Document:

Exhibit 10.7

 

PROMISSORY NOTE

(Portfolio B)

 

	
  $6,286.48

  	
  February 13, 2009

  

 

FOR VALUE
RECEIVED, the undersigned, CLST Asset III, LLC, a Delaware limited liability
company (the “Borrower”), hereby promises to pay
to the order of James F. Cochran (the “Lender”) the
principal sum of SIX THOUSAND TWO HUNDRED EIGHTY-SIX DOLLARS AND FORTY-EIGHT
CENTS ($6,286.48) together with interest as provided herein (the “Loan”).

 

The Borrower
shall repay the Loan in twenty-one (21) quarterly installments, which shall
consist of (i) equal principal payments of $299.36 each, plus (ii) all
interest accrued through such payment date  (together, the “Term Loan Payment”).  Beginning on April 1, 2009, each Term
Loan Payment shall be payable on the first day of each January, April, July and
October.  The Borrower’s final Term Loan
Payment, due on February 13, 2014, shall include all outstanding principal
and accrued and unpaid interest under the Loan.

 

The Borrower may prepay this note in whole at any time or in part from
time to time.  Any such prepayment shall
be applied first to accrued interest, then to principal hereunder in inverse
order of maturity.

 

All payments by the Borrower
shall be made to the Lender at 111 Monument Circle Suite 3680
Indianapolis, IN  46204 and shall be payable
in lawful currency of the United States in immediately available funds.

 

Principal of
this note outstanding from time to time shall bear interest at a rate per annum
which shall from day to day equal the Floating Rate, each change in the rate
charged hereunder to become effective without notice to the Borrower on the
effective date of each change in the Floating Rate or the Maximum Lawful Rate,
as applicable; provided that interest charged hereunder shall be limited to the
Maximum Lawful Rate. Interest on this note shall be calculated on the basis of
actual days elapsed and computed as if each year consisted of 365 days, subject
to the limitations of the Maximum Lawful Rate. 
If at any time or from time to time the rate of interest applicable to
this note is limited to the Maximum Lawful Rate, then any subsequent reduction
in the Floating Rate shall not reduce the rate of interest payable below the
Maximum Lawful Rate until the total amount of interest accrued from and after
the date of this note equals the amount of interest which would have accrued
thereon if the Floating Rate had at all times been in effect.

 

If any
principal of or interest on this note is not paid in accordance with the
provisions contained herein, such overdue principal and, to the extent
permitted by applicable law, overdue interest shall bear interest from the due
date, payable on demand, until paid at a rate per annum equal to the sum of
five percent (5.0%) plus the LIBOR
Rate from time to time in effect, subject to the limitations of the Maximum
Lawful Rate.

 

1

 

As used
herein, (a) the term “Maximum Lawful
Rate” means the maximum non-usurious interest rate, if any (or, if
the context so requires, an amount calculated at such rate), that at any time
or from time to time may be contracted for, taken, reserved, charged, or
received by the Lender under applicable laws of the State of Texas or the
United States of America, whichever authorizes the greater rate, as such laws
are presently in effect or, to the extent allowed by applicable law, as such
laws may hereafter be in effect and which allow a higher maximum non-usurious
interest rate than such laws now allow. 
To the extent the laws of the State of Texas are applicable for the
purpose of determining the Maximum Lawful Rate, such term shall mean the weekly
ceiling from time to time in effect as referred to and defined in Chapter 303
of the Finance Code of Texas, as amended, and in any case after taking into
account, to the extent required by applicable law, any and all relevant
payments, charges and calculations, (b) the term “Floating
Rate” means for any day a per annum interest rate equal to the sum
of four percent (4.0%) plus the LIBOR
Rate from time to time in effect, but in no event exceeding the Maximum Lawful
Rate, and (c) “LIBOR Rate” means a fluctuating rate of interest which
shall initially be equal to the three month London interbank offered rate as of
the date of this note as published in the “Money Rates” section of The Wall Street Journal, which rate shall be adjusted as of
the first day of each January, April, July and October hereafter to
be such rate as determined from such source as of each such adjustment date (or
if such rate from such source is not available for any adjustment date, such
rate from such source as of the last business day prior to the applicable
adjustment date).

