each instance providing for or
relating to extensions of credit (including agreements and arrangements for the issuance of letters
of credit or for acceptance financing) in respect of which the Borrower or any Subsidiary is in any
manner directly or contingently obligated; and the maximum principal or face amounts of the credit
in question, outstanding or to be outstanding, are correctly stated, and all Liens of any nature
given or agreed to be given as security therefor are correctly described or indicated in such
Exhibit. Such Exhibit, however, shall not include real estate loans or leases for car lot
locations.

     Section 4.15. Environment. The Borrower has duly complied with, and their businesses,
operations, assets, equipment, property, leaseholds, or other facilities are in material compliance
with, the provisions of all federal, state, and local environmental, health, and safety laws, codes
and ordinances and all rules and regulations promulgated thereunder. The Borrower has been issued
and will maintain all material required federal, state, and local permits, licenses, certificates,
and approvals relating to (1) air emissions; (2) discharges to surface water or groundwater; (3)
noise emissions; (4) solid or liquid waste disposal; (5) the use, generation, storage,
transportation, or disposal of toxic or hazardous substances or wastes (intended hereby and
hereafter to include any and all such materials listed in any federal, state, or local law, code,
or ordinance and all rules and regulations promulgated thereunder as hazardous or potentially
hazardous); or (6) other environmental, health, or safety matters the absence of which could
reasonably be expected to cause a materially adverse effect. The Borrower has not received notice
of, or knows of, or suspects facts which might constitute any violations of any federal, state, or
local environmental, health, or safety laws, codes or ordinances and any rules or regulations
promulgated thereunder with respect to its businesses, operations, assets, equipment, property,
leaseholds, or other facilities the existence of which could reasonably be expected to cause a
materially adverse effect. Except in accordance with a valid governmental permit, license,
certificate or approval, there has been no emission, spill, release, or discharge into or upon (1)
the air; (2) soils, or any improvements located thereon; (3)

18

 

surface water or groundwater; or (4)
the sewer, septic system or waste treatment, storage or disposal system servicing the premises, of
any toxic or hazardous substances or wastes at or from the premises the existence of which could
reasonably be expected to cause a materially adverse effect. There has been no complaint, order,
directive, claim, citation, or notice by any governmental authority or any person or entity with
respect to (1) air emissions; (2) spills, releases, or discharges to soils or improvements located
thereon, surface water, groundwater or the sewer, septic system or waste treatment, storage or
disposal systems servicing the premises; (3) noise emissions; (4) solid or liquid waste disposal;
(5) the use, generation, storage, transportation, or disposal of toxic or hazardous substances or
waste; or (6) other environmental, health, or safety matters affecting the Borrower or its
business, operations, assets, equipment, property, leaseholds, or other facilities the existence
of which could reasonably be expected to cause a materially adverse effect. The Borrower does not
have any material indebtedness, obligation, or liability, absolute or contingent, matured or not
matured, with respect to the storage, treatment, cleanup, or disposal of any solid wastes,
hazardous wastes, or other toxic or hazardous substances.

Article 5

AFFIRMATIVE COVENANTS

     So long as any Note shall remain unpaid or the Bank shall have any Commitment under this
Agreement, the Borrower will:

     Section 5.01. Maintenance of Existence. Preserve and maintain, and cause each Subsidiary to
preserve and maintain, its corporate existence and good standing in the jurisdiction of its
incorporation, and qualify and remain qualified, as a foreign corporation in each jurisdiction in
which such qualification is required.

     Section 5.02. Maintenance of Records. Keep, and cause each Subsidiary to keep, adequate
records and books of account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Borrower and its Subsidiaries.

     Section 5.03. Maintenance of Properties. Maintain, keep, and preserve, and cause each
Subsidiary to maintain, keep, and preserve, all of its properties (tangible and intangible) as it
reasonably deems necessary or useful in the proper conduct of its business in good working order
and condition, ordinary wear and tear excepted.

     Section 5.04. Conduct of Business. Continue, and cause each Subsidiary to continue, to engage
in an efficient and economical manner in a business of the same general type as conducted by it on
the date of this Agreement.

     Section 5.05. Maintenance of Insurance. Maintain, and cause each subsidiary to maintain,
insurance with financially sound and reputable insurance companies or associations in such amounts
and covering such risks as are usually carried by companies engaged in the same or a similar
business and similarly situated, which insurance may provide for reasonable deductibility from
coverage thereof.

19

 

     Section 5.06. Compliance With Laws. Comply, and cause each Subsidiary to comply, in all
respects with all applicable laws, rules, regulations, and orders, such compliance to include,
without limitation, paying before the same become delinquent all taxes, assessments, governmental
charges imposed upon it or upon its property.

     Section 5.07. Right of Inspection. At any reasonable time and from time to time, permit the
Bank or any agent or representative thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the Borrower and any Subsidiary, and
to discuss the affairs, finances, and accounts of the Borrower and any Subsidiary with any of their
respective officers and directors and the Borrower’s independent accountants, provided that Bank
shall keep all such information and records confidential.

     Section 5.08. Reporting Requirements. Furnish to Bank:

     (1) Monthly financial statements. As soon as available and in any event within
forty-five (45) days after the end of each calendar month, consolidated balance sheets of
the Borrower and its Subsidiaries as of the end of such month, consolidated statements of
operations of the Borrower and its Subsidiaries for such month and the period commencing at
the end of the previous fiscal year and ending with the end of such month, and, if
requested, consolidated statements of cash flow of the Borrower and its Subsidiaries
for the portion of the fiscal year ended with the last day of such month, all in reasonable
detail and all prepared in accordance with GAAP (except with respect to the absence of
footnotes) consistently applied and certified by the responsible accounting officer or other
responsible officer of the Borrower (subject to year-end adjustments);

     (2) Audited Annual financial statements. As soon as available and in any event within
one hundred ten (110) days after the end of each fiscal year of the Borrower, consolidated
balance sheets of the Borrower and its Subsidiaries as of the end of such fiscal year,
consolidated statements of operations and shareholders’ equity of the Borrower and its
Subsidiaries for such fiscal year, and consolidated statements of cash flow of the Borrower
and its Subsidiaries for such fiscal year, all in reasonable detail and stating in
comparative form (beginning with the April 30, 2006 year end) the respective figures for the
corresponding date and period in the prior fiscal year and all prepared in accordance with
GAAP consistently applied accompanied by an opinion thereon unqualified as to scope by
independent accountants selected by the Borrower and reasonably acceptable to the Bank
(and Bank hereby approves the Borrower’s current auditor or any other “Big 5” accounting
firm);

     (3) As soon as available and in any event within thirty (30) days after the end of each
fiscal year of the Borrower, annual forecasts projecting the operating results of Borrower
for the coming year;

     (4) As soon as available and in any event within thirty (30) days of the filing
thereof, copies of Borrower’s federal income tax returns if requested;

20

 

     (5) As soon as available and in any event by the fifteenth (15th) day of
each calendar month: (a) such other reports as to the Collateral of the Borrower as the Bank
shall reasonably request from time to time; and (b) a certificate of an officer of the
Borrower certifying as to the accuracy and completeness of the foregoing. If any of the
Borrower’s records or reports of the Collateral are prepared by an accounting service or
other agent, the Borrower hereby authorizes such service or agent to deliver such records,
reports, and related documents to the Bank.

     (6) Management letters. Promptly upon receipt thereof, copies of any reports submitted
to the Borrower or any Subsidiary by independent certified public accountants in connection
with the annual examination of the financial statements of the Borrower or any Subsidiary
made by such accountants;

     (7) Certificate of no Default. In connection with the delivery of financial statements
under Section 5.08(1), the Borrower shall deliver a certificate signed by a
responsible officer of the Borrower, (a) certifying that to the best of his knowledge no
Default or Event of Default has occurred and is continuing, or if a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof and the action
which is proposed to be taken with respect thereto; and (b) with computations demonstrating
compliance with the covenants contained in Article 7;

     (8) Accountant’s Report. Simultaneously with the delivery of the annual financial
statements referred to in Section 5.08(2), a certificate of the independent public
accountants who audited such statements to the effect that, in making the examination
necessary for the audit of such statements, they have obtained no knowledge of any condition
or event which constitutes a Default or Event of Default, or if such accountants shall have
obtained knowledge of any such condition or event, specifying in such certificate each such
condition or event of which they have knowledge and the nature and status thereof;

     (9) Notice of Litigation. Promptly after the commencement thereof, notice of all
actions, suits, and proceedings before any court or governmental department, commission,
board, bureau, agency, or instrumentality, domestic or foreign, affecting the Borrower or
any Subsidiary which, if determined adversely to the Borrower or such Subsidiary, could
reasonably be expected to have a material adverse effect on the financial condition,
properties, or operations of the Borrower or such Subsidiary;

     (10) Notice of Defaults and Events of Default. As soon as possible and in any event
within five (5) days after the occurrence of each Default or Event of Default, a written
notice setting forth the details of such Default or Event of Default and the action which is
proposed to be taken by the Borrower with respect thereto;

     (11) ERISA reports. As soon as possible, and in any event within thirty (30) days
after the Borrower knows or has reason to know that any circumstances exist that constitute
grounds entitling the PBGC to institute proceedings to terminate a Plan subject to ERISA

21

 

with respect to the Borrower or any Commonly Controlled Entity, and promptly but in any
event within five (5) Business Days of receipt by the Borrower or any Commonly Controlled
Entity of notice that the PBGC intends to terminate a Plan or appoint a trustee to
administer the same, and promptly but in any event within five (5) Business Days of the
receipt of notice concerning the imposition of withdrawal liability with respect to the
Borrower or any Commonly Controlled Entity, the Borrower will deliver to Bank a certificate
of a responsible officer of the Borrower setting forth all relevant details and the action
which the Borrower proposes to take with respect thereto;

     (12) Reports to other creditors. Promptly after the furnishing thereof, copies of any
statement or report furnished to any other party to whom Borrower owes $2,000,000 or more,
pursuant to the terms of any indenture, loan, credit, or similar agreement and not otherwise
required to be furnished to the Bank pursuant to any other clause of this Section
5.08;

     (13) General information. Such other information respecting the condition or
operations, financial or otherwise, of the Borrower, Guarantor or any Subsidiary as Bank may
from time to time reasonably request.

     Section 5.09. Environment. Be and remain, and cause each Subsidiary to be and remain, in
compliance with the provisions of all material federal, state, and local environmental, health, and
safety laws, codes and ordinances, and all rules and regulations issued thereunder; notify Bank
immediately of any notice of a hazardous discharge or environmental complaint received from
any governmental agency or any other party which is likely to have a Material Adverse Effect;
notify Bank immediately of any hazardous discharge from or affecting its premises which is likely
to have a Material Adverse Effect; immediately contain and remove the same, in compliance with all
applicable laws; promptly pay any fine or penalty assessed in connection therewith; permit Bank to
inspect the premises, to conduct tests thereon, and to inspect all books, correspondence, and
records pertaining thereto; and at Bank’s request, and at the Borrower’s expense, provide a report
of a qualified environmental engineer, satisfactory in scope, form, and content to Bank, and such
other and further assurances reasonably satisfactory to Bank that the condition has been corrected.

     Section 5.10. Operating Account. Maintain its primary operating account with Bank.

     Section 5.11. Loss Reserves. If necessary, maintain loss reserves in an amount, calculated
as of the last day of each month, which is in accordance with GAAP.

     Section 5.12. Perfection and Protection of Security Interest. The Borrower shall, at its
expense, perform all steps requested by the Bank at any time to perfect, maintain, protect, and
enforce the Bank’s Liens in the Collateral, including, without limitation: (i) executing and filing
financing or continuation statements, and amendments thereof, in form and substance satisfactory to
the Bank; (ii) upon Bank’s request, delivering to the Bank, at the request of Bank, the originals
of all Instruments, documents, and chattel paper, and all other Collateral of which the Bank
determines it should have physical possession in order to perfect and protect the Bank’s security
interest therein, duly pledged, endorsed or assigned to the Bank without restriction; (iii) placing
notations on the

22

 

Borrower’s books of account to disclose the Bank’s security interest; and (iv)
taking such other steps as are deemed necessary or desirable by the Bank to maintain and protect
the Bank’s Liens in the Collateral. To the extent permitted by applicable law, the Bank may file,
without the Borrower’s signature, one or more financing statements disclosing the Bank’s Liens in
the Collateral. The Borrower agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is sufficient as a financing statement.