 

Regardless of
any provision contained herein, the Lender shall never be entitled to receive,
collect or apply, as interest on this note, any amount in excess of the Maximum
Lawful Rate, and in the event the Lender ever receives, collects or applies as
interest any such excess, such amount which would be deemed excessive interest
shall be deemed a partial prepayment of principal on this note and treated
hereunder as such; and if this note is paid in full, any remaining excess shall
promptly be paid to the Borrower. In determining whether or not the interest
paid or payable under any specific contingency exceeds the Maximum Lawful Rate,
the Borrower and the Lender shall, to the extent permitted under applicable
law, (a) characterize any nonprincipal payment as an expense, fee or
premium rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, and (c) amortize, prorate, allocate and spread the total
amount of the interest throughout the entire contemplated term of this note, so
that the interest rate is the Maximum Lawful Rate throughout the entire term of
this note; provided that if the unpaid principal balance hereof is paid and
performed in full prior to the end of the full contemplated term hereof, and if
the interest received for the actual period of existence thereof exceeds the
Maximum Lawful Rate, the Lender shall refund to the Borrower the amount of such
excess and, in such event, the Lender shall not be subject to any penalties
provided by any laws for contracting for, charging, taking, reserving or
receiving interest in excess of the Maximum Lawful Rate.

 

This note has been negotiated, is being
executed and delivered, and will be performed in whole or in part, in the State
of Texas.  This note, the entire
relationship of 

 

2

 

the parties hereto, and any litigation between the parties (whether
grounded in contract, tort, statute, law or equity) shall be governed by,
construed in accordance with, and interpreted and enforced pursuant to the laws
of the State of Texas without giving effect to its choice of law principles.

 

The Borrower hereby irrevocably submits to
the non-exclusive jurisdiction of any United States federal or Texas state
court sitting in Dallas, Dallas County, Texas in any action or proceeding
arising out of or relating to this note or any other agreement or document
executed in connection herewith, and the Borrower hereby irrevocably agrees
that all claims in respect of such action or proceeding may be heard and
determined in any such court, and the Borrower hereby
specifically consents to the jurisdiction of the State District Courts of
Dallas County, Texas and the United States District Court for the Northern
District of Texas, Dallas Division.

 

 

[Signature page follows]

 

3

 

IN WITNESS
WHEREOF, the undersigned has caused this note to be executed by its duly authorized
representative as of the date first written above.

 

	
   

  	
  CLST ASSET III, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ROBERT A. KAISER

  
	
   

  	
   

  	
  Robert Kaiser

  
	
   

  	
   

  	
  Manager

  

 

Portfolio B Promissory Note (James Cochran)Exhibit 10.8

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5601 Granite Parkway, Suite 740

  	
  Plano, Texas 75024-6654

  	
  T 972.377.0300

  	
  F 972.377.0307

  	
  bvafirm.com

  	
   

  
	
   

  	
   

  	
  BUSINESS

  
	
   

  	
   

  	
  VALUATION

  
	
   

  	
   

  	
  ADVISORS

  

 

February 17, 2009

 

Board
of Directors of CLST Holdings, Inc.

17304
Preston Road, Suite 420

Dallas,
Texas 75252

 

Dear
Directors:

 

Pursuant
to our engagement letter dated December 17, 2008, you have requested that
Business Valuation Advisors LLC (“BVA”) provide an opinion (the “Opinion”) as
to the fairness, from a financial point of view, to the nonaffiliated
stockholders of CLST Holdings, Inc. (“CLST” or the “Company”) of the
consideration to be paid by CLST in the transaction discussed below (the “Transaction”).

 

The Transaction

 

We
understand that CLST Asset III, LLC, which is indirectly wholly owned by CLST,
is today consummating the acquisition of two receivable portfolios, Portfolio A
and Portfolio B, collectively referred to as the “Portfolios,” from Fair
Finance Company (“Fair”), Timothy S. Durham, and James F. Cochran (collectively,
the “Seller”). In connection with the Transaction, CLST will pay total
consideration of $3,594,354, with 50 percent being paid in cash, 25 percent
being paid in the form of newly issued shares of CLST common stock, and the
remaining 25 percent being financed with note payables to the Seller (the “Seller
Notes”). The Seller Notes relating to Portfolio A will be payable in 11
quarterly installments, each consisting of equal principal payments, plus all
interest accrued through such payment date at a rate of 4.0 percent plus the
London interbank offered rate (“LIBOR”). The Seller Notes relating to Portfolio
B will be payable in 21 quarterly installments, each consisting of equal
principal payments, plus all interest accrued through such payment date at a
rate of 4.0 percent plus LIBOR.