     Section 5.13. Title to, Liens on, and Sale of Collateral. The Borrower represents and warrants
to the Bank that (except as for any Collateral that has not been paid for, but such obligation is
included in accounts payable or accrued liabilities): (a) all of the Collateral is and will
continue to be owned solely by the Borrower free and clear of all Liens whatsoever except for the
Bank’s Liens and Permitted Liens; (b) the Bank’s Liens in the Collateral will not be subject to any
prior Lien; (c) the Borrower will store and maintain the Collateral with all reasonable care; and
(d) the Borrower will not, without the Bank’s prior written approval, sell, or dispose of or permit
the sale or disposition of any of the Collateral other than in the ordinary course of business.
The inclusion of proceeds in the Collateral shall not be deemed to constitute the Bank’s consent to
any sale or other disposition of the Collateral except as expressly permitted herein.

     Section 5.14. Collection of Contracts; Payments.

     (a) At the election of Bank, the Borrower shall collect all Accounts, shall receive all
payments relating to Accounts, and shall promptly deposit all such collections into Payment
Accounts established for the account of the Borrower at Bank acceptable to the Borrower
and the Bank, and subject to the provisions of a Blocked Account Agreement acceptable to
Borrower and Bank. All collections relating to Accounts received in any such Payment Account or
directly by the Borrower or the Bank, and all funds in any Payment Account or other account to
which such collections are deposited, shall be the sole property of the Bank and subject to the
Bank’s sole control. After an occurrence of any Event of Default and following any applicable
notice and cure period the Bank may, at any time, notify obligors that the Accounts have been
assigned to the Bank and of the Security Interest therein, and may collect them directly and charge
the collection costs and expenses to the Borrower’s loan account. The Borrower, at Bank’s request,
shall execute and deliver to the Bank such documents as the Bank shall require to grant the Bank
access to any post office box in which collections of Accounts are received.

     (b) If sales of Inventory are made for cash, the Borrower shall immediately deposit such
identical checks, cash, or other forms of payment which the Borrower receives into the Payment
Accounts.

     (c) All payments received by the Bank on account of Accounts or as Proceeds of other
Collateral will be the Bank’ sole property and will be credited to the Borrower’s loan account
(conditional upon final collection) immediately upon receipt.

     (d) In the event the Borrower repays all of the Obligations upon the termination of this
Agreement, any additional payments received by the Bank shall be promptly returned to the Borrower
or deposited into an account for the benefit of the Borrower.

23

 

Article 6

NEGATIVE COVENANTS

     So long as any Note shall remain unpaid or the Bank shall have any Commitment under this
Agreement, the Borrower will not:

     Section 6.01. Liens. Create, incur, assume, or suffer to exist, or permit any Subsidiary to
create, incur, assume, or suffer to exist, any Lien, upon or with respect to any of its properties,
now owned or hereafter acquired, except:

     (1) Liens in favor of the Bank pursuant to the Security Agreement;

     (2) Liens in favor of Bank of Oklahoma in connection with its loan to Colonial whereby
the accounts, if any, are pledged as additional collateral.

     (3) Liens for taxes or assessments or other government charges or levies if not yet due
and payable, or if due and payable, if they are being contested in good faith by appropriate
proceedings and for which appropriate reserves are maintained;

     (4) Liens imposed by law, such as mechanics’, materialmen’s, landlords’,
warehousemen’s, and carriers’ Liens, and other similar Liens, securing obligations incurred
in the ordinary course of business which are not past due for more than sixty (60) days or
which are being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established;

     (5) Liens under workers’ compensation, unemployment insurance, Social Security, or
similar legislation;

     (6) Liens, deposits, or pledges to secure the performance of bids, tenders, contracts
(other than contracts for the payment of money), leases (permitted under the terms of this
Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or
other similar bonds, or similar obligations arising in the ordinary course of business;

     (7) Judgment and other similar Liens arising in connection with court proceedings ,
provided the execution or other enforcement of such Liens is effectively stayed and the
claims secured thereby are being actively contested in good faith and by appropriate
proceedings or the amount of such judgement or similar lien is not reasonably likely to have
a Material Adverse Effect;

     (8) Easements, rights-of-way, restrictions, and other similar encumbrances which, in
the aggregate, do not materially interfere with the occupation, use, and enjoyment by the

24

 

Borrower or any Subsidiary of the property or assets encumbered thereby in the normal course
of its business or materially impair the value of the property subject thereto; and

     (9) Purchase-money Liens on any property hereafter acquired or the assumption of any
Lien on property existing at the time of such acquisition (and not created in contemplation
of such acquisition), or a Lien incurred in connection with any conditional sale or other
title retention agreement or a Capital Lease; provided that

     (a) Any property subject to any of the foregoing is acquired by the Borrower or
any Subsidiary in the ordinary course of its respective business and the Lien on any
such property attaches to such asset concurrently or within ninety (90) days after
the acquisition thereof;

     (b) The obligation secured by any Lien so created, assumed, or existing shall
not exceed one hundred percent (100%) of the lesser of the cost or the fair market
value as of the time of acquisition of the property covered thereby to the Borrower
or Subsidiary acquiring the same;

     (c) Each such Lien shall attach only to the property so acquired and fixed
improvements thereon (if applicable);

     (d) The Debt secured by all such Liens shall not exceed (i) One Million Five
Hundred Thousand Dollars ($1,500,000) per fiscal year pertaining to real property,
or (ii) Two Hundred Fifty Thousand Dollars ($250,000) per fiscal year pertaining to
personal property of Borrower; and

     (e) The Debt secured by such Lien is permitted by the provisions of Section
6.02.

     Section 6.02. Debt. Create, incur, assume, or suffer to exist, or permit any Subsidiary to
create, incur, assume, or suffer to exist, any Debt, except:

     (1) Debt of the Borrower under this Agreement or the Note;

     (2) Debt described in Exhibit “J” (i.e. ACM-Texas Sub-Debt and Colonial
Sub-Debt), not to exceed $5,000,000 and $3,000,000, respectively, at any given time, and no
prepayment, renewals, extensions, or refinancings thereof shall occur following the
occurrence and continuance of an Event of Default;

     (3) Debt of the Borrower subordinated on terms satisfactory to the Bank to the
Borrower’s obligations under this Agreement and the Note;

     (4) Accounts payable to trade creditors for goods or services and current operating
liabilities (other than for borrowed money) in each case incurred in the ordinary course of
business, and paid within the specified time (or if no specified time exists, within a

25

 

reasonable time), unless contested in good faith and by appropriate proceedings or unless
the amount is less than $50,000.00;

     (5) Debt of the Borrower or any Subsidiary secured by purchase-money Liens permitted by
Section 6.01(8), not to exceed $250,000 in the aggregate per given fiscal year; and

     (6) Debt related to the acquisition of land and improvements, on a net basis, for the
operation of Car-Mart facilities in an aggregate amount not to exceed $1,500,000 per fiscal
year.

     Section 6.03. Mergers, Etc. Wind up, liquidate or dissolve itself, reorganize, merge or
consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially all of its assets
(whether now owned or hereafter acquired) to any Person, or acquire all or substantially all of the
assets or the business of any Person in excess of $500,000 in a given fiscal year, or permit any
Subsidiary to do so, except that (1) any Subsidiary may merge into or transfer assets to the
Borrower and (2) any subsidiary may merge into or consolidate with or transfer assets to any other
Subsidiary.

     Section 6.04. Leases. Create, incur, assume, or suffer to exist, or permit any Subsidiary to
create, incur, assume, or suffer to exist, any obligation as lessee for the rental or hire of any
real or personal property, except (1) Capital Leases permitted by Section 6.01(8); (2)
leases existing on the date of this Agreement and any extensions or renewals thereof; (3) leases
(other than Capital Leases and the leases described in (5) below) which do not in the aggregate
require the Borrower and its Subsidiaries on a combined basis to make payments (including taxes,
insurance, maintenance, and similar expenses which the Borrower or any Subsidiary is required to
pay under the terms of any lease) in any fiscal year of the Borrower in excess of Two Hundred Fifty
Thousand Dollars ($250,000); (4) leases between the Borrower and any Subsidiary or between any Subsidiaries;
and (5) leases incurred in the ordinary course of business for the rental of dealership locations
for an amount not to exceed the fair value of the leased property.

     Section 6.05. Sale and Leaseback. Sell, transfer, or otherwise dispose of, or permit any
Subsidiary to sell, transfer, or otherwise dispose of, any material real or personal property to
any Person and thereafter directly or indirectly lease back the same or similar property.

     Section 6.06. Dividends. Declare or pay any dividends; or purchase, redeem, retire, or
otherwise acquire for value any of its capital stock now or hereafter outstanding, or make any
distribution of assets to its stockholders as such whether in cash, assets, or in obligations of
the Borrower; or allocate or otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption, or retirement of any shares of its capital stock;
or make any other distribution by reduction of capital or otherwise in respect of any shares of its
capital stock; or permit any of its Subsidiaries to purchase or otherwise acquire for value any
stock of the Borrower or another Subsidiary, except that the Borrower may make cash Distributions
to ACM-Texas in an aggregate amount not to exceed seventy-five percent (75%) of Borrower’s Net
Income in any fiscal year so long as no Event of Default exists. Notwithstanding the foregoing and
regardless of whether

26

 

an Event of Default exists, Bank reserves the right to suspend any of the
foregoing privileges upon written notice to Borrower of such intention.

     Section 6.07. Sale of Assets. Sell, lease, assign, transfer, or otherwise dispose of, or
permit any Subsidiary to sell, lease, assign, transfer, or otherwise dispose of, any material
portion of its now owned or hereafter acquired assets (including, without limitation, shares of
stock and indebtedness of Subsidiaries, receivables, and leasehold interests), except: (1)
inventory disposed of in the ordinary course of business; (2) the sale or other disposition of
assets no longer used or useful in the conduct of its business; or (3) the sale and purchase of
Contracts between Borrower and Colonial.

     Section 6.08. Investments. Make, or permit any Subsidiary to make, any loan or advance to any
Person, or purchase or otherwise acquire, or permit any Subsidiary to purchase or otherwise
acquire, any capital stock, assets, obligations, or other securities of, make any capital
contribution to, or otherwise invest in or acquire any interest in any Person, or participate as a
partner or joint venturer with any other Person, except: (1) direct obligations of the United
States or any agency thereof with maturities of one year or less from the date of acquisition; (2)
commercial paper of a domestic issuer rated at least “A-1” by Standard & Poor’s Corporation or
“P-1” by Moody’s Investors Service, Inc.; (3) certificates of deposit with maturities of one year
or less from the date of acquisition issued by any commercial bank having capital and surplus in
excess of Two Hundred Fifty Thousand Dollars ($250,000); (4) stock, obligations, or securities
received in settlement of debts (created in the ordinary course of business) owing to the Borrower
or any Subsidiary; (5) loans to employees of the Borrower up to $250,000 in the aggregate in any
fiscal year; (6) property to be used in and acquired in the ordinary course of business; and (7)
purchase of Vehicles in the ordinary course of business.

     Section 6.09. Guaranties, Etc. Assume, guarantee, endorse, or otherwise be or become directly
or contingently responsible or liable, or permit any Subsidiary to assume, guarantee, endorse, or
otherwise be or become directly or contingently responsible or liable (including, but not limited
to, an agreement to purchase any obligation, stock, assets, goods, or services, or to supply or
advance any funds, assets, goods, or services, or an agreement to maintain or cause such Person to
maintain a minimum working capital or net worth or otherwise to assure the creditors of any Person
against loss), for obligations of any other Person, except guaranties by (i) endorsement of
negotiable instruments for deposit or collection or similar transactions in the ordinary course of
business; and (ii) in favor of the Bank.

     Section 6.10. Transactions With Affiliates. Except as permitted by Bank in writing, the
Borrower shall not sell, transfer, distribute, or pay any money or Property, including, but not
limited to, any management fees or expenses of any nature, to any Affiliate, or lend or advance
money or Property to any Affiliate, or invest in (by capital contribution or otherwise) or purchase
or repurchase any stock or indebtedness, or any Property, of any Affiliate, or become liable on any
Guaranty of the indebtedness, dividends, or other obligations of any Affiliate. Notwithstanding
the foregoing, the Borrower may (i) reimburse an affiliate the actual cost of expenses paid or
assets acquired on the Borrowers behalf, (ii) pay ACM-Texas amounts due pursuant to the ACM-Texas
Sub-Debt as permitted in the ACM-Texas Sub-Debt Subordination Agreement, (iii) pay Colonial
amounts due pursuant to the Colonial Sub-Debt as permitted in the Colonial Sub-Debt Subordination
Agreement,

27

 

(iv) make income tax payments to ACM-Texas, (v) pay ACM-Texas a management fee not to
exceed $250,000 per fiscal year, (vi) sell contracts to Colonial, purchase inventory from Colonial,
pay Colonial or its subsidiary a management fee, and charge Colonial or its subsidiary for rent and
office expenses, and (vii) engage in other transactions with Affiliates in the ordinary course of
business, in amounts and upon terms fully disclosed to the Bank, and no less favorable to the
Borrower than would be obtained in a comparable arm’s-length transaction with a third party who is
not an Affiliate.

     Section 6.11. New Car Lots. Open more than ten (10) new car lot locations annually. The
relocation of an existing location or opening a satellite location will not be counted as a new car
lot for purposes of this Section.

     Section 6.12. New Subsidiaries. Directly or indirectly, organize or acquire any Subsidiary.

     Section 6.13. Reporting Methodology. Without the Bank’s prior written consent thereto, the
Borrower shall not amend or modify the methodology employed by the Borrower in preparing its
accounting and financial reports relating to the presentation of, if any, (i) the delinquency of
Vehicle Contracts, (ii) the repossession of Vehicles, and (iii) the charge-off of delinquent
Vehicle Contracts from the methodology employed by the Borrower as of the date of this Agreement
so as to materially change the consistency of the information with respect to such items, from time
to time, provided to Bank.

     Section 6.14. Contract Forms. The Borrower shall not use or acquire in its business Contracts
which are not on the printed forms previously approved in writing by the Bank and the Borrower
shall not change or vary the printed forms of such Contracts without the Bank’s prior written
consent (which shall not be withheld unreasonably), unless such change or variation is required by
any requirement of law or such change is minor in nature and has been recommended by counsel. The
Bank may reasonably withhold its consent until the Bank receives a satisfactory opinion of the
Borrower’s counsel regarding compliance of the revised form of Contract with any
requirement of law subject to such opinion. Based upon such opinion, Bank consents to the
forms attached as Exhibit “K” attached hereto.

     Section 6.15. Credit Guidelines. The Borrower shall not make any changes in its Credit
Guidelines without the Bank’s prior written consent which the Bank may withhold in its sole and
absolute discretion. The Borrower shall not purchase or otherwise acquire Contracts which do not
comply with the Credit Guidelines.

     Section 6.16. Service Contracts. To the extent that the Borrower offers so-called “service
contracts,” the Borrower shall ensure that the cost of such service contracts are disclosed to the
Contract Debtors and such service contracts are in compliance with all applicable consumer credit
laws, including any and all special laws relating thereto.

     Section 6.17. Purchase of Vehicle Note Receivables. Borrower shall not sell Vehicle Contracts
to any Person except Colonial.

28

 

Article 7

FINANCIAL COVENANTS

     The following financial covenants shall be calculated on a consolidated basis. So long as any
Note shall remain unpaid or the Bank shall have any Commitment under this Agreement:

     Section 7.01. Leverage Ratio. The Borrower will at all times, calculated as of the last day
of each month, maintain a ratio of Funded Debt to EBITDA for the trailing twelve (12) month period
of no greater than 2.50 to 1.00.

     Section 7.02. Fixed Charge Coverage Ratio. Borrower will not permit the ratio of (a) EBITDA
to (b) Fixed Charges to be less than 1. 50 to 1.00 as of the end of each month for the
trailing twelve (12) month period.

     Section 7.03. Minimum Tangible Net Worth. Borrower shall maintain at all times a minimum
Adjusted Tangible Net Worth as of the last day of each fiscal quarter equal to or greater than the
sum of (i) the greater of (A) eighty-five percent (85%) of the Minimum Adjusted Tangible Net Worth
as of July 31, 2004 and (B) $9,600,000, plus (ii) seventy-five percent (75%) of positive
quarterly Net Income (after July 31, 2004) and (iii) one hundred percent (100%) of any subsequent
equity issuances (after July 31, 2004) less Distributions permitted under Section 6.06
hereof.

Article 8

EVENTS OF DEFAULT

     Section 8.01. Events of Default. If any of the following events shall occur, and continue
uncured for a period of thirty (30) days with respect to subsections (2), (3), (4), (7), (8), (10)
and (11), then they shall be deemed an Event of Default:

     (1) The Borrower shall fail to pay when due (subject to a five (5) Business Day grace
period) the principal of, or interest on, any Note, or any amount of a commitment or other
fee, as and when due and payable;

     (2) Any representation or warranty made or deemed made by the Borrower in this
Agreement or the Security Agreement or by the Guarantor in the Guaranty or which is
contained in any certificate, document, opinion, or financial or other statement furnished
at any time under or in connection with any Loan Document shall prove to have been
incorrect, incomplete, or misleading in any material respect on or as of the date made or
deemed made;

     (3) The Borrower or the Guarantor shall fail to perform or observe any term, covenant,
or agreement contained in Articles 5, 6, or 7 hereof;

29

 

     (4) Excluding the ACM-Texas Sub-Debt, Colonial Sub-Debt and other debt less than
$2,000,000, the Borrower or any of its Subsidiaries shall (a) fail to pay any indebtedness
for borrowed money (other than the Note) of the Borrower or such Subsidiary , as the case
may be, or any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise); or (b) fail to perform or observe
any term, covenant, or condition on its part to be performed or observed under any agreement
or instrument relating to any such indebtedness, when required to be performed or observed,
if the effect of such failure to perform or observe is to accelerate, or to permit the
acceleration of after the giving of notice or passage of time, or both, the maturity of such
indebtedness, whether or not such indebtedness shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof;

     (5) The Borrower or any of its Subsidiaries or the Guarantor (a) shall generally not
pay, or shall be unable to pay, or shall admit in writing its inability to pay its debts as
such debts become due; or (b) shall make an assignment for the benefit of creditors, or
petition or apply to any tribunal for the appointment of a custodian, receiver, or trustee
for it or a substantial part of its assets; or (c) shall commence any proceeding under the
Bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or (d) shall have
had any such petition or application filed or any such proceeding commenced against it in
which an order for relief is entered or an adjudication or appointment is made, and which
remains undismissed for a period of sixty (60) days or more; or (e) shall take any corporate
action indicating its consent to, approval of, or acquiescence in any such petition,
application, proceeding, or order for relief or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties; or (f) shall suffer any such
custodianship, receivership, or trusteeship to continue undischarged for a period of sixty
(60) days or more;

     (6) One or more judgments, decrees, or orders for the payment of money in excess of
Five Hundred Thousand Dollars ($500,000) in the aggregate shall be rendered against the
Borrower or any of its Subsidiaries, and such judgments, decrees, or orders shall
continue unsatisfied and in effect for a period of sixty (60) consecutive days without
being vacated, discharged, satisfied, or stayed or bonded pending appeal;

     (7) The Security Agreement shall at any time after its execution and delivery and for
any reason cease (a) to create a valid and perfected first priority security interest in and
to the property purported to be subject to such Security Agreement; or (b) to be in full
force and effect or shall be declared null and void, or the validity or enforceability
thereof shall be contested by the Borrower, or the Borrower shall deny it has any further
liability or obligation under this Security Agreement, or the Borrower shall fail to perform
any of its obligations under the Security Agreement;

     (8) The Guaranty shall at any time after its execution and delivery and for any reason
cease to be in full force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by the Guarantor or the Guarantor shall deny it
has

30

 

any further liability or obligation under, or shall fail to perform its obligations
under, the Guaranty;

     (9) Any of the following events shall occur or exist with respect to the Borrower and
any Commonly Controlled Entity under ERISA: any Reportable Event shall occur; complete or
partial withdrawal from any Multiemployer Plan shall take place; any Prohibited Transaction
shall occur; a notice of intent to terminate a Plan shall be filed, or a Plan shall be
terminated; or circumstances shall exist which constitute grounds entitling the PBGC to
institute proceedings to terminate a Plan, or the PBGC shall institute such proceedings; and
in each case above, such event or condition, together with all other events or conditions,
if any, is likely to subject the Borrower to any tax, penalty, or other liability which in
the aggregate is likely to exceed Five Hundred Thousand Dollars ($500,000); or

     (10) If the Bank receives its first notice of a hazardous discharge or an environmental
complaint from a source other than the Borrower and the Bank does not receive notice (which
may be given in oral form, provided same is followed with all due dispatch by written notice
given to the Bank by Certified Mail, Return Receipt Requested) of such hazardous discharge
or environmental complaint from the Borrower within twenty-four (24) hours of the time the
Bank first receives said notice from a source other than the Borrower and the impact of such
hazardous discharge or complaint is likely to have a Material Adverse Effect on the
operations of the Borrower; or if any federal, state, or local agency asserts or creates a
material Lien upon any or all of the assets, equipment, property, leaseholds or other
facilities of the Borrower by reason of the occurrence of a hazardous discharge or an
environmental complaint which is reasonably likely to cause a Material Adverse Effect; or
if any federal, state, or local agency asserts a claim against the Borrower and/or its
assets, equipment, property, leaseholds, or other facilities for damages or cleanup costs
relating to a hazardous discharge or an environmental complaint which is reasonably likely
to cause a Material Adverse Effect; provided, however, that such claim shall not constitute
a default if, within five (5) Business Days of the occurrence giving rise to the claim (a)
the Borrower can prove to the satisfaction of the Bank that the Borrower has commenced and
is diligently pursuing either: (i) a cure or correction of the event which constitutes the
basis for the claim, and continues diligently to pursue such cure or correction
to completion or (ii) proceedings for an injunction, a restraining order or other
appropriate emergency relief preventing such agency or agencies from asserting such claim,
which relief is granted within ten (10) Business Days of the occurrence giving rise to the
claim and the injunction, order, or emergency relief is not thereafter resolved or reversed
on appeal; and (b) in either of the foregoing events, the Borrower has posted a bond, letter
of credit, or other security satisfactory in form, substance, and amount to both the Bank
and the agency or entity asserting the claim to secure the proper and complete cure or
correction of the event which constitutes the basis for the claim.

     (11) A default should occur and be continuing under the Amended and Restated Agented
Revolving Credit Agreement between Colonial; Bank of Oklahoma, N.A., et al., of even date
herewith.

31

 

     (12) Any change in Control of Borrower occurs without Bank’s prior written consent at
its discretion.

     (13) A material adverse change occurs with respect to the financial condition of either
of the Guarantors.

               Upon the occurrence of any Event of Default, and following a written notice and a thirty (30)
day cure period as to the foregoing sections other than 8.01(1), ; the Bank may by notice to the
Borrower, (1) declare the Bank’s obligation to make Loans to be terminated, whereupon the same
shall forthwith terminate; and (2) declare the outstanding Note, all interest thereon, and all
other amounts payable under this Agreement to be forthwith due and payable, whereupon the Note, all
such interest, and all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all of which are hereby expressly
waived by the Borrower; and the Bank is hereby authorized at any time and from time to time,
without notice to the Borrower (any such notice being expressly waived by the Borrower), to set off
and apply any and all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by the Bank to or for the credit or the account
of the Borrower against any and all of the obligations of the Borrower now or hereafter existing
under this Agreement or the Bank’s Note or any other Loan Document, irrespective of whether or not
the Bank shall have made any demand under this Agreement or the Bank’s Note or such other Loan
Document and although such obligations may be unmatured. The Bank agrees promptly to notify the
Borrower after any such setoff and application, provided that the failure to give such notice shall
not affect the validity of such setoff and application. The rights of the Bank under this
Section 8.01 are in addition to other rights and remedies (including, without limitation,
other rights of setoff) which each the Bank may have.

Article 9

MISCELLANEOUS

     Section 9.01. Amendments, Etc. No amendment, modification, termination, or waiver of any
provision of any Loan Document to which the Borrower is a party, nor consent to any departure by
the Borrower from any Loan Document to which it is a party, shall in any event be effective
unless the same shall be in writing and signed by the Bank, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose for which given.

     Section 9.02. Notices, Etc. All notices and other communications provided for under this
Agreement and under the other Loan Documents to which the Borrower is a party shall be in writing
(including telegraphic, telex, and facsimile transmissions) and mailed or transmitted or delivered,
if to the Borrower, at its address at 1501 Southeast Walton Blvd., Suite 213, Bentonville, Arkansas
72712, Attn: Hank Henderson, with copy to T.J. Falgout, III, 251 O’Conner Ridge Blvd., Suite 100,
Irving, Texas 75038, and with a copy to America’s Car-Mart, Inc., Attn: Mark D. Slusser, at 251
O’Conner Ridge Blvd., Suite 100, Irving, Texas 75038; and if to BANK OF OKLAHOMA, N.A. at its
address at One Williams Center, 8th floor, Tulsa, OK 74103, Attention: John Anderson; or, as to
each party, at such other address as shall be designated by such party in a written notice to all
other

32

 

parties complying as to delivery with the terms of this Section 9.02. Except as is
otherwise provided in this Agreement, all such notices and communications shall be effective when
deposited in the mails or delivered to the telegraph company, or sent by facsimile, answerback
received, respectively, addressed as aforesaid, except that notices to the Bank pursuant to the
provisions of Article 2 shall not be effective until received by the Bank.