 

Scope of Analysis

 

In
connection with this Opinion, BVA conducted various procedures, investigations,
and financial analyses with respect to the preparation of our Opinion
including, but not limited to, the following:

 

	
  1.

  	
  Reviewed the Purchase and Sale Agreement
  (the “Purchase Agreement”) by and between the Seller and CLST;

  
	
  2.

  	
  Reviewed the Limited Liability Company
  Agreement of CLST Asset III, LLC;

  
	
  3.

  	
  Reviewed a memorandum from Whitley Penn LLP
  to the Company regarding net operating loss carry forwards;

  
	
  4.

  	
  Reviewed an internal balance sheet as of
  November 30, 2008 for CLST, which management represented to be the
  latest data available;

  

 

 

	
  5.

  	
  Reviewed certain accounting entries
  provided by CLST management for CLST’s recent acquisition of the FCC Texas
  bulk portfolio;

  
	
  6.

  	
  Reviewed minutes of the Company’s Board of
  Directors meetings for the previous 12 months;

  
	
  7.

  	
  Reviewed summary information provided by
  Fair regarding the outstanding balances of the Portfolios as well as other
  statistics, such as weighted average remaining life, aging, and weighted
  average interest rate among others;

  
	
  8.

  	
  Reviewed detailed cash flow models provided
  by Fair management for the FCC Texas bulk portfolio and the Portfolios;

  
	
  9.

  	
  Reviewed investment memoranda prepared by
  Fair relating to the Portfolios;

  
	
  10.

  	
  Reviewed an offering circular for Fair
  dated July 24, 2008;

  
	
  11.

  	
  Reviewed sample contracts of the loans in
  the Portfolios provided by Fair;

  
	
  12.

  	
  Reviewed and analyzed information obtained
  from the capital markets;

  
	
  13.

  	
  Discussed the operations, financial
  conditions, future prospects, and projected operations and performance of
  CLST and the Portfolios with the management of CLST and Fair;

  
	
  14.

  	
  Reviewed certain publicly available and
  privately provided financial statements and other business and financial
  information of CLST, Fair, and the Portfolios, respectively, and the industry
  in which CLST and Fair operate;

  
	
  15.

  	
  Reviewed certain financial forecasts
  provided by CLST’s management relating to CLST future earnings;

  
	
  16.

  	
  Reviewed CLST’s historical trading price
  and trading volume for its publicly traded stock; and

  
	
  17.

  	
  Conducted such other analyses and
  considered such other factors as we deemed appropriate.

  

 

Limiting Conditions and Assumptions

 

This
Opinion is subject to the terms and conditions of our engagement letter. In
performing our analyses and rendering this Opinion, BVA, with your consent:

 

	
  1.

  	
  Relied upon the accuracy, completeness, and
  fair presentation in all material respects of any and all information
  obtained from public sources or provided to it from private sources,
  including the management of CLST and Fair. BVA did not independently verify
  such information;

  
	
  2.

  	
  Assumed that any estimates, forecasts,
  projections, and assumptions furnished to BVA were reasonably prepared and
  based upon the best currently available information and good faith judgment
  of the person furnishing such information and that such forecasts and
  projections are achievable as presented;

  
	
  3.

  	
  Assumed that the final versions of all
  documents reviewed in draft form by BVA conform in all material respects to
  the drafts reviewed;

  
	
  4.

  	
  Assumed that information supplied to BVA
  and representations and warranties made in the Purchase Agreement are
  substantially accurate;

  
	
  5.

  	
  Assumed that all of the conditions required
  to implement the Transaction will be satisfied and that the Transaction will
  be completed in accordance with the Purchase Agreement without any amendments
  thereto or any waivers of any terms or conditions thereof;

  
	
  6.