     Section 9.03. No Waiver. No failure or delay on the part of the Bank in exercising any right,
power, or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power, or remedy preclude any other or further exercise thereof or the
exercise of any other right, power, or remedy hereunder. The rights and remedies provided herein
are cumulative, and are not exclusive of any other rights, powers, privileges, or remedies, now or
hereafter existing, at law or in equity or otherwise.

     Section 9.04. Successors and Assigns. The Agreement shall be binding upon and inure to the
benefit of the Borrower and the Bank and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights under any Loan Document to which the Borrower
is a party without the prior written consent of the Bank.

     Section 9.05. Costs, Expenses, and Taxes. The Borrower agrees to pay on demand all costs and
expenses incurred by the Bank in connection with the preparation, execution, delivery, filing, and
administration of the Loan Documents, and of any amendment, modification, or supplement to the Loan
Documents, including, without limitation, the fees and out-of-pocket expenses of counsel for the
Bank, incurred in connection with advising the Bank as to its rights and responsibilities
hereunder. The Borrower also agrees to pay all such costs and expenses, including court costs,
incurred in connection with enforcement of the Loan Documents, or any amendment, modification, or
supplement thereto, whether by negotiation, legal proceedings, or otherwise. In addition, the
Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable
in connection with the executing, delivery, filing, and recording of any of the Loan Documents and
the other documents to be delivered under any such Loan Documents, and agrees to hold the Bank
harmless from and against any and all liabilities with respect to or resulting from any delay in
paying or failing to pay such taxes and fees. This provision shall survive termination of this
Agreement.

     Section 9.06. Integration. This Agreement and the Loan Documents contain the entire agreement
between the parties relating to the subject matter hereof and supersedes all oral statements and
prior writings with respect thereto.

     Section 9.07. Indemnity. The Borrower hereby agrees to defend, indemnify, and hold the Bank
harmless from and against any and all claims, damages, judgments, penalties, costs, and expenses
(including attorney fees and court costs now or hereafter arising from the aforesaid enforcement of
this clause) arising directly or indirectly from the activities of the Borrower and its
Subsidiaries, its predecessors in interest, or third parties with whom it has a contractual
relationship, or arising directly or indirectly from the violation of any environmental protection,
health, or safety law, whether such claims are asserted by any governmental agency or any other
person. This indemnity shall survive termination of this Agreement.

33

 

     Section 9.08. Governing Law. This Agreement and the Note shall be governed by, and construed
in accordance with, the laws of the State of Arkansas.

     Section 9.09. Severability of Provisions. Any provision of any Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without invalidating the remaining provisions of
such Loan Document or affecting the validity or enforceability of such provision in any other
jurisdiction.

     Section 9.10. Counterparts. This Agreement may be executed in any number of counterparts and
by different parties to this Agreement in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall constitute one and the same
Agreement.

     Section 9.11. Headings. Article and Section headings in the Loan Documents are included in
such Loan Documents for the convenience of reference only and shall not constitute a part of the
applicable Loan Documents for any other purpose.

     Section 9.12. Jury Trial Waiver. THE BORROWER AND THE BANK HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY,
ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS. NO OFFICER OF THE
BANK HAS AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.

     Section 9.13. USA Patriot Act Notification. IMPORTANT INFORMATION ABOUT PROCEDURES
FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money
laundering activities, Federal law requires all financial institutions to obtain, verify, and
record information that identifies each person or entity that opens an account, including any
deposit account, treasury management account, loan, other extension of credit, or other financial
services product. What this means for Borrower: When Borrower opens an account, if Borrower is an
individual, Lender will ask for Borrower’s name, taxpayer identification number, residential
address, date of birth, and other information that will allow Lender to identify Borrower, and, if
Borrower is not an individual, Lender will ask for Borrower’s name, taxpayer identification number,
business address, and other information that will allow Lender to identify Borrower. Lender may
also ask, if Borrower is an individual, to see Borrower’s driver’s license or other
identifying documents, and, if Borrower is not an individual, to see Borrower’s legal
organizational documents or other identifying documents.

[Remainder of Page Intentionally Left Blank]

34

 

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

	 	 	 	 	 	 	 
	 	 	“BORROWERS”
	 
	 	 	 	 	 	 
	 	 	AMERICA’S CAR MART, INC.,
	 	 	an Arkansas corporation
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/	 	 
	 

	 	 	 	 	 	 
	 

	 	Name	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	TEXAS CAR-MART, INC.,
	 	 	a Texas corporation
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/	 	 
	 

	 	 	 	 	 	 
	 

	 	Name	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title	 	 	 	 
	 

	 	 	 	 	 	 

[Signature Page to Revolving Credit

Agreement dated June 23, 2005]

35

 

	 	 	 	 	 
	 	 	“BANK”
	 
	 	 	 	 
	 	 	BANK OF OKLAHOMA, N.A.
	Principal Office and Lending Office

	 	 	 	 
	P.O. Box 2300

	 	 	 	 
	Tulsa, OK 74192

	 	By
	 	/s/
	 

	 	 	 	 
	Attn: John Anderson

	 	 	 	 
	janderson@bokf.com

	 	 	 	 

[Signature Page to Revolving Credit

Agreement dated June 23, 2005]

36

 

Exhibit “A”

(Borrowing Base Certificate)

37

 

AMERICA’S CAR MART, INC.

TEXAS CAR-MART, INC.

BORROWING BASE CERTIFICATE

     Pursuant to Section 2.01 of the Revolving Credit Agreement dated June 23, 2005, (“Credit
Agreement”) among AMERICA’S CAR MART, INC., an Arkansas corporation, and TEXAS CAR-MART, INC., a
Texas corporation (separately and collectively, “Borrower”), and BANK OF OKLAHOMA, N.A. (“Bank”)
and as inducement for Bank to advance funds under the $5,000,000 Revolving Line of Credit
established thereunder, the undersigned hereby certifies to Bank, as of _________, the
following:

	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 
	 	1.	 	 	Borrowing Base (80% of Borrower’s
Eligible Inventory)
	 	 
	 	 	 	 	 

	 	 
	 	 	 	 	 
	 	 
	 	2.	 	 	Less Amounts owed on Inventory
	 	 
	 	 	 	 	 

	 	 
	 	 	 	 	 
	 	 
	 	3.	 	 	Less Loan Balance
	 	 
	 	 	 	 	 

	 	 
	 	 	 	 	 
	 	 
	 	4.	 	 	Equals Available to Borrower
	 	 
	 	 	 	 	 

	 	 

ASSIGNMENT AND CERTIFICATION

     The undersigned Borrower hereby assigns, transfers and pledges to BANK OF OKLAHOMA,
N.A. (“Bank”) and grants and agrees that Bank has a security interest in, pursuant to the
Revolving Credit Agreement and Security Agreement between Borrower and Bank, all of Borrowers’
Inventory (Line 1 above), as defined therein.

     Dated:                     .

	 	 	 	 	 
	 	 	AMERICA’S CAR MART, INC.
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	 	Its	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	TEXAS CAR-MART, INC.
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	 	Its	 
	 

	 	 	 	 

 

 

Exhibit “B-1”

(Guaranty-Colonial)

 

 

Exhibit “B-2”

(Guaranty-ACM-Texas)

 

 

Exhibit “C-1”

(Security Agreement-ACM)

 

 

Exhibit “C-2”

(Security Agreement-TCM)

 

 

Exhibit “C-3”

(Security Agreement-Colonial)

 

 

Exhibit “D”

(Promissory Note)

 

 

Exhibit “E”

(Opinion of Borrower’s Counsel)

 

 

Exhibit “F”

(Opinion of Guarantor’s Counsel)

 

 

Exhibit “G”

(Subsidiaries of Borrower)

As of the Closing Date, the following are subsidiaries of the Borrowers:

                    Name:

                    State of Incorporation:

                    Shares Outstanding:

                    Shares Owned By:

 

 

Exhibit “H”

(List of Borrower’s Debt)

On the Closing Date, the following credit agreements, indentures, guaranties, capital leases, and
other investments, agreements and arrangements in excess of $250,000 as described in Section 4.14
of the Agented Revolving Credit Agreement are outstanding:

ACM-Texas Sub-Debt

Colonial Sub-Debt

 

 

Exhibit “J”

(Permitted Debt)

ACM-Texas Sub-Debt

Colonial Sub-Debt

 

 

Exhibit “K”

(Contract Forms)Exhibit 4.1

 

Exhibit 4.1

CAPITAL PLAN

of the

Federal Home Loan Bank of Pittsburgh

	 	 	 
	

	 	As Approved by the Executive Committee on
	 

	 	April 26, 2002

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	I. Purpose
	 	 	3	 
	A. General
	 	 	3	 
	 
	 	 	 	 
	II. Stock Investment
	 	 	3	 
	A. General
	 	 	3	 
	B. Minimum Amount
	 	 	3	 
	C. Adjustments to Minimum Amount
	 	 	7	 
	 
	 	 	 	 
	III. Transition Rule
	 	 	7	 
	A. Manner of conversion
	 	 	7	 
	B. Right to opt out of Capital Plan
	 	 	8	 
	C. Effects of Opting Out of the Conversion
	 	 	8	 
	D. Failure of a Member to affirm election to convert
	 	 	8	 
	E. Timetable for transition and full capital compliance
	 	 	8	 
	 
	 	 	 	 
	IV. Par Value, Rights, Terms, and Preferences of Capital Stock
	 	 	8	 
	A. Par Value
	 	 	8	 
	B. Ownership
	 	 	8	 
	C. Limitations
	 	 	9	 
	D. Dividends
	 	 	9	 
	E. Redemption
	 	 	9	 
	F. Cancellation of Redemption
	 	 	9	 
	G. Limited Transferability
	 	 	9	 
	H. Termination of Membership
	 	 	9	 
	I. Voting rights
	 	 	11	 
	J. Rights in Bank Merger
	 	 	11	 
	K. Rights in Bank Liquidation
	 	 	11	 
	 
	 	 	 	 
	V. Bank Review of Plan
	 	 	11	 
	A. Review by Independent CPA
	 	 	11	 
	B. Review by NRSRO
	 	 	11	 
	C. Good faith effort determination
	 	 	12	 
	D. Approval by FHFB
	 	 	12	 
	E. Process for Amending this Plan
	 	 	12	 
	 
	 	 	 	 
	VI. Definitions
	 	 	12	 
	 
	 	 	 	 
	Exhibit A — General instructions for maximum borrowing capacity (MBC) calculation
	 	 	 	 
	Exhibit B.  — Line description for MBC calculation — banks
	 	 	 	 
	Exhibit C — Line descriptions for MBC calculation — thrifts
	 	 	 	 
	Exhibit D — Line descriptions for MBC calculation — credit unions
	 	 	 	 
	Exhibit E — Line descriptions for MBC calculation — insurance companies
	 	 	 	 
	 
	 	 	 	 
	Schedule A
	 	 	 	 

Page 2 of 16

 

	I.  	Purpose

	 	A.  	General. This Capital Plan is being implemented to comply with the provisions
of the Bank Act and Capital Regulation.

	 	1.  	Effective Date. The Capital Plan will become
effective on the Recalculation/Conversion Date, which shall be the date stated in a Notice
to Members. Unless directed otherwise by the Finance Board, the
Recalculation/Conversion Date shall not be greater than 18 months after
the Finance Board approves the Capital Plan nor less than sixty (60) days
after the date of the Notice to Members.
	 
	 	2.  	Capitalized Terms. All capitalized terms used
but not defined elsewhere in the Capital Plan shall have the meaning
ascribed to such terms in Section VI.

	II.  	Stock Investment

	 	A.  	General. Adequate capitalization is required to: (a) provide for the safe and
sound operation of the Bank; (b) permit prudent leveraging into products and
services of benefit to Members and Housing Associates; (c) provide appropriate
risk-adjusted Member dividend returns; (d) protect creditors of the Bank and the
Bank System against loss; (e) generate earnings sufficient to meet the Bank’s
various community support and public purpose obligations; and (f) comply with
prevailing Minimum Regulatory Capital Requirements. Towards these objectives, this
Capital Plan requires Members to make certain Minimum Member Stock Investments in
the Bank.
	 
	 	B.  	Minimum Amount

	 	1.  	General. The need for capital is in great
part a function of the volumes of and risks inherent in the products and
services provided by the Bank to its Members, including the potential for
Members to borrow from the Bank.
Therefore, the Capital Stock of the Bank should be contributed in general
proportion to the distribution of such products and services
to its Members, including their potential borrowing activities. Each
Member must purchase and maintain a minimum investment in the Capital
Stock of the Bank in an amount determined in accordance with the
requirements of this Capital Plan.
	 
	 	2.  	Minimum Member Stock Investment. Each Member
is required to maintain a Minimum Member Stock Investment, both as a
condition to becoming and remaining a Member and as a condition to
obtaining Loans from the Bank, access to the Bank’s credit products
through its Unused Borrowing Capacity, and to support Acquired Member
Assets with the Bank. The total amount of the required minimum investment
of all Members shall be sufficient to ensure that the Bank stays in
compliance with the Minimum Regulatory Capital Requirements under the
Capital Regulation. The Board of Directors will monitor and, as necessary,
adjust

Page 3 of 16

 

	 	   	the minimum investment to provide for Capital Stock purchases and
maintenance by all Members sufficient to allow the Bank to remain in
compliance with its Minimum Regulatory Capital Requirements.

	 	a)  	Member Loan Stock Purchase Requirement. Each Member is required to purchase
and hold Capital Stock in an amount equal to the Bank’s Member Loan Stock Purchase
Percentage multiplied by all the Loans extended from the Bank to that Member. The Member
Loan Stock Purchase Requirement will be calculated at the time each Loan is Transacted.
The Member Loan Stock Purchase Percentage is set forth on Schedule A. From time to time,
upon approval by the Board of Directors, the Member Loan Stock Purchase Percentage may be
adjusted to as high as six percent (6.0%) or to as low as four and one half percent
(4.5%).
Changes outside this range would constitute an amendment to this Capital Plan that would
require Finance Board approval. An adjustment in the Member Loan Stock Purchase Percentage
may be applied in either of the following manners:

	 	(1)  	A change in the Member Loan Stock Purchase Percentage may be applied
prospectively, affecting only Loans Transacted subsequent to the change in the
Member Loan Stock Purchase Percentage, or
	 
	 	(2)  	A change in the Member Loan Stock Purchase Percentage may be applied
retrospectively, in which case the new Member Loan Stock Purchase Percentage would
be applied both to the Member Loans outstanding at the time of such change and to
any Loans Transacted subsequent to such change. If a change in Member Loan Stock
Purchase Requirement is made retrospectively, the Board of Directors may choose to
either:

	 	(i)  	apply the new Member Loan Stock Purchase Percentage to all Member
Loans outstanding at the time of such change, or
	 
	 	(ii)  	apply the new Member Loan Stock Purchase Percentage
only to Member Loans which do not include a Principal Prepayment Fee.

	 	b)  	Unused Borrowing Capacity Stock Purchase Requirement. Each Member is required
to purchase and hold Capital Stock in an amount equal to the Bank’s Unused Borrowing
Capacity Percentage multiplied by the principal amount of
Unused Borrowing Capacity of that Member. The amount of Unused Borrowing Capacity shall be
calculated no later than April 10
th of each year and at the time each Loan is
Transacted. The Unused Borrowing Capacity Percentage is set forth on Schedule A. From time
to time, upon approval by the Board of Directors, the Unused Borrowing Capacity Percentage
may be adjusted to as high as one and one-half percent (1.5%) or to as low as zero percent
(0%).

Page 4 of 16

 

	 	   	Changes outside this range would constitute an amendment to this Capital Plan, which
would require Finance Board approval. An adjustment in the Unused Borrowing Capacity
Percentage will be applied to the principal amount of Unused Borrowing Capacity for all
future calculations. From time-to-time, in the discretion of the Board, the amount any one
Member would have to purchase under the Unused Borrowing Capacity Stock Purchase
Requirement may be subject to a cap of no less than $10 million.
	 
	 	c)  	Acquired Member Asset Purchase Requirement. Each Member is required to
purchase and hold Capital Stock in an amount equal to the Bank’s Acquired Member Asset
Purchase Percentage multiplied by the amount of Acquired Member Assets delivered by that
Member and held by the Bank at the time the transaction occurs (in the Bank’s discretion,
it may recalculate the member’s Acquired Member Asset Purchase Requirement from
time-to-time to capture any reductions in the amount of Acquired Member Assets then being
held by the Bank). The Acquired Member Asset Purchase Percentage is set forth on Schedule
A. From time to time, upon approval by the Board of Directors, the Acquired Member Asset
Purchase Percentage may be adjusted to as high as four percent (4.0%) or to as low as zero
percent (0.0%). Changes outside this range would constitute an amendment to this Capital
Plan that would require Finance Board approval. Adjustments made to the Bank’s Acquired
Member Assets Purchase Percentage, if any, shall be applied in accordance with the
following:

	 	(1)  	Any increase in Acquired Member Asset Purchase
Percentage shall be applied only on a prospective basis, i.e., affecting only
master commitments entered into between a Member and the Bank subsequent to such
increase in the Acquired Member Asset Purchase Percentage.

	 	(a)  	Any Acquired Member Assets delivered to the Bank under a master
commitment made prior to an increase in Acquired Member Asset Purchase
Percentage shall be subject to the lower Acquired Member Asset Purchase
Percentage, if any, that had been in effect at the time that master
commitment was originally accepted by the Bank.

	 	(2)  	Any decrease in Acquired Member Asset Purchase Percentage may, in the sole
discretion of the Bank, be applied either retrospectively, affecting all Acquired
Member Assets previously delivered and held by the Bank or to be delivered under
existing master commitments, or prospectively, affecting only master commitments
entered into subsequent to such decrease in the Acquired Member Asset Purchase
Percentage.

Page 5 of 16

 

	 	3.  	Excess Stock Investment. A Member may hold Excess Stock to the extent it has
the legal authority under applicable statutes and regulations, subject to the following:

	 	a)  	Repurchase. With Notice to Members of at least one (1)
Business Day, the Bank, in its sole discretion, may elect to Repurchase Excess
Stock shares at any time. The Bank will Repurchase Excess Stock from all Members
on a pro rata basis (provided, however, in the event a Member has given Written
Notice of its intent to redeem Excess Stock the Bank may, in its sole discretion,
Repurchase the Excess Stock of that Member as set forth below).
The effect of Repurchasing Capital Stock by the Bank is to retire such shares. The
one (1) Business Day Notice to Members does not apply to the repurchase of Capital
Stock on the Recalculation/Conversion Date.
	 
	 	b)  	Redemption. A Member may, at its discretion, request a
Redemption of Capital Stock by providing Written Notice. A
Member may request a Redemption of some or all of its Capital Stock in accordance
with the Redemption terms of this Capital Plan. The 5-year Redemption period
commences upon the receipt of the Written Notice that specifies the number of
shares to be redeemed. Following Written Notice of a Member’s intent to redeem
shares, but prior to actual Redemption, the Bank may, in its sole discretion, elect
to Repurchase those Excess Stock shares for which it has already received a
Redemption request. In the event that multiple Redemption requests are pending, the
Bank may, in its sole discretion, elect to Repurchase Excess Stock on a prorated
basis or according to the order in which the Redemption requests were received by
the Bank, or according to another allocation method as necessary to maintain
ongoing compliance with the Bank’s Capital Regulations. The effect of Redeeming
Excess Stock shares by the Bank is to retire such shares. A request by a Member
(whose Membership has not been terminated) to redeem Capital Stock shall
automatically be cancelled if the Bank is prevented from redeeming the Member’s
Capital Stock because such redemption would cause the Member to fail to meet its
Minimum Member Stock Investment. The effective date of the automatic cancellation
shall be five (5) business days after the expiration of the applicable redemption
notice period.
	 
	 	c)  	Limitation on Repurchase and Redemption. The Repurchase and
Redemption of Capital Stock will be subject to the applicable restrictions set
forth in 12 C.F.R. sections 931.7 and 931.8. A
Member’s right to the Repurchase or Redemption of its Excess Stock may be impaired
by these regulatory requirements if the Bank has used the Member’s Excess Stock to
provide the necessary capital support for its investments and other assets.

Page 6 of 16

 

	 	C.  	Adjustments to Minimum Amount

	 	1.  	Member Acceptance. Each Member is required to
comply with any changes adopted in the Bank’s Capital Plan, including any
adjustments made by the Board of Directors that may lead to an increase in
a Member’s Minimum Member Stock Investment. In order to effectuate the
sale of additional Capital Stock required due to such changes in terms,
the Bank is authorized to issue Capital Stock in the name of a Member and
to withdraw appropriate payment from the Member’s Demand Deposit Account.
	 
	 	2.  	Prior Notice. The Bank shall provide at least
fifteen (15) days Notice to Members prior to implementing any adjustment
to the Member Loan Stock Purchase Percentage, Unused Borrowing Capacity
Percentage, or Acquired Member Asset Purchase Percentage if doing so
affects the total Minimum Member Stock Investment of the Member. The Bank
shall implement the adjustments on the date stated in the Notice to
Members.

	III.  	Transition Rule

	 	A.  	Manner of conversion. The following steps shall be taken to implement the
Bank’s Capital Plan:

	 	1.  	Stock Conversion. On the
Recalculation/Conversion Date, each currently outstanding share of Bank
stock shall be converted into one share of Capital Stock.
	 
	 	2.  	Recalculation of Minimum Member Stock Purchase
Requirement. On the Recalculation/Conversion Date, immediately
following the conversion of currently outstanding Bank stock into Capital
Stock, each Member’s Minimum Member Stock Investment will be recalculated
by the Bank.
	 
	 	3.  	Identify each Member’s excess/deficient stock
positions. On the Recalculation/Conversion Date, after recalculating
each Member’s
Minimum Member Stock Investment, each Member’s Recalculated Stock
Excess/(Shortfall) shall be determined by the Bank.
	 
	 	4.  	Adjust each Member’s stock holdings. Each
Member’s holdings of Capital Stock will be adjusted on the
Recalculation/Conversion Date as follows:

	 	a)  	Recalculated Stock Excess.
If a Member has a Recalculated Stock Excess position, the Bank
will Repurchase at par a sufficient number of shares of Capital
Stock to eliminate the Member’s Excess Stock position (subject to
the Bank remaining in compliance with its Minimum Regulatory
Capital Requirement).
Proceeds from the share Repurchase will be credited to the
Member’s Demand Deposit Account with the Bank.

Page 7 of 16

 

	 	b)  	Recalculated Stock Shortfall. If a Member has a Recalculated Stock
Shortfall, the Bank will issue at par a sufficient number of shares of Capital
Stock to eliminate the Member’s Recalculated Stock Shortfall
position. Proceeds for the share issuance will be debited from the Member’s Demand
Deposit Account with the Bank.

	 	B.  	Right to opt out of Capital Plan. Each Member retains the right to opt-out of the
conversion as contained herein by providing the Finance Board with written notice of its
intent to withdraw its Membership from the Bank prior to the
Recalculation/Conversion Date. The written notice of its intent to withdraw must be filed
with the Finance Board prior to the Opt-Out Date, which Opt-Out Date will be set forth in
the Notice to Members setting forth the Recalculation/Conversion Date. The Opt-Out Date
shall be 30 days prior to the Recalculation/Conversion Date.
	 
	 	C.  	Effects of Opting Out of the Conversion. The Membership of a Member that opts-out of
the conversion according to this Plan shall terminate at the earlier of: (1) six months
from the date that the written notice of withdrawal was filed with
the Finance Board; or (2) the effective date of this Capital Plan. On the date the
Membership is terminated, all outstanding indebtedness of the Member to the Bank shall
become immediately due and payable. The Bank shall cancel each currently outstanding
share of Bank stock on the date the Membership terminates provided that the Bank, after
such cancellation, shall remain in full compliance with the Minimum Regulatory Capital
Requirement. Any Member that provides the Finance Board with written notice of its intent
to withdraw after the Opt-Out Date but before the effective date of the Capital Plan
shall have its existing stock converted into Capital Stock on the
Recalculation/Conversion Date and the written notice shall commence the applicable five
(5) year waiting period to redeem the Capital Stock.
	 
	 	D.  	Failure of a Member to affirm election to convert. The failure to provide the written
notice as set forth in Section III. B above shall be deemed by the Bank as acceptance of
the terms of conversion and of the terms of this Capital Plan.
	 
	 	E.  	Timetable for transition and full capital compliance. Immediately following the
Recalculation/Conversion Date, it is anticipated that the Bank will be in full compliance
with the Capital Regulation.

	IV.  	Par Value, Rights, Terms, and Preferences of Capital Stock

	 	A.  	Par Value. The par value of Capital Stock shall be $100. The Capital Stock
shall be issued, redeemed and repurchased at par value.
	 