  	
  Relied upon the fact that the Board of
  Directors and CLST have been advised by counsel as to all legal matters with
  respect to the Transaction, including whether all procedures required by law
  to be taken in connection with the Transaction have been duly, validly and
  timely taken; and

  
	
  7.

  	
  Assumed that all governmental, regulatory
  or other consents and approvals necessary for the consummation of the
  Transaction will be obtained without any adverse effect on CLST, Fair, or the
  contemplated benefits expected to be derived in the Transaction.

  

 

2

 

In
our analysis and in connection with the preparation of this Opinion, BVA has
made numerous assumptions with respect to industry performance, general
business, market and economic conditions and other matters, many of which are
beyond the control of any party involved in the Transaction. To the extent that
any of the foregoing assumptions or any of the facts on which this Opinion is
based prove to be untrue in any material respect, this Opinion cannot and
should not be relied upon.

 

BVA
did not make any independent evaluation of any of the forecasts or projections
with which it was furnished. This Opinion should not be construed as a
valuation opinion, credit rating, solvency opinion, an analysis of CLST’s or
Fair’s credit worthiness, tax advice, or accounting advice. BVA has not been
requested to, and did not, (a) initiate any discussions with, or solicit
any indications of interest from, third parties with respect to the
Transaction, the assets, businesses or operations of CLST, or any alternatives
to the Transaction, (b) negotiate the terms of the Transaction, and
therefore, BVA has assumed that such terms are the most beneficial terms, from
CLST’s perspective, that could, under the circumstances, be negotiated among
the parties to the Purchase Agreement and the Transaction, or (c) advise
the Board of Directors or any other party with respect to alternatives to the
Transaction. BVA has not made, and assumes no responsibility to make, any
representation, or render any opinion, as to any legal matter.

 

The
basis and methodology for this Opinion have been designed specifically for the
express purposes of the Board of Directors and may not translate to any other
purposes. This Opinion (a) does not address the merits of the underlying
business decision to enter into the Transaction versus any alternative strategy
or transaction; (b) is not a recommendation as to how the Board of
Directors or any stockholder should vote or act with respect to any matters
relating to the Transaction, or whether to proceed with the Transaction or any
related transaction, and (c) does not indicate that the consideration paid
is the best price possibly attainable under any circumstances; instead, it
merely states whether the consideration in the Transaction is within a range
suggested by certain financial analyses. The decision as to whether to proceed
with the Transaction or any related transaction may depend on an assessment of
factors unrelated to the financial analysis on which this Opinion is based.
This letter should not be construed as creating any fiduciary duty on the part
of BVA to any party.

 

BVA
has prepared this Opinion effective as of the date of this letter. This Opinion
is necessarily based upon market, economic, financial and other conditions as
they exist and can be evaluated as of the date hereof, and BVA disclaims any
undertaking or obligation to advise any person of any change in any fact or
matter affecting this Opinion which may come or be brought to the attention of
BVA after the date hereof. Notwithstanding and without limiting the foregoing,
in the event that there is any change in any fact or matter affecting this
Opinion after the date hereof and prior to the completion of the Transaction,
BVA reserves the right to change, modify or withdraw this Opinion.

 

This
Opinion, or excerpts thereof, may be included in any public filing distributed
to stockholders of the Company in connection with the Transaction or other
document required by law or regulation to be filed with the Securities and
Exchange Commission.

 

Except
as described above, this Opinion is not intended for general circulation or
publication, nor is it to be reproduced, used for any other purpose, or
distributed to third parties without our express written consent.

 

3

 

BVA
has not had any material relationship with any party to the Transaction for
which compensation has been received or is intended to be received, nor is any
such material relationship or related compensation mutually understood to be
contemplated.

 

Conclusion

 

Based
upon and subject to the foregoing, BVA is of the opinion that as of the date
hereof, the consideration to be paid by CLST in the Transaction is fair, from a
financial point of view, to the nonaffiliated stockholders of the Company.

 

 

	
   

  	
  Respectfully
  submitted,

  
	
   

  	
   

  
	
   

  	
  /s/
  Business Valuation Advisors LLC

  
	
   

  	
  Business
  Valuation Advisors LLC

  

 

4

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