	 	B.  	Ownership. The retained earnings, surplus, undivided profits and
equity reserves, if any, of the Bank are owned by the holders of Capital Stock
proportionate to their ownership of all outstanding shares of Capital Stock. The
holders of Capital Stock shall have no right to receive any portion of these
items, however, except through the declaration of a dividend or capital
distribution approved by the Board of Directors or through liquidation of the
Bank.

Page 8 of 16

 

	 	C.  	Limitations.The Bank may only issue Capital Stock in accordance with this Capital Plan
and the Capital Regulations. The Bank may only issue Capital Stock to Members and only
Members may hold Capital Stock.
	 
	 	D.  	Dividends. Dividends are to be declared and paid on Capital Stock from time to time
as determined by the Bank’s Board of Directors, and are non-cumulative with respect to
payment obligation and are not to exceed the sum of current net earnings plus net earnings
previously retained by the Bank. The Board of Directors may declare and pay dividends on
Capital Stock provided the Bank’s capital position is not below its Minimum Regulatory
Capital Requirement nor will it be below its Minimum Regulatory Capital Requirement
subsequent to the payment of the dividend.
	 
	 	E.  	Redemption.Capital Stock shares are redeemable for cash at par value following five
(5) years prior Written Notice, however, a Member may not have pending at any one time
more than one Redemption request for the same share of Capital Stock.
	 
	 	F.  	Cancellation of Redemption . In the event a Member, having previously notified the
Bank in writing of its intent to redeem some or all of its Capital Stock, wishes to cancel
its Redemption request before the completion of the five (5) year notification period, it
may elect to do so by providing Written Notice to the Bank of its intent to cancel its
Redemption request. The Bank will impose a Redemption Cancellation Fee on the Member that
either voluntarily or involuntarily cancels its Redemption request; provided, however, the
Bank may waive the fee for a bona fide business purpose consistent with section 7(j) of
the Bank Act. The Redemption Cancellation Fee is the fee in effect at the time the Member
provides Written Notice of cancellation. The Member has ten (10) business days from the
date the Bank sends the Notice to Member of the amount of the Cancellation Fee to provide
Written Notice of its intent to revoke the cancellation and to proceed with the Redemption
of the Capital Stock it previously sought to redeem according to the original Redemption
timetable, thereby avoiding the Redemption Cancellation Fee. The Redemption Cancellation
Fee is calculated by taking the percentage set forth on Schedule A and multiplying it
against the par value of the Capital Stock subject to the notice of Redemption. The
Redemption Cancellation Fee percentage may be adjusted at the discretion of the Board of
Directors to as high as five percent (5%) and to as low as zero percent (0%).
	 
	 	G.  	Limited Transferability. A Member may only transfer any Excess Stock of the Bank it
holds to another Member of the Bank or to an institution that has been approved for
Membership in the Bank and that has satisfied all conditions for becoming a Member, other
than the purchase of the minimum amount of Capital Stock that it is required to hold as a
condition of Membership. Any such Capital Stock transfers shall be at par value and shall
be effective upon being recorded on the appropriate books and records of the Bank. Capital
Stock may only be traded between the Bank and its Members.
	 
	 	H.  	Termination of Membership.The following terms pertain to the termination of a
Member’s Membership in the Bank.

Page 9 of 16

 

	 	1.  	Voluntary Withdrawal.

	 	a)  	A Member may withdraw from Membership by providing the Bank Written
Notice of its intent to withdraw. A Member may cancel its notice of withdrawal at
any time prior to its effective date by providing the Bank Written Notice of such
cancellation.
The Bank will impose a fee on a Member that cancels a notice of withdrawal;
provided, however, the Bank may waive the fee for a bona fide business purpose
consistent with section 7(j) of the Bank Act. The Withdrawal Cancellation Fee is
the fee in effect at the time the Member provides Written Notice of cancellation.
The Member has ten (10) business days from the date the Bank sends the Notice to
Member of the amount of the Membership Withdrawal Cancellation Fee to provide
Written Notice of its intent to revoke the cancellation, thereby avoiding the
Membership Withdrawal Cancellation Fee. The Membership Withdrawal Cancellation Fee
is calculated by taking the percentage set forth on Schedule A and multiplying it
against the par value of the Capital Stock held by the Member. The Membership
Withdrawal Cancellation Fee percentage may be adjusted at the discretion of the
Board of Directors to as high as five percent (5%) and to as low as zero percent
(0%).
	 
	 	b)  	The Membership of a Member that has submitted a Written Notice of
withdrawal shall terminate as of the date on which the last of the applicable
Capital Stock Redemption periods ends for the Capital Stock comprising the
Member’s Membership Stock Purchase Requirement, as of the date the Written Notice
of withdrawal is submitted, unless the Member has cancelled its notice of
withdrawal prior to that date.
	 
	 	c)  	The receipt by the Bank of Written Notice of withdrawal shall
commence the 5-year Redemption period for the Capital Stock held by the Member
that is not already subject to a pending request for Redemption. In the case of a
Member whose Membership has been terminated as a result of a merger or other
consolidation into a non-member or a member of another Home Loan Bank, the
Redemption period for any Capital Stock that is not already subject to a pending
request for Redemption shall be deemed to commence on the date on which the
charter of the former Member is cancelled.
	 
	 	d)  	No Member may withdraw from Membership unless, on the date the
Membership is terminated, there is in effect a certification from the Finance
Board that the withdrawal of a Member will not cause the Bank System to fail to
satisfy its Refcorp Obligations.

	 	2.  	Involuntary Terminations. The Board of Directors of the Bank has the right
to terminate the Membership of any Member that: 1) fails to comply with any requirement of
the Bank Act, Finance Board Regulations, or the Capital Plan; 2) becomes insolvent or
otherwise subject to the appointment

Page 10 of 16

 

	 	   	of a conservator, receiver or other legal custodian under federal or state
law; or 3) would jeopardize the safety and soundness of the Bank if it were to
remain a Member.

	 	a)  	The 5-year Redemption period for all the Capital Stock owned by the Member and not
already subject to a pending request for Redemption shall commence on the date the Bank
terminates the Member’s Membership.

	 	3.  	Liquidation of Capital Stock. If an institution ceases to be a Member of the
Bank for any reason, the Bank shall require the institution to continue to hold the
Capital Stock necessary to support the Loans outstanding and/or Acquired Member Assets
under the terms of the Capital Plan in effect at that time. Upon the repayment of
outstanding indebtedness to the Bank, including any Principal Prepayment Fees and
settlement of the Member’s risk sharing obligations under any Acquired Member Asset
program, the Capital Stock that was necessary to support the Loan and/or Acquired Member
Asset program shall become Excess Stock subject to Repurchase by the Bank in its
discretion.
	 
	 	4.  	Liquidation of Indebtedness. The Bank will liquidate the indebtedness of any
institution that ceases to be a Member in an orderly manner according to a schedule
established by the Bank in its sole discretion. The Bank may require the immediate
repayment of all indebtedness, in which case the Member shall be subject to any applicable
Principal Prepayment Fees. In the alternative, and in the Bank’s sole discretion, the Bank
may allow the institution to continue to hold on to any indebtedness for any length of
period up to and including maturity.

	 	I.  	Voting rights. The voting rights associated with Capital Stock are defined herein.
The voting rights associated with the election of directors are governed by Part 915 of
the Rules and Regulations of the Finance Board. There shall be no voting preferences for
any share of Capital Stock.
	 
	 	J.  	Rights in Bank Merger. In the event the Bank merges with or consolidates into another
Home Loan Bank, the Member will be entitled to the rights and benefits set forth in the
agreement of merger approved by the Board of Directors of each Home Loan Bank and the
Finance Board.
	 
	 	K.  	Rights in Bank Liquidation. In the event the Bank is liquidated, the Member will be entitled to
the rights and benefits granted to it by the Finance Board and/or Congress.

	V.  	Bank Review of Plan

	 	A.  	Review by Independent CPA
	 
	 	   	Attached.
	 
	 	B.  	Review by NRSRO
	 
	 	   	Attached.

Page 11 of 16

 

	 	C.  	Good faith effort determination
	 
	 	   	Pro forma financial projections attached.
	 
	 	D.  	Approval by FHFB
	 
	 	   	To be attached upon receipt
	 
	 	E.  	Process for Amending this Plan

	 	1.  	General. In order to safeguard the ability to serve its
Members and protect their capital investment, accommodate changes in the Bank’s
product or business mix, and maintain compliance with Capital Regulations, from
time to time this Plan may be amended. Capital Plan amendments may be made as
follows:

	 	a)  	Board of Directors. Upon a simple majority
vote of all of the individual members of the Board of Directors, not just
a simple majority vote of a quorum, a request to amend this Capital Plan
may be submitted to the Finance Board. The effective date(s) for any
proposed change(s) to the terms of this Capital Plan shall be contained in
any amendment request as submitted to the Finance Board.
	 
	 	b)  	Shareholder Notification. The Bank will
provide Notice to
Members of any request submitted to the Finance Board to amend this
Capital Plan at least thirty (30) days prior to the effective date of any
such requested amendment.
	 
	 	c)  	Finance Board. To become effective, any
amendment to this Capital Plan must be approved by the Finance Board.

	VI.  	Definitions
	 
	   	Certain terms used within this Capital Plan are defined as follows:

	 	   	Acquired Member Asset means the outstanding principal balance of assets purchased or
funded by the Bank from a Member or Housing Associate pursuant to Part 955 of the Rules
and Regulations of the Finance Board.
	 
	 	   	Acquired Member Asset Purchase Percentage means the percentage set by the Board of
Directors from time to time that determines how much Capital Stock a Member must
purchase in relationship to the outstanding principal balance of Acquired Member Assets
delivered by a Member and held the Bank.
	 
	 	   	Acquired Member Asset Purchase Requirement means the Activity Based Stock Purchase
Requirement based upon Acquired Member Assets as specified in this Plan.

Page 12 of 16

 

	 	   	Activity-Based Member Stock Purchase Requirement means a stock purchase
requirement under which a Member must acquire a specific amount of Capital Stock as a
function of the volume of a particular product or service provided to that Member by
the Bank.
	 
	 	   	Bank means the Federal Home Loan Bank of Pittsburgh.
	 
	 	   	Bank Act means the Federal Home Loan Bank Act, as amended, 12 U.S.C. 1421 through 1449.
	 
	 	   	Board of Directors means the Board of Directors of the Bank.
	 
	 	   	Business Day means any day on which the Bank is open to conduct business.
	 
	 	   	Charge Against Capital means a required reduction in the value of paid-in capital.
	 
	 	   	Capital Plan means the plan adopted by the Board of Directors and approved by the
Finance Board pursuant to the Capital Regulation.
	 
	 	   	Capital Regulation means Subchapter E of Chapter IX of Title 12 of the Code of Federal
Regulations.
	 
	 	   	Capital Stock means “Class B Stock” as defined by the Bank Act and Capital
Regulation.
	 
	 	   	Capital Sufficiency Assets mean the book value of the Bank’s total assets less the book
value of both the Bank’s outstanding Loans and its Short Term Investments maturing in one
year or less.
	 
	 	   	Excess Stock means that amount of Capital Stock held by a Member in excess of its Minimum
Member Stock Investment as required by this Capital Plan.
	 
	 	   	Finance Board means the Federal Housing Finance Board.
	 
	 	   	Finance Board Regulations mean Chapter IX of Title 12 of the Code of Federal
Regulations, as may be amended from time to time.
	 
	 	   	GAAP means Generally Accepted Accounting Principles as applied in the United States of
America.
	 
	 	   	Housing Associate means an entity that has been approved as nonmember mortgagee
pursuant to part B of Part 950 of the Code of Federal Regulations.
	 
	 	   	Loan means the outstanding principal balance of an advance, as defined in Section
950.1 of the Advances Regulations.
	 
	 	   	Market Risk Model means the internal market risk model or the internal cash flow model
used to calculate the market risk component of the Banks’ risk-based capital requirement
approved by the Finance Board.
	 
	 	   	Member means an institution that has been approved for Membership in Bank and that has
satisfied its Minimum Member Stock Investment requirement.

Page 13 of 16

 

	 	   	Member Demand Deposit Account means one or more demand deposit accounts maintain
with the Bank and which are subject to the terms and conditions of the
Bank’s Demand Deposit Account Agreement.
	 
	 	   	Member Loan Stock Purchase Percentage means the percentage set by the Board of Directors
from time to time that determines how much Capital Stock a Member must purchase in
relationship to its outstanding Loans from the Bank.
	 
	 	   	Member Loan Stock Purchase Requirement means the Activity-Based Stock Purchase
Requirement based upon Loans as specified in this Plan.
	 
	 	   	Membership Stock Purchase Requirement means a stock purchase requirement under which a
Member must acquire a specific amount of Capital Stock as a condition of Membership.
	 
	 	   	Membership means all of the rights, privileges and obligations associated with being a
Member of the Bank.
	 
	 	   	Membership Withdrawal Cancellation Fee means the fee the Bank may impose upon a Member
who having given notice of its intent to withdraw from Membership, subsequently revokes
that withdrawal notice.
	 
	 	   	Minimum Member Stock Investment means the minimum amount of Capital Stock that a Member
is required to purchase and hold in order to be a Member and in order to obtain Loans
from the Bank and to engage in other business activities with the Bank in accordance with
this Plan. The Minimum Member Stock Investment shall be the sum of (a) the Member’s
Member Loan Stock Purchase Requirement, plus (b) the Member’s Unused Borrowing Capacity
Stock Purchase Requirement, plus (c) the Acquired Members Asset Purchase Requirement;
provided, however, that the minimum investment of each Member in the Capital Stock of the
Bank shall be no less than Ten Thousand Dollars ($10,000).
	 
	 	   	Minimum Regulatory Capital Requirement means the minimum regulatory capital requirement
established for the Bank in either the Capital Regulation or by order of the Finance
Board.
	 
	 	   	Notice to Members means any written notice from the Bank to the Members regarding any
element of the Capital Plan, and also includes any electronic writing related to the
Capital Plan, including electronic mail and posting on the Bank’s public or private
web site.
	 
	 	   	Opt-Out Date means the date by which a Member wishing not to have its current stock
converted into Capital Stock shall provide the Finance Board with written notice of its
intent to withdraw from Membership.
	 
	 	   	Plan means the Capital Plan.
	 
	 	   	Principal Prepayment Fee means the fee charged by the Bank under the
Advances, Collateral Pledge and Security Agreement when a Member pays off a Loan before
maturity.

Page 14 of 16

 

	 	   	Recalculation/Conversion Date means the date upon which current stock shares are
converted into Capital Stock shares and each Member’s Minimum Member Stock Investment
is initially calculated.
	 
	 	   	Recalculated Stock Excess/Shortfall means the difference between a Member’s Minimum
Member Stock Investment as determined on the Recalculation/Conversion Date and that
Member’s stock holding immediately prior to the implementation of this Capital Plan,
where an “excess” refers to a Minimum Member Stock Investment which is less than the
Member’s Capital Stock holdings and a “shortfall” refers to a Minimum Member Stock
Investment which is greater than the Member’s Capital Stock holdings.
	 
	 	   	Redemption Cancellation Fee means the fee the Bank may impose upon a Member who, having
given Written Notice of its intent to redeem Capital Stock shares, subsequently revokes
that Redemption request.
	 
	 	   	Redemption means the acquisition by the Bank of outstanding Capital Stock from a Member at
par value following the expiration of the statutory Redemption request period.
	 
	 	   	Refcorp Obligations means the obligations under 12 U.S.C. 1441b(f)(2)(C) to
contribute interest payments owed on obligations issued by the Resolution Funding
Corporation.
	 
	 	   	Repurchase means the acquisition by the Bank of Excess Stock of a Member either on
the Bank’s own initiative or prior to the expiration of the statutory Redemption
request period.
	 
	 	   	Risk Assessment Procedures and Controls means the risk assessment procedures and
controls to be used to manage the Bank’s credit, market, and operation risks approved by
the Finance Board.
	 
	 	   	Short Term Investments mean cash and marketable investments with a stated maturity of one
year or less that, as of the calculation date, are instruments in which the Bank may
invest in full compliance with all Finance Board regulations, plus scheduled payments of
principal and interest over the next year on all assets that are fully compliant with
Finance Board regulations on the date of calculation. Such investments do not include
Loans, Acquired Member Assets, or assets with a maturity longer than one year even if
there is an optional or firm commitment to sell such assets within one year.
	 
	 	   	Transacted means the origination, repayment or renewal of a Loan.
	 
	 	   	Unused Borrowing Capacity for a Member equals maximum borrowing capacity
as calculated per Exhibit B for banks, Exhibit C for thrifts, Exhibit D for Credit
Unions and Exhibit E for Insurance Companies, less outstanding Member Loans, the
aggregate maximum amount that may be lent under outstanding letters of credit, and the
netted market value of intermediary derivative transactions.

Page 15 of 16

 

	 	   	Unused Borrowing Capacity Percentage means the percentage set by the Board of
Directors from time to time that determines how much Capital Stock a Member must purchase
in relation to its Unused Borrowing Capacity.
	 
	 	   	Unused Borrowing Capacity Stock Purchase Requirement serves as the Membership
Stock Purchase Requirement based upon a Member’s Unused Borrowing Capacity as
specified in this Plan.
	 
	 	   	Written Notice means a letter or other business writing, signed by an officer of the
Member, sent by certified mail, return receipt requested, to the Bank’s Corporate
Secretary at the Bank’s home office, currently 601 Grant Street, Pittsburgh, Pennsylvania,
15219.

Page 16 of 16

 

SCHEDULE A

In Effect As Of January 13, 2005

	 	 	 	 	 
	Member Loan Stock Purchase Percentage
	 	 	5	%
	 
	 	 	 	 
	Unused Borrowing Capacity Stock Purchase Percentage
	 	 	.50	%
	 
	 	 	 	 
	Acquired Member Asset Stock Purchase Percentage
	 	 	0	%
	 
	 	 	 	 
	Cap on Unused Borrowing Capacity Stock Purchase Requirement
	 	$	N/A	 
	 
	 	 	 	 
	Redemption Cancellation Fee
	 	 	2	%
	 
	 	 	 	 
	Membership Withdrawal Cancellation Fee
	 	 	2	%
	 
	 	 	 	 
	MBC Percentage
	 	 	30	%
	 
	 	 	 	 

 

 

EXHIBIT A

general instructions for maximum borrowing capacity (MBC) calculation:

	I)  	The Bank will calculate MBC on a quarterly basis using regulatory data approximately
60 days after each quarter end (see schedules for regulatory line items used).
	 
	   	The MBC used in determining annual Unused Borrowing Capacity Stock Purchase Requirement
will be based on year-end December 31 regulatory data.
	 
	II)  	MBC is based on the lower of total weighted (haircuted) qualifying collateral value
or the level of residential housing finance assets (RHFA).
	 
	   	To determine total weighted qualifying collateral value, specific asset balances (market
and/or book value) within each qualifying collateral category are derived from regulatory
data. Those balances are weighted by applicable haircut percentages, and are then
aggregated to arrive at total collateral value, netting out assets pledged to other
creditors or other borrowings secured by qualifying collateral.
	 
	   	NOTE: The weighted value for other real estate-related collateral is limited by policy not
to exceed a certain percentage of the final calculated MBC (“MBC Percentage”).
The current MBC Percentage is set forth on Schedule A.
	 
	   	The RHFA level is determined by adding balances that represent all residential mortgage
loan and mortgage-related securities assets.
	 
	   	example:
	 
	   	total weighted qualifying collateral method:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	collateral category	 	balance	 	 	haircut	 	 	value	 
	1. treasury & agency securities
	 	$	15,000	 	 	 	95%	 	 	 $	14,250	 
	2. agency mortgage backed securities
	 	$	25,000	 	 	 	90%	 	 	 $	22,500	 
	3. non-agency mortgage backed securities
	 	$	10,000	 	 	 	87%	 	 	 $	8,700	 
	4. single-family residential mortgages (net of past dues)
	 	$	50,000	 	 	 	80%	 	 	 $	40,000	 
	5. multi-family residential mortgages (net of past dues)
	 	$	7,000	 	 	 	65%	 	 	 $	4,550	 
	6. other real estate-related (value limited by MBC Percentage)
	 	$	12,500	 	 	 	50%	 	 	 $	6,250	 
	7. minus securities pledged to other creditors or other
	 	 	 	 	 	 	 	 	 	-$	6,500	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	borrowings secured by qualifying collateral
	 	 	total collateral value	 	 	 	 $	89,750	 
	 
	 	 	 	 	 	 	 	 	 	 	 

	note:    	 for Mortgage Partnership Finance (MPF) participants, the maximum credit enhancement amount is deducted from the total collateral value.

     RHFA method:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	collateral category	 	balance	 	 	haircut	 	 	value	 
	1. all residential mortgage loans
	 	$	65,750	 	 	 	n/a	 	 	$	65,750	 
	2. all mortgage-related securities
	 	$	35,000	 	 	 	n/a	 	 	$	35,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	total RHFA value	 	 	 	$	100,750	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	calculated MBC (lesser of total collateral or RHFA value):
	 	 	 	$	89,750	 

	III)  	The Bank may further refine a member’s MBC due to the following:

	 	1.  	collateral eligibility factors determined from on-site collateral
audits.
	 
	 	2.  	documented pledging activity not found in regulatory data.
	 
	 	3.  	adjustments for affiliate collateral pledging.

 

 

EXHIBIT B

Line descriptions for MBC calculation — banks

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	For
banks
 	 	 	(data
from fed. depository inst. corp. call report)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	qualifying collateral assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	current	 	 	 	current	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	blanket	 	 	 	specific	 	 	 	range for	 	 
	 	 	 	 	line	 	 	 	schedule/	 	 	 	collateral	 	 	 	collateral	 	 	 	collateral	 	 
	 	category	 	 	description	 	 	 	line number	 	 	 	weighting	 	 	 	weighting	 	 	 	weighting	 	 
	 	treasury and agency securities
	 	 	ustreshfv	 	 	RC-B-0213	 	 	 	95	%	 	 	 	90	%	 	 	 	85% - 98	%	 
	 	 
	 	 	ustresafv	 	 	RC-B-1287	 	 	 	95	%	 	 	 	90	%	 	 	 	85% - 98	%	 
	 	 
	 	 	issbyaghfv	 	 	RC-B-1295	 	 	 	95	%	 	 	 	90	%	 	 	 	85% - 98	%	 
	 	 
	 	 	issbyagafv	 	 	RC-B-1298	 	 	 	95	%	 	 	 	90	%	 	 	 	85% - 98	%	 
	 	 
	 	 	issbyushfv	 	 	RC-B-1290	 	 	 	95	%	 	 	 	90	%	 	 	 	85% - 98	%	 
	 	 
	 	 	issbyusafv	 	 	RC-B-1293	 	 	 	95	%	 	 	 	90	%	 	 	 	85% - 98	%	 
	 	govt. and agcy. mortgage
	 	 	passisshfv	 	 	RC-B-1705	 	 	 	90	%	 	 	 	85	%	 	 	 	80% - 93	%	 
	 	backed securities
	 	 	passissafv	 	 	RC-B-1707	 	 	 	90	%	 	 	 	85	%	 	 	 	80% - 93	%	 
	 	 
	 	 	passgtyhfv	 	 	RC-B-1699	 	 	 	90	%	 	 	 	85	%	 	 	 	80% - 93	%	 
	 	 
	 	 	passgtafv	 	 	RC-B-1702	 	 	 	90	%	 	 	 	85	%	 	 	 	80% - 93	%	 
	 	 
	 	 	cmoisshfv	 	 	RC-B-1715	 	 	 	90	%	 	 	 	85	%	 	 	 	80% - 93	%	 
	 	 
	 	 	cmoissafv	 	 	RC-B-1717	 	 	 	90	%	 	 	 	85	%	 	 	 	80% - 93	%	 
	 	non-agency mortgage
	 	 	passpvthfv	 	 	RC-B-1710	 	 	 	87	%	 	 	 	82	%	 	 	 	72% - 92	%	 
	 	backed securities
	 	 	passpvtafv	 	 	RC-B-1713	 	 	 	87	%	 	 	 	82	%	 	 	 	72% - 92	%	 
	 	 
	 	 	cmocolhfv	 	 	RC-B-1719	 	 	 	87	%	 	 	 	82	%	 	 	 	72% - 92	%	 
	 	 
	 	 	cmocolafv	 	 	RC-B-1732	 	 	 	87	%	 	 	 	82	%	 	 	 	72% - 92	%	 
	 	 
	 	 	cmopvthfv	 	 	RC-B-1734	 	 	 	87	%	 	 	 	82	%	 	 	 	72% - 92	%	 
	 	 
	 	 	cmopvtafv	 	 	RC-B-1736	 	 	 	87	%	 	 	 	82	%	 	 	 	72% - 92	%	 
	 	1-4 fam. mtgs. - 1st lien
	 	 	refamfstln	 	 	RC-C-5367	 	 	 	80	%	 	 	 	75	%	 	 	 	65% - 85	%	 
	 	(less troubled assets)
	 	 	(CL1ST30-89)	 	 	(RCNC236)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(CL1ST90MOR)	 	 	(RCNC237)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(CL1STNACC)	 	 	(RCNC229)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	multi-family mtgs.
	 	 	remltagg	 	 	RC-C-1460	 	 	 	65	%	 	 	 	60	%	 	 	 	35% - 70	%	 
	 	(less troubled assets)
	 	 	(resmul30-89)	 	 	(RC-N-5436 or 3499)
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(mltrs90mor)	 	 	(RC-N-5437 or 3500)
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(mltrsnonac)	 	 	(RC-N-5438 or 3501)
	 	 	 	 	 	 	 	 	 	 	 
	 	other real estate
	 	 	recons - RE secured construction loans	 	 	RC-C-1415	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	related & community
	 	 	refarm - RE secured farmland loans	 	 	RC-C-1420	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	financial inst. collateral
	 	 	relineofcr - SF revolving, open-end loans	 	 	RC-C-1797	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	(less troubled assets)
	 	 	refamjrln - SF junior lien mortgage loans	 	 	RC-C-5368	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	 
	 	 	renonfarm - nonfarm, nonresidential	 	 	RC-C-1480	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	 
	 	 	farm - loans for agricultural production *	 	 	RC-C-1590	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	 
	 	 	cilnsus - commercial, industrial loans *	 	 	RC-C- 1763	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	NOTE: total limited to
	 	 	(cnld30-89)	 	 	(RC-N- 5424 or 2759)
	 	 	 	 	 	 	 	 	 	 	 
	 	30% of total MBC
	 	 	(const90mor)	 	 	(RC-N- 5425 or 2769)
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(constnonac)	 	 	(RC-N- 5426 or 3492)
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(frml30-89)	 	 	(RC-N- 5427 or 3493)
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(farm90mor)	 	 	(RC-N- 5428 or 3494)
	 	 	 	 	 	 	 	 	 	 	 
	 	* community financial
	 	 	(farmnonac)	 	 	(RC-N- 5429 or 3495)
	 	 	 	 	 	 	 	 	 	 	 
	 	inst. eligible only
	 	 	(revoe30-89)	 	 	(RC-N- 5398)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(revrs90mor)	 	 	(RC-N- 5399)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(revrsnonac)	 	 	(RC-N- 5400)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(snfrn30-89)	 	 	(RC-N- 5439 or 3502)
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(nonrs90mor)	 	 	(RC-N- 5440 or 3503)
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(nonrsnonac)	 	 	(RC-N- 5441 or 3504)
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(agpf30-89) *	 	 	(RC-N- 1230 or 1594)
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(pdfrm90mor) *	 	 	(RC-N- 1231 or 1597)
	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(farmnonacc) *	 	 	(RC-N- 1232 or 1583)	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(cmlpd30-89) *	 	 	(RC-N- 1606)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(pdci90more) *	 	 	(RC-N- 1607)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(cinonaccrl) *	 	 	(RC-N- 1608)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	(less pledged securities)
	 	 	(secpledge)	 	 	(RC-B-0416)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	     note:
for Mortgage Partnership Finance (MPF) participants, the maximum
credit enhancement amount is deducted from the

             total collateral value.	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	RESIDENTIAL HOUSING FINANCE ASSETS (no haircuts)	 	 	 	 	 	 
	 	 
	 	 	line	 	 	schedule/	 
	 	category
	 	 	description	 	 	line number	 
	 	revolving 1-4 mtgs.
	 	 	relineofcr	 	 	RC-C-1797	 
	 	1-4 fam. mtgs. - 1st lien
	 	 	refamfstln	 	 	RC-C-5367	 
	 	1-4 fam. mtgs. - junior lien
	 	 	refamjrln	 	 	RC-C-5368	 
	 	multi-family mtgs.
	 	 	remltagg	 	 	RC-C-1460	 
	 	govt. and agcy. mortgage
	 	 	passisshfv	 	 	RC-B-1705	 
	 	backed securities
	 	 	passissafv	 	 	RC-B-1707	 
	 	 
	 	 	passgtyhfv	 	 	RC-B-1699	 
	 	 
	 	 	passgtafv	 	 	RC-B-1702	 
	 	 
	 	 	cmoisshfv	 	 	RC-B-1715	 
	 	 
	 	 	cmoissafv	 	 	RC-B-1717	 
	 	non-agency mortgage
	 	 	passpvthfv	 	 	RC-B-1710	 
	 	backed securities
	 	 	passpvtafv	 	 	RC-B-1713	 
	 	 
	 	 	cmocolhfv	 	 	RC-B-1719	 
	 	 
	 	 	cmocolafv	 	 	RC-B-1732	 
	 	 
	 	 	cmopvthfv	 	 	RC-B-1734	 
	 	 
	 	 	cmopvtafv	 	 	RC-B-1736	 
	 

NOTE: The MBC is based on the lower of the qualifying collateral
assets or residential housing finance assets.

 

 

EXHIBIT C

Line Descriptions for MBC Calculation

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	FOR THRIFTS	 	 	(from OTS Thrift Financial Report)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	QUALIFYING COLLATERAL ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	range for	 	 
	 	 	 	 	LINE	 	 	 	CURRENT BLANKET	 	 	 	CURRENT SPECIFIC	 	 	 	collateral	 	 
	 	CATEGORY	 	 	NUMBER(S)	 	 	 	COLLATERAL WEIGHTING	 	 	 	COLLATERAL WEIGHTING	 	 	 	weighting	 	 
	 	US Government and
	 	 	 	SC130	 	 	 	 	95	%	 	 	 	90	%	 	 	 	85% - 98	%	 
	 	Agency Securities
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	US Govt. Agcy. MBS
	 	 	 	SC210	 	 	 	 	90	%	 	 	 	85	%	 	 	 	80% - 93	%	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Non-Agency and
	 	 	 	SC215	 	 	 	 	87	%	 	 	 	82	%	 	 	 	72% - 92	%	 
	 	Other MBS
	 	 	 	SC217	 	 	 	 	87	%	 	 	 	82	%	 	 	 	72% - 92	%	 
	 	 
	 	 	 	SC219	 	 	 	 	87	%	 	 	 	82	%	 	 	 	72% - 92	%	 
	 	 
	 	 	 	SC222	 	 	 	 	87	%	 	 	 	82	%	 	 	 	72% - 92	%	 
	 	1-4 Fam. Mtgs.
	 	 	 	SC254	 	 	 	 	80	%	 	 	 	75	%	 	 	 	65% - 85	%	 
	 	(less troubled assets)
	 	 	(pd123+pd223+pd323)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Multi-Family Mtgs.
	 	 	 	SC256	 	 	 	 	65	%	 	 	 	60	%	 	 	 	35% - 70	%	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	(less troubled assets)
	 	 	(pd125+pd225+pd325)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Other Real Estate-
	 	 	SC251 - revolving open end 1-4 mtg. loans	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Related & Community Financial
	 	 	SC255 - junior lien 1-4 mtg. loans	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	Institution Collateral
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	SC230 - SF construction loans	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	(less troubled assets)
	 	 	SC235 - MF construction loans	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	 
	 	 	SC240 - nonresidential constr. loans	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	NOTE: total limited to
	 	 	SC260 - mortgages on nonres. property	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	30% of Total MBC
	 	 	SC265 - mortgages on land	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	 
	 	 	SC 300 - commercial, non-mtg., secured *	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	* Community Financial
	 	 	SC303 - commercial, unsecured *	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	Institution eligible only
	 	 		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	SC306 - commercial, financing leases *	 	 	 	50	%	 	 	 	45	%	 	 	 	35% - 70	%	 
	 	 
	 	 	(PD 115/215/315)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(PD 121/221/321)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(PD 124/224/324)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(PD 135/235/335)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(PD 138/238/338)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	(PD 140/240/340) *	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	(less Other Borrowings
	 	 	(SC72)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	assumed collateralized)
	 	 	exclude FHLB advances	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	 	Note: For Mortgage Partnership Finance (MPF) participants, the maximum credit enhancement amount is deducted from the total collateral value.	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	RESIDENTIAL HOUSING FINANCE ASSETS (No Haircuts)	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	LINE	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	CATEGORY
	 	 	NUMBER	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Tot. Net Mortgage Loans
	 	 	 	SC26	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	(less non-residential
	 	 	(SC240+SC265+SC260)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	property and land)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	US Govt. Agcy. MBS
	 	 	 	SC210	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Non-Agency and
	 	 	 	SC215	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Other MBS
	 	 	 	SC217	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	SC219	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	SC222	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 

     NOTE: The MBC is based on the lower of the Qualifying Collateral Assets or Residential Housing Finance Assets.

 

EXHIBIT D

Line descriptions for
MBC calculation - credit unions

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	For credit unions	 	 	(data from National Credit Union Administration reports)	 
	 	 
	 	 
	qualifying collateral assets	 
	 	 
	 	 	 	 	 	 	 	 	current	 	 	current	 	 	 	 
	 	 	 	 	 	 	 	 	blanket	 	 	specific	 	 	range for	 
	 	 	 	 	 	 	 	 	collateral	 	 	collateral	 	 	collateral	 
	category	 	 	acct. codes	 	 	weighting	 	 	weighting	 	 	weighting	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	treasury
and

	 	 	 	741C	 	 	 	 	95	%	 	 	 	90	%	 	 	85% — 98%	 
	agency securities

	 	 	 	742C	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	govt. and agcy. mortgage

	 	 	 	732	 	 	 	 	90	%	 	 	 	85	%	 	 	80% — 93%	 
	backed securities

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	non-agency mortgage

	 	 	 	733	 	 	 	 	87	%	 	 	 	82	%	 	 	72% — 92%	 
	backed securities

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	1-4 fam. mtgs. - 1st lien

	 	 	 	 	 	 	 	 	80	%	 	 	 	75	%	 	 	65% — 85%	 
	fixed rate

	 	 	 	704	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	adjustable rate

	 	 	 	705	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	other real estate related

	 	 	 	 	 	 	 	 	50	%	 	 	 	45	%	 	 	35% — 70%	 
	collateral

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	revolving mortgage loans

	 	 	 	708	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	non first lien fixed rate loans

	 	 	 	706	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	non first lien adj. rate loans

	 	 	 	707	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	NOTE: total limited to 30% of
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	total MBC
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	less other collateralized

	 	 	 	860C	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	borrowings

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 

		
	note: 	for Mortgage Partnership Finance (MPF)
participants, the maximum credit enhancement
amount is deducted from the total collateral value.

  RESIDENTIAL HOUSING FINANCE ASSETS (no haircuts)

	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 
	category	 	 	acct. codes	 	 	 	 
	 	 	 	 	 	 	 	 
	mortgage loans
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	first lien fixed rate

	 	 	 	704	 	 	 	 	 
	first lien adjustable rate

	 	 	 	705	 	 	 	 	 
	revolving mortgage loans

	 	 	 	708	 	 	 	 	 
	non first lien fixed rate loans

	 	 	 	706	 	 	 	 	 
	non first lien adj. rate loans

	 	 	 	707	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	govt. and agcy. mortgage backed securities

	 	 	 	732	 	 	 	 	 
	 	 	 	 	 	 	 	 
	non-agency mortgage backed securities

	 	 	 	733	 	 	 	 	 
	 	 	 	 	 	 	 	 

		
	NOTE: 	The MBC is based on the lower of the qualifying collateral
assets or Residential Housing Finance Assets.

 

 

EXHIBIT E

Line
descriptions for MBC calculation - insurance co.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	For insurance companies	 	 	(data from audited financials and/or delivered collateral records)	 
	 	 	 	 	 
	 	 
	qualifying collateral assets	 
	 	 
	 	 	 	current	 	 	current	 	 	 	 
	 	 	 	blanket	 	 	specific	 	 	range for	 
	 	 	 	collateral	 	 	collateral	 	 	collateral	 
	category	 	 	weighting	 	 	weighting	 	 	weighting	 
	 	 	 	 	 	 	 	 	 	 	 
	treasury and agency securities

	 	 	 	95	%	 	 	 	90	%	 	 	85% — 98%	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	govt. and agcy. mortgage backed securities

	 	 	 	90	%	 	 	 	85	%	 	 	80% — 93%	 
	 	 	 	 	 	 	 	 	 	 	 
	non-agency mortgage backed securities

	 	 	 	87	%	 	 	 	82	%	 	 	72% — 92%	 
	 	 	 	 	 	 	 	 	 	 	 

RESIDENTIAL HOUSING FINANCE ASSETS (no haircuts)

	 	 	 	 	 
	 	 
	category 	 	 	 	 
	 	 	 	 	 
	govt. and agcy. mortgage backed securities

	 	 	 	 
	 	 	 	 	 
	non-agency mortgage backed securities
	 	 	 	 
	 	 	 	 	 

		
	NOTE: 	The MBC is based on the lower of the qualifying collateral assets or
Residential Housing Finance Assets.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}]]